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December 30, 2003

MINIMUM WAGE....Nathan Newman is praising Howard Dean for proposing an increase in the minimum wage to $7 per hour. Me too. This is one of the most important things we could do to help the working poor, who have seen the minimum wage fall by a third over the past three decades.

And for those who insist that raising the minimum wage would cause massive economic dislocation, I'd like to point out that Congress doubled the minimum wage in 1950 with no ill effects, and raised it to about $8/hour in present-day terms in 1968, again with no ill effects. What's more, with a few exceptions, most minimum wage jobs are in service industries, not manufacturing jobs that are susceptible to being sent overseas. Raising the minimum wage would help a lot of people at a pretty small cost. We should do it.

And should we index the minimum wage to inflation? Of course. But I'll renew an even better idea I proposed a year ago: index it to congressional salaries. Assuming a normal 2000-hour work year, congressmen make about $75/hour right now. How about simply making the minimum wage equal to 10% of that? Congress can then increase their own salaries anytime they want, but only if they're willing to help out the working poor at the same time. Seems fair to me.

Posted by Kevin Drum at December 30, 2003 09:40 AM | TrackBack


Comments

great suggestion!

Posted by: aimai at December 30, 2003 09:42 AM | PERMALINK

Actually, the 28th Amendment at least theoretically precludes Congress raising their own salary.

Posted by: James Joyner at December 30, 2003 09:46 AM | PERMALINK

This is a great idea, and thus will never happen.

Posted by: Realish at December 30, 2003 09:47 AM | PERMALINK

Indexing the minimum wage to inflation will succeed mostly in driving inflation.

Posted by: J. Michael Neal at December 30, 2003 09:51 AM | PERMALINK

Kevin, Kevin, Kevin...

If the poor aren't dirt poor they'll never have any motivation to stop being so lazy and stupid and get rich already! The only thing that ever motivates anyone is punishment for not being better.

Also, I'd like to propose that somehow this is wealth distribution and therefore a communist plot.

Posted by: Tim at December 30, 2003 09:54 AM | PERMALINK

While we're at it, let's have Congress pass laws that ensure that they never have better healthcare insurance/access than any other citizen.

And another law that says the children of any elected official must attend public schools.

And can they do something about the pothole in front of my house?

;)

OK, I'm serious about the first two.

Posted by: Jeff Boatright at December 30, 2003 09:55 AM | PERMALINK

"This is one of the most important things we could do to help the working poor, who have seen the minimum wage fall by a third over the past three decades"

No, the most important thing we can do is to push unemployment down into the low 4%- 3 % range where training of the least employable demographic - unskilled, semi-illiterate, marginal social skills, mostly nonworking poor - become economically viable for employers . The already semi-skilled working poor see their hourly wages rise far above minimum wage at this time because of the labor shortage

Posted by: mark safranski at December 30, 2003 09:56 AM | PERMALINK

Let's key the minimum wage to CEO salaries and bankrupt the nation!

Posted by: Dick Durata at December 30, 2003 09:59 AM | PERMALINK

Cute idea, but actually awful. Two reasons. First, given the stakes, Congessional pay should be doubled or tripled. This would have the concomitant effect of making them less whorish on book deals and such. Plus, it might give them a higher status than lobbyists, which is important. Your idea precludes Congress from doing the sensible thing.

Second, it'll be very easy for Congress to just hold the line on their salaries and, well, be MORE whorish. Or make service in Congress like service in a part-time state legislature...a ticket to a job as a lobbyist.

Posted by: Raleigh at December 30, 2003 10:01 AM | PERMALINK

$7.00 an hour? Not nearly enough. How can this help the working poor. Who can possibly live on that?

The floor of the minimum wage should be $15.00 an hour. I'd even push for something along the lines of $20.00 to $25.00 per hour. Then we're nearing a liveable wage. Anything less and you're just being mean spirited.

Posted by: Black Oak at December 30, 2003 10:01 AM | PERMALINK

But, if you raise the minimum wage, won't that just provide even more of an incentive for employers to hire illegal aliens at as low as $2 a day?. Perhaps it's time for the "liberals" to quit their present coalition with labor-intensive industry fat cats and the elites of Mexico.

Posted by: Lonewacko: I Blogged Across America. Twice. at December 30, 2003 10:02 AM | PERMALINK

No, the most important thing we can do is to push unemployment down into the low 4%- 3 % range where training of the least employable demographic - unskilled, semi-illiterate, marginal social skills, mostly nonworking poor - become economically viable for employers . The already semi-skilled working poor see their hourly wages rise far above minimum wage at this time because of the labor shortage

What does this have to do with raising the minimum wage? How is it at odds with raising the minimum wage? Is it just one or the other? Either you keep the minimum wage so low no one can live off it and somehow create new jobs or you raise the minimum wage and... what, no new jods ever get created?

How is your comment even remotely related to the argument for raising the minimum wage?

Posted by: Tim at December 30, 2003 10:04 AM | PERMALINK

In the mid- to late-'60's, a standard argument I heard against the minimum wage was the disappearance of supermarket "bag boys," or "baggers," as they'd be known today. The argument was that the stores couldn't afford to pay (or the baggers didn't add enough value to justify paying) the minimum wage for such persons, so they stopped hiring them.
I noticed the return of baggers several years ago, despite the increased minimum wage. But if it's true that the real-dollar equivalent minimum wage today would be about $8/hour, then the return of the baggers becomes explicable. An increase to that amount would give us a test of the "bag boy" argument. Would the baggers disappear?

Posted by: C.J.Colucci at December 30, 2003 10:05 AM | PERMALINK

Alright, which of you are joking?

First, given the stakes, Congessional pay should be doubled or tripled. This would have the concomitant effect of making them less whorish on book deals and such. Plus, it might give them a higher status than lobbyists, which is important. Your idea precludes Congress from doing the sensible thing.

Is this a joke? The shorter version seems to be "congressional greed should be pandered to at all costs because their greed is the problem and certainly they'd be less greedy if we pandered to it".


The floor of the minimum wage should be $15.00 an hour. I'd even push for something along the lines of $20.00 to $25.00 per hour. Then we're nearing a liveable wage. Anything less and you're just being mean spirited.

I think the minimum wage should be at or above $10 an hour, but is this particular post a joke since it seems so... inconsistent?


But, if you raise the minimum wage, won't that just provide even more of an incentive for employers to hire illegal aliens at as low as $2 a day?. Perhaps it's time for the "liberals" to quit their present coalition with labor-intensive industry fat cats and the elites of Mexico.

Is that a joke? I can't visit the link so I'm mystified.


Who's joking?!?

Posted by: Tim at December 30, 2003 10:11 AM | PERMALINK

Jeff

OT but

It is good to have a pothole right in front of your house. It takes care of the speeders.

When we first moved to our present house, the street was in terrible condition. Think paved then driven on by concrete trucks, then half washed away. Very pleasant, no thru traffic at all. Eventually the county figured out how to control the underground springs and fixed it. Instant major cut thru street.

Posted by: ____league at December 30, 2003 10:14 AM | PERMALINK

I love the part about indexing to congressional salaries.

General Clark has something similar to this in regards health care.

Here is a quote from his web site:

Every American without other means to buy insurance will have access to the same health plan as Members of Congress...

Kevin and the good General are damn straight correct.

Posted by: -pea- at December 30, 2003 10:16 AM | PERMALINK

Tim

The comment relates to Kevin's statement " the most important thing we can do... is raise the minimum wage ". It isn't the most important thing we could do.

Is raising the minimum wage incompatible with driving down employment ? Not entirely. Raising the minimum wage drives up employer costs for training the unskilled which makes them less likely to hire new unskilled workers. However, if you execute a minimum wage increase during a time that economists consider " full employment " you do not get that negative effect to the same degree because employers are already trying to maximize the labor pool. So as a matter of sequence I think the economic effect is better after, not before, a decrease in unemployment rates.

Posted by: mark safranski at December 30, 2003 10:17 AM | PERMALINK

Oh god, I'm agreeing publicly with lonewacko. I'm gonna get my lefty credentials forcibly repossessed. This is gonna hurt. Nonetheless.

Gedankenexperiment for all of you. If raising the minimum wage to $7 an hour is a good idea (claims Kevin), and if raising it to $10, $15 or some arbitarily "livable" wage is an even better idea (per commentary), wouldn't raising it to $25 an even better idea? And hell, why not raise it to $100 an hour? We'll all be rich!

Oh wait, that probably won't work, will it?

This is literally Macroeconomics 101, folks. (Hell, my macroecon prof was avowed socialist and could still do the math on this one.) The only thing the minimum wage does is give unscrupulous employers a huge advantage over ethical ones, and fuel the traffic in modern slavery, AKA migrant labor.

Posted by: doctor memory at December 30, 2003 10:22 AM | PERMALINK

"This [minimum wage] is one of the most important things we could do to help the working poor"

This is simply a Kevin Drum knee jerk liberalsim.

The most important thnig we can do for the poor is reduce government and tax the rich.

Oh, by the way, 30% of California's economy is immune to minimum wage because it is the underground economy. Another 30% is direct government expenditures.

So, whatever you do with minimum wage, it only effects the remaining 30%, mainly the retail clerks.

Posted by: Matt Young at December 30, 2003 10:30 AM | PERMALINK

Doc Memory: Don't be ridiculous. Suggesting that the minimum wage should be increased to $7 does not mean that it should be increased to $100. Try again.

Posted by: Kevin Drum at December 30, 2003 10:30 AM | PERMALINK

On a more relevant note.

The low wage problem can not be taken care of with a quick fix. Yes, some workers will earn more and some will no longer have jobs. How many of each is an empirical question.

At the present time, if I was going to build a facility that provided a good or service that was not tied to a location, I would either go to a low wage location that had adequate infrastructure or build an automated facility (or maybe both).

As long as the world has a large number of people who are willing to work for very low wages, it will be difficult to keep the real wages of our less skilled workers from falling.

Posted by: ____league at December 30, 2003 10:31 AM | PERMALINK

...Congessional pay should be doubled or tripled. This would have the concomitant effect of making them less whorish...

Sweetly reasoned, but human behavior is actually more sour: more is never enough.

Greed is an appetite that obeys no party lines and is never sated.

That's why it is best to index.

Posted by: -pea- at December 30, 2003 10:32 AM | PERMALINK

Tim, you and will have difficulty agreeing that the grass is green. My post is to highlight the absurdity that any minimum wage is "fair" to the poor. That it somehow will make fix all their ills.

Mandate that the 19 year pizza delivery boy (hell, make him a 38 year old family man) must make a minimum of $20.00 an hour, and see what your pizza will cost. That pizza delivery guy working 50 hours a week will gross over 58,000 a year. Dead center middle class in small town Wisconsin and probably will be able to barely make ends meet in New York City.

Now, what does the night supervisor get paid? He delivered pizza for 2 years before he got his promotion. He'd definately going to have to be paid more than the delvery guys. Right? Same goes for the manager of the place too.

Same for all the 7-11 clerks/shift supervisors and managers. So what if gas costs $5.00+ a gallon.

All for a good cause though. We want/need a "living wage" in this country. I'm sure we're all willing to pay $40 to %50 for a pizza to make sure that happens.

And a mandated minimum goes just as far in San Diego CA as it would in Fargo ND. Right?.

Posted by: Black Oak at December 30, 2003 10:32 AM | PERMALINK

The idea that a congressman works 2000 hours a year is ludicrous. If my congressman worked less than 3500 hours a year I'd be outraged.

In fact, my (terrible) congressman has called me at 10:30pm on a Saturday from his D.C. office where he was working with staff on answering constituent mail. And I'm not a contributor, a volunteer, or even an ally. I think 4000 hours a year is more typical than 2000.

That puts congressional pay closer to the $30/hour category.

But the compensation for serving in Congress doesn't come from the salary. It comes from pride in serving your nation, the opportunity to help your constituents, and the respect and appreciation of your fellow citizens back home. Also, many congressmen take highly paid, lightly worked lobbying jobs when they retire.

Posted by: Brian at December 30, 2003 10:33 AM | PERMALINK

Raising the minimum wage drives up employer costs for training the unskilled which makes them less likely to hire new unskilled workers.

I really doubt an hourly wage difference of 3 or 4 dollars drives up the cost of training that much on an individual basis. Most costs of new hiring comes from things like insurance and the administrative efforts required, and of course the simple cost of training in that time and money is spent training rather than whatever it is the business does. A few bucks difference in the hourly wage of the new hire isn't going to make much of or any difference in those costs.

