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Minimum Wage

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GavinPalmer1984 Posted: Tue, Oct 4 2011 9:01 AM

The most fit organization will be one that doesn't exclusively use the money of governments.  I think minimum wage laws should be replaced with "minimum standard of living laws".  This allows corporations to move toward self-sufficient organization where government money-wages are not necessary.

But this also requires a country to stop trading with countries who do not uphold the same minimum standard of living law.

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Clayton replied on Tue, Oct 4 2011 11:51 AM

 I think minimum wage laws should be replaced with "minimum standard of living laws".  

Good idea. My modest proposal is that we liquidate anyone who fails to maintain the minimum required standard of living.

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limitgov replied on Tue, Oct 4 2011 12:13 PM
"I think minimum wage laws should be replaced with "minimum standard of living laws".

i think you'd fit in with the fake, planted, wall street protesters. what does that mean, minimum standard of living laws? be more specific. who would you punish and for what?
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I just like the idea of giving companies the ability to substitute minimum wage with something different - like a minimum standard of living.  There is no reason why a corporation couldn't be self-sufficient: providing a minimum standard of living without wages.  Perhaps it could be an employee choice?

Is an employee legally allowed to accept less than minimum wage?

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Is this an idea for your own company or is this something you want to make other people's companies do?

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limitgov replied on Tue, Oct 4 2011 12:48 PM
"I just like the idea of giving companies the ability to substitute minimum wage with something different"

why substitute it with anything? what about teenagers who work? should companies provide them with livable wages or conditions, even though the teenager would be living at home with their parents?
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I hope my company becomes a non-publicly-traded corporate empire where I can offer something like this.  The benefit of this capability is that government money is a fraud and a failure.  There has to be some way to allow intelligent corporations to become less dependent upon government-backed money.

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Malachi replied on Tue, Oct 4 2011 1:12 PM

Sure there is. Repeal legal tender laws.

Keep the faith, Strannix. -Casey Ryback, Under Siege (Steven Seagal)
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The economics of the current "minimum wage" laws and your "minimum standard of living" proposal-assuming that it is legislated by government- are essentially the same thing- price floors. Price floors cause surpluses which are produced means of further production which are not being productive. 

What does a price floor do?

In order for a price floor to acheive the ends for which they are advocated, the price floor must be set at a level such that it is greater than the price that a good would earn but for that price (ie. If gas sells for $6 a gallon, it wouldn't change things if the price floor is set at $0.50 a gallon; the point of a price floor is to set a minimum price for a good that is higher than the market price for it.)

What are the effects of a price floor?

The effects of a price floor can be shown accurately by a graph, elaborated by explanation of the graph and the laws which govern the result.

Observe the graph:

Observe the following:

Along the vertical axis, prices are marked and increase incrementally the higher up the axis.
Along the horizontal axis are quantities and increase incrementally the farther right of the axis.

The red line (The Supply Curve): Represents the Supply of goods that suppliers are willing to bring to market at each price per unit of the good. 

The blue line (The Demand Curve): Represents the Demand of goods that consumers are willing to buy at each price per unit of the good. 

To elaborate further, at the market-clearing price-also known as the equilibrium price- consumers will buy 500,000 goods at $6 per good; and suppliers will supply 500,000 goods at $6 per good. There is no surplus of goods (where supply brought to market exceeds demand for that good) nor shortage of goods (where demand for a good exceeds the supply of that good brought to market).

The black line: Represents a price floor set at $8.00

Observe where the price floor intersects the supply curve: At $8.00 per unit, 700,000 units of the good will be supplied.
Observe where the price floor intersects the demand curve: At $8.00 per unit, 300,000 units of the good will be demanded.

Instead of having a market clearing price, there is a surplus- more goods are brought to market than are demanded by consumers (in this case, 400,000 more units of the good are supplied than is justified by demand.)

The origin of these curves

Demand Curve: This curve is drawn from the Law of Demand which states that, ceteris paribus, a lower price will lead consumers to buy more units of a good, while a higher price will lead them to buy fewer units of a good.

