Thread: The Minimum Wage Fallacy

Originally Posted by washunut

What does absolute spending levels have to do with debt ratios? Spending for any area, defense, health care is a choice. Spending more than you take in through taxes is the point.

LOL! The US has carried significant public debt since 1836. It took us that long to pay off all that Revolutionary War debt, and once we had accomplished it, people began to ask why we had done it, and there weren't many good answers. It was basically just a matter of national pride for the new nation at that point. Meanwhile, there is absolutely no reason why a national government should not carry debt, and virtually all do. Living in some Protestant work-ethic world where debt is the instrument of the devil is simply silly.

Originally Posted by washunut

Sounds like you are an economist for the Greek government. They didn't care about debt ratios either.

What is the debt-to-GDP ratio of Japan? Greece by the way is a teeny-tiny backwater economy that does not have a currency it could hjave devalued nor a central stabilization fund it could have turned to. The problem with Greece is meanwhile not Greece. It is the banks that are tied to Greece.

Originally Posted by themostimproved

Neoclassical economics assumed demand for labor is derived from product demand...

And which theory is it that assumes otherwise? A rational entrepreneur will hire a new worker only when he has become convinced that there exists somewhere a market in which demand is such that he can sell the marginal product of that new worker at a profit. Absent such demand, there is no reason to hire.

Originally Posted by themostimproved

...and you would certainly lay them off on the margin.

There is nothing certain about it. It takes eggs to make an omelet. Low-skilled labor is an essential input.

Originally Posted by themostimproved

If it more profitable to term away customers then hire another laborer, what do you do?

Ask why such a question has been raised. Your post suggests you see the situation as a series of dominos. Knock one over and the rest fall according to some set of pedestrian rules. This is not the way things work. A better image would be a balloon. If you push in at one point, that localized depression is offset by tiny expansions over the rest of the balloon.

Originally Posted by themostimproved

Don't say that businesses don't do this now, or else everything would be free. By charging whatever price they do, they turn away some customers.

Brilliant. Businesses serve only profitable customers and clients.

Originally Posted by themostimproved

edit: For clarification, I'm arguing with you because I don't think you've presented a case for the minimum wage.

The minimum wage exists. I am not arguing for its establishment. I am arguing against hollow-headed claims concerning increases in it. Existence of a minimum wage in so nearly all developed economies meanwhile arises from understanding of the simple fact that the market between any corporation and an individual low-skilled worker is not nearly free, and that -- despite the preachings of laissez-faire snake-oil salesmen -- free markets are no magic elixir and cannot be relied upon to arrive at socially desirable or even acceptable equilibria of their own accord.

Originally Posted by themostimproved

From you analysis, it logically follows that the minimum wage isn't economical.

No, it doesn't. State the particulars of your claim and you'll soon see why.

Originally Posted by themostimproved

What you are arguing here is that demand for labor isn't very price sensitive.

That's correct. Short-run demand for labor is inelastic with respect to price increments that are on a par with historical precedent. That's a logical and empirical given.

Originally Posted by themostimproved

This may be the case in a fast food restaurant, but this higher prices will be passed onto customers.

Actually, the example was for an upscale-casual outlet. Nice dinner for two for less than $100. And you are again playing dominos when there is in fact no certainty whatsoever as to how increases in the cost of labor OR ANY OTHER NECESSARY INPUT will be handled even within a single outlet, not to mention across the dozens, hundreds, and thousands who might be similalry affected. Your reach exceeds your grasp.

Originally Posted by themostimproved

Citation? given they probably face more job search frictions (Read: are likely more exploited) then other workers, I find this hard to believe.

Argument from personal incredulity. Wonderful. Maybe you should just go look it up?

Originally Posted by cpwill

yeah? hows' that been working out for us?

Pretty well, given the stark turnarounds in GDP growth, job losses, capacity utilization, and other such measures that have come on the heels of stimulus and liquidity efforts.

Originally Posted by cpwill

the "Deficit As Stimulus" theory is a fallacy built upon the assumption that, if Government had not spent wealth, it would not have existed. Absent purchase of Treasuries, it's not like those dollars would have instead been space-shot into a black hole or set on fire by the Joker.

GDP is the sum of but four things: Personal Consumption Expenditures, Gross Private Domestic Investment, Net Exports, and Government Spending and Investment. When the first two crash and there is no hope of help from the third, that fourth thing better step it up and shoulder the load. Otherwise, you simply sink into depression.

