Minimum Wage Debate A Failure Of Common Sense

[FederalRepublic]

I understand what you are saying, but we will just have to agree to disagree on this because I don't believe in any subsidies at all. If something (or someone) can't exist without a subsidy, then it probably doesn't need to exist, as it is costing more than it is producing, and essentially making everyone else more poor.

Of course there are some necessary exceptions, like the extremely disabled and elderly and young children.

Someone else suggested that minimum wage IS a form of subsidy. I disagree with that totally. I see minimum wage more as a mechanism to protect lower end workers from the wage disparity that exists due to natural distortions of negotiating power. If minimum wage was substantially higher, we wouldn't NEED to subsidize either the individual or the low wage paying employer.

I also believe that a higher minimum wage would result in more consumer demand, thus more jobs, more business profit, and more creation of wealth. When people ask me "where does the money to pay higher wages come from", I think it should be obvious that it comes from the creation of additional wealth that businesses create when they expand due to increases in demand.

I'm not talking about a ludicrous increase in minimum wage, like the $100 or $1,000 an hour minimum wage that anti-minimum wages nuts suggest, I'm talking about amounts that are economically viable, without forcing inflation. There is a logical range to minimum wage that we must work within. Obviously the low end of that range is $0, the upper end would be the average dollar of value produced per worker in the US, which is a little more than $50/hr (GDP/workers/work hours). Somewhere between $0 and $50 is the ideal minimum wage.

Maybe we are already at that wage or even above it, but seeing how many countries have either mandated or effective minimum wages much higher than the US minimum wage, and also have unemployment rates lower than in the US and inflation that is either lower or comparable, I would seriously doubt that we are at or above the ideal minimum wage. We could probably double it, although I wouldn't recommend doubling it instantly, it should be done over several years or maybe even a decade.

If simply paying everyone more money really increased productivity, you wouldn't have to pass a law...

 

[AlabamaPaul]

It's hard to do, I will research it, honestly, it's a good question.

Now since you have assigned me a task, can you show me one time where increasing the minimum wage has increased poverty?

Actually, it doesn't take much research to confirm that poverty has remained rather steady for decades...

 

[Mach]

And I usually end up posting links to relevant examples of exactly what I'm talking about. This trend has been going on since the 80s, guy, it's not an Obama, or even a Bush thing. Neither have helped, but they certainly aren't the cause. The causes are legion, but greed combined with crony capitalism would be the front runners. The only thing tedious is explaining this over and over, often to the same people, and they have no credible rebuke, so they drop it cold, only to question the message, the same one they couldn't refute before, when it happens to come up again, as its prone to do in threads relating to economics. Good day.

Cognitive dissonance just ends up being ad hom.

The reality is that I think people who are business leaders, owners, CEOs, managers, look at your posts and do not believe you know what you're talking about. I do. Sawdust did. Sure they read the words and understand them, but they are so far from the reality of the real world positions that you refer to, that it seems as though you've been reading propaganda or watching movies/reading about these topics, rather than having actual experience. That's not cognitive dissonance though is it? It's just good old fashioned ignorance.

This is likely the root cause. But even if we ignore root cause, the fact that you continue to blast what amounts to "all CEOs" as being greedy and the ruination of our economy, is on the face absurd. It's discriminatory, it's backed by no evidence, and no plausible explanations have even been floated. It's really no different than calling all jews greedy. Or all minorities criminals. But somehow, in what passes for public discourse, if you're demonizing people you're envious of it's magically OK. I'm informing you that you're wrong, that you are making wild accusations without having actual real world experience or at least evidence, and that you're insulting a huge group of people including me, personally, by claiming I'm (insert all the negatives you've been spouting on the forums). Can you envision any more ways you can be in the wrong on a single issue?

 

[gavinfielder]

Ok, I can accept that argument. That's more reasonable. I'll have to think on that. This, however:

Minimum wage is just one sector of the work force. If you raise the wages of the minimum waged worker, those who make more then minimum wage is going to want higher wages as well.

I have never seen anything that suggests this is actually the case. It's another one of those neoliberal myths with nothing to actually back it. I can see why some people might think that, granted, but I'd call it a silly sense of self-aggrandizement to think that they should always earn more than any particular person. I certainly wouldn't value $12/hr employees at $14 suddenly just because I'm required to pay $9 for others.

 

[gavinfielder]

Any chance there's a connection?

I don't see any significant and relevant connection between the loss of certain menial jobs to technology and the fact that the average minimum wage worker is older now. Do you? I'm all ears.

 

[FederalRepublic]

I'm not saying that we should mandate a certain level of pay for everyone, it's mandating a higher minimum level of pay that I am supporting.

It rewards work more. Especially if you combine a higher minimum wage with eliminating means tested welfare - which is what I am suggesting.

