Double The Minimum Wage

[tyr_13]

To zero as it is completely irrelevant.

Once again you forget that entry-level wages for unskilled, unproven, and generally talentless workers competes with what the welfare state will pay them to stay home and make Democrat voters full-time.

The vast majority of people tie their self worth with working and instinctively work. This mechanism drives people to not take available aid (I make less than $25,000 a year and take no state aid), and compete to keep jobs that otherwise they would pass over.

Generally speaking, people want to work. The idea that welfare takes a sizable chunk of productive people out of the labor pool is unsupported, but don't let that stop you from demonizing poor people and Democrats of course.

 

[Solitaire]

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.

I'd agree, and I suspect that the people who want to raise the minimum wage also agree on the first part, but on the second part it looks like there's another option.

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.

Right. I like the numbers, clears things up. So we got possibility one and possibility two, but what happened to possibility three?

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 equilibrium.

OR…

The minimum wage goes up, prices stay the same, and employment increases, and the fed doesn't print additional money. It's such a simple mathematical operation, I'm surprised it took me so long to figure it out. Just look at the incomes and ask what change can you make that raises the minimum wage without shifting the curve. It's a fun little problem.

P.S. I was reading this article on tripling the minimum wage and feeling really puzzled.

 

[Wildy]

Yeah, it seems like a really bad idea.

"You're providing an estimated value of about $16/hour, but since the government is already paying you $11/hour, we're going to offer you $5/hour Above Minimum Income, and pocket the rest as profit."

I don't think the idea is supposed to work like that. It's more if the minimum income was say, $20k/year, and you're in a job that only pays $15k/yr, the government would give you an extra $5k/yr to make up for it. So someone getting $20k/yr wouldn't get anything from the government. Neither would someone making $22k/yr.

 

[Emperor_Gestahl]

If you double the minimum wage companies that employ minimum wage labor will have to increase their prices significantly just to retain a functioning business model, while companies already paying more than minimum wage will have to increase their wages (and therefore prices) commensurately as skilled labor isn't going to settle for suddenly making minimum wage while prices are soaring. I don't know what all the effects would be, economies are complicated things, but it's far from a simple solution to any given problem. Remember, profit margin is a percentage, so maintaining that margin means CEO and executive pay are probably going up too..

 

[maxpower1227]

We simply can't burden businesses with an increase in the minimum wage. The effects would be catastrophic. Many of them are still recovering from the damage dealt by the outlawing of affordable child labor.

 

[ehcks]

We simply can't burden businesses with an increase in the minimum wage. The effects would be catastrophic. Many of them are still recovering from the damage dealt by the outlawing of affordable child labor.

Exactly. What we need to do is bring back company towns that pay in scrip.

 

[theprestige]

What talent could a person develop that was not in any way teachable or otherwise reproducible? I can't think of anything, but if such a talent existed, that person would probably soon find themselves heading their own company.

Unless they have no talent for heading a company. In which case they'll probably want to hire a talented company head to head the company, so they can focus on reaping the rewards of their own unique talent. And if the company head is at all talented, she won't pay a penny more than the market rate for janitorial staff at the company headquarters.

Are you helping me fill a demand for goods and services from which I am able to reap enormous profits? Is a private citizen paying someone for a personal favor really analogous to an employer who is running a business? No? Then maybe you should come up with a realistic comparison and stop trying to justify corporations keeping their employees in poverty.

And there it is: Special pleading. Some jobs in some industries are magically so special that the people that do them must be underpaid, and deserve a lot more.

And other jobs in other industries are pretty worthless, and can be written off as "paying someone for a personal favor", instead of being recognized as an honest day's work that deserves an honest day's pay.

According to you, anyway.

But you're sooo close! You do actually realize that not every job brings the same value to the employer. Now all you need to do is come up with a coherent theory of determining the value of labor, and applying it consistently via some model other than "corporations are evil".

 

[sir drinks-a-lot]

I'd love for maxpower1227 to start a company, and we could all work there for a 'living wage'. I'd handle social marketing, and guarantee that I would post a single tweet each and every day.

Of course, it is very doubtful that the company would turn any profit. But I'm sure that maxpower1227, not being greedy, would make sure we all got paid out of his other income.

When do I start? And, max, I appreciate your concern for us workers. Thanks!

 

[maxpower1227]

Unless they have no talent for heading a company. In which case they'll probably want to hire a talented company head to head the company, so they can focus on reaping the rewards of their own unique talent. And if the company head is at all talented, she won't pay a penny more than the market rate for janitorial staff at the company headquarters.



And there it is: Special pleading. Some jobs in some industries are magically so special that the people that do them must be underpaid, and deserve a lot more.

And other jobs in other industries are pretty worthless, and can be written off as "paying someone for a personal favor", instead of being recognized as an honest day's work that deserves an honest day's pay.

According to you, anyway.

But you're sooo close! You do actually realize that not every job brings the same value to the employer. Now all you need to do is come up with a coherent theory of determining the value of labor, and applying it consistently via some model other than "corporations are evil".

There is no special pleading. Your scenario was absurd and in no way representative of a typical job in the (for example) fast food or retail industries. The problem with your argument is that it can be used to support keeping the minimum wage at any arbitrarily low value, since you provide no argument for determining what a job is worth. You certainly don't favor having wages correlate to worker productivity, or else you'd advocate for wages higher than they are now. You accuse me of having no way to judge the value of labor - what is yours? Setting it as low as the peons will tolerate without getting violent?

