View Poll Results: All othe things being equal, when you raise price, what happens to demand?

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  • When you raise price, all other things being equal, demand decreases

    11 84.62%
  • When you raise price, all other things being equal, demand increases

    1 7.69%
  • I do not believe that the laws of supply and demand apply to labor

    1 7.69%
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Thread: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

  1. #31
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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by cpwill View Post
    .... really. So raw materials, energy, etc; these are all fictional?
    Of course not. Did you not read what I wrote in the next sentence?


    If my employees require food, then the food that they purchase does not fuel their production?
    If you provide your employees with food, that's on you. If they purchase it themselves, it has no bearing whatsoever on this discussion. In fact, it has no bearing on the discussion if you do provide them with food, as that is merely a different way of paying their wages. The cost of labor intrinsically includes such things. It also includes the cost of workman's comp insurance, employee benefits, etc.



    If I have to ship my materials from the port to the factory, then the gallon of gasoline that I buy does not affect my production?
    I addressed this specifically. Did you not bother to read what was written at all?

    I had the misguided idea that you were interested in a discussion with people, not your imagination. My bad.

    My facilities, equipment, electricity, all my overhead.... none of this affects production?
    Of course it does. It was addressed.

    At some point, most stuff goes back into supporting follow-on production.
    And that was addressed in my post.

    Sure, you have your entertainment goods (television doesn't really go back in to supporting production), but the majority of expenditures are on goods (housing, food, energy, transportation) that do.
    That's not true. What the worker spends their money on does not affect your production. You cannot claim that it affects your production because it's absurd and dishonest to do so. So since the majority of goods do not directly affect production.

    Oh, and that pesky word direct was present initially. If you're going to have arguments with your imagination, that's one thing, but please do not direct this self-masturbatory nonsense at me in the future.



    Actually there are several different venues for you here. You can (as you have suggested) raise the price of your product. Or you can purchase from another supplier who does not suffer under the same raised price floor. Or you can alter your mixture to reduce the corn percentage in your corn chips. Or you can fire low-skill workers and automate some of your processes. Or you can seek out a combination of any of these.
    You'll note the important thing, however, is that there is not, in any way, a decrease in demand.



    There are alternate means of transportation and you will likely begin to look at those, as well as looking at more fuel efficient means of powering your trucks.
    And alternate means often cost more. And even if I have the capital to overhaul my entire operation, it might not be economically viable. The important thing, again, is that the price did not affect demand.

    that is correct only in that you have consistently misrepresented the examples above, and labor.
    I didn't do that. Your imagination is not me. Please do not attribute the actions of your own imagination to me again in the future.

    You are basically arguing that labor and these goods are completely price inelastic - that if we were to (for example) hike up the minimum wage to $1,000 an hour, McDonalds would duly keep the same number of employees and give them all commiserate raises instead of automating it's franchises and hiring a very few highly talented workers to run the software and hardware.
    Think about what such a hike would do to the economy. Don't oversimplify reality, account for it. What you describe would cause mega-inflation and devalue the money exponentially. IF minimum wage was $1000 per hour, then the cost of a hamburger would be about $500. Demand would not change, the value of money would change.

    Yes, but the number of employees that they require is not fixed.
    The number is dictated by the rate of production required to maintain profits. I was really ratehr clear about that.

    And so demand for labor can go down while companies continue production.
    If the rate of production was unchanged, then the labor employed did not directly affect production. I've addressed this.

    Remember back when Congress last raised the minimum wage to $7.25? Did you notice how it was a couple of months after that that all those self-checkout lanes started popping up?
    Aside from the obvious fact that correlation =/= causation, there's also this glaring little flaw in your anecdotal claim: the facts disagree with it.

    The increase in those self-checkout lanes has been a worldwide phenomenon (increasing in multiple countries at the same rates) that started in the 90's and is not directly tied to US minimum wage rates.

    Technology definitely affects the demand for labor, but it is usually a double ended affect: It both increases and decreases demand for labor. It will decrease the demand in the place where the technology is implemented, but it increases demand for labor in producing, maintaining, distributing, transporting, and installing such technology. Now, while it's true that production typically ends up being outsourced, labor associated with maintenance, distribution, transport, and installation cannot really be outsourced.

    Employees were no longer profitable on the margin, and so they were replaced with previously prohibitively expensive automation that was now cost-effective due to an artificial raising of a price ceiling on labor.
    If it was caused by our minimum wage increase, why did it happen A. before that increase and B. in places where that increase did not exist?


    True, the less necessary labor will be the first cut. Or it (and that involved in direct production) could be replaced with either alternative (say, foreign, or illegal) labor, automation, or some other alternative.
    Ah, so you agree that the demand for labor is not really affected at all.


    This is the Henry Ford Fallacy. Increases in wages in and of themselves do not lead to an increase in demand because you have not increased the wealth inside the system. Increases in production lead to increases in demand.
    You are debating with your imagination again. First: You are describing the exact polar opposite of what occurs in supply and demand: Increased production =/= increased demand. That's a profoundly incorrect view of supply and demand. Increased production merely increases the supply. The demand can always stay constant or decrease in the face of such increases in production.

