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Raising minimum wage improves unemployment rt

Cermank
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2/17/2013 11:34:02 AM
Posted: 3 years ago
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.
tmar19652
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2/17/2013 12:16:38 PM
Posted: 3 years ago
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.
Show me how a cashier at McDonalds produces jobs. They do not make enough money to truly support consumerism, whereas if Bill Gates wants a new yacht, he can create 100+ jobs at the drop of a hat.

Also, the only way to get into debt is to spend beyond your means, so no it is not a stereotype.
"Politics is supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first." -Ronald Reagan

"The notion of political correctness declares certain topics, certain ex<x>pressions even certain gestures off-limits. What began as a crusade for civility has soured into a cause of conflict and even censorship." -George H.W. Bush
Cermank
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2/17/2013 12:39:11 PM
Posted: 3 years ago
At 2/17/2013 12:16:38 PM, tmar19652 wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.
Show me how a cashier at McDonalds produces jobs. They do not make enough money to truly support consumerism, whereas if Bill Gates wants a new yacht, he can create 100+ jobs at the drop of a hat.

True. But then the sheer volume of minimum wage benefitters has to account for something. There is just one Bill Gates, there are a lot more people receiving minimum wage.

Not that I'm agreeing with the theory, but still.

Also, the only way to get into debt is to spend beyond your means, so no it is not a stereotype.

Do you have any links or sources to show that an an average American is in debt?
tmar19652
Posts: 727
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2/17/2013 12:48:01 PM
Posted: 3 years ago
At 2/17/2013 12:39:11 PM, Cermank wrote:
At 2/17/2013 12:16:38 PM, tmar19652 wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.
Show me how a cashier at McDonalds produces jobs. They do not make enough money to truly support consumerism, whereas if Bill Gates wants a new yacht, he can create 100+ jobs at the drop of a hat.

True. But then the sheer volume of minimum wage benefitters has to account for something. There is just one Bill Gates, there are a lot more people receiving minimum wage.

Not that I'm agreeing with the theory, but still.

Also, the only way to get into debt is to spend beyond your means, so no it is not a stereotype.

Do you have any links or sources to show that an an average American is in debt?

I never said that all Americans are in debt, but the ones that are in debt are there because they spend beyond their means.
"Politics is supposed to be the second-oldest profession. I have come to realize that it bears a very close resemblance to the first." -Ronald Reagan

"The notion of political correctness declares certain topics, certain ex<x>pressions even certain gestures off-limits. What began as a crusade for civility has soured into a cause of conflict and even censorship." -George H.W. Bush
darkkermit
Posts: 11,204
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2/17/2013 3:39:05 PM
Posted: 3 years ago
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

Although this is only in the short-run and ignores the long-run. In the long-run you cannot stimulate supply through demand. In the short run, demand can stimulate supply, because prices are sticky and do not change.
Open borders debate:
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Cermank
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2/17/2013 3:47:04 PM
Posted: 3 years ago
At 2/17/2013 3:39:05 PM, darkkermit wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

Although this is only in the short-run and ignores the long-run. In the long-run you cannot stimulate supply through demand. In the short run, demand can stimulate supply, because prices are sticky and do not change.

In the long run, you Can stimulate supply through demand, isn't it? Increasing supply requires increasing the fixed factors of production, aka long run.

Do you agree with the inet hypothesis?
darkkermit
Posts: 11,204
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2/17/2013 3:53:43 PM
Posted: 3 years ago
At 2/17/2013 3:47:04 PM, Cermank wrote:
At 2/17/2013 3:39:05 PM, darkkermit wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

Although this is only in the short-run and ignores the long-run. In the long-run you cannot stimulate supply through demand. In the short run, demand can stimulate supply, because prices are sticky and do not change.

In the long run, you Can stimulate supply through demand, isn't it? Increasing supply requires increasing the fixed factors of production, aka long run.

In the short-run, the factor of production that changes in supply. In the long-run, the factor of production that is most relevant is capital.


Do you agree with the inet hypothesis?

What hypothesis?
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Cermank
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2/17/2013 4:00:24 PM
Posted: 3 years ago
At 2/17/2013 3:53:43 PM, darkkermit wrote:
At 2/17/2013 3:47:04 PM, Cermank wrote:
At 2/17/2013 3:39:05 PM, darkkermit wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

Although this is only in the short-run and ignores the long-run. In the long-run you cannot stimulate supply through demand. In the short run, demand can stimulate supply, because prices are sticky and do not change.

In the long run, you Can stimulate supply through demand, isn't it? Increasing supply requires increasing the fixed factors of production, aka long run.

In the short-run, the factor of production that changes in supply. In the long-run, the factor of production that is most relevant is capital.

I'm sorry I don't get your point. Can you please elaborate?

