Democrats & Liberals Archives

Raising Minimum Wage Increases Growth

I always believed, as do most Democrats, that the minimum wage should be increased and tied to the poverty level because of pure fairness. If we raised the minimum wage to about $8 an hour, it would reinforce the social contract that says, If you have a job you can support yourself. Ravi Batra, however, has demonstrated that increasing the minimum wage would increase economic growth, boost employment and be economically beneficial to all Americans.

Republicans are dead set against increasing the minimum wage. Big Republican Alan Greenspan told the House Banking and Financial Institutions Committee in 1999:

"My main concern is ... the issue of individuals who become unemployed because of the minimum wage."

Republicans argue that small companies would have their expenses increased to the point where it would kill their profits, which would force them out of business. When this happened more employees would be out of work. Batra's argument is the reverse: increasing the minimum wage would not change the profit picture of companies involved, but would boost overall economic activity that would lead to more employment.

The logic is straightforward. It starts with the following simple equation that defines the simple case of economic balance:

SUPPLY = DEMAND

When the economy is in balance, suppliers produce enough to satisfy the demand of all consumers. There are no goods unsold. There are no unsatisfied buyers. When productivity increases, that is, we can build more products with the same workers, the supply rises. If we increase wages a similar amount, consumers will be able to buy more to keep the system balanced.

Of course, nothing stays in balance long. Inflation is always with us to some degree. When inflation rises, workers' wages don't buy as much as they used to. We say that real wages have decreased. With the decrease of real wages, demand decreases. This means that some products are not sold, a situation that may lead to lower profits and retrenchment through worker layoffs. This is negative growth. It's no good for business and it's no good for labor.

It's especially bad for workers at the lower end. They had been struggling to make ends meet before their real wages declined. Now they are worse off. What would happen if we increased the minimum wage they received? Their real wages would increase. And since they spend every penny they get, this would increase aggregate demand. Companies on the supply side would sell more, make more profit and perhaps hire more workers. This is positive growth. It's good for business and it's good for labor.

How would raising the minimum wage affect the fortunes of companies hiring minimum-wage workers? Not much; maybe they would need to charge their customers more. Their expenses would rise. But so would the expenses of their competitors.

The improvement in the economy is better than what could be achieved by raising the minimum wage alone. Many low-end workers who make a little more than the minimum wage would probably soon get increases too. When they go spending, it would increase the aggregate demand further, thus enriching companies more and raising the possibility for more employment.

Let's increase the minimum wage to about $8 per hour and let's tie it to the poverty level. When the poverty level increases, the minimum wage should automatically increase a similar amount. Democrats are promoting this because it is good for business and good for labor - it's good for everyone.

Posted by Paul Siegel at December 6, 2005 5:53 PM
Comments
Comment #99424

A couple of thoughts.

First, all it takes is a basic supply and demand curve to see why raising the minimum wage raises unemployment. There is a market wage for most workers higher than minimum. But any individual worker is paid roughly in proportion to his marginal productivity. It would undoubtedly increase unemployment to raise the minimum wage, just as it would increase shortages of any other good if there were price caps. Any such legally mandated increase in wages would be artificial. It would allow some workers to profit above their productivity, while others lost. But the optimal, market number of workers would be redued.

The fairness argument is also overstated. Many minimum wage workers are not supporting themselves and a family; they are teenagers, single adults, second incomes, etc. It would lead to European levels of unemployment—10% and up—if it is harder (i.e., more expensive)—to hire these unproven employees.

Third, the real downward pressure on wages comes from the overall labor market, and in particular the explosive growth of low wage workers. The current high rates of immigration, not anything being done by the laws, are what is pushing down adult wages and will continue to push more of them down to minimum wage, whatever that number may be. That is, it’s more expensive and less economical to make capital investments to increase worker productivity and wages in an economy with a growing labor pool. Those investments can more cheaply be made and albor. With a capped labor pool based on zero net immigration, many service jobs—increasingly the largest sector of the economy—would find themselves increase in productivity due to a greater incentive capital investments. The social costs of high rates of immigration would be redued. Newer immigrants would begin to see their wages rise as they did not have to compete with newcomers. Most important, the “command and control” aspect of rasing the minimum wage would be absent. (Indeed, if raising the minimum wage has no effect on unemployment, why not make it $100/hour).

Finally, Ravi Batra is an econometrician whose predictions have repeatedly been proven completely wrong. That is, he purports to look into his equation-driven crystal ball, but he can’t do what he says he can: namely, he cannot predict the future. He wrote a book called The Great Depression of the 1990s for instance. Does ayone remember that predicted Great Depression? I remember instead a booming time of massively increasing wages and stock market indices.

And we still listen to this guy?

Posted by: Roach at December 6, 2005 6:08 PM
Comment #99427

The current minimum wage in the US in unconscionable. In Ireland, a small country on the periphery of Europe, the minimum wage is $9.42 (about Eu8). How are people who are working supposed to live with any dignity on a wage of, what is it, about $5 per hour? So for 40 hours, that’s $200. Anyone who advocates this as a living wage should try managing on it themselves. My car costs me more than that per week. How can you raise children on that kind of money, and put a roof over their heads, and food in their bellies? I believe that those who hold with this scrooge mentality have no capactiy for empathy with their fellows. Their spirit is driven solely by greed and heartlessness. And certainly it is not in keeping with that true spirit of American generosity. Shame on them.

Posted by: Paul in Euroland at December 6, 2005 6:12 PM
Comment #99428

“How can you raise children on that kind of money, and put a roof over their heads, and food in their bellies?” Who says every worker must be able to do this. I made $4.75 an hour in HS and was happy to have $800/week to save and spend during summers and and extra $400 during the school year.

People should be paid what they are willing to accept. It’s a basic principle of freedom: freedom of contract.

Posted by: Roach at December 6, 2005 6:19 PM
Comment #99430

YEAH BUT ROACH, HELLO??? You were living with your parents in Highschool I would assume, correct. Baffle us not with the BS, now listen we do need a raise in the minimum wage and the reasons being that the cost of living index and minimum wage are entirely out of whack. Especially in a market with an undervalued dollar where it takes more of those little green rectangles to keep food on the table and a roof over your head. Simple.

Secondly Bush has done nothing but to cut education spending even with his hollow claims of funding community colleges he has faultered on.

WHY ARE REPUBLICANS UTTER FAILURES AT EVERYTHING IS THE QUESTION. They fail, then they fail and then they fail and that’s all they seem to be good for. Instead of the elephant as a party symbol why not a paperweight that isn’t used properly or a doorstop that slides under the door?

Posted by: Novenge at December 6, 2005 6:36 PM
Comment #99431

I know students earning Eu12 per hour ($14.14) vacation times, and double this on Sundays. Roach, you say that people should be paid what they are willing to accept. What you are advocating is the strong preying on the weak. That to me is the unacceptable face of capitalism.

You could as easily say that the Government should butt out of all contracts, that it should have no say in financial markets, because presumably both contracting parties are adults who should be left to the advice of caveat emptor. Capitalism is too important to be left in the hands of capitalists. Regulation of the market in essential, as Enron, Worldcom, and countless other examples have shown us. People of low and no skills are people none the less, and are as a consequence are entitled to a modicum of dignity. And you cannot have dignity on $5 per hour, unless you are a HS kid who is only after pocket money. Your mean minded attitude does you no credit.

Posted by: Paul in Euroland at December 6, 2005 6:37 PM
Comment #99434

My other question to roach is on the money he claimed to be making—$800.00 a week. Hmm let me do the math on how many hours that took and how he still found time to stay in highschool. Please Roach 800.00??? Listen dude I work for a living too come on now. In 1989 I was working one job at $4.60 and hour for fourty hours and a second part-time job making 4.25 an hour. I did barely $350.00 and that was putting in over fifty hours a week. And you made a whopping $800.00 a week @ $4.75, was it? Wowie Roacharoonie!!!! Caught lying just like a true Bushie.

