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.
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.
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.