Leaked documents show strong business support for raising the minimum wage
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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).
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?
> 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.
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.
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.
This is pretty much what the future of fast food restaurants is like when you raise the minimum wage:
http://www.businessinsider.com.au/mcdonalds-australias-upsca...
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.
Yeah, I've tried those they're pretty gross. You can also buy a Big Mac for the same price as in the US.
>When you earn $15/hr, you now have to work 19.5/15 hrs to earn a burger.
A much, much better burger.
And you've got more disposable income too.
5.5/15 doesn't beat 1/7.25, but it's a lot more competitive than 19.5/15, and I imagine the Big Mac isn't the cheapest burger on the menu.
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%.
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.
Academic Economists know pretty much nothing of Macro.
It is simply a game of eliminating competition.
Of course, the money will be worth more when it's scarcer too.
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).
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.
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!
Perhaps you made a typo, but if not, you just said something that's exactly the opposite of reality.
Do you have any data that even slightly backs up what you just wrote?
Also googling "prices increasing faster than 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.
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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
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).
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.
Though possibly that could be fixed with proper regulation.
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.
Factually the overwhelming majority of low wage work is done by people who do in fact need to support themselves and their families.
Even so it's entirely possible for special exemptions to be made for kids and the other cases are hardly worth mentioning.
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.
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.
http://trends.collegeboard.org/college-pricing/figures-table...
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.
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.
> 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.
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.
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.
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.
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
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.
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.
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.
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.
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.
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.
(1) http://www.newyorker.com/magazine/2013/08/12/the-pay-is-too-...
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.
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.
https://en.m.wikisource.org/wiki/The_Wealth_of_Nations/Book_...
An enterprise which cannot pay the full cost of its inputs isn't an economically viable activity. It's a charity benefiting its owner.
More on Smith regards wages: https://www.reddit.com/r/dredmorbius/comments/2311mb/adam_sm...
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.
Minimum wage is an arbitrary price control on labor. Price controls are always a bad idea in economics.
The 80% supporting an increase are just stating the obvious: you need demand if you want to sell anything.
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.
Workers being paid substantially less than their labor is worth by their employer is wrong.
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.
Employer: Likes tipping
Employee: Likes tipping
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.
But when it's clear what to do, like in restaurants and cabs, I'm happy to tip a percentage.
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.
A better solution would be UBI since it actually deals with the issue that MW is claiming to solve (but doesn't)
(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).
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.
Cost is what you give up for something.
Value is what you get for it.
Price is what you pay on the market.
They're three distinct concepts. Much economic confusion results from it.
(And yes, there are some who describe "value" as "market value", which I refer to as price. See though "economic value.)
In other words technology and humans are in competition with each other too and ultimately technology will win most jobs.
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).
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.
If you were listening to reality instead projecting you wouldn't be hyperventilating over a product which is currently vaporware (driverless cars).
>The horses didn't find new jobs after the car replaced them.
Horse riders did. The London Cabbie organisation predates cars.
>The problem with all you techno-optimists
Uh... you're the techno optimist... not me. I still think human labor has value that can't be replicated.
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.
By the way, what are the "leaked documents" in the title? The public survey and the public research?
Ignorance. Poor education. Disinformation. Astroturfing.
http://www.cbsnews.com/news/most-americans-cant-handle-a-500...
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.
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.
" 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. "
[1] http://www.nytimes.com/2014/02/09/opinion/sunday/the-case-fo...
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.