19 Mar 2013

Progressives Call Our Bluff on Minimum Wage

Economics, Krugman 72 Comments

You know how some of us knee-jerk libertarians were scolded–by friends and foes alike–for saying, “Well gee Mr. President, if raising the minimum wage to $9/hour is a good idea, why not $20 or $100?” Well now we’re getting dangerously close to this.

There’s now a video floating around the Intertubes, praised by progressive pundits and (with reservation) by econ grad students alike, where Sen. Elizabeth Warren tiptoes up to endorsing a $22/hour minimum wage. (I saw this first on EPJ.) Now it’s true, neither she nor her progressive fans comes out and says, “I want the president to push for a $22/hour minimum wage,” but you certainly get the impression that it would be good for workers, and–at the very least–that it’s pure greed by the fat cats that prevents workers from earning that much right now.

What the heck is going on here? We’re not talking about a “modest” change that Krugman et al. hide behind when we free-marketeers go nuts on this stuff. (Even here, I’m still waiting for someone to show me why going from $7.25 to $9/hour–which is a 24 percent increase–is “modest.” If the government cut the deficit by 24 percent in a year, I doubt Krugman would dismiss it as “modest.”)

Is there anyone with economics training who actually thinks there are millions of workers generating $22/hour for their bosses, but are only getting paid $7.25/hour? And I’m talking gross pay; of course the tax man grabs a huge cut of what workers produce.

If so, why doesn’t the writer for the Daily Kos team up with Senator Warren and open a restaurant? They could pay $15/hour, more than doubling the pay of current minimum wage workers, and still make an absolute killing.

72 Responses to “Progressives Call Our Bluff on Minimum Wage”

  1. Edward King says:

    The reason why progressives and the like will not start a business and follow your suggestions is that it would lead to reality bumping up against their false beliefs. The one thing progressives hate more than human freedom, is reality destroying their sacred nostrums.

    • Daniel Kuehn says:

      That’s slanderous!!!!

      I hate human freedom at least TWICE as much as I hate reality destroying my sacred nostrums!

      • Bob Murphy says:

        DK wrote:

        I hate human freedom at least TWICE as much as I hate reality destroying my sacred nostrums!

        Uh oh, now Major Freedom will have to lecture you on ordinal vs. cardinal utility.

        • Daniel Kuehn says:

          Oh crap – I hate that three times as much as I hate reality destroying my sacred nostrums.

          • Ken B says:

            I know something you hate four times as much, but I can’t say. What happens in Bonoboville stays in Bonoboville.

            • Daniel Kuehn says:

              Every day I become more convinced that you have whole hard drives full of monkey porn.

              • Ken B says:

                You of all people should know!!

          • Major_Freedom says:

            I’m glad I am not as hateful of a person.

            For what it’s worth, the only thing I really hate about what you write, indeed what anyone writes, is the hatred you project through your desire and calls for violence backed social interactions, in their many forms, explicit and implicit, direct and indirect, obvious and not so obvious.

            I really cannot truly understand how anyone who has not had a lobotomy, or brain damage, can be so banal about evil so as to advocate for it and talk about it like the weather, or which team won last night’s game. I have tried to understand, believe me, but I can’t even convince myself as a joke that I am OK with it.

            • successfulbuild says:

              Says the guy who admits Libertarianism justifies slavery so long as a guy farts on a piece of land before someone else and calls it his.

              Libertarianism is tyranny; nothing more.

              I wonder what business Edward King, Matt Tanous, Major_Freedom/pete/egoist have run?

              Of course, they never even took up my offer to prove that they graduated from high school.

              • Richie says:

                Of course, they never even took up my offer to prove that they graduated from high school.

                Based on this link, looks like you haven’t yet yourself, Chomskey lover:

                http://www.youtube.com/user/successfulbuild

              • MR says:

                The NAP is the core of many varieties of libertarianism.

                Enslaving someone violates the NAP.

              • Bharat says:

                Of course, they never even took up my offer to prove that they graduated from high school.

                What do you call a “birther” for high school graduation? This is ridiculously funny if successfulbuild is being serious.

              • successfulbuild says:

                Lol. Bharat webpage shows that he’s a stupid little kid with sentences claiming empiricism never trumps logic and that Mises discovered an “action axiom” which would be torn to shreds in any psychology class.

