Labour Market Equilibrium - Excess Supply and Demand for Labour

[abovesobelow]

[tclambert]

1. He makes at least one critical error there. The demand for workers comes from customers.

If wages go down, businesses won't necessarily hire more workers. They don't hire more workers just because they can afford it. They will only do that if they have more work that needs doing. That depends on customer demand. It doesn't matter at all if wages go way down, if customer demand for your product or service declines even a little bit. If sales go down, you lay off workers, no matter how cheap you can get workers. If sales start booming, you hire more workers to deal with the demand, even if you can't get workers cheap.

He's trying to relate the wrong two variables.

W directly relate to sales, since the vast majority of customers depend on their working class income. If wages go down across the board, sales go down because the customer base has less money to spend, and you thus have less customer demand. When wages go up, business booms, and businesses hire more workers, and entrepreneurs start new businesses.

So, his conclusion that higher wages would result in less demand for workers and therefore, higher unemployment, is exactly backwards.
Higher wages lead to higher sales, which leads to MORE demand for workers, which leads to LOWER unemployment. For verification, look at history. In the 90s, business prospered, unemployment got lower, and average wages ticked upward. During recessions and depressions, unemployment skyrockets while wages fall. Businesses don't hire more workers while they're available for low wages during economic downturns; they lay off workers, adding to the unemployment.

[abovesobelow]

2. Technological effeciency, outsourcing and tax practices make his assesment spot on.

I agree our market should be as you say, but we don't have an idealist market, we have one that is parasitic on labor.

[tclambert]

4. No, he is incorrect. The historical data shows he has it wrong.

Employers DO NOT hire more employees just because wages go down. And they do not lay off employees just because of high pay. If they did, they'd lay off basketball players and neurosurgeons and replace them with minimum wage workers.

Numerous studies have now shown that the old assumption that raising the minimum wage costs jobs is wrong. The studies of actual historical data show just the opposite--increasing the minimum wage is followed by a growth in jobs.

[abovesobelow]

5. If that were the case buying power would have increased, not decreased, as more women obtained jobs

, or when African Americans began to obtain jobs outside the "slave wage" range. In fact our buying power is lower than it's ever been, and inflation higher.

When the "White male" ruled the house and economy, a dollar earned could buy so much more. A car, house, etc were all affordable with one job, easy credit, and enough money left over to pamper yourselves and put away a nice nest egg.

Today a one job household, even in factory production work, is unlikely to feed the average household of today, let alone leave them with enough money left over to buy all the necessities let alone any luxury items.

We have an economic model that was knowingly designed by Oligarchs and Monarchs to ensure AND IRON LIKE GRIP COULD BE MAINTAINED ON GOVERNMENTS THROUGH MONETARY MEANS, INCLUDING ECONOMIC WARFARE."

It's time for a more equitable, larger, economic union that rids us of the global imbalances that allow starving to occur in one nation while another nation eats the food that was grown by the now starving and dying people.

[adieu]

6. Things change over time

For a while, the white male single income family was sufficient to earn enough to make a comfortable lifestyle. But then, belt-tightening occurred and employers hired more women (because they were, indeed, 77% cheaper then men -- if not more so). And then, for a while the dual income family was doing well and leading to a comfortable lifestyle, although both parents were at work.

Similarly, when blacks moved out of share cropping, they did better for themselves than when they were slaves or sharecroppers (duh). But over time, lack of increase in wages relative to increases in inflation made the better lifestyle less better.

Still, it has been shown that we are now better off that both men and women, of all races, are able to obtain employment.

Of course, in today's world, a single-income family is not viable, unless that family consists of one person, or at most one parent and perhaps at most 2 children. But that's not due to any of the things you claimed.

Oh, and inflation is NOT higher than ever before. Inflation is almost non-existent. Most things are actually dropping in price due to technological advances.

[abovesobelow]

7. A working women of today is NOWHERE EQUAL IN ABILITY TO OBTAIN INDEPENDANCE

as a male in the 1950's.

African Americans didn't do much better than sharecropping until much MUCH later which is why many transitioned to sharecropping, THEY AREN'T TREATED EQUALY BY THE EDUCATIONAL SYSTEM OR THE ECONOMY TODAY, otherwise the demographics of poverty would be a much different picture than it is.

