That actually makes sense in a perverse way. From the poll, one can see that most business owners would like to pay more wages. Well, they own the business, so they could just raise wages if they wanted to, without a legal minimum wage. Then why don't they? Competition. A business owner won't raise wages because his neighboring business will have lower costs and be more competitive. However, by forcing all business owners to give raises, competitive pressure is lost. Raising the minimum wage still defies economic sense, however, in that it distorts the marketplace and causes job loss.
It's more than that. If you have higher margins or more discretionary pricing power than your competitors and they are forced to raise wages (as you are,) by law, you can squeeze them out of business entirely by raising the minimum wage and destroying their margins. You're not likely to make minimum wage at Wal-Mart, but some of their small shop competitors do pay lower wages. In the end it's in Wal-Mart's interest to push for minimum wage hikes for this very reason (which they have in the past.)
Exactly, for a company like Walmart, they know that (a) small competitors are not as efficient has they are, (b) small competitors will not able to invest in large scale capital projects to ameliorate wage increases (eg. robotics, self-checkout, etc)
If people suddenly have more cash, prices will rise until equilibrium. After all, if everyone has $1 million and you auction off something in demand, you're likely to get a lot more currency than if everyone had only $1,000 to spend.
Of course, the money will be worth more when it's scarcer too.
You can't have capitalism both ways. Either the market will result in lower prices / greater efficiency (which negates your argument) or it won't (which means we need more regulation to correct market distortions).
The reality is a lot of companies, banks, and politicians have finally recognized that the US consumer class is tapped out and a significant portion of the world relies on that as a central economic engine. Even China isn't ready to fully switch away from being export-driven. To have consumers you need people with money in their pockets to spend. That means management and capital need to move back toward the historical division of profits with labor. We'll all end up better off in the long run.
California raising the minimum wage will barely impact unemployment. A few prices will rise a bit but the net effect should be positive. Some of the money will be due to multiplier effects but some will come from obsessively high corporate profits which is fine (companies are so overflowing with cash many are doing record stock buybacks for lack of a better ROI).
Prices constantly rise faster than wages all over the world, there is actually zero reasons to believe that prices would only rise as much as wages, because they usually don't.
Companies that trying to sell you stuff don't look for an equilibrium it's not like they are saying you have to buy milk, apples, and bread so lets see how much you make to maximize profits if they are the ones that selling you milk and bread they'll charge you as much as "humanly" possible to the point of forcing you to give up on the apples.
You only have to look at long-term trends to see what nonsense that is.
Since you mentioned milk, let's use that. In the UK, in 1914, a pint of milk cost 1d, and the average wage was 16s 6d for a standard 58 hour working week.
That's an average wage of 198 pints of milk per week, or 3.4 pints of milk per hour.
In 2016, a pint of milk is 45p. The minimum wage is £7.20, or 16 pints of milk per hour. If you buy your milk in four-pint bottles (economies of scale not available in 1914), your wage doubles to 32 pints of milk per hour, a nearly 10-fold increase on a hundred years ago, and you're only working two-thirds of the amount of time per week, too!
To be pedantic there is no reason to believe increasing the minimum wage to 15 usd will increase prices proportionally to the increase in wages.
Ex. Someone who would be making 9 would see 66% increase in wages but because wage earners as a whole would only be earning a little more so the increase in prices would be proportional to the overall increase not the much larger individual increase.
Suppose that wages earned only increased 6%. The individual would easily see a great increase to his standard of living despite a small bump in price.
Also note there is no reason to believe that costs of businesses that rely on minimum wage work would go through the roof. Imagine 30% of their costs are labor and 2/3 is minimum wage work. 20% of their cost then double it perhaps and their costs increase 20%.
Note we are talking about an atypical service oriented business dominated by minimum wage labor.
This means that your taco costs a few more dimes but the dude making it doesn't need food stamps and welfare on your dime.
ALDI manages to continually beat Walmart – while paying far higher wages.
How? Efficiency.
Putting the pallets directly into the store saves 2 people who’d otherwise be stocking up shelves, for example.
Making shopping carts cost a deposit, which you get back upon bringing them back, ensures that you save another employee who’d otherwise work on that – instead, money-conscious families, homeless and teens do that for you.
A lot of companies can compete with Walmart at lower prices and higher wages – even in its home market.
It's entirely possible to be paid above minimum wage and require food stamps, since minimum wage applies to everyone, to include minors and dependent spouses.
Increases to the minimum wage have had a brutal effect on black and youth employment, for obvious reasons. It's amazing how minimum-wage advocates refuse to accept reality.
The minimum wage should be the lowest amount a person is willing to work for.
The amount I'm willing to work for is effected by the availability of subsidized housing, food stamps, and Medicaid for all. Free minimalistic cellphones.
I probably benefit 15k annually. Making the crappy 14k I'm making survivable. My wife can't work due to medical issues.
Basically we don't have a rational market now and can't so the only rational way to keep companies from riding on everyone's tax dollars is to set an artificial floor.
What positive effect would be accomplished by abolishing the minimum wage. People don't actually have to be rational let alone moral actors. Do you really believe the middle class should be taxed to provide benefits for people that are working so that their employers don't have to pay more in wages?
That is literally what is happening now and there is no reason to suppose that in the absence of benefits that wages would be adjusted upward to compensate with any degree of expediency.
The people of our nations are precisely stupid enough to let the economy crash and burn as has been previously shown.
UNLESS it is a fundamentally demand starved economy where the wealth is concentrated in the hands of people that don't know how or have no clue how to increase flow of money.
Here's a clue: GDP goes up if people have money to buy things, which then causes people to get paid more and more jobs, which then gets more people money to buy things.