                And apparently this moron believes we should still be using Aristotelian physics — after all, it was valid logically, but not empirically.

                Libertarians are complete morons.

              • Bharat says:

                Do me a favor and tear it to shreds for me.

                Of course, I’ve taken a psychology class and it wasn’t torn to shreds there, so I’m already doubtful.

              • Joseph Fetz says:

                Bharat, you’re a sincere person, I can sense that about you. With that said, you know that this guy is not worth your time or effort. Wash your hands of him, it’s so much more enjoyable. Trust me.

              • Ken B says:

                Successfully build is proof, for me at least, that the enemy of my enemy need not be my friend!

                You are being unfair to MF.

              • Major_Freedom says:

                “Says the guy who admits Libertarianism justifies slavery so long as a guy farts on a piece of land before someone else and calls it his.”

                I already showed you that this gobbledygook is a straw man, nothing more.

                “Libertarianism is tyranny; nothing more.”

                Libertarianism only seems tyrannical to tyrants, who are prevented from being tyrannical, and thus feel an experience of tyranny over them.

                “I wonder what business Edward King, Matt Tanous, Major_Freedom/pete/egoist have run?”

                So I take it then that because you have not been a slave, your prattling on about slavery should be taken as rhetoric on the basis of inexperienced naïveté?

                “Of course, they never even took up my offer to prove that they graduated from high school.”

                You haven’t proven to me that you don’t beat your wife. So by your “logic”, I should conclude you still do.

            • Gamble says:

              MajorFreedom,

              Without getting preachy, The Holy Bible talks about satan and how evil is his natural state.

              I really do love your post, I have never witnessed anybody put it in such simple, succinct terms.

              The violence mongers among us do not even flinch, they actually speak of their plots with a gleam in their eye…

      • Bob Roddis says:

        We all know that, but one would think you would do a better job of keeping it under wraps.

        • Major_Freedom says:

          Maybe the hope is that by joking about it enough, and being sarcastic about it enough, there will arise the appearance that it’s so ridiculously off that it is not even worth considering, and then others follow in that belief.

    • JFF says:

      It’s funny, professional cooks – restaurant people not FoodTV people – are by and large stunningly “progressive,” i.e., advocates of “living wages,” “universal health care,” high taxes on the “rich,” etc., UNTIL they own their own restaurant.

      You should hear what they say when asked about prices, costs, offerings, regulation, etc., when non-pros complain to them about various features of their restaurants/perceived inequities of the business.

    • Mike L says:

      One famous progressive did start a business: http://thomas.loc.gov/cgi-bin/query/z?r102:S04JN2-163:

  2. skylien says:

    “If so, why doesn’t the writer for the Daily Kos team up with Senator Warren and open a restaurant? They could pay $15/hour, more than doubling the pay of current minimum wage workers, and still make an absolute killing.”

    Yep that is what I always ask others as well. If profits are so high then it should be easy competing in that field and still paying workers double or whatever…

    What is missed in my view is that employers and employees are only abstract categories. People can choose what they want to be. If politics makes one category more attractive compared to the other than naturally people will flock more to this side. If you make it more attractive to be a worker by having secured minimum wage, unemployment benefits, protection from being fired (which at the same time makes it harder and less attractive to be an employer yourself) etc then it might be better for people who also think about starting their own company (those are for sure not the most unskilled) to rather be a worker. So they push those who are less skilled out of those jobs, decreasing possible competition among firms for workers, and increasing competition among workers for fewer jobs…

    Employers and Employees are in a certain balance. If you enact policies that favor one side imbalances will come up that obviously cannot be cured if you do more of the same policies that started it in the first place..

    • Gamble says:

      Really no different than a union, if business is so darn easy, start your own, rather than trying to commandeer the one that employs you…

      I understand what it means to be screwed by an employer however rather than create a union or start my own business, I save, insure myself and then find a higher paying job.

  3. Teqzilla says:

    To be fair she never actually out right endorses the idea of a $22 per hour minimum wage and therefore the whole thing is moot. As we know you may strongly imply something, imply it so strongly that it stands as practically the sole coherent interpretation of your remarks, without it being something any fair minded person should pay attention to. So long as you do not explicitly state something it is just a nonsense to take notice of it and people who do are scurrilous vermin.

