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Another way of looking at increasing the minimum wage

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CriticalThought

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I work at a nonprofit that is currently understaffed due to not being able to pay a decent wage. The people we hire have to be able to pass a Level 2 background check, drug test, have at least 2 years of experience working with kids, and a high school diploma or GED. The job can be very aggravating and has tough hours since we run around the clock, and for all this we pay $8 an hour with no benefits.

I generally oppose the idea of increasing the minimum wage because I worry that it would worsen our staffing situation. Our nonprofit does not have the additional funds to pay and so we would likely have to reduce our already understaffed organization to pay employees even though I believe it would be much better for them.

I also generally oppose it because I believe in purely economical terms that increasing the wage simply increases prices which has no general effect on the economy but to increase inflation.

However, somebody recently made an argument I had not considered before. He explained that when you increase the amount of money that the middle class and upper class have, they generally save or invest it, which while really good for the financial sector does not tend to have a major impact on the overall economy (also known as the disconnect between Wall Street and Main Street). However, the lower socioeconomic class, he argued, generally spends additional money when they receive it and generally on consumer products. Increasing the minimum wage for 16.5 million Americans may in the short run be detrimental to additional job growth, but it could fundamentally serve as an economic stimulus as poorer people have more money to spend and a willingness to spend it. He argued this can actually reduce prices because overall spending significantly increases.

I had not considered this argument before and it is making me rethink the probabilities of raising the minimum wage. It seems like there is a potential, fiscally responsible argument for it beyond the moral decrying of trying to reduce income inequality. In the long run, if it did lead to a true economic stimulus, it could actually spawn job growth.
 
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CriticalThought said:
I work at a nonprofit that is currently understaffed due to not being able to pay a decent wage. The people we hire have to be able to pass a Level 2 background check, drug test, have at least 2 years of experience working with kids, and a high school diploma or GED. The job can be very aggravating and has tough hours since we run around the clock, and for all this we pay $8 an hour with no benefits.

I generally oppose the idea of increasing the minimum wage because I worry that it would worsen our staffing situation. Our nonprofit does not have the additional funds to pay and so we would likely have to reduce our already understaffed organization to pay employees even though I believe it would be much better for them.

I also generally oppose it because I believe in purely economical terms that increasing the wage simply increases prices which has no general effect on the economy but to increase inflation.

However, somebody recently made an argument I had not considered before. He explained that when you increase the amount of money that the middle class and upper class have, they generally save or invest it, which while really good for the financial sector does not tend to have a major impact on the overall economy (also known as the disconnect between Wall Street and Main Street). However, the lower socioeconomic class, he argued, generally spends additional money when they receive it and generally on consumer products. Increasing the minimum wage for 16.5 million Americans may in the short run be detrimental to additional job growth, but it could fundamentally serve as an economic stimulus as poorer people have more money to spend and a willingness to spend it. He argued this can actually reduce prices because overall spending significantly increases.

I had not considered this argument before and it is making me rethink the probabilities of raising the minimum wage. It seems like there is a potential, fiscally responsible argument for it beyond the moral decrying of trying to reduce income inequality. In the long run, if it did lead to a true economic stimulus, it could actually spawn job growth.
Click to expand...

I just expressed that same thought in another thread running around here...that people who make minimum wage aren't saving that raise, they're spending it. As you point out, it's a great stimulus to the economy.
 
MaggieD said:
I just expressed that same thought in another thread running around here...that people who make minimum wage aren't saving that raise, they're spending it. As you point out, it's a great stimulus to the economy.
Click to expand...

In a tight economy how do you think a raising of the minimum wage is going to be paid for? A small business thats doing ok treading water, is gona have to make a hard choice who do they cut? can they raise their prices and still keep their business? By the way you think just because the minimum wage that's the only cost that goes up as a result? Start with workers comp, the premiums are based on wages. What about the wages of those near minimum wage before it went up? They now minimum wage workers? Or can their company afford to give them a raise? All increasing the minimum wage does is increase the pace of inflation and make a few more people unemployed.
 
CriticalThought said:
I work at a nonprofit that is currently understaffed due to not being able to pay a decent wage. The people we hire have to be able to pass a Level 2 background check, drug test, have at least 2 years of experience working with kids, and a high school diploma or GED. The job can be very aggravating and has tough hours since we run around the clock, and for all this we pay $8 an hour with no benefits.

I generally oppose the idea of increasing the minimum wage because I worry that it would worsen our staffing situation. Our nonprofit does not have the additional funds to pay and so we would likely have to reduce our already understaffed organization to pay employees even though I believe it would be much better for them.

