How Does A Big Minimum Wage Hike Help?

[David Sklansky]

I don't want to make a Glenn Beck type mistake here and I am actually scared I might be because my conclusion seems so obvious. Yet many disagree. But I just don't see how a significant hike in the minimum wage helps those who are presently making that wage. As long as there are unemployed people standing by. Some of those people are smarter, more competant and more industrious than those presently making minimum wage. And if it is hiked they will now compete for, and get, jobs that weren't previously on their radar screen.

[WillMagic]

Post this in politics and you'll get tons of responses.

But yeah, the minimum wage is about as counterproductive a policy as there is.

[TomCollins]

[ QUOTE ]
I don't want to make a Glenn Beck type mistake here and I am actually scared I might be because my conclusion seems so obvious. Yet many disagree. But I just don't see how a significant hike in the minimum wage helps those who are presently making that wage. As long as there are unemployed people standing by. Some of those people are smarter, more competant and more industrious than those presently making minimum wage. And if it is hiked they will now compete for, and get, jobs that weren't previously on their radar screen.

[/ QUOTE ]

Just to clarify, you are talking about people who choose not to work now for various reasons, but would work if they could make more money?

If so, you are correct and understand a basic supply/demand curve. Unfortunately, that alone puts you in about the top 5% of all people in terms of understanding economics and makes you inelgible to ever become elected to office.

[SNOWBALL]

what % of jobs that pay minimum wage require any type of talent whatsoever?

[Carded]

I don’t disagree with the OP’s point in the short term.

In the long term
For those that kept their jobs and receive the benefit of the pay increase. The benefits of the increased wages will be passing. In my mind, salaries are a function of minimum wave and would increasing accordingly in time. Inflation would result devaluing bankrolls.

[Aleo]

Because there are many career minimum wage earners who are in little danger of losing their jobs and who will be happy to get the raise. Yes there are plenty of career minimum wage earners. I'm very surprised that you can think added job competition can hurt minimum wage earners that much.

Your question says

[ QUOTE ]
Some of those people are smarter...

[/ QUOTE ]

SOME, not all. This is to say that many unemployed people are unemployed precisely because their abilities are less competitive. Also, many currently employed are comparably or even smarter/industrious than the competitive unemployed. It is their weaker co-workers who will have something to fear, and I'd argue that this is a small group of the overall minimum wage earners.

Regards
Brad S

[TomCollins]

[ QUOTE ]
what % of jobs that pay minimum wage require any type of talent whatsoever?

[/ QUOTE ]

Can't certain people be more efficient at minimum wage jobs, even if they are not required? If I have a cashier who can do 100 transactions an hour vs. one that can only do 50, it's pretty clear which one I want.

[Aleo]

[ QUOTE ]
what % of jobs that pay minimum wage require any type of talent whatsoever?

[/ QUOTE ]

Pretty much all of them.

Sure, they don't require special training or skills. But many of them are hard work and a willingness/ability to work hard will always be an advantage.

If you don't define work ethic as talent, fine, but the point is the same.

[Aleo]

[ QUOTE ]
In my mind, salaries are a function of minimum wave and would increasing accordingly in time. Inflation would result devaluing bankrolls.

[/ QUOTE ]

Sure, but it is important to bear in mind that the reverse is also true. The two will always respond to one another in reaction to inequity or need. Why should the minimum wage earners accept the low end of things?

[Stu Pidasso]

The United States essentially has full employment. Very few actually earn minimum wage. However of the few, many of them are not smart enough or industrious enough to bargin for a wage increase or find a job that pays more. These people, who are 100% competent in thier minimum wage jobs, would benefit from a minimum wage increase.

Yes David there are such people. Example, there is a girl who works for a contractor my company uses. Her employer pays her the state minimum wage. She is just as qualified as the hundreds of people we have hired over the last 3 years. All she would have to do to get a job is put in an online application. She doesn't have a computer so I suggested she go to the library. Every couple of months or so I ask her if shes put in her application in yet and she always replys "I haven't got around to it". To put this in perspective, she could go from making state minimum wage with no benefits to $64000/yr with excellent medical, and dental.

Stu

[hmkpoker]

[ QUOTE ]
The United States essentially has full employment. Very few actually earn minimum wage. However of the few, many of them are not smart enough or industrious enough to bargin for a wage increase or find a job that pays more.

[/ QUOTE ]

That's ok, we'll just keep forcibly lowering our standards and rewarding failure. That can't have any downside...

[iron81]

Minimum wage is definately Politics territory. Give us a try David, we'd be happy to have you. To get you started, I dug up the last few Minimum Wage threads we've done:

Dem plans to hike minimum wage (http://forumserver.twoplustwo.com/showflat.php?Cat=0&Board=politics&Number=7980988&S earchpage=1&Main=7980988&Words=%2B%26quot%3Bminimu m+wage%26quot%3B+-re%3A&topic=&Search=true#Post7980988)
Minimum wage can increase employment? (http://forumserver.twoplustwo.com/showflat.php?Cat=0&Board=politics&Number=7983579&S earchpage=1&Main=7980988&Words=%2B%26quot%3Bminimu m+wage%26quot%3B+-re%3A&topic=&Search=true#Post7983579)
Generic minimum wage thread (http://forumserver.twoplustwo.com/showflat.php?Cat=0&Board=politics&Number=7985617&S earchpage=1&Main=7985617&Words=%2B%26quot%3Bminimu m+wage%26quot%3B+-re%3A&topic=&Search=true#Post7985617)
Redistributive taxes instead of a minimum wage (http://forumserver.twoplustwo.com/showflat.php?Cat=0&Board=politics&Number=8003705&S earchpage=1&Main=8003705&Words=%2B%26quot%3Bminimu m+wage%26quot%3B+-re%3A&topic=&Search=true#Post8003705)
Minimum wage exemptions for homeless people (http://forumserver.twoplustwo.com/showflat.php?Cat=0&Board=politics&Number=8004782&S earchpage=1&Main=8004782&Words=%2B%26quot%3Bminimu m+wage%26quot%3B+-re%3A&topic=&Search=true#Post8004782)

[West]

[ QUOTE ]
And if it is hiked they will now compete for, and get, jobs that weren't previously on their radar screen.

[/ QUOTE ]

Well what were they doing before? What would you consider 'significant'? Are there that many unemployed (and more competent) people uninterested in min wage jobs at $5.15/hr who become interested at $6.15/hr??

I guess this is where those elasticity curves come in.

[Stu Pidasso]

Hi Hmkpoker,

[ QUOTE ]

That's ok, we'll just keep forcibly lowering our standards and rewarding failure. That can't have any downside...

[/ QUOTE ]

I'm not in favor of increasing the minimum wage, I'm only commenting that such an increase will benefit a lot of minimum wage earners.

Stu

[DougShrapnel]

Minimum Wage laws hurt the Big Guys and the really poor. Yet help everyone else. It's the collective bargining aspect of it. Minimum Wage employees lack negotiation skills. So other people negotiate for them. Some as you say will lose their previous work but they won't be competing against other human labor often, they will be competing against mechanical labor. It is of utmost importnace that the minimum wage is set at a "fair market" price. I don't mean what they are willing to suck it up and work for, but what thier worth is. To high and jobs dissapear and like you envision they now have to compete at a higher level. To low and you now have too many in need. Since you understand decreasing maginal utility, and other people do as well, they clamer to raise taxes. In the form of redistribution programs or crime prevention. Provided a minimum wage law reflects a fair market value, not a free market value, a wage hike even a big wage hike helps a ton of people. If it set at a fair price, those that are close to getting paid minimum wage can fine offers from empolyers at higher than the new minimum by employers looking to attrack those quality people.

I'm trying to work this out in relation to a capped buy in NL table. But it doesn't quite fit. I bring it up becuase as a long time player you understand that without TV and that max NL is a game relageted to tournaments.

Maximum wage laws say 400x the minimum wage would do wonders, it just seems to socialistic for me. Just my ideas, I'm not very smart and have not studied this a lick. I have listened to Boro, pvn, and moorobot, propertarian argue. When smart, intelligent, studied people argue the answer is usually in the middle.

[Carded]

[ QUOTE ]
[ QUOTE ]
In my mind, salaries are a function of minimum wave and would increasing accordingly in time. Inflation would result devaluing bankrolls.

[/ QUOTE ]

Sure, but it is important to bear in mind that the reverse is also true. The two will always respond to one another in reaction to inequity or need. Why should the minimum wage earners accept the low end of things?

[/ QUOTE ]

Why accept minimum wage jobs? Convince, flexible hours no/little hassle in getting or quitting the job.

