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Guest Post: Increased Minimum Wage, Decreased Economic Prosperity
Submitted by David Howden via the Ludwig von Mises Institute of Canada,
Standard microeconomic theory shows that deviations of a price from its natural level bring forth bad results. In my experience, students most easily grasp the pernicious effects of price controls when phrased in terms of the minimum wage.
Long story short, the minimum wage acts as a price floor which stops people from selling labour services at a price below the mandated level. The final result is an increase in unemployment, partly from existing workers who lose their jobs and partly from new entrants to the labour market looking for a job but unable to get hired.
It’s really not a very difficult theory to comprehend.

Yet I’m always surprised at how few are able to apply this basic lesson. Take the recent protests in Thunder Bay in support of increasing Ontario’s minimum wage from $10.25 to $14 an hour as a case in point.
Amongst the arguments the protestors put forward, two stood out to me for their weakness in justification.
First, some protestors seemed to think that $14 was inherently “more fair” or “just” than $10.25. Prices are not about justness or fairness, they are about reflecting underlying conditions. A price doesn’t just come out of nowhere. Instead it is the result of the subjective demand someone has for an object, the resource constraints available, the substitute goods that the person could resort to instead, or the potential purchaser’s income level. Changing these general determinants of demand into the specific ones that affect the labour market, we can see that wages are the result of: 1) the productivity of workers, 2) the number of workers available, 3) the price of labour substitutes, like machinery or automated production processes, and 4) the incomes of the employers. (There are lots of other determinants, but this short list will suffice.)
Changing the price of labour does absolutely nothing to alter these determinants. Advocates of alterations to the minimum wage confuse cause with effect. The wage one earns is the effect of all of these aforementioned causes. Changing the wage will not have a positive effect because unless one of these determinants changes there is no reason why the wage should change.
The second prevalent argument at the protests was that higher wages would stimulate the economy. One protestor claimed that the increase in the minimum wage to $14 would stimulate the Thunder Bay economy by $5.1 billion!
Economist Livio Di Matteo did a little digging, and it turns out the “stimulus” in question is the sum of all Thunder Bay residents earning an extra $3.75 an hour. Unfortunately this doesn’t amount to stimulus; it just changes the distribution of income. Minimum wage earners, if they manage to keep their jobs, will end up a little wealthier and businesses will lose some money.
One of the best lessons from economics is that one should pay attention to the unseen effects of a policy. Often times this will be more important than those results which are obvious.
In minimum wage discussions, the unseen effects are two-fold. First are those people who are going to lose their job because of the increase in the minimum wage. If you thought it was hard to survive on $10.25 an hour, wait until you are earning nothing. Second, even those who keep their jobs are not stimulating the economy through their increased wages. To the extent that businesses will have to pay more money to workers there will be less money to invest. This means less growth, and fewer opportunities for people in the future.
Wages, like all prices, are not randomly created. They signal underlying conditions and as such are not inherently just or unjust; they just are. Changing the wage rate without doing anything to alter one of the underlying variables creating it cannot achieve anything positive, and will more than likely make people worse off. If these protestors are successful in achieving an increase in Ontario’s minimum wage, at the very least some of them will gain time to think about this simple lesson after they lose their job.
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Let's raise the minimum wage to $100/hour, then we'll all be rich!!!
Or lower it to zero and we all get free work!
Would you work for $0?
Exactly which is why the chart doesn't reflect reality.
Minimum wage needs to increase, not because it will benefit anyone, but because inflation demands that it be raised.
ROFL.
Who cares about the minimum wage in the "modern service economy" when there's no fucking service to even begin with?
In the last week, I've wrestled with one bank 3 separate times the first two them telling me "nothing wrong" after a bland e-mail that said to call so and so who'd ask me for all my passwords, etc., to solve a problem... yeah, right. So I call another group to verify, who said to ignore the e-mail. And for good measure make a trip to the bank to talk with a flesh and blood live being who tells me ignore it, it's fraud, but do call the fraud operation. I do to report it to the fraud operation as suggested and they say good job, thank you very fucking much. Who then turn around 2 days later (the same fraud group) and tell me I'd never contacted them and denied access to my accounts. Which I had to clear up on the phone with... the fraud operation.... oh never the fuck mind.
And another fucked up an account outside of standing guidelines which I called them on and I got an explanation which clearly showed that they were not paying any fucking attention.
And I called my doctor about a prescription refill which told me top take 4 times the pills I had been taking. And spoke with an assistant whom I've not heard shit from.
And a contractor had an order which they'd lost, called me to get the details, I call them back, he's not here, leave my number and no calls.
And I go to my local library at 11 a.m. Monday when their web site says they open but they've changed their hours on Monday to open at 2 p.m. and not changed the website...
And I get a call at 8:20 p.m. last night for my opinions about some such shit, and I never ever bother to give my opinions to people I don't know, since it's none of their Goddamned business and my line's a do not call number....
I mean, what fucking service economy?
With service like this they should pay me to be a client.
Pay peanuts.
Here's a gift for ZH...
http://money.ca.msn.com/investing/insight/wal-mart-asks-workers-to-donate-food-to-its-needy-employees
How government works:
1) It innately makes the rich richer.
2) It buys the allegiance of the poor with free shit and minimum wages.
3) It destroys the middle class with 1 and 2.
4) Failure.
And yet, government is older than money. Go figure.
Fail, the element gold has been around a lot longer.
It was an element long before it was considered money. Travel back in time to an early human society and see if they accept your shiny rocks in exchange for food :-)
There really isn't a need for money in a zero-sum system, you just barter.
We need to lower the maximum wage for Zionists to $10 a month.
Insanelysane
It's clear that either 1.) You never took economics or that 2.) You took it and failed.
Your problem is that you 'believe' that economics describes something akin to reality.
Exactly! The chart shows the economics of labor in a free market. Minimum wage has nothing to do with free market or economic theory. It is a set number. Some people may feel that it is arbitrarily set at some level but others could argue that it is raised over time as inflation dictates.
Maybe one of the economists on this site can do a chart on minimum wage levels vs actual cost to live and see if there is a correlation.
You're right about the minimum wage not having anything to do with a free market, but not because it's some arbitrary set level, more because it stops a free market existing.
