rcgldr said:
So the plan here is to lower the income for mainstream (blue collar) type workers to that of third world countries where many jobs are being outsourced, but while living in the USA where the cost of living is higher? If enough companies reduces wages to survival level in the USA, which is a 70% consumer based economy, the economy goes downhill, because a huge chunk of the income that was used to buy those consumer products goes away.
But why is the cost of living here higher? And in what ways?
Food is not substantially more expensive, especially raw ingredients. In some cases it's cheaper because of government subsidies. Clothing is about the same. Electronics is about the same. Electricity and gasoline are similar. Cars are substantially cheaper, as any European will attest.
There are three reasons why the cost of living appears higher, those are, housing, healthcare, and education. Housing appears to be more expensive, but that is partly because Americans have a different opinion of what's 'normal' (IIRC, Americans have at least double the average square footage per capita vs. most developed countries, to say nothing of China or Brazil), partly because of government subsidies such as section 8, and partly just simply false (the average price of a 2-bedroom apartment in Moscow surpassed $500,000 some time around 2005, and has remained above that level ever since.) Furthermore, getting rid of the minimum wage would allow the cost of construction of new housing to drop dramatically (90% of the cost of new construction is typically labor and permits), making housing more affordable for all.
Healthcare is, indeed, incredibly expensive here, by any reasonable standards, and that is, of course, caused (1) by absurd regulations that require you (or your health insurance company) to pay $100 to your doctor to get a prescription for a bottle of Amoxicillin (market price in India: $0.50) any time you get sick, and (2) by a severe shortage of doctors, caused by more absurd regulations which limit the number of spots in medical schools and residencies, and ensure that the shortage can't be filled by imported doctors. But that is only a factor for the reasonably well-off, because people out of labor force and people working for anything near the minimum wage (and their children) tend to get their healthcare through Medicaid/S-Chip, courtesy of taxpayers.
I don't want to go into education now, that's a complicated problem, but let's just say that we can safely drop the minimum wage to $1/hour (where it should be) while still allowing bright poor students to get college education.
The ultimate objective is to have a healthy economy. In a healthy economy, aggregate output is maximized, there's no such thing as "discouraged workers", and unemployment does not have tendency to stay high at a huge cost to taxpayers. The American economy is not it. Close to 20% of all working-age (25-55) adult males are unemployed at any given moment (and most of them have no interest in working or looking for work). For females that's close to 1/3. Many others only appear to work, while inflating the apparent GDP by far more than their real contribution, the demand for their labor tenuous at best (it's very uncommon outside the U.S. for secretaries/administrative assistants/clerks to make $20/hour). It is no surprise that a shock like the last recession can knock a large segment of population permanently out of labor force, and the national GDP into a lower trajectory.
Fortunately, there are countries that have it worse (France comes to mind), but that's nothing to be proud of.