Posted by: Novenge at December 6, 2005 6:53 PM
Comment #99441

Roach is right. If people are not happy with subsistance wages, they should leave. There are enough illegal aliens out there willing to take their place.

Posted by: Aldous at December 6, 2005 7:30 PM
Comment #99447

Movin’ right on up to soup kitchen status, thanks Aldous, problem solved. I love the right wing’s argueing points on this stuff. It’s so bull-sh##ty.

With all the faulty math I’ve seen in the right column I tend to trust this Ravi Batra more. I’ve often argued that it is actually more beneficial to American consumerism to have those making under 25k a year to be tax free (incl. small businesses) and having tax cuts along the lower strata of the middle classes. turning much of corporate welfare into a 6 to 10 year loan system (with consolidation upon default) and putting our dollar through the commodity markets for the sake of education and social spending. And a minimum wage that meets with the cost of living index and may even exceed national estimates (but making time and a half anything over 45 hours). What political party that makes me I have no idea.

See a good many states aren’t NY and Massachusetts where you might have a good employees market. Arkansas, Florida and New Mexico are quite different in terms of it’s job markets and what’s available so that also carries over into wages to a good degree.

Posted by: Novenge at December 6, 2005 7:50 PM
Comment #99448

The reality of the situation is that there are people willing to work for less than a ‘living wage’ because they are not dependant upon those wages to live on. For example, kids in high school, people looking for second jobs for income supplementation, people who are not the primary ‘bread winners’, etc.

By forcing everyone who provides a job to pay the ‘living wage’ then these people would be left out in the cold.

Right now, if you want a job above minimum wage they are easy and plentiful to get.

However, one thing not mentioned when we talk about raising the minimum wage is the effect it has on those making above minimum wage.

Let’s say I make $1 more than minimum wage. Then the wage is raised $.75. Now, I only make $.25 more than minimum wage! Well, I’m sure going to demand that my wages increase to compensate, and the guy who is making $1 more than me then complains, etc. Eventually everyone is increased in salary, the products and services then increase in cost and we come back to minimum wage not being enough to support a family and we must raise the minimum wage again… etc. In fact, there are many contracts with unions that stipulate that if the minimum wage increases, everyone in the union gets an equivalent raise. I wonder who wants the minimum wage raised and why?

Posted by: Rhinehold at December 6, 2005 7:51 PM
Comment #99449

Rhinehold~

Finally the voice of reason….nice to know someone understands what happens when you raise minimum wage!!! HELLO PEOPLE…minimum wage will always be just that…..minimum wage!! Cost of living will increase with the wage and then movie theater popcorn will be $20.00 a stinkin’ bucket…get ahold of yourselves!

Posted by: Traci at December 6, 2005 7:57 PM
Comment #99454

hmmm…been a small business owner since 1988 and for people to say that the 70% of new jobs created by small business would not come to a virtual stop if we raised the minumum wage to 8.00 per hour are completly delusional ,,what would happen is those small businesses able to survive would reduce personal while increasing work load on remaining employees …remember vast majority of small business do not have benefits and with rising fuel costs ,electricity and government intrusion into what and how they do business has pushed many to the edge … personally i feel if rate was pushed to 8.00 per hour with in 18 months we would have a major recession /total melt down depression ….

Posted by: rylee at December 6, 2005 8:12 PM
Comment #99455

Traci makes a good point.

Half of all Americans are always going to make less than the median wage and some will always and everywhere make the least.

It is market driven. My unskilled 16 year old son made $7.15 at his first paid job down at the local Arby’s. The market in my area demands a higher wage and people pay it. Not many experienced people make minimum, but if you demand that employer pay more than the worker is worth, they don’t hire as many workers.

Paul

Ireland is a fantastic success story. Congratulations. Keep it up. Some American states or regions also pay more. As I wrote, even Arby’s starts at $7.15 and they have to bring in workers from other states. It aslo depends on living costs. A $60,000 a year salary will buy more in rural Virginia than $125,000 will in NYC. I have not been to Ireland recently, but in September I noticed in the UK that prices were higher there in POUNDS than they are in the U.S. in Dollars. Since the pound is worth more than the dollar, it is even worse than it seems. In Brussels, the fast food that would have cost me 5 dollars cost 10 Euro. Same consideration applies.

The minimum wage idea doesn’t work so well most places anyway. In continental Europe where they defend high wages, they also have 10% unemployment more or less permanently.

Posted by: Jack at December 6, 2005 8:18 PM
Comment #99458

I agree that there should be a small increase in the minimum wage. However, with our free trade policy, you would drive companies to look for more labor outside of the United states. You would also drive business to look at technology more, to replace labor. This isn’t necessarily a bad thing, because you lose a few minimum wage jobs for a high paying tech job, but how do you feel if your the high school kid that tears movie tickets to make a few extra bucks, and your job is replaced by a machine. We have lost a large amount of call center jobs to foreign countries, and that would only increase with a minimum wage increase.
I think the biggest thing that needs to take place in the corporate world is to tie the CEO’s wage, to the wage of the average employee in the company. The CEO’s wage should be nothing more the ten times what the average workers wage is. I saw a 20/20 news program. It talked about companies like Costco, who are doing extremely well. the CEO for costco makes 350K per year, and the average worker makes $17/hour. This company has great prices and are probably the best company as far as wholesale warehouses go. The CEO does get some stock bonuses depending upon his performance, which he should, but there are many corporations with CEO’s making ten times that. I just don’t understand how that helps the shareholders. There would be a line of people who would love to have that job for 350K who would do just as good of a job as anyone. The CEO for JetBlue has a salary of 200K/year, why do we as investors and share holders allow multimillion dollar salaries for CEO’s. I don’t think that we should be looking at increasing the minimum wage as much as we should be looking at the other end of the spectrum.

Posted by: Ivan Mitchell at December 6, 2005 8:28 PM
Comment #99476

Every time the minimum wage goes all up prices go up. It cost companies more to produce their products. If you think that their going to eat the increase cost then you don’t know squat about business. People are in business to make money not loose it.
Also while most business owners that pay more than minimum wage will give their employees a raise to keep them above the mimium wage. There’s a hole heap that won’t. So that means more people at mimimum wage. Which means more people at the poverty level.
But then that’s what Liberials want. They can expand their power base that way.

Posted by: Ron Brown at December 6, 2005 9:09 PM
Comment #99477

ivan,
good point on the ceo’s salary. there are a number of companies that could raise the wages of their lowest paid employees simply by putting a ratio cap on ceo to lowest paid or average paid employee. let the ceo or other exec’s make the bigger bucks in performance bonuses or performance stock options. since the total outlay for wages would be the same, we would not have the inflationary upward spiral in prices. please guys do not tell me that the ceo salaries are always based on what the market will bear, not when the ceo is hand picking the board of directors and the board is rubber stamping ceo compensation packages. is a marriage made in heaven.

Posted by: ec at December 6, 2005 9:16 PM
Comment #99480

ron,
intersesting point. what do we do with the people who are not making it? perhaps if they were making a livable wage we could draw down on welfare outlay.

anyone for john rawls and his “theory of justice”?

Posted by: ec at December 6, 2005 9:21 PM
Comment #99492

God I wish they would raise the minimum wage. Maybe then I could pay back all the student loans I have from graduating from college.

Posted by: kyle at December 6, 2005 10:03 PM
Comment #99495

Why pay Americans a measely mininum wage when you can pay an illegal alien even less ?

That’s actually the sad truth.
And government allows it.
Government wants cheap labor, so they won’t raise the minimum wage?

I agree with Paul in Euroland.
The trend of Corporatism and Corpocrisy we have now is:


“the strong preying on the weak. That to me is the unacceptable face of capitalism.”

