I was chatting about economics with a friend today and there is "something" that seems to be ignored or not showing up as it should in economic discussions. Something that just came out in the discussion is when we were talking about low wages I said that there was no consumer liquidity when wages were too low and you need consumer liquidity for the economy to hum along.
I also maintain that economists that go on about there not being any basis for a minimum wage are missing something in their analysis and I am thinking it is this consumer liquidity. In the macro perspective of looking at the economy consumer liquidity is extremely important to keep the economy humming along, just as this finanical liquidity that has made the news.
I suppose this is looked at from the perspective of disposable income, but I like this idea of consumer liquidity because it implies the parallel of the consumer activity coming to a standstill without liquidity just like the financial markets do.
I like this Franklin D. Roosevelt quote:
“No business which depends for existence on paying less than living wages to its workers has any right to continue in this country”
The economy simply does not work if people do no earn living wages at their jobs.