7 ms·

I don't believe that raising the minimum wage will trigger businesses to cut jobs significantly. They will probably pass the higher cost onto the consumer. Ulti

I don't believe that raising the minimum wage will trigger businesses to cut jobs significantly. They will probably pass the higher cost onto the consumer. Ultimately, it's a method of wealth redistribution, which is sorely needed in our economy.

johnjac 11y ago
The problem with this type of wealth redistribution is that the poor are often consumers of the same products and services served by min wage jobs. This is one of many reasons I support unconditional basic income. It allows labor to be accurately priced in the market, without raising cost to the poor.
- thomasfoster96 11y ago
  I'd agree, but raising the minimum wage is a relatively good alternative to doing nothin given unconditional basic income is merely a political dream in most jurisdictions. The US has such a low minimum wage given the wealth within the economy it's hard to see a rise having much of an impact.
  - w1ntermute 11y ago
    An EITC would more effectively incentivize the poor to work than unconditional basic income.
    - dllthomas 11y ago
      Assuming it doesn't taper, yes.
    - ashark 11y ago
      1) An EITC fails to realize the efficiencies of consolidating or eliminating other forms of aid that basic income could. 2) The incentive to work under basic income is having more than barely enough money to scrape by. Wages will go up until this is a sufficient incentive. My money's on wages not having to rise much at all, if any, to achieve this. I wouldn't even be surprised if average compensation dropped a bit under basic income. 3) An EITC doesn't support entrepreneurship and small businesses the way basic income could.
    - dragonwriter 11y ago
      > An EITC would more effectively incentivize the poor to work than unconditional basic income. Maybe, but: (1) This is an assertion provided without evidence, and (2) The purpose of the basic income isn't to incentivize poor people to work, anyway, and (3) Poor people, even before considering EITC or Basic Income, have more than sufficient incentive to work, what they generally lack is opportunity to work with their current skill set, and opportunity to gain the skills needed to work where it is in demand without trading off present necessities.
    - thomasfoster96 11y ago
      I should've clarified: by impact I mean negative impact on business costs and employment rates.
- fweespeech 11y ago
  > The problem with this type of wealth redistribution is that the poor are often consumers of the same products and services served by min wage jobs. This is one of many reasons I support unconditional basic income. It allows labor to be accurately priced in the market, without raising cost to the poor. Yes but labor is less than half of the cost for everything. One of the most labor intensive is food [growing -> market -> consumer] and its still not even 50%. https://www.fmi.org/docs/facts-figures/marketingcosts.pdf?sfvrsn=2 https://www.fmi.org/docs/facts-figures/marketingcosts.pdf?sf... http://www.ers.usda.gov/media/307995/aer780d_1_.pdf http://www.ers.usda.gov/media/307995/aer780d_1_.pdf Its 38.5%. The impacts is similar on other areas where the minimum wage laborer is also the minimum wage consumer. The pay increase still flows ~60% to the people on minimum wage and is the most effective method that is politically feasible. [e.g. Backed by a large portion of a major political party] Ideally, raising the standard deduction to the poverty level for 1 person as well would be ideal to spread things out more. Of course, you'd need to raise the marginal tax rates [e.g. Money after $11,700/year would be taxed at a higher rate] to do that since it'll cost hundreds of billions otherwise :p [e.g. $6,300 -> $11,700] http://familiesusa.org/product/federal-poverty-guidelines http://familiesusa.org/product/federal-poverty-guidelines
  - afarrell 11y ago
    You would also want to have the IRS automatically fill out the tax returns of people making less than 3x the poverty line. Otherwise the poor and frazzled would not take advantage of this.
- jefurii 11y ago
  > this type of wealth redistribution As opposed to the kind where the bosses pay absurdly low wages and distribute the profits to themselves? Update: grammar, typo
  - icebraining 11y ago
    No, clearly as opposed to UBI. Did you read the whole post?
Kequc 11y ago
As a general rule prices in a capitalist society are already as high as they can be. Any higher and they would be undercut. When a company becomes large and therefore able to produce goods for less money, the price doesn't fall, profit margins increase. These large businesses are the ones paying employees the federal minimum wage. Only thing that happens is their profit margin shrinks a tiny amount. As long as the profit margin is in the black the business will continue to operate. It puts more money into the pockets of consumers, who are the drivers of the economy.
- JonFish85 11y ago
  "As a general rule prices in a capitalist society are already as high as they can be." What you're discounting is that once the minimum wage is raised, the market can bear higher prices, and will move accordingly.
  - ealexhudson 11y ago
    It's not a huge number of people on minimum wage that would be affected by an uplift: in the UK in 2014, there were around 1.5M minimum wage jobs, 50% of which in hospitality, cleaning and retail (so, many not full time). The average wage shift would be virtually imperceptible and the extra spending power of those on the minimum wage does not translate to measurably higher prices (in the UK the minimum wage has rarely followed average earnings, and it's difficult-almost-impossible to measure the spending of minimum wage earners separately).
    - davis_m 11y ago
      It isn't just the people on minimum wage that would get a raise. Anyone making between the current minimum wage and the new minimum wage would receive a pay bump. I don't have the numbers, but I would guess that there are more people within a dollar or so of the current minimum wage than there are actually at the minimum wage. The trend in the US is for people to at least get nominal raises that would technically raise them above minimum wage, but well below the proposed new minimum wage.
- 11y ago
rhino369 11y ago
