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Minimum Wage: Helpful or Harmful?


FoxwolfJackson
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That's what scholarships, student loans and FAFSA are for.

Some jobs also help pay for employees who go back to school.

There's also the option of joining the military, and using the GI Bill to go back to school. The minimum you'd have to serve is 4 years active duty, and 4 years in the inactive reserves.

all in limited supply, all not guaranteed lol.

are you seriously suggesting that if people can't get the above 3 they should join the military? whaaaat?

1: The goal of a minimum wage (granted, I'm not a historian, so I'm merely taking a stab at it) was probably supposed to be a failsafe to prevent businesses from abusing labor and paying artificially low wages to maximize profits and to protect workers from unfair business practices.

that's essentially what i said. so do you think the min. wage should be removed? what about employee protections?

2: Granted, this whole question/premise is a logical fallacy, but I'll bite anyway. Hypothetically, yes, we do want our citizens to live comfortably, but there has to be a balance and a reality factor in this whole utopian premise. The harsh reality is, no, not every citizen is going to live comfortably, as much as we would like to see it.

if given the choice between allowing more people to live comfortably vs. not, i'll choose the former. we can afford a min. wage.

3: Everyone deserves help at one time or another. It is virtually impossible to be successful every moment in your life. I personally don't believe in the phrase "doomed to fail", because it implies that no one has control over their situation and fate. Life is what you make of it.

most variables in a person's life aren't controllable. think about that--a person can control a few things, but not much.

4.0 student, 3 meaningful extracurriculars, amazing letters of rec, but asian. doesn't get accepted into any top 15 united states university, but wants to go into investment banking. this person is now at a severe disadvantage at no fault of their own, because big banks typically only hire from 'elite schools.' this is but one very small example of the many ways a person is doomed to fail in a capitalist system.

not to mention the obvious part: limited resources. i'm going into physics and there's only so many positions that can be filled. let's say there's 1200 openings in the us for graduate school in physics, but with 2000 qualified (even if not equally qualified) bs physics earners. 800 of them are doomed to fail. this world needs its custodians, its garbagepeople, its clothes-makers, and to say that there's "always something out there" is not only wrong, but i feel like it's delusional. minorities are at a severe disadvantage by the start.

First of all, the data already has showed that it is a big problem, as multiple sources in the article have pointed out. Prices for goods have gone up, restaurants are releasing employees or closing down, etc., etc.

hmmmmmmmm decades of data supported by literally hundreds of top experts in the field vs what is by comparison anecdotal evidence of one city.........i wonder which way the scales tip. what other research has been done to prove this is caused, either exclusively or primarily, by the increase in min. wage?

Is $15 an hour a necessity in urban areas with a high cost of living? Of course. However, wages are a contract between employer and employee; there is absolutely zero reason to have a third party artificially tying an arm behind the back of either party. Is $15 an hour a necessity in other places? Not all the time. It's all case-by-case basis depending on the area an individual lives in.

forget how much it is, a third party is necessary because businesses will exploit employees if left unchecked. this is shown throughout history, even today. why do so many american-born companies outsource labor to the poorest parts of the world so that the people work for piss?

businesses and government aren't perfect. that's why there exists checks and balances for both.

For the record, the term "living wage" is probably one of the most cliche terms used by the political left's rhetoric to garner sympathy from the listeners, despite the fact it is also a logical fallacy and thus leaves a bad taste in some people's mouths.

ok. why is it a bad term?

To give a pragmatic, practical answer without sugar coating? Yes, essentially. Many people actually do work two jobs in today's society. Some out of necessity, others out of the want to have extra money as a "rainy day fund" or to have extra to indulge in on their days off. Again, the reality of the situation is that after high school, people should be ready to face the world at large. Either they can go to college and rack up student loans (or get scholarships if they are lucky enough) to get a degree in a decent-paying field, they can go to a trade school and pick up a craft, or they can join the workforce and attempt to move up the corporate ladder from within. Those that are ill-prepared should not have to burden the rest of society because of their ill-planning.

do you think high school prepares a person well? i don't think most do. most people have no idea what they even want to do until they're like 20 or something. that is through no fault of their own--picking a career when one is fresh outta high school, after not having the opportunity to really try anything, is madness. people need a fast start, not a slow start when it comes to wages. otherwise, they'll get stuck in a rut.

I counter your question with a question of my own: Do you think it is fair for a zero-experience high school student to be paid the same wage as someone who lives on their own, who may or may not have prior experience in the job field, and is struggling to pay their bills because there is an artificial floor in what is the smallest amount a person can be compensated for their labor?

yes

Edited by Phoenix Wright
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You're assuming that people will have the resources to not only start a business, but keep it afloat, while paying for basic living expenses. Living paycheck to paycheck is a reality for some, and those people aren't in the best position to start up a business. I don't trust the free market to fix things, except in a way that gives themselves the biggest slice of the pie. That's why I think some government oversight into business is a good idea. Businesses sure as hell aren't going to keep themselves honest!

Want to know one industry that is allowed to pay under the minimum wage? Any tipped food service position - and not all employers will reimburse their employees up to the federal minimum, should they fall short on tips. Despite the federal minimum wage exception, it's anything but a free market utopia.

