Lion of the Blogosphere

Minimum wage and Democrats

According to the NY Times, the Democrats see a minimum wage increase as a key strategy for 2014.

I don’t think that a minimum wage increase is as popular with the people as Democrats think it is. The person who is most opposed to a minimum wage increase is not the rich Republican, but rather the person who makes around $30,000 per year, and sees a minimum wage increase as extremely threatening to his social position because it will give an undeserved raise to people he has worked hard to rise above.

However, I predict that if the minimum wage is increased, there will be no discernible economic harm resulting from it. This is an easy prediction to make because past increases in the minimum wage to not cause any discernible economic harm. In fact, a minimum wage increase wills stimulate the economy by putting more money into the hands of people who tend to spend every cent they have.

Written by Lion of the Blogosphere

December 30, 2013 at EST am

Posted in Economics, Politics

50 Responses

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  1. R’s need to get out in front of this and champion it. It polls very well, it encourages automation and shrinks the pool of “jobs Americans won’t do”; why let D’s use it as a wedge?

    Fiddlesticks

    December 30, 2013 at EST am

    • It polls well, but people don’t give a crap about it unless some pollster is pestering them. 99.9% of the time, it never enters into their thoughts.

      Some Guy

      December 30, 2013 at EST am

      • What Lion is saying is that the D’s/MSM will collude to make sure it enters into everyone’s thoughts in 2014.

        Sandra Fluke all over again. Look at @Instapundit’s TL during the fast-food strikes…it’s obvious that there are some moneycons with latent comtempt for low-wage workers, and some R’s will get baited into making gaffes or awkwardly insulting them. Then it’s off to the races.

        Fiddlesticks

        December 30, 2013 at EST am

    • “R’s need to get out in front of this and champion it”

      Yeah, that’ll be the day. The R’s are totally bought in on globalist crony capitalism — which they laughingly refer to as the “free market” — and they will never support such a thing. Also, when it comes to political tactics the Republicans are morons.

      peterike

      December 30, 2013 at EST am

  2. Because of the underclass safety net, the small numbers of marginal minimum wage workers who lose their jobs will not experience must change in their total level of consumption. I still think subsidized full employment is the best policy and better than minimum wages or EITC.

    Companies bid to employ the unemployed – ‘I can pay $2 an hour for some ditch-diggers’ – ‘I can pay a little more, $2.25’ – but the government fills the gap between that full-employment wage and the ‘living wage for a minimally decent life of dignity’ (whatever that is, and anyway, which just replaces the expenditures of the existing underclass welfare state) in a way that is obscured so that the worker doesn’t notice.

    He just gets the pride of being a $15/hour ditch-digger, and is incentivized to live a more bourgeois lifestyle and maybe even demonstrate some of those virtues to his kids.

    Handle

    December 30, 2013 at EST am

    • Agree to a point… idle hands, idle minds, and all that. However, as Lion has repeatedly written, managing low-skill labor is often a negative value creating effort. A crew of shiftless $2/hr broom pushers will still need a bull manager riding their butts to make sure they are: 1) getting the job done 2) not stealing from inventory 3) not breaking some high-priced machine they shouldn’t even be touching in the first place 4) wrecking the morale among other workers performing vital tasks but getting the same or only slightly more money in wages.

      In short, dealing with a structural underclass is a tough problem. An ounce of prevention is worth a pound of cure, but Dem’s benefit from the votes and Chamber of Commerce Rep’s benefit from the near-term negative wage pressure.

      Portlander

      December 30, 2013 at EST am

      • You can always decrease the bids to negative territory. Instead of it being worth $2 an hour to you, you may need to be compensated $2 or more an hour or more for adult work-daycare. It’s still much less wealth destructive than prison.

        Handle

        December 30, 2013 at EST pm

      • The Germans adopted this system years ago. http://www.forbes.com/sites/paulroderickgregory/2013/05/05/why-obama-cannot-match-germanys-jobs-miracle/

        International comparisons work better than “We raised the minimum wage by fifty cents and the end of the world did not ensue on the exact date of the rise”, because the difference between nations tends to be much larger than the difference within one nation on date x.

        If nation A does one thing on date X, and then goes into decline, well, the decline could be due to many things, but if we compare nation A and nation B, the case that X is causal is more plausible, particular as nation A usually goes on doing similar things on dates X, X +1 year, X + 2 years, and so on and so forth.

