Minimum Wage Debate A Failure Of Common Sense

[JoeTheEconomist]

@Everyone missed the most valid point here. I would happily abolish the minimum wage if we could also ensure 1) full (adequate) employment and 2) that the government doesn't play crony police buddy and forcibly restrict the right of people to form unions. Both of these are kind of a no-brainer.

However, we're still living in a system that allows high unemployment, which makes the minimum wage not only necessary, but also the most powerful tool in combating inequality and a stagnant economy. Presently, it would actually be enormously stimulative to raise the minimum wage; Any raise to the minimum wage now would feed directly into aggregate demand, significantly raise money velocity, thereby lowering unemployment and raising our GDP all at once. That we aren't doing it now is a failure of common sense.

The most universally acceptable decent alternative would be a state bank. North Dakota's done quite well with theirs.

Your points are not relevant because no one is saying that minimum wages increases will achieve full employment, or make unions more operative. These are things that you want, and put these conditions forward to getting rid of something that complicates both.

"Any raise to the minimum wage now would feed directly into aggregate demand, significantly raise money velocity, thereby lowering unemployment and raising our GDP all at once."

If we lived on the planet where that is true, I might agree with you. The problem is we don't.

 

[phattonez]

Your points are not relevant because no one is saying that minimum wages increases will achieve full employment, or make unions more operative. These are things that you want, and put these conditions forward to getting rid of something that complicates both.

"Any raise to the minimum wage now would feed directly into aggregate demand, significantly raise money velocity, thereby lowering unemployment and raising our GDP all at once."

If we lived on the planet where that is true, I might agree with you. The problem is we don't.

The fallacies that ensue when you ignore Say's Law are innumerable.

 

[ttwtt78640]

It is actually worse. "These programs include: the refundable portions of the Earned Income Tax Credit and Child Tax Credit". The EITC and CTC are credits that off-set tax obligations. The only proportion of the credit included here is the refundable part.

Yep. They were designed to undo the "harm done" by SS/Medicare taxes.

 

[JoeTheEconomist]

The fallacies that ensue when you ignore Say's Law are innumerable.

Global Crossing as I recall created a supply for bandwidth that resulted in a demand for bankruptcy lawyers.

 

[Grant]

It's a balancing game there gents. Capitalists want enough people working to buy their good and services but not so many as to cause wages to rise. 5% unemployment usually hits that mark nicely.

Why would Capitalists not want wages to rise? Costs are always passed along to the consumer so it makes very little difference whether wages go up or not.

What has happened in the past is when is that wages will go up only for certain businesses, thereby making it more difficult for them to compete. But in an open marketplace this is not a problem. Everything eventually evens out.

Government interference in the marketplace, more than any other human factor, is what generally creates the problems.

 

[Diogenes]

You should check out the definition of a straw man. Nobody in this thread has suggested anything remotely resembling this "more is better for every situation" idiocy. But you went and pulled this $100,000 nonsense out of your ass anyway. Why? I think raising the minimum wage is good, therefore I must agree that $100,000/hour is a good minimum wage? Well then you support 0% taxes. Because you started this straw man nonsense, not me.

The Laffer curve is a useless model because there's no way to actually apply it to the real world. You can't actually declare with any certainty where you are located on the curve currently, or even whether multiple peaks might exist.

Talk about a straw man argument... :roll:

 

[274ina]

same stupid arguments that the rich made in 1890 before the min wage.

And blame the victim?

"problem is a level of productivity that fails to command a higher wage"

Mcdonalds workers are "productive" enough for $5B in profits that goes to the TOTALLY "unproductive" idle rich ............

How about this.

The rich make less.

The workers make more.........that is the lesson loius the 16th did not learn.

 

[Diogenes]

Thomas Sowell is a man with some creds in this area. A Lesson for the Busybodies | National Review Online

Great link! Sowell is without doubt the wisest observer of American society now living.

 

[gavinfielder]

Your points are not relevant because no one is saying that minimum wages increases will achieve full employment, or make unions more operative. These are things that you want, and put these conditions forward to getting rid of something that complicates both.

"Any raise to the minimum wage now would feed directly into aggregate demand, significantly raise money velocity, thereby lowering unemployment and raising our GDP all at once."

If we lived on the planet where that is true, I might agree with you. The problem is we don't.

"You're wrong because you're wrong."
You don't actually know any economics, do you?

KevinKohler already pointed out the same thing with demand. Maybe you'd sooner listen to him--if you could listen at all.

 

[sawdust]

True, but higher wages aren't good for business owners, which is why true full employment is not possible in a capitalist society. Capitalists want unemployment to exist to keep wages down. The higher the unemployment rate, the better for business owners.