I also generally oppose it because I believe in purely economical terms that increasing the wage simply increases prices which has no general effect on the economy but to increase inflation.

However, somebody recently made an argument I had not considered before. He explained that when you increase the amount of money that the middle class and upper class have, they generally save or invest it, which while really good for the financial sector does not tend to have a major impact on the overall economy (also known as the disconnect between Wall Street and Main Street). However, the lower socioeconomic class, he argued, generally spends additional money when they receive it and generally on consumer products. Increasing the minimum wage for 16.5 million Americans may in the short run be detrimental to additional job growth, but it could fundamentally serve as an economic stimulus as poorer people have more money to spend and a willingness to spend it. He argued this can actually reduce prices because overall spending significantly increases.

I had not considered this argument before and it is making me rethink the probabilities of raising the minimum wage. It seems like there is a potential, fiscally responsible argument for it beyond the moral decrying of trying to reduce income inequality. In the long run, if it did lead to a true economic stimulus, it could actually spawn job growth.
Click to expand...



I believe that version of "trickle down" was first proposed by Marx, Karl not the smart one, Groucho around 1900.

The only problem is that what they spend is not a large part of the GDP, and they are spending it on more costly items.

You defeated your argument with the opening statement...raise the minimum wage and that and every other non profit will be able to afford fewer employees, now, not when the money the minimum wages earners' spending filters back around into donations....and that busts that more spending thing all to hell.

I am so tired of this argument. It has been going on in Canada since the formation of what was Canada's communist party in the 1910's, the Co-operative Commonwealth Federation, now the New Democratic Party has been touting this crap for a hundred years, it keeps getting exposed as bull**** and another few years goes by and some other idiot is touting it.

Look, in this economy, no one makes minimum wage. It is $8.85 but if you want someone who is capable of more than three hours work you will pay $10 to start someone mowing lawns, and move them to $15 with a bonus structure quickly if you want to keep them. Semi-skilled starts at $18 to $20.

When the economy is performing well, which is never under socialism, it does not need a minimum, competition that great thing socialists always like to ignore abolut a free economy, drives the price up.

If you have people who are not students, not starting workers, new to the trade etc. who are dependent on minimum wage, your economy is ficked and no tinkering with what you force business to do is going to change that.

Obama is spewing this stuff now, because he's failed at everything else, and it plays in Poughkeepsie
 
Fearandloathing said:
I believe that version of "trickle down" was first proposed by Marx, Karl not the smart one, Groucho around 1900.

The only problem is that what they spend is not a large part of the GDP, and they are spending it on more costly items.

You defeated your argument with the opening statement...raise the minimum wage and that and every other non profit will be able to afford fewer employees, now, not when the money the minimum wages earners' spending filters back around into donations....and that busts that more spending thing all to hell.

I am so tired of this argument. It has been going on in Canada since the formation of what was Canada's communist party in the 1910's, the Co-operative Commonwealth Federation, now the New Democratic Party has been touting this crap for a hundred years, it keeps getting exposed as bull**** and another few years goes by and some other idiot is touting it.

Look, in this economy, no one makes minimum wage. It is $8.85 but if you want someone who is capable of more than three hours work you will pay $10 to start someone mowing lawns, and move them to $15 with a bonus structure quickly if you want to keep them. Semi-skilled starts at $18 to $20.

When the economy is performing well, which is never under socialism, it does not need a minimum, competition that great thing socialists always like to ignore abolut a free economy, drives the price up.

If you have people who are not students, not starting workers, new to the trade etc. who are dependent on minimum wage, your economy is ficked and no tinkering with what you force business to do is going to change that.

Obama is spewing this stuff now, because he's failed at everything else, and it plays in Poughkeepsie
Click to expand...

That is a tough sell. Fiscal conservatives have been arguing for decades that allowing Americans to keep more of their own money would stimulate the economy and that has been the basis of every tax cut and stimulus package to date. By the same logic, boosting the income of the lowest branch of the socioeconomic ladder should also do the same. That has very little to do with redistribution of wealth and everything to do with economic stimulus. I also can't buy your argument that it is "not enough". We are talking about a huge section of our society. 16.5 million Americans! It is probably different in Canada, but we have a much larger portion of our society that is underpaid. It is a common fallacy to try to apply the economic circumstances of one particular place to every time and place. It simply is not a valid argument.

