Tuesday, May 14, 2013

WEALTH INEQUALITY IN AMERICA...the story of reaganomics and the trickle down of misery...





The buzz word lately is Benghazi...
The cover up that keeps holding the flame in the heart of the demoralized army of Libertarians, petrified Conservatives, and dumbed down Tea Partiers, who still can't believe they actually lost the last election...
The question on everyone's mind is: why does the loyal democratic opposition keep flaming the ashes of the Libyan story, when it was not the first, nor the only attack on a US embassy compound.
Well...the plot thickens when one remembers how the Benghazi story just changed the target, from The Presidents "misconduct", to his Secretary of States "incompetence"...
Little does it matter to GOP that none of their twisted manufactured information has any back up in the real world of foreign affairs, nor does it matter that the investigation concluded nothing but following up a protocol that led to the tragic end...nothing matters to the GOP...
When you can't run on merit, when you have nothing else to offer to the people who's votes you need for election or reelection, the only thing you can do is pander to your most faithful zealots with stories that they want to hear...ergo Benghazi...and wait for the opposition to make a mistake that you can really use against them...
What is then the real story that is underlining Benghazi and all the rest of the culture wars? Why the many divides in our political structure?
Cause each day we talk about Benghazi, IRS, AP...guns, God and abortions, we as people are pulled in their vortex of blame games, and we do not talk about, we actually forget about the truth...

Wealth and Income inequality...

The wage divide, the income stagnation that keeps falling behind productivity, behind inflation, behind the growth and pile up so much wealth on one side that becomes something this country has never seen before and not many are even aware of it...
Wages...
Taboo theme rarely anyone talking about on TV, and even when one does talk about it their misconception is so great that is unbelievable...
... To the bleeding heart libertarians it's a no brainer...keep the Government out of the labor markets and abolish even the minimum wage and let the market work its wisdom...so simple, right, except when you ask them...
   -What markets set the minimum wage?
Instantly that same bleeding heart libertarians refuses to accept the market, the same market they so faithfully adores!
... To the hard core conservatives minimum wage is no brainer either...you get paid what your labor is worth on the market, but ask them the same question and you will see how shallow their faith in market truly is...
... To the slick Republican wages are also no brainer...they are more educated and they know their economics 101...till you apply mathematics to verify their claim, mathematics that does not add up...then you will instantly see how their faces changes and the ugly, selfish, primitive business owner pop up as Mister Hyde...
I do not blame them...
What undoubtedly unite them is the notion that they all agree to disagree with the market witch all of a sudden they all refuse to even acknowledge...
Wages...the old question of capitalism...the only question of capitalism that unites the wealthy across the borders of religious, national, or cultural spectrums...
I do not blame them...
I understand them...
Every dime they pay their workers less in wages, is a dime that will boost their bottom line, will keep cost low, augment the profit cashing on productivity and enrich their portfolio...
I do not understand the rest of us...we who work for a living, who can't make our ends meet, who work second or third jobs, we who may not work for minimum wage, but still work for paychecks, we who comply to work paycheck to paycheck and never bother why is that...
I do not understand why we do not bother to learn the truth!
Some of us, poor souls will be even fast to answer:
   - Labor market set the minimum wage...the competition between workers set the minimum wage...more workers, less their value...
Others will run to correct them...
   - No, no, no...Federal Government! set the minimum wage!...
Both answer show maximum indoctrination of the workers into market economics...Reverse economics I shall say...
How easily we are eager to accept and not question the obvious...
   - Does the Government really set the minimum wage, or is it just trying to adjust the minimum wage with the cost of living?
The real question is not what set the minimum wage, the real question is what set the minimum price of labor? If the labor market set the price of labor what is the starting cost of that specific merchandize the worker sales?
The Distinction between minimum wage and the minimum price of labor is deliberately erased from everyday talk, because if the minimum wage is defined as the natural cost of labor then it will be easily understandable to every single worker in every possible trade, across all geographic lines too...
Then why do we not know it...after all, it is our livelihood?

 "Labour, like all other things which are purchased and sold, and which may be increased or diminished in quantity, has its natural and its market price. The natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race, without either increase or diminution.
The power of the labourer to support himself, and the family which may be necessary to keep up the number of labourers, does not depend on the quantity of money which he may receive for wages, but on the quantity of food, necessaries, and conveniences become essential to him from habit, which that money will purchase. The natural price of labour, therefore, depends on the price of the food, necessaries, and conveniences required for the support of the labourer and his family. With a rise in the price of food and necessaries, the natural price of labour will rise; with the fall in their price. the natural price of labour will fall."
 David Ricardo, The Principles of political economy, published first 1817, Chapter V, On wages,
 
1817 it was clear to the economics mastermind as Ricardo...who was pupil of Adam Smith...1817!
Why did we forgot that simple truth...its not science fiction, after all...its what we all practice every day: we eat...we sleep...we cant go around naked...bare necessities also known as cost of living...
The concept of cost is not unknown to any business owner...its actually their mind trap...
If one asks any business owner how much his business cost of operation are, he will tell you the price to a dime...he knows exactly how much he paid starting with the supplier of the material, how much he paid his workers, utility, transport, taxes...he know how much exactly he invested in every single product that he is selling...good or service, respectively...
One don't need a phd in economics, nor one need to be a business owner to understand the cost theory of value...
If one asks a housewife how much a cake she made cost her, she will also know how to calculate the price of her cake, cause she knows what she paid for the eggs, flower, milk and sugar...frosting or fudge...
Yet we as workers we do not know what make our natural price of labor, what are our cost of living that represent the minimum wage...the base cost of our labor...
If you ask one owner he will know that if he does not recoup all his expenses in the course of the business cycle, his business will cease to exist...He knows...and he will fight tooth and nail to prevent its bankruptcy or closure...
We on the other hand...We the workers, did we forget that poverty is just the end of the equation when wages do not cover the base expenses that are necessary for labor to replenish its own cost of living...
It is utterly sad to listen, to witness a rich man being comfortable talking about how important it is for businesses to recoup every cost in the process and hope the market will grant more than the cost of operation, namely profit, the more, the merrier, but will deny his own workers the same philosophy...
Government does not meddle in setting the price of rent in one city, nor does the Government set the price of food in one grocery store, nor does the Government tell a retail store what the price of clothing will be...
The market sets those prices...
Rent is set by the housing market...
Utility are set by the energy market...
Food is set by the agricultural market...
Clothing is set by the manufacturing market...
No worker is able to lower the price of any of these goods and services he desperately needs in order to sustain himself...
If one tells the business owner the cold reality of his own market creed, he will turn and readily twist those bare cost of living from necessity into a choice, like its an indulgence, not the minimum...
The minimum is not a choice...the minimum is the lowest price of those goods and services...period!
If one person works and he makes less than the cost of those bare necessities for survival, the person will suffer malnutrition, stress and eventually get some chronic disease and face death in the long run...in other words, just as the business that cant recoup its cost of operation ceases to exist, so does a worker who cant recoup the cost of living...

