[Lemmy]

Bruce_the_vii wrote:

I've stated that the emerging countries are trying to industrialize in low tech and then move up to better industries to improve their standard of living. It's the world plan and is illustrated by Japan, Hong Kong and Korea. However you can't talk to the likes of Lemmy and Khar about it - academia will interfere.

You can't talk to me about economic development? Why not? International development is an issue and a topic that I'm both interested in discussing and researching. Hell, I wrote my dissertation on Singapore's development. Confused.

[Bruce_the_vii]

Well thanks for the polite response. My own information is rather limited, of course. However in my life I've had rather a lot of problem with the experts, which I call expertitis.

[Lemmy]

Nice new word, expertitis. I would, however, define "expertitis" to be "an illogical unwillingness to accept the opinions of those who know more than I on a particular topic". I agree with your diagnosis.

[Bruce_the_vii]

I've articulated a plan for patching the Canadian job market. I sent it Ken Dryden, my MP, and his office wrote back saying they'd look into it further.

..................Manipulating Society with Minimum Wage

An unsung aspect of normal economic growth is it moves the population up to better jobs. When Japan developed in the 1950s and 1960s it moved from low tech to high tech, improving wages and living standards. The worst of the low tech businesses were gotten rid off, moved off shore. The pattern was then repeated with the four Asian Tigers in the 1960’s and 1970’s. Hong Kong, Singapore, Korea and Taiwan all moved to Western levels of income. In fact this is the plan for all the emerging economies, to move up. It applies to the West as well, specifically to the cities that have robust growth but a large McLabour component. However, there’s a problem, this upward movement isn’t happening – which is the actual unsung aspect of the idea. Here I suggest a fix.

In an economy with growth people will move up as better jobs become available. When someone gets a better job he or she is replaced in turn, typically from below which is a domino effect. The domino effects in the labour markets reaches down to the worst jobs around. Then what happens with growth is at the very bottom as workers move down the street to better jobs employers will run out of bodies, wages will inflate, and the worst businesses won’t be able to keep up. They won’t survive. This is how society moves up better jobs and atrophies the worst industries.

In general in a growth economy as good jobs are being created labour people move to better industries and shortages develop, there’s wage inflation. The better businesses recruit from below, do on the job training and offer better wages. Businesses across the board that can’t keep up go under. However, the domino effect in the labour market assures that growth squeezes the bottom in particular. The high level of formal education in our society keeps the labour mobility in the businesses above the bottom staffed as well.

Many Western cities have good growth and the labor shortages are met with immigration. All immigration programs are bureaucratic and cause some unemployment, which economists explain away as a short term cost to long term growth. However, the unemployment suppresses the wage inflation at the bottom and eventually short circuits the upward movement to better jobs. In fact the persistent unemployment from bureaucratic immigration movements is an enabler of the further growth of the low wage sector.

The Greater Toronto Area, now population 5.6 million, is the center of the Canadian economy, one of the worlds leading immigration cities and has always had good growth. However its low wage sector is now large and troubling, some 16% of the jobs for adults pay $12 an hour or less. Toronto is an example of a good growth city with strong immigration leaving the bottom in bad shape. The low wages are unpopular and a social problem.

If you have immigration, you should legislate a high minimum wage, possibly just for a city region, to correct for the suppression of the upward growth at the bottom. That’s the idea being promoted here. In particular legislating a minimum wage for a city area.

The low wage economy is pretty dysfunctional. It causes poverty, affects most families over time, and is highly subsidized as low wage workers don’t pay their fair share of taxes. The low wage economy is characterized by too many small businesses that are not busy, productive, or profitable. They are economically dysfunctional as well as socially dysfunctional. You can see this with your eyes in any city in Canada where the main roads are lined with strip-malls, fast food and restaurants and marginal small businesses.

A high legislated minimum wage would inflate, cost jobs and slow growth. However in the Western growth cities this mainly means you trim immigration.

The worst off workers would be protected by a high legislated minimum wage. In fact it protects them from the side effects of immigration, which is keeping unemployment persistent, the de facto minimum wage down and preventing upward growth. It’s of note that immigration is central planning of the economy by the government so a high minimum wage protects the worst off from the government.

Also be reminded that much of the labour force is protected from the free market. Unions, big corporations and governments protect their employees from labour market vagaries. Skilled and professional workers with some economic power are also protected by their employers. They are treated like a long term investment and their wages do not bob up and down with the market, as do commodity prices by comparison.

Cities like Calgary or Edmonton in the Canadian oil patch pre-recession which had good economies but also robust immigration posted some better numbers. There workers earning less than $12 went down to 7 to 10%. The de facto minimum wage was reported as $10 to $12 an hour. A legislated high minimum wage there could be $12.50 or so – an increase of $1.50 an hour for the worst off on average. The inflation from that would only be ¼ of 1%. If the technique, the experiment, worked well you could consider being more aggressive. Calgary and Edmonton had good economies but the immigration still shaped their growth, including at the bottom.

At this time Canada and the USA have the same nominal average wage so the $12.50 figure would apply to America as well.

Immigration suppresses wage inflation and particularly at the bottom where the inflation is useful in weeding out worst businesses. The suppression of wages at the bottom is a tax on the worst off worker, making such people very highly taxed. A $12.50 legislated minimum wage in an immigration city is less of subsidy and more of a correction of these two problems with the strategy to maximize growth with immigration.

A family with two people working at a high minimum wage would earn $50,000 a year. This is $7,000 above the Low Income Cut Off (LICO) for a family of four.

The main immigration cities of Canada; Montreal, Toronto and Vancouver have been swamped with immigrants and despite good growth are well behind Calgary and Edmonton. These three central cities are now characterized by people having dropped out of the labour force because of the difficulty to find suitable employment. Raising minimum wage there might be delayed until their economies improved.

A major aspect of the Canadian labour market it has not been producing good jobs. The jobs being produced are contract positions, in boom and bust industries and typically without a pension plan. On average the jobs been created are below average. Boosting the minimum wage to $12.50 would cut the bottom and skew the arithmetic average of the jobs around back up.

Canada has always been about good jobs, it’s our philosophy. However, it has been backsliding in this regard for three decades or so. It has affected social order, more and more people are insecure. Everyone, every politician, is concerned about good job creation but good job creation is elusive. An alternative is to simply cut the bottom with a high minimum wage as growth produces replacement jobs. You can pay now with a little inflation or pay latter with an even worse jobs market and the social and economic costs of that. It’s only fair and it’s entirely strategic.

[Bruce_the_vii]

Immigration is set by an annual quota, the present quota was set in 1993. It doesn't correspond to the economy. It tends to cause some unemployment which economists call "a sort term cost for long term growth". In fact the little unemployment becomes permanent, this depresses wages at the bottom, encourages growth of minimum wage enterprises and causes middle class people to drop out of the labour force. Toronto is a foremost example of this. Toronto should be doing better than Alberta. Instead it's posting some monster numbers on social dysfunction.

The government has funded five immigration research centres for the last 10 years. They have produced a cornucopia of reports. These are on topics like how immigrant youth with english as a second language affect universities. A long list of research topics. In ten years these research groups, called Metropolis, have not looked at the effect of immigration on unemployment. I call it expertitis. It's possible and likely that experts are in the dark about their own specialty, the common sense of it.

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