Minimum wage as economic stimulus

[VIDEODROME]

I think this should be addressed by Unions and Collective Bargaining. The government's only role would be to enforce the resulting contract.

 

[euphemia]

Not if you live in a right-to-work and right-to-be-fired state.

 

[VIDEODROME]

Not if you live in a right-to-work and right-to-be-fired state.

I didn't mean to imply a guarantee that the workers would succeed in negotiating for better pay. In many cases, forming a Union to challenge Management could be very risky. Either both sides find a middle ground they can live with, or possibly Management gives them all Pink Slips.

 

[euphemia]

If the place of business does not contract with unions, what then?

 

[trey4sports]

#voodooeconomics

 

[VIDEODROME]

If the place of business does not contract with unions, what then?

Exactly.

 

[Zippyjuan]

That's clearly false.

Historically, every single raise in the minimum wage has led to the unemployment rate being higher than it would have been if the mw weren't raised.

This is as indubitably true as 2+2=4.

Link? Thanks!

 

[erowe1]

Link? Thanks!

http://upload.wikimedia.org/wikiped...or.svg/400px-Surplus_from_Price_Floor.svg.png

 

[Zippyjuan]

Hmm. Don't see anything mentioning the impact of previous (or any) minimum wage hikes but thanks anyways.

 

[erowe1]

Hmm. Don't see anything mentioning the impact of previous (or any) minimum wage hikes but thanks anyways.

It's there. I don't know how you missed it.

It's not any particular minimum wage hikes, it's all of them without exception, as an inviolable mathematical rule.

Perhaps you were making the mistake of thinking this was some kind of empirical science, where you could look at what official unemployment numbers did after minimum wage was hiked or something. Of course that would be illogical. No matter what the results of that were it wouldn't tell you anything at all about how the unemployment rate differed from what it would have been had the mw hike not happened.

On the other hand, the link I provided does show that.

 

[Acala]

What the OP needs to understand is that it is production that drives consumption, not the other way around. Tricking people into thinking that they have produced more than they really have by forcing their employers to pay them more does not create more wealth the way real production increases do. It simply shifts wealth around, and not even very much of that. It is empty-headed feel-good legislation.

 

[Boshembechle]

What the OP needs to understand is that it is production that drives consumption, not the other way around. Tricking people into thinking that they have produced more than they really have by forcing their employers to pay them more does not create more wealth the way real production increases do. It simply shifts wealth around, and not even very much of that. It is empty-headed feel-good legislation.

A firm would not produce a single thing if it doesn't expect consumption of said thing. A firm will produce according to consumption levels.

 

[ClydeCoulter]

What the OP needs to understand is that it is production that drives consumption, not the other way around. Tricking people into thinking that they have produced more than they really have by forcing their employers to pay them more does not create more wealth the way real production increases do. It simply shifts wealth around, and not even very much of that. It is empty-headed feel-good legislation.

I'm confused then.

I thought that consumption drove production, in the sense that, if you find that you cannot keep up with what people want, other investors will provide. Isn't that what drives a person to start up a new business, need/want/void?

Now, I do agree that "meme" in advertising and fads create a desire for consumption, because people want to "belong".

edit: Man I miss Steven.

 

[Zippyjuan]

What the OP needs to understand is that it is production that drives consumption, not the other way around. Tricking people into thinking that they have produced more than they really have by forcing their employers to pay them more does not create more wealth the way real production increases do. It simply shifts wealth around, and not even very much of that. It is empty-headed feel-good legislation.

I agree that raising the minimum wage won't do much positive for the economy (or really that much negative either). I do question "production drives consumption." You need to balance both. If we build it they will come? If Chrysler makes more cars will people automatically buy them? Only if demand for more cars than are currently being produced exists. With real incomes being flat, consumers aren't demanding more goods- despite producing more. So fewer workers are needed to produce those goods. More unemployment.