"When the market price of labour is below its natural price, the condition of the labourers is most wretched: then poverty deprives them of those comforts which custom renders absolute necessaries. It is only after their privations have reduced their number, or the demand for labour has increased, that the market price of labour will rise to its natural price, and that the labourer will have the moderate comforts which the natural rate of wages will afford. "

David Ricardo, The Principles of political economy, published first 1817, Chapter V, On wages

Ricardo was blunt...he knew what is happening in his time when labor was being paid less then the natural price...the number of laborers reduced...One do not need a gross imagination what reducing numbers of laborer meant...life expectancy was not the 19 century highlight...
Some will say...we come a long way from 19 Century...people don't starve to death anymore, they do not sleep under the bridges and they don't get sick exposed on cold weather...and even if they get sick, we have health care program that take care of them...After all, we learn from our past!
Did we? Did we really learn, or we just sooth our conscience turning our blind eye with few Social program and patchwork of same old remedies?
The tragedy of the workers today is that we as Human, we always group together and help each other, Our Society compliment ancient charitable soup lines with food stamps...shelters get additional space by low income assisted living...the Church and Government Welfare...but those programs just prolong the inevitable end result...they create the illusion of help and manufactured a burden of shame and guilt...
None of that should happen...none of the blame is true...
Poverty is nothing but mathematics...simple if I may say...
You wanna see the formula of poverty?

P= NW- m{f, CL}
where P stands for poverty; NW stands for net wages; m stand for minimum and CL stands for cost of living...In any civilized society minimum cost of living is represented as poverty line for family of four...
Mention to a business owner why a wage can not be set for individual but it has to supply living necessities for a family of four and you will see the naked face of ignorance and rude selfishness...

   "A man must always live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more; otherwise it would be impossible for him to bring up a family, and the race of such workmen could not last beyond the first generation. Mr. Cantillon seems, upon this account, to suppose that the lowest species of common labourers must everywhere earn at least double their own maintenance, in order that one with another they may be enabled to bring up two children...The labour of an able-bodied slave, the same author adds, is computed to be worth double his maintenance; and that of the meanest labourer, he thinks, cannot be worth less than that of an ablebodied slave. Thus far at least seems certain, that, in order to bring up a family, the labour of the husband and wife together must, even in the lowest species of common labour, be able to earn something more than what is precisely necessary for their own maintenance.. "

Adam Smith, Wealth of the Nation, 1776,  Chapter VIII, Of the wages of labor

As we see...a slave owner knew how much are his labor maintenance cost, like any machine maintenance, slave owners knew why they have to provide their labor with bare necessity fit for family, or they will lost the replacement of their human machine...of cource they knew the value of their labor, cause well, they paid for them...they purchase them... but our business owners seams lost in the momentum...
Excuses after excuses is all that will drip from their side...why?
Cause they do not feel responsible for workers living expenses...much less workers natural reproduction...

Poverty is simple equation...its not some virus one catches getting exposed on cold weather...its the amount of money one get paid below the minimum cost of living one depend on to survive...
We as Society step in and cover our underpaid workers the difference...and the only reason why the rich, the business owners and their management representatives are able to get away with paying below those bare minimal cost of living is because they manage to blind and bedazzled all of us who receive paychecks and contribute in taxes,,,
We as taxpayers are supplementing our business owners while they piling up more and more wealth during the last few decade...
We as workers let the owners get away with keeping million of us working and get in return so little that they are not able to support their own families...
Its sad, but it seams we as workers forget our own workers history that "gave" us all the benefits and lifted millions from poverty into the middle class, the same benefits that are shifting away from beneath our feet...middle class wages who were way above minimum wages due to Union contracts and Government Laws...
I do not know exactly how did that happen, cause I was not here in America, but I do know it started with Reagan...
The morning in America that introduced to the American people an economic doctrine that created the chart below...
They say it is the American way...the poor and the wealthy are the American pastime...its the way it is...as long as we have middle class in between them...
Well if you are Republican, I doubt you read past my few sentences, much less will you open the video...but ignorance is a bliss America can not afford anymore...
The chart show how big is the misconception of wealth in America...
I believe in numbers...I am macroeconomist after all...
Wealth inequality starts with income... The income that every one of us gets paid is our source of wealth, and the minimum wage is the starting point...if the minimum wage is below the cost of living, then the whole pyramid of more expensive skilled labor is also depressed and has no space for growth...
If the minimum wage is set below the cost of living, the cost of bare necessities such as food, housing and clothing, then people on minimum wage will end up on Government Welfare programs, while every other wage labor will just fill the gap on its own and have no leftover income to accumulate wealth...multiply that for few decades, and it is so obvious how the wealth inequality came to be reality of the American middle class...its just the perception of being better off, cause one makes way above the minimum wage that blur peoples vision...
The mirage of modern day capitalism...
Worker who generate $15 in hourly wage it seams to be paid double then the minimum wage when in reality one can barely keep up with the bill...
It does not matter where a person live...in Los Angeles California, or in Horatio Arkansas...if one live paycheck to paycheck losing the race with the bills trimming every dime on leisure and scraping by on every expense...one live on minimum wage no matter if one make $20 or $8 hourly rate...
Talking about mass delusion...
When I first saw these table statistics, it took me a while to come to my senses as an economist...
Not every day an economist is able to see a perfect example of David Ricardo's "Iron Law of wages" that has befallen America, and set the middle class on the road of extinction...

