Aside from circular reasoning

Aside from circular reasoning,
Why is the argument false?


aka
>uneducated person uses this argument. Wat do?

>Raise min wage
>Workers have more money to spend
>Businesses raise prices

ftfy

Economy becomes less competitive.

>raise min wage
>workers have more money to spend (but there is more unemployment so less workers)
>consumer spending stays the same (or lowers over long term due to inefficiencies)

>raise min wage (politically popular given stagnating economy, but only exacerbating the problem)

do you need to know how minimum wage causes unemployment?

please explain

It isn't exactly false, it goes more like this.

>Raise minimum wage
>Some workers are let go (Unemployment +)
>Money in circulation increases
>Inflation rises
>Unemployment goes down (Unemployment -)
>Inflation fought by the central bank
>Fed interest rates go up
>Financial sector profit margins get thinner
>There are some residual effects on import/export etc that require math to work out

Basically the working class catches a break, unemployment spikes then dips though whether or not it cancels itself out depends on a lot of factors, and the investors class and finance sector take it in the ass so they aren't happy about it.

What people who only took econ 101 are going to hit you with is this OP:

>Artificially raise price of good (labor)
>Creates surplus labor
>Surplus labor means unemployment

These folks have never taken enough advanced macro to know that the simpler scenario is just that: an overly simplified scenario used for basic instruction. They will defend it until they are shrill though, typically while sounding as arrogant as possible with their tiny amount of knowledge.

You might also hear the following:

>Cost of production goes up
>Price of goods and services are raised

This is another fallacy. Equilibrium pricing does not allow most companies to hike their prices in that fashion or else they will lose money. Something rarely considered:

>Demand for labor is relatively elastic or inelastic within a set band
>Many companies are at the point of low elasticity because they have already cut as much labor as they can
>Some sectors will remain unaffected while others will take the initial hit

The argument in your picture isn't really a fully developed argument, nor are most of the counterarguments that you are going to hear fully developed either. On this board you are going to get hit right smack in the face with a lot of "I took freshman economics so I know everything" type answers, which is good practice for when you run into those people.

It's not always false. It depends entirely on whether minimum wage labor is priced too high or too low. If it's too low, raising the floor will indeed benefit the economy as the wage increase offsets the employment decrease.

Anyone who then hits you with "all markets are constantly at equilibrium" is a moron.

>minimum wage labor is priced too high or too low. If it's too low,

And of course nobody can tell exactly what "too high" or "too low" is. Why don't we raise the minimum wage to $200/hr? "well, that's clearly too high". But there is really no magic "just right" figure.

The closest thing to a "just right" minimum wage is if we magically set it to be just about the same as the clearing wage for unskilled workers (which of course varies from place to place). If we do that, then the minimum wage is a farce, but it doesn't do much damage, and the politicians get to claim that they are doing great things.

The sad fact is that raising the minimum wage -- like any price floor -- is generally bad for the economy but does have winners and losers. The proponents of higher minimum wages can point to the winners (those who get to keep their job and get a raise) but the losers are more diffuse and harder to identify -- but that definitely does not mean they are not there.

The Econ 101: Raising the minimum wage make people more willing to sell labor, but makes firms less willing to purchase labor. This creates a surplus of labor (unemployment).

/thread

What many econtards don't realize about raising the minimum wage is that it is a short term vs. long term gain issue.

In the short term raising the min wage hurts businesses, but in the long term it helps businesses.

The people it effects are the lowest class, which rarely save if ever. They spend whatever they get.

jesus you have missed the consequences of raising min wage by several miles. if this was torpedo you just throw one off the board.

now that's what I call a reply

There's a time-lag between the rise of minimum wage and overall demand going up. Whilst in between that time-lag employees are being made redundant.

The effects get more severe the sharper the min wage rises.

you forget the most important aspect.
the min wage is basically a very important reference line for the entire workforce. it is what the absolutely utterly unskilled and uneducated workers make. if you express all wages as a multiple of the unskilled labor cost you can see what it will do if you increase it. takes a year or two but all wages across the board will adjust and that in turn will seriously kick the money supply of households. at this point the min wagers are not an important part of the equation anymore. whether they still work or not doesn't really matter.

Dude, no. Wages across the board wont shift anywhere due to how irreverent the min wage is. The min wage only effects part-time student workers.

Just because Joe and Fred got a rise at Burger King doesn't mean the whole labour market is shifting.

no you are absolutely wrong about that.
if a worker makes 300 when the min wage is 150 and you increase the min wage to 200 he will want to have 400 because he knows his training and abilities make him twice as useful as the min wage faggot.

that simple. people do more extensive study and training for more money in the future.