EDIT: Phoenix you ninja-lawyer-thingy. . . :P:

Edited by eclipse
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are you seriously suggesting that if people can't get the above 3 they should join the military? whaaaat?

It's an option, I'm just throwing it out there. Quite frankly, a person can do a lot worse than joining the military.

You can learn new skills, and go back to school with the GI Bill. Depending on the job you have in the military, such as cyber security, you'll have a good chance of getting a good job when you're out.

Plus, being a veteran always looks good on a resume. Provided you were never dishonorably discharged.

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The problem with having any sort of minimum wage is that it forces companies to set a standard for what it expects from its new employees from the get-go. No employer should be expecting much from a new employee that's just out of (or still in) high school and has zero previous job experience. I don't think it's wrong for that employer to hire a young kid and pay them only $4 an hour... and as wrong as that sounds, here's the logic behind it.

I agree that newcomers should start off with a blank slate since, in terms of job experience, they are one. A wage of $4/hr doesn't sound that heinous to me. What I meant with my wage floor idea was a bare minimum amount paid (say $1/hr), such that it would prevent the possibility of slave wages. Though the market would likely ensure that this wouldn't happen anyway (it already does to a degree), it's IMO better to have some sort of a guarantee.

Most only take up unskilled labor jobs for extra spending money outside of their allowances. Some use it to help them buy their prom dress/tux, limo to/from the dance, etc. What's the harm in hiring them for that rate? They're not desperately needing the money to live. Plus, the benefit to starting low is it allows more incentive for rewarding good work ethic. If a high schooler is paid $4 an hour, but shows a great aptitude for learning how the job works and is constantly driven to do the best job they can, why not give them a $2.50 raise at their 60-day evaluation? If a new worker can potentially get a huge raise, then naturally they will do their best to get the best raise they can. With a small base, it allows breathing room to really motivate workers to giving their all to get that huge raise. Not to mention, the good worker is given a good reference for their resume AND gets job experience on their resume for future job applications. If the person is a slacker who does the bare minimum, they can get a $0.25 raise on their 60-day and be done with it.

I concede your point.

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In a word? Yes.

But since I'm not one for answers succinct to the point of smarmy, a little more detail.

Every economic choice, absolutely every single one, is a question of trade-off. There are always costs and benefits associated with any choice, be it those made by each individual participant in the market, all the way up to choices made by boards of directors and legislatures. It is completely impossible to speak in absolutes about any individual tool of influencing the market, because we use tools in a context of some kind. So trying to fork the reader into a binary answer--helpful or harmful--is itself a fallacy, that of black-and-white thinking.

I am, generally speaking, in favor of minimum wage laws at the conceptual level. It's absolutely true that employment is a contractual arrangement between employee and employer; that much is inarguable. However, to stop there, without saying anything more about the nature of that relationship, is in my opinion deeply deceptive. People need income in order to survive, and furthermore, there is an enormous social pressure on the unemployed to find jobs (believe me, I know this quite well). When combined with population sizes as they are today, employment is absolutely a "buyer's" market (in the sense that labor is "bought" from workers at a price): supply is high, demand is low, alternative markets exist, etc. What this means is that the buyer, the employer, has a massive coercive ability. They can offer nearly anything and someone will go for it. I mean, bloody hell, not even a decade ago there were states that HAD a $0 minimum wage for tip-earning employees, and even where there is a "split" minimum wage (that is, a minimum after tips have been taken into account) there is a massive incentive for businesses to coerce their employees into falsely reporting their tip earnings.

I'll be honest: I didn't read all of the first post. It suffers from a similar problem to a lot of my own writing: taking a lot more words than necessary to make the point. From having read the first few paragraphs and skimming the rest, what I gathered was:

  1. In Seattle, where a recent large spike in the minimum wage occurred, restaurants have been closing in higher numbers than expected, and some think this is a causal relationship.
  2. Assumptions about the future progression of wages vs. productivity which would indicate that restaurants may cease to be a profitable business altogether.
  3. Restaurants, especially entrepreneurial/small-business ones, are hardest hit. Repeated over, and over, and over again.
  4. One offhand example of a small business which does not take advantage of its employees, and in fact does the opposite.
  5. One offhand example of a country with a high minimum wage where other economic factors counterbalance it (without actually making use of statistics which take these factors into account).
  6. The anti-poverty effects may not be happening as expected.

