• Quick note - the problem with Youtube videos not embedding on the forum appears to have been fixed, thanks to ZiprHead. If you do still see problems let me know.

Double The Minimum Wage

lobosrul said:
I think some sort of reasonable formula could be worked out that would give a single person a basic standard of living.

For example: take the mean (not average) national values of the following:

(Rent for a 1 bedroom apt + food costs + bills for basic services + cost of health insurance + public transport) / 160 (hours in a work month at full time) * 1.20 (for clothes incidentals etc).

That of course wouldn't be enough in some expensive locations, its up to localities to set their minimum wage higher if they so choose.

Also, I'd be very much for setting 2 different minimum wages. A lower wage if healthcare is provided with no premium to the employee, and a higher with no healthcare benefits. Somewhere in between if the employee pays part of the premium. That way large businesses that can negotiate good rates for their employees can offer healthcare, and smaller business that don't want to fool with it can opt out.
Click to expand...

So your goal for our minimum wage would be a living wage?

Around here, that comes out to about $11/hour. Would you favor reducing that sum for minors/students?
 
sarge said:
Why do you consider $15/hour too high?
Click to expand...

I suppose it seems high because I live in a rural area.

I don't really know enough to form an opinion - I have no idea what effect raising the minimum wage would have on, well anything.
Click to expand...


I think three possibilities exist.

One, if workers get more pay they'll spend more and that might lead to more inflation that wipes out any gain in wages over time. But there's a problem with that possibility. Bankers don't loan out money on easy terms any more, the money supply will likely not grow fast, and inflation seems unlikely.

This leads to the second possibility. The higher wages cause employers to drop employees leading to increasing unemployment and a declining economy. But this also seems unlikely because the remaining employees have more money and will spend it on goods and services they need, leading to a third possibility.

The increased spending by minimum wage workers in these areas cause other employers to higher more workers, mostly minimum wage workers to fill the need and the economy grows faster than if it didn't have a higher minimum wage.

P.S. I'm not an economist. I'm just guessing.
 
lobosrul said:
If you can't afford to pay someone a basic living wage, then don't hire them.
Click to expand...

And if set a "living wage" to above the equilibrium price, that is what will happen for many, many people.

Somehow, earning nothing is better than earning less.
 
sarge said:
So your goal for our minimum wage would be a living wage?

Around here, that comes out to about $11/hour. Would you favor reducing that sum for minors/students?
Click to expand...

Yes, and $11/hr sounds about right to me.

Yes for minors, but only if the job had actual educational value for students.
 
MikeMangum said:
And if set a "living wage" to above the equilibrium price, that is what will happen for many, many people.

Somehow, earning nothing is better than earning less.
Click to expand...

No. I expect employers to either take a slightly smaller profit, or raise their prices a little bit if they rely on minimum wage workers. Which one would depend on how competitive their market is and how highly consumers value their products.

Or take fruit picking for example:

For a typical household, a 40 percent increase in farm labor cost translates into a 3.6 percent increase in retail prices. If farm wages rose 40 percent, and this wage increase were passed on to consumers, average spending on fresh fruits and vegetables would rise about $15 a year

http://www.nytimes.com/roomfordebat...sts-and-benefits-of-a-raise-for-field-workers

Just an example, I'm sure labor costs for other businesses who employee minimum wage workers are more than that. But the notion that (in example) a 20% increase in the minimum wage would lead to a general 20% increase in goods and services is absolutely wrong. If you can't figure out why, please go back to school.

We live in the wealthiest (excepting micro-states and oil rich areas) country in the world and we can't pay people a basic minimum wage because it will cut down a tiny bit on profits. Or is it on principle that worker should live in poverty? :confused:
 
Solitaire said:
I think three possibilities exist.

One, if workers get more pay they'll spend more and that might lead to more inflation that wipes out any gain in wages over time. But there's a problem with that possibility. Bankers don't loan out money on easy terms any more, the money supply will likely not grow fast, and inflation seems unlikely.

This leads to the second possibility. The higher wages cause employers to drop employees leading to increasing unemployment and a declining economy. But this also seems unlikely because the remaining employees have more money and will spend it on goods and services they need, leading to a third possibility.
Click to expand...

The very first thing to keep in mind is that labor costs go up. Those additional costs have to be paid, and that additional money has to come from somewhere. Since all of the costs of a business are ultimately paid for by the customers of that business, it means that customers would pay higher prices or the business would fail.

