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Kevin Hassett: Your fat paycheck keeps your neighbor unemployed
Daily Chronicle ^ | September 9, 2010 | Kevin Hassett

Posted on 09/09/2010 4:18:17 PM PDT by USALiberty

Some observations perfectly at home in economics textbooks can be so beastly in practice that nobody is willing to mention them.

Ignoring the facts, though, leads to bad policies, and with the unemployment rate at a stubborn 9.6 percent, we don’t need more of those.

The biggest problem with the labor market right now is that wages are too high. As Washington again turns to government spending as a cure for unemployment, some against-the-grain thinking is in order.

Economics teaches that full employment would be reached if wages adjust downward, to a level that better reflects current circumstances. At lower wages, employers would desire more workers. Labor markets generate persistent unemployment only if wages are sticky, failing to fall as demand declines. A number of reasons help explain why wages don’t and won’t drop, beginning with federal and state minimum-wage laws.

(Excerpt) Read more at daily-chronicle.com ...


TOPICS: Business/Economy; Culture/Society; Philosophy
KEYWORDS: communism; economics; government; wages
THIS IS SO TRUE! It is time to REPEAL ALL of the federal and state minimum-wage laws. We also need to ban unions, and severely limit unemployment insurance. I mean, really... 100 weeks? I think 26 weeks is already FAR too much. It should be 12 weeks -- max. After 4 weeks, there should be a WORK requirement.

As we go into the fall, the GOP will be talking a lot about LOW TAXES and that is good. But real conservatives know that is only half the story. If we don't also find ways to drive down WAGES and BENEITS, we'll never grow the economy.

GET THE GOVERNMENT OUT OF THE WAY and LET WAGES ADJUST!

1 posted on 09/09/2010 4:18:19 PM PDT by USALiberty
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To: USALiberty

some wages are too high and some might be too low for all we know


2 posted on 09/09/2010 4:26:29 PM PDT by GeronL (http://libertyfic.proboards.com <--- My Fiction/ Science Fiction Board)
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To: USALiberty
True, but the worst offenders are GOVERNMENT employees, and even worse are UNION government employees.

We likely could reverse course back to prosperity and employment if we just got rid of 80% of government employees, starting with the union ones.

3 posted on 09/09/2010 4:28:55 PM PDT by Navy Patriot (Sarah and the Conservatives will rock your world.)
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To: USALiberty

The last time they raised the minimum wage in our area (this would be during the Bush years) even the lowest jobs paid more than minimum wage. Which, for anyone paying attention, meant that no minimum wage law was necessary, when demand for labor is strong, wages rise quite naturally on their own.

So what did they do? They screamed, and raised the minimum wage to about what they were paying anyway. Can’t afford to let people think they can survive without government intervention.

Am I paid too much? I don’t know, I’m paid what someone is willing to pay to get me. And everything I make goes right out the door paying for goods and services that other working people provide, so the more I make the more people make their living off of me.

The worst thing you can do is have someone appointed to decide what people should earn. If you make “too much”, in short order you find yourself out of work and your next job pays less. Or you find that raises are hard to come by until the rest of the economy eventually catches up. It all has a way of working itself out.


4 posted on 09/09/2010 4:30:26 PM PDT by marron
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To: USALiberty
Economics Communism teaches that full employment would be reached if wages adjust downward.

Correcting Mr. Hasshat's grammar and punctuation.

5 posted on 09/09/2010 4:33:07 PM PDT by Lazamataz ("We beat the Soviet Union, then we became them." Lazamataz, 2005)
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To: marron
The worst thing you can do is have someone appointed to decide what people should earn.

TRUE. And that is why, when the GOP regains control, we need to pass emergency legislation cancelling ALL union contracts and repealing all minimum wage laws.
6 posted on 09/09/2010 4:34:20 PM PDT by USALiberty
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To: USALiberty
The biggest problem with the labor market right now is that wages are too high.

Maybe. Getting rid of the minimum wage would solve that problem.

7 posted on 09/09/2010 4:35:33 PM PDT by Libloather (Teapublican, PROUD birther, mobster, pro-lifer, anti-warmer, enemy of the state, extremist....)
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To: USALiberty

“Bammy’s really reachin’ for it now...


8 posted on 09/09/2010 4:38:43 PM PDT by mo
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To: USALiberty
when i was a union carpenter i learned that suggesting we were making too much in wages and benefits to the brothers was a good way to get your ass torn off and shoved down your throat.

economic inertia will shake out all non politically connected wage disparities over time. the decline in tax revenue will adjust the connected workers economic wage/benefit imbalance once everything else collapses.

9 posted on 09/09/2010 5:37:44 PM PDT by mmercier (the great reckoning)
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To: USALiberty

Government needs to stay the hell out of wages all together.


10 posted on 09/09/2010 8:24:50 PM PDT by TASMANIANRED (Liberals are educated above their level of intelligence.. Thanks Sr. Angelica)
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To: mmercier
economic inertia will shake out all non politically connected wage disparities over time. the decline in tax revenue will adjust the connected workers economic wage/benefit imbalance once everything else collapses.

And the sooner the better! When I think about all the Soviet-style BS we put up with -- just to prop up some the vaunted "middle class," I get ill. America became a GREAT nation without having a coddled, subsidized "class" of people who could buy homes, new cars and big-screen TVs while working a 40-hour-per-week schedule. Americans are spoiled.

