“Restructuring the market so that less income flows upward has the same impact as taxing the income away. …it has the huge benefit over taxation in that it is done through the market. This is enormously more efficient than handing rich people money and then trying to take it away with taxes.”

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>I wrote a piece last year pointing out that in the three decades from 1938 to 1968, the minimum wage not only kept pace with prices, it also rose in step with productivity. This means that as the country got richer, so did the workers at the bottom rungs of the wage ladder. > >In the years since 1968, the minimum wage has not even kept pace with prices, so that a worker getting $7.25 an hour in 2022 can buy far less than a worker earning the minimum wage in 1968. However, if the minimum wage had continued to keep pace with productivity growth, it would have been more than $26 an hour in 2021. (It would be over $27 an hour today.) > >Imagine a country where the lowest-paid full-time worker was pocketing more than $52,000 a year and a two-earner couple would have more than $104,000 a year, even if both were just getting the minimum wage. This is not possible in our world, where the economy has been deliberately structured to send so much income to those at the top, but we should never forget that this is a policy choice. > >We have implemented a set of policies that give large amounts of money to people in a position to benefit from patent and copyright monopolies, to CEOs and other top management, and to a favored few in the financial industry. These groups will fight like crazy to prevent these policies from being reversed. > >But, the first step in the battle is recognizing they rigged the deck. Don’t let them ever get away with saying that it was just the natural workings of the market. –Dean Baker, senior economist, CEPR


> > >Instead of getting well over $1 million a year, maybe the president of a major university would draw pay in the high hundreds of thousands. And the provost and deans would be in the middle six figures. That would mean a radically different pattern of income distribution with a lot more money available to those lower down the pay ladder. No, it wouldn’t. It would mean less money for elite labor and more money for shareholders. There is zero reason to expect businesses who are paying their CEO less to pay rank and file employees more. >Imagine a country where the lowest-paid full-time worker was pocketing more than $52,000 a year and a two-earner couple would have more than $104,000 a year, even if both were just getting the minimum wage. I think the author intended this to be hopeful, but I’m feeling quite dystopic. I am imagining either a world with staggering levels of inflation or very high structural unemployment. There are very many workers who do not produce $50k a year of value in current dollars. >Pension funds and universities can structure their contracts so that the entire payment is dependent on beating a threshold. In that case, if a fund trailed the S&P 500, they would get nothing. (There can be a clause that ensures everyone who worked for the fund gets the minimum wage for the time they put in. We wouldn’t want to undermine labor laws.) Some private equity and hedge funds would balk at this sort of arrangement, but if these fund managers don’t have confidence in their own ability to beat the market, why should institutions risk money with them? This is a really, really terrible idea. If you offer to pay me a share of the take in excess of market, and zero if I don’t beat market, my incentives are to go for ultra-risky investments. I’m putting the whole endowment in DOGE. If it works, I get a huge payday. If it doesn’t work, I don’t eat any of the losses. The “2% of assets under management” is an incentive for the fund manager to keep the pile of assets under management large.


Fine article. Made me think, especially about “how” issues. Some of the proposed solutions seem blunt and with downside risks. Still, thumbs up!


You can thank the Fed who half ass their job last year. We would be in a much different position continuing to slow growth but steady. But these idiots are behind the curve. Just like Powell screwed the rate hikes a few years ago.


It’s a fountain. You keep the water fresh by moving it upward redirecting the downward pressure formed ideally by gravity from a wide basin all around. If you want to drink from it, there’s an optimal height where it isn’t just sprayed all up into the air to dissipate eg a trillionaire paying 10,000 lawyers to find tax shelters. There’s also a height so low that you end up lapping up stagnant water from the pool.