http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/29/obama-is-asking-businesses-to-raise-wages-heres-why-they-likely-wont-listen/
As the economy continues to recover, politicians, especially President Obama, look for ways to help it along. One theory, though it seems to be misguided, is that if companies raise hourly wages, U.S. citizens will have more disposable income, which they will use to stimulate the economy and so the whole country will be better off. While this seems logical at first, it fails to take into account the importance of shareholders. From a purely economic stand point, the satisfaction of the share holders is more important than that of the more easily replaced hourly worker. Not to say the worker is unimportant, just less important in terms of the monetary value he or she brings to the company. Thus, companies must prioritize the income of the shareholders, sometimes at the expense of the worker since without the shareholders, there would be no financing and eventually, no company at all.
I agree that shareholders are an important part of any business, but workers are too. We cannot neglect workers; therefore I encourage raising wages. Higher wages will increase productivity and help businesses become more profitable. If a business is already successful, shareholders should worry less about their own incomes. Instead, they should adopt a short-term loss for long-term gain strategy. By prioritizing the income of the shareholders, the rich become richer and leave workers uncompensated.
ReplyDeleteI agree that increasing hourly wages will boost the economy as workers will be motivated to be more productive while also having more disposable income to spend in the economy. However, it also depends on how much you increase the hourly or minimum wage. Some advocates argue that workers should be paid $15 an hour, however, that is counterproductive to increasing the amount of disposable income for every worker. If you increase the minimum wage drastically, then the price for various goods and services will rise sharply. This means that the additional income that workers receive will be lost through buying higher priced goods and services. It would be more productive to increase the minimum wage to a reasonable level where it matches current inflation. As recent reports suggest, it might be appropriate to increase the minimum wage to $10.56 per hour, which would make it similar to the buying power that consumers had in 1968.
ReplyDeleteFrom a policy standpoint, there are many who would also like to see an increase in the capital gains tax rate to boot tax revenue for the government. This blog post reminded me of a study I found that supported benefits for shareholders, specifically regarding capital gains taxes. Essentially, for the government to collect more revenue and to have more activity in the stock market, the tax rate should actually be held low to prevent a "lock-in" effect. The study is linked:
ReplyDeletehttp://www.nber.org/papers/w0257.pdf
I think that the wages are actually okay where they are right now. If wages were to increase as said before prices of goods will increase as well and we are back to were we started. This will keep going on its like a circle. I think there must be a better way to help the economy recover and wages are not it.
ReplyDelete