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18-05-2018, 00:09   #1
realitykeeper
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The solution to poverty

It may seem obvious but the solution to poverty is work. In some situations like in third world countries with no minimum wage, it can make a lot of sense to be self employed in order to get full value from effort. Even here in Ireland, when recessions come and companies close, it is worth asking, what if the work force worked for free to keep the company going. Would that make sense?

And, on the topic of the minimum wage, is it a good idea to deliberately force the cost of labour higher? Does it make sense for a government in deficit to have a minimum wage law when it cannot even balance its own books? When one considers nothing can happen if nobody works, is it wise to want work to be pricey? And, if an economy is kept afloat thanks to the unsustainable monitory accommodation of a non Indigenous Central Bank, is it clever to use this easy money to prop up the cost of getting stuff done?

I mean, if in hindsight it was foolish to ramp up property prices with easy money in the naughties, why would it be wise to prop up labour cost with easy money now? Any obstacle to the accomplishment of work is a seriously bad idea I contend. Even working to attain self sufficiency while rejecting modern efficiencies like the internal combustion engine promotes wealth, the Amish communities in the USA can attest to this, especially during times of recession in the broader US economy.

Am I wrong?

Last edited by realitykeeper; 18-05-2018 at 00:13.
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21-05-2018, 15:05   #2
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The ESRI conducted a study which showed that modest increases in minimum wage did not adversely affect the numbers in minimum wage employment.

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The 2016 increase in the national minimum wage (NMW) rate did not lead to greater unemployment among minimum wage workers, according to a new study published by the ESRI and the Low Pay Commission. While the research did find that there was a reduction in the average number of hours worked by minimum wage employees, the evidence suggests this was driven by an increase in part-time workers joining the labour market following the wage increase.

The study examines if the increased cost of wages led employers to reduce their number of employees or the number of hours worked, following the NMW increase from €8.65 to €9.15 per hour on 1 January 2016.
The research finds that the average number of hours fell by 0.7 hours per week. Among minimum wage workers on temporary contracts, there was a more pronounced reduction of 3.3 hours per week. Such falls are generally attributed to employers reducing the hours of existing employees because of higher labour costs. However, further analysis revealed a rise in part-time minimum wage employment, including a rise in the incidence of voluntary part-time work.
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21-05-2018, 15:45   #3
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Don't ask me to quote research but I remember haring an argument in relation to the US that the minimum wage can affect young people with little to no work experience trying to join the workforce ie if an employer is forced to pay a particular wage then he is inclined to hire someone with the most experience instead of taking a punt on someone with no experience albeit offering a lower wage.
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22-05-2018, 02:13   #4
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Don't ask me to quote research but I remember haring an argument in relation to the US that the minimum wage can affect young people with little to no work experience trying to join the workforce ie if an employer is forced to pay a particular wage then he is inclined to hire someone with the most experience instead of taking a punt on someone with no experience albeit offering a lower wage.
Most minimum wage systems have an an exception for people below a certain age, or for traineeship positions or the like. Which means that on the one hand, yes, this is a recognised issue with a minimum wage but on the other hand, yes, there are ways of addressing the issue that don't involve not having a minimum wage.
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23-05-2018, 10:18   #5
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The ESRI conducted a study which showed that modest increases in minimum wage did not adversely affect the numbers in minimum wage employment.

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Yes I saw this and similar ESRI studies and I consider them to be seriously flawed for the simple reason that high labour costs do not make sense. If the ESRI studies were conducted in an unaccommodating monetary environment, i.e. one without bank bailouts, normal interest rates (as opposed to ultra-low), tight credit limits by central banks etc, then a high minimum wage would make employment impossibly expensive for all but a few. And, the days of QE and low interest rates must end due to their inherent unsustainability.