But there are some serious problems with all of these points, in order:

  1. It is a fallacy (post hoc ergo prompter hoc -- "after this, therefore because of this") to assume that a past event caused a future event solely because it happened in the past. Further, even if we can demonstrate a clear correlation, that does not imply causation either. Proving that this was in fact causative would be an extremely difficult task, even if it is causative. Leaving it to the mind of the reader is somewhat disingenuous rhretoric.
  2. Firstly, the data shown here has diddly-squat to do with changes to the minimum wage, since it doesn't even cover the last three years--and seems to have been rising at more or less the same rate even with other, nationwide minimum wage laws coming into effect. Secondly, productivity in a restaurant setting is effectively fixed: food takes a fairly set amount of time to cook, so productivity will need to remain more-or-less constant, yet wages even without a minimum wage "should" go up approximately in step with inflation under the perfect, ideal free market economy. This means that of course wages over productivity will go up, even without minimum wages. Without meaningful units, and having no idea if it is adjusted for inflation, we cannot actually draw any meaningful conclusions from the data presented. Extremely shoddy statistical presentation. And, in fact, based on the Bureau of Labor Statistics' information about inflation, if these values are not adjusted for inflation, then in fact the cost of food service labor has gone down since 2002 ($1 in 2002 would be worth approximately $1.29 in 2013, a 29% increase, while there was only a 20% increase in wages over productivity!)
  3. To be blunt, your over-reliance on a single subset of a single market sector (entrepreneurial/small-business restaurants) hurts your argument a lot. Yes, we know restaurants often ride a narrow line between profitability and unprofitability. At the same time, many of them also resort to some rather dirty business as well. Should we repeal food safety laws, because keeping clean for inspection is a financial burden? Should we repeal OSHA compliance, because that is a financial burden? Simply demonstrating that this will create a new burden for employers is not enough to explain why we shouldn't do it: there are lots of burdens we place on businesses, restaurants or not, because we believe some other good (preventing disease, avoiding injury) is more valuable than the good of highly profitable businesses. What you have is a good start for an argument, but it simply doesn't go far enough--otherwise you'll be on board with removing a huge host of other regulatory burdens that you may or may not actually want to get rid of. I may be setting an unfair burden, but I definitely think your position would be much stronger if you could cite at least one (and, of course, preferably more) non-restaurant business categories that are plausibly experiencing undue burden because of this new law.
  4. That you can demonstrate that at least one--or even some--businesses do not resort to coercive or oppressive labor practices, does not mean that many, to say nothing of most, will do the same (this is an example of hasty generalization, also a fallacy). Of course, this doesn't mean that all other businesses are horrible terrible monsters who will ruthlessly exploit their employees and begrudgingly pay them as little as they can justify, either. Only that giving us one example of a "noble" business does nothing to demonstrate the commonness of such businesses (in fact, the only thing it can do, logically, is prove false the claim that no such businesses exist. Which is useful, but not really what you were going for, I suspect.)
  5. Your choice of Australia as an example was very poor, because a quick--not even five-minute--check through Google demonstrates that Australia's minimum wage is in fact better than that in the United States. When you actually do take into account the Purchasing Power Parity differences between Australia and the United States, Australia's minimum wage is more valuable than that in the US. It's not by a lot--if the US min wage is taken to be $7.25, then Australia's PPP equivalent wage is $9.77 (USD-equivalents, NOT AUD), or an increase of approximately 34.8% (note that these numbers were reported in 2013, so they must have been gathered before that, and thus may not be perfectly accurate today), as opposed to the expected 100*(16 - 7.25)/7.25 = 121% increase from the pre-adjusted (non-PPP) wages. Additionally, when comparing average wages to minimum wages, the United States is tied with Japan for last place among those countries which have legally established minimum wages (many Scandinavian countries cannot be evaluated this way, for instance, because minimum wages are set by extremely strong collective bargaining groups, rather than by legal mandate--it's essentially the same effect, but harder to directly evaluate).
  6. Jumping the gun a bit on those claims. That is, from reading the Fox News article, they're literally comparing the number of people seeking ANY form of financial assistance the month before, and the month after the law came into effect. That's...well, okay? I'm not entirely surprised that the decrease was small at first. Economic changes often take time. Expecting a near-instantaneous response seems a bit foolish. If it had been, say, a year-over-year thing, or even a five-year retrospective (which I know is impossible at this point), that would be dramatically more convincing. More or less, I don't think your claim even can be substantiated (nor disproved, for that matter) at this point--we just don't have enough data because there hasn't been enough time to evaluate it. It would be like making a change to the curriculum at a school and then using the next semester's grades as "proof" that the change didn't work--more time is needed for such things to play out.

Now, all of those problems aside? I don't necessarily disagree with you. $15/hour minimum wage seems very drastic to me--where I live, that would be nearly doubling the minimum wage, which very easily COULD be catastrophic to perfectly legitimate, above-board businesses. However, the idea that an extreme minimum wage is (potentially) bad does not, in itself, demonstrate that all forms of minimum wage are bad. You've go a much, much bigger hill to climb if you want to go from "15/hour is crazy!" to "ANY minimum wage is crazy!"

Particularly when real (not nominal) wages have been effectively static for all but the top 10% of earners over the past 40 years (while those in that top 10% bracket have enjoyed a 9.7% growth in real wages), while the profits going to corporations (probably pre-tax) have climbed dramatically faster than inflation. In fact, in 2013, corporate after-tax profits hit a record percent of GDP not seen since the 1942, while corporate revenue going to employee salary (also as a percent of GDP) was the lowest on record, while the total employee compensation (including things like insurance, Social Security, etc.) was also lower than it had been since the 40s (1948, to be specific).

