Let's assume that you're saving that money in the bank. Your savings is a liability of the bank. Someone else's loan (car loan, home loan, credit card, sba....) is the bank's asset. Finance 101.

So let's say you work for a homebuilder and someone takes out a loan for $100,000 to build a home. When the loan is originated, two things happen: first, the bank records the loan against the individual and whatever collateral they post. Second, the bank deposits the amount of the loan in the borrower's account (escrow, etc). The borrower pays the homebuilder and the homebuilder then pays you in turn. Your savings are essentially a call on that home loan. Let's say that the person who borrowed the money is a baker and you frequent their bakery to the tune of $10/day. Every month or so your patronage of their business allows them to retire ~$300 of that home loan in this simple mini economy we've built.

Translating things to the real world, your $1,000 in savings isn't just a call on that one home loan, it's a call on any loan, to anyone, of any maturity, at any time. Your savings could be a call on a part of a loan to an automaker due in eight years, or a cellular service provider due in twenty years. Your savings, when you spend them, can be used by the debtor to pay off part of their debt or go buy factors of production at which point that seller can redeem any part of that debt.... so on and so forth.

While theoretically you can redeem your savings in the form of high powered money (actual physical cash) this is hardly ever done so most "money" just exists as a ledger entry.

Now let's say a bunch of private sector workers such as yourself desire to build up cash savings. The only way this is possible is if a non-personal entity, such as a business or a government, borrows and then spends money into the economy at which point the money can be accumulated by those who desire to hold it. If you were sharp, you caught an important point there: banks don't lend money to governments the same way that they issue a loan to you or me. What happens instead is that the government borrows money from private individuals (usually through an intermediary) and that loan is considered to be of such high quality that it can be posted as collateral for an additional loan (indeed, USTs are the collateral bedrock of the global financial system). As a result, government borrowing increases private savings through a two part process: the borrow and spend (which creates no new money on net) and the second-order effect whereby the government bonds become collateral for private sector loans (which does create additional money).

There's another mechanism by which government spending can inject new money but it's not important for the sake of this conversation... but I will say this: Bernanke was seemingly aware of it whereas Trichet, Draghi, Kuroda, etc were/are not.

I need to read when sober........

This is exactly the kind of secondary/tertiary effect that is beyond the CBO evaluation.

With such a substantial increase in minimum wage, there has to be substantial increase in pay across the board or everyone will just regress to the easiest work possible because it will still pay $15. As you identify, if minimum wage is $15, shit jobs that pay $16 now are going to have to greatly increase pay.

The CBO evaluation also probably doesn’t consider that the longer term (3-10 year effect) is increased automation to eliminate the overcost of minimum wage labor. It’s coming anyway, but minimum wage increase will only accelerate it.

Then there are the structural effects. A 14 year old kid is going to get $15 per hour at their first job? No, they probably just aren’t going to be able to find work.

The other structural effect is who pays the price. The average billionaire is not getting any exposure to minimum wage. When Walmart and McD have to increase prices because of high labor costs it’s other lower wage workers who are going to pay for this and reduces the proclaimed benefit. When Joe Billionaire goes to Barney’s for a new shirt, there is no minimum wage worker st any point in the transaction, so the minimum wage is largely taking from poor Peter to pay poor Paul.

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"When I first had the opportunity to compete in triathlon, it was the chicks and their skimpy race clothing that drew me in. Everyone was so welcoming and the lifestyle so obviously narcissistic. I fed off of that vain energy. To me it is what the sport is all about."

You say it’s not the governments job to be a wealth redistributor, but then you say the government should raise minimum wage, which redistributes wealth (but in an ineffective way). I can’t understand your position.

The real solution here is universal income, which is government directed income redistribution, but is the most effective way to do it. This would be extremely easy to fund by simply restoring individual and corporate income taxes to historically normal levels. The universal income would not be enough to live on, but would sufficiently supplement low wage workers to achieve the living wage which is the claimed goal. This also addresses the issue of youth employment, there is really no reason anyone under 18 or 21 (or any claimed dependent who might work) needs a living wage

Instead we have been brainwashed into believing taxes are too high (even though they are at the lowest levels in 90 years) and stupid proposals (about 90% of economists are against minimum wage) are being proposed which won’t really fix the problem and to the extent it does fix things buts the burden on the bottom 80-90% and gives the wealthy another free ride.

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"When I first had the opportunity to compete in triathlon, it was the chicks and their skimpy race clothing that drew me in. Everyone was so welcoming and the lifestyle so obviously narcissistic. I fed off of that vain energy. To me it is what the sport is all about."

Great post, I think this very eloquently hits the a big part of the nail on the head.

The 16%ers have become a point of reality. As you point out, in an increasingly knowledge based economy, about 1 in 6 people are “functionally illiterate”, i.e. can only be trained to do very basic (increasingly automated or eliminated) tasks. Minimum wage increases will absolutely not help these people.