Glad to see you agree with Marx on this issue.

Sadly you don't know what you are talking about. It's not a goal of business to drive wages down. The goal is to attract and keep productive employees. Wages react to the market except for governmentally mandated minimums. Each task a business carries out has a value associated with it that impacts that businesses pricing structure. Generally the more complex or difficult the task the higher the wage.

The thing about the minimum wage is that its circular. Increases in minimum wage cause price increases which disproportionate affect the poor who spend a greater portion of their income on less expensive items. Tiffanies would not be affected in their pricing to the extent that food producers would.

Inflationary pressure on low cost items is bad for the poor as are suppressed hiring practices caused by businesses having to keep their labor costs within acceptable percentages of gross sales

 

[TiredOfLife]

Why would Capitalists not want wages to rise? Costs are always passed along to the consumer so it makes very little difference whether wages go up or not.

Learn Capitalism. That isn't it.

 

[head of joaquin]

Quoting Reagan is a sure sign of economic illiteracy.

There are plenty of studies that show MW laws work to benefit workers. In any case, the lumpen arguments against them -- Businesses will just raise prices! -- are nothing but vapid rightwing talking points with no basis in empirical data.

 

[head of joaquin]

Your points are not relevant because no one is saying that minimum wages increases will achieve full employment, or make unions more operative. These are things that you want, and put these conditions forward to getting rid of something that complicates both.

"Any raise to the minimum wage now would feed directly into aggregate demand, significantly raise money velocity, thereby lowering unemployment and raising our GDP all at once."

If we lived on the planet where that is true, I might agree with you. The problem is we don't.

Jesus. The velocity of money and its effects is a well known, measurable economic function. The fact that you are either unaware of it or don't think it's "on this planet" shows how devoid of knowledge your economic claims are.

NEXT DISCREDITED RIGHTWING MEME!

 

[head of joaquin]

It is actually worse. "These programs include: the refundable portions of the Earned Income Tax Credit and Child Tax Credit". The EITC and CTC are credits that off-set tax obligations. The only proportion of the credit included here is the refundable part.

Of course the EITC was a conservative idea created by a conservative think tank promoted by conservatives like Gingrich and passed by the conservative Reagan.

So now of course conservatives blame librals for their own policies. Typical.

 

[head of joaquin]

Labor laws and safety nets are a ruse. We didn't have mass starvation or scores of deaths in workplaces before these laws came into place. Funny how we still have the poor and workplace injuries, yet half of our paychecks are gone and high unemployment is now considered normal.

Jesus, the ignorance market evangelists have of history is phenomenal.

Timeline . Riding the Rails . American Experience . WGBH | PBS

February 1931
"Food riots" begin to break out in parts of the U.S. In Minneapolis, several hundred men and women smash the windows of a grocery market and make off with fruit, canned goods, bacon, and ham. One of the store's owners pulls out a gun to stop the looters, but is leapt upon and has his arm broken. The "riot" is brought under control by 100 policemen. Seven people are arrested.

 

[Grant]

Learn Capitalism. That isn't it.

I am a Capitalist.

 

[JoeTheEconomist]

Of course the EITC was a conservative idea created by a conservative think tank promoted by conservatives like Gingrich and passed by the conservative Reagan.

So now of course conservatives blame librals for their own policies. Typical.

The EITC was created in the mid-70s. Wrong president, wrong decade.

 

[JoeTheEconomist]

same stupid arguments that the rich made in 1890 before the min wage.

And blame the victim?

"problem is a level of productivity that fails to command a higher wage"

Mcdonalds workers are "productive" enough for $5B in profits that goes to the TOTALLY "unproductive" idle rich ............

How about this.

The rich make less.

The workers make more.........that is the lesson loius the 16th did not learn.

You credit the labor with making MCD 5 billion or 10 even. The problem is that it is the return on capital where the money is made not the return on labor.

 

[phattonez]

Quoting Reagan is a sure sign of economic illiteracy.

There are plenty of studies that show MW laws work to benefit workers. In any case, the lumpen arguments against them -- Businesses will just raise prices! -- are nothing but vapid rightwing talking points with no basis in empirical data.

You sound like Obama. "All economists agree" is a lie. But then again, you're known as a liar, or at least known to stretch the truth so why should I be surprised? There are way more studies that prove the negative effects of minimum wage.

 

[aberrant85]

How Milton Friedman

The Conservative Case for the Minimum Wage | EPRN

Debunking the Minimum Wage Myth: Higher Wages Will Not Reduce Jobs | Next New Deal

EXACTLY! These are great resources! :agree

Sadly you don't know what you are talking about. It's not a goal of business to drive wages down. The goal is to attract and keep productive employees.

