Minimum Wage --Prevents-- Wealth Acquisition!

[CultureCitizen]

This absolute IDIOCY to keep pushing it up so that we can "solve poverty" or whatever, is ridiculous... 82 years we've chased our tails with this and have the same exact problem. It only serves to drive up prices through inflation and eliminate jobs.
I have made the comparision to Mexico, because it is a place with a minimum wage which in general is far below the market equilibrium point. 50% of the population is poor , crime is rampant as well as informal economy , probably a third or so of the working class are self employed .

That settled , look at the situation of the USA before a minimum wage existed : Half of the population lived in poverty by today standards in 1920, wealth and income disparity were huge. The US population was not in better shape than any country from SA, to put it bluntly.
The FACT that poverty has been reduced from 50% to 15% is a success.
Now to nail my point down: from a macroeconomic perspective every increase in productivity has to be coupled with an net increase in exports OR an increase in the internal market size. Else the result will be an increase in private debt, asset bubbles ( land, housing , stocks) and an eventual market crash.

I can agree that a one size fits all policy is not appropiate , but going as far as eliminating minimum wage when productivity is increasing is a nonesense from a macro perspective.

Eliminating MW might be a good thing in a country with low immigration , where labour costs are the main production factor. Not in a fully industrialized country with growing productivity.

 

[EdwardBaiamonte]

This absolute IDIOCY to keep pushing it up so that we can "solve poverty" or whatever, is ridiculous... 82 years we've chased our tails with this and have the same exact problem. It only serves to drive up prices through inflation and eliminate jobs.
I have made the comparision to Mexico, because it is a place with a minimum wage which in general is far below the market equilibrium point. 50% of the population is poor , crime is rampant as well as informal economy , probably a third or so of the working class are self employed .

That settled , look at the situation of the USA before a minimum wage existed : Half of the population lived in poverty by today standards in 1920, wealth and income disparity were huge. The US population was not in better shape than any country from SA, to put it bluntly.
The FACT that poverty has been reduced from 50% to 15% is a success.
Now to nail my point down: from a macroeconomic perspective every increase in productivity has to be coupled with an net increase in exports OR an increase in the internal market size. Else the result will be an increase in private debt, asset bubbles ( land, housing , stocks) and an eventual market crash.

I can agree that a one size fits all policy is not appropiate , but going as far as eliminating minimum wage when productivity is increasing is a nonesense from a macro perspective.

Eliminating MW might be a good thing in a country with low immigration , where labour costs are the main production factor. Not in a fully industrialized country with growing productivity.

 

[EdwardBaiamonte]

eliminating minimum wage when productivity is increasing is a nonesense from a macro perspective.

you mean nonsense to a liberal idiot since conservative macro economists do in fact oppose the minimum wage. Why not tell us why its nonsense?? What does your fear teach us?

 

[EdwardBaiamonte]

, look at the situation of the USA before a minimum wage existed : Half of the population lived in poverty by today standards

100% stupid and confused liberal. correlation does not = causality. Wealth from the stone age to here increased because of inventions not because of minimum wage. If Republicans supply new inventions everyone gets wealthier.

Now do you understand?

 

[CultureCitizen]

eliminating minimum wage when productivity is increasing is a nonesense from a macro perspective.

you mean nonsense to a liberal idiot since conservative macro economists do in fact oppose the minimum wage. Why not tell us why its nonsense?? What does your fear teach us?

Which macro economists ?
Certainly not Steve Keen who predicted the 2008 SPM crisis, nor Joe Stiglitz.

The only macro economists opposing minimum wage are probably Austrian School economists, who make the awfull mistake of thinking they can apply the same rules of micro economy to macroeconomy.

Why do you think that minimum wage is a nonsense within a context of increasing productivity ?

 

[EdwardBaiamonte]

Which macro economists ?

The macro economist: Milton Friedman!!

 

[EdwardBaiamonte]

The only macro economists opposing minimum wage are probably Austrian School economists,

Milton Friedman the man who invented modern economics and just averted the housing crash Depression. See why we say dumb?? What other conclusion is possible??

 

[EdwardBaiamonte]

Why do you think that minimum wage is a nonsense within a context of increasing productivity ?

in any environment is decreases employment, raises prices, and teaches you to get ahead through libNazi govt not through being a more valuable employee

 

[CultureCitizen]

Why do you think that minimum wage is a nonsense within a context of increasing productivity ?

in any environment is decreases employment, raises prices, and teaches you to get ahead through libNazi govt not through being a more valuable employee

True enough. But you are missing the rate of change :
Assuming the demand for a product is linear based on price if we have two competing factories ( A and B ) :
If labour costs represent 1% of the cost for factory A , it is clear that its labour demand is a lot more elastic than in B where 90% of the costs are due to labour .