Supply Curve: This curve is drawn from the Law of Supply which states that, ceteris paribus, a lower price will lead suppliers to sell fewer units of a good, while a higher price will lead them to supply more units of a good.

Relation to the minimum wage/minimum standard of living.

Simply put, the minimum wage is a price floor leading to a surplus. Under this scenario prospective employees are the supply, of labor, and prospective employers are consumers of labor. Since a price floor is set there will be a surplus of goods- labor that is brought to market that is not demanded by producers-  so long as this floor exceeds the market price for each unit. 

Clarification

There is no such thing as a "unit of labor." By using labor I mean "productivity." If someone can only bring an employer $15 per hour, but minimum wage laws (or minimum standard of living laws) state that- I'm exaggerating to make the point- employers may not hire someone unless they pay them $30 per hour, then the employee will be either fired or not hired; It makes no sense for an emplyer to hire/keep an employee who costs an additional $15 an hour if the employee can only produce $15 an hour- producers want to cut costs.

As follows, in order for someone to be hired, the prospective employee must be willing to be paid less than their productivity allows.

If you are not talking exclusively of money, but also including fringe benefits (vacation time, health care insurance, etc.), rest assured that the same economic laws apply. 

Regarding Trade

The most important question of this part of your proposal, regarding minimum standard of living, is "Compared to what?" You answer this, somewhat, by shifting the focus from producers to countries. Countries do not trade (eg. The United States is a land mass extending from the Atlantic Ocean to the Pacific Ocean.); Individuals trade. There is a question of measure to be decided: eg. If the minimum standard of living is to be assessed relative to the highest PPP, such a policy would kill billions of people.

Hope this helps!

If I had a cake and ate it, it can be concluded that I do not have it anymore. HHH

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Does this paper have any credibility:

http://www.irle.berkeley.edu/workingpapers/166-08.pdf

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No.

Here's a quote from AGD about using statistics to prove or disprove an ecnomic theory [emphasis mine]:

On the contrary, I contend that economic theories cannot be “tested” by historical or statistical fact. These historical facts are complex and cannot, like the controlled and isolable physical facts of the scientific laboratory, be used to test theory. There are always many causal factors impinging on each other to form historical facts. Only causal theories a priori to these facts can be used to isolate and identify the causal strands.4

For example, suppose that the price of zinc rises over a certain time period. We may ask: why has it risen? We can only answer the question by employing various causal theories arrived at prior to our investigation. Thus, we know that the price might have risen from any one or a combination of these causes: an increase in demand for zinc; a reduction in its supply; a general increase in the supply of money and hence in monetary demand for all goods; a reduction in the general demand for money. How do we know which particular theory applies in these particular cases? Only by looking at the facts and seeing which theories are applicable. But whether or not a theory is applicable to a given case has no relevance whatever to its truth or falsity as a theory. Itneither confirms nor refutes the thesis that a decrease in the supply of zinc will, ceteris paribus, raise the price, to find that this cut in supply actually occurred (or did not occur) in the period we may be investigating.

The task of the economic historian, then, is to make the relevant applications of theory from the armory provided him by the economic theorist. The only test of a theory is the correctness of the premises and of the logical chain of reasoning.5...

The same considerations apply when gauging the results of political policies. Suppose a theory asserts that a certain policy will cure a depression. The government, obedient to the theory, puts the policy into effect. The depression is not cured. The critics and advocates of the theory now leap to the fore with interpretations. The critics say that failure proves the theory incorrect. The advocates say that the government erred in not pursuing the theory boldly enough, and that what is needed is stronger measures in the same direction. Now the point is that empirically there is no possible way of deciding between them.6 Where is the empirical “test” to resolve the debate? How can the government rationally decide upon its next step? Clearly, the only possible way of resolving the issue is in the realm of pure theory—by examining the conflicting premises and chains of reasoning.

