PeakTrader.com

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PeakTrader:

Typically, price controls have been used attempting to control inflation. A minimum wage is a labor standard, similar to requiring a safety cord when washing windows of skyscrapers.

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You’d have to be a simpleton to compare the U.S. economy to the Venezuelan economy. What may be a net negative in Venezuela can be a net positive in the U.S., given the huge differences in the economies.

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All supply and demand curves aren’t the same.

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Someone misinterpreted what I said. Supply and demand curves elasticities, the price-quantity axes, and the shifts aren’t the same in each country.

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Some people assume, and it may be conventional wisdom, that a minimum wage or a rise in the minimum wage is automatically negative for the economy.

A rise in the minimum wage from $8 to $10 (over three years, for example) may be net positive for an economy. However, a rise from $10 to $12 may be net negative.

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.

The (positive) income effect may be stronger than the (negative) employment effect, particularly in this economy where profits and income disparities are at all-time highs relative to the minimum wage.

And, in the U.S. economy, unlike Venezuela, there are more options than working almost for free.

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Morganovich, your statement is wrong and makes no sense.

Without consumption, which is 70% of GDP, income, output, and employment fall.

What good is saving or investing when you have no customers in your store?

You may want to learn about the “Paradox of Thrift.”

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Also, I don’t know why you assume there isn’t enough saving.

Corporate profits increased from 7% of GDP to 13% of GDP over the past 25 years, and income inequality is at an all-time high (i.e. workers incomes with the lowest marginal propensities to consume have increased much faster than workers incomes with the highest marginal propensities to consume, while the real minimum wage has declined).

The problems are a lack of demand and not enough saving being invested to generate real growth.

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Ken, the teen labor force participation rate fell with the decline in the real minimum wage:

http://research.stlouisfed.org/fred2/series/LNS11300012

There was higher teen employment when the real minimum wage was higher.

And labor economists at the 40 top research universities in the U.S. concluded a rise in the minimum wage would cause only a 1% fall in teen employment.

I think, a minimum wage of $10 would do more good than harm, in this economy, where per capita real income has more than doubled since the 1970s.

Labor should be viewed as an investment (like capital) rather than an expense, and I think everyone, except the most severely disabled, is capable of producing at least $10 an hour of value in the U.S..

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Also, I may add, with a higher minimum wage and labor as an investment, perhaps, fewer people would choose to attend college and fuel the “education bubble.”

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Ron, for someone who can’t even do basic math and looks up to a guy who never learned how to spell Keynesian, along with writing illogical wordy value judgements, you’re in no position to criticize someone with economics degrees.

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From some of the comments, we can say there are people willing to pretend working, because there are people willing to pretend paying them.

And some people want to go back to 19th century economics when labor was expendable, and squirrels had more sense about boom and bust cycles (or feasts and famines), which resulted in much slower economic growth in the 19th century than the 20th century, along with much more hardship.

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http://www.aei-ideas.org/2013/05/in-venezuela-government-price-controls-create-economic-chaos-so-dont-minimum-wage-laws-do-the-same-in-the-us/#comments

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PeakTrader:

There’s no doubt there’s a lot of “economic ignorance.”

For example, people say there’s a global saving glut without realizing much of that glut is in the U.S. (e.g. U.S. corporate profits rising from 7% to 13% of GDP over the past 25 years, including over $1 trillion stored in cash, and incomes rising much more quickly for workers with low marginal propensities to consume).

Of course, the federal government spends too much and the “middle class” is struggling.

Given the lack of demand and not enough saving being invested in real growth, a period of “conspicuous consumption” (by the rich) may be better to help lower income workers and raise employment than redistributing income.

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Ken, you make me imagine what happens when an American MD talks medicine with a Haitian witch doctor.

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I’m not the one with the collection of voodoo dolls.

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Vangel, government and the “middle class” have been able to borrow, while interest rates have been in a long decline, because there’s a saving glut.

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Foreigners need to sell their goods for dollars to buy commodities on the world market and those dollars flow into U.S. Treasury bonds. The Fed is still in an easing cycle.

Balance sheets of U.S. corporations, and perhaps the top 20% of U.S. income earners, are strong, which represent well over 50% of all assets in the U.S..

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When income rises, both spending and saving rise.

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http://www.aei-ideas.org/2013/05/quotation-of-the-day-murray-rothbard-on-economic-ignorance/#comments

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