This is another case of Keynesian nonsense getting in the way of clear thinking.
Basic supply and demand tells us that if you set an effective minimum price for something you’ll get a surplus. When that surplus is in labor we call it unemployment.
He talks about workers in the widget industry. What we’re really talking about is workers who cannot now produce at a level to make it worth taking a chance on them at the minimum wage. These include teenagers who in lieu of working have idle time on their hands to get into trouble. Ever wonder why crime increased so much in this demographic during the 20th century?
What’s rich though, is that he turns around and suggests cutting everybody’s effective wage by printing more money.
He asks, “But what if we’re in a liquidity trap, with short-run interest rates at zero?”
That’s why we shouldn’t get into this situation in the first place. We got here through a willful act of our government and the Fed cutting interest rates ever since the 80s. Stop controlling interest rates and stop inflating the money supply and we wouldn’t get into these traps.
It would be painful in the short run and lots of people, creditors and debtors alike would go bankrupt. But at the end of the deflation cycle with a stable money supply we would see steady growth with full employment and steady to falling prices with steady to rising wages.
One other comment. He talks about all these things that are contractionary. Of course they’re contractionary. When we’re inflated out the wazoo everything’s contractionary but printing money like Zimbabwe.
He followed up so I followed up
All we’re talking about is making it legal for some people at the bottom of the economic ladder to get a job which they cannot take now as they cannot produce as much as they are legally required to accept in wages.
Do you actually care about people? We have millions of unemployed teenagers who have no experience and could be learning how to work, helping provide for their families, and avoiding a life of crime. But it’s actually illegal for them to take a job that pays what they’re worth.
Well, I got responses in the thread and tried to comment but comments are closed now. Here is what I wrote.
@clone12
No, You are clearly the master at using snark to obfuscate a discussion. The name for your fallacy is the Straw Man fallacy. Your argument is in essence that because toddlers shouldn't work in coal mines, we shouldn't repeal the minimum wage.
@Roland Buck
Monopoly power of employers? We are talking the US? I look out my window here in Minnesota and see thousands of employers. Employers who if as you say, won't pay what a prospective employee is worth, certainly won't pay more than they're worth. And that's the point.
@Europhile D
Some people cannot produce what the minimum wage pays. And you are correct about "capital support" which is why eliminating as much as possible taxes on capital such as estate taxes, capital gains taxes, and investment taxes is important. As capital grows workers tend to become more productive.
This greater productivity lowers the cost to produce goods and services. This cost savings will tend to accrue to the worker and the consumer as the business competes for workers and customers.
Thus we would have full employment, steady to rising wages and steady to falling prices. It's not perfect and it takes time but that's the trend.
