On Wed, 02 Apr 2008 19:38:54 -0400, "Max B. Sawicky" <sawicky at verizon.net> wrote:
>> . . . If wage is X and cost of living is C (including location and
> other rents,
>> naturally) and X goes up, by say XTC, what happens to C?
>> Now let me know if this is crazy, but more money chasing the same goods
>> and locations means, it seems, higher prices? (especially higher rents).
> Not crazy, but nobody has ever shown that the Earned Income Tax Credit
> raises prices.
I hope you're not suggesting I should hold off on applying a logical analysis until somebody graciously provides a study that tells me what I should believe.
> It's $35-40billion in a $14 trillion economy.
However the net extra incomes of the relevant wage earners is 100% of the economy being discussed, and the relevant wage earners are not competing for the same goods and locations as the rest of those trillions.
> And even then, the
> issue would be whether the price rise totally offsets the credit (and
> then, maybe
> the wage goes up too, since it's a price as well).
Yes certain prices trump others, wages (or any supply which can be increased with labour and/or capital) can not resist location rents (or any supply which is fixed).
Thus any increase in prices in competitive markets, i.e. wages, are captured by non-competitive prices, i.e location rents.
>> How much up? Well if the amount of extra money competing
>> for the same goods and locations is XTC, what's to stop landlords and
>> there fellow rentiers from raising prices to absorb XTC?
> If they could have raised their prices, they would have done it
> previously.
??
Where would the money have come from to fund the qualified demand to support higher prices before any increase in nominal net wages?
> In this vein, it's not obvious how much a given person is entitled to
> under
> the credit. The law is sufficiently complicated to confuse taxpayers,
let
> alone employers or merchants who have even less information to go by.
As I said, I have no idea what the EITC is, my comments do not relate to any specific tax system.
>> Therefor, yes if "a" in your formula is the value of higher prices
>> (especially rents), then it will indeed equal any TC.
> If. But there's no evidence. Nobody has even thought it an important
> enough possibility to investigate it.
You say there is no evidence, I have not read every conceivable study to know that. In anycase, who gets to decide what investigations to fund?
Off the top of my head, Daniel Bell's research on collective bargaining, while not directly related, is instructive here. In "The Subversion of Collective Bargaining" Bell shows that wage increases earned through collective bargaining are always subsequently absorbed by price increases, and thus never in fact change the general level of real wages relative to rents and interest, only
the structure as certain groups, as some wage-earned make gains against others.
I see no reason to suspect that nominal net wage increases from some tax credit scheme will wash out any differently.
Well, except that, being more uniform, such schemes allow less potential for even structural gains by some workers against others.
>> "It is sometimes said it would illogical for labour to resist
>> a reduction of money-wages but not to resist a reduction of
>> real wages [...] experience shows that this is how labour
>> in fact behaves"
>> -- John Maynard Keynes,
>> The General Theory of Employment, Interest, and Money
-- Dmytri Kleiner editing text files since 1981
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