Minimum Wage destroys jobs--again!

[Chaos]

I think there are several works of literature which show that this would not be the case. Also, an old Chinese curse goes, "May your every wish be instantly fulfilled." There's something to be said for working for and earning things. You value those more than things which are just given to you.

I once heard a story (I don't know if it's actually, true, but it easily could be) about a guy who bought a new fridge and just wanted to get rid of the old one. There was nothing wrong with it, he just wanted a new and better fridge and wasn't interested in getting anything for the old one; just to be rid of it. So he put it out in his yard with a sign that says, "Free refrigerator--just come and haul it away."

Weeks went by; no takers. So then he removed the sign and replaced it with one that said, "Refrigerator: $50."

The next day someone stole it.

First, this is an anecdote, and as such proves nothing.

Second, even if we assume it did prove something, it would prove that humans do not act in a rational way.
However, the model that say that the free market works are based, among other things, on the assumption that all humans always act in a completely rational way - so if your anecdote actually proves anything, it also proves that the free market cannot work.

 

[69dodge]

Where do you get the assumption that the costs for goods and services will go up by 2.0 billion dollars in the first year of an increase in the MW. That's a very lowball under-estimation of the amount of additional earnings those 2.1 million people working at or below MW would get under the proposed increases. And the lowest end wage-earners aren't going to be investing in stock portfolios. They're going to be buying better food, furniture, etc.... In short, pumping money back into the economy.

I don't understand. "Pumping money back into the economy"? Why is that a good thing? How will the better food, furniture, etc. get made?

It's not invented, it's paid out in wages. Multiply 2.1 million workers times the amount of the increase, which is rather large this go-round, and deduct a suitable number (allowing for the survey cited in the OP) who will lose their jobs, and you still get a net increase in the billions. (Yes, billions.)

"Net increase"? Employees get paid more, but employers pay more. How is this a net increase of anything?

 

[Foolmewunz]

I don't understand. "Pumping money back into the economy"? Why is that a good thing? How will the better food, furniture, etc. get made?

"Net increase"? Employees get paid more, but employers pay more. How is this a net increase of anything?

Remember "trickle-down" economics. Give breaks to the upper classes and corporations and they have more money and that money goes into the economy, or so the theory said. Well, this is trickle-up. Give a better wage to the workers and they will spend it.

"Net increase" for the working pool that is on minimum wage. As mentioned, if the OP is correct and X number on minimum wage lose their jobs, but Y number get an increase, how much is that increase worth in dollars. That's the net increase of money that is being paid out... to people who will spend it.

If this means that in order to protect their dividends McDonald's or Walmart have to decide between laying off people or raising prices, then they will have to do one or the other. Since they need little Johnny to flip burgers, they're going to raise prices, and frankly, I don't really care if your Big Mac costs you another twenty cents or you have to pay an extra buck for the three-pack of boxer shorts in the long run. I'd like to know that the workers are getting a living wage. The current minimum wage comes out to two hundred bucks a week, before taxes.

Look at the link I provided. We're not talking about the majority of the population, here. We're talking about the work force living on minimum wage, a percentile that's gone down and down over the past twenty years. Then look into the funders of the institute in the OP. Would they have any motive in keeping minimum wages down?

 

[Mangafranga]

Since they need little Johnny to flip burgers, they're going to raise prices, and frankly, I don't really care if your Big Mac costs you another twenty cents or you have to pay an extra buck for the three-pack of boxer shorts in the long run.

How does this not effect inflation and therefore the real wage?

 

[Totovader]

To some, perhaps. But from the posts in this thread, apparently not to all. I wanted to re-emphasize that it's talking about 16-24 year olds, and while the survey/report covers all sub-groups within that age range, the article at EPI doesn't mention them at all.

Because the article is talking specifically about job losses. Again, it goes back to what you believe the purpose of minimum wage is. Is is to create wealth for some individuals at the expense of others- including their jobs? Do certain groups- groups which are otherwise specifically protected- suddenly become a moot point when they lose their jobs?

Your argument seems to be "yeah, who cares that these people lose their jobs, we're creating wealth!" (which isn't true, but more on that later).

So, for you, the ethics of minimum wage is simply that it redistributes wealth to other groups who may not necessarily need it as much, and for minorities, teens, and unskilled workers... screw them?

You see, I'm confused as to what it is about minimum wage that you're defending.

Did you read the study cited in the OP? It does not say that. Several posters in this thread assume that, but the study merely covers statistics in the groups cited. The full study also indicates that there are other key minority segments that actually benefit from MW increases.

It's not an assumption- it's economics. We know it happens, and we know why.