"The market price of labour is the price which is really paid for it, from the natural operation of the proportion of the supply to the demand; labour is dear when it is scarce, and cheap when it is plentiful. However much the market price of labour may deviate from its natural price, it has, like commodities, a tendency to conform to it. "
David Ricardo, The Iron Laws of wages. The Principles of political economy, published first 1817, Chapter V, On wages...

Ladies and Gentlemans...I present you Ricardo Law of wages in America...

Table 643. Annual Total Compensation and Wages and Salary Accruals Per Full-Time Equivalent Employee by Industry: 2000 to 2009
[In dollars. Wage and salary accruals include executives’ compensation, bonuses, tips, and payments-in-kind; total compensation includes in addition to wages and salaries, employer contributions for social insurance, employer contributions to private and welfare funds, director’s fees, jury and witness fees, etc. Based on the 2002 North American Industry Classification System (NAICS); see text, section 15]

Industry                                            Annual salary and wages                      
                                            2000        2005       2008        2009

Domestic industries. . . . . . 39,157     45,537    51,059     51,615
Private industries. . . . . . . .38,862     44,717    50,144     50,462
Agriculture,
forestry, fishing,
and hunting. . . . . . . . . . . .22,154     28,600    33,129     34,159
Mining. . . . . . . . . . . . . . . 57,983     73,161    88,615     87,214
Utilities. . . . . . . . . . . . . . 64,742     77,409     86,667     87,578
Construction. . . . . . . . . . 38,563     43,948     51,226     52,321
Manufacturing. . . . . . . . .43,933     50,909     56,373     57,374
Wholesale trade. . . . . . . .50,853     57,922     65,089     64,896
Retail trade. . . . . . . . . . .  26,585     29,230    30,861     31,195
Transportation
 and warehousing. . . . . . . 39,057     43,865    48,286     48,453
Information. . . . . . . . . . . .62,582     68,330    76,747     77,231
Finance and insurance. . . 64,561     77,981     88,034     84,555
Real estate
and rental and leasing. . . .37,146     43,708     47,849     47,290
Professional, scientific,
and technical services. . . .62,568     69,767     79,266     80,077
Management of companies
and enterprises 1. . . . . . . .74,201     87,971   101,450    96,586
Administrative and waste
management services. .     25,035    31,370      35,961    36,761
Educational services. . . . .29,243    34,844      39,221    40,785
Health care
and social assistance. . . . .35,269    42,286      47,071    48,354
Arts, entertainment,
and recreation. . . . . . . . . .32,479    37,149      43,746    43,219
Accommodation
and food services. . . . . . . 18,047    21,018      23,121    23,405
Other services,
except government. . . . . . 25,989    30,465      34,217    34,885
Government. . . . . . . . . . . 40,767     49,894      55,891    57,320
Federal. . . . . . . . . . . . . . .46,470     64,184      70,785    73,765
State and local. . . . . . . . . 39,164     46,174       52,058    53,056


Source: U.S. Bureau of Economic Analysis, Survey of Current Business, April 2011.



- Houston we have a problem....Houston, this is not anemia, but a case of advanced economic leukemia...

It is said long ago...

"We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate..."

Adam Smith, Wealth of the Nation, 1776,  Chapter VIII, Of the wages of labor
 

It is obvious to me that in present day America, the business owners find a way to organize entering into contract with a whole political Party and they are successfully holding the minimum aka natural wages low as humanly possible...
No wonder we have explosion of obesity, of chronic deceases and of poverty stricken neighborhoods who's only activity is the food stamp economy...

We can indulge in debate about Benghazi, AP, IRS, Verizon...we can debate till the end of time the topic of God and guns...we can debate Obama Care, Medicare, Social Security, Iraq, drones and vouchers...but if we do not address the income inequality in America, we will get nowhere...
Marie



 

36 comments:

  1. Eerything you said. The only regret I have about this essay, is that most working folk are so brainwashed by sound bite "facts" swepped by the ruling classes, they'll never take the time out to read or comprehend what you've so eloquently laid out here

    ReplyDelete
    Replies
    1. Thank you for your kind words...
      I do feel the same...so many workers don't even remember their own history...much less have idea how to fight for their rights...
      I wish I can reach more people...but even few I do reach is better then none...
      Marie

      Delete
  2. You want income "equality"? MOVE TO NORTH KOREA or CUBA!
    Enjoy your onanistic totalitarian-fest to your heart's delight.

    YOU want THEFT. Theft OF the Government, BY the Government and FOR the Government, and to H*LL with The People, for whom you so gallantly bleat.

    *Here's the REAL formula for poverty, you mathematical illiterate:
    P = NW - GET
    (P=poverty, NW=Net Wages, GET=Government EqualityTaxes)
    See how *easy* that was?!

    Now, GET PACKING and TELL US all how YOUR CONCEPTS WORK IN REALITY...if you survive the first few years.

    ReplyDelete
    Replies
    1. If you so sure you are right, don't be anonymous and log in as a man...let face it...OK

      Delete
    2. "Be a man"?!? BWAHAHAHAHAHAHAHA!!!!
      Oooohh...now, *that's* a rational argument if I ever heard one!
      SORRY, Sweet Cheeks, I don't *do* facebook, or any of the other options listed.

      Delete
    3. I should have said "log in as a human"...
      I did not say be a man...

      Delete
    4. What is Anonymous talking about? Think you are right about some people not knowing the history of labor in this nation. We are heading back-back to the turn of the 19th century. My Irish grandfather came to America then and went to work in the coal mines. He was paid 50 cents/day and had 10 children. To survive he charged goods at the Company Store.

      There was an explosion at the mine because there was no government safety regulations. He lost his sight. A blind man cannot mine coal, so he was fired. He couldn't sue, and-as the old song says - he owed his soul to the company store.

