Should minimum wage be tied to inflation?

[Mr.Nick]

Wages should be tied to wherever you live.

10 bucks goes further in Rockford Illinois than it does in Chicago..

 

[cpwill]

No. But I'd pay 25-cents more for a Big Mac.

Yes. But would you pay significantly more for a good or service than it was worth?

Probably not.

And neither will an employer.

There are lots of options for employers facing a scenario where their cost of employing an American (and remember, we don't just come with a price floor, we also come with tax costs and regulatory costs; if you want to actually give a job to an American, we're going to make sure you suffer for it), from shaping how they work their current workforce differently, reducing people, hiring illegals instead, or simply replacing low-skill personnel with non-employee options. Remember back in when they last raised the national minimum wage because Republicans thought it would help them in an election year? Did you notice how it was a couple months after that that all those self-checkout lines started showing up at Wal-Marts and grocery stores?


...what do you suppose happened to the former checkout clerks? Or the upcoming generation who would have moved into those positions, but now have no positions to move into?


Their price went up, so demand for them went down. Labor, like all other goods and services, exists on a supply/demand curve. We do not get to wish away reality simply because we really, really, want it. When we raise the price for hiring a low-skilled low-educated American, we decrease the demand for low-skilled low-educated American labor.

That is literally why we originally put the minimum wage into effect in the first place - it was an attempt to starve out the "Lower Races" and protect Decent White Americans from competition. Those who wrote the law knew exactly what it would do to the most vulnerable in our society, and that was their purpose.

 

[ttwtt78640]

You run the risk of being caught red-handed, of course. Doesn't give you much room to complain about the illegals in Texas taking your jobs, because, in essence, you're one of them. If you are injured at work, you have no workers' compensation or opportunity for Social Security disability. Or the unemployment safety net. Other than that, if you're okay with not paying your fair share, I really can't think of anything else.

Don't get me wrong -- No offense. I realize we do what we have to do. But, in my opinion, your employer is taking advantage of you; you just don't look at it that way.

SS disability does not require a current job, simply being declared unable to work for at least one year. The SS disability board looks at your past work history (not limitted to recent) and makes a determination, based on your age and education level as to whether it is worth helping to retrain you for other work or just declaring you "permanently" disabled. I attained my "full" SS benefit at age 26 (1980 - after working 40 quarters) and my maximum earnings period was in the early 2000s, when I lived near DC and worked on contract, writing computer programs, for the U.S. Navy's communication systems.

http://www.ssa.gov/dibplan/dqualify.htm

Other than SS/Medicare, for which I already qualify for as much as will ever get, I am not normally even liable for any FIT at my current income level. If I work "on the books" (1099) I am blessed with paying 2x what you pay for SS/Medicare since I am then considered "self employed", a mistake I made in 2006. I have a judgement against me that takes any IRS refund that I am due - so FTW. In about 2 and 1/2 years (at age 62), less time for my girlfriend, we will be able to collect SS and that will be a significant raise from what we now live on.

My "employer" varies frequently (as many as three per week), since I do everything/anything (handyman?) including, but not limitted to, demolition, carpentry (new/remodel framing, cabinetry and finish), fencing, landscaping, roofing, electrical, and plumbing. As I must compete with illegal aliens (or those that employ them) for work, the low wages that I get do not leave any room for additional federal taxation. Texas has no state income tax so they could care less what lets me earn money to spend. I have no business, per se, I get work (new employers?) only from referals.

 

[MaggieD]

SS disability does not require a current job, simply being declared unable to work for at least one year. The SS disability board looks at your past work history (not limitted to recent) and makes a determination, based on your age and education level as to whether it is worth helping to retrain you for other work or just declaring you "permanently" disabled. I attained my "full" SS benefit at age 26 (1980 - after working 40 quarters) and my maximum earnings period was in the early 2000s, when I lived near DC and worked on contract, writing computer programs, for the U.S. Navy's communication systems.

