The conventional wisdom that higher wages inevitably lead to higher prices, however, is flimsy

a reply to: toysforadults

Economics beyond the basics is a load of BS that nobody really understands, the housing bubble was and is a prime example.

You can’t have a free market and government interference at the same time

Inflation is used to reduce debts. Some executives would be pre-paid in shares/stock options and take out a huge debt to cover living costs. As time went by, the share prices and stock options pay out dividends while the loan devalue due to inflation.

Too bad for everyone else who attempts to save money.

a reply to: toysforadults

Depends on why wages increased. If it's an artificial adjustment simply doubling everyone's wages then out of necessity goods need to cost more.

originally posted by: toysforadults
a reply to: norhoc

That's what we all know or thought anyway but uhhh, apparently not?

Here's the problem is that people only have so much to spend before you reach the market cap at which point wages have no choice but to go down in order to remain competitive in the marketplace

Or, you hire less people or fire ones you have while demanding more work from those left or you go out of business or you outsource to countries where your labor costs are cheap enough that you can handle the market cap.

Outsourcing has been the most recent business solution because companies cannot afford to pay the cost of American labor, particularly Union labor. It has been cheaper to pay for sweatshop labor and ship cheap plastic goods back to the US.

a reply to: ketsuko
Good point
Outsourcing to cheap labour countries in itself proves that a lower wage bill results in lower product prices.
Businesses wouldn't do it otherwise.

a reply to: CornishCeltGuy

Thing is that most businesses would prefer to stay local as there are an entirely new set of headaches opened up with international trade and only the largest businesses can afford it, so that gives you some idea of how bad local regulations and labor costs have gotten compared to what the market will bare in terms of product cost.

a reply to: ketsuko

Thing is that most businesses would prefer to stay local

Interesting. Do you have some sort of reference for that statement?

as there are an entirely new set of headaches opened up with international trade and only the largest businesses can afford it

It depends on the product the business offers and if they offer products that are highly-regulated. It's quite easy to do international business, as you can easily process and ship international transactions. Even the smallest of websites can easily process international transactions, so I am a bit confused as to where you get your information.

so that gives you some idea of how bad local regulations and labor costs have gotten compared to what the market will bare in terms of product cost.

Local regulations on international trade? Have an example?

The Ford Business Model does not apply. Ford paid high wages to retain experienced labor in order to make production demands. The production demands were based on sales quotas to meet profit targets. Ford’s higher wages forced neighboring businesses to compete for labor, which in turn drove sales due to unexpected disposable income.

This also had a protectionist effect for Ford. Why go to work for a competing startup car company for lower wage? Why try to start your own car company when your seed capital and early profits will be blown on wages?

The idea put forth by the article is misleading intentionally. Voluntary wage increases do not have to increase the price of the product is very true. But forced wage increases across the entire economy (like the oft suggested doubling of minimum wage overnight) almost always means product price increases. The results of which is almost always a recession.

Political Pro Tip: Due to the see-saw nature of political party holding the presidency, meaning each new president is usually of the opposite party. Recessions cause by increases in minimum wage happen when the opposition is president creating the illusion that that president “caused” the recession to the uninformed. That idea compounded by political advertising/cheerleading. The exception was 2007’s incremental jumps from $5.15 to $7.25 by July 2009 in relation to the 2008 recession and flat economy that extended well into 2016.

Also worth noting that the US’s largest employment block is in the Food and Sevice industries which is near minimum wage workers. So a wage increase means little on the micro economy but wage increases across the entire economy (minimum wage increase) does change everything.

Edit to bring full facts on the 2007-2009 incremental changes to minimum wage: $5.15 to $5.85 July 24, 2007; $5.85 to $6.55 July 24, 2008; $6.55 to $7.25 July 24, 2009. And there was no minimum wage until 1938 in the US, a whole 25 cents per hour. Took 71 years to get that $7.00 and people wanted to more than double it 3 years later in 2012. No, that wouldn’t have instantly obliterated the economy at all.

a reply to: introvert

My husband's personal work experience in a multi-national company. They're entrenched locally. They have all their feeder resources sourced locally. They have all the distribution, etc., sourced locally. They would prefer to keep producing and expanding locally. This is all well-known.

