Need some moral support fellow RPers

[Acala]

And even if they had minimum wage laws, how are we to know that they are not prosperous in-spite of their minimum wage laws?

Absolutely! You can have a minimum wage that is essentially non-functional in that the market wages exceed it. There have been times in the last thrity years when Mcdonalds paid more than the minimum wage.

Also I have reason somewhere that socialism tend to be less disastrous in small homogenous societies.

So one has to really delve into the numbers to understand why their system is working

Socialism takes longer to fail in a small, homogenous society with a culturally robust work ethic. The exploitation of abundant natural resources and the banking scam can extend it even further. But it fails in the end anyway. A few generations of perverse economic incentives will finally bring it down.

 

[bbjaylive]

Socialism takes longer to fail in a small, homogenous society with a culturally robust work ethic. The exploitation of abundant natural resources and the banking scam can extend it even further. But it fails in the end anyway. A few generations of perverse economic incentives will finally bring it down.

Scandanavian countries don't have socialist economies, they have mixed economies, just like virtually every other nation in the world.

I've never understood the tendency of libertarians Austrians particularly) to call any economy to the left of the US 'socialist', or any economic school of thought which isn't Austrian, 'Keynesian'. I guess it's because of the Manichean view that Austrians all too often have of the world. It's always 'them and us', leaving little room for nuance.

 

[Danan]

Scandanavian countries don't have socialist economies, they have mixed economies, just like virtually every other nation in the world.

I've never understood the tendency of libertarians Austrians particularly) to call any economy to the left of the US 'socialist', or any economic school of thought which isn't Austrian, 'Keynesian'. I guess it's because of the Manichean view that Austrians all too often have of the world. It's always 'them and us', leaving little room for nuance.

Austrian Economists are particulary clear in equating the socialism in the US with those in other countries around the world. They even exaggerate when talking about how bad the US economy is even compared with European ones. Imho the typical supply sider is much more prone to call the US a free market and Sweden a socialist country.

Also, all economic theories that accept that aggregate supply and demand are two seperate functions that are only in equilibrium by chance (or are concievably not in equilibrium) are Keynesians. Keynes tried to wipe out Say's law (which stated that supply and demand are two sides of the same coin) with his treatise and he succeeded with that in all schools of thought I'm aware off, expect the Austrian school. What's the big macro economic difference between New Keynesians and neo-classicals/Neo-Monetarists? That the former stress the importance of sticky prices while the latter believe that's less of a problem in a truly free market? That's ridiculous two call that two distinct schools of thought because of that. Does any school of thought except the Austrian school deny the legtimacy of the Keynesian cross, Keynesian demand functions, Keynesian multiplier effects?

"We're all Keynesians now!"

- Milton Friedman

 

[bbjaylive]

- Milton Friedman

You should really provide the rest of that quote from Friedman as leaving it out is just misleading.

 

[Danan]

Alright guys more ridiculousness coming up.

He and a few others kept citing Europe in particular Scandinavian countries as places we need to emulated cause they are doing "so great" in their words. He claimed they had high minimum wages which I thought was true and I didnt have a counter argument. He also claimed lower unemployment and all this bullshit.

Frustrated I just did some research (Wikipedia) and found something remarkable that I wish I had known.

Norway
Sweeden
Finland
Denmark
Iceland
Germany
Austria
Switzerland
Italy
Cyprus

None of the above countries even HAVE a minimum wage. Zero zip. Nothing no minimum wage. I found this incredible and next class Im bringing this up. This supposed socialist paradises (Some have higher economic freedom rankings than the US) have NO Minimum wage. Only France Belgium and the Netherlands have a Minimum wage higher than ours in Europe. Most of Europe have lower minimum wages and ironically that most widely cited as being "successful" countries dont even have a minimum wage.

Be careful. Austria does have a minimum wage, Germany has industry-sector-specific minimum wage laws and they are trying to install a nationwide law. Most of the others have probably some kind of law too. Or firms are mandated to bargain with unions and offer everyone that wage as a minimum, whether or not the worker is member of a union. Or something like that.

Anyway, to say that a country's success comes from its minimum wage laws is ridiculous. If you want to know why Sweden is rich (even though it has a lower gdp/cap at purchasing power parity than the US), look at their productivity and unit-labor costs. Those factors always determine the "wealth of nations".