So yeah. Small businesses get squeezed hard by some of this stuff--and that's genuinely unfortunate. If I knew more about economics, finance, and corporate law, I would try to propose something that could alleviate the pressure on small businesses while maintaining the pressure on big business--because that's where the real problems lie. But I don't know those things, so I'm not going to even try to propose a solution. Anything I did would almost surely be riddled with flaws and inconsistencies. But something needs to be done--and, at least in the short term, I am okay with entrepreneurial restaurants closing, if it means getting some corporate fat cats to begrudgingly share a tiny slice of their pie with the rest of us. It sucks, to be sure. But every economic choice is a trade-off.

(While you probably know this, for those who don't: "real dollars" are those that have been adjusted for inflation, while "nominal dollars" are the numbers that would've been reported in whatever specific year you look at. So "real dollars" tell you how much things have "really" changed, while nominal dollars tell you what prices/values actually looked like in the past.)

Edited by amiabletemplar
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  • 2 weeks later...

The reason minimum wage needs to be raised is because you can't raise a family on it. You can't say a person who works 3 minimum wage jobs to feed their family without any luxuries like cellphones and internet, isn't working as hard as billionaire like Donald Trump because no matter how you look at it, it's just not true. Also studies show that poor children generally (Not always) do worse in school. So low minimum wage hurts the future of our country badly.

Edited by dice1235
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The reason minimum wage needs to be raised is because you can't raise a family on it. You can't say a person who works 3 minimum wage jobs to feed their family without any luxuries like cellphones and internet, isn't working as hard as billionaire like Donald Trump because no matter how you look at it, it's just not true. Also studies show that poor children generally (Not always) do worse in school. So low minimum wage hurts the future of our country badly.

None of that explains why minimum wage needs to be raised. If a minimum wage rise causes workers currently working at the minimum wage to lose their jobs, then they will be much worse off. As difficult as it is to raise a family on minimum wage it's even harder to raise a family on nothing.

Everything else comes down to this; whether or not a minimum wage increase will have a disemployment effect. And it's not really clear what the answer is.

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why isn't it clear?

Well, there are two sides to the coin, more or less. One says that profits and high-level pay have risen much faster than median-level (to say nothing of bottom-level) pay over the last several decades, so something needs to be done to see that workers get a (slightly) bigger portion of the benefits that growth entails. The other side says that, because small businesses employ a large segment (sometimes the majority, depending on how you define "small business") of the private labor force *and* are more likely to be financially harmed by these requirements, we should avoid any increases to the minimum wage (or even scrap it) so that more startup/entrepreneurial businesses get off the ground and employ more people. In other words, the two sides are talking past each other and focusing on completely different criteria, which is pretty much par for the course in any political discussion.

If I had to present an argument for the first side, I'd probably say that while small businesses (to my surprise, my intuition of "less than 100 employees" is a commonly-used standard!) often run a very tight ship and have little room for paying the owner/CEO/etc. much more than their lowest-paid employees, there's a huge discrepancy for many of the largest corporations, who will also be among the largest individual employers. According to the small-business advocacy group Small Business Majority, approximately 42% of US employees (not sure what year these statistics are from) work for a business with less than 100 total employees. So "large" businesses (for the given definition of "large") employ a majority of people in the workforce. I suspect--but cannot prove, too tired to do the research right now--that a majority of the lowest-paying jobs are found at large corporations as well. For such large corporations, the best-paid employees (chief officers, board members, etc.) may make hundreds or even thousands of times what the lowest-paid employees make--consider the salary difference between an entry-level McDonald's employee, or a cashier at a supermarket/one-stop-shopping place like Walmart or Kroger, and the CEO for that company?

At current minimum wage, 40 hour work week, even if we assume the equivalent of 53 work weeks (to account for overtime pay on holidays, which many low-income people feel they have to take), that's ($7.25/hr)*(40 hr/week)*(53 week-equivalents/year) = $15,370/year before tax. According to this analysis of CEO payment from last year (so presumably using 2014 statistics), the equivalent hourly pay--even using 60-hour work weeks--for the CEOs of big chain-restaurants like Panera, Dominos, and Chipotle is hundreds or even thousands of dollars an hour (for 60-hour weeks, Panera: $862/hr, Dominos: $2381, Chipotle: $8993 and $8981--not sure why Chipotle has two CEOs, but whatever).

Point being: there are some pretty substantial pay discrepancies between the best-paid and even the average, i.e. median, worker (McDonald's reported a ratio of 644:1 for their median employee salary, which means the lowest salary ratio would be even more dramatic). While I am absolutely fine with the idea that companies need to provide adequate, and competitive, compensation in order to keep qualified people in important positions like that, discrepancies of that magnitude simply in ratio, even without knowing the precise dollar value, make it a little hard to argue that large companies are floundering for cash. As that last link notes, "Average CEO pay at the 350 largest U.S. companies by revenue surged 997 percent from 1978 to 2014, while the compensation of non-supervisory employees rose 10.9 percent, according to the Economic Policy Institute, a research group that advocates for workers." (I assume this is after accounting for inflation, because there's no way in hell that a 10.9% increase in pay kept up with inflation over a 36-year span--the Bureau of Labor Statistics says $100.00 of 1978 money was worth $363.09 of 2014 money.)

