Tuesday, March 4, 2014

Minimum Wage Increase is Not Necessary

MinnPost did something very good today, they posted this piece that was written by an immigrant from the USSR who lives in Marshall MN.  MinnPost Minimum Wage Increase is Not Necessary  Though a little biased, it is well written and clearly describes the issues/consequences that the pro-wage folks keep denying.

I also found it interesting because it is typical of what my other USSR immigrant friends are saying.  They keep telling me that the Liberals should move to a more Socialistic country if they think it is a good thing.  There was a reason they left and have no intention of going back...

It is also amusing that the typical MinnPost commenters are beside themselves with frustration.  Those comments are worth the time of reading just for the fun of it.

More typical of MinnPost is How Tax Payers Subsidize Low Wage Workers.  Here was my view on that:
"Thank Heavens!!! We apparently can quantify what the low wage earners are costing our society. That is actually a good thing. We as a society can choose to support them and know what it costs.

Whereas by raising the minimum wage, we will push up all of our costs and hide what society is paying for these low wage earners. Also, it will increase the justification for automation, off shoring, etc.

And the Liberal folks here should find this much better than an increased minimum wage. The increased minimum wage and the ripple increases will be paid for by everyone including the people you aim to help. (ie regressive tax) Whereas these government programs are mostly paid for by the middle and upper income folks. (ie progressive taxes)

This is an ironic turn of events." G2A
Thoughts?

33 comments:

Anonymous said...

I thought the article was kind of a mess. You might notice how she mischaracterizes Winkler's argument. She also commits the fallacy of composition, the assumption that what's true for small numbers is true for large number. Nine dollars is a good minimum wage? Well then 900 must be better. Sort of like one vitamin pill might be good for you, so a hundred must be better, right? She also wanders off into a comparison of minimum wages with maximum prices.

There are lots of other confusions as well. She says that labor prices are determined by market forces, but if the costs of production go up, so will prices. Isn't that a contradiction. If the price of labor is determined by market forces, why not the prices of goods labor produces?

--Hiram

Anonymous said...

Community Voices pieces in MinnPost seem not to be edited, and I think it shows. Here is an instance of the problem:

"Karl Marx said that labor is a commodity, so establishing a minimum wage is the same as establishing a maximum price for bread and cars. The latter is never suggested in America even though in socialist countries all prices were set by the government and Venezuela is doing it as well."

First off, there is the pointless reference to Marx. Lots of people think of labor as a commodity. It's not a controversial view. The writer says establishing a minimum wage for labor is the same as a maximum wage for other commodities. Minimum, maximum? Is the author making a point here or just confusing something an editor should have caught? The author goes on to say that because we don't typically have price controls on inanimate objects, we shouldn't have controls on the price of human labor. Should any of us be comfortable with this stretch of logic? Surely there are some fundamental differences between human beings and inanimate objects that should be relevant to this discussion. Have you ever known of a tube of toothpaste with a family to feed?

==Hiram

jerrye92002 said...

I think the more interesting question is WHY taxpayers subsidize low-wage workers. Liberals are always Oh, So quick to point out what "society" spends on the poor, weak, infirm, etc, but never ask why it is society's responsibility for an individual's LACK of responsibility? They constantly speak of how "we" must do something for these poor folks, but really, "WE" have no collective obligation at all, certainly not at the point of government coercion. Any desire or even obligation to help is and ought be a personal one-- something at which liberals consistently fail to do while demanding that everyone ELSE must do, through government compulsion.

The minimum wage ought be a matter between the worker and the employer. It certainly is NOT a means to transfer wealth. It just creates more poverty.

Anonymous said...

WHY taxpayers subsidize low-wage workers

Because it relieves pressure on low wage payers to pay more, presumably.

--Hiram

John said...

Here are my subsidy thoughts per my discussions with Paul.

"Since I am sure you don't want to mislead the other commenters, I proposed 3 possible paradigms as to who is being subsidized by a low minimum wage, that is offset by tax payer funded programs for those with low incomes.

1. Society is subsidizing the businesses by paying their expenses. (ie neutral to regressive tax?)

2. Society is subsidizing the poor who are unwilling to work hard to improve their income earning potential. (ie progressive tax)

3. Society is subsidizing all of us by keeping our "Service/Product Industries" less expensive. And they are doing this at the expense of the tax payers. (ie progressive tax)
"

jerrye92002 said...