  4. Ken B says:

    ” They could pay $15/hour, more than doubling the pay of current minimum wage workers, and still make an absolute killing.”
    I basically agree with Bob on all this minimum wage stuff, but I’m glad to see he included this sentence, because it’s wrong, and so I get to disagree with something after all. These 22 boosters, to give them a name, understand that they can’t pay 15 when their competitors pay 7. They will be out competed. But if the minimum is 22 then that “unfair competition” doesn’t exist. They think all the restaurant jobs will still exist at 22. That is crazy wrong, but it’s a different error than the one Bob alleges they are making.

    • skylien says:

      Why are you outcompeted? It is alleged that those wages could be paid by just reducing profits! As long as you are not making a loss you cannot be outcompeted…

    • Dan says:

      Why would they be out competed? That makes no sense.

      • Ken B says:

        OK Dan, let’s set up fast food restaurants side by side. Identical except you pay your waiters and cooks etc $15 an hour and I pay $7. You think I can’t outcompete you? I can sell my burgers for less than you can.

        • Seth says:

          I think you are changing Warren’s logic. By saying you’ll sell your burgers for less, you’re implying that customers benefit from low wages with lower prices. I thought she implied that owners, not customers, accrue most of the benefit of the low wages.

          • Ken B says:

            Right. Her claim is that restaurants could function at higher wages.
            But BOB said there’s an easy counter example: Warren could *already* pay 15 not 7 and make a profit.
            I say that is not a good argument against Warren because I have the option to undercut her restaurant. I pay low wages and undercut her. She would NOT make a profit.
            Her restaurant would fail not because 15 is too high but because 15 is too high *when other can pay less.* She says, make the minimum apply to everyone. Then she claims all restaurants will STILL function. (I say she is wrong about that.)
            Then the benefits would accrue to workers.

            • skylien says:

              Then you are not getting their argument at all.

              • skylien says:

                See Bob below and me above.

              • Ken B says:

                “See Bob below and me above.”

                Kinda like a Minotaur?

            • Major_Freedom says:

              “Warren could *already* pay 15 not 7 and make a profit.”

              That presupposes no fall in prices, no “outcompeting” Dan.

              But you initially said you’ll be able to outcompete Dan by reducing your prices.

              You keep changing the context.

        • Dan says:

          You’re either bad at economics, totally misunderstood the example Dr. Murphy gave, or just messing with us.

    • Major_Freedom says:

      These 22 boosters, to give them a name, understand that they can’t pay 15 when their competitors pay 7. They will be out competed.

      Hahahahaha, you just admitted that 7 is the competitive wage rate, which means workers whose labor earns 7, are workers who are getting paid what their labor is actually worth!

      Too funny.

      • Ken B says:

        Yes MF, I do think the competitive wage rate is lower. I am not advocating Warren’s position. Her claim is that wage competition is what allows the owner to keep that imagined huge surplus. With a min wage then owners cannot force labor rates down, so the workers get to keep the 22.

        She’s wrong of course. But Bob’s reductio doesn’t prove she’s wrong.

        • Bob Murphy says:

          Ken B. sometimes you make this so hard… Right now, at existing prices, Warren is implying that a given restaurant owner is skimming $14 per man-hour from his employees, which is pure profit that he uses to buy yachts and contribute to the Romney campaign. So Warren and the staff economists at EPI could start their own restaurant, charge the exact same prices, pay $15/hour to the workers, and still make a decent profit, which they can then donate to the Sierra Club.

          • Ken B says:

            OK Bob, I’ll give you this one. I misunderstood the point you were making.

            • Bob Murphy says:

              OK Bob, I’ll give you this one.

              What have you done with Ken B.!!

              • Ken B says:

                He was so despondent waiting for a reply to the OLG stuff that he asked me to fill in.

        • skylien says:

          “Her claim is that wage competition is what allows the owner to keep that imagined huge surplus. With a min wage then owners cannot force labor rates down, so the workers get to keep the 22″

          Why only with minimum wage laws? Given I pay the worker 7 Dollars and his productivity is 22 Dollars: If I am currently taking in 15 Dollars profit per working hour in my restaurant, then I could easily hike his wage to 15 Dollars and only make 7 Dollars profit on his working hour. Why would I go out of business. Explain that!