If we were to cut anyone at our agency, it would only be part time workers, and we would have a much better chance of keeping the best workers that we do have if we could pay them a livable wage.
 
PirateMk1 said:
In a tight economy how do you think a raising of the minimum wage is going to be paid for? A small business thats doing ok treading water, is gona have to make a hard choice who do they cut? can they raise their prices and still keep their business? By the way you think just because the minimum wage that's the only cost that goes up as a result? Start with workers comp, the premiums are based on wages. What about the wages of those near minimum wage before it went up? They now minimum wage workers? Or can their company afford to give them a raise? All increasing the minimum wage does is increase the pace of inflation and make a few more people unemployed.
Click to expand...

I'm sorry, but I'm sick to death of that argument. $7.25 an hour is slave wages, in my opinion. If a company can't afford to pay its employees more than $7.25 an hour? They should go out of business and let someone with brains fill the void they create. If their service is needed, another company will start up and, possibly, the cost will rise. That's the way it works. As to creating inflation, too bad. People deserve to be paid a floor amount that will put a roof over their heads, food on their tables and gas in their cars.

Do you want a raise at work? Well, you can't have on. You're causing inflation!!
 
PirateMk1 said:
In a tight economy how do you think a raising of the minimum wage is going to be paid for? A small business thats doing ok treading water, is gona have to make a hard choice who do they cut? can they raise their prices and still keep their business? By the way you think just because the minimum wage that's the only cost that goes up as a result? Start with workers comp, the premiums are based on wages. What about the wages of those near minimum wage before it went up? They now minimum wage workers? Or can their company afford to give them a raise? All increasing the minimum wage does is increase the pace of inflation and make a few more people unemployed.
Click to expand...

That is typically the argument I make, but the idea of an economic stimulus from a minimum wage increase is entertaining. Care to address it?
 
CriticalThought said:
I work at a nonprofit that is currently understaffed due to not being able to pay a decent wage. The people we hire have to be able to pass a Level 2 background check, drug test, have at least 2 years of experience working with kids, and a high school diploma or GED. The job can be very aggravating and has tough hours since we run around the clock, and for all this we pay $8 an hour with no benefits.

I generally oppose the idea of increasing the minimum wage because I worry that it would worsen our staffing situation. Our nonprofit does not have the additional funds to pay and so we would likely have to reduce our already understaffed organization to pay employees even though I believe it would be much better for them.

I also generally oppose it because I believe in purely economical terms that increasing the wage simply increases prices which has no general effect on the economy but to increase inflation.

However, somebody recently made an argument I had not considered before. He explained that when you increase the amount of money that the middle class and upper class have, they generally save or invest it, which while really good for the financial sector does not tend to have a major impact on the overall economy (also known as the disconnect between Wall Street and Main Street). However, the lower socioeconomic class, he argued, generally spends additional money when they receive it and generally on consumer products. Increasing the minimum wage for 16.5 million Americans may in the short run be detrimental to additional job growth, but it could fundamentally serve as an economic stimulus as poorer people have more money to spend and a willingness to spend it. He argued this can actually reduce prices because overall spending significantly increases.

I had not considered this argument before and it is making me rethink the probabilities of raising the minimum wage. It seems like there is a potential, fiscally responsible argument for it beyond the moral decrying of trying to reduce income inequality. In the long run, if it did lead to a true economic stimulus, it could actually spawn job growth.
Click to expand...

This argument makes no sense. You are assuming that the money used to pay wages just grows on trees. No, it comes from somewhere. The money paid when the minimum wage raises would be spent anyway. It would be spent on growing the company, bringing in more employees, or even giving the good employees and a raise and a promotion. The "fiscal conservative" argument for a minimum wage hike would only make sense to an economically illiterate Keynesian economist.
 
TeleKat said:
This argument makes no sense. You are assuming that the money used to pay wages just grows on trees. No, it comes from somewhere. The money paid when the minimum wage raises would be spent anyway. It would be spent on growing the company, bringing in more employees, or even giving the good employees and a raise and a promotion. The "fiscal conservative" argument for a minimum wage hike would only make sense to an economically illiterate Keynesian economist.
Click to expand...

I made no such assumptions as you should be able to clearly see from my own personal example.

I simply sit in a position where I see that the money would be better suited paying better wages. What compels agencies like my own from paying better wages are what other agencies are paying their workers. Increasing the minimum wage eliminates that issue.
 
