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Thread: Pay low-income families more to boost economic growth, says IMF

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    Pay low-income families more to boost economic growth, says IMF

    Conservative methods do not create economic growth. The Republican party exists to give the wealthiest Americans even more money.

    Pay low-income families more to boost economic growth, says IMF | Business | The Guardian

    The idea that increased income inequality makes economies more dynamic has been rejected by an International Monetary Fund study, which shows the widening income gap between rich and poor is bad for growth. A report by five IMF economists dismissed “trickle-down” economics, and said that if governments wanted to increase the pace of growth they should concentrate on helping the poorest 20% of citizens. The study – covering advanced, emerging and developing countries – said technological progress, weaker trade unions, globalisation and tax policies that favoured the wealthy had all played their part in making widening inequality “the defining challenge of our time”. The IMF report said the way income is distributed matters for growth. “If the income share of the top 20% increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20% is associated with higher GDP growth,” said the report.

    Echoing the frequent warnings about rising inequality from the IMF’s managing director, Christine Lagarde, the report says governments around the world need to tackle the problem. It said: “Raising the income share of the poor, and ensuring that there is no hollowing-out of the middle class, is actually good for growth.” The study, however, reflects the tension between the IMF’s economic analysis and the more hardline policy advice given to individual countries such as Greece, which need financial support. During its negotiations with Athens, the IMF has been seeking to weaken workers’ rights, but the research paper found that the easing of labour market regulations was associated with greater inequality and a boost to the incomes of the richest 10%. “This result is consistent with forthcoming IMF work, which finds the weakening of unions is associated with a higher top 10% income share for a smaller sample of advanced economies,” said the study. “Indeed, empirical estimations using more detailed data for Organisation for Economic Cooperation and Development countries [34 of the world’s richest nations] suggest that, in line with other forthcoming IMF work, more lax hiring and firing regulations, lower minimum wages relative to the median wage, and less prevalent collective bargaining and trade unions are associated with higher market inequality.”

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    Re: Pay low-income families more to boost economic growth, says IMF

    Quote Originally Posted by Anomalism View Post
    Conservative methods do not create economic growth. The Republican party exists to give the wealthiest Americans even more money.

    Pay low-income families more to boost economic growth, says IMF | Business | The Guardian

    The idea that increased income inequality makes economies more dynamic has been rejected by an International Monetary Fund study, which shows the widening income gap between rich and poor is bad for growth. A report by five IMF economists dismissed “trickle-down” economics, and said that if governments wanted to increase the pace of growth they should concentrate on helping the poorest 20% of citizens. The study – covering advanced, emerging and developing countries – said technological progress, weaker trade unions, globalisation and tax policies that favoured the wealthy had all played their part in making widening inequality “the defining challenge of our time”. The IMF report said the way income is distributed matters for growth. “If the income share of the top 20% increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20% is associated with higher GDP growth,” said the report.

    Echoing the frequent warnings about rising inequality from the IMF’s managing director, Christine Lagarde, the report says governments around the world need to tackle the problem. It said: “Raising the income share of the poor, and ensuring that there is no hollowing-out of the middle class, is actually good for growth.” The study, however, reflects the tension between the IMF’s economic analysis and the more hardline policy advice given to individual countries such as Greece, which need financial support. During its negotiations with Athens, the IMF has been seeking to weaken workers’ rights, but the research paper found that the easing of labour market regulations was associated with greater inequality and a boost to the incomes of the richest 10%. “This result is consistent with forthcoming IMF work, which finds the weakening of unions is associated with a higher top 10% income share for a smaller sample of advanced economies,” said the study. “Indeed, empirical estimations using more detailed data for Organisation for Economic Cooperation and Development countries [34 of the world’s richest nations] suggest that, in line with other forthcoming IMF work, more lax hiring and firing regulations, lower minimum wages relative to the median wage, and less prevalent collective bargaining and trade unions are associated with higher market inequality.”
    The quote is an opinion, not a fact. The republican party exists to win elections just like the democrat party.