Personally, I see little harm of rasing the minimum wage some. How much? How about half way between the last time it was increased in 1997 ($5.15 per hour in 1997 which is $6.07 if adjusted for inflation in 2005 dollars) and the level it was at in 1968 ($1.60 per hour in 1968 and which is $8.85 if adjusted for inflation in 2005 dollars)? Hence, that would be a value between $6.07 and $8.85 today in the year 2005. Split the difference, and that would be $7.46 per hour (i.e. ($6.07+$8.85)/2). If it was OK then, why not now? That still puts it below the minimum wage of the United Kingdom, France, parts of Canada, Switzerland, but above many other countries.

Then, there is still the EITC (Earned Income Tax Credit).

There are many studies to show that minimum wage really has a small impact on the overall economy. Some cherry picking of studies has been done in the past to show how raising the minimum wage is a job killer. But, the fact is, it doesn’t affect the overall economy very much, because it primarily only affects certain industries that depend on very cheap labor. In all fairness, a minimum wage hurts only those certain types of businesses. That’s not quite fair is it, since some industries are not directly affected at all. However, everyone is slightly affected, indirectly, because the additional cost is passed on to customers. The question is, will we end up where we began ?

Some have suggested a larger EITC (Earned Income Tax Credit). Perhaps that would be more fair to spread the burden more fairly? But, that sort of forces tax payers to subsidize cheap labor, doesn’t it?

Here’s a good review and some history, and minimum wages in different countries.

Posted by: d.a.n at December 6, 2005 10:09 PM
Comment #99523

Novenge,
The “value of the dollar” is an expression of its excahnge rate vis a vis foreign currencies. It has zero effect on American’s purchasing power unless they are buying imports. Not many minimum wage workers are buying Mercedes and Gameboys.

Second, Bush has increased federal spending on education spending dramatically. Dept of Education’s budget is up 100% since he took office.

Roach, a fine post. Clearly you know more about econ than the other kids.

Paul Siegel, pls take Econ 101 before making more posts on important economic topics. I appreciate your zeal for learning, but you’d be better served by reading more learned econ professionals. This Batra guy strikes me as someone who’s trying to make a quick buck off Greenspan’s notoriety and flashy topics like market crash predictions.

Posted by: boojum at December 7, 2005 12:45 AM
Comment #99525

Just a few comments - the law of supply and demand states that as the price of something goes up, demand for it goes down. If the price of labor goes up, the demand for labor goes down. It’s simple economics.

The original post above claims that won’t happen because the demand for products from the people making higher wages will increase business. But he also argues that businesses will just pass those higher costs due to the new minimum wage onto their customers.

But who are among those customers? The very same employees that just got the minimum wage hike (if they indeed are the ones driving the increased demand). So they make more, but also pay more - putting them right back where they were. And since the now higher price is just as costly relative to their new wage, demand drops back to where it was.

That’s the problem with using the minimum wage as a social engineering tool. The laws of economics force circumstances right back to equilibrium.

Bottom line, businesses can only pay an employee an amount commensurate with the value they add. Any attempt to artificially inflate what an employer pays simply won’t work. The only way for workers to earn more is to do just that - earn it. Earn it by increasing the quantity or value of their output per unit of time worked.

Just as you can’t fool mother nature, you can’t fool the laws of economics.

Posted by: Paul Szydlowski at December 7, 2005 12:58 AM
Comment #99534

Why would anyone listen to Roach.

He said he made $4.75/hr and liked the $800/week.

*sigh* 7 days times 24 hours = 168 hours in one week. 168 hours times $4.75 = $798! So, not only is he $2 short, he would have worked forever no sleep.

Greed is the problem, what is the answer I don’t know.

Like say GM is laying off 30,000 workers to save money. But, how many of those workers jobs could be saved if some of the big CEOs and executives would take a pay cut. Say instead of making $10million they take a cut & make ONLY $9million, or perhaps refuse the $1million bonus to save the REAL workers jobs.

*SIGH* The last GREAT FAIR businessman we had in America was Milton Hershey! He used his money to build a whole town, park for employees…etc

Search for “Milton Hershey” and learn how busniesses could treat employees!

Posted by: the brain at December 7, 2005 1:42 AM
Comment #99548

boojum must be taking the same ECON classes as Roach!!! Must be the same University in Kansas that teaches Intelligent Design!!!

Posted by: Aldous at December 7, 2005 2:08 AM
Comment #99557

Raising the minimum wage without forcing Congress to revamp the way we look at how we use the new “Payroll Taxes” sounds exactly like the “Stay the Course” message talked about 40 years ago.

Yes, we know that raising wages causes raising prices and more taxes, but what are we to do when when we need more money? Didn’t Nixon believe he could inflate the economy back into shape? Why won’t the Left or Right acknowledge this line of growing the economy? Is the President policies putting more money in their pocket or just playing with the numbers?

Therefore, would not “Common Sense” tell us that we need to use this opportunity to raise the average workers wages while allowing them to invest part of their “Payroll Taxes” into their inherent best interest. $80.00/wk for health care savings plan, $20.00/wk for retirement, and $40.00/wk to pay down the nation debt would be a better use of any new payroll taxes.

By selecting to place these funds in U.S. Federal Reserve Special Treasury Notes (because the for profit businesses don’t want to insure our middle and low-income citizens or arrange so that they can take advantage of investment opportunities)the Individual Citizen could help themselve pull out of poverty. Additionally, the added money invested would shore up the little problem we are having at the Federal Reserve with our National Savings. Plus businesses and investors make out due to the large sum of money being placed into the Fed’s Bucket each and every week.

In this manner of raising wages and ensuring the minimum wage workers can invest in their own future while meeting their civil obligations just plain makes Common Sense.

Posted by: Henry Schlatman at December 7, 2005 2:47 AM
Comment #99561

Hey… Just a thought…

If what you say is true and raising the minimum wage is bad, what would happen if we LOWER the minimum wage?

Posted by: Aldous at December 7, 2005 2:57 AM
Comment #99594

Aldous,


It would decrease the “need” of illegal aliens as a source for cheap labor. And probably slow the flow of illegals comming across our borders.

It would also make it cheaper to provide services and products to the consumer. Companies would not need to charge as much to make the same profit margin, and therefore lower the cost of living. Or is that a bit too optimistic?

Posted by: Richard at December 7, 2005 4:36 AM
Comment #99619

Boojum,

Apparently you don’t understand economy or economics as a topic if you are to say that the effects of the dollar on the world market doesn’t effect prices here in the US in terms of goods and services as well as the effects upon real estate consumerism and the like. I love how republicans do that with little on no carricular basis.

Boojum you are a bag of nonsense sir, library cards are free. Sometimes you sound smart but your cases are quite thin in terms of connecting the spectrum. Maybe you can’t see how by lowering the value of our dollar it takes more dollars in essense to purchase a barrel of oil hence there being a fuel price hike as a result in the US. No it’s just arabs in funny hats right? Maybe you don’t see dollar fluctuation as a result of the rising energy costs. Maybe you can’t see how that effects trucking or even other foreign products that are used in manufacturing. I’d explain it to you but I’d rather you remain voodoo ignorant so it can all just be a mystery to you as to why prices go up. I’m not going to waste my time explaining it to you.

AS far as Bush’s 100% increase in education programs. Whatever you might have read in the weekly standard it’s simply not true.

Posted by: Novenge at December 7, 2005 6:38 AM
Comment #99621

RON BROWN,

Please illustrate for me one case, just one in which a minimum wage increase has shot up prices anywhere.

The vast majority of the inflation of prices are the result of our treasury policies in respect to the federal reserve. Such as was the case during the Carter administration when he had to decrease lending rates tremendously to revitalize his economy through treasury policy.

minimum wage increases do not translate into higher costs on products although in some service sectors it might increase costs but very very minimally at that, being that not all workers in service sector jobs are minimum wage earners. So the claim is anthill to a mountain.