Do you agree with the inet hypothesis?

What hypothesis?

the hypothesis by INET. The the recent move by Obama increasing the minimum wage would actually reduce unemployment rate.
wrichcirw
Posts: 11,196
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2/17/2013 4:03:40 PM
Posted: 3 years ago
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

The logic here is backwards. First of all, it doesn't matter where the jobs are from, once you institute a minimum wage, demand for labor will decrease.

When demand for labor decreases, spending decreases, sales decrease, etc etc etc...

The idea behind a minimum was is NOT that it stimulates economic growth, but that it offers workers protection from conditions worse than slavery...that as they work, they see whatever little wealth they have dwindle away until they can't even afford food and starve.

This is why the Democrats are advocating directly injecting massive amounts of stimulus directly into the economy. By doing so, people will have money to spend again. Spending increases, sales increase, etc etc etc

Also, tax increases for the rich do not hit consumption nearly as hard as a tax increase on the poor. The rich generally spend a lot less of their income on consumption. This means that a tax hike on the rich affects economic activity less.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
darkkermit
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2/17/2013 4:07:16 PM
Posted: 3 years ago
At 2/17/2013 4:00:24 PM, Cermank wrote:
At 2/17/2013 3:53:43 PM, darkkermit wrote:
At 2/17/2013 3:47:04 PM, Cermank wrote:
At 2/17/2013 3:39:05 PM, darkkermit wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

Although this is only in the short-run and ignores the long-run. In the long-run you cannot stimulate supply through demand. In the short run, demand can stimulate supply, because prices are sticky and do not change.

In the long run, you Can stimulate supply through demand, isn't it? Increasing supply requires increasing the fixed factors of production, aka long run.

In the short-run, the factor of production that changes in supply. In the long-run, the factor of production that is most relevant is capital.

I'm sorry I don't get your point. Can you please elaborate?

That's because i was speaking incoherently :p. I meant to state that in the short-run, the factor production that changes is labor. In the long-run, the factor of production that changes is capital.


Do you agree with the inet hypothesis?

What hypothesis?

the hypothesis by INET. The the recent move by Obama increasing the minimum wage would actually reduce unemployment rate.

No, I do not. We already have data on US states that have higher minimum wages, and those states that have higher minimum wages also tend to have greater unemployment:

http://reason.com...

Of course, correlation does not equal causation and its simply possible that these states also tend to have other policies that make job growth difficult. But I do not think that raising the minimum wage is a good way to increase aggregate demand.
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wrichcirw
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2/17/2013 4:08:33 PM
Posted: 3 years ago
At 2/17/2013 4:03:40 PM, wrichcirw wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

The logic here is backwards. First of all, it doesn't matter where the jobs are from, once you institute a minimum wage, demand for labor will decrease.

When demand for labor decreases, spending decreases, sales decrease, etc etc etc...

The idea behind a minimum was is NOT that it stimulates economic growth, but that it offers workers protection from conditions worse than slavery...that as they work, they see whatever little wealth they have dwindle away until they can't even afford food and starve.

This is why the Democrats are advocating directly injecting massive amounts of stimulus directly into the economy. By doing so, people will have money to spend again. Spending increases, sales increase, etc etc etc

Also, tax increases for the rich do not hit consumption nearly as hard as a tax increase on the poor. The rich generally spend a lot less of their income on consumption. This means that a tax hike on the rich affects economic activity less.

BTW, Ms. Honors Student, I'm just citing econ 101...:D

If you institute a floor above equilibrium price, then supply will decrease as price moves up the supply curve.

If you institute a floor below equilibrium price, there is no effect on the market.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
Cermank
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2/17/2013 4:16:31 PM
Posted: 3 years ago
At 2/17/2013 4:03:40 PM, wrichcirw wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

The logic here is backwards. First of all, it doesn't matter where the jobs are from, once you institute a minimum wage, demand for labor will decrease.

When demand for labor decreases, spending decreases, sales decrease, etc etc etc...

The idea behind a minimum was is NOT that it stimulates economic growth, but that it offers workers protection from conditions worse than slavery...that as they work, they see whatever little wealth they have dwindle away until they can't even afford food and starve.

This is true. Plus, this is what the conventional economics states. This article, however, comes up with this 'groundbreaking' theory that unemployment is a demand side problem. You would outright reject this, would you?

Would you say there is a demand deficit in America?


This is why the Democrats are advocating directly injecting massive amounts of stimulus directly into the economy. By doing so, people will have money to spend again. Spending increases, sales increase, etc etc etc

Keynesian economics FTW :P

Also, tax increases for the rich do not hit consumption nearly as hard as a tax increase on the poor. The rich generally spend a lot less of their income on consumption. This means that a tax hike on the rich affects economic activity less.

