$9/h minimum wage

[Cavemonster]

If I have 10 employees making minimum wage, and am forced to give them all a $1 raise, I would cancel any plans to hire another minimum wage worker, as the other ones just ate what would have been his hourly wage.

That's ridiculous. You would only have made plans to hire an 11th worker if that worker would generate a profit or value significantly beyond their wages. You speak as though you were planning for some reason to employ a new person you can do business without who generates no new income.

 

[WildCat]

That's ridiculous. You would only have made plans to hire an 11th worker if that worker would generate a profit or value significantly beyond their wages.

And when wages increase beyond the "profit or value" (which stays the same)?

 

[Cavemonster]

And when wages increase beyond the "profit or value" (which stays the same)?

Then the employer may decide against hiring or choose to lay off workers.

But if the employer's profit margin on the work of a single employee in a work force of 10 was $1-2 an hour, then you're not dealing with a great businessman. For a workforce that size, it would make the total profits barely above minimum wage.

I don't contest at all that a minimum wage increase will result in some companies having fewer employees. what I disagree with are the specifics of Courier's posts. Go read them.

 

[Cavemonster]

but unskilled workers, profits and consumers will in some manner combine to pay the higher wages.

I mostly agree with this, I was posting to contest Courier's assertion that workers would bear the full brunt.

But I think you leave out some factors.

Low wage workers tend to spend all their money, and they spend it largely at places that employ low wage workers either directly or through the supply chain, so all this extra money spent on employees is going directly back to similar businesses. A minimum wage increase will create an increase in trade. And that pays some of the difference.

Beyond that, bringing employees up to a living wage decreases turnover in many of these businesses, which has a real value. (Obviously less value than the full wage increase, or else they'd already be paying that much more, but it again returns value to the company)

 

[Courier]

That's ridiculous. You would only have made plans to hire an 11th worker if that worker would generate a profit or value significantly beyond their wages....

Or if the current employees were having problems handling the existing load of commerce.

 

[Cavemonster]

Or if the current employees were having problems handling the existing load of commerce.

But again, you're not Santa Claus. Either you need that extra employee in order to fill those orders reliably, in which case it's inelastic. Or being overworked will have a negative effect on your workforce with a value that exceeds the wages and other costs for the new hire, which is added value all the same.

But we don't need to brood over the hypotheticals. The major research of the last 20 years concludes that employment losses from the institution and raising of minimum wages are small to non-existent. Meta-analysis shows a barely significant effect and even that is likely attributable to publication bias. And to the extent they may have an effect, it's mostly on teenage employees.

And none of the minimum wage hikes studied had the effect of added spending from millions of minimum wage and near minimum wage workers cycling their higher paychecks right back into the same companies as customers.

 

[WildCat]

Then the employer may decide against hiring or choose to lay off workers.

But if the employer's profit margin on the work of a single employee in a work force of 10 was $1-2 an hour, then you're not dealing with a great businessman. For a workforce that size, it would make the total profits barely above minimum wage.

I don't contest at all that a minimum wage increase will result in some companies having fewer employees. what I disagree with are the specifics of Courier's posts. Go read them.

You are assuming all workers are equally productive, and they aren't.

What happens to the marginal worker who's only capable of adding $8.50/hr in value?

eta: and just what do you think a typical profit margin is?

eta2: and why do I never notice typos until someone quotes me?

 

[ehcks]

You are assuming all workers are equally productive, and they aren't.

What hapens to the marginal worker who's only capable of adding $8.50/hr in value?

They get fired and replaced.

 

[WildCat]

But The major research of the last 20 years concludes that employment losses from the institution and raising of minimum wages are small to non-existent. Meta-analysis shows a barely significant effect and even that is likely attributable to publication bias. And to the extent they may have an effect, it's mostly on teenage employees.

Have any of those studies shown increases in minimum wage were effective in reducing poverty?

 

[Cavemonster]

You are assuming all workers are equally productive, and they aren't.

Where do you see that assumption?

 

[Cavemonster]

Have any of those studies shown increases in minimum wage were effective in reducing poverty?

I'm honestly not well enough researched to speak on that in any depth.

I came from a place on the fence about minimum wage, and since the debate, I've been reading up on the biggest sticking point for me which was the effect on employment.

 

[Kaosium]

But we don't need to brood over the hypotheticals. The major research of the last 20 years concludes that employment losses from the institution and raising of minimum wages are small to non-existent. Meta-analysis shows a barely significant effect and even that is likely attributable to publication bias. And to the extent they may have an effect, it's mostly on teenage employees.

Might that be because until 2007 there were no federal minimum wage hikes and the ones studied in that twenty year period were regional in nature where the new minimum wage was near to the prevailing entry level wage in those areas?

Why would anyone expect that to hold for a significantly larger increase on the federal level? One thing for certain, we still have an abnormally high unemployment rate better than three years after the ending of the recession.

 

[Cavemonster]

Might that be because until 2007 there were no federal minimum wage hikes and the ones studied in that twenty year period were regional in nature where the new minimum wage was near to the prevailing entry level wage in those areas?

Why would anyone expect that to hold for a significantly larger increase on the federal level? One thing for certain, we still have an abnormally high unemployment rate better than three years after the ending of the recession.

I'm open to arguments that the specific numbers and scale of this increase present specific challenges.

I was responding to Courier who was making a general point.