"Oh, and inflation is NOT higher than ever before. Inflation is almost non-existent. Most things are actually dropping in price due to technological advances."

This isn't close to true, yet is repeated CONSTANTLY BY EVERY MEDIA OUTLET IN BUSINESS.

"One of the sneakiest of their options is to reduce how much product they put in a package, but keep the price the same. A bag of sugar costs the same, but quietly, they reduce the weight from five pounds to four. They put fewer potato chips into the same size bag, or add more air into cheese and ice cream. Consumers who might have paid $6 a pound for coffee now pay the same for three-quarters of a pound, reports the Spokesman Review.

In the case of coffee, that's a 33% price increase that manufacturers are probably hoping you won't notice. Is there any logical reason for you to pay 33% more for coffee? Well, the price of coffee has gone up even more by one measure -- according to Espresso Coffee Guide, the iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN has gone up 70% since the end of 2009. And Peet's Coffee & Tea (PEET) raised its prices in September to respond to a 35% rise in the price it pays for green coffee beans since the beginning of 2010.

But an analysis of a broader basket of consumer products suggests that coffee is among the most inflated items. A January study by Consumer Reports provides the following examples of reduced package sizes. Assuming the manufacturers are keeping prices the same, the following 10 examples represent an average price increase of 12.2%:

Tropicana orange juice +7.8% due to a reduction in the amount of product from 64 to 59 oz.;
Ivory dish detergent +20% from 30 to 24 oz.
Kraft American cheese +8.3% from 24 to 22 slices;
Kirkland Signature (Costco) paper towels +11.6% from 96.2 to 85 sq. ft.;
Haagen-Dazs ice cream +12.5% from 16 to 14 oz.;
Scott toilet tissue +9% from 115.2 to 104.8 sq. ft.;
Lanacane first aid spray +12.4% from 113 to 99 grams;
Chicken of the Sea salmon +13.3% from 3 to 2.6 oz.;
Classico pesto +19% from 10 to 8.1 oz.; and
Hebrew National franks +8.3% from 12 to 11 oz.

Are Companies Fooling the CPI?"

http://www.dailyfinance.com/2011/02/19/inflation-cpi-bls-rising-consumer-price-index-food-energy-low-or-high-commodities/

[SidDithers]

9. ...

Sid

[tclambert]

8. I'm not sure what you are trying to say there, but you make several misstatements.

Inflation is not higher than it has ever been. Inflation is quite low compared to the 70s and 80s and even 90s. Buying power is not lower than it has ever been. In the early 20th century, most people did not own family homes all on their own. They lived with extended families. They did not have cars. Very few people owned cars. In the 50s and 60s, a one job family could afford a small house and one car and maybe a black and white TV. Today's families have bigger houses, two cars, and lots of electronics that no one could buy back then because they hadn't been invented yet. Comparing buying power is tricky. The average household today contains a lot of stuff that didn't exist in the 50s and 60s.

At any rate, I don't see how your buying power argument supports the idea that lower wages means employers will hire more workers. if so, why does the lower buying power you say we have today not result in historically low unemployment? Why do wages historically fall as the unemployment rate rises?

The thesis of the video was HIGH wages brings on increasing unemployment, and low wages brings on lower unemployment. And yet, we see the opposite correlation in real life.

The demand for workers DOES NOT depend on employers' desire to limit labor costs. Customer demand for more goods and services drives the requirement for a greater supply of workers. Falling customer demand means businesses need a smaller supply of workers. That's the supply/demand relationship that applies.

Also, the video states that the supply of workers will change depending on the wages available. How does that happen? The labor force correlates with population. If wages decrease, do a lot of people die off?

[adieu]

3. Exactly. Employment can't be treated like other goods

Employment price-quantity demand curve resembles that of a necessary good, which has a vertical price-quantity demand curve. When you need it, you'll pay virtually whatever amount you can offer.

The comment that when prices (wages) go down, employers will hire more is a completely fallacious claim. That's basically the trickle down economics hypothesis espoused by the Reaganites, the Bachmanniacs ("...without minimum wage, everyone will be employed." Well, No.)