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[Jeff Harkins]

I am removing the items that I think have run their course - leaving 
issues that remain contentious:



>>Social mobility studies suggest that the friction that restricts
>>movement of low income levels to higher income classes is highly
>>correlated to education (quality and level achieved) and a set of
>>transferable/marketable skills (ability to provide value added
>>services). If one wants to enhance the opportunity for moving from
>>one social class to another, improve access to quality education
>>systems. Other significant factors appear to be indifference (don't
>>care), place bound (not able or unwilling to relocate) or believe the
>>shift would require too much effort on their part.
>
>This is true but insufficient.
>
>First, there is, at least for the forseeable future, the labor market
>-- especially for intangibles, where there literally no disadvantage
>to offshoring  -- is deeply imbalanced in favor of large employers.
>National borders are permeable for large purchasers of labor, but
>impermeable for individuals wishing to sell their labor. I cannot
>follow my job to India, nor could an equally qualified Mexican worker
>take my job.

Why couldn't you follow your job to India and why couldn't a Mexican 
worker take your job?  We hire many international faculty here at UI?

>Second, the employer gains bargaining power by being able to subject
>low-wage employees to unacceptable levels of risk. I'm not talking
>just about insurance, though the ability of an employer to extend or
>remove an employee's access to potentially life-saving treatment is
>certainly part of it. A person making $7.00/hr has no real capacity to
>buffer themself against the potential of a lost job: even assuming
>that they have the capacity to save, fixed costs -- like energy and
>rent -- occupy a proportionately larger portion of their income. This
>makes the consequences of a drop in income, and the potential anxiety
>accompanying the threat of a drop in income, much more severe.

I wasn't aware that the Workers Compensation programs and 
Unemployment Insurance programs had been eliminated.

>If I suddenly get poorer, I drop my cable Internet. If I stay poorer,
>I miss a credit card payment, or several. If I suddenly drop to zero
>income, it will likely be some time before my  landlord decides that I
>am no longer welcome, or Avista decides that I'd be better off without
>power. Even if I suddenly become grossly incapable of meeting any of
>my financial commitments, I go live in my mother's basment and likely,
>Mr. Harkins, harangue you from there, though I suspect with much less
>credibility.

Well, I won't get into the issue of credibility of your arguments 
based on your social status.  I think my record is clear - I focus on 
the issues and not your wealth status.  Now then, if you suddenly 
become poorer, what additional safety nets would you require in order 
to be on both feet and secure so that you can put the pieces back 
together and rebuild your life.

>Third, you might note that higher social mobility correlates with
>functional, well-administrated social welfare systems. This may have
>to do with the fact that education  is a relatively high-order need;
>one you are unlikely to be concerned with if you are worried about
>what or whether you are going to be eating tomorrow morning.

Gosh Andreas - I don't quite know how to respond to this.  The record 
on social welfare systems is mixed, but the majority of studies that 
I have seen seem to conclude that welfare systems are a single and 
enormous element that exacerbates a static or no movement state for 
the folks in the welfare system.  There is apparently a problem with 
the fact that most welfare systems don't provide an incentive to move 
to the next level.

As to education, between private scholarship programs and public 
funding for education (loans, grants, etc.) a significant burden has 
been lifted from those individuals who invest the time and effort to 
obtain financial assistance.  Over my 30 years in higher education, I 
just have not come across a persistent situation where students are 
denied an opportunity to pursue university level studies.


>>These same studies support the notion that human will/spirit is the
>>prime element in moving from one income class to another.
>>
>>Your model would seem to imply that being a member of a society
>>entitles you to a "social equity" income class - sounds like a pitch
>>for welfare to me and not far removed from the "living wage"
>>concept.
>
>I believe in the distinctly un-leftist principle that work should have
>something to do with wealth, which, at this moment, it does not. A
>minimum wage is not welfare. A fair wage is not welfare. A living wage
>is not welfare. Though, to warn you, I wholeheartedly recommend
>welfare as well: the presence of a robust welfare state correlates
>fairly well with social mobility. The absence of market controls does
>not.