In other words, the economic world is so complicated that many factors come into play in every given situation. The working paper acknowledges this by talking about "spatial heterogeneity". But instead of concluding that therefore what actually happened does not prove or disprove anything, it pretends it can "account for" this "spatial heterogeneity" and isolate only the effects of the minimum wage on employment. It then "proves' that the effect is nil.

Note that no effort is made to refute the impeccable chain of logic that shows that of course a minimum wage law, all other things being equal, will reduce employment. [Unions are very aware of this, and fight hard for minimum wages, but that's another story.] No effort is made, because it is impossible to refute.

So that if we grant the correctnes of the logic, what are we left with? That some mathematical massaging of the numbers that show there were less jobs after minimum wage laws were introduced show that "really' no jobs were lost. To reconcile this with the logical reasoning, we must conclude that there were other factors at work, as there always are.

 

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Nice post old guy!  But I am thinking about self-sufficient plantations where the corporation has doctors, teachers, cooks, etc. in combination with providing a good or service for the external market.  This allows for people to obtain a minimum standard of living without external wages.  I would imagine that the corporation would have its own credit/money used internally.

Then - there is no price floor for the goods and services sold externally within the external market.

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jay replied on Wed, Oct 5 2011 11:47 AM

Why do non-troll people post here with "there should be a law x" and think others here would be okay with it?

"The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated, but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience." -C.S. Lewis
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Maybe they are searching for the biggest holes in their logic.

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GavinPalmer1984:
But I am thinking about self-sufficient plantations where the corporation has doctors, teachers, cooks, etc. in combination with providing a good or service for the external market.  This allows for people to obtain a minimum standard of living without external wages.

I guess my biggest questions are: Would this be a law? To what is this "minimum" referring? Do these benefits go solely to employees of the firm in question, or are they a market good available to all consumers? What do you mean external wages?
 

I don't want to risk answering with these concerns still cloudy.

 

 

If I had a cake and ate it, it can be concluded that I do not have it anymore. HHH

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If I were to implement such a system for my own company - it would be outside of the law.  I would go to a country without minimum wage laws.  And I would provide a minimum standard of living to all of my employees.  Employees that were more valuable would obtain higher standards of living.  I definitely want to provide low-cost benefits to neighbors outside of the company as a means of maintaining support among the locals... and identifying potential employees.

I mention external money as being the money paid for the products and services provided by my company.  My employees might receive $4000.00 per year (or less) assuming the dollar is the external wage.  But within my company - I would have an internal economy which provides for varying standards of living.

I don't know if I will ever be able to build such a corporate empire.  So I am interested in your analysis of a system like this permitted within American law.  I will subjectively declare a minimum standard of living as one where people have access to a nutritious diet and healthy living conditions... while working no more than 20 hours per week.  Benefits from within a corporation can be provided in the market - but employees must be able to maintain their minimum standard of living.

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GavinPalmer1984:
If I were to implement such a system for my own company - it would be outside of the law.

My mistake. You mentioned before that you would like to see this as a law. So it's just for your compnay then.

 

GavinPalmer1984:
And I would provide a minimum standard of living to all of my employees.  Employees that were more valuable would obtain higher standards of living.

This seems to be just a replacement of the word "wage" with "standard of living." Every good that must be economized- including money (which is an indirect good that loses its value the more the government prints it)- is an economic good, the sum of which is a relative measure of wealth. The closer the ratio between available economic goods and one's requirements for fulfillment of needs can be called one's standard of living- again, wealth. So relate this to your workers: if a worker provides more of a good for you than another one, then the former is more valuable to you- because losing him would separate yourself from the fulfillment of your needs (a need being something that alleviates discomfort/uneasiness- in your case, the production of your product) further than the loss of the other one. So, you pay the former worker more than the latter worker- be it in money, benefits, or standard of living which is, to me, equivalent to the sum of money, and benefits assuming both are scarce.