Which is why I, personally, would like to see some wage-related stuff that specifically avoids targeting small businesses--those with less than X employees. It's gonna be an arbitrary number, but just because it's arbitrary doesn't mean it can't have some statistical analysis behind it (to make it more meaningful than simply picking a nice round number like 100). Of course, such things then make an interesting dilemma on the employee end, when things are already a little dicey for small-business employees (as the SBM link notes, the smaller a business is, the more likely it is to not offer medical benefits), but it seems pretty clear to me that *something* should address those discrepancies.

For me, it's a little hard to argue for the other side. Entrepreneurial/small-business jobs are super important, no question, but they're also highly ephemeral--many small businesses don't last more than a couple of years, and the majority don't make it to 10 years or more, statistically speaking. So while they can (at times, but apparently not now) employ a majority of the workforce, at the same time that also means that the majority of the workforce is experiencing a very high job turnover rate due to their employer folding, something like a new job every 3-6 years from my (exceedingly) rough estimate, which seems pretty damn fast to me. I'm not saying small business jobs are bad--they're great, and pretty much every business starts off as a small one!--but they're also very volatile. In other words, I see them as being the equivalent of a high-risk, high-reward investment: a small business that does well potentially grants employees access to MORE pay, BETTER benefits, than a large business job would. But it also exposes the employee to greater risk--on a variety of scales. That such "higher employee risk" jobs get crimped by a law that is specifically making reliable alternatives more attractive seems, to me, to be precisely what the law is intended to do. Whether it increases employment seems like a secondary issue; minimum wage laws aren't about getting more jobs regardless of quality, they're about trying to improve the quality of the jobs that already exist, even if that means a slower gain (or even temporary reduction) in quantity.

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why isn't it clear?

Absolutely everything we know about economics suggests that when you make something more expensive, people will buy less of it. The evidence is not 100% clear but minimum wages probably have a negative impact on employment, it's just that historically minimum wages have been set low enough to not have a large disemployment effect. Stumbling and Mumbling has a good post on it.

Plus, I might well ask you; if apparently raising the minimum wage to 15 dollars will have no negative impacts whatsoever and you think there's zero chance of anyone losing their job as a result, why stop there? Why not raise the minimum wage to $100? Or a thousand dollars? Since apparently it's just free money that appears out of the ether and will have no effect on employment or prices.

(Note that I am in general in favor of a minimum wage, preferably chained to inflation. But we should not underestimate the danger of disemployment effects which disproportionately effect the poor.)

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Well, there are two sides to the coin, more or less. One says that profits and high-level pay have risen much faster than median-level (to say nothing of bottom-level) pay over the last several decades, so something needs to be done to see that workers get a (slightly) bigger portion of the benefits that growth entails. The other side says that, because small businesses employ a large segment (sometimes the majority, depending on how you define "small business") of the private labor force *and* are more likely to be financially harmed by these requirements, we should avoid any increases to the minimum wage (or even scrap it) so that more startup/entrepreneurial businesses get off the ground and employ more people. In other words, the two sides are talking past each other and focusing on completely different criteria, which is pretty much par for the course in any political discussion.

If I had to present an argument for the first side, I'd probably say that while small businesses (to my surprise, my intuition of "less than 100 employees" is a commonly-used standard!) often run a very tight ship and have little room for paying the owner/CEO/etc. much more than their lowest-paid employees, there's a huge discrepancy for many of the largest corporations, who will also be among the largest individual employers. According to the small-business advocacy group Small Business Majority, approximately 42% of US employees (not sure what year these statistics are from) work for a business with less than 100 total employees. So "large" businesses (for the given definition of "large") employ a majority of people in the workforce. I suspect--but cannot prove, too tired to do the research right now--that a majority of the lowest-paying jobs are found at large corporations as well. For such large corporations, the best-paid employees (chief officers, board members, etc.) may make hundreds or even thousands of times what the lowest-paid employees make--consider the salary difference between an entry-level McDonald's employee, or a cashier at a supermarket/one-stop-shopping place like Walmart or Kroger, and the CEO for that company?

At current minimum wage, 40 hour work week, even if we assume the equivalent of 53 work weeks (to account for overtime pay on holidays, which many low-income people feel they have to take), that's ($7.25/hr)*(40 hr/week)*(53 week-equivalents/year) = $15,370/year before tax. According to this analysis of CEO payment from last year (so presumably using 2014 statistics), the equivalent hourly pay--even using 60-hour work weeks--for the CEOs of big chain-restaurants like Panera, Dominos, and Chipotle is hundreds or even thousands of dollars an hour (for 60-hour weeks, Panera: $862/hr, Dominos: $2381, Chipotle: $8993 and $8981--not sure why Chipotle has two CEOs, but whatever).