The "marketplace" or "free market" doesn't exist. Poof. Unless you are blind, "free markets" stabilize into cartel or monopoly power. Pick a goddamn industry, it is dominated by 1-4 players.
This only works when there are economies of scale. If there are significant dis-economies of scale smaller firms can out-compete the large firms.
The large firm can't just buy up all the small firms either because new firms are started all the time, and if every person who starts a small firm is rewarded with a buyout, the industry will attract more and more new firms until the large firm can no longer afford to buy out new firms.
---------------
Examples of industries that not dominated by three or four large companies: mining, farming, house cleaning, and being a land lord.
If everybody raises wages, and consequently prices (that is assumed since that's the only way you could have lost competitive edge after raising wages) - then what's the point of it? Of course, employees would be paid more numerically, but they could not buy more with this. Unless, of course, some production would be moved overseas, where prices are not affected by wage raise. So in essence, these people are betting on more goods manufactured out of the country - no doubt decrying "job loss to foreign countries" at the same time.
People who make minimum wage aren't the only ones who buy stuff. When prices go up to cover the wage increase the cost will be spread out over all consumers, not just minimum wage earners.
You can argue that those at the very top spend far, far less of a percent of their income on consumer goods and services provided by minimum wage earners and that's totally fair. But it's not credible to claim that a minimum wage increase will do nothing at all for people after a price increase.
Keep in mind that a wage increase affects not only one business's profit margins and pricing, but also the prices of all of their goods from suppliers too. Consider that fast food needs to pay 30% to labor, mostly at minimum wage. Another 30% or so usually goes to food costs. Those food supplies are the product of farm labor and food processing plant labor, both of which pay close to minimum wage as well. If minimum wage doubles, that means the fast food business now has a labor cost of 60% of his original pricing, plus the increases in food costs he is going to see as well. Those food cost increases could be 30-40%, meaning he will likely need to raise prices significantly to keep the lights on. For a company like McDonald's, who do you think is their target market when they try to keep prices as low as possible? The rich? They're trying to make food affordable for everyone, including minimum wage earners. When McDonald's costs nearly double, what do you think is going to happen to their prices?
If you're curious to see what American McDonalds' would look like where workers have higher spending power and McDonalds has higher costs, take a look at an Australian McDonalds where they already reacted to exactly that.
This is pretty much what the future of fast food restaurants is like when you raise the minimum wage:
McDonalds is usually able to adapt better to changing market conditions than other restaurants.
Many restaurants do go out of business when their prices rise, which is why they hate the idea of raising the minimum wage so much. However, those restaurants are quickly replaced by other restaurants, which is why employment is never affected.
Right, so you can now buy a burger off of the dollar menu, which costs approximately 1/7.25 hrs of your labor. When you earn $15/hr, you now have to work 19.5/15 hrs to earn a burger. Yes, it's a higher quality burger, but you can get a higher quality burger for the same amount of labor at minimum wage in the US, and still have the $1 option for those who want it.
You are essentially arguing that there should be no cheap burgers, since there are much, much better expensive burgers. What you seem to be forgetting is that some people won't be able (or not want) to afford much, much better burgers and that's the reason cheap burgers exist.
I think that's a bit of a moot point. The exchange rate is about $0.75:$1, but what really matters is relative purchasing power in the worker's own country. The OP was pointing out that for McDonald's to survive in Australia, they had to start offering expensive, gourmet burgers. Australia's minimum wage is roughly $17.25/hr in Australian dollars, so the math works out to be roughly the same.
People at minimum wage probably buy the least amount of stuff. This is probably the largest potential audience, by increasing their wages the market should directly expand.
The people who still have jobs will benefit, sure. We're making some poor people (including teenagers living at home) a little better off at the expense of a smaller number of poor people who be much worse off for not having a job.
If everybody raises wages, and consequently prices (that is assumed since that's the only way you could have lost competitive edge after raising wages) - then what's the point of it?
For one thing, labor costs are only one part of the larger economic picture. For another, labor costs at the bottom end of the pay scale are only a portion of overall labor costs. So if you raise the minimum wage by ten percent for five percent of the workforce, you have not raised it by ten percent for everyone. Even if you do raise it by ten percent for the whole workforce, you have not raised business expenditures by ten percent because there are other costs as well.
Unless of course all large companies are already sitting on large profit margins (they are, either explicit or just structurally sitting on them with bloated management structures), in which case the increased pay will simply help alleviate a demand starved economy, which will increase flow of money / rate of transactions and, guess what, everyone makes more money.
> If everybody raises wages, and consequently prices (that is assumed since that's the only way you could have lost competitive edge after raising wages) - then what's the point of it?
Why would prices increase by the same amount as minimum wage was increased by?
Pay the attendant 5% more and the total cost of obtaining, refining and delivering gas doesn't increase by 5%.
Refining and delivering gas requires labor too. While many in that industry may earn more, I'm sure there are minimum wage workers employed by that industry that will affect their costs. It doesn't help right now that oil and gas are at rock bottom prices either.
Oil rig workers do not make the minimum wage, at all. Neither do most refinery workers. I say this as someone who knows several people who work on oil rigs off the Louisiana coast, and have worked with (but not at) several petrochemical companies.
One thing to consider is percentage of gross revenues spent on payroll varies by type of industry but is somewhere between 10 and 30%. 10% would manufacturing. 30% would be a restaurant. Most everything else would be around 15%. Likely the businesses that would see the largest increases are those that can't be outsourced easily. The ones that are already paying well above minimum wage.
Difference between a business owner and an economics professor is the later writes equations down to describe how he thinks thinks business should work. And then blathers about hedonistic adjustments. A business owner stares at his books every week and thinks 'my problem is my customers have no money' Really easy for a business owner or accountant to get that customers with more to spend outweighs small increase in payroll expenses.