Hopefully, most people who are in minimum wage jobs are currently pursing training/education in another field and are using minimum wage jobs during a transitional period.

Minimum wages jobs are useful for people in transition and just need a little something to get by for now. For those who despite their best efforts end up in a minimum wage job for the rest of their life- I am truly sorry, but that doesn’t mean as a whole the system is broken and perhapse as DS pointed out, he/she might have no job at all if things were different.

[Borodog]

[ QUOTE ]
Hi Hmkpoker,

[ QUOTE ]

That's ok, we'll just keep forcibly lowering our standards and rewarding failure. That can't have any downside...

[/ QUOTE ]

I'm not in favor of increasing the minimum wage, I'm only commenting that such an increase will benefit a lot of minimum wage earners.

Stu

[/ QUOTE ]

At the expense of other (former) minimum wage earners, now put out of a job, other (potential) low wage workers who will now never be hired, producers who cannot afford to hire the work they need, and consumers who must either pay more for goods and services that are produced (in part) from low wage workers, or who cannot get those goods and services at all because they are no longer produced.

I.e. the minimum wage makes a tiny minority slightly better off at the expense of making everyone else poorer. Great.

[Jcrew]

[ QUOTE ]
I.e. the minimum wage makes a tiny minority slightly better off at the expense of making everyone else poorer. Great.

[/ QUOTE ]

Theoretically, there can be a region where you can decrease total wealth yet increase total utility by raising min wage. Also one argument can consist of social stability feedback benefits.

However personally I do think at this point in time, the net job destruction and consumer price pressures would outweigh the marginal utility gains.

[Jcrew]

[ QUOTE ]
Some of those people are smarter, more competant and more industrious than those presently making minimum wage. And if it is hiked they will now compete for, and get, jobs that weren't previously on their radar screen.

[/ QUOTE ]

If you make $ more and your chances of getting your job stolen is X....

[Stu Pidasso]

[ QUOTE ]
Minimum Wage laws hurt the Big Guys and the really poor. Yet help everyone else. It's the collective bargining aspect of it. Minimum Wage employees lack negotiation skills. So other people negotiate for them.

[/ QUOTE ]

I think most people who are in minimum wage jobs for an extended period of time are people who find it easier for themselves to be content with their positions than expend the energy necessary to improve it.

Stu

[DougShrapnel]

[ QUOTE ]
[ QUOTE ]
Minimum Wage laws hurt the Big Guys and the really poor. Yet help everyone else. It's the collective bargining aspect of it. Minimum Wage employees lack negotiation skills. So other people negotiate for them.

[/ QUOTE ]

I think most people who are in minimum wage jobs for an extended period of time are people who find it easier for themselves to be content with their positions than expend the energy necessary to improve it.

Stu

[/ QUOTE ]Knowing what self interest minimum wage earners are attempting to fulfill with these jobs would sure help out in solving this problem. Are you willing to put forth the arguement that the minimum wage workers are good negotiators? I imagine like most things it's for a bunch of different reasons. Some might be lazy deadbeats sure, Some might be thankful that they even have a job at all. Other don't have the tools or values needed to improve. When you take a flight most of the fuel is used during take off and on the landing. It's smooth sailing at the higher altitudes. Pulling your self up is a similiar challange. That you have to expend alot of energy just getting of the ground, but once you do. It's much easier to continue at that level. It's hard to compare the energy necessary to improve from our eyes.

[Aleo]

[ QUOTE ]
Hopefully, most people who are in minimum wage jobs are currently pursing training/education in another field and are using minimum wage jobs during a transitional period.

Minimum wages jobs are useful for people in transition and just need a little something to get by for now. For those who despite their best efforts end up in a minimum wage job for the rest of their life- I am truly sorry, but that doesn’t mean as a whole the system is broken and perhapse as DS pointed out, he/she might have no job at all if things were different.

[/ QUOTE ]

You seriously underestimate the number of people who are career minimum wage earners. I hear, as a standard argument, things like what you are saying here. That teenagers and students will fill minimum wage jobs and that this will allow employers to succeed while these people are in transition, etc...

The reality is very different.

The system is designed with permanent and long term minimum wage earners in mind.

Furthermore, the reason for a minimum wage is that at that level, bargaining, convincing employers, etc becomes pretty hard when you need the $500 paychecks just to pay rent and eat for the next two weeks.

Minimum wage and other salaries/inflation will always rebound off each other. When they do, it's usually a pretty good indication that one or the other needs it. In this case, minimum wage. Actually that's pretty long overdue.

I mean seriously, if minimum wage earners are such a small minority (as suggested in another post) then how could it hurt everyone else SO much. It's because there are actually a lot of them. And as far as it hurting you, that's natural, and ok, as suffering for many will mean things like not going on vacation where you want, or the kids needing to get loans for college. For the poor it's a lot worse.

Another important point is that when these decisions are made, it's not always a bleeding heart handout. It's because some people know that if it gets bad enough, the poor minimum wage earners might REALLY start to bargain and properly demand what they deserve, and that is what would actually hurt.

Regards
Brad S

[Phanekim]

David, why don't you wikipedia minimum wage.

http://en.wikipedia.org/wiki/Minimum_wage

[Borodog]

[ QUOTE ]
[ QUOTE ]
I.e. the minimum wage makes a tiny minority slightly better off at the expense of making everyone else poorer. Great.

[/ QUOTE ]

Theoretically, there can be a region where you can decrease total wealth yet increase total utility by raising min wage.

[/ QUOTE ]

No, you can't, because this statement is nonsensical. There is no such thing as "total utility", since utility cannot be totalled. "Utility" is a subjective valuation by individuals. Worse, even for a single person it is ordinal, not cardinal. Utility can't be measured in a single individual (beyond ordinality, which itself can change from moment to moment), much less intersubjectively compared, added, subtracted, multiplied, or divided.

[BCPVP]

[ QUOTE ]
I mean seriously, if minimum wage earners are such a small minority (as suggested in another post) then how could it hurt everyone else SO much. It's because there are actually a lot of them.

[/ QUOTE ]
You don't have any idea what you're talking about. There's less than 500,000 people making the federally mandated $5.15/hour. And half of them are 25 or younger.

http://www.bls.gov/cps/minwage2005.htm

[hmkpoker]

[ QUOTE ]
No, you can't, because this statement is nonsensical. There is no such thing as "total utility", since utility cannot be totalled. "Utility" is a subjective valuation by individuals. Worse, even for a single person it is ordinal, not cardinal. Utility can't be measured in a single individual (beyond ordinality, which itself can change from moment to moment), much less intersubjectively compared, added, subtracted, multiplied, or divided.

[/ QUOTE ]

Horsecock. fMRI scans indicate greater aggregate activity in my brain alone when I [censored] propertarian up the nine-hole than the total activity of you and your wife post-coitus. It is for the greater good that the two of you subsidize this activity.

[peritonlogon]

The minimum wage hike is a temporary fix. Getting by on $200/wk before taxes is not easy.

But, it is true that there are better ways to address the wage-growth problem this country is experiencing. For example:

1)Large penalties for employing undocumented workers.
2)Reducing interest rates.
3)Corporate restructuring.
4)Opening up professional jobs, Lawyers, Doctors, Engineers, Accountants etc. to international competition. (They make less everyone else makes more).

[BCPVP]

[ QUOTE ]
4)Opening up professional jobs, Lawyers, Doctors, Engineers, Accountants etc. to international competition. (They make less everyone else makes more)

[/ QUOTE ]
/images/graemlins/confused.gif

[pzhon]

[ QUOTE ]
I just don't see how a significant hike in the minimum wage helps those who are presently making that wage.

[/ QUOTE ]
Think of it as sizing a value bet.

It sounds like you think whether the minimum wage should increase can be determined from first principles. In fact, "It depends." Whether raising the minimum wage helps people currently making minimum wage depends on the actual situation. Arguments that are supposed to apply at all times are incomplete, just like the arguments of those who always say to lower taxes, regardless of the state of the economy, or who say to raise or fold regardless of the poker situation. There is a balance between costs and benefits.

[ QUOTE ]
As long as there are unemployed people standing by.

[/ QUOTE ]
It depends on a lot more than that. Do you think a $1/hour minimum wage is too high? (Although some people would say so, this would be an extreme, unpopular position. And wrong.) Inflation means the minimum wage automatically decreases, e.g., $5.15 today is worth $4.10 in 1997 dollars, when the minimum wage became $5.15, and $1.85 (http://data.bls.gov/cgi-bin/cpicalc.pl) in 1979 dollars, when the minimum wage became $2.90 (http://www.dol.gov/esa/minwage/chart.htm). If the minimum wage is never increased, the minimum wage will be worth less than $1/hour eventually in today's dollars. So, you should be willing to see an increase at some point. The question should be whether it is appropriate now.