Disability Planner: How You Qualify For Social Security Disability Benefits

Other than SS/Medicare, for which I already qualify for as much as will ever get, I am not normally even liable for any FIT at my current income level. If I work "on the books" (1099) I am blessed with paying 2x what you pay for SS/Medicare since I am then considered "self employed", a mistake I made in 2006. I have a judgement against me that takes any IRS refund that I am due - so FTW. In about 2 and 1/2 years (at age 62), less time for my girlfriend, we will be able to collect SS and that will be a significant raise from what we now live on.

My "employer" varies frequently (as many as three per week), since I do everything/anything (handyman?) including, but not limitted to, demolition, carpentry (new/remodel framing, cabinetry and finish), fencing, landscaping, roofing, electrical, and plumbing. As I must compete with illegal aliens (or those that employ them) for work, the low wages that I get do not leave any room for additional federal taxation. Texas has no state income tax so they could care less what lets me earn money to spend. I have no business, per se, I get work (new employers?) only from referals.

You've got it covered! I was coming from a place that had you figured at mid-20's -- a whole different kettle of fish. Good for you!

 

[douglas]

No. The fact that inflation lowers the minimum wage in real terms is minimum wages' one silver lining. If the minimum wage today was $9.74, all that would change would be that more low-education low-experience Americans would be out of work, and the demand for illegals would be somewhat less higher.

Will the demand for illegals decrease if minimum wage is cut? Of course not! Companies want who ever will work for less, and illegals will always fit that bill. Rising the minimum wage has an effect of raising the median age of the lowest earners, pushing the younger people out of work. This is not an increase to unemployment, it just revolves unemployed, but experienced, workers back into the work force. Since this will employ many "heads of households", this leads to a support base for a portion of the younger workers who are switched out; essentially, it'll make living with your parents a little less of a burden to society. A small portion of these younger workers can also just pursue an education, completely removing them from the labor surplus. This trend has been empirically proven from historical studies, it's not my opinion. http://www.cepr.net/documents/publications/min-wage-2013-02.pdf

That doesn't really make any sense. Minimum wage is using government force to make someone pay someone else for more than they're worth.

"Well, the government is making them pay $10/hr, so they must be worth it!"

No, it just means you'll find workers who are worth $10/hr. If you're profiting from having workers, they are worth more than what you're paying them; if you paid them what they're worth, you'd make a loss. The hourly worth of a worker (production) is = profit per manhour + wage per hour (Funny enough, the average capitalist almost always learns it this way; Profit = Production - Wages) If that yields more than $10/hr, then they are worth that amount. Analyze that equation, a worker is only paid what they are worth if profit = 0. (I can hear the screams of "douglas is an idiot", but non-profit corps and employee owned businesses succeed in doing this every year)

Tying wages to inflation could theoretically create a feedback loop in which wages drive inflation that drive wages that drive inflation......

It is something that needs to be revisited more frequently than it is, but I do not support automatic much of anything when it comes to economics.

Inflation is solely due to the government printing money without linking it to production. Gold worked for so long because it's linked to the labor of mining, a ratio of production. Just something to think about...

I'm about as fiscally conservative as people can be. Yet I disagree with the conservative take on minimum wage. Assuming we can't abolish it, then we should most likely raise it. Firstly, it represents only about 3% of the jobs so its implementation doesn't have large effects on the economy. Secondly, the conservative belief that raising it costs jobs is probably not true. Jobs are created by the employees companies need to operate, not by how much wages are. What raising it does is raise prices. Raising prices for the products and services provided by 3% of the labor force isn't going to change much. To me it is illogical to have a minimum wage in the first place. But it is even more illogical to have one so low that people can't make ends meet on it. The problem with indexing it in my view is the political nature and questionable accuracy of the indices. We always seen to want to adjust to inflation rather than bring inflation under control.

Modern capitalism is illogical, but I digress. I fully agree that bringing inflation down will help, see above.

No, you have the flaw. Just like how you can choose a different car, you can choose a different job. You can either find one better paying or work more hours. Furthermore, you can work your way up to a higher salary within the company if you take your job seriously.

