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PeakTrader:

It’s easy to ignore what the data reveal, along with ignoring other mechanisms, in a dynamic economy.

The labor economics literature shows raising the minimum wage has little or no effect on employment.

If the minimum wage is raised to $15 an hour, up to 99 workers receive a raise and at least one worker loses his job (labor economists, on average, say a rise in the minimum wage will increase teen unemployment 1%).

The (positive) income and multiplier effects may be stronger than the (negative) employment effect, up to $15 an hour. Real wages will rise for workers up to $25 an hour more than fall for workers over $25 an hour.

Along with a net increase in real wages, demand will increase, since lower income workers have higher marginal propensities to consume. The increased demand contributes to a consumption-employment cycle.

Moreover, the higher minimum wage will attract idle labor, raise median income, which has been falling since 2000, and reverse the decades-long steep decline in low-wage labor force participation rates.

Furthermore, I explained how raising low income wages can reduce other production costs and raise productivity.

There will be winners and losers. However, the point is to move the macroeconomy towards optimization.

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I stated before:

When capital replaces labor, from a higher minimum wage, better jobs are created, since workers create, build, ship, install, improve, maintain, operate, and manage those machines, and capital expenditures increase.

Currently, in the U.S., there’s an overabundance of capital and an education boom.

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, which reduces scarcity.

Some jobs cannot be replaced with capital equipment. However, capital equipment can raise labor productivity.

****Another version****:

Non-financial corporations are hoarding about $2 trillion in cash or cash equivalents (earning enough for capital preservation) and banks are hoarding another over $2 trillion in excess reserves. So, there’s a lot of idle capital, along with idle labor.

A higher minimum wage will replace some labor with capital, because capital becomes relatively cheaper. However, better jobs are created, because capital expenditures increase and workers create, build, ship, install, improve, maintain, operate, and manage those machines.

Currently, in the U.S., there’s an overabundance of capital and an education boom.

There are too many overeducated workers in low-skilled jobs.

Of course, some jobs cannot be replaced with capital equipment. However, capital equipment can raise labor productivity.

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Most Americans (76%) support raising the minimum wage, suggesting that most Americans (76%) don’t want to exploit desperate people willing to work, don’t want others to exploit desperate people, or want more customers in their stores.

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How about 76% of Americans want workers to pay taxes than collect welfare.

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Jon says: “Besides, it’s always easy to be generous with other people’s money.”

Besides, it’s always easy to be generous with other people’s labor.

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Yes, money can represent labor, although not necessarily the real value of that labor.

Of course, everyone wants a bargain. Typically, the people with money get a much better deal than the people without money.

That imbalance of power can lead to a market failure, e.g. when the people with more money get even more money, while the people with less money get even less money.

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While per capita real income doubled, the real minimum wage declined over 25%. Do you really believe minimum wage workers became less productive over the past few decades, or is there another explanation?

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That’s the problem with a large multidimensional puzzle. You can ignore most of it and see contradictions where they don’t exist.

For example, one mechanism is while some low skilled workers will lose their jobs, many workers will pay more taxes and collect less welfare from the higher wage, along with spending more on goods & services.

This means government can help more unemployed low skilled workers.

Other people’s solution is to get rid of the minimum wage and some workers will make $5 an hour, including the most desperate, while other people, with higher reservation wages, will refuse to work, particularly when labor is abundant.

I could go on, but maybe you get the point.

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It’s not opinion. Mathematical models explain the interrelationships of variables and empirical models explain the interactions of those variables.

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Putting a puzzle together in a chaotic and hostile environment isn’t easy

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Typically, I tie-together partial equilibrium models for a crude understanding, along with the supporting empirical evidence, rather than rely on one partial equilibrium model.

My investments in the stock market worked out well, e.g. the RMBS calls rising from $6 each to $33,000 each, although I sold some too soon and sold some too late. The over 40 times return I made on IMCL calls in six months was another big winner, including for many of my clients and friends.

When you learn about risk and reward, along with identifying enough winners to offset your losers by a huge margin, you’ll know what I’m talking about.

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Also, I explained before, that portfolio isn’t a retirement account. If you want to save for retirement, buy ETFs, e.g. each month.

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Harold says: “A little humility would serve you well.”

I am being humble. However, you’re forcing me to reveal my accomplishments

I’m really not trying to brag, like some others here, who are obviously delusional.

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http://www.aei-ideas.org/2013/11/monday-night-links-4/#comments

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PeakTrader:

Charlie says: "I got a raise in the 70s as a teenager when the minimum wage increased. The next week is was cut loose. But the politicians felt good so I guess it was worth it."

How do you know that was the reason they got rid of you? Maybe, they were looking for an excuse, and your boss felt good and was worth it.

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marque2 says: "And the ones that remained increased in average productivity – since bosses back then fired from least to most productive – supporting your hypothesis that increasing min wage increases average productivity in an organization."

Maybe, they didn’t trust him with a new machine that would’ve made him three times more productive.