Posted by: Novenge at December 7, 2005 6:59 AM
Comment #99631

RICHARD BALONEY,

In mexico they are making pennies compared to the dollars they could get in the US, they’d still be here. So you are argueing that we should have an economy like Mexicos? Now I know what the republicans are pushing for.

Posted by: Novenge at December 7, 2005 7:25 AM
Comment #99664

These arguments against raising the minimum wage are exactly the same as when Clinton was preparing to raise the minimum wage.

After it was raised, Those arguments were proven to be completely, totally, 100% nonsense.

But they’re back.

Posted by: Schwamp at December 7, 2005 9:11 AM
Comment #99690

Novenge,
Your petty, frenzied responses show more vitriol than thought.

Maybe you should sign up to become the Left’s answer to Rush Limbaugh.

Your posts show great promise in taking a set of facts discarding those that are inconvenient:

“The fairness argument is also overstated. Many minimum wage workers are not supporting themselves and a family; they are teenagers, single adults, second incomes, etc. It would lead to European levels of unemployment—10% and up—if it is harder (i.e., more expensive)—to hire these unproven employees.”

sneering at those that are contradictory,

“AS far as Bush’s 100% increase in education programs. Whatever you might have read in the weekly standard it’s simply not true.”

and pouncing on facts as the support for your argument whether they make sense or not.

“Especially in a market with an undervalued dollar”

You then sell those thin straws as a foundation of an argument where no logic lives.

Instead support for argument comes in the form of ad hominem’s,

“Boojum you are a bag of nonsense sir”

and attacks on the opposition (which with you pen seems more like enemy) that have no bearing on reality,

“So you are arguing that we should have an economy like Mexico’s? Now I know what the republicans are pushing for.”

“REPUBLICANS UTTER FAILURES AT EVERYTHING IS THE QUESTION. They fail, then they fail and then they fail and that’s all they seem to be good for. Instead of the elephant as a party symbol why not a paperweight that isn’t used properly or a doorstop that slides under the door?”

So no more sneers from you at Rush, Hannadity,
and their ilk. They are after all your mentors.

Posted by: Rob at December 7, 2005 9:41 AM
Comment #99702

Now Mr. Szydlowski,

Allow me to try out your logic asserting it’s true. Now if the price of toiletpaper shot up 35 cents demand would go down? The cost of snackfoods have gone up exorbitantly as has breakfast cereals but they are still restocking shelves every week, hmm. Your point must be faulty then.

The costs of labor are circumvented by an economy buying overseas parts and goods for manufacturing. If we had a dollar that worked for the importer as opposed to a one sided hedge we could fulfill whatever gaps we might be seeing. but right now with a dollar worth less and a definite energy hike as a result, yes it would wreck myriad a business sector. But if we had a better treasury with policies that could fascillitate the importer it would not take a substantial chunk of anything.

It is doable with little or no ramifications given the right conditions and treasury policies in place.

Posted by: Novenge at December 7, 2005 9:57 AM
Comment #99711

The minimum wage has not been increased in years by the Feds. San Francisco (City and County) pay $8.50 minimum and have always had a high minimum.
Can you name any area of this or any other country that has produced more wealth in the last 30 years? Small business do very there and even the tech crash in South San Francisco and San Jose didn’t kill this robust economy. How did they get it? The intelligent people there voted for it on the ballot.

Posted by: ed at December 7, 2005 10:09 AM
Comment #99712

Rob,

Inflated prices are not a thin straw and they have many contributive factors but the one main factor is our federal reserve policy (Ie paying down debt). What we’ve done is flooded the market with currency and yes that has a lead in to lower interest rates, but if left unchecked it becomes deleterious.

And as for my ‘vitriol’, that’s anger management wearing off. Tides are changin’ Rob and the dems if they ever get up off their knees and start playin’ smart cards will defeat the republicans in 2006 and even 2008. Your boy George is destroying the GOP just like his economic treasury policies are destroying GM and Ford because they don’t take into account the need for import in assembly.

Posted by: Novenge at December 7, 2005 10:11 AM
Comment #99732

Roach

People should be paid what they are willing to accept. It’s a basic principle of freedom: freedom of contract.

It’s a basic principle of trade. When the trade market is free, contracts are more or less free too, indeed.
That means for example that within such principle you could have to accept or not working for the wage of a chinese worker in the today worldwide free market. Good luck guys…

Oh, BTW, what’s the average wage of chinese these days, in dollar(s)?

Posted by: Philippe Houdoin at December 7, 2005 10:47 AM
Comment #99734

Several studies have shown that raising the minimum wage has actually had little impact on the overall economy, but did help low-income earners. A minimum wage of $1.60 in 1968 would now be $8.85 in 2005, if adjusted for inflation. A minimum wage of $5.15 in 1997 (the last time it was adjusted) would now be $6.07 in 2005. Why not simply split the difference, and make it $7.46 per hour, since there is no credible evidence that $1.60 in 1968 and $5.15 in 1997 devasted the economy.

For cryin’ out loud, there’s no reason to be so afraid of a slightly higher minimum wage. I believe in a free market and the least government meddling, the better, but slightly raising the minimum wage is not a totally bad thing.

As for the illegal alien thing, that’s a separate issue, and it should have no bearing on the minimum wage. And the following stunt that Bush and the GOP is about to attempt isn’t going to help Bush’s ratings. The “Open Borders Lobby” is going to pull a dirty legislative trick in an attempt to pass a Temporary Worker Amnesty that will give a legal status to 10-20 million illegal aliens currently in the US. I hope this pisses off millions of other Americans as much as it does me. I don’t know about other Americans, but this one thing alone leads me to be thoroughly disgusted with Bush and the GOP. This type of crap is largely why I am now non-partisan (no longer Republican, even though I see both parties, hand-in-hand are doing this crap, and just taking turns using and abusing the people). This is why voters need to vote out all of these greedy, corrupt, irresponsible, unaccountable, bought-and-paid-for, FOR SALE, influence peddling, hypocritical, do-nothing, arrogant bums. And Bush has the gall to call the Minute Men vigilantes. Bush is delinquent regarding border security. Bush should try to explain this to the family of the Dallas policman that was shot and killed two weeks ago by an illegal alien. That’s a murder that should not have happened. Thank you Bush for doing nothing about border security. So, what good is 2.6 million active, guard, and reserve troops if you can’t even station a measely 1% (26,000) troops along our 6500 miles of land boarders (that’s about an average of one troop every third 1320 feet). We could place stations every 10 miles (650 stations). It would not cost that much, because it would use a lot of troops and resources we already have.

But, politicians don’t care about any of that. They think they can illegally immigrate the nation out its’ severe fiscal problems. That’s doubtful. It’s unlikely we’ll be able to immigrate, tax, spend, grow, or print enough money to overcome our pressing problems that go ignored year after year.

I don’t mean to trivialize the impact of a minimum wage on those that need it most, but this nation has got a lot more serious issues to deal with, and the minimum wage issue might not be an issue if our government wasn’t so irresponsible and unaccountable to begin with.

Posted by: d.a.n at December 7, 2005 10:48 AM
Comment #99739

If I could just take a second to clear up something that is pretty simple to clear up, but causing some people to freak out. When I said “$800/week” as my earnings in HS, I miswrote. It was “per month.” Obviously, I did not work 100 hour weeks during the summer or anytime. This simple mistake, of course, did not prevent some people from calling me a liar and someone without any credibility, even though the fact that I simply miswrote what I wrote should have been pretty apparent. Sorry for the confusion all the same.

Posted by: Roach at December 7, 2005 11:03 AM
Comment #99752

Roach,
That’s OK. I figured you meant per month.

