Why the minimum wage cannot help.

[Sungai Pusat]

Why the minimum wage cannot help:

Lets take the simple supply and demand system and use it here. This is a very simple graph that almost anyone can understand:

See, the grey line represents the demand of workers and the black line represents the supply of workers. Of course, this can happen in any economic situation, just fyi, cause I don't want any stupid comments popping out of you guys about how the graph does not apply to depressions, which is the case when both of them decline.

So, this graph applies to any situation. Lets suppose we're talking about farming. The equilibrium wage is at $4 an hour. If no one knows, the equilibrium wage means the perfect wage to set for both the worker and the employer to be happy. But what if some government comes in to place a minimum wage at $5 an hour for farmers? Lets see that graph again, with the line for minimum wage:


So, there's the yellow line which is the minimum wage and the red portion which represents: Ta Da! The unemployement. Oh my! So, since the minimum wage is above the equilibrium wage by 25%, the unemployment rate should be very close to that. At 25%. So, because there's not enough employers hiring, the ones that can pay will pay exceptionally low, just low enough to meet the requirments.

Now, imagine there's an imaginary nation called Farmtopia, (Bear with me. ) which has 500 adults potential for work in the nation's farms. Using our minimum wage into picture, there's only 375 workers in the nation. If each worker earns $4 an hour and they can produce $5.50 of labour each hour, then there should be a full $750 earned per hour by the companies. But why not? That is because of the minimum wage which makes it way more expensive to employ. There is now only a combined $187.50 and lesser supply of food, lesser supply of workers and more unemployed.

Now, lets see how taking away the minimum wage can help. By this time, all the adults will be able to be employed since the companies can now afford. Lets take the GNP of the nation now. Since they're 375 workers and $5.50 earned per worker, there is a GNP of $2062.50 an hour. But with the minimum wage lifted, unemployment will drop and the GNP per hour will grow to $2750. That means an economic growth of 33.33% there!

Also, not to mention that since they;re more companies able to afford, they can advance technologies to improve productivity, thus increasing wages. And so on and so on. Also, thanks to the companies forming now, there will be more competition between the companies and so, they'll be willing to move thier wage per worker higher than what the minimum wage would offer! Oh, and not to mention the many more people that we'll be helping to get their bread and butter through this system.

Now, a conclusion. Even though these economics are used on a super simple society, they also apply to today's economics and economies. The mechanisms do not change. And that is all. Thank you.

[NotnotgnimmiJymmiJ]

I will repost this from another thread because it was never addressed.

People are still repeating the fallacy that a drop in wages will increase employment "because businesses can hire more." This argument is intuitive because it makes sense on a micro level. If everyone in the watchmaking industry takes a pay cut, the price of watches will fall relative to other goods. This will then lead to an increase in the quantity of watches demanded and a greater number of watchmakers will be required to fulfill demand at the new equilibrium price.

But the story falls apart in the aggregate. A person's wage (the price of their labor) is what determines their income (how much money they have to spend). The only way a general wage cut leads to an increase in employment across the board is if people buy more across the board.

Why should this be the case? Because a fall in the price level increases the real money supply and liquidity. This will lower interest rates. But right now we're in a liquidity trap. Interest rates cannot fall.

In fact, a fall in wages and prices actually ends up being contractionary for two reasons. First, if debt is nominally denominated, people with lower nominal wages become poorer even if there is a 1:1 fall in the price level. Second, if people expect further wage and price cuts, this raises real interest rates.


Let's assume for a moment that we are in normal times. The free marketeers are still ignoring the monopsony argument.

This is the kind of stuff you would learn after the introductory econ course.

[SaintB]

$4 is what makes the corporatist pricks happy and forces everyone else to starve.

[Inherentjoydom]

You are completely right! Huzzah for Capitalism!

[Sungai Pusat]

$4 is what makes the corporatist pricks happy and forces everyone else to starve.

No, this was just an example!

