Right responds to "cheap labor conservatives"... Gets owned again.

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Text
And of course, sooner or later you will hear ?the theory" that every conservative trots out in favor of cheap-labor. "Well if we raise wages, then prices will go up -- instantly." I've only gotten about 50 emails saying exactly the same thing.

Doesn't work, doggie. Here's why. Those businesses have competitors. If one raises prices and his competition "stands pat", his competitor takes market share because the competitor?s prices are now lower, and he makes up for the increased costs in volume.

But you don't believe that do you? Well, let's look at some facts -- you know, those things you say I don't have.

We created the minimum wage in 1938. We have raised it from time to time since then. Notable examples would be 1957, 1963, and 1996. Take a look at the inflation numbers for the years immediately following.

Here is the source for those figures, by the way.

Just for good measure lets look at the inflation rate from 1957 through the end of the Johnson administration in 1969.

1957 3.38
1958 2.98
1959 .58
1960 1.72
1961 1.13
1962 1.12
1963 1.10
1964 1.37
1965 1.62
1966 2.92
1967 2.84
1968 4.26
1969 5.29



How about the 1996 increase?

1996 2.96
1997 2.35
1998 1.51
1999 2.21
2000 3.38
2001 2.86



Oh damn. The rate of inflation went down right after these increases in the minimum wage. In 1963, the minimum wage was the highest its ever been in real terms. Did this lead to inflation? Nope. Did this lead to job loss? Sure didn't. Unemployment declined more or less steadily until Lyndon Johnson left office in 1969 -- with an unemployment rate of 3.5 percent.

The 1996 minimum wage increase was followed by declining rates of inflation the first two years, four straight years of 4% GDP growth, and a low unemployment rate of 3.9%.

You're not just wrong, doggie. You're positively full of sh1t. As is every single one of the millions of dittomonkeys who regurgitate ?the theory? on a regular basis.
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
OMG this is hilarious:D:

Maybe you don't believe that cheap-labor conservatives like unemployment, poverty and "cheap labor". Consider these facts.

Unemployment was 23 percent when FDR took office in 1933. It dropped to 2.5 percent by time the next Republican was in the White House in 1953. It climbed back to 6.5 percent by the end of the Eisenhower administration. It dropped to 3.5 percent by the time LBJ left office. It climbed over 5 percent shortly after Nixon took office, and stayed there for 27 years, until Clinton brought it down to 4.5 percent early in his second term.


It would be unmercifully cruel of us to point out that economic meddling hardly ever has any effect until the next presidency, so we won't. The author of this drivel did, after all, basically admit to being completely ignorant of Economics 101.

He did it again. He gave me some historical analysis -- such as it is, which I will now shove up his ass -- again.

Just how far into the next presidency would that be? Because Democrats held the White House for 20 years from 1933 to 1953. Truman left office with 2.5 % unemployment -- down from 23 percent when FDR took office 20 years earlier. Are you saying Herbert Hoover's beneficial economic policies took 20 years to kick in?

Oh and Bush the elder left office after 12 years of Republican rule -- with nearly 300 billion dollar budget deficits and 7.5% unemployment. Was that when Jimmy Carters problems finally caught up with us ? you know, the one?s he inherited from Nixon/Ford? And by your reasoning, Jimmy Carter's economic problems weren't his fault. In fact, he would get credit for the Reagan economy.

If you look at GDP growth and unemployment, you'll notice something. The best economic

times are toward the end of Democratic administrations -- not the beginning. Democrats inherit weak economies and strengthen them. Republicans inherit strong economies and run them into the ground. Even Reagan?s economy was strictly mediocre compared to Truman?s, Johnson?s and Clinton?s.

Have I called you an idiot yet? Have I called you a "drivelling loon?" I don't believe I have. I don't believe I'll need to. I think the facts -- which I have presented and you have not -- pretty well do my name calling for me.
 

glenn1

Lifer
Sep 6, 2000
25,383
1,013
126
And of course, sooner or later you will hear ?the theory" that every conservative trots out in favor of cheap-labor. "Well if we raise wages, then prices will go up -- instantly." I've only gotten about 50 emails saying exactly the same thing.

