$15/hr minimum wage

[EdReed4Prez]

I'm no economist. But it seems to me that raising the minimum wage to $15/hr will do nothing to increase minimum wage earners buying power. Food prices, materials and labor will go up. I'd imagine rents will rise too. Which will necessitate a COLA raise to the rest of the labor pool too.

Am I way off base here? It seems that no matter what you make that minimum wage burger flippers will always struggle to make ends meet. Any real economics guys want to help me out?

 

[Lmob0621]

It will make everyone earning more than minimimum wage have less spending power... It will make everyone earning $15 or less an instant minimum wage worker... It will keep everyone making minimum wage at minimum wage with essentially the same spending power... Sounds like a great deal to a communist.

 

[Scott T]

I had 1 raise in the last 8 years not related to promotion a whopping 25 cents. they just did a market review and By Golly dontcha know we're being paid appropriate to the market.

 

[Ron Burgundy]

Any real economics guys want to help me out?

As a matter of fact I do have a degree in economics, an MBA, and a partial writing credit for a college economics textbook. My education and experience tell me that you're being racist.

I had 1 raise in the last 8 years not related to promotion a whopping 25 cents. they just did a market review and By Golly dontcha know we're being paid appropriate to the market.

I own my own little business and my income has been cut by 50% since 2007. I only make money for the government and insurance companies these days.
A lot of the unseen taxes that employers pay are based on a percentage of their payroll. Workers comp, liability, state unemployment, Federal unemployment, and the employer's half of FICA all go up too if payroll goes up. I just sent the Feds $1800 this morning for last month's Federal taxes. My bank account has $1100 in it. We'll be okay by Wednesday when it clears.
My workers' comp and liability insurance is almost $2000 a month, that money has to come from someplace, and a lot of people think I charge too much and that I'm rich because I own a business.

 

[Tim Steelersfan]

There are thousands of reasons why it is bad policy. First, and foremost, any time you increase the price of something, people demand less of it. Second, when you increase the minimum wage, companies have to finance that increase in wages from somewhere. Often times, the first place companies look is benefits. As one wrote, if you raise my wage from $7/hr to $10/hr, but you finance that by reducing my medical benefit...am I making more?

The Forbes article (last link) is probably your best read.

http://reason.com/archives/2014/03/03/9-reasons-why-raising-the-minimum-wage-i

http://econlog.econlib.org/archives/2014/01/minimum_wage_no.html

http://gregmankiw.blogspot.com/2014/01/the-minimum-wage-as-antipoverty-tool.html

http://www.forbes.com/sites/williamdunkelberg/2012/12/31/why-raising-the-minimum-wage-kills-jobs/

 

[Lmob0621]

but you finance that by reducing my medical benefit...

and lord knows that has already been beat up enough recently.

 

[ark steel]

Really simple domino effect.

Raise MW from $X to $15/hour. Everyone who is now making anything between $X and $15/hour is now at $15/hour. So, you have Company A where the guy has been working for years and, pre-MW increase was making $16/hour. With the several years of experience he has, he now makes $1/hour over MW. Over this time his employer has noted a good work ethic and good all-around employee. This employee has had to work harder (and still does) than those $15/hour burger flippers. Company A has to now increase the pay of this employee to enough over $15/hour that he will continue to do this harder job. If not, the employee will leave Company A and go take the relatively easier job for $15/hour. Due to this employee's very nice work record, he will get this job and some layabout now earning the $15/hour will lose his job. Now, company A can't risk losing more employees so MUST increase wages. If Company A does so, all of his competitors must also do so. As Ron alludes, there ain't no magic money tree. Company A will have to increase prices (as do his competitors).

So, now Company A now pays $8/hour more than MW, again. Company B in a different industry with harder work has been paying $25/hour, but now that Company A is paying near that for easier work, Company B (and competitors) must increase their pay or Company A takes their employees, etc. ad nauseum.

All prices increase, buying power may increase in the very short term but will stabilize at the previous equilibrium. Democrats will have SAVED THE DAY!!

 

[MT~Forged]

I am not an Economist, but I would be willing to bet that the business owners will not be able/willing to just reduce their profits. The money has to come from somewhere, normally a price increase.

 

[Superman]

I'm not an economist, but am a racist, since I know this is some serious bullshit.