For example. I am a business owner. I have 5000 dollars per month to spend on workers. Lets say the present minimum wage is $7.50 p/h. Let's say they work 40hr weeks. I can afford to hire 4 people at ~1200 a month. There are presently enough people in the labour market willing to do my job for 7.50 p/h, I am able to hire my 4 people.
Now the minimum wage rises to $10. I still only have $5000 per month for labour, because my business hasn't changed any other parameters and still earns the same amount of money. Still assuming 40hr weeks, employees now cost $1600 a month. I can now only afford 3 employees. I've got to fire one guy, because unless I magically pull another $1400 out of my ass I literally cannot afford to pay him without going out of business.
Most likely, because I don't want to fire the guy or can't run my business with 3 people, I'm going to try and work around the problem. This will most likely begin by hiking the prices on my products to try and maintain my margins. My business will make less money, which means I can't expand or buy more equipment, which means I can't produce more, which may stop me from hiring more people in the future. All wage hikes accomplish where margins are already compressed (like in the present economic situation) is hiked up prices and slower growth. It's unfortunate that the minimum wage doesn't correlate well with cost of living, but frankly, it's this or it's nothing when we go bust and can't employ anyone.
The author forgot to include inflation. Wonder what else is left out to make him look good to master?
You mean the inflation that is caused by government?
Once again, the cause of the problem is looked upon as the solution.
Companies don't have a magic pot of money that creates more money when wages increase. Wages are a part of the flow of money into and out of the company. The money for increased wages comes from somewhere, and the only consistent source of that money is consumers of the companies products. Prices must go up. Companies do not pay increased wages, consumers do, so minimum wages are an attempt to tell consumers what value they shoud place on labor. Problem is, if consumers disagree about what that labor is worth, people loose thief jobs.
Only for very sexy women who give sex as the tip...regularly.
> Would you work for $0?
Early in my career when I needed experience: absolutely. This is incredibly difficult for business owners though, as the laws around apprenticeships and internships are mind-numbing. It is nearly impossible to work for knowledge outside of a college-based program.
Insert sad joke about shipping clerk jobs that require a degree in mailroom management -here-.
Good for you. Now imagine if 50 million on food stamps also decided to take your advice.
During our last recession there were plenty of stories of bosses "trying people out" for a few weeks before deciding they "weren't good enough". Oh but that's right, bosses would never have an entitlement mentality, would they ...
The only problem with this shill's premise is that it's totally false. The only time jobs were lost following a minmum wage increase was in the early '70's, during the oil embargo. That led to a nasty recession, not the wage increase.
People wonder how so many come to believe things that prove later to be completely false. It's because paid hacks like this keep repeating them over and over again for those paying for their services, but remaining way in the background.
Who does this lying weasel work for anyway?
Then, why not raise the minimum wage to $1000/hr?
Straw man... The fact is that governments' presence creates the Monopolies and market distortions that create the working poor's plight. Anyone who argues against the minimum wage that is not for full anarchy is not seing the big picture. Without government to protect their RE and tademark monopolies McDonalds could not exist in it's current form. Taken that fact I'm not so concerned if government demands they pay their workers a certain wage. Government is the problem for sure, but to many libertarians think that wiping out the social safety net and the Corporatocracy are equally worthy goals. Destroy crony capitalisim first AND THEN we can go after the safety net.
You make a lot more sense than most here...
I second that
Why not cut wages to zero? Infinite jobs and production for all! We have scientific proof that you will be richer, if only you allow yourselves to become poorer. Ignore the fact that real minimum wages have halved over the last 4 decades, they need to decrease even moar.
Okay Mr Supply-demand-did-economics-for-6-months-man, what happens to that demand curve as the customer's wages go down? Oh but that doesn't matter because of what happens to the supply curve as costs go down. Except, workers still have a mortgage. Customers still have a mortgage. Businesses still have to make repayments on their business loans. Remember all the chickens running around sqwarking about their fear of deflation?
Eventually, the minimum wage will be raised to $1000 per hour as it makes its way to $10 000 per hour and beyond. This should be a "good" thing (sorry investors but ponzi real estate speculation is akin to burying money in the ground where a thief will steal it. True "investment" involves creating production, not grabbing a choke-hold on a limited resource and milking it for infinite imaginary money) as debt is diluted, releasing more purchasing power to both worker and business owner. But as we all know, in the real world banks will still be lending money to idiots who will bid all prices through the roof. Through the whole hyperinflation, the minimum wage worker will only be playing catch up but he will get all the blame while the idiots with free borrowed money and monopoly control of prime real estate will be ignored.
Ok, where are all the gas station attendants pumping gas for customers? Maybe they lost their jobs because people decided they'd rather pump their own gas than pay those wages.
WTF, make it an even grand! Moar is always better!
Here's the real question as I see it: should I be able to engage in a private employment contract at any rate that is mutually agreed upon even if that rate is below some arbitrary government mandated minimum wage? For those that would question why I might want to work for less than the minimum wage I would say - "That's none of your business". It's nobody's business what I exchange my labor for. Sure, if I take a job for less than minimum wage and then turn to the public trough for food stamps or other benefits that would be immoral in my opinion. But as long as I don't suckle from the government teat and want to work for $5/hr, $4/hr or however much I think I'm worth then that should be my business only.
The real problem with the minimum wage is that everyone wants to apply a Bandaid to a gaping wound. That gaping wound is the Federal Reserve which has a policy of creating inflation and robs everyone through declining earning power. You can continue to raise the minimum wage all you want but it will never keep pace with inflation that is institutionalized by government and Fed policy.
But the guy said "Wages, like all prices, are not randomly created."
Like how the free market regulates interest rates, stocks, ethanol etc. Uh huh. It's a free market from the bottom up. But don't hold your breath about it going past the minimum wage earnings chumps.
The black market doesn't operate on free market principles either. The risk premium that makes some people very wealthy is based on government laws prohibiting commerce.
Go ahead, work for 3 bucks an hour. But there are plenty of talented people out there who will do the same job for 2 bucks and hour. What's your next move? Work for two bucks an hour? Plenty of hungry people out there are already working for less than that right now, why don't you travel to one of those countries and show us how happy you are competing with them?
I'm the kind of guy that is happy to start work anywhere up to 15 minutes early and finish 5 minutes late. What are you going to do to compete with me? Start work half an hour early and finish an hour late? What happens when you have to compete with someone exactly like yourself?