By everyone, I meant everyone making minimum wage. How does it give them incentive to work harder or be more productive? What would be the driver?

I might be with you on eliminating means-tested welfare, but I don't think we should pull the rug from people who truly aren't capable (that doesn't describe the majority of the welfare roles). How do you decide who's needs help?

 

[FederalRepublic]

I don't see any significant and relevant connection between the loss of certain menial jobs to technology and the fact that the average minimum wage worker is older now. Do you? I'm all ears.

You don't see any relevant connection to the disappearance of low-skilled jobs and mandated increases in costs of hiring low-skilled workers?

 

[head of joaquin]

Actually, it doesn't take much research to confirm that poverty has remained rather steady for decades...

So the MW laws didn't cause a problem after all.

However, your claim is a nonsequitur. Poverty is a moving target, affected by lots of economic inputs. It rises and falls according to those inputs, which generally can't be isolated. Judging the impact of MW laws by measuring poverty rates is like evaluating global warming by the temperature on a particular day. It can't be done.

That said, we can say that workers who got MW got paid more than they would without MW, and we can evaluate the claimed negative effects of MW laws bruited by the rightwing noise machine. They prove to be illusory.

 

[imagep]

Just got my AARP BULLETIN today in the mail and on page 46 they had a really interesting chart using figures from the Bureau of Labor Statistics Department of Labor comparing the minimujm wage of fifty years ago to that of today. In 1963 the minimum wage was $1.25 per hour. It took 3.4 hours at that rate to fill your gas tank. Today the minimum wage is $7.25 and it takes 8.4 hours at that wage to fill your gas tank.

In 1963 it took 61.9 weeks at minimum wage to buy a Ford coupe while now it would take 76.6 weeks to do so at minimum wage.

In 1963 you could buy a new home (median price) after 6.7 years of minimum wage salary - today it would take 16 years of the same.

Clearly, minimum wage has not kept up with real prices people have to pay.

And people wonder why demand isn't keeping up with our population growth (at least recently).

In 1963 the average top CEO had to work for an hour and a half to afford a tank of gas, today they have to work for 3.5 seconds. The average top executive had to work for 1.55 weeks to afford that Ford coupe in 1963, now they have to work for 36 minutes. (disclaimer, I just totally made those figures up)

 

[gavinfielder]

You don't see any relevant connection to the disappearance of low-skilled jobs and mandated increases in costs of hiring low-skilled workers?

That's reasonable, with the caveat that it's all inevitably dependent on aggregate demand. That's not what I said though. What connection does it have to the fact that the average minimum wage worker is older than in the past?

 

[FederalRepublic]

That said, we can say that workers who got MW got paid more than they would without MW...

You can say that, but that doesn't make it truth.

 

[FederalRepublic]

And people wonder why demand isn't keeping up with our population growth (at least recently).

I don't wonder at all, and it's not because the minimum wage is too low.

 

[imagep]

If simply paying everyone more money really increased productivity, you wouldn't have to pass a law...

It increases PRODUCTION, but maybe not productivity (although I suspect it would do that also). The reason that it increases production is because low end earners, who tend to spend every penny that they get, would purchase far more, thus business sales would increase, business profits would increase, businesses would expand and hire more people, and we end up with more productivity due to business expansion and more people working and producing wealth.

The reason that companies don't pay more voluntarally to create this effect is because businesses don't try to effect our macro economy, only their own micro economy. McDonalds increases it's wages would do little to increase demand, and McDonald's would lose competitiveness against their largest rivals. It all low wage paying companies HAD to increase wages, the aggregate demand would rise and no one company would lose relative competitiveness.

To understand economics, either on a micro or macro scale, you also have to understand business and consumer behavior. Thats what makes economics so fun. It's never cut and dried, and there are always a zillion different factors going on.

 

[AngryOldGuy]

Clearly, minimum wage has not kept up with real prices people have to pay.

Clearly you miss the point by a country mile or was the original intent?
Did they say HOW HIGH the minimum wage would have to be to equal the purchasing power of the early 60's
Hah when I was a kid then if someone was bringing home a grand a month they were doing more than OK

 

[imagep]

Actually, it doesn't take much research to confirm that poverty has remained rather steady for decades...

OK, I'll stipulate that to be true. Of course minimum wage has been declining since the late 1960's when adjusted for inflation.

One thing I do know is that during the mid 1980's, I was working my way through college, working low income jobs. The increase we had in minimum wage reduce MY level of poverty.

 

[AngryOldGuy]

Since when is someone making minimum wage supposed to buy a car and a house? Are they supposed to be happy with minimum wage in the land of hopey changey, Obamanation style?

