The Instigator
winnawinnachickindinna
Pro (for)
Losing
0 Points
The Contender
ax123man
Con (against)
Winning
3 Points

Raising minimum wage will help the current status of the US' economy

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Post Voting Period
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after 2 votes the winner is...
ax123man
Voting Style: Open Point System: 7 Point
Started: 10/20/2015 Category: Economics
Updated: 1 year ago Status: Post Voting Period
Viewed: 765 times Debate No: 81261
Debate Rounds (2)
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Votes (2)

 

winnawinnachickindinna

Pro

Rules if chosen to accept debate:
No Trolling
cite references
2 rounds


I will be arguing on the pro side of this argument. Meaning I believe that raising the minimum wage will help the Economy. According to the Keynesian economics if the consumers spirits are low it is the responsibility of the government to start spending money in order for consumers to trust the market again. So in order to improve the economy we need to be putting more money into play, with out effecting deflation or inflation of the American dollar. If this were to be accomplished people would have more money they could spend on their wants not just their needs. This makes it so the market is fed more money thus making the status of the Us economy better which then keeps consumer spirits trusting the economy not making them weary of it plummeting. Raising the minimum wage also means that there will be more money going in to taxes from the work forces' pay checks. For example take Colorado’s minimum wage of $8.23 if I were to get a 40-hour Pacheco for a week of work I would roughly make $219.47 with about a third of the pay check going to taxes, the government taking about $109.73. Now if the Minimum wage was $15 and hour the consumer would make about $400 and the government would make $200 off a two week pay check. The opposing side may say that raising the minimum wage will raise prices and jobs meaning small business will be on the decline. But like I mentioned earlier is that is if there is no inflation or deflation of the American dollar the prices don’t raise. Thus making it competitive even for small businesses’.

ax123man

Con

Ah, a nice, relatively short debate.

MW = minimum wage

There are major issues with bringing Keynes into this debate:

First, the economy is heating up to the point that there is talk of the federal reserve raising interest rates very soon. Keynesians advocate stimulus when the economy is poor, not when it's picking up steam.

Second, neither fiscal policy nor monetary policy (the two "levers" of Keynesianism) directly targets minimum wage jobs. Fiscal policy typically bails out Wall street and failing U.S. businesses while monetary policy tends to help the rich at the expense of the poor.

Third, Keynesian economics itself is flawed. It was refuted by Jean-Baptiste Say in 1803 before Keynes was even born. Recessions are not caused by demand shocks, they are caused by supply shocks:

"A man who applies his labour to the investing of objects with value by the creation of utility of some sort, can not expect such a value to be appreciated and paid for, unless where other men have the means of purchasing it. Now, of what do these means consist? Of other values of other products, likewise the fruits of industry, capital, and land. Which leads us to a conclusion that may at first sight appear paradoxical, namely, that it is production which opens a demand for products."

"Should a tradesman say, "I do not want other products for my woollens, I want money," there could be little difficulty in convincing him that his customers could not pay him in money, without having first procured it by the sale of some other commodities of their own"

http://www.econlib.org...

Fiscal policy simply transfers wealth from one person to another, giving person X the ability to spend the production of person Y. Monetary policy creates money out of thin air, allowing some lucky individuals to spend the general increase in productivity of everyone else.

Even if a MW increase somehow magically did increase spending, and J.B. Say was wrong while Keynes was right, where would the additional money come from to pay for the MW increase? Raising the MW only shifts money around, it does not create wealth. Of those workers who get paid more after the MW is raised, some may see reduced benefits or work hours. Other workers will lose their jobs either because they are replaced by machines or the business is forced to close, while still others simply will not be hired due to positions that would have been created without the MW increase. In other cases, the business owner will eat the cost and his/her spending will decrease.

And lastly, how does increasing government revenue help the economy? If it does, then shouldn't we just raise all tax rates to 100% and have government provide for us all?

Note: I concede that the MW increase will have zero affect on inflation. Inflation is caused by increasing the supply of money (Federal Reserve) faster than increases in productivity. It has nothing to do with the MW.