We need higher minimums and lower maximum (or at elast some maximum). Even the old capitaist Henry Ford knew you had to pay people a living wage if you wnated to have any customers. I for one am sick of the government subsidizing WalMart et al by effecively paying workers the wages the corporatistst wont pay (food stamps etc).
< I should be able to enter into an employment contract with any wage as long as I don't take government benefits
< Nobody has the right to work for below minimum wage because that would undermine government
How's that working out in practice? Lots of people working for $5/hr. and refusing government benefits? Maybe 12 year olds mowing lawns.
I'm not saying price controls are good or effective, but this economy is rotten to the core and you don't start free market reforms with the people who can least afford it. Well, you do, but it ends badly.
"you don't start free market reforms with the people who can least afford it"
WTF does that mean? You either start the rforms and get government out of everything it has no authority to be in, such as setting a min wage, or you will have those very same people, who can least afford it eventually walking around like zombies with nothing at all when this fucker disintegrates.
Stupid fucking idiots.
The minumum wage DOES NOT affect prosperity. This is the kind of libertarian BULLSHIT that I as a libertarian hate.
What affects prosperity is the debasing of our CURRENCY and the continued pursuit of a fast buck through the FINANCIALIZATION OF EVERYTHING.
The minimum wage is a moral and ethical construct. All work above and beyond a hobby AND provides a needed service that people cannnot or choose not to do for themselves should have a minimum basis of worth and makes for a livable wage if that person chooses to do that task or needs to because of the lack of other opportunity.
But to bitch and moan about how it's going to cut into the cost structure of your business thus making it harder for you to turn AS high a profit than you would otherwise have.....then FUCK YOU.
If that's the case....you need to get off your ass and do a little honest to God rioting, with Molotov cocktails and some politicians and bankers running for their fucking lives for the selling out of the American People to slave labor overseas and the debasement of our currency by a bunch of elite, academics who could not give less of RAT FUCK about any of us.
The Great Implosion™ will change a lot of things...
Just figured I'd chime in and let you know you are not a Libertarian.
There is nothing moral or ethical about price controls. Ever. For anything. And if you were a Libertarian as you say you are you would know that.
Sorry you are a statist through and through.
Hey Jumbo, the Pope just excommunicated you....
Fuck you pussy. (artless) It's not about price controls.
And being libertarian does not mean the total absence of a state. That's lawlessness. Even anarchists want some sort of state structure....just to an even LESS degree than Libertarians.
Read the fucking post again asshole. I said the minimum wage is a moral and ethical construct....(make sure you don't read religious into that,.....that's not what I mean). And matters of morality and ethics CAN be agreed upon not only on the individual level but on the larger societal level as well. Even at the state level.....even the level of a state that Libertarians can agree on....can come to consensus on this matte.r
Otherwise....you're arguing as if you're from the Confederacy of the old south.
And as someone who was born and raised on old Mississippi I'm glad that the South was burned to the ground in the Civil War. That's what we deserved for slavery. If a man works for you....pay him fairly and at a rate that even if it were just for a day.....if he choses or if you need that job to be done for a year....that man can live (not large....just get by) for that year......that is....eat.....house himself, and have a little left over to invest.
Otherwise.....you're a serf owner. And if you are that......you're a no-good motherfucker.
"What if C-A-T really spelled 'dog'?"
(Ogre, Revenge of the Nerds II)
minimus wage workers, the new middle class.
These von Mises crypto-Zionists really resent every penny paid to the gentiles don't they? Give them power and they will drive the European ethnic groups in America and Europe into the sea.
Do you guys do any critical thinking?
Why don't you reverse it? What if businesses asked that the government implement a MAXIMUM wage of $14? Would you still work for that wage?
Assuming you make that much right now...
This is not about feelings or what is "right", but common sense.
Is that addressed to me? If so, common sense left the house when the industry was all outsourced to the Cold-War allies of the Soviets, China and India. Common Sense has the ring of 'Historical Inevitability.'
So that's it? We changed topics? Why do I even bother?
It is still astounding how people don't understand the market for labor. You know how much someone's labor is worth? WHATEVER THEY WANT TO ACCEPT. That is the value of labor.
If you actually took your argument to it's logical conclusion, you would realize how ridiculous it is. 1) If miminum wages actually made people better off, why isn't the minimum wage 20, 50, or 100 dollars an hour? 2) Sometimes someone's labor is not worth the minimum wage, but they are instead LEAGALLY discriminated against, because they do not have the skills to command a higher wage.
Don't bother F-Tipp. These folks work on feelings, not logic.
Your argument would make more sense if people didn't get hungry. According to you, extortion does not exist.
Give people free land so they can opt out if they want to. That would be a start.
Is this tired old shit still being pedalled out?
I thought the "deep thinkers" at the Von Mises Inst. would harping about indirect corporate subsidies that allow a suppressed price of labor to be exploited...
Same people who pedal open borders. Just let 200 million Chinese in to every country and then we can all enjoy a Chinese workforce on our own doorstep.
As long as linear-thinking simpletons lobby for minimum wage hikes, there will be a constant need to pedal out the truth. It's challenging to get to "deep thinking" when the elitist liberals have dissuaded the masses of basic logic.
The basic logic is that if we compete with Chinese on their terms we end up with a Communist feudalism, on their terms.
You remind me my past readings of the history of early 20th century Russia... Pseudo-intellectuals babbling out complicated sounding "stuff" in denial of the fact that they were pulling the "stuff" out of their asses...
If you want to have a conversation, Flak, you'll need to step away from the mirror first. No doubt you are still waiting on the returns of your "science"...
Nobody would pay Obama even a minimum-wage to do any job...so, the only job left was president.
He's been counter productive his whole life.
Or worthless
He left out the part of 'under-employment'. The extra S of labour relative to the D will cause the unemployed to accept what they can get (i.e., under-employment). So raising the minimum wage puts DOWNWARD pressure on overall wage levels. As Barney would say, 'imagine that!'
File this in the "rule-of-law, sound money, free-markets, no FED, no crony capitalism, no mandated insurance purchases, property rights, Fourth Amendment, Gold Standard" folder in the bottom drawer of the cabinet.