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I forgot, you want jobs, not actual goods.

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Using Dr Perry’s own numbers of a 0.45% annual average increase in productivity in the fast food industry and going back to when the real minimum wage was at its peak in 1968 (and the unemployment rate was 3.5%), the minimum wage should be about $12.50 an hour today.

However, it should be noted, using his own numbers, since 1968, the real minimum wage has declined over 25%, while productivity in the fast food industry increased about 25%. So, they’ve been underpaid for decades.

Also, I stated before:

Low wages may cause low productivity. A higher minimum wage may attract better workers from the huge pool of idle workers (e.g. from the collapsed teen labor force participation rate).

Moreover, a reduced turnover rate, from the higher minimum wage, will boost productivity.

Furthermore, better & faster service, from workers, may retain customers.

Workers respond to incentives. They’re not like a can of peas on a store shelf (which the anti-minimum wage/anti-economics crowd here wants you to believe).

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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%

Source: Academic economists, academic papers, Census data, and the BEA.

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Economists have access to better information today (on the minimum wage) than in 1987. Some learn from it, while others remain pig-headed.

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PeakTrader:

The article is worse than sloppy economics.

The most rigorous empirical models reveal a higher U.S. minimum wage has little or no effect on employment.

There are other factors that have a statistically significant effect (positive or negative) on employment.

I suspect, countries with no minimum wage have fewer factors that that have a negative effect and more factors that have a positive effect on employment.

The fact that a country has a minimum wage (a good policy) may also mean it has too many other government policies (mostly bad policies).

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States with a higher minimum wage may also have more other government policies, or greater intervention in the marketplace, that reduce employment.

That’s why rigorous empirical models are needed, to seperate other significant factors, that have a negative or positive effect on employment.

When the minimum wage is isolated, from other factors, it has little or no effect on employment.

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Harold Saxson, the purpose of raising the minimum wage is not to create employment, it’s to increase output and efficiency in production, along with correcting a market failure.

If you want to just create employment, you can pay people to dig holes and fill them up again.

You’re as ignorant about economics as the misery loves company crowd, i.e. the five or six wackos, who drove most normal people out of this blog.

No one will build-up inventory and hire workers when there are no customers, because wages are too low.

Prices don’t have to fall. Profits can rise instead, and firms can underproduce to maximize profits.

Also, I may add, it’s amazing, when the Morganovich zoo describes me, they describe themselves perfectly.

Very cute.

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http://www.aei-ideas.org/2013/11/in-western-europe-the-average-jobless-rate-is-twice-as-high-in-countries-with-a-minimum-wage-vs-those-with-no-minimum/#comments

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PeakTrader:

Prices don’t equal wages.

Does the Fed know how much money to create or destroy?

Not exactly, and yet, it has been very effective smoothing-out short-term and long-wave business cycles to achieve faster economic growth, since boom/bust cycles are inefficient in both the boom and bust phases.

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I’ve noticed the more Jon comments, the more of his idiocy rubs off on people.

He reminds me of a giant baby in one of those 1950s B movies.

I mentioned vectors in n-space twice in several months, and only mentioned it a second time in response to marque2, who keeps repeating it.

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Prices equal wages only makes sense in simple equations (the supply & demand model is a graphical representation of a simple equation).

To assume prices equal wages doesn’t even explain a one sector market, i.e. the goods market.

A simple model works well in a vacuum. However, people don’t live in a vacuum, at least most people don’t

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Of course, some people believe the price of labor is like the price of a can of peas on a store shelf.

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You believe when the price of peas go up, the real price goes down.

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The amazing Morganovich, who can buy more when prices are higher.

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Morganovich, you’re changing the subject.

And, asset markets don’t equal the goods market either.

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Morganovich, I’ve explained the differences betwen prices and wages to you in many ways. You never really understood any of it. So, I’ve tried to make it as simple as possible for you.

Prices don’t equal wages. So, I used the example when the price goes up, the real price (the real wage according to you) goes down. However, that’s a contradiction, because when the real price falls, you can buy more, and when the real wage falls, you can’t buy more.

Of course, you always respond with irrelevant smoke-screens.

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Only in simple equations can the variable w (wage) equal the variable P (price).

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Morganovich says: “if, ceteris paribus, the price of peas rises, a buyer of peas can buy less. if ceteris paribus, the price of labor rises, a buyer of labor can buy less.”

And, you completely ignore wages. Is the net effect on wages positive or negative? What about the net effect on income, consumption, or saving? What about productivity?

Higher wages can lead to more consumption and saving, which in turn creates more income, etc. (income = consumption and saving).

You’re just stating a simple truth: higher prices reduce demand, ceteris paribus. However, that ignores 99.9% of economics.

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Morganovich, what a pile. Just put it all in a shaker, shake well, and it’ll all come out right. LOL

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http://www.aei-ideas.org/2013/11/whod-a-thunk-it-price-controls-dont-work-and-team-obama-doesnt-like-market-solutions-that-save-lives/#comments

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