The right size of a value bet depends on the elasticity of your market, and the value of checking.

[valenzuela]

Im a doctor, i make 100 dollars a day.
A mexican doctor comes, he makes 90 dollars a day.
As a result of his competition Im only making 90 dollars a day.
Everyone,but us doctors, win.

[Jcrew]

[ QUOTE ]
There is no such thing as "total utility", since utility cannot be totalled.

[/ QUOTE ]

Of course utility can be totaled. What you object to is whether utility can be quantified. Coarse probabilistic approximations can be made/justified. If you had give away 50$, could you not based on life experience priors give reasonable estimations to one time relative marginal utility gains giving the $ to a starving kid in Africa vs giving it to Paris Hilton?

[Borodog]

[ QUOTE ]
[ QUOTE ]
There is no such thing as "total utility", since utility cannot be totalled.

[/ QUOTE ]

Of course utility can be totaled.

[/ QUOTE ]

In what units is it measured? What is the utility of my dinner plus hmkpoker's breakfast? Do I find my Charger more satisfying than my wife finds her 300?

Utility cannot be totalled, and any claims or schemes to the contrary are unjustified and unjustifiable handwaving.

[ QUOTE ]
What you object to is whether utility can be quantified.

[/ QUOTE ]

What meaning does it have to total what cannot be quantified?

[ QUOTE ]
Coarse probabilistic approximations can be made/justified.

[/ QUOTE ]

What does this even mean?

[ QUOTE ]
If you had [to] give away 50$, could you not based on life experience priors give reasonable estimations to one time relative marginal utility gains giving the $ to a starving kid in Africa vs giving it to Paris Hilton?

[/ QUOTE ]

No. Why don't you demonstrate. Remember to include your methodology of measurement, the units you are measuring in, and show your calculations. Then show me how your scheme is objective, and could be agreed upon by another individual, say, Paris Hilton.

[Borodog]

[ QUOTE ]
[ QUOTE ]
I just don't see how a significant hike in the minimum wage helps those who are presently making that wage.

[/ QUOTE ]
Think of it as sizing a value bet.

It sounds like you think whether the minimum wage should increase can be determined from first principles. In fact, "It depends." Whether raising the minimum wage helps people currently making minimum wage depends on the actual situation. Arguments that are supposed to apply at all times are incomplete, just like the arguments of those who always say to lower taxes, regardless of the state of the economy, or who say to raise or fold regardless of the poker situation. There is a balance between costs and benefits.

[ QUOTE ]
As long as there are unemployed people standing by.

[/ QUOTE ]
It depends on a lot more than that. Do you think a $1/hour minimum wage is too high? (Although some people would say so, this would be an extreme, unpopular position. And wrong.) Inflation means the minimum wage automatically decreases, e.g., $5.15 today is worth $4.10 in 1997 dollars, when the minimum wage became $5.15, and $1.85 (http://data.bls.gov/cgi-bin/cpicalc.pl) in 1979 dollars, when the minimum wage became $2.90 (http://www.dol.gov/esa/minwage/chart.htm). If the minimum wage is never increased, the minimum wage will be worth less than $1/hour eventually in today's dollars. So, you should be willing to see an increase at some point. The question should be whether it is appropriate now.

The right size of a value bet depends on the elasticity of your market, and the value of checking.

[/ QUOTE ]

This is the worst analogy I've seen all day.

Do you see why?

[Jcrew]

[ QUOTE ]

No. Why don't you demonstrate. Remember to include your methodology of measurement, the units you are measuring in, and show your calculations.

[/ QUOTE ]

Here is one hypothetical method. The number steps a person is willing to walk to gain said item/service.

Paris Hilton < 0.5 steps;
Starving African Kid > 1 mile.

[Borodog]

[ QUOTE ]
[ QUOTE ]

No. Why don't you demonstrate. Remember to include your methodology of measurement, the units you are measuring in, and show your calculations.

[/ QUOTE ]

Here is one hypothetical method. The number steps a person is willing to walk to gain said item/service.

Paris Hilton < 0.5 steps;
Starving African Kid > 1 mile.

[/ QUOTE ]

Does that mean that a compulsive speedwalker gets the most utility out of the $50?

Does that mean that a paraplegic has no use for $50?

Is this the method you propose for measuring the utility of all goods and services to all individuals and then allocating them by? Force everyone who wants each item into a Trail of Tears deathmarch and award it to the last man walking?

How exactly does this help you measure total utility? Do you honestly think that if I am willing to walk a mile for $50 and that hmk is willing to walk a mile and a half for $50 that that implies that "total utility" is increased by taking $50 from me and giving it to him?

How is such a scheme any better than simply saying "I subjectively believe that the African kid is more deserving of $50 in charity than Paris Hilton is"?

[madnak]

[ QUOTE ]
[ QUOTE ]

No. Why don't you demonstrate. Remember to include your methodology of measurement, the units you are measuring in, and show your calculations.

[/ QUOTE ]

Here is one hypothetical method. The number steps a person is willing to walk to gain said item/service.

Paris Hilton < 0.5 steps;
Starving African Kid > 1 mile.

[/ QUOTE ]

You need more zeros.

[pzhon]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
I just don't see how a significant hike in the minimum wage helps those who are presently making that wage.

[/ QUOTE ]
Think of it as sizing a value bet.
...
It sounds like you think whether the minimum wage should increase can be determined from first principles. In fact, "It depends."
...
The right size of a value bet depends on the elasticity of your market, and the value of checking.

[/ QUOTE ]

This is the worst analogy I've seen all day.


[/ QUOTE ]
It's obviously possible that a larger value bet may be worth more, even when you get called less frequently, and it is possible that raising the wage level to increase the total wages paid even though the employment level decreases. This is referred to by the technical term "elasticity" in economics. If the demand for labor is inelastic, raising the wage will increase total wages. Since the net benefit to a worker is often much lower than the wage rate due to fixed costs associated with employment, the true elasticity is even lower than the nominal elasticity.

Do you have a real problem with this logic, or do you feel compelled to object for irrational political reasons?

[tabako]

Borodog is talking about utility in the strict economics-by-the-book sense.

While I agree that there might be a situation where you can increase social well being by instituting or raising a minimum wage (I don't think our current economy qualifys, however), it is incorrect to talk about it in terms of aggregate utility. Like Borodog said (unless you want to redefine what utility means specific to this discussion), utility is ordinal and specific to an individual. A utility of 10 is not "twice as good" as a utility of 5, and you certainly cannot aggregate it across an economy.

[andyfox]

Don't forget, though, that some states' minimum wage is higher than $5.15. For example, here in California, by far the most populous state, the minimum wage is $6.75 (going up to $7.50 in January), so nobody is making $5.15, but there are certainly people making minimum wage.

[BCPVP]

[ QUOTE ]
Don't forget, though, that some states' minimum wage is higher than $5.15. For example, here in California, by far the most populous state, the minimum wage is $6.75 (going up to $7.50 in January), so nobody is making $5.15, but there are certainly people making minimum wage.

[/ QUOTE ]
I know that. So what then is the point of raising the federal minimum wage? And why should that be a federal issue in the first place if the states are already handling it?

[andyfox]

A hike in the minimum wage helps those who are presently making that wage in that they get more money in their pocket. Unemployed people are not "standing by," waiting for a rise in the minimum wage to suddenly jump into the job marketplace. It's unreasonable to assume that there is a big reservoir of smarter and more competent people currently not working, just waiting for the minimum wage to go up. And they cannot be more industrious by definition.

[goofball]

David,

I reccomend finding and reading the following study on the effects of a minimum wage change. I'm an empericial scientist at heart afterall. All things being equal what actually happens trumps what 'should' happen:

Card, David and Alan B. Krueger. 1994. “Minimum Wages and Employment: A case Study of the Fast-Food Restaurant Industry in New Jersey and Pennsylvania.” American Economic Review, Vol. 84, No. 4 (September), 772-93.

[pzhon]

[ QUOTE ]
Borodog is talking about utility in the strict economics-by-the-book sense.

[/ QUOTE ]
Which of these do you think answers Sklansky's question, how can a significant minimum wage increase help those earning minimum wage?

A) We can never know or compare anyone's utility.