I'm not sure I follow your argument, here. I'm thinking that a simpler form of the question is: From whom will the money come to pay this higher wage? Where will they get it? And why not $100/hour?

Anonymous said...

From whom will the money come to pay this higher wage?

The argument that Winkler makes and that the original Minnpost article mischaracterizes is that higher wages are good for the economy generally, that they increase growth. That means that raising wages isn't a zero sum game, that it's a rising tide that lifts all boats. It's the argument Henry Ford made when he paid his workers high wages so they could afford the Model T's they were making.

--Hiram

John said...

Jerry,
The point was that businesses pay such a low wage, that us tax payers have to pay the employees additional funds through welfare, medicare, earned tax credits, etc.

Meaning tax payers are subsidizing someone, the question is who?

Hiram,
If additional wages are paid to a minority of citizens at the expense of the majority of citizens. I am pretty sure the river is not raised.

Ford's mechanics likely worked hard and added significant value, therefore they were paid pretty well like most manufacturing personnel are today. I am not sure the teenager working at Claires, Mcdonalds, etc adds that much value.

Laurie said...

It seems to me that if low wage workers were provided a higher income through earned income tax credit and various welfare benefits, all funded by the wealthy, the economy would have a slight boost compared to if the wealthy kept and saved this money.

If the minimum wage were higher we would all be paying for it through higher prices and companies might be slightly less profitable. I think there would also be a slight economic boost, as the low income people would spend all their money and I, as a middle income person, would probably buy the same amount of stuff and save slightly less.

I think the first option is maybe slightly better for the economy and the best way to subsidize the poor, but the second option offers more dignity in allowing the poor to support themselves.

John said...

I am starting to agree that raising the minimum wage seems like the "fairer" option, since the alternatives seem much more like "tax the rich" / wealth transfer which I am typically against. I mean the higher minimum wage in essence taxes us all.

I am still concerned that the direct cost increase will drive more off shoring, automation, slow purchases of American goods, etc, therefore end up hurting the low income folks more.

If you all haven't been to those 2 MinnPost links recently, there are over 140 relevant comments that are pretty interesting.

Today I'll be snowmobiling near New Ulm. And not even having to worry about frost bite for a change. Yippee !!!

Anonymous said...

If additional wages are paid to a minority of citizens at the expense of the majority of citizens. I am pretty sure the river is not raised.

the answer is, that it depends. If one assumes a zero sum game, that's someone's gain is someone else's loss then the tide neither rises nor falls. But the fact is, the economic tide rises and falls all the time, for a number of reasons, allocation of income surely being one of them.

Maybe it's worth noting that conservatives make the same point Winkler does, when you turn the tables a bit. They argue for tax cuts in the implicit belief that there isn't a zero sum game, that the money that stays in their hands will be used to increase overall growth. and all will benefit.

--Hiram

Anonymous said...

It is undoubtedly true that raising the minimum wage will mean some jobs, somewhere, will be lost. But I would point out that raising anyone's income, makes employing that person more difficult and more expensive, but I think instances of employees turning down raises on that basis are relatively rare. Employment choices are made for a variety of reasons, and income level is just one of them. Miminum wage laborers often do humble but necessary work. Mitt Romney stopped working at his firm years before they stopped paying him, yet nobody seemed to notice. How long would it take them to notice that the bathrooms weren't being cleaned? And how would you go about outsourcing that job to China?

--Hiram

jerrye92002 said...

"It seems to me that if low wage workers were provided a higher income through earned income tax credit and various welfare benefits, all funded by the wealthy, the economy would have a slight boost compared to if the wealthy kept and saved this money." -- Laurie

That makes sense, except that's not the way the economy works. Wealth redistribution does not create wealth. Allowing those with "excess" wealth to save and invest grows the economy, and everybody benefits as a result. The old "rising tide" (JFK's phrase) argument.

I think the point here is that government should not be deciding who gets the money or who is worth how much. They certainly should not be taking from one and giving to the other, regardless of the mechanism. It's inefficient and, as you point out, harmful to human dignity.

jerrye92002 said...

Actually, the notion that wages are arbitrarily set, either by employers or government, is just plain wrong. If I as an employer offer too little, almost no one will work for me, or will be such poor employees that they aren't worth having, or will leave just as soon as anything better comes along. If, on the other hand, my employees become more productive, I can pay them a higher wage without changing my profit margin or raising prices, or I can lower prices and do more business, while paying my employees more.