Passing costs on the client isn't something you can just do. Many products and services have elastic demand. Fast food, for example, has been has found it very hard to raise away from their dollar menu pricing. Businesses don't have to cut jobs either. They just have to move them. Edit2: Costumers can also shift to lower cost alternatives. Online retailers have less overhead and lower labor costs. If you make Walmart more expensive than Amazon, Walmart will shutter stores laying massive numbers of people off. Edit: Some economists have argued that past raises in min wage have not made noticeable impacts in employment. But this is way outsides of a normal rise in minimum wage. Going to 9 or 10 makes a lot sense. 15 dollars will put people in most of the country out of work.
- toomuchtodo 11y ago
  >15 dollars will put people in most of the country out of work. So be it. Can't find a job that offers a living wage? We provide a social safety net and increase taxes on the wealthy to pay for it. Make more than a million dollars a year? 95% marginal tax rate. Tax rates are the lowest they've been in the history of the US, and all we've seen is a disgusting level of income equality.
  - JonFish85 11y ago
    "Make more than a million dollars a year? 95% marginal tax rate." Great. Then what? Everyone currently making over $1m a year will cut their salary to $1m. Then you gotta start taxing the upper middle class -- what rate do you want to tax people making over $500k? $250k? $100k? Those are the ones that will pay for this program. As much as you want to tax "the wealthy", there really aren't enough wealthy people to pay for everything, and it comes down to how much you want to tax the moderately successful person who is trying to pay for their 2 kids' college expenses while saving to have a retirement.
    - toomuchtodo 11y ago
      > Great. Then what? Everyone currently making over $1m a year will cut their salary to $1m. Do wealthy individuals in other countries with a heavier tax burden (Europe, Scandinavia to be specific) do this? Would be nice to see evidence of this behavior before outright dismissing raising taxes.
phaus 11y ago
Its a form of wealth distribution that's going to have the largest negative impact on the lower and middle class. I agree we need to do something to solve the problem of poverty in this country, but this doesn't seem like it would redistribute wealth from the middle class to the poor, not the rich to the poor.
BurningFrog 11y ago
Then why not raise it to $100/h, so everyone can live a comfortable life?
- littletimmy 11y ago
  Reasonable person: 8 glasses of water keep you healthy. You: WHY DON'T YOU DRINK 100 LITERS A DAY IF YOU LIKE IT SO MUCH!!
  - BurningFrog 11y ago
    Well, yeah, I'm interested in what mechanism people think will make going to $100/h or $30/h fail, and what makes it not apply for $15/h.
    - unprepare 11y ago
      I'll take a crack at this. Because 100$ per hour is not what labor is currently worth. The whole idea behind making the minimum wage a livable wage is to stop allowing corporations to keep wages artificially low by having workers augment their wages with government provided subsidies. So what people are saying is, when you account for the subsidies people currently being paid minimum wage are taking advantage of, the real cost of that labor is much closer to 15$ per hour than the current 7.50$ per hour. Shifting the minimum wage to 15$ an hour will shift many people with minimum wage jobs off of government subsidy programs, actualizing the real cost of labor on corporations and lowering the burden of our current government programs. so this is much more than just picking a number and saying 'wages should be at least this high", its more "youre are paying X, we are subsidizing that by Y, we think you should pay all of X+Y"
bko 11y ago
Businesses would generally charge the price that would result in the most profit (revenue - expenses). Businesses can't just raise prices and get more revenue. If they could, they would do that already. Minimum wage has to do with marginal cost of producing an extra product. Marginal cost generally increases after a while. So producing that last additional unit usually costs more than the one before. When you increase cost in the form of the price of human capital, the marginal cost of producing a unit will increase and the intersection with the marginal revenue (price of the unit) will drop to a lower quantity supplied and higher price. So yes, prices will go up but the business will also sell less units. Since less units are sold, there will be less capital that will need to be utilized. Prices aren't arbitrarily set and increase in price will result in less units being sold and less employment. This isn't as controversial as journalists make it out to be. Pre-political Paul Krugman does a great job explaining it: > So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This theoretical prediction has, however, been hard to confirm with actual data. Indeed, much-cited studies by two well-regarded labor economists, David Card and Alan Krueger, find that where there have been more or less controlled experiments, for example when New Jersey raised minimum wages but Pennsylvania did not, the effects of the increase on employment have been negligible or even positive. Exactly what to make of this result is a source of great dispute. Card and Krueger offered some complex theoretical rationales, but most of their colleagues are unconvinced; the centrist view is probably that minimum wages “do,” in fact, reduce employment, but that the effects are small and swamped by other forces. > What is remarkable, however, is how this rather iffy result has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda–for arguing that living wages “can play an important role in reversing the 25-year decline in wages experienced by most working people in America” (as this book’s back cover has it). Clearly these advocates very much want to believe that the price of labor–unlike that of gasoline, or Manhattan apartments–can be set based on considerations of justice, not supply and demand, without unpleasant side effects.[0] [0] http://www.forbes.com/sites/timworstall/2015/03/02/paul-krugmans-amazing-about-face-on-the-minimum-wage/ http://www.forbes.com/sites/timworstall/2015/03/02/paul-krug...
- seanflyon 11y ago
Turing_Machine 11y ago
It isn't super-rich people who shop at Walmart, eat at McDonalds, or patronize most other low-wage businesses, so I don't think your "wealth distribution" theory is correct.
- civilframe 11y ago
  Check page seven of http://www.bls.gov/opub/reports/cps/characteristics-of-minimum-wage-workers-2014.pdf http://www.bls.gov/opub/reports/cps/characteristics-of-minim... for some insightful statistics.