Some very small businesses might not be able to hire based exclusively on an increase in the minimum wage, but if 3 dollars an hour is keeping a mom and pop from hiring someone than they were probably never in the position to hire in the first place. There are plenty of ways to cut the costs of hiring for small businesses that don't have anything to do with the minimum wage- like waiving the payroll tax for a new hire for a period or time, for instance.

The only reason any business hires is if there is demand that requires it and any business that needs more people isn't going to not hire people just because they cost 3 or 4 dollars more an hour. Hell, a company like Walmart would benenfit the most if they started paying their employees $10 an hour or so- they'd all have more money to spend there.

Apart from small business I don't think your theory holds any water at all. And while "creating jobs" is of course important, that's not something the government can just do with the stroke of a pen, raising the minimum wage and thereby raising the standard of living for millions of Americans is.

Posted by: Tim at December 30, 2003 10:35 AM | PERMALINK

Just because unemployment did not increase does NOT mean such increases in the minimum wage did not have any adverse effects.

How many more jobs would have been generated without the increase.

Anyway, I tell you what, I will trade you, a decent minimum wage, and some form of remuneration that provides a basic level of health care coverage in exchange for an end to welfare/Food Stamps/HUD etc and as long as the decent minimum wage and health care coverage favor two parent families.

Posted by: BigMacAttack at December 30, 2003 10:36 AM | PERMALINK

Interesting comments so far, but nobody's making any reference to what the rules actually are for Congressional pay raises and health care.

Congressional pay raises are essentially automatic--they get pay raises a half-percentage point below the average Americans. Technically, they have to approve these increases every year, but as a practical matter they pretty much rubber-stamp them, because a lower raise than the average American is pretty easy to defend. So, if you're going to tie the minimum wage increase to Congressional pay, you're actually going to tie it to below-average wage growth. Better than the zero change we've seen in recent years, but they'll still lag behind.

Health Care--Members of Congress have the same health care plan as other federal employees, which actually encompasses a number of health care options. The government subsidy is about 72 percent, with the employees picking up the other 28. The premiums aren't cheap (and the co-pays and deductibles add costs, too), and I doubt a lot of poor people will pick it up, even with the government subsidy.

Just food for thought when crafting your suggestions...

Posted by: John at December 30, 2003 10:38 AM | PERMALINK

So, whatever you do with minimum wage, it only effects the remaining 30%, mainly the retail clerks.

I love it when Matt comes up with all of these absolute factoids and percentages that he can never provide any evidence for.

Posted by: Tim at December 30, 2003 10:38 AM | PERMALINK

James Joyner: you must mean the 27th Amendment. And it doesn't preclude congressmen from raising their salaries; it just ensures that any raise doesn't take effect until the next session, after a new Congress has been elected and gets to correct the excesses of the previous one (yeah right).

Here in NYC, I see lamp-posts plastered with proposals for a 27th constitutional amendment guaranteeing affordable housing. Quite apart from the merits of the proposal, it's sad to see that the people posting it don't know that there already is a 27th amendment and has been for more than a decade now.

Posted by: phil at December 30, 2003 10:41 AM | PERMALINK

Kevin Drum: "Don't be ridiculous. Suggesting that the minimum wage should be increased to $7 does not mean that it should be increased to $100. Try again."

Kevin, he's still right. Why only $7? Can your 7-11 clerk in Irvine "live" on $7? I think that comes out to 20K a year (assuming 10 hours per week OT). So what is liveable in Irvine? $10 gets you 28K. I doubt you'd consider that "liveable". $20 an hour gets you over 50K. Are we getting "liveable" yet?

Where do you draw the line?

Better question: Who gets to draw the line, and why?

Posted by: Black Oak at December 30, 2003 10:41 AM | PERMALINK

Kevin: $100/hr is admittedly argumentum ad absurdem, but the absurdity is the point: a $7 minimum wage is a bad idea for the exact same reasons as a $100 minimum wage; we just don't see it as easily because the smaller number "seems" less absurd. But the inflationary and ethical fallout is exactly the same.

Please understand: I'm not a libertarian or in any way an economic conservative. I'm in favor of single-payer health care and expanded unemployment insurance -- and part of the reason I'm in favor of them is because I think they're a much better use of the state's resources than a lot of the "helpful" things we presently do for workers, the minimum wage being number one with a bullet.

Posted by: doctor memory at December 30, 2003 10:47 AM | PERMALINK

Tim,

Your wage is unimportant your wage versus the price level is what is important.(Or your wage versus everyone else's wage.)

The extra cost in wages is passed along in the price of the product. The net result is just inflation.

According to you reasoning we should set the minimum wage at 1 million a year. Think of all the demand we would generate! Plus we would all be rich!

Paraphrasing Douglas Adams -

As you all know since we adopted the leave as our currency we have all become fabulously wealthy, unfortunately a cup of coffee now costs one decidious forest. Next step deforestation.

Posted by: BigMacAttack at December 30, 2003 10:56 AM | PERMALINK


The floor of the minimum wage should be $15.00 an hour. I'd even push for something along the lines of $20.00 to $25.00 per hour. Then we're nearing a liveable wage. Anything less and you're just being mean spirited.

Posted by Black Oak at December 30, 2003 10:01 AM

I own my own business and employ mainly teenagers. Black Oak your plan would put me out of business and I wonder how many other businesses.

I currently pay kids starting out at $7.00 an hour. That is the going rate of the free market in my area.

Posted by: Matthew at December 30, 2003 10:58 AM | PERMALINK

Mathew, I'm on your side. The post was to show the absurdity of a mandated minimum wage.

What is "fair and liveable" is so fluid across the nation it's stupid to even think about Federally mandating it.

Posted by: Black Oak at December 30, 2003 11:01 AM | PERMALINK

Oak-

You're making a ridiculous, completely-untethered-to-reality argument about some guy you made up in your head and what pizzas would cost in a hellish future where deliverymen made $20 an hour.

Is there any evidence to suggest a raise in the minimum wage has a direct link to the proce of goods and services. I'd really like to know if there is considering inflation rose in the 80s with the minimum wage not moving a bit, and it was modestly raised in the 90s without inflation going nutso.

I'll concede small businesses would be affected, but there are many things that could be done to make keeping employees cheaper for small business. My overall question is- why so much animosity with the subject? Why aren't you all demanding the government cut costs for small business rather than being so appalled by the idea of an unskilled laborer making a wage they can live on?

I've looked around and found a lot of theories about how a minimum wage hike kills jobs, including this absolutely ridiculous piece from the House in 1996:

http://www.house.gov/jec/cost-gov/regs/minimum/against/against.htm

With facts so twisted it looks lifted from the heritage foundation, but haven't found anything to suggest their predictions proved correct.

So what's the deal? Do you have actual facts on your side? Do increases in the minimum wage make your latte cost a dollar more (boo-hoo)? Does it keep people from hiring? Does it cause rampant inflation? Got anything besides theory?

Why so much animosity for unskilled labor?

Posted by: Tim at December 30, 2003 11:02 AM | PERMALINK

Speaking of congressional pay raises. Congress has given itself almost $20K pay raises since 1999. Gheez.

pay raises

Posted by: Eric at December 30, 2003 11:04 AM | PERMALINK

Maybe this is just the head cold talking, but I think mark safranski has it all backwards.

If the minimum wage goes up, each potential new employee becomes more valuable, since you are going to be investing more (in terms of wages and benefits) over time. To ensure you are squeezing an extra $6,000 or $10,000 a year out of this guy, you will want to train him more than you would otherwise--adding skills up front so you can extract more added value over time.

I mean, if safranski's position made any contact with reality, the wranglers who scoop up migrant day labor at the crack of dawn for sub-minimum wage agricultural/construction/gardening work would stop at local skills center for an hour or two before delivering his crew to the worksite.

Posted by: jlw at December 30, 2003 11:04 AM | PERMALINK

I liked that idea of indexing minimum wages to CEO salaries. Or maybe putting a cap on CEO salaries; say, 20x the earnings of the lowest-paid worker?

Posted by: DanM at December 30, 2003 11:09 AM | PERMALINK

Bigmacattack-

No, in fact my reasoning does not lead to idiotic conslusions.

What is with you people? $7 or $10 an hour is not 1 million an hour nor is it $20 pizzas and neither is it a viable argument. Jesus christ, here, let me show you how stupid that absurdist line of thinking is:

OK, then by all your reasonings we shouldn't pay unskilled workers anything and instead keep them as slaves!

See? Being quite the dumbass, huh? So how about just getting off the $7 is $100 moron boat, OK?


Matthew-

Is labor your biggest cost? How much do you pay in payroll taxes and workman's comp insurance, etc., for every hire? Are they part time or full time? If they made 1 dollar an hour more but you got a year of no payroll taxes for new hires would it cost you more to employ that person at $8 for two years or $7 for two years with no break in taxes?

Posted by: Tim at December 30, 2003 11:09 AM | PERMALINK

Tim,
I'm just a cog in the machine where I work, I don't have all the answers. I wouldn't pay more than .50 cents for any cup of coffee though.

I don't have any animosity for the unskilled worker. Hell I was one for about 8 years (weren't all all at one time?).

My entire point is that a federally MANDATED minumum wage cannot be fair. What's fair in Bemidji MN will not be fair in Dallas TX.

The problem I have is whenever this issue comes up we hear about the need for a "liveable" wage. There is no such thing. See my psot to Kevin Drum. What would be "liveable" in Irvine CA? I doubt it's even 45K a year. But that would definatley be "liveable" in Green Bay WI.

This is why a federally mandated minumum wage is stupid.

Posted by: Black Oak at December 30, 2003 11:13 AM | PERMALINK


Salaries for congress members should be a fixed multiple of minimum wage, so they couldn't give themselves a raise without giving their constituents a raise too.

Posted by: Jon H at December 30, 2003 11:13 AM | PERMALINK

Uh, I should have read the whole post.

Damn ADD.

Posted by: Jon H at December 30, 2003 11:13 AM | PERMALINK

By the way, the New York Times is reporting that Ashcroft has recused himself from the Plame investigation.

Posted by: Jon H at December 30, 2003 11:15 AM | PERMALINK

"Kevin: $100/hr is admittedly argumentum ad absurdem, but the absurdity is the point: a $7 minimum wage is a bad idea for the exact same reasons as a $100 minimum wage; we just don't see it as easily because the smaller number "seems" less absurd. But the inflationary and ethical fallout is exactly the same."

Not everything operates as a linear function, you know. The deadweight loss side of raising the minimum wage isn't; that's why a $7 minimum wage is just fine - the benefits to the employees are large while the costs are small. At high rates the costs get so big it washes out the benefits of the higher wage. Not everything is as simple as corn price supports.

As to who gets to decide - the minimum wage isn't much different than any other tax. Last time I checked the government was in charge of taxes.

Posted by: Jason McCullough at December 30, 2003 11:18 AM | PERMALINK

"As long as the world has a large number of people who are willing to work for very low wages, it will be difficult to keep the real wages of our less skilled workers from falling."

So we need a global minimum wage? Or a global union system? Or do we need tarrifs on products from countries that have a lower minimum wage than us?

Posted by: DanM at December 30, 2003 11:20 AM | PERMALINK

Oak-

Yes, a federal minimum wage has the potential to be "unfair" depending on where you are, but there has to be a minimum just as there has to be a constant value for a dollar all across the country. I see them as similar things- a dollar buys more in Bumwad KS than in LA, which maybe "isn't fair", but are we going to allow the states to set the value of the dollar in their state? Of course not.

Yes, the dollar is a bigger deal than the minimum wage, the point is you can't really assess what's "fair" and "unfair" based upon relative economies. Is it unfair that I could buy a house in Iowa but not in California? Would it be unfair for someone making $8 an hour in Iowa to be able to buy more than someone making $8 an hour in LA? Would allowing Iowa to set the value of the dollar at less than LA to equal things out make things better?

"Fairness" is a non-argument in this case. Because it wouldn't be the same for everyone we should do nothing? It's already not the same for everyone, how would making life a little easier for all of them make things worse?

If states set the minimum wage it would still be unfair unless it went down the city level. If it was at the state level I gaurantee there would be $4 an hour states. It's the same reason we have the EPA, allowing the states to set all their own environmental laws means some states becomes cesspools of pollution and filth so they can get industries to come their way.

"Fair" is non-argument.

