Last Capitalist Standing
Before I begin, a tip of the cap to HappyPantsMcGee for providing the food for today's thought. As we, the United Socialists of America, stand here: two nations, under Government, with liberalism and justice for some...those crazy crazy capitalists in Hong Kong are finally taking steps toward our way of life.
The Nanny State Goes Global !!! Read All About It
As Hong Kong prepares to adopt the minimum wage law (without any economic rhyme or reason), I will quote some of the most telling excerpts from an article which demands close scrutiny from anyone with even a passing interest in global finance and economics.
Here is how Hong Kong dealt with the side effects of a mass Chinese immigration wave from 1948 to 1965 and the effects of said period which greatly grew the population count:
A miserly government, a lack of natural resources and a hostile northern neighbor became a backdrop for what people can achieve when left to their own devices. Economic growth was staggering . Over a few short decades Hong Kong was transformed from one of the world’s poorest places into one of its richest, as it remains.
According to Miriam Lau, a Liberal member of the HK Legislature:
Even at HK$24 an hour, the minimum wage would cost 30,000 jobs, or 1% of the workforce. At HK$32, 170,000 jobs would go, doubling unemployment.
The current minimum wage proposal figure being debated... HK$23 ...
Reading last night's and this morning's debate about the highway robbery currently being perpetrated on Illinois residents by their state government, I couldn't help to think that the entire tiny nation of Hong Kong could use a WSO invite...
In fact, unlike we cowardly Americans they are putting up a strong fight for what they know is and is not right.
A Look Ahead...A Look Back
As usual I am not really interested in your feelings and righteous indignations on the subject. But as is becoming a habit I've got Silver Bananas for anyone willing and (more importantly) able to make a lucid argument as to why Hong Kong needs to put out the torch of free enterprise for the betterment of the collective .
Back in 1977...
A businessman setting up shop in Hong Kong finds low taxes, no foolish government interferences…a government leaning over to encourage him to make as much money as he can. He finds, blessed discovery, no politics.
How ancient that sort of thought has become.
How many times has Milton Friedman rolled over in his grave today?
How funny is it that twenty years after our supposed victory in the Cold War, Hong Kong is saying dasvidanya comrade to its old buddy Capitalism.
Midas, the tags for this post, especially the third one, are made of win.
You'd think that with all of the smart MBA types over in Hong Kong, they'd know the negative impact that minimum wage laws have on the labor markets. They're pricing out people who would be willing to work for very little to get their feet in the door. It's basic economic theory--how is this happening?
MMM,
I think your feigned indignation over labor market regulations is comical and rather emblematic of contemporary American discourse. We can barely have conversation in this country without your bretheren interrupting it with the sound of the knuckles scraping the ground as they mutter platitudes from Friedman and The American Enterpise Institute.
Hong Kong is not some bastion of unfettered capitalism; prior to the current agreement for price floors on labor there were many successful pushes for market distorting regulations:
*1996-Hong Kong government forces bans discrimination *Hong Kong introduced sweeping high skilled certifications- essentially distorting the market for skilled labor *Hong Kong bans certain products, and enforces harsh restrictions on imports (especially from China) * Hong Kong's government is heavily involved in real estate, far more than our intervention
And to answer your question so I can maturate my Silver Bananas; minimum wage supporters often point to increases the standard of living for the poorest and most vulnerable class in society and raises average as a reason to increase the minimum wage. While this is heartfelt I will point toward more concrete examples for increasing rather paltry wages. The most obvious reason is to decrease turnover and increase productivity. Workers laboring for paltry sums are far more likely to quit their jobs and force their employers to hire more people, increase their recruiting apparatus; the effects on the collective are far more pernicious. High turnover often keeps the working populace listless, thus making them far more likely to riot, demonstrate destroy property, etc. There are American examples of the effect of higher wages on menial work: Henry Ford's increase of the minimum wage in his plants greatly decreased turnover and increased sales by endowing Ford employees with the ability to be the wares they toiled on.
Higher minimum wages stimulate consumption. More money is put into the hands of the people, thus increasing consumption and investment in human capital (education, health, etc). This, invariably will lead to higher revenues for companies and corporations in Hong Kong. The entire argument about higher wages decreasing employment is fallacious and rather myopic.
