Economics 101

Post by **Saxman** » Wed Jan 31, 2007 1:42 am

Does a free market economy work with unskilled labor? I understand how salaries will go up as companies compete for educated workers, but won't those same forces drive down unskilled labor rates? Why should a employer pay someone minimum wage when someone else will do it for a dollar less so he can have food?

Post by **L K Day** » Wed Jan 31, 2007 8:47 am

A free market economy works for all labor, whatever the skill level. Being unskilled is not an enviable position, be it at work or in any other aspect of life.

Post by **dhoyne** » Wed Jan 31, 2007 9:17 am

pigsteak wrote:right, and when McD's can't find workers for $2 an hour, they'll have to pony up to the local labor rate.

McDonald's pays their employees $9 an hour around here. I think there are very few places that actually pay minimum wage any more, at least around here.

This is one of those laws that won't have much real effect, but will make a few people seem like honest, caring politicians. Kind of like the law to take away pensions from congresspeople that have committed certain felonies.

Post by **Crankmas** » Wed Jan 31, 2007 10:17 am

Congress should NOT receive pensions- a match for a 401K is more than adequate and fair, elected public service should not be a career, for those who treat it as such reelection is the goal from day one.

Post by **whadam00** » Wed Jan 31, 2007 10:52 am

I think we're on the verge of a nation-wide labor dispute.

http://washingtontimes.com/commentary/2 ... -3079r.htm

The most shocking point is that CEO compensation has risen 600% in the past 25 years. The more this knowledge gets passed around, the less willing the "average" employees are going to be to accept an annual raise that barely competes with inflation while the executives take home disgusting increases and bonuses.

Post by **Day** » Wed Jan 31, 2007 11:42 am

As long the compensation for CEOs is a market based decision, and that the determination is above board and truly OK with the shareholders, I don't care how high it is. If a big company is failing (Ford lost 12.7 billion last year), and they find a CEO that can turn it around so that the company is making 12.7 billion, that is a 25 billion dollar swing. How many hundreds of millions do you think Ford stockholders would be willing to pay this CEO? He or she would be worth more than Tiger Woods, Shaq and The Rolling Stones put together.

The problem I have with CEO compensation is when it's a cozy little insider deal where all these rich guys sit on each other's boards, and vote for huge compensation packages for each other no matter what happens to the company. Assuming of course that this actually happens, and I'd be shocked if it doesn't. Still, this is a matter of shareholder responsibility.

Post by **Crankmas** » Wed Jan 31, 2007 12:29 pm

I say pop a cap up in that sucka's ass

Post by **gulliver** » Wed Jan 31, 2007 1:23 pm

I think the wage increase would be good for KY. Pay in this state sucks for those at the bottom end of the jobs market. I care a whole lot less about the hit the mom and pop business would take than I did as a larger percentage of the jobs that get by paying the minimum are more and more large national corporations. More and more of the goods are also sold by those same companies whose prices are fixed nationally having the effect of being more costly as a percentage of income than in other parts of the country. Their sheer size steam rolls their small competition and offers lower prices. That's ok if you don't place a value on the quaintness and diversity small business offers ( I tend to think it has a value), but it leaves them with sweet spots where they can sell at their price with a much lower labor cost. Such small markets don't attract competitors as the infrastructure isn't worth it. I don't see an increase having a bad effect locally.

Post by **gulliver** » Wed Jan 31, 2007 1:49 pm

Day wrote:As long the compensation for CEOs is a market based decision, and that the determination is above board and truly OK with the shareholders, I don't care how high it is.

I think this has become habit more than any well structured analysis of the market. The lobby against the shareholders holds too many of the cards. They're an incestuous bunch of appointed board members rewarding their main benefactor with only their employment at risk against winning the lottery. They claim too much credit for a strong economy. You don't often hear of contracts where the boards and ceo's cover corporate loss's from their own pocketbooks, then it falls back on the shareholders. Because the shareholders are cowed by the more unified lobby is less a function of the market.

Post by **whadam00** » Wed Jan 31, 2007 2:32 pm

Day, I agree with your arguments, but they don't stand up the test of reality. Average incomes are increasing less than productivity while management and executive incomes are increasing much more quickly than productivity, across the board.

Furthermore, labor doesn't work along simple S&D principles becasue the average workers don't understand economic theory and if they do, they are so restricted by monetary pressures that they don't feel able to do anything about it. Going on strike, even if you have a substantial nest egg, can been horribly burdensome. The executive know this and are cushy enough with their fleet of private jets that they can push labor to the breaking point.

What I'd like to see is a greater increase in ethical investing. Several funds already exist that screen their investments based on ethical evaluations of the companies. If this sector of the market were to increase, corporations would be forced to change their collective outlook.