This whole idea that government can tell me what I should pay my employees-- in essence, "what they are worth"-- is utter nonsense. And what will happen is that I will simply not pay those wages. I will automate, offshore, or cut employees until the remaining high-productivity employees balance out the work. Or I go out of business and NOBODY has a job. This idea that government can fiddle with the free market and the free market will just roll merrily on without adapting, makes you wonder about the sky color in their world.

John said...

Since we as a society are not going to let the questionable empoyees starve or live on the streets. Which is better, welfare or higher minimum wages?

jerrye92002 said...

We're not going to let them starve? Who decided that? Hunger is an excellent motivator, and welfare as currently operated serves to demotivate. Not making enough at your job? Get more skills or a better job, don't expect the taxpayers to bail you out.

Which is better? Welfare, because it distorts the free market less, but it really is the lesser of two evils.

John said...

I didn't decide that... Though it seems the Liberal half of our country seems pretty adamant that everyone living in this country is entitled to food, housing and healthcare no matter if they choose to work or sit. (and don't forget cell phones)

I am actually torn, I think eliminating the minimum wage and eliminating welfare seems like the best idea. Then jacking the Earned Income Tax Credit up significantly. Then at least we wouldn't be giving money to people who are not working at something.

jerrye92002 said...

I would agree, but you can't quite get there from here. 1996 welfare reform had the right idea, that there should be a lifetime cap on benefits (5 years not unreasonable), during which you gain skills and find work without losing all your benefits, which is the current system. I wouldn't eliminate the min wage, but I wouldn't raise it. There's no need for either and it just raises dust.

What needs to happen is a gradual consolidation of all "means tested" programs into a single payment like the earned income credit, but as a "progressive" tax, so you are always better off working than you are idle. And if I really had my druthers, I would give a 100% tax credit for charitable contributions. Which, by the way, could come with the FAIR tax.

John said...

Min Wage Demographics

But if someone is willing to work 40 hrs/wk. Should they be able to live on that income?

On the other hand what demons internal and external keep them trapped in that starter wage?

jerrye92002 said...

If someone is willing to work 40 hrs/week (or 80 hrs/week) for what they are getting paid, it is absolutely no business of government to tell them they have to be unemployed, or that they aren't being paid enough, or that the rest of the world somehow owes you the difference. LOTS of people get by making a lot less than a 40-hr minwage job; it's hard but there's the motivation to do better. Now, of course, you can't get a 40hr job because of Obamacare, or you might be unemployed already because of it, but don't worry, we'll raise the minimum wage that you can't get. How many more unemployed will there be if the best workers take TWO 30-hour jobs to make ends meet?

John said...

"LOTS of people get by making a lot less than a 40-hr minwage job"

What are smoking? I need some of that...

jerrye92002 said...

Rural families with big gardens, teens living at home, couples with two minwage jobs, singles living in dormitory-type lodging, or with minwage plus room and board arrangements (like live-in help). We all know people like it, don't we? Sure, it's tough and we wouldn't want to try to live that way, but most minwage earners do not stay in that situation for long-- they get a raise somehow. All minwage does is cut the lowest three rungs out of the career ladder.

And if we're going to say that the current $7.25/hr isn't "enough" yet $9.50 is, what do we say about those that are struggling now at $9.50? That's still below the poverty level for a family of three, let alone ANY family, yet liberals say "you can't raise a family on minimum wage."

And of course most minwage workers DON'T, so that isn't the point, is it? Once again liberals not only get to fantasize about how the world WILL work-- that they can give all these folks a raise and nothing else in the economy will change in reaction-- but they are trying to get us to buy into their fantasy of what the world IS-- where all of these workers are trying to raise a family and are locked in to slave wages because of some evil business owner hoarding all the money. I've always thought public policy should at least start in reality.

John said...

I don't disagree that the Liberals seem to want to over simplify things...

Yet I am interested to hear how Conservatives want to live in a USA when automation eliminates more jobs. And when there truly isn't enough value added work to justify paying everyone a "living wage".

John said...

I wonder what the future will look like...

Blade Runner
Star Trek
Walle

jerrye92002 said...

"how Conservatives want to live in a USA when automation eliminates more jobs."