      That is part of our labor history. The rich love low-wage workers or should I say slaves.

      Delete
  3. Oh yes: the *other side of that equation...

    P = not only NW - GET, but also
    P = LAP
    (LAP = Lazy A§§ Person)
    which means (NW - GET) = LAP, right?!

    Government theft of the earnings from the productive members of society to subsidize the slothful only ENCOURAGES MORE SLOTH in a society.

    ReplyDelete
    Replies
    1. When you think closely about cost of living away from your misplaced hate and anger, you will understand that net wages are actually wages already being subtract with taxes...payroll taxes...
      If you complain for federal taxes, that's another story...
      Federal taxes are simple issue...
      Wages earner should never ever file for tax return, period...that is my POV...
      Federal Income taxes should be filed only on income coming from other sources and not any paychecks, no matter what the amount on the paycheck is...
      Also Social Security should be no more then 5% but on all income, no cap on contribution...
      Any comment on that?
      Marie

      Delete
    2. "Any comment?"
      SURE!!!

      You have a talent for babbling on about trees (whether you are right or wrong on any particular matter is aside from the point), to avoid discussing the forest:

      A GOVERNMENT LARGE ENOUGH TO DO ANYTHING FOR YOU IS POWERFUL ENOUGH TO TAKE EVERYTHING FROM YOU.

      Any likely WILL.

      But, NOOOOOooooooooooooo...you have to go on about this tax and that tax and what in your sick little mind is "fair"....and THEN YOU HAVE THE CHUTZPAH TO ACCUSE *ME* OF "hate and anger"! BWAHAHAHAHAHAH!

      Government THEFT of working citizens' rightly earned money and property is the most *pure* form of "hate and anger."

      Vladimir Lenin would have rightly called you a USEFUL IDIOT.

      Delete
    3. You assume im a liberal of the sort you probably encounter on any given social media so you keep claiming things that I never said or even think...
      Why you don't reset and try to actually read my words...
      I never said Government set the minimum wage...I did said market does...
      I don't know what part of that statement you are not able to understand...I list briefly what markets set the minimum wage...
      Next you assume I am pro government but you assume Government of your ideas, not mine...
      I know it may come as surprise to you, but I do agree with your statement..."A GOVERNMENT LARGE ENOUGH TO DO ANYTHING FOR YOU IS POWERFUL ENOUGH TO TAKE EVERYTHING FROM YOU.A GOVERNMENT LARGE ENOUGH TO DO ANYTHING FOR YOU IS POWERFUL ENOUGH TO TAKE EVERYTHING FROM YOU."
      Marie...

      Delete
    4. Government has gone too far on occasion, and the people rose up. Perhaps Anonymous is too young to remember these events.

      Delete
  4. THE SELF-DEFEATING STUPIDITY OF A HIGH "Minimum Wage":

    Let’s say you set the minimum wage at $20/hour.
    “Hurrah for The People!”…right?

    WRONG, MARIE.

    Not only do businesses which have to NOW pay $20/hour FIRE most of their low-skill workers JUST TO STAY IN BUSINESS, but those businesses still operating have to raise their prices to cover extra expenses. Those higher expenses get passed on to the customer, or the company goes out of business. AND THERE GOES YOUR “For The People” minimum wage raise, because stuff that USED TO BE BOUGHT for $10 now costs $20…

    Get it?!

    ReplyDelete
    Replies
    1. What businesses that may be?
      Small mom and dad stores, or Corporations?
      I don't know did you notice, but Corporations are doing well, and mom and dad who work their stores are also doing well if they attached to a big corporation, to service any given maintenance or supply ( just few example), then they are doing also fine...
      What you have in mind is local McDonald franchise, who get by paying minimum wage...
      Yep some of those store will go bust, but thy will go bust anyway over time in the locality that cant accumulate volume needed to sustain their cost...
      What you obviously cant grasp is what min wage is...
      Its not amount of money, its quantity of food and basic necessities for workers own maintenance ( life) as shelter, clothing, transportation ( to and from work)...
      Prices may varies from state to state or from one city to another in the same state, but the quantity of those basic necessities is not arbitrary...it depend on the level of human development...
      Min wage in England may not be same amount of money, but it will be the same standard of living, while it may be lower in Guatemala and higher in Sweden...
      Get it?

      Delete
    2. Good point Marie. If US workers become low-wage workers, manufacturers will shrink the consumer base. This has happened somewhat during the recession. It certainly has impacted low-wage workers in their ability to buy American goods. They can only afford imported goods from low-wage countries.

      Eventually parasites (corporate greed) will kill the host (the consumer/worker).

      Delete
    3. Its hard to fathom that the tbag provacateur who keeps babbling fascist bullshit on your thoughtfull page is anything but a troll-it(the troll) hasn't said anything true. It would be too easy to put it to sleep.

      Delete
  5. Marie,

    As disappointing as those figures are, we are still better off than nations that have chosen socialism. An unequal portion of something is better than an equal portion of nothing.

    I object to your condemnation of Reagonomics. It worked. Ask Bill Clinton. He embraced it.

    There are gross inequities in the US economy, but they will not be solved with punitive taxes and forced income redistribution. The government has shown itself to have sticky fingers, when it comes to redistributing money.

    The Minimum Wage sounds good, but it only moves more people into poverty, once the Market adjusts. Just in case you were thinking about it, doing away with the Market has never worked. The Market is not an ideology, it simply is. You can't kill it. Those who pretend to manipulate it learn there are myriad unintended consequences.

    Macroeconomics is a poor tool for policymaking (but it can be an entertaining major, like other esoteric subjects whose career paths can only lead to teaching or government work). The euros have been trying to plan their economies for decades and it has never worked for them, yet they churn out thousands more economists from their universities every year, all competing for a coveted cushy, parasitic position as an EU bureaucrat -- or waiting for tenure.

