Does the "price of everything" go up with minimum wage?

[usregimechange]

I have heard this so many times that I am begining to woder if it is complete bunk. Anyone looked into this in the past?

[evlbstrd]

1. Not sure about that.

But it sure happens when the cost of oil goes up. The rest of us sink.

[Cvortex_10]

2. Uh because the price of the labor producing it goes up?

As does the labor required to produce and deliver any components involved as well (meaning not only do my costs for labor expand -- but the cost of goods delivered to me, due to their increase in labor costs).

You dont even have to look it up - its called "addition"...if it costs 10 bucks to produce a widget, and labor costs go up a buck...guess what Im selling my widget for (plus standard profit of 3%-5% on average goods)?

[Greyhound]

11. There is not one shred of evidence to support this claim.

We are talking about real-world business, not a high school Junior Achievement project. The argument might hold water if the minimum wage were a significant factor in the production costs involved, but there are so many expenses involved in bringing anything to the marketplace that raising the minimum wage, even doubling it, has no significance.

[Cvortex_10]

16. Unless 1+1 doesnt = 2, then theres tons of evidence.

The cost of a good includes the labor costs...the costs of labor goes up, generally so does the product price.

Since the cost of labor went up the same amount for all producers of a widget, then the general price will remain at the same
competitive level PLUS the new labor cost.

Im not sure how anyone can get lost in such basic logic.

[racaulk]

20. Because your "basic logic" doesn't factor in the existing cost of labor

Take this example:

You're my employee and I'm paying you $9/hour. Tomorrow, minimum wage is increased from the existing $5.15 to, say, $6.05. I'm now only legally requred to pay you $6.05/hour, so I still pay you $9/hour.

So you tell me, did my cost of labor change?

The answer is no.

There are so few workers in America making $5.15/hour that if the minimum wage were increased by a dollar an hour, the impact on labor costs would be very minimal, considered in the aggregate. Therefore, there is no reason for an increase of a dollar an hour in the minimum wage to have a significant impact on the price of goods (in general).

[Cvortex_10]

22. Lets take this in baby steps...

Why is that initial person making 9$ and hour instead of 5$? All the employer has to pay is 5, so why is he paying 9?

[racaulk]

25. Baby steps? Yes, please educate me...

If the labor market requires 9, and an employer is only offering 5, then he will be hard pressed to find employees and will not stay in business.

[Cvortex_10]

31. Since you seem to have a grasp on the labor market

What happens to unemployment when the minimum wage goes up? Let me draw this out to help you.

Ive got a budget of 100,000 dollars for labor for my buisness. I can afford to pay 9.6 people 5 dollars an hour to meet that buget (give or take a few bucks).

We bump the wage up to 6 an hour...now I cant afford to employ 9.6 people. Ill let you work the math out and tell me how many he can employ now.

As for how this effects those people making 9 bucks a hour, the pay scale of EVERYONE is a relative scale -- you must understand that right? The value of a job thats 4 dollars per hour more then a 5 dollar an hour job doesnt change just because you pushed up the minimum wage...it gets increased as well. The 9 dollar an hour job HAS to go up because the value of that work is actually worth 4 dollars more then the initial job (which you just boosted a buck). Its called market elastisity and it applied for not just labor, but goods and services.

Wikipedia is a great resource if your wanting to learn more...or just google.

[Greyhound]

36. You are arguing hypothetical arithmetic, we are talking about how it

works IRL.

[Cvortex_10]

38. What particular part of my explanation is invalid?

There is no way to gauge what your refering to unless you explain exactly what you think the problem is.

[Greyhound]

66. It is not that your explanation is in any way wrong, it is that the labor

costs associated with the minimum wage are, in practical terms, insignificant.

[racaulk]

55. Thanks for the explanation, but you're getting off track...

If I may quote from your post...

Ive got a budget of 100,000 dollars for labor for my buisness. I can afford to pay 9.6 people 5 dollars an hour to meet that buget (give or take a few bucks).

We bump the wage up to 6 an hour...now I cant afford to employ 9.6 people. Ill let you work the math out and tell me how many he can employ now.

The above is technically correct--if you are currently paying your employees minimum wage, and the minimum wage were increased, then you would indeed have increased labor costs or fewer employees. That's a great scenario using the assumption that employees are paid minimum wage, but that's not what we were talking about. We were talking about a $9/hour job when the minimum wage is $5/hour.

