Saturday, February 16, 2013

Raise the Minimum Wage?

Joe Bodell over at MN Progressive Project wrote a post in support of raising the minimum wage.  MPP Minimum Wage  Check out Joe's TV views at the following link.
"Tonight on Fox9 it was the minimum wage increase proposed by President Obama in Tuesday's State of the Union address (I'll post a link to the segment video when it's available). Standard fare, really -- put more money in people's pockets to drive consumer spending, demand, and ultimately job creation vs. the tired old Republican talking points about small businesses not being able to cope with the added expense of wage increases." Joe
"And they are tired old talking points. I'm not saying it's not a prisoner's dilemma -- the selfish solution (keep my business's costs low so it can survive!) makes for a more stable bottom line in the short term, while the unselfish solution (we all pay our workers a bit more so they can afford to buy our stuff!) requires more faith in other business owners than the average Republican is used to having. But raising the minimum wage to keep up with inflation is still the right moral, economic, and political thing to do." Joe
Of course I have concerns regarding this and left 2 comments. The first to Joe.
"Joe, Who exactly do you think will pay this higher wage? Who do you think will be most injured by it? I agree that Dueber's had much bigger problems than their employee cost, and I think it is silly to raise that issue. Since this would go country wide, I am pretty sure that most companies will be able to very quickly raise their prices to cover the additional cost. Or they will automate more jobs since they can justify the additional capital costs. Or they will send some more work over seas. So let's see, by mandating a higher minimum wage than the market justifies, we will increase the expenses that are paid by many of the people you strive to help. And we encourage and cost justify the elimination of many of these very low skill entry jobs. Be careful what you wish for, you may get it." John (G2A)
And the second in response to Sue's comment.
"What I think we've discovered, over many years of trial and error, in many states, is that those are not the sort of businesses that keep a community prosperous. It isn't always that the employer is mean-spirited; often they simply fall into a business model that requires wages at a certain level, and don't have the imagination or resources to get out of that model. Regardless, moving to a higher-wage economy, in which everyone has a bit more of the pie, will always involve winners and losers. The GOP trick is to make people focus on the losers as much as possible and ignore the greater good of society." Sue
"Please elaborate regarding the "greater good". We raise wages for the least qualified, thus increasing costs for all. And since we are doing it at the Federal level, that means this will drive the same wage whether one lives in a high cost city or a low cost rural town. Also, it will compress the wages at the lower end, unless you believe that it will shift the pay scale up for everyone. Which I guess it could since the higher costs of goods may drive that reaction. I am okay either way, yet it seems like a dog chasing it's tail." John (G2A)
So what do you think, will raising the federal minimum wage help or hurt the low income folks?  Or will it do nothing except drive inflation?  Your rationale?

22 comments:

Anonymous said...

what do you think, will raising the federal minimum wage help or hurt the low income folks?

Raising the minimum wage will do both of course, but on balance, I think it's a good thing. In my experience, the unproductive, deadwood, employees are hardly ever the ones making the minimum wage. And let's not forget the most basic thing about minimum wage employees, they work cheap. Other wage decisions companies routinely make have the potential to have far more impact on the bottom line then raising the minimum wage.

--Hiram

Anonymous said...

Here is Krugman on the minimum wage:

http://krugman.blogs.nytimes.com/2013/02/16/minimum-wage-economics/

--Hiram

John said...

Krugman Min Wage
Min Wage 101

These economists seem to avoid my inflationary "dog chasing his tail" concern. And they don't even mention jobs moving overseas or being automated away... Kind of strange since those are my concerns.

Anonymous said...

All that's required here is a little thought experiment. Let's suppose the proposal to "raise the minimum wage" says we're going to raise it to $100/hr. All of the arguments FOR it still apply. What would the argument against that proposal now be?

Guess what? The arguments against are the same for any number short of that, too, just different in magnitude. It WILL cost jobs and raise prices, even if the increase is to a number less than what most employers are already paying.

J. Ewing

Anonymous said...

All of the arguments FOR it still apply.

