Regarding a country's standard a living. The standard most economists use measures the productivity per worker. Countries that have the highest productivity have the highest standard of living and are the most prosperous. This is pretty much a proven statistical fact that even Krugman agrees with. Wages have ZERO effect on productivity alone. In fact, productivity generally goes up by dumping low wage workers and instead hiring less people who are more educated who can create more output per worker. The only way to increase productivity is if we completely change the existing worker with a more productive worker and then pay him more. You can't simply take a guy named Bob, who is making 7.75 an hour and who has no skills or education and simply raise his wage to 10.10 and suddenly like magic, Bob is more productive. Math doesn't work that way. And like others have mentioned, if the fuzzy Al Gore math DID work that way, every company in the world would race to raise their wages to capture the increase in productivity.
I've said this before in P&R and I will say it again, if you truly want to help the poor, you cannot do it by raising their wages. You have to raise their education or skill level (that whole productivity thingy). Most businesses that hire minimum wage workers are operating on thin margins as it is, they have no room to raise wages. Secondly, who is to say when the wage is high enough. Politicians don't get elected saying "OK, we're done". If wages go to 10.10 then the next election cycle they are going to have to ask for 12.10 then 14.10 then 30.10.....etc. Most businesses are intelligent enough to be forward looking. So the result? They change their business. McDonalds is already leaning in this direction anyway with the building of high end McCafe's in NY that cater to "higher end" people. They will simply cut labor, go after more productive workers, pay them more money and eliminate the poor hispanic and poor black from the labor force. The result? Well, we're seeing it now. Black youth unemployment is still near 50% which is staggering if you stop and think about it.
Just as you can't print your way to prosperity, you also can't simply raise wages to increase profitability. Profits at the company level MUST be grown through productivity and at the national level. This is why even in China where the gov't is spending trillions to stimulate their economy, they still have one of the lowest standards of living in the world. They also have one of the lowest productivity rates in the world. It's also why cities like Chicago and NY who have city governments that spend a fortune on welfare yet have the highest welfare rates in the country.
And lastly, I'll close with this. The increase of 2 dollars and change to minimum wage could be given synthetically to every worker through the lowering or overall prices through the reduction of monetary expansion. QE and the FED have raised prices for the poor well in excess of the added wage suggestions. A far more "productive" thing to do is to stop enriching the rich by printing money and driving stock and real estate prices higher and instead let prices deflate and allow the economy to become more affordable. At the end of the day, what matters is not how much money you have but what that money can buy. At the height of the Weimar Republic, the avg German was a billionaire who couldn't afford a loaf of bread. Caveat Emptor.
I've said this before in P&R and I will say it again, if you truly want to help the poor, you cannot do it by raising their wages. You have to raise their education or skill level (that whole productivity thingy). Most businesses that hire minimum wage workers are operating on thin margins as it is, they have no room to raise wages. Secondly, who is to say when the wage is high enough. Politicians don't get elected saying "OK, we're done". If wages go to 10.10 then the next election cycle they are going to have to ask for 12.10 then 14.10 then 30.10.....etc. Most businesses are intelligent enough to be forward looking. So the result? They change their business. McDonalds is already leaning in this direction anyway with the building of high end McCafe's in NY that cater to "higher end" people. They will simply cut labor, go after more productive workers, pay them more money and eliminate the poor hispanic and poor black from the labor force. The result? Well, we're seeing it now. Black youth unemployment is still near 50% which is staggering if you stop and think about it.
Just as you can't print your way to prosperity, you also can't simply raise wages to increase profitability. Profits at the company level MUST be grown through productivity and at the national level. This is why even in China where the gov't is spending trillions to stimulate their economy, they still have one of the lowest standards of living in the world. They also have one of the lowest productivity rates in the world. It's also why cities like Chicago and NY who have city governments that spend a fortune on welfare yet have the highest welfare rates in the country.
And lastly, I'll close with this. The increase of 2 dollars and change to minimum wage could be given synthetically to every worker through the lowering or overall prices through the reduction of monetary expansion. QE and the FED have raised prices for the poor well in excess of the added wage suggestions. A far more "productive" thing to do is to stop enriching the rich by printing money and driving stock and real estate prices higher and instead let prices deflate and allow the economy to become more affordable. At the end of the day, what matters is not how much money you have but what that money can buy. At the height of the Weimar Republic, the avg German was a billionaire who couldn't afford a loaf of bread. Caveat Emptor.