 

[Steelerfan]

The New America: Where entry jobs become careers and any drive to improve your standing in life is squashed by the guarantee of free phones, food, rent, and other ****. What happened to the America I knew where minimum wage jobs taught you life lessons but were only the beginning step to doing something with your life? And why can't fast food employees speak English? This country is so ****** up sometimes I'd like to move to Canada (but could never afford to move).

 

[Roy92040]

It only means that you will be paying $30 for a big Mac. I'm loving it.

 

[oneforthebus]

As someone who managed a small retail business on a small profit margin. I had to look at my projected sales for each month and keep my labor costs at a certain percentage of that, in order to keep my profit margin. Sure, I could raise prices, I could cut costs in other areas like purchasing, but I know I'm going to sell less if I do that, so it doesn't really help much. Really the only way I can make up for that it is to have fewer employees or cut their hours. I can't be paying a guy $15.00/hour to sweep the floor and unpack boxes, what am I going to pay the somewhat skilled people? $20/hour? $30/hour? Or, I could do what some of my competition did, and just pay some of them under the table, at less than minimum wage but without taking taxes out.

Yes, some will say I could take less money or the owner could take less money, we could all make $15.00/hour but then why the hell would anyone risk their own money and work their *** off build a business, or work their way up to a top management level of a business, with all the responsibility and stresses that go with it, if they don't get to make any more money than someone who just has to show up and sweep the floor? It's not like either of us were getting rich, that's for damn sure.

 

[Ron Burgundy]

I am not an Economist, but I would be willing to bet that the business owners will not be able/willing to just reduce their profits. The money has to come from somewhere, normally a price increase.

I would love to pay my employees $500 a week but my customers (who are hypocrites in my highly Democratic area) will not pay what I would have to charge in order to do that since I am a legit business in a line of work where many people work under-the-table.

"Liberalism always generates the exact opposite of its stated intent." -- Quinn's First Law

 

[Scott T]

As a matter of fact I do have a degree in economics, an MBA, and a partial writing credit for a college economics textbook. My education and experience tell me that you're being racist.


I own my own little business and my income has been cut by 50% since 2007. I only make money for the government and insurance companies these days.
A lot of the unseen taxes that employers pay are based on a percentage of their payroll. Workers comp, liability, state unemployment, Federal unemployment, and the employer's half of FICA all go up too if payroll goes up. I just sent the Feds $1800 this morning for last month's Federal taxes. My bank account has $1100 in it. We'll be okay by Wednesday when it clears.
My workers' comp and liability insurance is almost $2000 a month, that money has to come from someplace, and a lot of people think I charge too much and that I'm rich because I own a business.

I don't work for a small business but a major company that is making record profits this past year, talking close to a billion in profit per quarter or better. Company execs making record bonuses but us peons can't get a raise and promotions have come to a stand still, you know the American Dream.

 

[Steeltime]

Any real economics guys want to help me out?

I have a B.A. in Economics, plus 9 units in graduate courses on economics. I took 2 semesters of calculus and 1 semester of statistics as part of my study of economics. So I agree with Ron ... you're a racist.

I don't believe that an increase in minimum wage would have an appreciable effect on inflation, which seems to underlie your question. Specifically, you propose that the increased minimum wage would likely yield an increase in the cost of products and services, i.e., inflation.

But inflation is not triggered by increasing wealth or increasing wages, as was proven during the Reagan years. Inflation is nothing more - NOTHING - than the relative value of the good known as money. If the government prints money beyond market need - as the Fed did 1975-1978 - then the supply of money increases beyond demand, the product becomes too prevalent to support the then-existing price, and its value declines.

The supply of M1 (cash and easily-converted assets) increased by 8.7% in 1975, 9.2% in 1976, 9.9% in 1977, 9.9% in 1978, and 9.1% in 1979, despite a lagging economy and a lack of need for such increased money supply.

http://en.wikipedia.org/wiki/File:Changes_in_US_money_supply_1960-2007.gif

Inflation ended when Carter installed Paul Volcker as chairman of the Federal Reserve in 1979, and Reagan re-appointed him in 1983. Volcker followed the precept proffered by Milton Friedman more than a decade earlier, that inflation was nothing more than a decline in the value of one, JUST ONE, product - money - caused by a surplus of money put into the private sector by the Fed. Volcker reduced the M1 increase to 6.2% in 1981 and 8.1% in 1982.

