Basic economy questions

[pmaitra]

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.

• He is no benchmark to determine who is what. Calling people retards and dingbats won't make them so. It only reflects poorly on him, especially when the other person has not resorted to name-calling.
• He cannot afford to waste his precious time in reading what others have written, because, he has to post a certain number of posts in a short period of time, whether it is coherent or not.
• Yes, he is angry, and he is doing justice to his nomme-de-plume. "Mad" not only means a lunatic, but in some cases, it means angry.

 

[MananNarainSharma]

• He is no benchmark to determine who is what. Calling people retards and dingbats won't make them so. It only reflects poorly on him, especially when the other person has not resorted to name-calling.
• He cannot afford to waste his precious time in reading what others have written, because, he has to post a certain number of posts in a short period of time, whether it is coherent or not.
• Yes, he is angry, and he is doing justice to his nomme-de-plume. "Mad" not only means a lunatic, but in some cases, it means angry.

:biggrin2: Cheers. There should be an ignore button on this forum. Save us all some grief.

 

[MananNarainSharma]

That is why you have market to determine optimal level.

:biggrin2: Ofcourse. I am sure you know my come back to that as well. As I said agree to disagree.

 

[Bhadra]

Both the vedieo put up by @Mad Indian to argue that unemployment is the result of minimum wages is simply false. One Job is one job and if it is cheaper it does not become two jobs. The higher percentage of teenage unemployment is related to number of jobs available rather than cost of the job.The answer to their unemployment is to increase production / services and create more jobs rather then reduce the cost of the job.

In the classical case of demand and supply like in India, we have higher numbers of trained engineers than the market demands and hence minimum salary a trained engineers is offered is pittance some times less than a well trained mechanic who are lesser in supply. Has that created more jobs for engineers?? No. On the contrary, engineers jobs have been reduced in the market due to oversupply and no significant contribution.

If teenagers are more unemployed it is not solely due to their aspirations to earn minimum wages but due to lack of job opportunities at higher / skilled levels at a wage which they think they should get. If there are no jobs for higher skills why should any one acquire higher skills? The employers get better skilled labor due to compition from immigrants who are employed at lower wages .. laws or no laws.

Unemployment is not directly related to wages but inability of the society to create more jobs. In creating new jobs wages is but a small factor and not the sole factor. For creating new jobs, supply of money or inceasesing purchasing power is also necessary or why should any one produce !! Sometimes the Capital is given in loan to sustain that production like in the case of USA providing loans or grants to Pakistan to sustain their Arms industry. Or earlier USA supplying wheat to India to sustain their farmers.

If one is a pricipled free market advocate like @ Mad Indian half of the world industry will close down. If GoI does not provide free ash to cement manufactures in Kota, half of the cement production in India will not be there.

So should the industry only be the free loaders ?

 

[Mad Indian]

Both the vedieo put up by @Mad Indian to argue that unemployment is the result of minimum wages is simply false. One Job is one job and if it is cheaper it does not become two jobs. The higher percentage of teenage unemployment is related to number of jobs available rather than cost of the job.The answer to their unemployment is to increase production / services and create more jobs rather then reduce the cost of the job.

In the classical case of demand and supply like in India, we have higher numbers of trained engineers than the market demands and hence minimum salary a trained engineers is offered is pittance some times less than a well trained mechanic who are lesser in supply. Has that created more jobs for engineers?? No. On the contrary, engineers jobs have been reduced in the market due to oversupply and no significant contribution.

If teenagers are more unemployed it is not solely due to their aspirations to earn minimum wages but due to lack of job opportunities at higher / skilled levels at a wage which they think they should get. If there are no jobs for higher skills why should any one acquire higher skills? The employers get better skilled labor due to compition from immigrants who are employed at lower wages .. laws or no laws.

Unemployment is not directly related to wages but inability of the society to create more jobs. In creating new jobs wages is but a small factor and not the sole factor. For creating new jobs, supply of money or inceasesing purchasing power is also necessary or why should any one produce !! Sometimes the Capital is given in loan to sustain that production like in the case of USA providing loans or grants to Pakistan to sustain their Arms industry. Or earlier USA supplying wheat to India to sustain their farmers.

If one is a pricipled free market advocate like @ Mad Indian half of the world industry will close down. If GoI does not provide free ash to cement manufactures in Kota, half of the cement production in India will not be there.

So should the industry only be the free loaders ?

