AEIdeas

The public policy blog of the American Enterprise Institute

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Discussion: (42 comments)

  1. “No Living Wage Bill in DC.”

    Americans will find ways to live, and it’s unfair to raise the minimum wage only on some businesses.

    Imagine if the minimum wage kept up with real income growth, since 1968. It would be $20 an hour today.

    Tens of millions of workers would be happier and would’ve chosen work over government benefits or welfare, including student loans.

    They would’ve consumed more goods, saved more for retirement, paid more taxes, and consumed less government services.

    Trade deficits would’ve been even greater and there could’ve been budget surpluses instead of huge budget deficits. The national debt would’ve been shrinking.

    1. Both inflation and real growth, or nominal growth, would’ve been much higher. And, I explained before, low-income workers would benefit greatly, while high-income workers would lose little.

      1. There won’t be more to expand the economy, because the remaining workers are being paid too much – probably by the amount of new unemployed. So there is nothing more to give the economy.

        Seriously the economy grows, so these folks will eventually find jobs, but if you didn’t monkey with the minimum wage to begin with the economy would grow faster – a rising sea lifts all boats.

        1. How do you know the economy would grow faster? Since the minimum wage was established, per capita real GDP has grown at a much faster rate.

          Annual per capita real GDP growth:

          1863-1937 (75 years): 1.33%
          1938-2012 (75 years): 2.44%

    2. morganovich

      vote peak trader for mayor of fantasyland!

      with this minimum wage, i’ll put a chicken in every pot!

      far more workers would be out of work, us industry would be wildly uncompetitive, a burger would cost $9 at mcdonalds, there would be more capital substitution, more imports, and less investment.

      wage increases without increases in labor productivity are not even zero sum.

      1. “a burger would cost $9 at mcdonalds”

        No, because McDonald’s would be thusly incentivized to become vastly more efficient by dropping its executive compensation to minimum wage.

        (j/k)

        1. Actually imagine if the order taker were replaced by a screen where you punched in your order, and a credit card reader or even a device like in self service checkouts in groceries. If one thinks very much you can cut the number of folks working at the store by 10-20% easily.

          1. Citizen Buddy

            Lyle, you are correct and that is where fast food is going. Minimum wage pushers don’t seem to care about job losses.

          2. If a firm is able to produce the same output with fewer workers, then there’s more freed-up labor, available, to expand the economy.

          3. If a firm is able to produce the same output with fewer workers, then there’s more freed-up labor, available, to expand the economy.

            LOL

            I just can’t help myself. I MUST respond to this comment, which coming from you, is truly laughable. Are you with “The Onion” by any chance?

            1. There is currently no shortage of the low skilled labor you see being freed up by these food ATMs.

            2. There is *always* a larger pool of inexperienced and low skilled workers available than any other group of workers, no matter how good or bad the economy.

            3. Increases in the mandated price floor for this unskilled labor, as well as other increases in the price of employing workers is a good part of the reason automation can replace these jobs, and of course once in wide use, these machines will become ever less costly compared to human workers.

            “Pay workers more to spur the economy!”

            vs.

            “Replace workers with machines to spur the economy!”

            Learn some economics.

          4. Actually just an evolution of an earlier idea. Back in 1966 I went to an outfit called Kings Food Host in Ne. You ordered via a telephone headset, so there was no waiter taking the order, it was just delivered. Also this eliminated the need for a tip.

          5. Ron, obviously, you don’t understand how economies move from one economic revolution into the next (the Agricultural-Industrial-Information-Biotech Revolutions) through efficiencies in production, i.e. using less resources to produce output.

            Resources are limited.

            Are you blaming the minimum wage for this depression?

            Next time, say something about economics (and math is more than addition).

          6. Are you blaming the minimum wage for this depression?

            I’m blaming the minimum legal price of labor for higher than necessary unemployment/underemployment, and for redistributing income from all otherwage earners to low wage earners for no justifiable reason.

          7. Ron, obviously, you don’t understand how economies move from one economic revolution into the next (the Agricultural-Industrial-Information-Biotech Revolutions) through efficiencies in production, i.e. using less resources to produce output.

            Yes, and now the we have the Self Service Fast Food revolution?

            Self service is not at all new. ATMs have been around since the ’80s, as has pay-at-the-pump gasoline. Touchscreen fast food ordering appeared in the ’90s, as did self service checkout in retail stores. Self service checkout for hotels is now pretty much ubiquitous, and the list of self service applications grows ever longer as technology becomes better and cheaper than human labor..

            The result is an ever decreasing demand for low skilled humans – the same at-risk group you believe should be paid MORE for their efforts, thus speeding their replacement by machines.

