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Theta wrote:
Listen, I know it sounds counter intuitive, but minimum wage is the SINGLE WORST policy measure for the poor ever. If you want, I can explain it more thoroughly, but for now just consider this simple line of reasoning: "when the price of something goes up, you can afford less of it". It makes sense right? Its really intuitive. Now lets apply this to the labor market. When the price of labor goes up (ie, an increase in minimum wage), you can afford less of it (hence, unemployment increases). This is all in real dollar terms of course. Again, if this doesnt make sense to you, I can provide a more detailed explination.
What this means, however, is that a cut in minimum wage will effectively raise employment levels. Also, you have to keep in mind that the number of jobs in an economy is not fixed. Once one job is outsourced, it doesnt mean that person is unemployed forever. He can get a different job. It happens all the time once an industry collapses (think of all the people that worked in a typewriter factory when computers became popular...). I am not advocating ALL JOBS getting outsourced, only the ones that can be done for cheaper.
Now addressing what you said. 1) Unemployment will not increase due to outsourcing since the cut in minimum wage will create more jobs than there were before. 2) I have no idea how you think that 50% of america will starve and die without a minimum wage while the other 50% will make $2 an hour. Thats ridiculous. You understand that minimum wage didnt always exist right? People werent dying everywhere - they were doing reasonably well. What will happen is that people get paid what they are worth. If you do your job really well, youll get paid much much more than $2/hour. Why? Because if you dont get paid more, somebody else will pay you that amount. Consider the following example:
Lebron James is really, really, really good at basketball. You own an NBA team and one day show up on his high school court in Cleveland and are like: wow, that dude is really, really good at basketball - i bet that a lot of people are willing to pay to watch him play and he will ultimately increase my profits by $20million/year. But since there is no minimum wage, I can pay him $2 an hour. Ok so you pay him $2/hour. I come along and see that Lebron is really valuable to my NBA team as well and will increase my profits by $20million as well. I decide to own you and pay him $10,000/year. You come back and pay him $50,000 a year (after all, he is increasing your profits 20M, you can pay him more). I come back and pay him $2M a year, and you own my by paying him $20M a year. This is how the market works, theres a back and forth until equilibrium is reached. The same thing happens with people making $10/hour. You get paid what youre worth in a capitalist society. The govnt will only mess things up by imposing a price floor (which is what min wage is).
Dude, you're wrong when it comes to how things actually work.
I know where you're getting this from. The world doesn't function like a textbook.
My entire time through econ undergrad I sat there and had to listen to blatantly ridiculous theories based on equally ridiculous assumptions.
Real world economies thrive on information asymmetry and closed/ non competitive markets.
It irks me to no end having to listen to textbook %%!#$**! being spouted.
Economics, as presented today, is so far removed from its original intention that it has become nothing more than a self perpetuating ++++ show.