I agree with this.
darkkermit
Posts: 11,204
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2/17/2013 4:24:17 PM
Posted: 3 years ago
At 2/17/2013 4:08:33 PM, wrichcirw wrote:
At 2/17/2013 4:03:40 PM, wrichcirw wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

The logic here is backwards. First of all, it doesn't matter where the jobs are from, once you institute a minimum wage, demand for labor will decrease.

When demand for labor decreases, spending decreases, sales decrease, etc etc etc...

The idea behind a minimum was is NOT that it stimulates economic growth, but that it offers workers protection from conditions worse than slavery...that as they work, they see whatever little wealth they have dwindle away until they can't even afford food and starve.

This is why the Democrats are advocating directly injecting massive amounts of stimulus directly into the economy. By doing so, people will have money to spend again. Spending increases, sales increase, etc etc etc

Also, tax increases for the rich do not hit consumption nearly as hard as a tax increase on the poor. The rich generally spend a lot less of their income on consumption. This means that a tax hike on the rich affects economic activity less.

BTW, Ms. Honors Student, I'm just citing econ 101...:D

If you institute a floor above equilibrium price, then supply will decrease as price moves up the supply curve.

If you institute a floor below equilibrium price, there is no effect on the market.

If we get into keynesian economics, one effect is the marginal propensity to consume. The theory is that people of lower income have a greater marginal propensity to consume which will increase demand for labor. Interesting analysis here (although I have no idea what the equations are. He doesn't really define "n")

http://www.econbrowser.com...
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wrichcirw
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2/17/2013 4:33:26 PM
Posted: 3 years ago
At 2/17/2013 4:16:31 PM, Cermank wrote:
At 2/17/2013 4:03:40 PM, wrichcirw wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

The logic here is backwards. First of all, it doesn't matter where the jobs are from, once you institute a minimum wage, demand for labor will decrease.

When demand for labor decreases, spending decreases, sales decrease, etc etc etc...

The idea behind a minimum was is NOT that it stimulates economic growth, but that it offers workers protection from conditions worse than slavery...that as they work, they see whatever little wealth they have dwindle away until they can't even afford food and starve.

This is true. Plus, this is what the conventional economics states. This article, however, comes up with this 'groundbreaking' theory that unemployment is a demand side problem. You would outright reject this, would you?

Actually, I don't see anywhere in the article that unemployment is a demand-side problem, merely that a "supply side" approach is what they call mythical. They don't really offer an alternative. They just keep citing liberal claptrap about inequality and starvation wages without offering a realistic alternative other than to exacerbate the problem via increasing the minimum wage. To cite the article directly, all it essentially says is that a minimum wage doesn't hurt anyone - it's "but a small minnow in an ocean of deficient aggregate demand", i.e. it's insignificant to the big picture. Then it rails against corporate welfare to try to justify this tiny slice of happiness to the most needy, as if somehow 1.01 wrongs make a right.

Would you say there is a demand deficit in America?

This is complicated. I would ask "a demand deficit in what?" Maybe the best way to answer your question is that corporations are flush with cash right now (meaning they don't see opportunities to invest). Also, factory capacity is still low, meaning that we are producing and consuming less now than we used to. Once capacity fills up to pre-recession levels, then corporations will start investing again, leading to job creation. Once corporations start investing again, the Fed will stop its economic life-support measures.

Personally I am rather pessimistic that this will happen to an adequate degree.


This is why the Democrats are advocating directly injecting massive amounts of stimulus directly into the economy. By doing so, people will have money to spend again. Spending increases, sales increase, etc etc etc

Keynesian economics FTW :P

Also, tax increases for the rich do not hit consumption nearly as hard as a tax increase on the poor. The rich generally spend a lot less of their income on consumption. This means that a tax hike on the rich affects economic activity less.

I agree with this.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
Cermank
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2/17/2013 4:36:50 PM
Posted: 3 years ago
@darkhermit Yep. That is what INET is arguing. Give poor people more money, they'd spend more, demand increases, firms would want to expand production, labour demand would increase-> more employment.

I am skeptical about the demand deficit they are implying, however. I thought Americans spent too much.
wrichcirw
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2/17/2013 4:40:36 PM
Posted: 3 years ago
At 2/17/2013 4:36:50 PM, Cermank wrote:
@darkhermit Yep. That is what INET is arguing. Give poor people more money, they'd spend more, demand increases, firms would want to expand production, labour demand would increase-> more employment.

I am skeptical about the demand deficit they are implying, however. I thought Americans spent too much.

The demand deficit is real, in that people are spending less than they used to. However, the thing is, people spent a lot before utilizing debt, and debt (mortgages) is exactly why we are in this mess to begin with. Therefore, we need to get comfortable with a "new normal".