Your argument is very convoluted.  Declaring something does not make 
it true, nor does defining terms to fit your argument validate your 
argument.  Your argument for government regulated wages ignores the 
wage spiral problem.  Sooner or later (and in robust economies with 
educated consumers - sooner is the reality) the market must adjust 
for the artificially defined wage. The result is an increase in price 
or a reduction in employees.  In those markets where the lesser 
skilled worker obtains an artificial wage and is, at the same time, 
relegated to have to purchase goods and services from the local 
markets will obtain no increase in overall purchasing power.  Then 
the spiral begins - as those who support a "living wage" must lobby 
for an increase in the wage levels, which then prompts another round 
of price increases to compensate for the increased labor cost (or 
fewer employees).  The research is solid - the "living wage" or 
regulated wage does not produce the intended result.  It just creates 
a false hope.

>An aside: are you aware of what monthly TANF benefits are in the 
>state of Idaho?
>
>>  The fact there is no reason for a business entity to pay
>>more for labor than the value of the labor in the production and
>>delivery of goods and services.
>
>This definition is circular. The value of labor is the consensus of
>what employers are willing to pay.

You are assuming, of course, that employers collude to set wages.  It 
is clear to me that you have not studied the hiring processes of very 
many firms.  Go talk to any department head on campus.  Ask about the 
competition between institutions to hire entry level professors.  Be 
sure to inquire about the movement between WSU and UI for faculty and 
staff.  And be sure to raise these questions with Ed Schweitzer 
regarding the market for engineers.  I have volumes of data about the 
market for accountants - which has now risen to the top 5 starting 
salary positions for entry-level undergraduates.  You might find 
substantial evidence to refute your basic assumption about employer 
collusion.

In an anecdotal vein, talk to the managers of our local building 
supply stores (TriState, Moscow Building Supply, J & J Building 
Supply and Spence Hardware.  Ask them about your claims of collusion 
to set wages for their employees.

>And, again, you're arguing that the valuation of labor is
>intrinsically rational. Though it has historically been, there's been
>a total decoupling between productivity gains and median wage growth.
>Unless you can tell me with a straight face that the gains in
>productivity have almost entirely been restricted to the top quintile
>(and have been in the high double digits for the top quintile of the
>top quintile), the labor market is behaving in a way that appears to
>be at odds with any rational valuation of labor.

Of course it is rational - as much as any human judgment can 
be.  Perhaps come and sit through some of the management courses 
offered here at the UI - particularly courses which address personnel 
management.  I think you will be surprised at the extent to which 
firms utilize economic modeling to aid and abet their hiring practices.

>>Thus, unless the employee
>>contributes to the value of the enterprise (marginal revenue product
>>exceeds marginal cost), there is no reason to employ that
>>individual.  And over time, unless that individual enhances their
>>value (e.g., added or improved skills, lower error rate), there is no
>>basis for increasing the wage compensation of that individual.
>>
>>The fact is though - very little can stop the cream from rising to
>>the top.
>
>I don't mean to discount the importance of personal accomplishment,
>but the history of "self-made men" is one of the merely well-off
>transforming themselves into the obscenely wealthy. Bill Gates'
>parents were millionaires. J.P. Morgan inherited a ten million dollar
>fortune. Henry Ford's parents owned one of the largest farms in
>Michigan. E.I. DuPont was descended from French nobility.

I would suggest you read the biography of Bill Gates.  You may 
discover that he was not financed by his parents.  Similarly, 
consider reading about Adam Osborne, Steve Jobs, Ted Turner, Trammel 
Crow, J R Simplot, Sam Walton and Henry Luce. Also,  the magazine 
"Entrepreneur" is a fine reference for learning about the numerous 
accomplishments of aspiring capitalists.  You can find it at Hastings.

>Andrew Carnegie's family, though, was pretty much broke. There's one for you.
>
>>Persistence and determination, coupled with observation and
>>ingenuity will nurture a robust opportunity for individuals to move
>>through the social stratums. There seems little substitution for
>>effort and achievement.
>
>This is a statement of faith as much as it is a statement of fact. I
>believe in individual acocmplishment, and I believe in the strength of
>markets, but I don't believe in the infallability of markets. This is
>the same sort of magical thinking disguised as economic theory that,
>for instance, brought us the Laffer Curve.

