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PeakTrader:

The U.S. economy was able to “absorb” a $10 an hour real minimum wage in 1968, and since 1968, per capita real income has more than doubled, while the real minimum wage has declined over 25%.

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The teen labor force participation rate has collapsed, over the past 30 years, while the real minimum wage has declined.

Many teens won’t work for wages that are too low. Instead, they’ll mooch off their parents and government, while going into debt fueling the education boom.

And, given weak demand (in part, because of low income from workers with the highest marginal propensities to consume), after they finish school, they’ll mooch off their parents and government again.

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Would teens more likely work, and stay employed (reducing the costly turnover rate) at $10 or $7.25 an hour?

Instead of your best choice of hiring a new employee being a high school dropout, who smokes marijuana, it can be the high school graduate, who’s twice as productive.

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Stronger demand, from the higher wage, higher productivity, from better workers, and reducing an expense, e.g. turnover cost, will create jobs. I stated before:

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 and “excess” profits.

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.

Also, I may add, a combined increase in higher wages and unemployment benefits (if unemployment rises) can facilitate a virtuous cycle of consumption-employment.

Or, the income effect may be stronger than the employment effect. to have a net positive effect on growth and employment.

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Jon, how about 600 jobs at $5 an hour, which will eventually lead to 200 jobs.

Then, Americans can move to Canada for better jobs, like Mexicans move to America.

Costco can afford higher wages. Poor Walmart.

http://www.forbes.com/sites/rickungar/2013/04/17/walmart-pays-workers-poorly-and-sinks-while-costco-pays-workers-well-and-sails-proof-that-you-get-what-you-pay-for/

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Jon, there are really no economics in your statement. It’s static at best.

When the real minimum wage was above $10 an hour (and even higher compared to per capita income), the unemployment rate was below 5% and the teen labor force participation rate was much higher.

I’ve answered your questions. Apparently, you don’t understand them, like you don’t understand the paradox of thrift.

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Jon, if you look at all my prior comments, none of them had anything to do with singling out Walmart for a higher minimum wage, and I already answered all your questions.

One way to look at it is as a tax. Unless, you raise taxes too high, all firms won’t go out of business. If you raise taxes 10%, perhaps 1% of firms will go out of business.

However, by taking advantage of loopholes, you can lower the tax and create more business, which I’ve shown with the minimum wage (e.g. reducing turnover cost).

An income effect, e.g. a higher wage, has an immediate effect on consumption, like reducing taxes.

You don’t seem to believe in concepts, e.g. reservation wage and opportunity cost, when you ask me about teens working, and a higher minimum wage will generate a multiplier effect or a virtuous cycle of consumption-employment.

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http://www.aei-ideas.org/2013/07/joe-bidens-flawed-logic-of-a-1968-minimum-wage-hike/comment-page-1/#comment-295400

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PeakTrader:

“French economist Frederic Bastiat wrote almost two hundred years ago in the early 1800s that “It is necessary to view economics from the viewpoint of the consumer.”

What consumer? The affluent consumer, who works hard and saves 20% or more of his income, in a U.S. and global savings glut, or the impoverished consumer, who works hard and saves nothing?

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"The saver is harmed by the loss of potential income if he could invest in Wal-Mart. The hard worker is harmed because he is denied the opportunity to spend less money on many goods and services and have the potential to save."

How do you know there isn’t a rise in real income, for both savers and consumers?

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"Because we know the demand curve for labor doesn’t slope up."

I see you’re still working with half of a supply-demand model. See paradox of thrift (a Keynesian concept).

When income rises, both saving and consumption rise.

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http://www.aei-ideas.org/2013/07/more-on-the-dc-city-councils-economic-death-wish/#comments

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PeakTrader:

“…minimum wage laws that do great harm…”

If the minimum wage increased to $12 an hour for every firm, to level the playing field, Walmart wouldn’t of pulled-out, and the higher wage would’ve decreased the demand problem, that worsened in the 2000s.

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Jon, I don’t know what kind of “analyst” you are, but you cannot consume a good, until it’s produced.

And, no one will produce more goods when there’s a high level of inventory and no customers.

Demand can clear the market and increase production.

You haven’t disproven anything I stated. All you’ve shown is a shallow and limited understanding of economics.

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Everything in economics fits together. My statements are supported by mathematical and empirical models. That’s why you found no contradictions in my statements.

I suggest, you begin reading some of the labor economics literature for an idea of what I’ve been talking about (I’ve taken labor economics classes at the grad level, although my fields of specialty are Money and Central Banking and International Trade).

Robert Solow, who won the Nobel Prize for his analysis of economic growth, stated:

“The main thing about the (minimum wage) research is that the evidence of job loss is weak. And the fact that the evidence is weak suggests that the impact on jobs is small.”

I stated before, the (positive) income effect may be stronger than the (negative) employment effect, and explained how a higher minimum wage can be “absorbed,” leading to faster economic growth, particularly under the changing economic conditions over the past three decades.

You can’t solve a problem, until you identify it. Yet, some people remain in denial that a problem exists.

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Much stronger growth could’ve been achieved, since Dec 2007, if we had a large tax cut initially, then raising the minimum wage, with further tax cuts or an overhaul of the federal tax system, and removing or scaling back $1 trillion of the $2 trillion a year in federal regulations.

