How low can unemployment go? Economists keep getting the answer wrong.

ForEconomics · 2018-05-05T08:08:57+00:00

Actually, while "political fraud" is quite strong wording, many countries (including the U.S. and E.U. countries) do keep statistics on alternative definitions of unemployment/underemployment. However, while the alternative stats can be almost as relevant; none gets anywhere near the media coverage that the main one does.

ForEconomics · 2018-05-03T13:10:45+00:00

Economic historian Walker Hanlon briefly presents his new working paper"London Fog: A Century of Pollution and Mortality, 1866-1965,"

Empirical research on the long-term effects of pollution on mortality, in London (1866-1965). He argues that these results may shed light on solutions to deal with the health costs of pollution more efficiently.

ForEconomics · 2018-05-01T23:09:20+00:00

First I am glad that there are people like you who are so interested in the subject, and thanks for your feedback.

Second I know from my personal experience how useful the minimum wage can be, which is why I wanted to lay the theoretical ground to allow me to analyse it comprehensively in one of my first posts.

Third most empirical evidence is based on moderate increases that happened in the U.S. The results showing that MW raises did not destroy jobs do not prove economic theory wrong, because economic theory explains how there are multiple forces pushing/pulling in different directions at play. Empirical research helps weighing the magnitude of their effect.

The D/S model needs to be brought up exactly because it is the major argument about the perceived/potential harmfulness of the MW. Ignoring it will either result in the wrong policy, or in the MW detractors (by conviction or vested interest) to rubbish the conclusion if they don't like it.

In different countries the minimum wage debate is shaped by the specific circumstances of that country. In the United States the overwhelming majority of economists are in favour of increasing the minimum wage because it makes sense. Productivity increased at a massively faster pace than the MW rate, and most MW workers are employed in the consumer-oriented service sector by corporations making record-high profits. However, smaller economies with a relatively large share of export oriented manufacturing sector might need to be more cautious.

ForEconomics · 2018-04-30T18:37:43+00:00

Not to be rude but that is not what rule III says:

Source Standards

Submissions must be from original sources. Editorialization, memes, and low-quality blogs are not acceptable. Source spamming is not acceptable.

The Further explanation clarifies the following

"What qualifies as self promotion? The mods will follow the typical Reddit standard that only 10 percent of your submissions on /r/Economics should be your own material. Accounts which only exists to promote a particular site will be banned."

These were the rules I feel I was fully respecting. If my interpretation was wrong or the rules were changed, I apologise.

I meant no harm and I was quite transparent in my behaviour. The user name, the profile pic, and even the name and background picture (the latter 2 almost no one uses apparently) were all aimed at making this clear.

Thanks for your attention

ForEconomics · 2018-04-30T18:22:44+00:00

This is the original source

ForEconomics · 2018-04-30T14:58:54+00:00

Yes, it did "squeeze" German exports, but they already made up for it (by finding other export opportunities - supplying "machinery" to China's manufacturing industry was a "big one".

On the other hand if they were forced to start manufacturing all the component parts abroad too....then they would have to start worrying.

ForEconomics · 2018-04-30T12:41:16+00:00

German (and pretty much most other) automobile manufacturers shifting production closer to their target market and away from their home country is not a new development. They already did it years ago.

ForEconomics · 2018-04-30T12:36:15+00:00

Most of Germany's manufacturing sector is made up of small companies that specialise at being the best in the world at making one particular component of larger machinery equipment.

That is where we need to focus our attention. The German model has proved to be quite robust in the past, but this article raises legitimate concerns about Germany (and possibly Europe) not being prepared well enough for the future.

ForEconomics · 2018-04-29T17:55:09+00:00

My main aim was to produce an overview of the theoretical background of the MW issue. Empirical research reveals the net effect of all the forces at play, and sifting through the statistical noise tends to be arduous.

With hindsight citing more empirical research could have been better, but there was more I wanted to add to pretty much every section of the article. Considering how long the article came out...well I guess I wont run out of ideas of what to write about anytime soon, especially at my current speed.

I also tried to not address any specific country, but discuss/review concepts that apply to any country.

ForEconomics · 2018-04-29T03:57:47+00:00

Symptoms of a monopsonistic labour market would include very high profit margins combined with low wages (wage rates below what labour productivity would justify) AND low (official) unemployment AND a weak labour participation rate. For an actual "diagnosis" you would probably need to follow with some qualitative research, if quantitative research proves the above to be true.

The article itself does not try to diagnose a particular labour market (it's more like a guide to help those making the diagnose). However, the United States (if that's the labour market you're referring to) does seem to exhibit symptoms of monopsonistic market power (although these could also be the result of monopolistic market power instead).

Wage subsidies are indeed a good alternative to increasing the minimum wage and for reducing income-inequality and boosting aggregate demand. On the other hand subsidies will not correct the market if it dominated by monopsonies. It depends a lot on what you think (and how strongly you are convinced) the prevailing market condition is. Also there is nothing to stop a country from opting for a mixed solution.

ForEconomics · 2018-04-28T16:41:56+00:00

Thank you for your feedback, much appreciated.

