$15 dollars an hour for the minimum wage?

[Jeffwhosoever]

The real cost of raising the minimum wage - Diana Furchtgott-Roth - MarketWatch

 

[iluvatar5150]

I wouldn't necessarily argue against you here. 1 employee is certainly no negotiating match for a billion dollar firm, unless he is in such high demand and limited supply. But we're not necessarily talking about an employee only competing against a firm for wages ( which is impossible anyway), but also employees competing against each other for wages. What about an employee who is willing to work for what some would consider sub par wages? Should he be legislated out of the labor market? And why?

All together, employees make up the supply of labor ( or the demand for wages....however you want to look at it). Employers make up the demand. A glut of people competing for work will bring down wages (all else being equal). Legislating price of labor will only price some employees out of the market.

It won't price them out of the market, because the demand for labor is still there. What it'll do is prevent them from undercutting the rest of the employees, so they have a chance at feeding themselves.

 

[Jeffwhosoever]

Try out this scenario.

We raise the minimum wage to $15 an hour. As a result, McDonalds doubles their prices. Since the middle class hasn't seen any increase in real income since Obama took office, we cut back on the number of meals we buy at McDonalds. As a result, McDonalds cuts back on their staff. Yes, some get a raise, but others lose their job, so which is better for our nation?

 

[[serious]]

The real cost of raising the minimum wage - Diana Furchtgott-Roth - MarketWatch

We are well aware that some people are of that opinion. Posting a link to one such person with that opinion doesn't really further the discussion.

Here are several academic approaches that offer a bit more than opinion:
http://www.cepr.net/documents/publications/min-wage-2013-02.pdf
http://econweb.tamu.edu/jmeer/Meer_West_Minimum_Wage.pdf
http://www.stanford.edu/class/econ101c/class2.pdf

 

[Jeffwhosoever]

We are well aware that some people are of that opinion. Posting a link to one such person with that opinion doesn't really further the discussion.

Here are several academic approaches that offer a bit more than opinion:
http://www.cepr.net/documents/publications/min-wage-2013-02.pdf
http://econweb.tamu.edu/jmeer/Meer_West_Minimum_Wage.pdf
http://www.stanford.edu/class/econ101c/class2.pdf

Your source says it all:

"The voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment."

In other words, they don't have a clue.

 

[iluvatar5150]

Try out this scenario.

We raise the minimum wage to $15 an hour. As a result, McDonalds doubles their prices. Since the middle class hasn't seen any increase in real income since Obama took office, we cut back on the number of meals we buy at McDonalds. As a result, McDonalds cuts back on their staff.

Why would McDonald's double their prices? Hiking the minimum wage to $15/hr would be roughly double the current minimum. The only way that McDonald's would have to double their prices in order to maintain their profit margins would be if labor accounted for 100% of their expenses.

But labor doesn't account for 100% of their expenses. The cost of raw materials (food), utilities, real estate, insurance, and managerial salaries aren't going to double with this wage hike.

Yes, prices will have to go up in order to maintain profits, but the only way they'd go up double is if McDonald's decided to raise prices in order to increase profits. In that case, it's McDonald's fault, not the government's.

 

[[serious]]

Your source says it all:

"The voluminous literature on minimum wages offers little consensus on the extent to which a wage floor impacts employment."

In other words, they don't have a clue.

Maybe try reading them rather than just cherry picking a quote out of one of them. If that's from the one i'm thinking it is, (you didn't specify) it's discussing theoretical models as well as studies of real world changes.

 

[Jeffwhosoever]

"In a labor market, when the wage rate is at the equilibrium level, the quantity of labor demanded equals the quantity of labor supplied. There is neither a shortage of labor nor a surplus of labor. At a wage rate above the equilibrium wage, the quantity of labor supplied will exceed the quantity of labor demanded. Employers will not demand for labor due to the high wage rate they need to pay to employees. Employers think this will increase their cost of production. The demand of labor determines the level of employment and the surplus of labor is unemployed. This is due to the legal wage rate cannot eliminate the surplus; therefore the minimum wage creates unemployment. "

Minimum Wage | The Angry Economists

 

[Jeffwhosoever]

Why would McDonald's double their prices? Hiking the minimum wage to $15/hr would be roughly double the current minimum. The only way that McDonald's would have to double their prices in order to maintain their profit margins would be if labor accounted for 100% of their expenses.

But labor doesn't account for 100% of their expenses. The cost of raw materials (food), utilities, real estate, insurance, and managerial salaries aren't going to double with this wage hike.

Yes, prices will have to go up in order to maintain profits, but the only way they'd go up double is if McDonald's decided to raise prices in order to increase profits. In that case, it's McDonald's fault, not the government's.

How much of the cost of McDonald's food is labor?

 

[iluvatar5150]

How much of the cost of McDonald's food is labor?

Roughly a third of their expenses are labor: About that 68-Cent Big Mac Price Increase | MinimumWage.com

 

[Jeffwhosoever]

Roughly a third of their expenses are labor: About that 68-Cent Big Mac Price Increase | MinimumWage.com

Thanks. That makes some sense. I do find this part concerning.

"Restaurants generally avoid big price hikes that decrease their sales. A doubling in labor costs will decrease employment for less-skilled job seekers, who will find their jobs replaced by touchscreen and voice recognition technology as business operators find automation a feasible alternative. "

As I've said before, I'd support a reasonable increase in minimum wage that doesn't cause a significant increase in unemployment. We can't afford to go backwards. Maybe it is just me, but when I hear people talk about raising the minimum wage to numbers like $10 or $15 an hour, I find it hard to believe they are based on hard economic analysis that ensures we don't create a worse problem with unemployment. Would I like to legitimately raise the standard of living in the US? You bet your life. I'm just not sold on this being the way, at least based on the analysis I've seen thus far (which is nil).