Doesn't work, doggie. Here's why. Those businesses have competitors. If one raises prices and his competition "stands pat", his competitor takes market share because the competitor?s prices are now lower, and he makes up for the increased costs in volume.

But you don't believe that do you? Well, let's look at some facts -- you know, those things you say I don't have.

We created the minimum wage in 1938. We have raised it from time to time since then. Notable examples would be 1957, 1963, and 1996. Take a look at the inflation numbers for the years immediately following.
He's mixing apples and oranges. It doesn't make sense to compare the general rate of inflation in the economy as a whole when you're talking about an increase in the wages for a small section of the workforce. It also ignores all the other variables involved - i.e. inflation could remain the same even in a period of generally rising wages if the rate of productivity gains were higher still.

Either way, he needs to read up the sections of econ 101 he missed when he took the class.
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Where's the inflation cheap labor conservatives talk about then when it comes to minimum wage increases? (quantitative proof would be nice rather than defering to economics 101 ignorace;)).

I'd just like to add this for you to ponder:

Author- They don't like "bottom up" prosperity, and the reason for it is very simple. lords have a harder time kicking them around.

CLC- Actually, most Evil Capitalists I know (well, ALL of them, actually) LOVE "bottom up" prosperity. More people with money means more people willing to buy whatever it is I'm producing, which means more money to me.

Because, let me tell you: It's bloody hard to sell an Infiniti to a rice paddy farmer.

Author- The one sensible thing you've said. But it contradicts your earlier remark. Remember, I said there was a contradiction and here it is. Earlier, you said,

CLC- Because, as anybody even remotely familiar with the mysteries of economics will tell you (and we know for a fact that you'll need somebody to explain it to you), all of those things are brought about by labor and that, the cheaper said labor is, the cheaper the fruits of it as a result.


Author- Sorry doggie, but you can't have it both ways. You see, you've actually stumbled onto the reason a higher wage environment winds up generating more prosperity. First of all, why do you assume that a cheap labor environment leads to lower prices? Did Nike lower their prices when they moved to Indonesia? The answer is hell no. A higher wage environment produces more demand on the bottom -- which gets spent on more goods and service -- which in turn produces economic expansion. That's why the high wage sixties -- when organized labor was 25% of the workforce -- was a period of economic boom. That's why those rises in the minimum wage weren't followed by either inflation or job loss, but economic expansion. That's one of the reasons "the theory" -- that higher wages lead to inflation and job loss -- is hogwash, as demonstrated by the hard numbers I have already furnished.



 

glenn1

Lifer
Sep 6, 2000
25,383
1,013
126
Where's the inflation cheap labor conservatives talk about then when it comes to minimum wage increases? (quantitative proof would be nice rather than defering to economics 101 ignorace).
Fine, we'll go through what happens when the minimum wage is raised. Since only a portion of the workforce is affected, there isn't wholescale, systematic inflation throughout the entire economy, but rather an additional unit of marginal cost put onto the employer of the minimum wage workers. The employer then has one of three basic choices; he can either eat the additional costs and accept the lower profits, he can pass along the additional costs to his customers if he has pricing power, or he can trim his cost/capital structure to make up for the lost marginal profit caused by the minimum rate hike. Which generally means firing workers, hire less workers than he would have, etc.... often it's a combination of all three. Therefore you normally see a pretty immediate pop in consumer end prices for items normally produced by minimum wage workers, such as fast food, etc. The additional costs of the minimum wage have to be paid somehow, so the consumer does most of the heavy lifting in the end.

You also see a trickle-down effect with prices rising to a lesser extent in other market sectors to account for the additional costs up and down the value chain where minimum wage workers are involved.

After a while, since the wage/demand curve was artificially shifted, you begin to see higher wage workers agitating for higher wages as well as an echo. A guy who was earning $3 over minimum wage previously, now is only $1 above minimum wage, and he wants a raise, etc. etc. sparking the whole inflationary process.

