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Odd they only interviewed business owners and employers, and not the people who benefit from higher wages. Of course, this article scratches its head because i

Odd they only interviewed business owners and employers, and not the people who benefit from higher wages. Of course, this article scratches its head because it is assuming SKorea = USA and South Koreans = 'Muricans. Maybe we should look at the biggest driver of the economy in the US: consumer spending. Giving workers higher wages causes a boom in spending and a boom in economic growth (see: the wage increases in the 1990's and the largest boom in latter 20th century history). Maybe SKoreans just don't need to own piles of crap like americans? Maybe we should look at what historically the biggest driver of the SKorean economy is, and see if raising wages would actually increase that. Too bad the article is so thin on actual economic history and, um, knowledge.

theredbox 8y ago
What the heck that's ironic. Primary driving factor for SKorean economy is export. Which means americans buying shit.
- iheartpotatoes 8y ago
  That... that is very ironic. Makes even more sense that growth wouldn't respond to wage increase. Huh.
oceanplexian 8y ago
There's some truth to what you're saying but the idea that you "give workers higher wages...(to create) a boom in spending", as if wages were some kind of perpetual motion machine is not accurate. If everyone was paid more for no reason, that creates inflation since it artificially alters supply and demand even though no new value was created in the labor market. Prices for everything would simply increase. But even this, is a simplistic view. Inflation typically causes previously issued corporate debt to drop in price and newly issued fixed rate instruments to increase in yield. The problem with that is that increased yield cost corporations more money to borrow when they refinance their existing debt. Now companies are in trouble from two angles: One, a higher cost of labor due to inflation, and two, from higher costs of borrowing money. As a result, companies increase prices even further, which starts an upward spiral where wages can't keep up. By the way, this is the cause of the recent meltdown in US Stocks over the last 4-6 months. If this process is allowed to run without any controls, you'll wind up with a hyperinflationary environment, similar to Argentina, where the dollars in your bank account are worth 40% less than they were the previous year. People wind up unable to afford anything beyond day-to-day goods like food and housing, consumerism, the main driver of most Western economies, slows to a crawl (You can't save for an iPhone when it costs double what it did last year), industries that rely on discretionary income go out of business, and the economy contracts and collapses on itself. I know this is a bit dramatic, but it can and does happen. It can happen even without a trigger, but if you suddenly increased the minimum wage in a tight labor market you're basically throwing gasoline on the fire that is inflation.
- iheartpotatoes 8y ago
  I agree this can lead to inflation, but the 90's kept it solid even with the boom, right? The problem with this cycle: wage increase -> cost of labor increase -> goods increase -> wage increase -> inflation is, and here's where I get all Che, a fundamental problem with capital. Unless only some people see their wages increase, it keeps a lid on inflation, because there will always be exploitable labor. So I go back to the late 1990's: why did the economy boom and wages rise without inflation? Simple: the notion of labor increases driving inflation ignores the fact that very very rich people are taking the bulk of the profits and if they weren't so intent on taking every last penny, then labor costs would NOT be passed on to the consumer. As long as CEOs feel entitled to unlimited pay, there will always be inflation.
- skybrian 8y ago
  This is like wanting to go faster, but being afraid to press the gas pedal, because you're afraid to go too fast and get into an accident. To get inflation, you need enough of an increase in demand to create bottlenecks (not enough sellers to meet demand). But an increase in demand (hopefully somewhat less than that) is also what you need for economic growth. In fact, that's what economic growth is for. People benefit from being able to buy more of what they need. This is a good thing! Getting the balance right can be tricky, but they're not opposites.
- JamesBarney 8y ago
  You just made a very persuasive argument that increasing minimum wage will spike inflation. But I don't think this is true when you look at the data. We've recently increased minimum wage a lot over the last 8 years, but inflation hasn't really moved at all. And from a theory standpoint minimum wage increases should have very little effect on inflation. Standard inflation theory is too much money in the economy. And too much demand for goods, causes too much demand for workers. This causes a tight labor market which drives wage rates which get passed onto consumers through increased prices. But minimum wage workers have the least amount of negotiating power, and since the minimum wage is higher than their market wage they by definition can't negotiate. Which makes it impossible for them to drive inflation. > One, a higher cost of labor due to inflation, and two, from higher costs of borrowing money. As a result, companies increase prices even further, which starts an upward spiral where wages can't keep up. Inflation does have some serious problems, but the idea that wages can't keep up with inflation doesn't make any sense. How can wage driven inflation drive inflation higher than wages? I'm also not sure borrowing money is any more expensive. The nominal interest rate increases, but the real interest rate decreases. There is a large boon to current borrowers when inflation unexpectedly increases, and a boon to loaners when inflation unexpected decreases.
eli_gottlieb 8y ago
>Odd they only interviewed business owners and employers, and not the people who benefit from higher wages. It's not odd at all, just biased.
cwkoss 8y ago
NYT often has a bias for capital over labor.