    ReplyDelete
    Replies
    1. Andrew...
      As disappointing as those figures are, we are still better off than nations that have chosen socialism. An unequal portion of something is better than an equal portion of nothing.
      ...
      There are gross inequities in the US economy, but they will not be solved with punitive taxes and forced income redistribution. The government has shown itself to have sticky fingers, when it comes to redistributing money. As disappointing as those figures are, we are still better off than nations that have chosen socialism. An unequal portion of something is better than an equal portion of nothing.
      ...
      I was born in Yugoslavia...Macedonia to be precise...Skopje.
      When you arbitrary talking about socialism I just wanna tell you that you are talking to someone who actually lived there...
      The minimum wage do not need market adjustment...
      I already explain in my previous reply, so now I will just copy part of it...
      "What you obviously cant grasp is what min wage is...
      Its not amount of money, its quantity of food and basic necessities for workers own maintenance ( life) as shelter, clothing, transportation ( to and from work)...
      Prices may varies from state to state or from one city to another in the same state, but the quantity of those basic necessities is not arbitrary...it depend on the level of human development...
      Min wage in England may not be same amount of money, but it will be the same standard of living, while it may be lower in Guatemala and higher in Sweden..."
      People already "get those necessity one way or another...some as wages, some as supplemental help trough different channels, from charity, church services, or Govt welfare, from food stamps to assisted living...
      Society always supply its own people with those necessity ergo, market will not endure more demand for food or housing, cause as I state in my post, humans depend on them for their survival...
      The question one Society can ask for is not what the price of those necessities is, but who will pay for it...
      Business or Government...

      Delete
    2. You are arguing over nomenclature. This is not Skopje (and Yugoslavia was not a pure socialist state -- Tito was not a fool). If you wish to discuss the minimum wage in the United States, it would be less confusing to stick with the definitions used here.

      What you seem to be describing is what is called a "living wage" here. The "minimum wage" is an arbitrary amount defined by Congress, and/or a state or local government. It may or may not equal the living wage.

      The Federal Minimum Wage in the US was not intended to be a living wage. Households cope with the living wage by having multiple wage-earners working multiple jobs.

      If my 20-something daughter wants to live away from the family, she will have to share costs with one or more roommates and carefully control her expenses.

      Poverty is another arbitrary definition. When I was a boy, those who are defined as poverty-stricken today would have been considered lower middle-class. The current regime's definition of poverty presents an ever moving target that can never be conquered.

      When a "safety net" begins to include things well beyond what were long considered basic necessities, it is a disincentive to participate in the labor force. Look at the millions who have simply withdrawn from the labor force since 2008. Because their lifestyle is being subsidized, not only are they no longer contributing to the economy, they are living off the earnings of those who continue to pay into the system.

      When those still working see that their unemployed neighbor is living better than they are, they lose incentive to continue working.

      Where do you propose the money will come from to support all these good citizens? We can tax the rich into oblivion, but that will only cover a few months, maybe as much as year, if we confiscate existing wealth. We can tax the middle-class into oblivion, then we can tax the working poor, because that is all that will be left. We can borrow money or print it, as we are doing now, but at a point, the bubble will burst and the economy will collapse.

      What then? The socialist utopia? It does not exist without subsidy. It cannot stand on its own. It is a failed ideology that can only lead to ruin and death.

      Society does not always supply its own people with necessities. An economic collapse is the ultimate market adjustment. What will be necessities under those conditions? How did Stalin deal with it, or Mao, or Castro? At least the British East India Company quickly learned how to avert famine. Beyond their Christian ethic, famine wasn't good for business.

      To answer your question, "...who will pay for it...?" It is obvious. Free Market Capitalism, whether you love it or hate it, is the only long-lasting solution to real poverty (not relative poverty).

      Ask the Cubans now fleeing to the ALBA countries how they feel about income inequality versus the blessed equality of socialism.

      There is no injustice in income inequality. My neighbor is not evil because he has something I don't have. I am not poor because my neighbor has something I don't have. I am not less than my neighbor because he has something I don't have.

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    3. Reaganomics did not work. The economic "boom" was false. Clinton embraced it,repealed Glass Steagall,and approved the marketing of exotic derivatives. That led to the 2008 economic collapse that could well have been another Great Depression. What sustained the economic through some of the voodoo economics period were laws put in place by FDR.

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    4. Macroeconomics are needed in this global economy. Start with micro in particular mfg segment, then look globally. It's now USA vs the world.

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  6. I got so much to correct you that it may take me few letters...so let start...
    "What you seem to be describing is what is called a "living wage" here. The "minimum wage" is an arbitrary amount defined by Congress, and/or a state or local government. It may or may not equal the living wage.
    What I am describing is known in economics that is forgotten in western literature as natural price of labor...and yes, that natural price may or may not be actually paid by the market...
    If you think its something Socialist economist prescribe ( I don't see why you will mention Skopje otherwise) you are completely mistaken...
    Its not Marx I was referring to, it was David Ricardo and Adam Smith...
    So instead of dismissing my "nomenclature" maybe you should ask me why America set its Federal minimum wage below the real or natural minimum wage as it is in any other National economy that care about its own population...
    Its a legitimate question...who benefit from putting American in such position that most people work, but cant make ends meet?
    Now about apple and oranges that you mix and match all the time...and I'm saying this cause I heard the same basket of fruits being used from Conservative and Libertarians each time they face minimum/living wage debate...
    Your 20 something daughter and my 20 something son will face the same choice, but they do not have a families...They will be students, or young adults...
    Key word is "families"...
    Even a single mother (or single father) with kids is considered a families and as family, they have different needs and they have different expenses that are sometime beyond their control...

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  7. Poverty is not arbitrary definition...if your bills extend your revenue, you are de facto poor, what you don't take in consideration is the difference in tech progress, so 50 years ago people walk to jobs, and today rarely do, today they need transportation...or people 20 years ago didn't have cell phones and now having a cell is a way of communicating...
    Time change but time change the standard of living, not the minimum...( I mention cell as example of tech, not as example of standard of living that should be uphold too )...
    Minimum is not a choice of expenses when we are talking about minimum wage...its what is necessary for survival...We have establish poverty line...I cant imagine what is taken into account but the amount is ridiculously low...
    World calculation of poverty is not top secret...its easily calculated amount...