I will repost this from another thread because it was never addressed.

People are still repeating the fallacy that a drop in wages will increase employment "because businesses can hire more." This argument is intuitive because it makes sense on a micro level. If everyone in the watchmaking industry takes a pay cut, the price of watches will fall relative to other goods. This will then lead to an increase in the quantity of watches demanded and a greater number of watchmakers will be required to fulfill demand at the new equilibrium price.

But the story falls apart in the aggregate. A person's wage (the price of their labor) is what determines their income (how much money they have to spend). The only way a general wage cut leads to an increase in employment across the board is if people buy more across the board.

Why should this be the case? Because a fall in the price level increases the real money supply and liquidity. This will lower interest rates. But right now we're in a liquidity trap. Interest rates cannot fall.

In fact, a fall in wages and prices actually ends up being contractionary for two reasons. First, if debt is nominally denominated, people with lower nominal wages become poorer even if there is a 1:1 fall in the price level. Second, if people expect further wage and price cuts, this raises real interest rates.


Let's assume for a moment that we are in normal times. The free marketeers are still ignoring the monopsony argument.

This is the kind of stuff you would learn after the introductory econ course.

I'm not saying that! I'm trying to say that for the short term, the wage is able to be like so. But as I explained in the ending, the competition from more companies able to afford will enable those companies to afford better technology which increases productivity. That's what you'll see after looking at the ending of my topic!

[Abdju]

Now, lets see how taking away the minimum wage can help. By this time, all the adults will be able to be employed since the companies can now afford.

So, removing the min wage results in zero unemployment UK had no minimum wage until 1999. Therefore, the UK had zero unemployment before 1999.

[NotnotgnimmiJymmiJ]

I will repost this from another thread because it was never addressed.

People are still repeating the fallacy that a drop in wages will increase employment "because businesses can hire more." This argument is intuitive because it makes sense on a micro level. If everyone in the watchmaking industry takes a pay cut, the price of watches will fall relative to other goods. This will then lead to an increase in the quantity of watches demanded and a greater number of watchmakers will be required to fulfill demand at the new equilibrium price.

But the story falls apart in the aggregate. A person's wage (the price of their labor) is what determines their income (how much money they have to spend). The only way a general wage cut leads to an increase in employment across the board is if people buy more across the board.

Why should this be the case? Because a fall in the price level increases the real money supply and liquidity. This will lower interest rates. But right now we're in a liquidity trap. Interest rates cannot fall.

In fact, a fall in wages and prices actually ends up being contractionary for two reasons. First, if debt is nominally denominated, people with lower nominal wages become poorer even if there is a 1:1 fall in the price level. Second, if people expect further wage and price cuts, this raises real interest rates.


Let's assume for a moment that we are in normal times. The free marketeers are still ignoring the monopsony argument.

This is the kind of stuff you would learn after the introductory econ course.

I'm not saying that! I'm trying to say that for the short term, the wage is able to be like so. But as I explained in the ending, the competition from more companies able to afford will enable those companies to afford better technology which increases productivity. That's what you'll see after looking at the ending of my topic!

This paragraph is not even coherent.

[Inherentjoydom]

$4 is what makes the corporatist pricks happy and forces everyone else to starve.

Very rude language u Communist degenerate.

[Sungai Pusat]

Now, lets see how taking away the minimum wage can help. By this time, all the adults will be able to be employed since the companies can now afford.

So, removing the min wage results in zero unemployment UK had no minimum wage until 1999. Therefore, the UK had zero unemployment before 1999.

No, this is only a hypothetical scenerio. If we only had minimum wage and removed that, then the unemployment will come down to zero. If there're other regulations that cost as well, then the unemployment will still be up to a certain degree. But yes, minimum wage removal will pretty much get a lot of businesses that would not be able to succeed with the minimum age succeed withut it. And I'm talking about the little guys, not the big companies.