No. The goal of business is to make money. Everyone agrees with that.

The thing about the minimum wage is that its circular. Increases in minimum wage cause price increases which disproportionate affect the poor who spend a greater portion of their income on less expensive items. Tiffanies would not be affected in their pricing to the extent that food producers would.

Who are the poor? If they are working, they are poor because they are only making minimum wage. In which case, if MW went up, the cost of goods would only go up proportionate to the amount of the cost of labor to a good, which is invariably less than 100%. Therefore inflation will never catch up with the increase in the MW. People making it will still have more buying power.

Inflationary pressure on low cost items is bad for the poor as are suppressed hiring practices caused by businesses having to keep their labor costs within acceptable percentages of gross sales

Businesses that hire MW generally have already figured out the balance of workforce to profit that they need. They know that if they only staff their McD's with 2 people, customers would be turned away because they could not handle the demand. On the other hand, they know when customer traffic is low to not have 15 extra employees waiting around on nobody, eating up profits. They have already figured out how many employees they need to operate, and they generally don't exceed staffing above their needs.

Now here comes the MW hike. Will McD's cut half their staff because they cost twice as much? Of course not, because they know how many employees they need to meet demand. Where do they make up the lost revenue? Of course they pass it on to the customer, raising the price of the food proportionate to its labor costs (less than 100% of overall costs).

Will they lose customers? If the MW hike was instituted immediately, they might, because the wage hike hadn't rippled up yet, raising the wages of the middle class who demand to make more now that the MW is closer to their salary. Once their wages see an increase, the customer traffic should be restored. But it's unthinkable that MW would double overnight. More likely the MW would increase in steps over 1-3 years, smoothing out the transition.

The only reason McD's cuts its staff is from increases in productivity, like self-flipping burgers, etc.

 

[douglas]

True. If raising the minimum wage would help, why not raise it $100,000 per hour? That way we could all work half a day and take the rest of the year off in comfort. Or (entering conspiracy theory territory now) is it possible that there is a point beyond which raising the minimum wage is counterproductive?

You'd die if you were dropped in the ocean, or the desert. Sometimes, it's an "8 glasses of water a day" situation. Right now we pay people 7 glasses, and they need one more. Not an ocean, not a desert, 8 glasses. Or, to lose my metaphor, a living wage.

 

[TiredOfLife]

I am a Capitalist.

Apparently not.

 

[aberrant85]

Anyone opposed to raising the MW at all must either think:

a. There should never be a MW

b. The minimum wage is at the perfect amount

If they think "a.", then ask what would happen if it was ended. It would be a mirror image of the "race to the bottom" of wages worldwide thanks to globalization.

An individual worker would not be more attractive to an employer, who will create a job for him, because he costs less. Rather, there will always be another worker willing to work for less. Not having a baseline, minimum wage will create a desperation for those who are suddenly making less money. Some individuals will simply take more jobs, working more hours to make the same money. They will take over other people's jobs, creating more unemployment and putting more people on welfare. Most companies will simply pocket the extra profit.

If they think its "b.", I don't know what to tell you, besides its a miracle of government policy that it just happens to be at the one correct amount, especially after 3 years of depreciation.

 

[sawdust]

EXACTLY! These are great resources! :agree



No. The goal of business is to make money. Everyone agrees with that.



Who are the poor? If they are working, they are poor because they are only making minimum wage. In which case, if MW went up, the cost of goods would only go up proportionate to the amount of the cost of labor to a good, which is invariably less than 100%. Therefore inflation will never catch up with the increase in the MW. People making it will still have more buying power.



Businesses that hire MW generally have already figured out the balance of workforce to profit that they need. They know that if they only staff their McD's with 2 people, customers would be turned away because they could not handle the demand. On the other hand, they know when customer traffic is low to not have 15 extra employees waiting around on nobody, eating up profits. They have already figured out how many employees they need to operate, and they generally don't exceed staffing above their needs.

Now here comes the MW hike. Will McD's cut half their staff because they cost twice as much? Of course not, because they know how many employees they need to meet demand. Where do they make up the lost revenue? Of course they pass it on to the customer, raising the price of the food proportionate to its labor costs (less than 100% of overall costs).

Will they lose customers? If the MW hike was instituted immediately, they might, because the wage hike hadn't rippled up yet, raising the wages of the middle class who demand to make more now that the MW is closer to their salary. Once their wages see an increase, the customer traffic should be restored. But it's unthinkable that MW would double overnight. More likely the MW would increase in steps over 1-3 years, smoothing out the transition.

The only reason McD's cuts its staff is from increases in productivity, like self-flipping burgers, etc.