B) It is possible for raising the wage level to increase the total wages paid even though the employment level decreases. It depends on the actual situation. In real dollars, the minimum wage is now 64% of the minimum wage level in 1979.

Borodog is either making an irrelevant objection to the term "utility," which I didn't use, or he is making a sophomoric objection to most of economics (which actually contradicts his first post). The field got past that in the 1800s. Economics doesn't pretend to have a True aggregate utility function, but there are sensible things to discuss about many completely standard aggregate measures (which may be called utility by other people, but not by me). It is perfectly reasonable to discuss whether these (say, expected income) will improve or not by a change in the minimum wage, and whether a particular aggregate measure is appropriate.

[pzhon]

[ QUOTE ]
There's less than 500,000 people making the federally mandated $5.15/hour. And half of them are 25 or younger.

http://www.bls.gov/cps/minwage2005.htm

[/ QUOTE ]
While that figure of 500,000 is contained in the page you linked, it is out of context. That page also said there were 1.9 million people working for minimum wage or less, and mentioned that many of the 300,000 people who answered that they earned exactly $5/hour might have just rounded down. Of course, there are many people who earn a bit more than minimum wage who would benefit about as much from an increase in minimum wage. About 10% of US workers, about 14 million, earn $7.15/hour or less.

[peritonlogon]

[ QUOTE ]
David,

I reccomend finding and reading the following study on the effects of a minimum wage change. I'm an empericial scientist at heart afterall. All things being equal what actually happens trumps what 'should' happen:

Card, David and Alan B. Krueger. 1994. “Minimum Wages and Employment: A case Study of the Fast-Food Restaurant Industry in New Jersey and Pennsylvania.” American Economic Review, Vol. 84, No. 4 (September), 772-93.

[/ QUOTE ]

Could you please sum up the major points or give us a linky?

[goofball]

I have the pdf file if someone can host it. Basically a minumum wage increase was planned in NJ (and not in PA) so they looked at fast food employment on the border and found the increase did not negatively affect employment levels and might have had a small positive impact.

[David Sklansky]

"It's unreasonable to assume that there is a big reservoir of smarter and more competent people currently not working, just waiting for the minimum wage to go up. And they cannot be more industrious by definition."

They are not waiting for the minimum wage to go up. They are applying for higher paying jobs. The fact is that if almost ANY class of jobs were suddenly forced to pay 30% more, most of those who currently hold those jobs, would soon lose them.

[PLOlover]

I would be interested to see the real purchasing power of minimum wage for say the last 30 or 40 years.

I think if there is going to be a minimum wage, it should be rather consistent in terms of real purchasing power.

[vulturesrow]

[ QUOTE ]
David,

I reccomend finding and reading the following study on the effects of a minimum wage change. I'm an empericial scientist at heart afterall. All things being equal what actually happens trumps what 'should' happen:

Card, David and Alan B. Krueger. 1994. “Minimum Wages and Employment: A case Study of the Fast-Food Restaurant Industry in New Jersey and Pennsylvania.” American Economic Review, Vol. 84, No. 4 (September), 772-93.

[/ QUOTE ]

You picked a really poor example of an empirical study. This particular one had some serious questions about the methodology used in it and most economists dont give it a whole lot of weight.

Minimum wage is a price control, and no economists disagree on the effects of price controls. If you want to make the argument that the negative effects are fairly negligible or that the negative effects are outwieghed by the positive, feel free. But dont start off with the premise that minimum wage laws dont have a negative effect on the labor market for minimum wage earners.

[andyfox]

"The fact is that if almost ANY class of jobs were suddenly forced to pay 30% more, most of those who currently hold those jobs, would soon lose them."

On July 1, 1988, California increased its minimum wage by 26.87%, from $3.35 to $4.25. There was no influx of unemployed applying for higher paying jobs and most of those who held minimum wage jobs did not lose them.

There's a psychological factor at work. While the absolute dollars involved is an increase, it's still the minimum wage. Assuming, for the sake of the discussion that there are smart, competent, industrious people who are unemployed, virtually nobody who is smarter, or more competent, or more industrious than those currently working for minimum wage will be motivated to apply for minimum wage work because the minimum wage goes up.

[andyfox]

Only 17 states have minimum wage rates higher than the federal minimum. Plus six states have no state minimum wage law and one has a lower minimum wage than the federal rate (Kansas).

By having a federal minimum wage, the federal government is saying "this is the minimum to be paid, if you want to have a higher minimum in your state, so be it, but you cannot go lower than this."

[Thremp]

All,

When social justice proponents and others speak of min. wage earners they don not refer to the strict $5.15 an hour. Usually anyone upto ~10 bucks an hour is considered min. wage as they have not met the criteria for a "living wage". Please do not whip out lame straw men arguments based on stats of people who only make $5.15 an hour and are excluded at the first quarter raise.

Now for quantifying the effects you obviously need tighter ranges respective to what the raise would be, but it doesn't really change the responses to the argument above.

[disjunction]

[ QUOTE ]
I don't want to make a Glenn Beck type mistake here and I am actually scared I might be because my conclusion seems so obvious. Yet many disagree. But I just don't see how a significant hike in the minimum wage helps those who are presently making that wage. As long as there are unemployed people standing by. Some of those people are smarter, more competant and more industrious than those presently making minimum wage. And if it is hiked they will now compete for, and get, jobs that weren't previously on their radar screen.

[/ QUOTE ]

So you just identified two effects, both of them good:

(1) Low quality employees will be replaced by medium quality ones
(2) The total sum amount paid to low quality + medium quality employees will increase

The first increases productivity. The second will largely occur at the expense of shareholders, meaning the money will be taken out of somebody's safety deposit boxes and into circulation. (Assuming a constant number of jobs.) For reasons beyond this scope, I'm assuming this is a Good Thing.

[David Sklansky]

"So you just identified two effects, both of them good:

(1) Low quality employees will be replaced by medium quality ones
(2) The total sum amount paid to low quality + medium quality employees will increase

The first increases productivity. The second will largely occur at the expense of shareholders, meaning the money will be taken out of somebody's safety deposit boxes and into circulation. (Assuming a constant number of jobs.) For reasons beyond this scope, I'm assuming this is a Good Thing."

Possiblly correct. My title for this thread actually pertained to the workers only, not society in general. Of course Borodog would claim that it is the market that should decide if it wants better higher paid workers.

[dragon14]

Just to clarify a post by Andy Fox, the Kansas minimum wage exception refers to those under 18 and in food service jobs such as waiting that depend on tips.

FWIW my father owns a business in Kansas in suburban Kansas City and the lowest paid worker makes $10/hr. My father recently commented that he didn't think it was possible to find anyone for under $10/hr in today's economy.

[Thremp]

[ QUOTE ]
Just to clarify a post by Andy Fox, the Kansas minimum wage exception refers to those under 18 and in food service jobs such as waiting that depend on tips.

FWIW my father owns a business in Kansas in suburban Kansas City and the lowest paid worker makes $10/hr. My father recently commented that he didn't think it was possible to find anyone for under $10/hr in today's economy.

[/ QUOTE ]

Your father is a naive moron.

[dragon14]

Thremp you are a jackass and a student who knows nothing about the economy of the Johnson County Kansas area or the needs of businessmen in my father's field.

[Jcrew]

[ QUOTE ]
Is this the method you propose for measuring the utility of all goods and services to all individuals and then allocating them by?

[/ QUOTE ]

It is not my claim that this method has a tight margin of error. It is a crude method, but however I hope you can agree that if the metric measured between two individuals differ by several orders of magnitude, it is reasonable to infer that a greater amount of utility is generated for the person with the higher quantity in the TYPICAL case. So if you were not willing to walk 10 steps for 50$, but you take the average person who is willing to walk 5 miles for it, I honestly believe it is safe to say total utility is increased given a 50$ transfer whether it is justified or not.

A more realistic scheme would generate a slew of metrics(how long would a person wait in an isolation room for said good /services...etc) and just take the average after normalization. Not exact, but is able to generate a reasonable set of magnitude buckets.

[Siegmund]

I'll offer the suggestion that one of the more important minuses of a minimum wage hike is the way it effectively punishes those minimum wage earners who were, on their own, bettering themselves.

Here in Alaska the state minimum wage went from $5.65 to $7.15 a few years back. The minimum wage people of course were all happy. The guy who had worked his way up to earning $7.50 an hour by staying at a job for a couple years -- and got NOTHING extra when the new hires got a buck fifty raise -- was not real pleased.