Business people I deal with are highly aware Macro issues. If you ask them what they think of things like minimum wages or other regulatory costs their usual concern is that their' particular entity doesn't suffer an unfair burden.
Academic Economists know pretty much nothing of Macro.
I believe the theory is that the price of goods/services created by high-wage workers would not substantially increase, and thus the minimum-wage workers would be able to achieve a higher quality of life at the cost of slightly degrading that of the high-wage workers (since the price of some of the goods those high-wage workers buy has increased).
Minimum wage can be an attempt to fight income inequality. Not that it's necessarily the best approach for that though (as mentioned elsewhere in these comments).
>> I believe the theory is that the price of goods/services created by high-wage workers would not substantially increase
That is a pretty big assumption. If you are a high wage worker and your favorite supermarkets, restaurants and resorts all raised their prices, wouldn't you feel you are less high-wage than before? Wouldn't you demand to restore the buying power of your wages - or, alternatively, wouldn't you switch to a company that offers you such restored power? High wages are not something valued for the numbers, it's valued for what you can afford. And a lot of places that you want to afford are in service industry - which is highly dependent on labor costs, and even if they did not pay minimum wage, once minimum wage raises they'd have to raise pay too - because otherwise they would be now paying minimum wage or very near to it, and the workers would not tolerate being paid minimum wage now while only year ago they were paid 150% of it.
>> at the cost of slightly degrading that of the high-wage workers
How do you know it would be slight? And how do you know high-wage workers - which are high-wage for a reason, they probably command some economic power, otherwise they wouldn't be able to demand high wages and would agree to work for minimum wage - would tolerate it and would not attempt to restore their buying power? For example, some union contracts have CPI/cost of living increases baked in. Would you expect them to give up those for the sake of their lower paid brethren?
>> Minimum wage can be an attempt to fight income inequality.
Quite a bad one. If you are secure in belief of it affecting only minimum wage workers, you at best can influence 5% of the workers (that's how many get minimum wage), and even if you assume all of them get the pay raise and not the pink slip the effect still will be rather small. If you however (correctly) believe the effect would be much bigger, then pay differentials would be preserved, because they are reflection of many structural and market conditions, none of which would be improved by it.
Yes, it is - I am not at all confident in my understanding of the subject (so thanks for sharing your views with me).
>> at the cost of slightly degrading that of the high-wage workers
> How do you know it would be slight?
"Slight" was a bit of a red herring. Whether the impact on high-wage workers is slight of not, so long as it's negative, it is causing incomes to be more equal.
> If you however (correctly) believe the effect would be much bigger, then pay differentials would be preserved, because they are reflection of many structural and market conditions, none of which would be improved by it.
If these assumptions hold, does that mean that pretty much any attempt at leveling the wage distribution within a capitalist system is destined to failure? i.e. negative income tax, basic income, etc. would also do nothing, as the wage distribution would adjust itself to revert the effects? The only workaround (in which workers are compensated only in cash) is to outright fix wages across the board? (Not that I am suggesting this). Or am I misinterpreting this?
Why causing incomes to be equal is a good thing? Equal incomes for unequal work is a recipe for disaster, as those who do more valuable work would be discouraged from doing quality work if they can get the same for easier and less diligent one.
> If these assumptions hold, does that mean that pretty much any attempt at leveling the wage distribution within a capitalist system is destined to failure?
Yes. As much as one relies on voluntarist decrees to override the economic laws, it is destined to fail. Of course, the decrees would affect the wage distribution, at least for a time, and they may temporary improve income for some specific people, but ultimately since the labor price differentials are not product of absence of a decree banning them but of myriad of market conditions, these conditions would cause the prices to readjust or, if proper pricing is prohibited, to go to the gray or black market or be replaced. I.e. cheap fast food places may automate ordering and get rid of those minimal wage cashiers. Or hire just one instead of two and make them work more. Etc.
> i.e. negative income tax, basic income, etc. would also do nothing
Oh, those would definitely do something. Just maybe not the thing you expect them to do. If you institute basic income equal, say, to the salary of a teacher - which is not an easy job - then many people now employed as a teachers may choose to get the same money but instead pursue their leisure or some other less stressful activities. If you still need teachers, you'd have to offer them more to compensate them for giving up their leisure and endure the stress of the job.
Now, these extra money have to come from somewhere - so something has to be made more expensive. People that consume this something would try to keep their consumption level - if successful, they'd get raises too, if failing - they'd consume less, thus influencing those who produced that something and requiring them to be either compensated or find another employment. And so on, and so forth - the ripples are numerous.
The Economist had a lucid interview with someone who ran a cleaning business in London not long after the minimum wage was introduced there. Abbreviating: "Now that I know what my competitors pay, there's no point in trying to beat my own labour costs below that point, and I spend my time in ways that benefit my business more."
He didn't say "I felt like a soulcrusher when I beat down the wages of people who earned very little, and now I spend that time on positive improvements instead". Maybe it was in his mind though. Managers are people too.
Of course the fact is, if you pay better wages, you get better workers. In 'n Out Burger restaurants pay substantially better wages than most of their fast food competion, and they're doing fine. Many years ago I read an article in Forbes which cited a study finding that fast food franchises which paid somewhat above minimum wage were more profitable than those which paid only minimum wage. They had better motivated employees, and substantially lower turnover and recruitment and training costs.
So raising wages across the board would mean those worse workers who cause higher turnover and other costs are now going to earn the same amount as the better workers who don't cause businesses those problems, right?
I'm confused. Where did you get this idea from the information "an article has concluded certain businesses that pay more to their employees are more efficient"?
The parent comment stated if you pay more, you get better workers. Of course that is true, until you have to pay everyone more. Paying someone more money does not magically make them a better worker. Paying more attracts higher quality talent, which allows your business to offer a higher quality product, which allows you to charge a premium and make more money.