 

GavinPalmer1984:
I mention external money as being the money paid for the products and services provided by my company.  My employees might receive $4000.00 per year (or less) assuming the dollar is the external wage.  But within my company - I would have an internal economy which provides for varying standards of living.

Ok, now I understand. While maintaining this, as you describe above with teachers, etc. may be expensive, it would be interesting to see. I see one harm of this being price floors- the potential employee should be able to decline this offer if he feels that he cannot be productive enough to enjoy these benefits. So long as this is voluntary- meaning that it isn't a prerequisite for hire that a potential employee must accept these conditions- I don't see price floors as a problem with it; if they (a cap on working hours, minimum standard of living, other benefits, etc.) are imposed- opposite of my above definition of voluntary- you will not be able to hire as many workers as you might otherwise like and the productivity of your output will be less than it, otherwise, could be. 

 

GavinPalmer1984:
I don't know if I will ever be able to build such a corporate empire. 

That is a tough call. I think Google provides employees with such benefits, but that is a BIG firm. 

Hope this helps!

 

If I had a cake and ate it, it can be concluded that I do not have it anymore. HHH

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"while working no more than 20 hours per week"

So, Gavin, you would punish any business that schedules their employees more than 20 hours a week?

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I would hope to hire people who are qualified and capable.  So I would know that my employees would easily obtain a cerain quality of life through their labor.  The employees might not have the ability to make external money.  But I would assure them the ability to obtain a standard of living so long as they were willing to work at least 20 hours.  In all actuality - some workers might work less than 20 hours if their labor is valuable enough.  But I am accounting for the most-dirty-job employee.

The product or service sold within the market could be used to directly fund the expansion of the corporation - assuming that no employee takes wages.

Services like farming, construction, police, doctors, education, etc. are expensive.  But our modern economy has a scarce supply of these laborers.  This entire idea allows my corporation to develop its own economic model where there are plenty of teachers, doctors, farmers, etc.  And the beautiful thing about this idea is that the corporation is much more capable than the Government.  The government inherits incapable minds who raise incapable children who elect incapable representatives.  A corporation gets to choose their employees while the government inherits them.

So as corporations begin to implement an internal economy that is self-sufficient: these new economic models can be studied and adopted as they are proven to provide high qualities of living.  The internal economy of a corporation like this - may be far superior than anything banks and governments can think of.

This is competition of economic systems.

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limitgov:

"while working no more than 20 hours per week"

So, Gavin, you would punish any business that schedules their employees more than 20 hours a week?

I am basically stating my opinion that every adult on this planet should be capable of working 20 hours per week as a means of obtaining a nutritious diet and healthy living conditions... but this is not the point of the conversation.  Employees could choose to work more than 20 hours per week if their is a need for their addtional labor.

I really think this type of law would be arranged so that employees can complain about employers and that complaint can be investigated and the relevant information can be made publicly accessible.  The consumer can then decide which company to support.

I don't really think a police force can uphold these types of laws.  I think information must be made available to inform consumers and potential employees.

A Chinese company can provide trinkets at a low price because they use employees who are paid very little.  I would like to see local companies who pay their employees very little (or nothing) while providing those employees with a high quality of living.  Like thatoldguy said - this type of system would not create a price floor.  So then the consumer can choose a company who provides its employees with a higher standard of living while maintaining low prices... this in turn will force the Chinese to adopt better practices as a means of competing within this market of people who will account for information regarding the treatment of employees.

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jay replied on Thu, Oct 6 2011 9:03 AM

GavinPalmer1984:
A Chinese company can provide trinkets at a low price because they use employees who are paid very little.

A company doesn't decide what to pay its employees and then determine the consumer price. That makes no sense.

A lot of your ideas are very subjective, especially the livable wage/working conditions ones. Good wages/working conditions are subjective to the specific economy and preferences of employers and employees. A livable wage to a Carthusian monk would be much different than that of a fedual lord.

It seems like you're doing some preference-setting for people that would be doing it for themselves.

