Is the minimum wage and middle class destroying the American economy?

Question

It is no secret that perhaps the majority of our consumer goods are produced or manufactured outside the United States, where labor is much cheaper. As a result, our economy is reliant on these goods, while high domestic wages and costs raise domestically-produced far higher. As a result, we have high demand for foreign goods while international demand on ours remain low.

Thus, there is no demand for our dollar and it loses its value. Then, high inflation occurs so that these foreign companies can maintain their profit margins. Worse yet, if perhaps there was some commodity that kept rising in price (in addition to the falling dollar), would this not be the kicker that turns the economy into rubble (OIL)?

Is there any solution besides tariffs that can solve this problem?

Answer 1

I've heard rumors that something called the 'free market' works the best, in the long run.

Answer 2

Dude, you really need to start watching news shows.

NAFTA

Sub-Prime loan and housing chrisis

Gas price increases

War in Iraq

Answer 3

Middle class people are not making minimum wage.. haha.

Minimum wage will always be the bare minimum to scrape by... even if you raise minimum wage to $25/hour, bread will just go to $10 a loaf to match... why don't people understand this? We can't afford to pay everyone well, or the pyramid scheme that is our materialistic society would collapse. People would realize money is just paper and it would become worthless.

Aside from the fact that companies don't want to pay someone $10/hour to make shoes when they can get them for essentially free with outsourcing, even if you did bring all the work to America, companies aren't going to lose profit over it... everything will just triple in price to account for the additional labour costs, and no one will be any better off.

Poor people stay poor and their labour is exploited, rich people get richer for doing less. Welcome to capitalism.

Answer 4

Tariffs will only make matters worse, as they usually do.  (And as nearly all government interference with the free market system does.)

It's true that labor costs are a primary cause of moving some kinds of manufacturing overseas.  This makes certain types of goods less expensive, which puts some downward pressure on inflation.  It also exerts downward pressure on wages, but only for the types of jobs that are lost in that type of manufacturing (mostly lower-skilled jobs).

The fall of the dollar raises the cost of imports and lowers the price of our exports overseas.  This should help to counterbalance the loss of jobs in certain types of manufacturing -- the types of goods that we are most competitive in for export are not the types of goods that have been most commonly lost to lower-cost labor countries.  

For example, we import more toys, we should be exporting more machinery and intellectual services.  (We should also be in a good position to export more cars, if not for the extremely bad decisions of Detroit car makers combined with the influence of autoworkers unions.)  We do see exports picking up in several industries.

If the dollar remains low, it will certainly work to neutralize trade imbalances.  However, the exchange rate right now is largely driven by interest rate decisions of the Fed and its European and other international counterpars, and by foreign estimates of how good our economic future looks versus other countries.  I think that the dollar has just about finished falling, for now, but this depends on actions of our Fed and others such as the European Central Bank.