Posted by: d.a.n at December 7, 2005 11:14 AM
Comment #99754

Two thoughts on CEO compensation.

First, a good CEO can very much be worth his millions by delivering shareholder value. A great CEO can literally be worth billions of dollars in added value to a company by making superior managmenet decisions that drive value. Think of someone like Jack Welch who turned a good company into a great company by his decisionmaking. How can the market move such people to their “most valued use” without being able to pay them more. How could a potential CEO decide between three different jobs if there were no metric of worth between them. The likilihood of any cap is that compensation would b achieved in other ways, like perques of various kinds or payment from other quiescent shell companies. Finally, aren’t shareholders the right decisionmakers here and not outsiders. The duty of a CEO is to the shareholders, to incresae their value. That is literally what the law requires. Now must CEOs recognize there are other stakeholders, including customers, employees, and the like. But those with their money on the line are the shareholders and they can sue for the breach of this fiduciary duty in a unique manner.

Second, performance bonuses and tying CEO salary to stock price creates a different set of problems. The usual fear of any CEO is that he’ll be too timid. So stock options create incentives to gamble a bit on the company, by letting him capture the upside of value for shareholders. But the problem with this is two-fold. First, it creates major incentives to rearrange business decisions to meet quarterly targets to hit bonuses. Second, it creates incentives for fraud to exagerrate stock value. This option-culture is what fed many of the problems with Enron. Finally, creditors do not like an option and bonus-heavy compensation structure because it does not tie the CEO’s fortunes to the stability of the company as much as a big salary does. These issues of risk and risk aversion are captured by “Debt Equity” ratios.

It’s silly to talk about capping CEO salaries in the abstract without some sense of the credit structure of the company and the incentives that shareholders would want a CEO to have in light of the company’s mix of debt and equity, its need for continued credit, and the like.

Posted by: Roach at December 7, 2005 11:15 AM
Comment #99762

Perhaps there’s room for some middle ground?

Let’s see if there’s an equlibrium position on the facts, since so many are so fond of throwing around their dubiously-remembered Econ 101 knowledge (to which, I would add, that perhaps the only thing worse than NOT taking econ 101 is taking ONLY econ 101 - God, did so few of you have econ 101 profs who honestly discussed the _assumptions_ of supply and demand?).

1. Minimum wage is not a living wage if one is trying to support a family.

2. Most (or at least many - an empirical question) minimum wage earners are not supporting families.

3. A blanket hike in the minimum wage WOULD cause some problems for some industries that hire minimum wage workers.

Suppose a family (mom, mom, 2 kids) is supported by 2 workers, each working full-time at $6 an hour. Assuming a 2000 hour work year, this family grosses $24000/year. Now, I live in a poor, rural part of a relatively poor, rural state, and median family income in my county is $37000 per year, and the cost of living here is low. That family making 24 grand, even in my area, is probably going to be receiving some form of state aid - EITC, medicaid, WIC, food stamps, rent assistance, whatever…so taxpayers are forced to subsidize low-wage paying employers - corporate welfare.

So my question, I guess, is how we can restructure the idea of a “minimum wage” to some kind of a “living wage” geared at people who actually have to use such wages to, well, live, as opposed to young people who mostly needs funds for recreation, in such a way as to stop the transfer of income from middle class wage-earners (like myself) to subsidize bad practices by some elements of corporate America?

Posted by: Arr-squared at December 7, 2005 11:27 AM
Comment #99765

Also, Roach:

How can you raise children on that kind of money, and put a roof over their heads, and food in their bellies?
Who says every worker must be able to do this.

Every worker: nobody. Most workers: demography.
Let’s take an example: your parent. Most probably, their incomes allow you to save all your HS earning during summer because they provided you a roof and food, right? What if they could have not? How much would have you save from these $800 in such scenario? Half? Even lower? And, if you couldn’t find a better paid job, how could you raise your own kids then?

If during years many people can’t afford to raise more than 2 kids, your national demography will be badly impacted in the future. And for a nation that have to rely on his future generation to payback its huge debts, it’s not good.

Massive Immigration Policy could help balancing demography, though…

Your frenchly,

PS: France minimum wage is 51% of GDP per capita! How come a third word nation could afford this insane living level 8-)

Posted by: Philippe Houdoin at December 7, 2005 11:38 AM
Comment #99768

Arr-squared: great post!

Posted by: Philippe Houdoin at December 7, 2005 11:40 AM
Comment #99769

Okay my apologies Roach but you miswrote it twice, dude. I had to pull up the rock although I restrained from getting out the calculator. $800/week sounded surreal at best.

Arr-squared, excellent point and so too with areas like that where there are fewer industries per capita the minimum wage is pretty much par as they can get people to work for that amount. It does incur subsidization on many levels (incl. medicare)and meeting with the cost of living index is needed. It doesn’t create a shortage of labor either being that the min. wage hikes are usually quite minimal.

Posted by: Novenge at December 7, 2005 11:44 AM
Comment #99771

It’s the same old argument. If you raise minimum wage, unemployment goes up - sigh .

Not true, if people have money in their pocket, they can buy goods and services, which fuels a need for more workers.

EVERYWHERE in this country, where cities have passed living wage laws, the standard of living and EMPLOYMENT went up.

Madison and Milwaukee, Wisconsin (now statewide :-)
Santa Fe, New Mexico
Portland, Oregon
ETC.

Posted by: Patrick Howse at December 7, 2005 11:45 AM
Comment #99788

The business’ that complain that raising the minimum wage would Put them out of business / or hurt their profits. In effect they are saying that they are not smart enough to run their businness’ and make a profit unless they cheat and exploit their employees. That they cannot afford to pay a living wage because they are stupid.
Starting in 1934 minimum wage ,25 cents per hour. raise year by year, with it it tied to the cost of living and to day the minimum wage would be approx $12 to $15 per hour.
You do the math….. You can get a list of the rate of inflation from 1917 right up to today from the Federal Dept of Labor

Posted by: HereticSpeaks at December 7, 2005 12:26 PM
Comment #99796
Roach wrote: First, a good CEO can very much be worth his millions by delivering shareholder value. A great CEO can literally be worth billions of dollars in added value to a company by making superior managmenet decisions that drive value. Think of someone like Jack Welch who turned a good company into a great company by his decisionmaking. How can the market move such people to their “most valued use” without being able to pay them more.

Roach,
Respectfully, I disagree.
A really good CEO would never be so greedy to accept a mult-million dollar salary.

I personally don’t want to work for a company like that.

And, when times are hard, and 20% of a CEO’s salary could hire dozens of engineers and workers, that’s not what happens. The CEO’s lay off their workforce first.

What some CEOs make is ob$cene and greedy.
It isn’t illegal, and I’m not saying we need laws to limit it. It’s simply is what it is. Greedy.

Did you hear about the President of the United Way? He was arrested, indicted, and convicted of stealing from the United Way. His cu$hy multi-million dollar salary wasn’t enough for him. He went to jail. But, the United Way made the mistake of not formally firing him. So, he sued the United Way for his 4 million dollar salary. And guess what? He won.

This epitomizes the greed and corruption, Corporatism, and Corpocrisy in America today. And why not? Look at the fine example that Congress sets.

Posted by: d.a.n at December 7, 2005 1:00 PM
Comment #99797

HereticSpeaks,
I tend to agree with you on that.

Posted by: d.a.n at December 7, 2005 1:01 PM
Comment #99799

Novenge,
First, I apologize if I sounded like a smartass in my post. That’s a byproduct of posting right before going to bed. But you seem to have outdone me in the rude department.

My point was simple: the “value of the dollar” of the dollar usually refers to its value vis a vis other currencies, not its domestic purchasing power, which is what you seem to be referring to. Absent significant inflation, a weak dollar does not NECESSARILY impact the purchasing power of individuals significantly—depends what they are buying and how much foreign content it contains. If prices for imported commodities increase, you are correct, this does cause an inflation ripple throughout the economy that is generally passed on to consumers (although many short-term commodity price increases are mitigated through hedging). If this had been happening, you would see an increase in inflation, which we have not.