How can a guy that makes "300" demand for a higher wage just because the min wage went up from "150 to 200" when the guys who make min wage are in a completely different job market to him?

It's not.

raise minimum wage -> worker has more to spend.

This is where the magical thinking happens. Where does this extra money come from? The government can just command more money into existence !? Amazing! let the govt put the minimum wage at $100 p/h and we can all be rich!

Back in reality, the employer is forced to put his prices up, because his wage cost have been forced up. Or he just makes the job redundant.

The minimum wage makes society poorer, because all goods and services become more expensive.

Read this (pic related).

As long as the min wage is slow and steady, there's no problem as time is given for the market to respond.

Except wages are never 100% of the cost of a good or service so there is never a 1:1 correlation between higher wages and higher prices. It only really 'hurts' people with much higher incomes. Rising unemployment associated with higher incomes is just plain wrong.

>there is never a 1:1 correlation between higher wages and higher prices
I didn't say it was 1:1

>It only really 'hurts' people with much higher incomes
Wrong. It hurts the low skilled, those who labour is worth less per hour than the min wage now have no job. The high skilled are unaffected.

>Rising unemployment associated with higher incomes is just plain wrong
Wrong. The min wage makes low paid crappy jobs illegal, and therefore, those who can only get crappy jobs unemployed.

I know most people today are indoctrinated with what they think they know from college, but you owe it to your self to get a basic understanding of economics. We are headed in to rough financial waters in the years ahead, success in navigating what's coming depends on you understanding it and it's causes.

>'Increase in wage' not 'increase in min wage'
Minimum wages were originally use as a tool to keep out starting and low skill workers by making them have a net negative impact on revenue. Hence, why blacks, mexicans, millenials, and teens have record levels of unemployment in the last 30 years but boomers and retirees are being employed left and right.

>As long as the min wage is slow and steady, there's no problem as time is given for the market to respond.

There are many problems.
One is the ethical / moral problem. Who are you to dictate what someone’s wage is? In a free society, why should private citizens need the permission of government, economists or people like you to take a low paid job? If the employer and employee agree on a wage, why is this anyone else's business? Are there any other aspects of people private lives you would like to regulate? What they eat perhaps, how much they drink?

This is correct. Leftist fail to see that the min wage is discrimination, it started as discrimination from the beginning.

Leftists truly are the 'useful idiots' Stalin spoke about.

What utter nonsense. You're forcing static assumptions into a dynamic, reflexive process. Higher wages not accompanied by an equal increase in aggregate consumer prices will increase purchasing power for those consumers. Higher real discresionary income will invariably lead to higher consumption by those consumers which feeds into the very businesses which see an imput cost increase. Firing employees would be arbitrary and even detrimental to a company's productivity, instead, they adapt.

You're effectively denying the most attractive value of capitalism: it's ever changing and adapting to new condition, not being tied to fixed conditions or else risking collapse.

This argument uses qualitative arguments for something which is quantitative, and only focuses on variables relevant to proving the desired outcome. It would be like saying pic related would work as a perpetual motion machine by only focusing on the right-hand-side of the picture.

Some possible missing arguments:
- Due to increased wages, companies have less money
- Due to increased unemployment, workers have less money to spend
- Even if workers had more money to spend, increased wages doesn't impact the productivity of the goods themselves, so there will be as much to go around as before

>Higher wages not accompanied by an equal increase in aggregate consumer prices will increase purchasing power for those consumers

Here is the flaw in your argument. Higher wages DO lead to higher prices. How can they not? If labour costs go up, the employer is forced to pass these costs on down the chain. Everything becomes more expensive, because it costs more to make, and so everyone becomes materially poorer.

Your engaging in magical thinking. How can a government just make everyone richer by forcing wages up? If this is true, I repeat, then make the minimum wage $100 per hour and we all live in paradise.

Wealth only comes from increasing productivity, not from distorting or fixing market prices, like the price of labour.

>an equal increase in aggregate prices
You even quoted it. Your argument there implodes.

As for why minimum wage being increased to $100 wouldn't work, it's because you end up with a tiny population of wealthy people to pass the real cost onto, too few to still patron all the businesses affected by the higher imput cost and the labor cost increase makes the other imput costs dwindle as a percentage of the good's costs. After factoring equal profit margins, you end up with disproportionately higher prices to wage increases.

