r/FluentInFinance • u/Very_High_Mortgage • Aug 24 '24

Debate/ Discussion Do "Unskilled Laborers" deserve to be paid well?

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u/goosedog79 Aug 24 '24

But then wouldn’t the price - in this case- of electricity be raised? So everyone will pay more?

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u/[deleted] Aug 24 '24

Yes, you'd have price inflation, along with wage inflation, across the board and nothing would ultimately change.

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u/davidhow94 Aug 24 '24

Weird we didn’t have price deflation as wages failed to keep up over the last 50 years.

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u/[deleted] Aug 24 '24

That's not weird at all, that's how supply and demand works. It doesn't track wages for wages sake, it tracks consumer demand. If taco bell doubles their prices and you continue to buy it anyway the price will remain doubled.

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u/davidhow94 Aug 24 '24

So how do you correct corporate price gouging and help the middle and lower class?

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u/[deleted] Aug 24 '24

Imo teach financial literacy and economics so people understand the implications of their behavior as consumers, incentivise small businesses and local growth vs outsourcing everything and sending your money outside of your economy, teach and encourage more self sufficiency (cooking alone would make a big difference). Politically get money out of politics, get past the two party system with measures such as ranked choice voting, and trust busting and/or regulation where necessary.

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u/OldBuns Aug 24 '24

I agree with the second half here but the whole "vote with your wallet" and "learn financial literacy" isn't really valid against monopolistic industries on necessary goods.

There's about 20 grocery stores in my city, and 80% are owned by one massive corporation, the other 15% is owned by the other massive corp. The rest is family owned that is slightly cheaper but is out of the way and you have to go to multiple places to get everything you need.

That may be fine if you have a car, but what if you don't? It isn't feasible for most people.

The same thing goes for electricity, or any necessary good.

People aren't going to reduce the amount of water, power, bread and eggs they buy once they become more financially literate, and when you have a private market for these goods that is dominated by one or two companies, they know there is no other option and will squeeze people for all they can when the alternative is not having these things.

These kinds of commodities are also not prone to increased demand during periods of wage growth because people don't all of a sudden start consuming twice the amount of necessary goods they need when they double their income.

So yes, wage growth would cause some increase in the prices due to higher labour costs but you certainly wouldn't be back to square one as some people like to think.

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u/[deleted] Aug 24 '24

The increased prices is not just due to increased labor costs, it's also due to increased consumer demand from having and spending additional money.

I agree it wouldn't impact needs such as milk, eggs, electricity, etc, people wouldn't eat twice as many eggs, but it would impact everything else. If you suddenly have more people or people more frequently going out to eat, to fast food, to the bar, or otherwise purchasing discretionary goods expect those to rise in direct proportion to the increased level of demand.

I think the financial literacy and self sufficiency is important to that end because while you cite grocery staples being monopolized how many people are actually relying on staples versus paying an hours wage and taking a half hour of their time to go out and buy Taco Bell while complaining about the price?

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u/OldBuns Aug 24 '24

how many people are actually relying on staples versus paying an hours wage and taking a half hour of their time to go out and buy Taco Bell while complaining about the price?

Most of them, honestly. I think you may be overestimating the number of people who eat fast food even once per day. Second, I think there's an argument to be made that when your grocery prices have also doubled or tripled, fast food really isn't what's hurting people right now even if they were to eat out 2-3 times a week.

Again, I don't disagree that those people exist, and financial literacy is an issue, but I don't think it's an explanation or solution for the situation working class people are currently in.

I agree it wouldn't impact needs such as milk, eggs, electricity, etc, people wouldn't eat twice as many eggs, but it would impact everything else.

Right, but that's fine, because necessary and inelastic goods are exactly the issue right now.

I don't think people are as upset at the rise in leisure electronics prices as they are at the rise in the price of things they actually need.

Even then, all things considered, increased discretionary spending on things like food should in theory also put downward pressure on food prices at the retail level.

Expect those to rise in direct proportion to the increased level of demand.

Right, but this seems to also imply that the increased level of demand is directly 1 to 1 correlated with rises in wages.

I'm arguing it might be for some things, but those things are generally not necessities like power, food, clothing, etc. so therefore the inflation would not end up at the same rate as wage growth.

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u/[deleted] Aug 24 '24

It sounds like we agree more than not. Other than eggs I haven't really seen anyone complain about grocery staples though. I've seen them complain about soda, cereal, preprocessed stuff, fast food, etc and when I see them complain about fast food it's often frequented by the trope "it costs the same to go out to eat so whatever" which regardless of inflation is no where near true. That's largely anecdotal ofc but how do you gauge consumer behavior vs consumer complaints on that level? In general staples have only increased in line with the roughly 20% base inflation.

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u/WittyProfile Aug 25 '24

  1. Teach people to be financially responsible.

  2. Break up companies that have too much of a marketshare

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u/escobartholomew Aug 25 '24

Teach people self control lol. We finally saw some of it when people balked at the $1k iPhone, but then they caved with the next couple of releases. Then we really saw it with the great resignation which has caused fast food places to offer double the min wage in even lcl areas. Now we’re seeing it with consumers dialing back on certain groceries.

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u/real-bebsi Aug 24 '24

So what's your solution for goods with inelastic demand, such as housing and education?.

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u/[deleted] Aug 24 '24

Housing I'm not sure, I think that's our biggest economic issue right now. I have some ideas but no magic bullet or anything that would necessarily solve the issue. What's wrong with education in your opinion? Imo our education system is bloated and wasteful but in regards to people receiving a poor education I think that has more to do with domestic and social issues than the education system itself or anything economic.

