PeakTrader.com

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PeakTrader:

A valid reason to raise the minimum wage is to “grow the pie,” not reduce income inequality.

A $15 national minimum wage may raise income inequality, because higher productivity and lower overall production costs, from the higher wage, may boost profits.

A $20 national minimum wage may shrink the pie and reduce income inequality, because unemployment (for both capitalists and laborers) may be higher.

Which is better? A bigger pie with more income inequality or a smaller pie with less income inequality.

I think, raising living standards, not reducing income inequality, should be the objective. Otherwise, there may be some undesirable effects.

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Mike, the problem is when you owe $5,000 on your car payments, of $450 a month, and you’re behind on your bills, how will paying someone to pave the road help you? I doubt it would help much.

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Tax cuts would build a mountain of government debt to reduce a mountain of household debt.

Government spending would build a mountain of government debt to add to a mountain of household debt.

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Edward, I share your concern about income inequality, but only over the past few years and with low-wage workers longer-term.

I think, many people underestimate how well the U.S. economy performed, until after 2007 (including huge gains in real median household income, large sustainable trade deficits, and enormous capital creation through efficiencies, in both old and new industries).

Of course, we need to grow the size of the pie faster.

And, if labor receives a disproportionate low share of income from employment, the larger pie allows more redistribution.

However, it should be noted, labor share is relative. There can be a faster improvement in living standards with a falling labor share, or a slower improvement in living standards with a rising labor share.

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The U.S. is a most diversified and dynamic economy. Why slow the inevitable, i.e. moving from one economic revolution into the next, just because some workers pull ahead faster than other workers? Allow them to “do their thing” and grow the pie faster. Everyone will benefit.

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