Post by unlawflcombatnt on Jan 22, 2006 1:32:19 GMT -6
Increased Wages INCREASE Hiring
The falsehood that "increased wages reduce hiring" needs to be debunked. Wage increases have no effect on hiring until they reach a "profit-eliminating" level. Furthermore, if aggregate consumer income increases from wage increases, it increases consumer spending and product sales. As such, increased aggregate wage may even INCREASE aggregate corporate profits.
WAGE INCREASES HAVE NO EFFECT ON HIRING UNTIL THEY ARE HIGH ENOUGH TO ELIMINATE PROFITS.
It is a falsehood to state that increasing wages decreases hiring as wages rise. In fact, at the microeconomic level, increased wages have NO effect on hiring, until they approach a level that eliminates profits. In other words, the "price" of labor has NO effect on the quantity demanded until the total labor costs eliminate profits. Wage increases don't reduce hiring ANY, until they approach this level.
The following is an example. Let's say a company produces items that sell for $100 with a production cost of $10, including $8 of labor cost. Let's say the company can sell 1,000 of these per day. How many workers will be hired? Enough workers to produce 1,000 items per day.
Let's change one variable. Lets increase the labor cost to $28 per item, making the total production cost $30 per item. How many workers will be hired? Enough to produce 1,000 items per day. The SAME number as before, when labor costs were only $8 per item.
Let's change the labor cost in the opposite direction. Let's reduce the labor cost to $2/item, making the total production cost $4 per item. How many workers will be hired? Enough to produce 1,000 items per day. The SAME number as in the previous 2 examples.
What determined how many workers were hired? The number needed to produce 1,000 items per day. How much did the "labor cost" affect hiring? NONE. The cost of labor had absolutely NO effect on the number of workers hired.
workers to produce 1,000 items/day = workers to prod. 1,000 items/day = workers to prod. 1,000 items/day.
AND,
# of workers@$2/unit hired = # of workers@$8/unit hired = # of workers@$28/unit hired
The number of workers hired was determined EXCLUSIVELY by the number of workers needed to fulfill the production demand. Workers will continue to be hired, as long as their added production increases a company's profits. Wages have NO effect whatsoever on hiring, until they approach a level high enough to eliminate profits.
The hiring of workers is determined EXCLUSIVELY by demand for labor, until wages approach a level that eliminates profits. The marginal utility of hiring one more worker is completely unaffected by wages until wages reach a certain level. It is the demand for production, and demand for labor to provide that production, that determines hiring. Again, wage increases have absolutely NO effect on hiring until they reach a certain "profit-eliminating" level.
This has further implications at the MACROECONOMIC level. Increased aggregate labor wages increase aggregate consumer income. This increases consumer spending and consumer demand for production. This further increases demand for workers to provide that production. This further increases hiring, wages, and aggregate labor/consumer income.
Thus, the end result of aggregate wage increases is even further wage increases and hiring. There's a fancy term for this situation. It's called "economic growth." The increased production demand created by increased wages "grows" our economy. It increases production, as well as the wealth created by that production.
Wage increases are a win-win situation. Corporate America, as well as working America would benefit.
_______
The economy needs balance between the "means of production" & "means of consumption."
The falsehood that "increased wages reduce hiring" needs to be debunked. Wage increases have no effect on hiring until they reach a "profit-eliminating" level. Furthermore, if aggregate consumer income increases from wage increases, it increases consumer spending and product sales. As such, increased aggregate wage may even INCREASE aggregate corporate profits.
WAGE INCREASES HAVE NO EFFECT ON HIRING UNTIL THEY ARE HIGH ENOUGH TO ELIMINATE PROFITS.
It is a falsehood to state that increasing wages decreases hiring as wages rise. In fact, at the microeconomic level, increased wages have NO effect on hiring, until they approach a level that eliminates profits. In other words, the "price" of labor has NO effect on the quantity demanded until the total labor costs eliminate profits. Wage increases don't reduce hiring ANY, until they approach this level.
The following is an example. Let's say a company produces items that sell for $100 with a production cost of $10, including $8 of labor cost. Let's say the company can sell 1,000 of these per day. How many workers will be hired? Enough workers to produce 1,000 items per day.
Let's change one variable. Lets increase the labor cost to $28 per item, making the total production cost $30 per item. How many workers will be hired? Enough to produce 1,000 items per day. The SAME number as before, when labor costs were only $8 per item.
Let's change the labor cost in the opposite direction. Let's reduce the labor cost to $2/item, making the total production cost $4 per item. How many workers will be hired? Enough to produce 1,000 items per day. The SAME number as in the previous 2 examples.
What determined how many workers were hired? The number needed to produce 1,000 items per day. How much did the "labor cost" affect hiring? NONE. The cost of labor had absolutely NO effect on the number of workers hired.
workers to produce 1,000 items/day = workers to prod. 1,000 items/day = workers to prod. 1,000 items/day.
AND,
# of workers@$2/unit hired = # of workers@$8/unit hired = # of workers@$28/unit hired
The number of workers hired was determined EXCLUSIVELY by the number of workers needed to fulfill the production demand. Workers will continue to be hired, as long as their added production increases a company's profits. Wages have NO effect whatsoever on hiring, until they approach a level high enough to eliminate profits.
The hiring of workers is determined EXCLUSIVELY by demand for labor, until wages approach a level that eliminates profits. The marginal utility of hiring one more worker is completely unaffected by wages until wages reach a certain level. It is the demand for production, and demand for labor to provide that production, that determines hiring. Again, wage increases have absolutely NO effect on hiring until they reach a certain "profit-eliminating" level.
This has further implications at the MACROECONOMIC level. Increased aggregate labor wages increase aggregate consumer income. This increases consumer spending and consumer demand for production. This further increases demand for workers to provide that production. This further increases hiring, wages, and aggregate labor/consumer income.
Thus, the end result of aggregate wage increases is even further wage increases and hiring. There's a fancy term for this situation. It's called "economic growth." The increased production demand created by increased wages "grows" our economy. It increases production, as well as the wealth created by that production.
Wage increases are a win-win situation. Corporate America, as well as working America would benefit.
_______
The economy needs balance between the "means of production" & "means of consumption."