Disspelling Minimum Wage Myth.

Reich is saying that the current wage increase values the minimum wage at the "real value" 10 years ago because it's been accounted for inflation. Legal minimums can't be fluid, because they require a legal process with which to be implemented, as well as a re-negotiation of existing wages for current earners of the minimum.

Robert Murphy, the article writer, is saying that it's besides the point because the market has already adapted to the current minimum, and that increasing it will still create unemployment.

The argument of Free Market theorists is that business owners don't pocket the higher real-value they get from inflated currencies, but instead use the real wealth gained to hire more low-skilled workers and/or raise prices at a slower rate than if they had been accounted directly in accordance to the inflated currency. Hypothetically, it's how the price of a good may only rise by 5% over a year, whereas inflation has devalued the dollar by 15%.

There's nowhere I can't reach.

I think there are many problems with free market economists--primary among them being that markets can't really be free. Some can be close and exhibit many of the characteristics that the theory states... but, there are always problems. It is inextricably linked to politics. If you look at how the U.S. uses our political power and foreign service, one of their main goals is to help U.S. business. The assumption of rational thought which is necessary in a market system only applies to a limited extent as well. You have all kinds of social barriers like "buy American" or many of my East Asian friends who find those goods superior. Not to mention that we don't have a free labor market while we have closed borders. But, people like Adam Smith didn't even believe the free movement of capital was a good idea--he thought that should be limited or the state would die, but today we take that as a necessary part of free markets. I think there are all types of problems... and that doesn't mean you should ignore free market economists but they do not preach Truth, they just give insight into how we construct our economic system. But, we can't ignore the social aspects to this system.

However, I thin the minimum wage as a means to deal with poverty is stupid. I would rather have no minimum wage and have the government help in other ways. Freer markets help to increase overall wealth... and to an extent lower taxes have helped a lot (good examples being some of the states in Eastern Europe that kept industrial taxes low). A country needs to decide if they want to help the less fortunate or not (I'd vote yes on that) and then make policies that best do that. I would rather help people out with sub-living standard jobs in a free market than have more unemployed because of a minimum wage which acts as a disincentive to hire. The minimum wage is a quick thing that politicians can do to look good to their constituents... but, it really doesn't solve the problem. I have no problem with curbing capitalism to help people... but, I think we need to do that in efficient ways... because even if capitalism is amoral... it does have its own logic.

This thing is sticky, and I don't like it. I don't appreciate it.

Adam Smith was right, the free movement of capital would destroy the state, because it eliminates their ability to control it.

Free market theorists don't preach an "untruth" it's just that Free Market theory assumes that the state is an impediment to exchange, not a facillitator of it.

Because we don't have a Free Market doesn't mean that the theorists aren't right, it simply means that they have no sway in the body politic.

I am a dolphin, do you want me on your body?

I could've sworn my econ text said that labour demand was pretty insensitive to the minimum wage, so a lot of economists supported keeping one. And then this pops up on CNN.

But economists don't generally forecast a major impact on any sector. "Whatever the effect is, it's not very large," said David Gleicher, a labor economics expert at Adelphi University. "First of all, minimum wage workers are a very small percentage of the whole labor force. ... It's almost impossible for it to have a major effect."

Primarily, repercussions from raising the minimum wage occur among younger workers, according to Gleicher. Many of those teens and college-age workers belong in a class Gleicher called "target earners" who have a certain amount of money they wish to make, such as for college expenses or a car payment. Once they reach their target, the incentive to work decreases, creating the possibility that a higher minimum wage could lead to somewhat lower productivity and employment.

Mostly, Gleicher joins others who view the minimum wage in its current context as far more a political issue than an economic one.

Plus those Crazy Canucks agree (thx, Google news).



So yeah, it costs a few jobs, with the noisy data hard to say how much. But it's an administratively simple way to help the people good enough to still get jobs. Whatever. There's bigger things to worry about. Unfortunately, it's probably not going to be enough swell the ranks of the military.

I was speaking idiomatically.

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Free market theorists don't preach an "untruth" it's just that Free Market theory assumes that the state is an impediment to exchange, not a facillitator of it.

But without state regulated mechanisms there is no market. You wouldn't have property rights. You wouldn't have stock markets or any of the large institutions that need state legitimization to exist. Without the state you don't have confidence in money. The state can be an impediment to efficiency in many ways, yes. But there is no such thing as a free market and the state is necessary.

I also don't think the free movement of capital will destroy the state. It has caused problems in some cases but we have relatively free movement in some places and it has been a good thing for growth. Of course, you have problems like what happened with Long-Term Capital Management.

I'm speaking in generalization because I haven't closely read very many free market theorists. I just think the notion that the state is only a hindrance is silly, because the state completely enables the whole system.

What kind of toxic man-thing is happening now?

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But without state regulated mechanisms there is no market. You wouldn't have property rights. You wouldn't have stock markets or any of the large institutions that need state legitimization to exist. Without the state you don't have confidence in money. The state can be an impediment to efficiency in many ways, yes. But there is no such thing as a free market and the state is necessary.