Take a restaurant, for example. Standard rule of thumb for restaurants is that prime costs (labor, food, and beverages) should not exceed 65% of total sales. Generally, labor costs shouldn't be more than 30% of sales. It varies based on type of restaurant, and if labor costs are lower, food and beverage costs can be higher, but generally prime costs need to be 65% or sales or lower (preferably lower).

Assume $100,000/monthly sales for a nice round number.


labor costs: 30% of sales, $30,000
F&B: 35% of sales, $35,000
Other costs (Occupancy costs, operating cost, administrative costs): 25%, $25,000
Profit: $10,000


Now, double labor costs to 60,000 and at current sales the restaurant is losing 20,000 a month. Let's say the employer compensates by increasing prices by 30%. However, sales do not actually increase by 30% linearly with the increase in price. Supply and demand are curves. Let's say sales increase by 25% after a 30% increase prices. Labor now makes up 48% of sales. Costs are now 120,000/month and sales are 125,000/month. Profits went from 10,000/month to 5,000/month.

But wait...we aren't done. The food gets more expensive as well. The producers of the food have just seen their labor costs go up too, remember. Bump food prices up by 40% and Food COGS is now 49,000/month, giving a total cost of 134,000/month. The restaurant, after raising prices by 30%, went from making a 10,000/month profit to a $9,000/month loss.

The restaurant can try to raise prices even higher, and/or it can lower labor costs by reducing hours worked, and/or reduce food costs by reducing portion size or quality. The end result is that the customers will be paying substantially more for either the same goods and services, or a fair amount more for reduced value goods and services. Or the business fails and they all employees lose their jobs.

That exact same dynamic happens all throughout the economy to varying degrees based on a particular business' labor costs percentage, with the increased costs added at each step; from producer, to warehouser, to wholesaler, to retailer. Purchasing power goes down. Let me repeat that: purchasing power goes down. There isn't actually enough money in the economy for people to pay the higher prices (or the higher wages, for that matter), so economic activity is reduced. Many businesses fail. Unemployment increases.

OR

The Fed can deal with the fact that there isn't enough money in the economy to bear the higher costs and just print the additional money. Welcome to inflation. If the Fed prints enough money to overcome the difference, the reduced value of the dollar essentially
negates the increase in wages, and society is back to where it started for the minimum wage (as adjusted for inflation) except for all the reduced economic activity during the time that it took for the additional money to trickle through the economy and for prices to reach a new equillibrium.
 
I have 7 employees that range from 12-16 dollars an hour right now.

Id have to find a way to run with 6 if this went down. My budget would not magically grow to accommodate the changes. Not yet anyways.
 
How about a different approach. I happen to have heard this while driving today.

1. Abolish minimum wage, let the free market set the wage.

2. Establish minimum Income. If you are employed and still fall below minimum income then the governments supplements until you reach minimum income.

3. Welfare remains set below minimum income in order to retain incentive to pursue employment.

I have no idea if this would work in practice, but it seems an idea at least worth bouncing around.
 
Funnily enough, Australian society had not fallen apart with a livable minimum wage, which recently increased. Last I looked we have moved quite rapidly up the GDP table in recent years.....
 
lionking said:
Funnily enough, Australian society had not fallen apart with a livable minimum wage, which recently increased. Last I looked we have moved quite rapidly up the GDP table in recent years.....
Click to expand...

Funnily enough, the very same is being discussed here, since austerity demonstrably does not work.
 
MikeMangum said:
The very first thing to keep in mind is that labor costs go up. Those additional costs have to be paid, and that additional money has to come from somewhere. Since all of the costs of a business are ultimately paid for by the customers of that business, it means that customers would pay higher prices or the business would fail.

Take a restaurant, for example. Standard rule of thumb for restaurants is that prime costs (labor, food, and beverages) should not exceed 65% of total sales. Generally, labor costs shouldn't be more than 30% of sales. It varies based on type of restaurant, and if labor costs are lower, food and beverage costs can be higher, but generally prime costs need to be 65% or sales or lower (preferably lower).

Assume $100,000/monthly sales for a nice round number.


labor costs: 30% of sales, $30,000
F&B: 35% of sales, $35,000
Other costs (Occupancy costs, operating cost, administrative costs): 25%, $25,000
Profit: $10,000


Now, double labor costs to 60,000 and at current sales the restaurant is losing 20,000 a month. Let's say the employer compensates by increasing prices by 30%. However, sales do not actually increase by 30% linearly with the increase in price. Supply and demand are curves. Let's say sales increase by 25% after a 30% increase prices. Labor now makes up 48% of sales. Costs are now 120,000/month and sales are 125,000/month. Profits went from 10,000/month to 5,000/month.