I have already explained what actually happens in real world scenrios with Minimum wage.

But of course, to understand that either you must have run a business or must have read economics books. I am guess you have done neither. Did you even read my post #25 ? Dude, seriously shed your ego and you might actually learn.

But of course, You can "believe" whatever you want. after all for socialists, believes trumph reason and logic

 

[Mad Indian]

:biggrin2: Ofcourse. I am sure you know my come back to that as well. As I said agree to disagree.

He is a economics PhD student. I suppose you have better knowledge of economics than him

 

[Mad Indian]

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.

Again your posts reek of the typical champagne swallowing socialist ramblings , who has no clue as to what happens on ground. Even if I do counter your stupid post, it will simply just go over your head. This is why I prefer not to engage in debates with stupid people. I have only so little time for learning something new, which I cant afford trying to teach economics to people who clearly have no interest in learning.

You can believe whatever nonsense is convinient for you, like how Milton's extreme position of 2+2=4 and Communist position of 2+2=6 , and so the moderation of two that 2+2=5 must be true

 

[Mad Indian]

What the hell. At max I am going to waste half an hour in my life trying to explain why your reasoning is wrong and even if you dont get what I am saying, if someone else gets it, I think it "might" have been worth my time

Both the vedieo put up by @Mad Indian to argue that unemployment is the result of minimum wages is simply false. One Job is one job and if it is cheaper it does not become two jobs.

Eh, nope. thats not how labour market works. For instance, I own a Fast food stall and the average wage we pay is from 8000Rs. to 12000 Rupees, depending on the value of the worker/productivity of the worker. if tomorrow, govt mandates that I pay 20k per worker. Then I would just have to close shop and all the workers in my restaurant would lose the low paying jobs they have now. This is how real world job market works

The higher percentage of teenage unemployment is related to number of jobs available rather than cost of the job.The answer to their unemployment is to increase production / services and create more jobs rather then reduce the cost of the job.

Again, the no. of jobs available also depends on the wages one has to pay for those jobs. For instance, if the job market is such that I will get workers for 6000Rs. instead of the 12000 workers, then i might even hire three workers in place of two . The fast food stall could use some extra help and training and reserves, if I can afford to keep it that way. Wages directly influence how job hirers behave(considering I am one)

In the classical case of demand and supply like in India, we have higher numbers of trained engineers than the market demands and hence minimum salary a trained engineers is offered is pittance some times less than a well trained mechanic who are lesser in supply. Has that created more jobs for engineers?? No.

Actually yes, the no. of engineers being higher in number do increase the job opportunities for them indriectly , since now their wage is lower due to competition. I am a co-owner of a software start up along with my cousin. We have four people working for us, and we could pay them only 5000 Rs. per month. But they gain experience for their work and we learn as well. That is the only amount we could spare for them as of now, since right now, we are only establishing and have to put money from our pocket to run it. So if the govt comes along and fixes some 10k as the min wage - again, i would have to close up shop and you wont have those four jobs anymore.

Also, people who do work for us for 6-8 months do get better paying jobs and may move on to some other bigger firms with the exp they gained from us. And eventually that what we are tryin to achieve - give enough wage to make them stick with us, if they are good. But for now, we can afford it and so any tinkering with minimum wage will kill our firm . this is also the case for all the industries in the world

On the contrary, engineers jobs have been reduced in the market due to oversupply and no significant contribution.

What you are talking about here will happen even if there is minimum wage. If there are too many people to work the same job - then the price for the job will come down. There is nothing special here. But if you try to artificially keep it up by means of min wage - then even the one or two jobs which might otherwise be available for smaller pay will disappear too. This is the practical ground reality

If teenagers are more unemployed it is not solely due to their aspirations to earn minimum wages but due to lack of job opportunities at higher / skilled levels at a wage which they think they should get. If there are no jobs for higher skills why should any one acquire higher skills? The employers get better skilled labor due to compition from immigrants who are employed at lower wages .. laws or no laws.

What you have said has no relevance to the topic at hand.

Unemployment is not directly related to wages but inability of the society to create more jobs.

And artifical minimum wages is one of the many things which affect the ability of the society to create jobs

In creating new jobs wages is but a small factor and not the sole factor.

LOL. Labor costs typical accounts for 30% of all the costs in medium and small scale industries. That is not a small factor by any scale. I am guessing you have no experience in running anything related to business.

