Bold increases in the minimum wage

[csbrown28]

I agree, naturally, that increasing wages will increase demand by those getting a raise - current workers. My point was that those on fixed pensions or "safety net" programs get no benefit from that increased demand (resulting in higher prices for goods and services) which only benefits current workers.

That is a legitimate concern. However, run with me for just a sec here. Imagine that wage increases since 1960 had been constant in real terms and today people were making the same as they did in 1960 in inflation-adjusted dollars (whatever the number is $10.50-$20 depending on who you ask), how do you think people on fixed incomes would view prices then? Would they see those prices as too high, or are prices today artificially low and people on fixed incomes should consider themselves fortunate that prices have been this low for this long?

I think, in reality had the market adjusted to small increments in the minimum wage over 5o years, this wouldn't be an issue. The problem is the disruption that will occur as a result of the failure to raise wages over the long term. Now the justification for not raising wages is that it will cause hardship for people on fixed incomes? What about the hardship that people working for minimum wage experience?

 

[Neomalthusian]

Payroll taxes only remove money from an economy.

We're a monetarily sovereign country, so all federal taxes remove money from the economy, and therefore federal spending puts money into the economy. The problem with payroll taxes (and other mandates related to employing someone) is that they disincentivize firms expanding their payroll.

If employees had but to wave their hands and demand higher salaries and employers would do it, would we even be having this conversation?

Denying that wage floors create wage inflation generally is extremely silly. The entire point of minimum wages is to promote wage inflation across the board. And obviously there has to be increases throughout the rest of the wage scales to accommodate a significantly increased minimum wage. There could be some wage compression, but the general movement has to be up for other positions too. Why do you think there are different levels of pay for different jobs right now? Those incremental differences between different types of positions are going to be maintained. That's the entire point of pushing for higher wage floors.

 

[csbrown28]

Let's see, I have some skill and get paid $20 per hour, some fry boy comes along and starts at $15 per hour, what sets us apart? Also what happens with inflation?

Inflation results when market demand exceeds market supply. Do you think that if people making less than $15hr were to make $15 (increased in increments over at least 5 years) that the result would be that, as a nation, we'd be unable to meet the demand for whatever goods and services these people want?

 

[ttwtt78640]

That is a legitimate concern. However, run with me for just a sec here. Imagine that wage increases since 1960 had been constant in real terms and today people were making the same as they did in 1960 in inflation-adjusted dollars (whatever the number is $10.50-$20 depending on who you ask), how do you think people on fixed incomes would view prices then? Would they see those prices as too high, or are prices today artificially low and people on fixed incomes should consider themselves fortunate that prices have been this low for this long?

I think, in reality had the market adjusted to small increments in the minimum wage over 5o years, this wouldn't be an issue. The problem is the disruption that will occur as a result of the failure to raise wages over the long term. Now the justification for not raising wages is that it will cause hardship for people on fixed incomes? What about the hardship that people working for minimum wage experience?

Small and gradual increases in the federal MW (to keep pace with inflation) are not a problem, in fact that is probably a good idea, but the $15/hour now (over a 100% increase) is not a good idea. Many like to use 1968 as the MW base year simply because it was the inflation adjusted high yet had 1939 been used as the base year (after a 100% increase from the initial 1938 amount) it would be about $8.40/hour now. I think that periodic (annual?) federal MW adjustment for inflation, as is done with Social Security retirement benefits, would be a good idea.

 

[csbrown28]

We're a monetarily sovereign country...

Agreed

...so all federal taxes remove money from the economy...

Agreed

...and therefore federal spending puts money into the economy.

Agreed

The problem with payroll taxes (and other mandates related to employing someone) is that they disincentivize firms expanding their payroll.

Hmmm...Two sides of the same coin. Firms don't hire people because they can. Firms hire people because the demand for their goods and or services is greater than they can produce at their current level of employment. Reducing taxes, especially on those that spend most of their income back into the economy, will result in increasing demand.

Denying that wage floors create wage inflation generally is extremely silly.