Higher wages also lead to more automation of industry and thus, more human capital investment. This is probably the best effect of higher minimum wages. Corporations that automate their processes are far more productive than their slower ilk.
In what world do minimum wages increase consumption because "more money is in circulation". Ceterus parabus, an increase in minimum wage (or any increase in wages for that matter) only works to drive up consumer prices, since more people are now chasing a fixed supply of dollars. Thus, prices increase. The way minimum wages increase consumption is if inflation expectations become large enough to encourage consumers to make purchases now instead of later because of the falling purchasing power of their dollars over time.
There are so many resources that show that consumption increases after minimum wage increases. First, your logic is poor because you are assuming increases in wages drive up the prices of the products and not the number of products sold. Markets in developing countries are competitive and rising prices on consumption goods, will cause fewer sales since goods are easily substituted and consumers have access to price information. Thus, higher wages will increase goods purchased, not prices.
Also higher wages will also lead to increases in credit. Someone who earns more is more likely to be able procure loans; this increase in credit will lead to more consumption. People who previously were prevented from buying cars, tvs, homes, boats and other consumption goods will be able to buy things.
Higher wages will not increase the money in circulation (last time I checked the money supply can only be increased by open market operations, not increased wages). Inflation expectations effect consumption? In America? Are you serious? Do you think the average American knows what the term CPI means? Seriously, this isn't some third world country with hyperinflation.
Please respond.
.
It is the government's job to protect its citizens. If business owners try to all lower wages to below living levels to remain competitive, then the workers should be protected by their government from exploitation and the business should never exist in the first place.
A democracy is a democracy of citizens, not a democracy of dollars.
you don't understand economics.
1) a wage is just the price of labor. price is just a product of supply and demand. minimum wage is just a price control. price controls are counter-productive.
2) "exploitation" and "fair" are emotional words without any concrete meaning. trying to enforce arbitrary ideas on the market always result in often horrible unintended consequences. "poor people need housing!" -> freddie and fannie -> GFC
This is a great example of the fundamental error liberals make in their "logic" towards social programs. How does a minimum wage protect the country's citizens? By making it more expensive for businesses to hire workers? This only leads to lower overall employment numbers. Further, by making it ILLEGAL for businesses to higher workers below the minimum wage, you are discriminating against those potential employees whose skills do not justify a wage rate at, or above, the minimum wage.
Midas, the regulatory situation the Economist was referencing in the US back in 1977 was a lot different than it is today. Back then, it was illegal for a bank to pay you more than 4% interest on a savings account, checking accounts were reserved for the rich and wealthy clients of commercial banks (CC: Rapper's Delight comment about checkbooks), and the credit card company couldn't charge more than about 15% interest without triggering usury laws. Oil was sold at a fixed price, railroads needed permission from the government to cut services, and individuals had only been allowed to own bullion for eight years. A bank that tried to buy commodities would probably have had its officers sent to jail. And the top marginal tax rate was 70%.
You have to admit that compared to 35 years ago, heck, just 15 years ago, the US has become very, very laissez-faire capitalist. I think that's a very good thing, but for the past 500 years, capitalist countries have always come with some sort of regulations. For most of history, it was illegal to enter short sales, for instance. Now people are claiming that the uptick rule is some sort of socialist conspiracy.
I am against Hong Kong imposing regulations. Not because it's necessarily as dumb as the fiercest capitalists make it out to be, but because we need a reference for what a nearly laissez-faire capitalist country looks like. Minimum wage didn't turn into a doomsday scenario for the US economy- that doesn't mean we should increase it, but it probably suggests that minimum wage will not turn Hong Kong back into a swamp.
The minimum wage was a starting point. No one is supposedto raise a family off it. If you show up, work hard and do your job you will be rewarded. Go to a non Indian gas sation and tell me those people deserve more than the minimum. There is a lot of turn over because they show up late, don't wok hard or are complete F ups.
The cry always is "pay me more and then I will work". How about show me hard work and then get more money.
Socialism is great for losers.