But so do the arguments against it. But actually, this is a fallacy of composition. And really, the argument that we should be a little less poor is quite a different argument from saying we should all be rich. Let's not distract ourselves from the issue on the table, whether the minimum wage should be raised to 9 bucks and change, not a hundred bucks and change.

--

John said...

Wiki Minimum Wage

Well let's walk this through logically. Assuming the Fed Min Wage changed from $7.25 to $9.00 per hour.

First consequences: All people working for less than $9/hr get an immediate raise. They will therefore have additional money to spend since they pay little or no income tax.

However, this brings their wage up to the same as their more experienced co-workers. Either the more experienced co-workers will have to be ok with this or companies will need to bump up most of their pay scales somewhat.

Second consequences: The cost of doing business will be increased in many locations. Especially in those locations with the lowest cost of living. (ie rural and poor neighborhoods) This is because the higher cost of living locations probably are paying $9/hr or more already.

The higher costs will reduce profits in these areas immediately.

Third consequences: Companies will begin to adjust in order to restore their profits. Their choices will be to send the jobs to a lower wage location if possible, automate the job if possible or raise prices.

Fourth consequences: Fewer jobs and/or higher cost of living. With this slight change I am guessing it would be mostly higher cost of living.

So I am guessing it would help the ~10% of Americans more than it would hurt them, because they would only pay ~10% of the cost of living increase and they would get 100% of the raise. The other 90% of the cost of living increase would be paid by the rest of us. For better or worse.

Maybe it is a good idea.

Anonymous said...

I think it's backwards. If you are really concerned about "making work pay" then you have to incentivize employers to offer jobs at what they can afford, and incentivize people to take a job, any job, that they can get. Lower min-wage means more jobs, pure and simple, because they won't be outsourced or automated. Then, you can use something like the EITC, if you're a bleeding heart liberal, to give the "living wage" to those who need it and not to those who don't.

J. Ewing

Anonymous said...

It's not that corporations don't have the funds to raise the compensation of the lowest paid workers. It's that the funds have been slowly re-allocated from the workers to the C-suite and the shareholders.

"The federal minimum wage hasn't kept up with inflation, but CEO pay has risen 725% over the last 30 years and 80% of all real income growth has gone to the richest 1% of Americans.

The real value of the minimum wage peaked in 1968. Had it kept pace with rising living costs, the minimum wage would exceed $10.50 per hour today."

http://www.cnn.com/2012/07/25/opinion/henry-owens-minimum-wage


--Annie

Anonymous said...

In general, our economic problems are in large part due to the fact that we pay people too little, not too much. Wages, according to the Wall Street Journal, haven't gone up since 1997.

==Hiram

John said...

Henry Owen Min Wage

Annie,
Are you willing to give up some of those low end jobs to raise the wage for the others?

Are you okay with raising your cost of living to do this for the low end earners?

We know the money won't come out profits for very long. Thoughts?

Per the article, just for fun... Should we pay "telemarketers" more?

Anonymous said...

The late, great Sen. Daniel Patrick Moynihan said, " The greatest social change of this century is the replacement of a viable economic unit-- the two-parent family-- with two nonviable economic units. It used to be that the cure for low-wage jobs was to have the spouse find part-time work, or take another job yourself so the spouse could stay home. Or you moved back in with your Mom, or you went to school nights to get a better job. You didn't sit there and grouse because somebody made more than you did. You certainly didn't demand a raise that would likely get you replaced by a machine.

J. Ewing

Anonymous said...


Are you willing to give up some of those low end jobs to raise the wage for the others?
I'm willing to give up some of the corporate compensation to raise the wage for those on the lower end of the spectrum (economic bonus! The wages will further stimulate the economy!)

Are you okay with raising your cost of living to do this for the low end earners? If my CoL is artificially low because we simply don't pay the lowest rung enough to live on-- well, of course.

We know the money won't come out profits for very long. Thoughts?
Not sure what you're fishing for here.

Per the article, just for fun... Should we pay "telemarketers" more?
Hey, great example! I've been a telemarketer in my life. I've managed a large staff of telemarketers as well at one point. They were good folks (generally very overeducated--it was during a recession) working hard to earn their salary. I don't see that as individuals they deserve to be singled out for extra scorn over, say, gun salesmen or aerosspace executives(the kind who slap small children on airplanes).