 

[imagep]

Clearly you miss the point by a country mile or was the original intent?
Did they say HOW HIGH the minimum wage would have to be to equal the purchasing power of the early 60's
Hah when I was a kid then if someone was bringing home a grand a month they were doing more than OK

There has been a figure tossed around recently of about $10.50 per hour to match the 1968 minimum wage level adjusted for inflation. No one argued that it wasn't correct, so I have to assume that it is more or less in the right ballpark.

 

[FederalRepublic]

That's reasonable, with the caveat that it's all inevitably dependent on aggregate demand. That's not what I said though. What connection does it have to the fact that the average minimum wage worker is older than in the past?

You said those jobs don't exist any more. As for the older average minimum wage worker--the existence of the minimum wage itself, availability of free/low-cost education, bad economy, lazy kids. I could think of a number of reasons for that.

 

[JoeTheEconomist]

Well...if you can figure out how to make companies reduce their prices on their products then what other solution is there to keep people from living in the street?

I didn't say that I had a solution, only that the idea that a higher minimum wage will offset poverty is on the surface absurd. It is untargeted welfare. Untargeted welfare that undermines the targeted welfare. This idea appeals to those largely who have no investment in the solution. They don't own businesses that will have to pay the higher wages, nor do they see that they will have to pay higher prices on goods. They are only too happy to spend someone else's money on someone else's problem. The MW solution does not fix the problem you describe anyway.

 

[imagep]

Since when is someone making minimum wage supposed to buy a car and a house? Are they supposed to be happy with minimum wage in the land of hopey changey, Obamanation style?

So you don't want car companies to sell lots of cars, or builders to build lots of houses?

Do you just want people to be miserable, or companies to be bankrupt?

What's your point?

As our nation becomes wealthier and wealthier due to accumulated long term wealth (mostly in the form of technology, education, and land improvements), and as we become more productive due to technology, I would think that our goal should be for everyone who is willing to work, even those at the bottom of the totem pole, to live a nice lifestyle.

There is no merit in poverty.

 

[head of joaquin]

You can say that, but that doesn't make it truth.

Then you shouldn't mind that we have MW laws. If they don't raise wages, you have nothing to complain about.

(You need to work on your memes -- they're contradicting each other with people who notice)

 

[imagep]

I didn't say that I had a solution, only that the idea that a higher minimum wage will offset poverty is on the surface absurd. It is untargeted welfare. Untargeted welfare that undermines the targeted welfare. This idea appeals to those largely who have no investment in the solution. They don't own businesses that will have to pay the higher wages, nor do they see that they will have to pay higher prices on goods. They are only too happy to spend someone else's money on someone else's problem. The MW solution does not fix the problem you describe anyway.

The idea appeals to me, and I do own a business.

The reason it appeals to me is that if minimum wage was higher, my customers would purchase more of my products, and thus I would become more wealthy. You see, businesses don't really make money by paying low wages, they make money by selling goods and services. A 5% increase in my gross sales would improve my bottom line far more than a 20% increase in minimum wage would harm it.

Do you just not like business owners?

 

[JoeTheEconomist]

There has been a figure tossed around recently of about $10.50 per hour to match the 1968 minimum wage level adjusted for inflation. No one argued that it wasn't correct, so I have to assume that it is more or less in the right ballpark.

It isn't that it isn't correct. It is the highest level the WM has ever reached in real terms. The problem isn't that the figures aren't right. The problem is that the wording suggests that the $10.50 per hour is how a benchmark that is a historical norm when in fact it is a historical max.

 

[FederalRepublic]

It increases PRODUCTION, but maybe not productivity (although I suspect it would do that also). The reason that it increases production is because low end earners, who tend to spend every penny that they get, would purchase far more, thus business sales would increase, business profits would increase, businesses would expand and hire more people, and we end up with more productivity due to business expansion and more people working and producing wealth.

The reason that companies don't pay more voluntarally to create this effect is because businesses don't try to effect our macro economy, only their own micro economy. McDonalds increases it's wages would do little to increase demand, and McDonald's would lose competitiveness against their largest rivals. It all low wage paying companies HAD to increase wages, the aggregate demand would rise and no one company would lose relative competitiveness.

To understand economics, either on a micro or macro scale, you also have to understand business and consumer behavior. Thats what makes economics so fun. It's never cut and dried, and there are always a zillion different factors going on.

This is the circular argument of arbitrarily raising wages to increase demand to increase production to increase profit. Why not just hand out money?

 

[imagep]

It isn't that it isn't correct. It is the highest level the WM has ever reached in real terms. The problem isn't that the figures aren't right. The problem is that the wording suggests that the $10.50 per hour is how a benchmark that is a historical norm when in fact it is a historical max.

I think the point is that a minimum wage of $10.50 didn't destroy our economy back then, or increase unemployment or increase inflation, so why would it be harmful now?

As our society becomes richer, why should the poor become poorer?