        Germany applied economics 101. Employment will rise if it workers have an incentive to take jobs and employers have an incentive to hire.

        Here, we hear terribly expert economics telling us incentives do not matter, so the government can destroy incentives as much as they like and everything will be lovely.

        Note that the Obamacare tax increase introduces a bunch of cliffs, where earning one more dollar means you receive far fewer dollars. This is a government that simply does not believe that incentives have effect.

        James A. Donald

        December 30, 2013 at EST pm

      • Well, we’ve had EITC for years, which is similar. I’m aware of the German example. Hartz IV does indeed incentivize work, but it’s still more like EITC (but with more power in the job centers) than what I’m talking about.

        Handle

        December 30, 2013 at EST pm

    • In my view the economics and politics of this are all negligible. The middle class can adsorb the resulting price rises while the poor already vote Democrat.

      I still think subsidized full employment is the best policy and better than minimum wages or EITC.

      The better policy is hiking minimum wages. It will filter hardworking but unskilled whites from unemployable minorities and scumy non-white immigrants. Whites are rewarded with higher wages while non-whites are pushed out of the labor market. And it also disincentives low-skill immigration.

      One could argue newly unemployed minorities will just add more tp the welfare burden. But I see even this as a pro – more strain on the welfare state speeds up its collapse and, over time, makes sterilization for lifelong welfare arrive sooner.

      The Undiscovered Jew

      December 30, 2013 at EST pm

    • Interesting concept. I have a team of Pakistani workers that do data entry for me, and I pay them each $2 an hour. If the government subsidized the employment of American data entry clerks, and I only had to pay $2 of their hourly labor cost – I’m curious what sort of people I’d get.

      Southern WASP

      December 31, 2013 at EST pm

      • Well, they’d have to be at least as good or you’d continue to outsource it.

        Though you do illustrate a point I neglected to emphasize above which is that subsidized domestic work also encouraged full employment by making outsourcing less competitive.

        The current minimum wage does the exact opposite which is to make outsourcing more attractive. But you rarely hear progressives argue for a simultaneous increase in the minimum wage for foreigners abroad that are hired by Americans or American companies in order to offset the (mild) domestic disemployment effect.

        In fact, I’ve heard some people who like Ron Unz’s ideas, say that we should indeed dramatically raise the minimum wage but only for non-citizens, to ensure that the only ones we get are high-quality and low-skill natives have plenty of work.

        A subsidized work program, where non-citizens are ineligible for the significant subsidy would accomplish the same effect, but also make it harder for the government to decline to enforce the immigration rules.

        You could combine subsidy-for-citizens with high minimum wages for immigrants and outsourcing and get at much higher levels of employment pretty quickly without dramatic moves from the federal reserve or wasteful and corrupt federal deficit spending which just adds to the debt.

        Handle

        December 31, 2013 at EST pm

      • Data entry seems like a no brainer that NAMs can perform just as well. However, I have to say South Asians are inefficient workers when it comes to White collar work and even lag Mexicans when it comes to menial tasks. Have you seen Indian people who work at their 7-11s, gas stations and pizzerias? They are slow and very inefficient.

        People equate South Asians with Jews who are poor performance workers when it comes to blue collar menial work, but South Asians also lag in White collar office tasks.

        JS

        December 31, 2013 at EST pm

      • Handle – “You could combine subsidy-for-citizens with high minimum wages for immigrants and outsourcing…” I like this idea. I’m curious if any analysts or academics have done the math to estimate how much this sort of subsidy would cost the government.

        JS – I agree that the baseline of work quality is lower in south Asia than in the United States. But, $2 an hour is more than three times the minimum wage in Pakistan, so I can be selective about who I hire. I estimate that a $2 Pakistani produces value similar to a $12 to $14 an hour American (in a mid-market city).

        Southern WASP

        January 1, 2014 at EST pm

  3. At this point, let them raise it. A raise will only increase the use of automation technology at the lower end of the wage scale, which will force society to deal with the actual underlying issue, which is the collapse in the value of low-end human labor. I would bet that even with a raise, the actual total wages paid to minimum wage workers won’t really move or, if they do, they will rise in the short-term, but fall over the medium-term and longer-term, as fewer workers are hired and eventually the concept of a minimum wage job becomes obsolete. A child born today will probably never go to the local fast-food place and fill out an application for an entry-level job because all those jobs will be done by machine.