    "When those still working see that their unemployed neighbor is living better than they are, they lose incentive to continue working. When those still working see that their unemployed neighbor is living better than they are, they lose incentive to continue working."

    I honestly do not know anyone who will even remotely envy person on food stamps...only if one work part time and make less then what welfare is, then actually I understand that its better not to work at all...especially if the person is a young mother...her care for the child is more valuable then her extra few backs...IMHO...

    "Where do you propose the money will come from to support all these good citizens? We can tax the rich into oblivion, but that will only cover a few months, maybe as much as year, if we confiscate existing wealth. We can tax the middle-class into oblivion, then we can tax the working poor, because that is all that will be left. We can borrow money or print it, as we are doing now, but at a point, the bubble will burst and the economy will collapse.Where do you propose the money will come from to support all these good citizens? We can tax the rich into oblivion, but that will only cover a few months, maybe as much as year, if we confiscate existing wealth. We can tax the middle-class into oblivion, then we can tax the working poor, because that is all that will be left. We can borrow money or print it, as we are doing now, but at a point, the bubble will burst and the economy will collapse."

    Not taxes...I do not think taxes are solution to anyone well being...
    If you carefully read my post, you will understand that I do not think welfare or charity is the solution...its wages...
    Money should come from the place where they are created...Corporations...
    I did calculate that if Wal-Mart is willing to pay its workers a wage that will enable them to make a dissent living independent of food stamps, he will need to raise 5 cents on a dollar, all other variable being equal, like volume of sales and no new merchandise introduced, witch if you are a businessmen as I think you are, will agree its almost impossible to envision...
    So no, Andrew, I don't think any Corporation will suffer paying "living" wages...

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  8. "Society does not always supply its own people with necessities. An economic collapse is the ultimate market adjustment."
    Wrong on multiple level...
    Society does provide for everyone since 1920'...its Society unwillingness to sales without getting profit...
    Do you know that during the Great depression people who were impoverished were hungry while the countryside got food rotten cause no one come to purchase the harvest? True...
    "How did Stalin deal with it, or Mao, or Castro? At least the British East India Company quickly learned how to avert famine. Beyond their Christian ethic, famine wasn't good for business."
    Crises are never good for business...but you wrong if you think today crises are crises out of famine as they were prior capitalism...they are crises of to much, not too little, and as I always say to my internet readers...
    - Our last crises happen cause we build too many houses or cause there was no houses on the market...Are the stores shelves full of goods that have no buyers or the shelves are empty and people hold pockets full of money and got nothing to buy?
    Crises are another issues, and I will talk to you more if you don't mind...
    "There is no injustice in income inequality. My neighbor is not evil because he has something I don't have. I am not poor because my neighbor has something I don't have."
    This paragraph has nothing to do with economics...its notion of envy and emotion of greed...and that is a character flaw, not economic matter...
    When I first come to America there was time when I got no dime till my next paycheck...I swear my best friends are people who are the richest Macedonians in Vegas...but I never envy what they have, I just dream one day I will...

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  9. This is a jumble of thoughts from readings the posts. Marie, I like your comments on greed,wealth,poverty.

    Growing up in the 50s,few women worked-only those who were in deep poverty. This was a time of economic boom and unions. As the unions got too powerful and needed slapped down (not busted although they were), wages fell. Women went into the workforce to supplement the wages, and women's pay was awful. Now it's just accepted that the woman/mother must work.

    As for taxes, I think corporate taxes should be lower; and all corporations must pay. As for personal income of executives, that tax should be raised. It was very high in the 50s, lower under Clinton. Bush dealt the country a blow by lowering capital gains and taxes on personal income of the mega-rich.

    All will be well sooner or later. People will only stand so much. Even the French under an oppressive monarchy finally had enough.



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  10. Marie,

    Again, nomenclature. I cannot speak as to why the terminology is different, it simply is. It serves no purpose to pursue the issue in this context.

    The Federal Minimum Wage is not intended to establish a wage sufficient to support a household. Again, a household meets its expenses with multiple wage earners often working multiple jobs. Call it a market adjustment, if it makes it easier to understand.

    If arbitrarily setting a minimum wage fixed the problem of a living wage, I suppose we wouldn't be having this discussion. The minimum wage doesn't work and it has a disruptive ripple effect throughout the market.

    The official definition of Poverty is as arbitrary as the Federal Minimum Wage and has recently been redefined as being a proportion of National Wealth, therefore it can never be overcome.

    By your definition, I know many people with 6 and 7 figure incomes who can't make ends meet.

    If you do not know anyone who envies (perhaps there is a more appropriate synonym?) someone who lives in subsidized housing, gets free medical care, free daycare, free school lunches (and breakfasts), fee waivers, food stamps, free training, free cellphone, foreclosure protection, unemployment for life (seemingly, or at least to the end of the Obama's reign) or disability payments, etc., then you need to get out more.

    Beyond the true poor, or a crisis, usually people can't make ends meet because they buy things they can't afford and/or buy things they want before they buy things they need. Is it Society's responsibility to enable poor decisionmaking?

    I agree that companies could pay higher wages, but forcing them to do so doesn't work. If no one was willing to work at Walmart for minimum wage, they would raise their wages. Walmart can pay minimum wage because the market responds positively -- like it or not. They are not forcing anyone to work for minimum wage. I agree with Hillary about the role of unions. It is unfortunate their excesses brought/is bringing about their downfall.

    The famines in Russia, China, Cuba, North Korea, as opposed to those famines dealt with by the British East India Company, were caused by policy, not climate. You are correct that the hunger experienced in the US in the Great Depression was due to poverty, not a scarcity of food. I am unconvinced, however, that the policies of FDR did anything to end the Depression, rather, they extended it 10 years, when the rest of the world had recovered by the early 30's. My father was the son of a poor farmer during the Depression years (I joke that my parents were raised in the Great Depression, so I was too), but he had not great love for FDR.

    You mention Society's unwillingness to sell without making a profit. That is a truism of human nature far older than modern Capitalist theory. Why make an effort without gain? Why work without pay? Why invest without a return?