    • Tom Dougherty says:

      Ken B,
      The argument is that these laborers are producing $22 worth of value per hour but are only being paid $7.50 per hour. Bob’s response is that OK, then open up your own restaurant, pay your workers only $15 an hour and reap the profits.

      You see employers are greedy. If they see some other employer making $14.50 ($22-7.50) per hour per worker in profits, they say to themselves that they would like to make profits, too. So, they compete for the undervalued labor by bidding up the wage that is offered. So, Burger Kos opens up and offers $13.00 per hour to bid away labor resources from the existing employers. Burger Kos says, “I am greedy and would like to earn profits too. Why should all of the profits go to the other guys? The employees generate $22 dollars of revenues per hour but I am offering only $13 per hour. That will still leave me to earn $9 per hour in profit per worker.” Warren Burger says, “Look, I can offer $18 per hour and still make $4 dollars per hour in profits per worker.” As employees of the existing burger joints lose workers to the new competition who are greedily searching for profits, the existing burger joints are forced to raise their wages to retain labor resources. They, too, will bid up their wage in order to entice labor resources to come back to work for them. As long as excess profits exist, this will encourage more competition until the wages are bid up to the marginal value. If excess profits can be earned from a resource, competition, in the search for profits, will bid up the price of the resource until the profits disappear.

      Fortunately for all workers, not just unskilled labor, you are wrong. If you were correct all wages would tend towards zero.

      • Ken B says:

        Tom, YOUR argument is para 2 is the right one. It’s the usual one, that in equilibrium factors earn their marginal return.
        The wage is 7 because the value of the work done is 7.

  5. Matt M says:

    I can’t imagine how tripling the major cost of an industry where 50% of new entrants go broke within the first year would have any unintended consequences. No siree.

    “If X is so easy/profitable then why aren’t you doing it” is a great argument, but progressives usually avoid it by appealing to their obviously superior moral code. “Well sure I COULD start my own fabulously successful diner, but I’m not willing to exploit people by wage slavery.”

    • skylien says:

      “…but I’m not willing to exploit people by wage slavery.”

      They don’t need to they can share their “immoral” high profits equally with every employee.

    • MR says:

      Great point Matt.

      I’m an owner in a start up restaurant, 9 months in, and we run a loss every month. Things are improving as we get more traction…

      Labor is by far the biggest expense and we employ mostly min wagers. Labor is ~ 40% of net sales. Increasing labor costs three fold would mean we operate at a loss before paying any other bill.

      A $22 min wage would sink us and prevent many others from entering the industry. This means less jobs. People would be replaced by an IPad to take orders and pay bills.

  6. Bob Murphy says:

    Ken B., the claim is that each worker delivers $22 in productivity to the employer, and yet only needs to be paid $7.25/hour. So that’s built-in profit right there. Warren is asking where the “extra $14″ went. You are setting up some kind of argument whereby there isn’t any $14 at all, and in fact the employee isn’t delivering $22/hour because it gets whittled away by competition on the final price.

  7. George Ford Smith says:

    RPM,

    I don’t know anyone with economics training who believes there are “millions of workers generating $22/hour for their bosses, but are only getting paid $7.25/hour.” But there are reputable economic writers, such as Bill Bonner, who point out that “the typical workingman’s wages [have been] flat for the last 40 years.” [http://lewrockwell.com/bonner/bonner570.html]

    Forty years ago the federal minimum wage was $1.60/hr. [http://www.infoplease.com/ipa/A0774473.html]

    Using the BLS inflation calculator, $7.25 in 2013 had the same buying power as $1.39 in 1973. Had the minimum wage merely kept up with BLS inflation it would have to be $8.37 today. ($1.60 in 1973 has the same buying power as $8.37 in 2013.)

    I think it’s safe to say worker productivity has improved significantly since 1973 because of improved productivity tools, though I don’t have any figures to back that up. Has productivity improved to the point of “justifying” a minimum wage of $22.00? Even if it can be shown that workers are roughly three times as productive now as they were then – including restaurant workers – it wouldn’t follow that businesses could afford to pay them that much. In fact, I believe if government raised it to $22.00 it would bring the economy to its knees.