    For example, if I have a company that makes pies, and I make about 100 pies a day, selling about 95 of them each day, producing 200 pies would not mean that I sell 190 pies that day. In fact, I'm probably only going to sell 95 of them and I'll be tossing 105 out.

    Second: I never said that increased wages increase demand. That, much like your imaginings about the effect of production on demand, is not only utterly imaginary, it's 100% factually incorrect.
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  2. #32
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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by ReformCollege View Post
    A single company may be more competitive then others by paying a higher wage, due to decreased turnover and attracting the best possible workers from that field.
    Absolutely true, but not really relevant to the point I am making. I didn't incorporate a false premise because I wasn't making a point related to the premise you are using would relate to.
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  3. #33
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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    All other things are never equal.
    Liberté. Égalité. Fraternité.

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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Raising the minimum wage does little more than devalue the money because it increases the costs of goods. That's why people with money oppose such increases. Even if the physical amount of money they have is unaffected, it's buying power is, thus making it less money than they had before. Yet is has no practical benefit for those who receive it, since it gets eaten up by the more expensive goods.
    Last edited by Tucker Case; 02-20-13 at 12:05 PM.
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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by iliveonramen View Post
    It's not only their own workers. It's the whole bottom rungs of the income ladder that generally frequent fast food chains...including McDonalds and they would all have higher wages.
    Assuming they didn't lose their jobs first. Which they do, they get priced out of the labor market. Minimum Wage Laws

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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by ReformCollege View Post
    Assuming they didn't lose their jobs first. Which they do, they get priced out of the labor market. Minimum Wage Laws
    We've had this argument and have posted multiple studies that look at the effect of minimum wage increases and employment by individuals that receive minimum wage. The changes in employment have been small and swing both ways.
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by Tucker Case View Post
    Raising the minimum wage does little more than devalue the money because it increases the costs of goods. That's why people with money oppose such increases. Even if the physical amount of money they have is unaffected, it's buying power is, thus making it less money than they had before. Yet is has no practical benefit for those who receive it, since it gets eaten up by the more expensive goods.
    The inflation caused by higher labor costs for minimum wage employees is generally much lower than the increase minimum wage employees receive. For example I've posted before a St Louis Fed Reserve study that estimated that the 20% increase in minimum wages would increase inflation at around .23%.
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    The crux of the problem is Americans are less financially secure today. The reason IMHO is due to new competition with cheap labor outside of America, automation and robotics, the value of American labor is increasingly lower than in the past and most Americans financial security is a result of labor. The solution(s):

    -Figure out ways to incentivize American made products and services and I'm not so sure lower taxes that would allow investors to have more capital to invest in Asia is the answer.

    -Figure out ways to encourage investment by average Americans. I personally think every American should have a private investment account that they contribute to ongoingly. In a generation we all could be millionaires. People who make their money from capital gains are in a far better situation than those who make money from labor.

    -Identify industries that cannot be duplicated overseas and lets get behind them. Tourism of those from other countries IMHO should definitely be on that list. People all over the world dream about visiting America, are willing to spend money here and we make it hard for them to visit. If we have a NO Fly List, we should also have a Friend of America list that allows people from other countries who enjoy visiting here avoid unnecessary hassles especially regular visitors. By being on the list, we can better monitor them while here by offering a pre-paid VIP VISA card and a cell phone administered by the Commerce Department (letting Homeland Security stealthily track their movement, communications and spending while here ). At the same time, use of these offers gives them discounts at various accommodations and attractions, free VOIP calls and/or texts to and from their home country and tethered Internet access to their laptops and tablets, etc. If we can get people from around the world making America an easy to visit tourist destination, that alone might turn the economy around and it cannot be duplicated anywhere.

    -Give Americans access the the best education and make high tech degrees more common. I personally support extending free public school through a bachelors degree, then we're not struggling to compete with people outside of America who can do the same thing cheaper.
    Having opinions all over the map is a good sign of a person capable of autonomous thinking. Felix -2011

  9. #39
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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by iliveonramen View Post
    The inflation caused by higher labor costs for minimum wage employees is generally much lower than the increase minimum wage employees receive. For example I've posted before a St Louis Fed Reserve study that estimated that the 20% increase in minimum wages would increase inflation at around .23%.
    Interesting. What were the factors cited as causing the net benefit to individual minimum wage employees in that study? I'd also be interested in how much the net .23% increase in inflation amount to in real costs for goods at the lower end of the cost spectrum. A minimum wage employee isn't affected by a $10 increase in the price of a Filet Mignon, but they are greatly affected by a $1 increase in the price of milk. I'd have to look over the numbers in depth before I would assume that minimum wage increases provide much more than a psychological benefit for the lower wage employees. I'm not saying it doesn't exist, just that I'm skeptical of it existing.
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    Re: If Labor Exists on a Supply Demand Curve, what happens when the price is raised?

    Quote Originally Posted by iliveonramen View Post
    We've had this argument and have posted multiple studies that look at the effect of minimum wage increases and employment by individuals that receive minimum wage. The changes in employment have been small and swing both ways.
    You showed a singe study that showed that a single small town may have had a growth in employment whilst increasing MW.

    You also posted another study, and I cited your study, showing that it did lead to an increase in unemployment.

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