Debate Round No. 1
winnawinnachickindinna

Pro


Thank you for accepting my debate.



Right off the bat we are going to have to agree to disagree about Keynesian economics if you are a believer in Jean- Baptiste Say theory of economics we are just not going to see eye to eye. Yes, the Federal Reserve is thinking about raising interest rates, but according to The Economist The Fed may be jumping the gun. It states:


"Yet raising rates is risky. Despite low unemployment, wage growth has so far been modest. That suggests that wage-driven inflation may yet be some way off—and America's labour market may still be some way away from "maximum employment". The Fed has been over-optimistic about inflation before; it found itself repeatedly restarting its asset-purchase programmes after inflation failed to rise to and stay near target when purchases were curtailed. The move toward Fed tightening has also destabilised global markets, squeezing emerging economies, putting downward pressure on commodity prices and pushing up the dollar; rate rises may therefore ensure that the factors which have been dragging down inflation are not in fact one-off events. But what really ought to give the Fed pause is the asymmetry of the risks it faces. If it waits too long to raise rates then inflation could rise to 3% or 4%. But inflation which temporarily rises that high is not a major threat to the American economy, and the Fed has unlimited capacity to raise rates to rein in price increases” (http://www.economist.com...)



Also the Keynesian theories are may be considered more when the Economy stimulus is poor but it only takes something like a spike in the interest rate to spook the consumers and have them start saving their money instead of spending it hurting the Economy. “Just look at the Great Depression, Keynes said. The first problem was that people created lots of products they were unable to sell in the short run. The second problem: when they did manage to sell some, they didn’t “get rid of the money” but stashed much it away in banks or even mattresses.” (http://www.pbs.org...) Meaning that the economy is at risk of recession at any point.



Yes you may say by people putting their money in the banks is a good thing and it will be loaned out again, but remember we already have 1.5 trillion dollars on deposit not being loaned out at all right now. With higher interest rates people will not be inclined to take out loans and the 1.5 trillion dollars grows to an even greater number. But on the other hand and people obtain a higher MW they are putting more money into banks and spending money on wants not needs making a more stimulated economy.


“While 29 states and the District of Columbia currently have a minimum wage higher than the federal minimum, increasing the federal minimum wage will boost the earnings for nearly 38 million low-wage workers nationwide. That includes workers in those states already earning above the current federal minimum. Raising the federal minimum wage is an important part of strengthening the economy. A raise for minimum wage earners will put more money in more families' pockets, which will be spent on goods and services, stimulating economic growth locally and nationally.” (http://www.dol.gov...)




Again I have to go back to my point of Inflation. What I meant is after the MW is raised the economy cannot react by changing the prices of cost of services to match the jump in MW. This means the cost of benefits stays the same and there would be no need to cut hours. I did not just mean the Fed controlling the supply of money to avoid fiscal drag. But if the MW was raised the supply of money to the Fed would increase through people being moved up into new tax brackets and more taxes taken from income taxes. If we don’t experience any inflation on the money changing the fed is able to stimulate that money into social securities and welfare, which gives people more trust that the American Economy is doing good. As it stands right now many people who are now entering the work force are hesitant if they are even going to be able to collect social security checks when it is time for them to retire.


Yes by not allowing inflation by the fed it will slowly start a fiscal drag, but if the Government were to put inflation on a freeze and tell the public when inflation would be back in play it would allow people to start saving money and work their way into better social classes. The people however that decide to spend it while they have the money will realize like teenagers do now a days if you want to keep their way of living they will have to continue to work even after the freeze on inflation to keep their cost of living. “Academic research has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs.” (http://www.dol.gov...) When the government takes off the freeze they will be able to fix the fiscal drag.