johnjac 11y ago

The problem with this type of wealth redistribution is that the poor are often consumers of the same products and services served by min wage jobs. This is one of many reasons I support unconditional basic income. It allows labor to be accurately priced in the market, without raising cost to the poor.

thomasfoster96 11y ago
I'd agree, but raising the minimum wage is a relatively good alternative to doing nothin given unconditional basic income is merely a political dream in most jurisdictions. The US has such a low minimum wage given the wealth within the economy it's hard to see a rise having much of an impact.
- w1ntermute 11y ago
  An EITC would more effectively incentivize the poor to work than unconditional basic income.
  - dllthomas 11y ago
    Assuming it doesn't taper, yes.
  - ashark 11y ago
    1) An EITC fails to realize the efficiencies of consolidating or eliminating other forms of aid that basic income could. 2) The incentive to work under basic income is having more than barely enough money to scrape by. Wages will go up until this is a sufficient incentive. My money's on wages not having to rise much at all, if any, to achieve this. I wouldn't even be surprised if average compensation dropped a bit under basic income. 3) An EITC doesn't support entrepreneurship and small businesses the way basic income could.
  - dragonwriter 11y ago
    > An EITC would more effectively incentivize the poor to work than unconditional basic income. Maybe, but: (1) This is an assertion provided without evidence, and (2) The purpose of the basic income isn't to incentivize poor people to work, anyway, and (3) Poor people, even before considering EITC or Basic Income, have more than sufficient incentive to work, what they generally lack is opportunity to work with their current skill set, and opportunity to gain the skills needed to work where it is in demand without trading off present necessities.
  - thomasfoster96 11y ago
    I should've clarified: by impact I mean negative impact on business costs and employment rates.
fweespeech 11y ago
> The problem with this type of wealth redistribution is that the poor are often consumers of the same products and services served by min wage jobs. This is one of many reasons I support unconditional basic income. It allows labor to be accurately priced in the market, without raising cost to the poor. Yes but labor is less than half of the cost for everything. One of the most labor intensive is food [growing -> market -> consumer] and its still not even 50%. https://www.fmi.org/docs/facts-figures/marketingcosts.pdf?sfvrsn=2 https://www.fmi.org/docs/facts-figures/marketingcosts.pdf?sf... http://www.ers.usda.gov/media/307995/aer780d_1_.pdf http://www.ers.usda.gov/media/307995/aer780d_1_.pdf Its 38.5%. The impacts is similar on other areas where the minimum wage laborer is also the minimum wage consumer. The pay increase still flows ~60% to the people on minimum wage and is the most effective method that is politically feasible. [e.g. Backed by a large portion of a major political party] Ideally, raising the standard deduction to the poverty level for 1 person as well would be ideal to spread things out more. Of course, you'd need to raise the marginal tax rates [e.g. Money after $11,700/year would be taxed at a higher rate] to do that since it'll cost hundreds of billions otherwise :p [e.g. $6,300 -> $11,700] http://familiesusa.org/product/federal-poverty-guidelines http://familiesusa.org/product/federal-poverty-guidelines
- afarrell 11y ago
  You would also want to have the IRS automatically fill out the tax returns of people making less than 3x the poverty line. Otherwise the poor and frazzled would not take advantage of this.
jefurii 11y ago
> this type of wealth redistribution As opposed to the kind where the bosses pay absurdly low wages and distribute the profits to themselves? Update: grammar, typo
- icebraining 11y ago
  No, clearly as opposed to UBI. Did you read the whole post?