If I’m not mistaken, though, oil is a bad example since global trade in oil is denominated in dollars. Which means we do not have to exchange dollars for another currency to purchase oil, therefore the dollar’s exchange rate is irrelevant in this instance. A $50 barrel of oil costs us $50, whether the dollar is strong or weak. The price of oil, on the other hand, goes up or down according to supply, demand and the machinations of OPEC. If you think I’m incorrect, please explain.

In general, inflation has been under control in recent years—the FED’s more recent concern was DEFLATION. Meaning that in general, the cost of goods and services has remained pretty stable.

All that aside, the strength or weakness of the dollar is far less a factor in wage levels and subsequent purchasing power than productivity, workers’ skill/education level, unemployment levels (ie, competition for labor), and the emergence of a global supply of low-skilled labor, esp in labor-intensive manufacturing such as textiles, which helps keep wages and prices low.

Novenge, looking at another of your posts, I thought your zero taxation for incomes of $25,000 or below was very interesting and I would be inclinded to agree. Part of your implicit reasoning is that low income workers are more responsive to marginal income and expenditure increases (which I agree with). Using that same logic, would not small and medium business owners in labor intensive industries be similarly susceptible to cost increases (eg, minimum wage hikes)? Your thoughts welcome, as always.

That said, I think the minimum wage debate is actually one of the more minor economic topics of our age. Surely it is dwarfed by topics such as deficits (bad), tax reform (good), the Doha Round (good, but in bad shape), improving education (essential for increasingly knowledge-based economy), and the Mets payroll (don’t care as long as they win the World Series).

As for my party affiliation, I have none. I am an independent and depart from the lines of both parties on many issues.

Sorry if this all a bit incoherent—I’ve been coming back to this post on and off for 2 hours.

Cheers,
B

Posted by: boojum at December 7, 2005 1:10 PM
Comment #99805

Arr-squared,
Very good post.

Posted by: boojum at December 7, 2005 1:29 PM
Comment #99810

Novenge

Please illustrate for me one case, just one in which a minimum wage increase has shot up prices anywhere.


Try EVERYTIME the minimum wage goes up ANYWHERE. If the cost to produce an item goes up the manufacturer is going to raise prices to cover the added cost.
It currently cost me about $38.43 to rebuild an alternator for your car. I sell them to the wholeseller for $48.43, a $10 profit.
Some of my suppliers pay minimum wage. If it goes up, they’ll raise their prices to cover the added cost. So a part that cost me say $3.21 could cost me (depending on the added cost to my supplier) up to $4.21. Now multiply that $1.00 (I’m figuring a little high as not all parts will increse a dollar) by 5, the adverge for the number of parts I replace per alternator. That comes to $5.00 in added cost to me. So now the alternator cost me $43.43. Now in order to still make a $10 profit I have to raise my price to the wholesellers $5. In order for them to continue to make their profit they have to raise their price to the parts store where you buy the alternator $5. And then the store charges you $5 more in order to maintain their profit. And that’s just the extra cost to them from my having to raise my prices. They would most likely have other additional cost tacked to the alternator that comes from other sources.
So that raise in minimum wage you want see so bad ends up costing YOU more money. And you most likely didn’t get a raise when the minimum wage went up.


Posted by: Ron Brown at December 7, 2005 1:38 PM
Comment #99820

Paul:


What would happen if we increased the minimum wage they received? Their real wages would increase. And since they spend every penny they get, this would increase aggregate demand.

This is simply not true. If you increase the minimum wage, you take money from one pocket (the Business owner or corporation) and put it into another pocket (labor). The difference will be in the spending patterns of the business owner or the employee.

You could make a small argument that less would be invested, as the wealthy invest more $$. (As you say the lower income spends each dollar it gets).

Companies on the supply side would sell more, make more profit and perhaps hire more workers. This is positive growth. It’s good for business and it’s good for labor.

Companies who hire minimum wages would have less profit to spend. Companies that sell to minimum wage employees would see a net gain, those that sell to businesses and corporation would see a net loss. It would be a basic wash.

Raising the minimum wage has only limited impact on the ecnomy. It is generally a negative on employment growth, (fewer jobs). The reason to consider raising the minimum wages has nothing to do with national economics. All of the credible arguments are on the side of justice to the poor.

Craig


Posted by: Craig Holmes at December 7, 2005 2:04 PM
Comment #99822

Assorted folks upthread:

Thank you for the kind words re: my post.

Mr. Brown:

“If the cost to produce an item goes up the manufacturer is going to raise prices to cover the added cost…And you most likely didn’t get a raise when the minimum wage went up.”

Well, as someone who grew up in and ran a small business, I would say that if my labor costs went up (or any other part of my overhead), I would do almost anything NOT to raise prices. I would first try to shave costs anywhere else to maintain my price and profit margin - you seem to neglect that labor cost is just a part of the cost of production. In fact, in some industries, it might even be a very small part of the cost.

Regarding the latter part of your post, I don’t agree that I am in competition with low-wage workers. I am an educated middle-class professional, and if the minimum wage went up to, say, $6, I would most definitely not feel like I had lost out somehow.

The increased purchasing power that would come from raising the minimum wage would lead to higher consumption, which leads to increased sales tax revenues, which leads to improved services and infrastructure.

If the minimum wage is raised enough to allow more people to own homes, that’s even better. Homeowners have a huge incentive to maintain the values on their property in a way that renters and landlords do not necessarily have. Increased homeownership leads to increased property tax revenues, which generally translates to better schools.

To be honest, and perhaps a bit bourgeois, even if the cost of products went up a little bit in response to a significant increase in the minimum wage, I’m very glad that my family and I are in a position where we could bear that cost without much pain. Speaking from my own personal moral perspective, I believe that if more peoples’ lives were improved by my scintilla of discomfort, I would bear that fairly gladly. I believe in the Keynesian maxim that the proverbial rising tide lifts all ships.

R^2

Posted by: Arr-squared at December 7, 2005 2:10 PM
Comment #99826

Ron Brown,

If that is the true cost of doing business, then so be it. It’s better then us the taxpayers having to subsidize the industries with higher tax related costs (example, welfare to those poor workers). That is business pushing off those costs unto you without your consent.

At least when one goes to buy an alternator, the true costs should be reflected, and you decide weather or not to purchase it.

With non-living wages, the expense is much greater to us all.

Please let me reiterate EVERYWHERE in this country, where cities have passed living wage laws, the standard of living and EMPLOYMENT went up.

Posted by: Patrick Howse at December 7, 2005 2:15 PM
Comment #99829

Ron,
True, the cost of things go up a little, but not a whole lot. There is no doubt that a minimum wage is social engineering in a sense. The question (posed by Arr-squared) is how do we keep from exploiting the low-income populations? I’m pro-business, and pro-free-market, but not when it uses people too much. That’s what gives rise to unions (except mostly only for skilled labor). Also, if we don’t all try to provide a fair wage, guess where these people end up? On welfare. And, perhaps that’s the way it should be? Why over-complicate it by shifting the problem to other systems? Perhaps EITC is another better approach, to distribute the burden? I know this sounds socialist, but a minium wage of $7.46 (the difference split between the rate in 1968 and 1997, adjusted for inflation) doesn’t sound like too much to ask really. I think the cost of goods produced by those making them would cause some costs to increase, but those costs would most likely shift to those that can better afford it? Not sure. But, one thing is for certain. The minimum wage has been allowed to fall way behind without any adjustments since 1997. If adjusted for inflation, the $5.15 in 1997 would now be at least $6.07 now in 2005. Would that be acceptable? I’d be willing to pay a little more for everything if it helps lower-income populations make a little more. It’s still a starvation wage though. It’s still only about $1300 per month. But every little bit helps. Hence, I grimmace a bit when I try to come up with decent reasons to argue against something so insignificant to most of us. I just don’t think a minimum wage increase will hurt that much.