If you are or ever have been in business you'd understand that businesses have lots of goals. Certainly profit is a goal of every business but it's shallow to say that profit is the only goal of business, unless you are into logical fallacy.

Who are the poor? If they are working, they are poor because they are only making minimum wage. In which case, if MW went up, the cost of goods would only go up proportionate to the amount of the cost of labor to a good, which is invariably less than 100%. Therefore inflation will never catch up with the increase in the MW. People making it will still have more buying power.

As I said, circular or if I were to break down this paragraph, tortured. The goal here, it seems to me is a never ending cycle of not having enough coupled with a never ending quest to separate production from remuneration.

Businesses that hire MW generally have already figured out the balance of workforce to profit that they need. They know that if they only staff their McD's with 2 people, customers would be turned away because they could not handle the demand. On the other hand, they know when customer traffic is low to not have 15 extra employees waiting around on nobody, eating up profits. They have already figured out how many employees they need to operate, and they generally don't exceed staffing above their needs.

Now here comes the MW hike. Will McD's cut half their staff because they cost twice as much? Of course not, because they know how many employees they need to meet demand. Where do they make up the lost revenue? Of course they pass it on to the customer, raising the price of the food proportionate to its labor costs (less than 100% of overall costs).

Will they lose customers? If the MW hike was instituted immediately, they might, because the wage hike hadn't rippled up yet, raising the wages of the middle class who demand to make more now that the MW is closer to their salary. Once their wages see an increase, the customer traffic should be restored. But it's unthinkable that MW would double overnight. More likely the MW would increase in steps over 1-3 years, smoothing out the transition.

The only reason McD's cuts its staff is from increases in productivity, like self-flipping burgers, etc.

If I may let me explain how businesses generally figure out the balance of workforce to profit. To make profit, restaurants have different categories in their accounting. Simply put they have fixed, controllable and semi controllable. Fixed costs include things like rent and loan payments. Controllable expenses are things like food. You only have to buy what you need to replace what you sold. Labor is a semi controllable because if nobody comes in you still have to pay for it but if you aren't busy you can send people home. I don't know what McDonalds theoretical labor cost is but generally labor costs with management are 25 or 26 percent of gross volume. With all of the other costs of doing business, insurance, taxes ect. McDonalds theoretical profit is only 10% of gross volume. You can see that when you look at business models what you pay people is important but more important than hourly wage is operating percentages that have to be maintained in order to make a thin profit. If you increase wages there are only two options. Raise prices or cut staff. If an increase in price equals less volume you have to cut staff anyway because you have to maintain the labor percentage.

I maintain that Obama will never create an economic environment which encourages and nurtures confidence in the private sector which is about all the feds can do to create permanent good paying jobs, so behind his leadership we will always have weak job growth, millions of peopel who have dropped out of the job market and we'll be stuck talking about the minimum wage because that's all the jobs there are with Obamanomics.

 

[aberrant85]

If you are or ever have been in business you'd understand that businesses have lots of goals. Certainly profit is a goal of every business but it's shallow to say that profit is the only goal of business, unless you are into logical fallacy.



As I said, circular or if I were to break down this paragraph, tortured. The goal here, it seems to me is a never ending cycle of not having enough coupled with a never ending quest to separate production from remuneration.


If I may let me explain how businesses generally figure out the balance of workforce to profit. To make profit, restaurants have different categories in their accounting. Simply put they have fixed, controllable and semi controllable. Fixed costs include things like rent and loan payments. Controllable expenses are things like food. You only have to buy what you need to replace what you sold. Labor is a semi controllable because if nobody comes in you still have to pay for it but if you aren't busy you can send people home. I don't know what McDonalds theoretical labor cost is but generally labor costs with management are 25 or 26 percent of gross volume. With all of the other costs of doing business, insurance, taxes ect. McDonalds theoretical profit is only 10% of gross volume. You can see that when you look at business models what you pay people is important but more important than hourly wage is operating percentages that have to be maintained in order to make a thin profit. If you increase wages there are only two options. Raise prices or cut staff. If an increase in price equals less volume you have to cut staff anyway because you have to maintain the labor percentage.

I maintain that Obama will never create an economic environment which encourages and nurtures confidence in the private sector which is about all the feds can do to create permanent good paying jobs, so behind his leadership we will always have weak job growth, millions of peopel who have dropped out of the job market and we'll be stuck talking about the minimum wage because that's all the jobs there are with Obamanomics.

But from the business's standpoint, since raising the MW affects every business in the US including all their competitors, isn't there no change in competitiveness? People still need to eat, after all, and anywhere they go will have been affected by the same MW increase.