    Keep in mind Warren’s words, that minimum wage has not reflected gains in worker productivity. She’s not saying the minimum wage should be raised to $22.00, only that workers have not received the benefit of their productivity gains.

    If this is true, then where did the productivity gains go? Who got them? She asked that question in the hearing and didn’t get a clear answer.

    • Major_Freedom says:

      Productivity growth is not what raises total nominal wage payments.

      Inflation does that, or, less often in our society, more savings and investment.

      If the money supply does not rise, if aggregate spending does not rise, but real productivity rises such that real wages grow year after year at 3%, then it would be terribly wrong to assert that nominal wages have to rise 3% per year.

      What is going on with Warren’s claim is the fallacy of composition. She takes what is true for one individual, namely, if one individual becomes more productive relative to their peers, then their nominal wages will tend to go up, and then, making the false inference that if total productivity goes up, then everyone’s nominal wages should go up, or, just as equally wrong, every minimally productive person’s nominal wages should go up.

      Nominal wages are being confused by both Warren and Warren’s critics as reflecting productivity in the aggregate. This is not the case. In the aggregate, individuals who become relatively more productive will tend to earn higher nominal wage rates, which will make fewer dollars available to pay other laborers, ceteris paribus. If every individual becomes more productive, this does not imply or obligate employers or economically call for higher nominal wages!

      Real growth is associated with FALLING prices, not rising prices. There is no economic rhyme or reason why total nominal incomes, average nominal incomes, minimum nominal incomes, or total nominal profits, average nominal profits, minimum nominal profits, or total nominal interest payments, average nominal interest payments, minimum nominal interest payments, or total nominal wages, average nominal wages, or, finally, minimum nominal wage payments, should rise, alongside rising production. The gains are being made on the side of lower prices, not higher prices.

      If real wages are stagnant, as they have been since the 1970s, it isn’t because of the silly, naive, destructive, and economically illiterate belief that the government isn’t using violent threats to ban potential nominal wage rates at a high enough rate.

      • Matt M says:

        This post pretty much hits the nail on the head.

        I would simply add that what we should actually be measuring is quality of life, not income (nominal OR real).

        Would Warren or other progressives like to live for a month on only the goods and services that were available in 1973? Todays poor, unemployed, working class, middle class, AND wealthy elite all have acess to higher quality goods and services than were available in the 1970s. Insert reference to Gordon Gecko’s cell-phone here.

        Even if we concede that today’s food service employees have not had any significant gains in *monetary income* over the last four decades, they have had incredibly significant gains in the amount, and more specifically the quality, of goods and services they can purchase. Their lives are better.

        That is where the increasing productivity went. Workers *have* benefited from increasing productivity. They are just receiving their gains in the form of goods and services, rather than in the form of money.

        • Major_Freedom says:

          “Workers *have* benefited from increasing productivity. They are just receiving their gains in the form of goods and services, rather than in the form of money.”

          Precisely. It is possible for aggregate nominal incomes to be fixed for a trillion years, and standards of living can keep growing on the basis of more production and falling prices (and costs!).

          ———————–

          I didn’t mention the following in my last post, but I should have:

          There is in fact a connection between productivity growth and aggregate nominal incomes. This connection exists in a free market of money (meaning no taxation in the commodity the government demands), where money would likely be gold and/or silver.

          When capital accumulation takes place, the productivity of labor increases. When the productivity of labor in general increases, we can expect that mining would become more expansive and productive as well. With more capital machinery, the rate of gold and silver production would increase as well. When this happens, aggregate incomes will tend to rise as well.

          When folks like DK are saying things that are along the lines of nominal incomes going up when productivity goes up, they are, probably inadvertently, using “gold standard thinking.”

          With fiat money on the other hand, the connection between productivity and money creation is completely severed. The government can bring about any quantity of money it wants, even if real productivity hasn’t grown accordingly.

          The main “problem” that this introduces, is not, of course, that prices rise more than they otherwise would have risen. This is unfortunately what too many critics of gold think all fiat critics are basing their position on. No, the main problem with the severance between money creation and private production, is that economic calculation gets thrown out of whack.

          Economic calculation in private market activity in the production of real goods, requires private market activity in the production of the most highly valued real good which we happen to call “money”.