Over the last several decades, productivity has soared. But the worker did not share in the benefits of their increased productivity. They produce more goods per hour of labor but don't receive (are not able to buy) more goods per hour worked. Nor has the higher productivity shown up in lower prices for goods. The vast majority of the benefits have gone to the owners of capital- the heads of the companies and their shareholders.

 

[Madison320]

I agree that raising the minimum wage won't do much positive for the economy (or really that much negative either).

Only if the minimum wage is relatively low. If you made minimum wage $1 an hour it would almost no effect since no one works for $1 an hour anyway. If you made it $20 an hour it would have a huge negative effect. The unemployment rate would skyrocket.

 

[SilentBull]

Make all companies pay everyone 1 million a year. That way we will all be millionaires and spend a ton of money buying everyone's products. What do you think?

 

[Madison320]

If a MW bill passed congress and was signed into law, what would the MW workers do with the higher amount of cash they are now earning? Would they not spend it, thus increasing the sales and productivity of companies and stores experiencing the new demand? Wouldn't this new demand cause business owners to produce more, thus increasing the amount of jobs available?

I hate this argument that somehow, magically, a business will get back more than it is forced to pay out. Suppose company A makes widgets. The widget costs 1 dollar to make and sells for 1 dollar and 30 cents. Now suppose the govt forces that business to pay 1 million more in wages. The absolute best case scenario is that those employees spend the entire 1 million in extra wages buying widgets from their employer which would be a profit of 300K. So the BEST CASE would be that the business would lose 700K since they had to spend 1 million more in wages! Thanks for you help, Uncle Sam!!!!

 

[angelatc]

A firm would not produce a single thing if it doesn't expect consumption of said thing. A firm will produce according to consumption levels.

And consumption is set, in part, by price.

If I am forced to raise wages, then I am pretty much forced to raise prices. The people who are not making minimum wage and are already buying my widget will now buy less of them, while unskilled laborers will probably not buy my widget any more now than they did then.

 

[angelatc]

I hate this argument that somehow, magically, a business will get back more than it is forced to pay out. Suppose company A makes widgets. The widget costs 1 dollar to make and sells for 1 dollar and 30 cents. Now suppose the govt forces that business to pay 1 million more in wages. The absolute best case scenario is that those employees spend the entire 1 million in extra wages buying widgets from their employer which would be a profit of 300K. So the BEST CASE would be that the business would lose 700K since they had to spend 1 million more in wages! Thanks for you help, Uncle Sam!!!!

You forgot payroll taxes. Paying the employees 1 million more in wages costs the employer about 25% more than the cost of the raise.

But all this is for naught. Liberals don't care about being right as long as they can get more free stuff.

 

[Acala]

I agree that raising the minimum wage won't do much positive for the economy (or really that much negative either). I do question "production drives consumption." You need to balance both. If we build it they will come? If Chrysler makes more cars will people automatically buy them? Only if demand for more cars than are currently being produced exists. With real incomes being flat, consumers aren't demanding more goods- despite producing more. So fewer workers are needed to produce those goods. More unemployment.

Over the last several decades, productivity has soared. But the worker did not share in the benefits of their increased productivity. They produce more goods per hour of labor but don't receive (are not able to buy) more goods per hour worked. Nor has the higher productivity shown up in lower prices for goods. The vast majority of the benefits have gone to the owners of capital- the heads of the companies and their shareholders.

The ability to pay for something to consume arises ONLY because something was produced first. Simply WANTING something does not consumptions make. Trade is the exchange of one person's excess production for another person's excess production. It is only the imposition of the fungible medium of money that disguises this truth. Without having first produced something, the consumer has nothing with which to trade for other goods to consume.

If Chrysler makes cars, Chrysler will be able to sell them at some price. Whether or not it is at a price that is profitable is another matter. The production of cars creates goods that can be traded for other goods. Production is leading to the consumption of the other goods.

But let's take the other side of your example. Suppose Chrysler doesn't make any cars. How can Chrysler enter the market and trade for other goods? To consume Chrysler must produce. So it is with all economic actors.