Even if this demand deficit is ostensibly because people are deleveraging, there's no real reason to expect people to just start taking out debt to buy jacuzzis and pool tables again after they're done.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
darkkermit
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2/17/2013 4:46:16 PM
Posted: 3 years ago
At 2/17/2013 4:36:50 PM, Cermank wrote:
@darkhermit Yep. That is what INET is arguing. Give poor people more money, they'd spend more, demand increases, firms would want to expand production, labour demand would increase-> more employment.

I am skeptical about the demand deficit they are implying, however. I thought Americans spent too much.

http://cdn.theatlantic.com...

Here's a graph of the gap. Yes, pre-recession there was a problem with americans spending too much. Although its important to realize that its not necessarily important what the savings rate, but rather changes in the savings rate is what is important. I'd also argue another problem is that US banks have record excess reserves.
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slo1
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2/17/2013 4:48:34 PM
Posted: 3 years ago
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

That author is right in that if the spending from the 90% of american's were to stop the economy would collapse, however that is a wide range somewhere around the group that makes $0 to $150,000 per year.

The subset of that group earning min wage is only something like 12 million people. It is a given that unemployment in that sector will increase if the min wage passes so the increased spending of those earning min wage may or may not make up the increase of the newly unemployed who obviously will not spend as much. When it all falls into the greater economy it is just a drop in the bucket and will have no negligible affect either way.

I'm very suspect of anyone who says a problem is either one of supply or demand and does not recognize both are factors.

Ultimately his broader stroke of just increasing wages is wrong as a method to get the economy going is wrong. Wage inflation only increases demand if the cost of good and products don't inflate as much as wages. In other terms people don't have more disposable income if the cost of goods and services are rising. It is highly doubtful that companies would eat wage inflation rather than passing it on to the consumer.

Fundamentally what a min wage does is makes sure that market pricing of labor does not deflate too much. Imagine the market price for a low skill job if 100 million people were chasing 12 million jobs. It would be astronomically low.

However with min wage a person gets a decent wage at the cost that fewer people have min wage jobs. Since this proposal would move the min wage to the median point for the past 60 years, it is much to do about nothing at an aggregate level.
darkkermit
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2/17/2013 4:50:16 PM
Posted: 3 years ago
Also, it should be noted that every time a debt that the bank lent out is returned, the bank needs to create a new loan, otherwise debt-deflation occurs, since the money supply is created through the process of creating debt.
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Cermank
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2/17/2013 4:58:04 PM
Posted: 3 years ago
At 2/17/2013 4:33:26 PM, wrichcirw wrote:
At 2/17/2013 4:16:31 PM, Cermank wrote:
At 2/17/2013 4:03:40 PM, wrichcirw wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

The logic here is backwards. First of all, it doesn't matter where the jobs are from, once you institute a minimum wage, demand for labor will decrease.

When demand for labor decreases, spending decreases, sales decrease, etc etc etc...

The idea behind a minimum was is NOT that it stimulates economic growth, but that it offers workers protection from conditions worse than slavery...that as they work, they see whatever little wealth they have dwindle away until they can't even afford food and starve.

This is true. Plus, this is what the conventional economics states. This article, however, comes up with this 'groundbreaking' theory that unemployment is a demand side problem. You would outright reject this, would you?

Actually, I don't see anywhere in the article that unemployment is a demand-side problem, merely that a "supply side" approach is what they call mythical. They don't really offer an alternative. They just keep citing liberal claptrap about inequality and starvation wages without offering a realistic alternative other than to exacerbate the problem via increasing the minimum wage. To cite the article directly, all it essentially says is that a minimum wage doesn't hurt anyone - it's "but a small minnow in an ocean of deficient aggregate demand", i.e. it's insignificant to the big picture. Then it rails against corporate welfare to try to justify this tiny slice of happiness to the most needy, as if somehow 1.01 wrongs make a right.

It was outright implied! It rejects the supply side arguments for unemployment, then goes on about how the Obama policy would increase demand and hence employment.

Would you say there is a demand deficit in America?

This is complicated. I would ask "a demand deficit in what?" Maybe the best way to answer your question is that corporations are flush with cash right now (meaning they don't see opportunities to invest). Also, factory capacity is still low, meaning that we are producing and consuming less now than we used to. Once capacity fills up to pre-recession levels, then corporations will start investing again, leading to job creation. Once corporations start investing again, the Fed will stop its economic life-support measures.

Oh... There is a demand problem then. Along with a supply problem. Low investment sentiment, increased agg. demand Might improve the conditions in the short run at least.

Personally I am rather pessimistic that this will happen to an adequate degree.
After listening to the speech by Obama, I would understand your reservations. That man should be on reality TV, such a master of emotional manipulation.