[Sith Korriban]

Nope. See, the problem is you're explaining this shit in an absurdly patronising tone ("even any socialist can understand") when you don't even know what you're talking about.

You've already admitted you're thirteen, which leads me to highly doubt you've experienced any of this first-hand.

[Ifreann]

$4 is what makes the corporatist pricks happy and forces everyone else to starve.

Very rude language u Communist degenerate.

I am so amused at your post. So very amused.

[Sungai Pusat]

Nope. See, the problem is you're explaining this shit in an absurdly patronising tone ("even any socialist can understand") when you don't even know what you're talking about.

You've already admitted you're thirteen, which leads me to highly doubt you've experienced any of this first-hand.

Yes, I do know. And age =/= skill.

It may mean not much experience, but it does not mean skill. And yes, I've had enough fills of my own lessons from older people with experience and I'm conveying their lessons here.

[Wilgrove]

What's to prevent the company from pocketing the profit and still pay their employees at $4? Just because there's a raise in sales and employment doesn't mean there's going to be a raise in salary.

[Sdaeriji]

As far as I can tell, you made up every part of your theoretical example. Are we supposed to be impressed that the numbers work out to favor your argument when you literally invented them out of thin air? I could navigate a starship through the holes in your argument.

[Dystopianus]

Although I mostly agree with you, there is one thing I don't understand. If 4$ is the equibrillium wage (the perfect wage), then why isn't the minimum wage exactly 4 dollar?

[Wilgrove]

As far as I can tell, you made up every part of your theoretical example. Are we supposed to be impressed that the numbers work out to favor your argument when you literally invented them out of thin air? I could navigate a starship through the holes in your argument.

Are we talking Enterprise size spaceships or Death Star size spaceship?

[Sith Korriban]

Nope. See, the problem is you're explaining this shit in an absurdly patronising tone ("even any socialist can understand") when you don't even know what you're talking about.

You've already admitted you're thirteen, which leads me to highly doubt you've experienced any of this first-hand.

Yes, I do know. And age =/= skill.

It may mean not much experience, but it does not mean skill. And yes, I've had enough fills of my own lessons from older people with experience and I'm conveying their lessons here.

You're incoherent, persistently misunderstand whatever anyone says to you, and you still don't get what I'm talking about.

Have you, or have you not, worked at an actual job, not just chores, for an established wage?

[SaintB]

$4 is what makes the corporatist pricks happy and forces everyone else to starve.

Very rude language u Communist degenerate.

Its not rude to speak the truth. Could you survive on $160 a week? Its hard enough on the current amount.

[Iniika]

Where's your line indicating average cost of living and annual inflation rate?

[Sith Korriban]

Where's your line indicating average cost of living and annual inflation rate?

There isn't one because he seems to think 'everything should be simple' = 'everything really is simple.'

[Sungai Pusat]

Where's your line indicating average cost of living and annual inflation rate?

There isn't. I already told you that this complies with all of those because both of the lines would go up or down for the cost of living thing. Oh, and inflation has nothing to do with this.

[Wilgrove]

Want to know what you get with no minimum wage? You get a sweatshop in China. Do you really want that?

[Tubbsalot]

a very simple graph that even any socialist can understand:

This is where I stopped reading. Which isn't much of a loss, considering how vapid your threads tend to be. Still, if you want people to bother reading huge walls of text, it's probably a good idea to not put in such immature remarks. I'm not even a socialist, that's just obnoxious.

[Maineiacs]

Feel free to take a job at $1/hour, see how that works for you.

[Sungai Pusat]

a very simple graph that even any socialist can understand:

This is where I stopped reading. Which isn't much of a loss, considering how vapid your threads tend to be. Still, if you want people to bother reading huge walls of text, it's probably a good idea to not put in such immature remarks. I'm not even a socialist, that's just obnoxious.

Oh, fine. I placed that in becuase socialists a lot of times don't really view simple maths, which is the case of this. But I'll take that out anyway.