Skip to comments.Kevin Hassett: Your fat paycheck keeps your neighbor unemployed
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 dont 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 dont and wont drop, beginning with federal and state minimum-wage laws.
(Excerpt) Read more at daily-chronicle.com ...
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!
some wages are too high and some might be too low for all we know
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.
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.
Correcting Mr. Hasshat's grammar and punctuation.
Maybe. Getting rid of the minimum wage would solve that problem.
“Bammy’s really reachin’ for it now...
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.
Government needs to stay the hell out of wages all together.
Care to offer support for your preposterous statement?
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.
“The cost of labor is too high....”
The return too low...
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?
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?
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.
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!
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.
Thank you for putting things in better perspective.