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The government announced it will be shedding government jobs.
http://www.businessweek.com/news/2010-06-30/u-k-to-lose-610-000-government-workers-by-2016-.html
Normally this is good news for the market. Wages on average would drop encouraging investment and the lowering of prices, however there is a problem. Minimum wage is in the way. without minimum wage, average wages would drop to an equilibrium. With minimumu wage however, prices are sticky, and the increase of supply causes an oversupply of labor, also called unemployment. Instead of a better economy, only higher taxes and more welfare will ensue.
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I'm sorry I don't have time to explain it in detail (and I'm sure some will be more adept than I), but Britain is adopting a bunch of policies to battle their MASSIVE budget deficit, thats how its done
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government sheds jobs ... [OK] minimum wage exists ... [OK] government shreds jobs + minimum wage = unemployment ... [Error]
you know what really causes unemployment? people losing their jobs. not having a minimum wage would just mean there would be even more people on welfare.
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motbob
United States12546 Posts
There are so many things wrong with your post that I've been inspired not to go home from work early. Instead, I'm going to flame you.
First of all, you're using the word "sticky" wrong. The word "sticky" implies that wages are resistant to change in the short run (which they are: businesses rarely give pay cuts. Retirements and inflation are the main drivers down of the average real wage), not the long run. This implies that wages will drop to a lower level in the long run, which isn't really a "fail" at all.
You claim that the minimum wage keeps real wages from decreasing. This is clearly inaccurate. There are plenty of examples of societies with minimum wages having real wages decrease. The United States is one of those societies.
Basically, I'd recommend taking more than one college course on Economics before making any more arguments against the minimum wage (which I assume is the main point of this post.)
Instead of a better economy, only higher taxes and more welfare will ensue.
Higher taxes after the government cuts expenses by cutting jobs? I don't understand.
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United States12180 Posts
Why minimum wage exists at all is a mystery to me. Objectively speaking, if there is a company that offers you a job but at a substandard wage, chances are you won't take the job. Conversely, people that are low-skilled or just entering the job market looking for experience will take almost any wage they can get. It's cool if you're earning minimum wage and the government raises it, because sweet, you just got a raise. However, that translates to higher commodity/service prices (due to more consumer money circulating) and all kinds of other unseen expenses. Side rant: I used to buy these Stouffer's French bread pizzas for lunch at the grocery store at 2 for $2.00 just a couple of years ago, now they're 2 for $3.69 =(
I get that it's supposed to be fair and designed for people to make a decent living, but the drain it puts on everyone else is brutal. In the current economy where I didn't get a raise last year but the prices of everything I buy regularly has gone up, things have become much tighter for me on a month-to-month basis.
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Smaller government = the best policy to come around in this current time
Thats all i can really say about it, shedding government jobs and reducing the role of the government in the UK is very important right now
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motbob
United States12546 Posts
On July 01 2010 04:49 Excalibur_Z wrote: Why minimum wage exists at all is a mystery to me. Objectively speaking, if there is a company that offers you a job but at a substandard wage, chances are you won't take the job. Conversely, people that are low-skilled or just entering the job market looking for experience will take almost any wage they can get. It's cool if you're earning minimum wage and the government raises it, because sweet, you just got a raise. However, that translates to higher commodity/service prices (due to more consumer money circulating) and all kinds of other unseen expenses. Side rant: I used to buy these Stouffer's French bread pizzas for lunch at the grocery store at 2 for $2.00 just a couple of years ago, now they're 2 for $3.69 =(
I get that it's supposed to be fair and designed for people to make a decent living, but the drain it puts on everyone else is brutal. In the current economy where I didn't get a raise last year but the prices of everything I buy regularly has gone up, things have become much tighter for me on a month-to-month basis. Your hypothesis seems to be that a rise in the minimum wage adversely affects the real wages of people who make more than the minimum wage. However, from the available data, it doesn't look like that's the case:
During the minimum wage hikes in the early 90's and the late 90's, it doesn't appear that the rise in the hourly wage of the lower 10% of wage-earners corresponds with any drop in the hourly wage of the higher percentiles.