But, the regulatory and taxing regimes over the past eight years forced expansion in other countries more than locally.

Now that those burdens eased, the focus has shifted back to local expansion/production again. It was and has been the preferred focus and market because it was the entrenched and easiest place to develop, but recent developments made it less financially viable. They waited out the less profitable conditions and are now back to focusing in this area again.

a reply to: ketsuko

My husband's personal work experience in a multi-national company.

Anecdotal.

They're entrenched locally. They have all their feeder resources sourced locally. They have all the distribution, etc., sourced locally. They would prefer to keep producing and expanding locally. This is all well-known.

Feeder? So you must be talking about commodities? If so, that is an entire different ball game and those areas are highly-regulated, which I mentioned, but at the federal level, not local.

Now that those burdens eased, the focus has shifted back to local expansion/production again. It was and has been the preferred focus and market because it was the entrenched and easiest place to develop, but recent developments made it less financially viable. They waited out the less profitable conditions and are now back to focusing in this area again.

Sure. That does not prove what you claimed. It appears you are taking anecdotal experience, which is very specific and not applicable to other areas, and are claiming it is hard for businesses to deal with international customers. Not to mention, you really did not address what you claimed.

How is it that you claim only the large businesses can afford to do international business because of regulations, yet any boob with a website can sell their products to people all across the globe?

originally posted by: introvert
a reply to: ketsuko

My husband's personal work experience in a multi-national company.

Anecdotal.

They're entrenched locally. They have all their feeder resources sourced locally. They have all the distribution, etc., sourced locally. They would prefer to keep producing and expanding locally. This is all well-known.

Feeder? So you must be talking about commodities? If so, that is an entire different ball game and those areas are highly-regulated, which I mentioned, but at the federal level, not local.

Now that those burdens eased, the focus has shifted back to local expansion/production again. It was and has been the preferred focus and market because it was the entrenched and easiest place to develop, but recent developments made it less financially viable. They waited out the less profitable conditions and are now back to focusing in this area again.

Sure. That does not prove what you claimed. It appears you are taking anecdotal experience, which is very specific and not applicable to other areas, and are claiming it is hard for businesses to deal with international customers. Not to mention, you really did not address what you claimed.

How is it that you claim only the large businesses can afford to do international business because of regulations, yet any boob with a website can sell their products to people all across the globe?

Businesses always prefer local all things considered equal. Too many unknowns, especially when dealing internationally. Heck, even moving manufacturing to a different state in the US is difficult.

The labor cost differences internationally for low skilled and even mid skilled labor are so much lower that is makes financial sense to take the risks.

a reply to: Edumakated

Businesses always prefer local all things considered equal. Too many unknowns, especially when dealing internationally.

Businesses prefer to make money. In this day and age, it is very easy to do business internationally, especially if their business/products are available online.

Heck, even moving manufacturing to a different state in the US is difficult.

That was not an aspect that was even mentioned. Has nothing to do with what was said.

The labor cost differences internationally for low skilled and even mid skilled labor are so much lower that is makes financial sense to take the risks.

Irrelevant to the point I brought up.

originally posted by: introvert
a reply to: Edumakated

Businesses always prefer local all things considered equal. Too many unknowns, especially when dealing internationally.

Businesses prefer to make money. In this day and age, it is very easy to do business internationally, especially if their business/products are available online.

Heck, even moving manufacturing to a different state in the US is difficult.

That was not an aspect that was even mentioned. Has nothing to do with what was said.

The labor cost differences internationally for low skilled and even mid skilled labor are so much lower that is makes financial sense to take the risks.

Irrelevant to the point I brought up.

Businesses prefer to make money and the most common reason for moving manufacturing operations overseas is substantially cheaper labor. Yes, it is relatively easy to do business internationally because an entire industry has developed overseas for manufacturing cheap goods. However, the point still stands that this option only exists because it is substantially cheaper than manufacturing locally.

Again, all things being equal, a company would rather have it's operations locally as they would be easier to manage. However, because the cost differential is so high between the US and third world sh*tholes with manufacturing plants, it is economically feasible to manufacture half way around the world and ship back to the home market. The cost savings of outsourcing overseas outweigh any loyalty to the home market.

a reply to: Edumakated

Businesses prefer to make money and the most common reason for moving manufacturing operations overseas is substantially cheaper labor.

