The Trap of the High Value Woman

 

A Level Economics 64: Maximum and Minimum Price

Maximum and minimum prices are government-imposed price controls (regulations) aimed at influencing the market price of goods and services. These controls are typically implemented to achieve specific economic or social objectives. The rationale behind maximum and minimum prices can vary, but their primary purposes are to protect consumers, ensure fair wages for workers, stabilize markets, or control inflation.

Maximum Prices: A maximum price, also known as a price ceiling, is the highest price that can be legally charged for a specific good or service. The government sets the maximum price below the market equilibrium price to protect consumers from excessively high prices. The goal of a maximum price is to make essential goods more affordable for consumers, especially during times of crises or shortages.

Example of Maximum Price: During a severe drought, the government may set a maximum price on bottled water to prevent sellers from charging exorbitant prices due to increased demand. By capping the price, the government ensures that consumers can access water at a reasonable cost during the crisis.

Minimum Prices: A minimum price, also known as a price floor, is the lowest price that can be legally charged for a good or service. The government sets the minimum price above the market equilibrium price to provide producers with a fair income or to ensure minimum wages for workers. The objective of a minimum price is to support producers and workers in industries where they may face challenges in earning a living wage or fair returns on their products.

Example of Minimum Price: In the agricultural sector, the government may set a minimum price for certain crops to support farmers and stabilize their incomes. If the market price for a crop falls below the minimum price, the government may step in to purchase the surplus at the set minimum price, ensuring that farmers receive a fair income.

Working of Maximum and Minimum Prices:

• Maximum Price: When a maximum price is set below the market equilibrium price, it creates a situation of excess demand or shortage. At the maximum price, consumers are willing to buy more of the good than producers are willing to supply. This can lead to long queues, black markets, and reduced availability of the product.

• Minimum Price: When a minimum price is set above the market equilibrium price, it creates a situation of excess supply or surplus. At the minimum price, producers are willing to supply more of the good than consumers are willing to buy. This can lead to unsold inventories, wastage, and potential inefficiencies in the market.

Example of Maximum Price in Action: During a housing crisis, the government may set a maximum rent price for apartments to protect tenants from unaffordable rent increases. While this measure benefits renters, it may discourage landlords from maintaining or offering additional rental properties due to reduced profit margins.

Example of Minimum Price in Action: In the labor market, the government may set a minimum wage to ensure that workers are paid a fair wage. While this measure benefits workers, it may lead some employers to reduce hiring or cut back on labor-intensive activities to offset increased labor costs.

In conclusion, maximum and minimum prices are government interventions in the market to achieve specific economic or social objectives. Maximum prices are aimed at protecting consumers from high prices, while minimum prices are intended to support producers and workers. While these price controls can have positive effects, they may also lead to unintended consequences and distortions in the market. The success of such interventions depends on the government's ability to strike a balance between achieving the desired objectives and avoiding potential market disruptions.

Economics Essay 101: National Minimum Wage

 Discuss the view that a national minimum wage is beneficial for an economy.

The view that a national minimum wage is beneficial for an economy is widely debated and depends on various factors and perspectives. Let's discuss some of the arguments supporting the benefits of a national minimum wage:

1. Improved Standard of Living: One of the primary arguments for a national minimum wage is that it helps improve the standard of living for low-wage workers. By setting a floor on wages, it ensures that workers receive a certain level of income deemed necessary for a decent living. This can help reduce poverty and inequality, lifting individuals and their families out of hardship.

2. Reduced Income Inequality: A national minimum wage can contribute to reducing income inequality within a society. By narrowing the gap between low-wage and higher-wage workers, it promotes a more equitable distribution of income. This can have positive social and economic implications, fostering social cohesion and reducing social disparities.

3. Increased Consumer Spending: When low-wage workers receive higher wages through a national minimum wage, they tend to have more disposable income. This increased purchasing power can lead to higher consumer spending, stimulating demand in the economy and potentially boosting economic growth.

4. Reduced Reliance on Welfare Programs: A national minimum wage can help reduce the dependence of low-wage workers on government welfare programs. By providing higher wages, it allows workers to rely less on social assistance, thereby reducing the burden on public finances.

However, it is important to consider the potential challenges and criticisms associated with a national minimum wage:

1. Potential Job Losses: Critics argue that a higher minimum wage can lead to job losses, particularly in sectors with lower profit margins or where businesses rely heavily on low-wage labor. Employers may respond to increased labor costs by reducing staff, cutting work hours, or slowing down hiring. This can particularly impact small businesses and industries with limited pricing flexibility.

