Re: Way OT: Can any econ majors help me out here?

In article <R9mdncsyE-f3yCvenZ2dnUVZ_sSdnZ2d@xxxxxxxxxxxx>,
roads@xxxxxxxxxxxx says...
>
>
>I know this is way the hell OT for MTR, but I also know there are many
>bright minds here as well, so here goes ...
>
>A few weeks ago, I was driving through central upstate NY on the Thruway
>(obligatory roadgeek content) ;-) and listening to my Sirius radio. In
>particular, I tuned into the long-running "MoneyTalk" program hosted by
>Bob Brinker, a name I'm sure any of you investors out there know quite
>well. On this particular night, he invited Joseph H. Ellis, the author
>of a new book titled _Ahead of the Curve_ to appear as a guest on
>"MoneyTalk."
>
>In _Ahead of the Curve_, Ellis has tried to show that there is a
>predictable pattern in leading economic indicators that investors can be
>on the lookout for to maximize their returns. To summarize, it goes like
>this:
>
>-- Real wage growth (wage raises minus inflation) makes it way into
>workers' pockets and bank accounts. As a corollary, inflation must be
>kept reasonably under control, which the Fed under Greenspan (and
>hopefully also under Bernanke) has done a decent job at.
>
>-- With higher disposable income, the lower and middle classes can
>purchase more things they need or even merely want.
>
>-- This causes higher demand for products, leading companies to invest
>in increased production capacity and hire more workers. Theoretically,
>this leads to overall real wage growth for more people, completing the
>circle.
>
>-- In sum, wage growth and inflation are the best leading indicators,
>and (un)employment numbers are really more of a lagging indicator.
>
>Now I'm no genius, and it's highly possible I'm missing something here
>that wasn't mentioned that night on "MoneyTalk." I have to admit that
>I'm going to get a little bit political here, but Ellis' argument kinda
>begs the question: wouldn't we improve the economic lot of a hell of a
>lot of Americans by enacting policies to push wage growth? I mean things
>like raising the minimum wage from $5.15/hour to something people can
>actually live on, like $10.00/hour. Obviously, I know that raising the
>minimum wage to $10/hr overnight isn't exactly the greatest thing for
>certain low-margin small businesses, but you can't tell me that $5.15/hr
>is anything but corporate welfare for medium to large corporations

Is getting good grades in college level economic courses a substitute for
being an econ major?

*I don't think raising the mininum wage would cause more unemployment, as
some have alleged. Companies don't hire more workers than they actually
need (and it seems most hire less!) whether wages are $5.50 or $10.00.
It's possible a few might be driven out of business by the increased
costs, but I think most would pass along the increased costs to
consumers. Anyone who thinks the people in suits would take a pay cut to
increase the salaries for the rank and file are in a dream world.

* However, raising the minimum wage would cause inflation, because
A) As mentioned above, the costs of goods and services would increase.
B) You have more money chasing around goods and services. Although tThey
can make as many copies of Windows XP as they need, with other things the
supply is fixed, say starter houses or antiques; things that they aren't
or can't make more of.

>Let me posit another theory, and feel free to point out anything I might
>be missing with this one as well. If our minimum wage is $10/hr, more
>Americans would suddenly be able to "put food on their family" (can't
>resist using the W malaprop here) on minimum wage jobs; isn't that one
>of the arguments in favor of allowing illegal immigrants from Mexico to
>stay here, that 'Americans won't take certain jobs'? I mean, if
>minimum-wage jobs at $10/hr are suddenly that much more attractive to
>Americans, that should theoretically squeeze illegals out of the US
>employment market. (Anticipating the reply that companies will simply
>move more jobs overseas where labor is cheaper, I come prepared with the
>following Jeremy Lance quote: "One word: tariffs.")

Srubbing toilets isn't much more attractive at $10.00/hour than $5.15 an
hour. Factory jobs already tend to pay more mininum wage anyway. Tariffs
cause inflation by making things cost more, and other countries would
retaliate by slapping tarriffs on our stuff. Whether the end result would
be worthwhile is another question entirely.
>
>Like I've said, if anybody is seeing something obvious that I haven't
>mentioned, bring it up. Let's avoid name-calling and inane partisan
>bull*** and keep this to an academic discussion of economic theories.
>
The Twin Cities might be a localized case of what might happen if minimum
wages were raised. For a long time (I don't know if we still are with the
NWA situation and all) we were at essentually full employment; every fast
food resteraunt had a help wanted sign. With no college degree I got a
white collar job that started at $11.50 and hour; I think even fast food
is around $9. We still have mexicans scrubbing our toilets, and lots of
them since our wages attract people from all over the country. The price
of certain fixed commodities like land and starter houses is going
ballistic. As I know, we still have a lot of people who would rather live
on government handouts than work. Congestion is increasing as road
building hasn't kept up with economic and population growth. However, I
think all in all, I think we're doing quite well.

Economics are maddenly complex; and have been the primary cause of most
wars in history.


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