MaggieD said:
I just expressed that same thought in another thread running around here...that people who make minimum wage aren't saving that raise, they're spending it. As you point out, it's a great stimulus to the economy.
Click to expand...

the way they are printing money why dont they just hand it out like candy?
 
Looking more into the question of whether minimum wage increases can lead to economic stimulus, I see some people have studied the issue.

http://www.chicagofed.org/digital_assets/publications/working_papers/2007/wp2007_23.pdf

Study that finds that minimum wage increases raise incomes and increase consumer spending, especially triggering car purchases. The authors examine 23 years of household spending data and find that for every dollar increase for a minimum wage worker results in $2,800 in new consumer spending by his or her household over the following year.

http://www.epi.org/files/page/-/IssueBrief255_Final.pdf

Economic Policy Institute estimates that Obama’s campaign pledge to raise the minimum wage to $9.50 by 2011 would inject $60 billion in additional spending into the economy.

In fact, the minimum wage was initially enacted as an economic stimulus.
 
CriticalThought said:
I work at a nonprofit that is currently understaffed due to not being able to pay a decent wage. The people we hire have to be able to pass a Level 2 background check, drug test, have at least 2 years of experience working with kids, and a high school diploma or GED. The job can be very aggravating and has tough hours since we run around the clock, and for all this we pay $8 an hour with no benefits.

I generally oppose the idea of increasing the minimum wage because I worry that it would worsen our staffing situation. Our nonprofit does not have the additional funds to pay and so we would likely have to reduce our already understaffed organization to pay employees even though I believe it would be much better for them.

I also generally oppose it because I believe in purely economical terms that increasing the wage simply increases prices which has no general effect on the economy but to increase inflation.

However, somebody recently made an argument I had not considered before. He explained that when you increase the amount of money that the middle class and upper class have, they generally save or invest it, which while really good for the financial sector does not tend to have a major impact on the overall economy (also known as the disconnect between Wall Street and Main Street). However, the lower socioeconomic class, he argued, generally spends additional money when they receive it and generally on consumer products. Increasing the minimum wage for 16.5 million Americans may in the short run be detrimental to additional job growth, but it could fundamentally serve as an economic stimulus as poorer people have more money to spend and a willingness to spend it. He argued this can actually reduce prices because overall spending significantly increases.

I had not considered this argument before and it is making me rethink the probabilities of raising the minimum wage. It seems like there is a potential, fiscally responsible argument for it beyond the moral decrying of trying to reduce income inequality. In the long run, if it did lead to a true economic stimulus, it could actually spawn job growth.
Click to expand...

Congrats for being open minded about such.

Actual economic history does not support the notion that increasing minimum wage has any significant inflationary results or that it decreases the number of jobs. While that seems to be very contrary to typical tea party populist ideas, it's reality.

People who believe that it is inflationary or causes unemployment do so because they don't understand the true nature of inflation or unemployment. While they are correct that there is such a thing as wage driven inflationary pressure, they are oblivious to the other factors which tend to offset in part or in full such pressure. Like when people consume more, businesses produce more, more people are hired, more wealth is produced, and each additional unit of production actually costs less due to economy of scale.

Also, I suspect that people in my age bracket, like over the age of 40, were likely emotionally scarred by the high inflation of the early 1980's when we were children and young adults. Of course that inflation wasn't caused by increasing the minimum wage, it was caused by increase energy cost due to an artifical shortage of oil created by OPEC.

The typical textbook explanation for inflation is "too much money chasing after too few goods". Most people stop thinking after they hear "too much money". The reality is that the real issue is "too few goods". As long as we can produce more goods, then inflation is unlikely and even when it does occur, it's insignificant and actually a slight stimulous to our economy.

Textbooks wold be much more accurate if they started explaining inflation as "a shortage of goods available for the amount of demand exhibited". thats the real driver of inflation. During the late 70's and early '80's, virtually all of our inflation was driven by an oil shortage. At one point, oil prices quadrupled in just a few months, and that created cost push inflation throughout our economy. The good news was that incomes more or less kept up with inflation, thus inflation was primarally an inconvienience, much more so than an economic disaster.
 
CriticalThought said:
I made no such assumptions as you should be able to clearly see from my own personal example.

I simply sit in a position where I see that the money would be better suited paying better wages. What compels agencies like my own from paying better wages are what other agencies are paying their workers. Increasing the minimum wage eliminates that issue.
Click to expand...

The money would be better suited paying for whatever is deemed necessary by those that own the money. Central planners cannot account for every single little detail in every single company. There will be casualties. People fired, hours cut, businesses bankrupt. Central planning always has unintended and undesirable consequences, and the minimum wage is no different. Let companies account for their own money, and let employees work for their wage increases.
 