"The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated, but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience." -C.S. Lewis
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"I don't really think a police force can uphold these types of laws."

Then why do you need a government to provide a website where people can complain about their employers?  Why not start one yourself, or just wait for someone else to do it?  Why can't the place where you complain about the employers be a regular website, paid for by those who wanted to create it? 

Why must it be government?

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@Jay

I understand what you are saying.  But I do think that every person on this planet would enjoy healthy living conditions: and this is not subjective.  I also think that every person on this planet enjoys reduced cost of living... which can equate to more time spent doing things other than paying the costs of living.

@limitgov

You need the government to allow for people to work for less than minimum wage... because there are already laws regarding minimum wage.  Everything else you suggest is fine... let individuals self-organize.  Like I said earlier - it would be nice if I could build my own corporate empire in a country without minimum wage laws.  And it would be nice if corporations begin heading down this route I have attempted to speak about.  I truly think that discussing these ideas helps to bring them into reality.

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limitgov replied on Thu, Oct 6 2011 10:25 AM

"because there are already laws regarding minimum wage."

would it not be easier to just get rid of the that law?

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jay replied on Thu, Oct 6 2011 10:43 AM

GavinPalmer1984:
But I do think that every person on this planet would enjoy healthy living conditions: and this is not subjective.

I might concede that healthy living isn't subjective, but some people may value something more than healthy living. You see real life examples of this all the time now as it is. How are you going to make people to value healthy living enough?

GavinPalmer1984:
I also think that every person on this planet enjoys reduced cost of living... which can equate to more time spent doing things other than paying the costs of living.

Again, I may concede this point, but a reduced cost of living is a technological goal towards which markets naturally gravitate. No need to plan or force it.

"The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated, but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience." -C.S. Lewis
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Forcing companies to pay a wage that adheres a minimum standard of living law, will create problems that are similar to the problems that minimum wage creates and new problems. One of the new problems is that a minimum standard of living is subjective.

But I thought that is exactly the justification for the minimum wage, to force companies to pay a "living wage" or a wage that people can live off.

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I think the point of minimum wage laws are to placate criticism of authority from the left while effectively setting a minimum wage that does little or nothing as far as being a price floor or actually giving people a wage they can sustain themselves off of.

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@limitgov

I really don't know the answer to that one.  There are many people who are stuck on the idea of minimum wages.

@jay

I don't expect people to jointly value healthy living conditions and nothing else.  I was just trying to describe my idea of a minimum standard of living.

I don't think our current market is moving toward a reduced cost of living.  The existence of minimum wage laws create price floors.  So I am suggesting a new perspective where corporations can internally reduce the cost of living for their employees.  The corporations who can provide the lowest cost of living will probably attract the better employees.  So it is not a matter of planning or force - but a matter of providing opportunity.

I also see this idea as opportunity for micro-socialism to manifest internally within corporations.  I think socialist economies have the potential of minimizing the cost of living moreso than capitalism.  We just haven't found a form of socialism that works.  This approach allows corporations to experiment with a working socialist  model internally while producing products and services within the external capitalist market.

@Jack Roberts

I think you missed my point.  The employees might not receive any wages.  The employees obtain standards of living because the company is a self-sufficient community that does not require products and services from outside of the company's assets.

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Birthday Pony:

I think the point of minimum wage laws are to placate criticism of authority from the left while effectively setting a minimum wage that does little or nothing as far as being a price floor or actually giving people a wage they can sustain themselves off of.

I agree but I think the government might have used the living wage as a justification at some point in history and it most likely did increase some peoples wages at the time. But i stand to be corrected on that one. Thanks to inflation and central banking the days where you could live off the minimum wage are long gone. But then there could be a counter argument that the minimum standard of living has increased, to which the minimum wage has not increased at the same rate. So when the minimum wage was created it would sufficient to have a home with food and you were lucky to have a toilet in your house, electricity, a table to eat off etc. But these days a minimum standard of living includes an iphones and tvs and take out food etc.

