Sales create jobs, not the rich

[JP Hochbaum]

This video was put together by Mike Norman, a contributor to Fox News and an economist, so it is reputable. Although it comes off as a bit goofy to me it is the truth.

Rich people are created by you and me, by people who buy things. We create the demand that allows rich people to create jobs. In order to do this we must have money. The private sector typically reduces employment because it is an input cost, and only increase employment when they have more demand to do so.

It's the 1% who are on the government dole! - YouTube

I am not trying to argue to tax the rich more, so let's try to avoid that discussion in this thread. The point of this thread is that what is needed is more income on the bottom, not the top.

 

[imagep]

Most certainly everyone can see that consumers need to spend money so that job creators can create jobs. So it is only logical that if the consumer class had more money, they would spend more, thus creating even more jobs, and prosperity for all who either produce or own the means of production. So I really can't imagine anyone disagreeing with you that all of us would be better off if we had more money. With your ban of discussion of redistribution by taxation in mind, I can think of a few other ways to promote such:

1) A higher minimum wage
2) A maximum wage
3) Cival or criminal penalties for those who do not donate substantial portions of their wealth to those who are less wealthy
4) Wages that are determined by a formula which more equitably distribute income/profit (such as a manditory ratio between the CEO pay and the lowest paid worker pay or average worker pay)

Or, something a little more creative...

5) The government could stop taxing all together and just print up lots of money and then distribute an equal amount of money to everyone that works a certain number of hours. This sounds really wacked out, and could possibly be inflationary, but it would most certainly do two things - it would increase spending and it would incentivise people to work. And even the downside, inflation, might not be as catistrophic as most people tend to think. A lot of people, particularly conservatives on this forum love to blaim our economic woes on borrowing, well in a high inflation rate environment, little borrowing is done because no one wants to lend. Inflation is a huge disincentive to lenders. So people who are against borrowing (and lending) should be cheering on inflation. At the same time, inflation is a huge incentive for people to spend (increase demand) and to invest. When demand and investment increases simultaniously the perfect storm for a very productive economy is created.

Edit: I am not advocating any of this. I'm just saying these are a few ways to increase the spending capability of the consumer class.

 

[JP Hochbaum]

I like where you went with me banning the discussion on redistribution. To be technical I am not against talking about redistribution, just taxing the rich more.

I also like number 4 a formula type idea, but let's combine that with number 1.

If we took productivity growth of the US and paced that with minimum wage that would give us a very reasonable lower class and match it with production.

If we were to supposedly put this in place right now I believe it would be near $20 an hour as the minimum wage. Which to many may seem high, but keep in mind that Australia is less productive per capita and has a wage near $15 an hour.

 

[partier9]

Increasing the minimum wage leads to less workers being hired, which would lead to people lnoy having a job and not having money to spend. Though as a teenager I wouldn't mind a $20 minimum wage for the next few years .

Personally I think minimum wage should be pegged to inflation or if we are feeling generous the cost of living.

 

[sangha]

Increasing the minimum wage leads to less workers being hired, which would lead to people lnoy having a job and not having money to spend. Though as a teenager I wouldn't mind a $20 minimum wage for the next few years .

Personally I think minimum wage should be pegged to inflation or if we are feeling generous the cost of living.

Employment increased every time we increased the minimum wage

 

[ttwtt78640]

Employment increased every time we increased the minimum wage

So employment has never decreased since we raised the minimum wage? If employment should ever decrease, you would recommend raising the minimum wage to help get it to increase? Just what is your point?

There is certainly a point at which the raising the minimum wage would exceed the productivity value of an unskilled worker, we just try not to reach it. That is why the minimum wage only gets rare COLA adjustments to keep pace with inflation.

 

[Bigfoot 88]

Demand and Supply simply work off of each other. I believe the discussion of which creates jobs is meaningless.

When government attempts to stimulate demand and thereby create employment through taxes, borrowing or inflation, it simply doesn't work. Taxes take the money out of peoples hands, and that will not help them create jobs. Inflation effectively taxes everybody, while creating only an illusion of demand. Borrowing causes people to hoard, because they know the loans must be paid back through taxes or through inflation. While all these government interferences continue, unemployment will continue to stagnate or worsen, while productivity and wealth creations continues to slow or stop.