The reduction of M1 yielded exactly what Friedman and Volcker had projected - a decline in inflation. The same is true for all products - an increase in the supply of the product unaccompanied by a corresponding increase in demand will result in a lower relative value for the product, in this case, money. (Money is simply another product.)

So, no, increasing minimum wage will not result in inflation. However, Bammy's recommended fiscal policies - "easing" the money supply to try and keep interest rates down, to help pay the massive Federal debt - is very likely to trigger inflation. As others have noted previously, we are currently in an inflationary cycle, but the Fed is adjusting the calculation, changing how the CPI is determined, revising its methodology, etc. to keep the CPI as low as possible. The Fed does so because a large number of obligations it has for payment, including social security and retirement pay, are tied to the CPI.

Forbes had an article about the true inflation rate, based upon money supply (M2 reviewed in the article). The author noted:

M2 measures the supply of US dollars, which includes cash, checking deposits, saving deposits, and money market mutual funds. The more money that’s created and put into circulation, the less valuable it becomes. And the Fed has created a lot of money recently. The Fed’s unprecedented bond buying program, Quantitative Easing, created $116 million an hour for the entire year last year. It doesn’t make sense that the BLS’s measurement of inflation was only 1.5% last year, while at the same time, monetary inflation grew 4.9%.

http://www.forbes.com/sites/periann...l-rate-of-inflation-dont-bother-with-the-cpi/

So Bammy's administration has seen a massive influx of money to ease interest rates, while changing how CPI is calculated to lower that measure. A "neat trick" to "hide the decline," it would seem.

I trust that this answers your question. If not, it's because you're a racist.

 

[Hineswardkickedurpanzyass]

I don't understand why they settled on $15/hour. I mean those ******* on Wall St are making hundreds or even thousands EVERY HOUR. And pro atheletes? When they are not knocking their wife out on Candid Camera they are making millions for PLAYING A GAME.

I vote for a $50/hour minimum wage, lets make it fair.

 

[Ron Burgundy]

I don't believe that an increase in minimum wage would have an appreciable effect on inflation, which seems to underlie your question. Specifically, you propose that the increased minimum wage would likely yield an increase in the cost of products and services, i.e., inflation.

Actually there is more than one type of inflation. Yours is correct but there is also demand-pull and cost-push inflation. A greatly increased minimum wage would affect both of those. Demand-pull because more people would have more money in their hands and cost-push because many businesses would have to raise their prices in order to pay the higher mandated wages. The end result over time would be that the purchasing power of everyone making min wage would be the same except that there would be less people working in total as businesses cut back the number of workers because they have to pay the existing number of workers more.

When times are good, as they were under Reagan and Slick Willie, min wage isn't even in the discussion because the demand for workers is strong enough that you have to pay better than that to find any workers even if it's just flipping burgers.

 

[Steeltime]

Actually there is more than one type of inflation. Yours is correct but there is also demand-pull and cost-push inflation. A greatly increased minimum wage would affect both of those. Demand-pull because more people would have more money in their hands and cost-push because many businesses would have to raise their prices in order to pay the higher mandated wages. The end result over time would be that the purchasing power of everyone making min wage would be the same except that there would be less people working in total as businesses cut back the number of workers because they have to pay the existing number of workers more.

The old economic models proposed demand-pull and cost-push, and I studied those in the early 1980's.

But Friedman was right; inflation is simply a reflection of the relative value of money, and nothing else. That is why during the recession of 1977-1978, despite increasing unemployment, lower employment participation, and lower demand for most consumer products, inflation was rampant. Increasing oil prices were proffered as a possible explanation, via cost-push, but that cost could not possibly explain the 13% inflation rate that the country experienced in the middle of a recession.

Meanwhile, during the Reagan recovery, employment, income, wages, working population, capital, etc. all skyrocketed - and yet inflation plummeted to below 4%. Why? Fed policy.

Friedman put it this way: "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output." His theory on the cause and cure of inflation has been proven accurate.