Where do you get the assumption that the costs for goods and services will go up by 2.0 billion dollars in the first year of an increase in the MW. That's a very lowball under-estimation of the amount of additional earnings those 2.1 million people working at or below MW would get under the proposed increases. And the lowest end wage-earners aren't going to be investing in stock portfolios. They're going to be buying better food, furniture, etc.... In short, pumping money back into the economy.

I made no such assertion- your figure is $2B, which I cannot see you possibly justifying with empirical data. They are not going to be buying better food, furniture, etc- they're going to be buying the same exact stuff at a higher price, if they haven't lost their job.

It's not invented, it's paid out in wages. Multiply 2.1 million workers times the amount of the increase, which is rather large this go-round, and deduct a suitable number (allowing for the survey cited in the OP) who will lose their jobs, and you still get a net increase in the billions. (Yes, billions.)

And where do wages come from? Are they invented?

It's simple economics- if you have to increase the cost of wages, you either lay off some of your workforce and merge their jobs with other people, or you increase the price of your product to cover the new expense. You do not simply get more money for wages from nowhere. Your calculations are specious at best- to just assume that you can multiply the available workforce by what they will now be getting as a result of the regulations and then claim it will be a net increase is intentionally excluding the factors I just mentioned. You cannot simply assume that money will come from nowhere to pay these individuals their new wages.

As you wish. http://www.bls.gov/cps/minwage2003tbls.htm

This information indicates that the number of workers working at minimum wage. It also shows this number as a percent of the total wage workers.

What you claimed was that this information would show no decrease in the number of minimum wage workers on the year of or year after a minimum wage increase. Not only is this not true, but we see a steep decline in the percentage of wage workers who are minimum wage. This information does not even account for total population and unemployment rates- which the study you seem to want to compare it to does. How you can insist that this contradicts the findings of the OP is beyond me.

It's a decrease in only the highlighted minority categories mentioned in the OP. As mentioned, the full study actually mentions differing effects in certain sub-sets of that same 16-24 y.o. group.

I'm still confused as to why this is troubling you. What is the purpose of minimum wage?

To be more specific, the research cited in the OP states that this segment of the population suffers, i.e. loses those MW jobs. But the overall MW population does not suffer, it actually increases in the year of an increase in the MW. Check the tables in the above link.

Actually- those tables show quite the opposite- but I again point to my overall confusion on your point. If minimum wage is supposed to be defending these workers- why is it a valid rebuttal to claim that some portions of this group will get screwed, but others will benefit?

If the goal of minimum wage is to protect these people- it's undeniable that it does not work.

If the goal of minimum wage is to help the economy and provide more jobs- it's undeniable that it does not work.

If the goal of minimum wage is to redistribute the wealth of some people to others- it sort of works.

If the goal of minimum wage is to make it far more difficult for minorities, unskilled workers, and teens to enter the workforce- then clearly the data shows that it works.

It's quite socialist indeed to just claim that for those who are losing out and getting tossed aside- others are benefiting on their behalf...

Obviously, what happens is that in the year of an increase the number of workers and percentage of workers are now statistically larger because workers earning slightly over the MW (old) are now in that statistical pool. Notwithstanding that factor, it's not until one and two years after a MW increase that the numbers in those categories go down. And there is NOTHING in the report cited that indicates that they can say whether that is because of a good economy, persons working their way up from the lowest paying jobs, or other causes. All that the studies show are statistics.

Which is why it takes further research to understand the full effects.

 

[Foolmewunz]

Totovader - the purpose of MW is not to create jobs. It is to give a fair wage to workers.

Try the math.
How many workers on the MW level in 2003? 2.1 million
The proposed increase is higher, but let's say it's a dollar an hour. And assume, like the OP that say 4 (heck, let's say ...5)... 5% lose their jobs.
That's over a hundred thousand jobs lost, but still nearly two million workers at that level. Again, this is conservative.*
Two million workers at an extra dollar per hour is two million dollars per hour or 80 million per week if they work a forty hour week. Multiply that times 52 weeks and you get four billion, easily.

So, let's assume that many work 20 hour weeks, or assume that all of them work 20 hour weeks. That will take you down to the two billion figure, but that's very conservative*, as I've said.

And I don't know why you guys keep assuming the inflationary spiral. You do realize that all your clothing, toys, and furniture are made over here, don't you? Please go into IKEA and check the price of a standard model desk today, and tell me that it goes up when MW goes up. The cost of labor, factored into the final purchase price for your goods is nearly negligible. (e.g. the plush toy you buy for your kid at 19.95.... labor is at six and a half cents!) I work in this industry and ship consumer goods from all over Asia into the markets in North America and Europe. (And yes, I fight for fair working wages over here, too.)