 

[partier9]

Employment increased every time we increased the minimum wage

Probably yes; the minimum wage is generally increased during periods of growth, if I remember correctly, and as a result the overall economic growth would negate the loss of jobs from the increase in the minimum wage so employment would increase.

 

[imagep]

Increasing the minimum wage leads to less workers being hired, which would lead to people lnoy having a job and not having money to spend. ...

Are you just theorizing that increasing the minimum wage leads to less workers being hired, or do you have any real life historical data to back that up?

 

[imagep]

There is certainly a point at which the raising the minimum wage would exceed the productivity value of an unskilled worker,...

Sure. There is evidence to support that minimum wage workers contribute on average about $40/hr to our national productivity. Of course paying that much would be rediculous as their has to be a profit in their employers employing them. So mayby $20-$30/hr would be reasonable. Maybe even a little less for teenagers.

 

[ttwtt78640]

Are you just theorizing that increasing the minimum wage leads to less workers being hired, or do you have any real life historical data to back that up?

There is certainly a point at which the raising the minimum wage would exceed the productivity value of an unskilled worker, we just try not to reach it. That is why the minimum wage only gets rare COLA adjustments to keep pace with inflation. Paying $20/hour for a McJob would make the price of a McBurger go from $1 to $3 so you make the call. Raising the cost of labor simply raises the cost of goods and services that it produces, so all you will really get is inflation, requiring yet another rise in wages to keep pace, rinse and repeat.

 

[imagep]

When government attempts to stimulate demand and thereby create employment through taxes, borrowing or inflation, it simply doesn't work. Taxes take the money out of peoples hands, and that will not help them create jobs...

History has proved you wrong.

 

[Keridan]

Sure. There is evidence to support that minimum wage workers contribute on average about $40/hr to our national productivity. Of course paying that much would be rediculous as their has to be a profit in their employers employing them. So mayby $20-$30/hr would be reasonable. Maybe even a little less for teenagers.

Could you please cite a link to that number? It's not specifically the number I doubt, but I question the relative factors. If they produce $40 in, say, marketable product, does that include the cost of the materials used to produce that product? Does it account for the taxes paid? Does that include the cost of overhead, such as the factory they produced it in?

For instance, I pay my employees 10-11/hr. In theory, they produce between 50 and 100/hr for me. Here's the thing ... I get about 5/hr out of that. I haven't run all my reports this month, but that was roughly the figure from last month.

Edit: It's also worth noting that I run a service business. When an employee makes a customer unhappy, I end up losing money.

 

[Helix]

i agree that in a nation with a consumer spending-based GDP, consumer spending is quite important.

i also have nothing against being wealthy. however, capitalism does have a tendency to eat itself, so regulation is necessary. the end result of an under-regulated market is that a few large entities made up of a few individuals control an increasing amount of the wealth until the system fails. finding the proper balance of regulation is key, and it is no easy task. it's not only a matter of preventing severe consolidation of wealth. it's also a matter of promoting competition, which is reduced sector by sector as wealth is consolidated.

i've always argued that there are three pillars : government, corporate, and the general population. it's important to maintain a proper balance of power among these three groups, because a severe tilt in any direction results in some degree of collapse.

 

[Bigfoot 88]

History has proved you wrong.

No it hasn't.

 

[Keridan]

i agree that in a nation with a consumer spending-based GDP, consumer spending is quite important.

i also have nothing against being wealthy. however, capitalism does have a tendency to eat itself, so regulation is necessary. the end result of an under-regulated market is that a few large entities made up of a few individuals control an increasing amount of the wealth until the system fails. finding the proper balance of regulation is key, and it is no easy task. it's not only a matter of preventing severe consolidation of wealth. it's also a matter of promoting competition, which is reduced sector by sector as wealth is consolidated.

i've always argued that there are three pillars : government, corporate, and the general population. it's important to maintain a proper balance of power among these three groups, because a severe tilt in any direction results in some degree of collapse.

