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Ashish's Niti

Niti in Sanskrit means policy/strategy/vision. This blog hosts my political views, along with news and commentary. This blog has moved here.

Monday, August 09, 2004

Lower prices and lower wages vs higher Prices and higher wages

Michael Munger talks about study conducted by UCal-Berkeley Labor Center.

The surprising conclusion of the study:

When workers do not earn enough to support themselves and their families through their own jobs, they rely on public safety net programs to make ends meet.

Study points out that WalMart causes loss high paying retail jobs by "shutting" down other retailers in the area. In their place, it gives lower prices and creates low paying jobs without health benefits.

The argument is familiar one. Ruthless profit-seeking efficiency drives down both consumer prices and wages. Now, the question is which combination is better? Higher consumer prices and higher nominal wages or lower consumer prices and lower nominal wages? I will bet on the latter.

Another important point that is missing here is why the same lowering of wages is not occuring in the Health Care? Can we open up our immigration policies to allow doctors/nurses from other countries? In that case, it will result in lower prices for patients and lower wages for Doctors.

Thus, if every segment of economy experiences the same effect of lower consumer prices and lower nominal wages, then there is no reason why welfare burden of Govt. will increase.

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