Political Crossfire Forums

[LostSoul3412]

SouthernComfort wrote: But lets say that you live in a town where the only job available to you at this point is to work for a local privatley owned business. This business happens to sell shoes. Your employeer pays you $3.50 an hour. Yes the shoe prices might accommodate your wage but what about the other businesses around. Will the gocery store who pays it's employees $7.00 accomadate to your $3.50 wage? What about the other businesses in town? What if you are stuck in the only business that pays it's employess under $6.00?

Where the individual works is irrelevant. What ends up happening is that I now have purchasing power that no other company has. In order to get my business, stores beginning to low prices, or new stores are formed to accommodate my prices. As cost of labor and cost of product both go down, deflation happens.

Just another part of the economic cycle of Capitalism.

[SouthernComfort]

LeopardPM wrote: SouthernComfort wrote: Gatz Nieblas wrote: Why does the nation need the minimum wage at all?

So employeers can't get away with paying $2 an hour.

You say that, if not for the minimum wage, employers would pay rock-bottom $2 for labor... why not $1... or $.01? What explains why any employer would ever pay more than minimum wage - shouldn't every employer be paying minimum wage no matter what the job is then?

employers are not 'getting away' with paying $2 - do you see engineers or architects working for $10/hour? Why not? Don't those employers want to pay $2/hour as well, or, at least the minimum amount they can?

Employers want to pay as little as possible, and employees want to be paid as much as possible... so how are the market wages determined?

Labor is just a commodity, like apples or cars. People that sell their labor, their 'product', determine for themselves how much it is worth - employers do not determine this. Employers determine how much the purchase of labor is worth to them, just as a shopper determines how much an apple is worth to them. Advocating a minimum wage is the same as advocating forced purchase at a certain price of any good - shouldn't the apple picker receive at least a 'minimum' amount for their apples? Shouldn't shoppers be forced to pay this amount? Just as less shoppers would purchase apples at a certain 'minimum' price, less employers would purchase labor at the minimum wage.

Quote: Of course you can say "just don't work at a place where that is all they pay you, but in some cases you may not be able to get a better job.
in what cases? Are the factors relating to these cases changable by the worker? What type of worker/person has more options open to them as far as employment?


The argument you give applies to most cases, but what if the employee is in no position to sell their labor? This is the only work available to them.

[SouthernComfort]

LostSoul3412 wrote: SouthernComfort wrote: But lets say that you live in a town where the only job available to you at this point is to work for a local privatley owned business. This business happens to sell shoes. Your employeer pays you $3.50 an hour. Yes the shoe prices might accommodate your wage but what about the other businesses around. Will the gocery store who pays it's employees $7.00 accomadate to your $3.50 wage? What about the other businesses in town? What if you are stuck in the only business that pays it's employess under $6.00?

Where the individual works is irrelevant. What ends up happening is that I now have purchasing power that no other company has. In order to get my business, stores beginning to low prices, or new stores are formed to accommodate my prices. As cost of labor and cost of product both go down, deflation happens.

Just another part of the economic cycle of Capitalism.

But would this apply if only 3% of the towns population made under $6.00? Would other businesses lower prices to get the business of that 3%? I doubt it, they would have to signifigantly drop prices to accommodate that small group. The 3% increase in bussines would not come close to covering the money they lose on sales as a result of the price drop.

[Gatz Nieblas]

You appear to ignore the vested interest the employer has in paying decent wages that sustain a community in order to maintain a consumer base, but even if this ideal situation doesnt work for you, let me addressed what you stated about the $2 an hour possibility. If this occurs on a large range then we have nothing to worry about due to the fact that corporations dont get to where they are by plucking dollars out of trees, they have to deliver a product that is capable of being bought by the populace at large. If everyone is getting paid low wages, then, naturally, wages will fall nationwide so businesses can remain afloat.

Also, if the $2.00 an hour becomes the new $7.50 an hour, then we have seen no difference in wages due to the fact that businesses will see it as the same amount of money. After all, labor determines the value of a dollar or the product of one's work. If $2.00 an hour continues to artificially increase to $7.50 then inflation will be inevitable, but that doesnt mean workers are earning more since it becomes the new minimum, it is just that, the new minimum and the workers who benefit are given a false sense of security and nothing more.