I don't recall denying that increases in pay could cause price increases, especially in the short term, but if you understand how prices are determined, you might realize that higher pay at the low end might increase overall demand. Higher demand can result in lower costs due to economies of scale. So it's possible, though not inevitable, it really depends as economies of scale have a rate of diminishing return, that costs could be lower if pay were higher.

Now, I'm speaking of economy-wide. Facebook has 1000 employees and rakes in billions (And I bet not a single one of them works for less than $15hr), so a minimum wage increase will only increase their revenue as more people click on ads to buy things and use their services, but the service, fast food, hospitality and other industries that rely on low wage workers will see their costs rise. In the aggregate, my money is in greater demand as the velocity of money increases.

The entire point of minimum wages is to promote wage inflation across the board.

Disagree, though short-term inflation might occur, the point of minimum wage is to pay people something approaching a "living wage". When more people are creating higher demand businesses will need more employees and unless we run out of people to do work (this is where automation and immigration help) and the real resources needed to create whatever it is that might experience higher levels of demand, Inflation will be minimal.

And obviously, there has to increase throughout the rest of the wage scales to accommodate a significantly increased minimum wage. There could be some wage compression, but the general movement has to be up for other positions too. Why do you think there are different levels of pay for different jobs right now? Those incremental differences between different types of positions are going to be maintained. That's the entire point of pushing for higher wage floors.

I don't disagree that there would be some shifting of wages at levels above $15. Bullseye was claiming that there would be "commensurate" rases as a result. That's what I was disagreeing with. The reality is that any rise in wages should come over at least a 5 year period, probably more. Will the guy making $15.50 make more, probably maybe a few bucks, but it won't be "commensurate". In any event, any shift in wages to increase pay in the lower and middle class would pay for itself in increased demand.

Of course, the increases in pay won't result in distributed demand. SOme companies will do well and others not as well, but I still believe that in the aggragate, the economy will be better off.

 

[csbrown28]

Small and gradual increases in the federal MW (to keep pace with inflation) are not a problem, in fact that is probably a good idea, but the $15/hour now (over a 100% increase) is not a good idea. Many like to use 1968 as the MW base year simply because it was the inflation adjusted high yet had 1939 been used as the base year (after a 100% increase from the initial 1938 amount) it would be about $8.40/hour now. I think that periodic (annual?) federal MW adjustment for inflation, as is done with Social Security retirement benefits, would be a good idea.

If you are saying that an increase from $7.50--->$15 is a bad idea...Totally agree. That's a level of pay that should have happened over 40-50 years. Shorting it to instantaneously is a really bad idea. Honestly, just spitballing, I'd say increase the rate over 20 years raising the minimum every other year. It's not the cost of wages that are the real problem. It's the disruption that results. After that, we should come up with a way that the level is periodically reviewed so we're not back in this place in 40 years.

 

[csbrown28]

Small and gradual increases in the federal MW (to keep pace with inflation) are not a problem, in fact that is probably a good idea, but the $15/hour now (over a 100% increase) is not a good idea. Many like to use 1968 as the MW base year simply because it was the inflation adjusted high yet had 1939 been used as the base year (after a 100% increase from the initial 1938 amount) it would be about $8.40/hour now. I think that periodic (annual?) federal MW adjustment for inflation, as is done with Social Security retirement benefits, would be a good idea.

The problem with using numbers from that long ago is that it's not just costs that have risen, but the sheer number of items that people are likely to buy today have increased.

The other problem is we don't know discretionary costs vs mandatory costs, but I take your point.

 

[danielpalos]

Cost of living is an issue in California. A fifteen dollar an hour minimum wage, helps with that issue.

 

[lefty louie]

Increasing the minimum wage means, more people will be paying more payroll taxes.

And, put an upward pressure on wages.

I agree with the added tax, not sure if they want an upward tick in wages (They may) they do want the added taxes. I'm thinking they want to narrow the pay gap so things are more socialist style. Then again if wages go up so does inflation and taxes go along for the ride.

 

[lefty louie]

Inflation results when market demand exceeds market supply.

Yes but this would create false inflation, prices will catch up to the new found money and these minimum wage workers will once again be bottom of the barrel.