Posted by: Tim at December 30, 2003 11:28 AM | PERMALINK

Jason McCullough and Tim,

The key is that the extra costs/wages will be passed on in the price of the product.

You have to make a convincing case as to why the extra wages would not get passed along in the price of the product.

Or why your absolute wage level and not your wage level relative to the price level is what is important.

As others have tried to explain one cent or one billion dollars it does not make a difference.

If the one cent is passed along in the price of the product wages rise one cent but prices rise one cent as well. The net effect is a wash.

If you have a persuasive argument as to why a $2 dollar increase in the minimum wage will NOT be passed along in the price of the product please present it.

Reiterating that it won't be passed along is not a persuasive argument. Neither are insults. Though at least they are fun.

Posted by: BigMacAttack at December 30, 2003 11:38 AM | PERMALINK

Ok, here we go:

Tim: For one, small business creates *most* new jobs in this country - something on the order of 80 %. Secondly, for large employers who operate on economies of scale like Wal-Mart they definitely do calculate labor costs on an aggregate basis where an extra $ 3 or $ 4 dollars an hour per employee is immensely significant sum ( without even factoring administrative costs or benefits). These are corporations that look to save $.01 per unit costs !

jlw: Two points - First, casual, itinerant, day labor is not skilled or semi-skilled labor. The fact that this is often done at illegal wage rates implies that the minimum wage by statute bears little relation to the actual market value of the work of this particular group of workers. Paid at the minimum wage rate these workers would create more costs for the employer by being unskilled than their product is worth.

Two, your other point is a generally truism, higher minimum wage rates usually result in fewer but better trained minimum wage workers. This is what's wrong with the minimum wage in principle as well as effect. That's not to say that the minimum wage doesn't help anyone, it does but the economic costs fall on the demographic groups seeking employment who already have the most strikes against them.

Posted by: mark safranski at December 30, 2003 11:38 AM | PERMALINK


>>"But, if you raise the minimum wage, won't that just provide even more of an incentive for employers to hire illegal aliens at as low as $2 a day?. Perhaps it's time for the "liberals" to quit their present coalition with labor-intensive industry fat cats and the elites of Mexico.

>Is that a joke? I can't visit the link so I'm mystified."

What exactly is it you find curious?
1. Making legal labor more expensive will create even more of a demand for illegal labor.
2. There is a de facto coalition between "liberals," fat cats in labor-intensive industries, and the elites of Mexico. See, for example, Nanci Pelosi's comments at the link provided above. Those were made in Mexico and in support of Mexico's position. Note also that Nanci owns two small vineyards in the Napa valley. I can provide many more links on request, or just see my immigration category.

Posted by: Lonewacko: Doing the jobs Americans won't do at December 30, 2003 11:38 AM | PERMALINK

Jason: I'd argue that the costs are hidden, but not at all small.

Posted by: doctor memory at December 30, 2003 11:38 AM | PERMALINK

Phil, it's quite reasonable for people to not realize there was a 27th amendment. Congress doesn't vote to increase it's pay these days, they get the raises automatically if they don't vote to turn them down. And the courts rendered the 27th amendment moot by ruling that this sort of raise doesn't invoke it.

Posted by: Brett Bellmore at December 30, 2003 11:40 AM | PERMALINK

OK Tim, If "fair" is non-argument. What's the reason for having a minimum wage?
Why don't we just let the market dictate wages? It does to a degree anyway.
Why then, is the issue of fairness brought forth constantly by the min wage advocates?

Why can't an employer pay someone $3.00 an hour? If the employee is willing to accept that amount, who are we (or the Government) to say different? If his alternative is unemployment, $3.00 an hour probably looks good.

If we want to ensure that the poor are helped by mandating a minumum starting salary, why $7 an hour?

That's an absolutly pitiful amount. It grosses out to 14K a year. How is that helpful to the true working poor family? Is it because it's better than earning say 10K per year? That's certainly true, but neither are helpful to the poor in my book.

Posted by: Black Oak at December 30, 2003 11:50 AM | PERMALINK

The standard 'macroeconomic' argument is that raising minimum wage reduces the number of jobs, thus increasing unemployment.

Like much in economics :-) this seems to have been based on flimsy mathematical models and a 'it just makes sense' basis. In other words: dogma.

As it turns out, empirically (what a novel concept for a scientist!) over the last 50 years raising minimum wage has not had any significant correlation to increased unemployment.

I just wanted to add that. There is no such thing as 'simple macroeconomics:' our economy is a complex system we don't understand all that perfectly. Nothing about it is simple.

So given no evidence that jobs will be lost, the only moral thing to do is raise the minimum wage.

Posted by: Timothy Klein at December 30, 2003 11:56 AM | PERMALINK

Guys, the idea that raising the minimum wage will unleash massive inflation is ludicrous. I don't think most of you realize just how small a portion of total wage payments go to minimum-wage earners. I was part of an impact study for the recently authorized Illinois minimum wage ($6.50), and the impact on employers was, well, tiny. Even assuming that workers making up to $7.50 an hour get a mild bump bump from a $6.50 minimum wage, the total increase in wage payments in Illinois will be -- get ready -- four-tenths of one percent.

These, um, horrendous costs are fairly easy for employers to recoup. Better-paid workers are more productive and stay on the job longer (meaning reductions in turnover costs). If that doesn't cover costs, businesses raise the price of things, oh, a nickel and accept exceedingly small profit reductions.

It should also be pointed out that a higher minimum wage is a good demand-side stimulus -- because workers at the bottom of the economy are paid so poorly, any wage increase tends to be recirculated as new spending. The boss's profits, on the other hand, get invested.

Posted by: Slothrop at December 30, 2003 12:01 PM | PERMALINK

bigmac-

If you have a persuasive argument as to why a $2 dollar increase in the minimum wage will NOT be passed along in the price of the product please present it.

Well, there's no evidence the increase in the 90s caused any inflation, I can't find any at least. If you can feel free. And in the 80s the minimum wage remained at $3.35 an hour while prices rose up to 50%.

There's this:

http://www.uvm.edu/~vlrs/doc/min_wage.htm

Which summarizes a peer-reviewed study by a couple professors and some new research wich shows no real correlation between any increases in the minimum wage and loss of jobs, which one can guess a spike in inflation would be related to job loss.

I can't find anything that boosts your argument. Nice job turning the challenge around and avoiding the question yourself- now how about you provide some evidence, any evidence, that an increase in the minimum wage increases inflation?

Hmmm?


Mark-

What's your point about small businesses? There are better ways to facilitate employment at small businesses than keeping the minimum wage low. And what's the point about Walmart. So it would cost them millions more a year. So what? That's the price of doing business. They rake in billions a year and could offset the costs in any number of ways including raising the price of everything one shiny penny probably.

What's your point? Walmart's the victim? Because they don't want to pay more they shouldn't have to?

Posted by: Tim at December 30, 2003 12:01 PM | PERMALINK

Timothy Klein,
"As it turns out, empirically (what a novel concept for a scientist!) over the last 50 years raising minimum wage has not had any significant correlation to increased unemployment"

That's probably true as the minimum wage is kept so low. Make the minimum wage high enough to actually help the working poor and you'd see your empirical evidence fly right out the window.

But who really gets paid the minimum wage? The demographic has to be PRIMARILY teenaged kids. Mostly part-time too. (no I'm not going to back that up - prove me wrong please). I'm sure there are exceptions, but their a small percentage of the whole.

Posted by: Black Oak at December 30, 2003 12:03 PM | PERMALINK

Timothy Klein,

A persuasive model exists that doing A will cause bad thing Z.

No persuasive model exists that doing A will cause good thing Y.

No emperical evidence exists that convincingly supports either assertion.

And yet you claim that doing A is the only moral choice. What rubbish.

Posted by: BigMacAttack at December 30, 2003 12:03 PM | PERMALINK

There is a more important wage-related economic policy than raising the minimum wage, I think. That is, doing things to ensure that wages do not continue to stagnate as they have been. There has been no increase in wages even as corporate profits have continued to climb. (See Krugman in NY Times of 12/30). Increasing the minimum wage is only part of a broader picture. Improving the jobs situation, supporting unionization, and the like, are equally or more important.

Posted by: David in NY at December 30, 2003 12:07 PM | PERMALINK

" As it turns out, empirically (what a novel concept for a scientist!) over the last 50 years raising minimum wage has not had any significant correlation to increased unemployment"

First, I agree with you regarding the complexity of economic measurement. It's very hard to accurately isolate particular actions from all others in a dynamic situation.

Overall employment rates are not what everyone is arguing - it's the marginality of the negative effect and upon whom the costs are imposed. What is the moral virtue involved in favoring the already employed poor people over the unemployed poor people ?

The most intellectually credible liberal argument for the minimum wage isn't that it is a free lunch but that liberals think that paying the accompanying costs are worthwhile. This is the case with all economic policies, even ones generally regarded as highly beneficial.

Posted by: mark safranski at December 30, 2003 12:07 PM | PERMALINK

We've heard these arguments every time the minimum wage has been raised or proposed to be raised, and the sky hasn't fallen yet. And hee's why. Though it will have a downward effect on small businesses (easily fixed through government tax credits or something) the upward effect on the economy generated by all those people who now have a little more money and spend all of it. Doesn't this make at least as much sense as cutting taxes on the rich and hoping they'll spur capital investment and new hires? Bush has pinned his hopes on that one, and what we've seen is what you'd expect: Cut taxes on rich people and they do better, as shown by the Dow. Rich people do well when they get treated well, what a surprise. But this is a recovery that really only applies to rich folks; it hasn't shown the job growth that Bush may have predicted but every economist around could tell you wasn't true.

People always like to say "Oh, but what might have happened if such and such didn't happen". How about this one for a What If?: If Gore had been selected President we'd have used targeted tax cuts instead. We'd already have been out of the downturn for longer and had major job creation, since the money the people got all got put into the economy instead of helping outsource jobs. No right winger would agree with that, but who cares, since it's a what if and none of those have any meaning in the real world. The fact is that the minimum wage has been raised before, each time the right wing says the sky will fall, each time they've been wrong by a long shot, but lets just give them time, they'll be right some day and boy will we be sorry.

BigMacAttack: Got a different proposal for you. How about we get a Democrat elected, we get universal health care, we raise the minimum wage, and you can go suck something when it comes to your two parent families incentivizing. I like that option better.

Posted by: Norman at December 30, 2003 12:07 PM | PERMALINK

Slothrop,
"Guys, the idea that raising the minimum wage will unleash massive inflation is ludicrous. I don't think most of you realize just how small a portion of total wage payments go to minimum-wage earners"

On that you are right. But almost every union contract wage scale is tied to the minimum wage. Minumum wage goes up and so do all the union worker's pay rates.
That amount of wage payments is not small.

Posted by: Black Oak at December 30, 2003 12:09 PM | PERMALINK

Ugh, should have said that the upward benefits to the economy outweigh the downward trend on small business employment.

Posted by: Norman at December 30, 2003 12:11 PM | PERMALINK

I don't beleive that a lot of companies are paying less than minium wage.

I ran accross this a few times when I worked as a public-interest lawyer. Clients who were paying off their debts to the Chinese mafia sometimes worked at mafia-owned garment sweatshops which paid on a piecework basis, i.e. $0.40 per shirt sewn. This did come out to less than the miniumum wage in one or two cases. But I represented hundreds of people and only saw this two or three times. And you've got to realize that these were extremely vulnerable workers. My clients had no legal status, did not speak English and -- and this is the big one -- were subject to physical coercion if they sought other employment.

The deal was that the tongs would get you to the US in exchange for a specified sum (at that time $30,000 -- it's probably more like $40,000 or $45,000 today.) Naturally, most residents of rural Fujian Province, China, do not have $30,000 in cash lying around. As a result, the tongs would take you to New York City on the condition (known to all) that you would work in one of their sweatshops for two years. You'd work at a garment factory, as a dishwasher in a resteraunt, etc. If you decided to default on the $30,000 debt by quitting your job once you arrived in NYC, the tongs would retailate against your relatives in China. "Retaliate" means torture, followed by rape and/or murder.

Nonetheless, the tongs almost always paid minimum wage. You'd even get to keep most of it. Many, many people, upon fulfilling their two-year committment of working 70 - 80 hours per week washing dishes, would have $20,000 to $40,000 saved up, which they would then use to open their own business.

If the tongs weren't exploiting their workers, I can't imagine that the practice is that widespread. A Mexican immigrant who quits his job at the fast-food resteraunt doesn't have to worry that his sister in Mexico will raped or murdered. He is not in debt to the smugglers either.

