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Vindicarre
PostPosted: Fri Apr 01, 2011 4:45 pm 
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http://www.nytimes.com/2011/04/01/opini ... ml?_r=2&hp
Paul Krugman wrote:
Here’s the report’s explanation of how layoffs would create jobs: “A smaller government work force increases the available supply of educated, skilled workers for private firms, thus lowering labor costs.” Dropping the euphemisms, what this says is that by increasing unemployment, particularly of “educated, skilled workers” — in case you’re wondering, that mainly means schoolteachers — we can drive down wages, which would encourage hiring.

There is, if you think about it, an immediate logical problem here: Republicans are saying that job destruction leads to lower wages, which leads to job creation. But won’t this job creation lead to higher wages, which leads to job destruction, which leads to ...? I need some aspirin.

Beyond that, why would lower wages promote higher employment?

[My bold]

And this guy won a Nobel in economics...

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TheRiov
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PostPosted: Fri Apr 01, 2011 4:56 pm 
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If there is no work to be done, lower wages just increase profit margins, yes?
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Lex Luthor
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PostPosted: Fri Apr 01, 2011 5:19 pm 
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He makes sense to me. You can't fix unemployment by getting rid of jobs. Also people won't apply for jobs that don't pay as well.
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darksiege
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PostPosted: Fri Apr 01, 2011 5:23 pm 
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Lower wages mean that if an employer can hire two guys to do four guys worth of work, but only be paying the price they would pay for one person normally... unemployment would go down, in theory.

As opposed to paying one guy to do three guys worth of work and paying a higher price per employee. A wise employer would know that if they can double the number of workers for the same price as they were paying, they can also get more work done.

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Darksiege
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Lex Luthor
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PostPosted: Fri Apr 01, 2011 5:25 pm 
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If that one person you paid was at market value, then if it was skilled labor you're not gonna find people to do it at half or quarter wages. Even if you did, they'd leave A.S.A.P. for a different job that pays right.
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Lex Luthor
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PostPosted: Fri Apr 01, 2011 5:29 pm 
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Also you have to factor in the cost of training, and human resources costs involved. Getting rid of a guy is an enormous cost because you have to train up more people, which can take a year in some cases.
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Vindicarre
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PostPosted: Fri Apr 01, 2011 5:32 pm 
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Read the report, or at least the article, Lex, maybe then you won't sound like you have no idea what's being discussed.

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darksiege
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PostPosted: Fri Apr 01, 2011 6:21 pm 
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Lex Luthor wrote:
If that one person you paid was at market value, then if it was skilled labor you're not gonna find people to do it at half or quarter wages. Even if you did, they'd leave A.S.A.P. for a different job that pays right.


For the past several years, I have been doing two or three people's worth of work on a daily basis... and I understand I can be replaced. BUT... if my employer could hire two people for my salary and get each of those people to do the same amount of work I currently do... why wouldn't they?

There have been people hired into the department I am in that are very overqualified for the job we are doing who took the jobs that are making less than I am. They do this because it was better than not working.

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Darksiege
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TheRiov
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PostPosted: Fri Apr 01, 2011 6:30 pm 
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If a company only sells enough to employ 100 people, no matter what they get paid, they'll only hire 100 people. In my experience (granted I'm not an economist) but many companies dont have enough work to employ more workers. Getting those workers for cheaper only drives up the profit margins, but does not create more jobs.
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Khross
PostPosted: Fri Apr 01, 2011 6:34 pm 
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Driving down wages simply drives down wages. Krugman, as usual, is an incompetent twit.

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Arathain Kelvar
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PostPosted: Fri Apr 01, 2011 7:58 pm 
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I get what he's trying to say, though.

Increase supply (of workers, through unemployment) = lower prices (wages).

But, as employers snap up these cheap workers (demand), prices (wages) would rise until the equilibrium is met.

And this is true, in a closed system. You can't increase employment by driving down wages due to layoffs. (Assuming supply and demand were balanced initially.) But it's not closed and much more complicated.
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darksiege
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PostPosted: Fri Apr 01, 2011 8:12 pm 
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...Ceteris paribus...

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Darksiege
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Arathain Kelvar
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PostPosted: Fri Apr 01, 2011 8:32 pm 
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yes.
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Hannibal
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PostPosted: Sat Apr 02, 2011 8:02 am 
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As always, Krugman doesn't follw the river to the source since it would disprove his theories. Who pays the workers? The owner(s). Who pays the owner(s)? The consumer. What is consumed? A product or service. What product or service does the avg gov worker use to compete with in the market? ........

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