 

[Steeltime]

The Friedman quotation is from his work, "The Counter-Revolution in Monetary Theory," Institute of Economic Affairs, Institute of Economic Affairs, London (1970). The full article is found here:

http://0055d26.netsolhost.com/friedman/pdfs/other_academia/IEA.1970.pdf

I read this in college, and became a Friedman fan. He posited this turn of events in his article:

11. One important feature of this mechanism is that a change in monetary growth affects interest rates in one direction at first but in the opposite direction later on. More rapid monetary growth at first tends to lower interest rates. But later on, as it raises spending and stimulates price inflation, it also produces a rise in the demand for loans which will tend to raise interest rates. In addition, rising prices introduce a discrepancy between real and nominal interest rates. That is why world-wide interest rates are highest in the countries that have had the most rapid rise in the quantity of money and also in prices—countries like Brazil, Chile or Korea. In the opposite direction, a slower rate of monetary growth at first raises interest rates but later on, as it reduces spending and price inflation, lowers interest rates. That is why world-wide interest rates are lowest in countries that have had the slowest rate of growth in the quantity of money—countries like Switzerland and Germany.

He foresaw the runaway inflation and 22% interest rates that would plague our country between 1977-1981.

He would never make it as a global warming scientist; his prophesies were accurate

 

[EdReed4Prez]

I'm not saying it will cause inflation, as I understand it printing money we don't have is the culprit there. I'm saying basically what ark said. Right now a fresh faced grad out of college might be happy with 30k and benefits to start. If that becomes min wage it will kick everyone else's pay scale up. So prices for all things will go up. Minimum wage folks will still be bottom rung and struggle to make ends meet.

 

[oneforthebus]

I don't work for a small business but a major company that is making record profits this past year, talking close to a billion in profit per quarter or better. Company execs making record bonuses but us peons can't get a raise and promotions have come to a stand still, you know the American Dream.

They are able to do that because there's no competition for workers. Competition for workers comes from a robust, expanding economy. Imposing ever more regulations and costs on investing, expanding and hiring creates the opposite.

 

[Ron Burgundy]

The Friedman quotation is from his work, "The Counter-Revolution in Monetary Theory," Institute of Economic Affairs, Institute of Economic Affairs, London (1970). The full article is found here:

http://0055d26.netsolhost.com/friedman/pdfs/other_academia/IEA.1970.pdf

I read this in college, and became a Friedman fan. He posited this turn of events in his article:

11. One important feature of this mechanism is that a change in monetary growth affects interest rates in one direction at first but in the opposite direction later on. More rapid monetary growth at first tends to lower interest rates. But later on, as it raises spending and stimulates price inflation, it also produces a rise in the demand for loans which will tend to raise interest rates. In addition, rising prices introduce a discrepancy between real and nominal interest rates. That is why world-wide interest rates are highest in the countries that have had the most rapid rise in the quantity of money and also in prices—countries like Brazil, Chile or Korea. In the opposite direction, a slower rate of monetary growth at first raises interest rates but later on, as it reduces spending and price inflation, lowers interest rates. That is why world-wide interest rates are lowest in countries that have had the slowest rate of growth in the quantity of money—countries like Switzerland and Germany.

He foresaw the runaway inflation and 22% interest rates that would plague our country between 1977-1981.

He would never make it as a global warming scientist; his prophesies were accurate

PoloElfie and 21's heads just exploded.

 

[Steeltime]

PoloElfie and 21's heads just exploded.

We can but hope ...

 

[Steeltime]

I don't work for a small business but a major company that is making record profits this past year, talking close to a billion in profit per quarter or better. Company execs making record bonuses but us peons can't get a raise and promotions have come to a stand still, you know the American Dream.

I hear 'ya, Scott, 100%.

The economic boom in the 1980's was based on the beginning and expansion of small businesses. Generally, the greatest source for new jobs is not GM, or IBM, but instead small business.

I was working for a large law firm but did not have a substantial number of clients whom I brought to the firm. I was told, basically, you will be at your maximum earning level in another year or two.

Okay, thanks. I left and went to a small law firm that paid me for results, and then moved to my current employment. I am now am one of 3 lawyers who started our own law firm. I win, I get paid; I lose, I get nothing but bills.

I have never earned more money. Do the same - @#%& the business that will not pay you what you are worth. Bet on yourself and go to work for a small business, or start your own business. Believe me, there have been times where I wish I was getting paid a steady salary, but find a way to work through the lean times. It's worth it.

 

[south dakota STEEL]

I don't get raising it.

No competition for most of the minimum wage jobs out there. Due to the fact that our country takes care of so many people that they don't need to work.

Problem coming is we will have to give even more handouts as prices will go up do to the wage being increased.

oh well.....live on