Also, there are legal safeguards against exploitation. There are pretty harsh sanctions for employers who pay less than minimum wage. I have seen people get hit with huge fines -- in the millions -- for violating the wage and hour laws. Almost no one wants to take that risk.

Therefore, the conservative argument that if we raise the minimum wage, a black market in below-minimum wage labor will spring up does seem a bit farfetched. It might happen eventually, but I don't see it being a problem if the minimum wage is raised incrimentally. Kevin's proposal sounds okay to me.

Posted by: Joe Schmoe at December 30, 2003 12:13 PM | PERMALINK

Tim my point is, since you seem reluctant to acknowledge it, that employers nationwide are not going to simply ignore the raise in wage rates because you would like them to do so. They will react to the increase in labor costs and act to minimize them and not simply absorb all of it.

Posted by: mark safranski at December 30, 2003 12:14 PM | PERMALINK

Why is it obvious that the increase wages will just be "passed along" in the form of higher prices?

Wouldn't the same competitive factors be in place? You know, different companies competing to have the lower prices?

Wouldn't that keep prices at a similar level? With the only hit being to the profit line?

Or is this whole idea of a competitive free market just a pile of bullshit?

Posted by: Karmakin at December 30, 2003 12:16 PM | PERMALINK

Oak-

So you're arguing because it's not perfect nothing should be done? Again you're not arguing any substantive points you're just saying there's no point in arguing becuase it doesn't make things perfect and there's no point in doing anything if things are done perfectly. You're not engaging the issue at all.

$4000 more a year is a lot to a poor person. Because it's not more than $4000 there's no point for the $4000 and it's worthless? Please.

Why not $3 an hour? Because that's indentured servitude, that's why. In the Ayn Rand fantasy world people only do things they are willing to do and have only themselves to blame because there's always another option. In the real world someone who would work for $3 an hour in the US is only doing it because they have no other option. Please. You can make up all the scenarios you want in which someone could do botherwise "well they could move or they could do this or do that" but you're trying to argue a real-world point with made up fantasy. It's a waste of time for all involved.

Imagine if there was no minimum wage tomorrow- none at all- what do you think walmart, the nation's largest employer, would do? Do you think they'd pay more than they absolutely had to. Walmart is literally the only game in town for thousands of people- rural areas where there aren't really any more retail stores because of walmart and where the prevailing wage is whatever walmart is paying- which is the minimum.

You're not arguing anything of substance. You don't like $7 an hour because it's not enough but you don't want to have a minimum wage anyway? Then why are you bothering to comment at all? You don't seem to have anything to add as your overall position seems to be: $7 an hour is insulting- the government has no right to set wages. OK. "Do nothing". Got it.

Posted by: Tim at December 30, 2003 12:17 PM | PERMALINK

They will react to the increase in labor costs and act to minimize them and not simply absorb all of it.

And what in history backs up this absolute assertion?

[and for BigMac]

And why can't BigMac back up his theories?

Posted by: Tim at December 30, 2003 12:20 PM | PERMALINK

Joe Schmoe,
If what you are saying is true, then why raise it? You make a pretty solid case for not even having one (since it seems to be irrelavent anyway).

You can be 15 and start at any of the local McDonalds in my town here for $8.00 an hour. we're talking a "you want fires with that" job, and you won't start at the mandated minimum.

So why do we want to raise this again? Oh yeah, The unions.

Posted by: Black Oak at December 30, 2003 12:21 PM | PERMALINK

The point about who actually gets paid minimum wage is EXTREMELY significant.

How many people are actually raising a family on the minimum wage?

Most of the minimum wage workers I encounter in daily life are teenaged kids. Others are recent immigrants, to whom the minimum wage is a vast fortune which enables them to buy things they never could have afforded in their own country.

This, BTW, also seems to be true for the workers at California supermarkets. Most of the cashiers seem to be married women who use their job at Ralph's or Von's to supplement their husband's salary. They are NOT THE SOLE SOURCE OF INCOME FOR THEIR FAMILIES.

You do sometimes see people supporting themselves on minium wage jobs in rural areas, but the cost of living is also much lower there.

It might be a good idea to raise the minimum wage, but the idea that there are millions of people actually raising families on it just does not seem credible to me. Also, how many of these people are going to be making the minimum wage forever? Probably very, very few.

Raising the minium wage does seem to be a good idea, but I fear that we may be falling into the usual leftist trap of assuming the existence of an oppressed underclass that isn't actually oppressed. We simply assume that there are vast numbers of people struggling to raise their families on the minimum wage, but I doubt that this is true.

Posted by: Joe Schmoe at December 30, 2003 12:23 PM | PERMALINK

Tim,

You poor deluded soul. You are pushing for the policy change it is incumbent on you to prove that your policy will provide benefit.

It is not incumbent on me to prove that your policy will not work.

I do not even need to bother with he said she said economic emperical claims.

Though WTF, from your source, 'Most studies have found that the entire net effect of an increase in minimum wage results in a slight decrease in employment. A 10 percent increase would most likely lead to only a 1 percent reduction in employment.'


In addition if you had paid attention you would know that I was NOT claiming that an increase in minimum wage would lead to more unemployment. I was claiming that an increase in minimum wage would lead to an increase in the price level.

But go ahead keeping jousting with strawmen instead of me.

At least I have a persausive working model. You don't even have that.

And yet minus a persausive working model and minus any emperical evidence you want us to impelement your policy. What nonesense.

Posted by: BigMacAttack at December 30, 2003 12:24 PM | PERMALINK

Black Oak --

Which unions have their wages tied to the minimum wage? Off the top of my head, AFSCME doesn't, and that's as substantial a union as there is these days. If the wages are tied to the minimum wage, is it a cent-for-cent bump? Proportional? Percentage? If you think raising the minimum wage is going to impact union wages in a way that matters, please do the math for us. It's your claim.

As for 15-year-old burger flippers in your home town getting $8 an hour: Good for them. But not representative of much more than burger flippers in your own town. According to the Current Population Survey (as cited by me, but the Economic Policy Institute, etc.), 30% of the workers in this country earning less than $6.50 an hour are teenagers. The representative workers in a low-wage service job is in her twenties or thirties, and doesn't make $8 an hour.

Try to stay civil -- we realize you don't like unions. But be reaonable about it, please.

Posted by: Slothrop at December 30, 2003 12:28 PM | PERMALINK

Shmoe-

Easily found stuff. Here's one:

http://www.epinet.org/content.cfm/briefingpapers_min_wage_bp

In 2000 about 4.7 million children were raised under the minimum wage.


And more for Mark--

So business would react to an increase. So what? I fail to see the signifigance of that. Are you suggesting prices are related to labor costs in a way unlike any other costs? A rise in labor costs always means a rise in prices? I still haven't seen any evidence of this.

Because Walmart might not choose to absorb the costs and otherwise raise prices is a good reason to let Walmart effectively dictate wages? Are we at risk of being blackmailed by business?

Posted by: Tim at December 30, 2003 12:29 PM | PERMALINK

mark safranski wrote, in part:

jlw: Two points - First, casual, itinerant, day labor is not skilled or semi-skilled labor. The fact that this is often done at illegal wage rates implies that the minimum wage by statute bears little relation to the actual market value of the work of this particular group of workers. Paid at the minimum wage rate these workers would create more costs for the employer by being unskilled than their product is worth.

This assumes that itinerant day laborers actually know what their labor is worth. It is in the employer's interest to pay the lowest possible wage, and if that means taking advantage of assymetric distributions in information--or even coersion and threats, if they think they will get away with it--most employers of this sort of day labor will do so. The fact that such laborers are almost often illegal immigrants hinders their ability to bargain fairly.

What is such labor really worth? Obviously more than such laborers are being paid (for obvious reasons) but how much more can't be answered as long as the work is being done by people in such a poor position to bargain.

Two, your other point is a generally truism, higher minimum wage rates usually result in fewer but better trained minimum wage workers. This is what's wrong with the minimum wage in principle as well as effect. That's not to say that the minimum wage doesn't help anyone, it does but the economic costs fall on the demographic groups seeking employment who already have the most strikes against them.

Sure, if you set the minimum wage low enough, everyone will have a job. Two or three, in fact.

But your concern for those with the "most strikes against them" seems to carry you toward advocating a policy that will destroy incentives to work. If you work 60 or 80 hours a week and have little to show for it--a small check, little training, no way to advance out of this starter job--then your allegiance to the Protestant-style work ethic will be seriously tested. And with it, your stake in the liberal/democratic/capitalist system. Better to instill a belief that a first job is the gateway out of poverty than the realization that the first job is the way to maintain poverty.

The genius of the Earned Income Tax Credit is that it helps reward work.

Posted by: jlw at December 30, 2003 12:34 PM | PERMALINK

BigMac-

From earlier: The extra cost in wages is passed along in the price of the product. The net result is just inflation.

and:

The key is that the extra costs/wages will be passed on in the price of the product.

You have to make a convincing case as to why the extra wages would not get passed along in the price of the product.

And now:

You poor deluded soul. You are pushing for the policy change it is incumbent on you to prove that your policy will provide benefit.

It is not incumbent on me to prove that your policy will not work.

I've asked you to provide evidence for your assertion, and I've been real nice about it. I've given you plenty to work with- there's no evidence in history that has shown an increase in the minimum wage causes inflation. I could find none at all.

You say it does, you still have not provided any evidence. Why on earth would anyone take your assertion as truth without some evidence?

But forget it, you're just another dishonest troll who'd rather run round and round a challenge than take ten fucking seconds to put your money where your mouth is. Forget it. I've got no patience for dishonest debators.

Posted by: Tim at December 30, 2003 12:36 PM | PERMALINK

Norman,

What is the difference between universal health care and providing every one with renumeration in form of basic level of health care coverage?

Why don't you want to encourage two parent families?

If we provide a decent working wage why would we still need the other programs like food stamps?

Talk your pathetic smack, reject compromise, and when Bush is re-elected whine about how the working poor are getting the shaft. Great idea.

Posted by: BigMacAttack at December 30, 2003 12:36 PM | PERMALINK

Tim,
"Imagine if there was no minimum wage tomorrow- none at all- what do you think walmart, the nation's largest employer, would do? Do you think they'd pay more than they absolutely had to."

NO. But here's a news flash. They don't pay anymore than they absolutely have to now. And that's STILL over the minimum wage. As I stated before, you can start work at McDonalds for $8.00 an hour where I live. Do you really think that Walmart is paying less and getting better workers? They aren't.

And again Tim, if that $4000 more per year (from 18K to 22K) is really going to help the poor, why stop there? Raise the minimum wage to 40K+ per year. Then there would be no working poor and we'd all have a Merry Christmas.

Posted by: Black Oak at December 30, 2003 12:37 PM | PERMALINK

I only waded through maybe half the comments, but I thought I'd throw my two cents in. I support the living wage. We have living wage laws in most of the Bay Area, and the service industry jobs that these laws affect are generally unhurt. [Tech jobs, on the other hand, are above that living wage-- and are hard to find.]

We rely a lot on San Francisco tourism, so that's part of the explanation. But I don't see non-tourism related jobs disappering:

But if it's true that the real-dollar equivalent minimum wage today would be about $8/hour, then the return of the baggers becomes explicable. An increase to that amount would give us a test of the "bag boy" argument. Would the baggers disappear?

Actually, even with a living wage, our supermarkets are packed with baggers. Especially at Trader Joe's and the Berkeley Bowl (which is an equivalent locally-owned store). Even the worker-owned coops have baggers, and they probably have the most incentive to restrict the number of employees.

Posted by: GFW at December 30, 2003 12:47 PM | PERMALINK

Lots to disagree with here.

Tim,
"What does this have to do with raising the minimum wage? How is it at odds with raising the minimum wage? Is it just one or the other?" and,

"Some very small businesses might not be able to hire based exclusively on an increase in the minimum wage, but if 3 dollars an hour is keeping a mom and pop from hiring someone than they were probably never in the position to hire in the first place." and,

"The only reason any business hires is if there is demand that requires it and any business that needs more people isn't going to not hire people just because they cost 3 or 4 dollars more an hour. Hell, a company like Walmart would benenfit the most if they started paying their employees $10 an hour or so- they'd all have more money to spend there.

Apart from small business I don't think your theory holds any water at all."