So, let's use your example but get back on point. If I have a $100,000 annual budget for labor and I pay my employees $9/hour, then I can employ 5.34 people, no? So, the minimum wage is increased from $5/hour to $6/hour, guess what? I still have 5.34 people in my employ, and the effect on my labor costs is nil. And I would not be contributing to unemployment because I wouldn't have to lay anyone off.

Regarding your point on market elasticity, if minimum wage were increased by $1/hour, would every employer suddenly and voluntarily hand out pay raises nationwide? Would employees nationwide be demanding them? Sure, employees making $5/hour would be demanding pay increases, but what about those people making $9? Or $20? $100? $500? Would they immediately demand pay rates of $10, $21, $101, or $501 respectively? Doubtful. And since the employees won't demand it, the employers won't pay it--they will only pay what the labor market demands them to pay (and what is legally required).

Oh, and if you're going to give me an explanation on market elasticity, then you should learn how to spell it. I doubt a search for "market elastisity" on Wikipedia or Google would yield many results.

[Cvortex_10]

58. Well lets get it back on then shall we...

Normally, when people start attacking spelling and punctuation, its because they want to avoid addressing the issues...but you seem to somewhat want to deal with the actual points, so lets dive in.

Your paragraph that starts with "Regarding your point" makes use of some interesting terms..

"every employer suddenly"
"immediately demand pay rates"

Those terms seem to imply that Im suggesting that instantly everyones wages would go up the same amount. This is simply a straw man at best. Show me where I said the effect of the increases would instantly be transmitted throughout all jobs.

Also, your ploy to set up this straw man seems to indicate that your aware the increases will ultimately flow through the rest of the economy in time. I think you understand this exactly, but just want to avoid the issue.

[racaulk]

92. I don't believe I am setting up a straw man at all.

I was simply expanding upon your point in an earlier post which said...

the pay scale of EVERYONE is a relative scale

So I was just using your statement and taking that a step further. A job paying $500 is worth $495 more than a $5 job, right? I mean, "the pay scale of EVERYONE is a relative scale," right? So if the minimum wage were increased from $5 to $6, would that person's wage increase from $500 to $501? It may (and probably will) increase in time due to inflation, sure, but not due to the instant increase in minimum wage. If you're paying that $500 employee in excess of $1 million per year, you're not going to increase their pay $2,080 just because the minimum wage increased by a dollar in an effort to keep their pay scale "relative" to everyone else's. Sorry, market elasticity or no, that's not going to happen.

Again, I was attempting to take your statement and expand upon it to prove my point. By doing so, I fail to understand how I have constructed a straw man version of your viewpoint.

Regarding my stab at your incorrect spelling, in previous posts you spoke to me as if my understanding of basic mathematics needed to be tested, that simple economics needed to be explained to me in "baby steps," and as if I were some sort of Internet novice that had never heard of Wikipedia or Google. I was simply responding in kind. Treat others how you want to be treated, and all that jazz...

[hfojvt]

65. your arguments only look good on paper

First, the question was about inflation, not about unemployment. So you are shifting in your reasons for disliking minimum wage increases. Second, a budget for labor? Who runs their business on a fixed budget? Under Clinton, when the minimum wage was increased a couple times, unemployment hit new record lows every month, and labor force participation rates were higher.

Finally, the value of a $9 an hour job and elasticity? You have apparently gotten away from economics, since an economist knows the price of everything and the value of nothing. Sure, if the minimum wage goes up, the $9 an hour person has lost some economic status and is probably not happy about it. However, that's kinda like snakes on a plane - there isn't a tanj thing he can do about it. Neither his employer nor the mysterious 'market' is going to quickly correct that. It might happen in the long run, but I am not convinced it will, and besides, in the long run, we are all dead.

Only in an economics textbook is there some linkage between "the value of a job" and the wage of a job. For example, before I was hired as a full time employee I filled the position as a part time employee. Thus I had full time hours, but part time benefits (half vacation, half sick leave, half holidays, and no insurance). When I got hired the value of my work did not change, but my income sure did.

[lumberjack_jeff]

104. Simplistic to the point of uselessness

An increase in the minimum wage also provides a windfall to those who are most likely to spend it.

If your product is consumed by people, your business will be improved by an increase in their disposable income.

[Greyhound]

34. And then he can whine to HRC and the rest of the corporate politiwhores

that "there are no workers willing to do this job" :nopity:

Then, he can get him one of those "guest workers".