For creating new jobs, supply of money or inceasesing purchasing power is also necessary or why should any one produce !!

Supply of money will only increase inflation in absence of higher productivity. This is what I explained in my very first post.

Sometimes the Capital is given in loan to sustain that production like in the case of USA providing loans or grants to Pakistan to sustain their Arms industry. Or earlier USA supplying wheat to India to sustain their farmers.

And that is a bad way of doing business and running an economy. this is why socialist economies eventually fail - like USSR and the EU boil down recently. Govt cant subsidise a failing industry without taxing a profitable one. That is, you are in essence encouraging destruction of profitable industry by propping up a useless industry.

If one is a pricipled free market advocate like @ Mad Indian half of the world industry will close down. If GoI does not provide free ash to cement manufactures in Kota, half of the cement production in India will not be there.

Wow. Just wow. the Typical scaremongering BS commies use when talking about free market

But, back here in the real world, evidence says other wise. All the socialist countries have gone bankrupt or forced to change their ways under the threat of bankruptcy to follow free market. And the present data also proves that economic success of a nation depends on how free the market is. But you can live in your lala land. No problem for anyone

So should the industry only be the free loaders ?

Exactly. Why should free loading commies be given care of industry? If anything only productive members of the economy deserve to get paid and not free loaders who want govt to pay the bill for them
ime.

 

[amoy]

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!

Fyi in China there's a compulsory min wage thats varying from area to area e.g. Shenzhen at around rmb 2000, and Tibet at 1700 per month (usd1=rmb6.2), subj to annual review, supposedly far higher than India's. does it cause massive job transfers to India or others?

all in all productivity matters.

it's doubtful that min wage works in India (inked on paper but hardly enforced in full). under yr circumstances there's an huge general oversupply of cheap labor (continuously converted fm rural to urban) that keep wages depressed, plus reportedly a sizable shadow economy unregulated/untaxed hence beyond the min wage.

many Indians sound quite wary of inflation. however an mild inflation is a necessary stimulus for growth. deflation is another dreadful monster. a malign cycle likely ~ constantly low wages >> inadequate purchasing power >> contracted demand for products >> lack of incentives for business >> downsizing >> unemployment >> …less demand >> …deflation… recession…

~Tapa talks: Orange is the new black.~

 

[Mad Indian]

Fyi in China there's a compulsory min wage thats varying from area to area e.g. Shenzhen at around rmb 2000, and Tibet at 1700 per month (usd1=rmb6.2), subj to annual review, supposedly far higher than India's. does it cause massive job transfers to India or others?

If that logic is taken to its conclusion, US should not have any industries in its soil today. So your very reasoning is flawed from start to finish. And this minimum wage is one of the major reasons why US companies shift to india(for services) and to China , in case you had forgotten, since the minimum wage is much higher in US than in India or china

all in all productivity matters.

Exactly. Minimum wage does jackshit to improve the economy. Productivity of the economy is what matters

 

[amoy]

If that logic is taken to its conclusion, US should not have any industries in its soil today. So your very reasoning is flawed from start to finish. And this minimum wage is one of the major reasons why US companies shift to india(for services) and to China , in case you had forgotten, since the minimum wage is much higher in US than in India or china



Exactly. Minimum wage does jackshit to improve the economy. Productivity of the economy is what matters

u talk as if there were only three in the world America China and India. Eh isn't Mexico the next door to America as a member of NAFTA with cheap labor?

so whats yr point ? America shall lower or undo their min. wages so as to retain xxx industries? then what is the purpose of economic growth? [emoji38]

now America is developing something more value added than manufacturing.

for yr knowledge American manufacturing shifted to Japan first then Korea Taiwan... Mainland China then took the next shift from these recepients in turn. all the manufacturing giants Germany Japan Korea… r NOT "cheap". in this regard I agree with @jouni "u have to pay more to get more".

growth for growth sake is meaningless. the income must keep pace with productivity so as to sustain economic growth with sufficient demand. min wage is only setting the floor - a bottomline for the "being" in a certain society . honestly speaking a company shall not be allowed to open / operate if it cannot meet the "minimum" in the first place. ever heard of the term "good corporate citizen"? [emoji1]

labor and capital may be on different sides of the tug of war. the state (legislature) must tip the balance ~ that is how a "minimum" comes abt.