          Calculating profits and losses between the many different industries and firms that produce real goods, requires profits and losses to be calculated in the production of money as well. That is the only way we can know what the marginal valuations of real goods vis a vis money happens to be at any given time. Changes in market time preferences would be the fundamental causal force in the rate of money production, and marginal valuations will determine who produces the money and where and when they will produce it.

          With fiat money on the other hand, there is no profit and loss in creating money. The government uses political means, not market means, to maintain inflation. Thus there is a fundamental disjoint between calculating the marginal valuations of money vis a vis real goods and services. Funny money dilutions brought about by non-market means send non-market signals, and non-market signals hampers entrepreneurs and investors and consumers in being able to figure out what the true marginal valuations of things really are, and, crucially, what the true time preferences of people really are.

          • Tel says:

            I don’t think it is actually possible to compare in a meaningful way.

            My great grandfather had a horse. I don’t have a horse because pasture and stables are prohibitively expensive, so I’m worse off.

            I have a computer, my great grandfather didn’t have a computer because no one had heard of such a thing. So I’m better off.

            There you go, I’m worse off and better off at the same time.

            • Matt M says:

              Would you trade your computer for a horse?

              That’s how you compare.

            • Major_Freedom says:

              Tel, what you said is true for all goods choices, everywhere, all the time.

              Scarcity.

              I can’t afford a yacht, but I can afford a canoe.

              There, I’m better and worse off at the same time.

              Am I saying anything significant, or contrary to my prior post? Don’t think so, but maybe I misunderstood you.

    • Bob Murphy says:

      OK George then I’ll turn it around on you. If workers are contributing $22/hour and only get paid $7.25/hour, then why don’t you hire them at $10/hour and make a killing? I’m not saying you support the minimum wage, I’m just relying on your endorsement of that “fact.”

  8. Tel says:

    I think the deeper problem is that the government doesn’t have a form, where you can claim to be a hard-luck Native American princess, and they give you a free restaurant in recompense.

    Probably in the next few weeks they will have fixed that up, as they should do. Only fair.

  9. successfulbuild says:

    Yes. progressives not only believe that waging the minimum wage is economically beneficial but it is the moral thing to do. 20 years ago, wage and salary earners got 75% of national income, today 67%. 50 years ago, the CEO earned less than 50 times the pay of the average worker, today that is 350 to 1. The capitalists are laying claim to more and more of the nations income, from 25% in the 1990s to 35% today, while for every dollar of increased output from worker productivity only 13 cents goes to the worker.

    A system where the elite control so much of the resources is fundamentally immoral and totalitarian. The capitalists have no moral claim to their increase in income, it is simply how the system was designed. A great deal of it may be because of government policy, but all markets will result in the same thing.

    Since this is immoral, it is moral to increase the worker’s purchasing power. So, progressives are making a moral argument in addition to an economic one.

    However, the fact remains that this situation is fundamentally immoral, and keeps getting so with increased environmental destruction that corporations do not pay for. Of course, Libertarianism is also immoral by this logic, and is thus rejected.

    • Tom Dougherty says:

      There is nothing that prevents a “progressive” from becoming an entrepreneurial capitalist or an “elite” capitalist controller of resources. “Progressives” can become CEOs of their own companies and refuse the 350:1 earnings ratio. “Progressives” can refuse to receive 35% of their capital income and reduce it to 25% and thereby increasing the worker’s purchasing power. “Progressives” need to stop lecturing everyone about how morally superior they are to everyone else, and yet at the same time not lift a finger to actually DO and put into ACTION what they tell everyone else to DO and how to ACT.

      • Matt M says:

        “There is nothing that prevents a “progressive” from becoming an entrepreneurial capitalist or an “elite” capitalist controller of resources. ”

        Well, besides a complete lack of understanding of how markets actually work.

        The proper point would be that if economics *actually worked the way progressives think it does* then there would be nothing stopping them from coming in and reaping the benefits. IF every resturaunt owner was making $14 an hour of profit per employee they hire, then yes, Warren could start her own burger chain and make a killing.

        Of course, that is not reality. Deep down she knows it (which is why she hasn’t started her own burger chain and donated half of the profits to planned parenthood), but she can’t say that, because it’s bad for her political rabble-rousing.

