Basic economy questions

[Mad Indian]

To add to the above video, the minimum wage would force the small businesses, which cant afford to compete with larger ones with the higher artificially inflated wages. So they would be forced to cut down the number of employees or close their business down.

So these dirtbags would rather have a higher minimum wage and force unemployment rather than market decide the wages at appropriate levels

 

[Mad Indian]

Then why did you see it? I presume you did, because you posted it.

Just kidding.

did you see the video? I saw a milton video , which was very long and discussed all the negative aspects of Minimum wage. It had made all the arguments and so it makes me lazy to retype them here

 

[pmaitra]

did you see the video? I saw a milton video , which was very long and discussed all the negative aspects of Minimum wage. It had made all the arguments and so it makes me lazy to retype them here

I agree with your fundamental point.

I have not seen the videos, but I have been following this minimum wage BS for years, very recently with the McDonald's burger flippers' protest drama.

I will see the videos at a later time.

 

[Abhijat]

@Mad Indian , You are right in case of MGNREGA, i.e it had put more money in hand of labor class. But the problem started , when their consumption pattern , tended more towards protein/vitamin rich products , like fruits,milk products etc.

So , it caused inflation , in short run, as "supply side" of these products , were not taken care of.

So , the problem was not due to ,demand side in all, but also mismatch from supply side, and "no productive" work done by laborers in MGNREGA.

Regarding minimum wage, it would not be necessary to raise them, if the Reserve Bank of India, taking India as an example, stopped printing counterfeit currency. Every time one Rupee is printed, the RBI should add so much precious metal to its reserves to preserve the worth of the Rupee. However, RBI does not do that, and hence, increase in the number of Rupees, with no increase in the reserve, causes the value of all Rupee units to drop. Every Rupee that is printed without adding precious metals to the reserves is counterfeit, but since RBI issues all Rupees, we cannot distinguish between what is counterfeit and what is not. Therefore, the ill effect of counterfeiting is shared across all Rupees that exist.

Isn't it the basis of all "fiat" currency at the moment , print all the money you wanted , without increment in reserve ?

 

[Mad Indian]

I would try to give an example for why Minimum wage is retarded, but I doubt it will get into the head of the idiots, considering my previous well reasoning post dint get past their stupidity.

Here is a scenerio - I have 2 lakh money to invest in a Restaurant business. 1 lakh, I invest in the furniture/false walls/equipments and the likes (@Sakal Gharelu Ustad what is the word for it in economics?) and 1 lakh for hiring the workers and running the restaurant for 1 month.

Since I am investing in a business and want profits - I expect a reasonable return for my investment - Rs. 20000/- per month .

Now scenerio 1 - no minimum wage and I pay the workers based on the wage/labor market. So I have 1 lakh to pay the workers. If the wage market is such that the workers cost 10000 per head to hire, I can hire 10 people to work for me. So my sales nets me 1,20,000 per month, and so I would have 20000/- per month in profit

Scenerio 2 Now the well intentioned socialist idiots come up with a brilliant minimum wage plan to help the workers and the govt, for political reasons goes ahead with it because worker votes trumphs logic and reason, and hence set the minimum wage at Rs. 20000 per month-

this can lead to three outcomes. Note that in all cases, I would need 20000 per month to justify the time I spend in managing my restaurant and I only have 1 lakh rupees to spend on the workers.

A. 1 lakh rupees per month means, I can hire 5 people and make them work for me under those laws. So instead of 10 workers, i would only hire 5 workers. I have to force them to work double time or other such shit and to compensate for the loss of 5 workers. I get to keep 20000 rupees in profits for my investment and my efforts to run the company


B. The five people I hire are not enough to run the business and so, they quit, or the business drops due to their lower efficiency compared to working with more people and so the sale drops - I fire more due to it or i simply cannot afford to run the business anymore and so i decide to just to say fuck this shit and Close the restaurant - bye bye five well paid jobs as created by the minimum wage law

C. The govt manadated plan has the practical effect of Increasing the inflation and so , now prices of the food items are higher now. So instead of selling the goods at a return of 1.2 lakhs, i now sell them at 2.4 lakhs, .ie the increase is directly proportional to how high the minimum wage set above the labor rate in open market- .,ie 100% higher minimum wage higher than labor market results in a 100% increase in prices(because the goods produced are the same, while the people have 100% more cash in hand. Prices are the result of demand vs supply - with higher wages/money in people's hand , but the amount of goods produced remains the same, prices will go up in proportion to increased demand from wages). So I will have a turnover of 2.4 lakhs and since I have 10 workers paying them 20000 permonth. So In the end, I make a profit of 40000 Rs. But it is not any more worth than the 20000Rs. per month in scenerio 1 due to the price inflation