Also your statement to people loosing their jobs to machinery and small business forced to close. The US Department of Labor states, “A July 2015surveyfound that 3 out of 5 small business owners with employees support a gradual increase in the minimum wage to $12. The survey reports that small business owners say an increase "would immediately put more money in the pocket of low-wage workers who will then spend the money on things like housing, food, and gas. This boost in demand for goods and services will help stimulate the economy and help create opportunities." (http://www.dol.gov...) It also states “In aletterto President Obama and congressional leaders urging a minimum wage increase, more than 600 economists, including 7 Nobel Prize winners wrote, "In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front." (http://www.dol.gov...) Also if people’s jobs were starting to be replaced by machinery there would an entirely new job market for the people to go into.


So it will also be stimulating the job economy.


And to your very last point “shouldn't we just raise all tax rates to 100% and have government provide for us all?” I say that’s an absurd statement we are the United States of America and we are a country that prides our self in freedom of choice and success, and having money allows someone to do what he or she want and by having the government provide for us it takes the illusion of success away. We don’t need the Government providing for us all.




ax123man

Con

Thank you Pro for you arguments. I'll first respond to Pro's rebuttals to my R1 arguments:

1) It's the wrong time for stimulus, the economy is heating up

Pro counters by with text from a blog at the economist.com, which includes the following:

"The Fed now believes that the time for those unusual measures is over, and that it is appropriate to begin raising rates."

http://www.economist.com...

So we have a disagreement between "R.A.", the author of this blog post, and the Federal Reserve. I'm going with Federal Reserve on this.

This point firmly stands.

2) Keynesian economics (Fiscal & monetary policy) are unrelated to MW

This point appears to be dropped, therefore Keynes is null and void in support of MW in this debate.

This point firmly stands.

3) Keynesian economics is flawed due to Says law

No longer relevant. See #2.

4) Fiscal policy just transfers wealth, monetary policy is similar except it creates money out of nothing. Same with MW: it's just a wealth transfer

(I will only cover MW here due to my point #2 & #3 arguments)

This point appears to be dropped. If true, how could it stimulate the economy? You'll have some MW workers no longer working and much less to spend, along with some businessmen with reduced profits and also less to spend. The minimum wage doesn't create money out of thin air.

This point firmly stands.

5) How does increasing government revenue help the economy?

Pro tries to counter here via selective reading, never answering the above question, but only responding to my "raise all tax rates to 100%" analogy. In fact, I can turn Pro's statement:

"we are the United States of America and we are a country that prides our self in freedom of choice and success, and having money allows someone to do what he or she want and by having the government provide for us it takes the illusion of success away. We don’t need the Government providing for us all."

The minimum wage IS an example of Government help, so it seems my opponent is arguing against the resolution.

This point firmly stands.

I will now discuss what remains of Pro's R2 arguments.

"What I meant is after the MW is raised the economy cannot react by changing the prices of cost of services to match the jump in MW."

Pro speaks again as if raising the MW creates wealth out of nothing, which is false because it only shifts existing money around.

"This means the cost of benefits stays the same and there would be no need to cut hours."

I'm not sure what this means. How can costs stay the same when the cost of labor increases?

"But if the MW was raised the supply of money to the Fed would increase through people being moved up into new tax brackets and more taxes taken from income taxes. " (and subsequent paragraph)

I assume the Fed is the federal government here (?) This whole paragraph is filled with flaws. First of all, MW workers are unlikely to see a change in tax bracket, but if they did, I'm supposed to again believe that increases in taxes are going to benefit the economy? That a larger social security net and welfare state is also going to improve the economy? What is this based on? Marxism?

"Yes by not allowing inflation by the fed it will slowly start a fiscal drag," (and subsequent paragraph)

I'm really not sure what this is saying. I assume the meaning of "The Fed" is now the federal reserve (?) But the Federal Reserve NEVER announces a specific date when they are going to change monetary policy. Additionally, the Fed has a fixed inflation target of 2%.

"Also your statement to people loosing their jobs to machinery..." (and subsequent paragraph)

You have to be very careful when looking at the motives of those advocating raising the MW. Unions and those making above the MW would love to see the MW raised because it reduces competition for labor. In fact, the origins of MW are based in racism and eugenics. http://www.cpsvictimsupport.com...

