Political Forums  

Go Back   Political Forums > Economy

We appreciate your help

in keeping this site going.
Reply
 
Thread Tools Display Modes
  #1  
Old 04-14-2014, 04:24 AM
bhunter's Avatar
bhunter bhunter is offline
Senior Member
 
Join Date: Feb 2011
Location: San Diego California
Posts: 3,261
Reich v. Boudreaux Minimum Wage

Here's Reich's recent article on raising the minimum wage:

http://www.salon.com/2014/04/10/robe..._hour_partner/

Notice the flow of his argument and his appeal to emotions by the demonizing of McDonalds and Walmart. Since I'm aware of Reich's background, I also know that he knows exactly why he's doing what he's doing: he knows his argument is not sound economically.

What's wrong with it?

Quote:


Donald Boudreaux takes on one of Robert Reich's recent arguments for the minimum wage. Reich writes:

A $15/hour minimum is unlikely to result in higher prices because most businesses directly affected by it are in intense competition for consumers, and will take the raise out of profits rather than raise their prices. But because the higher minimum will also attract more workers into the job market, employers will have more choice of whom to hire, and thereby have more reliable employees -- resulting in lower turnover costs and higher productivity.


Boudreaux responds:

Reich is correct that businesses are in intense competition for consumers. What he misses, however, is the fact that, precisely because of this intense competition, businesses have none of the excess profits that Reich presumes will be tapped into to pay the higher mandated wages.

. . . Intense competition eliminates excess profits; with no excess profits firms cannot, contra Reich, simply pay workers higher wages. Firms instead must respond to a higher minimum wage by some combination of hiring fewer low-skilled workers, working their remaining low-skilled workers harder and reducing these workers' non-wage pay, and charging higher prices for their outputs.


I would also add that it's strange that businesses that are in "intense competition" have not apparently, according to Reich, figured out that they can get lower turnover and higher productivity by themselves raising their wages.

But put that aside. Here's what I wonder:

How would Reich draw the supply and demand curves to get the result that prices of the firms' goods and services would not rise?

Also, note something else in Reich's statement above. He writes:

But because the higher minimum will also attract more workers into the job market, employers will have more choice of whom to hire,


I think he's right. With employers being more choosy, some employees get left behind. And who are they? The ones who are least productive. Reich has made a substantial concession, whether or not he realizes it.
__________________
Dear Optimist: Unless life gives you water and sugar too, your lemonade will suck.

Last edited by bhunter; 04-14-2014 at 04:27 AM.
Reply With Quote
  #2  
Old 04-14-2014, 06:17 AM
merrylander's Avatar
merrylander merrylander is offline
Resident octogenarian
 
Join Date: May 2009
Location: Maryland
Posts: 20,860
Quote:
Originally Posted by bhunter View Post
Here's Reich's recent article on raising the minimum wage:

http://www.salon.com/2014/04/10/robe..._hour_partner/

Notice the flow of his argument and his appeal to emotions by the demonizing of McDonalds and Walmart. Since I'm aware of Reich's background, I also know that he knows exactly why he's doing what he's doing: he knows his argument is not sound economically.

What's wrong with it?
With Boudreaux's argument? Quite simple he says comeptition for customers is intense and profits are low. His first point is silly because with wages where they are who has the money to consume, and From what I see on NBR profits sure as hell are not that low.

As well workers tend to produce only what is asked of them, should they find that their output does not meet the job requirements they simply produce more. As a matter of fact productivity here has increased significantly over the last few yeares, far more than salaries have increased.
__________________
Great minds discuss ideas; Average minds discuss events; Small minds discuss people.
Eleanor Roosevelt

Last edited by merrylander; 04-14-2014 at 06:22 AM.
Reply With Quote
  #3  
Old 04-14-2014, 06:53 AM
donquixote99's Avatar
donquixote99 donquixote99 is offline
Ready
 
Join Date: Oct 2013
Posts: 19,122
First, an aside on 'productivity.' It's a misconception that this misleadingly-named indicator varies with how hard or skillfully workers work. It's simply output divided by manhours, and it really measures the effect of capital equipment. You might load 1000 tons of coal with 100 men with shovels, or with one man with a front-end loader. The one man is enormously more 'productive' than one of the 100 laborers, but it's not because he's working 100 times as hard.

Now, let's call minimum wage what it is, redistribution from the top of society to the bottom, from the few to the many. As a basic concept, this is likely to be a good thing. The global over-supply of labor is holding the market price of labor down. Market theory, which treats labor as a commodity, says fine, there will be an adjustment, falling prices signal producers to make less of a thing, until a new equilibrium is reached. Except, these are human beings we're talking about. Scrapping excess labor is not an option. Satisfying human needs is why we have an economy. Human beings are not disposable.

There are two ways human needs might be better met under these conditions: taxation and redistribution to meet the human needs of the 'surplus labor,' and increasing the share of output distributed as wages. My guess is that a combination of both methods will be best. The optimum mix is a technical question I am not qualified to answer.