1. Any environment which facilitates an exchange is a market. There is such a thing as a market anarchy. I'm not going so far as to say that the state should be completely abolished, but that ensuring property rights and other basic rights of its citizens should be its sole function. Of course, property rights are also enforceable in a free market depending on how well private security firms are capable of enforcing them.

2. A stock market does not need state legitimization, but may instead have private legitimization, with security enforced by private firms. If one's exchanges are guaranteed, and ownership observed, then the stock market is trusted as an institution. If a stock market doesn't guarantee exchange or proof of ownership, then confidence in the market is lost, and it dissolves.

3. Confidence in state money is only backed up by fiat. In the case of a governmental collapse, it's essentially worthless. There are currently a few successful electronic currencies backed by gold which are being exchanged on the internet. Some theorists think we'll be exchanging gold electronically in the future instead of fiat money, or even commodity-backed paper. There's also talk of a gold denar to be used as a pan-Arab currency.

4. Free markets exist where the state has no impact on exchange. Free markets exist all over the internet, where people exchange goods between each other free of taxation, and instead pay a service for the exchange. It's not unrealistic to presume that there can't be real-world free markets. Somalia, for instance, has a free market because it's the only country in the world which lacks a government. There's little good to say about it, because it's still factionalized, but the point is that it exists.

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I also don't think the free movement of capital will destroy the state.

If capital moves freely, then the state has no means to seize it. The only alternative to taxation is a donation-state, a business-state, or a gambling state, which earns revenues by facilitating gambling. While it may not destroy the state, it effectively limits its ability to expand, which runs contrary to the nature of a state. It's inconceivable for any state to accept the absolute freedom of capital, because it erodes the majority of its power.

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So yeah, it costs a few jobs, with the noisy data hard to say how much. But it's an administratively simple way to help the people good enough to still get jobs.

Have you not been paying attention? We live in a welfare state. If people can't work, then they become a burden of the taxpayer. This doesn't just lower employment for teens and uneducated adults, it further ensures the chronic unemployment that plagues minority communities.

If things get as worse as they could, as Shin said, and we're faced with a further surge of illegal labor, it's not inconceivable to cause severe hatred of Mexicans by blacks, possible enough to where the Irish/black race riots of the 19th century would occur again, only with the roles reversed and the whites replaced with Mexicans.

Either that, or it's more rappers, drug dealers, and B-ball players. Future's lookin good, Black People.

FELIPE NO

I erased my other answer. :O

1. Yes. But, these are all political entities that interfere with markets for their own interests. Hegemons help to make markets work in their interests and, more subtly, help shape the discourse about what is a free market. That's why I think the institutions necessary for free markets often help to curb market freedom. There is definitely a tension there.

2. Yep.

3. Yep, although I'm not sure that gold is really a hard backing. If its perceived value goes away it has the same problem as paper money.

4. I'm not sure that you can argue that Somalia has a free market. I know little about Somali ethnology but I presume that to some degree areas still work on kinship ties rather than market principles--because they are so underdeveloped. Also, the best argument against them having a free market is that there is really little exchange of information. Without information to make decisions you don't have free markets--or so I was taught.

Capital movement: Possibly. I think states can benefit from states have access to force so they can stop free movement when they deem it necessary. So, I think it could be free as long as states think it's helping them. Once their arms industry flees the country they will cry national security and put holds on capital movement. This goes back to point 1. If free markets aren't perceived to benefit the state they will often act to curtail it.

I think.

What, you don't want my bikini-clad body?

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1. Yes. But, these are all political entities that interfere with markets for their own interests. Hegemons help to make markets work in their interests and, more subtly, help shape the discourse about what is a free market. That's why I think the institutions necessary for free markets often help to curb market freedom. There is definitely a tension there.

Elaborate on this, please.

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3. Yep, although I'm not sure that gold is really a hard backing. If its perceived value goes away it has the same problem as paper money.

From 1952 until 2001 gold did lower in value, not in small part because it stopped being used in currencies and lost value as a storage of wealth. If gold becomes worthless, then people will begin to base moneys and currencies on other commodities. However, Gold and Silver are the most likely materials to be used for money because they're rare, easily malleable, don't decay, and have artistic applications. Even when people were using wheat as money, they still stored bushels in terms of their weight in gold.

Gold and silver are too soft to use in weapons or industry, so it was only natural that its artistic applications would encourage people to use it for money.

The likelihood of Gold losing its value for currencies depends on how much gold is being produced, and the rare case where people suddenly consider gold worthless for social reasons, at which point, like I mentioned before, they'd simply use other commodities to back up their currencies.

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4. I'm not sure that you can argue that Somalia has a free market. I know little about Somali ethnology but I presume that to some degree areas still work on kinship ties rather than market principles--because they are so underdeveloped. Also, the best argument against them having a free market is that there is really little exchange of information. Without information to make decisions you don't have free markets--or so I was taught.