I followed the link in Pro's source that claims "3 out of 5 small business owners with employees support a gradual increase in the minimum wage to $12", shown below:

http://www.smallbusinessmajority.org...

I'd like to provide a quote from that link:

"Of those paying $12 per hour and under—the group that would be directly impacted by a minimum wage increase—nearly 6 in 10 (58%) support raising the minimum wage to $12"

Do you see the problem here? If they support this, why don't they just pay the 12$ now? It seems to make no sense until you hear an economists viewpoint on this:

"However, the conclusions of the Small Business Administration study .... are very revealing, .... Contrary to the arguments made by so many well-meaning but misguided opponents of the minimum wage, small business owners actually favor an increase in the minimum wage. The reasoning is that it would force their larger rivals to pay higher wages, thus making it more difficult for large firms to offer discount prices on wholesale and retail products."

https://mises.org...

Note that 85% of small businesses already pay their employees above minimum wage. http://www.smallbusinessmajority.org...

Also, only 3% of workers in the U.S. earn minimum wage and only 1.5% are full-time workers. Even if the funds for a MW hike did appear, like magic, from out of nowhere, would the increase in spending of this group make any difference? Now consider the negative employment affects and this MW driven supply-side economic magic seems quite far fetched.

Pro claims that recent literature on MW show that increases have had little or no negative effect on the employment. First of all, even if I concede that a MW hike does not impact employment, it wouldn't matter. Pro needs to show how a MW hike will IMPROVE the economy, not how it will avoid negative effects. But lets look at this information, first regarding the 600 economists who support a MW hike. I turn to economist Greg Mankiw, who asked a leading member of those 600 about it:

"My friend told me that he viewed the minimum wage as a second-best policy. He would prefer increased cash payments to the poor, such as a much-expanded earned income tax credit (EITC) or a more general negative income tax. But if his first-best policy was politically impossible, a minimum-wage increase was, in his view, an improvement over the status quo. He admitted that the minimum wage had adverse effects on employment, but he judged those to be modest in size."

http://gregmankiw.blogspot.com...

So this leading economist views a MW hike as another form of welfare for the poor, which does nothing for the economy as a whole (or my opponents resolution). Mankiw also states;

"Some economists, such as David Neumark, view the adverse employment effects as larger than my friend does. But, even if my friend is correct that the disemployment effects are modest, one should look at the magnitude of the anti-poverty effects. The minimum wage is not well targeted to poor families."

And a view from two other economists:

"Still, the American Economic Association has over 20,000 members, and I suspect that a clear majority of these members would have refused to sign that petition if they had been asked. They believe, as I do, that the negative effects of a higher minimum wage would outweigh any positive effects. That is one reason I would surmise why only a fraction of the 35 living economists who received the Nobel Prize signed on to the petition"

http://www.becker-posner-blog.com...

With that all said, I see no reason to believe a raise in MW will help the economy as a whole. At best, it will help a small view at the expense of others.

Debate Round No. 2
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2 votes have been placed for this debate. Showing 1 through 2 records.
Vote Placed by Sarai.K82 1 year ago
Sarai.K82
winnawinnachickindinnaax123manTied
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Reasons for voting decision: I had to do some reading to understand these arguments. Both sides presented their arguments well, relied on solid sources, and were articulate in term of spelling and grammar. I found that Con's arguments opened my mind to what a minimum wage raise might have on the economy and shifted me from solidly pro to questioning the issue. On that basis, I awarded con the most convincing argument win. This debate really could have benefited from an additional round.
Vote Placed by Meropenem777 1 year ago
Meropenem777
winnawinnachickindinnaax123manTied
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Reasons for voting decision: I feel that this debate could have gone on a lot longer than merely two rounds. Both had relatively good spelling and grammar. Both used relatively reliable sources. If the debate had gone on longer, a disparity of convincing arguments probably could have been much more apparent than with two rounds. Also, some quotes were drastically pulled out of context for both sides. I will leave the "convincing argument" criteria for another voter more experienced in economics, or perhaps they will have the same notion as I do, how this could have gone on longer as a debate.