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    Re: Pay low-income families more to boost economic growth, says IMF

    This whole things loses sight of the inherent quid pro quo nature of work and remuneration. I have no objection to anyone making all they can make - the maximum the market will allow. In the long run however, the market will determine this and not some pin head at the IMF making a statement proclaiming that wages are arbitrary. They are not. The relationship between production and wages is and will remain solid and operates with the range the market allows. Playing around the margins of basic economic principles will not change this and it will not rescue the poor or the middle class.

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    Re: Pay low-income families more to boost economic growth, says IMF

    They want us to work harder for less, and then maybe our reward will come in heaven. Did you notice that elite are now almost as rich relatively speaking as they were at the beginning of the century? The society is so divided again.

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    Re: Pay low-income families more to boost economic growth, says IMF

    I found two graphs rather quickly which I feel illustrate something important.
    http://assets.motherjones.com/politi...eholdincom.png
    http://www.heritage.org/~/media/imag...9-chart-2.ashx

    As government spending on social welfare programs increases the gap between the rich and the poor increases. The government has steadily been increasing in size and power, under both parties, and this increase has seen an increase in income inequality.

    There is a basic economic issue which has remained unaddressed, as technology increases the need for unskilled labor will decrease. As things like the minimum wage increase you alter the cost effectiveness of automating such labor. While this is a gradual process it is accelerated when greater pressure is placed upon the market by increases to the minimum wage. The issue that needs to be addressed is that to function the economy does not need a large portion of the population. The market for unskilled labor is small and shrinking daily.

    The secondary issue is that due to the way current social programs are set up, the unskilled portion of the population is increasing. Those on welfare and government assistance have more children then those making their own money. This is because of a very logical decision on the part of both groups. Those making their own money, below that of the ultra rich, factor into their expenses the cost of children and thus tend to have very few so that they can take care of them to the level they believe appropriate. As those on government welfare programs are provided income for each child, they have no specific incentive to keep their reproductive rate low. Multiple studies have also shown that those whose parents are on welfare are more likely to end up on welfare themselves. This is for a variety of reasons probably most significantly that a parent on welfare usually lacks the job skills and education to help their child achieve more.

    This is causing an imbalance in the population. The portion of the population that is dependent on government subsidies to live is increasing both because of decreasing job prospects and increased fertility rates for those on welfare. As this population increases the cost of these programs also increases. Such costs are generally offset by increased taxes and fees. These increased taxes and fees are primarily felt by the middle to upper class, though not by the ultra wealthy who have enough money to move it around the new legislation. This pushes the majority of income earning and productive citizens further down the income bracket and invariably some percent off the income bracket onto the the government welfare programs. This is quite obviously a cyclical phenomenon that will continue to get worse.

    The problem is you cant fix it by increasing the taxes on the ultra wealthy for a variety of reasons. First the increased taxes will not provide more unskilled labor jobs, this means while benefits might increase job opportunities will not. Secondly the ultra wealthy have the money to hire experts who can find the loopholes in the regulations so they can legitimately avoid paying them. This is why our current byzantine tax system favors them. Without the money to hire experts one cannot fully take advantage of it. This is not to say there is anything wrong with them taking advantage of it, why should they pay more then they are legally obligated to, no one wants to pay more taxes then they have to, so why should they.

    There are very few answers to how to solve the problem of income inequality but government programs do not appear to be the solution. All data on them seems to indicate that they in fact increase the problem and make it more difficult to change. When you pump money into the low income families it has to come from somewhere and that somewhere is generally the middle class to the upper class. This is a cannibalistic behavior as all socialist programs are, the destroy the people they depend on for survival in order to increase the comfort of their current position. If things stay the way they are the welfare population will continue to increase. As the skilled labor market shrinks it will become harder and harder for the country to sustain the ever increasing benefits. If one wants to see this future in action simply look at Greece. If we want to fix income inequality we need to incentivize education and jobs, not simply increase their income for the same amount of work.

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