    BS Inc.

    December 30, 2013 at EST am

    • Middle-class teenagers are already not going to fast food places because the jobs are now done by Hispanic immigrants who are better low-wage workers than teenagers (because they are available to work whenever the boss needs them, no conflicts with school, and because they really NEED the job while teenagers working for some extra cash don’t).

      Lion of the Blogosphere

      December 30, 2013 at EST am

      • The bottom line: White proles in America need to upgrade themselves or else they will fail.

        There are a few trades left in which they can be part of. Other than that, there aren’t many living wage opportunities for those who are not college bound. Not that all college grads are being paid a living wage, but finding a job with a decent salary gets harder by the day, for those who are not.

        America is by far a proletariat nation. For a country that boasts its power and wealth, the average citizen here is less educated and less travelled than a 2nd rate Spaniard or Italian in their crumbling nations.

        JS

        December 30, 2013 at EST am

      • That and years ago, long after you were an adult, states started making it very difficult to hire teenagers. Lots of paperwork and restrictions, at least in blue states.

        Curle

        December 30, 2013 at EST am

      • While I agree that today’s middle-class white teen for whom a minimum-wage job is more of a necessity than a luxury, the impact of Hispanic immigrants on the fast-food employment front has been negative, I don’t think any teen in the future will be able to do that job better than a machine. One could try to rewrite the story of John Henry against the machine by casting a Hispanic teen as John Henry and a burger-serving machine as the machine, but the outcome will still be the same.

        I can even envision a scenario where a customer walks in, a human-like robot with a modifiable screen for a face scans the human’s facial structure to determine ethnicity and the robot’s screen then displays a face most like the face which that ethnic group will relate to easily and speaks with a vocal tone consistent with the face. That will put the customer immediately at ease and enable the employer to modify the “ethnic” composition of their workforce as the clientele changes. No one will ever again be able to complain about “bad service because of racism” or that the workforce composition in the local franchise doesn’t reflect the composition of the community.

        BS Inc.

        December 30, 2013 at EST pm

      • “America is by far a proletariat nation. For a country that boasts its power and wealth, the average citizen here is less educated and less travelled than a 2nd rate Spaniard or Italian in their crumbling nations.”

        Does the education also factor in the low IQ of NAMs? Perhaps if whites were included, then there be parity with European nations.

        Latias

        December 30, 2013 at EST pm

      • Middle-class teenagers are already not going to fast food places because the jobs are now done by Hispanic immigrants

        White teenagers will seek minimum wage jobs again for $12/hr.

        The Undiscovered Jew

        December 30, 2013 at EST pm

      • Well, everyone is getting poor due to the influence of globalization and the politically connected. It is not like knowledge would empower anyone anyway, since people are de facto disenfranchised in the United States, and cannot exert any significantly influence on social or economic policy. There will be social externalities, but the wealthy are fairly insulated from that.

        Latias

        December 30, 2013 at EST pm

      • Does the education also factor in the low IQ of NAMs? Perhaps if whites were included, then there be parity with European nations.

        I was only talking about proles. America is more proletariat than a Southern European nation such as Spain or Italy, which are less prole than Greece. Americans would share more similarities with Greeks than their Catholic neighbors on the Mediterranean sea.

        The Midwest and South have some of the starkest provincialism you can find. Big Cities such as NYC, also have their fair share of parochial minded individuals who are completely out of touch with the world.

        JS

        December 31, 2013 at EST pm

  4. This is an easy prediction to make because past increases in the minimum wage to not cause any discernible economic harm.

    It is easy to find that some regulation finds no discernible harm, if discerning that harm is likely to get you in trouble. Finding that the minimum wage reduces labor market attachment is much like finding that homosexual behavior results in a wide variety of self harming behavior and an early death. Very bad for your career.

    The same economists that find that raising the minimum wage causes no discernible unemployment (implying that the wage labor market is infinitely inelastic) also find that immigration causes no discernible unemployment (implying that the wage labor market is infinitely elastic)

    If the the data contradicts economics 101, so much the worse for the data.