PirateMk1 said:
In a tight economy how do you think a raising of the minimum wage is going to be paid for? ...
Click to expand...

It gets paid for lots of ways. Increased demand increases business sales and thus increases business profitability, allowing employers to be able to pay more in wages. Employers who are in incredibly tight and competitive markets would be forced by price competition to eat part of the wage increase by accepting slightly lower profits. It's entirely possible that a few of the weaker employers would fail, but their stronger more efficient competition would quickly fill their void, thus there would be little if any net loss of jobs in those industries. And of course there is economy of scale, with each additional unit of production that a company produces, the fixed expenses are spread out more and more, making each additional unit slightly less expensive to produce, thus economy of scale also serves to offset wage driven inflation.

A small amount of that inflation may be passed onto the consumer, after all, those are under valued industries with under valued prices. Studies indicate that a 10% increase in the minimum wage would add at most 4% to the price of goods that those industries sell, and at most 0.2% overall to the inflation rate. Note that these are ONE TIME inflationary events, not annual inflationary events. However, there are also offseting factors to that...

... fed has a target goal of 2-3% inflation, thus if we had a tad of wage driven inflation, the fed would have no option that to back off of it's inflationary policies in order to keep the overall inflation rate within it's target.

Regardless of all the theory in the world, actual historic economic facts indicate that increases in the minimum wage neither increase inflation or decrease the number of jobs. I'll go with the actual history and let radical loonies keep their cherry picked economic rhetoric.
 
MaggieD said:
I'm sorry, but I'm sick to death of that argument. $7.25 an hour is slave wages, in my opinion. If a company can't afford to pay its employees more than $7.25 an hour? They should go out of business and let someone with brains fill the void they create. If their service is needed, another company will start up and, possibly, the cost will rise. That's the way it works. As to creating inflation, too bad. People deserve to be paid a floor amount that will put a roof over their heads, food on their tables and gas in their cars.

Do you want a raise at work? Well, you can't have on. You're causing inflation!!
Click to expand...
I think you are confused as to what a wage represents. I have a 15 year old daughter about to enter the workforce. At 15 she obviously lacks a high school education, she has no references, no work history and no real job experience of any kind. Just what monetary value is such a person to the company you work at or virtually any company for that matter? Answer--not much. Virtually everyone working for minimum wage is working in an entry level job. Raise the minimum wage too high and where do people like my daughter go get work experience? If the minimum wage is $10 why would an employer hire some inexperienced kid when he can get someone with at least some work experience. kids that cant get jobs anywhere. I don't see how that benefits anyone. Minimum wage jobs don't exist so that people can live and raise families off of that income, they exist as the first rung of the employment ladder. Cut off that rung and where do kids go to get work experience?
 
TeleKat said:
...You are assuming that the money used to pay wages just grows on trees. No, it comes from somewhere.
Click to expand...

Money used to pay wages comes from customers. When customers have money (like they have jobs that pay decent wages), they purchase more goods and services, the employer then takes that money and pays his employees. Thats not really to hard to understand is it?

The money paid when the minimum wage raises would be spent anyway. It would be spent on growing the company, bringing in more employees, or even giving the good employees and a raise and a promotion.
Click to expand...

That would be a good argument, except for the fact that if demand doesn't increase, companies don't have a need to produce more goods and services, thus they don't expand and dont hire more employees and don't have any money to give performance raises.

The "fiscal conservative" argument for a minimum wage hike would only make sense to an economically illiterate Keynesian economist.
Click to expand...

I have read all three of Keynes books, and he never made an argument for or against wage hikes. You don't have a clue what you are talking about. Where did you get your economics degree from? Some of us actually have one you know.
 
CriticalThought said:
I work at a nonprofit that is currently understaffed due to not being able to pay a decent wage. The people we hire have to be able to pass a Level 2 background check, drug test, have at least 2 years of experience working with kids, and a high school diploma or GED. The job can be very aggravating and has tough hours since we run around the clock, and for all this we pay $8 an hour with no benefits.

I generally oppose the idea of increasing the minimum wage because I worry that it would worsen our staffing situation. Our nonprofit does not have the additional funds to pay and so we would likely have to reduce our already understaffed organization to pay employees even though I believe it would be much better for them.

I also generally oppose it because I believe in purely economical terms that increasing the wage simply increases prices which has no general effect on the economy but to increase inflation.