This summary of course assumes all other things are equal in the economy, which they are not. Economies aren't stable systems and fluctuate constantly. No matter what the author of the article you linked thinks, more goes into determining economic trends than just labor costs. That's only one part of the equation, and a rather small one at that in most industries where fixed costs are orders of magnitude higher than variable costs such as labor.
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Thanks glenn what you say makes sense qualitativly but is it testable or shown with quantitative values anywhere? The author indicated: "A higher wage environment produces more demand on the bottom -- which gets spent on more goods and service -- which in turn produces economic expansion." (followed by historical examples) It seems to me higher wages make the "boom" possible which would natually increase wages accross the board since more compitition for labor is in demand now in order to fullfill the supply. This is what causes wages to increase accross the board not jealous joe.
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
76
Give a poor man a dollar he is apt to spend two. He believes he is prosperous. He believes the economy is great because he earns more. He will make the economy benefit from that dollar raise he got beyond the effect of it. The attitude of the purchaser... the psychology of the people is what controls. There are a lot more folks who earn to their needs then those who earn to their wants.

Economics is a Social Science not a mathamatically absolute science that most argue it is. It is the philosophy of emotion, the absence of Zen and the prognostication of future events based on historical miscognitions. The best economist ought first be a good psychologist or perhaps a drunken philosopher. Look to the people who spend and why and then you can predict with some sense of reality. IMO
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
Originally posted by: LunarRay
Give a poor man a dollar he is apt to spend two. He believes he is prosperous. He believes the economy is great because he earns more. He will make the economy benefit from that dollar raise he got beyond the effect of it. The attitude of the purchaser... the psychology of the people is what controls. There are a lot more folks who earn to their needs then those who earn to their wants.

Economics is a Social Science not a mathamatically absolute science that most argue it is. It is the philosophy of emotion, the absence of Zen and the prognostication of future events based on historical miscognitions. The best economist ought first be a good psychologist or perhaps a drunken philosopher. Look to the people who spend and why and then you can predict with some sense of reality. IMO
hehe This guy has a couple philosopheries (degrees) and a law degree... Did you see the orginal Cheap Labor Conservatives?
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
76
Zebo,
I could spend a long time in that site.. lots of interesting thingi.. like this here (from somewhere in Zebo's link)

"... the political, and by extension, the ideological struggle was between the old power of the church and the new power of the nation state. Those sources of power were very different, so that a clash of world-views resulted. The medieval "metaphysical" philosophy of the church was gradually supplanted by the "empirical" scientific philosophy of the nation-state.

For those of you who don't know what the hell I'm talking about, don't worry about it. Here's the bottom line. That very same kind of struggle is going on right now. Its origins are almost identical, namely in the emergence of a new kind of power, rivalling the power of the nation-state.

That power is the power of business corporations.

In fact, the largest trans-national corporations have annual revenues that are greater than the gross domestic product of entire nations. International communication and transportation have made corporations transcend national bouderies. The "global economy" is an international corporate economy, with corporations regulated, taxed, and frequently impeded by laws and regulations of nations that can only be regarded as "local" by corporate executives. In other words, governments and nation-states are "in the way" of increasing corporate power.

Of course corporations, as I point out endlessly, are legal fictions. They have no tangible existence. Corporations are nothing more than the people who run them, just as the church was nothing more than the churchmen that ran it. But this corporate fiction -- this organizing concept, complete with an entire culture that goes along with it -- has created a new "class" of people, whose power is tied to this theory of social organization. Their primary loyalty is not to any particular nation, but their "company". In a larger sense, their loyalty is to a mode of business organization. They are not democratic leaders. They are "business leaders", and the political leadership of nations is frequently hostile [to] their power and their interests."
The last part of the last sentence I'd say, depends...
 

Zebo

Elite Member
Jul 29, 2001
39,398
19
81
The last part of the last sentence I'd say, depends...
No kidding. What other transaction, other than medicare percription drugs for millions, would you have to pay full retail no matter the volume? Answer: Only when the law was written by the "trans-national corporations".
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
76
Originally posted by: Zebo
The last part of the last sentence I'd say, depends...
No kidding. What other transaction, other than medicare percription drugs for millions, would you have to pay full retail no matter the volume? Answer: Only when the law was written by the "trans-national corporations".