But it's clear to anyone that the ever-increasing concentration of wealth brought about by current economic arrangements is suppressing demand, therefore holding down output and threatening us with a deflationary depression. For this reason alone it is imperative that distribution of economic output be reformed, that the trend of wealth concentration be reversed. Only free-market dogma, that refuses to recognize that blind market forces can in fact be bad for people, stands in the way.
Reply With Quote
  #4  
Old 04-14-2014, 07:53 AM
Oerets's Avatar
Oerets Oerets is offline
Senior Member
 
Join Date: Aug 2011
Location: Derby City U.S.A.
Posts: 8,176
I have some personal knowledge of minimum wage and good help. One of my brothers owned two restaurants. Sit down thirty tables freshly prepared meals type.

He would be the first to tell another three important facts. If wanting the best help, you pay them enough to keep them happy. More then minimum wages and offered benefits. Happy workers are good for business. Second any cost increases get passed along to the customer. Just enough to go unnoticed by the average patron. Never lessen the quality of the end product by cutting corners in materials.

The people would come week after week to eat and stay to visit. The employees were a big part in this.

He made money, is now retired over ten years and just turned fifty five.



Barney

Last edited by Oerets; 04-14-2014 at 07:55 AM.
Reply With Quote
  #5  
Old 04-14-2014, 08:28 AM
finnbow's Avatar
finnbow finnbow is offline
Reformed Know-Nothing
 
Join Date: Oct 2009
Location: MoCo, MD
Posts: 25,857
I think it's perfectly OK that raising wages at McDonald's would also increase the cost of their "food" offerings. That's a "win-win" as far as I'm concerned.
__________________
As long as the roots are not severed, all will be well in the garden.
Reply With Quote
  #6  
Old 04-14-2014, 09:52 AM
icenine's Avatar
icenine icenine is offline
Senior Member
 
Join Date: Oct 2011
Location: San Diego via Vermilion Ohio and Points Between
Posts: 11,536
I do not want to be a member of a society in which everyone I interact with is in poverty.

I have a friend from the Philippines who will not go back, even though he could "live like a King" on his retirement. He just does not want to be surrounded by millions in extreme poverty.

I do not want that happening here either. It is if you look around.
__________________
Never was there a time when I did not exist, nor you, nor in the future shall any of us cease to be.
Reply With Quote
  #7  
Old 04-14-2014, 11:10 AM
merrylander's Avatar
merrylander merrylander is offline
Resident octogenarian
 
Join Date: May 2009
Location: Maryland
Posts: 20,860
Quote:
Originally Posted by icenine View Post
I do not want to be a member of a society in which everyone I interact with is in poverty.

I have a friend from the Philippines who will not go back, even though he could "live like a King" on his retirement. He just does not want to be surrounded by millions in extreme poverty.

I do not want that happening here either. It is if you look around.
But if you are living in a 15,000 sq. ft. McMansion on 15o acres you never have to see poverty all around you.
__________________
Great minds discuss ideas; Average minds discuss events; Small minds discuss people.
Eleanor Roosevelt
Reply With Quote
  #8  
Old 04-14-2014, 11:30 AM
icenine's Avatar
icenine icenine is offline
Senior Member
 
Join Date: Oct 2011
Location: San Diego via Vermilion Ohio and Points Between
Posts: 11,536
Quote:
Originally Posted by merrylander View Post
But if you are living in a 15,000 sq. ft. McMansion on 15o acres you never have to see poverty all around you.
Well you have to go to the store sometimes Rob..........
I think anyone who has walked the footbridge from San Ysidro into Tijuana will understand what I am saying....
__________________
Never was there a time when I did not exist, nor you, nor in the future shall any of us cease to be.
Reply With Quote
  #9  
Old 04-14-2014, 01:48 PM
Boreas's Avatar
Boreas Boreas is offline
Senior Member
 
Join Date: Nov 2009
Location: Sonoma County, CA
Posts: 20,496
Quote:
Originally Posted by icenine View Post
Well you have to go to the store sometimes Rob..........
No, you don't. If you're in the 1%, you "have people" who do that for you.

Remember George H. W. Bush's astonishment upon seeing price scanners at the supermarket? Though scanners had been around for decades, he'd never seen one because, quite simply, he never had the need to do his own shopping.

John
__________________
Smoke me a kipper. I'll be back for breakfast.
Reply With Quote
  #10  
Old 04-14-2014, 01:51 PM
Boreas's Avatar
Boreas Boreas is offline
Senior Member
 
Join Date: Nov 2009
Location: Sonoma County, CA
Posts: 20,496
Quote:
Originally Posted by donquixote99 View Post
But it's clear to anyone that the ever-increasing concentration of wealth brought about by current economic arrangements is suppressing demand, therefore holding down output and threatening us with a deflationary depression.
Hence the push for all these trade deals like NAFTA and the TPP. It's all about expanding markets and that is all about moving away from the charred remains of the American middle class.

John
__________________
Smoke me a kipper. I'll be back for breakfast.
Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -5. The time now is 12:05 AM.



Powered by vBulletin® Version 3.8.6
Copyright ©2000 - 2024, Jelsoft Enterprises Ltd.