I think the idea is that if the minimum wage is $15, then you'd have to pay $17, $18 to get yourself above the froth of the marginally employable people again and hire the higher-quality workers.
Sure, it's good for them. But it's a little nuts that you can make that kind of money saying "Hello, can I take your order?", when I know welders and millwrights that have decades of experience and uncommon skills that only make $20 an hour.
What I think is going to happen, is that the McDonalds' of the world will fire 75% of their staff, and just turn around the POS system so that the customer punches in their order themselves
There is no empirical evidence that it causes job loss. Nor a complete, coherent economic argument. It's perfectly plausible, even likely, that an increase in the minimum wage leads to an increase in the demand for labor.
On the empirical side, Germany just introduced a minimum wage for the first time and unemployment is at all time record lows. The estimated job losses did not materialize.
The labor market is incredibly fucked anyway. Imagine you, and everyone else has a gold nugget. However, by law you, and everyon else, are required to sell it by the end of the month. Do you think you could get a fair price?
There is no free labor market, as long as not working is not a feasible option. That's why an unconditional basic income makes a tremendous amount of sense if you want to make the labor market more efficient.
At the bottom end we see companies offering wages that aren't survivable without welfare and food stamps effectively forcing the tax payers to subsidize their low wages. Effectively setting a sane floor prevents this abuse.
It makes sense in other ways too. Specifically because it hurts potential new entrants to the marketplace.
You've got to keep in mind that for every business or franchise that starts, it first is a small business that has to open it's doors with little cash and no advertise, build up a customer base and hopefully be able to hire people while it's owners have zero income for what's usually 3-4 years if they survive.
Add higher minimum wage to that formula and the whole thing gets even harder. People take for granted that the reason we have a 1% problem is that as a society we continually make it harder and harder to start a business without lots of capital.
When you do that it means that you've got to have somebody very wealthy invest in your business meaning they're going to own a piece of it too. That's how "the rich get richer" as the saying goes.
If you aren't starting a service business where you're selling your own skillset or a business where employees are paid contract / commission it's incredibly expensive and risky. The first time you hire somebody and realize the responsibility and financial pressure that comes with it...along with no guarantees on whether or not that person will actually do their job...your entire point of view on minimum wage will change.
That's the ENTIRE reason that I support a basic income of about $700 / month. It would have the effect of doubling the minimum wage WITHOUT passing the cost on to businesses.
Had liberals (or north-american libertarians) been able to win the battle for words, we would be discussing "making it illegal for low skill workers to get jobs", not "minimum wage".
They did win battle for words! Libertarians call any exchange of work for money, no matter how small, a "job". But normal people, when they want "a job", don't seek to have an economic exchange for miniscule amount of money that cannot pay their bills. That can be called either a "gig" or "slavery", depending on circumstances, but hardly a "job". A "job", in normal speech, is something that can actually economically support you.
So what is being outlawed by minimum wage are "jobs" that cannot feed people, which, I am sure you will agree, are simply not worth existing.
And in fact I think popularity of libertarianism is half of the cause why minimum wage is still being discussed, because people and businesses who actually know economic stuff support minimum wage, as they understand that flow of money in economic systems starts from the demand. The other half of the cause are possibly some rich people, who are a different type of political actor than businesses.
That's a silly argument, Denmark for instance, doesn't even have a minimum wage, nor Iceland, Italy, Liechtenstein, Norway, or Singapore..and technically neither does Switzerland. I'd hardly call those "libertarian" societies. Then again, I have a hard time taking someone seriously when they equate general labor with literal slavery. If you have mobility of labor through your own free will, you are not a slave. It's disgracefully offensive to those that actually do, to this day, work as slaves. Working for $8.50/hr at McDonald's is not slavery.
As was debated in prior threads, minimum wages are nonsensical from an economic (and welfare) standpoint. Negative income taxes or living wages make a lot more economic sense.
While technically the Scandinavian countries have no minimum wage, they also technically lack a standard work week and most other aspects of what in the U.S. is considered employment law. But these all still exist, just not as statute law. Employment conditions are instead set in collective negotiations between labor representatives and industry representatives. In Denmark, for example, the Confederation of Danish Industry (DI) and the Danish Confederation of Trade Unions (LO), mainly, periodically negotiate and revise big framework agreements. These cover almost all workplaces in the country, which makes the contents of the agreements de facto pretty close to the national labor law. They include agreements on the standard work week (37 hours) and the minimum wage (109 DKK, roughly $16.50). There may then be sector agreements or individual workplace agreements on top of these, but the big framework agreements set the basic conditions of employment.
What kinds of consumer goods? When I lived there, it seemed reasonably cheap to me. Groceries were about normal from a US perspective, and rent in Copenhagen was quite low for a major city (~$1250/mo for a nice 2bd in a central part of the city). Some things varied, e.g. pork was very cheap, while fresh fruits were often expensive, but that's more a question of geography than anything else. Beer was exceptionally cheap, like $4/sixpack type prices. Fast food was on the expensive side, and labor costs are probably a part of that. Nicer restaurants were normal by American standards (expensive compared to Texas, cheap compared to SF or NYC). Overall I think my cost of living was lower than when I lived in the SF Bay Area, by a not-trivial margin.
I live in Norway where many of the same conditions pertain. I suspect that one reason for there not being a minimum wage here is that unemployment is low, which means that you have to pay a reasonable amount in order to get someone to work for you.
I don't see how you in any way address what I said (in fact I mostly agree with you):
> I'd hardly call those "libertarian" societies.
I didn't claim that society has to be libertarian to not have minimum wage.
> If you have mobility of labor through your own free will, you are not a slave.