[Harbinger]

SouthernComfort wrote: LostSoul3412 wrote: SouthernComfort wrote: But lets say that you live in a town where the only job available to you at this point is to work for a local privately owned business. This business happens to sell shoes. Your employer pays you $3.50 an hour. Yes the shoe prices might accommodate your wage but what about the other businesses around. Will the grocery store who pays it's employees $7.00 accommodate to your $3.50 wage? What about the other businesses in town? What if you are stuck in the only business that pays it's employees under $6.00?

Where the individual works is irrelevant. What ends up happening is that I now have purchasing power that no other company has. In order to get my business, stores beginning to low prices, or new stores are formed to accommodate my prices. As cost of labor and cost of product both go down, deflation happens.

Just another part of the economic cycle of Capitalism.

But would this apply if only 3% of the towns population made under $6.00? Would other businesses lower prices to get the business of that 3%? I doubt it, they would have to significantly drop prices to accommodate that small group. The 3% increase in business would not come close to covering the money they lose on sales as a result of the price drop.

The minimum wage should only apply to adults. That 3% sounds about right for all the kids going to work.

[macadoo]

What this argument seems to be missing is that the U.S. is primariliy a service economy. Goods are imported because labor is cheaper over seas. That's why povery has increased in the last 5 years, because no one can live off of 5.15 an hour. Raising the minimum wage would increase consumption and therefore have little net effect on inflation or the price of goods.

[ubikk]

Quote: Actually they did have an argument. The argument was that raising minimum wage would result in employers cutting jobs and cutting benefits in order to continue operating their business.

In fact raising minimum wage improves productivity. This is why it usually results in a net positive economic effect. If employers have to pay a little bit more for labor, they're going to make sure the workers produce more for that wage.

Low wages encourage a waste of human resources. When it's cheap to throw a bunch of bodies at a problem, that slows innovation.

Quote: I am for an increase, but 7.25 in three years is a bit extreme. That in ten years is a much more possible solution.

$7.25 is not extreme at all. It's still low enough that it will have minimal impact. Now, a $15 min wage in 3 years might be a little extreme, but it probably still wouldn't kill the economy.

[LostSoul3412]

SouthernComfort wrote: But would this apply if only 3% of the towns population made under $6.00? Would other businesses lower prices to get the business of that 3%? I doubt it, they would have to signifigantly drop prices to accommodate that small group. The 3% increase in bussines would not come close to covering the money they lose on sales as a result of the price drop.

Then you must not be familiar with greed. If there is 3% of a society's capital not being used, then you can bet that someone will accommodate those wages in an effort to make money. If they don't, that's just wasted profit; and when was the last time a business turned down more money? Of course, the quality of such goods at such low price would not be the same, but they would be goods none the less.

For example: Ramen noodles for 25 cents, or Progresso soup for $1?

[gavnook]

:bnghd:

I don't know where to start.

[LostSoul3412]

ubikk wrote: In fact raising minimum wage improves productivity. This is why it usually results in a net positive economic effect. If employers have to pay a little bit more for labor, they're going to make sure the workers produce more for that wage.

Productivity does not change with the price of labor, only value. The economics effects are positive because the economy is generating more money. As the price of labor goes up, so does the price of product. With more people with more money, there is more to buy; but to reflect that, price of products go up in response to production costs. While minimum wage does not benefit those earning it, it does punish those who make more than it through higher prices on goods. Productivity and consumption remain the same, but the amount of money being traded increases; which is what actually creates the false increase in the economy.

ubikk wrote: Low wages encourage a waste of human resources. When it's cheap to throw a bunch of bodies at a problem, that slows innovation.

Actually, high wage encourages a waste of human resources because the employer cannot, or will not, pay high amounts of wage for workers he does not need. And sometimes, the employer will work at below optimum levels so he does not have the pay as much in production costs. Minimum wage does nothing but raise the cost of production and limit the labor market.

ubikk wrote: $7.25 is not extreme at all. It's still low enough that it will have minimal impact. Now, a $15 min wage in 3 years might be a little extreme, but it probably still wouldn't kill the economy.

If I am a chair maker, earning $6.50 under current wage laws, and the chairs I make sell for $7.00; each chair earns a 50 cents profit for my employer. However, if I am now paid $7.25, those chairs I make will now cost $7.75 to make sure my employer earns the same profit margin. However, while I am earning more money, everyone else that buys those chairs is spending more money to cover my employment costs. On top of that, I still have to work two hours to buy the same chair; meaning that I am actually not making any more purchasing power, leading only to inflation.