Also, another thing to remember is that states are not forced to adhere to a federal minimum wage (and probably rightfully so…the federal government should not be able to control states at to that degree).

Posted by: d.a.n at December 7, 2005 2:20 PM
Comment #99837

Check out this website http://www.dol.gov/esa/minwage/america.htm there is a general trend of sorts: the states with minimum wages better than the federal minimum wage are some of the wealthiest, with the highest median incomes.

Posted by: tjoey at December 7, 2005 2:34 PM
Comment #99838

I’ll hazard a guess that there’s one thing that most of us can agree on: we need to do a better job educating the citizenry so they are equipped to avail themselves of opportunties beyond minimum wage employment. And parts of the citizenry need to take education more seriously during their formative years so they have opportunties for higher ed down the line.

Although I don’t know much about the details of the policy, isn’t one of Bush’s policy and budgetary priorities increasing funding for community colleges? Is this not a good means of providing more training/education for people not bound for 4 year degrees? I seem to recall Clinton proposing much the same thing.

Posted by: boojum at December 7, 2005 2:36 PM
Comment #99844

Novenge:

You suggest that prices would not rise if the the minimum wage were hiked, then go on to say:

The costs of labor are circumvented by an economy buying overseas parts and goods for manufacturing.

And Arr says:

Well, as someone who grew up in and ran a small business, I would say that if my labor costs went up (or any other part of my overhead), I would do almost anything NOT to raise prices. I would first try to shave costs anywhere else to maintain my price and profit margin - you seem to neglect that labor cost is just a part of the cost of production. In fact, in some industries, it might even be a very small part of the cost.

Those are both alternative ways of responding to an increase in wages, whether they’re minimum wage or not. But if you cut costs by shifting work overseas, aren’t you reducing the need for labor here in the States?

And Arr, how would you cut costs elsewhere? Negotiate lower prices with suppliers? Reduce waste? Cut back on benefits? Cancel the company Christmas party? Each of those puts a hurt on someone, whether it’s your suppliers, employees or the local caterer of your Christmas party.

You don’t seem to realize it, but your arguments actually support those of us who question the benefit of increasing the minimum wage.

But even if raising the minimum wage has such little effect on prices and employment, it’s because those receiving minimum wage are largely on the fringe of our economy. Teens, entry level workers and recent hires are most likely to earn minimum wage and least likely to go on the unemployment rolls when unemployed.

That’s the biggest downside to a higher minimum wage - those people trying to get a foothold aren’t let go, they just aren’t hired in the first place. Therefore, they don’t show up in statistics. They just become the uncounted, chronically unemployable lacking work skills that could have led to far higher wages down the road.

Posted by: Paul Szydlowski at December 7, 2005 2:49 PM
Comment #99856

I knew that my post would get many of you excited because it contradicts what you have believed for a long time.

Roach:

“But any individual worker is paid roughly in proportion to his marginal productivity.”

And when inflation comes along, the mimimum wage worker’s productivity decreases? Nonsense.

Rhinehold:

You worry about workers who make slightly more than the minimum wage. They will want an increase. This is GOOD. Aggregate demand will increase further, enabling business to sell more and maybe hire more workers.

Boojum:

Asking me to take Econ 101 is not an argument. Address my reasoning.

Paul Szydlowoski:

You say that the extra income of minimum wage workers would be used to buy things they work on, thus increasing the cost to them. These workers will use their increase for many things. A restaurant worker, for instance, does not do much eating out.

You also say business pays a worker what he is worth. This is not so. It pays the least it can get away with. Now, you will tell me this is how we determine what the person is worth. Maybe this system is fine for higher paid workers. For those at the bottom, who have no negotiating power, we should make sure they have a living wage.

Craig:

You say that companies that hire workers for a greater minimum wage would make less profit. Mybe so and maybe not. If they raise their prices they may make the same profit. No need to worry either, because all competitors are in the same boat.


Posted by: Paul Siegel at December 7, 2005 3:24 PM
Comment #99859

What you are all missing is that this is a perfect example of why the FEDERAL government shouldn’t be involved. States, actually counties, are much better equipped to know what a living wage is in their area. Are you going to tell me that $9 an hour is a living wage the same in Tennessee and California? In one state, it would be almost wealthy by comparison, in another it would hardly be enough to eat on.

So setting an arbitrary number at the federal level is assinine. I have no problem at all with localized minimum wages because they affect a smaller area, the people voting for them are more in tune with what their community needs are and it is more realistic with setting the appropriate price accurately.

Posted by: Rhinehold at December 7, 2005 3:31 PM
Comment #99862

Paul:


Craig:

You say that companies that hire workers for a greater minimum wage would make less profit. Mybe so and maybe not. If they raise their prices they may make the same profit. No need to worry either, because all competitors are in the same boat.

All domestic competitors. No need to worry for the consumer as foreigners will be happy to supply the product for the same price.

No need to worry either as the companies that have no foreign competition can simply raise their prices on the the consumer and produce inflation.

Craig

Posted by: Craig Holmes at December 7, 2005 3:35 PM
Comment #99871

Paul S.:

“And Arr, how would you cut costs elsewhere? Negotiate lower prices with suppliers? Reduce waste? Cut back on benefits? Cancel the company Christmas party? Each of those puts a hurt on someone, whether it’s your suppliers, employees or the local caterer of your Christmas party.”

Thanks for your thoughtful reply. First and foremost, I want to be clear that I don’t believe that raising the minimum wage would do no harm. My original post did admit that some companies would probably suffer for it. Now, who would suffer, and how much, are empirical questions that my preferred style of armchair bloviating can’t address - they’re questions for data.

In the case of my family’s business, as sole proprietors, our first decision was always whether or not WE could eat the increased cost of whatever. We never hired at the minimum wage, and we never had more than 3 full-time employees from outside the family, but the cost of doing business always seemed to go up, no matter what.

But in the cost-cutting department, our best options were generally to look for lower-cost suppliers and to defer buying (or buy less) new machinery. I take your point that those options “hurt” someone else, but by the same token, if I can buy my supplies for a lower cost from a new supplier, or negotiate a better price, that’s a prudent use of my resources. If I choose to maintain a piece of equipment instead of buying new, that’s often prudent as well.

And while your comments have merit, the general thrust of your post is, I think, rather tangential to the core of my original post. I specifically wanted to talk about ways to promote “living wages” for people who are actually trying to live on minimum wages, not to subsidize teenagers.

Posted by: Arr-squared at December 7, 2005 3:47 PM
Comment #99882

Paul,
You are absolutely right. Smarmy remark on my part was inappropriate. I have made a couple more sustantive remarks since which I’ll let stand in the interest of time. Arr-=Squared and others have made some interesting contributions as well.

Posted by: boojum at December 7, 2005 4:12 PM
Comment #99896

Rhinehold,
No, that fact did not escape me.

Also, another thing to remember is that states are not forced to adhere to a federal minimum wage (and probably rightfully so…the federal government should not be able to control states at to that degree).

You’re right. A one-wage-fits-all is not really possible. While I personally would not be opposed to a higher minimum wage (at least an average of each rate (adjusted for inflation) each time it changed), the federal government can not force states to adhere to it. However, I think many states would. Afterall, it hasn’t been increased since 1997. If states think it’s too high, they don’t have to adhere to it.

Posted by: d.a.n at December 7, 2005 4:31 PM
Comment #99939

I flavor raisong the mimimum wage

Posted by: MIMA at December 7, 2005 6:11 PM
Comment #99944

What I can not figure out is if our economy is doing so great and with corporations making record profits than why are these same people crying about rasing the wages of workers?