However, somebody recently made an argument I had not considered before. He explained that when you increase the amount of money that the middle class and upper class have, they generally save or invest it, which while really good for the financial sector does not tend to have a major impact on the overall economy (also known as the disconnect between Wall Street and Main Street). However, the lower socioeconomic class, he argued, generally spends additional money when they receive it and generally on consumer products. Increasing the minimum wage for 16.5 million Americans may in the short run be detrimental to additional job growth, but it could fundamentally serve as an economic stimulus as poorer people have more money to spend and a willingness to spend it. He argued this can actually reduce prices because overall spending significantly increases.

I had not considered this argument before and it is making me rethink the probabilities of raising the minimum wage. It seems like there is a potential, fiscally responsible argument for it beyond the moral decrying of trying to reduce income inequality. In the long run, if it did lead to a true economic stimulus, it could actually spawn job growth.
Click to expand...

Yeah, I've seen this argument before. It comes with a host of flaws, but a quick example will suffice:

John runs a business, John's Widgets. In our mythical example, John employs low income workers, and only low income workers will purchase his product, so the maximum possible gains will accrue to John and John's Widgets under the theory above.

To keep this easy, minimum wage is currently $10, and John has 10 employees, each putting in a 40 hour work week for a weekly payroll of $4,000. Minimum wage is then increased to $20 an hour, meaning that payroll is increased to $8,000, and all of the employees are going to spend all of the increase on widgets, meaning that the maximum possible benefit is going to accrue right back to John. Yay!

Well now, of course, payroll hike doesn't actually cost $4K. After all, John had to pay payroll tax on that - that's 7.65%. So John is really out $4,306. Now where did that come from? Well, it came from profits, because after all, John is running a business, and his profits are all he has to reinvest in the store. And the employees have to pay payroll taxes as well as regular income taxes, so all those profits aren't actually going to be distributed to them (ole Uncle Sam wants his cut, after all). But let's say they don't pay any income taxes, just their payroll - so they only get $3,694. But for the low-low cost of $4,306, John is going to get an additional $3,694 of business! Yay!

Well.... sorta. You see, widgets come with all kinds of costs built in. Not just labor, but materials, energy, shipping, regulatory compliance, the whole kit and kaboodle. That's why the average profit margin for retail is about 4.4%, while Tech is about 13.5. But let's saw Johns' Widgets don't fall under retail, they fall under Tech. So out of that $3,694, John is going to actually see a return in the form of new profits of $498.69.


In other words. In the best possible scenario, you forced John to take $4,306 in profits, and turn it into $499 in profits.


Anyone who thinks this is good for business is free to work with me. I will happily send you a money order for $499 as soon as your check for $4,306 clears my bank account. I am willing to sign any kind of legally binding contract to make this trade, and furthermore, am willing to make it as many times as you like. So come on up! After all, you're gonna get rich, right? :D




And that's the problem with consumption-side "stimulus". In order to work, it requires that the money not come from anywhere.
 
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imagep said:
I have read all three of Keynes books, and he never made an argument for or against wage hikes. You don't have a clue what you are talking about. Where did you get your economics degree from? Some of us actually have one you know.
Click to expand...

If anything, from what I understand, his solution to Sticky Wages was inflation, which technically is a real pay cut.
 
Fletch said:
I think you are confused as to what a wage represents. I have a 15 year old daughter about to enter the workforce. At 15 she obviously lacks a high school education, she has no references, no work history and no real job experience of any kind. Just what monetary value is such a person to the company you work at or virtually any company for that matter? Answer--not much. Virtually everyone working for minimum wage is working in an entry level job. Raise the minimum wage too high and where do people like my daughter go get work experience? If the minimum wage is $10 why would an employer hire some inexperienced kid when he can get someone with at least some work experience. kids that cant get jobs anywhere. I don't see how that benefits anyone. Minimum wage jobs don't exist so that people can live and raise families off of that income, they exist as the first rung of the employment ladder. Cut off that rung and where do kids go to get work experience?
Click to expand...

Employers hire as many employees as they need to fulfill demand, regardless of what wage they have to pay. If the wage exceeds the value of their products, then obviously they will go out of business, or more likely they never had any employees to begin with.

The simple fact is that actual historic data proves that moderate increases in minimum wage have never lead to increases in the unemployment rate or inflation.

By the way, you should probably encourage your daughter to spend more time studying or engaging in school related extracurricular activities, that would serve her much better later in life than a part time minimum wage job in high school. She probably has nearly a decade before she will be mature enough to have a professional type job, so why rush her into a low wage job? Does your family really need an extra $60 a week in income that bad?
 
