Thread: Low Wages Cause Unemployment

Originally Posted by jor

If the company is forced to pay lets say $10 (since that is an easy number) for minimum wage but the employee only provides $9 in productivity there is no point in keeping the employee since they are causing the company to lose money. Wage laws harm the unskilled worker.

You've simply ignored the three aspects mentioned. We know that underpayment increases as we move down the wage distribution (i.e. the minimum wage actually reduces market failure). We also know that minimum wages have been found to increase productivity levels. We also know that there are macroeconomic limits to wage reductions: given the negative demand effects can actually harm enterprise. We also know that, due to job search frictions and the adoption of reservation wage strategies, a minimum wage can actually increase wages and employment levels

Originally Posted by Reiver

That's a fallacy! Even if we had perfect mobility its nonsense to suggest that vacancies exceeds the number of those seeking work. Indeed, a bigger problem is 'hard to fill' vacancies created by skills mismatches.

You are ignoring the obvious question. Why are the unemployed not gaining the skills to fill these vacancies?
Perhaps because the wages/working conditions for these skilled jobs are not very good, relative to the cost, training, and time it takes to get this training.
"Demand" can be a misleading concept. To try to quantify it, it is a product of how much these jobs pay individually and the quantity of jobs demanded. Demand might be very high, but this does not necessarily mean the demand of any particular individual is very high.

You are talking about "skill mismatches", but you are expecting the unemployed to go through all this difficult and expensive training, only to work in an overworked job, that does not even pay enough for the workers to afford a house! An obvious example of these is nursing. There is no "shortage" of nurses. No one wants to go into this profession because they hear about how nurses are overworked, underpaid, and underappreciated by the hospitals. And now the hospitals are only hiring experienced nurses. If there really was some desperate shortage, the hospitals would be training new nurses, which they are not really doing.

And your conception of "skill mismatch" is relative. There are not enough doctors in Africa (because no one can afford medical treatment). I guess that means there is a "skill mismatch"! (sarcasm)
If you have any examples of a good paying job, that does not require more than four years of training, where the working conditions are good, and where there is a shortage of workers, please let me know. Or jobs that require more education and training, but have excellent incomes to compensate potential workers for everything they had to go through. It is not really realistic to expect everyone to become physicians when physicians do not really have wonderful incomes.
It almost seem that many economists want the government to train all the workers, because there is not enough demand in the private workforce to incentivise the employer to train his own employees. But the problem with schools is that the training is almost always not actually real work experience that is applicable to the job. Many potential employees have gone through expensive 2-year long training programs, only to find that they had to relearn everything on the job again. Apparently these training programs are more about credentialism, and weeding out the less motivated, than actually providing useful training.

Originally Posted by Anders Hoveland

You are ignoring the obvious question. Why are the unemployed not gaining the skills to fill these vacancies?

Haven't ignored anything. Skills mismatches are typically the result of either market failure (i.e. insufficient training due to contracting problems) or supply side problems (e.g. home ownership; finance sector limitations for human capital investment etc.). They certainly cannot be used to support your previous comment. We simply do not have 'more vacancies' than unemployed. Its even more nonsensical as, using your corrupted measure (where you're referring to 'non-active' potential workers), we'd have a massive excess supply problem

And your conception of "skill mismatch" is relative

More drivel! Its easily calculated. We just have to refer to the methods employed to calculate hard to fill vancanies

Originally Posted by Til the Last Drop

It is not just that though, Archer. We need to cut taxes and regulations by a good 80%. We need to bring back protectionism to make up most of the difference for infrastructure spending and military. We need to bring back sound money. To eliminate the social programs without doing the rest would be to hand this nation over to corporations on a silver platter. You must remember taxes and regulations keep small guys from being able to compete. That means the average worker has no chance at joining the owner class. Corporatism via politicians for sale is destroying us. Basically, we need a genuine state. We never want the side of socialism that is the state controlling production, but we need the side of socialism that is workers in control of the state. Globalism has made enemies of the rich.

I agree and we need to eliminate the min. wage.

Originally Posted by Anders Hoveland

You are ignoring the obvious question. Why are the unemployed not gaining the skills to fill these vacancies?
Perhaps because the wages/working conditions for these skilled jobs are not very good, relative to the cost, training, and time it takes to get this training.
"Demand" can be a misleading concept. To try to quantify it, it is a product of how much these jobs pay individually and the quantity of jobs demanded. Demand might be very high, but this does not necessarily mean the demand of any particular individual is very high.