Mind you, I have recently come to realize that high pay should also be effectively capped with punitively high tax above a certain limit in order to help de-heat the economy until Ireland becomes a low cost place to live and do business. The reasons for this and the reason for abolishing the minimum wage is not to tax the rich or be mean to the poor but to:

a) make sure business owners re-invest in their businesses rather than pay themselves too much.
b) reduce the cost of running government and businesses.
c) lower the tax burden.
d) deflate the economy so it will become competitive due to low costs.
e) make prices cheaper for everyone.
f) make it feasible to manufacture low value goods.
g) make work cheap so things will get done

Sorry if this strayed out of the Humanities zone but those are the reasons I believe work is the solution to poverty.

Last edited by realitykeeper; 23-05-2018 at 10:34.
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23-05-2018, 10:30   #6
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Even here in Ireland, when recessions come and companies close, it is worth asking, what if the work force worked for free to keep the company going. Would that make sense?

would you work for free? Would you give up your time for nothing to try to help somebody else earn money (ie owners /shareholders)?
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23-05-2018, 10:46   #7
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, there are ways of addressing the issue that don't involve not having a minimum wage.
A curious double negative. I assume these ways involve regulations. I think the idea of regulations was a good one to start with but when regulations get out of hand they become a real problem with real consequences. A lot of businesses that used to exist in the west are now in China. We have regulations and the Chinese have jobs. As for our jobs, how many of them would exist without the multi trillion stimulus by the ECB, the ultra low interest rates or the tens of billions borrowed by the Irish government?

Monetary accommodation has limits.
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23-05-2018, 10:58   #8
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would you work for free? Would you give up your time for nothing to try to help somebody else earn money (ie owners /shareholders)?
Only if everyone else did likewise. In recession things stop because people stop working. But supposing people worked on regardless, the only thing that would be impacted would be your pay. Given time, your pay could resume but at a more sustainable level.
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23-05-2018, 10:59   #9
Peregrinus
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I don't think it makes sense to start out by arguing that work is the solution to poverty, and then to end up suggesting that wages should be kept low, that policies tending to increase the wages of the low-paid are a bad thing, and that at times people should work for free. Such measures benefit shareholders at the expense of workers; why would we imagine this will reduce poverty?

Eliminating poverty involves two things:

First, increasing productivity in the economy. A large part (but not the whole) of this will involve increasing labour productivity, which in turn involves both increasing the labour force (i.e. reducing unemployment, improving labour force participation) and increasing the productivity of individual workers (e.g. by training, education, incentivisation, ensuring affordable childcare).

Secondly, reducing inequality in the economy. Increased wealth does not reduce poverty if a disproportionate share of it ends up in the hands of the very wealthy, or even in the hands of the not-poor. It will only lift people of out poverty to the extent that it goes towards people currently in poverty. There are a variety of ways in which this can happen - reducing unemployment, reducing taxation on the low-paid, greater transfers to the economically inactive (pensioners, the disabled), more social spending on services that benefit the low-paid/unpaid, etc, etc. Ideally you'd be relying on a combination of these things.

It's complex, because of course measures which may tend to reduce poverty in one way may increase it in others. Reducing tax on wages, for example, makes low-paid workers better-off, but it leaves less tax revenue to fund transfers to non-workers (the young, the old, the disabled) or to fund education and training which will raise labour productivity. So, on balance, does it increase poverty or reduce it? That may not be easy to say, and the answers people offer may tell you more about them and their ideological preconceptions (ether right or left) than it does about the policies.
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23-05-2018, 11:11   #10
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Only if everyone else did likewise. In recession things stop because people stop working. But supposing people worked on regardless, the only thing that would be impacted would be your pay. Given time, your pay could resume but at a more sustainable level.
Well, suppose consumers continue to pay for products even though the company wasn't actually delivering them? That would work just as well, or even better, but it's equally unrealistic.

What you suggest has been experimented with in workers co-operatives, where the workforce owns, or part-owns, the business, and their remuneration is therefore partly composed of a share of profits. When times are good they do well; in leaner times they take a hit. But workers, particularly low-paid workers, are not well-positioned to bear the whole risk of recession. Few of them can survive for more than a couple of weeks with no income at all, so they do need to be entitled to at least a basic wage in all circumstances.

