What about the zero lower bound? Recent history seems to demonstrate that the central bank can put a cap on inflation, but not necessarily a floor. For that you need fiscal policy.

It's not a singularity. It's the logical consequence of the world's largest political economy being captured by the thieves. These events will play out again and again until 1) The US fixes its political system (which the Supreme Court just made harder) 2) The US economy damages itself to the point of insignificance to the world economy. 2) Involves huge amounts of pain. Enough pain that it will eventually drive 1) I am thinking somewhere between 1 million and 30 million dead people (hunger, homelessness, riot, bombs, disease, ....) may be required before 1 happens.

What does employment look like scaled by population?

a) Broken link. b) I think this is fundamentally bad news. Lower productivity, increased income maldistribution.

Cuba runs 2 currencies. Cuban pesos and convertible pesos. Cuban pesos are officially not supposed to be converted. There is an official exchange rate (Cuban<=>convertible), the rate on the street is higher than that. To make money in Cuba you work in the tourist trade, that includes renting rooms and running local restaurants.

So what happens when the goods and services market is monopolistic and the labour market is monopsonistic? My guess is that labour market issues drive AS down. There is much trying to paper over the cracks but eventually recessions get triggered.

UWAG (Unscientific Wild Ass Guess) CPI 1.25 Unemployment 9% CAD/USD 1.02 Overnight Rate 0.75 TSX 11,000 The dollar will go over par, people will freak, some intervention will happen. US bad news will leak into Canada.

That's not what I am saying. It is absolutely true that a GAI will require union support and I fully expect that if as and when push comes to shove the unions will support it and make concerted efforts to get their members to support it. What I am saying is that unions will not lead on this issue.

No, I am saying that they will only support it when they see a reasonable chance of it passing. It's not an issue of personal support, it's an issue of how much work they do to get the membership on side.

Well, I am not currently in a union but I think I have a better understanding of how they function than the previous 2 posters. Union leaders achieve their positions by being elected by the members. This means when they are developing policy they are influenced by considerations concerning how to convince the membership that the policy is a good thing. There is a component of right wing populism in union politics. As in "Whaddaya mean, the bum gets paid for not working?". To get a coherent policy on GAI in the teeth of this attitude requires considerable work on the part of the union leadership. In the absence of a credible proposal working its way through the other political institutions of the country they are simply not going to do that work. It doesn't have a big payoff. Having it show up in the McDonald commission report also makes it the fruit of the poisoned tree. Trying to extract any good bits out of that assault on the Canadian polity would require serious political contortions in the midst of a huge fight. Note, that piece of the commission went nowhere. If you think that union support for it would have moved it into implementation range your understanding of the power relations in Canadian politics is vastly different than mine.

I'd like to back up a bit. My understanding of optimal tax theory is that it attempts to design taxes that have no influence on behaviour. That would seem to imply no constraints on the (generally) positive feedback loop involved in the gathering of wealth and power. Why do you want to design a tax system like that?

Whether or not the milk quotas are a good thing depends on the value system used to evaluate them. If price minimization is the absolute value standard they are horrible. If giving farmers a reasonable income is a higher value they are very successful. More effective than taxi licenses. Given that value system the problem is not with dairy farmers, it's with all the other farmers who are going broke. With respect to the international price. How much of that is driven by the use of bovine growth hormone? High milk prices reduce the pressures to use unsafe practises to increase volume.

You were too restrained about the source of the deficits in years past. The chief statistician at StatsCan concluded that deficit reduction effects caused most (80%?) of the deficit. Finance managed to keep the report from being officially published. "didn't help" is too much of an understatement.

Congratulations Doug. Better beat grunt than baseball player, hmm?

Hiring additional workers is not the question at hand. It's: Do higher wages drive productivity investments or do productivity investments drive higher wages? It's actually both, with some particular circumstances (higher capital costs, possibly fewer potential workers) to get the second mechanism to work.

That story is a best incomplete, and probably mostly wrong. I have to work now. I will attack the note tonight. Caricatures are not helpful in this debate. It's all about what happens at the margins. If Haiti went to 100% unionization and everybody bargained to the current limit Haiti would start seeing lots of productivity investments. If they don't hire anyone they go out of business. That costs.

No, no, no. It's the change in the wage driven by employee economic power that drives the increased investment in productivity. At the original wage the investment does not produce increased profits. At the new wage it does. I have to finish the note I was writing on this.

That is likely true in aggregate, however there are localities where they are more significant, low wage tourist areas in particular. Like Newfoundland and Muskoka.

Some evidence. From Newfoundland The Employers Council “If the intent is to improve the income and the lives of that group by increasing minimum wage, that’s fine, but one of the consequences is that the minimum wage in this province is used as a benchmark,” Alexander said. “A significant portion of the labour market has a wage that’s tied to the minimum wage, so it’s minimum wage plus $2 or minimum wage plus $2.50. “When government increases the benchmark, it tends to put pressure on employers to increase salaries right across the board. It’s kind of a blunt instrument for trying to improve the lives and the take-home pay of the lowest wage earners in the province.”

At least some of it is coming from the economic rents that would otherwise accrue to employers. What's the evidence on how much that is? Do any of the studies showing employment drop also examine price increases?

Well, you have actually convinced me that the direct effects of minimum wages on poverty are small, since a large chunk of the working poor lack hours of work. As far as providing evidence that minimum wage increases drive other increases, yes, evidence would be a good thing. Could you tell me where you looked? Your posts on the employment effects keep using words like significant, what are the numbers? How big are the effects found? My current take on this debate is that we would agree on setting the minimum wage at 45% of the average industrial wage, rather than a fixed nominal amount. The realpolitik amount is the level at which the number of people that appreciate the increase equals the number of people that are pissed off by losing their jobs.

Do a shift-click to follow the link in a new tab/window. That keeps the WCI page open.

Which equilibrium wage? Every place of employment has a different equilibrium wage (BTW nobody knows what it is, because nobody knows what their demand curve looks like). So whatever the minimum wage is set at, somebody is unemployed, and somebody else is exploited. My bias is to reduce exploitation because there are a lot more of them and the other economic effects of doing that (notably flattening the income/power distribution) are a good thing.

What part of the argument do you not understand?

MattM hit a critical point. The rest of you seem not to have direct experience with this part of the labour market. It's like looking at an interest rate that is above prime and assuming if prime changes that rate will stay the same. Wage rates in this part of the market are implicitly set as minimum wage plus a premium. So when minimum wages rise, so do all of the others. MattM points out why. If you are paying at minimum wage your workforce is volatile. Everybody knows they will not take a pay cut by moving to another job. So employers start people at minimum wage and pay as small a premium as they can to keep people they want. This mostly leaves workers exploited, but less so as minimum wage rises. Patrick, that example is unlikely. Immigrant family? Mom is working. Dad is way over 40 hrs/week. They are also very likely coping with poverty by sharing accomodation. TDSB has trouble with immigrant high schoolers working 40 hr weeks because that's part time for their families. But the more significant point is the argument above.