The essential difference between the Neo/New Keynesian interventionists and the pro-free market Austrian School (in regards to this issue) is whether or not an artificial boom is sustainable.

New Keynesians agree that pumping new money into the economy creates an artificial boom. Even Krugman admitted that the housing bubble was caused by the Fed's easy money policies. In fact Krugman was one of the people who actually called for a housing bubble...

The problem with artificial booms (in the Austrian view) is that they are just that: artificial. There's nothing backing up that new money. The result is a shift in resources from where they would normally go into sectors that would otherwise be obvious to be unsustainable.

The interest rate is essentially the price of money. if you take a cab and pay $50 for that,t hen that $50 was the price for a cab ride. If you borrow $500 and pay back $550 then the price of that $500 was $50 or 10%.

Obviously people will be more inclined to borrow money when the price is lower then when it is higher. Artificial low interest rates leads to mal-investment. People start projects they would otherwise not have started. They start projects that are not sustainable in the long run. Why are they not sustainable? Because the price of money is artificially being kept low and the Gov (central bank) can't keep doing this forever (or they would cause hyperinflation.. think Zimbabwe). When the price of money goes up again, those companies that couldn't exist without cheap/free money run into problems.

What we need is the market to do its work. What we need is liquidation of bad investments.

If no one is buying the products you are selling then that is the market giving you a signal. It's telling you that no one is willing to buy those products at the price you are selling them.

If you just invested $1000000 in a new carriage factory and except for a few Amish no one is buying your horse drawn carriages then it doesn't make sense to continue borrowing more cheap money to keep your factory going but then it's time to scale things down. Then it's time to sell some (or all) of the wood, leather,metal, tools etc you intended to use to build carriages. Yes, you probably won't be able to recuperate your $1000000 investment (some of the wood can only be sold as firewood (at a lower price than you expected to get for it if it was part of a finished carriage), some of the tools are too specialized to be used for something other than building Amish style carriages and can only be sold as scrap metal etc), but that is the great thing about the free market: it rewards responsible behavior and it punishes bad behavior. Maybe you should have started with a small factory or you could have started building those carriages in your garage. And you could have expanded your operation if things went well, but no... because money was cheap you overreached and now you end up paying the price for that)

Keeping unsustainable business in business by putting them on an IV with cheap money does not provide more wealth. It does not provide more goods and services that people want and are willing to pay for. Keeping unsustainable business in business only harms sustainable and new business because it raises the prices of the resources they are competing for (skilled laborers, wood, oil, leather etc).

And it gets even worse when they start directly bailing out companies. Because that way they totally remove all responsibility.

(I'm off, i'll be back on monday)

I think currently minimum wage in the states is $7.25 p/hr.

$7.25 x 40 hours = $290, less approximately 25% in assorted payroll taxes and deductions (not including health care), leaves you with around $220 for the week.

That averages LESS than $1,000 p/month to pay ALL of your bills and life expenses.

And some of you think people would be able to live on LESS than this?!

PLEASE!

Do you think that had anything to do with that? I don't. For one thing there was a giant Internet bubble that pumped the economy incredibly.

As far as an infrastructure stimulus plan being artificial, that's not entirely true. Even conservative estimates put return on smart infrastructure investments at 2.5-3% due to increased productivity and other factors over time. Modernizing infrastructure gives short term gains in jobs and consumer spending, but it also gives long term gains due to the return caused by living in a modern and more efficient society. High speed rails, nation wide high speed wifi, modern schools, etc. These things all allow us to be more productive, educated and innovative which gives us long term economic stimulus.

As far as cheap money and bailing out business and propping up companies, I never suggested any of that.

Don't forget, our economy was relatively normal until we decided to wage two of the longest wars in American history....simultaneously. Then we allowed the banking industry to totally wipe out a majority the equity every American had in their home, after which we gave the banks all the money they lost right back. It's not like we need to re-invent the wheel here. We just need to right the ship. America has worked for a pretty long time, it's just that a few stupid people at the top made some incredibly short sighted decisions, some for ideology, and some for greed.

