4 ms·

- Full employment - Low inflation - High wages Pick two.

by Victerius 4y ago

socialismisok 4y ago
Wages aren't the only input to inflation. It's not axiomatic that these three cannot be met simultaneously.
- MereInterest 4y ago
  It also doesn't account for wage disparities. Even if I accept the premise that wages cannot increase without increasing either unemployment or inflation, it still doesn't follow that increasing the minimum wage imposes the same requirement. Under that model, employment/inflation could also be kept constant by increasing wages to workers while decreasing wages to management, or by increasing wages to both workers and management while decreasing rent extraction (e.g. stock buybacks, dividends).
  - propernoun 4y ago
    Of course it does. You have a naive view of wages. You do not increase minimum wages and not have wage compression elsewhere in the workforce. Increasing the minimum wage has the most dramatic impact on increasing the demand for goods because it impacts so many people. Increasing the maximum wage has little if any impact on broader demand for goods because it impacts so few. Unless your supply chain can keep up with the demand surge through raised wages, you will see inflation, which is our situation today. You might naively assume the solution is to introduce price controls but the general outcome of that is the economy shifting transactions to barter-based, black markets, and non-denominated currency exchange, which causes more economic upheaval as GPD and tax revenues drop. There are many examples of this in the last 100 years, Venezuela being a recent one.
    - MereInterest 4y ago
      Thank you for the additional details, and that helps my understanding. That the key quantity to keep constant is the total demand, not merely the total distribution. Therefore, when working to reduce wealth disparities, an increase in the minimum wage must be coupled with a greater-than-proportional decrease in the maximum wage in order to avoid negative side effects.

- Full employment - Low inflation - High wages Pick two.

socialismisok 4y ago

Wages aren't the only input to inflation. It's not axiomatic that these three cannot be met simultaneously.

MereInterest 4y ago
It also doesn't account for wage disparities. Even if I accept the premise that wages cannot increase without increasing either unemployment or inflation, it still doesn't follow that increasing the minimum wage imposes the same requirement. Under that model, employment/inflation could also be kept constant by increasing wages to workers while decreasing wages to management, or by increasing wages to both workers and management while decreasing rent extraction (e.g. stock buybacks, dividends).
- propernoun 4y ago
  Of course it does. You have a naive view of wages. You do not increase minimum wages and not have wage compression elsewhere in the workforce. Increasing the minimum wage has the most dramatic impact on increasing the demand for goods because it impacts so many people. Increasing the maximum wage has little if any impact on broader demand for goods because it impacts so few. Unless your supply chain can keep up with the demand surge through raised wages, you will see inflation, which is our situation today. You might naively assume the solution is to introduce price controls but the general outcome of that is the economy shifting transactions to barter-based, black markets, and non-denominated currency exchange, which causes more economic upheaval as GPD and tax revenues drop. There are many examples of this in the last 100 years, Venezuela being a recent one.
  - MereInterest 4y ago
    Thank you for the additional details, and that helps my understanding. That the key quantity to keep constant is the total demand, not merely the total distribution. Therefore, when working to reduce wealth disparities, an increase in the minimum wage must be coupled with a greater-than-proportional decrease in the maximum wage in order to avoid negative side effects.