Yeahhhh... No. Buying a different car is different from getting a different job in this crucial way; there aren't any JOBS!!! Oh, and if you're already working for such a low wage that you can barely survive, hoping and praying that "maybe" your extra effort will be rewarded next year, isn't exactly palatable. It's exploitation, nothing more, nothing less. I worked 3 years at a minimum wage job and my eventual promotions (I was a great employee) were less than the inflation rate. Even after putting in all the work, above and beyond my peers, I was rewarded with less purchasing power. Your world view doesn't match reality; the problem isn't with the worker.

Companies pay the least they have to for workers, and not what the worker is worth. If workers were paid what they're "worth," all companies would be profit-neutral, since everyone in the value chain would get back what their efforts produced.

Exactly, although this is not the horrible thing that some want us to believe. Non-profit corps and employee owned/operated businesses do this every year.

It's the salaries they don't pay that matters in this. No successful businessman will hire someone for a net loss. How many people who's value is less than minimum wage can't find a job, and can't get any job skills because of this?

Education costs money, and you can't get money without a job. You can't get a job because your value is less than minimum wage, so you're pretty much just ****ed. Then they go on the government tit. I guess that's better?

Exactly. Cutting the minimum wage is guaranteed to lower wages, which is already the problem. Excepting the idea that we just force everyone into poverty and then let them die, this will increase the burden on the welfare state.

No, but it correlates with unemployment. If what you're saying is true, why don't we just make the minimum wage $40 an hour? Every company will be able to afford this, because they need workers to continue operating. Right?

In case you haven't noticed, we have massive unemployment problems. Minimum wage makes it worse, not better. Employers do not say "Oh, higher minimum wage? We should hire more minimum wage workers!"

So we make the corporate taxes off-settable by wage increases for the lower half workers in a company. As of now when a company starts paying a lower end worker more, they're losing profit, if they're just offsetting their tax burden, everybody wins.

And what happens when the prices of a product go up? Do you really think demand increases? The newer wages increase prices which offsets demand.

I've posted some evidence above for my statement, but I'll reiterate it; there is absolutely no reason to think a reasonable (you're being silly with $40, and you know it) increase to minimum wage will lead to further unemployment. One problem you guys seem to have is the misconception that the American citizen gives half a crap about your profit margins, we don't. If you can't make a profit after paying your workers more, that's your problem. (Hey, it's the same jab you use on the workers, why not turn it around?) The argument that prices will go up is a joke, they'll never rise at the same rate as wages ; unless the price is 100% due to wages, that's impossible, and there are ways that inflation adjusted prices could even decrease, due to increased consumption. Increasing the minimum wage is a guaranteed way to increase the median real purchasing power of Americans. E

Yes. But would you pay significantly more for a good or service than it was worth?

Probably not.

And neither will an employer.

There are lots of options for employers facing a scenario where their cost of employing an American (and remember, we don't just come with a price floor, we also come with tax costs and regulatory costs; if you want to actually give a job to an American, we're going to make sure you suffer for it), from shaping how they work their current workforce differently, reducing people, hiring illegals instead, or simply replacing low-skill personnel with non-employee options. Remember back in when they last raised the national minimum wage because Republicans thought it would help them in an election year? Did you notice how it was a couple months after that that all those self-checkout lines started showing up at Wal-Marts and grocery stores?

...what do you suppose happened to the former checkout clerks? Or the upcoming generation who would have moved into those positions, but now have no positions to move into?

Their price went up, so demand for them went down. Labor, like all other goods and services, exists on a supply/demand curve. We do not get to wish away reality simply because we really, really, want it. When we raise the price for hiring a low-skilled low-educated American, we decrease the demand for low-skilled low-educated American labor.

That is literally why we originally put the minimum wage into effect in the first place - it was an attempt to starve out the "Lower Races" and protect Decent White Americans from competition. Those who wrote the law knew exactly what it would do to the most vulnerable in our society, and that was their purpose.