If a market allows two parties to make exchanges without the oversight of a third party, that's a free market. If not the whole country, then the Somali arms market is certainly a free one.

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Capital movement: Possibly. I think states can benefit from states have access to force so they can stop free movement when they deem it necessary. So, I think it could be free as long as states think it's helping them. Once their arms industry flees the country they will cry national security and put holds on capital movement. This goes back to point 1. If free markets aren't perceived to benefit the state they will often act to curtail it.

I think.

You're essentially right, which is why the powers of the state itself must be curbed.

Jam it back in, in the dark.

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Gold and silver are too soft to use in weapons or industry,

As a quick note, gold and silver are very important materials in industry today, mostly because we've realize you can do more with materials than make buildings or weapons out of them.

There's nowhere I can't reach.

How's gold important? Unreactive?

How ya doing, buddy?

Gold does not oxidize (at least, not in any significant amount). Also, it is very conductive, so its proven to be very helpful in electronics.
I'm sure there are a multitude of other practical applications of gold which RR can list off... but lets not get this thread too off track with this little side note. >_>

I am a dolphin, do you want me on your body?

Well, here's a website that outlines a few spots we use gold nowadays.

http://www.nma.org/about_us/publicat..._gold_uses.asp

I was speaking idiomatically.

Originally Posted by UnpackedRat

Also, it is very conductive, so its proven to be very helpful in electronics.

Bleh, gold has its use in electronics, but 9 times out of 10 it's just a marketing ploy. Copper is still too good and too cheap.

Most amazing jew boots

Except in applications where cost isn't the primary concern. =\/

FELIPE NO

If gold is used as the base of currencies again, then the cost would have to be a concern.

Even if there is no substitute for technological applications, the economic and social benefits are too great.

What, you don't want my bikini-clad body?

They used gold for jewelry when it backed currency, so why couldn't they use it in mission-critical devices nowadays (an even less frivolous use)? Like, there's a reason replacement knees are made out of titanium instead of stainless steel even though it's shitloads more expensive. Hell, didn't they use gold fillings for teeth 100 years ago?

Jam it back in, in the dark.

My parents used to have gold fillings, in my lifetime. Well, at least my mom did.

There's nowhere I can't reach.

Originally Posted by RacinReaver

They used gold for jewelry when it backed currency, so why couldn't they use it in mission-critical devices nowadays (an even less frivolous use)? Like, there's a reason replacement knees are made out of titanium instead of stainless steel even though it's shitloads more expensive. Hell, didn't they use gold fillings for teeth 100 years ago?

That's true. It depends in large part on how popular the use of gold is in industry. I mean, Jewelry was a store of wealth unto itself, just one which was worn instead of one which could be immediately exchanged for money. Jewelry and gold fillings, though, are also much more easily convertable into money than the gold used in industry. It's much more simple to melt down a bracelet than to extract the tiny bit of gold from complicated circuitry and finding a substitute for it.

How ya doing, buddy?

I don't think that you can completely say that minimum wage is necessarily good or bad. If we were to completely eliminate the minimum wage, then we would be reverted back to the Gilded Age where corporations ruled and all union strikes (the most known was the Haymarket Affair) were controlled by private police.

What Reich said about the cost of minimum wage being diverted to the customers would actually reverse what he wanted minimum wage to do in the first place. Raises minimum wage and then raising product price would cause inflation which would make the wage increase in essence moot.

(Some of my logic may be flawed, I' only in AP Economics)

I am a dolphin, do you want me on your body?

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I don't think that you can completely say that minimum wage is necessarily good or bad. If we were to completely eliminate the minimum wage, then we would be reverted back to the Gilded Age where corporations ruled and all union strikes (the most known was the Haymarket Affair) were controlled by private police.

No, that would involve the dissolution of unions and the criminality of unionization. It's alternatively possible to marginalise unions but so long as the threat of organized labour exists, then corporations and business owners are willing to work with their employees on grievances. The police who broke up union strikes also weren't private, they were bought off by the corporations, and if you can buy into the state's monopoly of force, you can get away with pretty much anything.

If it were truly possible to organize private police then the unions could have organized their own police forces for the purposes of security. The Black Panthers did a similar thing by having brothers and sisters work security to make sure the police didn't try and break up rallies. It didn't work all the time, and some people still ended up getting shot but the point is that it worked.

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What Reich said about the cost of minimum wage being diverted to the customers would actually reverse what he wanted minimum wage to do in the first place. Raises minimum wage and then raising product price would cause inflation which would make the wage increase in essence moot.

Raising prices doesn't cause inflation, it's the prices which have inflated. The problem is that there's nothing to account for inflation, such as the maintenance of existing minimum wages that ease the price rise. Your understanding is correct, though. If prices rise to meet higher wages, then minimum wage workers have essentially gained nothing.

Now, if you admit that such is true, how can we justify the minimum wage when we just expect business owners to pass on the greater costs to consumers, which includes the people receiving a higher minimum wage?

I was speaking idiomatically.