[racaulk]

57. DING DING DING! We have a winner!

On a related note, I'm still looking for one of those jobs picking lettuce for $50/hour. I hear it's great work, if you can get it!

:rofl:

[HarukaTheTrophyWife]

67. Oh yeah, because ALL employers pay minimum wage.

:eyes:

I hope you're making minimum wage. After all, why would your employer pay you more?

[Viva_La_Revolution]

69. Oregon min. wage is $7.50, and our economy IMPROVED after

raising it.

Wage hike sparks economic gain, researchers say
Friday, July 21, 2006
Aaron Marshall
Plain Dealer Bureau
Columbus- Whether it's Oregon apple pickers plucking $7.50 an hour or New York dishwashers clearing $6.75 an hour, states that have hiked the minimum wage above the federal level have netted economic gains, not losses.

That was the bottom line found by researchers from a half dozen states with varying economies gathered together Thursday by the Economic Policy Institute, a research group supported by labor.

"It's been a really good experience for Oregon," said Dan Gardner, the state's labor commissioner, echoing sentiments by researchers from other states with minimum wages above $5.15 an hour. "None of the predictions of the devastating effects of this have come true at all."
http://www.cleveland.com/ohio/plaindealer/index.ssf?/base/news/1153470788195450.xml&coll=2


There is no evidence of job loss from the last minimum wage increase.

A 1998 EPI study failed to find any systematic, significant job loss associated with the 1996-97 minimum wage increase. In fact, following the most recent increase in the minimum wage in 1996-97, the low-wage labor market performed better than it had in decades (e.g., lower unemployment rates, increased average hourly wages, increased family income, decreased poverty rates).
Studies of the 1990-91 federal minimum wage increase, as well as studies by David Card and Alan Krueger of several state minimum wage increases, also found no measurable negative impact on employment.
New economic models that look specifically at low-wage labor markets help explain why there is little evidence of job loss associated with minimum wage increases. These models recognize that employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.
A recent Fiscal Policy Institute (FPI) study of state minimum wages found no evidence of negative employment effects on small businesses.

http://www.epi.org/content.cfm/issueguides_minwage_minwagefacts

[Greyhound]

74. Raising the bottom levels is always what stimulates the economy.

The people on the bottom, of necessity, spend all they make, pumping up the economy, which flows up to the middle classes who buy more durable goods, which still makes the rich richer.

I don't think it's about economics, it's about classes and the larger objectives.

[Viva_La_Revolution]

78. damn straight...

If I make $250 a week, that's what I spend.

If I make $350 a week, I spend all that too, to make up for what we couldn't afford the week before.

It's one of those "duh" equations.

[izzie]

72. It only counts if you have to work longer for the same stuff

Money only has the value of what you can buy with it and the time you work for the money. If you are working 2 hours for the pair of shoes you bought this year and 1 hour for the same pair last year you are going back. Since WW2 the worker has been making more and able to buy more until Bush came in. Now it is starting to go back. So if, and I say if, every thing went up the worker stayed ahead of it until Bush came in. Or so figures the the gov. has put out has said. It is hard to say raising the Min. wage has hurt things as our eco. has almost been on a steady rise since WW2 which I would say is proof that a higher Min. wage does not hurt business. We do have businesses that want a 40 percent profit it seems and that is really unheard of in days gone by. Hold on to your pocket book on this new Hospital deal. Some one will want their money back next year on that.

[Greyhound]

75. Wow, thanks for the clarity.

you reminded me of when I first started learning about business and it was the restaurant business. If we showed 8% net it was a great year. The profits demanded today are insane and can't be maintained indefinitely, they may have already broken the camel's back.

Have you ever read Napoleon Hill? I don't agree with much of what he claims, but his suit analogy is brilliant and really makes your point.

[izzie]

77. I hated this stuff but grew up in a capitalize family and we did this

My father would give us a math problem for my sister and I to do at supper with out paper and it would go some thing like this. 'You have earned 100 dollars and bank it and at 4 and half percent how much money will it earn in 5 years that you did not have to go to work for?' He had endless problems that we two girls would rush to figure out. I think we learned new math by the time we were 7. By the way 8 percent used to be a wild percent for profits. 40 percent would have been for crooks.

[izzie]

79. Sorry sp.capitalist wrong.

--

[raccoon]

89. Not exactly,

"Since WW2 the worker has been making more and able to buy more until Bush came in."

In the '70's and early '80's, the US had ferocious inflation. Especially in the early '80's.