A) can raise salaries from 1 to 2 USD easily thus increasing the money available for demand at the households
B) can not do the same , because it would have to duplicate the price of the goods which in turn would reduce demand and it would drive it out of business.

Company A can cope with a rise in wages from $1 to $2, while company B can't, it would get out of business.

Third world countries start with B style factories, so it's hard to argue that in this case setting a minimum wage is a smart move.
However as productivity increases , and the share of labour decreases wages must start going up.
Company A would put $1 into the households while company B would put $90 into the households.
Shock therapy is what happens when a third world's country B factories are suddenly replaced by A style factories which employ 10 times less workers with the same wages.

 

[Boss]

That settled , look at the situation of the USA before a minimum wage existed : Half of the population lived in poverty by today standards in 1920, wealth and income disparity were huge. The US population was not in better shape than any country from SA, to put it bluntly.
The FACT that poverty has been reduced from 50% to 15% is a success.

The problem with having wages based on free market principles is sometimes wages will suck because there is no demand for labor. Such was the case during the Great Depression, as it was during the depression in 1907, 1897, 1893, 1873, etc. People wanted something done because things were really bad.

Instead of going to free market capitalist solutions, we went to closed-market socialist solutions and adopted a minimum wage. The promise was "a decent living wage for all" and that is not what resulted and hasn't resulted in 82 years. We did not go from 50% poverty to 15% because of the minimum wage. In fact, these are somewhat exaggerated numbers because we've probably never had more than 33% poverty, or less than 20% for that matter. It's hard to define because what do you mean by it? "Poverty" is just a word until you define the parameters.

Socialism always plays on the vulnerabilities of those who are desperate for something to improve their conditions. That's what is so diabolical about it.

 

[CultureCitizen]

That settled , look at the situation of the USA before a minimum wage existed : Half of the population lived in poverty by today standards in 1920, wealth and income disparity were huge. The US population was not in better shape than any country from SA, to put it bluntly.
The FACT that poverty has been reduced from 50% to 15% is a success.

The problem with having wages based on free market principles is sometimes wages will suck because there is no demand for labor. Such was the case during the Great Depression, as it was during the depression in 1907, 1897, 1893, 1873, etc. People wanted something done because things were really bad.

Instead of going to free market capitalist solutions, we went to closed-market socialist solutions and adopted a minimum wage. The promise was "a decent living wage for all" and that is not what resulted and hasn't resulted in 82 years. We did not go from 50% poverty to 15% because of the minimum wage. In fact, these are somewhat exaggerated numbers because we've probably never had more than 33% poverty, or less than 20% for that matter. It's hard to define because what do you mean by it? "Poverty" is just a word until you define the parameters.

Socialism always plays on the vulnerabilities of those who are desperate for something to improve their conditions. That's what is so diabolical about it.

Poverty : Yes, there is a fuzzy standard of $10 per day person ( fuzzines comes from the fact that i heard that number 5 years ago and it has to be adjusted for inflation and purchase parity ) . There is a multidemensional definition of poverty ( see link )
- Access : Education , sufficient food, electricity, clean water, sanitation, finished floor in household.
- Assets : TV , Radio or Computer / Transport ( bike , horse or better ) .
When evaluating historical poverty, some components have to be discarded , like electricity and ownership of tv, radio .

I fully disagree with you regarding the number of poor in the US. Low poverty rates are a post-WWII situation ( see links ). Much of it is due to increased productivity.

Well Boss,
As it is usual I don't think we can agree on this one. Anyway here are some cases in which I agree and some I think are worth discussing. The cases in which I agree :
- Labour intensive industries should be able to avoid MW ( at least temprarily )
- Startups should be able to avoid MW for a year or two , posibly making a fair exchange with employees ( shares in the company maybe)
- Part time jobs whould also be able to avoid MW , I would think of a high school student working during the summer.

Now the cases worth discussing :

- I am against an overall drop , because it would also cause a drop in aggregate demand... this is specially true in a country full of immigrants .

- Industries/sectors where labour represents a small factor should pay a lot more than MW ( they usually do anyway, at least in the US, but it wouldn't surprise me if Goldman Sachs had its janitors on MW) .

- Overall I find disquieting that an increasing gap exists between productivity and average income. This can lead to asset bubbles and to economic crashes.


http://hdr.undp.org/sites/default/files/specifications_for_computation_of_the_mpi.pdf
Pan American Exposition 1901 Buffalo
http://visualeconsite.s3.amazonaws.com/wp-content/uploads/2008/05/avg-income-2006.jpg

 

[EdwardBaiamonte]

A) can raise salaries from 1 to 2 USD easily.

how Lib Nazi and stupid can you be? A capitalist business is competitive and so most businesses are going bankrupt in the long run, and often in the short run too, as capitalism squeezes profits toward $0. There is no easy way to raise prices when you are operating on the margin to begin with against in kind competitors and against substitute products.