    One of the methods used to avoid discerning economic harm is to set some arbitrary date as the introduction date of the minimum wage, and ask was there an instantaneous rise in youth unemployment and labor market attachment on that date.

    No?

    Then supposedly the rise in the minimum wage did no harm.

    Now in fact of course one would not expect a rise in the minimum wage to cause an instantaneous reduction in labor market attachment, but rather a slow reduction over decades in labor market attachment.

    Which is exactly what we do see, another good indicator being nation states like Greece and Spain that have high minimum wages.

    (And don’t tell me Germany and Sweden have labor protection and yet they have good labor market attachment. They have no minimum wage,)

    James A. Donald

    December 30, 2013 at EST am

    • There has been a long-term increase on labor force participation rate despite many increase to minimum wage, and labor force participation rate has been declining since 2007 despite no increase in the minimum wage since the 1990s.

      Lion of the Blogosphere

      December 30, 2013 at EST pm

      • The rise in participation is women who would have once upon a time been hard at work making homes for their children and their hard working husbands, thus those indirectly attached to the labor force, and thus not showing up in participation statistics, are now directly attached to the labor force, due to the destruction of the family by the state and thus showing up in misleading statistics that are designed to denigrate the female role of mother and home maker.

        Male participation has collapsed, and has been in collapse for a very long time.

        Now to some extent the rise in permanently unemployed males reflects the diminished prospect of having a wife and children, but, at the low end of the labor market, that is less likely to be a factor. For permanently unemployed young males, has to be permanently declining job availability, a market permanently failing to clear.

        James A. Donald

        December 30, 2013 at EST pm

  5. Republicans are always losers on the minimum wage, and will, as they have in the past, have to succumb and go along with a minimum wage hike. The question is whether they stretch it out over months or get the pain out of the way quickly. I think the Republicans have an economic case to be made for not raising it, but it won’t fit on a soundbite and Republicans have never been able to explain it in a way to convince the American public, and they won’t be able to figure out how to do it now.

    Ideally, the Republicans should figure out a way to disarm the minimum wage so it doesn’t come up as a political issue to attack them every two years or so. Maybe if they passed one indexed to the cost of living, except when unemployment is above a certain number. Then they wouldn’t have these votes and wouldn’t have to go on the talking head shows trying to make a sophisticated argument in which the only thing that people hear is, “Blah, blah, we hate working people, blah, blah, love rich corporations, blah…”

    Mike

    December 30, 2013 at EST am

  6. “The person who is most opposed to a minimum wage increase is not the rich Republican, but rather the person who makes around $30,000 per year, and sees a minimum wage increase as extremely threatening to his social position”

    Similarly, the biggest racists aren’t rich white southerners, but poor white southerners. Among other things, Jim Crow was a means of keeping their social position from being on the bottom rung as their financial position would otherwise dictate.

    Allan Folz

    December 30, 2013 at EST am

    • “Similarly, the biggest racists aren’t rich white southerners, but poor white southerners.”

      I think this proposition is at best debatable, though I doubt there’s any way to measure it. A better way of putting it might that poor White Southerners — and for that matter, many poor White Northerners in urban areas — are far more exposed to interaction with Blacks than are upper class Southerners, or again U.C. urban Northerners.

      Some poor Southerners who interact with Blacks on a daily basis aren’t happy about that at all. Some are OK with it and form friendships with some, but not all, Blacks. Some more or less integrate into the Black community, and adopt the speech patterns of Blacks, socialize predominantly with Blacks, have kids with Blacks, etc.

      I’d say that among poor Southern Whites, you’re more likely to encounter overt anti-Black sentiment, but you’re also more likely to encounter real — not token — social integration with Blacks. It’s a complicated phenomenon.

      ice hole

      December 30, 2013 at EST pm

      • Yes, I lived in the south over 30 years ago, and it was not unusual to hear some white prole spouting the N word, and then come to find out he had a biracial grandkid who was loved and included in the extended family. I think what the southerners hated more than anyone were northern white do-gooders.

        caroljm36

        December 30, 2013 at EST pm

      • “I think what the southerners hated more than anyone were northern white do-gooders.”

        Like the ones that started the Civil War and decimated the South, slaughtering soldiers and civilians both? Funny that they would have a grudge.

        peterike

        December 30, 2013 at EST pm

  7. “The person who is most opposed to a minimum wage increase is not the rich Republican, but rather the person who makes around $30,000 per year, and sees a minimum wage increase as extremely threatening to his social position because it will give an undeserved raise to people he has worked hard to rise above.”

