PeakTrader.com

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PeakTrader:

After we bow our heads, hold hands, and chant supply & demand, one more time, Austrian econ degrees will be awarded, while playing Kumbaya.

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Labor economics literature:

http://www.raisetheminimumwage.com/pages/job-loss

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Morganovich, I explained it to you many times before. Yet, you remain delusional and in denial.

The (positive) income and multiplier effects may be stronger than the (negative) employment effect, up to $15 an hour.

And, real wages may rise much more for workers up to $25 an hour than fall for workers over $25 an hour.

Moreover, it’ll somewhat offset the structural problems, built-up over several decades, along with correcting a market failure.

Obviously, you’ve never hit it big in the stock market and wouldn’t know how to improve businesses. So, I wouldn’t be too critical of the minimum wage when you constantly show a subsistence wage is all you’re worth, and that’s being generous

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PeakTrader:

The fallacy is assuming prices equal wages.

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Jack, I find it hard to believe someone over 16 and living on earth doesn’t know at least one difference between wages and prices.

Nominal wages = real wages and inflation (or change in prices). If nominal wages rise 10%, prices won’t necessarily rise 10% (for reasons I stated before).

I’ve shown an increase in price will reduce demand and an increase in wages can increase demand, etc..

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Wages is the price of labor only in one dimension.

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Economics is just supply and demand to the real trolls here like Ron, who has a hard time pounding round pegs into square holes. He doesn’t have a clue of the extent of his ignorance. LOL

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What are you talking about? My comments reflect American mainstream economics, which is supported by mathematical and empirical models:

http://www.raisetheminimumwage.com/pages/job-loss

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John Dewey,

You’ve wasted your time and other people’s time, since you’ve been on this blog.

You should go somewhere else, where there is no economics.

I’ve shown you, and your sidekicks, wages don’t equal prices, which you never proven wrong.

Playing politics or calling people names is not proof.

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I already explained how the (positive) income and multiplier effects may be stronger than 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. comparing low marginal propensity to consume and high marginal propensity to consume), while workers making over $25 an hour will lose little (e.g. from faster economic growth); how it’ll somewhat offset the structural problems in the economy built-up over several decades (e.g. idle capital in a saving glut), etc..

However, it’ll also make firms much more efficient in production (weak firms will fail and stronger firms will take their market share and also benefit from the increased demand). 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, morale 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.

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Jack, it’s the same topic and I haven’t changed any definitions.

I’ve shown the relationship of wages to other variables.

My statements are supported by mathematical and empirical models, along with the labor economics literature.

Every economist I talk to, on this subject, completely understands what I’m saying, and acknowleges it’s orthodox economics.

I stated before, wages are prices only in one dimension, not in a general equilibrium model.

And, I’m not anti-free market. There are market failures and inefficiencies.

I’ve shown laissez faire is suboptimal, and labor standards can move the economy towards optimization.

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Jack, are you Morganvich?

The last sentence in your prior comment was:

“Please do not insult me and answer my question.”

I did both.

You not only insult yourself, you attempt to insult the American mainstream economics profession, and labor economists in particular.

When you figure out the difference between wages and prices, let me know.

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John Dewey,

Jack isn’t new. He pretends he’s “civiilized,” and when he hears exactly what he doesn’t want to hear, i.e. rigorous mainstream economics that contradicts his beliefs, he explodes. LOL.

He has the exact pompous attitude, low character, and plays the same cute little games as Morganvich.

His reactions to my statements are funny. He’s just a punk, like you.

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You don’t have to “embrace” American mainstream economics, i.e. NeoClassical economics. You can embrace Austrian economics or Marxism instead.

Some people on this blog cling more strongly to their ignorance when their beliefs are challenged.

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You really can’t have a debate with some people here. Their defense is mostly name calling.

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Why don’t you write what Krugman wrote, not what someone else wrote?

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I’ll clear it up for you:

In 1998 Krugman wrote:

“So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This theoretical prediction has, however, been hard to confirm with actual data.”

And what he wrote in 2013:

“Now, you might argue that even if the current minimum wage seems low, raising it would cost jobs. But there’s evidence on that question — lots and lots of evidence, because the minimum wage is one of the most studied issues in all of economics. U.S. experience, it turns out, offers many “natural experiments” here, in which one state raises its minimum wage while others do not. And while there are dissenters, as there always are, the great preponderance of the evidence from these natural experiments points to little if any negative effect of minimum wage increases on employment.”