How is a price floor socialism? Were the price floors on Uranium during the 50s and 60s socialism? Or price floors for agricultural goods? A minimum wage is just a price floor for a given unit of labor. And people do work harder for higher wages. Try to do so research on the effects of Henry Ford's wage increases in his factories.
http://www.investors.com/NewsAndAnalysis/Article/547855/201009201845/Th…In what way do I disagree with you on a minimum wage? You want it higher. I honestly think the minimum wage is probably lower than market forces would have. You can't get good employees at that price as it is, it's not going to be cheaper.
Relax dude.
I could care less about the minimum wage. Very few people work for the minimum wage in the USA and Hong Kong. I once worked for the minimum wage in an amusement park and I would imagine most people working for the minimum wage are 15 and 16 year olds in their first jobs.
MMM just laid out a question about arguments supporting the minimum wage and proffered some reasons for the minimum wage. Do I think its within the federal governments purview to force employers to pay, at the very least some wage? Yes.
If you believe this is true your clueless... anytime you eat fast food the person serving you is being paid minimum wage besides the manager, the mall the same thing, gas station same thing, those are places I know for fact are minimum wage there probably is much more. Fact is way too many people try to live off minimum wage, with the mind set "pay me more, and I will work harder" yet they show up late to work get fired and collect unemployment. Realize it pays more than minimum wage does and never go out and find a job again, hence why we have the problem we do in America. Do I think there should be a minimum wage? No. If you want more money work harder, if you don't want to work harder than shut up....
Great points. The data here tend to agree:
http://www.bls.gov/news.release/empsit.t19.htm
People complaining about the exorbitant minimum wages, you do realize that HK$24 is only about 3 USD, right?
Libor, we can agree to disagree. Your response was solid.
No crap consumption increases as wages increase. Government mandating an increase in the minimum wage is not the answer. A low supply of labor and a high demand should drive increased wages. Forcing a company to pay $15 an hour when they would normally pay $8 an hour is just stealing from profits that would otherwise be reinvested or given to investors.
Companies will simply automate or move somewhere else. I will not invest MY money in a company that overpays and under performs. Simple economics.
This is why liberals and socialism is so dangerous. If you keep following their logic they will ultimately resort to force in order to stop the natural order of things.
Force companies to pay more per hour ---> Lower profits, less investments ---> Company goes overseas, automates, etc, anything to bring back investors ----> Only way to stop this is to create a law to stop it ----> Company relocates overseas to avoid oppressive laws ---> Only way to stop this is to FORCE the company to stay ---> Investors will still leave and invest elsewhere ----> Only way to stop this is to FORCE investors to invest
Socialism and liberalism is always backed up by force and threat.
Where do you draw the line in terms of regulation?
Are food safety standards bad? They raise the cost of doing business, and the consumer couldn't neccessarily select safer producers as certain toxins only show after years.
Is Safety at Work and severance pay bad? After all if in the US companies are not allowed to expose their workers to poisonous substances theyll leave and surely go elsewhere where safety regulation is less stringent and cost of doing business lower? A company investing in workplace safety because its forced to do so by the government will also underperform by your standards.
So ANT where do you draw the line? Are you advising an entirely free system where people are merely input and easily discarded(britains industrialization period)? Do we have some kind of intervention, if yes how much?
That happypantsmcgee guy really does deserve quite a tip of the cap
The effect of minimum wages is limited anyway, labour markets don't clear regardless since the optimal wage is above the classical intersection of demand/supply due to productivity/turnover/shirking reasons regardless. Unless the minimum wage is set waaaaay above the current clearing level it won't have too much of an impact.
The days where lax regulation was needed to boost growth are over, at its current wealth levels HK can afford some more human friendly regulation.
I think its a pretty far cry to jump from raising the minimum wage to getting rid of any and all food and workplace safety standards dude
ANT's point was very general, the minimum wage is irrelevant, its probably a bad idea to raise it from an economic point of view.
The question is where do we draw the line in terms of intervention.