First, if I had more money, then higher prices aren't a problem. The idea that minimum wage leads companies to use illegals is a joke; they're breaking a law and undercutting their countrymen. To blame minimum wage workers for a business's crimes is the epitome of blaming the victim.

To say automation is due to minimum wage increases is ridiculous; it's been increasing since the industrial revolution, a century before even the notion of a minimum wage.

On the last point, that the minimum wage is a secret conspiracy against minorities, I say that's ridiculous. Companies were racist bastards, don't get me wrong, but this is a complete flip flop on your argument that the minimum wage leads to companies hiring illegals. The real conspiracy isn't white-vs-minoties, it's rich-vs-poor.

The real political reason to create a minimum wage was as a response to the first red scare; it was a pressure valve to reduce Marxist leanings in America. We gave the workers just a taste of socialism, to keep them ignorant to all the other ways their money would be taken from them. Without a minimum wage, there'd probably have been a Socialist-leaning revolt against the rich/government during the Great Depression. You'll notice that nearly all of the changes during the New Deal of the 30's, were just to create Socialism-like benefits; there's a reason for this, and it's certainly not because capitalism was doing so great. In fact, every time the free market has let us down, the government implemented Marxist ideas, but just called them Capitalism. Something to think about...

 

[Fisher]

Wages should be tied to wherever you live.

10 bucks goes further in Rockford Illinois than it does in Chicago..

But crack and crack ho's be cheaper in Chicago than in Rockford so it evens out :mrgreen:

It more or less does in a messy supply-demand sort of way.

 

[Sisyphus]

Well I can rent a place in Rockford Illinois for 200 a month however, I cant rent a pace in Chicago for anything less than 500.

Does that make any sense?

Perfect sense: Rockford is the ass hole of IL, Chicago is not.

 

[Master PO]

its funny, how people think wages should be tied to everything, but the business who's paying the wage.

what ever happened to the right to commerce?

 

[MaggieD]

Well I can rent a place in Rockford Illinois for 200 a month however, I cant rent a pace in Chicago for anything less than 500.

Does that make any sense?

Yes. It makes perfect sense if one understands how rents are determined. Look at the expenses for a 4-flat in a blue collar Chicago suburb:

Just recently sold for $275,000; 4 apartments....three 2-bedroom apts and one 1-bedroom apt. Real estate taxes: $5,000 a year or $416/month just for taxes. Putting 25% down on that $275,000 results in a mortgage of $206,000. The monthly mortgage payment would be approximately $1240/month. Insurance would probably run $250/month. So, between principal, interest, taxes and insurance, it would cost the property owner $1900/month just to hold the property. Or a monthly rental per unit of $475.00.

That $475 rental per unit allows for no property maintenance (cutting the lawn, shoveling the snow, plumbing problems, heat/air conditioning break-downs, etc.), no upgrading (new refrigerators, window replacement (which this particular building needs, parking lot renovation, etc), no redecorating costs (every time a tenant moves, there are painting expenses, possible carpet replacement), no vacancy factor, and nothing to cover delinquency costs.

One vacancy, and the landlord can't make his mortgage payment (at $475/month per unit). One "professional tenant" -- a tenant who pays his first month's rent plus security deposit -- and never makes another rental payment forcing the landlord to evict him -- and the property owner has lost his investment to foreclosure.

So rent for this units is probably going to average $700 a month -- and, still, if a landlord is unlucky enough to get one of these goofballs who plays the landlord/tenant laws to his advantage, he's still going to lose his building.

In areas where property values are lower and real estate taxes aren't as high? Of COURSE the rents are going to be cheaper.

 

[KevinKohler]

its funny, how people think wages should be tied to everything, but the business who's paying the wage.

what ever happened to the right to commerce?

Died with too big to fail.


Foxes are guarding the hen houses, and we're trying to find ways to keep them from screwing us all...again.

