bruce—not hard to understand. But that is different than a flat statement that the EITC is a subsidy to low-wage employers, which was the assertion floating around that I was referring to. I don’t believe there is any empirical evidence for your fear either, but that is a different matter.

(this sort shows you don’t know the fast food industry very well. I don’t know about now but about 10 yrs ago an owner of a BK franchise made about 35K a year and put in some serious hours. Granted this was in the South so prolly below national average. But margins are really tight as it is a very competitive business)

…is that the reason they exist is because there are low-productivity people out there (hey I know, I was one of’em). It’s great when the “economy creates high-skilled jobs” …

(here the kudos being given to an abstraction called “the economy” rather to any, potentially “parasitic” employer)

…that some lawyer or doctor or engineer can take but that don’t do nothing for some guy who dropped out of high school at 16. I remember during the middle of the Clinton boom Ralph Nader sneering about how lots of the jobs being created were “low skill low paying jobs” and thinking “well, schmucko, that’s the only kind of job I gots the qualifications for right now”. If “the economy” “creates” low skilled jobs that means that somebody without a high school degree who was unemployed before now is employed (often this person being a teenager).

Given that the education system has failed some people (see the other CT post) the fact “the economy” or “parasitic employers” or whoever creates job that don’t require a lot of education is a good thing.

You elitist.

How hard is that to understand, Max?

Time goes by and little by little it becomes impossible to survive on $.5/hour; just not enough for the basic necessities anymore. What to do, what to do? Here’s what I do: I call my managers, security guards and mechanics and I tell them: look at these poor women working sewing machines 16 hours a day – all this work and they can’t even afford to sleep indoors. That’s a disgrace, we can’t let this go on like that. Starting today I’m going to deduct 10% from each of your paycheck and distribute it among the women – agreed? Sure, everyone wants to help the poor women. Great, problem solved, now I can go back to the Bahamas.

Now, this is, obviously, an ugly caricature, reductio ad absurdum of the EITC idea, I understand it. Nevertheless, according to your logic (if I understood it correctly), there is no subsidy to the owner here, exactly 0 subsidy – correct?

With considerably more effort, complexity, and data, that’s what the empirical research shows.

Your logic echoes the reductionism of Walrasian fundamentalism.

Slave wages are a disincentive to productivity.

I see some on the left repeating this because they find it hard to believe a gov measure could be helpful to the working class, and when I challenge them for evidence rather than their (semi)logical arguments, they have nothing but end up repeating the same thing later on.

“He who’s convinced against his will,
is of the same opinion still.”

Increase in productivity doesn’t necessarily translate into decrease in total employment. I think I read somewhere that in the 1960s (or 70s) the number of bank tellers in the US was projected to grow exponentially until every single resident would have to become a bank teller. But then ATMs were introduced, became common and destroyed millions of potential bank-teller jobs. Still, some people somehow manage to find employment…

And this constitutes empirical evidence how exactly?

“This sort of thing is possible…”

For example, it is confused to dismiss Zambelli on the grounds that his simulation investigates the existence of production functions. Zambelli finds that in 60% of his randomly generated economies, real Wicksell effects are sometimes positive. (The chances of reswitching occuring are a lot less, though they increase with the number of commodities. But reswitching is not necessary for capital-reversing.)

To continue, this sort of is possible in an economy with one capital good in which that capital good simultaneously is the one consumer good. At least, Ian Steedman argues so (Cambridge Journal of Economics, V. 18, N. 3 (1994): 299-311). I suppose one could argue the capital good is not homogeneous since the capital goods is distinguished by how old it is.

Anyways, the textbook assumptions are supposed to yield a model of supply and demand in the labor market in which a minimum wage causes unemployment. I present examples in which all the assumptions are met and a higher externally-imposed real wage results in more employment. Thus the textbook model is logically invalid. (Its nonsensical nature can perhaps be seen by trying to find a clear statement of assumptions in microeconomics textbooks.)