Minimum wage does nothing but harm those who earn above it, and set a bare minimum on the price of labor, which sets a bare minimum on the price of goods. Essentially, minimum wage keeps goods from costing less.

[LostSoul3412]

macadoo wrote: Raising the minimum wage would increase consumption and therefore have little net effect on inflation or the price of goods.

Consumption would not increase at all because the cost of goods will rise in response to the cost of labor. Basically, I'd be spending more money for the same goods because of the costs it takes to make those goods. The only thing that will happen is that people will be trading with more money for the same products; thus, inflation.

To raise the cost of production but keep the price of good constant would bring about deficits and debt to the company, and bring about a decline in the overall economy. Price of goods must increase with the price of labor, that's basic economics. From there, when the cost of the same product increases, that's inflation. Consumption would not change, only the amount of money it takes to consume.

[ubikk]

Quote: Productivity does not change with the price of labor, only value.

Higher wages push the drive for more productivity. Declining or stangnant wages encourage laziness on the part of businesses to increase productivity. Why waste time coming up with new ways of doing things when it's cheaper just to hire another person than to pay for the time and resources needed to increase individual productivity?

For example, you have some machine that will make your workers more productive, but right now, the cost of that machine is more than the cost of adding additional workers to keep doing things the way they are. So, as a businesman interested in short-term quarterly stock returns, what are you going to do? Invest in the machine or hire another person?

[Harbinger]

LostSoul3412 wrote:
macadoo wrote:
Raising the minimum wage would increase consumption and therefore have little net effect on inflation or the price of goods.

Consumption would not increase at all because the cost of goods will rise in response to the cost of labor. Basically, I'd be spending more money for the same goods because of the costs it takes to make those goods. The only thing that will happen is that people will be trading with more money for the same products; thus, inflation.

To raise the cost of production but keep the price of goods constant would bring about deficits and debt to the company, and bring about a decline in the overall economy. Price of goods must increase with the price of labor, that's basic economics. From there, when the cost of the same product increases, that's inflation. Consumption would not change, only the amount of money it takes to consume.

"macadoo" is right. Prices only increase when there is not enough competition to keep prices down and when the disposable incomes of existing consumers increases. People who earn minimum wage don't have any disposable income which is why they are barely even part of the consumer base. Increasing their wages would only allow them to buy essential things they cannot currently afford thus acting to expand the consumer base. As long as consumers in general have alternative products to choose from, producers cannot afford to loose business by increasing prices just to compensate themselves for a minor increase in the minimum cost of labor. Those who pay minimum wage can try to recoup their added cost by increasing production and selling more units of product at the same prices to all the extra minimum wage consumers who can now afford to buy them. Most employers pay well more than the minimum wage anyway so, it wouldn't hurt the economy at all.

On the other hand, a better way to eliminate poverty and streamline prices would be to narrow the gap between middle class income and the minimum wage. This could be done by destroying all the large businesses in the economy who pay higher than average wages. Again, the solution is to keep all businesses small.

[SouthernComfort]

ubikk wrote: Quote: Actually they did have an argument. The argument was that raising minimum wage would result in employers cutting jobs and cutting benefits in order to continue operating their business.

In fact raising minimum wage improves productivity. This is why it usually results in a net positive economic effect. If employers have to pay a little bit more for labor, they're going to make sure the workers produce more for that wage.

Low wages encourage a waste of human resources. When it's cheap to throw a bunch of bodies at a problem, that slows innovation.

Quote: I am for an increase, but 7.25 in three years is a bit extreme. That in ten years is a much more possible solution.

$7.25 is not extreme at all. It's still low enough that it will have minimal impact. Now, a $15 min wage in 3 years might be a little extreme, but it probably still wouldn't kill the economy.

Your right, the employers will try to get the most out of their employes, but fewer employees working harder.

[LostSoul3412]

ubikk wrote: Higher wages push the drive for more productivity.

Not at all, higher wages push the price for higher value. As the cost of production increases through cost of employment, the cost of the finished good must increase as well to turn profit. That's basic economics and price margin. Cost < Sales = Profit. To raise the cost, but keep sales the same will cause deficit. Cost > Sales = Deficit.

ubikk wrote: Declining or stangnant wages encourage laziness on the part of businesses to increase productivity.