These are the three possible outcomes of Govt madated artificial wage increase , with A and B being more of a short term result and C being the long term result when market stabilises

So, at best, you have no net change as in C and at worst - you have job loss for 5 workers or job loss of 10 workers as in A and B

And of course, this does not include the negative effect of scenerios A and B on new investments. Since now workers cost more to hire and maintain, only people with more money would be able to start and run a business. So instead of people requiring 2 lakhs to start and run a restaurant , you will need 3 Lakhs to start and run the same thing, and that too will have diminised result on the investment - seeing as how 20000k return on 2 lakh is 10% return on investment while 20000k return on 3Lakhs is only 7.5% return on my investment, So in outcomes A and B, you will have far fewer no. of people opening new businesses and hence fewer new jobs - .ie in addition to destroying existing jobs, the no. of new jobs created will be lower. This A and B scenerio will continue till the market stabilises aroung the new increased minimum wage and in scenerio C we will end up in the same starting square of scenerio 1


So tell me how does Minimum wage help any one?

 

[Mad Indian]

@Mad Indian , You are right in case of MGNREGA, i.e it had put more money in hand of labor class. But the problem started , when their consumption pattern , tended more towards protein/vitamin rich products , like fruits,milk products etc.

So , it caused inflation , in short run, as "supply side" of these products , were not taken care of.

So , the problem was not due to ,demand side in all, but also mismatch from supply side, and "no productive" work done by laborers in MGNREGA.



Isn't it the basis of all "fiat" currency at the moment , print all the money you wanted , without increment in reserve ?

Its actually far worse than that - read my previous post. You will understand how sinister this minimum wage is on the economy. Why do you think Indian economy was crawling during Socialist era? not because socialists intentionally brought in fucked up laws, but because most of the well intentioned interventions on the economy tend to fuck it up

 

[Mad Indian]

@pmaitra dude, you are unfairly blaming the fiat currency for this issue. If anything fiat currency makes the blow from minimum wage laws to be less severe. What I said would be true of minimum wage laws in gold backed currencies too

@Sakal Gharelu Ustad Correct me if I am wrong

 

[Mad Indian]

This is the video I was talking about. Notice how the leftist loonatics here do the the same in the video- argue on emotions rather than facts and logic. -"the typical Humanitarian BS and what not"


Watch what the Black american says in 9.27 . It will blow the crap that minimum wage increases economy by increasing consumption right out the window

 

[Sakal Gharelu Ustad]

@pmaitra dude, you are unfairly blaming the fiat currency for this issue. If anything fiat currency makes the blow from minimum wage laws to be less severe. What I said would be true of minimum wage laws in gold backed currencies too

@Sakal Gharelu Ustad Correct me if I am wrong

@pmaitra believes that if you suck fiat currency out of system, the world will turn green! Under gold standard, minimum wage will lead to permanent fall in employment because rate of digging gold will most probably be less than the inflation needed to support full employment.

On the other post, it is called fixed or sunk cost.

 

[MananNarainSharma]

What BS. If thats the case all the countries of the world would just legislate their way to increase the minimum wage using consumption driven economic growth justification and become rich. It is a fallacy through and through.

About min wage being a fiscal policy- it has more to do with welfare and the political gains rather than economic ones. This is kind of the same retarded argument used by MNREGA proponents, among many others that MNREGA will increase the money circulation among the poor and will stimulate consumption and hence growth. But the actual result of course is there for anyone to see

Why do you have the habit of selective blindness. You ignore half of the very post you quote where I say min wage can be used in some cases, but you need to be careful when determining its level. If creating wealth was as easy as raising wages then every idiot will be an economist, but where did I claim any such thing in my post? I said min wage is a fiscal policy tool which can be used to spur economic growth and there is enough empirical argument to back that up. The problem seems to be your rush to shout down everyone by calling them names if they have a different view point.

I have already read enough of Mr Milton work, infact I have read all of it. The difference is I have also read other view points and prefer to arrive at my conslusion after having heard all sides of the different economic philosophies. I think having a measured centred approach is better than extreme positions at the risk of sounding like a nutter.

