Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I think the whole point of capitalism is to rely as little as possible on govt/taxpayer welfare. Free bus tickets, subsidized housing and food stamps must by paid by somebody.
.
Haven't we heard the phrase: penny wise, dollar foolish?
End up homeless, and one homeless person on our streets, on a national average, costs taxpayers $42,500 a year, and higher in some cities.
Haven't we heard the phrase: penny wise, dollar foolish?
End up homeless, and one homeless person on our streets, on a national average, costs taxpayers $42,500 a year, and higher in some cities.
But it costs taxpayers overall, it does not cost one slum lord a bunch of profits by having a rent fixed place, or a crumby buisness their profits.
When communities allow these places to exist in their communities it costs everyone in terms of homelessness, blight, social problems, etc. Everybody understands there is going to be a burger joint a pizza joint etc but those should be like 1% of the jobs. There should also be a bunch of factories and centers of production that employ everyone else.
NOT an abundance of crappy jobs that are employing 60% of the people.
Background: There's a little technique in economics, something of an on the fly proofing device, to help identify the direction of small changes in something. I like the term, "exaggeration". It works as follows in this context.
Question: Does an increase in minimum wage cause inflation? (let's ignore the lost jobs angle for a bit)-
Answer: Well, it's hard to know. Not that many people earn the minimum wage. Any increase in the minimum wage is trivial compared to aggregate income etc. So I don't know.
Exaggeration: Would a new minimum of $60,000 cause inflation? (let's again ignore the lost jobs angle)
Answer: Of course.
Respectfully, I must disagree. Let's NOT ignore lost jobs.
One of the things that governments are exceptionally good at is creating shortages. All the government needs to do to create a shortage, for example, is to set the maximum price of apples at an artificially low price such as 2 cents per pound and in short order there will be no apples for sale anywhere. Similarly, if the government were to set the minimum wage at $60,000 as in your hypothetical, then employers purchasing labor (hiring) in short order would stop purchasing and there would be massive layoffs and destruction of jobs. Wide swaths of American would be thrown into poverty. The economy would crater. The economic damage would be profound -- probably lethal. The underground economy would flourish, of course, where there is no minimum wage at all.
Inflation is an increase in the general price level of all goods and services, has sometimes been described as too many dollars chasing too few goods. In the case of the massive overnight unemployment caused by your hypothetical $60K minimum wage, the unemployed's ever-deteriorating financial circumstances could never be characterized as chasing those goods.
Inflation is almost exclusively a monetary phenomenon caused by, surprise, too many dollars chasing too few goods... coupled, of course, with some rational expectations about the general price level in the future.
Company X makes 1 million widgets per year but low paid workers can only afford to buy 600,000 of them, creating excess inventory (or excess production capacity). Give the workers a raise, now they buy 700,000 widgets per year. Company X does not raise the price because they are happy to sell their excess inventory. In other words, raising minimum wages is not inflationary until the slack and imbalance in the economy is sopped up.
When you try to describe the entire economy at once, as in your hypothetical, you're delving into the area of General Equilibrium. This branch of economics is pretty tough stuff. Mathematical economists have studied general equilibrium theory for over a century. See https://en.wikipedia.org/wiki/Genera...librium_theory. Economists Kenneth Arrow (Nobel Prize, 1972), Gérard Debreu (Nobel Prize, 1983) were key to the development of the mathematical underpinnings in what is now called the Arrow-Debreu model https://en.wikipedia.org/wiki/Arrow%...93Debreu_model. This stuff usually isn't taught at the undergraduate level because the math is tough. For example, it is developed using topological mathematics rather than simple calculus.
If you're so inclined, start by reading https://www.jstor.org/stable/1907353?seq=1 but I warn others that this stuff is the cure for insomnia. General Equilibrium Theory really is above the pay grade of those on this forum and hence discussions of the topic are not useful.
It is easy to get wrapped around the axle when you try to create a hypothetical general economic model simple enough to illustrate your point as you did above. For the most part it just does not work. Your hypothetical is no exception.
In your hypothetical, for example, you ignore the demand originated from the business owners themselves. Your hypothetical says that workers only buy 600K units before a raise but buy 700K units after the raise. You ignore that the business owners purchase, say, 400,000 units before giving workers a raise, but can only afford to buy 100,000 units after having given workers a raise. Aggregate demand (workers plus owners) goes down. Or maybe they can afford to my more and aggregate demand goes up and hence is inflationary. As with so many things in the dismal science, "it depends."
I agree with you that under reasonable conditions raising the minimum wage is not inflationary, but trying to use a simple model to discuss sopping up excess production capacity as you do above is a step too far. It doesn't help make your point.
Quote:
Originally Posted by Elliott_CA
The economy shows all the signs of being imbalanced with excess capital at the top (global savings glut) and a shortage of demand at the bottom (underpaid labor).
I disagree. There are no signs of such an imbalance because no such imbalance can exist in a general equilibrium. There is no such thing as "excess capital at the top (global savings glut)." It. Does. Not. Exist. In aggregate, Savings=Investment your assertion of a global savings glut is synonymous with asserting there is a global investment glut. Neither are true. Investment is the vehicle by which future economic expansion occurs, so to say there is a savings glut implies future economic expansion will be excessive - and that doesn't happen either.
Quote:
Originally Posted by Elliott_CA
The fact that you have a high stock market and a low rate bond market simultaneously is evidence of that.