Having said that, you're right that most of those countries are probably not noticeably more socialistic than the US. Also, the US is almost every GDP/capita(PPP) ranking among the richest ten countries. The only European countries that are (occasionally) richer are Luxembourg, Norway, Switzerland, Monaco and Liechtenstein. All of those except Norway (and partly Switzerland) because they are very small tax heavens and/or financial centers.

In fact if anything wealth correlates with economic freedom, not socialism. All the popular rankings show that the freer a country is, the more likely it happens to have a high GDP/cap.

 

[Acala]

Scandanavian countries don't have socialist economies, they have mixed economies, just like virtually every other nation in the world.

I've never understood the tendency of libertarians Austrians particularly) to call any economy to the left of the US 'socialist', or any economic school of thought which isn't Austrian, 'Keynesian'. I guess it's because of the Manichean view that Austrians all too often have of the world. It's always 'them and us', leaving little room for nuance.

Yes, it was a loose use of language. To the extent government controls the use of resources by force or redistributes wealth by force it is socialist in common parlance and I am comfortable with that. But there are varying levels of such socialism. There are virtually NO purely socialist countries anymore since pure socialism is impossible and collapses rather quickly even when sustained by a black market. How long "mixed" economies last depends on how much command there is of resources and how much disincentive to produce. It may be possible to sustain very low levels of socialism for a long time. But human nature being what it is, corruption is likely to push the whole camel under the tent once the nose gets under.

 

[Danan]

You should really provide the rest of that quote from Friedman as leaving it out is just misleading.

Friedman later objected that it was taken out of context--all he meant was that everybody used Keynesian language and concepts.

"We all use the Keynesian language and apparatus; none of us any longer accepts the initial Keynesian conclusions"

So what's wrong with saying that modern day non-Austrian macro is essentially Keynesian? They all use the Keynesian language and apparatus, IS-LM, AS-AD, Keynesian Cross and Multiplier, etc. That's the way all monetarists and New Keynesians think about macro-economics today. And that's exactly what Austrians mean when they call them Keynesians, because Austrians don't think about the economy in that way at all. They very profoundly criticize the very language and apparatus all the other schools use.

Nobody said that both New Keynesians and modern monetarists would always come to the same policy conclusions. Although I'd argue that even there the distinction becomes more and more difficult. There are hardly any oldschool monetarists left since the money supply targeting failed and New Keynesians accept insights from the Rational Expectations Theory since decades.

Also, Friedman was a big fan fo Bernanke (who is a Republican), who is himself very much influenced by Friedman's work. Everything from the fear of deflation to the concept of "helicopter money" comes from Friedman originally. At the same time Bernanke is often considered to be a New Keynesian.

 

[Zippyjuan]

Just a couple of things to toss out there.

According to the Bureau of Labor Statistics, only about four percent of hourly wage earners get the Federal minimum wage (that is in part because many states have higher minimums). (59% of all workers are hourly workers). http://www.bls.gov/cps/minwage2012.htm

What percent of people actually make the minimum wage- those are the numbers which would gain or lose from changes in the wage. In the US (300 million people), 1.6 million people were paid hourly wages equal to the minimum wage and another two million made less. If hardly anybody is making the minimum wage then it is not economically terribly significant.


Second, would lower wages lead to a more prosperous economy?

List of countries and their minimum wages: http://en.wikipedia.org/wiki/List_of_minimum_wages_by_country

Countries from that list with a higher minumum wage than the US wage of $7.25 an hour: (hand searching so I may miss a few):
Andora $7.71
Australia $16.45
Belgium $12.67
Canada $9.60
France $13.10
Ireland $12.01
Japan $8.40
Luxembourg $15.05
Monaco $13.10
Nederlands $11.77
New Zealand $10.83
San Marino $12.22
United Kingdom $9.98

In most of the "no minimum wage" coutries in the earlier post, wages are set by collective barganing. Germany for example (from my link):

None; except for construction workers, electrical workers, janitors, roofers, painters, and letter carriers. Minimum wage is often set by collective bargaining agreements in other sectors of the economy and enforceable by law[6]