    The last financial crisis was caused, not by an overabundance of houses, but by an overabundance of bad mortgages. The next financial crisis will be caused by either an overabundance of bad student loans or an overabundance of bad loans to sovereign nations (or states and local governments).

    Why discuss wealth inequality? What has it to do with supply and demand curves? It is inserted into the discussion because of socio-political concerns. Your post was meant to create a feeling of frustration and anger among workers against employers and the wealthy. You are seeking to foment class envy.

    Greed is the backbone of Capitalism. Envy is the foundation of Consumerism. They have everything to do with economics.

    Hillary, the derivities market was created to deal with the trillions of dollars of bad mortgages the Democratic Party forced banks to approve. It had nothing to do with Reagonomics. The Republicans are not saints, but you cannot legitimately pin that one on them.

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  11. Andrew, as you can see Im not having many people who leave comments on my blog, and for that I honestly appreciate your time and energy...
    I will do my best to continue the dialogue, if you don't mind...I can see you are educated person and you are not vulgar or disrespectful in your replies...thank you for that...
    So lets begin...

    ... "The Federal Minimum Wage is not intended to establish a wage sufficient to support a household. Again, a household meets its expenses with multiple wage earners often working multiple jobs. Call it a market adjustment, if it makes it easier to understand."

    Of course I do understand...
    That do not change the fact that is economically insane to pursuit that level of minimum wages as America does...I ask you why is that...From the literature I read it wasn't like that till Reagan...many families have stay at home mothers and their single income was sufficient to place food on the table and support the childrens too...Usually the second (wife/moms) income is the one that lift family above poverty into a middle class...
    Most of European countries wages are sufficient to support a families on single income...and last thing I check German Capitalists or Sweden, Denmark, French or English were having really profitable businesses too...
    ..."If arbitrarily setting a minimum wage fixed the problem of a living wage, I suppose we wouldn't be having this discussion..."
    Minimum wage is not arbitrary set by Govt...its set by markets of bare necessities as I explain in my post...those markets are ignored in America as indicators of the minimum wage level, but ignoring them do not make them disappear altogether. What we do in America is supplementing the federal min wage with federal social programs and we accomplish equilibrium between real and market min wage...
    No other civilized country do that: people who work should be able to support themselves at least...The disruption of the market is not an issue at all...and I can point to few studies that come from American academia if you wish to read them...
    ..."By your definition, I know many people with 6 and 7 figure incomes who can't make ends meet..."
    Not really...but I see my mistake...I should have said minimum cost of living, aka poverty line for family of four...and I will index my formula with an "m"...thank you...In my mind I did have Cost of living as poverty line...

    ..."If you do not know anyone who envies (perhaps there is a more appropriate synonym?) someone who lives in subsidized housing, gets free medical care, free daycare, free school lunches (and breakfasts), fee waivers, food stamps, free training, free cellphone, foreclosure protection, unemployment for life (seemingly, or at least to the end of the Obama's reign) or disability payments, etc., then you need to get out more..."

    Honestly I don't...but do you, that's the real Question...and if you do, do you feel envy ( or any emotion of regret you don't share their spot at all)... Honestly Andrew?

    I never have any "help" from the Govt in any form or shape but tax credits and deduction every April 15, but I can testify to this real life story...After September 11 my brother was lay off as so many other Vegans cause we turn into a ghost town, and he was directed to a unemployment benefit office...when the first check arrive we were shocked...
    I remember saying to the woman that he is not alone, that he has a family and two kids of witch one is a baby and he spend more on dippers and milk for a week then the amount on the check he receive...she smile (literally finding my comment amusing) and told me that is all he can get...
    I swear I was so shocked I needed a time to digest that info...
    So no...all those stories of "how good people on welfare are having" are nothing but urban legend, in my humble opinion, but I will be happy to listen to any real facts if you state otherwise...

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  12. in continuum
    ..."I agree that companies could pay higher wages, but forcing them to do so doesn't work. If no one was willing to work at Walmart for minimum wage, they would raise their wages. Walmart can pay minimum wage because the market responds positively -- like it or not. They are not forcing anyone to work for minimum wage..."

    Here you are mistaken again on multiple level...
    First:
    Federal minimum wage is what Companies as Walmart base their starting pay...meaning if Govt elevate minimum wage to a standard of living wage Corporation will have to by Law pay their workers...and as you point out they are profitable enuff to be able to afford the increase...the only reason they don't pay is because they will be fools if they do without being lawfully obligated...
    The World never end each time the min wage was raised, nor the prices went on a spiraling spikes, I live in America since 1997, so I remember Clinton raising the min wage from $4.75 to $5.15 an hour, and America was not hit by inflation...as well as few time the minimum was raised during Bush years...
    Second...
    People are not willing to work in Walmart for minimum wage...people have to work in Walmart cause usually there is no other job available...
    See Andrew...
    Third...
    Market did not respond positively to Walmart low wages, au contraire, Market is disturbed by the crises, so many people become laid off, so corporation as Walmart are having a good time having all those desperate people from every walk of life knocking on their doors, searching for a jobs when there isn't any, and they are legaly taking advantage of their misery...
    That's just the tip of the iceberg...the other side of the equation is that the tech progress is displacing the labor force and Corporation actually do not need the same number of workers even when they do need workers...
    The solution to that is simple:
    DC must lawuly change that is to say lower the working hours from 8 per day to 6 per day anytime soon, in order to match the demographic natural trends with the technological progress...
    Andrew...I will continue tomorrow, if you don't mind...

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  13. Spot on, Marie! You seem to have attracted a couple of right wing sock puppets! They are scared of you, because you are right! Don't waste your time arguing with these fools, because that is what they want. Ronald Reagan was a two-bit, B-Grade movie actor that was good at reading the scripts from his handlers, nothing more. He was the start of the decline of America.

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  14. Anonymous, do you have anything constructive or intelligent to contribute to this thread?

    You chose not to use your name. What are you afraid of?

    I am not afraid of Marie nor was I silenced by the weight of her logic. I have been politely waiting for her to finish her point, which she was to have continued on June 8.