Well said, though I doubt we'd find a whole lot of agreement on that balance

An unregulated market is as bad as an over-regulated market. Both are killer, though.

 

[imagep]

Paying $20/hour for a McJob would make the price of a McBurger go from $1 to $3 so you make the call.

The cost of minimum wage labor is only a small fraction of the cost of a McBurger. I used to be a manager for McDonalds. We were mandated by the company to spend no more than 15% of hourly sales in labor costs. We litterally "pulled a tape" from the sales tracking system every half hour to make sure that sales were justifying the number of employees that we had in the store, and if sales didn't justify that, we sent someone home (with no pay). Anyhow, lets do some math here...

Mc Burger = $1
15% of $1 is .15
Now if we trippled minimum wage, we would then be spending 45 cents per McBurger in labor, possibly forcing the price of a McBurger up to $1.30, thus creating a one time inflationary event of 30% inflation.

Now if a minimum wage worker was making $10,000 and spending every penny, that was injecting $10,000 into our economy. If that same worker was now making $30,000 (just from minimum wage increasing), then that worker is now injecting $30,000 minus inflation of 30% into our economy is about $23,000. So we have literally more than doubled the spending power of minimum wage workers, even after inflation. Such an increase in real inflation adjusted spending mre than doubles demand (of people at that wage level) and thus increases the number of jobs needed to keep up with demand. the higher real spending power also becomes a great incentive for slackers to get a job and be productive, and it increases our tax base and lowers the need for both private charity and public welfare, and thus we could either reduce (or eleminate) the federal deficit or we could decrease taxes, or both.

Thats not a bad deal for the poor, or for minimum wage workers, or for middle class workers, or for the rich. When you have something that benifits ALL workers, you have to consider giving it some serious consideration.

Anyhow, no, a tripling of minimum wage would not force a tripling of the the cost of food at an establishment that only pays minimum wage.

 

[imagep]

No it hasn't.

Then please provide links/data/charts/numbers proving me wrong.

 

[imagep]

Could you please cite a link to that number? It's not specifically the number I doubt, but I question the relative factors. If they produce $40 in, say, marketable product, does that include the cost of the materials used to produce that product? Does it account for the taxes paid? Does that include the cost of overhead, such as the factory they produced it in?

For instance, I pay my employees 10-11/hr. In theory, they produce between 50 and 100/hr for me. Here's the thing ... I get about 5/hr out of that. I haven't run all my reports this month, but that was roughly the figure from last month.

Edit: It's also worth noting that I run a service business. When an employee makes a customer unhappy, I end up losing money.

I read that number a while back, don't remember where, sorry. You might can google the subject. My business sounds a lot like yours. Mine is a combination of service, retail and light industrial, and I pay 50% or so over minimum wage like you and my workers add about the same amount of value per hour as yours do. Like you, poor judgement or poor workmanship on the part of my employees can cost me big time.

 

[Bigfoot 88]

Then please provide links/data/charts/numbers proving me wrong.

You told me history has proved me wrong. You need to prove me wrong.

Keynesian stimulus was a failure during the Great Depression just as it is failing now.

 

[Helix]

Well said, though I doubt we'd find a whole lot of agreement on that balance

and that is as it should be. there's little chance of discovering the balance (which can change at any given time point) without debate. however, debate is currently limited by partisan teamsports. instead of arriving at a consensus on the best path forward, we are left to argue the merits of the proposals put forth by team x or team y. given this, our current dilemma is no mystery.

 

[specklebang]

I am the sole member of, and Presidential candidate of, The Logical Party.

Had I been in charge, instead of the last 2 asshats, instead of sending off trillions of dollars to billionaire bankers, I would have send a $10,000.00 VISA card, 6 month expiration, no cash value to every citizen who had paid no less than $500.00 and no more than $10,000.00 in Federal Income Tax the previous year. We would be back on our feet again and the right people would have benefitted.

Specklebang for President 2016. I'm Specklebang and I approved this self-serving, sycophantic message.

 

[imagep]

I am the sole member of, and Presidential candidate of, The Logical Party.