Point being: there are some pretty substantial pay discrepancies between the best-paid and even the average, i.e. median, worker (McDonald's reported a ratio of 644:1 for their median employee salary, which means the lowest salary ratio would be even more dramatic). While I am absolutely fine with the idea that companies need to provide adequate, and competitive, compensation in order to keep qualified people in important positions like that, discrepancies of that magnitude simply in ratio, even without knowing the precise dollar value, make it a little hard to argue that large companies are floundering for cash. As that last link notes, "Average CEO pay at the 350 largest U.S. companies by revenue surged 997 percent from 1978 to 2014, while the compensation of non-supervisory employees rose 10.9 percent, according to the Economic Policy Institute, a research group that advocates for workers." (I assume this is after accounting for inflation, because there's no way in hell that a 10.9% increase in pay kept up with inflation over a 36-year span--the Bureau of Labor Statistics says $100.00 of 1978 money was worth $363.09 of 2014 money.)

Which is why I, personally, would like to see some wage-related stuff that specifically avoids targeting small businesses--those with less than X employees. It's gonna be an arbitrary number, but just because it's arbitrary doesn't mean it can't have some statistical analysis behind it (to make it more meaningful than simply picking a nice round number like 100). Of course, such things then make an interesting dilemma on the employee end, when things are already a little dicey for small-business employees (as the SBM link notes, the smaller a business is, the more likely it is to not offer medical benefits), but it seems pretty clear to me that *something* should address those discrepancies.

For me, it's a little hard to argue for the other side. Entrepreneurial/small-business jobs are super important, no question, but they're also highly ephemeral--many small businesses don't last more than a couple of years, and the majority don't make it to 10 years or more, statistically speaking. So while they can (at times, but apparently not now) employ a majority of the workforce, at the same time that also means that the majority of the workforce is experiencing a very high job turnover rate due to their employer folding, something like a new job every 3-6 years from my (exceedingly) rough estimate, which seems pretty damn fast to me. I'm not saying small business jobs are bad--they're great, and pretty much every business starts off as a small one!--but they're also very volatile. In other words, I see them as being the equivalent of a high-risk, high-reward investment: a small business that does well potentially grants employees access to MORE pay, BETTER benefits, than a large business job would. But it also exposes the employee to greater risk--on a variety of scales. That such "higher employee risk" jobs get crimped by a law that is specifically making reliable alternatives more attractive seems, to me, to be precisely what the law is intended to do. Whether it increases employment seems like a secondary issue; minimum wage laws aren't about getting more jobs regardless of quality, they're about trying to improve the quality of the jobs that already exist, even if that means a slower gain (or even temporary reduction) in quantity.

despite being a pretty good post, i don't think you ever really answered the question. why is the effect of a min. wage increase not clear? i think you and i agree on why it's useful and should be increased--you actually even said you can't think of good enough reasons not to. i would also like to see legislature that specifically avoids small businesses. intuitively, i have a much better time believing high min. wage hurts small business, but a very difficult time believing it for corporations. even by order of magnitude estimates, most corporations are so lucrative that employment in corp. vs small business (ie, how much a business is hurt by having to take care of all its employees) aren't comparable/proportional to each other. in some ways they're completely different beasts.

but anyway, if i'm interpreting your post correctly, i'd bet you'd argue that an increase in min. wage is generally beneficial. i don't think, and new readers can look through the topic for sources, this is unclear.

Absolutely everything we know about economics suggests that when you make something more expensive, people will buy less of it. The evidence is not 100% clear but minimum wages probably have a negative impact on employment, it's just that historically minimum wages have been set low enough to not have a large disemployment effect. Stumbling and Mumbling has a good post on it.

Plus, I might well ask you; if apparently raising the minimum wage to 15 dollars will have no negative impacts whatsoever and you think there's zero chance of anyone losing their job as a result, why stop there? Why not raise the minimum wage to $100? Or a thousand dollars? Since apparently it's just free money that appears out of the ether and will have no effect on employment or prices.

(Note that I am in general in favor of a minimum wage, preferably chained to inflation. But we should not underestimate the danger of disemployment effects which disproportionately effect the poor.)

i feel like you took my post as a charged attack--it was just a question. i suggest reading the link smug posted, as it may interest you. in fact, similar links were posted in the blog. there are decades of data that suggest adverse effects on employment don't arise due to increasing the minimum wage modestly.

there is no data in the case where min. wage is increased by an arbitrarily large amount, but as you've pointed out, that would probably be silly.

so the question is, is a factor of 2 increase in the min. wage too large? will it destroy the economy as we know it? it's a bit difficult (ie, would take more time but the point will end up the same) to find just how many people make minimum wage in the united states--including but not limited to the federal minimum wage. i'm talking about in places where min. wage is higher, like in california, or particular cities like seattle. but anyway, this 2014 estimate assumes around 3 million workers make 7.25 or less, accounting for merely 4% of the united states workforce.

let's posit that a workweek is 40hrs, all of these workers are full-time, and they keep the entirety of their paycheck. no money taken from them by any party. i claim that this person will make $10,440 in one year. if we double it, that's $20,880. times that by the amount of people that would be earning the wage (actually more than 3 million but whatever),