These are all wealthy countries. Does their wealth allow for higher minimum wages or did the minimum wage laws help make them more prosperous? Most of the countries with the highest minimum wages are also listed among the top countries in terms of GDP per Capita: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita

Top 20 according to the United Nations list:
Lichtenstein
Monaco
Luxemburg
Norway
Qtar
Burmuda
Switzerland
Australia
Macau
San Marino
Denmark
Cayman Islands
Sweden
Kuwait
Canada
Nederlands
Singapore
Austria
Finland
Ireland
United States
Belgium
Japan

 

[Danan]

Zippy I'd argue that the GDP (PPP) per capita (at purchasing power parity) is more relevant than GDP (nominal) per capita. According to that the US is anywhere between 6th and 9th richest nation per capita (PPP). However, given that the guy gwax23 was arguing with is a socialist, he might point out that income distribution plays a role here too.

Otherwise I'd largely agree with your post. Especially important is:

What percent of people actually make the minimum wage- those are the numbers which would gain or lose from changes in the wage. In the US (300 million people), 1.6 million people were paid hourly wages equal to the minimum wage and another two million made less. If hardly anybody is making the minimum wage then it is not economically terribly significant.

That should end every argument right there. If the greedy capitalists who are only interested in their profits (which might even largely be true) can push those workers' wages beyond their marginal productivity, why can't they do this with all the other workers too? Why can they only "exploit" unskilled laborers?

Could it be that they are actually producing additional wealth at approximately the rate of the minimum wage and that therefore the usual competitive market forces that elevate all other workers above that wage are not able to do the same to them? If so, that would validate the common believe that workers are paid wages according to their marginal productivity (more or less) and that therefore an increase in the minimum wage will only increase unemployment and in fact not boost the actual wages of anyone still employed.

 

[Zippyjuan]

As far as the countries listed, even if you go by PPP (purchasing power parity) they are still listed among the better off countries. List: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita That list does include more oil producing countries.

As for economic impact of getting rid of minimum wages and increasing jobs here. Say getting rid of the minimum wage would create 10% more jobs. Given that the US has 1.6 million actually getting paid the federal minimum wage, that would add 160,000 jobs (a random percent figure).

 

[gwax23]

Anyway to estimate the total loss of jobs to that 1.6 million figure if the minimum wage was raised to lets say 9$?

 

[Zippyjuan]

We can try to compare a couple of charts. First- US Minimum Wages.

And then compare that to a unemployment rate chart:

http://www.google.com/imgres?imgurl...xkUYyiIKjmygG2koD4Ag&ved=0CDoQ9QEwAg&dur=2831

 

[awake]

Trying to speak the truth will almost always get you nowhere. Or so it seems, the battle is one ignoramus at a time. It is frustrating to no end, but it must be done.

 

[Danan]

Anyway to estimate the total loss of jobs to that 1.6 million figure if the minimum wage was raised to lets say 9$?

I believe that's not really doable. If we assume that all of them work at a wage corresponding exactly to their marginal productivity all of them would lose their jobs. But that's not very likely, imho.

Also, in reality they wouldn't necessarily lose their jobs immediatly even if their actual MPL were to be lower than the new mininum wage, since the business owner likely doesn't know exactly how high their MPL is. They would see their profits diminish after some time, but that was to be expected regardless of whether or not their wage is now still lower than their MPL or not. Only in the long run would those businesses that fired these workers after the increase of the minimum wage do better or worse than those who kept them. And to analyze the exact empirical impact of the increased mininum wage by then is likely impossible.

 

[Zippyjuan]

Looking at these charts let's pick some times (pick any you like). Say 1975- 1980 which saw a pretty good increase in the minimum wage. Unemployment was actually falling during that time (from 9% to below 6%). Another big step in 1991- 93 roughly. There unemployment rose. Next step- 1998 to 2000. Falling unemployment.

Historically it would be difficult to say how it would impact unemployment since we have seen both. There are two effects- one is that employers who use minimum wage workers have higher labor costs. They must reduce their costs (cut back on workers or other expenses) or pass them along to their customers via higher prices or just accept lower profits. Then the worker side of the issue. They have higher incomes which means they can purchase more things which means more demand for goods and services and in turn more jobs. Which is the greater effect? You can find economists on both sides.

