Free-Market Conservatives Are Just Wrong

[marmar]

from OurFuture.org:




Free-Market Conservatives Are Just Wrong
By Dave Johnson

July 31, 2009 - 8:00am ET


--------------------------------------------------------------------------------


There are things you can see in front of your face, and then there are things that conservative “free market” ideologues tell you.

One example is when they talk about the minimum wage. (An increase in the national minimum wage goes into effect today.) Conservative “free market” ideologues tell you that raising the minimum wage “costs jobs.” They say that if employers have to pay a few cents more per hour they won’t employ as many people.

But then there is something you can see in front of your face: whenever the minimum wage is raised, things get better. Things obviously get a little better for the people who work at the minimum wage, and for their families. As this works its way up the food chain things get a little better for the people and stores these workers rent and buy from. But also, studies looking into the effect of what actually happens after the minimum wage is raised show that the net effect is no loss of jobs.

Here is why. Employers hire the number of people they need to get done what needs to get done, according to demand. Ideally they employ the correct number of people to fill orders, run checkouts, stock shelves, etc. They don’t just have extra people sitting around for the heck of it. Of course there are some tasks where a calculation of a few cents in wages can make someone “not worth it,” but in the aggregate any jobs lost from this are offset by the new people hired to meet the increased demand created by people spending the higher wages. More people with more money to spend increases demand, which is good for business. Profits for some employers may be reduced a bit by the increase in labor cost, but these are also offset by increased profits for others due to increased demand. ..........(more)

The complete piece is at: http://www.ourfuture.org/blog-entry/2009073131/free-market-conservatives-are-just-wrong

[drm604]

1. It seems like it should be common sense, doesn't it?

It increases demand and therefore profits. The free-market conservatives benefit from it along with everyone else, yet they fight it.

[Warpy]

2. Consider there has never been a demand to roll back

any increase in the minimum wage. Silly conservatives have a memory that extends back only a nanosecond or so, and they invariably forget how the last minimum wage hike increased their income, too, by increasing demand for goods and services all the way up the chain.

The only think you can do with conservatives is listen, nod sagely, and then do the opposite.

[TexasProgresive]

3. My Dad, God rest his soul, was an employment counselor

for the state of Louisiana. I don't know where he got his info but he said that a payroll turns over 8 times in the community. This may not be as true in these days of less and less locally owned business and so more money flows out of the local area then in the past.

[izquierdista]

4. Turnover

Wal-Mart is working hard to make sure it turns over just once before it gets shipped to China. If only they could bus in stockers and cashiers from Shanghai....

[unblock]

5. in any economic transaction, there is a gap between willing participants. who gets the gap?

if i'm willing to part with a widget for $5 and you're willing to pay $10 for it, then a trade will likely occur and be mutually beneficial. but at what price? that is a matter of negotiation and depends primarily on the relative power of the participants.

in the case of labor, the worker usually has VERY little power, especially at the low end of the income spectrum where managers view them as disposable and interchangeable. the company usually sets the price and has a take-it-or-leave-it attitude, leaving no room for negotiation.

so in the above example, if i sell my widget for $5.01 i might not be very excited about the trade, but i'd do it and be better off, though it would take me forever to get any real savings. meanwhile the buyer got a $10 value for only $5.01, nearly doubling his position. guess who gets rich faster?

basic economic theory doesn't get into all this, they presume that the market zeroes in on a specific price and if that's excessive one way or another, then either more sellers or more buyers will jump in and correct the situation. but that this ignore barriers of entry and so on, which may be huge in the labor market (particularly where specific credentials are required). at best it works in the long run, but of course, all the action happens in the short run. if one side (the rich & powerful) are always in a position to get an unfair advantage each unfolding short run situation, how is that supposed to lead to any kind of fairness in the long run?

[Laelth]

6. K&R for the truth. n/t

:dem:

-Laelth

[safeinOhio]

7. Henry Ford proved demand side economics works 90 years ago

Always fun to bring up to supply siders.

[KakistocracyHater]

8. yes, I agree

*

[Cresent City Kid]

9. Why don't they mention the effect of HIGH salaries?

If a higher minimum wage is bad because of higher costs to companies, couldn't the same argument be made for top salaries that average 400 times that of the lowest paid worker? (That figure may have changed since I last checked).