GOP proposal to raise minimum wage

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-- GOP proposal to raise minimum wage
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Posted by .montecarlo. on Mar-31-2005 21:38:

quote:
Originally posted by Dupz
No offence taken mate, it's all good . Rest assured though, I wrote my reply exactly how I intended. Tariffs are bad for even the domestic economy (as well as the economy that's exporting stuff to your country, obviously). There is a redistribution of economic surplus AWAY from the consumer, and given TO the producer. However, the loss of consumer surplus is ALWAYS greater than the gain by producers because of the existence of a what is called "dead weight losses". The economic impact of tariffs is show in a simple example, below:

To explain, we see that domestic production of the good increases from Q1 to Q2. yay for domestic producers. The quantity of the foreign good decreases from Q4 to Q3. boo for foreign producers. We have an increase in government revenue equal to the red-shaded area. BUT we have created a dead weight loss equal to the two triangles either side of the red-shaded rectangle (the triangles ACE and BDF). It is the existence of this that proves that the loss to consumers is ALWAYS greater than the gain to consumers, leaving society worse off.

True in general, although there is a theoretical exception. Namely, if a country is sufficiently large, as to be able to affect world prices, then a positive optimal tarrif exists. In this case, the terms of trade gains will exceed the the losses from consumption distortion and production distortion caused by the imposition of the tarrif, resulting in a net gain in national welfare. Realistically though, this would probably lead to retaliation by other countries and the benefits would soon be discipated.

Posted by Dupz on Apr-01-2005 01:02:

quote:
Originally posted by .montecarlo.
True in general, although there is a theoretical exception. Namely, if a country is sufficiently large, as to be able to affect world prices, then a positive optimal tarrif exists. In this case, the terms of trade gains will exceed the the losses from consumption distortion and production distortion caused by the imposition of the tarrif, resulting in a net gain in national welfare. Realistically though, this would probably lead to retaliation by other countries and the benefits would soon be discipated.

hmmmm... i forgot about that..
Thanks for the point though, I dont mind being proven wrong on economic theory every now and then

Posted by .montecarlo. on Apr-01-2005 08:12:

quote:
Originally posted by wolverine16
(Not directed at Occrider)On minimum wage, if you factor in inflation and put the amount in constant dollars, a $1 increase is quite modest since the current rate was set in 1996. Otherwise the price increases of the economy outperforms the income of the people who make minimum wage and they perpetually fall further behind at the same job. By claiming that a $1 or $2 increase comes at the expense of the number of available jobs, why would it be better to have more jobs at $4/hr continually being worth less with each passing year when that is even further from reaching the poverty line? Shouldn't the businesses that employ these people be keeping up with the rate of inflation? They're doomed to ultimately fail or else continually decrease their costs, including worker's wages, in order to stay in buisness if they don't . If people at the lower end see their wages in constant dollars decrease, I'm not sure why the economic growth is considered beneficial to them at it's current pace if their incomes cannot keep up and they are not receiving proper re-education to gain higher skilled employment.

I'm not sure how high you propose the minimum wage should be, but you should consider the fact that the higher the minimum wage is, the higher is the incentive for firms to substitute capital for labour in the long-run. The result would be even less jobs for unskilled workers, futhering the problem that you are worried about in the first place.

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