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More Upward-Sloping Demand Curves

July 1, 2011, 11:05 am

Other than the demand among the status-conscious for Chanel handbags, the demand for a product or service generally decreases as its price decreases.  This is an observation so trivial it is almost stupid to write down. But I guess the point is still not understood in Washington.

"The Center for American Progress, often called the think tank for the Obama White House, recentlyrecommended another increase in the minimum wage to $8.25 an hour. Though the U.S. unemployment rate is 9.1%, the thinkers assert that a rising wage would "stimulate economic growth to the tune of 50,000 new jobs." So if the government orders employers to pay more to hire workers when they're already not hiring, they'll somehow hire more workers. By this logic, if we raised the minimum wage to $25 an hour we'd have full employment."

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Category: Economics
  • Jim Clay

    I think you meant "the demand for a product or service generally decreases as its price increases". Totally agree with your intended point, of course.

  • NL_

    No, it makes perfect sense to raise the minimum wage. Businesses will be able to afford more expensive labor once we give workers more money to buy the business' products. Just like the feds will be able to close the budget deficit if the government just spends more money now. Everybody knows you spend money to get out of a deficit.

  • Sean2829

    Hey, I bet if we included the cost of employee health care premiums, we might find that many employers are already paying over $10 an hour.

  • James H

    I think Joe Biden once said something like "if we don't spend a lot more money, we're going to go bankrupt". Same line of reasoning here. I think that we shouldn't stop at $25/hr. I've always wanted a Ferrari and a bit more luxurious house, so we should raise it to at least $1000/hr. If we did that, we could wipe out poverty in this country, right? If we had pretty much full employment at $25/hr, we could probably employ much of the rest of the world as well at $1000/hr and put a big dent in world hunger. Brilliant!

    Wait, if everyone all of a sudden made $1000/hr, would a Ferrari's price stay fixed at ~$150K? Would luxurious houses cost the same? That would be a bummer if the price of goods and services went up at the same time. I think that we should enact a cap to prevent that from happening. Phew! Averted a disaster there.

  • James H

    Well, I just got off the phone with my buddy Hugo Chavez. He tells me that I forgot something that he learned the hard way. I forgot that if I cap the prices while raising the wages, there will be shortages. So, we'll need to first threaten and ultimately nationalize any of those evil companies that think that they can just refuse to produce under the price cap. I think that covers everything, then, now we're good to go.

  • Ted Rado

    When I was a youngster, my first job (at age 13) was as a produce boy in a Kroger store at 35 cents per hour. I worked two hours after school, and 12 cents of the 70 went for street car fare. I subsequently worked as a caddy (caddying double got me $1.60 in about four hours). I also set pins in a bowling alley, delivered papers, etc. When in the univerity, I had a part time job (chem research lab) at 90 cents per hour.

    Bottom line: by the time I got out of college, I knew how to deal with superiors, customers, and colleagues. I also learned to manage my money (albeit on a very small scale). I also learned the work ethic. If there had been a minimum wage or child labor law, I would never have gotten the experience.

    I think we have screwed up the young folks royally. If bottom rung jobs are priced out of existence, it becomes impossible to get early life work experience. Describing the sort of jobs I had as a youth as sweatshops abusing children is a huge misrepresentation. It was an invaluable experience.

  • jlkinsella

    An interesting GAO Government report was just published on the impact of minimum wage on employment in American Samoa. The increase didn't work out very well for the workers who were suppose to benefit.

    http://www.gao.gov/new.items/d11427.pdf

  • IgotBupkis, President, United Anarchist Society

    >>> Though the U.S. unemployment rate is 9.1%, the thinkers assert that a rising wage would “stimulate economic growth to the tune of 50,000 new jobs.”

    I see the logic, though it's clearly faulty.

    The idea is, I guess, if you pay workers more, they'll spend more, which means they'll stimulate the economy.

    Not arguing in favor of this ludicrous idea, but it's probably a good idea to be armed with data to destroy that position, as you're sure to hear arguments in favor of it.

  • bobby b

    " . . . demand for a product or service generally decreases as its price decreases."

    You were looking at a picture of Obama when you typed this, weren't you?

    It's okay. He does that to people. Every time I see him give a speech, I wake up late that night screaming "the polar bears! Oh, gawd, the polar bears!" Then my wife hits me, says "no more late news", and rolls back over.

  • Mad Rocket Scientist

    You are all thinking about this wrong, the idea isn't just that raising the minimum wage will improve the spending habits of the minimum wage employee, it'll also stick it to those greedy business owners who are choosing 'obscene' profits over paying their "single mother of three" workers a living wage.