2. Negative Impact on Small Businesses: Small businesses may face difficulties in adjusting to higher labor costs associated with a national minimum wage. They may struggle to compete with larger firms or face challenges in passing on the increased costs to consumers. This can potentially lead to business closures, reduced job opportunities, or increased prices for goods and services.

3. Potential for Inflationary Pressure: A significant increase in the minimum wage can potentially lead to higher costs for businesses, which may be passed on to consumers through higher prices. This can contribute to inflationary pressures in the economy, eroding the purchasing power of consumers and potentially offsetting some of the intended benefits of the minimum wage increase.

4. Regional and Sectoral Variations: National minimum wage policies may not consider regional or sectoral differences in living costs and economic conditions. Setting a uniform minimum wage across the country may not adequately reflect the varying economic realities, potentially leading to unintended consequences in certain regions or industries.

In conclusion, the debate on the benefits of a national minimum wage is complex and multifaceted. While proponents argue that it can improve living standards, reduce income inequality, and stimulate consumer spending, critics highlight concerns over job losses, negative impacts on small businesses, inflationary pressures, and the need for regional and sectoral considerations. The effectiveness and desirability of a national minimum wage depend on careful policy design, taking into account the specific context and economic conditions of the country in question.

Also, when discussing the impact of a national minimum wage, it is important to consider the role of globalization. Here are some additional points to consider:

1. Global Competitive Pressures: In an increasingly globalized world, countries with higher minimum wages may face challenges in maintaining their competitiveness. Higher labor costs resulting from a national minimum wage can make domestic businesses less competitive compared to firms in countries with lower labor costs. This can potentially lead to job losses, reduced investment, and shifts in production to countries with lower labor costs, impacting domestic industries.

2. Supply Chain Effects: Globalization has facilitated complex supply chains, with production processes spanning multiple countries. Implementing a national minimum wage may affect the cost structure of these supply chains. If a country's minimum wage is significantly higher than that of its trading partners, it can lead to cost increases in the production of goods and services, potentially impacting the competitiveness of industries reliant on global supply chains.

3. Migration and Labor Mobility: Globalization has increased labor mobility, allowing workers to seek employment opportunities in different countries. A higher national minimum wage can attract migrant workers seeking better wages, potentially impacting the domestic labor market and employment dynamics. Additionally, businesses may choose to outsource or offshore jobs to countries with lower labor costs to offset the impact of higher wages.

4. Multinational Corporations: Globalization has facilitated the growth of multinational corporations (MNCs) that operate across borders. MNCs may have operations in countries with different minimum wage levels, allowing them to adjust their labor costs based on local conditions. This can affect the impact of a national minimum wage on these corporations and their employment practices.

5. Economic Integration and Trade Agreements: Countries engaged in regional economic integration or trade agreements may face considerations regarding the harmonization of labor policies, including minimum wages. Disparities in minimum wage levels between countries within such agreements can lead to concerns about fair competition and potential distortions in trade.

It is important to note that the impact of globalization on the effectiveness and desirability of a national minimum wage can vary depending on the specific circumstances and characteristics of the country. Policymakers need to carefully consider the interplay between national minimum wage policies, global market dynamics, and the potential consequences for domestic industries, employment, and overall economic competitiveness.

Economics Essay 100: Elasticity and Minimum Price

Explain how the impact of a minimum price for a good or service is affected by its price elasticity of demand and its price elasticity of supply.

The impact of a minimum price for a good or service is influenced by its price elasticity of demand and price elasticity of supply. These two concepts measure the responsiveness of demand and supply to changes in price. Let's explore how these elasticities affect the impact of a minimum price:

1. Price Elasticity of Demand: Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. It indicates how sensitive consumers are to price changes. When a minimum price is imposed above the equilibrium price, it creates a price floor, which can lead to the following scenarios:

• Inelastic Demand: If the good or service has an inelastic demand, meaning that consumers are less responsive to price changes, the impact of the minimum price may be relatively small. The quantity demanded may not decrease significantly, and the burden of the higher price may fall more on consumers than on producers. For example, if the minimum price is imposed on essential goods like medicines, consumers may continue to purchase them despite the price increase due to their necessity.

• Elastic Demand: If the good or service has an elastic demand, meaning that consumers are highly responsive to price changes, the impact of the minimum price can be significant. The higher price may lead to a substantial decrease in quantity demanded, potentially resulting in a surplus. This can create challenges for producers, as they may struggle to sell their goods at the mandated minimum price. For example, if the minimum price is set for luxury goods or non-essential items, consumers may reduce their purchases significantly, leading to excess supply.