There I disagree again. Your assertion is incorrect.
Quote:
Originally Posted by Elliott_CA
The fact that the US is at full employment and there is no evidence of a wage-price spiral is more evidence that aggregate demand is suppressed by low wages.
Incorrect again. Those two are not connected at all.
Quote:
Originally Posted by Elliott_CA
In the early 1970's full employment triggered a wage-price spiral because most workers belonged to a union, were well paid, and demand exceeded production capacity.
Incorrect. Full employment is not a "yes/no" condition. Employment did not trigger a wage-price spiral. Union membership had nothing to do with the 70s inflation. Demand did not exceed production capacity in the least.
In your hypothetical, for example, you ignore the demand originated from the business owners themselves. Your hypothetical says that workers only buy 600K units before a raise but buy 700K units after the raise. You ignore that the business owners purchase, say, 400,000 units before giving workers a raise, but can only afford to buy 100,000 units after having given workers a raise. Aggregate demand (workers plus owners) goes down. Or maybe they can afford to my more and aggregate demand goes up and hence is inflationary. As with so many things in the dismal science, "it depends."
Your example doesn't, in general, make sense. There are two possibilities: workers and owners have the same elasticity of consumption, or they differ. If it's the same, then shifting profit from owners to workers would have no effect on aggregate demand; the workers would collectively spend the same as the owners.
In reality, workers spend much more of their income than owners do. The wealthiest owners currently have more money than they and their grandchildren can ever possibly consume, unless perhaps someone auctions off the Moon. Workers often go without basic necessities. Common sense will tell you that directing a larger portion of corporate revenue to the workers will therefore increase aggregate demand. Your example (that owners spend the money but workers don't) doesn't make much real-world sense.
I think health care workers should be paid no less than $15 an hour, that goes for all healthcare jobs.
Home health aides provide a valuable service for the elderly, allowing them to remain at home and live (largely) independently for as long as possible. Not only do seniors normally greatly prefer this, it's far cheaper for the healthcare system to have people living at home than in a facility. Yet home health aides aren't paid squat. https://www.statnews.com/2019/04/09/...des-low-wages/
Respectfully, I must disagree. Let's NOT ignore lost jobs.
One of the things that governments are exceptionally good at is creating shortages. All the government needs to do to create a shortage, for example, is to set the maximum price of apples at an artificially low price such as 2 cents per pound and in short order there will be no apples for sale anywhere. Similarly, if the government were to set the minimum wage at $60,000 as in your hypothetical, then employers purchasing labor (hiring) in short order would stop purchasing and there would be massive layoffs and destruction of jobs. Wide swaths of American would be thrown into poverty. The economy would crater. The economic damage would be profound -- probably lethal. The underground economy would flourish, of course, where there is no minimum wage at all.
Inflation is an increase in the general price level of all goods and services, has sometimes been described as too many dollars chasing too few goods. In the case of the massive overnight unemployment caused by your hypothetical $60K minimum wage, the unemployed's ever-deteriorating financial circumstances could never be characterized as chasing those goods.
Inflation is almost exclusively a monetary phenomenon caused by, surprise, too many dollars chasing too few goods... coupled, of course, with some rational expectations about the general price level in the future.
Because $60/hr makes good economic sense. It’s not like there is a line between absurdity and preventing exploitation or anything.
I like how proported “economists” have detailed nuance when it comes to lase fair but but use absurd generalizations when it comes to protecting vulnerable people from slavery and exploitation (yes numerous companies use over seas slave labor because we allow it)
You want to stop inflation, raise interest rates significantly.
Also companies are essentially paying 2 cents a lb for cotton chocolate etc and marking it way up so ... so it all depends on who can and can’t leverage slavery to the market.
Last edited by pittsflyer; 01-03-2020 at 08:40 PM..
Your example doesn't, in general, make sense. There are two possibilities: workers and owners have the same elasticity of consumption, or they differ. If it's the same, then shifting profit from owners to workers would have no effect on aggregate demand; the workers would collectively spend the same as the owners.
In reality, workers spend much more of their income than owners do. The wealthiest owners currently have more money than they and their grandchildren can ever possibly consume, unless perhaps someone auctions off the Moon. Workers often go without basic necessities. Common sense will tell you that directing a larger portion of corporate revenue to the workers will therefore increase aggregate demand. Your example (that owners spend the money but workers don't) doesn't make much real-world sense.
My central point is that it is useful to look at things such as the marginal propensity to consume from the perspective of partial equilibria in microeconomics. As near as I can tell, you don't disagree with that (not trying to put words in your mouth).
However, a different poster (not you) attempted to describe a general equilibria condition of an increase in aggregate demand based on an income transfer from owners to workers via an increase in the minimum wage. I assert that general equilibria is a whole 'nuther beast that cannot be analyzed so easily.
Combined with the 15 or so states that already started raising their wages in the early-mid 2010s, this will start making the $7.25 states the outlier ones.
I'd like to see data on who actually gets paid $7.25. When I started working for Wal-Mart as a cashier, in 2004, I was paid in the high $6 per hour range, it was over $7 by the following year with regular merit raises. Back then minimum wage was $5.15. That was over 15 years ago! In Texas!!
I suspect that only temp ditch-diggers are paid $7.25 in 2020. The Dairy Queen at the end of my block has a sign that says they start at about $11.50 - 12 an hour.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