Our new law also had, as originally passed, an annual cost of living adjustment to minimum wage incorporated in it. That part actually got repealed after a big lobbying effort from the bar and hotel association about how all their employees would demand such raises if the minimum wagers were guaranteed annual raises.

It sure looks like a recipe for inflation to me.

It IS largely hypothetical, though, since there are extremely few jobs that pay that low -- no-experience stocker at Fred Meyer starts at $11 or $12.

[PLOlover]

[ QUOTE ]
It sure looks like a recipe for inflation to me.

[/ QUOTE ]

Totally confusing cause and effect here imo.

[TomCollins]

[ QUOTE ]
[ QUOTE ]
It sure looks like a recipe for inflation to me.

[/ QUOTE ]

Totally confusing cause and effect here imo.

[/ QUOTE ]

Yeah, rising costs of production have no effect on price at all.

[PLOlover]

What I mean is that the reason to raise the minimum wage in teh first place is to keep pace with inflation.

The reason is not to give the lowest wage earners more money, more purchasing power, at all. The reason is simply to keep pace with inflation, to correct the erodation of their purchasing power.

[TomCollins]

[ QUOTE ]
What I mean is that the reason to raise the minimum wage in teh first place is to keep pace with inflation.

The reason is not to give the lowest wage earners more money, more purchasing power, at all. The reason is simply to keep pace with inflation, to correct the erodation of their purchasing power.

[/ QUOTE ]

Which then creates more inflation, and more minimum wage increases, on and on. I forget the exact case, but there was something like this in Israel based on pensions (if I remember correctly) where they tied it to the cost of living. The more they raised pensions, the more the cost of living rose, until someone finally got smart enough to realize it wasn't a good idea.

(note: I remember this story from an Econ class 8 years ago, so I may have some of this wrong).

[PLOlover]

True, inflation ripples through the economy. But if you want to have a minimum wage, that's really got nothing to do with anything. Inflation will be there regardless of the minimum wage. If you want to usse that as an excuse to abolish the minimum wage, that's fine, just realize that's what you're doing.

As far as israel, the demographics are so totally different I don't think you can extrapolate that to the US.

[Thremp]

[ QUOTE ]
Thremp you are a jackass and a student who knows nothing about the economy of the Johnson County Kansas area or the needs of businessmen in my father's field.

[/ QUOTE ]

O RLY?!?

I have two friends who live in Mission and both work for <$10 an hour. Eat [censored] bitch.

[Thremp]

[ QUOTE ]
True, inflation ripples through the economy. But if you want to have a minimum wage, that's really got nothing to do with anything. Inflation will be there regardless of the minimum wage. If you want to usse that as an excuse to abolish the minimum wage, that's fine, just realize that's what you're doing.

As far as israel, the demographics are so totally different I don't think you can extrapolate that to the US.

[/ QUOTE ]

lets use an extreme example. We raise min wage from 5.15 to 51.50. Does anyone else think that we just tack a zero onto everything else and boom we are right back to where we started?

[dragon14]

I don't doubt that you and your friends currently and probably always will work for minimum wage.

[Thremp]

[ QUOTE ]
I don't doubt that you and your friends currently and probably always will work for minimum wage.

[/ QUOTE ]

Burn.

My Dad can beat up your Dad.

[PLOlover]

[ QUOTE ]
lets use an extreme example. We raise min wage from 5.15 to 51.50. Does anyone else think that we just tack a zero onto everything else and boom we are right back to where we started?

[/ QUOTE ]

In your example, are you saying the dollar had been devalued 90%, and 51.50 now has the same purchasing power as 5.15 used to have?

[PLOlover]

Let me put it another way. What was the minimum wage in 1950? Should it still be that same amount? Why or why not?

Now if you say there should be no minimum wage, then that is fine, but that is a different question than what should the mw be once the decision has been made that there should be a mw.

[ianlippert]

Wouldnt it just be more productive to increase average real wages? It seems like minimum wage laws are just bandage solutions to problems that run much deeper in our economy. Wouldnt it be more productive to figure out why the dollar was worth more in past decades than match min wage to an ever devaluation of the dollar?

[PLOlover]

[ QUOTE ]
Wouldnt it just be more productive to increase average real wages? It seems like minimum wage laws are just bandage solutions to problems that run much deeper in our economy. Wouldnt it be more productive to figure out why the dollar was worth more in past decades than match min wage to an ever devaluation of the dollar?

[/ QUOTE ]

of course that's a different question. a good question, especially in light of nafta , gatt, cafta, and the coming north american union, and what that will do to the US standard of living. But ultimately outside the scope of the minimum wage debate.

[Thremp]

[ QUOTE ]
[ QUOTE ]
lets use an extreme example. We raise min wage from 5.15 to 51.50. Does anyone else think that we just tack a zero onto everything else and boom we are right back to where we started?

[/ QUOTE ]

In your example, are you saying the dollar had been devalued 90%, and 51.50 now has the same purchasing power as 5.15 used to have?

[/ QUOTE ]

Essentially yes.

The min wage is a cause of inflation and reduces purchasing power. It harms middle class America and generally sucks.

Free trade is good and this is an example of anti-free trade.

[PLOlover]

[ QUOTE ]
The min wage is a cause of inflation and reduces purchasing power. It harms middle class America and generally sucks.

[/ QUOTE ]

so you think that without minimum wage there would be no inflation?

If you were somehow able to partially control the minimum wage, in that you could not abolish it, but you could set the amount per hour, what would it be?

[lastchance]

IIRC, EITC > Minimum wage.

[pzhon]

[ QUOTE ]

The min wage is a cause of inflation and reduces purchasing power.

[/ QUOTE ]
Minimum wage is A cause of inflation, but it has a relatively minor effect. Inflation is mainly caused by other things. Doubling the minimum wage would not come close to doubling the prices of goods and services on average.

While there are secondary and tertiary effects, 0.1 + 0.01 + 0.001 + ... is not infinitely big.

Inflation reduces the purchasing power of a dollar by definition, but unless you are on a fixed income, you are supposed to be able to adjust.

[ QUOTE ]

It harms middle class America and generally sucks.


[/ QUOTE ]
The idea of a minimum wage really bothers some people. However, the idea that people can work full time, and still be below the poverty line and be eligible for government assistance paid by tax dollars really bothers many others. I think the latter effect is larger for the middle class, that raising the minimum wage would transfer money from the companies that hire people for the current minimum wage to the middle class and working poor.

[ QUOTE ]

Free trade is good and this is an example of anti-free trade.

[/ QUOTE ]
So are child-labor laws and mandatory workers' compensation insurance. Enabling market forces to act is not the only normative principle, it is one of many. It is the responsibility of the government to curtail free trade in many circumstances. This is one of them, and letting the minimum wage fall 1/3 in real dollars over the last 25 years while the per capita GDP grew over 50% (http://eh.net/hmit/gdp/) was a failure of the US government.

[Bandgeek]

[ QUOTE ]


Free trade is good and this is an example of anti-free trade.

[/ QUOTE ]

In "free trade" the market, or the supply and demand curve control prices.
In the wage market this isn't the case.
The Federal Reserve will never let the economy rise to a 1% or 0% unemployment rate, a situation in which workers would go to the highest bidder.
If unemployment gets too low, the fed does everything within its power to slow the economy down to keep a lid on inflation.

Since the government is manufacturing a constant excess of supply in the labor market (the 4-6% of people who are unemployed) wages would always remain low unless we had a minimum wage.

[vhawk01]

[ QUOTE ]
[ QUOTE ]


Free trade is good and this is an example of anti-free trade.

[/ QUOTE ]

In "free trade" the market, or the supply and demand curve control prices.
In the wage market this isn't the case.
The Federal Reserve will never let the economy rise to a 1% or 0% unemployment rate, a situation in which workers would go to the highest bidder.
If unemployment gets too low, the fed does everything within its power to slow the economy down to keep a lid on inflation.

Since the government is manufacturing a constant excess of supply in the labor market (the 4-6% of people who are unemployed) wages would always remain low unless we had a minimum wage.

[/ QUOTE ]
This is very interesting to me and I know almost nothing about economics. Can you elaborate on this, or at least point me to something I can read that would explain this to me better? Specifically I am curious about the negative effects reducing the unemployment rate would have and what powers the federal government has to prevent/cause this.

[Thremp]

[ QUOTE ]
[ QUOTE ]
The min wage is a cause of inflation and reduces purchasing power. It harms middle class America and generally sucks.

[/ QUOTE ]

so you think that without minimum wage there would be no inflation?

If you were somehow able to partially control the minimum wage, in that you could not abolish it, but you could set the amount per hour, what would it be?