Much as I dislike the Junta, the workers started to fall behind long before they stole the WH.

[izzie]

91. You maybe right as I know things go up and down but

I thought it was more of less a steady raise in buying power for all those years. Inflation in the 70's was a big problem but it went back to going up after. I am not so sure the whole country is better off as we all owe so much and it all has to be paid back plus interest. I guess when we stated to see things like US steel could no roll pipe for the pipe line, and we did not make ships any more it was really the start of going down. Face it this is not my thing at all. I tend to put every thing into a family income state so I can understand it as it is so deep to me.

[sandnsea]

14. Not anymore

If you sell your widget for ten bucks, odds are 3 bucks is labor and 3 bucks is profit. If labor goes up, it could well mean profit will go down and the cost of the product will stay the same. One only has to remember that cheap foreign labor has done squat to keep prices down in order to reject the notion that labor is a huge production cost anymore.

[Cvortex_10]

37. Your just incorrect on those numbers...

On average, the profits on a mature company or industry is 3%-5%...not 30% as in your example.

If profits go down more then a couple points, then your talking about companies going out of buisness (i.e. see the US auto industry to tell me that companies dont go under).

[sandnsea]

43. bla bla bla

I know what they teach in Econ 101, I know what I see in the real world. I know when the airline industry drops their ticket prices in half and then cries bankruptcy in order to bust unions and pensions, that the economy is not running on any sort of traditional econ principles at all. Profits and incomes of those in the top 10% have skyrocketed, nobody elses has. I don't really care how they're jimmying their numbers around, they're doing it and can afford to give workers more without raising prices. It's crystal clear.

[Cvortex_10]

45. well, if your not going to present any real facts..

that cant be verified, then theres just no debating. The numbers 3% to 5% are very easy to double check (i.e. www.google.com) and all we have here is your assertion that "something is going on"...which obiviously happens on some scale, but certainly not on the scale your suggesting (you seem to allude that most buisnesses are screwing thier people). In your hermetically sealed reality...Im afraid your just not going to want to face anything that might shake that worldview any eh?

Rather you choose to believe it or not, most buisnesses in the world are not in some global conspiracy to fix prices so they can escape market forces to screw over thier employees...Most buisness people know perfectly well they have to play within market rules to survive.

(once again, see the US car industry -- of couse if your right, they wont collapse or need bailouts right?)

[sandnsea]

51. And again, bla bla bla

Live on the planet 50 years, watch them fuck you over with the "textbook facts", and then get back to me. I know what I know. It does not work the way the textbooks tell you in the real world.

Chevy and Ford need to retool for the next generation of cars, threats of bankruptcy is a good way to get out from under a lot of old technology, contracts and just plain baggage. Nothing is going to happen to Ford or Chevy that wasn't designed to happen to them. Get a clue.

[Name removed]

53. Deleted message

Message removed by moderator. Click here to review the message board rules.

[sandnsea]

60. I know this

I know you are in for some rude awakenings and I don't need to "know everything" to know that.

[Binka]

82. The Only Air Being Blown Is Coming Out Of Your Pie Hole

Alert & Ignore in that order.

[bleedingheart]

94. explain why prices are going up and have been going up for 30 years

in spite of stagnation of wages?

Tell me....??

Minimum wage has gone less than $4 in 40 years....why doesn't milk cost less? Why don't homes???

[Bill McBlueState]

98. good point

Let's follow your logic to its conclusion. If we don't pay anyone anything, stuff will be really cheap. It worked in the antebellum South!

[leftofthedial]

3. no, it doesn't

RW class war lie

[QuestionAll...]

12. yep. big lie. CEOs benefits may do down a million or so.

oh but wonderful capitalism - no ceiling to wealth.
but the floor is poverty and death.

[Cvortex_10]

18. This statement implies the CEO set the profit rate...

CEOs do not control the profit rate of the company (unless the get help from governments, warlords, etc...).

The market determines profit rates. In most cases, theres large profits being made by the first people into a new area of production, but soon as the competitors move in, the average profit market starts to creep in.

In most mature markets, the profit for an item is generally (read on average) 3% to 5%.

Example...the CEO of Kroger or Publix grocery stores would love 500% profit, but they cant do it. The market simply doesnt allow for it.

Even with some of the larger corps, where theres billions in profits...one must look at their total value and measure profits against that. A corp may make 10 billion a year, but if its profits are only 1% of its total value -- then its a sucky corp just waiting to get taken over by a more efficient one (i.e. most US car companies).