This is why the Democrats are advocating directly injecting massive amounts of stimulus directly into the economy. By doing so, people will have money to spend again. Spending increases, sales increase, etc etc etc

Keynesian economics FTW :P

Also, tax increases for the rich do not hit consumption nearly as hard as a tax increase on the poor. The rich generally spend a lot less of their income on consumption. This means that a tax hike on the rich affects economic activity less.

I agree with this.
malcolmxy
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2/17/2013 6:26:16 PM
Posted: 3 years ago
At 2/17/2013 4:48:34 PM, slo1 wrote:
At 2/17/2013 11:34:02 AM, Cermank wrote:
http://ineteconomics.org...

... The real job creators are the bottom 90 percent, including those right at the bottom rung who would benefit from a minimum wage--consumers, those who spend nearly all of their income on real goods and services and hoard very little of it. And truth be told, without spending there are no sales; without sales there are no profits; without profits there is no demand for workers; without demand for workers there is no job creation; and without job creation there is no recovery!...

I know this is against basic economics, but I was entertaining this. This one article looks at unemployment as a demand side problem.

I was under the impression that demand isn't a problem in America. With the huge credit card rage and unemployment benefits and stuff, I thought a major problem was that people spent way beyond their means. Is this a stereotype? Do you have any data to support/oppose this assumption.

That author is right in that if the spending from the 90% of american's were to stop the economy would collapse, however that is a wide range somewhere around the group that makes $0 to $150,000 per year.

The subset of that group earning min wage is only something like 12 million people. It is a given that unemployment in that sector will increase if the min wage passes so the increased spending of those earning min wage may or may not make up the increase of the newly unemployed who obviously will not spend as much.

Um...not so much...

http://4.bp.blogspot.com...

When it all falls into the greater economy it is just a drop in the bucket and will have no negligible affect either way.

Seems bigger than that...

http://thinkprogress.org...

I'm very suspect of anyone who says a problem is either one of supply or demand and does not recognize both are factors.

If you have to choose one, though, demand is the smarter choice to work through.

Ultimately his broader stroke of just increasing wages is wrong as a method to get the economy going is wrong. Wage inflation only increases demand if the cost of good and products don't inflate as much as wages. In other terms people don't have more disposable income if the cost of goods and services are rising. It is highly doubtful that companies would eat wage inflation rather than passing it on to the consumer.

Red Delicious Apples cost $.99/lb. Of that, $.07 was the cost of labor to pick and transport them to the grocer. If you DOUBLED these people's wages, price only needs to go to $1.06/lb to keep everything else equal.

How many fewer apples will people buy at $1.06 than they would at $.99? It's negligible.

Fundamentally what a min wage does is makes sure that market pricing of labor does not deflate too much. Imagine the market price for a low skill job if 100 million people were chasing 12 million jobs. It would be astronomically low.

Increasing the minimum wage puts dollars into the economy, since there is no correlation between min wage increases and unemployment rate.

More money in the economy means more capital is available to grow the economy. This isn't rocket science.

However with min wage a person gets a decent wage at the cost that fewer people have min wage jobs. Since this proposal would move the min wage to the median point for the past 60 years, it is much to do about nothing at an aggregate level.

Except, that's not true. See provided chart.
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Subutai
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2/17/2013 7:51:02 PM
Posted: 3 years ago
This makes no sense.

Think of this hypothesis:

1) There exists a marginal productivity (the amount of revenue that worker brings their employer per hour of work) for workers.

2) Because companies compete with each other for workers, a worker's wage will be close to that marginal productivity. (if a worker is making significantly less than their marginal productivity, another person can make a profit by hiring them for slightly more than they're making, and so on until the wage is approximately the marginal productivity).

3) A government declaration of a 'minimum wage' doesn't raise the productivity of workers.

4) If a minimum wage is set above the marginal productivity of a worker, that worker's employer must either continue paying that worker, losing money, or fire that worker.

5) Businesses aren't charities, they will not hire workers for a loss.

6) So the minimum wage can only cause unemployment.

On evidence, Economists have studied the job-destroying features of a higher minimum wage. Estimates of the job losses of raising the minimum wage from $4.25 to $5.15 have ranged from 625,000 to 1,000,000 lost jobs. It is important to recognize that the jobs lost are mainly entry-level jobs. By destroying entry-level jobs, a higher minimum wage harms the lifetime earnings prospects of low-skilled workers.[1]

If you compare the average from the states (plus DC) with a minimum wage higher than the federal one to those who only obey the federal one, you get an average unemployment rate of 9.34% for the 1st group and an average of 7.88% for the 2nd group. [2][3]

Sources:

[1]: http://www.frbsf.org...
[2]: http://www.onlineathens.com...
[3]: http://www.foxnews.com...
I'm becoming less defined as days go by, fading away, and well you might say, I'm losing focus, kinda drifting into the abstract in terms of how I see myself.
malcolmxy
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2/17/2013 8:30:03 PM
Posted: 3 years ago
At 2/17/2013 7:51:02 PM, Subutai wrote:
This makes no sense.