Are you OK with corporate salaries and profit-takings skyrocketing while the lowest paid are stagnant--particularly in a macro sense and in view of how it has impacted the economy as a whole over the past several decades. Discuss.



--Annie

John said...

Wasn't fishing, the reality is profits and corporate compensation will stay similar no matter what we do to the minimum wage. (Within reason)

Let's use fast food for example. If all the restaurants have to pay more in a region. They will simply raise their prices to maintain their profits and executive comp....

Why do you think a higher min wage will take from the rich and give to the poor?

Anonymous said...

I don't think executive compensation is the problem. Dividing the typical CEO pay across all employees gives them all another $10/year, or something (I did the math once). And unless you are going to say that top ball players don't deserve their millions for being exceptional, you shouldn't be saying it about CEOs, either, because there are darn few people able or willing to do that job. If there is a question as to "what a CEO is worth" then why don't we apply the same question to MVP wide receivers, telemarketers and burger flippers? Or teachers? Compensation should be set by the market, not government fiat.

J. Ewing

John said...

Not even I can defend a lot of the executive compensation and board of directors "good ole boy" stuff that goes on... I just don't think raising the minimum wage will have any affect on it...

I certainly don't see any of the CEO's I have heard of being worth $50,000,000/yr... At least in sports one can see the performance in action. Where as often CEO's are paid very well for very bad performance, either because they were in charge during bull market or they get a very nice golden parachute to get them to leave...

Though I agree that I sure don't want their job, anymore than I dream of being a telemarketer.

Anonymous said...

Here is a link to a discussion of corporate tax issues from renegade conservative economist Bruce Bartlett.

http://economix.blogs.nytimes.com/2013/02/19/who-pays-the-corporate-income-tax/

Although this piece is a discussion of corporate income taxes, I think the issues it raises apply to other ways in which allocate burdens to corporations, particularly business to business sales taxes, and relevant to this thread, minimum wage increases.

--Hiram

Anonymous said...

"Not even I can defend a lot of the executive compensation and board of directors "good ole boy" stuff that goes on.." -- John

I agree with you, just not in the context of the minimum wage or "fairness" imposed by government fiat. There shouldn't be a "maximum wage" any more than a minimum one.

Personally I favor the Peter Prescription. CEOs get $100,000/yr (or somesuch) plus (negotiable) millions of dollars worth of stock options that vest 5 years later. Drive the stock into the ground and you lose. Boost the stock in the short run at the expense of the long run and you lose. Tenure is limited to 5 years and no golden parachutes.

J. Ewing

John said...

NY Times Who Pays Corp Tax

I'll have to do some more research since I disagree with this view. "corporations cannot raise prices to compensate for the corporate income tax because they will be undercut by businesses to which the tax does not apply."

It makes sense if they are competing with a "tax free" entity, though I am not sure who that would be.
------------
I am not excited about government price fixing wages either. I just wish the "Boards of Directors" actually did their job and protected the other shareholders more diligently. Too many cases of reported ethics violations for my taste.

Especially when management is allowed to sell the company and take a nice payment for organizing the deal.

John said...

Slightly different views.
WonkBlog 4 Things to Know
Montana's Min Wage

Anonymous said...

Here's the "thing to know":
"Those over the age of 25 making the minimum wage or less only comprised 3 percent of hourly paid workers."

So, the notion that upping the minimum wage provides a "living wage" for those millions trying to raise a family is utter nonsense. All you are doing is keeping teens from getting their first job.

J. Ewing

John said...

A lot of the 17 - 25 year olds may be those with kids and working for minimum wage... (ie not too smart or responsible)

Anonymous said...

Yes, but even those are and probably should remain a small fraction of min-wage workers. Any baby daddy or baby mama worth their salt that starts out at min wage and sticks at it very long, is soon making more than that. Raise the min wage and they don't get the job in the first place. The EITC, clumsy as it is, is far and away the better approach. We should be encouraging work and responsible behavior, not making it more rare.

J. Ewing