It's a different definition of the word "slave", and perhaps more precise, that you are using here. Technical word for what I mean, is, I believe, "precariat". It's not the same as slavery but there is often an overlap. And historically it's not obvious that one or the other is definitively worse condition.
For example, Czechoslovakia was communist. People were not free, yet they were economically quite well off. Today, people are politically free, but economically, some (although a small minority) are worse off. Because of that, I don't think it's obviously "disgracefully offensive" to compare the two situations. It's certainly not offensive to the poor people who make the comparison themselves.
> As was debated in prior threads, minimum wages are nonsensical from an economic (and welfare) standpoint.
It is only nonsensical if you subscribe to theories of "rational" decision-making, which do not hold for humans in practice. See for instance the ultimatum game, and how people respond to it.
> It is only nonsensical if you subscribe to theories of "rational" decision-making
Oh, dear lord, you have just fallen into a stereotype of a person that thinks they understand economics, but actually doesn't. So, we'll just leave it here. Not all economics assumes 100% rational decision making from an overall perspective, you make those assumptions so you can make a model to test. A basic game theory table can tell you that much; even with the simple example of the prisoner's dilemma.
You can make a "rational" decision without it being rational to an outside observer. For instance in the prisoner's dilemma it's in both people's interest to not cooperate, but since not all factors are known the "rational" decision is less apparent and both will betray one another. The field of economics, that generally is on the side of free trade (even from people like Krugman), is a much deeper field than the shallow picture you just painted. I basically already had your politics/understanding of economics picked from your previous post, but now I have a pretty clear picture.
Well, as far as I can tell, minimum wage has been tested, and, contrary to the claims of "rational" economic theory, according to which it should cause unemployment, it doesn't. I agree that many economists do not completely subscribe to the rational choice, and by the way, many of them do support minimal wages. So my understanding of economics is not an issue here.
> So my understanding of economics is not an issue here.
Actually it is, because most economists agree that you can raise the minimum wage and have -some- positive outcome. It depends on market elasticity. But, sure you can believe whatever you want. There's a reason why you can raise a minimum wage by $1 with some positive effects (you could still have negative effects,) and not $100 because it would have massive negative effects. It all depends on market elasticity, it's curve.
The argument above was basically, 'modern economics isn't a real because it assumes rational actors!,' which is absolute nonsense.
FYI, the Nordic countries do not have national minimum wage, but they have strong government protected unions who negotiate a minimum wage per industry. It's a much better solution, and frankly the loss of industry unions is a tragedy for the US and the only reason people think they need a national minimum wage - which is really a dumb solution.
The conspiracist in me likes to think that corporations there push for minimum wage as one of many ways of stripping unions of power, and to argue that they're not necessary
That doesn't make sense. A business wants to have as few union workers as possible. If they only give raises to union members then everyone will want to join a union further putting the business during negotiations in a even worse position than just raising the wages for everyone.
It's possible that a national minimum wage increase could be achieved revamping the entire nature of labor and unions not as likely. We can talk about implementing the later and doing away with the national minimum wage thereafter.
Those countries mostly have stronger unions which negotiate effective minimum wages.
Singapore is the exception. Economically it's business friendly to an almost absurd degree (which approximates liberatarianism). Consequently income inequality there is ridiculous even compared to America.
> So what is being outlawed by minimum wage are "jobs" that cannot feed people, which, I am sure you will agree, are simply not worth existing.
I certainly don't agree with that sentiment. There are a lot of people that are working that don't need to support themselves. Between teenagers, college students (who may only need to pay for books, etc), mentally/physically impaired (that are supported by the state but work because it's good to be productive)... there's a place in society for jobs that pay below what you're saying.
Let's ignore, for the moment, the big issue here, which is that by far, these jobs are not held only by people who you describe (college students and impaired).
I don't think creating an artificial job that cannot actually feed you can make anybody feel better of themselves. In any case, it shouldn't be called "a job", which was my point.
In particular, I think college students should study and not be distracted by having side jobs, and disabled people should either enjoy their pension (assuming they live in a civilized country that has that) or have a regular job (in fact, labor laws in my country prescribe positive discrimination for disabled people, even though it is probably economically inefficient).
Because you don't care about those people who would really benefit from an easy job for 1-2 years which gives them a foot in. Horrible values on display.
I do care for those people, but I subscribe to a different cultural model. To provide job training so that economy could function should be responsibility of the employer, or the government, and it should be considered a full time job. Regardless whether the "foot in the door" job is supposed to be a job training or not, then I think the employer is perfectly capable of paying minimum wage for people doing it.
I would like to see a real flexible job market. (hire and fire misses the point). Companies want employees they don't have to train. I can't blame them for that but right now you have to decide your career path very early on and it's very difficult to switch. At the current pace of the economy it's not reasonable to expect from someone to work at the same job or industry their entire life.
> At the current pace of the economy it's not reasonable to expect from someone to work at the same job or industry their entire life.
I disagree, I think it's a wrong path, because it devalues really deep expertise. It seems to me that people do not want to be experts anymore, precisely for this reason. Dabbling in many different things is seen as a path to success. But I think this culture is missing out on something.
By the way, good social security or basic income can be seen as insurance to switch jobs without too much risk, too.
Job training by employers doesn't work great, because the worker can get training at an employer that gives training and then switch to one who pays more because that employer doesn't have to do training.
Though possibly that could be fixed with proper regulation.
> college students (who may only need to pay for books, etc)
Now you're beginning to sound like the generation that talks about paying for college with their summer job, which has rapidly become close to impossible over the last few decades. Sure, if you have scholarships and such.
Standard in-state sticker price is now $20,000/year; which would require 69 weeks of work at 40 hours per week before you even account for taxes.