[QuestionAll...]

21. (unless the get help from governments, warlords, etc...).

mwhahahahahah.

where do you live?

[Cvortex_10]

24. In a place without choice in water, cable, power, etc..

you get to choose your power provider where you live? Cool!

[QuestionAll...]

30. are you paying Enron prices?

[Cvortex_10]

33. Me...its nominal for the area...

but ask those poor souls in New York or California if they like thier government sponsered blackouts...which Im sure you have no comment on right?

[QuestionAll...]

35. last I heard they were Enron sponsored blackouts.

please update me and Aunt Millie.

[Cvortex_10]

39. Ive got a friend thats an ...

electrical engineer on Long Island and studied the NYC power grid while an undergrad and can tell you the problem with the blackouts, especially in Astoria is that the network of feeder cables that were overloaded are nearly 60 years old. They were never meant to carry such large loads of electricity, upwards of 10 Gw per day. The system was designed when the population of NYC was around 2 million, in all five boroughs. Now there's more than that in Queens alone. Con Ed was under no pressure to upgrade the system because the huge cost would have to be subsidized by the city which would mean an increase in spending and taxes. People would have inevitably complained that "The electricity works fine, why the hell are my taxes going up to upgrade the system?" It takes an event like this for the citizens to get on board, and now everyone complains that "They've done nothing to prepare for this, they should have seen it coming and upgraded a long time ago."

Now, do shoe manufacturers see a massive increase in footwear demand as a problem? Do fast food companies see lunchtime munchies as a terrible threat? On the contrary, these are profit opportunities. Other sectors that provide DSL and other forms of internet and telecommunication services are expanded and advancing day by day — not with perfect results but at least with the desire to serve consumers.

Markets don't denounce us for our "consumerism" and "greed"; if anything, these things are courted and encouraged. Indeed, isn't this why markets themselves are denounced? They encourage consumers to spend, spend, spend, consume, consume, consume. Well, think about the alternative. It exists right now with electrical provision. We are denounced for not wanting to live in 90-degree houses and sleep in puddles of sweat.

Enron had nothing to do with this latest blackout, which Im amazed you commented on, but incorrectly attributed the cause to a completely unrelated company...Too funny.

[QuestionAll...]

47. yah, belly laugh funny

when corporatists can swindle and pirate the citisens with the governments blessing and just fucking run oft with the cash and leave the pleebs in the dirt.
I'll have to tune up my sense of humor I suppose.

[Cvortex_10]

49. What corporatists are you refering to here?

The recent New York blackout from Con Edison was brought to you because theres no competition allowed. If you attempted to start your own major power company in New York, the government would prevent you.

Now if I lived there and Con Edison shafted me on my power, I would love nothing better then to just pick another power company like I pick my bank or my food markets. Blame the state for the lack of competition.

[QuestionAll...]

59. well gee...

I wonder if those blackouts are not somehow 'fiddled' with to convince you that privatization is the way to go...
stuff pockets then the consumer gets stuffed (in the Australian sense), and boy o boy, another Enronish episode to fade away in distant memory in about 3 months.

nah, couldn't happen, no way, I'm paranoid and from another planet of thinking that anything like that is possible. no way. Not in the land of the free for all.

[alarimer]

68. They are having blackouts because of deregulation

not because the government runs the utilities. Here in Texas they sold us a bill of goods claiming deregulation would cause prices to go down. Guess what? It hasn't. In fact I am easily paying 2X what I was before deregulation. They whole thing was a load of shit.

[SammyWinstonJack]

88. That's the line they always use with regard to deregulation. One

of these days, people will stop falling for it.

[Greyhound]

4. Of course it is.

There are so few that are actually paid the minimum wage, combined with the fact that the wage is so shamefully low, makes it a non-factor in the US economy.

Just another distraction to scare the sheep.

[FUGW]

6. The same can be said of the "Death Tax"

[Greyhound]

15. Exactly, I am still wondering why I haven't heard one Democratic

leader or candidate refer to the "Paris Hilton Trillion Dollar Giveaway".

[Czolgosz]

40. 15,000,000 workers (11% of the work force) would benefit from $7.25 wage

http://www.epi.org/issueguides/minwage/epi_minimum_wage_issue_guide.pdf

[Greyhound]

71. It would make their lives easier, and really stimulate the economy too.

Personally I'd like to see a minimum standard of living wage requirement based on about $9 an hour in say, Des Moines, for full time work.(40 hrs! If you're giving more than 1/3 of your waking hours to work you deserve extra pay.)