Actually most states do have their own minimum wage. If you would educate yourself on the topic you would know this.

http://www.dol.gov/whd/minwage/america.htm#Consolidated

And no you can't live on $15,000 a year ANYWHERE. People making only $15K a year be eligible for some kind of government assistance which is what we are trying to avoid. The lone except is a single person with no dependents. But even they can't live on $15K a year. After FICA and income taxes are taken out a single person making minimum wage is only left with $13,300 a year to live on. And of course that's not counting other taxes he'd pay like state income taxes or sales taxes, gas taxes etc etc. In my state you get taxed 8.25% on FOOD. And I'm not talking just McDonald's and shit I'm talking groceries.

The problem with the minimum wage is that it stays the same for years then has to be increase by huge amounts. Businesses and republicans don't want to raise it so they delay delay delay. But it ALWAYS gets raised eventually and in the end these business end up hurting themselves when they get $2 increases in the minimum wage. Congress needs to raise the minimum wage one more time then after that have it increase annually based on CPI. It's better for workers and business because they will KNOW it's coming and how much it will be instead of sitting around thinking for 10 years "oh god I hope they don't raise the minimum wage this year." then one day "Oh damn now I have to pay out $2 an hour more?" It also helps because it no longer becomes a political issue.

Amen brotha!

Among the worst offenders of paying below minimum wage are various government and non-profit entities, such as community swimming pools. Most people are surprised to learn that some occupations are exempt from minimum wage laws and can legally pay even less than $7.25 per hour. Some summer jobs in Pennsylvania, reportedly, pay per hour in the high $5s / low 6s.

On a related topic, most people, including many employers, are surprised to learn that in some states, such as Pennsylvania, that the employer doesn't legally have to provide any breaks at all for persons age 18+, if they don't want to ...

And the kicker is that while providing breaks is voluntary on the employer's part in some states (ie. Pennsylvania), if the employer provides them, it's mandatory for the employee to take them.

Bottom line is, the employer sets the rules; many of the legal protections many employees assume they have, they don't really unless they've negotiated for them, as part of a collective bargaining (ie. is a member of a union).

Ron

Bingo.

Good luck selling that painfully obvious logic to a teabagger or, even more so, to an idiot like gideon though.

the amazing thing is you guys keep accusing me of being entitled while your the ones arguing for the rights of people to EARN a minimum wage

the biggest pay day i ever got was when i worked for $1/hour because i gave up 59/hour of my normal rate for a percentage of the business.

if you think your wage is too low try and figure out how you can make/save the company 7 times what it cost you to work there. The average company, has to make that amount just to break even.

minimum wage is not an issue for anyone who thinks like that.

A whole thread full of fail.

It saddens me that all of you think any economic problem can or would be fixed by the government. A government that owes a huge debt to a private bank, the Federal Reserve, run by international bankers.

Every time one of you utters an opinion on anything more complicated than tying your shoes the collective world I.Q. goes down a few points and Baby Jesus begins to cry.

That's ridiculous, there is ALWAYS stuff to do... companies don't hire because benefit from hiring is lower than the cost... lower the cost and the benefit vs cost equation shifts in favor of hiring more people... :2 cents:

Take fast food industry for example... most fast food places are not open 24/7... and that's because lets say they earn $200/night, but have to pay $250 in labor costs... so it makes no sense to keep McDonalds open at night.... lower the cost of labor to $150 and suddenly, there is room to hire some night shift workers...

similar logic can be applied to ANY business...

(by cost of labor, I don't necessarily mean wages, but also various taxes, unemployment insurance, health insurance, and other costs and barriers to hiring...)

Yep, it always burned my ass to have to pay MATCHING social security funds for my employees. Fucking govt. double dipping for social security and spending it on wars and lavish lifestyles for politicians and kickbacks to their buddies.

Hiring someone these days is a damn adventure all in itself. It's VERY expensive to have employees. TOO expensive.