    Ronald Reagan was an excellent B-grade movie actor and that background helped him immensely in politics. He was also intelligent, with a quick mind and a sharp wit. Unlike Obama, he was never at a loss for words without a teleprompter.

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    1. Dear Andrew...
      I can not begin apologizing for not continue are little discourse...I can only say that I was wrong assuming you are not interested in exchange, but I cant explain how that assumption cross my mind...
      I was wrong...
      I hope you will understand...
      Let resume our chat, if its still doable...

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  15. In continuum...

    "I am unconvinced, however, that the policies of FDR did anything to end the Depression, rather, they extended it 10 years, when the rest of the world had recovered by the early 30's."

    I don't know why in America FDR politics are taken as crises solutions, but I guess that is official case, and its wrong...
    FDR policies as any further Keynesian measures of Government interventions do not solve the crises, they just soften the fall and are purchasing time for the system to get out of the crises on its on...
    I agree that the crises was prolong for ten years...I actually have a post on this blog that say the exit of crises was WWII...

    "You mention Society's unwillingness to sell without making a profit. That is a truism of human nature far older than modern Capitalist theory. Why make an effort without gain? Why work without pay? Why invest without a return?

    True...its truism older then Capitalism...if you see the world with the eyes of an Amish, or the Amazon tribes that knows no money and exist even today, your statements are equally questionable for them as it is for you...
    Society do not sale in order to profit...individuals do...and individuals are motivated by selfish desire that usually contradict the needs of a Society...
    The role of Government is to set the rules of engagement between individuals that will benefit the whole Nation, that will enrich our Society on account of all of its people not just few...
    Governments who can accomplish that are considered good leaders, others fail and set one National State on road of desperation...

    "Why discuss wealth inequality? What has it to do with supply and demand curves? It is inserted into the discussion because of socio-political concerns. Your post was meant to create a feeling of frustration and anger among workers against employers and the wealthy. You are seeking to foment class envy."

    Not at all...
    I am macroeconomist...where I come from, macroeconomist is the one who take care for the benefit of one National economy...Income equality is prerequisite for prosperous Society...only in America talking about wages and wealth or taxes is somehow class war...not in my eyes...The table #643 showing annual compensation that I post above, is unsustainable for America and its a fertile soil for all sorts of problems that we facing today, from deficit and debt to skyrocketing poverty and pressure on every welfare and program...

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  16. Sorry for the late response.

    We obviously differ in what an ideal economy should look like. I was not raised a statist. Statism is a distinctly un-american notion. It is not the state's place to guarantee outcomes.

    You claim skyrocketing poverty, but what do you base that on? Income inequality? So, they are poor because someone has more than they do? Yes, by that definition, there are many poor people in the US. Will income equality make them happier? No. They all want what the rich have. Most won't achieve that, but that is life.

    The State can't make them rich. The State can only take what the rich have and flush it. I suppose, ideally, you could take what the rich have and divide it equally among the population. Yipee, a highly diluted dividend that then disappears forever. Same result.

    You mention the Amish and primitive jungle societies. They are not representative of humanity. Their societies, at least in the case of the Amish, allow the dissatisfied to leave. In order to superimpose such an egalitarian structure at the national or global level, you can have no escapees. These forced societal structures are unnatural and never succeed.

    I live in Utah where many utopian communities, living the "United Order" under the authority of the Mormon Church, were attempted in the 1800's. Even with the force of the Church behind them, they failed, with two short term exceptions, and the effort was abandoned. It was generally agreed that for such a utopian society to prevail it would have to be managed by God -- directly, with no middlemen. Humans are simply too fallible. You will rarely find an individual who can rally the people behind him/her for a short time, but then you change the leader, or the leader changes, and things fall apart.

    Free Market Capitalism works because it acknowledges human nature.

    Income equality takes the energy out of an economy. If you must rely on everyone's good intentions, to survive as a group, you will perish. Egalitarian societies, so called, only exist by force and intimidation, where the individual becomes a slave of the state -- except, of course, for the apparatchiks (and macroeconomists).

    So, it comes back to the little saying I used in my first comment, "An unequal portion of something is better than an equal portion of nothing."

    Is there a role for the State in the economy? Yes, but a limited role. The State can lesson the negative aspects of free market capitalism, but using hand pruners, rather than a chainsaw. Every intervention by the State in the economy has negative consequences, intended or not.

    If business owners and investors were confident of a reasonable return for their investment and efforts, they would start hiring. With deficits, Obamacare and tax hikes looming, they are disinclined to expand and many are retreating or shutting down altogether.

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  17. Regarding the minimum wage, again, the Federal Minimum Wage is not, nor ever was, intended as a living wage, and certainly not intended to support a household.

    Again, we are in America and any discussion of the Federal Minimum Wage should use American nomenclature. So, the minimum wage -- not the living wage -- in the US is arbitrarily set by government and is not tied to the standard of living, the poverty line or a living wage.

    Reagan had nothing to do with women entering the workforce. My grandmother worked outside the home in the 1930's. Her great-grandmother worked outside the home in the 1830's. You are working with an unrealistic Victorian ideal that was reborn as a Post-war ideal in the 1950's.

    Please review this article for a reasonable explanation of who is earning the Federal Minimum Wage: ; and this article, for the most up-to-date information from the Dept. of Labor: .

    Your argument then is that raising the Federal Minimum Wage to the level of a Living Wage, will eliminate poverty? Unfortunately, poverty, as it is currently defined, can never be eliminated until we all make the same amount -- real income equality. That is to say, in the US, under the Obama Administration, the Federal Minimum Wage can never be a tool to be used to eliminate poverty -- unless it is used, in conjunction with confiscatory taxes, to force real income equality.

    Since we seem to be reaching outside of Economics in this discussion, there is no political will to replace government handouts with a Federal Living Wage. Where would be the political benefit? Politicians, and most especially Democrat politicians, need a domesticated electorate.

    I abhor the domestication of the American people.

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  18. Sorry, the references mentioned above are:

    http://www.getrichslowly.org/blog/2007/10/09/who-earns-the-minimum-wage/

    http://www.bls.gov/cps/minwage2011.htm

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