Minimum wage and employment levels are certainly linked (the general relation is that minimum wage increases tend to decrease employment at the margins) though contra Doctor Memory the effect is almost certainly not the same direct relationship at the $5 to $7 level as it would be at a the $100 level. Arguing about whether or not the effect is big enough to be a problem is worth fighting over, ignoring the effect probably isn't a good idea.

The dismissiveness of small business seems weird considering that they employ almost half of all private sector employees. Even in the 50-100 employee range, it is very possible that a modest increase in the minimum wage could restrict new hires, especially in the current more risk-averse environment.

Karmakin, "Why is it obvious that the increase wages will just be "passed along" in the form of higher prices?

Wouldn't the same competitive factors be in place? You know, different companies competing to have the lower prices?"

In a simple model, all the companies will have their costs increase the same amount, so competitive differences wouldn't help to restrain passing along higher prices. Your question seems to assume that companies can compete prices all the way down to zero. That isn't true. They have to cover their costs. In a more complex model the wage increase hurts those who have relied more on labor, while those who made the same thing through a less people-intensive process will be ok. This leads those fewer-employee-hiring firms to do better which leads us back to the employment/minimum-wage problem mentioned above.

I suspect a better use of the government's effort would be in letting people get enough job skills to win a job which pays better than the minimum wage no matter what it is .

Posted by: Sebastian Holsclaw at December 30, 2003 12:47 PM | PERMALINK

Tim-

Actually, the study you cited re: number of families actually depending on minimum wage jobs to raise children says:

We find that in 1999, about one-third of affected adult workers-2.7 million persons-were parents of children. Most of these parents (22.0% out of 32.3%) were from married-couple families, and of these, most- about 1.3 million-were women (i.e., wives). About 862,000 were single parents, and here again, the vast majority (774,000) were female. Note that these parents were responsible for a total of 4.7 million children who depended, at least in part, on the earnings of their minimum-wage-earning parents.

These numbers (863,000 people seems to be the most significant one) are pretty darn low. And I would ask this -- how many of the single minimum wage workers with children receive alimony or child support from the children's other parent, or other benfits from the state? I think it is possible to receive welfare benefits in most states if are rasing a family on a minium wage job.

Again, I don't have a problem with the idea of raising the minimum wage, but I do have a problem with the idea that there is a vast pool of people in abject poverty struggling to raise families on the minimum wage, and the minimum wage alone, because it simply is not true.

Also, the study appears to be a little misleading in that it deems "adult" workers as anyone who is over 18 years of age. This does not control for college students, who are almost always 18 years of age or older and quite often make the minimum wage. By lumping in the college kids with the 64 year-olds, the study appears to be obvioulsy trying to disguise the fact that there just aren't that many 37 year-olds struggling to get by on minimum wage. I am sympathetic to anyone who is, and that's why I can be persuaded to support an increase, but this just doesn't sound like a terribly serious problem. We are not curing some great injustice here.

Posted by: Joe Schmoe at December 30, 2003 12:48 PM | PERMALINK

Tim,

No, while Wal-Mart might choose to pass along costs in the form of prices most likely they will simply hire fewer workers than they would have otherwise.

This would not be " blackmail " by Wal-Mart in any event, simply a market response to an intervention that increased labor costs. Wal-Mart simply illustrates the reaction, they do not control or initiate it.

Posted by: mark safranski at December 30, 2003 12:54 PM | PERMALINK

Oak-

You. Are. Not. Arguing. Any. Point.

Why stop at $4000? Because at a certain point there is a negative effect, of course. Of course we can't make it $100. Of course. Why are you asking such pointless questions? Are you trying to make the $7 an hour argument look absurd?

And the average pay at walmart is meaningless since it's not the same at every store. Many start at or very near minimum wage, and then of course there's the fact that they keep most people just under full time- and employees aren't eligible for benefits for a full year if they are eligible at all. There's a lot more things about walmart than just what their average wage is- wich is like $9.60 or so, but that's an average skewed by the minority that makes over $10-$12 an hour.

Forget walmart. You can make $8 at mcdonalds where you are. Great. Many places you get minimum wage. What is your argument against raising the wages for those people that work in markets that doesn't pay over minimum wage? What's your point with the $8 mcdonald's job? What does that job have to do with the minimum wage? I don't understand what you're arguing against.

Posted by: Tim at December 30, 2003 12:55 PM | PERMALINK

Mark-

You're arguing as if an increase in the minimum wage would cause a sea-change in employment, or inflation, or something else. There never has been throughout history that I can see, why would there be one now? And can you really not see the benefits of an increase perhaps softening this blow you seem sure of?
As in, more money for the poeple that spend every cent they earn?

Posted by: Tim at December 30, 2003 12:59 PM | PERMALINK

Minimum wage and employment levels are certainly linked (the general relation is that minimum wage increases tend to decrease employment at the margins)


Oh man... People keep saying this but I have yet to see any evidence.

Posted by: Tim at December 30, 2003 01:00 PM | PERMALINK

We need to think in grand terms.

Instead of racing to the bottom with trade agreements, we need to raise living standards around the globe.

All trade agreements must include an international minimum wage based of a set universal cost of living standard in each particular country.

It may be $7 a day in some countries and $7/hour in others.

A world of rising incomes and a decent standard of living........

Posted by: MaiznBlue at December 30, 2003 01:00 PM | PERMALINK

Joe Schmoe wrote, in part:
Also, the study appears to be a little misleading in that it deems "adult" workers as anyone who is over 18 years of age. This does not control for college students, who are almost always 18 years of age or older and quite often make the minimum wage. By lumping in the college kids with the 64 year-olds, the study appears to be obvioulsy trying to disguise the fact that there just aren't that many 37 year-olds struggling to get by on minimum wage.

Of course, most high school graduates entering the workforce are 18 as well. I don't know how prevalent it is these days, but in my home town in the 1980s, 18 was the point at which one had to "get out of the house and get a job (you bum)," get married, and start popping out kids. It reflects an unconscious classism (not an attack, just an observation) to think that 18 equals "college" and not the beginning of adulthood.

Posted by: jlw at December 30, 2003 01:02 PM | PERMALINK

JLW-

No, not really. I have several friends who started working at minimum-wage jobs after high school. One still works as a cashier at Dominick's, a Chicago supermarket chain (they are unionized, so she actually makes more that the minimum wage, but you get my point.) Another still works in a hospital foodservice facility by day and as hostess at Denny's by night. When I knew her, she owned a house (FHA loan) and a new car (a Chevrolet Cavalier).

Everyone else got better jobs shortly thereafter. One used to be a cashier at a gas station; he now works for the state Department of Fish and Wildlife. Another gas-station worker went to the General Motors Institute and is now a highly-paid mechanic at an auto dealership. Still another worked at a bicycle shop for a year or two after finishing college (job market was tight at the time) but later went on to become a journalist. She lived with her parents when earning the minimum wage. One of my friends is a fireman, the other is an electrician, another owns a lawn care company. All started out as minimum wage workers.

All of these people entered the workforce as minimum wage workers, but most went on to secure higher-paying positions within a reasonably short time. I do not think that anyone will depend on the minimum for the next 30 years.

Posted by: Joe Schmoe at December 30, 2003 01:10 PM | PERMALINK

Tim wrote:

"You're arguing as if an increase in the minimum wage would cause a sea-change in employment, or inflation, or something else."

No, I am not. Reread my posts. You are conflating my arguments with other commenters.

I very carefully stated that some people benefit from an increase - my point is that this is *not* the most important thing we could do to help the working poor and that we should weigh the costs instead of presuming they don't exist before forging ahead.

Posted by: mark safranski at December 30, 2003 01:11 PM | PERMALINK

I would like to see this whole discussion reframed. Would somebody with time on their hands, or a reporter looking to write a story, analyze the labor costs of different industries in relation to their cost of materials and in a stratified fashion that shows the costs of the different levels of the heirarchy. For simplicity break it into three levels: actual workers, mid-level managers, and high level managers.

I am willing to bet that the management costs of many businesses are higher than the cost of the workers being managed. How often have I seen the managers get raises and bonuses when the grunts got nothing?

In the same way if we double the income of the poorest 10% of the population it will have almost no effect on the gross domestic product simply because those people make so little to start with.
So called conservatives scream like the world is going to end but the real effect on the economy would be almost unnoticeable, except to the people whose standard of living is actually raised.

Posted by: Stuart at December 30, 2003 01:11 PM | PERMALINK

Tim,
"Are you trying to make the $7 an hour argument look absurd?"

YES!!! Ding! Ding! Ding! Ding! Ding!

The dollar amount is an arbitrary thing. It is meaningless to a large protion of the U.S. anyway - even you've said that.

Why not $7.50? Seriously, that's only .50 cents more an hour than what is being proposed. Chickenfeed right? Why not $8? Is it because, at that amount, too many people start to think that's too high? Do we only raise it to the level were the collective American conscience deems it to be "the right amount". Why is a $7 mandated minimum wage "OK", but 6.50 is "not enough" and 7.50 is "too much"?

Answer: Because $7.00 was pulled out from the guy's ass as what he thought would be reasonable to most people.

Posted by: Black Oak at December 30, 2003 01:13 PM | PERMALINK

Shorter Black Oak:

"Eating 100 hamburgers at a sitting will kill you, so eating one hamburger is just as absurd. After all, why not two? It's not that much more, right? Why not three?"

Bleh. Transparent nonsense.

---JRC

Posted by: JRC at December 30, 2003 01:20 PM | PERMALINK

JRC,
huh? Talk about Transparent nonsense.

Posted by: Black Oak at December 30, 2003 01:21 PM | PERMALINK

Tim,

You are making the assertion. You are asserting that an increase in the minimum wage would be beneficial. You need to back up your assertion. I am asserting that you are incorrect. I really don't need to prove that you are incorrect. (It is impossible to prove a negative.)

An analogy -

The plaintiff, the one making the claim, that is you, asserts that the defendant is guilty. The defendant asserts that she is innocent. It is not dishonest for the defendant to demand that the plaintiff his claim. What is dishonest is for the plaintiff to demand that the defendant prove her claim.

Again this is very simple. I have admitted I lack any conclusive emperical evidence that backs my claim.

Again, I at least still have a persuasive working model. You have neither a persuasive working model or any emperical evidence and yet YOU are demanding we implement your policy. No thanks.

Again as I noted originally I am not against the idea of increasing the minimum wage. A persuasive argument can be made as to why this would he a good policy. However, you are clearly incapable of making such an argument. The best you can do is play a very weak game of he said she said with the emperical data.

LMAO.


Posted by: BigMacAttack at December 30, 2003 01:24 PM | PERMALINK

I think a more realistic idea is to link congressional payrase increments to the mimimum wage. If congressmen's COLA's go up 5% a year, why can't the minimum wage? Because neither would then pass. How about giving the minimum wage a CPI type link? Sounds good too, or maybe even COLA adjusted to where people live? I guess that is what economists would call the "prevailing wage"

Most folks don't get 5.15, but it doesn't excuse how low it is. I still doubt the idea that if you jacked it up to 6 or 7 an hour, about what people get at Burger King, that there would be massive unemployment. Most people who make the bare minimum are agricultural workers, who are mostly "undocumented workers" in CA and AZ. We still need to stick up for their rights, but I am afraid some of those would be scared of losing their jobs if they stood up to big Ag.

Posted by: Dave B at December 30, 2003 01:28 PM | PERMALINK

Stuart and Tim are probably right.

It is literally true that the corporate lobby fights every increase in the minimum wage, new environmental regulation, etc. with hysterical gloom-and-doom predictions.

Remember the hysteria six or seven years ago over the Family Medical Leave Act? The one which permits workers to take up to 12 weeks of unpaid leave per year for family medical emergencies?

We heard the usual cries of impending cataclysm from the corporate lobby. Small businesses would be ruined, productivity would be destroyed, costs would increase as expensive and ill-trained temoporaries were hired to fill the positions of workers on leave, etc.

In reality, nothing happened. NOTHING.

Black Oak is right -- this will start to have real effects if the minimum wage is raised too much. But would a 20 or 25% increase really hurt anyone?

The only thing that gives me pause is the fact that minimum wage jobs represent SUPPLEMENTAL income for the vast majority of minimum wage workers. Not many people are actully trying to support themselves on the minimum wage.

Posted by: Joe Schmoe at December 30, 2003 01:30 PM | PERMALINK

I live in Texas just a few blocks from the Dell Round Rock campus. Michael Dell and his corporation hire thousands of "temporary workers" who make more than minimum wage but who exist in a system that will never allow them to be "real" employees. As a result, no matter how many years they work for Dell, they never receive benefits, health insurance, or job security.

