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PeakTrader:

So, “economic amnesia” means the vast majority of economists forgot the only real forces in economics are supply and demand.

All the other forces, i.e. vectors in n-space, that interrelate and interact in the economy, are so weak, they should be completely ignored.

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There are so many mechanisms that are ignored, I don’t know where to start.

Raising the U.S. minimum wage will cause some offshoring. However, those goods will be imported at low prices, particularly compared to the higher wages, from the higher minimum wage, paid at jobs that can’t be offshored.

Moreover, any freed-up labor from the higher minimum wage will be available to expand the U.S. economy (there are much more powerful factors that create jobs than raising or lowering the minimum wage).

Unlike the price of sugar, raising the minimum wage will lower other production costs and raise productivity. Here’s a 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 of course, 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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Sure, economists can’t be taken seriously, unless they only believe in supply and demand, and based on your prior ignorance you believe sugar is labor too.

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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 (or overpaid workers) and “excess” profits (capital as a share of GDP is at an all-time high, while real wages declined).

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

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marque2, you’re delusional. You and my “opponents” have always supported my statements by trying to oppose them.

The problem with your assumption is it’s not supported by the data. When the real minimum wage was at its peak, the unemployment rate was 3.5%.

Now, the real minimum wage is over 25% lower, while per capita real income has doubled.

Since the real minimum wage has declined, the low-wage unemployment rate has been higher, while the low-wage labor force participation rate has been in steep decline.

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marque2, also, I may add, if you understood how economic variables interrelate (in mathematical models) and interact (in empirical models), you’d realize your statements have the opposite effect of what you intended.

You’ve shown this tendency often, i.e. believing in the opposite of what’s true.

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I’d like to see median income and low-wage labor force participation rates begin to rise again.

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Supply and demand aren’t the only real forces in economics. The labor economics literature supports my statements. 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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It’s interesting the U.S. has the highest corporate tax rate in the world, and yet U.S. corporate profits as a percentage of GDP is at an all-time high, while U.S. corporations are holding $2 trillion in cash (i.e. collecting only enough interest for capital preservation).

http://taxfoundation.org/blog/another-study-confirms-us-has-one-highest-effective-corporate-tax-rates-world

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It should be noted, the U.S. is a consumer-driven economy, not an export-led economy, like Germany, China, and Japan.

Higher gasoline prices in the U.S. is like a consumption tax, and higher gasoline prices means less money to buy other goods.

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John Dewey, if the goal of a user tax or consumption tax is to reduce the size of government through consumption, then output = GDP = income will fall.

See the consumption function Y = C + I + G + NX. Both C and G will fall, which will lower Y. Of course, an increase in NX can compensate for the decreases in C + G, if you don’t mind working for foreigners.

On the production side, high income workers are already productive whether their income is $200,000 or $150,000. Of course, lower income workers may shirk or find ways to raise their income to compensate, e.g. working slower to earn more overtime.

The regressive tax where everyone pays the same tax rate for a gallon of gasoline, for example, may cause low income workers to take the bus and high income workers to buy gas guzzlers. Al Gore may go for that, because many older cars will be taken off the road.

And, what would the user or consumption tax rate be to fund government – 25% or more?

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Jack (?), your 32% is an irrelevant and illogical response to my statement. You’re creating responses to statements I didn’t make. Very cute.

I see you’re still trying to find new fools.

And, Jon, I’ve already proven you don’t understand economics, along with constantly giving dumb replies on every subject. You’ve been “wrestling” with American mainstream economics, and it has pinned you so hard, the floor has an impression of your face.

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Hitssquad, although aliases Jack’s response to my statement makes no sense, the trend has been labor economists have led other economists into believing raising the minimum wage would be a net benefit:

“Surveys of labor economists have found a sharp split on the minimum wage. Fuchs et al. (1998) polled labor economists at the top 40 research universities in the United States on a variety of questions in the summer of 1996. Their 65 respondents were nearly evenly divided when asked if the minimum wage should be increased. They argued that the different policy views were not related to views on whether raising the minimum wage would reduce teen employment (the median economist said there would be a reduction of 1%), but on value differences such as income redistribution. Daniel B. Klein and Stewart Dompe conclude, on the basis of previous surveys, “the average level of support for the minimum wage is somewhat higher among labor economists than among AEA members.”

My comment: The data suggest one mechanism is a higher minimum wage will attract more productive workers, including idle workers (or workers out of the labor force), the higher wage will increase demand, and then less productive workers will be hired to meet demand.

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It should be noted, if the minimum wage is raised from $7.25 to $10 an hour, all workers earning under $10 an hour will get a raise (not just minimum wage workers), and it’s likely many workers earning above $10 an hour will also get a raise.

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*Attacks of the Kook in the Link:

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http://www.aei-ideas.org/2013/10/whod-a-thunk-it-americas-protectionist-policies-send-production-and-jobs-overseas-and-damage-the-economy/#comments

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PeakTrader:

If you have 99 people with higher income, to spend and save, and one person unemployed, government, and parents, will likely save a lot of money.

Moreover, the higher wage will lead to efficiencies in production, and the freed-up labor can expand the economy.

Furthermore, capital spending (both substitute and complement) will increase, in this saving glut.

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I think, the U.S. economy can absorb a $15 national minimum wage.

Prices will rise much less than the higher wage. Overall, real wages will rise, in part, because low-income real wages will rise more than high-income real wages will fall, e.g. up to $15 an hour.

It should be noted, while per capita real income doubled, the real minimum wage declined over 25%, and when the real minimum wage was at its peak, the unemployment rate was 3.5% with a rising low-wage labor force participation rate. I suspect, median income will rise with a higher minimum wage too.

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Morganovich says: “a mandated $15 min wage would hike prices, shrink profits, lead to more automation, lead to more imports, and shrink investment in future growth (which is funded by profits).”

Yes, prices will rise. The Fed has been trying to raise inflation to boost nominal GDP, which is too low, to boost real GDP. Profits can rise through efficiencies in production, including raising productivity through a higher level of capital spending for substitute and complement capital equipment to boost labor productivity, in this saving glut. Weak U.S. firms will fail or lose market share, while better managed U.S. firms will capture market share and also benefit from the increased demand from the higher wage.

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