(04-26-2010 05:49 PM)texd Wrote: I think it's a generally accepted (by economists) economic reality that non-wage costs of employment (employers' share of payroll taxes; health insurance; workers' comp) are borne by employees in the form of lower wages or fewer jobs. I know that CBO has assumed the former (lower wages) for at least the last decade and a half.
There are actually three possibilities:
1. Lower wages
2. Fewer jobs
3. Raise prices
The choice of which one depends not so much upon some sinister motive on the part of the employer, but upon the reality imposed by the market in which he operates.
If the employer has pricing power (probably OO's scenario) or if all his competitors face the same cost, then raising prices is a viable option for him/her (and his/her competitors). If not, then one of the other two choices is required to remain competitive.
Where problems arise is when the competition is overseas and therefore does not face the same cost. This is what we're up against in the US today, and it's why we're losing jobs. I'm not as concerned about the sweat shop jobs we are losing to China--nobody here wants then anyway (except perhaps those here illegally). But the jobs we lose to Italy or Japan are preventable losses, and we should be pursuing policies to prevent them. Higher tariffs are not the answer. In a global economy, you must export to survive, and higher tariffs do more to harm than help exports. Unless, of course, they come in the form of a consumption tax. Which is one HUGE reason for going that way.
But whatever we do--VAT, cap-and-trade, both of which I support if properly done--must be offset by benefits elsewhere, or else they threaten to destroy jobs, and with them the economy.