CriticalThought said:
Looking more into the question of whether minimum wage increases can lead to economic stimulus, I see some people have studied the issue.

http://www.chicagofed.org/digital_assets/publications/working_papers/2007/wp2007_23.pdf

Study that finds that minimum wage increases raise incomes and increase consumer spending, especially triggering car purchases. The authors examine 23 years of household spending data and find that for every dollar increase for a minimum wage worker results in $2,800 in new consumer spending by his or her household over the following year.

http://www.epi.org/files/page/-/IssueBrief255_Final.pdf

Economic Policy Institute estimates that Obama’s campaign pledge to raise the minimum wage to $9.50 by 2011 would inject $60 billion in additional spending into the economy.

In fact, the minimum wage was initially enacted as an economic stimulus.
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That is incorrect. The minimum wage was initially created as a way to starve out society's "undesirables" by making them structurally unemployable.

As I've had to point out on multiple occasions.

cpwill said:
I sure would. That would make everyone whose' labor isn't worth $15 + the cost of per employee regulation + the cost of mandated per employee benefits + the cost of taxes unemployable. But that demographic is going to mostly just be our poor, our least educated, and our least experienced - our most vulnerable.

Mind you, the minimum wage was originally put into place for precisely this purpose - we introduced it in order to defend Decent White Folks who were trying to raise Decent White Families in Decent White Conditions... but who were being undercut by "Negros and mongrelized asian hordes." Sidney Webb (British Socialist) argued that "[o]f all ways of dealing with these unfortunate parasites, the most ruinous to the community is to allow them unrestrainedly to compete as wage earners". Edward Alsworth Ross (American Progressive) pointed out that since inferior races were content to live closer to a filthy state of nature than the Nordic man, they did not requier a civilized wage. "The Coolie cannot outdo the American, but he can underlive him" was the problem, and the answer was to enact a civilized minimum wage that would put said savages out of wage competition. The authors of the Davis-Bacon Act were quite open about the fact that the intent was to keep cheap black laborers from "taking" jobs from whites.

now, the language has shifted, and the minimum wage is presented as a means of wealth-redistribution. the argument goes that any employer can afford to pay any worker minimum wage (plus taxes, plus the regulatory burden), and so they should be forced to do so, in order to make sure that the worker is getting enough resources from the employer. Unfortunately, this is in direct contradiction to historical reality - the originators of the minimum wage had a sounder grasp of economics than its' modern defenders. In practice, many workers today are not worth the minimum wage plus the cost of taxation plus the additional regulatory burden. It's a small percentage of the total workforce, but it is our poorer portion of the workforce. If you are part of the community that is young, urban, poor, black, and dropped out of high school because doing drugs or having a baby sounded like more fun at the time, then you face the harsh reality that under our current regime, you may be structurally unemployable, and the higher the minimum wage and regulatory costs, the less likely you are to ever be able to become employable. Oh, given some experience, some job skills, etc. you could become employable; but thanks to the higher cost whose threshold you cannot cross, you will never get that experience. Meanwhile, demand goes on, and the guys in the neighborhood a block over are all working 10-12 hours a day. Because they don't fall under minimum wage or regulatory laws - because they are illegal immigrants.

They cost less for roughly the same labor, which is why there is a high demand for them, but not for American citizens. All the proposed two-tier minimum wage system is going to do is perform the same function for adults v those under the age of 21. You know how all those businesses right now are cutting back people's hours, and reducing their workforce to 49 hours in order to avoid the increased costs of Obamacare? What do you think is going to happen to all the employed minimum-wage-earning 20 year olds when their employers face a doubling of the cost of employing them, but without a commensurate doubling of the value of their labor?

Now they cost more than they are worth, and they have to be fired.
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Fletch said:
I think you are confused as to what a wage represents. I have a 15 year old daughter about to enter the workforce. At 15 she obviously lacks a high school education, she has no references, no work history and no real job experience of any kind. Just what monetary value is such a person to the company you work at or virtually any company for that matter? Answer--not much. Virtually everyone working for minimum wage is working in an entry level job. Raise the minimum wage too high and where do people like my daughter go get work experience? If the minimum wage is $10 why would an employer hire some inexperienced kid when he can get someone with at least some work experience. kids that cant get jobs anywhere. I don't see how that benefits anyone. Minimum wage jobs don't exist so that people can live and raise families off of that income, they exist as the first rung of the employment ladder. Cut off that rung and where do kids go to get work experience?
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I completely agree with you. My ideal would be a two-tiered minimum wage. A lower one for people under 18. And I'm not talking about raising families off a minimum wage job. I'm talking about putting gas in the car and a roof over one's head. I don't think that's asking too much.
 
imagep said:
Employers hire as many employees as they need to fulfill demand, regardless of what wage they have to pay. If the wage exceeds the value of their products, then obviously they will go out of business, or more likely they never had any employees to begin with.
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And businesses closing their doors helps those seeking employment how?

