Our left wing remains baffled at the concept that minimum wage laws might drive unemployment. They see corporations as swollen with profits and thus have money to spare...
Occasionally this is true. It is easy to look at, say, McDonalds, and conclude this.
But even our left wing will agree that consumer goods follow supply and demand laws. B2B goods follow these laws even more tightly... that is, the curve is much less elastic.
There is absolutely no reason that labor is a resource that should work any differently (and, indeed, it does not).
Why is it not a highly elastic resource? At the lower end, if we increase wage rates, there will be many companies that "suck it up" and continue forward.
But, ultimately, profit rates will pinch. For companies without astronomical profits (and that is the vast, vast majority of them), labor-heavy expansions will be much less appetizing... and thus investment in these _will go down_. If these companies do not perform layoffs, they _will_ reduce the amount of labor-heavy growth, and thus job creation, that they perform.
These companies will also be much more tempted to invest in _capital_ (or consulting, in my experience) to _replace_ labor. The capital:labor cost ratio will go down in favor of capital, and thus these companies will invest in replacing this labor. This has become increasingly common in labor-heavy manufacturing, if not as popular yet in service... but it will be. Jobs _will be lost_, and these more labor-efficient processes will persist into the future, reducing job growth.
There will be companies that are "on the margin" of profitability. They exist--I do not know how great a number they are, but they are typically small businesses (which, remember, hire the plurality of Americans!). Some of these will go under and let labor go. Jobs will be killed.
By _all_ economic logic, artificially increasing wage rates will be a job-killer, period.
Left-wingers actually brag that higher minimum wages actually pushes up the wages of those jobs that would be near minimum wage--thus the effect occurs at higher-wage jobs, as well.
Am I in favor of _low_ wages? No, I think it is awful. But high unemployment pushes wage rates down. Again, supply and demand. The higher unemployment is, the more bargaining power the companies have, the lower the wage rates for everyone not benefiting directly from the minimum wage law. And if we are keeping unemployment higher, _which we do by having these wage restrictions_, those wage rates will _never go back up_.
Allowing the market to do its job will mean that rates go down until the labor supply is more-or-less exhausted. When it is exhausted, any further growth in the economy will _necessarily_ push wage rates up. So in the free-market example, we have a temporary period of low wages, replaced by ever-rising wage rates. Excepting immigration, labor (unlike _any other good_) is not a supply that can go up to keep up with demand, and thus the price will rise with labor in a free market unlike any consumer or B2B good.
We see the opposite in Europe--high government intervention in labor means companies are _not hiring_. Young people in France have 40% unemployment; in Italy, it is 60%, and in Spain/Greece it is over 80%. Some of this is the recession, of course, but the US is not experiencing this, Canada is not experiencing this, because they do not have artificially inflated wages and labor restrictions to the extent that these countries do.
Despite our continual denial of this, these simple economic laws will continue to govern labor. The best of intentions (these minimum wage laws and labor regulations ) will continue to drive unemployment and, ultimately, contribute to stagnation and poverty in the countries in which they are employed. The free-marketers, in contrast to the propaganda set against them, do not want to hose the poor in favor of the rich. It is the minimum-wagers that want to hose the unemployed in favor of the employed, and this is working splendidly.
Tragically, we will also blame the "free" market for our woes, increase our minimum wage rates more, and continue the economic death-spirals that we're seeing currently.
Occasionally this is true. It is easy to look at, say, McDonalds, and conclude this.
But even our left wing will agree that consumer goods follow supply and demand laws. B2B goods follow these laws even more tightly... that is, the curve is much less elastic.
There is absolutely no reason that labor is a resource that should work any differently (and, indeed, it does not).
Why is it not a highly elastic resource? At the lower end, if we increase wage rates, there will be many companies that "suck it up" and continue forward.
But, ultimately, profit rates will pinch. For companies without astronomical profits (and that is the vast, vast majority of them), labor-heavy expansions will be much less appetizing... and thus investment in these _will go down_. If these companies do not perform layoffs, they _will_ reduce the amount of labor-heavy growth, and thus job creation, that they perform.
These companies will also be much more tempted to invest in _capital_ (or consulting, in my experience) to _replace_ labor. The capital:labor cost ratio will go down in favor of capital, and thus these companies will invest in replacing this labor. This has become increasingly common in labor-heavy manufacturing, if not as popular yet in service... but it will be. Jobs _will be lost_, and these more labor-efficient processes will persist into the future, reducing job growth.
There will be companies that are "on the margin" of profitability. They exist--I do not know how great a number they are, but they are typically small businesses (which, remember, hire the plurality of Americans!). Some of these will go under and let labor go. Jobs will be killed.
By _all_ economic logic, artificially increasing wage rates will be a job-killer, period.
Left-wingers actually brag that higher minimum wages actually pushes up the wages of those jobs that would be near minimum wage--thus the effect occurs at higher-wage jobs, as well.
Am I in favor of _low_ wages? No, I think it is awful. But high unemployment pushes wage rates down. Again, supply and demand. The higher unemployment is, the more bargaining power the companies have, the lower the wage rates for everyone not benefiting directly from the minimum wage law. And if we are keeping unemployment higher, _which we do by having these wage restrictions_, those wage rates will _never go back up_.
Allowing the market to do its job will mean that rates go down until the labor supply is more-or-less exhausted. When it is exhausted, any further growth in the economy will _necessarily_ push wage rates up. So in the free-market example, we have a temporary period of low wages, replaced by ever-rising wage rates. Excepting immigration, labor (unlike _any other good_) is not a supply that can go up to keep up with demand, and thus the price will rise with labor in a free market unlike any consumer or B2B good.
We see the opposite in Europe--high government intervention in labor means companies are _not hiring_. Young people in France have 40% unemployment; in Italy, it is 60%, and in Spain/Greece it is over 80%. Some of this is the recession, of course, but the US is not experiencing this, Canada is not experiencing this, because they do not have artificially inflated wages and labor restrictions to the extent that these countries do.
Despite our continual denial of this, these simple economic laws will continue to govern labor. The best of intentions (these minimum wage laws and labor regulations ) will continue to drive unemployment and, ultimately, contribute to stagnation and poverty in the countries in which they are employed. The free-marketers, in contrast to the propaganda set against them, do not want to hose the poor in favor of the rich. It is the minimum-wagers that want to hose the unemployed in favor of the employed, and this is working splendidly.
Tragically, we will also blame the "free" market for our woes, increase our minimum wage rates more, and continue the economic death-spirals that we're seeing currently.
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