Declining/stagnant wages encourages competition for labor. If someone is not working up to production quotas, the employer will find someone that will. Laziness only encourages replacement, and since the labor market is highly competitive, and since there are many able laborers, laziness will lead to replacement.

ubikk wrote: Why waste time coming up with new ways of doing things when it's cheaper just to hire another person than to pay for the time and resources needed to increase individual productivity?

Technological advances will always be made in an effort to increase production. Again, basic economics. If a chair costs $5 to make, and someone is trying to sell that chair for $15 (trying to make a $10 profit), but I sell two of those same chairs for $10 each (making the same profit from multiple sales), are you going to buy that chair for $10, or $15? Supply pushes the value of each product down, which increases sales amounts, which increases profit. Any business that doesn't attempt to increase productivity levels through technology will fall to their competition.

[LostSoul3412]

Harbinger wrote: "macadoo" is right. Prices only increase when there is not enough competition to keep prices down and when the disposable incomes of existing consumers increases. People who earn minimum wage don't have any disposable income which is why they are barely even part of the consumer base. Increasing their wages would only allow them to buy things they cannot currently afford thus acting to expand the consumer base. As long as consumers have alternative products to choose from, producers cannot afford to loose business by increasing prices just to compensate themselves for a minor increase in the cost of labor. They can, however, recoup the extra cost by increasing production and selling more units of product at the same prices to all the minimum wage consumers who can now afford to buy them.

If a factory is producing goods at $7 a product and it pays its employees $7.25 per product, that's a $0.25 loss on every product sold. A business absolutely has to increase prices beyond the cost of production, or else they will lose money, and fail. Regardless of how many products are sold, the deficit increase with each sale because the cost of that product is greater than the market value of it.

Harbinger wrote: On the other hand, a better way to eliminate poverty and streamline prices would be to narrow the gap between middle class income and the minimum wage. This could be done by eliminating all the large businesses in the economy who can afford to pay such wages. Again, the solution is to keep all businesses small.

Poverty will always exist because someone must fill the bottom ring of the economic ladder. If a society earns $1,000 an hour, but there are some than earn only $900 an hour, those earning $900 are in poverty to the society catering to the needs of the mass earning $1,000. Streamlining prices would only serve to eliminate the natural competition of a Capitalist system, which is great for the business, but horrible for the consumer. On top of that, regulation of the economy only serves the same fate; except now it is bad for both the business, and the consumer. Effectively, you are arguing that the way to essentially give everyone economic equality is to set a maximum on wage value. Doing this will only destroy the labor market that Capitalism depends on. By not allowing companies to compete with each other for the labor of the individual, the individual is stuck with equal pay regardless of job. That is what promotes laziness. Elimination of greater wage will cause complacency and lack of motivation within the worker.

[Harbinger]

LostSoul3412 wrote:
If a factory is [selling] goods at $7 per [unit] and it pays its employees $7.25 per [unit], that's a $0.25 loss on every [unit] sold.

Sure but, labor is only one factor of total cost. If labor alone costs $7.25 per unit (wow - what would that be per hour!), a $7 wholesale price would be pure stupidity.

Someone once told me the rule of thumb in business is to accept nothing less than a 300% markup. Assuming the additional costs bring the total to $15, the producer would want no less than $60 per unit while the retailer would want no less than $240 per unit. If people knew the true costs of the things they buy, they'd revolt.

LostSoul3412 wrote:
A business absolutely has to increase prices beyond the cost of production, or else they will lose money, and fail. Regardless of how many products are sold, the deficit increase with each sale because the cost of that product is greater than the market value of it.

I agree. I don't think anybody is contesting this fact.

[Harbinger]

LostSoul3412 wrote:
Harbinger wrote:
On the other hand, a better way to eliminate poverty and streamline prices would be to narrow the gap between middle class income and the minimum wage. This could be done by eliminating all the large businesses in the economy who can afford to pay such wages. Again, the solution is to keep all businesses small.

Poverty will always exist because someone must fill the bottom [rung] of the economic ladder.

The quality of life in the bottom rung is only poor when there is no limit to the height of the economic ladder. If the economy had only two rungs- employed and self employed- it would be harder to fall into poverty than it would to remain in the middle class.