Kequc 11y ago

As a general rule prices in a capitalist society are already as high as they can be. Any higher and they would be undercut. When a company becomes large and therefore able to produce goods for less money, the price doesn't fall, profit margins increase. These large businesses are the ones paying employees the federal minimum wage. Only thing that happens is their profit margin shrinks a tiny amount. As long as the profit margin is in the black the business will continue to operate. It puts more money into the pockets of consumers, who are the drivers of the economy.

JonFish85 11y ago
"As a general rule prices in a capitalist society are already as high as they can be." What you're discounting is that once the minimum wage is raised, the market can bear higher prices, and will move accordingly.
- ealexhudson 11y ago
  It's not a huge number of people on minimum wage that would be affected by an uplift: in the UK in 2014, there were around 1.5M minimum wage jobs, 50% of which in hospitality, cleaning and retail (so, many not full time). The average wage shift would be virtually imperceptible and the extra spending power of those on the minimum wage does not translate to measurably higher prices (in the UK the minimum wage has rarely followed average earnings, and it's difficult-almost-impossible to measure the spending of minimum wage earners separately).
  - davis_m 11y ago
    It isn't just the people on minimum wage that would get a raise. Anyone making between the current minimum wage and the new minimum wage would receive a pay bump. I don't have the numbers, but I would guess that there are more people within a dollar or so of the current minimum wage than there are actually at the minimum wage. The trend in the US is for people to at least get nominal raises that would technically raise them above minimum wage, but well below the proposed new minimum wage.
11y ago

rhino369 11y ago

Passing costs on the client isn't something you can just do. Many products and services have elastic demand. Fast food, for example, has been has found it very hard to raise away from their dollar menu pricing. Businesses don't have to cut jobs either. They just have to move them. Edit2: Costumers can also shift to lower cost alternatives. Online retailers have less overhead and lower labor costs. If you make Walmart more expensive than Amazon, Walmart will shutter stores laying massive numbers of people off. Edit: Some economists have argued that past raises in min wage have not made noticeable impacts in employment. But this is way outsides of a normal rise in minimum wage. Going to 9 or 10 makes a lot sense. 15 dollars will put people in most of the country out of work.

toomuchtodo 11y ago
>15 dollars will put people in most of the country out of work. So be it. Can't find a job that offers a living wage? We provide a social safety net and increase taxes on the wealthy to pay for it. Make more than a million dollars a year? 95% marginal tax rate. Tax rates are the lowest they've been in the history of the US, and all we've seen is a disgusting level of income equality.
- JonFish85 11y ago
  "Make more than a million dollars a year? 95% marginal tax rate." Great. Then what? Everyone currently making over $1m a year will cut their salary to $1m. Then you gotta start taxing the upper middle class -- what rate do you want to tax people making over $500k? $250k? $100k? Those are the ones that will pay for this program. As much as you want to tax "the wealthy", there really aren't enough wealthy people to pay for everything, and it comes down to how much you want to tax the moderately successful person who is trying to pay for their 2 kids' college expenses while saving to have a retirement.
  - toomuchtodo 11y ago
    > Great. Then what? Everyone currently making over $1m a year will cut their salary to $1m. Do wealthy individuals in other countries with a heavier tax burden (Europe, Scandinavia to be specific) do this? Would be nice to see evidence of this behavior before outright dismissing raising taxes.