They have a captive audience... sick folks! A fool proof way to justify the length of string attached to their political dummies.. And to think the Congress think they have all the power.. Not even Kennedy (John) could buck the machinery of his day..
 

glenn1

Lifer
Sep 6, 2000
25,383
1,013
126
Thanks glenn what you say makes sense qualitativly but is it testable or shown with quantitative values anywhere? The author indicated: "A higher wage environment produces more demand on the bottom -- which gets spent on more goods and service -- which in turn produces economic expansion." (followed by historical examples) It seems to me higher wages make the "boom" possible which would natually increase wages accross the board since more compitition for labor is in demand now in order to fullfill the supply. This is what causes wages to increase accross the board not jealous joe.
You are correct, my theory is not readily provable. However, the author's point is very testable. Since his position is that an increase in the minimum wage leads to higher economic growth, it logically follows that the corresponding growth rate should scale with the wage increase. Compare the baseline average rate of growth (years where there is no minimum wage increase) vs. the rate of growth where there's an increase in the minimum wage. That is, if the author's theory is correct, the economy boost should be higher given a larger boost in the minimum wage.

Don't have time to do the math right now, but i doubt you'll see that such a relationship exists.
 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
76
I thought the author was refuting the assertion made by the 'cheap labor folks' that there was a correlation between an increase in the minimum wage and a jump in prices. So, I'd expect to see an inflation jump attributable to the increase in the minimum wage but seeing no inflation increase 'instantly' he, the author seems to make his point.
However, there could have been one but, it was offset by some other dynamic. Perhaps a decrease in one or more of the elements that make up the CPI while others related to minimum wages increases went up.. which ever ones might be populated by a significant number of minimum wage folks.
 

glenn1

Lifer
Sep 6, 2000
25,383
1,013
126
I thought the author was refuting the assertion made by the 'cheap labor folks' that there was a correlation between an increase in the minimum wage and a jump in prices. So, I'd expect to see an inflation jump attributable to the increase in the minimum wage but seeing no inflation increase 'instantly' he, the author seems to make his point.
No argument. Of course, i don't think i've heard someone express the POV that an increase in minimum wage would have an "instant" effect on the IPD (Implicit Price Deflator), but in case they did i guess the author has done fine to discredit that. I think however that the more commonly raised criticism of raised minimum wage rules is that it reduces the amount of available minimum wage positions to those who would fill them, since the employers who would otherwise have hired them either could not or would not pay the higher wages. In short, the employer who might have hired 10 minimum wage workers decides to only hire 8 instead, etc. The author didn't address this common criticism.

I don't have a problem with the intent of the author to point out the fallacies of the dumber members of the conservative set, but he'd be better served to tone down his class rhetoric. All his talk about "all cheap-labor conservatives are defenders of corporate America - whose fortunes depend on labor" sounds like Samuel Gompers quoting Karl Marx and gets really old really quick.


 

LunarRay

Diamond Member
Mar 2, 2003
9,993
1
76
He does put a very large bucket out there. As I sit here, I can only think of a places like 'fast food', 'super market baggers', waiters, some commission earners and folks like that who are paid the minimum wage allowed. I guess because they either earn a livable wage off the tips and commission or they are willing and it is accepted for those slots to earn that wage.
Most industry type work is paid some kind of 'scale'. The basis of their needs is generally the man hours needed to accomplish the production needs. If they did pay the minimum they would, I expect, recognize the variance in productivity is offset by the standard wage per hour they uses for '$rate variance'. As you know but, some may not, a company that uses a standard cost system has lots of variances and that they may get more bang for the buck out of actually paying lower wages and incurring lower productivity. For instance: Assume person A makes 10$ per hour and person B makes 5$ per hour. Further assume that the standards are 200 Direct labor hours at 9$ per hour or 1800$ of direct labor $. Person A is 90% and person B is 110% of the standard hours. This would result in person A's net variance = to 180 hours at 10$ = $1800 or 0 variance (net) and person B's is 220 hours at 5$ = $1100 or a positive variance (net) of 700$. That cheapo labor guy may earn a dollar or so more and be a bit less productive but, I'd guess not much less.. after some reasonable learning curve.

Edit: in my example the Er cost for benefits and statutory Ee expense would go into overhead and be allocated to the product based on an overhead rate and generate more variances as actual incurred and applied plays out..
There are many types of Cost Systems and this is just one example for simplicity.
 

ASK THE COMMUNITY