You’re a bigger political hack than Krugman (which is saying something). Of course, Krugman is also an excellent economist, while you’re just an economic lliterate.

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http://www.aei-ideas.org/2013/10/the-minimum-wage-and-the-fallacy-of-the-special-case/#comments

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PeakTrader:

Ron won’t be satisfied, until real wages for the working poor decline faster. The decline over the past 45 years wasn’t fast enough for him.

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One of my instructors, with a Ph.D in economics from Berkeley, wanted to go into statistics, but was talked out of it, because it was a “dead field.”

He was told he should think about economics, because there’s so much more to learn. A hundred years ago, there were no economists. They were mostly moral and social philosophers.

Back in 1980, there was much less knowledge of the minimum wage. It was easy to overlook any evidence.

Today, there’s a better understanding how a minimum wage interacts in the U.S. economy.

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You seem to imply I’m not aware of “negative consequences.”

Anyone who notes only negative effects and ignores positive effects cannot possibly determine the net effect.

Are you really sure raising the minimum wage to $10 an hour will have only negative consequences, or a net negative effect, on the economy?

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It’s been “hashed out” already and this is the result:

http://www.bls.gov/opub/ted/2011/ted_20110224.htm

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Larry:

LarryG | October 6, 2013 at 8:18 am
@Peak – hey dude. How DARE you bring real data into this discussion!

Pity there’s not a chart like this for minimum wage workers, eh?

wait… that would really mess things up…

http://i.huffpost.com/gen/1183444/thumbs/o-MINIMUM-WAGE-PRODUCTIVITY-570.jpg?6

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PeakTrader:

Larry, are you trying to stir up trouble with that chart

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The data show employers have been getting more for less.

Profit is at an all-time high compared to GDP and income of high-wage workers have been soaring above low-wage workers.

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Nick:

sshhh. your empirical data is no match for their anecdotal evidence.

real output per hour across the economy is 2.3x higher today than it was in 1968, yet low-skill wages are 1/3rd lower.

all of those gains are being captured by employers.

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Larry:

He’s not saying there is anything wrong with the price of labor!

he’s saying the CURRENT SIMPLISTIC theory fails at completely describing the real world system that is far more complex than the theory asserts….

and a professor of economics is actually promoting a viewpoint that asserts a simple theory CAN produce valid answers – as if the real world could be explained by a simple all-variables-held-constant – theory.

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PeakTrader:

Free, You’re using the wrong model, which you don’t fully understand anyway.

Here are some ideas by economists:

Minimum Wage

“The argument that minimum wages decrease employment is based on a simple supply and demand model of the labor market. A number of economists (for example Pierangelo Garegnani, Robert L. Vienneau, and Arrigo Opocher & Ian Steedman), building on the work of Piero Sraffa, argue that that model, even given all its assumptions, is logically incoherent.

Michael Anyadike-Danes and Wyne Godley argue, based on simulation results, that little of the empirical work done with the textbook model constitutes a potentially falsifying test, and, consequently, empirical evidence hardly exists for that model.

Graham White argues, partially on the basis of Sraffianism, that the policy of increased labor market flexibility, including the reduction of minimum wages, does not have an “intellectually coherent” argument in economic theory.

Gary Fields…argues that the standard “textbook model” for the minimum wage is “ambiguous”, and that the standard theoretical arguments incorrectly measure only a one-sector market.

An alternate view of the labor market has low-wage labor markets characterized as monopsonistic competition wherein buyers (employers) have significantly more market power than do sellers (workers)…Such a case is a type of market failure and results in workers being paid less than their marginal value.

Under the monopsonistic assumption, an appropriately set minimum wage could increase both wages and employment, with the optimal level being equal to the marginal productivity of labor.”

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http://www.aei-ideas.org/2013/10/classic-milton-friedman-video-on-the-minimum-wage/#comments

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PeakTrader:

It’s ridiculous the working rich pay over 50% in federal and state taxes, while the working poor receive tax credits and other government benefits.

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There’s an interactive chart in the article on changes in real wages, by percentile, comparing men and women, and comparing periods (between 1973 and 2012):

http://www.epi.org/blog/real-hourly-wage-growth-last-generation/

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It seems, women have been working increasingly more hours, since 1973.