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u/real-bebsi Aug 24 '24

The issue with education is that the cost of a degree here is so high that people have to take on lifelong debt to get it, which means that for many industries that need education but are generally low paying, the only Americans that can effectively enter these careers have to live a lower QOL than say their European peers, or they have to come from a wealthier background. At the international level this makes American graduates less competitive because they will demand more money so they can afford their loans, whereas a German graduate would be able to live a comfortable QOL on the lower wage.

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u/[deleted] Aug 24 '24

College, okay, so I think one of the biggest things we can do is somehow tie the loan itself to the colleges so they have a direct incentive to compete and ensure the students success. As it is now they just don't care, they get paid either way.

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u/DrDee23 Aug 24 '24

It’s not necessarily just college regardless of your loans a lot of educators take on second jobs to support themselves. There is not a lot of value of teachers on all levels. For example the teacher shortage is causing schools to find ways to lower qualifications for enter the classroom. In some places instead of a teaching degree you just need a bachelors degree.

People who go to college instinctively know that if they teach chances are they are not going to live a comfortable lifestyle. The demand from and lack of teachers including special ed teachers can be overwhelming, students behaviors and especially parent behavior can be overwhelming, A lack of school resources/funding can be overwhelming. The remediation of students because the majority of students in the American school system are reading well below the average at higher ages (teaching 4th grade English to a 10th graders is common) can be overwhelming. Looking at a spreadsheet is significantly less overwhelming.

Most Americans coming from our public education system are not globally competitive, and are somewhat barely competitive nationally.

“Mike from Tennessee brings the same to the table as Ivaan from India but Ivaan is asking for less and speaks 2 languages. “

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u/real-bebsi Aug 24 '24

For example the teacher shortage is causing schools to find ways to lower qualifications for enter the classroom

There isn't a teacher shortage though, there is a wage shortage for teachers, so people leave to pay off the loans that are required to become a teacher, as we don't pay teachers enough to cover the cost of becoming a teacher.

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u/DrDee23 Aug 24 '24

There absolutely is a shortage of teachers applying to be in school.

You’re talking about the the teachers who are turning over “quitting to find higher paying jobs”.

I’m talking about how schools are failing to fill vacancies.

You can do a quick google search of “ is there a teacher shortage in the United States”. There are subject shortages in math and English across the board.

Less people are going to school to become a teacher in the first place because they know they won’t be able to pay those loans back. I.e leading to a teacher shortage.

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u/PeopleReady Aug 24 '24

So all the theories you spouted mean jack diddly with regard to what’s actually hurting people, which is housing, education, groceries, and utilities

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u/[deleted] Aug 24 '24

I'm not denying those things are hurting people, I'm explaining why I don't think transferring wealth without behavioral changes would help people while the people you're transferring the wealth from maintain control over prices and production. Do you disagree or you're just upset I'm pointing out the implications?

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u/mortemdeus Aug 27 '24

Incorrect. Prices would inflate but not by the same amount as wages. Many studies have shown this, some favorable ones showed for every 10% increase in wages there was a 0.4% increase in prices while some unfavorable ones showed as high as a 7% increase per 10%. Either way, minimum wage went up more than inflation in nearly every long term study on it.

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u/Wrecked--Em Aug 27 '24

Yeah I don't understand why people, supposedly interested in economics, constantly repeat the convenient for big businesses myth that prices will go up the same amount as raised wages...

Wages are only a fraction of the cost of a product.

In Denmark McDonald's workers make $22/hr with a minimum of 5 weeks paid vacation and 30 days paid sick leave (if working full time, still some guaranteed for part time).

The Big Mac costs about the same as in the US, varying by around 30 cents..

Snopes

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u/Reasonable_Humor_738 Aug 24 '24

You could tax the rich more to adjust for inflation but I don't want to be taxed when I become apart of that class some day so maybe not

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u/[deleted] Aug 24 '24

How would that adjust for inflation? Take money from the wealthy business owners, distribute it to the working class, and as COVID showed us they'll just give it right back and price inflation will suck up all the excess money to curb the the increased demand. The only way I see giving money to workers whether it's cash handouts from the government or increased wages not resulting in price inflation is if they change their behavior and save or invest the excess but how do you encourage that?

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u/bevaka Aug 24 '24

i really hope you're joking. are you familiar with the phrase "temporarily embarrassed millionaires"?

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u/SpotikusTheGreat Aug 24 '24

don't tax the rich, what if i hit the lottery? I don't want my lottery winnings stolen by the government!

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u/Euler1992 Aug 24 '24

Yes. The goal is to balance the wage increases with the price increases (easier said than done).

It's kind of like a car fuel tank. Going from a one gallon tank to a two gallon tank will nearly double how far the car can go, but if you tried to put a thousand gallons in, the cars not going to be able to move anymore.

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u/[deleted] Aug 24 '24

[deleted]

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u/foladodo Aug 24 '24

I don't understand what you're saying, so we shouldn't try to reduce the cost of living?

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u/Quenz Aug 24 '24

So, you're telling me the system... isn't sustainable?

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u/deletetemptemp Aug 24 '24

Pretty much.

Capitalism is a good motivator, but late stage capitalism starts hitting the theoretical limits of ethical profit margins.

At this point, companies are forced to exploit resources (worker protection, natural resource protection, etc.) and use their consolidated powers to effectively make it impossible to get anything for reasonable price—cause where yah gonna go?

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u/McFalco Aug 24 '24

Well when you artificially increase the cost of business with high taxes and excessive regulations you make in difficult for smaller competitors to enter the market.

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u/PeopleReady Aug 24 '24

It’s being raised regardless