~Tapa talks: Orange is the new black.~

 

[Mad Indian]

u talk as if there were only three in the world America China and India. Eh isn't Mexico the next door to America as a member of NAFTA with cheap labor?

so whats yr point ? America shall lower or undo their min. wages so as to retain xxx industries? then what is the purpose of economic growth? [emoji38]

now America is developing something more value added than manufacturing.

for yr knowledge American manufacturing shifted to Japan first then Korea Taiwan... Mainland China then took the next shift from these recepients in turn. all the manufacturing giants Germany Japan Korea… r NOT "cheap". in this regard I agree with @jouni "u have to pay more to get more".

growth for growth sake is meaningless. the income must keep pace with productivity so as to sustain economic growth with sufficient demand. min wage is only setting the floor - a bottomline for the "being" in a certain society . honestly speaking a company shall not be allowed to open / operate if it cannot meet the "minimum" in the first place. ever heard of the term "good corporate citizen"? [emoji1]

labor and capital may be on different sides of the tug of war. the state (legislature) must tip the balance ~ that is how a "minimum" comes abt.

Oh, please,my post was in response to your counter of @Sakal Gharelu Ustad argument that minimum wages force the otherwise would be available jobs to foreign market with lower wages,. You claimed that China has not started losing its jobs to India and so his logic is false(it already has, come out of your well and even if your statement is true, the logic is flawed as I showed) . That was a BS argument from start to finish. I just demonstrated why that is a stupid argument.

As for the topic at hand, I dont know whether you even understood what you were posting as it only solidify's @Sakal Gharelu Ustad ' argument . As you yourself have said, the American Companies shift their production centres based on the several factors- labor cost being an important one, but not the only one. For instance , the same american company which is investing in china would not invest in India despite india has a better labor market - for other reasons like the proposal getting delayed in the bureaucracy, the red tape and socialistic legislations making it harder to business here and what not. but given a choice between India and china, all other conditions being the same, the business men would invest in India if India has a cheaper labor market. That is all. The fact that US companies shifted from Japan to Korea to China and now looking at India itself proves how important Labor costs is and also why it is harmful to keep it artificially high with minimum wage laws

As for why the claim that minimum wages dont improve anything in the economy - look at the opposite and reason. If Minimum wage does improve consumption and shit, why not countries legislate a larger and larger minimum wage and legislate their way to riches? What cat got their hands?? . If this logic is lost on you - I will explain it simpler , your argument is that 2000$ minimum wage per month in place of the actual market value of the job of 1000$ will make the economy richer by that much by stimulating consumption. So why not 5000$ and make it that much richer? Or even 10000$ and make even more richer? Or a billion $ and so on and so forth? So China can become a Billion Billioners state overnight by just making a minimum wage law of billion $


PS: And this time, keep out the purpose of economic growth or other such straw man BS out of your reply. BTW Economic growth is not even about wages or jobs or income. Its about goods available for consumption.

 

[Bhadra]

@Mad Indian - you seem to advocate classical theory of Adam Smith that labour should be paid so low that their number reduces by death and starvation like post and during industrial revolution. Wages are not and should not be purely a function of supply and demand and negotiation between the employer and employee. Wage determination must be a wider socio-economic phenomenon.

Some how I get an impression here that the term "minimum wages" is being understood and being pedalled to be as "maximum wages" or exploitation of industry by labour / workers. Which the case is not.

Firstly, no one pays wages as determined by the govt. There are extensive legislation on this but of no avail :

• The payment of Wages Act 1936

• The payment of Bonus Act 1965

• The Equal Remuneration Act

• The Minimum Wages Act

• The Companies Act 1956

Wages on ground are determined, sector wise, skill wise. geographic location wise, supply of labour and cost of living. Due to migration of Bangladeshi poor, the rates of domestic servant wages in Delhi, for example is pittance. The same worker engaged in construction will get different wages. Within the same group, skilled labour would get more, woman labour different and Children labour different wages.

Minimum wages as laid down by the govt mostly are applicable to labour hired by the govt deptts and govt agencies. Inspite of numerious lagis lations on the subject, is that ever followed. @Mad Indian pays only Rs 5000 to a BTech graduate and claims he is giving him experience in lieu of salary ... What a nobel method of value addition :

Even in govt sector. there is exploitation of labour by the contractors and Babus who collaborate to take away part of it.

