Please go read through the Walmart annual financial statement.
> Minimum wage goes up - so folks have more money to spend, so they buy more from retailers, so profit margins rise, so the economy booms and hiring increases. Everybody wins!
Fantasy.
You are missing a very important part there that should be obvious to anyone today: Competition is global, not national.
Let's take your theory up to an extreme. Let's raise minimum wage to, say, $50 an hour. Why not? Per your thinking it's simple. Everyone raises prices and all is good.
And so, you manufacture product A in the US and now have to sell it for $155 each.
I manufacture the same product. I fire everyone except for a small sales staff and take the product to China to manufacture it there. I am able to sell the same product with equal or better quality for $25.
When people have to choose between your product for $155 or mine, of equal or better quality, for $25, they will choose mine every single time over yours. Your sales plummet, you have to fire everyone and close down the company. Or you fire everyone and go to China just like I was forced to do.
At one point even importing bricks from China becomes a better financial decisions.
In other words, the scenario you painted is a fantasy.
The vast majority of products sold in the US today are NOT made in the US. We can raise our wages and prices all we want. It will only serve to create vast unemployment and further destroy us from within.
Just wait and see what will happen when $15 per hour laws ripple through the entire nation during the next few years. There are companies already leaving California because of just this.
Same recommendation as I seem to make all too often on HN: You don't understand how business works. Please do some reading and fire-up a spreadsheet and play with numbers. It isn't very complicated at a basic level.
> So anyway, its immoral to freeze just the wage labor is paid
Exactly. That's minimum wage. The free market should determine what that is. Our local and national economies will determine where the wage floor might be. In San Francisco this could be $15 per hour minimum wage due to cost of living. In other parts of the country it could be $7, $10 or $12. Government intrusion accomplishes only one thing: Job loss.
> When people have to choose between your product for $155 or mine, of equal or better quality, for $25, they will choose mine every single time over yours.
You probably already know this, though - and I am not saying that because of these two things that your premise (or anyone else's) is wrong -or- correct.
I just wanted to inject this, as to many it may be counter-intuitive that by dropping your price (or selling at a lower price), that sometimes people won't purchase it.
I think there have been studies done where they've used the exact same product, but priced it differently, and despite the product being identical in every way, people purchased the higher-priced item more frequently.
The two links you provided are about something very different.
What's going on with our economy is that people have become very used to seeing very high quality products made in China. A stroll through Walmart, Best Buy, Fry's Electronics, Home Depot, Lowe's, Sears, Kohls, Petco, etc. is all that's required to ascertain this.
Nearly everything sold at those retailers is made in China. In fact, short of things like obvious US-made products like bricks and lumber products (and I even hesitate to make that statement) everything else is made outside the US, mostly in China.
And quality is excellent.
It didn't use to be that way. China was synonymous with cheap junk. Sure, there's still cheap junk coming out of China but I think it is safe to say that most of what you can buy at the top retailers in the country is of fairly decent quality.
And so, when faced with a price difference between a high priced US-made good and a lower priced Chinese product the effects you linked to don't really apply. In fact, in some cases the Chinese product is of equal or better quality when objectively compared to the US-made product.
Here we have a case where paying a low price does, in fact, deliver a good-to-excellent quality product.
Luxury goods are a different story. They don't necessarily obey the laws of physics.
We have a problem. A really big problem. I wish I was smart enough to know what the solution might be. I don't. I know bits and pieces of it. Yet it is way too complicated. There is one thing I do know, Trump's idea of "bringing jobs back" sounds great but it is easy to see, given our discussion, that this is just-about impossible.
Can we start manufacturing excellent iPhones if we build fully automated factories? Nope. Not a chance.
Why?
Because China has reached a point where labor cost advantages are not the only advantages they enjoy. I don't have the time to get into the details so I'll be brief. Manufacturing businesses depend on efficient supply pipelines in order to produce product at the lowest possible cost. Chinese industrial cities are setup such that the supply pipelines are very short and efficient. Everything is an hour or less from the OEM. There are towns that make microwave ovens and all of the sub-contractors for the microwave oven makers surround them. Same with other product categories.
This advantage is huge and it is one we do not have. We don't make semiconductors or motors or almost anything here any more. You'd have to take the desert in Nevada and build a huge manufacturing town consisting of fully automated factories producing every component needed to make an iPhone in order to reach the point where we MIGHT be able to make iPhone on par with China.
That's what I call a "gulp" moment. When you realize just how terrible our position might be in a globally competitive marketplace.
As I said before, an artificially high forced minimum wage only exists completely disconnected from the context and the realities of what's going on in the real world. And this, precisely, is the reason it is so destructive. Companies don't need to pay lower wages because they are greedy. They need to reduce their costs because they are getting killed right and left by China, and high government-imposed minimum wages only means one thing: Our government is helping China force these companies out of business one by one. This is not what we should be doing.
The argument for protection of the poor sound interesting until you realize that the more businesses we kill off and the more jobs we export the reality of high minimum wages is that the very people the idea seeks to help will be the first to end-up on the street by the millions.
This is a math problem. And politics and politicians are fucking it all up because they do not suffer direct consequences and their lives are secure. I mean, look at the Obama's. They are getting paid SIXTY MILLION DOLLARS to write a couple of books. Their lives are completely decoupled from the policies they have forced upon us. They are set for life while everyone else will have to suffer. And that's the way it is.
> Minimum wage goes up - so folks have more money to spend, so they buy more from retailers, so profit margins rise, so the economy booms and hiring increases. Everybody wins!
Fantasy.
You are missing a very important part there that should be obvious to anyone today: Competition is global, not national.
Let's take your theory up to an extreme. Let's raise minimum wage to, say, $50 an hour. Why not? Per your thinking it's simple. Everyone raises prices and all is good.
And so, you manufacture product A in the US and now have to sell it for $155 each.
I manufacture the same product. I fire everyone except for a small sales staff and take the product to China to manufacture it there. I am able to sell the same product with equal or better quality for $25.
When people have to choose between your product for $155 or mine, of equal or better quality, for $25, they will choose mine every single time over yours. Your sales plummet, you have to fire everyone and close down the company. Or you fire everyone and go to China just like I was forced to do.
At one point even importing bricks from China becomes a better financial decisions.
In other words, the scenario you painted is a fantasy.
The vast majority of products sold in the US today are NOT made in the US. We can raise our wages and prices all we want. It will only serve to create vast unemployment and further destroy us from within.
Just wait and see what will happen when $15 per hour laws ripple through the entire nation during the next few years. There are companies already leaving California because of just this.
Same recommendation as I seem to make all too often on HN: You don't understand how business works. Please do some reading and fire-up a spreadsheet and play with numbers. It isn't very complicated at a basic level.
> So anyway, its immoral to freeze just the wage labor is paid
Exactly. That's minimum wage. The free market should determine what that is. Our local and national economies will determine where the wage floor might be. In San Francisco this could be $15 per hour minimum wage due to cost of living. In other parts of the country it could be $7, $10 or $12. Government intrusion accomplishes only one thing: Job loss.