Tuesday, July 06, 2010
GOODSPACEGUY SAYS LOWER HIGH COMPENSATION TO PROMOTE EMPLOYMENT.
Tuesday, July 6, 2010
Message 39 on blog: Our Spaceship Earth
From Goodspaceguy, a middle of the flock sheeple and a 2010 Primary Election US senatorial candidate from Washington State
High Compensation Promotes Unemployment
In our competitive free market economy, prices change. Prices adjust. Prices attempt to create a full employment economy by finding the price level where supply and demand balance. At the balancing, equilibrium prices for labor, people should have a choice of jobs. Wages are a prime ingredient in the construction of prices. Usually, when wages go up, prices go up. A simple rule: if wages go up, prices go up.
High compensation promotes unemployment and recession, because the high, increasing compensation causes profits to turn to losses. Then some of the highly compensated people get laid off. (There is not enough money to hire everyone at high pay.)
A simple rule: Losses create layoffs. Profits create jobs.
But the COMPETITIVE free market attempts to bring in competing labor to bring down the cost of labor until everyone who wants to work at the competitive market rate has work at the different free market rates for the different types of labor.
At the lower market rates for labor, profits might increase. Increasing profits help to increase employment.
If you want to increase employment, do what is necessary to increase long-run profits. Profits promote employment. Losses cause job loss.
Recessions and recurring recessions are caused by widespread compensation and other costs and other taxes and other regulations that are too, too high. Profits again disappear. Jobs are again lost. Recessions force people to become more reasonable in their compensation demands. Receiving less compensation, people can help make up for other sabotage of the market place that may be occurring. If people do help lower the effects of sabotage of the market, profits may return. Then jobs may return.
But with good times returning, people may again demand higher compensation. Profits decrease.
To increase profits, people can also decrease taxes and regulations or other causes of sabotage of the job market.
Can you think of anything else that will decrease profits and lead to job loss?
How about management mistakes? Would labor unions do anything to decrease profits and thereby decrease jobs?
The wonderful COMPETITIVE free market strives again and again and again for balance and full employment.
Move upward to full employment with Goodspaceguy.