A higher minimum wage basically functions as a market oriented method of making the poor better off at the real expense of those better off, but you need a fairly large amount of people making more than the minimum wage for it to be effective and most of the real costs be eliminated by higher purchasing power of the (now less) poor.

>Raise in wage
>Raises the bottom line for companies with negligible pay increase to anyone already working above minimum wage.
>Companies raise their prices to cover the increased cost of minimum wage.
>Since wages other than minimum wage remained stagnant, the middle class must now pay more money for the same goods.
>Spending DECREASES because of increased price.
>Company has less money
>Hires fewer minimum wage employees and demands higher qualification to save money.
>Employment is now fiercely competitive, most people working minimum wage jobs now get outcompeted
>Same minwagefags arguing to raise minimum wage today bitch about not having jobs.

That's why.

Wrong.

because If I make $15-$20/hr as a dental tech/paramedic/(which requires schooling) and the min wage is raised to $15, meaning some walmart uneducated entry level faggot makes the same/nearly the same as me for doing less, why should i be okay with that?

You shouldn't be, and will ask for a raise or quit to work at Walmart
Hooray, economics

the problem now is i could be an entry level slave forever, or do i shut my mouth for 2-4 years getting paid the same but doing more in hopes that i can get into a much higher paying job once my schooling is over?

You can say "just deal with it because you will earn 5X the walmart worker in a few years" but im betting only a tiny handful of workers will actually think this.
the remainder will just continue to protest about wanting even higher wages to now pay for their education that they never finished because they dropped out when they thought they could get paid more for doing less at *insert entry level here*

And if those drop-outs cause a shortage of people willing to do what you do, your employer will eventually be forced to...
It's not foolproof in the short run, but it's about as inevitable as death and taxes.

Why do you all pretend there is no foreign economy?

The raise in income doens't proportionally rise the profit of the home economy.

Some money fucks right of in an open system. Therefore externally helping an/more other economies. Jet only the home companies pay for that.

Its more or less an positiv external effect that lowers the profibility of your economy and helps every other trade partner.

>the employer is forced to pass these costs on down the chain.


which is why the argument "Fast food will only go up 17 cents on average if we had a $15/hr wage" is flawed.
most of these studies (along with the oft quoted Purdue University’s School of Hospitality and Tourism Management study) fail to look at the ENTIRE production chain. From the farm where the beef/poultry originated, to the slaughter house, to the processing plant, and the transportation lines.
They only focus on the STORE'S bottom line and how an increase in wages would affect the price of the food.
Not only that but in most cases, employee turnover isnt considered either. Fast food has some of the worst turnover rates of any industry (burger king reported 210% turnover in 2008)

so at the end of the day, nobody knows a goddamed thing

>your employer will eventually be forced to...


hire from India

Saving your employer money, so he can afford to shop at the walmart you now work at
Hooray, economics

there is an economic reason for every wage difference, and differences in wages maintain the equilibrium on the market. when you kick it from below suddenly someone ho is a skilled worker with many years of experience will make the same as the most useless faggot. he will not be happy about that the order of the universe is shattered he will want to make more but then he will make as much as an even more educated or skilled worker above him made and he will get upset about that.

there is no way in hell you can raise the min wage without this domino effect, unless you are not raising the min wage enough to matter, say only a very very minuscule portion of the work force actually made below and no skilled worker made anywhere near it. but then why bother?

Every argument here assumes that $7.25 is the equilibrium price and a higher floor is binding. Obviously labor is elastic, but and increase in min. wage might have a net gain in social welfare compared to the gain in unemployment.

Given that equilibrium theory is laughably wrong, I'm not sure what point you're trying to make.

this. All else in this thread is baseless speculation and should be addressed by looking at reasearch papers about the effects of minimum wage.

>"tfw too smart for economics"
Kys

This was meant to be @

What are you babbling about?

Nice.

Because companies then offshore their labour and the citizenry lose their jobs.

Currently many jobs are also being automated, which has the same effect.

Soon enough very few people will NEED to work, although the prestige of having the extra capital, as well as the self satisfaction gained through having a sense of purpose, will see people endeavour I ever more cerebral industries until we either merge with or succumb to AI.

I wonder how many people make minimum wage. Of those, I wonder how many make it for a time period of 12+ months.

test

>Called all those arguments
>They were all made later in the thread

Feels good man.

>>Surplus labor means unemployment
Don't you mean Surplus labor ELIMINATES unemployment. This tiny part confuses me.

This assumes minimum wage employees spend every dollar they make on minimum wage services. They don't, so the money companies make from this isn't as much as they are spending on this.