 

[maxpower1227]

I'd love for maxpower1227 to start a company, and we could all work there for a 'living wage'. I'd handle social marketing, and guarantee that I would post a single tweet each and every day.

Of course, it is very doubtful that the company would turn any profit. But I'm sure that maxpower1227, not being greedy, would make sure we all got paid out of his other income.

When do I start? And, max, I appreciate your concern for us workers. Thanks!

You're so right. And poor Walmart would be out if business if they actually had to pay their workers more than poverty wages. They barely make any profit!

Keep justifying sociopathic greed and exploitation.

 

[NewtonTrino]

You're so right. And poor Walmart would be out if business if they actually had to pay their workers more than poverty wages. They barely make any profit!

Keep justifying sociopathic greed and exploitation.

Maybe you should start a business and show everyone how it's done?

Minimum wage laws are racist laws used to keep black people out of the work force. The fact that people can't see that is disturbing.

 

[maxpower1227]

Can we stop with the "go start your own business or stfu" arguments? Unless all of the people using it are themselves business owners...

 

[sir drinks-a-lot]

...you provide no argument for determining what a job is worth. You certainly don't favor having wages correlate to worker productivity, or else you'd advocate for wages higher than they are now. You accuse me of having no way to judge the value of labor - what is yours?

The best way to determine what a job (or anything) is worth is to let a free market set the price. Just like the best way to price bananas is by letting the market set the price, so it is with labor.

 

[sir drinks-a-lot]

Can we stop with the "go start your own business or stfu" arguments? Unless all of the people using it are themselves business owners...

NewtonTrino and myself are both business owners. We can get you setup quick, and ourselves on the payroll at a 'living wage', courtesy of your bank account.

 

[NewtonTrino]

Can we stop with the "go start your own business or stfu" arguments? Unless all of the people using it are themselves business owners...

Since I own a business let's keep talking about it.

 

[tyr_13]

Because it's an appeal to (false) authority.

EDIT: Or an ad-hom, depending on which direction. Hell, could be both.

 

[MikeMangum]

The vast majority of people tie their self worth with working and instinctively work. This mechanism drives people to not take available aid (I make less than $25,000 a year and take no state aid), and compete to keep jobs that otherwise they would pass over.

Generally speaking, people want to work. The idea that welfare takes a sizable chunk of productive people out of the labor pool is unsupported, but don't let that stop you from demonizing poor people and Democrats of course.

Generally speaking, you are probably right; most people would prefer to work. Specifically speaking, you are incorrect.

Believe me, there are plenty of people who would accept an income that met just their most basic needs if they didn't have to work. When I was young, I worked landscaping for a living. I worked with people who wanted to go on unemployment and stay on unemployment as long as they could continue to receive benefits. It's amazing how during 8 months of benefits they were never able to find a job, but when that last week or two of benefits came up, they would always find something very quickly. It helps when they stop holding out for a management position.

 

[NewtonTrino]

Generally speaking, you are probably right; most people would prefer to work. Specifically speaking, you are incorrect.

Believe me, there are plenty of people who would accept an income that met just their most basic needs if they didn't have to work. When I was young, I worked landscaping for a living. I worked with people who wanted to go on unemployment and stay on unemployment as long as they could continue to receive benefits. It's amazing how during 8 months of benefits they were never able to find a job, but when that last week or two of benefits came up, they would always find something very quickly. It helps when they stop holding out for a management position.

Then there are the numerous people who take unemployment and then find a cash under the table style job when they need some extra cash.

Personally I have no issue with unemployment insurance. I do have an issue with trapping people in poverty by making it impossible to get a job because they lack ability to create enough value to earn minimum wage.

The minimum issue is a complete red herring when it comes to what most people get paid. Otherwise how would you explain all the people (most people) who earn above the minimum?

 

[MikeMangum]

You're so right. And poor Walmart would be out if business if they actually had to pay their workers more than poverty wages. They barely make any profit!

Keep justifying sociopathic greed and exploitation.

I'm guessing you aren't that familiar with WalMart. There are 2 basic strategies for making profits as a retailer of goods: charge a large markup and have relatively fewer sales (ex: Tiffany's or Apple), or charge a smaller markup, compete on price, and make your profits off of a large volume of sales (WalMart).

WalMart does indeed have very, very large profits. But it actually has very, very small margins.

http://ycharts.com/companies/WMT/profit_margin

Wal-Mart Stores Profit Margin Quarterly:
3.31% for April 30, 2013

http://ycharts.com/companies/AAPL/profit_margin

Apple Profit Margin Quarterly:
21.90% for March 31, 2013

If you are concerned with the plight of those with lower incomes, attacking WalMart is a very strange way to help, considering WalMart has improved the purchasing power of the poor immensely. What's even more shortsighted about singling out WalMart for vitriol is that WalMart has been able to improve the purchasing power of low income people by offering goods priced well below what can be bought elsewhere while offering wages comparable to (or better than!) other retailers.

So why the WalMart demonization fetish?

 

[balrog666]

Wal-Mart is singled out because they are (entirely justifiably) anti-union.

Just, as a business owner, as I am.