In the centrally planned kleptoligarchy of today we may as well have a $20/hour minimum wage so people can afford all the central planning edicts of the New Rome.
But golly, that might hurt corporate and bank profits, so it's a "no-go" for us serfs.
if the currency that wages are paid is infinite, supply and demand doesn't apply.
Correct.
http://www.usdebtclock.org/
I strongly suggest that you acquaint yourself with how the farmers got screwed by the deflation in the late 19th century under a gold standard in a time of small increases in the amount specie...
"Our results show that the deflation in the late nineteenth century gold standard era in three key countries reflected both positive aggregate supply and negative money supply shocks. Yet the negative money shock had only a minor effect on output. This we posit is because the aggregate supply curve was very steep in the short run. Thus our empirical evidence suggests that deflation in the late nineteenth century was primarily good."
And...
"Finally, although we find that pre-1914 deflation was primarily of the good variety, it doesn’t mean that people felt good about it. The common perception of the 1880s and 1890s in all three countries was that deflation was depressing. This in turn may reflect the fact that deflation was largely unanticipated. It may also have reflected money illusion. This was reflected in labor strife and political turbulence. This perception can be seen in the views of US farmers who believed that the terms of trade had turned against them and workers in all three countries who did not view falling money wages as being compensated by even more rapidly falling commodity prices. It is doubtful if a true deflation today would be any less unpopular."
Post 1913 - with the institution of the Income Tax and the Federal Reserve in the U.S. - the gradual march away from tangible money into fiat fantasy land took power away from individuals to determine what they would and would not buy at what price.
Now - with: unpayable debt, fungible intangible money, agricultural subsidies out the wazoo, Food Stamps/EBT, and crony capitalism - individuals have become slaves to the money system rather than actors and primary movers of the system; the invisible hand has been lopped off and replaced with the iron fist of centralized banker hegemony.
Source: http://www.nber.org/papers/w10329.pdf?new_window=1
Demonstrate that commodity prices, i.e. wheat, oil, have not basically tracked gold prices since the 50's and I may believe you...
The conventional wisdom here is that oil is manipuated up while gold is manipulated downward... Not much of a manipulation if the ratio stays basically the same (with some obvious market shocks) over 50 years...
The Chinese don't have a minimum wage, and look how great things are going for the working people in their country!
Well played.
just drop the minimum wage altogether, eliminate any employment regulations, and let the "free market" do its thing. We need to go back to company towns and 72-hour mandatory workweeks. Oh, and child labor laws need to be stripped, too. Free market, again.
We'll be all the better for it.
Considering that the wealth is all owned by Zionist oligarchs, we all know that would only deepen the feudalism.
Let's see I got my first real job at 13 and had to provide my own tools and transportation, I got no health insurance, no benefits, no sick days and no paid vacations, and I was double taxed social security & medicare because I was paid by the company as an independent contractor. Several decades later I still routinely work 72 hour weeks -but now I own a significant chunk of my own company...
I am better for the experience.
Good for you. But you'll never understand the other side of humanity.
~ "worked 72 hours per week all my life and now I own a significant chunk of my own company."
Sounds really motivating.
damn touchpad
These days you would be lucky to start off debt free, and you may have to help your parents clear their debts, as you work. Then you would find that no matter how hard you saved house prices would escalate at a faster value than your earning potential. You would find it impossible to save to a point where you could be independent.
In the first year that I earnt 40 grand, house prices went up by over 40 grand. No point saving for a deposit.
"But no, it's all them people demanding minimum wages that are hurting the economy ..."
Years ago I could have swapped my flat for a house if I put up an extra 20 grand. Now I'd have to kick in at least an extra 200 grand for the same transaction. What to do? What to do? Shall I compete with the idiots and their blank cheques and work my guts out so I can make another banker rich?
I agree. My 6 year old needs to get some damn skin in the game. I don't even care if the only job he can get is picking the dingle berriers out of Oprah's crack.
Growing up the best full-season hishschool job was working in the nursing home, and you know what that entails, yes it stinks, and I was blown away to find out that a dude was doing it. Not me, I just delivered milk there, and that was enough to spook me.
The truth is in a global economy the capital is going to migrate to countries with low labor costs. We can't have a global economy where slave labor is allowed in one country and others demand a basic standard of living for their citizens. It seems more like common sense than economics to me.
So, dick faced David Howdumb, what do you suggest we do to rectify this problem where corporations have raked in record profits and paid their ass sucking execs record amounts, yet continue to reduce workers wages and benefits? We are all waiting for your enlightened answer. My personal suggestion is to hang every banker, lobbyist, and politician you can find. Therefore, I am bullish on hemp.
The troll-rant is probably a 4 on a 10-point scale, but I'm nominating yer hemp reference for "non sequitur of the year'...
It is pretty clear that you are the troll...
Nothing to do now that your latest AGW theory has failed the evidentiary test (yet again)? There are meds for that, y'know...
My assertion stands....
Seems you've mastered the art of pressing the green up arrow on your posts and the red down arrow on mine. That's pretty good evidence that you have run out of anything substantive to say (yet again). You stopped fooling people about 400 posts ago.
I guess in the new normal, if you state the obvious, you are branded a troll. Ok, I am a troll then. Pay the toll fucker.
Besides, isn't inflation what the FED claims it wants? Aren't rising wages one of the key inflationary triggers? Seems like the solution to the FED's deflation fear is a $50/hr minimum wage for the masses and a reduction in exec pay. The reduction in exec pay is ............... just because fuck the 1%!!!! They have already gotten more than their fair share.
You essentially argued "if not raising the minimum wage, then what do you (author) suggest we do to rectify the obscene corporate welfare?" The implication is that raising the minimum wage isn't such a bad idea and would somehow actually do some good relative to the cronyism. That's pretty linear thinking, because one of the more effective ways that corporate welfare is protected is by shifting the masses' focus onto their own wages. (Yeah I got your idea of hang the bankers, but your premise is that something should be done to level the playing field...)
The only viable way to break up the crony-capital economic system is to replace it. And in order to do that, it is essential to replace the medium of exchange (currency). That is why controlling the next currency is THE RACE that is going on in the global economic and geo-political landscape.
Look we all know what you are implying...