Think of this hypothesis:

1) There exists a marginal productivity (the amount of revenue that worker brings their employer per hour of work) for workers.

2) Because companies compete with each other for workers, a worker's wage will be close to that marginal productivity. (if a worker is making significantly less than their marginal productivity, another person can make a profit by hiring them for slightly more than they're making, and so on until the wage is approximately the marginal productivity).

3) A government declaration of a 'minimum wage' doesn't raise the productivity of workers.

4) If a minimum wage is set above the marginal productivity of a worker, that worker's employer must either continue paying that worker, losing money, or fire that worker.

5) Businesses aren't charities, they will not hire workers for a loss.

6) So the minimum wage can only cause unemployment.

Then why have unemployment rates gone down after a minimum wage increase more often than they've gone up? (U6, not U3)

On evidence, Economists have studied the job-destroying features of a higher minimum wage. Estimates of the job losses of raising the minimum wage from $4.25 to $5.15 have ranged from 625,000 to 1,000,000 lost jobs. It is important to recognize that the jobs lost are mainly entry-level jobs. By destroying entry-level jobs, a higher minimum wage harms the lifetime earnings prospects of low-skilled workers.[1]

Wouldn't that equate to a spike in unemployment?

http://4.bp.blogspot.com...

If you compare the average from the states (plus DC) with a minimum wage higher than the federal one to those who only obey the federal one, you get an average unemployment rate of 9.34% for the 1st group and an average of 7.88% for the 2nd group. [2][3]

Sources:

[1]: http://www.frbsf.org...
[2]: http://www.onlineathens.com...
[3]: http://www.foxnews.com...

Your sources are bunk. This link has MANY sources which did more statistically valid studies than anything you put forth.

Your simplistic, neoclassical analysis is as sophomoric as it is flat out wrong.

http://www.raisetheminimumwage.com...

If the minimum wage had kept up with inflation since 1973, it would be $10.50 today. Were workers in 1973 30% more productive than workers today? If not, they all should have been fired.

Welcome to the reality that you're intro to Econ textbook doesn't account for.
War is over, if you want it.

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Subutai
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2/17/2013 8:43:26 PM
Posted: 3 years ago
At 2/17/2013 8:30:03 PM, malcolmxy wrote:
At 2/17/2013 7:51:02 PM, Subutai wrote:
This makes no sense.

Think of this hypothesis:

1) There exists a marginal productivity (the amount of revenue that worker brings their employer per hour of work) for workers.

2) Because companies compete with each other for workers, a worker's wage will be close to that marginal productivity. (if a worker is making significantly less than their marginal productivity, another person can make a profit by hiring them for slightly more than they're making, and so on until the wage is approximately the marginal productivity).

3) A government declaration of a 'minimum wage' doesn't raise the productivity of workers.

4) If a minimum wage is set above the marginal productivity of a worker, that worker's employer must either continue paying that worker, losing money, or fire that worker.

5) Businesses aren't charities, they will not hire workers for a loss.

6) So the minimum wage can only cause unemployment.

Then why have unemployment rates gone down after a minimum wage increase more often than they've gone up? (U6, not U3)


They haven't. "Using data extended to 1999, they find that the effect of the minimum wage on employment has been fairly constant over time, and that there are statistically significant negative effects of the minimum wage on teenage employment, with an elasticity of &#8722;0.12 in the short-run and &#8722;0.27 in the longer-run."[4] (NOTE: Low-skill workers are affected the most by minimum wage increases and thus are the subject of my studies.)
On evidence, Economists have studied the job-destroying features of a higher minimum wage. Estimates of the job losses of raising the minimum wage from $4.25 to $5.15 have ranged from 625,000 to 1,000,000 lost jobs. It is important to recognize that the jobs lost are mainly entry-level jobs. By destroying entry-level jobs, a higher minimum wage harms the lifetime earnings prospects of low-skilled workers.[1]

Wouldn't that equate to a spike in unemployment?

http://4.bp.blogspot.com...


No difference. Businesses expand and can hire back previously laid off workers in a few years due to inflation and business expansion.
If you compare the average from the states (plus DC) with a minimum wage higher than the federal one to those who only obey the federal one, you get an average unemployment rate of 9.34% for the 1st group and an average of 7.88% for the 2nd group. [2][3]

Sources:

[1]: http://www.frbsf.org...
[2]: http://www.onlineathens.com...
[3]: http://www.foxnews.com...