But wait...we aren't done. The food gets more expensive as well. The producers of the food have just seen their labor costs go up too, remember. Bump food prices up by 40% and Food COGS is now 49,000/month, giving a total cost of 134,000/month. The restaurant, after raising prices by 30%, went from making a 10,000/month profit to a $9,000/month loss.

The restaurant can try to raise prices even higher, and/or it can lower labor costs by reducing hours worked, and/or reduce food costs by reducing portion size or quality. The end result is that the customers will be paying substantially more for either the same goods and services, or a fair amount more for reduced value goods and services. Or the business fails and they all employees lose their jobs.

That exact same dynamic happens all throughout the economy to varying degrees based on a particular business' labor costs percentage, with the increased costs added at each step; from producer, to warehouser, to wholesaler, to retailer. Purchasing power goes down. Let me repeat that: purchasing power goes down. There isn't actually enough money in the economy for people to pay the higher prices (or the higher wages, for that matter), so economic activity is reduced. Many businesses fail. Unemployment increases.

OR

The Fed can deal with the fact that there isn't enough money in the economy to bear the higher costs and just print the additional money. Welcome to inflation. If the Fed prints enough money to overcome the difference, the reduced value of the dollar essentially
negates the increase in wages, and society is back to where it started for the minimum wage (as adjusted for inflation) except for all the reduced economic activity during the time that it took for the additional money to trickle through the economy and for prices to reach a new equillibrium.
Click to expand...


How are you going to inspire passion by reciting dry, old, and incredibly obvious facts?

Besides facts are racist, homophobic, and anti-womyn!! Just because!!!
 
lobosrul said:
No. I expect employers to either take a slightly smaller profit, or raise their prices a little bit if they rely on minimum wage workers. Which one would depend on how competitive their market is and how highly consumers value their products.

Or take fruit picking for example:

For a typical household, a 40 percent increase in farm labor cost translates into a 3.6 percent increase in retail prices. If farm wages rose 40 percent, and this wage increase were passed on to consumers, average spending on fresh fruits and vegetables would rise about $15 a year

http://www.nytimes.com/roomfordebat...sts-and-benefits-of-a-raise-for-field-workers

Just an example, I'm sure labor costs for other businesses who employee minimum wage workers are more than that. But the notion that (in example) a 20% increase in the minimum wage would lead to a general 20% increase in goods and services is absolutely wrong. If you can't figure out why, please go back to school.

We live in the wealthiest (excepting micro-states and oil rich areas) country in the world and we can't pay people a basic minimum wage because it will cut down a tiny bit on profits. Or is it on principle that worker should live in poverty? :confused:
Click to expand...

Well, with farm labor, raising the the wage by 40% is what, $2/hr?
 
The ability for people to believe two contradictory thoughts at once always amazes me:

1. We lost all our good-paying jobs to low-wage countries like China.
2. We can raise the minimum wage significantly without losing a lot of jobs.
 
MikeMangum said:
When left alone, aside from issues of externalities, the market seems to handle these sorts of issues far, far better than even the smartest amongst us.
Click to expand...
With all due respect, quite a few of us are atheists here at JREF, and that includes "The Market" and "The Founding Fathers" as well.

To take your argument to its ridiculous conclusion, all health and safety regulations should also be abolished, because if a lot of people start getting sick, injured or dead because of a product, people will stop buying that product. That's Market Self-Correction at work! The Invisible Hand!
 
Brainster said:
The ability for people to believe two contradictory thoughts at once always amazes me:

1. We lost all our good-paying jobs to low-wage countries like China.
2. We can raise the minimum wage significantly without losing a lot of jobs.
Click to expand...

Are Walmart and fast food restaurants going to start outsourcing their workforces if we increase the minimum wage?
 
maxpower1227 said:
Are Walmart and fast food restaurants going to start outsourcing their workforces if we increase the minimum wage?
Click to expand...

Fast food restaurants would probably start going out of business. People eat at them for convenience, but raise the prices enough and they'll decide they can fix it themselves for much less. Wal-Mart would find some way to reduce the number of workers at their stores; I would not be surprised to see robots stocking shelves in the next few years.
 
You must log in or register to reply here.

Back
Top Bottom