If the tobacco lobbies fund a cancer study, you question it, don't you? If the alcohol lobby comes out with a report recommending Remy Martin for three year olds, I'd certainly have my worries. Check out EPI. The abbreviation is not a coincidence - they want to sound as though they're the Economic Policy Institute. They are NOT. They're a mouthpiece for the restaurant/fast food industries.

 

[69dodge]

Remember "trickle-down" economics. Give breaks to the upper classes and corporations and they have more money and that money goes into the economy, or so the theory said. Well, this is trickle-up. Give a better wage to the workers and they will spend it.

I don't know anything about economics, really. I wasn't comparing your proposal to "trickle-down economics", because I don't know how that's supposed to work either. I was just thinking about it on its own.

Whether the poor workers spend it or whether their rich bosses spend it, I don't see what difference it makes to anyone else. (Of course, it makes a difference to the workers and the bosses.)

"Net increase" for the working pool that is on minimum wage.

Ok, sure. But it doesn't come from nowhere.

As mentioned, if the OP is correct and X number on minimum wage lose their jobs, but Y number get an increase, how much is that increase worth in dollars. That's the net increase of money that is being paid out... to people who will spend it.

I still don't get why spending it is such a good thing. To spend it on stuff, first the stuff has to get made somehow. This means someone else has to work to make the stuff.

Hoarding money seems like a selfish thing to do, but really it's the opposite. It means that you've provided stuff for other people (the stuff they paid you for), but you don't expect them to provide stuff for you in return (stuff you might have bought but didn't).

If this means that in order to protect their dividends McDonald's or Walmart have to decide between laying off people or raising prices, then they will have to do one or the other. Since they need little Johnny to flip burgers, they're going to raise prices, and frankly, I don't really care if your Big Mac costs you another twenty cents or you have to pay an extra buck for the three-pack of boxer shorts in the long run. I'd like to know that the workers are getting a living wage. The current minimum wage comes out to two hundred bucks a week, before taxes.

Little Johnny needs to eat food and wear underwear too. So I'm not sure it's quite that simple.

 

[shanek]

So do I, and this is one of the reasons why increased minimum wages can be beneficial to the overall economy. If low wage jobs are replaced by machinery (because that gets relatively cheaper when the wage rises) then that can be a good thing. Of course, that presupposes that these workers can find something else to do which is more productive.

And that is the bad assumption. If they could do more productive work, and hence, get paid more, don't you think they'd be doing it already?

All the MW does is take jobs away from people who can only demand (say) $6 in wages and give them to the people who are worth $7.

 

[shanek]

So the "freemarket" offers no protection.

That is the protection! Why don't you get that?

 

[shanek]

It's not? Job aren't being created in Washington because Idaho can't compete? I guess all those people jumping the border into Washington are working for imaginary companies.

No, they're competing with Washington workers for the jobs. There is absolutely no evidence whatsoever that there are now more jobs in Washington as a result.

 

[shanek]

Laws, and the way the system is allowed to operate. In short, the exact same way anyone becomes subjugated to anything.

Then it's government doing the subjugating, not the economy.

Yes it is, you just don't like it. Furthermore, I think the onus is on you to justify how you can equate the economy and the individual.

Who do you think makes up the economy? Whose decisions do you think drive economic forces? Martians? Or individual human beings?

 

[shanek]

The problem with the study is that it ignores nearly 50% of the MW earning population. There should be emphasis that this study is 16 to 24 year olds. After reading the entire report, I'm not sure why they left off the million persons who don't fit into that category. That's a huge number.

Because it's extremely rare that any of them work for minimum wage.

I'd also like to see some of the famed trickle-down economy folks comment on the trickle up effect. Does anyone presume that MW earners are not going to be spending their increased salaries in the community on goods and services?

Broken Window fallacy.

 

[shanek]

Second, even if we assume it did prove something, it would prove that humans do not act in a rational way.

Actually, they're acting very rationally, in an economic sense. In the first instance, the owner of the refrigerator is declaring that the fridge isn't worth anything, and so people wonder why it's worth the bother of hauling it away and hooking it up. They don't want to do that just for a fridge that isn't going to work. After the sign was changed, the fridge was declared to have a value, and therefore there was value in obtaining it for nothing.

However, the model that say that the free market works are based, among other things, on the assumption that all humans always act in a completely rational way

How many times am I going to have to debunk that claim? No, it does not--it never has and it never will!

 

[shanek]

Remember "trickle-down" economics. Give breaks to the upper classes and corporations and they have more money and that money goes into the economy, or so the theory said. Well, this is trickle-up.

And it was wrong.

Give a better wage to the workers and they will spend it.