I am no fan of Mengra, it was stupid law but even Menrega had its advantages. Few points-

1) congress had no idea how to pay for it, they just kept running the fiscal deficit and poor management of food grain stock led to the soaring inflation. If they had shown fiscal discipline and managed food stock better the inflation would have been under control

2) Menrega should have been used to create assets congress was happy to give out wages for digging holes and filling them up.also they had no clue how to plug leakages.

3) also look at the effect of Menrega in budelkhand. The MP part where BJP imp,emended it properly Menrega wages were used to construct infrastructure for agriculture led to growth of 16 percent. While in UP part of the same region zero. So it's also down to political will.


The point is there are shades of grey, the world is not black or white. You have a habit for being aggressive and calling people names just because they disagree or put forward a different pov. If you don't want to listen to contrarian point of view why are you even on an Internet forum? You are a very angry person, if I were you I would get some help.

 

[Sakal Gharelu Ustad]

Why do you have the habit of selective blindness. You ignore half of the very post you quote where I say min wage can be used in some cases, but you need to be careful when determining its level. If creating wealth was as easy as raising wages then every idiot will be an economist, but where did I claim any such thing in my post? I said min wage is a fiscal policy tool which can be used to spur economic growth and there is enough empirical argument to back that up. The problem seems to be your rush to shout down everyone by calling them names if they have a different view point.

I have already read enough of Mr Milton work, infact I have read all of it. The difference is I have also read other view points and prefer to arrive at my conslusion after having heard all sides of the different economic philosophies. I think having a measured centred approach is better than extreme positions at the risk of sounding like a nutter.

I am no fan of Mengra, it was stupid law but even Menrega had its advantages. Few points-

1) congress had no idea how to pay for it, they just kept running the fiscal deficit and poor management of food grain stock led to the soaring inflation. If they had shown fiscal discipline and managed food stock better the inflation would have been under control

2) Menrega should have been used to create assets congress was happy to give out wages for digging holes and filling them up.also they had no clue how to plug leakages.

3) also look at the effect of Menrega in budelkhand. The MP part where BJP imp,emended it properly Menrega wages were used to construct infrastructure for agriculture led to growth of 16 percent. While in UP part of the same region zero. So it's also down to political will.


The point is there are shades of grey, the world is not black or white. You have a habit for being aggressive and calling people names just because they disagree or put forward a different pov. If you don't want to listen to contrarian point of view why are you even on an Internet forum? You are a very angry person, if I were you I would get some help.

Oouch! Min wage is a fiscal policy tool but it requires private restaurant business to foot the bill!! That is a new definition of fiscal policy.

 

[MananNarainSharma]

Oouch! Min wage is a fiscal policy tool but it requires private restaurant business to foot the bill!! That is a new definition of fiscal policy.

Used in conjunction with fiscal policy. Is that better, yea technically you are right it's not a fiscal policy tool but it is used as part of overall policy to influence demand.

People who argue that min wage is deterrence to employment have one problem, the facts are not in their side of the argument. For example in the US Job creation and profitability at companies that employ low-wage workers have continued to grow even when the minimum wage has increased, 75 percent of the largest U.S. employers of minimum or near minimum-wage workers had higher revenues after the recession (either 2012 or 2011, depending on when the company’s fiscal year ended) than before (2007 or 2008). That period also coincided with two minimum wage increases, one in July 2008 and the other in July 2009, to the current level of 7.50.

 

[Sakal Gharelu Ustad]

Used in conjunction with fiscal policy. Is that better, yea technically you are right it's not a fiscal policy tool but it is used as part of overall policy to influence demand.

People who argue that min wage is deterrence to employment have one problem, the facts are not in their side of the argument. For example in the US Job creation and profitability at companies that employ low-wage workers have continued to grow even when the minimum wage has increased, 75 percent of the largest U.S. employers of minimum or near minimum-wage workers had higher revenues after the recession (either 2012 or 2011, depending on when the company’s fiscal year ended) than before (2007 or 2008). That period also coincided with two minimum wage increases, one in July 2008 and the other in July 2009, to the current level of 7.50.

Causality is a bitch. I have not come across any studies which prove it. As far as recession goes, companies reduced a lot of loose flab and fired a lot of inefficient workers- that is why jobless recovery a major concern due to outsourcing or mechanization of routine tasks.

Min wage is similar to unions. It benefits those who are employed and reduces opportunities for others. Demand stimulation through minimum wage is a big myth. In open economy, it just leads to transfer of jobs to China or other locations!

 

[MananNarainSharma]

Causality is a bitch. I have not come across any studies which prove it. As far as recession goes, companies reduced a lot of loose flab and fired a lot of inefficient workers- that is why jobless recovery a major concern due to outsourcing or mechanization of routine tasks.