How do you reconcile the stock of your preferred currency (gold) with the flows in the oil market knowing full well that the Petrostates are all running current account surpluses? Just Kuiwait, SA and Russia are at about 3,000 tonnes a year currently...
It would take 15 to 20 years for all your wonderful gold to pile up in their vaults..
Putin would kiss you.....
Or do you even think about what really would happen when you indulge in your mental masturbation?
Who said anything about gold? It's always entertaining to watch you attempt to make an argument when it requires you to introduce information unilaterally. That's why you and your junk science continually fail. But keep trying - someone will pay attention to you if you rant enough.
Quite an about face on your part, or are you loosing your religion?
So now you've graduated to unsubstantiated either/or questions? That's what rookie news reporters do...
When all land is owned by a minority they can force wages down to a subsistence level and pocket all the surplus production themselves, which is exectly what we see happening. The minimum wage (and social security) puts a floor under wages, otherwise the land owners would be pocketing even more than they are now.
Land owner is a bit inaccurate. Rather, if you can entice the landowner to take out debt, then you can accomplish the same thing as if you owned the land, but without as much risk...
Sadly these analysis belive there is some sort of "free market" incidentally how is lack of minimum wage working out in Bangladesh and India? Thats right with predatory capitalism backed by the state you would just end up working for a buck a day or less.
The Chinese sock sewer in the 19th century making 6 socks an hour would earn 10% of the European average wage. The Chinese sock machinist today, monitors a sock machine that can make 20,000 socks an hour and he still earning 10% of the European average wage. All the profits are consolidated to the tiny elite. The wage the machinist gets paid is largely irrelevant to the end price of the goods. If you let the employer pay zero, say, by brining back slavery, then the typical Zionist factory owner would gladly do that.
What the rest of the "Deep Thinkers" fail to remember is that many ofthese copanies are publicly traded, the majorityof stock is held by mutual funds or 401k's where the shareholder has little to no voice in the running (ruining) of the company. Essentially, these companies can pay almost nothing and itwillnever matter because there are always more lemmings willing to fork over thier hard earned cash to incompetent management teams. You want to get rid of the employment problems ad labor cost issues? Outlaw 401k's and mutual funds, theyare set to rig the game.
LOST: One ZH Chat room. Disappeared suddenly about a week ago. If you have seen it, please respond to this post. Thank you.
(PS: No reward.)
I see 11 (now 7) people hanging out in one ZH Chat room right now...
Now that's odd. Minutes after posting this message, chat started working again. God must've heard my prayers. Or maybe Sacrilege.
So when prices jacknife upwards to reflect the new wages (including rents) explain to me how that helps the person making nothing, or how it helps the person already making that wage.
Example: Say min wage is 10/hr and goes up to 15/hr.
If Bob is a skilled worker already making 20/hr then instead of making 100% above min wage (and enjoying the standard of living thus afforded to his skill set) he will now be making 33% above min wage. His living standard is now sorrowfully diminished when prices rise.
Or lets say that Craig makes $15/hr. If Craig is a semi-skilled worker who was making 50% above min wage but is now making 0% above min wage, then what incentive does Craig have to work his $15/hr trade as opposed to having less responsibility at a convenience store? Other than the pride of course.
The other option is that Bob and Craig now have to demand more since they can certainly be employed in lesser occupations whereas few(er) people would be able to do what Bob or Craig do. Thus they are in more demand and can demand more $$$. This causes his employers to pay more which causes prices to go up.
And then we're back at square zero.
Your arguments are ll well and good until you factor in the manic embrace by corporate America of offshoring.
There would not be a single job left if it could be applied across the board.
We could even get our laundry sent to a Chinese ocean liner parked offshore where a thousand Chinese with a thousand washing machines and ironing boards would be working away like good little employees.
I really get tired of this minimum wage crap when the fed prints money by the trillions and we pretend like money has the stability it use to when it was actually tied to something. $10 dollars an hour is going to crush the eCONomy, companies will just pass it on to consumers, it acctualy hurts job growth. What hurts job growth is crony capitalism, waste and graft, Web sites built by politically connected hacks and the military industrial complex The whole idea that minimum wage is the problem with this country, is like saying the last cheeseburger that some 450lbs 70 year old ate was what killed them. In a world where fiat is created out of air, minimum wage is the least of our problems. Not that I don't think most people (90%) are stupid fucks and earn way more than they're worth, but that goes for those from the top to the bottom. I can honestly say at times in my life I've been overpaid and at other grossly underpaid. How many CEO'S are worth the wage they get paid? How many could be replaced by someome making 20% of what most CEO'S in the top 5000 companies make in this country?
There are just a few points to consider;
1. Would present levels of wages persist if there were no food samps being handed out?
2. Would present levels of wages be where they are without offshoring?
3 . Why aren't politicians subject to the same free market factors as the poor old bastard working for under $10.? It seems to me that if the worker could source his congressman from overseas he might get a better congressman at a cheaper price.
We need a minimum wage of about $15 an hour. Yep prices would rise but since labor is only about 25% of biz costs they would only rise by 25% X the percentage increase. So if Min wage was at $10 now and rises to $15 then prices of goods sold using minimum wage workers would go up about 12.5%. For stuff not made/sold using minimum wage works there shouldn't be much of a price increase.
The lower classes would now have more money to spend. They are working, they deserve it to be so. This would cause the need for more jobs and thus more spending and continued economic growth. Biz profit would also be a bit higher as higher prices mean higher profits at the same % level of margins. So the rich get richer as well. Also more income equals more tax dollars coming in...lower subsidies going out. Get everyone working at livable wages and social security begins to fund itself once again as well. We wouldn't be far from a fully funded government with a low level of subsidies.
Of course the same people who argue against minimum wage also argue strongly against welfare of any sort. They basically just want you to die if you aren't in the same camp of wanting to take advantage of people. They say..well he doesn't have to work for $8 an hour...it is his choice..so under that premise it is ok to gouge people for water after a disaster..."he was willing to pay me $20 for that bottle of water so no problem here"...
Fuck you people who insist on the right to take advantage of otehrs.
"So if Min wage was at $10 now and rises to $15 then prices of goods sold using minimum wage workers would go up about 12.5%. For stuff not made/sold using minimum wage works there shouldn't be much of a price increase."