I agree with your sentiment, but the $20,000/year "sticker price" number is way off.
The first result Google turns up suggests:
In 2015-16, average published tuition and fee prices for in-state students at public four-year institutions range from $4,890 in Wyoming and $6,350 in Montana to $14,990 in Vermont and $15,160 in New Hampshire.
> Now you're beginning to sound like the generation that talks about paying for college with their summer job, which has rapidly become close to impossible over the last few decades. Sure, if you have scholarships and such.
Not in the least. In fact, the wife and I are still paying off the $90,000 in loans she racked up during college, 20 years ago. However, a part time job a few days a week, to pay for things the loans didn't, was beneficial. Going out with friends, a few amenities, etc.
Your view of the world is not cemented in reality. Go start and run a non-trivial business with lots of employees and international competition for ten+ years. Come back and see what you'll think of these views then. You'll struggle to understand how it was possible that your views were so misaligned with reality.
> Go start and run a non-trivial business with lots of employees and international competition for ten+ years.
Perhaps we could cut to the chase and you could tell me what am I supposed to learn from the experience? If it is the fact that the international competition causes wage race to the bottom, then I am already aware of that.
And that's exactly the reason why minimum wage should be a law. Here's food for thought, too: How does Germany does it? Despite having high wages for decades, compared to the rest of the world, even in manufacturing, and recently adopting minimum wage, most Germans are employed, and there are many German companies out there. That I would like to have explained by someone with business experience.
Let me turn thing around then. Are you proposing there's zero value in having experience running a non-trivial business. Are you saying everything there is to learn about business can be had by reading a book, reading some stuff online and through observation?
If that were the case all MBA's and all Economists would be the wealthiest people in the world. That this is not the case should make everyone reflect a bit.
I take most everything I read from economists as total and utter bullshit. Including what they have to say in favor of high min wage. As a group their performance sucks. All they are good for is writing books nobody wants to read.
Not to disagree with the premise of your comment but I can, at least partially, answer your question regarding Germany.
Germany uses the weaker Eurozone countries to artificially deflate the cost of purchasing their exports. If the Euro was only based on the strength of the German economy their exports would be a lot more expensive. Whether or not this would reduce sales significantly or not is debatable but chances are it definitely wouldn't help.
The point is that it's not law everywhere, and never will be.
At some point, the minimum wage will price unskilled labor completely out of the market. Companies now have 5 years to start automating these positions.
The Internet made this possible. So many people love using adblock and sharing files for free.. and the same tactics are being used to outsource labor... and now government intervention is a good thing.
Walmart and Target earn between three and four cents on the dollar; a typical McDonald’s franchise restaurant earns around six cents on the dollar before taxes, according to an analysis from Janney Capital Markets.
In fact, the combined profits of all the major retailers, restaurant chains, and supermarkets in the Fortune 500 are smaller than the profits of Apple alone.
Yet Apple employs just seventy-six thousand people, while the retailers, supermarkets, and restaurant chains employ 5.6 million.
The grim truth of those numbers is that low wages are a big part of why these companies are able to stay profitable while offering low prices.
> Walmart and Target earn between three and four cents on the dollar; a typical McDonald’s franchise restaurant earns around six cents on the dollar before taxes, according to an analysis from Janney Capital Markets.
Those numbers say nothing about how many cents on the dollar their retail employees currently cost. A cashier can easily check out thousands of dollars of merchandise an hour.
I can virtually guarantee retailers pay more in credit card processing fees than they do for their retail employees. Of course, Target reflects this with their 5% Red Card. And many smaller retailers reflect this by either (a) not taking credit cards or (b) only taking certain cards.
Economic 101. Minimum wage does nothing except hinder the disadvantaged. But yes, may also be good to get rid of your competition. Useless debate, because people, even engineers, don't think about it economically but only politically. If you believe it works, let's just make it $50 an hour.
And economics has EVERYTHING figured out? At least towards an oligarchical fascist police state dystopia with monopoly or cartel control over most "free markets" and can't predict basic things like the housing mortgage crash, overexuberance in tech stocks, and the like.
It can't even fucking figure out how to fundamentally avert global disaster or total ecological destruction. It basically can see three months into the future.
So I hate to tell you, your supply/demand curves may look second-nature, and the pirates dilemma may let you sleep at night with the current distribution of wealth, but it doesn't represent chaotic, nonlinear, fly-off-the-rails reality.
Raising the minimum wage does nothing except take a chunk out of profits unless it is raised very high.
This ought to be obvious if you look at who spends the lobbying dollars, but the idea spread by business lobbies that it kills jobs is one self serving lie that has persisted.
This has been empirically verified (Katz/Krueger) though that's not never covered in econ 101.
The problem with arguing against this from an Econ 101 perspective is that Econ 101 has all of these artificial perspectives to make it easier to understand, like holding everything constant except one variable.
Actual examples of raising the minimum wage in the US has shown little to no negative effects on unemployment, and at least some positive benefits.
Of course. Demand is necessary for business. If lots of people are barely scrapping by (which has been true for a long time), only a tiny handful of businesses will make any money.
The 80% supporting an increase are just stating the obvious: you need demand if you want to sell anything.
Servers earn the greater of tipped minimum wage plus tips, or minimum wage. Of course people take serving jobs expecting to earn more than minimum wage, but it's not the same moral issue if they don't.
I agree that is a problem. I suspect it's receding as the percentage of restaurant sales paid by credit card increase.
People who dine at restaurants that likely commit wage theft might tip for moral reasons, but to me, it makes more sense to boycott those restaurants and communicate to managers and owners the reason why.
They can, yes. But the instability of wages is a bigger issue. You can do amazing one day, and horrible the next. Combined with the fact that we teach next to nothing about financial planning in the US, and the extreme reliance on consumer debt by our economy, tipped workers are more like gamblers.
