Labour markets

Great article. I agree that labor cant be expensive right now, but it needs a lot of planning and good training and have a better edge than the previous service providers.

Although the the increase in employment would be minimal at best and negative at worst, those who are employed will have a significantly higher standard of living. a $1/hour raise in the minimum wage translates to $2000/year or a nearly %15 raise. Most minimum wage jobs are service work which is tied to a specific location suggesting that a raise in the minimum wage would have no negative impact on unemployment numbers but, as you said, the increase in spending through the wealth transfer could cause a slight increase in employment.

Well, when there is an economic downturn, the real wage is going to go up. So, I think there is a problem of correlation (unemployment and wage), or at the very least unemployment causes the real wage to edge up.

It's interesting that the real minimum wage peaked in the late 60s when many of our unskilled workers were busy in Southeast Asia. It's observations like that that make me sympathize (albeit reluctantly) with the Occupy movement.

"I'm trying desperately"

Why?

"That last, substantial rise in the minimum wage looks strangely familiar. In fact, it mirrors quite closely the sharp rise in unemployment that occurred over a similar time frame."

Indeed, I wonder if something happened in 2008 to cause the REAL value of the minimum wage in increase. Could it have been recession related deflation? In fact, its more likely the mass unemployment causing the increase in the real value, not the other way around.

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In any case, an increase in the minimum wage may decrease the number of low level workers, (Insofar as that effects the business of non-movable service centers that require enough employees to meet demand and no more) but it increases the wages of the remaining workers and the ratio of wages/employee debts/employment related costs.

The whole trouble comes from the fact that the marginal efficiency of investing abroad is advantageous. This comes from the fact that the financial- and capital-markets are made too global and liberal.

The economy should not necessarily back down the whole of the idea of free trade while it is not favourable to radicalise it, either. Primarily problematic is the hasty globalisation of the financial- and capital-markets, which have been conducted for the last decades to primarily reduce the cost of investing abroad. As the US non-household sector as a whole finds more efficient investment abroad than at home, it has changed their portfolio in a corresponding manner, pushing up the market interest rate (as a complex of all the interest rates in the open market at present) in a corresponding manner against the key interest rates. Additionally, now that insolvency is more seriously considered than before, the US economy at home is suffering a credit crunch. As a result, the money interest rate is considered too high for investing at home and too low for investing abroad at any time and even if the interest rates were lowered the market fear for insolvency discourages the non-household sector from investing at home, and hence markets prefer investing abroad in which the financial cost is considered dirty cheap comparing expected returns.

Also, the economy should not necessarily back down the whole idea of free economy while it is not favourable to radicalise it, either. Primarily problematic is the hasty liberalisation of the financial- and capital-markets at home, which have been conducted for the last decades to primarily reduce the cost of investing into speculative assets. As the US non-household sector as a whole finds more efficient investment in speculative activities than in entrepreneurial activities, it has changed their portfolio in a corresponding manner, pushing up the market interest rate (as a complex of all the interest rates in the open market at present) in a corresponding manner against the key interest rates. Additionally, now that insolvency is more seriously considered than before, the entrepreneurial or employment motives, particularly among SMEs, at home are suffering a credit crunch. As a result, the money interest rate is considered too high for investing into entrepreneurial or employment activities and too low for investing into speculative activities at any time and even if the interest rates were lowered the market fear for insolvency discourages the non-household sector from investing enterprises at home, and hence markets prefer investing into speculative assets in which the financial cost is considered dirty cheap comparing expected returns.

Both the above two can be easily explained by the liquidity-preference theory.

The chart above only has one line. Did unemployment correlate negatively with real wages consistently or is it only over the last couple of years?

There is a school of thought saying that if low paid workers price themselves out of jobs, those jobs will then have to be done by the remaining higher paid workers. By and large, those higher paid workers would prefer to do the jobs they are doing now, thank you very much.

It is those damned curves again - they are not all textbook shaped, you know. It all comes down to elasticity.

It's the same as jobs at the top. If the going rate is higher, employers will have to pay more to get the job done.

The minimum wage is just another political class warfare front.

"These are not high marginal productivity workers."

No, but a low-skill worker manning highly productive machinery is.

Relatively higher wages lead to more productive use of labor at the margins, and helps build a middle class. See: Ford, Henry.

So, granted that the timing isn't great, it's still an important discussion to have.

Time to start because it is so infrequently done. The timing was unfortunate because it was delayed so long.

Agreed - especially about a tight labor market. The most reliable form of job security, and best incentive for workers' rights, is the knowledge that, if I lose my current job, a new one can be found without difficulty.

But unions find this hard to accept. Every change of job is a potential loss of member. And the more bargaining power the individual worker has, the less the need to go collective.
Is there any way to reconcile the incentives of organized labor with this awkward fact?