Do you think that if people making less than $15hr were to make $15 (increased in increments over at least 5 years) that the result would be that, as a nation, we'd be unable to meet the demand for whatever goods and services these people want?

When you take something from one and give it to the other you are not creating more of a demand or more cash, just more cash for some and less for others. Expl: Dunkin donuts coffee now $2, will cost $2.50, I didn't get a raise so to compensate I either limit my trips to dunkin or I stop buying something else. The owner of the store realizes less business due to increasing prices so he automates and lays people off so he can lower prices again.

 

[danielpalos]

I agree with the added tax, not sure if they want an upward tick in wages (They may) they do want the added taxes. I'm thinking they want to narrow the pay gap so things are more socialist style. Then again if wages go up so does inflation and taxes go along for the ride.

more people paying taxes means we can be taxed less, individually.

 

[danielpalos]

Yes but this would create false inflation, prices will catch up to the new found money and these minimum wage workers will once again be bottom of the barrel.




When you take something from one and give it to the other you are not creating more of a demand or more cash, just more cash for some and less for others. Expl: Dunkin donuts coffee now $2, will cost $2.50, I didn't get a raise so to compensate I either limit my trips to dunkin or I stop buying something else. The owner of the store realizes less business due to increasing prices so he automates and lays people off so he can lower prices again.

so what; just get another minimum wage job at fifteen an hour.

 

[lefty louie]

more people paying taxes means we can be taxed less, individually.

Now that's funny! When do you ever see lower taxes for the working class?

 

[danielpalos]

Now that's funny! When do you ever see lower taxes for the working class?

when the minimum wage is fifteen dollars an hour, and payroll taxes are being collected on it.

 

[lefty louie]

so what; just get another minimum wage job at fifteen an hour.

So why not just get another min wage job at $8 an hour now? It is all the same once inflation catches up.

 

[lefty louie]

when the minimum wage is fifteen dollars an hour, and payroll taxes are being collected on it.

So, the govt will just increase spending, like always. I can hear congress now, the poor just about doubled their rate of pay, we need to reward ourselves on a job well done, let's give us a raise.

 

[csbrown28]

Yes but this would create false inflation, prices will catch up to the new found money and these minimum wage workers will once again be bottom of the barrel.

If we look at the chart that comes in most econ 101 textbooks:

The chart assumes that capacity utilization is near 100%. This is done to simplify the lesson for new econ students by removing other variables. So it is correct only if certain assumptions are made. However, in reality, increasing demand will not result in increased scarcity thus shortages that would normally cause increasing prices will not occur. This is because as a nation, we are only utilizing about 76% of or productive potential, increases in demand won't result in higher prices, instead, it will result in higher utilization of existing capital resources and labor. In other words, if a company has unused capitral equipment it's paying for, it would rather increase volume and put unused equipment to work before it raises it prices. Instead, a company will increase profits via increased volume and economies of scale.

When you take something from one and give it to the other you are not creating more of a demand or more cash, just more cash for some and less for others. Expl: Dunkin donuts coffee now $2, will cost $2.50, I didn't get a raise so to compensate I either limit my trips to dunkin or I stop buying something else. The owner of the store realizes less business due to increasing prices so he automates and lays people off so he can lower prices again.

I'm not sure where you're getting your data or how you can assume that a cup of coffee would increase in cost by 25%. Wouldn't be near that much.[/quote]

According to the Bureau of Labor Statistics, 1.54 million people working in food preparation and serving related occupations make at or below the federal minimum wage of $7.25 per hour. Raising their hourly wages to $15 -- a 107% increase -- would cause prices to rise an estimated 4.3%. That means your $3.99 Big Mac would wind up costing $4.16, and an average fast-food meal costing $7.00 would go up in price to $7.31.

To calculate the data, the study used median data from the National Restaurant Association and Deloitte & Touche, finding limited-service restaurants employ a median of 9 employees. The data also assumes the median amount of sales generated per employee was $69,644 to generate $626,796 in sales.