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http://www.aei-ideas.org/2013/10/new-economic-concept-the-social-value-of-gazillionaires/#comments

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PeakTrader:

It should be noted, living standards tend to rise over time, although not always, e.g. over the thousand year period called the Dark Ages, after the fall of the Roman Empire.

Also, living standards of the working poor, e.g. those earning $12 an hour or less, may have had the slowest improvement in living standards, over the past 30 years, e.g. because of the declining real minimum wage and more regulations, although the 1982-07 period was one of the greatest eras of U.S. prosperity in history.

Moreover, the economic “recovery,” since June 2009, has been so slow that per capita real GDP is about $6,000 a year lower than it should be, although the federal government is spending $1 trillion a year more than in 2007 and adding to the national debt. Every man, woman, and child would be wealthier if they had an additional $6,000 a year.

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http://www.aei-ideas.org/2013/10/when-it-comes-to-the-affordability-of-common-household-goods-the-rich-and-the-poor-are-both-getting-richer/#comments

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PeakTrader:

In the context of a partial equilibrium model, wages are prices, cetrius paribus and under certain assumptions.

In the context of a general equilibrium model, wages don’t equal prices, which I’ve shown above.

It makes no mathematical sense to exchange prices for wages or vice versa in many of the relevant equations in econ grad school.

Basically, you’re saying something like a bear is black, and I’m saying it’s also a mammal, and then you say no, it’s black. So, it can’t be a mammal too.

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If wages rise 10% for every worker, inflation will likely rise 10% too. So, real wages are unchanged, at worst, although it boosted nominal GDP growth in the 1970s.

However, if wages rise 20% for the bottom 50% of workers and are unchanged for the top 50% of workers, then, because of imbalances built into the economy, real wages will likely rise for the bottom 50% much more than real wages will fall for the top 50%.

Two of the mechanisms are attracting idle labor, e.g. represented in falling labor force participation rates, particularly the teen labor force participation rate, which is at an all-time low, and shifting real income from high-wage earners (with low marginal propensities to consume) to low-wage earners (with high marginal propensities to consume), and therefore, shift unproductive assets, from the saving glut, including profit at a record high compared to GDP, into productive assets, through increased demand, which will facilitate real growth, to raise both consumption and saving.

We know, the Fed has been targeting a faster inflation rate, to raise nominal GDP growth, and therefore raise real GDP growth. However, its policy has become increasingly less effective over the past two or three years.

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Also, I may add, it seems, much more of the expansion from 2001-07 was fueled by household debt compared to the expansion from 1991-01, which was fueled, in part, by real wage increases. When the music stopped, in 2007, households were left with way too much debt, which has depressed consumption.

Chart Medium Household Real Income

http://research.stlouisfed.org/fred2/series/MEHOINUSA672N

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PeakTrader:

Jon, interesting, you quote part of the scientific methodology and then don’t follow it.

And, you not only contradict the labor economics literature, you ignore it.

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“How can it be that firms are so sensitive to international differences in wages that they greedily lower their production costs whenever possible by shifting away from using higher-wage to lower-wage workers, yet simultaneously are so insensitive to legislated hikes in domestic wages that these firms simply absorb, with no attempts to reduce, the higher costs imposed on them by minimum-wage legislation?”

The U.S. economy is not the Chinese economy. For example, because of the Law of Comparative Advantage, the U.S. should completely offshore an old low-wage industry to China and shift limited resources into a newer high-wage industry, e.g. with market power, and trade.

The low-skilled worker in the new industry can be paid more than in the old industry. So, he can spend more, save more, and borrow less.

When you level the playing field with a national minimum wage, prices won’t rise equally for all firms, to compensate for the higher wage. Stronger firms will prevail, gaining market share from weaker firms and benefiting from the increased demand.

You want more customers and fewer idle workers when the economy is underconsuming and underproducing.

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Moreover, the lower skilled labor force won’t reach full employment if a U.S. worker is 10 times more productive than a Chinese worker, but is only paid five times more in wages.

Prices don’t have to fall, profits can rise instead.

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The minimum wage worker may move from NYC to rural Tennessee. Wouldn’t you?

Can you live on $10 an hour in NYC?

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http://www.aei-ideas.org/2013/10/more-on-economic-amnesia-and-the-minimum-wage/#comments

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