But again, that's a Broken Window fallacy. What do you think would have happened to the money otherwise? You think it would have just been in a vault somewhere gathering dust?

"Net increase" for the working pool that is on minimum wage.

Support this. As the pool is now smaller, you cannot assume a net increase.

As mentioned, if the OP is correct and X number on minimum wage lose their jobs, but Y number get an increase, how much is that increase worth in dollars. That's the net increase of money that is being paid out... to people who will spend it.

As far as I'm concerned, that's irrelevant anyway. You may as well have gone to X, robbed them of their money and taken food off their table, and given it to Y.

and frankly, I don't really care if your Big Mac costs you another twenty cents or you have to pay an extra buck for the three-pack of boxer shorts in the long run. I'd like to know that the workers are getting a living wage.

They aren't. You've taken their jobs and given them to people who could have demanded that wage anyway.

 

[shanek]

Here's the question that nobody in the old MW thread could answer, and it's a question that really sheds light on the whole rest of the discussion:

Where is the extra money going to come from?

 

[Mangafranga]

But again, that's a Broken Window fallacy. What do you think would have happened to the money otherwise? You think it would have just been in a vault somewhere gathering dust?

Not that I agree with Foolmewunz, but isn't savings distinct from expenditure in economics?

 

[shanek]

First of all, you don't know that it necessarily would have been saved. Second, savings = investments. It could have been used to expand the economy and create even more jobs.

 

[burnvictim77]

Companies should be mandated to permit breaks and should be aggressively prosecuted for coercing, or encouraging employees to forego their breaks. However, the individual should remain free to work during the break should he/she want. Just like, although I think we need a 30-35 hour work week, people should still be free to work more if they want. In both instances, the choice is up to the individual alone.

The same goes for gay porn, if someone is willing to do it, they should have that right. But, outside of working in the gay porn industry of course, an individual shouldn't be coerced into being in a gay porn simply because their boss might decide one day to make that a condition of employment. So far, I have seen no protection in the "free market" that would prevent such a situation.

Okay, I see here that you don't think employment is a voluntary contract terminable at any time, at least not for both parties. Though, in the absence of another specially agreed upon contract that specifies a length of time and guarantees of employment, it should be by default. That is, if I can quit at any time for any reason, so should my employer be able to fire me at any time for any reason.

The protection in the free market that keeps things like coercion into gay porn from happening is competition. The average supermarket clerk WILL NOT decide to film porn because their boss says it is now part of their job. Because there is clearly a competing grocery store or some other retail outfit that will hire them without this absurd requirement. Additionally, we haven't even mentioned the strength of collective bargaining in discouraging these more obvious "abuses" of employees. Collective bargaining would still be present in a free market.

Also, what consitutes coercion in your opinion? That is, if I ask Johnny to film gay porn, and he says no, and then I mention that Chad and Richie both agreed to do it and that I don't really have room on my payroll for those who will not perform the "fullness of their job," have I coerced him, or I am saying that he's replaceable by someone who WILL do what I ask? I should say it's not coercion. If I actually threaten force upon him, that would be coercion, but terminating a voluntary contract is not force.

So, what this comes down to is that you want to hold me, the entreprenuer, to much stricter standards than any other individuals. My employees can quit without repercussions, but I cannot fire them without expecting repercussions. My employees can demand better jobs, better benefits, etc. but I cannot demand they take on new/exotic tasks, nor lessen their benefits.

How does one justify seeing this as just?

Short answer yes. It's your business, you can do things with it that your employees can't.

As shown above, you are already putting restraints on the owner, however, of course the owner 'can do things' that the employees can't, but this isn't in regard to rights. If the employees started their own business, they then 'can do things with it' as well.

Does a car owner have more rights than someone who takes the bus?

I think we are hitting a communication wall.

 

[Merko]

Two million workers at an extra dollar per hour is two million dollars per hour or 80 million per week if they work a forty hour week. Multiply that times 52 weeks and you get four billion, easily.

So, let's assume that many work 20 hour weeks, or assume that all of them work 20 hour weeks. That will take you down to the two billion figure, but that's very conservative*, as I've said.

I agree with you that this effect exists and is likely very beneficial, however, you can't just say that this means two billions being 'injected', because clearly the money comes from somewhere. I think it could be argued that we're switching this money from 'trickle down' to 'trickle up' (or rather, 'trickle around'). And if you, like me, believe that 'trickle around' is more beneficial to the economy as a whole, then this will indeed be beneficial to the overall economy.

 

[Merko]

Does a car owner have more rights than someone who takes the bus?

Obviously the car owner has rights to this particular car. If you don't agree, you must have a very weird definition of rights. Courts will certainly agree that the car owner has such additional rights.