uk economics and why it fails

Instead of a better economy, only higher taxes and more welfare will ensue.

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.

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

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

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.

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.

However, minimum wage IS necessary, at least in the industrialized world.

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?

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

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?

On July 01 2010 05:29 koreasilver wrote:

Funny, because the disparity of wealth has increased ever since you guys started implementing neo-liberal policies.

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.

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.