We will just have to agree that we have different philosophies on 
this point.  I was raised in an environment which nurtured the notion 
of working hard and working smart, of not expecting others to take 
care of me and when neighbors are in trouble, do what you can to help 
them through their time of difficulty.

>>You seem to confuse achievement with consumption. Why would you
>>define the "American Dream" in the context of a gold-plated Rolls
>>Royce?  The American Dream that I subscribe to is built on the notion
>>that "if you are willing to make the necessary sacrifices and
>>efforts, you have a great likelihood that you can be what you want to
>>be. In this world, there is no free lunch.


>The economic system in this country is a gaming table where certain
>people are betting their pocket change and others are betting their
>lives. While I don't recommend the equal distribution of money and
>misery, the idea that both groups are rational economic actors in
>exactly the same sense is a convenient pretense and very little more
>-- and the ways in which the working poor cannot make what would
>otherwise be rational economic decisions are being exploited, very
>much to their detriment.

Again - we are light years apart on this philosophical view.  Let's 
just agree to disagree.

>-- ACS



>>I've read volumes about the captains of American Industry. I've
>>carefully selected the recommended biographies.
>>
>>At 11:03 AM 8/29/2006, you wrote:
>> >On 8/28/06, Jeff Harkins <jeffh at moscow.com> wrote:
>> >>Bill,
>> >>
>> >>Here is a simple thought for you to ponder ...
>> >>
>> >>The ultimate force that assures that competitive behavior and free
>> >>choice will provide a check on greed is that there is nothing that
>> >>can prevent you from becoming the next CEO earning $200 million - you
>> >>simply have to be willing to commit to that agenda and be willing to
>> >>make the sacrifices necessary to achieve your goal.
>> >
>> >This is utter nonsense, Jeff. As an economist, you should know
>> >full-well that it's utter nonsense.
>> >
>> >Social mobility has declined since the 1970s. 42% of people born in
>> >the lowest income quintile die in the lowest income quintile. 24% move
>> >up a quintile. Less than 5% reach the top income quintile. Likewise,
>> >36% of people in the top income quintile remain in the top income
>> >quintile. Note, also, that this is lifetime social mobility --
>> >including the expected increase in wages over a lifetime. This is a
>> >problem, both in terms of social equity and in terms of efficiency:
>> >talent is spread more widely than income, and we are insufficiently
>> >capitalizing on the talents of our low-income citizens.
>> >
>> >For God's sake, Jeff, social mobility is higher in Finland, Norway,
>> >Germany, France, Canada, and Denmark. Only Britain has a lower degree
>> >of social mobility than the United States. The "American Dream", at
>> >least insofar as the "American Dream" involves becoming a
>> >multi-billionaire capable of gold-plating his Rolls Royce, is, in the
>> >21st century, a collective hallucination on the part of the American
>> >people.
>> >
>> >>Yes indeed - you could be the CEO of WalMart and you could then
>> >>restructure that company or any other multinational firm as you see
>> >>fit - as long as you satisfy the return on capital demands of the
>> >>shareholders and the expectations of the capital markets.
>> >>
>> >>It really is that simple.
>> >>
>> >>You might consider reading the biographies of Dupont, Firestone,
>> >>Ford, Hughes, Vanderbilt, Osborne - even Gates (to name a few) to
>> >>gain a sense of how this is possible.
>> >
>> >You might want to consider reading the biographies of Paris Hilton,
>> >John E. Du Pont George W. Bush, Edsel Bryant Ford. You might then want
>> >to take a chance with the biographies of the second generation of
>> >robber barons: the children of Astor, Morgan, Carnegie, and
>> >Vanderbilt. Then you might take a moment to remember that Ford was a
>> >vocal pro-fascist who used his considerable wealth to promote very
>> >little other than anti-Semitism. Then you might take a moment to
>> >consider the social good acomplished by ridiculous and unprecedented
>> >concentration of wealth in the hands of a small number of people.
>> >
>> >-- ACS
>> >
>>
>>
>