    ———- This. The seething resentment, particularly among females, in low income apartment complexes where some work and others sit around all day on welfare is familiar to anyone who has had to involve themselves in such places.

    Curle

    December 30, 2013 at EST am

  8. The problem with the minimum wage is that employers replaces American workers with robots and / or illegals everytime it rises.

    As always, LOTB is wrong in his analysis.

    A single mother earning $30k with two young kids earns so much in government gimmedats that here net income is the same as a man earning $72k. (And this is ignoring Obamacare, which he will be fined to buy while she gets free coverage through Medicaid. And this is ignoring forced child support payments which are greater when her income is smaller).

    So, if a minimum wage hike doesn’t have that Oomph, it is not because of status competition between the lower middle class and the poor, but because the base wage is almost irrelevant due to the size of the federal welfare state. One woman interviewed in one of the fast food union protests, wanted a wage increase so she could take more time off work.

    The way the welfare trap works, your federal bennies expire at the same income thresholds that progressively higher taxes kick in. The single mother earning $28k has to more than double her income before she sees an extra dime.

    So the minimum wage increases, American workers get canned and replaced by illegals and or robots, but they don’t care because the majority of their income is federal gimmedats. The illegals come in and bring their whole families and now somebody has to pay for the non working Americans and the non working families and offspring of the illegals.

    Printed money wolnt last forever.

    Rotten

    December 30, 2013 at EST am

    • This. Raising the minimum wage just increases the number of U.S. workers who are deemed unuseful for work and who will be replaced by illegals and robots. They will then live on the bounty produced by the rest of us. I’m not sure that is a bad thing, and as we get closer to post-scarcity, a larger and larger percentage of people will comprise this group.

      CamelCaseRob

      December 30, 2013 at EST pm

  9. “The person who is most opposed to a minimum wage increase is not the rich Republican, but rather the person who makes around $30,000 per year, and sees a minimum wage increase as extremely threatening to his social position because it will give an undeserved raise to people he has worked hard to rise above.”

    Well, that might explain this meme that has been going around (from South Carolina – big surprise there):

    JayMan

    December 30, 2013 at EST am

  10. You are forgetting that a raise in minimum wage pushes up most people’s wages. If the guy making $13 an hour now is five five dollars an hour above minimum wage, he will want the same margin with the new minimum. Everyone who makes an hourly wage between the old and new minimum wage will want the same gap they have now.

    The time of raise the minimum wage if during an economic boom much as the Unions expanded during the 1950’s when it was easy to pass on costs to others.

    superdestroyer

    December 30, 2013 at EST am

  11. Another thing people don’t realize is that because of inflation, the minimum wage actually decreases over time if it is not raised. The Fed targets 2% inflation a year, so the minimum wage should actually be tied to the amount of inflation in the economy instead of a fixed rate.

    For instance, the minimum wage should be $X.XX + COL adjustment.

    The problem, of course, is that doing this would effectively price some low-wager earners out of the market since their productivity would be less than the COL adjusted minimum wage.

    Jay

    December 30, 2013 at EST pm

    • “The Fed targets 2% inflation a year”

      Which doesn’t include food and fuel, and is pretty much just another fake statistic.

      peterike

      December 30, 2013 at EST pm

    • I certainly hope all the readers of this blog realize that inflation reduces the buying power of minimum wage over time.

      CamelCaseRob

      December 30, 2013 at EST pm

  12. As a small business owner who does NOT employ minimum-wage workers, I still don’t want constant government intervention to raise the minimum wage as it goes momentum to further government regulation of all kinds…

    Camlost

    December 30, 2013 at EST pm

  13. However, I predict that if the minimum wage is increased, there will be no discernible economic harm resulting from it. This is an easy prediction to make because past increases in the minimum wage to not cause any discernible economic harm. In fact, a minimum wage increase wills stimulate the economy by putting more money into the hands of people who tend to spend every cent they have.