Tipping just about doesn't in Australia, where we pay a reasonable minimum wage ($17.29 per hour for adults in full-time employment). You occasionally find people will tip a taxi driver or bartender, but by and large it's just not done.
In Norway where I live tipping is totally unnecessary, the restaurant staff are paid a reasonable wage. I travel to Poland on business and rarely tip anyone, just a few cafes in touristy spots seem to think they deserve it. I often let the taxi driver keep the change when I am flying out because I have no use for a pocketful of small denomination coins.
Personally, as a consumer I like tipping. But only because it gives me a chance to pay a higher price than I normally would, and to preferentially support small businesses that I like. I could do that by buying more stuff, but tipping is somewhat easier and more direct.
However, overall I think I'd prefer to see the end of tipping culture in America. There are too many downsides to it to justify the upside (which is effectively a kind of market segmentation / consumer surplus capture). For one, a lot of places allow different minimum wages for tipped positions, which is a very bad practice in my opinion and defeats the purpose of tipping. For another, tipping makes harassment (especially sexual harassment) of waitstaff by patrons a lot harder to combat. It also skews the income distribution between the waitstaff and the back of house staff. All of these things are bad verging on extremely bad. And they could be substantially improved by eliminating tipping. So even though I'll miss being able to be generous with a tip when I feel like it, I think it's time for the practice to be put out to pasture.
I don't like tipping for those situations where it's unclear how much is appropriate, for instance grocery delivery at the supermarket says their employees won't take tips but then you talk to the delivery person and they say that it's bullshit, people tip anywhere from $1 to $50 at Christmas. What am I supposed to do? Tip a percentage of my groceries? That's ridiculous. Nobody on the receiving end will honestly tell you how much to tip, because they want you to overestimate it.
But when it's clear what to do, like in restaurants and cabs, I'm happy to tip a percentage.
If one increase the minimum wage the business employing people have 3 choices:
1. Have less profit, but this is not in the business owners interest
2. Increase the prices, this might be possible. This would normally lead to less customers since the cost increased
3. Become more effecient, reduce the number of people employed
I would guess mostly and sometimes 2 would be the normal response. Nobody wants to decrease their profit and the profit can not be lower than 0 over time.
Technology, by increasing per-worker productivity, should increase labour value.
(Mind: I said "labour value", not "labour compensation". There's a difference.)
Technology that decreases value of workers isn't technology, at least in the economic term (Solow) which sees it as an increase in productivity not accounted for by capital or labour directly (the Solow Residual).
There is certainly technology that substitutes many cheap (low-skill) workers for a few individually more expensive ones. The value to the business of the labor would increase, and on average "labor value" would be higher, but it would be different people's labor having more value.
At the same time, all else equal this would reduce the relative demand for the low-skilled worker, leading to a fall in the competitive wage they could get.
So, yes, "technology" should increase productivity and thus mean "labor value", but individuals can definitely lose out.
Depends on you definition of labour. The workers labour is playing a decreasing role in productivity so their value is decreasing compared to the growing value of technology.
In other words technology and humans are in competition with each other too and ultimately technology will win most jobs.
>It does not solve the actual problem of technology decreasing the value of each worker in most of those fields.
Technology doesn't reduce the value of workers, it just shifts the nature of work required.
Austerity and outsourcing reduce the overall level of demand for workers.
Technology is promoted as the scapegoat for austerity and trade deals because of the desire to shape public opinion such that anti-austerians / trade reformers (hard to dismiss) are seen as luddites (easy to dismiss).
The luddite fallacy is a fallacy in itself. It's only easy to dismiss because you choose to ignore the very reality you live in.
Jobs are moving two ways. For a smaller and smaller part of the population wages are going up, for the rest it's going down.
This is in big parts because technology has pushed the need for people to do jobs out.
When automated cars become a reality not only uber drivers but truck drivers (the most common job in the US) is going to be out of jobs. Where are they going to go when most of those jobs are going to be obsolete? You must be able to point to something now. Not just claim that we are going to find someting for them to do. They don't have the time to get re-educated to learn any of the skills that are required for the jobs that are left.
The problem with all you techno-optimists is that you don't understand that technology is a competitor not just and aid to humans and that it progresses exponentially not just linearly.
The horses didn't find new jobs after the car replaced them. Technology is increasingly competing not just with our muscle but with our brains.
So yes technology actually decreases the value of the worker by making them less and less useful for the production output.
What it doesn't do is reduce the value of the work needed to get done but this will now be back in the hands of those who own the capital.
Reality speaks for itself.
Structural unemployement is increasing, the actual wages one can make doing any one jobs is for most decreasing and for those it's increasing the amount of people who can actually do it is decreasing.
Driverless cars hyperware? Tell that to Uber who is actively working on it.
But horses didn't and they are part of the animal race too.
Sure it has value, to humans but not in the areas we consider jobs. Techno optimist is someone who sees technology primarily as a tool not a competitor which as far as I can see is exactly what you do.
I don't understand this. The federal minimum wage (7.25 USD) in US is higher than Czech average wage (~6.78 USD), yet things generally aren't any cheaper here. Taxing crippling. I thought the minimum wage at its current height is unsustainable, and they want to raise it even more?
By the way, what are the "leaked documents" in the title? The public survey and the public research?
I haven't read all the comments but I think there is a large sector of the workforce being ignored in the discussion. I live in a rural area and most manufacturing jobs here start in the $10/hr range. All the companies starting less than the new minimum will have to increase wages as well. This will include all experienced people who will now want to be earning more because the floor has now risen by x dollars.