This politically correct worship of the sacred "middle class" -- something we did very well without until after WWII -- has to end. The gravy train is over!
11 posted on 09/10/2010 7:13:39 PM PDT by USALiberty
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To: Lazamataz

Care to offer support for your preposterous statement?


12 posted on 09/12/2010 7:59:58 AM PDT by TopQuark
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To: USALiberty
"The biggest problem with the labor market right now is that wages are too high."

This is wrong, grossly misleading, and politically costly.

The cost of labor is too high, but not because of paycheck. It is the benefits portion that went sky-high after the health-care reform.

The enemy of prosperity are politicians that created the current housing crisis and current unemployment. The author misleads us into thinking that the problem stems from the workplace. It does not. We have enough of socialist propaganda pointing to CEOs and "capitalists." The problem is socialist politicians in the WH and Congress.

13 posted on 09/12/2010 8:04:52 AM PDT by TopQuark
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To: TopQuark

“The cost of labor is too high....”

The return too low...


14 posted on 09/12/2010 8:05:54 AM PDT by mo
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To: mo
TQ: “The cost of labor is too high....”

MO: The return too low...

Ok, if the cost is too high then, obviously, the profit is low. Having made this profound observation, do you have anything more meaningful to say?

15 posted on 09/12/2010 9:45:10 AM PDT by TopQuark
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To: Navy Patriot

There are some things about the article that don’t seem to add up to me.
He asks why people aren’t moving from high unemployment places to low unemployment places but he doesn’t make any mention about the number of jobs AVAILABLE in the low uemployment area. Duh.

He also said that people aren’t moving because they have houses that they can’t sell. How many min. wage workers own houses?

He also makes no mention of CEO compensation. Are they going to take a pay cut, too? Lawrence Ellison, CEO of Oracle made $56,810,851 in total compensation in 2009, or the equivalent of 3,767 minimum wage workers. But please, ask a worker already at near poverty level to pitch in 19% of their income so that his neighbor can also be poor? How does this guy sleep at night?


16 posted on 09/12/2010 9:55:50 AM PDT by Chatty Kathy
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To: TopQuark

A way to look at the “cost” of a job is by the same amount of capital return parked in T-bills. A 40000/yr job requires the equivalent 800000 if T-Bills return 5%. If they return
1%....4 million dollars.

That’s what I mean by return too low.


17 posted on 09/12/2010 11:17:25 AM PDT by mo
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To: TopQuark

The ROOT problem is that Americans have been spoiled and expect too much.

America became a GREAT nation without having a coddled, subsidized “class” of people who could buy homes, new cars and big-screen TVs while working a 40-hour-per-week schedule.

This politically correct worship of the sacred “middle class” — something we did very well without until after WWII — has to end. The gravy train is over!


18 posted on 09/12/2010 11:29:59 AM PDT by USALiberty
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To: mo
OK, you have stated that a cost of a project (such as hiring an employee) must include opportunity costs, which you computed at a risk-free rate of return operationalized as T-bills. Fine. How is this related to what I have previously said?

The point was that the author was misleading in relating the prohibitive cost of labor to paychecks (you do the same). What made jobs prohibitively expensive in such a short period of time was another cost component, namely, health-care benefits.

In the context of your example, $40,000 job cost previously $60,000 when benefits were included, but now it is a greater amount.

Finally, the computation you offered is incorrect. Capital and labor are generally nonadditive. If one hopes to get $100,000 by investing $1M in a machine that requires labor input of $40,000/year, not hiring an employee today does NOT incur the opportunity cost you indicated: the capital is a sunk cost (possibly nonsalvagable), and what is forgone is the cash flow of $60,000/year (100,000 - 40,000). It is misleading to seek an equivalent capital and compare it to risk-free return.

19 posted on 09/12/2010 12:53:08 PM PDT by TopQuark
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To: USALiberty
Your post is a breath of fresh air for me. It is generally impossible to say on this forum that the problem lies in the culture rather than politics and, to that extent, the enemy is we ourselves --- a narcissistic society addicted to instant gratification when the world is least predisposed to grant that satisfaction. Most people seem unaware that politics follows culture, not conversely. When teh culture is narcissistic, we get a 60-something, grey-haired Jay Leno telling infantile jokes and infantile politicians such as the "conservative" governor of South Caroline who just can't keep his pee-pee in his trousers. The point is that politicians are drawn from the same pool of humanity, and we cannot expect them to be much better than we ourselves.

Thank you for putting things in better perspective.

20 posted on 09/12/2010 12:59:24 PM PDT by TopQuark
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To: TopQuark
Hey..if I'm a guy creating jobs....and I need to fund one spot with 4 million vs five spots...it stands to reason if the return on 5 justifies the investment, I will do so.

There is no return today. Says more about hidden regulatory and potential liability costs-of which your argument concerning bennies is a relevant part of. I happen to be an employer...10years ago with 17-currently with 5...and I only see potentially going lower.

The employer has a bullseye on their back.

21 posted on 09/12/2010 1:31:49 PM PDT by mo
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To: mo
"The employer has a bullseye on their back. "

And it was placed there by the government.

My original post was in support of people like you. The article's author makes it sound like the problem is with employers. The problem lies with the government: it created the mess with housing, the mess with credit, and now with hiring --- by making hiring too expensive for employers.

22 posted on 09/12/2010 1:37:32 PM PDT by TopQuark
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