Why is a rich man who games the system in this way considered a model citizen? He is off loading some of the principal costs of his business onto the surrounding city and onto his workers. The same people who oppose the minimum wage let this man do just what he wants, costs to society be damned.

Posted by: Stuart at December 30, 2003 01:30 PM | PERMALINK

Joe Schmoe sez:

"The only thing that gives me pause is the fact that minimum wage jobs represent SUPPLEMENTAL income for the vast majority of minimum wage workers. Not many people are actully trying to support themselves on the minimum wage."

In Illinois, at least more than 1/3 of the households with an earner making $6.50 or less get ALL of their income from workers making $6.50 or less.

Nationally, the median age of someone earning $6.50 or less (less than Kevin's proposed $7 minimum wage, that is) is 27 or 29 or something liek that. 70% of workers earning $6.50 or less are 20 or over. In your own personal experience in Arlington Heights or Lake Forest or wherever, most low-wage workers are teenaged kids earning extra CD money, but your own experience IS NOT representative.

And just because someone lives in a household with another working member, decent compensation for her labor is unimportant? I think most people here have trouble with that one.

Posted by: Slothrop at December 30, 2003 01:38 PM | PERMALINK

"Do we only raise it to the level were the collective American conscience deems it to be "the right amount". Why is a $7 mandated minimum wage "OK", but 6.50 is "not enough" and 7.50 is "too much"?" - Black Oak

You already pointed out " that a federally MANDATED minumum wage cannot be fair. What's fair in Bemidji MN will not be fair in Dallas TX."

Right. Well, a federally mandated hourly wage won't be fair across the country, but might a federally mandated standard tied to cost of living on which to base an hourly wage be closer?
Is it inconceivable that minimum wage could be connected (as a percentage?) to cost of living?

On the other hand, I'm a little bewildered by how what's "liveable" is calculated since living comfortably in Manhattan on 20K/year is not at all impossible.

Posted by: qp at December 30, 2003 01:38 PM | PERMALINK

Hell yeah! And let's index my salary to Congressional pay while we are at it. I didn't receive a raise this year and that pissed me off! And when we raise the minimum wage to $7.00 per hour let's mandate that the guy making $7.50 per hour gets an equivalent raise. And why the hell is gas $1.59 per gallon, Congress should damn well index that to something as well. Kevin Drum for President!

Posted by: GaryL at December 30, 2003 01:40 PM | PERMALINK

I think our elected officials should live on minimum wage for 3 months. Let them try to find decent housing, day care, and health care on a minimum wage salary. Make them live it, then they might actually understand it.

Posted by: Ajay at December 30, 2003 01:43 PM | PERMALINK

"Therefore, the conservative argument that if we raise the minimum wage, a black market in below-minimum wage labor will spring up does seem a bit farfetched."

There already is a huge underground economy in California:

...estimates of the size of the state's underground economy vary... The state Employment Development Department, using a 1998 federal Internal Revenue Service study, pegs it at $60 billion to $140 billion a year.

Posted by: Lonewacko: I Blogged Across America. Twice. at December 30, 2003 01:44 PM | PERMALINK

I know this is a Cal centered blog, but your neighbor to the north, Oregon, already has the min. wage pegged to inflation. This month the Oregon min. wage will increase from $6.90/hr. to $7.05/hour. This will happen every year unless it is repealed.

Posted by: Noah@Alliancewatch at December 30, 2003 01:49 PM | PERMALINK

mark safranski,

'No, I am not. Reread my posts. You are conflating my arguments with other commenters.

I very carefully stated that some people benefit from an increase - my point is that this is *not* the most important thing we could do to help the working poor and that we should weigh the costs instead of presuming they don't exist before forging ahead.'

That sums it up very nicely.

Posted by: BigMacAttack at December 30, 2003 01:49 PM | PERMALINK

So Black Oak et al,
"And again Tim, if that $4000 more per year (from 18K to 22K) is really going to help the poor, why stop there? Raise the minimum wage to 40K+ per year."
Well, if the minimum wage is such a burden on our economy, why shouldn't Bush abolish it? This reductio ad absudrum works both ways. Why not pay workers what Chinese sweatshop workers make?

Also the 'businesses are already paying unskilled workers more than the minimum wage' argument seems inconsistent with the 'raise in minimum wage will destroy the same businesses' argument.

Posted by: sym at December 30, 2003 02:01 PM | PERMALINK

Mark-

OK. But all that just to semantics ("the most important")?


Oak-

But it's not absurd. By your own admission an increase in the minimum wage would make a difference to the people receiving a higher wage, you're just dismissing the $7 figure because it's somewhat arbitrary. Somewhat is the key as it's close to an inflation-adjusted min wage and it would mean real benefits for lots of people.


All-

I'd like to point back to the earlier URLs I linked to that all show basically no signifigant correlation between min wage increases and job losses nor inflation. Anyone claiming otherwise needs to show their work because it just doesn't seem to be out there.

Posted by: Tim at December 30, 2003 02:04 PM | PERMALINK

Tim, et al. re the "minimum wage causes inflation" issue:

See, e.g., http://news.bbc.co.uk/2/hi/business/2905511.stm

Brazil would seem to present an historical precedent.

Posted by: D. Citizen at December 30, 2003 02:05 PM | PERMALINK

Also-

How can an increase in the min wage simultaneously not benefit that many people that much but nonetheless cause nation-wide inflation and unemployment?

Posted by: Tim at December 30, 2003 02:06 PM | PERMALINK

"The key is that the extra costs/wages will be passed on in the price of the product.

You have to make a convincing case as to why the extra wages would not get passed along in the price of the product."

Of course most of it will be passed along in the price of the product - it's effectively a tax on all non-minimum wage earners to subsidize minimum wage earners. It also has some nice benefits in terms of getting employers to switch to production methods using more capital, which gets some good path dependencies going.

"Answer: Because $7.00 was pulled out from the guy's ass as what he thought would be reasonable to most people."

How do you think Social Security benefit levels are arrived at? It's just democratic negotiating.

"But who really gets paid the minimum wage? The demographic has to be PRIMARILY teenaged kids. Mostly part-time too. "

http://www.epinet.org/content.cfm/issueguides_minwage_minwagefacts

"The earnings of minimum wage workers are crucial to their families' well-being. Evidence from the 1996-97 minimum wage increase shows that the average minimum wage worker brings home more than half (54%) of his or her family's weekly earnings."

Posted by: Jason McCullough at December 30, 2003 02:08 PM | PERMALINK

D.Citizen-

I don't know what you're trying to prove- that it does or does not, the article doesn't seem to support either position:

Brazil's central bank predicted on Monday that inflation would hit 10.8% in 2003 - up from the previous 9.5% estimate - and fall to 4.1% in 2004.

But especially since the US isn't Brazil... yet.

Posted by: Tim at December 30, 2003 02:08 PM | PERMALINK

By the way, you can't really use a country with an enormous inflation-driving budget deficit (Brazil) to effectively argue that the minimum wage increases inflation.

Posted by: Jason McCullough at December 30, 2003 02:10 PM | PERMALINK

Of course most of it will be passed along in the price of the product - it's effectively a tax on all non-minimum wage earners to subsidize minimum wage earners. It also has some nice benefits in terms of getting employers to switch to production methods using more capital, which gets some good path dependencies going.

Jason- this isn't theory, you know. The minimum wage has been raised in the past and data has been collected- I can't find any evidence that supports your assertion and can't accept it unles you can.

Posted by: Tim at December 30, 2003 02:11 PM | PERMALINK

Joe Schmoe

Are your friends representative of the average minimum wage person? Since you are highly educated and sometimes seem to be quite intelligent I suspect that your friends are also brighter than average. Therefore I would expect that they would do better than average.

With regards to your remark about minimum wage jobs being second jobs for those who already have higher wage first jobs the person who has to take a minimum wage job as a second job is obviously not earning enough to live on at their first and higher than minimum wage job.

Posted by: ____league at December 30, 2003 02:21 PM | PERMALINK

big mac attack--

you want an argument for why the increased cost of goods and services would not be passed along to the consumer. here is one:

the companies would certainly pass the cost along to the consumer if they can, but they don't actually control the price of whatever it is they are selling. suppose it costs $10 to produce a widget, and people are willing to pay $15 for a widget. if the production cost rises to $12, widgetco would want to sell them for $17 each, but there may not be a market for $17 widgets. on the other hand there may be. it isn't something that the producer gets to decide though.

Posted by: Olaf glad and big at December 30, 2003 02:24 PM | PERMALINK

Which assertation, that the minimum wage is a tax on everyone else? That one seems kind of obvious.

As to the path dependency - when the price of labor goes up, the alternative of using more capital becomes more attractive. The use of more capital is historically associated with innovation and economic growth. Not a slam dunk, but enough to be interesting.

Posted by: Jason McCullough at December 30, 2003 02:26 PM | PERMALINK

Tim,

I will not do economic research for others, but here's a good starting point for you to begin your research on the correlation between higher wages (including the minimum wage) and higher unemployment. The vast majority of professional economists will not even bother discussing this point. Why are you?

http://www.econlib.org

Enjoy.

Posted by: * at December 30, 2003 02:26 PM | PERMALINK

What evidence? That Card-Krueger study didn't find any, and any evidence of minimum wage effects on unemployment (at the levels seen in practice) is really elusive.

http://www.pkarchive.org/cranks/LivingWage.html

Posted by: Jason McCullough at December 30, 2003 02:34 PM | PERMALINK

... the person who has to take a minimum wage job as a second job is obviously not earning enough to live on at their first and higher than minimum wage job.

Because somebody takes a second job does not mean that they cannot survive without it. As someone else pointed out earlier, there seems to be an assumption of rampant destitution that is not being backed up by any facts.

Additionally, taking a second minimum wage job may be no more a permanent state of affairs than needing to keep a single minimum wage job to raise a family. I have taken second, relatively low-paying jobs, SHORT TERM, many times. This is the same sort of statistical fallacy that conflates those individuals who by choice fail to get health insurance for six months or less after they lose a job with those individuals who are chronically without health insurance.

Posted by: * at December 30, 2003 02:45 PM | PERMALINK

What do yo mean for others, *? You're making the same assertion, but in a more dismissive, annoying manner.

I've looked at studies and none of them show any distinct correlation. If you say there is then please show me your evidence. I say there isn't, have provided a couple urls, have never seen any research that suggests there is, why the hell should I be poking around some libertarian site you've mentioned? If you're so confident dig something up- I haven't been able to find anything myself. Well, anything that wasn't just bs theorizing with no substantial backing data.


Jason- I thought you were saying a rise in the min wage will necessarily mean higher prices. There's no evidence for that as I can see.

Posted by: Tim at December 30, 2003 03:01 PM | PERMALINK

I've looked at studies and none of them show any distinct correlation.

Then you are a very poor researcher. Try again. There is a reason why the vast majority of economists are in agreement on this point (they only argue the details).

And try not to get excited. There are plenty of other issues with which you can posture as a righteous defender of the proletariat. Relax.

Posted by: * at December 30, 2003 03:15 PM | PERMALINK

Memo to Black Oak, Lonewacko.

Re: Tim and others (including, unfortunately, Kevin)

Rational arguments will get you nowhere. Instead of mandated min wage suggest mandated Econ 101 course from competent, non Krugmanlike professor.

Posted by: Lloyd at December 30, 2003 03:17 PM | PERMALINK

"Jason- I thought you were saying a rise in the min wage will necessarily mean higher prices. There's no evidence for that as I can see."

Well, the income transfer to the minimum wage earner has to happen somehow; it either has to come out of other worker's wages at the same company, capital's share of income at the company, or from the customers of the company - higher prices.

".....from competent, non Krugmanlike professor."

This is extremely amusing.

Posted by: Jason McCullough at December 30, 2003 03:20 PM | PERMALINK

*-

OK. I get you now. Troll not worth dealing with.

Thanks.

Posted by: Tim at December 30, 2003 03:27 PM | PERMALINK

The point, Black Oak, is that any decent proposal can be made to sound absurd by escalating it way out of proportion.

Favor increasing the military budget by 10%?
"Well, if that will make us safer, why don't we just raise it by 1000%, huh? I mean, won't that make us even safer?"

Favor modest increases in welfare payments?
"Well, if that will help America's poor, why not just buy them all MANSIONS, huh? I mean, won't that help them even more?"