A 4% price increase would be needed to make up the difference in salary if employees were paid $15 an hour. The following chart shows how the math works out:

Furthermore, to my knowledge none of this takes into account the number of people that will eat more fast food because they have more money.

Other factors that aren't considered is that when you pay people more, turnover decreases. Turnover is estimated to be 93% in fast food which costs approximately $4,700 per worker. It's projected that increasing wages to $15 will save $5.2 billion in savings for the fast food industry. Not to mention the decrease in social costs as local and state economies see less demand for social services helping to reduce revenue burdens on states which would allow for lower taxes.

 

[danielpalos]

So why not just get another min wage job at $8 an hour now? It is all the same once inflation catches up.

No, it isn't. That is like saying, why cut taxes; it is all the same once inflation catches up.

 

[danielpalos]

So, the govt will just increase spending, like always. I can hear congress now, the poor just about doubled their rate of pay, we need to reward ourselves on a job well done, let's give us a raise.

higher payrolls taxes.

 

[lefty louie]

If we look at the chart that comes in most econ 101 textbooks:

The chart assumes that capacity utilization is near 100%. This is done to simplify the lesson for new econ students by removing other variables. So it is correct only if certain assumptions are made. However, in reality, increasing demand will not result in increased scarcity thus shortages that would normally cause increasing prices will not occur. This is because as a nation, we are only utilizing about 76% of or productive potential, increases in demand won't result in higher prices, instead, it will result in higher utilization of existing capital resources and labor. In other words, if a company has unused capitral equipment it's paying for, it would rather increase volume and put unused equipment to work before it raises it prices. Instead, a company will increase profits via increased volume and economies of scale.





I'm not sure where you're getting your data or how you can assume that a cup of coffee would increase in cost by 25%. Wouldn't be near that much.

Furthermore, to my knowledge none of this takes into account the number of people that will eat more fast food because they have more money.

Other factors that aren't considered is that when you pay people more, turnover decreases. Turnover is estimated to be 93% in fast food which costs approximately $4,700 per worker. It's projected that increasing wages to $15 will save $5.2 billion in savings for the fast food industry. Not to mention the decrease in social costs as local and state economies see less demand for social services helping to reduce revenue burdens on states which would allow for lower taxes.[/QUOTE]
A standard DD store by me has 25 employees working directly on the sales floor, then you have delivery drivers, cleaning staff, and host of bakers/fryers that work at around $10 per hour who will all need to get a raise, and you don't think that will increase costs 25%, how about the added cost of supplies because the company that supplies the flour, oil, cups, bags, napkins, fuel, etc all have to now pay more for staffing.

 

[Lafayette]

A MINIMUM WAGE PLEDGE FROM 111 ECONOMISTS

But I am not certain that a price floor on the price of labor is the way for large numbers of people to exit poverty, as it is understood that price floors consistently produce surpluses.

Well, I am certain and a good number of economists also feel this way as well.

So, just google-the-question yourself. See what you get. There's both pro&con.

For instance, from the Economic Policy Institute:
Economists in support of a federal minimum wage of $15 by 2024 - excerpt:

The last decade has seen a wealth of rigorous academic research on the effect of minimum wage increases on employment, with the weight of evidence showing that previous, modest increases in the minimum wage had little or no negative effects on the employment of low-wage workers. It is time to support a bolder increase to address the fact that wages for workers at the low end of the labor market have continued to stagnate. Even if the growth of aggregate work hours for low-wage workers were to slow somewhat, workers who work less could still break even, or come out ahead, in terms of annual earnings. Since as many as 10 percent of the lowest-wage workers leave or start jobs every month, any decrease in the number of full-time equivalent jobs will mean that some workers will take more time finding a new job, or will work fewer hours. But many of these workers may still see their annual earnings rise because of their wage increase.

The benefits of gradually phasing in a $15 minimum wage by 2024 would be far-reaching, lifting pay for tens of millions of workers and helping reverse decades of growing pay inequality. The benefits of a $15 minimum wage in 2024 for workers, their families, and their communities far outweigh the potential costs. Of course, the minimum wage is just one of many policies designed to help low-wage workers. We believe that an increase in the minimum wage should be accompanied by complementary policies such as an expanded Earned Income Tax Credit (EITC), enhanced safety net, increased job training, and policies to generate full employment.