        • successfulbuild says:

          Actually, if Tom Dougherty and “Matt M” had taken even a basic class in economics you’d know that “market power” prevents competitors from entering into a market. And if progressives did try and take over the companies and implement fair policies, they would immediately be removed as a CEO. The job of a CEO is to make the most profit possible, it is NOT to pay workers fairly.

          In fact, the failure of cars to get better MPG is a market failure. Cars could have been made electric a long time ago, which have dramatically cut down on global warming. They could have been getting the same efficiency standards as they get in other countries as well

          Furthermore, successful businessmen rarely are trained in economics. In fact, most aren’t. Rather they are better at exploiting the work of others or making money off of finance, none of which is really beneficial to society. Most inventions come from either in house (i.e. from workers under oppressive contracts) or from private individuals, not corporations.

    • Major_Freedom says:

      What a stupid post. It’s got everything. Environmentalism, anti-capitalism, violence advocacy, economic illiteracy, and philosophical irrationalism.

      Pathetic.

      • successfulbuild says:

        Yes, the fact that millions of people die from pollution and global warming is not “pathetic.” And the only economic illiteracy here has been your own, repeatedly shown over and over again.

        • Major_Freedom says:

          “Yes, the fact that millions of people die from pollution and global warming is not “pathetic.”

          That’s false. Millions of people are not dying from pollution or global warming. Millions of people are in fact being born and living more prosperous lives because of industry, my backwards middle age mystic friend.

          “And the only economic illiteracy here has been your own, repeatedly shown over and over again.”

          No U.

    • Tel says:

      20 years ago, wage and salary earners got 75% of national income, today 67%.

      The size and power of government has steadily grown over the same time period. If you are going to use correlation as a pointer to causality then I point to government.

      50 years ago, the CEO earned less than 50 times the pay of the average worker, today that is 350 to 1.

      Which could easily be explained by the “progressive” tax system. After all, a CEO is just a worker like any other, but with skills that are difficult to come by (let’s leave aside the difficult matter of what those skills are and whether anyone can accurately measure them). So every worker is motivated by their after tax pay, because that’s what they get to spend. In order to motivate people at the top end of the pay scale, you need to increase their before tax pay much more steeply in order to overcome the “progressive” tax rate.

      The capitalists are laying claim to more and more of the nations income, from 25% in the 1990s to 35% today, while for every dollar of increased output from worker productivity only 13 cents goes to the worker.

      Well a goodly chunk of that increase has gone to increasing the size of government, so what’s your point?

      I can say that the modern big business well understands that being a capitalist in the pure sense does not make good money. In a capitalist system there’s a trade off between profit motive (i.e. greed) and free market competition (i.e. keeping market share against competitors who will happily eat your lunch). Government is all about regulating markets and thus preventing competition. So with competition stifled, the profit motive has nothing to contain it… are you surprised?

      A system where the elite control so much of the resources is fundamentally immoral and totalitarian.

      I agree, but capitalists have only business, products and voluntary participation. That’s insufficient to be a totalitarian. Only with the help of police, guns, drone bombers and stuff like that can you become totalitarian… oh wait, those are all government.

      The capitalists have no moral claim to their increase in income, it is simply how the system was designed.

      Hmmm, if they earned it then they have a moral claim to it. However, if it was taken by force then ask yourself who provided that force? Who designed the system, and how?

      A great deal of it may be because of government policy, but all markets will result in the same thing.

      How do you figure that? Voluntary participation will always end in totalitarianism? Kind of difficult to swallow that at face value. What is your reasoning?

      Since this is immoral, it is moral to increase the worker’s purchasing power.

      By using more guns and more drone bombers and tougher police? That’s moral?

      So, progressives are making a moral argument in addition to an economic one. However, the fact remains that this situation is fundamentally immoral, and keeps getting so with increased environmental destruction that corporations do not pay for.

      Socialist systems have demonstrably delivered the worst environmental record the world has ever seen (and the worst humanitarian record, should you be interested in that).

      Of course, Libertarianism is also immoral by this logic, and is thus rejected.

      Because allowing people the freedom to trade with one another is immoral. Just in case they trade in such a way that someone else doesn’t get a share of. Maybe you should start by coming up with your own definition of morality.

  10. Gamble says:

    22 per hour may be stupid and much more than a modest increase but 7.25 per hour is really no better.