There theoretically are three wages as followed :

Minimum Wages, Living Wages and Fair Wages

• Minimum wages- It must provide not only for the bare sustenance of life but for the preservation of the efficiency of the workers by providing some measures of education, medical care, etc.
• Criteria: It must be calculated for a family of 4 units (numbers)
• It must be able to provide 2700 calories per adult per day
• It should be sufficient for 18 yards of cloth per unit per annum
• There should be a provision for reasonable house rent, light, fuel and miscellaneous items
• When ever the cost of the above increases the minimum wages are increased and there is no conspiracy in that as being propagated here as leftist tamasha.

Minimum Wages, Living Wages and Fair Wages

• Living wages- It is not only for the bare essentials for the worker and his family, but also for comfort, protection against ill-health, decency, social needs and insurance for old age ( say a fourth class Railway employee)
• Fair wages- It is in-between minimum wages and living wages, but below the living wage . ( say a organised sector factory worker)

Now tell me what is being paid to the unorganised labour in India - none of the three. It is below subsistence level.. Adam Smith's conspiracy to decrease the population

 

[amoy]

PS: And this time, keep out the purpose of economic growth or other such straw man BS out of your reply. BTW Economic growth is not even about wages or jobs or income. Its about goods available for consumption.

goods available[emoji1]

and keep out purpose?[emoji1]

curious who would be able to afford the available goods in your economics to motivate the supply.

without ever growing purchase power as a result of increasing productivity +jobs +wages >> DEMAND yr economic growth is driven by hot air sheerly.

and we're talking abt "minimum" arent we?


~Tapa talks: Orange is the new black.~

 

[jouni]

u talk as if there were only three in the world America China and India. Eh isn't Mexico the next door to America as a member of NAFTA with cheap labor?

so whats yr point ? America shall lower or undo their min. wages so as to retain xxx industries? then what is the purpose of economic growth? [emoji38]

now America is developing something more value added than manufacturing.

for yr knowledge American manufacturing shifted to Japan first then Korea Taiwan... Mainland China then took the next shift from these recepients in turn. all the manufacturing giants Germany Japan Korea… r NOT "cheap". in this regard I agree with @jouni "u have to pay more to get more".

growth for growth sake is meaningless. the income must keep pace with productivity so as to sustain economic growth with sufficient demand. min wage is only setting the floor - a bottomline for the "being" in a certain society . honestly speaking a company shall not be allowed to open / operate if it cannot meet the "minimum" in the first place. ever heard of the term "good corporate citizen"? [emoji1]

labor and capital may be on different sides of the tug of war. the state (legislature) must tip the balance ~ that is how a "minimum" comes abt.





~Tapa talks: Orange is the new black.~

I would say that developed countries like for example Germany and Finland have high skill jobs in the area, that in India or China might be called unskilled labor jobs. For example carpenters and other construction workers are proud professionals with own guilds and good salary in both countries. We try to add value to the process in all levels. That is made possible because everybody nowadays have good education no matter what the job.
http://en.wikipedia.org/wiki/Journeyman_years

 

[amoy]

@jouni I would not call carpenter a unskilled job [emoji2]

like any commodity labor is usually dictated by the market force. then "minimum wage" comes into play as normal as the sate / legislation sometimes intervenes to maintain a relatively "fair play" for stakeholders like anti-dumping or anti-trust acts.

~Tapa talks: Orange is the new black.~

 

[Mad Indian]

goods available[emoji1]

and keep out purpose?[emoji1]

curious who would be able to afford the available goods in your economics to motivate the supply.

without ever growing purchase power as a result of increasing productivity +jobs +wages >> DEMAND yr economic growth is driven by hot air sheerly.

and we're talking abt "minimum" arent we?


~Tapa talks: Orange is the new black.~

Yes, goods available for consumption is what determines how good the economy is and the increase in goods available for consumption is what constitutes the economic growth - not wages.

I wrote this long back . I will repost it again. Dont make me feel that I have wasted my time by coming up with strawmans again,


And people think that Jobs are the factor which determines the economy. Thats wrong. Jobs are just an indicator in economics. The end result from the jobs - the services and goods we get is the one which is more important when determining the economic progress.

For ex. Lets say there are two countries A and B each with a population of 1000 working members in 2015. For argument's sake lets take that they all manufacture only clothes.