I stated in Feb 2009 [the tax cut should've been $5,000 per worker for the 150 million workers at the time or $750 billion]:

1. Obama should change his stimulus plan to a $2,000 tax cut per worker, along with increasing unemployment benefits by a similar amount. This will help households strengthen their balance sheets (i.e. catch-up on bills, pay-down debt, increase saving, spur consumption of assets and goods, etc.). This plan will have an immediate and powerful effect to stimulate the economy and strengthen the banking system. When excess assets and goods clear the market, production will increase.

2. Shift “toxic” assets into a “bad bank.” The government should pay premiums for toxic assets to recapitalize the banking industry and eliminate the systemic problem caused by global imbalances. The Fed has the power to create money out of thin air, to generate nominal growth, boost “animal spirits,” and inflate toxic assets.

3. Government expenditures should play a small role in the economic recovery. For example, instead of loans for the auto industry, the government should buy autos and give them away to government employees (e.g. a fringe benefit). So, automakers can continue to produce, instead of shutting down their plants for a month. Auto producers should take advantage of lower costs for raw materials and energy, and generate a multiplier effect in related industries.

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The recession that began in Dec 2007 and the depression that began in Jun 2009 (when the recession ended) reflected both cyclical and structural problems in the economy.

Bold tax cuts would’ve improved the cyclical problem (a less severe recession and stronger recovery), and a higher minimum wage, overhauling the tax system, and deregulating would’ve improved the structural problem (a more sustainable and stronger expansion).

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http://www.aei-ideas.org/2013/07/more-on-the-economic-death-wish-of-the-dc-city-council/#comments

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PeakTrader:

The 1982-2007 period (trough to peak) was one of the greatest eras of U.S. prosperity.

U.S. per capita real income grew much faster than average, while inflation was likely overstated, and the U.S. consumed up to $800 billion a year more than it produced in the global economy.

People should see an episode of “Kojak,” for example, to see how Americans lived in the 1970s, when living standards, labor standards, and environmental standards were much lower.

Even after the spectacular structural bull market from 1982-00, a high level of prosperity continued into 2007.

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Walt Greenway:

Both husband and wife can now work because the wife has things like prepared food from the supermarket, washers and dryers, dishwashers, vacuum cleaners . . . . I spent my summers in Arkansas in the 1960s where the women all stayed home. I was amazed at the amount of time they spent canning food, cooking and preparing food, using wringer washers and hanging the laundry outside to dry . . . all without air conditioning and often in 100 degree heat. I think a lot of women escaping the house to work outside the home was by choice because it was both possible and more desirable.

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John Dewey:

Good points, Walt. To expand those ideas just a bit:

1. specialization of labor – a few thousand workers at food processing plants could prepare food much more efficiently than millions of housewives working in kitchens;

2. women’s liberation – the social change which allowed girls to perceive themselves as engineers, accountants, and physicians

3. decline in fertility rates – women spent far fewer weeks of their lives not working before and after childbirth

Those are three factors I could quickly remember which enabled the desired growth in two-income households.

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PeakTrader:

Here’s some data on changing demographics:

100 Years of U.S. Consumer Spending – BLS

http://www.bls.gov/opub/uscs/report991.pdf

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The BLS data show women entering the workforce, over the past hundred years, was more of a gradual process rather than something that happened suddenly.

I suspect, children in the workforce declined slowly too.

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John Dewey:

The data do show that the percent of women in the workplace gradually increased over the past century. What the article you linked to does not appear to show is the type jobs those women performed.

I cannot find the statistics I have seen before. But I am certain that a much higher percentage of jobs in engineering, sciences, and corporate leadership were filled by females after the women’s liberation movement of the 1970s. That change I’m referring to did not happen overnight: it takes many years to become a physician or to rise through the ranks of corporate leadership. But the role of women in the workplace definitely changed after the 1970s.

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PeakTrader:

Some significant factors, since the 1960s, are government facilitating education (education “bubble” with more women attending college), rising age of first marriage, rising divorce rate, and rising abortion rate.

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And:

27.3% of Single Parent Households Live in Poverty
July 2012

“According to a 2010 study by the U.S. Census Bureau, the percentage of married couple families living in poverty was 6.2%. For single-parent households in that same year, the poverty rate was 27.3%; for single mother households, the poverty rate was 29.9%.

Research also shows that children born or raised in single-parent families are at higher risk for a variety of social ills, including welfare dependency, academic difficulties and criminal activity.

Today over 47 million Americans receive food stamps.

The Affordable Care Act intends to give health care coverage to 35 million citizens, of which 20 million – with limited income – will be either potentially Medicaid eligible or receive subsidies to participate in exchanges nationwide.

In total the nation will spend $250 billion for means-tested welfare benefits for single parents.”

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http://www.aei-ideas.org/2013/07/yes-the-middle-class-has-been-disappearing-but-they-havent-fallen-into-the-lower-class-theyve-risen-into-the-upper-class/#comments

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Dagbone:

“… and oddly, this comes during a period when both crime and on-duty police deaths are at historic lows.”

I wonder if there might be a causal relationship between the increased reliance on the “overwhelming show of force” and the low crime/police death rates?