Greed? Could be after all does not upper managemant make almost 500 times as much money as your average worker that actually brings home the bacon. No, that answer would lead to a PR outrage.

Competitiveness? With our trade deficit booming each year as more and more Americans can only afford to buy items made in China, one would think that raising wages would only help ths strong economy grow.

Or is it because the economy is not doing as well as the administration is stating. Once again misleading the nation blindly into the future? How many CEO’s have gotten raises over the last 8 years? How much bonus money have they recieved during this time for lowering the purchasing power and number of potentail economically viable consumers so that their shareholders can enjoy profit?

Maybe instead of talking about raising the minimum wage, Americans should be talking about laying off the upper management teams that account for the pork in the payroll system. After all if company A would let go their top five executives, how much more money could they save compared to the laying off of 500 low wage workers?

Posted by: Henry Schlatman at December 7, 2005 6:40 PM
Comment #99947

I’m not necessarly against the posibility of an increase in the minimum wage. I’m also not necessarly for it either.
I just wanted to let those favoring it know that prices will go up. How much depends on the increased cost on employers. Businesses are not going to eat the extra cost.


Arr-squared
I can easyly cut cost by buying cheaper material. The problem there is quality. If quality goes down so does business. If business drops I’d have to lay off. If it drops to much I’d have to go out of business. Then guess where my former employees end up.
I’ve tried to cut cost by shoping for cheaper parts. The problem is in this business you get what pay for. So I have to pay a little more for the quality.
I could cut benifits. Then I have a whole heap of disgruntaled employees. Quality and production suffers.
I could cut back on mantiance on the equipment. Then quality and production suffers. And I also have disgruntaled employees adding to the problem. No one wants to run faulty equipment.
I did find a cheaper carrier to deliver my product for me. So far there hasn’t been any problems.

The fact that there is a minimum wage shows two things.
1. It shows that the Federal Government thinks it knows better that the local government.
2. It shows the sad fact that there are business owners out there that don’t believe in paying a living wage. These are the employers that pay their employees minimum wage. And would pay less if they could. And some do by hiring illegals.

Posted by: Ron Brown at December 7, 2005 6:49 PM
Comment #100048

Ron,
You seem to think that the minimum wage has rose over the last 20-40 years. Given the way Humans look at the increase from under $2.00/hr in the 70’s to the $5.15/hr of today, one might argue that the price of labor has risen.

However, when that same person adjusts this wages into real dollar minimum wages the Raise and Fall of minimum wage shows that Laborer has been losing purchasing power for almost the last 40 years. How is this serving the best interest of the Stockholders of these corporations? Does our American Corporations not see the ignornance of fpllpwing this policy?

Posted by: Henry Schlatman at December 8, 2005 12:00 AM
Comment #100220

Henry
The minimum wage has increased over the last 30 years. And with the way eveything else has gone up it’s a good thing. I’d hate to be making $1.95/hr and paying $2.09/gallon for gas. I don’t doubt that it takes a big bite out of $5.15/hr.
While the cost of labor has gone up, the price of everything else has raisen faster so it takes more of the pay check to purchase the same items.
I cann’t tell you if Corporations can see the folly of keeping workers and low pay or not. I do know that they care more about giving the stockholders a bigger dividend check than they do of paying there employees a decent wage.
I’m personally of the opinion that contented employees are productive employees. I rather take a little less profit per unit and have employees that are contented than make more and have disgruntaled employees. But that’s me. Not everyone in business agrees with me.

Posted by: Ron Brown at December 8, 2005 1:16 PM
Comment #100225

Great discussion all around. But some commenters:


“Not true, if people have money in their pocket, they can buy goods and services, which fuels a need for more workers.”

“The increased purchasing power that would come from raising the minimum wage would lead to higher consumption, which leads to increased sales tax revenues, which leads to improved services and infrastructure.”
…just don’t get the basics. If you have more money in your pocket, it came from SOMEWHERE (unless we just print more, which devalues it further). It comes from businesses you have to buy things from. Circular argument. That should be the end of the discussion.

If my kids want an increase in their allowance….it affects the “global economy” of my family…albeit only a bit, but the US has 260 million “children”, so multiply. Do you think Dad wouldn’t take the family out to eat less, or go on vacation as much?

I just don’t get where the pro-minimum wage people think the money comes from. Like mom said, it doesn’t grow on trees.

Posted by: Kris Culotta at December 8, 2005 1:29 PM
Comment #100226
The minimum wage has increased over the last 30 years. And with the way eveything else has gone up it’s a good thing.

Ron, have you considered the reason the “way everything else has gone up”? Just because two things are related….the causality could go either way. Either increased cost of goods means you need more money, or your demand for more money raises the cost of the good to maintain the profit margin for the businesses (or would you like more of them, usually small ones, to fail?).

See my above post.

Posted by: Kris Culotta at December 8, 2005 1:32 PM
Comment #100262

It’s all about the stock holders, if they feel the stock dividends aren’t high
Enough, the company rises the cost of their product or cuts their overhead
(Employees) now every body’s happy. Management gets their bonus stock holders get their dividends good job boys


Posted by: layne45 at December 8, 2005 3:58 PM
Comment #100303

Kris
There are a number of reasons that prices go up. When the cost to produce goods goes up for any reason you can expect to see prices go up.
It’s not just the cost of labor that drives prices up. Believe it or not tax increases have forced me to riase prices more than labor cost.

I’m a small business owner so why would I want to see ANY of them go under? I also understand profit margins. I’m not against anyone making a profit. That’s why they’re in business.

Posted by: Ron Brown at December 8, 2005 6:03 PM
Comment #100319

Complete and utter nonsense. All raising mini wage would do is increase unemployment rates for the low earning members of the work force. Get a life

Posted by: Jim bob at December 8, 2005 6:58 PM
Comment #100321

The minimum wage in Ireland is $9.04. Not alone is it not causing the loss of jobs, Ireland has unprecedentedly high immigration, particularly from Eastern Europe. Our Inflation has dropped by .4% following the reductions in oil prices to 2.6%. Our unemployment is currently at 4.6%, which is functionally full employment. GIVE THE LEAST FORTUNATE A BREAK. THE SKY WON’T FALL.

Posted by: Paul in Euroland at December 8, 2005 7:12 PM
Comment #100330

roach,
“it’s silly to think of capping CEO’s salary’”

my suggestion as to capping salary’s was meant to be at the corporate level not mandated by law. and the capping suggested was not at just salary’s but at total initial compensation. you have some good points that highlite the complexity of capping. i still think it is a viable alternative. i don’t don’t think it’s silly and apparently neither does just welch. he capped his own salary.

Posted by: ec at December 8, 2005 7:45 PM
Comment #100393

SO, with minimum wage going up, does that mean that taxes, bus, train, and everything else goes up. Don’t play slick.Regardless lower and middle class usually need 40 hours plus to survive in the US.

Posted by: jewel at December 8, 2005 11:57 PM
Comment #100473

Raising the mini will cause firms to lay off or increase prices to maintian margins. Which in turn sets the equilibrium at higher prices/ higher income and you have accomplished much of nothing. Tax cuts can help, but only if they are applied correctly. Govt spending can help by providing more jobs, but then again you have to have sufficeint tax revenue. The answer may be to save as much as possible, live within your means, cut back on credit cards, buy a used car instead of a new car, etc. Huge problem that cant be solved simply by raising the mini.

Posted by: jim bob at December 9, 2005 7:37 AM
Comment #100615

Ron,

It’s not just the cost of labor that drives prices up. Believe it or not tax increases have forced me to raise prices more than labor cost.

Good point….taxes are going to kill our economy too, if we don’t reign in our politicians. :)

Posted by: Kris Culotta at December 9, 2005 1:17 PM
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