theredbox 8y ago

What the heck that's ironic. Primary driving factor for SKorean economy is export. Which means americans buying shit.

iheartpotatoes 8y ago
That... that is very ironic. Makes even more sense that growth wouldn't respond to wage increase. Huh.

oceanplexian 8y ago

There's some truth to what you're saying but the idea that you "give workers higher wages...(to create) a boom in spending", as if wages were some kind of perpetual motion machine is not accurate. If everyone was paid more for no reason, that creates inflation since it artificially alters supply and demand even though no new value was created in the labor market. Prices for everything would simply increase. But even this, is a simplistic view. Inflation typically causes previously issued corporate debt to drop in price and newly issued fixed rate instruments to increase in yield. The problem with that is that increased yield cost corporations more money to borrow when they refinance their existing debt. Now companies are in trouble from two angles: One, a higher cost of labor due to inflation, and two, from higher costs of borrowing money. As a result, companies increase prices even further, which starts an upward spiral where wages can't keep up. By the way, this is the cause of the recent meltdown in US Stocks over the last 4-6 months. If this process is allowed to run without any controls, you'll wind up with a hyperinflationary environment, similar to Argentina, where the dollars in your bank account are worth 40% less than they were the previous year. People wind up unable to afford anything beyond day-to-day goods like food and housing, consumerism, the main driver of most Western economies, slows to a crawl (You can't save for an iPhone when it costs double what it did last year), industries that rely on discretionary income go out of business, and the economy contracts and collapses on itself. I know this is a bit dramatic, but it can and does happen. It can happen even without a trigger, but if you suddenly increased the minimum wage in a tight labor market you're basically throwing gasoline on the fire that is inflation.

iheartpotatoes 8y ago
I agree this can lead to inflation, but the 90's kept it solid even with the boom, right? The problem with this cycle: wage increase -> cost of labor increase -> goods increase -> wage increase -> inflation is, and here's where I get all Che, a fundamental problem with capital. Unless only some people see their wages increase, it keeps a lid on inflation, because there will always be exploitable labor. So I go back to the late 1990's: why did the economy boom and wages rise without inflation? Simple: the notion of labor increases driving inflation ignores the fact that very very rich people are taking the bulk of the profits and if they weren't so intent on taking every last penny, then labor costs would NOT be passed on to the consumer. As long as CEOs feel entitled to unlimited pay, there will always be inflation.
skybrian 8y ago
This is like wanting to go faster, but being afraid to press the gas pedal, because you're afraid to go too fast and get into an accident. To get inflation, you need enough of an increase in demand to create bottlenecks (not enough sellers to meet demand). But an increase in demand (hopefully somewhat less than that) is also what you need for economic growth. In fact, that's what economic growth is for. People benefit from being able to buy more of what they need. This is a good thing! Getting the balance right can be tricky, but they're not opposites.
JamesBarney 8y ago
You just made a very persuasive argument that increasing minimum wage will spike inflation. But I don't think this is true when you look at the data. We've recently increased minimum wage a lot over the last 8 years, but inflation hasn't really moved at all. And from a theory standpoint minimum wage increases should have very little effect on inflation. Standard inflation theory is too much money in the economy. And too much demand for goods, causes too much demand for workers. This causes a tight labor market which drives wage rates which get passed onto consumers through increased prices. But minimum wage workers have the least amount of negotiating power, and since the minimum wage is higher than their market wage they by definition can't negotiate. Which makes it impossible for them to drive inflation. > One, a higher cost of labor due to inflation, and two, from higher costs of borrowing money. As a result, companies increase prices even further, which starts an upward spiral where wages can't keep up. Inflation does have some serious problems, but the idea that wages can't keep up with inflation doesn't make any sense. How can wage driven inflation drive inflation higher than wages? I'm also not sure borrowing money is any more expensive. The nominal interest rate increases, but the real interest rate decreases. There is a large boon to current borrowers when inflation unexpectedly increases, and a boon to loaners when inflation unexpected decreases.

eli_gottlieb 8y ago

>Odd they only interviewed business owners and employers, and not the people who benefit from higher wages. It's not odd at all, just biased.

cwkoss 8y ago

NYT often has a bias for capital over labor.