Thank you for point that out. Highlights the market dynamics behind wages. So even if there is NO minimum wage, employers would still be under pressure to pay prevailing wages based on industry and skill level of the employee.

Yes and no. In a perfect world that is how it works. However, we don't live in a perfect world.. Say someone takes a job for $3 per hour. You can't live on $3 per hour. There might be exceptions to the rule, but the average person cannot support themselves on $3 per hour. So they will still likely be getting food stamps, possibly housing assistance, welfare, babysitting assistance etc. so they aren't really out of the system, they end up getting moved to a different part of the system.

The only way for it to really work and people having a decent life at that wage is if prices drop quickly and substantially and that is likely not going to happen.

Ok so if they lower the wages by 40% then they'll hire workers. Workers who don't exist because no one will work for 40% less than the curent minimun wage. I wouldn't.
ther's this myth that if business could lower wages then they'll hire more workers. I think thay would take that savings and put it in their pockets and we would still have an unemployment problem. Also even if they did feel like hiring more workers there is the myth that they are millions of Americans willing to work for $4 an hour like it was 1988. The only workers willing to work for $4 an hour speak spanish and no one wants them here.

That is exactly my point. Heck there are people making $7.25 an hour that get foodstamps etc. at $3 they'd get even MORE. Where does this money come from. Ironically from the people bitching that the minimum wage is too high. So their taxes would have to be RAISED to give these people more welfare money. Also lowering the wages means less money coming in for SS and Medicare taxes which means the deficit gets even higher. If raised the minimum wage to $10 an hour then those on welfare would recieve LESS welfare and foodstamp of they get any at all. That SAVES money. They would get LESS money for the earned income credit. That SAVE money. They would pay MORE SS and medicare taxes. That SAVES money.

Also people on foodstamps don't pay sales tax on the food they buy. Where I live people like me not on foodstamps pay 8.25%. Maybe if there were less peole on foodstamps the tax on the food I'm buying wouldn't have to be 8.25% because there would be more people paying taxes on it. The way you get people off foodstamps is to increase their wages enough that they no longer qualify for them. This isn't rocket science people.

Another thing to consider. Of the 9% unemployed and face it it's really 15%, the VAST majority of those people had jobs paying MUCH more than minimum wage. So lowering the minimum wage or getting rid of it completely does NOTHING to lower unemployment for those people who were making $30K, $40K, $50K a year.

As mentioned elsewhere in this thread, even many fast food places and gas stations are paying $12.50 or so. So if you need to earn more than $7.25, either start showing up sober so you qualify for McD's or better, or wait until you're 18 to move out.

When you talk about minimum wage employees, these are the ones who aren't responsible and hard working enough for even fast food. Darn right you can't make a decent living showing up an hour late and stoned out of your mind. Tough. Show up on time and you can make $12.50.

This is a gross oversimplification of a larger problem. On one hand you are correct. A guy working a minimum wage job is much more likely to flake off, do a bad job etc than a guy making $15 or more. The reason is that the minimum wage guy is likely a kid who is just doing the job so he can make a few extra bucks while the other guys is likely supporting himself or others. Also, the more you pay, the larger the pool of prospective employees is so you can choose to be picky and select the best.

However, one of the main problems we are having now is that there are a ton of people who built a middle class life for themselves on a manufacturing job that paid $15-$25 per hour. That job is now gone and it isn't coming back. Many, hell, most, of the new jobs being created are lower paying service industry jobs or higher paying tech jobs. This means the guy has to make a choice. He can either take the lower paying job, declare bankruptcy and start over from scratch, but still not be able to provide much of a life for himself and his family or he can go back to school, get retrained and get a higher paying job. Neither one of those is a fast, easy fix nor is either other of those a pretty situation when you have kids to feed, but that is the way the world works and it is a situation a lot of people are facing today.