Favor increased security for airliners?
"Well, if that will help fight terrorism, why not just perform cavity searches on EVERYONE, huh? Won't that fight terrorism even more?"

That's what I mean by "transparent nonsense." You have no inclination to discuss the actual merits of the proposal, so instead you toss out straw men to demolish. Nobody is proposing raising the minimum wage to $100/hour, and every single time you talk about an extremely moderate increase as if it were equivalent, you argue in bad faith.

---JRC

Posted by: JRC at December 30, 2003 03:38 PM | PERMALINK

Jason-

Yes, but not necessarily prices, and looking at the data, it seems it's usually just absorbed since there seems to be no correlation btwn inflation and the min. wage. Considering throughout the 80s the min wage stayed the same yet prices went nutso, and when the wage was increased prices didn't go nutso, it seems the minimum wage has very little effect on inflation at all.

At the micro level it might be pretty direct, but that shouldn't preclude a rise in the min wage- there are many ways to make labor cheaper for small business that make more sense than just keep the min wage low.

In a just economy a CEO wouldn't make 435 times what his lowest paid employee makes. Let's look at how an $8 wage could be absorbed by one CEO:

$7 x 40 x 52= 14,560 (the lowest paid workers, let's say there's 200 of them with a total number of employees at 800, so that's 2,912,000 a year)

The ceo makes 14,560 x 435 = 6,333,600 a year.

The min wage goes to $8 an hour: 16,640 a year, that's 3,328,000 a year, 416,000 more a year for the 200 total. The CEO could take that amount for a pay cut and make 5,917,600 a year still.

Yeah, it's a simple example but you're right- it has to come from somewhere- but it doesn't seem to come from prices and for many, many companies simply come from the top down.

Posted by: Tim at December 30, 2003 03:41 PM | PERMALINK

That's "could come from the top down".

Posted by: Tim at December 30, 2003 03:43 PM | PERMALINK

I guess it comes down to whether you think workers earning a wage that puts them below the poverty line deserve more. And whether that extra money should come out of corporate profits, which run pretty high. All economic theory predicts is that companies will be forced to adjust to the new law, not that there will be economic breakdown or necessarily any inflation. (Preemptively: Alan Blinder was my econ prof. at Princeton, but thanks for asking.) All we're talking about here is economic redistribution here, not creating more money, which is what causes inflation. Take money from corporations and executive fat cats, and give it to the abjectly poor. Same money, different hands, no inflation. If corporations raise prices to keep executive salaries high, well, then someone will come along and undersell them. That's what capitalism is good for.

That seems like a good idea to me.

Posted by: GFW at December 30, 2003 03:50 PM | PERMALINK

There are 11,000,000 families with incomes below 20,000 (as of 2001) and another 4,000,000 with incomes below 25,000. Two full time minimum wage jobs just gets to about 25,000. Some of these are obviously just starting out and some of them are the elderly who own their own homes, but there are not likely 15,000,000 families in those two groups.

In this area there are people with full time jobs who are homeless and many more who are paying one-half their income to rent an apartment.

Posted by: ____league at December 30, 2003 03:54 PM | PERMALINK

What abjectly poor?

Posted by: Joe Schmoe at December 30, 2003 03:55 PM | PERMALINK

______league

Why not? There are 270 million people in the United States.

Actually, I do support the idea of an increase in the minimum wage. While too many leftists seem to assume that there is this vast underclass of people raising families on the minimum wage, condemned to a lives of toil, struggle, and despair -- in rural areas and in the inner city, you really can find people who live on minimum wage jobs. Most of them have other sources of income -- many live with a relative or receive other forms of state or federal assistance -- but still, they are out there.

Posted by: Joe Schmoe at December 30, 2003 03:58 PM | PERMALINK

GFW-

Good point. Some people though, I don't know if they're here, don't understand that money isn't being created when someone gets paid. I think it was black oak a while back linked to some guys site and this guy was saying when, for example (his example), a screenwriter gets paid 2 million dollars because in the free market his screenplay is worth that much, that's 2 million more added to the GNP!'

I think he was waxing about how great the free market is. Funny he didn't even know how it worked.

Anyway, I think a lot of people see no correlation between, say, a ceo's salary and compensation for the rest of the company. To many a ceo is paid what he's paid because that's what he's worth- never seeming to put two and two together that the ceo's pay is just another expense of the business and rightly, and ethically, it should be regarded as such.

Anyway, good point. My illustrative phrase is: Money is finite and fungible. Which, if you think about it really means that the problem isn't too little money, the problem is it's not being used well.

Posted by: Tim at December 30, 2003 04:01 PM | PERMALINK

Lloyd

Econ 101 is usually taught whether by Krugman or anyone else as if the world fit the models. None of this real world stuff about imperfect and asymetrical information, vastly differing wealth situations etc. It is good for understanding a few basic principles but to assume the world resembles econ 101 is nonsense.

Posted by: ____league at December 30, 2003 04:03 PM | PERMALINK

Tim,

You disappoint me. It?s obvious you didn?t try very hard. If you had bothered to do a search under ?unemployment? at the Web site I listed you?d have found plenty of information. Plenty of references to plenty of articles and essays. Try again. Perhaps you need to consider that there might be another reason that I want you to do your own research.

Then again, perhaps your little Internet research has revealed a vast conspiracy of economists to keep us all ignorant of the true relationships between wages, unemployment, prices, et al. Who knew it could be so easy to reveal a conspiracy so vast?

Do a Google search, not of anything specific to unemployment/minimum wage but of economic resources, and you should be on your way, to wit:

http://rfe.wustl.edu/EconFAQ.html

I?d like to point out that not all studies are posted on the Internet. There are thousands of economics departments, tens of thousands of research papers, hundreds of professional academic journals. Do you really think nobody has ever done this kind of a study?

Do your own damn research. Troll indeed.

Posted by: * at December 30, 2003 04:07 PM | PERMALINK

Increased labor costs are either passed on in the form of higher prices or reduced other labor costs in the form of slower raises, less bonuses and benefits. I've used the pass-through effect of 88% from a Lewin study on how much of a Medicare payroll tax increase the employers would pass on.

Tim: You must have either 1) higher prices 2) less labor costs in other areas. Unless you believe that corporations just have a fat pool of profits and don't worry about the bottom line. and if you believe that, then you must worry about where capital goes if profit is reduced. If investors get a smaller return in businesses then why invest in risky enterprises and why not bonds or invest outside the US?

You can not raise the minimum wage w/o increasing unemployment or price increases or a reduction in other costs.

Posted by: Hoo at December 30, 2003 04:08 PM | PERMALINK

France recently dropped the workweek from 40 hours to 35 hours. That move caused unemployment, and was universally regarded as a failure. We all saw that it was a failure.

Wouldn't increasing the minimum wage (increasing the cost/hour of labor) have the same effect on a lower level?

Posted by: Rem at December 30, 2003 04:12 PM | PERMALINK
Anyway, I tell you what, I will trade you, a decent minimum wage, and some form of remuneration that provides a basic level of health care coverage in exchange for an end to welfare/Food Stamps/HUD etc and as long as the decent minimum wage and health care coverage favor two parent families.

While nice on first thought that simply shifts the costs from businesses (and the rich) to everyone else (through Federal income taxes). And since 80% of working adults work for someone else, i.e., are an employee, the irony of your idea is that it shifts the burdon of providing a decent living for the working poor to other workers.

Posted by: Dr. Morpheus at December 30, 2003 04:16 PM | PERMALINK

Hoo-

Show me any empirical evidence that that's the case. There doesn't seem to be any. It makes simple sense, but history doesn't back you up.


*-

You're a dick, you realize that? Listen, arrogant ass, I've read research regarding the issue at hand and it all showed no distinct correlation. There wasn't any in the 60s, nor the 80s, nor the 90s. I've looked around for research that does show the opposite and have found nothing but theory- no statistical data that backs any of it.

Go ahead and feel superior, I really don't care what assholes think of me.

Posted by: Tim at December 30, 2003 04:17 PM | PERMALINK

Well, Joe Shmoe, I live in a neighborhood with abjectly poor people making minimum wage. And it't not pretty. But you'd probably say it's good for them, right? Builds character, right? Or, let me get the sloganeering better: poverty provides incentives to work harder?

You should get to the inner city more often, and see what's it's like.

Posted by: GFW at December 30, 2003 04:18 PM | PERMALINK

Well Lloyd, perhaps you could actually provide some of the ?rational? arguments that Lone ?liberals are in league with the elites of Mexico? wacko and Black ?eating is dangerous to your health, I?ve proven it by showing that 100 hamburgers a day will kill you? Oak don?t seem to be able to provide. But it looks like you would rather cast aspersions and make ad hominem attacks on those competent in their field ? as determined by their peers.

*, linking to a loony libertarian site and demanding people research it as if it were something other than a holding pen for ideologues is, in fact, troll behavior. When asking for information to back up your opinions I guess Tim needed to specify ? credible sources.

Hoo, the problem with your Econ 101 explanation is that, you are missing out on the big picture. If the economy were based on mom and pop shops that pay minimum wage, you would have a point. But the minimum wage affects mostly those at the lower rungs of giant service corporations like Walmart and McDonalds. These do, in fact, have a large pool of profits, as well as fantastically overcompensated upper tiers, they can quite easily afford the minor hike in the minimum wage suggested by Dean.

One of the fundamental fallacies being bandied about here is that minimum wage is about small businesses. This simply isn?t the case. Most small businesses aren?t service oriented and aren?t paying anywhere near minimum wage. Small businesses are merely being used as a stalking horse for four of the wealthiest people in the world ? the Waltons.

Posted by: Lori Thantos at December 30, 2003 04:22 PM | PERMALINK

Wouldn't taxing wealthy people more, and using that money to subsidize whatever the going rate is for unskilled labor make more sense than artificially mandating a wage?

Posted by: Stone at December 30, 2003 04:23 PM | PERMALINK

*

I suspect that you consider yourself a professional economist. Most of the people on this thread are probably not. While we know that most economics is based on a few simple principles "the devil is in the details" It is possible to find individual studies to support almost any assertion. If corporations were such perfect profit maximizing organizations why do so many of them lurch through downsizings and reorganizations followed by yet more downsizings and reorganizations. We also see significantly different rates of return persisting for significant lengths of time.

Posted by: ____league at December 30, 2003 04:24 PM | PERMALINK
If you have a persuasive argument as to why a $2 dollar increase in the minimum wage will NOT be passed along in the price of the product please present it.

Shorter BigMacAttack:

"I swear, if you don't let me pay starvation wages I pull the trigger on this gun of higher prices!"

The threat of "passing the costs along to the consumer" is NOTHING more than extortion, pure and simple.

Posted by: Dr. Morpheus at December 30, 2003 04:25 PM | PERMALINK

I've looked around for research that does show the opposite and have found nothing but theory- no statistical data that backs any of it.

My my, a little testy, aren't we? Rummaging around on the Internet is not serious research. Perhaps you should find the nearest first rate university with its own business/economics library and then try to find what you're looking for. The librarians are professionals and should be able to help you out, since you're obviously an amateur.

And my arrogance isn't an issue. This isn't about you, Tim -- it's not even about the psychological needs of some to demonstrate their personal exceptionalism by posturing as defenders of the destitute. It should be only about making a rational public policy decision. You're on the right track trying to get the facts -- you're just using the wrong tool (Google).

Try again.

Posted by: * at December 30, 2003 04:30 PM | PERMALINK

I like the idea of a government wage supplement.

Minimum wage no longer exists, and people are paid whatever the market bears. As long as someone is working 40 hours a week, the government gives them enough money so that they're earning the equivalent of a LOW but living wage.

The cost of this program comes out of increased personal income taxes on the highest tiers.

Posted by: Stone at December 30, 2003 04:31 PM | PERMALINK

Well, that wouldn't work since the market would go down to $0/hr and the government would bear the cost.

Posted by: Stone at December 30, 2003 04:33 PM | PERMALINK

*, if you are actually in possession of credible information backing your opinion I would suggest posting it. Otherwise you just look like a boorish twit yammering on with no discernable qualifications or expertise.

Posted by: Lori Thantos at December 30, 2003 04:34 PM | PERMALINK

The empirical evidence is weak at best that minimum wage will significantly improve the conditions for the low-wage poor. A better policy tool is the Earned Income Tax Credit which does not tend to come with the disemployment problem.

