In his essay, “Social Consequences of Changes in the Value of Money,” economist John Maynard Keynes discusses the effects of inflation and deflation on an economy, as well as the people in that economy. For example, the investing class, the business class, and the earner. However, in paragraph 40, Keynes clarifies that it is “not merely that the actual occurrence of price changes profits some classes and injuries others… but that a general fear of falling prices may inhibit the productive process all together.” In this main point of his essay, Keynes explains that it is, in fact, the spenders that sway the value of money to inflate or deflate.
My favorite part of “Social Consequences of Changes in the Value of Money” is the first sentence of the piece, “Money is only important for what it will procure.” I think it is nearly impossible for the reader to read through this stimulating opening sentence without momentarily sitting back and letting out a pensive “hmmm…” I love how this simple statement can provoke thought about a concept that is rudimentary and yet rarely put into words. I feel that this is a theme throughout this essay. Keynes takes a concept that seems fairly straightforward and then expands on it.
Another section that particularly caught my eye was the first paragraph of the section “III The Earner.” Keynes states, “It has been a commonplace of economic textbook that wages tend to lag behind prices, with the result that the real earnings of the wage earner are diminished during a period of rising prices." I have recently been a witness (and, in my opinion, victim) of this concept. On November 7, 2006, Ohio voted on Issue 2 to raise minimum wage. I work as a server at a local restaurant and was therefore directly affected by this issue. I voted against the passing of this issue because I reasoned that it would not help anyone because prices of products would just be raised as well. It does not matter if one can make more money if the value of that money decreases proportionally to the increase earned (to reiterate, “Money is only important for what it will procure.”). I have already seen the predicted effects of this issue as my place of employment has been forced to raise its prices to be able to afford the increase in wages of the employees. As Keynes said, prices were too high for what the minimum wage worker was earning (32), so, minimum wage was raised to compensate, however, because prices were raised we are in the same position we started in. (Hmmm, downward spiral, anyone?)
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2 comments:
I understand the argument and points you are presenting. Though they are not clear. Your current place of employment may have had to raise its prices because of the raise of minimum wage, but where exactly do you work? The raise of minimum wage will affect many people differently. It may affect small business and cause them to raise their prices, but with having previous experience of ownership in a small business I know that the wage of the workers is not the largest factor of the income (or loss of income) of the business. Many factors affect a business and its’ need to raise prices. I have noticed though, that the price of milk and bread and food and clothing has generally stayed the same. Technically the raise of mimunum wage is not in effect yet.
Though minimum wage was raised, it does not affect the price of products. The state of Ohio receives many of its products from not only other countries but also other states where the minimum wage is already higher then the minimum wage within the state of Ohio. Products imported from other countries or other states include fruit, corn, bread, soybeans, cabbage, lettuce, tomatoes, and clothing (which most is made in small third world countries, check your shirt and see where exactly it was made). The raise of minimum wage will positively affect those who work for large companies that our world is getting taken over by. For workers of Wal-Mart, Target, Dick’s Sporting, American Eagle, J Crew, and Rite Aid (I personally work there), the raise of minimum wage will have a positive affect on the majority of the people within the state. Sad to say, small business is dying and the large money hungry companies, are required to pay their workers more. For example, a pair of jeans at J Crew cost eighty dollars; I checked to see where they were made… Bangladesh, I know that it did not cost J Crew even sixty dollars to make those jeans. The more money that a company makes, the cheaper they become; the products are cheap because they are made in third world countries by sweat shop laborers, they pay their workers (in the stores) minimum wage and they keep racking up the profit. By the raise of minimum wage it takes just a little more money from the companies and forces them to give it to their hard workers. The workers who are trying to earn money for college, rent, food, electricity or diapers, the hard workers who are just trying to get by; we know that those who can afford those eighty dollar jeans, don’t need to work a minimum wage job.
I, too, found the mininum wage arguemnt interesting and thought provoking. I think you are exploring an argument that many would agree. Look at the conservative CATO Institute for a number of essays on the subject.
Some questions: In ten years the mininum wage has not increased but the price of goods has increased considerably -- how would that factor in with the idea of one negatively affecting the other?
Is there a ever a wage that should not be regulated as minunum? If we follow the rationale presented, shouldn't we get rid of mininum wage altogether and thereby prices would "come down"?
If business regularly give employers cost of living raises (Congress sometimes gives themselves two of these in a year), why are the lowest paid positions not afforded the same?
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