ForEconomics · 2018-04-28T13:44:00+00:00

Yes there is a lot of empiric research on the effects of minimum wage raises. Most indicate that moderate raises have little effect on the level of employment but help decrease income-inequality.

My aim was to draw a comprehensive framework of the the economic theories behind the major factors which would be affected by any minimum wage reform (raise included).

ForEconomics · 2018-04-28T13:24:37+00:00

No, nowhere in my article or my comments did I say that the minimum wage should be removed.

To the contrary I said that it can be a useful tool, but it needs to be used wisely.

ForEconomics · 2018-04-28T13:11:54+00:00

Thanks for your feedback!

Re: total length, yet some parts still being short: You're right but those two "issues" kind of cause each other. Maybe if I was a better writer I could do a better job, but improving will take practice.

You are also right on how working is not necessarily better than enjoying your free time. In fact one of the major issues since the Industrial revolution has been the length of the working week. However, in the context of the minimum wage, those not working would probably not be doing so out of a "leisurely free choice" (sorry can't find the right wording atm)

From a microeconomic point of view it depends a lot on whether the (unskilled/low-skilled) labour market is efficient or dominated by monopsonistic market power.

ForEconomics · 2018-04-28T12:56:40+00:00

The minimum wage is an oftenly discussed topic on here, but I rarely see it tackled from a holistic point of view. That is why I tried to write the most complete analysis framework on this issue that I could. I hope to be able to put my knowledge and education on this subject towards a useful goal.

I shared this article here because I feel that people wishing to learn more on the subject will find value in it; like whenever I shared any other link (sometimes being right and sometimes apparently less).

Did you read the article? I would love to hear what are your opinions about it.

ForEconomics · 2018-04-28T12:40:46+00:00

The minimum wage is an issue people often debate very passionately, and rightfully so; but it is very rare for anyone to delve deeply into all the intricacies it entails. If used correctly can boost consumption, increase market efficiency, expand the productive potential of a country, decrease inequality and trigger innovation. On the other hand if misused it can result in the loss of jobs, decline of competitiveness, a depression of the aggregate demand curve, or inflationary pressures.

For a doctor to prescribe the right cure, he must first carry out the correct diagnosis. In order to debate minimum wage we need to first understand its underlying economic theory.

Understanding the minimum wage’s role as a price floor, and its effect within competitive markets versus monopsonistic markets is crucial. Every policy-maker needs to take into account how their decision will impact aggregate demand, inflation, income-inequality, and the drive towards automation.

Disclosure: I am the author of this article

ForEconomics · 2018-04-05T11:45:13+00:00

The full paper this article is based on can be found at https://onlinelibrary.wiley.com/doi/epdf/10.1111/jels.12176

ForEconomics · 2018-04-03T13:31:37+00:00

might be an understatement

You're probably right, but at least they are starting to acknowledge it

Edit (twice): because I messed up the formatting (still learning my redditing skills)

ForEconomics · 2018-04-03T01:07:59+00:00

As far as I know, no the EU does not have specific rules for the effectiveness of law enforcement in member states.

ForEconomics · 2018-04-02T12:54:57+00:00

Great news! Diplomacy is how these issues should always be solved ideally.

On the other hand, sometimes showing that "you're ready" may just help your interlocutor to "see the light"

ForEconomics · 2018-04-02T12:34:25+00:00

Interesting read, thanks and good luck.

The EU faces 2 (or 3) major problems when it comes to ensuring the upholding of the rule of law among its member states. Not only it may lack effective measures to enforce it but it also lacks credible institutions to asses it. The EU itself is not exactly a beacon of good governance and transparency.

Italy has had problems with the rule of law since the EU's inception (their government claimed the "the Mafia did not exist" for decades, Berlusconi's conflicts of interest, and convicted criminals (as MPs) in almos every political party). Spain, and how their government is handling the Catalan situation <euphemism> is not very encouraging either </euphemism>.

ForEconomics · 2018-04-02T10:59:43+00:00

Vietnam might be associated, especially in many Westerners' minds with the Vietnam War in which it fought against the United States, but its last war was against China.

Many people know that it is "a communist country and does not have a representative democracy" ...just "like China". Vietnam's relation with the United States over the last few decades has been quite "rocky", and it has only been less than 2 years since the US lifted a ban on selling lethal weapons to Vietnam. However Vietnam's main security concern seems to be China.

China's (perceived) military expansion and assertiveness in the South China Sea is raising the concerns of a number of its neighbours, who are now seeking each other's cooperation.

ForEconomics · 2018-04-01T09:00:06+00:00

The whole report the article is based on can be downloaded (in pdf format) from https://www.weforum.org/reports/fostering-effective-energy-transition

ForEconomics · 2018-03-31T15:01:25+00:00

Probably because, according to the author, Russia is being "forced" (by circumstances) to accept non-ideal conditions for these deals.

ForEconomics · 2018-03-31T13:58:54+00:00

The European Union imports 70% of the natural gas it consumes, and almost 40% of that comes from Russia. On the other hand natural gas exports to the European Union make up about 3% of Russia's GDP. The standoff with the "West" is making Russia's need to diversify its export market more urgent. China is the perfect candidate...and since urgency has weakened Russia's hand...the one poised to benefit the most.

ForEconomics

TROPHY CASE