However, nothing occurs in a vacuum. The people making $15 when it was above the minimum wage would then be minimum wage and would want their wage raised to say $20. Then the 12.5% number becomes invalidated, as pay increases ripple across the board.
... but the wage earner's debt will stay the same, the company's debt will remain unchanged, the customer's debt will remain unchanged, so all three end up with relatively more money.
My little town of Seatac, just voted (by a razor thin margin) to raise the minimum wage to $15.00/hr.
My neighbors think they're going to get "the wage we deserve". I think they're going to be unemployed.
It's going to be a boon for all the towns that border Seatac, though.
In other words they will be "offshoring".
People need to understand that once upon a time even the lowest paid worker was better off than today's lowest paid worker.
Why? Because offshoring has stuffed the labour market and because government handouts such as food stamps is blurring the problem.
Our minimum wage was started in 1938. We've had many periods of extremely low unemployment and great economies since then. I fail to understand how the minimum wage was a negative thing for the country. Things change however, and when we opened up our "free" trade with countries who pay pennies a day for labor, it immediately put pressure on our jobs and wages.
The US minimum wage has never been sufficient to raise a family out of poverty in a one-worker household. The minimum wage has seldom kept up with actual price inflation. In real dollar terms we are paying at 1960 levels. In real terms the wage peaked in 1968 and has declined ever since.
What is a good economy? Is it something that maximizes corporate profits and stock prices? Or is it a system that provides maximum employment, livable wages, and contentment to its citizens? What good is an economic system that could provide a doubling of GDP, but deliver increased unemployment and poverty?
With 40,000,000 (yes 40 million) illegal workers in the US there is no wage floor. No mimimum wage will see a new daily pay scale of 1$ a day.
The elites demand it.
As currently shown on this chart, Demand quantity is less than Supply quantity, this equals supply surplus but it's highlighted as unemployment. No. The unemployment should be underneath the supply and demand lines. Unemployment = supply shortage i.e. Supply quantity is less than demand quantity. Therefore shortage is under. Supply surplus is on top of demand/supply lines.
Aside from this, if Walmart had to pay people, they would have to withdrawal money from the banks. That would cause a banking crisis.
Any withdrawl by Walmart to enable payment of a decent wage would not even reduce the family fortune by a single zero.
But here is a question for all of you.......why did Henry Ford pay higher wages than he could get away with?
The OP's article is precisely correct. However he leaves out the critical part of the analysis - why is it that wages are low, yet corporate earnings are high?
This is the confluence of two mechanisms; rent seeking, and (captured) regulation.
Firstly captured regulation.
Regulation is created by corporations and enacted by politicians they control. It is always disguised as something socially beneficial - like a minimum wage law. A minimum wage law does the exact opposite thing that is intended. Large corporations have a lot of capital, and highly paid top end staff - layers, accountants, managers and so on. The impact of minimum wage laws on a large corporation is very minor. On the other hand, the impact on small business is much more dramatic. Many small businesses rely on unskilled, young staff - and the proportion of their expenses that are assigned to low paying jobs is substantially higher than large corporations.
So when minimum wage laws are implemented, then it is small business that takes the bulk of the cost increase - and this means that many more jobs are lost, and businesses contract allowing the growth of corporations.
It is the small business owner that employs more labor, because they have less capital investment and tend to hire more from the unskilled end of the spectrum. So minimum wage laws will simply put small business out of business, send more people into the labor pool - which will cause a fall in labor costs overall.
Corporations know that it is small business that threatens them, and if they did not weild the power of govt, then small business would destroy almost all of them. So they create a complex reulatory environment, complex taxes - because it punishes small business far more than corporations.
Rent seeking.
Corporations love to control monopolies - often these occur naturally, but many are created by intellectual property rights.
The first person who saw the sun does not own it - does not hand it down to his children, and charge us all rent for getting sunlight. In fact the idea that it could happen seems absurd. However, we use the same reasoning when we allow corporations to own and control mines, waterways, real estate and to poison water and air, and not pay everyone else compensation for the pollution they cause. Above all, the intellectual property of society in the form of patents should never be monopolized - knowledge is the basis for our entire civilization.
Rent is unearned income, it is income that is accrued without effort or labor. Land cannot be created by human beings, niether can water, or minerals in the ground. Things that are discovered do not simply pass to the first person who saw them, they belong to society - and every member of society has an equal interest in them.
The value obtained from these natural monopolies should be returned to every member of society - that is every man should jointly benefit from the wealth of the land beneath their feet, wealth that was not earned, that nobody labored for - which belongs to all men.
There is no doubt, if you invent something then you have a right to use it - and exploit it - but knowledge is the foundation of civilization, and it is built up over long periods and step by step. If we see far, it is because we stand on the shoulders of giants. A patent should certainly reward the person, or group who discovered it - and for the term of their life it is reasonable that they benefit from thier genius.
But the knowledge upon which it was built, and the knowledge which it adds is the inheritance of all men. So patents should pass immediately into the public domain, and the inventors should be returned a fixed rate from the revenue generated for the term of their lives - non transferable.
That fraud and deciet walk the halls of power is known, that our fiat and fraudulent currency is a source of misery is also known - but there are also these things I have discussed which will remain a thorn, even if we are ruled by a good and just law, and our money is sound and honest.
Funnily enough, I came onto ZH to both complain and appeal.
I've been reading this site for years, the comments were populated by well informed traders, interested individuals and redneks. The articles were presented, as now, without much bias (other than scathing)
ZH seems to have been abandoned by the well informed traders and intersted individuals and has been taken over by the rednecks (that's corportoratism for you)
And then Amagnonx goes and posts.
Amagnonx is obviously a Marxist, unfortunately for all you Redneck '(rent seeking) Capitalists, as far as economics and crony capitalism is concerened, Marx is right.
And then we get to the appeal (perhaps I should stroke rather than antagonise my audience before appealing to their better nature)
Has anyone found a site like this (obviously the articles won't be as good) where the comenteers are both articulate and well informed. I don't care which school predominates as long as the quality of the debate is top notch.
Yes, it would seem the red necks won...
Naked Capitalism is probably your ticket...
Debate is at a higher, more civil level but tends to very dry... There is zero tolerance for anti-social behaviour...
BTW, I hope you don't mind libertarians gettting their asses handed to them on a platter... That is one reason why I don;t spend inordinatate amount time there, the results are always a foregone conclusion, sort of a Groundhog day for Libtards...