 

[ThatRobGuy]

If the minimum wage gets increased to $15 from $7.25...what's to become of the people already making $15?

Let's say a person has worked for 5-6 years in a factory environment to get their pay up to that level, you're essentially knocking them back down to square one...I can see that causing some cases of disgruntled employees. (especially when you consider that within a year or two, that $15 doesn't quite have the buying power it once did).

Raising the minimum wage by that drastic of an amount would undoubtedly cause some increases in prices (increases varying based on the type of business a person's running).

Doubling the minimum wage like that would essentially be giving everyone else a small pay decrease in order to subsidize a large pay increase for a select few once you factor in price increases and inflation.

 

[abdAlSalam]

If the minimum wage gets increased to $15 from $7.25...what's to become of the people already making $15?

Let's say a person has worked for 5-6 years in a factory environment to get their pay up to that level, you're essentially knocking them back down to square one...I can see that causing some cases of disgruntled employees. (especially when you consider that within a year or two, that $15 doesn't quite have the buying power it once did).

Raising the minimum wage by that drastic of an amount would undoubtedly cause some increases in prices (increases varying based on the type of business a person's running).

Doubling the minimum wage like that would essentially be giving everyone else a small pay decrease in order to subsidize a large pay increase for a select few once you factor in price increases and inflation.

This is a wonderful illustration of crab mentality.

 

[Jeffwhosoever]

This is a wonderful illustration of crab mentality.

I'd call it reality. What part do you take issue with?

 

[abdAlSalam]

I'd call it reality. What part do you take issue with?

I take issue thus:

If the minimum wage gets increased to $15 from $7.25...what's to become of the people already making $15?

This is irrelevant to whether or not the minimum wage should be raised. It is an emotional appeal to keep minimum wage low based on crab mentality.

Let's say a person has worked for 5-6 years in a factory environment to get their pay up to that level, you're essentially knocking them back down to square one...

Again, this is not an argument against raising the minimum wage. This hypothetical worker isnt getting knocked down to square one. Also, the going rate for labor in a factory in America is such that if one is only making $15/hour after 5-6 years, they have greater problems than some poor schmuck getting a minimum wage hike.

I can see that causing some cases of disgruntled employees.

This is again crab mentality.

(especially when you consider that within a year or two, that $15 doesn't quite have the buying power it once did).

Buying power has already been destroyed by stagnant wages and inflation. Hiking the minimum wage would not cause anywhere near the damage that stagnant wages have already caused.

Raising the minimum wage by that drastic of an amount would undoubtedly cause some increases in prices (increases varying based on the type of business a person's running).

An increase in the working class wage would also undoubtedly lead to much greater aggregate demand, as much if not more than an increase in price would cause a decrease.

Doubling the minimum wage like that would essentially be giving everyone else a small pay decrease

Wrong. Increasing the minimum wage would not decrease someone else s wage. Furthermore, if a factory worker feels that they are not being paid their fair wage then they should ask for a raise themselves rather than attacking the minimum wage worker who received a long-deserved wage.

in order to subsidize a large pay increase for a select few once you factor in price increases and inflation.

There is little to no evidence that raising the minimum wage would increase inflation.

 

[iluvatar5150]

If the minimum wage gets increased to $15 from $7.25...what's to become of the people already making $15?

Let's say a person has worked for 5-6 years in a factory environment to get their pay up to that level, you're essentially knocking them back down to square one...I can see that causing some cases of disgruntled employees. (especially when you consider that within a year or two, that $15 doesn't quite have the buying power it once did).

If those workers didn't automatically get a pay raise (and I'd be surprised if they didn't, but for the sake of argument, let's say they didn't), there would be, at the very least, pressure on that employer to raise his wages, because he no longer has the hiring advantages (namely, being selective) that come with paying 2x minimum wage. The employees that wanted to work for him for the higher pay now have more options at that pay tier, so if the factory owner wants to retain those employees (or hire employees of a similar caliber), he'll need to raise his pay rates in order to be more attractive.

 

[Jeffwhosoever]

If those workers didn't automatically get a pay raise (and I'd be surprised if they didn't, but for the sake of argument, let's say they didn't), there would be, at the very least, pressure on that employer to raise his wages, because he no longer has the hiring advantages (namely, being selective) that come with paying 2x minimum wage. The employees that wanted to work for him for the higher pay now have more options at that pay tier, so if the factory owner wants to retain those employees (or hire employees of a similar caliber), he'll need to raise his pay rates in order to be more attractive.

That makes a good argument for doing away with any minimum wage, and allow the free market to set the wage.

 

[abdAlSalam]

That makes a good argument for doing away with any minimum wage, and allow the free market to set the wage.

By getting rid of the minimum wage you would give private entities even more coercive power over the working class. It has little to do with markets and much more to do with greed and exploitation.

 

[[serious]]

That makes a good argument for doing away with any minimum wage, and allow the free market to set the wage.

Maybe if you didn't read what he wrote.

 

[Jeffwhosoever]

By getting rid of the minimum wage you would give private entities even more coercive power over the working class. It has little to do with markets and much more to do with greed and exploitation.

The majority of the "working class" is not directly affected by the minimum wage. Take US auto workers for instance. Unless you are suggesting that the working class is those making only the minimum wage.