Posted on 01/05/2007 2:05:18 AM PST by leadpenny
BUMP for a later read in my cubicle dungeon.
Economics 101 should be mandatory in every high school curriculum.
Bring it down from the macro level a bit to see what may happen. In the short term, it could just be a reallocation effect, longer term, it messes with reinvestment as liquidity drys up. If the minimum wage guy finds more dollars in his pocket, he might buy more cigarettes, beer, porn, and pay per view wrestling. The business has less money to put in the bank. More dollars are chasing consumables, causing prices to rise, and less dollars are available for borrowers, causing interest rates to rise. That trickles down to everything as more higher prices and a stagnating economy. Stagflation. Unless the Fed opens the spigots and encourages businesses to over expand to meet the new demand created by higher wages, then you have phase two of inflation, which will manifest as some new bubble in our economy. The value of the dollar will fall in response, causing imports to be more expensive. That will go on until the bubble breaks, recession, and some new equilibrium. Meanwhile, the person they tried to help now has no job, faces higher prices, and any savings they had is depreciated by inflation and a falling dollar. However, if they have a lot of debt, and keep their job, they can pay the debts back in cheaper dollars. That is how governments do things.
"Well, where did they think the money would come from?!?"
Passing a feel-good issue doesn't require thought.
Yes, it will hurt business.
If the minimum wage guy finds more dollars in his pocket, he might buy more cigarettes, beer, porn, and pay per view wrestling. The business has less money to put in the bank.
True and true.
More dollars are chasing consumables, causing prices to rise, and less dollars are available for borrowers, causing interest rates to rise.
Bzzzzt. Here's where most people get it wrong. If consumers still buy the same quantity of the higher priced (due to wage hike) product, they have fewer dollars to chase other consumables, causing prices to drop.
bttt
Somewhere else?
I can see you're not real familiar with s. Ohio's Appalachian counties. :>)
You remember HeeHaw?
"If it weren't fer bad jobs, we'd have no jobs at all..."
Unless productivity increases by 33%, the reduction in hours worked will result in a reduction in revenue to pay for those hours worked and may result in an increase in expenses (e.g. for equipment to allow the remaining workers to operate more efficiently). Further, an increase in the minimum wage will not necessarily affect only those at the very bottom. Removing from the workforce those whose labor was worth less than the new minimum wage will increase the market labor price for those who remain.
Ohio residents have not seen the half of it yet-school construciton in OH was exempt from prevailing wage laws-schools being built or remodeled did not have to pay union scale. Now with Brown in as Gov that is sure to get repealed-the cost of new school construction and renovation is going to go up.
Union wages are tied to minimum wage. So all those $35.00 a hour UAW work dodgers just got a nice raise. Which of course means that building a factory in Union territory just got yet more unappealing.
Ye-haw!
Surprise, surprise.
Coal Mine, or
Moonshine, or
Movin on down the line.
I hate to keep repeating myself, but this is not entirely true - and that's why it works for politicians.
Assuming our businessman is actually trying to maximize his profits - a safe assumption, and one we regularly make, then he should pass on one half (and only one half) of any small change in his operating costs. Again, it doesn't matter what the current government burden on him is, as long as the current increase is small, he should pass on half of it, and eat the other half out of his profits. Anything else is bad business, as he is no longer trying to maximize his profits (I do, by the way, start with the assumption that his current practices are maximizing his profits to start with.)
You'll note the Democrats plan to phase in their minimum wage increases, so each individual increase is small. Price increases won't be so large, because each time the business owners will eat half of the increase.
And, of course, some businesses will fail, and fewer new ones will be created. That's the real long term effect - but it is a long term one, that doesn't show up as clearly. This nonsense works, politically.
And repeating that customers pay the cost ignores the actual trade off going on, and thus the political benefits. Sadly, the principaled case against the minimum wage is not a trivial one to make.
Drew Garrett
Many conservatives fail to acknowledge the various ways in which liberal policies may, superficially, "work". Liberals are in many cases behaving quite sensibly in deriding their "Ivory Tower" arguments, since they completely fail to acknowledge (and seemingly contradict) readily-observable phenomena.
One analogy I like to use is to imagine a store that comes changes management; the new manager decides that purchasing inventory is a waste of money, so for every ten units of merchandise he sells, he'll buy five to replace them. This allows him to cut prices by 25% while increasing his worker's wages by 50%. Who would have thought it possible to cut prices so much while still giving such a nice raise to employees?
Perhaps that example may seem over-simplistic, but many liberal policies operate on the same principle as that store. Conventional arguments against them would be akin to arguing that the store couldn't possibly raise wages without raising prices, nor cut prices without cutting wages.
A key to resolving many such conundrums is to consider capitalisation and policies' effects thereon. Consider the electricity industry. Generators cost money, and periodically need to be replaced. Left to its own devices, a power plant will make a significant nominal profit, but will from time to time spend a large chunk of that overhauling or replacing equipment. If the power plant is prevented from making such a profit, it may continue to operate at nominal profit as long as the equipment holds out, but then hit a snag. It won't have enough money on hand to buy the needed equipment, and it will be hard to attract people to invest much money without prospects for significant profit. The only way the plant will be able to stay in business will be to impose a very large rate increase (which must be large enough either to collect the money for a new generator fairly quickly, or else to reduce demand to the point that the generator that needed replacement is no longer required). Of course, the fact that customers had been receiving cheap electricity for so many years will only aplify their outrage when it ends.
The Democrats are trying to convince the public that the CEO, VP's, Presidents are the "owners" of companies such as Exxon, AT&T, Verizon, General Motors, Sony, etc. Ever hear the word "shareholder" cross the lips of a liberal??
On the other hand, maybe the Dem's really do believe that the CEO's, etc. own the companies.
She came by tonight after work and mentioned that ALREADY her restaurant had decreased their happy hour, in addition to raising their prices. To top it off, they all had to put new inserts into their menus because of the price changes.
I think she's finding out that her mother DOES know more than she does...LOL!
"It comes at a time when Gasber's business is being affected by a gasoline surtax on food deliveries and a tax on sanitation. He noted sanitation rates have increased four-fold over the past five years."
The voice of Labor Unions ring LOUD and CLEAR in the ears of Nancy’s Congress. Please tour this:
http://www.changetowin.org/
There are no Union Members earning minimum wage. Yet here is the # 1 Union Issue:
• Raise the minimum wage: It should be a first act of Congress to raise the minimum wage from $5.15 to $7.25 per hour; future annual increases should be tied to inflation to take politics out of this basic need.
An actual UNION Wage Contract will reveal a minimum wage multiplier . Something I fortunately no got.
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