Minimum Wage

[The Lizard Queen]

What you have here is not just an argument against increasing the minimum wage, but an argument against all economic growth. If those people on the minimum wage quit their minimum wage jobs and started thriving businesses, there'd be more money in the system, and exactly the same mechanism would kick in.

Only if their thriving business was printing money...
Successful businesses would actually increase the value of currency by giving it a greater buying power, since the real value has nothing to do with the number on the paper, but the buying power it represents.

 

[Dudeofteenage]

How does this happen? How does higher wages and people being able to afford things actually make revolutions more likely? If people are content, they have no reason to risk life and limb fighting the state military.

Empowerment and contentment are not necessarily the same things. Sometimes rising living standards makes people more ambitious and less willing to live with restrictions. Probably the paradigmatic example is the French Revolution which was preceded by an economic boom in ancien regime France.

Only if their thriving business was printing money...
Successful businesses would actually increase the value of currency by giving it a greater buying power, since the real value has nothing to do with the number on the paper, but the buying power it represents.

So how does that work? You've still got extra money going into the system, which means a greater amount of money chasing the same amount of goods.

I'm guessing you may mean that successful businesses indirectly stimulate the wider economy and indirectly lead to an increase of goods and services available, so inflation is minimised. Which may well be true, but it's quite possible for minimum wage increases to do the same thing, since low income people have more money available to spend, leading to an economic stimulus effect.

I know that the beneficiaries of the minimum wage haven't "earned" their extra money the same way successful business owners have, but the economic effect of a dollar (or whatever unit of currency) is the same whether or not it was earned by entitlement, honest hard work, or anything in between.

 

[PeteyCoffee]

What you have here is not just an argument against increasing the minimum wage, but an argument against all economic growth. If those people on the minimum wage quit their minimum wage jobs and started thriving businesses, there'd be more money in the system, and exactly the same mechanism would kick in.

No, a new business creates wealth; assuming a business survives the free market without losing money, it has to be creating more wealth than it expends.

The value of money depends on the wealth it represents. Increasing the minimum wage does not create wealth, it simply redistributes it. More money being distributed to an area without more represented wealth in that area in order to justify it = temporary inflation, in order to correct the discrepancy.

Say the minimum wage was doubled. That would mean suddenly certain types of companies have about 30% increased expenses. Sure, market adjustments will soon take care of that and at that point expenses will be basically the same as before. However, many small to medium sized companies couldn't last 6 months losing money, much less the 3 to 4 years the complete market adjustment will probably take. (Hell, there are companies which couldn't take 3% increased expenses.)

In the meantime, companies fail, corporations buy them out. The dead competition means that after this recession corporations of the effected industries get by offering less wealth than they did before. The wealth gap is increased.

 

[autisticdragonkin]

As one can see minimum wage moves the amount of people working from point E to point A.
the grey area represents economic loss from minimum wage
the pink area represents the profits of corporations with minimum wage
the orange and teal areas represent worker income with minimum wage

without a minimum wage the orange area and the lower grey area are worker income
the pink area the teal area and the higher grey area represent profits for corporations

 

[PeteyCoffee]

So how does that work? You've still got extra money going into the system, which means a greater amount of money chasing the same amount of goods.

That is called a recession - more money being added to a system without more value being created, or without an equivalent increase in productivity.

In a time of prosperity, money becomes more distributed as a consequence of increased productivity. Usually it's because of either technological innovations or increased competition. Forcefully redistributing money does not produce the same effect. On the contrary, doing so reduces competition, as plenty of small to medium sized companies cannot survive any more money being taken away from them.

Edit: Also, inflation hurts the poor and the most generous organizations the most because they can least take the hit.

If increasing the money supply is the solution to a better economy, then we should transfer all production to printing dollar bills.

 

[Dudeofteenage]

That is called a recession - more money being added to a system without more value being created, or without an equivalent increase in productivity.

You're mixing up your terms here. A recession is simply a prolonged period of negative economic growth. It can happen with or without more money being added to the system.

Using the definition you've extended here, the early 90s economic recession was not an economic recession because Bush Snr didn't print money.

In a time of prosperity, money becomes more distributed as a consequence of increased productivity. Usually it's because of either technological innovations or increased competition. Forcefully redistributing money does not produce the same effect.

Never said it did. However, conversely, increased productivity does not, contrary to libertarian economics, always lead to increased prosperity.