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jay replied on Fri, Oct 7 2011 2:10 PM

Jack Roberts:
But these days a minimum standard of living includes an iphones and tvs and take out food etc.

Which is why the "livable wage" argument is nonsense. I can tell you right off the bat that my standard of living is very different than the guy a few cubes over from me. A "livable wage" is whatever politicians and state-meddlers say it is.

"The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated, but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience." -C.S. Lewis
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Smiling Dave:

No.

Here's a quote from AGD about using statistics to prove or disprove an ecnomic theory [emphasis mine]:

 
Is that quote also in Rothbard's "In Defense of Extreme Apriorism"?

 

If I had a cake and ate it, it can be concluded that I do not have it anymore. HHH

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Wibee replied on Sat, Oct 8 2011 6:37 PM

How do minimum wage laws affect business when the amount of businesses who give the minimum wage is in the lower single digit % bracket?

 

 

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Malachi replied on Sun, Oct 9 2011 11:45 AM

>>>>How do minimum wage laws affect business when the amount of businesses who give the minimum wage is in the lower single digit % bracket?>>>>

It prices all potential businesses that would use less valuable labor out of the market, period. It also forces the prices of goods and labor up, by instituting an artificial floor, therefore the cost of any good must necessarily rise. Fast food is more expensive and lower quality because the demand for fast food is sufficient to overcome the inefficiency of the minimum wage. The quality suffers as a result because artificially inflating the value of labor creates a sense of entitlement among the underclass. If the were making $2 an hour to start, they would really really want to get the order right so they could earn a raise.

Keep the faith, Strannix. -Casey Ryback, Under Siege (Steven Seagal)
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Wibee replied on Sun, Oct 9 2011 1:03 PM

I understand businesses being priced out of the market.  But still, hardly anyone pays the minimum wage.  It would seem it's effects on the price of goods would be negligible since only a very small minority pays the minimum wage.

Unless that is just a marketing strategy to say they do not hire people at minimum wage. 

 

Perhaps if there was no minimum wage limitations, one would see more competition.  Once the competition gains market share, they may raise prices accordingly. 

So much easier to argure that it is no one's business to tell me what wage I should pay...

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MaikU replied on Sun, Oct 9 2011 2:41 PM

Where I came from, minimum wage is a standard. Thanks to our great government.

"Dude... Roderick Long is the most anarchisty anarchist that has ever anarchisted!" - Evilsceptic

(english is not my native language, sorry for grammar.)

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Malachi replied on Sun, Oct 9 2011 3:08 PM

Things that are seen vs. Things that are not seen. When the government regulations make it impossible to have taxi service below a certain dollar amount, you dont see taxi service below a certain dollar amount. 

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Government will decrease as charity and volunteerism increase.  The charitable organizations must become self-sufficient in their relationships with each other.  The price floor in terms of currency price can become near zero as volunteers cooperate effectively.

I see this path of volunteerism and charity to be ideal as robots fix robots and politicians foolishly attempt to create more work.  A rational organization is one that attempts to reduce the amount of work needed to provide a good or service.
 

Our markets see planned obsolescence, pollution, wasteful regulation, and general inefficiency because these practices end up benefiting a small group of people while placing costs on another group of people.  The foundation of these wasteful tendencies lies in a lack of competition and a lack of awareness.

The job of the non-profit is to compete in the markets to provide goods and services at minimal costs.  This disempowers the profit seekers who are willing to deceptively place costs on consumers as a means of increasing personal profit.  The other job of the non-profit is to increase awareness of each individual concerning the consequences of their interactions within the economy.

As an individual - we can begin to engage the economy with renewed understanding that it is healthier for our economy to become conscientious consumers who do not always seek the lowest price because prices do NOT currently reflect ALL costs with regard to SUSTAINABILITY.

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Keeping the minimum wage may be even worse than more negative taxes.

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I'm always learning more - which helps me to refine my understanding.

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