[FUGW]

5. At least when wages go up the money is put in the hands of people

who will spend it and not just make their bank account bigger. I love these A-Holes who try to tell us that making rich people richer will help us all. I don't know about you but all the rich bastards I know are cheap as the day is long.

[Cvortex_10]

7. uh, your forgetting everything costs more now...

with the increase labor costs embedded in everything increasing...your extra money does no good (or doesnt equate into REAL wealth).

Imagine on Gilligan's Island, if Mr Howell discovered he had stored an extra million dollars in a trunk somewhere...would that have made the island wealthier? or would the cost of a coconut just go up?

[FUGW]

85. Your forgetting competition, corporate profits are at a record high

they could afford the hit and still be competitive. Demand has a stronger influence on price then does cost of making it.

[sandnsea]

8. Has the price of everything gone up the last 8 years??

Did minimum wage go up?

Well I guess the cost of goods doesn't have as much to do with wages as they always told us.

[Cvortex_10]

9. Inflation...blame the federal reserve (n/c)

.

[Selatius]

10. Crash course in economics

You can look at the economy as a struggle between two forces:

The wages of labor and the cost of goods and services. When wages rise faster than the cost of goods and services, then of course producers would raise prices to off-set the increase in labor costs. When the cost of goods and services rises faster than wages, then of course workers will demand higher wages to off-set the decrease in purchasing power.

As a result, a cycle of escalation is set up where a rise is countered by a rise on the other side, and a rise on the other side is countered by a rise on the first side. Nobody has really found a way to stop this cycle of inflation, and after a while, it just became accepted as normal. The only time the whole process was "reset" was when there is a massive "correction" like a strong recession or depression where deflation could occur.

If you provoked a depression that is deep enough and had a Federal Reserve that was interested in having little inflation to no inflation or even deflation, you could reverse several decades worth of inflation in one blow.

However, the minimum wage is so pitifully low in the US that raising it at this point wouldn't make much of a difference to middle class folks because they already make more than the minimum wage, sometimes far more. The best thing you could do is raise it to eight dollars an hour with change and then simply index it to the rate of inflation or even deflation. This way, you won't have to touch it ever again.

If the goal is to fight things like hunger, homelessness, and disease, then ending hunger with food stamps, assuring people have homes, and assuring people have health care would be more direct courses of action.

Another method to prevent wealth polarization is a progressive income tax that doesn't allow the wealthiest to dodge the tax burden. With our current tax code, frankly, we don't have that.

[Cvortex_10]

13. Nice breakdown...

Im pretty sure given a stable money supply (gold or other commodity based) there would be gentle deflation, with a real rise in actual wealth.

[Selatius]

17. Our money supply is NOT stable at this point.

When your government runs gigantic debts and large deficits, you are going to see devaluation of your dollar on the currency exchange markets. Nobody foreign will have much faith in a dollar if it is backed by a government that can't even balance its own "checkbook." The exchange markets are sort of like "bankruptcy court" for countries that are in fiscal trouble. Your government's debts are paid off by devaluation. Sometimes devaluation is so severe you witness your infrastructure gobbled up by foreign firms from all over the world. Think of US infrastructure as "collateral."

Since the US imports more goods than it produces for itself, this will mean foreign-made goods will be that much more expensive for you, the worker trying to pay the damn bills at the end of the month.

Add in the effects of rising fuel prices, and you're looking at stagflation where unemployment goes up at the same time inflation goes up.

The government says we have something like 4.7% inflation, but when you include the cost of housing and the cost of fuel, it is much closer to double-digit inflation if it isn't already past the 10% mark.

BTW, I have added some stuff to my original post.

[Cvortex_10]

19. I agree with just about all your statements here...

except the "However, the minimum wage is so pitifully low in the US that raising it at this point wouldn't make much of a difference to middle class folks because they already make more than the minimum wage, sometimes far more." one. The cost would push up ALL rates eventually due to the elastisity of the labor pool.

Like I allude in an earlier post, the labor cost of production is "multiplied" during each step in production. If it takes 5 steps of labor to produce an item, then the net increase in a 1% minimum wage increase will amount to 5% increase in the cost of the good.

i.e. To produce a foam cup, one must make it from baser materials...so theres a 1% increase in the actual labor making the cup. The materials you made it from had to be produced by another person, so embedded in the material cost is HIS 1% increase. It had to be delivered from the initial chemical company to the cup maker, so the labor cost associated with moving it goes up, so theres 3%.

