- #31
CAC1001
rcgldr said:
Increasing productivity per worker increases the number of jobs, not decrease them. New business creation is an important component of economic growth. But in order for new businesses to be created, they need workers. These workers cannot be freed up to go work for such new businesses unless the economy is able to gain the ability to do more with fewer workers. This then frees up workers for new jobs created by the new businesses.
I'm not sure if I'm getting the logic to this. More goods and services do not need to be sold to "off-set" the increase in productivity per worker. Increasing worker productivity does quite a few things:
1) Allows new business creation, and hence new job creation
2) Allows the economy to produce more goods and services for a cheaper cost
3) Increases per capita incomes, so people can thus buy more stuff
The average American doesn't earn about 3X what the average Mexican does because they necessarilly work harder, it's because they are far more productive. In the 1800s, almost every American farmed. Today, less than 1% of America farms, yet even though America alone is about 5% of the global population, the 1% of our own little 5% produces enough food to feed the whole planet.
We use less land today to grow a significantly greater amount of food than what we did in say the 1930s. This is all because of productivity increases.
They very much realize it. Perhaps not initially, but the overall economy certainly does. Productivity increases do not lead to wide-scale unemployment, they lead to a rising standard of living for everyone.
No it isn't. This takes the assumption that there's a fixed supply of jobs in the global economy that countries have to compete over, and that in order for one country to gain jobs, another must lose jobs. But that's not how it works.
Jobs are like wealth. They can be created and destroyed. There is no zero-sum game. Outsourcing of jobs to a foreign country does not mean the USA loses said jobs. Outsourcing jobs does a few things:
1) Leads to cheaper products and services (which can lead to more job creation)
2) Allows the USA to concentrate on producing things it is good at (if we tried to produce everything here, we'd end up with lackluster quality of everything, because what we're good at doing would get hampered by us trying to produce things we're not so good at)
3) Serves as a form of efficiency: a foreign worker who can produce something with the same quality for a lot cheaper is like a machine that replaces workers in America because it can do the same job for equal quality, but cheaper, or even cheaper with better quality. Yet despite machines replacing humans in various jobs for over a century now, we haven't seen the economy permanently lose jobs with no new jobs created.
rcgldr said:
Corporations don't "control" the job supply, new jobs are created all the time by new businesses.
You're making two fallacies here:
1) That American society is divided into fixed classes, i.e. the "poor," the "middle-class," and "the rich." The reality is that the country is divided into income brackets, not classes, which people freely move into and out of all the time. Many of the same people who are classified as "rich" or even "middle-class" now were amongst the "poor" twenty to thirty years ago. Most "rich" people did not start out rich and most "poor" people do not remain poor. Income is not distributed by some collective decision by society, it just means some people make more than others.
2) That there is a fixed amount of wealth and income in society, and that the rich class has been getting more and more of this income for themselves, thus shorting the middle-class and the poor. Again, that's not how it works. The economy creates wealth. The top 5% gaining a larger share of total income for the USA is likely because we have seen so much wealth creation over the past thirty years. There are a lot more wealthy and high-earning people now than before.
Real income per capita has overall been increasing: http://www.bea.gov/briefrm/percapin.htm
Wages can be stalled or declining, but wages are not incomes, they're a part of incomes, and the reason for their likely stalling or declining is because a larger and larger portion of people's income is having to be devoted to healthcare, which has been rising up in cost. We have a system that due to the tax and law makes it where most health insurance is provided through the employer as opposed to individually-purchased health insurance.
You're viewing it that the economy is a zero-sum game, with a fixed supply of wealth, and thus "the rich" are hogging more of that wealth for themselves now since Reagan. A progressive tax system (which we actually still have BTW) was a way of taking some of that wealth away from "the rich" and redistributing it "back" to the "poor class" and "middle class" whom it was "taken" from.
But that's not how the system actually works. All Reagan's tax cuts meant is that those who worked hard got to keep more of their money (to a degree, as even though the rates were cut, some big loopholes were closed as well).
It would have been a 4 percentage point increase, not a 4% increase. The actual increase would have been about 11.6%. One reason the Republicans didn't want to increase it is because historically, increasing taxes, provided revenues increase, only then leads to more spending. It also could hamstring the economy further.
I know this particular question was addressed to WhoWee, but just wanted to point out that Reagan never followed any "trickle-down" strategy (i.e., cut taxes for the rich, they'll spend the money, and the benefits will "trickle-down" to the rest of society). A trickle-down effect probably occurs to some degree when the wealthy spend money, but that was not the goal of Reagan's economic policies, and it has never been supported by any serious economist as far as I know (although quite a few politicians have mistakenly used the term).
The goal of supply-side economics is to increase the supply of goods and services in the economy, by encouraging investment. Prior to Reagan's tax cuts, the wealthy had all their wealth tied up in trusts and commodities to avoid taxes. With the cuts, a flood of money went into the stock and bond markets.
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