2. Price Elasticity of Supply: Price elasticity of supply measures the responsiveness of quantity supplied to changes in price. It reflects the ability of producers to adjust their output in response to price changes. When a minimum price is imposed, it can affect the supply of the good or service:

• Inelastic Supply: If the supply of the good or service is inelastic, meaning that producers are less able to adjust their output in the short run, the impact of the minimum price may result in a smaller increase in quantity supplied. Producers may struggle to meet the higher demand at the mandated price, leading to potential shortages. For example, if a minimum price is set for agricultural products with limited short-term production capacity, there may be supply constraints.

• Elastic Supply: If the supply of the good or service is elastic, meaning that producers can easily adjust their output in response to price changes, the impact of the minimum price can lead to a larger increase in quantity supplied. Producers may be able to respond to the higher price incentive by expanding their production. However, if the demand does not match the increased supply, it can result in excess supply or surplus. For example, if a minimum price is set for a highly competitive industry with flexible production capabilities, producers may increase their output, but if consumer demand does not rise accordingly, oversupply may occur.

In summary, the impact of a minimum price depends on the price elasticity of demand and price elasticity of supply. If the demand is inelastic or the supply is elastic, the impact may be less pronounced, with a relatively smaller change in quantity and potentially higher burden on consumers. On the other hand, if the demand is elastic or the supply is inelastic, the impact can be more significant, leading to larger changes in quantity and potential challenges for producers. Understanding these elasticities helps assess the potential consequences and effectiveness of implementing a minimum price policy.

Economics Essay 62: Minimum Wage

 With the aid of a diagram, evaluate the likely impacts of statutory minimum wages in labour markets.

A statutory minimum wage is a government-mandated wage floor that sets the minimum hourly rate at which employers are legally required to compensate their workers. Evaluating the impacts of statutory minimum wages in labor markets involves assessing the potential consequences, both positive and negative, on various stakeholders. Here are the key impacts to consider:

1. Impact on Workers:

• Positive Effects: A statutory minimum wage can benefit low-wage workers by increasing their earnings and improving their standard of living. It can help reduce income inequality and alleviate poverty among the working population.
• Negative Effects: Some argue that higher minimum wages may lead to reduced employment opportunities, particularly for low-skilled workers. Employers facing increased labor costs may respond by cutting jobs, reducing work hours, or automating tasks to compensate for the higher wage rates.

2. Impact on Businesses:

• Positive Effects: Proponents argue that higher minimum wages can enhance worker productivity, reduce turnover, and improve employee morale and loyalty. It can also stimulate consumer demand as workers have more disposable income to spend, potentially benefiting businesses, especially in industries reliant on domestic consumption.
• Negative Effects: Increased labor costs can pose challenges, particularly for small businesses and industries with tight profit margins. Some businesses may struggle to absorb the higher wages, leading to potential reductions in hiring, cuts in employee benefits, or increased prices for goods and services.

3. Impact on Unemployment:

• The impact on unemployment is a contentious aspect of minimum wage policies. While some studies suggest minimal effects on overall employment levels, others find that higher minimum wages can lead to job losses, particularly for vulnerable workers with limited skills or in industries highly affected by labor costs.

4. Impact on Inflation:

• Higher minimum wages can potentially contribute to inflationary pressures in the economy. When businesses face increased labor costs, they may pass on the costs to consumers through higher prices. However, the overall impact on inflation depends on the size and frequency of minimum wage increases relative to other factors driving inflation.

5. Impact on Income Distribution:

• Minimum wages can help address income inequality by lifting the wages of low-income workers. However, their effectiveness in reducing overall income inequality depends on the magnitude of the wage increase and the distribution of low-wage workers across different income brackets.

It is important to note that the impacts of minimum wage policies can vary across different contexts, such as the level of the minimum wage relative to prevailing wages, the competitiveness of industries, and the broader economic conditions. Robust monitoring, evaluation, and adjustments to minimum wage policies are necessary to strike a balance between supporting workers' well-being and maintaining a favorable business environment that promotes employment opportunities.

A Strong Labour movement Raises everyone’s Living Standards

Owen Jones in The Guardian

Respect for tradition, we are told, underpins the Conservative party. But there’s one tradition for which it has unwavering contempt – strike action: a part of our culture and heritage it has ferociously and instinctively demonised as an antisocial attack on the general public. Tories are known to extol the virtues of rugged individualism, but it seems the collective suddenly matters when industrial action is declared. Then, it seems, society – which in previous Tory eras was doubted to even exist – becomes a totem to be protected from sinister forces, from a malign and externalised striking rabble.