While we can discuss the specifics of my example, the central point is that its not just confined to final labor production costs but to every step in the chain...which ultimately gets dumped right back in the consumers lap.

[Selatius]

23. Just index minimum wage to the rate of inflation, is what I say

This way you won't have to go back to Congress each time to raise it. The purchasing power of the minimum wage was highest around 1969 or so. I say raise it back to that level, accounting for inflation, and then peg it to inflation from that point forward. Never touch it again afterward.

You also ought to institute a more progressive tax code and change spending priorities in the government to combat poverty.

[Cvortex_10]

26. I would rather just lose the inflation...

this would also help the poor...since pay decreases would probably be less common as pay increases now (due to inflation - we all expect yearly raises right?), so their purchasing power would grow -- in effect, they would make the same amount and with gentle deflation, they could buy more stuff.

[Selatius]

28. That could work as well, you just need the Federal Reserve on board

I am not sure Bernanke is as interested in the interests of common people than the interests of the elite, however.

[Cvortex_10]

32. I think deflation would work best because the elites are the ones..

that benefit most from inflation's initial injection of wealth. Now, bankers get the money first, and they get to charge interest on loaning it out... talk about a win - win for them.


and your right, it will be a cold day in hell before the elites let you take away their money printing presses.

[ProfessorGAC]

95. No It's Not

The labor multiplier to which you refer simply doesn't exist. At the very most, it is a highly non-linear effect at which small increases in the lowest wages have no measurable effect on the actual cost of sale.

Throughout this thread, you expound on this stuff like you read it in a book, but never actually did any work in this regard. I've been publishing econ papers for over 25 years specifically in the interest of debunking the simpleminded nonsense taught in fundamental economics courses.

The entire premise of the Austrian school, from which your opinions are rooted, is flawed as soon as one realizes the economy does not function in two dimensions. X therefore Y, is not an appropriate model for the macroeconomy, and not only are there too many variable, but there are non-linear autocorrelations beyond certain bounds for various inputs, and crosscorrelations of certain outcomes. That makes the overall model so multidimenstional as to make "x therefore y" statemnets useless and invalid.
The Professor

[WoodrowFan]

97. thank you!

thank you! :yourock: I was getting frustrated listening to what seemed like a college freshman lecturing from his econ tax book. I was wondering when the real economists would show up.

[ProfessorGAC]

102. You're Welcome, And Thank You Back

Good to know that somebody actually reads my stuff and appreciates that i have some knowledge in this matters.
The Professor

[juajen]

63. Social Security is indexed to the rate of inflation,

but this administration lies about the rate of inflaton, so SS just doesn't keep up. Every time we get a raise, medicare goes up and takes almost all of it

[SammyBlue]

27. No, it's a C of C and Republican ploy,

just like "small businesses will be hurt by the increase." If your business is doing so back that 2.10 raise in the minimum wage will crippled your business, you need to get out of business.

[datadiva]

29. It hasn't happened in California

and our minimum wage is one of the highest in the nation. I believe studies were done and no evidence was found that costs went up as much as the wage. More people had more money to spend and it kept the prices down.

[Czolgosz]

41. No evidence to support that canard. Here is a very good presentation:

http://www.epi.org/issueguides/minwage/epi_minimum_wage_issue_guide.pdf

[Cvortex_10]

42. What specificially in this are you refering too?

[Czolgosz]

46. There is no evidence that price of everything go up with minimum wage.

Instead, there is evidence that businesses absorb cost which is recouped through increased productivity and decreased recruiting and training costs due to better worker retention.

[Cvortex_10]

50. What page speficially does it say that in your document?

I see no information like that at all.

[Czolgosz]

56. If I recall, it's in the FAQ. Otherwise, you can look up Robert Pollin's

study confirming that raising the minimum wage generally doesn't increase inflation based on California data or you can look up the Economic Opportunity Institute's study reaching the same conclusion based on the Washington state data.

[Cvortex_10]

61. Ah, I see it now.

I also dug a little into this group that produced this report, and they seem to be prodominantly Keynesian economists, which last I check were debunked back in the 70s during the stagflation days.


adding info shortly

[Czolgosz]

70. Please don't feel obliged to pull out a Cato Institute critique of ...

Keynesian economic theory on my account.