I would imagine that the explanation of higher price of goods such as french bread pizzas has more to do with the sharp increase of oil prices recently. Agriculture and transportation costs are closely tied to the price of petroleum, and making french bread pizzas takes a lot of transporting.
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minimum wage was introduced so businesses could not get something for nothing,
if the wages of people were cut,more people would just live of the dole, most people on minimum wage would think " why should i have to work the same number of hours for the same or even less money. alot of people would not be thinking about changing to a job which has just a little more pay, as its just as easy to go on the dole, which means our government spending increases... which is not what we want.
personally its benefits which is the thing that needs to be cracked down on...
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On July 01 2010 04:54 BrTarolg wrote: Smaller government = the best policy to come around in this current time
Thats all i can really say about it, shedding government jobs and reducing the role of the government in the UK is very important right now Oh yeah, man, fucking hell, you are right, twenty last years have exactly proven that neoliberal policies are so fucking great!!! That's why US are reinvesting massively in teir economy and why UK which was supposed to have a top notch eveonomy because Tatcher-Major-Blair ultraliberal policies were so fucking good for economy is twenty times more fucked up than France or Germany right now.
School of Chicago era is over. Reagan/Tatcher anti-statist ultraliberal policies have had for sole effect to make the rich much richer, life of everybody else much more difficult and removed the little stability economy had since the WWII. Didn't you notice?
Geez.
EDIT: Plus it would be cool to quote in the OP another website than this right-wing patronal stuff. It's quite obvious that managements/shareholders make more money when they can pay 1£ per hour their slaves, I mean, employees.
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On July 01 2010 04:54 BrTarolg wrote: Smaller government = the best policy to come around in this current time
Thats all i can really say about it, shedding government jobs and reducing the role of the government in the UK is very important right now Funny, because the disparity of wealth has increased ever since you guys started implementing neo-liberal policies.
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Accounting and Applied Economics Major here.
Essentially, minimum wage lessens the rich-poor gap but as a whole, it is detrimental to the economy as firms that would have hired workers @ the market equilibrium price of say $5, does not hire in the current job market as the minimum wage is say $10, as their value of the marginal product of labor is probably somewhere around say, $8. However, minimum wage IS necessary, at least in the industrialized world.
The Gov't job cuts are also necessary because Britain's Gov't deficit was a staggering 11% of its GDP while its debt was around 70% of its GDP (just a few trillion dollars). Similar situation occurred in Canada during the early 1990 when careless spending racked up a HUGE gov't debt for the Canadian gov't. The result? High interest payments, rising unemployment, and all the other nasties that usually come with a large gov't deficit.
Surely the current situation is grim, but usually these policies are consulted by economists and take the lesser of the evils. Consequences of inaction would be much worse.
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On July 01 2010 05:32 SoManyDeadLings wrote: Accounting and Applied Economics Major here.
Essentially, minimum wage lessens the rich-poor gap but as a whole, it is detrimental to the economy as firms that would have hired workers @ the market equilibrium price of say $5, does not hire in the current job market as the minimum wage is say $10, as their value of the marginal product of labor is probably somewhere around say, $8. However, minimum wage IS necessary, at least in the industrialized world.
The Gov't job cuts are also necessary because Britain's Gov't deficit was a staggering 11% of its GDP while its debt was around 70% of its GDP (just a few trillion dollars). Similar situation occurred in Canada during the early 1990 when careless spending racked up a HUGE gov't debt for the Canadian gov't. The result? High interest payments, rising unemployment, and all the other nasties that usually come with a large gov't deficit.
Surely the current situation is grim, but usually these policies are consulted by economists and take the lesser of the evils. Consequences of inaction would be much worse. Nobody says that nothing needs to be done. But the "economists" seem to have no other medicine that what basically lead us to where we are.
You know, no offense I find that there is a lot in common between economists and doctors form the XVIth century. You know, theses very savant people, who were highly respected by everybody, and whose basic way of curing people was by killing them with their bloodletting.
Let's bleed England one more time, folks, it will get better soon.
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On July 01 2010 04:49 Excalibur_Z wrote: Why minimum wage exists at all is a mystery to me. Objectively speaking, if there is a company that offers you a job but at a substandard wage, chances are you won't take the job.