Now both countries take different routes to development(in this case manufaccturing clothes), A mechanises the industries because A found mechanisation to be cheaper and so more efficient and dint really care about the loss of jobs and B increases the no. of jobs by Human labor, because they thought that, mechanisation while efficient, decrease the no. of jobs and so concluded to save the jobs at the expense of efficiency and so in the same sectors
|
Now lets say that it takes 200 people to make 100 clothes and lets say that it costs 2 crores for that.

Now the country B employed the 200 people to produce 100 clothes instead of mechanisation because they thought that mechanisation destroys jobs though they are cheaper . So after 10 years, country B produces 500 clothes with 1000 people at the cost of 10 crores, and so now has full employment

Now the reason A mechanised was because the mechanisation with employment of just 100 people was 50% cheaper than the employing 200 people for the same job of producing 100 clothes and so for them it cost 1 crore for employing 100 people with machines to produce 100 clothes. So the country A after ten years, employed 800 people with mechanisation and produced 800 clothes at the price of just 8 crores. Now the country A has 200 unemployed people, but has saved 2 crores


Now compare A and B. A has more unemployment but has more resources to consume, .ie (800 clothes as against the 500 clothes of B) and has saved 2 crore rupees for other future projects. B has full employment and has less resources to consume compared to A.

Note that the average productivity of B is 0.5 clothes to a person. So to achieve the same level of consumption of an average person in B, the govt of A can fund a welfare for the unemployed 200 in its country at a rate of 0.5 clothes per person(.ie the wage he will earn had his country had not mechanised and had remained job oriented like B) . So now, after funding the welfare, govt A now produces 300 clothes in excess of govt B. and hence the country of A has on average a GDP of 0.8 clothes per capita while the country B has an economy of 0.5 clothes percapita, with A also having 2 crores in their foreign exchange or future expenditure account while B has none.


So now tell me, which among the two countries A and B is better off economically?

This analogy will make it clear why productivity is what determines economics and not wages or the jobs available

 

[Mad Indian]

@Mad Indian - you seem to advocate classical theory of Adam Smith that labour should be paid so low that their number reduces by death and starvation like post and during industrial revolution. Wages are not and should not be purely a function of supply and demand and negotiation between the employer and employee. Wage determination must be a wider socio-economic phenomenon.

Some how I get an impression here that the term "minimum wages" is being understood and being pedalled to be as "maximum wages" or exploitation of industry by labour / workers. Which the case is not.

Firstly, no one pays wages as determined by the govt. There are extensive legislation on this but of no avail :

• The payment of Wages Act 1936

• The payment of Bonus Act 1965

• The Equal Remuneration Act

• The Minimum Wages Act

• The Companies Act 1956

Wages on ground are determined, sector wise, skill wise. geographic location wise, supply of labour and cost of living. Due to migration of Bangladeshi poor, the rates of domestic servant wages in Delhi, for example is pittance. The same worker engaged in construction will get different wages. Within the same group, skilled labour would get more, woman labour different and Children labour different wages.
... What a nobel method of value addition :

Even in govt sector. there is exploitation of labour by the contractors and Babus who collaborate to take away part of it.

There theoretically are three wages as followed :

Minimum Wages, Living Wages and Fair Wages

• Minimum wages- It must provide not only for the bare sustenance of life but for the preservation of the efficiency of the workers by providing some measures of education, medical care, etc.
• Criteria: It must be calculated for a family of 4 units (numbers)
• It must be able to provide 2700 calories per adult per day
• It should be sufficient for 18 yards of cloth per unit per annum
• There should be a provision for reasonable house rent, light, fuel and miscellaneous items
• When ever the cost of the above increases the minimum wages are increased and there is no conspiracy in that as being propagated here as leftist tamasha.

Minimum Wages, Living Wages and Fair Wages

• Living wages- It is not only for the bare essentials for the worker and his family, but also for comfort, protection against ill-health, decency, social needs and insurance for old age ( say a fourth class Railway employee)
• Fair wages- It is in-between minimum wages and living wages, but below the living wage . ( say a organised sector factory worker)

So does any of the BS you have written has any actual logic or reason on how it improves the economy or even the working condition of the worker? No. All you have given is the usual emotional rhetoric on why wages must be high. But dont worry, you are not alone as for socialist emotions and ideological dogma trumph logic and reason. What I gave is reason and logic on why Minimum wage is BS and all you have come up with moronic rants about why we need minimum wage because workers are Human. Basically, I have given reason and logic and you have given an emotional argument. But sorry to bust your bubble, economics does not work on emotions. It works on crude hard facts and logic

Minimum wages as laid down by the govt mostly are applicable to labour hired by the govt deptts and govt agencies. Inspite of numerious lagis lations on the subject, is that ever followed. @Mad Indian pays only Rs 5000 to a BTech graduate and claims he is giving him experience in lieu of salar

You know, without my firm, those BE grads would be jobless right now. But I know you would prefer them to be jobless for the lack of minimum wage than work according to their ability and learn for a lower wages

But again, if the govt raises the minimum wage, I just have to close up the firm and all those five employed in it will lose their only means of food and wages as of now and their only means of getting on the job training. Is that what you want Genius?

