Wednesday, August 29, 2007

Who's going to eat whose lunch?

The poverty line in this country is set at three times the cost of an "emergency" diet (wherein you may not purchase a can of beans, only dried beans). I move that the federal government move immediately to a poverty standard of six times an emergency diet which is much more in keeping with 2007 basic needs (eg., $40,000/yr for a family of four).

Market failure implies that markets are for some (as far as I can see) unexplained reason expected to produce "fair" outcomes. The "free market" should be seen as analogous to the operating system of a computer -- as the OS of the economy -- upon which may be imposed any fair or unfair checks and balances program.

The first such "program" imposed by industrialization in nineteenth century England was the race to the bottom. Individual weavers who made a decent living were replaced by 100 (?) times more productive steam loom operators who were reduced to, not just-enough-to-stay-alive income, but the lowest form of just-enough-to-stay-alive income: staying alive on oat cakes three times a day because they could not even afford wheat bread.

The idea that the biggest ongoing drama in human history -- who's going to eat whose lunch -- is going to be automatically fairly resolved by an unfettered free market is what psychiatrists might characterize as "magical thinking".

25% of Americans live below a realistic poverty line (double the official line -- see the 2002 book, Raise the Floor). I am willing to admit 25% below without assistance (food stamps, etc.).

This ties in neatly -- until the recent slight increase in the minimum wage -- with 25% of labor earning below the modern European minimum wage level (generally $9.50/hr). Of course in Europe that is accompanied by full medical, 4 weeks paid vacation, etc., etc., etc.

Which fits in with a New story in the "Globalist" : "The OECD recently updated its definition of 'the middle class' " -- now focusing on "the average worker" rather than on "the average production worker" -- the recalculation:

"A British middle class family with two children and two incomes of 100% and 67% of average wages still earns 40% more (in PPP terms, net of taxes) than their U.S. counterparts ($65,000 compared to $45,500). In fact, U.S. families in this category rank only 15th in the OECD."

Which also ties in with -- until the slight increase -- 25% earning less than the 1968 US federal minimum wage.

We have a near 1939 minimum wage ($4.50/hr -- no taxes) -- we have a prohibition (drugs). We have created a new organized crime base -- this time it black and Hispanic rather than Irish, Italian and Jewish.

I read Wilson's 1997 book, When Work Disappears at the same time I read Venkatesh's 2002, American Project. Wilson's study wrapped up (if I remember correctly) while the fed minimum wage was still about $7/hr. At this point the projects which had once been a place of hope (when factory work had yet to disappear and the minimum wage was closer to $10) had become crime ridden but not yet the gang controlled Hell that accompanied the minimum wage drop to $5/hr. Better to make "all of" $10/hr selling drugs.

If work paid in America like it pays in labor controlled Europe (I'm no big lefty, BTW) poverty in America would not exist any more than it does in Europe. (Minority schools would work too if the parents worked; a.k.a., were paid enough to work -- forget worrying about the teacher's union).

A $500/wk minimum wage would add less than 4% to cost of GDP output (going from the $5.15/hr level!) -- about how much we grow per capita every two or three years -- up from $380/wk in 1968; following 100% increase in average income since. All we ever had to end poverty in America, it turns out, was to pay people what we could afford to pay them.

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