Do you understand now??

 

[EdwardBaiamonte]

However as productivity increases , and the share of labour decreases wages must start going up.

A liberal lacks the IQ for economics so why try? Wages must go up under capitalism, not socialism or communism. Under capitalism profits go up with new inventions that improve our standard of living because Republican competition demands it. If a capitalist does not pay the highest wage possible his workers will quit and go to where wages are the highest.

Is that simple enough for a liberal to understand?

 

[CultureCitizen]

A) can raise salaries from 1 to 2 USD easily.

how Lib Nazi and stupid can you be? A capitalist business is competitive and so most businesses are going bankrupt in the long run, and often in the short run too, as capitalism squeezes profits toward $0. There is no easy way to raise prices when you are operating on the margin to begin with against in kind competitors and against substitute products.

Do you understand now??

Yes, I understand you are clueless.
Those laws work only if you have two identical products: copper , iron ore , pure water

When ever there is a difference in quality or service levels those rules start to become fuzzy. Pizza can be sold at different prices with different margins of utility, and believe me, an increase of 1% will not make them bankrupt , else Dominos would not be able to offer delivery time warranty.

That said there are allways other solutions , like vertical integration which can give you an edge over your competitors.

 

[CultureCitizen]

However as productivity increases , and the share of labour decreases wages must start going up.

A liberal lacks the IQ for economics so why try? Wages must go up under capitalism, not socialism or communism. Under capitalism profits go up with new inventions that improve our standard of living because Republican competition demands it. If a capitalist does not pay the highest wage possible his workers will quit and go to where wages are the highest.

Is that simple enough for a liberal to understand?

And what happens with aggregate demand Ed? uh? Production increases, but wages stay low? Who is going to buy the products Ed?

 

[EdwardBaiamonte]

, and believe me, an increase of 1% will not make them bankrupt ,.

dear, businesses are all on the verge of bankruptcy, especially local pizza joints that come and go daily. When I Lib Nazi forces wages up, that can easily be the straw that breaks the camels back. If not you'd find a generous owner who paid $20/hour. None do because none can afford it! And of course its just not the deliverer but everyone in the supply chain who gets a raise so it can have a huge and bankrupting effect on end price.

Now do you understand?

At Walmart for example a manager had a budget to meet. If his wage cost exceeded the budget he'd get fired. The idea is to always show increasing profit margins even if only .1%. I remember Campbells Soup would give huge bonuses to anyone who could shave .25 cents off the cost of a can of soup. And of course the lower the price the more who buy and the more you can hire and pay.

As I said economics is too complicated for a liberal

 

[EdwardBaiamonte]

And what happens with aggregate demand Ed? uh?

dear this is way over your head but questions are good. That's why they are used in court.

What happens with aggregate demand? The cheaper and better the Republican invention the more it is demanded. Do you understand? A Rolls creates less demand than a Chevy.

See how good I am at bringing things within reach of even a liberal?

 

[EdwardBaiamonte]

Production increases, but wages stay low? Who is going to buy the products Ed?

very very stupid and liberal of course. If production increases, all other things staying the same, the Republican capitalist will make more money and he will have to pay higher wages.

Simple enough???

 

[CultureCitizen]

dear, businesses are all on the verge of bankruptcy, especially local pizza joints that come and go daily. When I Lib Nazi forces wages up, that can easily be the straw that breaks the camels back. If not you'd find a generous owner who paid $20/hour. None do because none can afford it! And of course its just not the deliverer but everyone in the supply chain who gets a raise so it can have a huge and bankrupting effect on end price.

They actually expect 2.5% to 5% of their deliveries to be late. Their utility margin is a lot higher than 1%.
High traffic is actually more dangerous for their business model.

A stable company usually expects to have a 10% utility over sales and this includes many other expenses: intrests, taxes, depreciation, again, startups don't have that, they usually operate on losses, so it's reasonable to make an exception.

 

[CultureCitizen]

Production increases, but wages stay low? Who is going to buy the products Ed?

very very stupid and liberal of course. If production increases, all other things staying the same, the Republican capitalist will make more money and he will have to pay higher wages.

Simple enough???

He will have to pay higher wages why ? It seems unlikely. He can do all the following:
Use it to acquire assets : land , buildings, stocks, hedge funds.
Use it to acquire capital goods to increase productivity
Use it to expand its business.
Why would he raise salaries ? Only a shortage of labour would make him do that, but that depends on the actual labour elasticity and oversupply.