I worry about that, too, but the answer is not to force that transition sooner by making low-value employees MORE over-priced than they already are.

The theory has always been that we make workers more productive with automation-- replacing 10 men with hammers with one man-- more skilled, and a 500-ton press machine. The other 9 move into work that requires more knowledge or skills (like press repair or design) and make more money. It's a win-win-win, because the rest of us now get our goods at a lower price, while on average, our wages are higher. The other thing that happens, and it already has, is that more people are moving into the service economy. That's very hard to automate, often doesn't pay as well, but at least it is employment. I'm really hoping that eventually we get to the Star Trek end game, where self-improvement and knowledge are the goals, and material and economic advancement isn't required. But I assume the guy who invented the replicator got filthy rich.

Sean said...

"where all of these workers are trying to raise a family and are locked in to slave wages because of some evil business owner hoarding all the money. I've always thought public policy should at least start in reality."

It is in fact reality that median household incomes are stagnating and labor's share of GDP is historically low while corporate profits and cash reserves as a share of GDP are historically high.

Whether you choose to phrase such a scenario in the way you do, or in some other way is a matter of opinion, I suppose, but those are the facts.

John said...

Decoupling Link from G2A Wages vs Buying Behavior Post

Maybe that "replicator" problem is almost here...

jerrye92002 said...

"It is in fact reality that median household incomes are stagnating and labor's share of GDP is historically low while corporate profits and cash reserves as a share of GDP are historically high."

What matters is what conclusions one can draw from those facts. In my mind they are clearly linked. Government has made capital investment risky, and punished successful entrepreneurship. This reduces productivity gains by workers that would otherwise provide labor with higher salaries, while simultaneously reducing the supply of goods and services relative to the population, thus increasing prices and profits, which are retained because of the above risks to capital investment. All while government deficit spending sucks huge amounts of capital out of the marketplace and builds a horrendous inflationary pressure that will be released down the line somewhere.

Having government boost the minimum wage by fiat is just one more in a long, long string of government interventions in the economy, each designed to correct some problem caused by previous government intervention in the economy. Somebody, please, stop the merry-go-boom.

Sean said...

What evidence is there that productivity has been limited?

http://www.tradingeconomics.com/united-states/productivity

How has government punished entrepreneurship? Marginal tax rates are low, historically speaking.

People who look at our current economy and think we've got a supply-side problem need to find a better ophthalmologist.

John said...

Trading Econ Productivity

jerrye92002 said...

No doubt Sean is right, that productivity keeps going up without a huge amount of capital investment, which is why John's item about the divergence of productivity from wages is so compelling. The reason, according to the article, is that productivity gains can now come from automating certain high-skill jobs with computer technology. For example, we used to have lots of people doing "production planning." Now it's pretty much done automatically by computers, and we can increase production greatly because the computer does it better. Not only that, the computer doesn't care whether you've got 10 orders or 100, it just calculates a little longer, at the same cost-- once you have the computer and software, it just runs.

So yes, maybe we're nearing that "replicator" stage already, but that doesn't mean that government can solve the problem. Much more likely, they are going to exacerbate it, by causing automation to arrive even sooner.

John said...

If not through our society's elected governing body, how would you recommend addressing the replicator problem?

Maybe Japan had it right... Don't allow people to immigrate, accept a low birth rate, and let the population shrink... Fewer people to have to find jobs for...

jerrye92002 said...

I would recommend keeping our elected "leaders" completely out of it. I would hazard a guess that the first 535 names in the Mason City, Iowa phone book would come up with smarter and better answers than our 535 members of Congress. High intelligence is not a requirement for high office, and common sense is found among the common people, not these elites. I would always trust the individual decisions of 100 million Americans over the 100 members of the Senate as to how those 100 million should lead their own lives.

That said, the free market is going to need to be a lot more free than it was even a few years ago, before the Obamanation set in, if this problem is to be solved. I really believe that the best answer may be a new burst of capitalism, so that manufacturing jobs return to the US, but run by factories full of automation. This means the rest of the world can't sell us cheap labor and puts the ball back in their court for their own economic development. Then, even more of us are going to have to go into service work of some kind-- barbers, plumbers, financial managers, robot repair, poets, etc. Material wealth accumulates, and frees people for more human pursuits. I don't think there's anything wrong with that; it's the transition that concerns me, and having sclerotic government try to manage it on our behalf is downright frightening.