Reply To: If they only increased wages…


This is how I see it… to keep things extremely simple lets assume that nothing else changes but one company’s wages and the amount of products. It’s a gross oversimplification, a toy model, but still useful (I think).

One part of company’s money goes into making stuff, the other goes to wages to buy stuff.

[The rest of the money goes to savings but in this simple model that doesn’t change either so we’ll ignore it.]

If you artificially increase wages that means you have less money to make stuff. So yes, Wonka’s workers will have more money and will come to him to buy candy but there will be no candy because it couldn’t have been made. Society has less candy.

We could also think of the extreme case, resulting in immediate arrest of activity: ALL the money goes to wages and nothing is ever made.

This is for Wonka being a single company. If you want Wonka to stand for ALL the companies in a country at the same time, then it’s hard for me to distinguish between money for wages and money for production, because everything is someone’s wage.. if a particular company spends money into production that is actually wages for workers in other companies… if Wonka wants to make more candy it has to buy sugar so that’s wages to sugar-factory and truck-company workers. In that case, increasing wages for ALL these workers simply means disturbing the cooperation between companies – truck company won’t have trucks because it gave it money to its worker’s wages, sugar company will have no sugar etc etc.

All I wrote here is too simplistic, but you asked for something quick and easy to snap back at your liberal friend… who cannot see that if you increase the wages artificially that money has to come from somewhere else where it has a serious, important role to play and you can’t just take it away. The effect is, in the long run, you hurt and distort and confuse the production and society ends up with less.