Strikes bring inconvenience. Of course they do. They disrupt our normal life, our plans, our expectations. But the concentrated attempt to stigmatise the very notion of the strike is something that must be resisted. The strike – and the threat of striking – should be celebrated precisely because it underpins many rights and freedoms we now take for granted. Union struggles in the 19th century played a pivotal role in shortening the working day, and in the 20th century, in creating the weekend. In the postwar heyday of union power, they drove up incomes. Strikes are a profound social good.

Yet how little this argument is heard. Anti-union sentiment is profoundly embedded in our political culture. When the Tory chairman, Nadhim Zahawi, suggested on national television that the upcoming nurses’ strike would aid Vladimir Putin by worsening inflation in the west, it was yet another crude illustration of this very British phenomenon, echoing Margaret Thatcher’s denunciation of striking miners as the “enemy within” in the 1980s. This hostility has a long pedigree and, historically at least, the Tories have been known to be candid about their real intentions.

RMT picket at Slough railway station, 8 October 2022. Photograph: Maureen McLean/Rex/Shutterstock

As the 20th century dawned, the Tories defended a legal ruling making unions financially liable for profits lost to strikes, leading the Conservative prime minister Stanley Baldwin to later confess: “The Conservatives can’t talk of class war. They started it.” In 1926, they introduced a raft of anti-union laws in the aftermath of the general strike, including the banning of solidarity industrial action.

But while unions were hobbled in the 1930s, a spirit of collectivism nurtured by wartime sacrifice helped their rebirth. The three-decade social democratic consensus established by Clement Attlee’s Labour government led the Trades Union Congress in 1968 to boast that it had grown from a “small debating assembly” into a body that shared “in the making of government policies, taking part in administering major social services and meeting on equal terms with the spokesmen of the nation’s employers”. This was the era in which Britain enjoyed its highest ever sustained period of economic growth, which – thanks in part to strong unions – was more equitably distributed, boosting the pay of ordinary workers.

When the oil shock of the 1970s sent prices surging, unions mobilised in an effort to match wages with the cost of living. The grand climax – the winter of discontent – was successfully spun by Thatcher to label unions as national bogeyman for a generation. Her successors took up that framing as well. When Tony Blair became prime minister in 1997, he promised that his government would “leave British law the most restrictive on trade unions in the western world”. And David Cameron assailed Ed Miliband as “taking his script from the trade unions”, and turned the screw further, with even more restrictive laws.

But today this anti-union approach jars with political reality. One poll has suggested that nearly six in 10 voters back the nurses’ strike, and another found that more people backed the rail strike than opposed it. After an unprecedented fall in living standards, the default position of millions whose pay packets are shrivelling in real terms has become “well, fair play to them, at least someone is taking a stand”.

While earlier generations of Tories may have used the language of class warfare openly, their modern cohort is savvier. They seek to isolate striking workers from the wider public, portraying them as somehow separate from society at large. Rishi Sunak denounces strikers as a threat to “hardworking families”, as if nurses, paramedics or transport workers are excluded from that category. But this attempt to separate striking workers from society at large collides with the reality people see every day. The withdrawal of strikers’ labour is so noticeable precisely because of how central they are to our way of life. Rather than a middle-finger salute at the general public, it is one part of society crying for help from another.

 

Despite all the talk of monstrous disruption, for most the real inconvenience is struggling to pay bills and feed their children, rather than the irritation of a postponed train journey. Real wages are projected to be lower in 2026 than they were in 2008.

Indeed, a fundamental reason for wages being so low and conditions so poor in the UK is because of the dilution of union power. According to one study, the “changes in bargaining power” suffered by unions explains half of the decline in the share of the economy going to wages over four decades in several rich countries, including Britain. Rather than union action inconveniencing everybody else, the decline of unions has dragged down the wages of non-unionised workers, too, according to a US study. A strong labour movement, in other words, brings up everyone’s living standards.

A strike, then, isn’t antisocial behaviour, on a collision course with the interests of the wider public. By neutering the threat of strike action with authoritarian laws, the Tories have succeeded only in weakening a mechanism with a proven record in raising the living standards of all workers. Despite the mythology, no one goes on strike on a whim. A worker forfeiting a day’s pay isn’t just a sacrifice for the sake of their own interests, it’s a gamble and a sacrifice. Indeed, one of the government’s fears is that a victory for nurses or railway workerswould embolden the pay claims of other workers – an anxiety that is well founded.