Min wage is similar to unions. It benefits those who are employed and reduces opportunities for others. Demand stimulation through minimum wage is a big myth. In open economy, it just leads to transfer of jobs to China or other locations!

Agree to disagree.

Jobs going to china are not the min wage jobs those are 40k to 50k per annum which chinese are happy to accept 15-20k US. That is part of open markets with free flow of good and services, you can't have it both ways. U.S. Has long benefited from this order and continues to do so, there be might be some jobs being lost but the pros of a free system of flow of good and services and trade enchancement is in mutual benefit of all.

 

[Sakal Gharelu Ustad]

Agree to disagree.

Jobs going to china are not the min wage jobs those are 40k to 50k per annum which chinese are happy to accept 15-20k US. That is part of open markets with free flow of good and services, you can't have it both ways. U.S. Has long benefited from this order and continues to do so, there be might be some jobs being lost but the pros of a free system of flow of good and services and trade enchancement is in mutual benefit of all.

It is difficult to see with naked eyes because changes are subtle. Most of the repetitive jobs are moving towards either being outsourced or mechanized. Bring in minimum wage and it advances this process even more by decreasing labour cost efficiency. France for example has artificially inflated wages which has basically made eastern european countries more competitive and led to failure of French firms.

In an open economy and mechanization environment, so called minimum wages hurt more.

 

[MananNarainSharma]

It is difficult to see with naked eyes because changes are subtle. Most of the repetitive jobs are moving towards either being outsourced or mechanized. Bring in minimum wage and it advances this process even more by decreasing labour cost efficiency. France for example has artificially inflated wages which has basically made eastern european countries more competitive and led to failure of French firms.

In an open economy and mechanization environment, so called minimum wages hurt more.

As I said before the level of min wage needs to be determined carefully, I don't advocate making it artificially too high, plus there are other labour laws that make France uncompetitive.

 

[Sakal Gharelu Ustad]

As I said before the level of min wage needs to be determined carefully, I don't advocate making it artificially too high, plus there are other labour laws that make France uncompetitive.

That is why you have market to determine optimal level.

 

[pmaitra]

@pmaitra dude, you are unfairly blaming the fiat currency for this issue. If anything fiat currency makes the blow from minimum wage laws to be less severe. What I said would be true of minimum wage laws in gold backed currencies too

@Sakal Gharelu Ustad Correct me if I am wrong

I am not blaming the fiat currency at all. The fiat currency issue is different from the minimum wage issue, prima facie. If you look closely, in either case, too many pieces of currency notes in everyone's hands leaves everyone in the same relative position.

@pmaitra believes that if you suck fiat currency out of system, the world will turn green! Under gold standard, minimum wage will lead to permanent fall in employment because rate of digging gold will most probably be less than the inflation needed to support full employment.

On the other post, it is called fixed or sunk cost.

GREEN: That is part of the solution. Either suck it out, or allow alternative currencies to be legal tender along with the all fiat currencies. In a truly free market, people should be free to choose their currency, and the currency should be free from manipulation. It is no wonder Indians hoard gold. They know if they keep their hard earned money in bank, they will still retire and live like a beggar.
RED: There is no evidence that inflation is "needed" to support full employment.

 

[Sakal Gharelu Ustad]

I am not blaming the fiat currency at all. The fiat currency issue is different from the minimum wage issue, prima facie. If you look closely, in either case, too many pieces of currency notes in everyone's hands leaves everyone in the same relative position.

GREEN: That is part of the solution. Either suck it out, or allow alternative currencies to be legal tender along with the all fiat currencies. In a truly free market, people should be free to choose their currency, and the currency should be free from manipulation. It is no wonder Indians hoard gold. They know if they keep their hard earned money in bank, they will still retire and live like a beggar.
RED: There is no evidence that inflation is "needed" to support full employment.

Indians hoard gold before the advent of modern banking systems! It is more than 2 years since our first discussions started regarding it. Fiat money is a tool and outcomes depend on how you use it.

Red: I did not say inflation is needed to support full employment- Philips curve is not true. My statement was given the discussion on minimum wage.

 

[pmaitra]

Indians hoard gold before the advent of modern banking systems! It is more than 2 years since our first discussions started regarding it. Fiat money is a tool and outcomes depend on how you use it.

Red: I did not say inflation is needed to support full employment- Philips curve is not true. My statement was given the discussion on minimum wage.

Ok, thank you for the clarification. So, we agree on the red part.