[/ QUOTE ]

Your grasp of logic sucks.

[Thremp]

pzhon,

When you are considering inflation in terms of %, a big change is not required. If raising the min wage $1 which is a ~20% rise in min. wage would cause a change of 10% of that... We have a 2% increase in inflation. Of course this is in proportion to who has wages increased and my example is poor and of limited use, but I feel you can understand what I'm saying about it. It is mainly an example for people who think we can jump from 5.15->9.50 with no problem.

I disagree however that the gov't has anything responsibility with wages. But that belongs in another forum.

The middle class is hurt in retirement as min. wage increases through reductions in profitability of companies.

[ianlippert]

Can we bump the min wage to $15/hr? I could use some extra spending cash.

[dragon14]

Businesses will either pay for the low wage worker through wages or through taxes. If the minimum wage is not increased then the min wage worker will need government subsidies for housing and food. The money will come from taxes which is provided by businesses.

[Bandgeek]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]


Free trade is good and this is an example of anti-free trade.

[/ QUOTE ]

In "free trade" the market, or the supply and demand curve control prices.
In the wage market this isn't the case.
The Federal Reserve will never let the economy rise to a 1% or 0% unemployment rate, a situation in which workers would go to the highest bidder.
If unemployment gets too low, the fed does everything within its power to slow the economy down to keep a lid on inflation.

Since the government is manufacturing a constant excess of supply in the labor market (the 4-6% of people who are unemployed) wages would always remain low unless we had a minimum wage.

[/ QUOTE ]
This is very interesting to me and I know almost nothing about economics. Can you elaborate on this, or at least point me to something I can read that would explain this to me better? Specifically I am curious about the negative effects reducing the unemployment rate would have and what powers the federal government has to prevent/cause this.

[/ QUOTE ]

Somehow I get the feeling you're poking fun at me with your "I know nothing about economics" remark, however, I'll humor you.

The federal reserve controls the supply of money into the economy and the ease or difficulty of obtaining credit, thereby controlling whether the economy grows or shrinks, and at what pace.
http://www.google.com/search?hl=en&l...federal+reserve (http://www.google.com/search?hl=en&lr=&safe=off&rls=GGLJ%2CGGLJ%3A2006-35%2CGGLJ%3Aen&q=role+of+federal+reserve)

Since true market forces don't apply to the labor market (i.e. there is almost never a shortage of supply to drive the price up) then the government has a responsibility to counterbalance that with a minimum wage, rules on hours worked per week, etc.

In the early industrial age, before there were labor laws or a minimum wage, 10 year old boys worked 16 hours per day in factories and lost life and limb doing so because of unsafe working conditions.
While this is "pure capitalism" I think we can all agree that it's not in the best interest of our society.

Also, the minimum wage is not inflationary. Prices are set by the market and sellers will always charge the maximum that the market will pay for their product, regardless of what their labor costs are. A higher wage doesn't drive prices up, it redistributes money from the business owners to the workers. (See my comment above about the early industrial age if you think that some redistribution is a bad thing)

[vhawk01]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]


Free trade is good and this is an example of anti-free trade.

[/ QUOTE ]

In "free trade" the market, or the supply and demand curve control prices.
In the wage market this isn't the case.
The Federal Reserve will never let the economy rise to a 1% or 0% unemployment rate, a situation in which workers would go to the highest bidder.
If unemployment gets too low, the fed does everything within its power to slow the economy down to keep a lid on inflation.

Since the government is manufacturing a constant excess of supply in the labor market (the 4-6% of people who are unemployed) wages would always remain low unless we had a minimum wage.

[/ QUOTE ]
This is very interesting to me and I know almost nothing about economics. Can you elaborate on this, or at least point me to something I can read that would explain this to me better? Specifically I am curious about the negative effects reducing the unemployment rate would have and what powers the federal government has to prevent/cause this.

[/ QUOTE ]

Somehow I get the feeling you're poking fun at me with your "I know nothing about economics" remark, however, I'll humor you.

The federal reserve controls the supply of money into the economy and the ease or difficulty of obtaining credit, thereby controlling whether the economy grows or shrinks, and at what pace.
http://www.google.com/search?hl=en&l...federal+reserve (http://www.google.com/search?hl=en&lr=&safe=off&rls=GGLJ%2CGGLJ%3A2006-35%2CGGLJ%3Aen&q=role+of+federal+reserve)

Since true market forces don't apply to the labor market (i.e. there is almost never a shortage of supply to drive the price up) then the government has a responsibility to counterbalance that with a minimum wage, rules on hours worked per week, etc.

In the early industrial age, before there were labor laws or a minimum wage, 10 year old boys worked 16 hours per day in factories and lost life and limb doing so because of unsafe working conditions.
While this is "pure capitalism" I think we can all agree that it's not in the best interest of our society.

Also, the minimum wage is not inflationary. Prices are set by the market and sellers will always charge the maximum that the market will pay for their product, regardless of what their labor costs are. A higher wage doesn't drive prices up, it redistributes money from the business owners to the workers. (See my comment above about the early industrial age if you think that some redistribution is a bad thing)

[/ QUOTE ]

No, I wasn't poking fun at all. I really know nothing about economics, its a pretty large gap in my education, but I still find it interesting. Thank you for the information.

[tolbiny]

[ QUOTE ]

In the early industrial age, before there were labor laws or a minimum wage, 10 year old boys worked 16 hours per day in factories and lost life and limb doing so because of unsafe working conditions.
While this is "pure capitalism" I think we can all agree that it's not in the best interest of our society.

[/ QUOTE ]

Why were 10 yr old boys willing to work 16 hours a day, and why were their parents willing to put them in such horrible conditions?

[keith123]

[ QUOTE ]
[ QUOTE ]

In the early industrial age, before there were labor laws or a minimum wage, 10 year old boys worked 16 hours per day in factories and lost life and limb doing so because of unsafe working conditions.
While this is "pure capitalism" I think we can all agree that it's not in the best interest of our society.

[/ QUOTE ]

Why were 10 yr old boys willing to work 16 hours a day, and why were their parents willing to put them in such horrible conditions?

[/ QUOTE ]

they enjoyed survival.

[tolbiny]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]

In the early industrial age, before there were labor laws or a minimum wage, 10 year old boys worked 16 hours per day in factories and lost life and limb doing so because of unsafe working conditions.
While this is "pure capitalism" I think we can all agree that it's not in the best interest of our society.

[/ QUOTE ]

Why were 10 yr old boys willing to work 16 hours a day, and why were their parents willing to put them in such horrible conditions?

[/ QUOTE ]

they enjoyed survival.

[/ QUOTE ]

Right- that system was better than the one where they did backbreaking work 16 hours a day on the farm only to have one dry season, thunderstorm during plowing, or other natural disastor kill half your family. It wasn't "pure capitalism" that created terible working conditions, it was life. Capitalism was what brought about steady improvements, and was the reason that enough people could pull thier own children out of work so that they could then vote for child labor laws without hurting their own family. It wasn't some words on a piece of paper that increased productivity to the point where one person working 40 hours a week could support 3 others.

[keith123]

well, no one here is claiming that doing "backbreaking work 16 hours a day on the farm only to have one dry season, thunderstorm during plowing, or other natural disastor kill half your family" is better than a minimum wage job in america.

[Jeff_B]

If I work at McDonalds and minimum wage is raised significantly. Lets say I made $5 an hour and I now make $10.

My work done can be defined by a definite amount per unit time. Lets say I can "process" (for lack of a better term) $50 worth of orders in an hour after costs. Now after my raise profits are $40 vs $45. This money comes out of the owners pocket basically.

Now to combat this he may raise profit so that same $50 worth of orders is now $55 so he can make the same $45 profit.

The problem: all minimum wages are increased so everyone raises prices..

$45 after my raise != $45 before.

[arahant]

[ QUOTE ]
If I work at McDonalds and minimum wage is raised significantly. Lets say I made $5 an hour and I now make $10.

My work done can be defined by a definite amount per unit time. Lets say I can "process" (for lack of a better term) $50 worth of orders in an hour after costs. Now after my raise profits are $40 vs $45. This money comes out of the owners pocket basically.

Now to combat this he may raise profit so that same $50 worth of orders is now $55 so he can make the same $45 profit.

The problem: all minimum wages are increased so everyone raises prices..

$45 after my raise != $45 before.

[/ QUOTE ]
yeah, but it doesn't equal 22.50, that's for sure.
I agree that your wage increase may only be 95% instead of 100%.
Of course, since rich people buy more, this amounts to wealth redistribution...