Your sources are bunk. This link has MANY sources which did more statistically valid studies than anything you put forth.

Your simplistic, neoclassical analysis is as sophomoric as it is flat out wrong.

http://www.raisetheminimumwage.com...


And "Raisetheminimumwage.com" isn't bunk? Explain. Also, these sources has a lot of studies too.[5][6]
If the minimum wage had kept up with inflation since 1973, it would be $10.50 today. Were workers in 1973 30% more productive than workers today? If not, they all should have been fired.

Welcome to the reality that you're intro to Econ textbook doesn't account for.

Productivity doesn't reeally matter here.

Sources:

[4]: http://showmeinstitute.org...
[5]: http://web.archive.org...
[6]: http://web.archive.org... (Especially this)
I'm becoming less defined as days go by, fading away, and well you might say, I'm losing focus, kinda drifting into the abstract in terms of how I see myself.
FREEDO
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2/17/2013 8:48:23 PM
Posted: 3 years ago
It's not against basic economics. Economists are split 50/50.

Austrian economists seem adamant, but there is no found correlation between rising minimum wages and rising unemployment. And nobody takes them seriously anyway.

Minimum wage offsets it's own effects because the thesis behind demand-side economics is correct. Improve the economy from the bottom up, not the top down. Higher wages means more consumerism.
GRAND POOBAH OF DDO

fnord
Contra
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2/17/2013 9:08:59 PM
Posted: 3 years ago
At 2/17/2013 8:48:23 PM, FREEDO wrote:
It's not against basic economics. Economists are split 50/50.

Austrian economists seem adamant, but there is no found correlation between rising minimum wages and rising unemployment. And nobody takes them seriously anyway.

Oh come on. What about regarding black teenager's unemployment rates? (http://www.google.com...)

When you raise labor costs, there is less output. So, there is less business activity, which means less hiring, less reinvestment and expansion, less R&D, and a less efficient economy (economic waste).

Minimum wages are also mostly earned by teenagers and young people. For example, those who earn the minimum wage, 60.6% of them are under the age of 29. People who earn the minimum wage can then earn low wages while receiving on-the-job training and experience, and can improve their skills. Over time they increase their productivity and the value of their work, so they get pay raises and have higher levels of take home pay, and rise into the middle class (with a good economy). This is exactly how the immigrants did better.

The minimum wage though reduces employment, and is a bad deal, that we should at least eliminate for teenagers.

(http://www.google.com...)

Minimum wage offsets it's own effects because the thesis behind demand-side economics is correct. Improve the economy from the bottom up, not the top down. Higher wages means more consumerism.

The unions push for minimum wages, so competition is limited and their own salaries go up. Minimum wages erode the status of the poor.

To help the poor rise out of poverty, we need free marketplace exchanges. Let people negotiate their wages. Let people acquire the necessary skills of the marketplace and get higher incomes. America should have a freer immigration policy. Reduce taxation, spending, regulation, and improve education (it rhymed). Significantly reduce the welfare state (elimination is probably impossible).

Regarding education, it is a simple service. If the market had the task of delivering it, good schools would succeed, and teachers could get higher incomes. We would have innovation in education, as schools would partner with local community colleges and businesses to help improve their students' education.

Markets deliver goods that people demand, and through competition deliver better quality goods at a lower, more affordable price. The same can happen with education.
"The solution [for Republicans] is to admit that Bush was a bad president, stop this racist homophobic stuff, stop trying to give most of the tax cuts to the rich, propose a real alternative to Obamacare that actually works, and propose smart free market solutions to our economic problems." - Distraff

"Americans are better off in a dynamic, free-enterprise-based economy that fosters economic growth, opportunity and upward mobility." - Paul Ryan
FREEDO
Posts: 21,057
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2/17/2013 9:41:41 PM
Posted: 3 years ago
At 2/17/2013 9:08:59 PM, Contra wrote:
Oh come on. What about regarding black teenager's unemployment rates? (http://www.google.com...)


Lets try expanding that graph.
http://tarheelred.files.wordpress.com...

Recently, there's some level of consistency you can try to draw between the two. Yet, in the 90s, which your graph conveniently leaves out, there's was an even more consistent reverse.

The unions push for minimum wages, so competition is limited and their own salaries go up. Minimum wages erode the status of the poor.

Of course.
http://classwarinamerica.files.wordpress.com...
GRAND POOBAH OF DDO

fnord
malcolmxy
Posts: 2,855
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2/17/2013 9:42:06 PM
Posted: 3 years ago
At 2/17/2013 8:43:26 PM, Subutai wrote:
At 2/17/2013 8:30:03 PM, malcolmxy wrote:
At 2/17/2013 7:51:02 PM, Subutai wrote:
This makes no sense.