This is NOT Keynesian, but the fact that you assumed it was tells me all I need to know.

I get it. You're a supply sider.

Look, it's late where I'm posting from. Let's just skip the part where you show me your Laffer curve and I tell you I'm not impressed.

Good night.

[lumpy]

44. All I now is that inflation is continuing to

inflate, CEO's salaries, perks and bonuses continue to inflate and the ability to make ends meet for the bulk of Americans continues to deflate.

[Cvortex_10]

48. Like I said before...blame the fed...

The negative effects of inflation fall heaviest on the poor. CEOs salaries, as much as I think we all think their overvalued, get determined by market forces in the end (much like professional sport players)....I mean no CEO could go in demanding a billion gillion quadrillion dollars now could they? They get what the market will bear for them just like everyone else. (see Dr Evil for correct pronunciation).

[Czolgosz]

52. Ask this: the real value of the minimum wage has fallen 30% over the last

quarter century. Has this fall in value of the minimum wage resulted in a corresponding real value (e.g., inflation adjusted) reduction in the cost of all goods?

[Cvortex_10]

54. I would say yes, but its been overpowered by...

the fed and thier relentless pumping of money into the economy. Do you happen to know what percentage food (or cars, or power, etc..) was of your average income 50 years ago vs today for your average family?

Why do you ask?

[MardiGras Bandit]

62. Damn Cvortexz

Nice job speaking the truth about minimum wage. I kinda want to kiss you right now.

[Viva_La_Revolution]

73. It's not truth, It's spin

see, we're pretty good at recognizing spin around here.

nice try though.

[Binka]

84. The Newbie Support Gee We've Never Seen That Before!

:hi:

[Viva_La_Revolution]

87. **giggle**

:hi:

[Czolgosz]

64. I ask because you misunderstand the link between labor costs and the costs

of goods. It's not a "1 + 1 = 2" relationship. When labor costs fall, the price of goods generally doesn't, and when labor costs rise, the cost of goods generally doesn't. And when there is an effect, it is not a direct effect but an incremental effect.

Let me ask you, do you live in a state with a minimum wage above the federal minimum? Many states do, in fact, has such laws, and many states do not. You can compare examples where two comparable cities located close to one another but on the opposite side of state lines where one state has a minimum wage and the other doesn't. You find generally comparable costs of living and comparable prices in the the two cities notwithstanding the different wage laws.

[NMMNG]

76. The minimum wage has not gone up in about 8 years

Yet prices on everything have gone up several times in that time period. What do the Rethugs have to say about that?

[samsingh]

80. i don't think it does.

[B Calm]

81. Price of everything goes up with the oil profits! Don't believe

the right-wing lies about a higher minimum wage.

New Republican Slogan: Work Cheap and Starve!

[rucky]

83. Apparently, it goes up despite minimum wage. n/t

[SensibleAmerican]

86. It can

A greater minimum wage creates a demand for more dollars in the market, which causes aggregate demand to rise.

However, this effect is quite negligible.

[Theyareallthesame]

90. Absolutely

[ProfessorGAC]

93. Yes I Have

And have published on this. (Not that i'm alone. This has been statistically debunked by dozens of published papers.)

It appears that there is a threshhold above which such a thing would occur, but that this wage level is so much higher than either minimum or living wage values, that at no time in economic history, has a wage floor caused a statistically significant effect in inflation, employment level, or a depressant effect on growth. Not in the U.S. Not in the U.K. Not in Europe, or Japan, or Canada.

Not once! Not ever.

It's a hypothetical canard rooted in Austrian school economics, most of which is only of value to predicting the actual macroeconomic behaviors if the world worked in two dimensions.

The Professor

[Norquist Nemesis]

96. DING DING DING!

[ComerPerro]

99. It does, in fact, because the cost has to come from somewhere

and it sure as hell isn't gonna come out of the CEOs' pockets.

[Norquist Nemesis]

100. Next time someone pushes that, ask about the CEO and VP

salaries. "So, you're saying the price of goods at Corporation X will go down if the CEO and VPs salaries are cut in half then, right?"

[rug]

101. I'd rather prices go up due to wages than profits.

[usregimechange]

103. kick

[usregimechange]

105. See any trends?

[Cvortex_10]

106. Noone doubts the fact...

that the real value of the minimum wage isnt falling...just that its a bad idea altogether... See below.

http://www.slate.com/id/2103486/