You are talking about "skill mismatches", but you are expecting the unemployed to go through all this difficult and expensive training, only to work in an overworked job, that does not even pay enough for the workers to afford a house! An obvious example of these is nursing. There is no "shortage" of nurses. No one wants to go into this profession because they hear about how nurses are overworked, underpaid, and underappreciated by the hospitals. And now the hospitals are only hiring experienced nurses. If there really was some desperate shortage, the hospitals would be training new nurses, which they are not really doing.

And your conception of "skill mismatch" is relative. There are not enough doctors in Africa (because no one can afford medical treatment). I guess that means there is a "skill mismatch"! (sarcasm)

I must say, that if we are going to allow free trade and fiat currency to dictate you have to have an education to get a job, higher learning and/or skills should be free. People shouldn't have to accumulate a mountain of debt for a middle class job. That would eliminate a lot of the problems with higher education, making people take ridiculous courses to earn their degree. To keep them there longer and gouge their easy to get debt. But one must also recognize that a lot of the mechanized jobs people claim they can't find the workers for, the college degree is worthless and the person must still be trained. Take for instance the rail road. For a century the railroad has had workers with zero college, all know their job. But now college grads have gotten a lock on the human resource divisions, and will only hire those with a diploma. I don't know if you could call academic nepotism, or what. But all the guys from the old days say the kids out of college, most of whom have never worked a real job, are worthless as tits on a bull. Hell, I'm a line cook and it took years to get as good as I am. We won't even look at culinary arts grads because college simply taught them recipes and they have no clue how to work. I remember one place that tried to hire a guy, paid him minimum because they knew he would be worthless but had a spot to fill, and he had trouble with a hamburger. No joke. "This is new for me, in school one guy does the bun, another the pickles, another the tomatoes". All I could say was "here partner, you do everything". Slow as molasses in January. Tits on a bull. And owes 40k to make minimum. Sad.

If low wages cause unemployment then it follows that high wages create jobs. Does that make any sense whatsoever?

Originally Posted by Hoosier8

If low wages cause unemployment then it follows that high wages create jobs. Does that make any sense whatsoever?

Nearly! It follows that increases in wages can create jobs. We just need monopsony power for that to occur (and that only needs job search frictions)

Originally Posted by Hoosier8

If low wages cause unemployment then it follows that high wages create jobs. Does that make any sense whatsoever?

Actually, yes. Over half of our great economy relies on frivolous spending. That spending only occurs when people have recreational money. When you pay people only enough to show up the next day, because you have them by the balls, pretty soon the entire economy shrinks around you. Because you weren't the 1st to think you're clever and do the same.

Originally Posted by Archer0915

And that is why we need to limit all social programs.

I disagree. I do not think all these people should be made to be desperate to work for minimum wage under poor working conditions. It seems like many conservatives believe the answer to dealing with unemployment and crime is to just increase the punishments. And if the poor already live under horrible conditions in their daily lives, the punishments should just be made even worse! I was talking about this with a woman, about how things were so bad in Mexico that many of the Mexicans would rather be in a prison in the USA than free in Mexico. Her opinion was that the solution to this problem was to just make things so bad in American prisons that no more Mexicans would want to migrate!

No, I believe the poor and low-wage workers struggling to survive should be treated with more consideration, not despised. It seems many people resent the fact that poor people exist, and almost wish they would just die. Then they put all the blame on the poor themselves.

But we do need to stop incentivising people not to work. Unemployment benefits need to be designed so that they will not all go away when someone obtains a minimum wage job. And the unemployed should be able to get a job, without fear that they will permanently lose all their assistance if they later become unemployed or decide they do not want to work in the job.

Originally Posted by Hoosier8

If low wages cause unemployment then it follows that high wages create jobs. Does that make any sense whatsoever?

Actually, yes. Over half of our great economy relies on frivolous spending. That spending only occurs when people have recreational money. When you pay people only enough to show up the next day, because you have them by the balls, pretty soon the entire economy shrinks around you. Because you weren't the 1st to think you're clever and do the same.