What I'm getting at is that getting a better paying job, a job that you can afford to support a family on and make a decent living on is a lot more difficult to get than just showing up sober or working hard. removing the minimum wage is not going help these people in the slightest unless it has an immediate effect on prices and brings things down in cost dramatically and quickly and that isn't going to happen.

I also have a theory that if there were no minimum wage it would not help create many jobs. The reason is that large companies would still have no real reason to create large amounts of jobs in this country. Why pay a US worker $2 or $3 per hour when they can still pay a worker in another country the same or less but not have to pay social security, benefits, overtime, deal with OSHA etc.

You might see some small companies add the lower paying jobs, but if we are being honest most of those jobs will likely have a high turnover rate and will be a pain in the ass to fill with reasonable people so chances are they may end up being more of a pain than they are worth and companies would rather just sit on that money than create those lower paying jobs.

I'm not going to argue the details anymore because the whole underlying concept is so ludicrous. Why on Earth would anyone believe that you can make a country great by further burdening the poor, the people with the least to give. All this talk of eliminating the minimum wage, drug testing those on food stamps, busting unions, cutting medicaid, they are all aimed at further burdening the poor. How do you make a country great by burdening the most disadvantaged among us even more than they already are?

Don't people realize what is happening, the super wealthy banks totally gutted the middle class of all it's value. They took the money, went out of business, then took the tax payers money to prop themselves back up. Now the super wealthy want to go after the poor, but the poor have nothing, so they are going after all the social programs they depend on. First they totally extracted all the money from the middle class and now they are going after the poor.

If you believe that further burdening the poor will make America great again then you are either:

a) Mr. Burns

or

b) have fallen for the right wing rhetoric that says that all the problems faced by this country are caused by the poor and all the solutions can only be carried out by catering to the wealthy.

mynameisjim... from my perspective it would seem that "yes" we do need to help some folks who genuinely can not work.

But I don't see it as a "burden" to require able bodied people to pay for their own food and medical care. I can see it as something that our country has tried to do. But if we can't do it anymore I don't think it is a "burden" to them. It's their responsibility to take care of themselves. I'm not on this Earth to pay other people's bills for them. I'm here to take care of MY family.

True, but don't forget, we are not broke as a country because we tried too hard to help those that are less fortunate. We went broke because we fought two of the longest wars in history while at the same time cutting taxes. Then we bailed out the banks which account for over half of the country's GDP. Before all that started we had a surplus of money!

The super wealthy started the Tea Party so they could shift the debate and they have succeeded. Sound minded people are starting to believe that we are broke because of social programs. The truth is, we can keep all our promises to the poor and the elderly, but we can't fight wars without raising taxes and we can't bail out companies that are larger than most countries and expect to somehow have money left in the bank.

We can't lose sight of how we really got here and we didn't get here by giving too much to the poor.

Productivity is up, wages are down, corp profits at all time highs. They will hire when their workforce can't meet demand, its pretty simple really.

:thumbsup :thumbsup :thumbsup

As long as companies are allowed to hire from the foreign labor pool, at pennies p/hour, without any penalties, then the US workforce will NEVER come back, period.

So just to be clear, hiring illegal labor is your solution for rebuilding the US jobs problem?

Technology is one of the big reasons for these job loses as you state. Also, as you state, these were/are unskilled jobs so it is no surprise that they eventually moved off-seas. Some of it can be blamed on greed. For example I read the other day that if Apple manufactured all of it's products here in the US and paid a livable wage to those who were making them they would still make 100% profit or more. They want more profit so they have them built elsewhere and that is there prerogative. Clearly the people of this country don't care where they are built or they would not buy them.

Where we have a big problem now that won't be quick or easy to solve is that we now have potentially millions of workers with no job and no skills beyond those for a job that no longer exists. Those people will need to get some kind of education or training if they are going to eventually get jobs that pay a good wage. If the government is going to be handing out stimulus money I wouldn't mind seeing some of it go to people like that who are going to go back to school and learn a new trade.

Where are the shovel ready jobs?

waiting for government money which the GOP refuses to give because they want things to continue to be bad until Nov 2012.