Originally Posted by Cardinal Fang

Get a grip. The price of ALL inputs is apt to rise over time. You have to deal with ALL of them.

Looks like cpwill has proven you wrong on that one.

The notion that you can carve out an exception for the lowest-priced tiers of labor is a product of mean-spirited bigotry and very little else.

mean-spirited bigotry? following the left wing playbook eh?

Originally Posted by cpwill

The Simon-Ehrlich Wager

Relevance? Are you hoping to contradict the notion that the price of all inputs is apt to rise over time?

Originally Posted by nonpareil

If your economics work correctly, and jobs such as waitressing and sale clerk have different skill sets and one job is harder than the other (waitressing is harder than being a sale clerk say), if they are paid the same thing, then most people will apply to be a sale clerk (they get the same wage for less work). The number of qualified people applying for waitressing falls, and pays will have to rise to attract qualified people to that job.

Businesses can only fire people if they are overstaffed. Then according to economic theory, they are inefficient businesses anyway, irregardless of wages, someone else with better business sense should take over and run a leaner operation to maximise their profits.

Anyone can make arguements, what counts is the evidence. Do you have evidence that wage control leads to lower standard of living? Try comparing countries with wage control and no wage control and their average standard of living. There could be reverse causation or no causation at all, but if you can't even establish a positive correlation between wage control and lower standard of living, then there's nothing wrong with your argument.

This still results in less jobs available and frankly, the restaurants aren't going to raise the wages anyway they will just get crappier employees to fill the positions which if you've gone to restaurants lately is certainly the case. Since the minimum wage increases, jobs available for teens trying to make a few bucks has plummeted. If you are not 18 or older forget except for a select few. Just what we need, more young kids with nothing to do during the summer and after school.

Originally Posted by Arbo

Looks like cpwill has proven you wrong on that one.

LOL! Simon won the bet because OPEC fell apart as a cartel, Reagan produced what was then the worst economic collapse since the Great Depression, and new technologies were developed that worked in Simon's favor. It is worth noting that he would have lost the same bet between 1950 and 1975. What in that light does this meaningless reference actually prove at all? Is it anything but another crude attempt at argument from the outliers?

Originally Posted by Arbo

mean-spirited bigotry? following the left wing playbook eh?

Just reading what some bozos post here is all that's actually required. Do you otherwise have any actual argument against the notion?

Originally Posted by Cardinal Fang

Just as an FYI, hiring decisons are not made with regard to wage rates. Hiring is done to provide the workforce needed to maximize current profit in response to current demand. If I run a restaurant and I need eight busboys on the floor and then the minimum wage goes up, I don't start laying them off. All that does is lengthen the amount of time it takes me to turn over a table and get another tab started. Wait times increase and the delays cause customers to become irritated and less likely to return. That doesn't fit my business model very well at all. Every enterprise has a mix of skill levels that it needs to call upon, just as it has a need for a variety of non-human inputs. If I know I need 60 t-bones per day, and their price goes up, I don't order just 40 and then tell 20 customers we don't have t-bone today. I pay the price increase and then pass that on, make it up someplace else, or find some combination of the two. What do you think happens to the price of ice when fuel prices spike? Do you think we just start serving ice tea at room temperature? Some of you have some really weird notions about the ways in which the real world works.

By the way, like everyone else, most illegals work for considerably more than the minimum wage. Such limited and stereotypical thinking goes on here sometimes.

Sorry, but all that real life business behavior stuff doesn't fit into conservative economics because it doesn't support the conservative viewpoint. Conservative economics is based on, well lets just say more "theoretical" type stuff that is made up to support the conservative viewpoint. So obviously it is impossible for a company not to lay off people if minimum wage rises because what you are suggesting doesn't follow the "theory" that conservatives want people to buy into.

Here, let me provide you with some absolute proof in the form of a hypothetical lie that I just made up to prove my point: "bla bla bla bla bla". See! I just proved that employers laid people off when the minimum wage went up.

Originally Posted by Cardinal Fang

...

Just reading what some bozos post here ...

I'm offended by that term. You got something against my "do"?

Originally Posted by cpwill

yeah? hows' that been working out for us?




the "Deficit As Stimulus" theory is a fallacy built upon the assumption that, if Government had not spent wealth, it would not have existed. Absent purchase of Treasuries, it's not like those dollars would have instead been space-shot into a black hole or set on fire by the Joker.

Deficits are a stimulus. Much of teh spending isn't always spent to stimulate however.