Right responds to "cheap labor conservatives"... Gets owned again.
- Thread starter Zebo
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glenn1
Lifer
- Sep 6, 2000
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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.
- Jul 29, 2001
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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.
).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
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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.
- Jul 29, 2001
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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
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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
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
- Jul 29, 2001
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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
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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...
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...
LunarRay
Diamond Member
- Mar 2, 2003
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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
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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
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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.
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
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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
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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.
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.
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