LostSoul3412 wrote:
If a society earns $1,000 an hour, but there are some that earn only $900 an hour, those earning $900 are in poverty to the society catering to the needs of the mass earning $1,000.

Not even - there would only be a 10% difference in income!

The current minimum is only $10,712 a year. Prices are based on the spending habits of two income households earning anywhere from $40,000 to $80,000 a year- 400% to 800% more than the minimum wage! Such grossly inflated middle class incomes is what creates such grossly inflated prices and that is what makes life so much worse for those who make the least.

LostSoul3412 wrote:
Streamlining prices would only serve to eliminate the natural competition of a Capitalist system, which is great for the business, but horrible for the consumer.

I'm not talking about directly dictating prices. I'm not advocating a minimum wage either. I'm only talking about prohibiting business expansion. When a small business is successful, the owner can do whatever he wants with his profits accept increase the physical size of his business in an attempt to grab market share out from under everyone else. The owner can open another small business elsewhere (thus promoting competition), but he shouldn't be allowed to expand his current operation or franchise it.

LostSoul3412 wrote:
On top of that, regulation of the economy only serves the same fate; except now it is bad for both the business, and the consumer.

I would agree that excessive regulations are unnecessary and destructive. But, no regulations would be just as bad as too many. At least a handful of regulations is necessary to maintain an economy that is full of opportunity for anyone with the motivation and desire to succeed. Not just Harvard business grads.

LostSoul3412 wrote:
Effectively, you are arguing that the way to essentially give everyone economic equality is to set a maximum on wage value.

Huh?

LostSoul3412 wrote:
Doing this will only destroy the labor market that Capitalism depends on.

Small businesses create more jobs than large corporations do. That's why the rate of unemployment increases whenever a large business moves in and shuts a bunch of small businesses down. If all the big corporations that dominate the economy were replaced with small businesses, it would create a lot of additional jobs so, competition in the labor market would be better than it is now.

LostSoul3412 wrote:
By not allowing companies to compete with each other for the labor of the individual, the individual is stuck with equal pay regardless of job.

While average income would be lower and the differences in income lessor, it would not be equal.

LostSoul3412 wrote:
That is what promotes laziness. Elimination of greater wage will cause complacency and lack of motivation within the worker.

All the high paying corporate jobs would certainly be eliminated but, the promise of high income would prevail. With big corporations out of the way, individuals and families would have a maximum of opportunity to achieve financial success and independence by opening small businesses of their own. An economy filled with small business would be far more competitive than one with only a handful of corporations yet, I think it would be far less volatile and self destructive too.

[LostSoul3412]

Harbinger wrote: Someone once told me the rule of thumb in business is to accept nothing less than a 300% markup. Assuming the additional costs bring the total to $15, the producer would want no less than $60 per unit while the retailer would want no less than $240 per unit. If people knew the true costs of the things they buy, they'd revolt.

I'd believe it. But the point is the higher the labor cost, the higher the overall cost, and then the higher the retail cost of the product.

Harbinger wrote: I agree. I don't think anybody is contesting this fact.

Then how can you justify macadoo's claims?

macadoo wrote: Raising the minimum wage would ... have little net effect on ... the price of goods.

[Harbinger]

LostSoul3412 wrote:
Harbinger wrote:
LostSoul3412 wrote:
A business absolutely has to increase prices beyond the cost of production, or else they will lose money, and fail. Regardless of how many products are sold, the deficit increase with each sale because the cost of that product is greater than the market value of it.

I agree. I don't think anybody is contesting this fact.

Then how can you justify macadoo's claims?

macadoo wrote:
Raising the minimum wage would ... have little net effect on ... the price of goods.



I explained this before.

Harbinger wrote:
Prices only increase when competition is low and when disposable income is high. People who earn minimum wage don't have any disposable income which is why they are barely even part of the consumer base. Increasing their wages would only allow them to buy essential things they cannot currently afford thus acting to expand the consumer base. As long as consumers in general have alternative products to choose from, producers cannot afford to loose business by increasing prices just to compensate themselves for a minor increase in the minimum cost of labor. Those who pay minimum wage can try to recoup their added cost by increasing production and selling more units of product at the same prices to all the extra minimum wage consumers who can now afford to buy them. Most employers pay well more than the minimum wage anyway so, it wouldn't hurt the economy at all.