It's a vicious circle. Increased wages will result in increased consumption and contribute to making the rich richer while flooding the poor with goods with built-in obsolescence. It would be much better to learn living with much less than we do now and teach the one who try to deprive our workforce that they are dependent form us.
First off, most Americans are already in a borderline financial crisis, and you're saying that it's better they stay this way than get more money to "increase consumption"?
Obviously if you have more money, you will increase consumption, but the more money you make, there will be diminishing consumption. It's not like people making $30 million a year spend 95% of it at Walmart. The more money you make the more you either invest or save (as a percentage of your income), even if the total consumption increases as well. In other words, having more people with more money is not a "bad thing" for the economy (or their personal lives). Quite the opposite.
Second, if there's a stronger middle class, it means the money paid to businesses will be much more distributed. When people have little money, then they can only afford to spend on "necessities", which by default shrinks the market to a handful of business categories, which means only a few will be able to get "richer".
It's also likely that only the biggest such businesses will survive thanks to better economies of scale and people's price sensitivity due to the very low incomes, which means there will be higher inequality and less competition in the market.
When more people have more money, they buy all sorts of stuff, giving life to all sorts of new businesses and because consumers aren't as price sensitive, competition will be higher as well.
As always, lots of opinion from people who have never taken a risk, used their own money, launched a non-trivial business, ran it for a decade and lived the reality of a competitive imternational marketplace while trying to survive govenrment fucking shit up all around you.
Nah, forcing a 50% hike in minimum wage will only have one effect. And anyone who has operated a non-trivial business for a while knows what that will be. What was Ross Perot's famous line about a huge sucking sound?
Do you non-business folks want me to spell it out? Well, I don't have the time to describe all that will happen. I'll just pick one consequence. This one highhlights the economic tsunami this will be:
You only need one, or a handful, of people at minimum wage to destroy jobs and even the very viability of a business.
So, you have 50 people earning $15 to $20 per hour today. Maybe you have another ten earning $25 to $50. And you have, say, five, earning minimum wage.
In five years your minimum wage folks go to $15 per hour. An incredible 50% raise.
The folks making $15 to $20 know this. They don't want to be at minimum wage or thereabouts. Their wages are likely to have to go up. What do we do? One group just got a 50% raise. Do we give everyone a 50% raise? No, let's try $5 per hour.
We now go from $15 and $20 to $20 to $25. In other words, 25% to %33% hike in wages for mid-range employees.
Of course, those making $25 to $50 now want their cut. Let's give them $5. So, $30 and $55 it becomes.
On the aggregate, mid-range employees probably represent the bulk of your labor expenses. Your real costs just went up somewhere around 33%.
Can we raise our prices? Probably not.
What we now have is a hit in profitability AND a cashflow squeeze. And we know we can't survive them.
Well, fuck it! Let's fire the minimum wage earners and problem solved. We only have five of them and they triggered this mess.
Will that solve the problem? No. Your employees know about this new scale out there. They don't think it is fair that they earn anywhere close to what a 14 year old kid can get at Del Taco.
Well, shit! We didn't solve the problem.
Oh, wait a minute. A Chinese competitor who understands the math just lowered their prices by 10%, forcing us to follow suit and causing a further squeeze to our finances.
We need to take drastic measures.
We need to lay-off enough people to remain viable. We migt even have to shift some of the remaining people to part-time work.
The trouble is that we were straining to keep up as it was. We really can't produce enough goods with 25% less man-power.
Only one choice remains. We contract to have our goods and services made and performed in China and India. We shrink dow to a management and marketing team in the US, get out of the lease for our 50,000 square foor facilty and move into a 1,500 square foot office space.
And there you go: The huge sucking sound you'll hear is that of millions of jobs leaving the US.
Thanks everyone! Good job! We are really good at destroying ourselves from the inside. They are laughing their asses off in China right now.
Again, go start and run a non-trivial business and you'll understand. I don't think you understand how most businesses run. Not everyone is Facebook, Google or Apple. A payroll increase of 25% to 50% can kill most businesses, even healthy ones, if management does not take drastic measures to balance the equation.
Except that numerous studies have shown that your scenario isn't what really happens when the minimum wage is raised. Numerous states have raised the minimum wage in the past while surrounding states haven't, giving us a lot of actual comparison data (check out the Berkeley paper linked below). Quotes from an article from NYTimes[1]:
"
The weight of the evidence shows that increases in the minimum wage have lifted pay without hurting employment, a point that was driven home in a recent letter[2] to Mr. Obama and congressional leaders, signed by more than 600 economists, among them Nobel laureates and past presidents of the American Economic Association.
That economic conclusion dovetails with a recent comprehensive study[3], which found that minimum wage increases resulted in “strong earnings effects” — that is, higher pay — “and no employment effects” — that is, zero job loss.
"
The links you provide are for articles that are totally biased and carry an agenda.
Look, this isn't about politics or research papers. It's about math. As an engineer who founded and ran multiple companies over the last 30 years I can tell you math is a fucking bitch to face. It don't lie and it does not care if you like Obama or Trump. And simple math, in this case, tells the cold hard truth: These kinds of changes have consequences.
Even if you don't have a business you ought to be able to understand this. If gasoline went up 50% you would be forced to make some spending changes. Some won't care. Others would have to stop going out, buy a smaller car, sell their SUV, etc. If we also raised your rent or mortgage by 25 to 50 percent via mandate and your income did not increase at all. Well, extrapolate from there.
High minimum wage will screw the poor and middle class in more ways than one.
For example, if I have to pay someone $15 per hour rather than %10 (50% more just because some politician pulled the number out of their ass) I am likely to be far less tolerant of lack of experience or performance. There are whole layers of people who might have a very difficult time finding work for these reasons.
Nah, it's a bad idea.
So sorry to see that populism and pandering is destroying this country.