(2.1x104 $/per*year) * 3x106 per = 6x1010 $/year

think of whatever effect 30bn dollars has on the economy as a whole (not very much, bn vs. trn is very small) and merely double it. it still doesn't have a big effect. the numbers aren't large enough. if the laws are set up such that only corporations or "large businesses" have to increase min. wage (or something more complex than that), it's simply not going to impact the economy in any notable way, and this is supported by decades of data. increasing the minimum wage won't cause the economy to collapse. maybe if you increase it to $100, or $1000 it may, but 7 --> 15 won't do it. i claim that the min. wage is about being able to live somewhat comfortably off of your job, and it's very difficult to do that with current laws. it is so crazy to me that measures that attempt to close the gap between rich and poor in this nation are not only opposed in this nation by its rich (near the bottom), but also by its relatively poor.

edit: i bet this would be an interesting read as well: http://www.politifact.com/truth-o-meter/statements/2014/nov/06/ben-cardin/does-raising-minimum-wage-result-job-growth/

Edited by Phoenix Wright
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i feel like you took my post as a charged attack--it was just a question. i suggest reading the link smug posted, as it may interest you. in fact, similar links were posted in the blog. there are decades of data that suggest adverse effects on employment don't arise due to increasing the minimum wage modestly.

Except here, and here. I could probably find more; we could spend all day firing studies at each other since there are probably hundreds out there for each of our particular viewpoints. Given that the evidence is not helping us, I think it's completely reasonable to conclude that basic demand curves hold and that increasing the price of something will cause people to buy less of it.

there is no data in the case where min. wage is increased by an arbitrarily large amount, but as you've pointed out, that would probably be silly.

so the question is, is a factor of 2 increase in the min. wage too large? will it destroy the economy as we know it? it's a bit difficult (ie, would take more time but the point will end up the same) to find just how many people make minimum wage in the united states--including but not limited to the federal minimum wage. i'm talking about in places where min. wage is higher, like in california, or particular cities like seattle. but anyway, this 2014 estimate assumes around 3 million workers make 7.25 or less, accounting for merely 4% of the united states workforce.

let's posit that a workweek is 40hrs, all of these workers are full-time, and they keep the entirety of their paycheck. no money taken from them by any party. i claim that this person will make $10,440 in one year. if we double it, that's $20,880. times that by the amount of people that would be earning the wage (actually more than 3 million but whatever),

2.1x104 * 3x106 = 6x1010 dollars. think of whatever effect 30bn dollars has on the economy as a whole (not very much, bn vs. trn is very small) and merely double it. it still doesn't have a big effect. the numbers aren't large enough. if the laws are set up such that only corporations or "large businesses" have to increase min. wage (or something more complex than that), it's simply not going to impact the economy in any notable way, and this is supported by decades of data. increasing the minimum wage won't cause the economy to collapse. maybe if you increase it to $100, or $1000 it may, but 7 --> 15 won't do it. i claim that the min. wage is about being able to live somewhat comfortably off of your job, and it's very difficult to do that with current laws. it is so crazy to me that measures that attempt to close the gap between rich and poor in this nation are not only opposed in this nation by its rich (near the bottom), but also by its relatively poor.

If 4% of the US workforce loses their jobs, that's an unmitigated disaster. We're talking about millions of people being fired and families having to go hungry. The effect is more than 30bn, because aggregate demand will also fall and cause more job losses. That's not even accounting for the many people who work above the minimum wage and for less than $15.

It seems crazy to me that you can be so unconcerned about the prospect of millions of people, most of whom are below the poverty line to begin with, losing their jobs.

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Except here, and here. I could probably find more; we could spend all day firing studies at each other since there are probably hundreds out there for each of our particular viewpoints. Given that the evidence is not helping us, I think it's completely reasonable to conclude that basic demand curves hold and that increasing the price of something will cause people to buy less of it.

why is that at all reasonable?

the fact that research is inconclusive doesn't mean we assume basic principles are correct. it's a failure on the study of economics and its predictive power as a soft science. more often than not, min. wage appears to have no effect on the economy. are they simply statistical fluctuations, then?

these studies are all over the place, i agree.

If 4% of the US workforce loses their jobs, that's an unmitigated disaster. We're talking about millions of people being fired and families having to go hungry. The effect is more than 30bn, because aggregate demand will also fall and cause more job losses. That's not even accounting for the many people who work above the minimum wage and for less than $15.

It seems crazy to me that you can be so unconcerned about the prospect of millions of people, most of whom are below the poverty line to begin with, losing their jobs.

when did we assume that 4% of the workforce would lose their jobs?

are you trolling

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why is that at all reasonable?

the fact that research is inconclusive doesn't mean we assume basic principles are correct. it's a failure on the study of economics and its predictive power as a soft science. more often than not, min. wage appears to have no effect on the economy. are they simply statistical fluctuations, then?

these studies are all over the place, i agree.

No, it's not a failure on the study of economics; all soft sciences have problems replicating their findings and the fact that the minimum wage is heavily politicized (by people like you) doesn't help.

More often than not, minimum wage increases are small scale. I would have absolutely no problem with a small increase in the minimum wage, or even chaining it to inflation as should have been done many years ago.

