I do not understand what you mean by the phrase:

"and does not recognize the individuals"

What are you trying to imply by the term "recognize"? It seems like there is more loaded into this language than what first meets the eye.

Example: the local butcher is in the business of producing meat products. I have dollars that I have earned from voluntarily rendering services to my boss. I offer to trade the butcher the product of my work (my dollars) for the product of his work (his meat). I am better off and he is better off.

So who should be 'recognizing' who in this situation? If I 'recognize' him, shouldn't he also 'recognize' me equally and we cancel each other out? Are you implying we should have an imbalance of recognition somewhere? How would you go about measuring such things in any meaningful way?

http://en.wikipedia.org/wiki/American_Letter_Mail...

Gift for you ;)

"But faced between paying 7 percent of his paycheck to Social Security, or investing that 7 percent in learning new skills to build a career, John has to choose the former or go to jail."

I actually take issue with this comment. Employees don't pay 7 percent of their paycheck -- they pay the full 12.4%, their share and their employer's share.

The 6.2% paid by the employer is a direct cost of hiring increase attached to the employee. If the employer side of the tax were to go away, I suspect that employee wages would increase by approximately 6.2%.

That is why the employer side of the tax is actually a hidden tax on the employee. The employee pays 6.2% directly, and his wage 6.2% lower than it otherwise would have been had the tax not been imposed.

This is more of a pure economics and political theory site, so I am not sure that you will find the answers you need here.

For personal finance questions and advice on serious problems, you might actually try: http://www.reddit.com/r/personalfinance

Forgive me for asking additional questions, but I always thought that there would be at least 3 different possibilities after a Minimum Wage hike; but I am not sure exactly which one would actually occur in reality, if one of them is theoretically false and therefore impossible, or if some combination of the possibilities would occur.

Imagine Mr. Market (the personification of the collective value scales of thousands of people) has an ordinal list of labor values.

ORDINAL VALUE SCALE OF LABOR W/ RESULTANT PRICES

Licensed Engineer - $35/hr
Licensed Engineering Intern - $25/hr
CADD Tech/Drafter - $15/hr
Bingo Attendant - $8/hr

Then comes the government mandate: "No job shall pay below $15/hr."

What do we expect to happen to our value scale? 1 of 3 possibilities.

1. Shift Upwards

Licensed Engineer - $40/hr
Licensed Engineering Intern - $30/hr
CADD Tech/Drafter - $20/hr
Bingo Attendant - $15/hr

The value scale corrects itself by shifting upwards, thus keeping the relative valuations the same as before.

2. Elimination or Severe Reduction of Job

Licensed Engineer - $35/hr
Licensed Engineering Intern - $25/hr
CADD Tech/Drafter - $15/hr
<...>

The value scale corrects itself by simply eliminating the corrupted entry, i.e., the Bingo Attendant jobs disappear.

3. False Information Accepted

Licensed Engineer - $35/hr
Licensed Engineering Intern - $25/hr
CADD Tech/Drafter - $15/hr
Bingo Attendant - $15/hr

People simply accept the new false price data, and therefore misallocation occurs when Bingo Attendant positions steal skilled labor and capital away from other truly valued uses.

One thing I've always been curious about, but have never seen discussed, is the effect that minimum wage might have on the distribution of skilled labor.

The function of prices in a market system is to guide the allocation of resources to their most valued ends. The absolute price of any good or service is not as important as the price in comparison to the prices of other goods and services. It acts as a sort of visible manifestation of our collective value scales.

Highly skilled and specialized laborers are drawn to the areas where prices are high, simply because their services there are valued more highly. Low skill workers are funneled into low wage jobs because their skills aren't valued as highly.

But if you artifically screw with the distribution of wages and raise the bottom up, isn't that going to funnel skilled workers (who otherwise would have taken high paying, high skill jobs) into low skill jobs instead, thus creating misallocation and inefficiency?

For example: Bob is looking for a career path. One option is Computer Aided Design and Drafting (CADD). Technical Drafters in his area have an average wage of $15/hour after a good deal of schooling and training. Menial labor, fast food, retail and customer service jobs pay much less, say $5.00/hour with little training.

But the local government suddenly passes a law stating: "No job may pay under $15/hour." Now the only way for those low skill employers to stay in business is to phase out their low productivity workers and hire fewer workers back, but make the few they do hire the most skilled and productive possible, meaning that all these previously low skill businesses are now targeting Bob and are competing against the CADD employers for his services.

What effect does this have on the CADD employers or other businesses who already pay wages close to the new Minimum Wage?

The point is that the argument tells us nothing of causation. The ad established no link whatsoever between rises in employment and minimum wage, because it never bothered to factor out other variables. It is like saying:

"I woke up this morning and my head hurt. I also got a new pair of shoes yesterday. Therefore, the new shoes caused my headache."

Also consider:

I have a choice to invest $5000 in either company A or B. I decide to invest it all in B. I make a $2000 return on investment. On its own it looks like a good result. But through my alternate timeline viewing machine I see that had I invested in company A instead, I would have made a $20,000 return.

So only looking at B, it appears that I made a good decision. I made a positive return on investment and my assets grew. But looking at the whole picture, including the alternative that was given up for the sake of B, I see that I actually LOST $18,000 that I otherwise would have made. My decision was actually a poor one.

As per Minimum Wage: a State that raises their minimum wage dramatically might see an increase in employment of 10%. On its own that looks good. But had they not raised the minimum wage at all their gain in employment might have been 12%, holding all other things equal. So in reality their gain is actually a LOSS, because they gained less jobs than they otherwise would have gained had they not gone through with their decision.

The important point being that there are myriads of other factors out there all simultaneously affecting the job market, and they might all be positive, but Minimum Wage as a single factor is still a net negative, and we would have that many more jobs without it on top of the gains from the other variables.

"There is, however, no independent category such as demand that drives an economy. Every demand must be funded by a previous production of wealth. By producing something useful to other individuals, an individual can exercise a demand for other useful goods."

Can I just say that I love this quote? It is a very simple, succinct response to both "demand siders" and "supply siders" both.

The biggest myth I see perpetuated in the media is:

"Aggregate prices are not rising quickly at all. That means there is no serious inflation happening" (*cough Krugman *cough*)

Truth: price inflation due to monetary expansion is uneven and often concentrated only in certain areas (bubbles), making aggregate measurements not very useful. Price Inflation happens nearest the injection point of the new money into the economy (currently the Stock Market), and ripples outward only slowly over time ala Cantillon.

As was mentioned, the biggest caveat is the fact that thousands of years ago, the only way taxes were collected was by local thugs going around from house to house and directly taking goods and money. Even the least bright of the common people could see exactly what was being taken from them. That is what made a unified rebellion more likely.

But Governments have gotten much smarter about stealing in the last few hundred years, and people (unfortunately) remain dumb and naive. Just try to explain to somebody today that they are actually paying ALL 12.4% of the Social Security tax themselves (because the employer simply deducts his share from base wages), and they will probably stare at you blankly like a deer in the headlights.

Try to explain to them that inflation is also a tax (the government is borrowing against the value of our money), and again: deer in the headlights.

As long as government can keep convincing people that they aren't paying any tax when clearly they are, or that somebody else is going to pay the tax for them, then there probably won't be any rebellion.