Not everyone can choose between multiple jobs. There is not even a guarantee that there are as many jobs as there are possible employees (of the respective qualification). So if you need money and can choose between not making any money at all and making very little money, you will have to choose the money. Great opportunity for companies to offer jobs at low wages.
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5003 Posts
However, minimum wage IS necessary, at least in the industrialized world.
Can someone give me a coherent argument why minimum wage is necessary instead of just assuming it? What would happen without the minimum wage? Why what follows after not having minimum wage not favorable (for whatever reason?)
I don't mean "Without minimum wage everyone will be exploited", well, how are you so certain about that? There has to be justification for any sort of government intervention and honestly I don't see how Minimum Wage solves anything.
School of Chicago era is over. Reagan/Tatcher anti-statist ultraliberal policies have had for sole effect to make the rich much richer, life of everybody else much more difficult and removed the little stability economy had since the WWII. Didn't you notice?
Maybe the economy was "stable" after WWII for other reasons. There are many different factors that come into this. Could you tell me about some studies that documents what you've said?
Smaller government = the best policy to come around in this current time
Thats all i can really say about it, shedding government jobs and reducing the role of the government in the UK is very important right now
Why is it important?
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In a free market, demand is always a function of price: the higher the price, the lower the demand. What may surprise most politicians is that these rules apply equally to both prices and wages. When employers evaluate their labor and capital needs, cost is a primary factor. When the cost of hiring low-skilled workers moves higher, jobs are lost. Despite this, minimum wage hikes, like the one set to take effect later this month, are always seen as an act of governmental benevolence. Nothing could be further from the truth.
When confronted with a clogged drain, most of us will call several plumbers and hire the one who quotes us the lowest price. If all the quotes are too high, most of us will grab some Drano and a wrench, and have at it. Labor markets work the same way. Before bringing on another worker, an employer must be convinced that the added productivity will exceed the added cost (this includes not just wages, but all payroll taxes and other benefits.) So if an unskilled worker is capable of delivering only $6 per hour of increased productivity, such an individual is legally unemployable with a minimum wage of $7.25 per hour.
Low-skilled workers must compete for employers’ dollars with both skilled workers and capital. For example, if a skilled worker can do a job for $14 per hour that two unskilled workers can do for $6.50 per hour each, then it makes economic sense for the employer to go with the unskilled labor. Increase the minimum wage to $7.25 per hour and the unskilled workers are priced out of their jobs. This dynamic is precisely why labor unions are such big supporters of minimum wage laws. Even though none of their members earn the minimum wage, the law helps protect their members from having to compete with lower-skilled workers.
Employers also have the choice of whether to employ people or machines. For example, an employer can hire a receptionist or invest in an automated answering system. The next time you are screaming obscenities into the phone as you try to have a conversation with a computer, you know what to blame for your frustration.
There are numerous other examples of employers substituting capital for labor simply because the minimum wage has made low-skilled workers uncompetitive. For example, handcarts have replaced skycaps at airports. The main reason fast-food restaurants use paper plates and plastic utensils is to avoid having to hire dishwashers.
As a result, many low-skilled jobs that used to be the first rung on the employment ladder have been priced out of the market. Can you remember the last time an usher showed you to your seat in a dark movie theater? When was the last time someone other than the cashier not only bagged your groceries, but also loaded them into your car? By the way, it won’t be long before the cashiers themselves are priced out of the market, replaced by automated scanners, leaving you to bag your purchases with no help whatsoever.
The disappearance of these jobs has broader economic and societal consequences. First jobs are a means to improve skills so that low skilled workers can offer greater productivity to current or future employers. As their skills grow, so does their ability to earn higher wages. However, remove the bottom rung from the employment ladder and many never have a chance to climb it.
So the next time you are pumping your own gas in the rain, do not just think about the teenager who could have been pumping it for you, think about the auto mechanic he could have become – had the minimum wage not denied him a job. Many auto mechanics used to learn their trade while working as pump jockeys. Between fill-ups, checking tire pressure, and washing windows, they would spend a lot of time helping – and learning from – the mechanics.