 

[Kaosium]

I'm open to arguments that the specific numbers and scale of this increase present specific challenges.

I've made some, but let me simply summarize:

This would represent a total increase of roughly 75% in the nominal minimum wage over the course of a mere eight years. It would come at a time of unusually high unemployment in a non-growing economy, with an especially high number of long-term unemployed.

Those who may not hire, or even fire, employees based upon a minimum wage increase may very well be in industries where things like production is tough to measure, but may entail things like additional duties delegated to a group of employees as opposed to hiring a new employee to take care of those tasks. Sometimes it may entail putting management into a production capacity (more often) instead of management. I'm thinking of things like fast-food restaurants where the managers may have to work the counter more as opposed to managing, or a department store not hiring a janitor or the like and instead delegating that responsibility to various different departments. There's also the likelihood some places may just eliminate hours where profits are marginal as opposed to staying open/expanding hours in hopes of growing the business. A restaurant closing earlier or a bar eliminating Sunday hours is the sort of thing I'm thinking of.

What are the best reasons in your view to make this increase?

 

[WildCat]

Where do you see that assumption?

When you talk about whether or not a company would continue to hire workers at a higher minimum wage. You make no distinction whatsoever between skill levels of workers, or their productivity. You act like they are all identical widgets.

 

[respect]

I mostly agree with this, I was posting to contest Courier's assertion that workers would bear the full brunt.

But I think you leave out some factors.

Low wage workers tend to spend all their money, and they spend it largely at places that employ low wage workers either directly or through the supply chain, so all this extra money spent on employees is going directly back to similar businesses. A minimum wage increase will create an increase in trade. And that pays some of the difference.

Beyond that, bringing employees up to a living wage decreases turnover in many of these businesses, which has a real value. (Obviously less value than the full wage increase, or else they'd already be paying that much more, but it again returns value to the company)

Yes, it can have some offsetting effect but not enough to fully offset the cost, businesses are not perpetual motion machines. For example, let's say a McDonald's employee made $8 an hour and gets hiked to $9, then works a ten hour shift and promptly spends the extra $10 at the McDonald's they work at. That $10 needs to cover the input costs of their orders (price of materials, portion of increased energy use and payroll on others, etc).

Although it is an interesting point. It is at least conceivable that some businesses could see an increase in profits, although it would take fairly unusual circumstances. For example, if that McDonald's were in a town that was built around a factory that paid minimum wages and produced something its employees were not interested in consuming themselves they may all spend their extra $10 at the McDonald's as well. Enough of this and the McDonald's benefits although the manufacturer is hurt.

IIRC, the evidence suggests that minimum wage hikes have very little effect on lateral movement and employee retention (although it has been years since I took classes in labor theory so I may be not recalling correctly). Rather, training and promoting from within does as it is associated with building a degree of loyalty and trust between employer and employee. Simply being forced to pay a higher wage that can be gotten elsewhere does not do that.

 

[respect]

But we don't need to brood over the hypotheticals. The major research of the last 20 years concludes that employment losses from the institution and raising of minimum wages are small to non-existent.

Herein lies the problem. Minimum wage hikes are typically not met with massive layoffs and this has been misconstrued by the internet's crack team of reporters to mean that there isn't adverse effects on employment which is simply not the case. Employers have a multitude of ways to recover some or all of their new costs from the people wage hikes are supposed to help. They can cut hours, they can eliminate vacation and sick days, restaurants and grocers can eliminate free lunches etc etc etc. We are looking for a lot of possible responses, studies that only look at employment numbers tell only a little of the story. Employer responses have been all over the place depending on their specific circumstances as they have a lot of options. Perhaps most disturbingly as the wage hikes are supposed to benefit the poorest and/or least skilled amongst us, in some cases they have been hurt badly because employers responded by increasing hiring standards in exchange for higher wages, for example, these guys found that a wage hike in New York led to a 26% decrease in employment among people ages 16-29 without a high school degree. Many may be fine with those who are high school students being boxed out by higher standards, but what about the affected adults? The people most hurt were those with the least marketable skills and education, the very same people who are supposed to be the beneficiaries. Simply looking at employment figures doesn't tell you that part of the story.

 

[respect]

Have any of those studies shown increases in minimum wage were effective in reducing poverty?

No, the changes are insignificant, and sometimes towards slight increases in poverty, especially when hour cutting is the method of choice for cost recovery.

Virtually every economist, regardless of general views and politics, agrees that negative taxes are a far superior method for reducing poverty than price distortions in labor markets so naturally we don't talk about that in the national political scene. It makes way too much sense.

 

[Cavemonster]

Simply looking at employment figures doesn't tell you that part of the story.

I'm getting a little frustrated with this. I've said many times that my posts about employment were a rebuttal to Courier's claims about employment. People continuously take them as a standalone argument entirely ignoring the context.

Don't read one tiny snippet in a chain of exchanges and respond as though it were posted with no context.

 

[Cavemonster]

When you talk about whether or not a company would continue to hire workers at a higher minimum wage. You make no distinction whatsoever between skill levels of workers, or their productivity. You act like they are all identical widgets.

Such a distinction is not relevant for the broad points I've been addressing. I also didn't do any breakdown of business type of hair color.

For about the half dozenth time, I'll say it again. I posted responding to Courier's general points about hiring and layoffs. My posts can be understood in the context of his that I responded to.