Had I been in charge, instead of the last 2 asshats, instead of sending off trillions of dollars to billionaire bankers, I would have send a $10,000.00 VISA card, 6 month expiration, no cash value to every citizen who had paid no less than $500.00 and no more than $10,000.00 in Federal Income Tax the previous year. We would be back on our feet again and the right people would have benefitted.

Specklebang for President 2016. I'm Specklebang and I approved this self-serving, sycophantic message.

You can count on my vote for 2016 - not because you suggest that you would have given out free money, but because your are correct that for the same cost (or less) as bailing out bankers and big business and having the spendulous plan, we could have send out direct tax rebates which would have been thousands of times more stimulative.

ps Where can I sign up for the logical party?

 

[Keridan]

I read that number a while back, don't remember where, sorry. You might can google the subject. My business sounds a lot like yours. Mine is a combination of service, retail and light industrial, and I pay 50% or so over minimum wage like you and my workers add about the same amount of value per hour as yours do. Like you, poor judgement or poor workmanship on the part of my employees can cost me big time.

I did a quick Google when I first read your post (I try not to be lazy), but I came up with several different answers on what average productivity is and very few that said anything about the formula used. I did find the standard formula but it provides 0 value because it factors in nothing but labor cost and end result. I don't know if the 40/hr was based on that or not.

Anyway, this topic has been worked over and we always come up with similar disagreements. Essentially, the question comes down to how best to stimulate demand. I have trouble with the question as much as any analytical person would. You stimulate demand by giving people more money to spend. You give them more money either by redistribution (I know it's a hot word, but it fits) or by providing a stable income. Simplifying it immensely, it's cyclical. You get the money in the hands of the workers and they spend it creating more jobs and therefore more money to spend.

I see tons of debates that really come down to the point of where to start the cycle. I personally don't want the government making the call. They will take huge amounts and give small ones. They will also save the bankers along the way. We could simply cut a trillion from the current budget and send it back in the economy without raising taxes. Then when revenue grows due to increase in taxable income, you get more money for them to misspend.

 

[specklebang]

There are a few qualifiers for membership in the Logical Party.

1) You can't consider yourself Right Wing, Conservative or Republican
2) You can't consider yourself Left Wing, Liberal or Democrat.
3) Your focus should be to pretty much disregard the very rich and the professionally poor and devote yourself to the interests of the middle class, who are the economic engine of this country.
4) You must eschew passion and regard only logic, even if that logic doesn't fulfill your fantasies.
5) You must accept that morality can not be legislated effectively.
6) You must accept that Corporations, while composed of individuals, are not in themselves sentient beings, and that their purpose is to generate profits, not to manage society.

Here are a few platform proposals. Some are much less serious than others.

1) Abortion should be legal with a lifetime limit of 2. Rape and incest excepted. Should you require a 3rd abortion, you will be sterilized. Both males and females will be tracked.
2) In certain cases, abortion is mandatory and retroactive.
3) The Social Security system is to be replaced with the Mandatory Savings Account. The MSA will take 10% of your income, employers will contribute another 5%, funds will be invested in 75% treasury bills that expire when you will turn 65. 25% can be invested in a limited choice of Mutual Funds. When you turn 67, you will be evaluated actuarially and funds will be distributed to you over your estimated remaining lifespan. Should you die prior to the expected date, the remaining funds go to your estate.
4) You will need a permit to have a child. This permit costs $1,000.00 and the funds go into the child's MSA.
5) Medical Insurance will be mandatory. There will be a self-sustaining Public Option insurance company which will offer mediocre coverage.
6) Any bureaucrat who carries a gun and has arrest authority may be randomly drug and lie detector tested.
7) Politician's do not receive lifetime benefits. They are public servants and should not receive greater or separate rewards than any mid-level corporation.

Ah, well, this list could get pretty long so I'll STFU.

Specklebang for President. Because it can't possibly get any worse.

You can count on my vote for 2016 - not because you suggest that you would have given out free money, but because your are correct that for the same cost (or less) as bailing out bankers and big business and having the spendulous plan, we could have send out direct tax rebates which would have been thousands of times more stimulative.

ps Where can I sign up for the logical party?