 

[radcen]

No. The fact that inflation lowers the minimum wage in real terms is minimum wages' one silver lining. If the minimum wage today was $9.74, all that would change would be that more low-education low-experience Americans would be out of work, and the demand for illegals would be somewhat less higher.

I think it would just raise everything correspondingly. Wages, prices, everything. Nothing significant would change, only the numbers would be slightly larger.

 

[Cardinal]

I think it should.

In 1974, the Federal minimum wage was $2.00. Using an inflation calculator, the Federal minimum wage should be $9.74. Why isn't it? (It's currently $7.25.)

If it's tied to the value of the dollar at, say, the year 1880, then minimum wage doesn't make any sense.

 

[Master PO]

Died with too big to fail.


Foxes are guarding the hen houses, and we're trying to find ways to keep them from screwing us all...again.

no one should ever be to big to fail, not the banks or GM.


the point was, look how many people think wages should be determined by an outside force, instead of the people/ business who pay the wage.

look at how far we have come, to willingly giving away our freedom to pay wages we wish to pay, to having government determine it or some economic scale.

 

[MaggieD]

If it's tied to the value of the dollar at, say, the year 1880, then minimum wage doesn't make any sense.

The minimum wage was first introduced in 1938. Your post got me curious. It was $.25. In today's dollars, that would be $4.14. So, you're right. Trying to look at history doesn't tell us "the whole story."

 

[radcen]

The minimum wage was first introduced in 1938. Your post got me curious. It was $.25. In today's dollars, that would be $4.14. So, you're right. Trying to look at history doesn't tell us "the whole story."

So, people paid minimum wage today are OVERpaid.

 

[cpwill]

I think it would just raise everything correspondingly. Wages, prices, everything. Nothing significant would change, only the numbers would be slightly larger.

Nah. Employment costs are only a portion (admittedly a significant one) of the final price. There would be downward pressure on low-skill employment as an input, and significantly less upward pressure on prices, with variation from industry to industry.

 

[American]

I got paid $2.25/hr in the mid-1970's.

 

[douglas]

I think it would just raise everything correspondingly. Wages, prices, everything. Nothing significant would change, only the numbers would be slightly larger.

Unless the price of a good is 100% due to minimum wage workers, the price of a good will never inflate at the same rate as minimum wage. For example; if the price of a good is 60% due to minimum wage work from the point it was raw resources to the point it's purchased by the end user, a minimum wage increase of 28% (~$10/hr) would only raise the price of that good by 16.8%. That is a simplification, the real numbers would differ due to other metrics and margins, but the increase in prices should never reach the increase in wages. This increases the purchasing power of minimum wage workers, people working for just under the proposed minimum wage (~$10/hr ?), and should have little effect on the middle class (due to competitive wages in medium-high skill work).

There are a lot of competing/contrasting theories for how an increase will affect demand/consumption and unemployment. Based off of empirical evidence and most theories based on Keynesian Economics, there is more than enough reason to expect no change in unemployment rates. This is due to the increase in demand/consumption that occurs with an increase in the wages of consumers, and a reduction of the labor force. The labor force should decrease due to an upward shift in the median age of minimum wage workers (empirically proved from historical studies), mostly by providing more incentive to hire experienced workers (If you have to pay more, might as well get more bang for your buck). This gives incentive for young adults to stay out of the workforce by pursuing an education, which reduces the competition for jobs (the most damaging factor of unemployment). There is also an increase in consumption by having more people with pocket money to spare after paying bills (previously paycheck to paycheck). This increases demand for goods, which increases the demand for employees to produce goods.

Remember, all customers are someone else's employees; what goes around comes around. The biggest factor in our current recession and unemployment spike is that we have hoarding of wealth and consumer doubt. Instead of giving a stimulus package to failing companies, give one to consumers. That's the key to solving our problems while working within the current system, and an increase to the minimum wage might be just what the doctor ordered.

 

[Sisyphus]

I got paid $2.25/hr in the mid-1970's.

That's about $9 in today's Dollars.