Dipshits like Mayhem Korner wouldn't last 5 minutes there...
Hmmm. I haven't been to Naked Capitalism, but I am now going to give it a try. Just to see. I have been on ZH a couple years now. There tends to be a lot of one liner comments, and fewer and fewer debate centered comments. The worst one I remember was a few year back when a huge anti climate science thread raged. I mean usually sensible people where screaming that most science was a scam and all that anti intellectual stuff really made me consider leaving ZH. I could not believe that in the 21st century that people would slam science on a computer device dependent on semi conductor physics and the underlying laws of quantum mechanics to work. Yet people used science created systems to call science a scam. All because they are politically angry that CO2 os changing atmospheric chemistry and the laws of physics were causing heat to build up. Now why shoot the messanger, is politics really that sstrong a belief system?
By chance would I have been involved in that debate? :-)
You are correct at pointing out the intellectual bankruptcy of some here...
Perhaps all it takes is an appeal to reasonableness.
I've been getting pissed off with ZH because of the prevalence of lowlife comments to any story
(it is the comments that make ZH)
Yet if you look at the quality of the comments that this thread draws, it is like the old days.
You articulate commentards, where have you been ?
I hate the free market, I hate the commies
(because I know nothing)
I am ready to argue the relevent merits of Keynes or Mises
(because I think I know better)
What I want to read is you lot arguing convincingly your position.
(because I want to learn)
There is a quality of debate at times that emerges on these forums that has no equal,
TPTB quiver when free and open exchanges of ideas of the way things should be run come into the open and they will always seek to subvert them.
Cheers ZH'rs
Perhaps all it takes is an appeal to reasonableness.
I've been getting pissed off with ZH because of the prevalence of lowlife comments to any story
(it is the comments that make ZH)
Yet if you look at the quality of the comments that this thread draws, it is like the old days.
You articulate commentards, where have you been ?
I hate the free market, I hate the commies
(because I know nothing)
I am ready to argue the relevent merits of Keynes or Mises
(because I think I know better)
What I want to read is you lot arguing convincingly your position.
(because I want to learn)
There is a quality of debate at times that emerges on these forums that has no equal,
TPTB quiver when free and open exchanges of ideas of the way things should be run come into the open and they will always seek to subvert them.
Cheers ZH'rs
Don't get ahead of yourself. Anagnox fails to recognize that the big corporates have immense pricing power due to their buying power which absolutely kills the little guy.
Time and time again, suppliers are politely threatened with loss of orders unless they drop price. The small retailer has no such power.
Their other power comes from their lobbyists and big pokitical donations.
Of course the stupid comments sometimes get a bit much but it comes with having an increasingly stupid society.
And remeber too, an increasing number of posters are products of the sinking American Education System. I remember when I respected a person with a college degree, now I give it no credit at all. Some of the most stupid people I know have degrees. Stupid comments are at their worst when one can see the obvious influence of the FOX and Limbaugh type of political dogma behind them. These, thankfully, are still not the norm here. I used to read Mish's Economic Analysis blog and commented frequently. It became taken over by a group of whack jobs, and a flood of FOX viewers. Comments became sickeningly like a FOX and Friends episode.
I do recognize it, but it is an effect - not a cause. A corporation needs govt protection and monopoly to grow to a size large enough to use pricing power.
Lols at being called a Marxist, Im an anarchist - I believe govt has no legitimate role in society whatsoever.
However, I believe that a society must be based on moral law, law that is derived from the universe itself - not the law of the jungle. I think that in an anarchist society, this law will eventually come to the forefront - but it would save a lot of pain and suffering if it is recognized and adopted from the beginning.
The law is simple;
Whosoever infringes the property of another human being without their consent, commits an unlawful act.
The land is the inheritance of all people, and those who use or infringe it shall restore a like value to the people.
Definitions;
Property means all things that are contingent upon the human being - body, mind, speech, products of labor etc.
Consent can only exist in the absence of deciet, or coercion.
Land means all things that are not contingent upon human beings (the universe).
Minimum wage is a tool used to starve stupid people.
"It’s really not a very difficult theory to comprehend."
The inflation adjusted minimum wage of 1968 is something like 10.75 an hour. The actual minimum wage now is 7.25. There were more people working in 1968 than there are now, as a percentage of the working age population, even though they were making a higher relative minimum wage to today.
The wealth and income disparity however, is greater now than at any time since the Great Depression.
The rich have more money to stuff into their pockets, yet there are fewer jobs. When JP Morgan took over Edison electric, he fired people and kept wages low. He as a result, became filthy rich.
It is not a difficult theory to comprehend.
Deja vu all over again.
It's even better...
Min wage in 1965 was $1.25 per hour or 1.25/35 of an oz of gold or $45 bucks an hour at todays fix....
Now who got screwed?
I wonder if the author of this piece was paid minimum wage?
Anyone who falls for this "higher wages" claim is a fool. You're just putting more gas on the fire. Rather we should demand that the base of the fire be extinguished as in, simply turning off the gas. It seems to me that inflation and/or price gouging feeds on each other with the little guys left with little to participate in the game.
Government loves to incite wage arguments as when wages go up so do the taxable wages. Insurance companies invoice workmens comp on wage value as well so guess who's side they are on.
WE NEED PRICE CONTROLS while the mess is figured out, not wage increases. Let there be a national freeze on all prices and eliminate the speculators in the commodities market and all of a sudden we'll all have more money to spend except the speculators that have been sticking it up our collective asses for way too long.
It would help if cash did not have to try and bid against Ponzi debt.
Bullshit. It is not cause and effect. The MW has only increased when "measured" inflation has significantly increased (something that goobermint will never let happen again). And by that time, the economic cycle has peaked and things quickly fall into the shitter.
So the argument is to let slavelandia eat cake? In the context of the fiat scheme, which is not free market capitalism, I do not advocate selective free makets. That's just fucking cruel. Make it all a free market.
Another Randian bullshit piece. Yup, let's blame the peons for trying to eat into corporate profits, those slimy bastards, what right do they have to a living wage.
We can use the made up government numbers to tell you that you are better off than you've ever been. Now go home and watch your $89 Wal-mart flat screen TV and shut the fuck up.
