>Paul Zarembka wrote:
>
>> The 1950 minimum wage was $0.75, which is higher than today's $4.25 when
>> corrected by the consumer price index. Productivity has gone up some
>> 140% in that time. So, the minimum wage today could easily be motivated for
>> over $10 and capitalism would not crack (or even feel much of a dent)!
>
>I don't really understand Paul's logic above. Firstly, 1950 is not 1995
>and one would have to consider the current situation of US capitalism
>before one can assert the potential impact of such an increase in the
>minimum wage on the accumulation process. Second, while US capitalism would
>not "crack" (i.e. breakdown?) if the minimum wage increased to over
>$10/hr., such an increase would most assuredly have a major impact on
>corporate profitability and would very much feel like a "dent" from the
>perspective of US capitalists. Third, what would be the likely
>consequence of such a dramatic increase in the minimum wage on "capital
>flight"? I suspect it would be significant.
>
>Jerry
1 December 1995
(almost 3:00pm)
Jerry's objection to Paul'ssuggestion of raising minimum wage to
$10/hr is based on two points:
1) Jerry says, "1950 is not 1995." That is, 135% wages increase
over 50% productivity increase (Paul's number) would definitely reduce
corporate profitability.
2) Reduction in corporate profitability would cause capital
out-migration.
I agree Jerry's first point, because labor cost increase (by 85%),
under ceteris paribus, would cut the profitability. One of the the ceteris
paribus conditions is a given price under global competiotion. An
assumption which is reasonably true.
However, I disagre with Jerry's second point. By capital migration
I only mean FDI by MNCs. Productive investment decision by MNCs (or some
call TNCs) not only depend on the existing disparities in profit rates
between home and host countries, but also expected future profit
disparities. It is assumed that MNCs with superior technology and
organizational and marketing skills are able to produce at lower cost than
local (indigenous) firms. Hence, a reduction of the rate of profit at home
(due to rising minimum wage) does not necessarily eliminate existing and/or
future profit disparities. And therefore, no capital out-migration.
Hugo, it is Friday here too. Time to go home.
Fikret Ceyhun.