            You are such a pathetic clown! Do you ever even think about this stuff before you let your grubby fingers hit the keyboard?

          8. Better jobs are created, since workers create, build, ship, install, improve, maintain, operate, and manage those machines.

            If one worker can do the job of 100 workers, that’s good for the economy.

            Then, the other 99 workers can produce other goods.

            Perhaps, you prefer more scarcity instead.

          9. Ron, obviously, you don’t understand how economies move from one economic revolution into the next (the Agricultural-Industrial-Information-Biotech Revolutions) through efficiencies in production, i.e. using less resources to produce output.

            And what do we have now, the Self Service Fast Food revolution?

            Self service is not at all new. ATMs have been around since the ’80s, as has pay-at-the-pump gasoline. Touchscreen fast food ordering appeared in the ’90s, as did self service checkout in retail stores. Self service checkout for hotels is now pretty much ubiquitous, and the list of self service applications grows ever longer as technology becomes better and cheaper than human labor..

            The result is an ever decreasing demand for low skilled humans – the same at-risk group you believe should be paid MORE for their efforts, thus speeding their replacement by machines.

            You are such a pathetic clown! Do you ever even think about this stuff before you let your grubby fingers hit the keyboard?

          10. If one worker can do the job of 100 workers, that’s good for the economy.

            Then, the other 99 workers can produce other goods.

            That’s correct, and therefore a minimum labor price is unnecessary.

      2. I explained in detail before, there would’ve been a net gain in purchasing power (the gains of low income workers would’ve been much greater than the losses of high income workers), greater efficiency in production, or productivity, and lower production costs.

        Real income would’ve been higher. So, both real consumption and real saving would’ve been higher.

        1. And, regarding unemployment.

          We know when the real minimum wage was $10 an hour and per capita real income was half as much, the unemployment rate was 3.5%. So, the minimum wage wasn’t high enough to trigger massive unemployment.

        2. The U.S. economy could become like the welfare to workfare Clinton economy, when real wages actually increased and the country had budget surpluses.

          Instead, we have depressed or falling real wages with a saving glut and huge budget deficits.

        3. But we all pointed out your explanation was false, unless the employer in question was paying less than market wages for the job in question and was therefore hiring marginal workers for the job in question.

          Sorry, it just doesn’t work. You can’t magically give people money, just because.

          1. marque2, yes, you falsely pointed out my explanation was false, and then I explained it another way, which you still didn’t understand.

        4. No, Peakadoodle, a dollar spent by a high income earner has the same purchasing power as a dollar spent by a low income worker.

          The dollar taken from a high income worker exactly equals the dollar given to a low income worker.

          It might represent a higher percentage of the low income workers income, but it doesn’t have higher purchasing power.

          Learn some basic math.

          1. Ron, you doodle too much.

            I explained how net purchasing power increases, and rather than you explaining why it’s wrong, you simply declare, with your wand, it’s wrong.

            Time for you to leave make believe and learn some economics.

          2. I explained how net purchasing power increases, and rather than you explaining why it’s wrong, you simply declare, with your wand, it’s wrong.

            No you didn’t explain that at all. You suggested that a dollar in the hand of a low wage earner had more purchasing power than a dollar in the hand of a high wage earner. That’s obviously not true – that is, obvious to everyone but you.

            I can easily explain why it’s wrong, as can anyone else who doesn’t have their head up their ass like you do. Perhaps I’m overestimating your understanding of some basics that shouldn’t need explaining, and as a result you see a magic wand.

            First of all, you must understand that goods and services are paid for with goods and services, and that money is merely a handy medium of exchange. A facilitator of exchanges. If that’s a problem for you, stop reading now.

            You keep insisting – incorrectly – that if you force an employer to exchange more goods and services with a low income earner without getting more production in return, the total of exchanges of goods and services will magically increase, which isn’t possible.

            Unless a worker produces more and offers more in the exchange, giving them more goods and services in exchange for the same amount of production means that increase must come from *somewhere else*. There is no other possible source.

            You have never offered a satisfactory or even plausible explanation for why those who are *somewhere else* should be forced to receive less in exchange for their production than those you believe – without any possible way of knowing – are getting paid less than they are *worth*, based on what they and their employer have *agreed* they are worth.

            Such hubris is disgusting.

          3. Ron, go back and read what I wrote rather than making up your own premise and then disagreeing with it.

          4. Ron, go back and read what I wrote rather than making up your own premise and then disagreeing with it.

            OK, that’s easy enough, here it is:

            I explained in detail before, there would’ve been a -NET GAIN – in purchasing power (the gains of low income workers would’ve been much greater than the losses of high income workers), greater efficiency in production, or productivity, and lower production costs.

            Have you lost track of your own narrative, or don’t you understand what you wrote?