Universal income is the obvious answer. On the one hand it’s radical socialism. On the other hand, I think most economists would agree it’s the only reasonable solution to the problem you identify. The alternative is more shanty towns of homeless beggars in the industrialized world. Even if you ignore the inhumanity of it, it’s worth the cost of universal income just do you don’t have to look at it.

You are totally restoring my faith in the collective intelligence of the lavender room. Very astute observations, all right on the money.

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"When I first had the opportunity to compete in triathlon, it was the chicks and their skimpy race clothing that drew me in. Everyone was so welcoming and the lifestyle so obviously narcissistic. I fed off of that vain energy. To me it is what the sport is all about."

This is something that has always bothered me about wage floors. We're undoubtedly pricing entry-level jobs out of the market. The kid scooping ice cream in the summer at your local shop? Yeah, that's not a $15/hour job. Lot's of seasonal, low-skill, and other jobs are not $15/hour jobs. Entry level jobs are important for young people because it teaches them very basic job-related skills like showing up on time (etc) and it's the start of a resume for most people. Without that, people won't take a job until much later in life at which point you run into the whole HR conundrum of "we're looking for someone who's 30 but with 20 years of experience".

UBI is the most appealing solution on its face. When I was an undergrad I saw the early days of the automation wave and thought "this is going to be a disaster" and I was a vocal advocate for UBI accordingly. As time has moved on, I'm not so sure. UBI is the sort of program that once you implement it you can't take it away so you better be damn sure it's the right program and that it's implemented properly. The whole "give a mouse a cookie and it's going to want a glass of milk" phenomenon is very real too so you have to be cognizant of that as well when implementing a massive social welfare program. A laughable recent example: British schoolteachers want price controls for vacation packages.

So with something with UBI you start with a stipend, and then that stipend isn't large enough, and then it's not being given to enough people, and then prices are too high....

It's easy to see how things could spiral out of control. With that said, I can't say with certainty that UBI isn't an eventuality. It's very much up for debate in my mind. In any event, there is not a pressing necessity. The "I" component of U.S. GDP is fairly low so there's still room for significant infrastructure investment should the need arise to take up labor force slack (comparatively, most European nations have stretched their "I"s about as far as they can reasonably go and China waived bye bye to reasonable levels of investment-driven GDP growth a long time ago and now they've created very serious distortions).

A simpler answer. You expect a return on your savings (no matter how small) how do you think the bank makes it.. they don't leave your money under the mattress or in the vault. They lend it to someone else who pays the bank interest and the bank gives you a small cut of it.

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Just Triing
Triathlete since 9:56:39 AM EST Aug 20, 2006.
Be kind English is my 2nd language. My primary language is Dave it's a unique evolution of English.

Why not pay them $15 an hour. Why is $7.25 so magical oh wait in most states that's not minimum wage. What happens when that High school kid gets a job at Costco. Do you think they say oh your only in H.S. we wont pay your our minimum $15/ hr.

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Just Triing
Triathlete since 9:56:39 AM EST Aug 20, 2006.
Be kind English is my 2nd language. My primary language is Dave it's a unique evolution of English.

Why not pay them $20 an hour? $25? More?! What the heck, it’s just money and we can raise prices right?

Serious question: have you ever looked at the cost structure of a low-margin service industry business? Labor is a killer, even cheap labor. I’m happy to post a spreadsheet here showing the cost structure for an Italian restaurant I just rented to.

Your statement falls into a similar vein as survivorship bias. We assume no job is worth less than $7.25 an hour and that nobody would work for less than $7.25 an hour because said jobs and employees cannot be observed... because it’s illegal.

Interestingly, we can see that employees actually *are* willing to work for less than minimum wage in the U.S. Disney exploits the J-1 visa program IIRC and pays the visiting workers something like $1.25/hour. Even after you factor in Disney provided housing and meal stipends, it still works out to less than minimum wage. Yet Disney only accepts something like 15% of all applicants and applicants come from wealthy countries such as Norway, the U.K., etc in addition to poorer countries.

Labor, like all goods, exists on a continuum and that continuum extends below arbitrary levels you or I or the government might pick. Fundamentally, supply lines slope up and to the right, demand lines down and to the left. Set a price floor and you’ll shift to a lower quantity demanded and create a dead-weight loss.

My minimum wage is $12 right now.
If you're under 20, for the first 60 days, you can be paid $4.25 "training wage"
If you are a full time student, you can only work 20 hours a week, and paid $10.20 (85% of min wage)

https://www.wsj.com/...nia-city-11563960603

"I just didn’t see how I was going to survive it," said Mr. Quezada, who opened the eatery in 2017.
...

Well he is in good company, I remember reading that about 80% of restaurants fail in the first 3 to 5 years. Don't think they are all in the Bay Area either..IF you are going to be one of the rare restaurants that actually make it, doubt a couple bucks an hour for the dishwasher is what would break you..