    Any fixed minimum wage is a cruel form of slavery, might as well make the number 22 just to prove no minimum wage rate will ever function as advertised…

  11. Gamble says:

    Look at us poor fools fight for left over scraps from the warfare/welfare machine, funny yet equally sad…

  12. Andrew Keen says:

    I like how Senator Warren thinks she take lessons from a study on McDonald’s prices and apply it to every business in the world.

  13. George Ford Smith says:

    RPM,
    I would not hire workers at $10/hr because the only one getting killed would be me.

    But that’s not to say they aren’t more productive than they were 40 years ago, is it? Even restaurant workers have access to much more sophisticated technology today than they did in 1973.

    If my company generates $1,000 in revenue/hr and the addition of one more worker generates $1,022/hr, then I could justify paying that worker up to $22/hr but not more. If I bid for this worker’s service and can hire him for $10, then it would seem that I’m making a killing having him work for me.

    But if in fact I hire this worker at that rate and discover I’m losing money, does it follow that I’ve erred in calculating the amount of revenue he generates? Maybe. Or it may be that on a free market this worker’s DMVP really would be just under $22, but due to interventionist policies my company only nets $7 from his hourly output, with the balance going to the regulating bureaucracies.

    Now, if I’m running a profitable business I will know these things in advance and realize I can’t pay the worker $22 or even $10. My profit and his wages have shrunk considerably because of government baggage. Yet this worker can be shown to be three times more productive say than a worker doing the same job 40 years ago because of the capital invested in his job.

    In Human Action SE, p. 601 Mises writes:

    “In the capitalist society there prevails a tendency toward a steady increase in the per capita quota of capital invested. The accumulation of capital soars above the increase in population figures. Consequently the marginal productivity of labor, wage rates, and the wage earners’ standard of living tend to rise continually. But this improvement in well-being is not the manifestation of the operation of an inevitable law of human evolution; it is a tendency resulting from the interplay of forces which can freely produce their effects only under capitalism. It is possible and, if we take into account the direction of present-day policies, even not unlikely that capital consumption on the one hand and an increase or an insufficient drop in population figures on the other hand will reverse things.”

    If I understand him correctly, he’s saying that the marginal productivity of labor is hurt by present-day policies. While I agree with this, I think it’s also clear that workers are still producing more and better widgets than they did 40 years ago. (They would be even more productive without government on their backs. ) Forty years ago I used an electric typewriter to write; today it’s a word processor, etc.

    I suppose you could argue that the increase in goods produced results in a lower price per good, other things equal, and therefore a worker’s marginal productivity as measured in constant dollars has not changed all that much. And so while he is more productive, the revenue he generates is not that much greater today than it was in the past.

  14. Denis Drew says:

    The “black hole theory” of the minimum wage:
    Physicists theorize that inside a black hole the laws of physics breakdown. When the minimum wage falls far enough below what the market would bear the laws of supply and demand breakdown. Doubling today’s federal minimum wage should lead to a disproportionate explosion of demand for the goods of minimum to median wage paying employers.

    If we cut today’s minimum to median wages in half that wouldn’t help McDonald’s or Wal-Mart, would it? This wage cut must already have taken place when we would need to triple today’s minimum wage to catch up with doubled productivity since 1968 (almost quadruple the early 2007 minimum wage — the median wage stagnated as productivity doubled too).
    http://www.huffingtonpost.com/2013/03/18/elizabeth-warren-minimum-wage_n_2900984.html%3Cbr

    Doubling today’s minimum wage to $15 an hour would add 50% to Wal-Mart’s wages but only 5% to Wal-Mart’s prices – 100% to McDonald’s wages but 33% to McDonald’s prices. $15 an hour being today’s median wage, half the workforce would get raises percentage multiples of pass through price increases.

    This win-win effect could not go on forever. At $30,000 a year consumers would buy a lot more fast food and retail items than they will at $15,000 a year – hugely pent-up demand. Going from a $30,000 year minimum wage to $40,000 would raise prices (3% at Wal-Mart; 11% at McDonald’s) but not add much to demand – though some people would have more money to spend — a wash? Somewhere in between is the edge of the black hole.

    Denis Drew
    Chicago
    ddrew2u@sbcglobal.net
    http://www.ontodayspage.blogspot.com

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