The fact is there will be relatively good and relatively bad times in the economic cycle, and a business's requirements for working capital will reflect this. Providing the working capital that the enterprise requires is not really the business of workers; it's the business of, well, capitalists. That, in fact, is why they are called capitalists.
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23-05-2018, 11:17   #11
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There is no solution to poverty.

If you somehow equally divided the worlds wealth equally between every person on the planet within a very short time you would still have people without a penny to their name and you would have others who have accumulated a massive amount of wealth.

Its just human nature.

However when it comes to national poverty. This is almost always down to government corruption which is blatantly obvious in certain countries around the world.
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23-05-2018, 11:22   #12
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There is no solution to poverty.

If you somehow equally divided the worlds wealth equally between every person on the planet within a very short time you would still have people without a penny to their name and you would have others who have accumulated a massive amount of wealth.

Its just human nature.

However when it comes to national poverty. This is almost always down to government corruption which is blatantly obvious in certain countries around the world.
No offence, but the last bit is balls. We've had poor and rich countries long before governments became signficant economic players. And we've also had examples of signficantly rich countries with signficant levels of government corruption, and of "poor but honest" countries.

Government corruption certainly can be a significant contributor to national poverty, but the notion that almost all national poverty is caused by government corruption is just silly.

As to your first point, yeah, there's always going to be some degree of poverty, for a variety of reasons. But that doesn't mean that we can't adopt strategies or policies which will significantly reduce poverty.
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23-05-2018, 22:47   #13
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Originally Posted by Peregrinus View Post

Eliminating poverty involves two things:

First, increasing productivity in the economy. A large part (but not the whole) of this will involve increasing labour productivity, which in turn involves both increasing the labour force (i.e. reducing unemployment, improving labour force participation) and increasing the productivity of individual workers (e.g. by training, education, incentivisation, ensuring affordable childcare).

Secondly, reducing inequality in the economy. Increased wealth does not reduce poverty if a disproportionate share of it ends up in the hands of the very wealthy, or even in the hands of the not-poor. It will only lift people of out poverty to the extent that it goes towards people currently in poverty. There are a variety of ways in which this can happen - reducing unemployment, reducing taxation on the low-paid, greater transfers to the economically inactive (pensioners, the disabled), more social spending on services that benefit the low-paid/unpaid, etc, etc. Ideally you'd be relying on a combination of these things.

It's complex, because of course measures which may tend to reduce poverty in one way may increase it in others. Reducing tax on wages, for example, makes low-paid workers better-off, but it leaves less tax revenue to fund transfers to non-workers (the young, the old, the disabled) or to fund education and training which will raise labour productivity. So, on balance, does it increase poverty or reduce it? That may not be easy to say, and the answers people offer may tell you more about them and their ideological preconceptions (ether right or left) than it does about the policies.
This was a bit painful. These ideas are very prevalent among policy makers and certain lobby groups in Ireland. The only thing you touched on (kinda) that I agree with is the need for greater emphasis on apprenticeships but not the way FÁS (or whatever they re-branded that failed organization as) do it, but a wide range of quality and standardized apprenticeships, like they have in Switzerland.
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23-05-2018, 23:01   #14
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The fact is there will be relatively good and relatively bad times in the economic cycle, and a business's requirements for working capital will reflect this. Providing the working capital that the enterprise requires is not really the business of workers; it's the business of, well, capitalists. That, in fact, is why they are called capitalists.
In Venezuela, Maduro recently accused troublemakers of sabotage. I do not like or agree with Maduro but I am prepared to accept this possibility. You see, capitalists who are forced to live under Communism would want to bring that regime down. There were similar examples in Russia when the peasants lost their small holding and told to work on large collective state farmland.

Similarly, I suspect there are left wing citizen`s in Ireland who sabotage what they perceive as capitalism. The constant pay demands in return for mediocrity is the most obvious example.
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23-05-2018, 23:07   #15
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There is no solution to poverty.

If you somehow equally divided the worlds wealth equally between every person on the planet within a very short time you would still have people without a penny to their name
... but supposing the poor worked and forgot about pensions and entitlements etc and just focused on working all the time as a way of living. That would put a big dent in their poverty.
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