Sincerely,
Jacqueline Agesa, Marshall University, Ph.D.
Sylvia A. Allegretto, University of California, Berkeley, Ph.D.
Bernard E. Anderson, The Wharton School, Ph.D.
Robert M. Anderson, University of California, Berkeley, Ph.D.
Eileen Appelbaum, Center for Economic and Policy Research, Ph.D.
Peter Arno, University of Massachusetts Amherst Ph.D.
Michael Ash, University of Massachusetts Amherst Ph.D.
Stephen Baldwin, Retired, Ph.D.
Dean Baker, Center for Economic and Policy Research, Ph.D.
Nina Banks, Bucknell University, Ph.D.
James Baron, Yale School of Management, Ph.D.
Lourdes Beneria, Cornell University, Ph.D.
David Betson, University of Notre Dame, Ph.D.
Josh Bivens, Economic Policy Institute, Ph.D.
Gail Blattenberger, University of Utah, Ph.D.
Robert Blecker, American University, Ph.D.
Barry Bluestone, Northeastern University, Ph.D.
Raford Boddy, San Diego State University, Ph.D.
Barry Bosworth, Brookings Institution, Ph.D.
Clair Brown, University of California, Berkeley, Ph.D.
S. Charusheela, University of Washington, Bothell, Ph.D.
Lawrence Chimerine, Radnor Consulting, Ph.D.
Robert Coen, Northwestern University, Ph.D.
Gregory DeFreitas, Hofstra University, Ph.D.
James Devine, Loyola Marymount University, Ph.D.
Peter Diamond, Massachusetts Institute of Technology, Ph.D.
Laura Dresser, COWS/University of Wisconsin, Madison, Ph.D.
Adrienne Eaton, Rutgers University, Ph.D.
Peter Eaton, University of Missouri-Kansas City, Ph.D.
John Edgren, Eastern Michigan University, Ph.D.
Gerald Epstein, University of Massachusetts Amherst, Ph.D.
Emma García, Economic Policy Institute, Ph.D.

.... and others (111 in total)

Of course, you can believe whatever you want. But try living on a wage of less than $25K a year with two-kids to feed (which is the poverty-threshold today), and then do come back and tell us about your experience.

 

[Lafayette]

No people like me who have actually taken business classes and economics classes and management classes understand that a job can only pay so much money.

And all I am proposing is that, like Europe, an American child can expect the government to furnish him/her a post-secondary education that is nearly free.

And, yes, we reduce the DoD budget to obtain the funding necessary. (Works in Europe - no problem!)

Instead of starting wars around the globe, America should be educating its own children ....

 

[Lafayette]

1) Nonsense, that 2 to 4 hours (plus fuel and vehicle maintenance/depreciation costs) spent commuting must be considered. That was an important reason for my decision to become self-employed. If one must spend 10 to 12 hours per day in order to be paid for 8 hours of their labor then that reduces their net hourly pay rate by 25% to 50%.

2) Why is one justified in demanding $15/hour to make sandwiches when someone else must supply all of the ingredients and the place to make an serve those sandwiches? BTW, the federal MW is paid to less than 3% of all US workers and any state is welcome to raise the MW within their state.

Spurious argumentation - not the least bit worth a rebuttal ...

 

[ludin]

And all I am proposing is that, like Europe, an American child can expect the government to furnish him/her a post-secondary education that is nearly free.

And, yes, we reduce the DoD budget to obtain the funding necessary. (Works in Europe - no problem!)

Instead of starting wars around the globe, America should be educating its own children ....

There is no such thing as free and you don't understand how european free schools work either.
Not every kid gets to go to college for free. it is only the select few that are the top 10% get to go for free.

We do educate our children the problem is that government and union control of our schools as dumbed it down so badly that we
have a hard time competing.

 

[rhinefire]

2019 will be the year to get out of stock, inflation will be a killer.