Robert Bunn wrote:
> This period is a net gain for minimum wage earners. To get an idea how
> sticky prices are, observe how long it took for gas prices to rise at
> the commencement of the war in Iraq.
The oil prices is a very bad example. There isn't a real competition on the
oil market as on many others. Well, the advent of multinational
corporations try to destroy the competition in everything else too, but
this is another subject.
In general, if you have real competition the prices are going to be pretty
sticky. Just loot that despite the fact that oil prices grew almost 2 times
in last 6 years, the prices of goods manufactured from or with a lot of oil
didn't. If they grew, they did 5..20%% not 100%% as the oil/gas did.
Nice try, but not quite. The competition can keep prices sticky.
This is the core reason we should oppose all these mega-mergers that happen
in the last 5 years. They are clear anticompetitive actions taken to
destroy the market competition.
> Wages are far stickier than prices.
Correct. Especially if you let them driven exclusively by the employer's
will (aka job market).
But once you rise the minimal wage a wave will start to propagate:
1. You rise the minimum wage from 5.15 to 7.30
2. The guy that now have a 7.30 job at 10 miles from home will switch it for
the new minimum wage (7.30) near by home.
3. The employer that payed the 7.30 have to increase the offer to 9 if he
need workforce since now his old wage is in competition with minimum all
over the place.
4. People getting 9 at 20 miles from home will go for a 9 at half distance.
ETC....
> Ah, so I have your own explicit expectation that the wage level will be
> slow to adjust. I'm glad there won't be any controversy over that point,
> then.
Well, yes. The adjustments in other wages will take some times, longer for
the higher wages. As for the guess that it will be slower than the growth
in prices, ..... this is just a guess. I don't have as of this moment any
strong argument for it to be slower or faster that the prices growth.
> Pegging wages to prices has the potential -- not guaranteed, but
> certainly not negligible -- to cause an inflationary spiral.
Possibly.
> Every time
> wages go up, prices have to go up somewhere. If prices going up is
> sufficient to cause wages to go up, a positive feedback linkage occurs.
Quite possible. But you can try to compensate for that by ...... increasing
competition. Like breaking monopolies or taxing big businesses to get money
to help creation of new small businesses to make competitions to big ones.
> It doesn't matter *who* is in power. It matters that the plan is
> inconsistent and unpredictable.
I find at least strange that the so called" right wing economists" always
look at keeping the wages low the measure to combat inflation and never
look at the other side.
1. Disposable income is generated by wages and dividends. If you increase
the wages you can cut the dividends to compensate and keep the average
income the same. Well, this administration however choose the other path:
they cut taxes on dividends and capital gain (inflationist measure) and now
they fight to keep minimum wage low as an antiinflationary measure.
Just do the reverse as they did and the inflationary results will be the
same.
2. What I find completely ridiculous in this administration is that they
fight to keep wages low to compat inflation but ON THE SAME TIME
they bless every single mega-mergers betwen large corporations to undermine
the competition on the market. The competition is the biggest reason a
company won't inflate the prices at will.
This are the reasons I call this administration politics: RIP & RUN
economics. They are not pro business but pro looters.