And again, on the economy as a whole, we are talking about effecting a small percentage of all workers.

 

[Danan]

Trying to speak the truth will almost always get you nowhere. Or so it seems, the battle is one ignoramus at a time. It is frustrating to no end, but it must be done.

If he only converts one of his listening classmates who then in turn gets passionate enough to convert others, it was worth it and could potentially pay off. It's a terribly hard fight though.

That's why we need to strive to be the most educated on all subjects we argue about. Our arguments need to be bulletproof and people need to come to us when they expect knowledgable insights on various subjects. Only when we strive for excellence can we eventually make an impact.

That's essentially Ron Paul's take on it too, afaik.

 

[Danan]

Looking at these charts let's pick some times (pick any you like). Say 1975- 1980 which saw a pretty good increase in the minimum wage. Unemployment was actually falling during that time (from 9% to below 6%). Another big step in 1991- 93 roughly. There unemployment rose. Next step- 1998 to 2000. Falling unemployment.

Historically it would be difficult to say how it would impact unemployment since we have seen both. There are two effects- one is that employers who use minimum wage workers have higher labor costs. They must reduce their costs (cut back on workers or other expenses) or pass them along to their customers via higher prices or just accept lower profits. Then the worker side of the issue. They have higher incomes which means they can purchase more things which means more demand for goods and services and in turn more jobs. Which is the greater effect?

That's not the right way to look at it, imho. Likely increasing the minimum wage always puts downward pressure on wages. However, in those instances an increase in the minimum wage corresponds with a decrease in unemployment something else had a positive influence on employment, canceling out the negative impact of the minimum wage law.

For your analysis to be meaningful you would have to hold all variables other than unemployment and the minimum wage constant. With various statistical, econometric tools you can make some progress with that, but in the end it's all doomed to provide no meaningful insights, since the nature of economic data really doesn't allow us to do that objectively.

However it is fairly easy to create models that show that an increase in the minimum wage law will always increase unemployment, ceteris paribus. It's way harder to show the opposite. Or at least you'd likely need ridiculous assumptions for that.

 

[cubical]

Ask him why anyone makes more than the minimum wage.

Ask him if someone can produce the equivalent of only $6 an hour, is he supposed to simply live off everyone else the rest of his life?

 

[gwax23]

Looking at these charts let's pick some times (pick any you like). Say 1975- 1980 which saw a pretty good increase in the minimum wage. Unemployment was actually falling during that time (from 9% to below 6%). Another big step in 1991- 93 roughly. There unemployment rose. Next step- 1998 to 2000. Falling unemployment.

Historically it would be difficult to say how it would impact unemployment since we have seen both. There are two effects- one is that employers who use minimum wage workers have higher labor costs. They must reduce their costs (cut back on workers or other expenses) or pass them along to their customers via higher prices or just accept lower profits. Then the worker side of the issue. They have higher incomes which means they can purchase more things which means more demand for goods and services and in turn more jobs. Which is the greater effect? You can find economists on both sides.

And again, on the economy as a whole, we are talking about effecting a small percentage of all workers.

So are you neutral on the issue? Where do you stand?

 

[cubical]

Looking at these charts let's pick some times (pick any you like). Say 1975- 1980 which saw a pretty good increase in the minimum wage. Unemployment was actually falling during that time (from 9% to below 6%). Another big step in 1991- 93 roughly. There unemployment rose. Next step- 1998 to 2000. Falling unemployment.

Historically it would be difficult to say how it would impact unemployment since we have seen both. There are two effects- one is that employers who use minimum wage workers have higher labor costs. They must reduce their costs (cut back on workers or other expenses) or pass them along to their customers via higher prices or just accept lower profits. Then the worker side of the issue. They have higher incomes which means they can purchase more things which means more demand for goods and services and in turn more jobs. Which is the greater effect? You can find economists on both sides.

And again, on the economy as a whole, we are talking about effecting a small percentage of all workers.

Yeah you find quacks on the "give them more money, and we all benefit" side.

There is no controlled case for economic theory, so sometimes it is hard to look at history or at least there can be a lot of spin. So you need logic. Trying to increase consumption through price controls of labor is just dumb. I can not take anyone seriously who takes that position.