    True if the increase isn’t too high in too short a time frame. $9/hr by 2017 wouldn’t be a problem. People in low cost of living Red States could lose.

    dsgntd_plyr

    December 30, 2013 at EST pm

  14. Whatever the economic reality of a minimum wage hike, there is a political reality to it which strongly favors supporting it. It gets Democrats votes from the low end of the income scale — or rather, motivates those who would vote for them anyway. It gets Democrats votes from the “compassionate” middle class and higher. It gets endless sympathetic coverage by the media. And even better, endless sneering and name-calling against anyone opposed to a “living wage” for the hardest working Americans (even though a whole bunch of ’em ain’t Muricans).

    Republicans will oppose it in their usual fumbling, bumbling way, and the Jon Stewart’s of the world will endlessly mock them for it. Same old same old.

    In economic reality, the minimum wage is almost meaningless anyway in a nation where the labor supply is now effectively infinite at all sorts of levels from fast food worker to software coder (but not for media pundits, investment bankers, politicians and various other groups that run the show). And at the same time, the gimmedats are more generous than ever before and easier to get, legal status be damned. So what difference does it make? Small local business will hire illegals off the books. The only one really effected will be major chains (like fast food) that are under more scrutiny. And since McDonald’s net income for Q3 2013 was $1.5 billion, they can go to hell too. Let them pay more.

    I long ago woke up from the fantasy of the “free market” and all that free-trade, open-borders rot. It’s all nothing but lies. American economic policy should be fervently nationalist with mile-high trade barriers and a zero immigration policy.

    As if.

    peterike

    December 30, 2013 at EST pm

  15. Lion shows he is disconnected from the rest of America, holed up in The City. Prevailing wages and costs of living are far different in flyover country that they are in the coasts. People on the coasts would propose bottom wages that make no sense for rural economies.

    Dan

    December 30, 2013 at EST pm

  16. “…but rather the person who makes around $30,000 per year, and sees a minimum wage increase as extremely threatening to his social position because it will give an undeserved raise to people he has worked hard to rise above.”

    I think you’re right. I worked at a place where there were temp and *regular* employees. Management once gave the temp’s an across the board raise, and many regulars took it as a slap in the face (literal quote), despite the fact that the temps were still getting paid less to do the same job, and the temps didn’t get benefits and were likely to get laid off by the end of the year anyway. I can see these guys shaking their heads when the minimum wage goes up.

    DelFuego

    December 30, 2013 at EST pm

  17. all for min wage increase to spur automation of said jobs in the medium and long term.

    indexed to 1960, min wage should be a hair over 11 dollars now.

    uatu

    December 30, 2013 at EST pm

  18. The unskilled lower class jobs are just one piece of the broken puzzle. Middle class jobs/trades have been outsourced on the cheap *and* above average minorities/immigrants in the US have filled the ranks here at home.

    Fine, let them raise the stupid minimum wage for the poor and illiterate. The real trick is if any one can (or wants) to raise middle class wages and stop taxing them down to near poverty level.

    The middle-class *is* the moral class.

    It’s the same old story: end welfare, close the borders, punish big corporation for cheating, and so many problems solved. . .but none of that is ever going to happen.

    fakeemail

    December 30, 2013 at EST pm

  19. Min wage in Australia is around $13/hr. But everything there is so damned expensive.

    bobo

    December 31, 2013 at EST am

  20. One more thing. Talking about the min. wage means Dems have decided Obamacare’s an electoral loser. The MD Dem Gubernatorial candidates are killing each other over the ACA. The white AG said the black Lt Gov’s using his blackness to get elected, but he’s clueless. White guy didn’t apologize accused black guy of playing dirty politics.

    http://www.foxnews.com/politics/2013/12/25/obamacare-fallout-turns-into-party-feud-for-democrats/

    dsgntd_plyr

    December 31, 2013 at EST am

  21. “In fact, a minimum wage increase wills stimulate the economy by putting more money into the hands of people who tend to spend every cent they have.”

    I can’t support that argument. It suggests the wealthy aren’t consumers when, of course, the wealthy buy plenty of things. They just buy different things. Of course, the wealthy probably spend a lower percentage of their money than the poor. That’s part of how they got wealthy in the first place. However, we should consider what the wealthy do with the money they don’t spend. They don’t dig a hole and bury it in the backyard. Rather, they invest it in businesses and factories which I would argue grows the economy more than a higher minimum wage ever could..

    destructure

    January 3, 2014 at EST am


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