And if the studies are all over the place, why did you say "decades of data supported by literally hundreds of top experts in the field"?

when did we assume that 4% of the workforce would lose their jobs?

are you trolling

I'm not assuming that. But even it's only only 1% or 0.5%, it's still contractionary (meaning that it will have effects on aggregate demand and the economy as a whole) and it's still affecting people on the scale of hundreds of thousands, if not millions. That's the gamble you're making with people's lives. 4% seems like a worst-case disaster that I don't think is very likely. But way more than 4% are going to be affected by this, and not all for the better.

(not to mention that the effects of min. wage increases aren't necessarily immediate; it may be that some employers can indeed afford higher wages in the short term but that if the economy were to go into recession again, they'd have to lay off more employees than they would otherwise.)

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No, it's not a failure on the study of economics; all soft sciences have problems replicating their findings and the fact that the minimum wage is heavily politicized (by people like you) doesn't help.

More often than not, minimum wage increases are small scale. I would have absolutely no problem with a small increase in the minimum wage, or even chaining it to inflation as should have been done many years ago.

And if the studies are all over the place, why did you say "decades of data supported by literally hundreds of top experts in the field"?

how is that not a failure of the study itself? if experiments or results are not reproducible, honestly, what good are they?

because it's true? take a look at smug's post. i know what a published academic journal looks like. some sources that say very different things all appear to be valid, though not at all in the way that you're claiming (where are you getting 1% or even 0.5% estimates from). of course, i'm inclined to rely on studies that support my view, but if other evidence shows it's not the case, then i'd have to readjust my views. out of everything, though, the consensus seems to be that the job market isn't affected very much by modest increases in min. wage. to me, 7 --> 15 is a modest increase, especially if we're only looking at "big business" min wage laws in the way amiabletemplar describes.

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I'm going to say...

Well...

The thing is that a minimum wage works both ways. On the plus side it results in making steps to ensure all parities get paid at least somewhat the same and that employers simply don't turn around and fire employee's in favor of people working for barely enough to survive leaving the former both jobless and, likely, unable to compete without falling down to those levels. This is something that actually happened and is still happening today. One of the reasons people are able to buy stuff like their 'women get paid 77 cents for every buck a man makes' t-shirts is because some woman is working out in China/India/wherever for pay that would make running a lemonade stand in your neighborhood look like a gold mine. If these people were paid more you can bet that the price of those t-shirts would skyrocket. There is a balance to be sure, where the pay is high enough to survive and low enough to thrive, but the real 'breakthrough' will likely come when automated labor (robots) becomes cheap enough to replace workers who work for below the minimum in America. What will happen? I don't know. But it will likely change a lot.

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I'm going to say...

Well...

The thing is that a minimum wage works both ways. On the plus side it results in making steps to ensure all parities get paid at least somewhat the same and that employers simply don't turn around and fire employee's in favor of people working for barely enough to survive leaving the former both jobless and, likely, unable to compete without falling down to those levels. This is something that actually happened and is still happening today. One of the reasons people are able to buy stuff like their 'women get paid 77 cents for every buck a man makes' t-shirts is because some woman is working out in China/India/wherever for pay that would make running a lemonade stand in your neighborhood look like a gold mine. If these people were paid more you can bet that the price of those t-shirts would skyrocket. There is a balance to be sure, where the pay is high enough to survive and low enough to thrive, but the real 'breakthrough' will likely come when automated labor (robots) becomes cheap enough to replace workers who work for below the minimum in America. What will happen? I don't know. But it will likely change a lot.

When the time comes when robots are capable of doing all unskilled labor, chances are there will need to be a basic income. The corporations don't have to pay the robots anything, they should be willing to pay extra taxes to support the workers they just laid off.
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When the time comes when robots are capable of doing all unskilled labor, chances are there will need to be a basic income. The corporations don't have to pay the robots anything, they should be willing to pay extra taxes to support the workers they just laid off.

I think it's more likely that the baseline will shift so that basic needs will be largely, if not entirely, free and the majority of jobs and purchases will be luxury items.

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I think it's more likely that the baseline will shift so that basic needs will be largely, if not entirely, free and the majority of jobs and purchases will be luxury items.

Maybe so; it's impossible to predict, really, how economics will change when unpaid labor in the form of robots exist.

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it's not too difficult to get an idea for (roughly) what would happen. assuming most jobs can be done by robots, excluding only those that require critical thinking skills and analysis techniques, when we get to the point that robots are doing these jobs, i think snowy is right in saying that a majority of necessities will end up being free. the workforce will diminish significantly in those countries that have robots doing the work. jobs will necessarily become more specialized--things like r&d in an assortment of fields will increase in demand, but probably not as fast as the supply (of possible employees). it'd be a pretty different society.

i have no idea what he means by a majority of jobs being a "luxury item," though

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Firstly a sizable chunk simply won't be available to the average street-goer without some inside connection. It is very possible we'll have to make 'fake/cyber' jobs (kind of like WoW gold farmers) to fill the void. Meanwhile most money will likely be spent on things like iPhones and the like as the economy shifts from necessity-based to luxury-based.

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