(full disclosure...i just read the last post, not many of the intervening ones, since this thread has become elderly).

[Bandgeek]

[ QUOTE ]
If I work at McDonalds and minimum wage is raised significantly. Lets say I made $5 an hour and I now make $10.

My work done can be defined by a definite amount per unit time. Lets say I can "process" (for lack of a better term) $50 worth of orders in an hour after costs. Now after my raise profits are $40 vs $45. This money comes out of the owners pocket basically.

Now to combat this he may raise profit so that same $50 worth of orders is now $55 so he can make the same $45 profit.

The problem: all minimum wages are increased so everyone raises prices..

$45 after my raise != $45 before.

[/ QUOTE ]

Actually this is incorrect.
The market sets the prices. The only way all prices would go up is if there was collusion amongst employers, which would be illegal.

If McDonald's raised their prices to cover the increase in labor cost, but Burger King and Wendy's didn't, then McD would lose alot of business to their competitors.

The wage increase isn't inflationary, it redistributes money from the owner to the employee.

[PLOlover]

[ QUOTE ]
If I work at McDonalds and minimum wage is raised significantly. Lets say I made $5 an hour and I now make $10.

My work done can be defined by a definite amount per unit time. Lets say I can "process" (for lack of a better term) $50 worth of orders in an hour after costs. Now after my raise profits are $40 vs $45. This money comes out of the owners pocket basically.

Now to combat this he may raise profit so that same $50 worth of orders is now $55 so he can make the same $45 profit.

The problem: all minimum wages are increased so everyone raises prices..

$45 after my raise != $45 before.

[/ QUOTE ]

Here's the deal so you can understand.

[ QUOTE ]
Lets say I can "process" (for lack of a better term) $50 worth of orders in an hour after costs. Now after my raise profits are $40 vs $45.

[/ QUOTE ]

So basically you are making 10%. 10% of 50 = 5.

Now in five years due to inflation you are doing the same thing but the value in dollars is now 80 instead of 50, for the same products. 10% of 80 = 8.

So now you see why the minimum wage or any wage has to increase, to keep up with inflation.

If it doesn't, then basically the owner is taking money out of the employees pockets.

[ianlippert]

[ QUOTE ]
If McDonald's raised their prices to cover the increase in labor cost, but Burger King and Wendy's didn't, then McD would lose alot of business to their competitors.


[/ QUOTE ]

Until Wendys and Burger King went out of business because they werent making any profit. Can anyone post exactly what the profits of large corporations are on a store to store basis? I find that people just look at overall profit and think that businesses are making huge profits so why cant they help the little guy out right? I'd imagine that an individuals store ROI isnt as high as most people think.

[tolbiny]

[ QUOTE ]
The only way all prices would go up is if there was collusion amongst employers

[/ QUOTE ]

Wrong, prices increase when the cost of resources increases. The min wage would increase the cost of a resource so an industry wide price increase would be a predictable result.

[Bandgeek]

[ QUOTE ]
[ QUOTE ]
The only way all prices would go up is if there was collusion amongst employers

[/ QUOTE ]

Wrong, prices increase when the cost of resources increases. The min wage would increase the cost of a resource so an industry wide price increase would be a predictable result.

[/ QUOTE ]

Many studies have shown this to be a false assumption.

It makes sense logically, but it doesn't necessarily happen this way in the real world.

For instance oil is a huge resource, it affects nearly every business.
However, when oil prices skyrocketed recently the overall rate of inflation was benign. The reason is that competition for consumer dollars is fierce, and companies were unable to pass on the higher energy/transportation/production costs to consumers, so the increased price of oil amounted to a shrinking of profit margin rather than an increase in consumer prices.

This is generally what happens whenever minimum wage is increased as well. Study after study show this. (don't make me post a link, google it if you're really interested, the data is out there)

Personally I think the minimum wage is just a big political football. They should index it to the CPI and be done with it, then they can spend time arguing about something else.

[Thremp]

How bought they just do away with min wage forever?

CPI from 2002-2005

2.3->2.7->3.6

Looks to me like fuel has a decent dent in the CPI.

[GMontag]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]

In the early industrial age, before there were labor laws or a minimum wage, 10 year old boys worked 16 hours per day in factories and lost life and limb doing so because of unsafe working conditions.
While this is "pure capitalism" I think we can all agree that it's not in the best interest of our society.

[/ QUOTE ]

Why were 10 yr old boys willing to work 16 hours a day, and why were their parents willing to put them in such horrible conditions?

[/ QUOTE ]

they enjoyed survival.

[/ QUOTE ]

Right- that system was better than the one where they did backbreaking work 16 hours a day on the farm only to have one dry season, thunderstorm during plowing, or other natural disastor kill half your family. It wasn't "pure capitalism" that created terible working conditions, it was life. Capitalism was what brought about steady improvements, and was the reason that enough people could pull thier own children out of work so that they could then vote for child labor laws without hurting their own family. It wasn't some words on a piece of paper that increased productivity to the point where one person working 40 hours a week could support 3 others.

[/ QUOTE ]

Right. That explains why so many people jumped at the chance to work 16 hours a day on a farm when the Homestead Act was passed.

The system wasn't better. That option wasn't open to the factory workers because they didn't own any land. The Industrial Revolution brought the productivity increases, but the child labor laws, workplace safety laws, unionizing, etc. are what made sure that at least some of the benefits of those "steady improvements" actually made it back to the workers doing all the work.

[tolbiny]

[ QUOTE ]

Right. That explains why so many people jumped at the chance to work 16 hours a day on a farm when the Homestead Act was passed.

[/ QUOTE ]

How do you explain that the majority of people DIDN'T take advantage of the homestead act. 372,000 farms were settled over 114 years. The united states had a population of 31 million (including slaves) in 1860, and a population of 76 million in 1900. The vast, vast, vast majority of factory workers preferred to stay in their situation rather than to try their hand at farming, despite being offer 160 acres for a price of $18.

[GMontag]

[ QUOTE ]
[ QUOTE ]

Right. That explains why so many people jumped at the chance to work 16 hours a day on a farm when the Homestead Act was passed.

[/ QUOTE ]

How do you explain that the majority of people DIDN'T take advantage of the homestead act. 372,000 farms were settled over 114 years. The united states had a population of 31 million (including slaves) in 1860, and a population of 76 million in 1900. The vast, vast, vast majority of factory workers preferred to stay in their situation rather than to try their hand at farming, despite being offer 160 acres for a price of $18.

[/ QUOTE ]

Your post is a prime example of distorting statistics. First of all, the size of the average household in 1860 was 5.2 people. It dropped over the years, but even as late as 1915, it was still at 4.5. Homesteaders most likely had larger households than average, so lets take 5 as a rough average number over the time when most homesteads were being settled. That makes your figure to 1.85 million people.

Second, that 372,000 figure only counts the claims of people who actually made it the whole five years and were able to get the title to their land. In fact 1.6 million claims were attempted over the course of the Homestead Act. However, a significant portion of those claims were simply fronts for cattle ranchers and other ploys. The ratio of successful farmers to attempted farmers was closer to 1 in 3. That would make about 1 million farms attempted and 5 million homesteaders. Any way you look at it, that is a huge portion of the population.

Also, I don't know where you got the $18 figure from. If you stayed the whole five years and completed a specific list of improvements to the land, you got it free. Alternatively, you could buy it after 6 months (if you completed a much smaller list of improvements) for $1.25/acre or $200 for the quarter section.

[moorobot]

A minimum wage hike has a tendency to shift the demand and supply curves...Furthermore, an increase in the minimum wage has a positive effect on labor productivity and therefore employment.

What puzzles me is that conservative economists don't realize this. They complain that the wealth will not work very much or very hard if they aren't getting enough money/incentive to do so. The same logic must apply to the poor as well, but that inconvenient (to free marketeers) fact is ignored. Furthermore, a higher wage for the poor means better food and health care, which is not true for the wealthy, and hence we should expect the increase in productivity and employment due to increased wages to be greater for the poor than for the wealthy.

[goofball]

[ QUOTE ]
This particular one had some serious questions about the methodology used in it and most economists dont give it a whole lot of weight.

[/ QUOTE ]


Like what?

Which economists?

[ianlippert]

[ QUOTE ]
[ QUOTE ]
This particular one had some serious questions about the methodology used in it and most economists dont give it a whole lot of weight.

[/ QUOTE ]


Like what?

Which economists?