phaus 11y ago

Its a form of wealth distribution that's going to have the largest negative impact on the lower and middle class. I agree we need to do something to solve the problem of poverty in this country, but this doesn't seem like it would redistribute wealth from the middle class to the poor, not the rich to the poor.

BurningFrog 11y ago

Then why not raise it to $100/h, so everyone can live a comfortable life?

littletimmy 11y ago
Reasonable person: 8 glasses of water keep you healthy. You: WHY DON'T YOU DRINK 100 LITERS A DAY IF YOU LIKE IT SO MUCH!!
- BurningFrog 11y ago
  Well, yeah, I'm interested in what mechanism people think will make going to $100/h or $30/h fail, and what makes it not apply for $15/h.
  - unprepare 11y ago
    I'll take a crack at this. Because 100$ per hour is not what labor is currently worth. The whole idea behind making the minimum wage a livable wage is to stop allowing corporations to keep wages artificially low by having workers augment their wages with government provided subsidies. So what people are saying is, when you account for the subsidies people currently being paid minimum wage are taking advantage of, the real cost of that labor is much closer to 15$ per hour than the current 7.50$ per hour. Shifting the minimum wage to 15$ an hour will shift many people with minimum wage jobs off of government subsidy programs, actualizing the real cost of labor on corporations and lowering the burden of our current government programs. so this is much more than just picking a number and saying 'wages should be at least this high", its more "youre are paying X, we are subsidizing that by Y, we think you should pay all of X+Y"

bko 11y ago

Businesses would generally charge the price that would result in the most profit (revenue - expenses). Businesses can't just raise prices and get more revenue. If they could, they would do that already. Minimum wage has to do with marginal cost of producing an extra product. Marginal cost generally increases after a while. So producing that last additional unit usually costs more than the one before. When you increase cost in the form of the price of human capital, the marginal cost of producing a unit will increase and the intersection with the marginal revenue (price of the unit) will drop to a lower quantity supplied and higher price. So yes, prices will go up but the business will also sell less units. Since less units are sold, there will be less capital that will need to be utilized. Prices aren't arbitrarily set and increase in price will result in less units being sold and less employment. This isn't as controversial as journalists make it out to be. Pre-political Paul Krugman does a great job explaining it: > So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This theoretical prediction has, however, been hard to confirm with actual data. Indeed, much-cited studies by two well-regarded labor economists, David Card and Alan Krueger, find that where there have been more or less controlled experiments, for example when New Jersey raised minimum wages but Pennsylvania did not, the effects of the increase on employment have been negligible or even positive. Exactly what to make of this result is a source of great dispute. Card and Krueger offered some complex theoretical rationales, but most of their colleagues are unconvinced; the centrist view is probably that minimum wages “do,” in fact, reduce employment, but that the effects are small and swamped by other forces. > What is remarkable, however, is how this rather iffy result has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda–for arguing that living wages “can play an important role in reversing the 25-year decline in wages experienced by most working people in America” (as this book’s back cover has it). Clearly these advocates very much want to believe that the price of labor–unlike that of gasoline, or Manhattan apartments–can be set based on considerations of justice, not supply and demand, without unpleasant side effects.[0] [0] http://www.forbes.com/sites/timworstall/2015/03/02/paul-krugmans-amazing-about-face-on-the-minimum-wage/ http://www.forbes.com/sites/timworstall/2015/03/02/paul-krug...

seanflyon 11y ago

Turing_Machine 11y ago

It isn't super-rich people who shop at Walmart, eat at McDonalds, or patronize most other low-wage businesses, so I don't think your "wealth distribution" theory is correct.

civilframe 11y ago
Check page seven of http://www.bls.gov/opub/reports/cps/characteristics-of-minimum-wage-workers-2014.pdf http://www.bls.gov/opub/reports/cps/characteristics-of-minim... for some insightful statistics.