Saturday, February 8, 2014

Can Congress Give Workers A Raise?

We live in a nominally private-enterprise economy, so it should strike the ear as odd to hear Obama acknowledge that it’s not a private-enterprise economy at all, much less a free-enterprise economy. What we have is an economy dominated by an alliance of politicians and well-connected, mostly corporate, interests.
Obama of course was calling on Congress to raise the minimum wage from $7.25 to $10.10 an hour. But the Bureau of Labor Statistics says that only 4.7 percent of hourly workers made the minimum wage or less in 2012, so those 3.6 million people hardly constitute “America.”

Can Congress give those workers a raise? No, it can’t.

As economists say, “Demand curves slope downward.” This means simply that when the price of something rises, the quantity demanded (other things equal) falls. You know this: You are likely to buy fewer oranges or go to the movies less often when the price rises. This doesn’t mean no one will continue to buy their usual quantity (and thus give up something else), but many people will curtail their purchases. It’s called economizing.-

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