Minimum Wage? Bah, how bout people are paid relative to their productivity and not a penny more or less. The free market determines that. If you go to work and sit behind a desk all day and do nothing at all, well then you will not be getting paid. (You are probably taking selfies, facebooking or looking at porn anyways.)
Couldn't agree more, but your premise lacks the existence of an entity that determines productivity of the individual worker. I know for a fact, that at any place that I ever worked, 100% of the work was done by 70% (or less) of the workforce, and the freeloaders were always paid the same rate.
Nothing stopping businesses from paying more to their good people. I've seen the prize for "Employee of the Month". I've also seen the employees of the month. Nice guys, but the pay off isn't worth it.
One winner was the most highly-strung, stressed out bloke I've ever met. I shudder to think what he must have done to get that award. Another winner quit two weeks after he got the award. I took that as a hint.
"Wages, like all prices, are not randomly created. They signal underlying conditions and as such are not inherently just or unjust; they just are'
ZIRP just is. QE just is.
A bowl of rice just is. Porridge just is. Did I say "porridge"? Sorry, I mean, a bowl of gruel just is. Please sir. Can I have some more?
If you pay the help too much they become lazy no-counts. The minimum wage is repression against the businesses that employ people. Let markets set the wage. If $2.00 and hour is appropriate, the market will set it. Increasing the minimum wage at a time when labor is in major surplus goes against market fundamentalism. I don't even know what it is. What, $7.50 or something? Too high, let it float down to Chinese levels and watch prosperity break out. Look at China, no minimum wage and workers are sought out by the exploding industrial revolution. America should do the same, inside of a decade many of the Chinese jobs will come back here. Right?
Yep, there is a global surplus of labor and excess capacity in almost every industry.... Execpt for one, oil production where whatever short term spare capacity exists is in the form of tank farms or salt domes...
Clearly the solution to the problem of maintaining the prosperity of the 1%'ers is by extracting even more from those at the bottom...
Just so. The article above is another attempt to blame people who work for low wages for the economic crisis. Look at them, they earn too much, this is bring the economy down. Forget bankers, forget the Corporate Bosses whose pay is out of all reality. Forget the manipulated markets and the federal reserve money printers. I simply don't get why a person willing to work is always seen as the enemy by these "free market fundamentalists". Do they not know that America is totally crony capitalist, and that wages measured by inflation adjusted dollars have sunk to incredible lows. Yet I read a dozen posts above saying a minimum wage was killing prosperity. You gitta be shitting me! Every business, especially small business needs some local people with a few dollars in their pockets to spend. No wages, no customes, that simple! Greed and ignorance is a religion with some.
I hear ya....
Funny how it is always asserted that the "free market" wage must be less than the mandated minimum wage.
JB re "If you pay the help too much they become lazy no-counts"
Don't tell that to the workers. Tell that to the CEOs. Judging by their pay, they must be reeeeeeeeeeeeeeeeeeeeeeaaaaaaaaaaaallllllllllllly lazy no-counts.
Actually, you're just full of shit. Most workers are acutely aware of their expendability and if they aren't, then you can soon show them. It's not like there is no-one to replace them.
" Changing the wage rate without doing anything to alter one of the underlying variables creating it cannot achieve anything positive, and will more than likely make people worse off."
I'm with you. End the bullshit that creates barrier to entry for busineses. Enforce racketeering statutes. Cancel the two tiered system of personal taxation that exists between earned, and unearned income.
Then watch wages rise as competition enters the economy and wealth distribution is altered.
Why exactly are so many people here still loving infinite corporate profits and CEO incomes for the top 0.1% while diverting even more income away from crushingly poor workers?
These workers have no benefits, no job security, and no possibility of pay increases which evenly pretend to match real inflation - while Wall St, the Fed and the banks have conspired to make any savings they once had valueless.
Where does it say that the posters love (infinite) corporate profits? Focus.
Why not just fire half your workers and make the other half work twice as hard? Or split your workers into two shifts, sending them home exhausted after an intense four-hour workday?
The first option is better for countries that have a monthly minimum wage based on a 38-40 hour workweek. The second is better for countries where employer penalties kick in at 30 or 40 hours per week.
I'm surprised that liberals haven't proposed a monthly minimum wage. 40 hrs/week = 174 hrs/month, so start at 7.25 * 174 = $1261/month and negotiate up from there.
How about reducing the working day to 6 hours for 5 days per week with no loss of pay (studies have shown that anything over 6 hours and workers start to be net negative)
Why not run that machinery (Cap Inv) 24/7 ?
Why don't shareholders insist that the CEO salary is a maximun of 15x the lowest paid in the business.
I'm a free marketeer, there is nothing worse than crony regulation and government mandated minimum wages, it really pisses me off that The government won't allow me to employ 13 year olds to sell guns and smack to primary school kids at the gate.
There has never been nor will there ever be a Free Market, the moment you set up your stall then some thug will come along and demand protection.
Another Mises blowhard acting as if economics is a hard science. Economics is not the study of natural forces or the properties of matter, it is the study of how humans aquire and apply resources. Just because the relationships between supply, demand and price of toothpaste look similar to the relationships between supply, demand and price of apples, doesn't mean that poor people and the economy as a whole should suffer because you get all dogmatic on the price of labor.
It's another Mises blowhard who doesn't realize that as wages go down, you have to draw a new demand curve to reflect the lower purchasing power. And blow me down, where does that new demand curve hit the old supply curve?
But if that is too complicated for him then there is no way he'll figure to draw a new supply curve to reflect the lower costs of production.
And even if he did, he would see quantity stay the same and then declare, "Oh, so wages make no difference."
So there is no way that he would try employing a few extra brain cells and try and put the effect of debt on his SD curves. For example, for most producers, the price of producing zero produce is not zero. They still have admin staff, an empty factory, and debt. So even at zero production, there is a price. Likewise, an extra 20 bucks in a worker's pocket will likely double his "profit" i.e. money available for frivolous purchase while 20 bucks less could cut his excess purchasing power to zero. But if he ever did get to that stage he would finally understand that quantity can go up as wages go up. But that would require employing brain cells, plus it would require questioning his association with the von Mises Institute.
Now you know why Economics drop-outs can get high paying jobs and lots of publicity while other Economists, who actually do understand the real world, are unemployed.