A solution for unemployment and under-employment

That's not true at all.

 

Billboards, ads on almost every webpage, magazine ads, newspaper ads, 100 television channels with dozens of ads playing every hour, company sponsored race cars, company blimps, paying people to paint their cars with ads, paying people to paint their houses with ads, radio ads, nonstop radio ads during drive time, one million dollar ads during the superbowl, two hundred million dollars to put their name on a stadium, "this popup has been blocked," mass mailings, mass emailings, telemarketing, infomercials, etc.

And they want us to believe that paying ten dollars an hour to the guy who actually makes the product is what's breaking the bank.

 

Ads generate revenue by increasing sales, so you can't blame businesses for spending money on them. However other expenditures like wages can be attributed to businesses failing. If a worker only generates 9$ an hour of revenue for the businesses then you can blame a forced wage of 10$ an hour for killing the business.

 

Given wages and productivity are inherently related, such simplistic comments are just an exercise in advertising a lack of understanding

 

Gee, I'm so sorry I didn't spend tens of thousands of dollars on an economic degree I won't use so I could make my statement match the latest theory

 

One doesn't need an economics degree to note the bleedin obvious: productivity is also a function of wages

 

Ensuring full employment of resources in the market for labor could end poverty, as we currently know it.

 

Yeah! Economics is easy! This is obviously shown by the shinning state of the world's economies where we clearly eradicated poverty!

(I'm sorry, I just feel like you're being too nit picky, and the simplistic comment was unnecessary)

 

You've created an argument based on ignorance of basic labour analysis. You've maintained an invalid position despite being informed of your multiple errors. Your confusion over the relationship between wages and productivity just takes the biscuit!

 

It should be obvious I've made no argument against that wage-productivity theory, so your post is invalidated, and it should be clear my response is just a reaction to you making needless points on my understanding.

 

Does spending 200 million to put a company name on a stadium generate 200 million in revenue? Do the company sponsored race cars generate enough sales to justify the cost? Yes, advertising can generate revenue. But at what point are they overspending? At what point do they spend more than the ads generate?

Yes, if a person who makes 10 dollars an hour only produces 9 dollars worth of product then the person is wasting money. How many tradesman do you think only make 9 dollars worth of product an hour? Do a little research and you will find that the average American tradesman is producing over 70 dollars worth of goods an hour. Suddenly the forced wage of 10 dollars an hour seems a little low.

If a company spends 700 million on advertising that only increases sales by 100 million then the company is wasting money. Spending 100 million on the wages of people who produce 700 million of actual product is a huge profit.

Take away advertising and the company will still sell products. Maybe they won't sell as much but they will still sell products. Take away the products and there is nothing to advertise.

 

You're a repeat error offender. Thye wage-productivity comment was nothing more than a repeat of the minimum wage mistake. Your position is based on a 2 fronted erroneousness: first, an invalid reference to minimum wage effects. Second, a quite ridiculous idea of encouraging low skilled labour (whilst failing to understand that underemployment and unemployment are inherently linked, with your policy 'effort' actually increasing unemployment and inefficiency)

 

The point is ads are not destroying companies, companies don't over pay for advertizing. I'm sure you can pointlessly point to one example of a company over paying, but there are thousands and thousands of examples where it is profitable. The other point is you can't reduce a company's advertisement budget and give that money to the employees, as sales will fall and you will have to lay employees off.

 

ok, how does minimum wage increase employment?

 

Due to monopsony effects created through job search frictions

 

Is this what your talking about with job search frictions? If so how does job friction increase unemployment and how does minimum wage reduce job friction? If not please elaborate as best you can.

 

Why wouldn't business hire more efficient labor for ten dollars instead of nine dollars, ceteris paribus? Wouldn't fewer but more efficient labor work to lower those costs, up to a certain point.

 

By "artificially" creating a wage that may attract more qualified labor.

 

Its shown by Burdett and Mortensen: an inefficient wage differential is created which ensures that mutually beneficial exchange is not exhausted. We therefore have the same effect as in traditional monopsony, an upward sloping labour supply curve that increases equilibrium unemployment, but with underpayment also predicted to rise as an industry apparently becomes more competitive (as the same model is used to understand the firm size-wage correlation). The minimum wage becomes a correction for that market failure.

 

There is a lot of companies who overspend on advertising. Far more than just one. Advertising may slightly increase sales but there is no way that the constant stream of advertising we see in this country is boosting sales enough to justify the cost. Every company out there could reduce it's advertising budget without having to lay off employees.

If you are looking to cut costs in order to create jobs then cut the costs of things that aren't very useful to your company. Cutting the wages of the people who make the actual product is like killing the goose that lays the golden egg. A company would be better served if it trimmed it's advertising budget and staff. In fact, most companies would be better served if they looked at all parts of their "middle management" and asked if they really needed that person. The guy who makes the actual product is, clearly, the most necessary person in the company. They guy who boosts sales by 0.00001% is not as necessary.

The point is that our companies are, for the most part, poorly managed. If a company wants to increase profits by cutting the wages of the person who actually makes their product then that company is poorly managed. They have lost sight of where thier money comes from.

The original post said we would have more jobs if we all agreed to work for one dollar an hour. Why should we agree to do that? Companies would have more money for payroll if they simply learned to manage their money better. They would have more money if they didn't waste it on things that are not justifying the cost. The guy who actually makes the product is a justified cost. If you want someone to make one dollar an hour then tell the advertising executive he's going to have to take a salary cut.

 

Then why would business experts, who know more about the effects of advertizing than you, run companies that pay for advertizing if it doesn't benefit them? How would this trend of advertizing even start if it had no benefit at all and harmed every business that payed for it? You have no clue how advertizing effects a businesses sales, you just look at the large advertizing budget alone, and that is just dumb. You need to compare sales before and after a business starts a new ad campaign. And you clearly haven't done that yet.

That is a gross representation of the plan. That is simply not true.

 

What is an inefficient wage differential (all I can find are web pages on discrimination), and how is it reduced by the implementation of minimum wage? How does that cause an upward sloping supply curve, and why does that decrease employment?

 

Monopsony destroys the notion of the law of one price. Wage differentials will be created that are independent of human capital or compensating differentials. The upward sloping labour supply curve reflects monopsony (firms become wage makers, rather than taking the market wage). In traditional monopsony that automatically leads to a reduction in employment (as the profit maximiser will choose employment where marginal costs and marginal benefits are equated, they will reduce employment because the supply curve coincides with the marginal cost curve and therefore it increases as employment increases). In dynamic monopsony it reflects the market failure that hinders the exhaustion of mutually beneficial exchange.

 

In my opinion, public sector intervention in the market for labor could better ensure full employment of resources in that market.

 

You keep saying naff all, hoping that people won't notice if you use a reasonable sentence structure. They will!