Ok. That has nothing to do with the aspect I was addressing.

Yes, it is relatively easy to do business internationally because an entire industry has developed overseas for manufacturing cheap goods.

It's easy to do business overseas because we have the freedom to do so, regardless of the status of the overseas manufacturing sector.

Anyway, that contradicts what the other member had stated.

However, the point still stands that this option only exists because it is substantially cheaper than manufacturing locally.

That was not a point I was addressing.

Again, all things being equal, a company would rather have it's operations locally as they would be easier to manage. However, because the cost differential is so high between the US and third world sh*tholes with manufacturing plants, it is economically feasible to manufacture half way around the world and ship back to the home market. The cost savings of outsourcing overseas outweigh any loyalty to the home market.

Ok. Again, that does not address the specific claims of the other member.

originally posted by: Edumakated
Again, all things being equal, a company would rather have it's operations locally as they would be easier to manage. However, because the cost differential is so high between the US and third world sh*tholes with manufacturing plants, it is economically feasible to manufacture half way around the world and ship back to the home market. The cost savings of outsourcing overseas outweigh any loyalty to the home market.

A lack of talent doesn't help matters.

originally posted by: Edumakated

originally posted by: introvert
a reply to: ketsuko

My husband's personal work experience in a multi-national company.

Anecdotal.

They're entrenched locally. They have all their feeder resources sourced locally. They have all the distribution, etc., sourced locally. They would prefer to keep producing and expanding locally. This is all well-known.

Feeder? So you must be talking about commodities? If so, that is an entire different ball game and those areas are highly-regulated, which I mentioned, but at the federal level, not local.

Now that those burdens eased, the focus has shifted back to local expansion/production again. It was and has been the preferred focus and market because it was the entrenched and easiest place to develop, but recent developments made it less financially viable. They waited out the less profitable conditions and are now back to focusing in this area again.

Sure. That does not prove what you claimed. It appears you are taking anecdotal experience, which is very specific and not applicable to other areas, and are claiming it is hard for businesses to deal with international customers. Not to mention, you really did not address what you claimed.

How is it that you claim only the large businesses can afford to do international business because of regulations, yet any boob with a website can sell their products to people all across the globe?

Businesses always prefer local all things considered equal. Too many unknowns, especially when dealing internationally. Heck, even moving manufacturing to a different state in the US is difficult.

The labor cost differences internationally for low skilled and even mid skilled labor are so much lower that is makes financial sense to take the risks.

It seems like this moving to a different country is mostly a union busting technique. Maybe it makes sense for a new plant for a large company. For an established facility, labor costs are not by themselves really enough to force a move.

One option is automation. This can reduce labor costs drastically. I'm surprised no one has mention this.

a reply to: surfer_soul

yeah I know we already have a socialist or centrally planned economy hence all the subsidies and all the grant money available and that's basically sustaining the entire country right now

originally posted by: toms54
For an established facility, labor costs are not by themselves really enough to force a move.

It really depends on the industry. In a lot of skilled labor work these days, it's not an issue of the currency but rather that the employer needs to move to where the talent is. There's not much sense in setting up in an area where the people don't have the skills you're looking for.

That's a big issue in the US right now. Our population is getting worse and worse. That's why tradesmen lose out to those lazy Mexicans that take all the jobs. Our people aren't good enough to compete.

One option is automation. This can reduce labor costs drastically. I'm surprised no one has mention this.

We've automated most of what current technology allows for at this point. The next level of automation will be in lowering barriers to entry, automating not the job but the knowledge. Give AR 5 more years for the technology to become a bit more refined and that will be the next big wave in automation.

a reply to: Aazadan

That's why tradesmen lose out to those lazy Mexicans that take all the jobs. Our people aren't good enough to compete.

they pay them way less that's why, way less

originally posted by: toysforadults
a reply to: Aazadan

That's why tradesmen lose out to those lazy Mexicans that take all the jobs. Our people aren't good enough to compete.

they pay them way less that's why, way less

Price is one aspect of competition. Better, faster, cheaper.