[/ QUOTE ]

My econ 101 text cites Daniel Hamermesh of the University of Texas at Austin, Finis Welch of Texas A&M University, and Kevin Murphy of the University of Chicago. Two of the problems cited with that study were that employers often cut labour before the law comes into place in anticipation of increased costs. The other flaw was that some of their cases could be accounted for by a general increase in economic productivity in the area.

This was just a short 1 paragraph blurb in an econ 101 text, so I'm sure there are more detailed criticisms of their studies elsewhere.

[ianlippert]

50 Years of Research on the Minimum Wage (http://www.house.gov/jec/cost-gov/regs/minimum/50years.htm)

[ QUOTE ]
The following survey of the academic research on the minimum wage is designed to give nonspecialists a sense of just how isolated the Card, Krueger and Katz studies are. It will also indicate that the minimum wage has wide-ranging negative effects that go beyond unemployment.

[/ QUOTE ]

[tolbiny]

[ QUOTE ]


Also, I don't know where you got the $18 figure from

[/ QUOTE ]

the 18$ was the application /processing fee.

[ QUOTE ]
cond, that 372,000 figure only counts the claims of people who actually made it the whole five years and were able to get the title to their land

[/ QUOTE ]

People ho attempted and failed to homestead do not support your argument that farming was favorable to working in factories. The 100 most populated cities in the US held 14% of the population in 1860, 17% in 1870 to 26% in 1910, and thats just the 100 most populous cities, the urban growth in the US outstripped rural by huge amounts, DESPITE the US government giving away millions of acres.

[ QUOTE ]
The ratio of successful farmers to attempted farmers was closer to 1 in 3. That would make about 1 million farms attempted and 5 million homesteaders. Any way you look at it, that is a huge portion of the population.

[/ QUOTE ]

Additionally the homesteaders were not all factory workers, large portions of them were farmers or farmhands who didn't own their own land. The percentage of people who moved from urban to rural areas because of the homestead act and stayed was not a large percentage of the population, however the numbers of people who moved from the rural to urban centers was massive. City life was preferable to rural life any way you look at it as the industrial revolution grew.

[pzhon]

[ QUOTE ]
50 Years of Research on the Minimum Wage

[/ QUOTE ]
You left out calling it "fair and balanced," and the Fox News logo.

The page you linked looked really biased to me, with article descriptions heavily spinning the contents, and other important articles left out, even before I noticed that the header said, "House Republican Members ... Talking Points." The sensible approach is to weigh benefits against costs, not to point out that whatever you find distasteful has costs. The latter approach followed by the page you linked sets the discussion backwards. Btw, even the Republican-controlled congress at the time of the release (1995) didn't follow the recommendations, since it was just too unpopular. The minimum wage was greater in real dollars then than now, and in 1996 the Gingrich congress accepted the Democrats' proposal to raise the minimum wage 20% by 1997.

If you want to look at rational academic objections rather than irrational political spin, there has been plenty of discussion in the academic literature, including quantitative analyses (which agreed with my answer to Sklansky's question). See the work of Neumark and Wascher. "Employment Effects of Minimum and Subminimum Wages: Reply to Card, Katz and Krueger" (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=226777) (abstract).

[ianlippert]

[ QUOTE ]
You left out calling it "fair and balanced," and the Fox News logo.


[/ QUOTE ]

So basically anything that criticized the min wage must be right wing bias? It was a government site with citiations from what seemed like credible sources. But like you said, arguing about min wage is pretty pointless since most people are in favour of it.

[pzhon]

[ QUOTE ]
[ QUOTE ]
You left out calling it "fair and balanced," and the Fox News logo.
...
If you want to look at rational academic objections rather than irrational political spin, there has been plenty of discussion in the academic literature, including quantitative analyses (which agreed with my answer to Sklansky's question). See the work of Neumark and Wascher. "Employment Effects of Minimum and Subminimum Wages: Reply to Card, Katz and Krueger" (abstract).


[/ QUOTE ]

So basically anything that criticized the min wage must be right wing bias?

[/ QUOTE ]
Please don't pretend to be that stupid. You linked an extremely biased site. I cited a much more sensible academic paper that argues against the Card, Katz, and Krueger paper. How could you possibly read that as a claim that all objections to (raising) the minimum wage are just bias? I am increasingly disgusted with what passes for discussion on the 2+2 forums. I will ignore you henceforth.

[ianlippert]

[ QUOTE ]
Please don't pretend to be that stupid. You linked an extremely biased site. I cited a much more sensible academic paper that argues against the Card, Katz, and Krueger paper. How could you possibly read that as a claim that all objections to (raising) the minimum wage are just bias? I am increasingly disgusted with what passes for discussion on the 2+2 forums. I will ignore you henceforth.

[/ QUOTE ]

I guess I'm ignore now. But you basically equated that site to fox news. Fox news is crap, my link was to a government site on min wage. I'd argue they have a shred more credibility than fox news. People really need to chill out.

[drzen]

This argument is fallacious because it assumes that people on minimum wage are hired on the basis of intelligence, competency or industry. Intelligence is a detractor in hiring for low-skilled jobs, competency requires a low baseline and degree of exceeding it is immaterial, and extra industry is wasted in jobs that have targets and useless in jobs that do not.

It's hilarious actually that you feel that a more "intelligent" person will not work for $X an hour but will suddenly feel $X + 50c is sufficient. You've clearly never been unemployed and have no understanding of how the labour market is structured. David, think, will you? You're supposed to be a smart guy but did it not occur to you that if a raise in minimum wage made a more industrious worker want to work for a company, and that worker was attractive enough to the company to replace an existing employee with, the company would simply pay above the minimum wage in the first place and attract that worker?

Furthermore, the argument that it's better to have a job that pays very little than no job appeals to those who wish to exploit those with no job but it creates an entirely false dichotomy. The choice is nearly never between low pay or no pay: companies do not go bust if they have to pay a little more to their lowest-paid workers. Profit, not the livelihood of the workforce, is what is jeopardised by being compelled to pay workers more.

[jogsxyz]

Why don't these politicians do something positive? Workers on minimum wage should be exempt from income taxes. They should not pay FICA. But those taxes would be credited on social security records without payment. Yes the employers would be required to pay the matching amount.

[drzen]

[ QUOTE ]
Why don't these politicians do something positive?

[/ QUOTE ]

Positive for whom?

[jogsxyz]

[ QUOTE ]
[ QUOTE ]
Why don't these politicians do something positive?

[/ QUOTE ]

Positive for whom?

[/ QUOTE ]

Those working for minimum wage.

[PLOlover]

[ QUOTE ]
Workers on minimum wage should be exempt from income taxes. They should not pay FICA. But those taxes would be credited on social security records without payment. Yes the employers would be required to pay the matching amount.

[/ QUOTE ]

This is something I thought of. Increasing m.w. increases social security intake. Income tax probably not although the gov does get to use the money for a while interest free.

[BCPVP]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Why don't these politicians do something positive?

[/ QUOTE ]

Positive for whom?

[/ QUOTE ]

Those working for minimum wage.

[/ QUOTE ]
At least half of them are unlikely to vote.

[Thremp]

pzhon,

I have no clue who the two guys writing in that paper are. One however is sponsored by people who also put this paper out in their thinktank:

http://www.ppic.org/main/publication.asp?i=88

Or maybe this paper by him where I quote "Minimum wages deliver no net benefits to poor or low-income families and, if anything, make them worse off."

http://www.ppic.org/content/pubs/op/OP_204DNOP.pdf

[drzen]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Why don't these politicians do something positive?

[/ QUOTE ]

Positive for whom?

[/ QUOTE ]

Those working for minimum wage.

[/ QUOTE ]

Giving them more money is positive. It's not the only positive thing they can do but it's positive in itself.

[pzhon]

[ QUOTE ]
pzhon,

I have no clue who the two guys writing in that paper are.

[/ QUOTE ]
I'm not sure either. I think I recall vehemently disagreeing with other papers by these guys in the "Povery and Welfare" class I took while getting my economics degree, but their papers do get cited in the academic literature.

Since I think it is right to raise the minimum wage, I'm not going to make the case against it carefully. (Even the Gingrich congress raised the minimum wage when it was higher in real dollars; I see nothing that says to act more conservatively now, and many reasons to act more liberally.) Mentioning this paper was part of pointing out that the opponents are arguing poorly if they just repeat irrational spin instead of making coherent arguments or citing the conclusions of academic papers which do.

[Thremp]

pzhon,

As a fellow economics major, you and I both know how to data snoop to make papers say anything you want. They are no more or less reliable unless the people are actually well know.

Thomas Sowell... Reputable.
My paper... Meh.