Now tell me what is being paid to the unorganised labour in India - none of the three. It is below subsistence level.. Adam Smith's conspiracy to decrease the population

Do you actually believe this crap? Wow. You have issues. Get help. No body is conspiring anywhere. In fact this very reasoning that population is a problem is a direct result of socialist reasoning and is not part of classical economics

 

[jouni]

I would say that developed countries like for example Germany and Finland have high skill jobs in the area, that in India or China might be called unskilled labor jobs. For example carpenters and other construction workers are proud professionals with own guilds and good salary in both countries. We try to add value to the process in all levels. That is made possible because everybody nowadays have good education no matter what the job.
http://en.wikipedia.org/wiki/Journeyman_years

Yes, you Chinese mastered carpentry already two thousand years ago. At least based on Crouching tiger movie...those houses were well crafted and full of great furniture.

 

[Sakal Gharelu Ustad]

So does any of the BS you have written has any actual logic or reason on how it improves the economy or even the working condition of the worker? No. All you have given is the usual emotional rhetoric on why wages must be high. But dont worry, you are not alone as for socialist emotions and ideological dogma trumph logic and reason. What I gave is reason and logic on why Minimum wage is BS and all you have come up with moronic rants about why we need minimum wage because workers are Human. Basically, I have given reason and logic and you have given an emotional argument. But sorry to bust your bubble, economics does not work on emotions. It works on crude hard facts and logic




You know, without my firm, those BE grads would be jobless right now. But I know you would prefer them to be jobless for the lack of minimum wage than work according to their ability and learn for a lower wages

But again, if the govt raises the minimum wage, I just have to close up the firm and all those five employed in it will lose their only means of food and wages as of now and their only means of getting on the job training. Is that what you want Genius?






Do you actually believe this crap? Wow. You have issues. Get help. No body is conspiring anywhere. In fact this very reasoning that population is a problem is a direct result of socialist reasoning and is not part of classical economics

Good reply.

@Bhadra- Lets say tomorrow you increase minimum (fair or whatever you want to call) wages from 500Rs/day to 1000Rs/day for manual labor. Some people would retain it and others would get fired. Read @Mad Indian's post at the beginning of the thread about restaurant business and possible consequences. A lot of people would loose their jobs and people do not take this into account while forming opinions.

South Africa is a classic example. It had natural resources and a lot of extraction industries. Most of these industries work on trade unions which wanted to keep the wages high. End result, people outside the union end up not having any jobs while the unions enjoy life.

Also, why do you think govt. mandated wage policies do not work? Because they are not sustainable. Actually I think they are more regressive because they lead to more exploitation. How? Back to @Mad Indian's restaurant example. Min wage goes up from 10000 to 20000 and he has 1 lakh to spend on wages. Before the min wage regulation he was employing 10 people but now could employ only 5. Business is unprofitable because he needs minimum 8 people to run the operation. So what are the options now? If you are not Indian there are no options, you just close the shop. But if you are Indian, you are smarter and you bend the rules. You hire 3 workers formally on the market and pay 20k each, so 60,000. The other guys are told they are fired unless they take a wage cut i.e. 8k each equalling 40,000 for 5 workers. The firms actually play around with these rules even more because it is illegal to pay below min wage. So what do they do now? They hire 2 workers for 20k each=40,000. Pay the rest six, 8k each, i.e. 48,000. This still leaves around 12,000 to pay as bribe to the tax inspector if he ever comes.

Moral of the story. If there are stupid laws, people will bend them and give opportunity to the bureaucrats to extracts money from simple people. But ofcourse, if you keep your eyes closed you will blame the evil businessman and not blame the screwed up economic policies.

P.S. It is not true just about Indians. Almost everyone in the world bends the rules, but probably Indians know how to bend a little bit more!