Edit: Also, inflation hurts the poor and the most generous organizations the most because they can least take the hit.

While hyper inflation is not characteristic of inflation, generally high levels of inflation hit the middle hardest, since the poorest sector of society's main asset is their wages, and wages can adjust for inflation while savings can't. The rich usually have most of their money in assets or investments and relatively slight liquid holdings, so, again, they're not vulnerable to inflation.

But this is missing the point - contrary to what you've written above, inflation is not exclusively caused by wealth distribution. Periods of high economic growth are usually accompanied by spikes of inflation regardless of whether or not that growth was state simulated or privately simulated. Redistribution, ironically, only creates inflation if it does its job, e.g. by creating economic growth.

If increasing the money supply is the solution to a better economy, then we should transfer all production to printing dollar bills.

Once again a caricature of Keynesian economics. Nobody would argue that simply printing money in and of itself will increase wealth. The argument is that printing money is a necessary evil for spending projects that will create sufficient economic growth to outweigh the inflationary effects of the printing. It's the same logic as a business borrowing money in order to expand, except that the state's method for increasing liquidity is different (although states often do borrow, and in fact generally prefer to do so).

 

[AnOminous]

Once again a caricature of Keynesian economics. Nobody would argue that simply printing money in and of itself will increase wealth. The argument is that printing money is a necessary evil for spending projects that will create sufficient economic growth to outweigh the inflationary effects of the printing. It's the same logic as a business borrowing money in order to expand, except that the state's method for increasing liquidity is different (although states often do borrow, and in fact generally prefer to do so).

Printing new money is essentially a tax on existing money, as it siphons from the fixed pool of value, the existing money, into the new money, devaluing the existing money. This effect isn't instantaneous, and when done responsibly, the growth created by doing so eventually offsets the loss of value.

It is generally, at the outset, politically painless to authorize this kind of indirect tax, which is where its pernicious features arise, as a government becomes inclined to do it again and again. While most developed countries are never going to make the elementary mistake of actually kicking off hyperinflation by excessive money printing, reliance on the method is still potentially dangerous.

It also tends to alter the behavior of market participants. It discourages saving and encourages borrowing, as both money saved and money to be paid back in the future are worth less. This is why money printing is usually coupled with increased interest rates.

This doesn't necessarily mean the practice is universally bad. There are times it's actually preferable to encourage spending and borrowing. It's just often, imprudently, done when that's exactly what you don't want to encourage.

 

[chimpburgers]

You're mixing up your terms here. A recession is simply a prolonged period of negative economic growth. It can happen with or without more money being added to the system.

Using the definition you've extended here, the early 90s economic recession was not an economic recession because Bush Snr didn't print money.



Never said it did. However, conversely, increased productivity does not, contrary to libertarian economics, always lead to increased prosperity.



While hyper inflation is not characteristic of inflation, generally high levels of inflation hit the middle hardest, since the poorest sector of society's main asset is their wages, and wages can adjust for inflation while savings can't. The rich usually have most of their money in assets or investments and relatively slight liquid holdings, so, again, they're not vulnerable to inflation.

But this is missing the point - contrary to what you've written above, inflation is not exclusively caused by wealth distribution. Periods of high economic growth are usually accompanied by spikes of inflation regardless of whether or not that growth was state simulated or privately simulated. Redistribution, ironically, only creates inflation if it does its job, e.g. by creating economic growth.



Once again a caricature of Keynesian economics. Nobody would argue that simply printing money in and of itself will increase wealth. The argument is that printing money is a necessary evil for spending projects that will create sufficient economic growth to outweigh the inflationary effects of the printing. It's the same logic as a business borrowing money in order to expand, except that the state's method for increasing liquidity is different (although states often do borrow, and in fact generally prefer to do so).

I would also add that this is why we also have monetary policy in place. I would also argue that part of the reason why the Great Depression occurred was because there wasn't enough in the money supply at the time. I don't think any economist would go around saying that printing money on its own creates wealth. Production is obviously really important.

 

[Joan Nyan]

As one can see minimum wage moves the amount of people working from point E to point A.
the grey area represents economic loss from minimum wage
the pink area represents the profits of corporations with minimum wage
the orange and teal areas represent worker income with minimum wage

without a minimum wage the orange area and the lower grey area are worker income
the pink area the teal area and the higher grey area represent profits for corporations

As one can see

Can one? I guess I have to take your word for it because I've been staring at that graph for 5 minutes and can't make heads or tails of it.