The simple fact is that actual historic data proves that moderate increases in minimum wage have never lead to increases in the unemployment rate or inflation.
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You wont see a rise in umemployment, you will simply see fewer hired by firms who use unskilled labor. This helps the unskilled laborer how?

By the way, you should probably encourage your daughter to spend more time studying or engaging in school related extracurricular activities, that would serve her much better later in life than a part time minimum wage job in high school. She probably has nearly a decade before she will be mature enough to have a professional type job, so why rush her into a low wage job? Does your family really need an extra $60 a week in income that bad?
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Bad advice. I would like my daughter to work for two reasons 1) to gain work experience 2) because she needs money to live just like everyone else. I don't need that $60 a week in income, SHE does. That is the point. She wants a car and the car needs gas and she wants to go to the mall and hang out with her friends. See, all these sorts of things cost money. Money doesn't grow on trees. Someone has to go out to work and earn it. If you think Im going to be paying for her entertainment for the next 'decade' you are out of your mind. Is that how you were raised? I wasn't. Everyone I knew growing up worked from the moment they were legally old enough to do so. I didn't work hard my whole life to raise a couple of mooching liberal brats. My kids are working.
 
imagep said:
Employers hire as many employees as they need to fulfill demand, regardless of what wage they have to pay. If the wage exceeds the value of their products, then obviously they will go out of business, or more likely they never had any employees to begin with.
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That's interesting. I had no idea there was no such thing as capital, or the ability to hire skilled labor to leverage capital and replace multiple lower-skilled workers.

Gosh. All this time I thought there was such a thing as (for example) self-checkout lanes. What a goof I am! :lol:

The simple fact is that actual historic data proves that moderate increases in minimum wage have never lead to increases in the unemployment rate or inflation.
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CBO: Increase in Minimum Wage could cost 500,000 people their jobs

New York Times: Many economists expect the minimum wage, if it has any effect, to (among other things) raise employer costs and therefore reduce employment, especially among those who are likely to work in minimum-wage jobs, like teenagers and restaurant workers.

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National Bureau of Economics Working Paper 19262: We find that the minimum wage reduces net job growth, with the most pronounced effects on younger and low-wage workers

National Bureau of Economics Working Paper 12663: Studies that focus on low-wage workers provide relatively overwhelming evidence that minimum wage increases result in strong disemployment effects

National Bureau of Economics Working Paper 18681: Utilizing proper control groups leads to stronger disemployment effects; the evidence shows that minimum wage increases still represent a trade-off between higher wages for some and unemployment for others

National Bureau of Economics Working Paper 6127: The Evidence indicates that Minimum Wage Increases mostly redistribute resources among the low wage demographics, with slightly more people falling into poverty due to the lost income of disemployment than rising out of it due to income increases.

By the way, you should probably encourage your daughter to spend more time studying or engaging in school related extracurricular activities, that would serve her much better later in life than a part time minimum wage job in high school. She probably has nearly a decade before she will be mature enough to have a professional type job, so why rush her into a low wage job? Does your family really need an extra $60 a week in income that bad?
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Actually a decade or so now of good data demonstrates that labor is more likely to result in employment attainment and growth than the much panacea'd "training and education". It seems that getting good "soft" skills such as the ability to show up on time, work hard, follow directions, and take care of individual responsibilities in return for compensation actually matter more than your math test score for everyone except for extremely high-level individuals currently designing computer-investing code for Goldman Sachs.
 
Fletch said:
Virtually everyone working for minimum wage is working in an entry level job. Raise the minimum wage too high and where do people like my daughter go get work experience?
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Same place. They just get paid better to do it.
 
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cpwill said:
minwage1.jpg
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The only thing that chart shows is that unemployment went up when the economy tanked in 2008. There's no evidence whatsoever that the dramatic rise in unemployment had anything to do with the increase in minimum wage.

Correlation =/= Causation.
 
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