Union membership should be honoured not just as a democratic right, but as a cornerstone of collective prosperity. Even many union sympathisers have retreated from such an argument, instead blaming bosses and government for any regretful breakdown in industrial relations. But to strike isn’t a sin, or antisocial or an act of mendacity: it’s a key to a society less beset by injustice than our own.

As Joe Biden moves to double the US minimum wage, Australia can't be complacent

Van Badham in The Guardian

When I was writing about minimum wages for the Guardian six years ago, the United States only guaranteed workers US$7.25 an hour as a minimum rate of pay, dropping to a shocking US$2.13 for workers in industries that expect customers to tip (some states have higher minimum wages).

It is now 2021, and yet those federal rates remain exactly the same.

They’ve not moved since 2009. Meaningfully, America’s minimum wages have been in decline since their relative purchasing power peaked in 1968. Meanwhile, America’s cost of living has kept going up; the minimum wage is worth less now than it was half a century ago.

Now, new president Joe Biden’s $1.9tn pandemic relief plan proposes a doubling of the US federal minimum wage to $15 an hour.


 
It’s a position advocated both by economists who have studied comprehensive, positive effects of minimum wage increases across the world, as well as American unions of the “Fight for 15” campaign who’ve been organising minimum-wage workplaces demanding better for their members.

The logic of these arguments have been accepted across the ideological spectrum of leadership in Biden’s Democratic party. The majority of Biden’s rivals for the Democratic nomination – Bernie Sanders, Elizabeth Warren, Kamala Harris, Pete Buttigieg, Amy Klobuchar, Cory Booker and even billionaire capitalist Mike Bloomberg – are all on record supporting it and in very influential positions to advance it now.

In a 14 January speech, Biden made a simple and powerful case. “No one working 40 hours a week should live below the poverty line,” he said. “If you work for less than $15 an hour and work 40 hours a week, you’re living in poverty.”

And yet the forces opposed to minimum wage increases retain the intensity that first fought attempts at its introduction, as far back as the 1890s. America did not adopt the policy until 1938 – 31 years after Australia’s Harvester Decision legislated an explicit right for a family of four “to live in frugal comfort” within our wage standards. 

As an Australian, it’s easy to feel smug about our framework. The concept is so ingrained within our basic industrial contract we consume it almost mindlessly, in the manner our cousins might gobble a hotdog in the stands of a Sox game.

But in both cases, the appreciation of the taste depends on your level of distraction from the meat. While wage-earning Australians may tut-tut an American framework that presently allows 7 million people to both hold jobs and live in poverty, local agitation persists for the Americanisation of our own established standards.

When I wrote about minimum wages six years ago, it was in the context of Australia’s Liberal government attempting to erode and compromise them. That government is still in power and that activism from the Liberals and their spruikers is still present. The Australian Chamber of Commerce and Industry campaigned against minimum wage increases last year. So did the federal government – using the economic downtown of coronavirus as a foil to repeat American mythologies about higher wages causing unemployment increases.


 

They don’t. The “supply side” insistence is that labour is a transactable commodity, and therefore subject to a law of demand in which better-paid jobs equate to fewer employment opportunities … but a neoclassical economic model is not real life.

We know this because some American districts have independently increased their minimum wages over the past few years, and data from places like New York and Seattle has reaffirmed what’s been observed in the UK and internationally. There is no discernible impact on employment when minimum wage is increased. An impact on prices is also fleeting.

As Biden presses his case, economists, sociologists and even health researchers have years of additional data to back him in. Repeated studies have found that increasing the minimum wage results in communities having less crime, less poverty, less inequality and more economic growth. One study suggested it helped bring down the suicide rate. Conversely, with greater wage suppression comes more smoking, drinking, eating of fatty foods and poorer health outcomes overall.

Only the threadbare counter-argument remains that improving the income of “burger-flippers” somehow devalues the labour of qualified paramedics, teachers and ironworkers. This is both classist and weak. Removing impediments to collective bargaining and unionisation is actually what enables workers – across all industries – to negotiate an appropriate pay level.

Australians have been living with the comparative benefits of these assumptions for decades, and have been spared the vicissitudes of America’s boom-bust economic cycles in that time.

But after seven years of Liberal government policy actively corroding standards into a historical wage stagnation, if Biden’s proposals pass, the American minimum wage will suddenly leapfrog Australia’s, in both real dollar terms and purchasing power.

It’ll be a sad day of realisation for Australia to see the Americans overtake us, while we try to comprehend just why we decided to get left behind.