Mid Terms and minimum wage

Bad news is that Republicans took governorships and the Senate. Good news on the minimum wage and rewarding work.

For all that, the minimum wage is popular, very popular, as voters in four red states proved once again Tuesday. Nebraskans approved a ballot measure to raise that state’s minimum wage to $8 an hour next year and $9 in 2016; South Dakotans voted to raise it to $8.50 next year. Arkansas voters approved a gradual increase to $8.50 by 2017. And Alaskans agreed to raise it to $9.75 by 2016. 

In Illinois, the one blue state to consider the issue, voters opted for $10 an hour starting next year, albeit in a nonbinding referendum. 

Consequently, a majority of states, containing more than half of the working-age population, have or soon will have minimum wages higher than the federal minimum.

via Dean Baker

Anyhow, Lane wants politicians to stop raising the minimum wage so he proposes indexing it to the rate of inflation. The idea of indexation is good, but Lane has the wrong target. Back in the good old days, when we had 4.0 percent growth and 3.0 percent unemployment, the minimum wage rose in step with productivity. If it had continued to rise in step with productivity since its peak level in 1968 it would be more than $17 an hour today.

Keynes and the ZLB

The Liquidity Trap, the Great Depression, and Unconventional Policy: Reading Keynes at the Zero Lower Bound by Richard Sutch

QE and inflation

The Effect of QE on UST Yields by Mark Dow

Via Matthew Klein

Mark Dow has persuasively argued that it boils down to learning: a lot of people used to think bond-buying was equivalent to the policies that led to the Weimar hyperinflation and those people either changed their mind or were forced to leave the market because their trades kept blowing up. 

(Peter Thiel comes to mind.) 

Another possibility is that QE3 did affect inflation expectations but in a way that is invisible to the naked eye because we can’t know what would have happened in the absence of additional bond-buying. While intriguing, this unfalsifiable hypothesis leaves us feeling empty inside.

Did Dow anticipate Robert Waldmann?

Wren-Lewis, Mason and Waldman

Michael Woodford on the Interdependence of Monetary and Fiscal Policy by JW Mason

Some thoughts on QE by Steve Randy Waldman

Fighting the last war by Simon Wren-Lewis