Michael

Unfortunately it doesn't work that way. There is only so much money in an economy so you have to take from one to give to another. The very rich have been doing that for the last 30 years by taking the vast majority of increase in gdp growth in the US as well as most other developed countries around the world. Unfortunately unless governments can figure out a way to distribute the increase in gdp more equitably, rasing the minimum wage usually has the greatest effect on the middle class whose wages have been fairly stagnant in real terms for the past 30 years.

One of the problems with increasing the minimum wage too high is a social economic issue. As the minimum wage is increased faster than inflation plus the percentage share of gdp growth of the middle class worker, it pulls more workers into minimum wage.

In the US, this has not been a major problem since minimum wage jobs are considered temporary by most workers and therefore most have expectations to advance beyond minimum wage in the future. Therefore when an American worker leaves his minimum wage job and makes $10 or $12 or hour, he generally feels good about his accomplishments.

However in France, the minimum wages has been increasing so fast in comparison to middle class worker wages (currently €9.22 per hour) that approximately 1/4th of the workforce is now working at minimum wage with little hope to advance much beyond that wage. With such a high percentage making minimum wage, this creates low self esteem among a large percentage of the population.

Just looking at the pure economics of the situation, the medium wage in the US is about $18 per hour with a minimum wage of $7.25 (can be higher depending on the state). Therefore someone earning minimum wage can more than double his/her salary by finding a job that is middle class.

France on the other hand has a medium wage of about $15 per hour with a minimum wage of about $12 per hour. If the minimum wage increase by another $3 per hour, 50% of all workers in France will be making minimum wage.

For the 30 years prior to 1977, real gdp grew 100% and everyone benefited equally with real incomes increasing approximately 100% for all classes. During the next 30 years, real gdp grew by 66% but the middle class only saw a real income increase of 14% and the poorest saw a 5% decrease in real income while the upper middle class experienced about a 66% increase in income but the top 1% saw their real income increase by about 250%. So in effect, the upper middle class got approximately what they deserved but the very rich got their 66% plus most of expected increase in real income from the bottom 80% of the workforce.

So unless you can figure out how to make it so that incomes are more fairly distributed, increasing minimum wage or medium incomes will only cause inflation and no one will be any better off.

scrubbedexpat099

Amusingly it would make those undocumented much more attractive to hire.

Of course there would also be a big fall out in lower paid jobs. How much will people pay for a Burger? The attraction of automation and outsourcing become more to the fore.

Steerpike

I'm frankly at a loss to come up with a viable (politically practical) solution to preventing job losses to overseas workers. Raising wages here in the US simply makes it more attractive to offshore those jobs as you said. We have, in this country, developed 'decent working conditions' for the average worker (relatively speaking) such that you can't employ children; must provide a safe working environment; must provide certain benefits; must pay minimum wage; must pay overtime; etc etc. These standards are not even on the horizon in places like China, yet we allow a company (like Apple) to knowingly employ workers overseas in conditions we would not allow in this country. How do you enforce such a requirement in a practical manner?

Until you can do that, I don't see any way around the reality that raising minimum wage here will simply backfire and force more jobs overseas.

Michael

Yes but conservatives keep trying to drive down wages for the middle class and eliminate regulations as if somehow this will cause jobs to return from countries that pay employees a $1 per hour and allows sewage to run in the streets.

scrubbedexpat099

You keep on saying conservatives this conservatives that.

I see no mention of those who support the Democrats pay a lot better than those who do not.

Actually the Banksters (Conservatives) get a lot of stick for paying their employees big bucks.

fatbrit

Studies I've read show that reducing wages mainly lead to greater remuneration for the bosses, not a lower cost for the product.

Michael

Well, it appears that the Banksters didn't learn their lesson from the last time they destroyed the economy. After the crash of 2008 and early 2009, they again increased bonuses for their investment bankers since the markets started to rise again and it was easy to make money. But surprise, surprise, the markets didn't continue to rise in 2011 and now we have not only couple of wall street banks in back in trouble due to their investment banking units but many European banks causing massive layoffs. But they just keep giving out those big bonuses because the investment bankers do such a good job.

Michael

That is how the redistribution of wealth has occurred over the last 30 years. If the bosses can figure out a way to decrease costs, their salary increases.

So reducing capital gain tax to 0% probably just means that there will likely be more investments in low cost companies that produce products overseas and companies that outsource US jobs to those low cost countries.

scrubbedexpat099

That has been the normal state of affairs.

Michael

So how does that create any jobs in the US? Or are the republican candidates referring to creating jobs around the world but not in the US when they talk about job creation?

For the rich, it doesn't matter where the jobs are created since they always get a large share of the profits.