I understand your point was intentional hyperbole but I also think you have to inject an element of common sense into it. There is no "here is the line" type of answer. The idea of minimum wage stems from the whole workers rights movement but has turned into a talking point for those that want to show their solidarity with the lower/working social classes. I think the thing that a lot of people fail to realize (both politicians and voters) is that a small rise in the minimum wage has a HUGE impact on the market as a whole. Not only that, but increasing the minimum wage does NOTHING for people that make 8 bucks an hour. Its not like if the MW is increased by 25 cents then all wages less than XXX are raised by the same amount.
I am saying that socialism is like a cancer. It tends to multiply until it eventually kills the patient. Some modest regulation is fine. I support a "minimum " wage, all I am saying is that when things go beyond a safety net, you get problems.
We draw the line when you go from basic to social engineering. Living wage, regulating what people eat, air bags, seat belt laws, all nanny state behavior.
Eating McDonalds is fine. It is not bad for you. When you consume it in excess there are bad consequences. Regulating mcdonalds is nanny state. Regulating adrig that can cause instant blindness is basic safety.
Minimum wage makes sense. Living wage is nanny state.
Basic gun permits make sense, regulating things into minutiae is nannystate.
Cars that don't explode on impact makes sense. Mandating a back up camera because you can't check yourself is nanny state.
See the difference.
Minimum wage is just a price control, it's unnecessary and ineffective. Competition eliminates any threat of exploding cars.
Anthony, everyone should have to eat healthy while wearing their seat belts and listening to music free from bad words. I know that it seems wrong, but everyone needs to be the RIGHT kind of happy and healthy.
Oh I forgot...Michelle Obama gets to decide what the RIGHT kind of happy and healthy is...
I must say...I'm envious
How is minimum wage price control? You honestly think that if minimum wage was done away with tomorrow people would be working for 3 bucks an hour? Get real. Try getting a decent employee for minimum wage. They usually steal, quit or flake off because who cares, it's minimum wage.
Now living wages are a bad. They set the bar higher than would otherwise be set.
Competition eliminates exploding cars?
http://en.wikipedia.org/wiki/Ford_Pinto
This thing sold a lot.
Basic safety and quality control. Even that is a stretch for the government, but I think we benefit from it. Too many choices and complexities for the average person to research every little thing. The problem comes when they try and save you from yourself. Banning transfats for example. Salt and soda, etc.
Seat belt laws are another thing. I didn't realize it was governments job to make me buckle up. Is someone from the government going to watch me to make sure I do not run with scissors? If I do something silly and take my life in my hands, that is my deal. Government is there to defend the nation, provide basic services and maybe some other things. The Fed has grown out of control and unless people go ape shit, it will never change.
Government needs to shrink, flat out. We gave them a shot, we let them grow and they keep screwing up. It isn't as if the US government has a glowing record, showing us all just how good it is with this money and power.
ANT, seatbelts aren't just for your safety, they are a difference between you being able to regain the wheel after a minor rear-ending and driving to exchange insurances, and you getting thrown head first into your windshield, and having your out of control vehicle flailing all over the road, causing other accidents. And I'm glad about the ban on the transfats. I'm tired of fatties driving up healthcare costs and not working while they are being treated for obesity induced illnesses.
Your seatbelt argument makes a little sense, but it wasn't the argument put forth for the bill. I agree with you about paying for overweight people, that's why we should subsidize others bad habits. You need to remember, you might be glad at that regulation, but eventually it will influence you some day. There are a lot of things I would love to bam, but in doing so I would erode the foundation of this country I so love.
I know it will affect me - finally I'll be able to breathe easier once the obese people lose some weight and reduce our dependency on foreign oil. Just imagine the fuel economy per vehicle from reducing a driver's weight from 300 lbs to a more decent 200 lbs.
Which period of foundation is your favorite? At some point there were slavery and tooth ache drops with cocaine
1) Slavery is not about freedom and liberty. Neither is it about the constitution. Seat belts are about another form of taxation.
2) I have no problem with prostitution being legalized. I think 21 is a stupid age limit for drinking. I think people should be allowed to consume alcohol when they turn 18. Blame the nanny state and MADD on that one my friend. See what happens when people try and protect other people. Someone drives drunk and commits a crime, you arrest them. You do not penalize all the other law abiding Americans.
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