Because the minimum wage prevents so many young people (including a disproportionate number of minorities) from getting entry-level jobs, they never develop the skills necessary to command higher paying jobs. As a result, many turn to crime, while others subsist on government aid. Supporters of the minimum wage argue that it is impossible to support a family on the minimum wage. While that is true, it is completely irrelevant, as minimum wage jobs are not designed to support families. In fact, many people earning the minimum wage are themselves supported by their parents.
The way it is supposed to work is that people do not choose to start families until they can earn enough to support them. Lower wage jobs enable workers to eventually acquire the skills necessary to earn wages high enough to support a family. Does anyone really think a kid with a paper route should earn a wage high enough to support a family?
The only way to increase wages is to increase worker productivity. If wages could be raised simply by government mandate, we could set the minimum wage at $100 per hour and solve all problems. It should be clear that, at that level, most of the population would lose their jobs, and the remaining labor would be so expensive that prices for goods and services would skyrocket. That’s the exact burden the minimum wage places on our poor and low-skilled workers, and ultimately every American consumer.
Since our leaders cannot even grasp this simple economic concept, how can we expect them to deal with the more complicated problems that currently confront us?
Source: http://www.europac.net/externalframeset.asp?from=home&id=16714&type=schiff
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"There are so many things wrong with your post that I've been inspired not to go home from work early. Instead, I'm going to flame you."
Motbob is bringing the econo-hammer down hard here.
Yeah, the UK is way fucked, but the budget is probably the best they could do, should recover in 5 years *allegedly*
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On July 01 2010 05:29 koreasilver wrote:Show nested quote +On July 01 2010 04:54 BrTarolg wrote: Smaller government = the best policy to come around in this current time
Thats all i can really say about it, shedding government jobs and reducing the role of the government in the UK is very important right now Funny, because the disparity of wealth has increased ever since you guys started implementing neo-liberal policies.
Why is this taken as an intrinsically bad outcome?
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Because studies show that the well being of a society and the general health and happiness of individuals decline as wealth disparity increases.
Also, if you don't have an issue with obscene wealth disparities then I can only say that you're a goddamned imbecile. Trickle down doesn't happen either.
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On July 01 2010 06:13 koreasilver wrote: Because studies show that the well being of a society and the general health and happiness of individuals decline as wealth disparity increases.
Studies also show that re-distributive processes inevitably function as a retarding agent on economic growth, so essentially what you're arguing is that we should trade present happiness for greater future happiness.
[edit] Last sentence is technically the wrong way around, but I think it still gets across my point.
Secondly, your argument automatically sets off down an "ends justify the means" view of things, which isn't remotely a consensus view of morality. Many people, myself included, would argue that the effects of a distribution of income are completely irrelevant unless the distribution was arrived at unjustly.
Also, if you don't have an issue with obscene wealth disparities then I can only say that you're a goddamned imbecile. Trickle down doesn't happen either.
Well, you're entitled to your opinion.
But its wrong.
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I wrote that from my phone so I didn't have time to go into detail, but just sheer frustration with the total lack of understanding of basic economics in government. Unemployment only exists because employers are not willing to pay someone to work. Here's a great example. Let's say you own a candy store, so you have 1 employee at all times and you pay him minimum wage say $8 US dollars. Now, you have heard complaints from customers that they are waiting in line too long and you calculate that you could earn an addition $7 an hour if you had another employee. Since the minimum wage is $8 you decide to not hire anyone. If there was no minimum wage, then you post the job for $5 an hour and hope that some kid who needs a summer job comes and applies. The kid makes $5 an hour, gains work experience, you make more profit and the complaints about your store disappear and you can finally grow a little faster.
The simplest way of understanding is this. Labor is a product. Depending on the price, there will be a certain amount of supply available in the market. If there is a set price minimum for that labor, then what happens is this.
The amount of labor that people want to sell exceeds the amount employers are willing to buy at that price. This is called unemployment.
In the united states we have something called unpaid internships. Students work for a short time for either no wage or for a stipend. There are some limits, but essentially they are bypassing the law. Also minimum wage is racist. The lowest earners in the united states are black teenagers and they have the highest unemployment rate and I believe that the minimum wage law contributes to the high crime rate from black teens. If black teens were able to work instead, even for an amount less than minimum wage, there would be a less chance of them committing crime. States with the lower minimum wage also tend to have lower crime.
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