          5. Ron, you know I explained it to you more than once before. I don’t know why you keep pretending to be dumb, unless you really are dumb.

            Here’s part of what I wrote many times before you:

            A rise in the minimum wage can increase real economic growth.

            The higher wage attracts better workers, with higher reservation wages, to increase productivity.

            Minimum wage workers have high marginal propensities to consume. So, a higher minimum wage increases consumption.

            Only a portion of the higher minimum wage may be passed along in higher prices, because portions will be absorbed by “excess” wages of other workers (or overpaid workers) and “excess” profits (capital as a share of GDP is at an all-time high, while real wages declined).

            Weak or poorly managed firms will lose business or fail. However, stronger or better managed firms will gain their business, and also gain from the increased demand.

            ****

            I already explained how the (positive) income and multiplier effects may exceed the (negative) employment effect raising the minimum wage (e.g. the very small employment effect), perhaps, up to $15 an hour, how workers making up to $25 an hour will benefit greatly (e.g. low marginal propensity to consume to high marginal propensity to consume), while workers making over $25 an hour will lose little (e.g. from faster economic growth), and how it’ll somewhat offset the structural problems in the economy built-up over several decades (e.g. idle capital in a saving glut).

            However, it’ll also make firms much more efficient in production. Real example:

            There was a fast growing firm that was also very disorganized, because it was so busy. One of the recommendations was raising the starting wage from $11 to $13 an hour for all factory workers. However, management decided that was a bad idea. One reason was there were always plenty of applicants for $11 an hour, over the prior five year period, and of course, there was concern profits would fall, substantially.

            However, roughly six months later, management raised the starting wage to $13 an hour and something miraculous happened.

            Turnover rates dropped like a rock, overtime was almost completely eliminated, including six day weeks, injuries fell dramatically, hardly anyone called in sick, damage to equipment and products almost disappeared, including steep declines in reject rates, quality rocketed, moral was lifted, management no longer had to spend enormous time interviewing workers, with related paperwork and training, supervisors no longer had to cover for sick workers, to do their jobs, and had time to actually do their work, and profits soared.

            Experienced workers who rejected the job when they learned it was $1 or $2 less than they were willing to work for took the jobs at the higher rate. Management had much more time to manage and supervisors had much more time to supervise. So, operations became much more organized and efficient.

          6. And, you’re still disagreeing with your own premise.

          7. Ron, you know I explained it to you more than once before. I don’t know why you keep pretending to be dumb, unless you really are dumb.

            You are evading the issue as usual. You posited a NET GAIN in purchasing power from transferring income from one group to another without any increase in production, I called you on your nonsensical claim, and in response you can only lie and paste irrelevant bullshit as is your custom, without owning up to the error like a man.

            You are a weaselly liar, and a sick fraud, and I’m back to ignoring you.

          8. Ron, good luck. I hope you win one of those arguments with yourself :)

    3. Hmm for lack of want of $3 twice as many jobs are coming in. Seems like DC will be winning since 2×9 is bigger than 12.

  2. Yes selling last years tickets for 1300 more is gross gouging. With prices like that I wonder what they will sell this seasons tickets for.

    1. Benjamin Cole

      Anyone paying $2,600 for a football ticket is not spending their own money. They are spending shareholder money.

  3. “Ron, obviously, you don’t understand how economies move from one economic revolution into the next (the Agricultural-Industrial-Information-Biotech Revolutions) through efficiencies in production, i.e. using less resources to produce output.”

    Are you actually claiming “minimum wage” laws caused the industrial revolution? Information age? Biotech?

    The “efficiencies in production” are caused by capital investment (including worker training and education) as well as R & D. Simply paying unskilled or low killed labor more does absolutely zero to increase “efficiencies in production”

    1. MikeK

      It seems obvious to everyone but Peak that he has no clue what he’s talking about. He will repeatedly paste the same nonsense in these comments without actually engaging in a meaningful discussion, all the while appealing to his own authority.

      I’ve given up reading his comments or responding to them – again.

      1. Ron, you never responded to my statements, you responded to yours. Very cute.

      2. Very cute, you responded to your statements and blamed me for them.

  4. That’s a ridiculous question that doesn’t require an answer.

    And, your assumption (on causes) is incomplete at best.

  5. I also explained (and more than once, e.g. to Ron) how a 10% increase in the minimum wage may result in only a 1% increase in prices, and low income real wages will increase much more than 1%, while high income real wages will decrease much less than 1%.

    1. Interesting. So you are claiming there exists an “optimal” minimum wage. If such a wage exists, we should have fairly accurate models that predict this wage, correct? I’d like to see these models, and would be especially interested in those models not based on any past wages (minimal or otherwise).

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