Think of this hypothesis:

1) There exists a marginal productivity (the amount of revenue that worker brings their employer per hour of work) for workers.

2) Because companies compete with each other for workers, a worker's wage will be close to that marginal productivity. (if a worker is making significantly less than their marginal productivity, another person can make a profit by hiring them for slightly more than they're making, and so on until the wage is approximately the marginal productivity).

3) A government declaration of a 'minimum wage' doesn't raise the productivity of workers.

4) If a minimum wage is set above the marginal productivity of a worker, that worker's employer must either continue paying that worker, losing money, or fire that worker.

5) Businesses aren't charities, they will not hire workers for a loss.

6) So the minimum wage can only cause unemployment.

Then why have unemployment rates gone down after a minimum wage increase more often than they've gone up? (U6, not U3)


They haven't. "Using data extended to 1999, they find that the effect of the minimum wage on employment has been fairly constant over time, and that there are statistically significant negative effects of the minimum wage on teenage employment, with an elasticity of &#8722;0.12 in the short-run and &#8722;0.27 in the longer-run."[4] (NOTE: Low-skill workers are affected the most by minimum wage increases and thus are the subject of my studies.)

What you have there are unfounded assertions.

I POSTED A CHART WHICH SHOWED EVERY RAISE IN MINIMUM WAGE AND ALSO CHARTED IT OUT WITH U6 UNEMPLOYMENT - UNEMPLOYMENT WENT DOWN MORE OFTEN THAN IT WENT UP AFTER A MINIMUM WAGE INCREASE.
On evidence, Economists have studied the job-destroying features of a higher minimum wage. Estimates of the job losses of raising the minimum wage from $4.25 to $5.15 have ranged from 625,000 to 1,000,000 lost jobs. It is important to recognize that the jobs lost are mainly entry-level jobs. By destroying entry-level jobs, a higher minimum wage harms the lifetime earnings prospects of low-skilled workers.[1]

Wouldn't that equate to a spike in unemployment?

http://4.bp.blogspot.com...


No difference. Businesses expand and can hire back previously laid off workers in a few years due to inflation and business expansion.

This makes ABSOLUTELY no sense. If people all lose their jobs, they can't buy the goods and services that businesses produce. Without these purchases to fuel the economy, businesses can't grow, there will be no inflation and you're completely full of sh!t.
If you compare the average from the states (plus DC) with a minimum wage higher than the federal one to those who only obey the federal one, you get an average unemployment rate of 9.34% for the 1st group and an average of 7.88% for the 2nd group. [2][3]

Sources:

[1]: http://www.frbsf.org...
[2]: http://www.onlineathens.com...
[3]: http://www.foxnews.com...

Your sources are bunk. This link has MANY sources which did more statistically valid studies than anything you put forth.

Your simplistic, neoclassical analysis is as sophomoric as it is flat out wrong.

http://www.raisetheminimumwage.com...


And "Raisetheminimumwage.com" isn't bunk? Explain. Also, these sources has a lot of studies too.[5][6]

A. Here is a list of links from every study on the site I posted
(raisetheminimumwage.com)

http://www.irle.berkeley.edu...
http://nelp.3cdn.net...
http://www.cepr.net...
http://www.irle.berkeley.edu...
http://www.ibrc.indiana.edu...
http://www.fiscalpolicy.org...
http://emlab.berkeley.edu...
http://nelp.3cdn.net...
http://nelp.3cdn.net...

B. Here's a list of the links to every study on the site you posted:
.
.
.
.
.
.
.
.
.

'nuff said.

If the minimum wage had kept up with inflation since 1973, it would be $10.50 today. Were workers in 1973 30% more productive than workers today? If not, they all should have been fired.

Welcome to the reality that you're intro to Econ textbook doesn't account for.

Productivity doesn't reeally matter here.

PER YOU:

If a minimum wage is set above the marginal productivity of a worker, that worker's employer must either continue paying that worker, losing money, or fire that worker.


So, does it matter or does it not?

And, seriously, if you have to go to the waybackmachine on archive.org for your sources, don't you think you might just be stretching here a bit?

Do you have ANYTHING recent that isn't from foxnews.com (which I refuse to even look at. they are historically too unreliable to even bother with)

Sources:

[4]: http://showmeinstitute.org...
[5]: http://web.archive.org...
[6]: http://web.archive.org... (Especially this)
War is over, if you want it.

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FREEDO
Posts: 21,057
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2/17/2013 10:02:02 PM
Posted: 3 years ago
This is irrelevant to the unemployment issue but if minimum wage kept up with worker productivity, it would be about $22.

If it kept up with executive salaries, it would be about $23.

Also, Denmark has a minimum wage equal to about $21 and you don't see them staggering unemployment.
GRAND POOBAH OF DDO

fnord