As for the wage subsidy issue, there are problems with that too. I am not convinced it is a good thing. It reminds me of de Toqueville's warning (paraphrased):

Democracy can only last until the public realizes they can vote themselves raises from the public treasurery.

In short, sloppy work, again Kevin.

Posted by: Steve at December 30, 2003 04:36 PM | PERMALINK

demonstrate personal exceptionalism by posturing as defenders of the destitute

It sounds like you're pretty disgrunted. Since when is showing a Christian concern for the poor "posturing." Have you been outwitted on comment threads so often that you have to demonize you opponents as some sort of post-hip, starving artist poseurs? Get a life.

Posted by: GFW at December 30, 2003 04:37 PM | PERMALINK

League,

It is possible to find individual studies to support almost any assertion.

Then what's the point of having an economic discussion? And what's the point of asking for Internet-linked studies to support your assertion?

As I implied, the only relevant discussions in regards to economics are those between professionals. This discussion is amusing, but not relevant. If the vast majority of economists find a correlation, albeit minor, between increasing unemployment and a higher minimum wage, then that should be enough.

Caveat: I'm for an increase in minimum wage; indeed I'm for the existence of minimum wage. What I'm against is the demagoguing of this issue and the fallacy of trying to create a 'living' wage. The minimum wage should not be used to garner the votes of the ignorant.

Posted by: * at December 30, 2003 04:38 PM | PERMALINK

The only thing I could see working is some sort of wage-matching program.

You earn $5, the government gives you $2.50/hr.

You earn $6, the government gives you $3/hr.

The money comes from top-tier increased personal income taxes.

The desire to do better and increase your wages is still there. Corporations still get more by paying more.

If that happened, couldn't we get rid of the minimum wage? We don't have an infinite labor market, right?

Posted by: Stone at December 30, 2003 04:43 PM | PERMALINK

*, since you obviously live near a University library why don't you trot out one of these gazillions of empirical studies that prove your point?

I mean, it should be easy, right? Since there are so many of them it shouldn't take much time at all.

Well? Can you? I'm throwing the gaunlet down here, do you have the guts to rise to the challenge?

Let's see those "real studies" 'cause otherwise I'm just going to call you for what you really are, a liar.

Posted by: Dr. Morpheus at December 30, 2003 05:03 PM | PERMALINK

*

It is fine to say "only relevant discussions in regards to economics are those between professionals" but you must also have learned that all the non-professionals have opinions. They are in the vast majority, they are also the vast majority of lawmakers.

Since I doubt that the non-economists are going to turn all the economic policy decisions to the economists (see Technocracy) it would behoove economists to try to educate non-economists.

Posted by: ____league at December 30, 2003 05:06 PM | PERMALINK

Look, I actually help design production equipment for my employer. And we DO take into account wage rates, when we decide how far to go in automating a process. Push the minimum wage above what we're currently paying, and you might not cause us to fire anybody, (We're already contracted to produce the parts they're working on, after all!) but we damned well WILL spend more money on automation on future jobs, and less on wages. The effect might not be instant, but it's no less real.

Posted by: Brett Bellmore at December 30, 2003 05:16 PM | PERMALINK

League,

Since I doubt that the non-economists are going to turn all the economic policy decisions to the economists (see Technocracy) it would behoove economists to try to educate non-economists.

Using those studies that you implied aren?t relevant because you can find a study to back up every claim? In theory it would behoove economists to try to educate the non-economists, certainly, the way professional economists working for the Administration helped to make rational policy recommendations, which the White House posted (and which people like Tim call ridiculous). But now we?re talking politics, and real-world politics isn?t about facts, it?s about perception, and that?s a whole other discussion.

Like I said, discussions concerning a ?living? wage typically have nothing to do with economics, and everything to do with political economy. I guess that?s really my main point.

Lori,

You don?t happen to hang out on Salon, do you? I never joined that discussion group because it was way, way too chatty. A chat room, not a discussion board. If I remember correctly, you had a bad habit of asking for studies to back up every point. It?s a modern failing, that, although I?ll grant it?s perfectly relevant when discussing economics.

Doc Morpheus,

Excellent points. Now I?d like you to cite statistics concerning how many economists believe there is a correlation between rising wages (without concomitant productivity gains) and unemployment. That is my criteria for discussion. Once you post this information, I?d like you then to convince me why I should delve into esoteric economic formulas for the next three days (again!, albeit not here) when this topic has already been largely resolved.

Or we could dispense with the economic balderdashery and get to the nubbins of why you (serving as a proxy for others on this board) REALLY want to increase the minimum wage, and by that I mean how this posture fits into a pre-existing political economic worldview.

Are you game?

Posted by: * at December 30, 2003 05:38 PM | PERMALINK

Kevin, you're wrong.
Obviously everyone would want the minimum wage to be higher. But on a societal and economic level, the raise may not be effective. It is merely a face-value proposal, an issue of vanity, of image, and of perpetuating the perception of 'helping the poor.'
Take a look at it from a theoretical, economist standpoint.

Posted by: bj at December 30, 2003 05:57 PM | PERMALINK

Tim:

First, hidden costs such as reducing bonuses and wages won't show up easily. It's more a secondary effect. But most studies I've seen show that the majority of minimum workers get raises quickly. These raises would stop and you might see companies cutting back in other areas.

Second, there's plenty of studies showing the effect on the labor rate. Most of the effects will be felt by the most unskilled labor. For instance, a while back Public Interest ran a story a long time ago attributing about half of the the rise in minority teen unemployment to minimum wage laws.

Lori: If profits are reduced by American businesses, will America enterprise still be as tempting to foreign capital? Or will investors decide to seek opportunities with a better return? Profits are not evil and the lure of profits leads to increased investment and opportunity. Reducing profits means that investors have higher risk and less incentive to invest and start new enterprises.

My own view is that minimum wage creates a class of winners and losers. Winners are those folks who get a wage increase and those whose earnings are tied to the minimum wages. Losers are those who see reduced benefits besides wages and the loss of possible jobs. The biggest category of losers will be the most unskilled, again namely teens.

As much as people ridicule Black Oak's $100 minimum wage, address the argument. Either the minimum wage hurts employment and the economy or it doesn't. What pro-minimum wage people are arguing, is that it is ok to take an economic hit as a trade-off for the societal good of increasing the minimum wage. The actual dollar amount is just trying to finesse the fine line between slowing employment growth and helping folks.

dch

Posted by: Hoo at December 30, 2003 06:04 PM | PERMALINK

"Well Lloyd, perhaps you could actually provide some of the ?rational? arguments that Lone ?liberals are in league with the elites of Mexico? wacko and Black ?eating is dangerous to your health, I?ve proven it by showing that 100 hamburgers a day will kill you? Oak don?t seem to be able to provide."

This article goes into more depth about the coalition, and this post provides a few more Ford Foundation links.

For a tangible example not involving the Ford Foundation, consider former governor Gray Davis:

Mexican President Zedillo: "I have confidence in the governor that he will do whatever he can so that these catastrophic effects that were foreseen for Proposition 187 several years ago will not come to pass."

Or, look into who voted for Gil Cedillo's "driver's licenses for illegal aliens" bill, and who supports things like that in general.

There are a few interesting links here. Note especially the bit about the judge. More here, here, here, and here. (As a bonus, the last is about Bush's ties with the Mexican elite, not liberals).

Posted by: Lonewacko Likes Lori Too at December 30, 2003 06:06 PM | PERMALINK

Btw, As I see it Howard Dean's economic platform is now:
1) Tax increase
2) Reducing Free Trade
3) Renewed Regulation on Business
4) Minimum Wage increases

I'm sickened by Bush's spending and was against the Iraq invasion. But these are very big hits to the Us Economy and will spike unemployment and prices pretty high.


Posted by: Hoo at December 30, 2003 06:12 PM | PERMALINK

OT, but along the same lines.

I'd like to see a requirement that Congressmen/women personally deliver KIA notices to family members in their respective districts.

Posted by: Brautigan at December 30, 2003 06:23 PM | PERMALINK

Hey righties, put up or shut up. Do you think Bush should abolish the minmum wage or not? If not, why not? If so, could you somehow petition to make Bush include it as part of his platform? I have a feeling it's a real electoral winner.

Posted by: sym at December 30, 2003 06:25 PM | PERMALINK

Some of the minimum wage opponents around these parts seem to be using the old chestnut of "increased prices passed on to the consumer", as well as the ad hominum of "go back to economics 101." You really ought to choose one and not the other, because they don't go together. Assuming businesses are run by good businessmen who understand economics 101, they'll already be charging the optimum price, based on people's willingness to purchase their products at various prices. In other words, if you've priced your product properly, any increase or reduction in price will result in less gross income. Notice this determination can be made entirely without reference to costs associated with production.

Economics 101 indeed.

Posted by: DJW at December 30, 2003 06:39 PM | PERMALINK

You could eliminate these "supply/demand" issues by substituting for the minimum wage some sort of negative income tax system. If you get less than the "minimum wage" you would get money back from the government.

A simple example (and we could tinker with the formula) let w equal a person's annual income:

tax owed = (w-20,000)* 40%

Somebody earning 20K would pay nothing; somebody earning 120,000 would pay 40,000; somebody earning 30K would pay $4000; somebody earning 10K would get $4000 back.

This would give us the "flat tax" that the conservatives like. There would always be an incentive to earn more money, as you could take home each additional dollar of gross income.

Of course, we should also get rid of these employer-supported health plans and substitute a single-payer approach.

Posted by: rachelrachel at December 30, 2003 06:57 PM | PERMALINK

I should have said:

you could take home sixty cents of each additional dollar of gross income.

Posted by: rachelrachel at December 30, 2003 06:59 PM | PERMALINK

The $7 raise was proposed by Clark, too--iirc, Dean and Kerry were both criticized for having plans that were VERY similiar to the General's...

http://clark04.com/issues/turnaround/goal4/

Posted by: josh in chi town at December 30, 2003 07:15 PM | PERMALINK

I believe Clark proposed a similar increase in the minimum wage in a speech some time ago.

Posted by: debforwes at December 30, 2003 07:20 PM | PERMALINK

I still believe that slave labor is the way to go.

If employers do not have to pay people, prices will decrease and consumers will be able to buy more products.

This country would be better off if all of you leftists, socialists, and all of the Democrat politicians would remember what a sign at a wonderful workplace in Poland once said: "Arbeit Macht Frei"-Work Brings Freedom.

Thanks to the policies of our great President and his administration there will be more work and more freedom in America over the next five years. We should all be thankful for that.

Posted by: Elaine Chao at December 30, 2003 07:25 PM | PERMALINK

I?m sorry Lonewacko, I mistook you for a rational debater ? a link to the loons from Frontpage quickly disabused me of that notion; even so the support for hunting Mexicans was really over the top.

*, asking for supporting evidence for wild assertions is the heart of rational debate. If you don?t have any evidence then your assertions have all the merit of a ten-day-old tuna and peanut butter sandwich.

Hoo, no one is asking for the elimination of profit. ?Profits are not evil,? is a nice strawman, but it has nothing to do with what I have said. In fact, your whole profit argument ignores the fundamental truth that the corporations that pay minimum wage are wildly profitable even with extraordinary compensation for upper management and shareholders. Where does all that money come from? It doesn?t come from the guy who buys 1000 shares of McDonalds; it comes from the thousands who toil away at the stores. Here?s a hint for you uber-capitalists out there: without labor, there is no capital.

By the way, no one addressed it because there is nothing to Black ?eat 1000 hamburgers a day? Oak?s argument.

Posted by: Lori Thantos at December 30, 2003 08:28 PM | PERMALINK

Let me try a different tack. Raising the minimum wage a small amount would cause a small downturn in employment for small businesses; I can agree with that in principle. It should be obvious that raising the minimum wage to $100 would cause inflation as this is a huge jump. For large corporations like Wal-Mart any price increase would be very low, probably taken out of Chinese suppliers anyway. That's why I suggest a small business tax credit to go with an increase in the minimum wage so we don't reign in entrepreneurship but ask corporate citizens to contribute more to the community by paying their workers a little better.

The results of this I believe would be an upturn in the economy that would outweigh the costs of tax credits and the minimum wage. Because when Wal-Mart makes umpteen billion a year, it doesn't spend it all in our communities. Just about every penny those workers make though will get spent, probably right away. That money goes through the economy and multiplies the good it does along the way; you economists know that is how our economy works. This means that raising the minimum wage can mean a net positive for society as a whole and not just for the teenagers flipping burgers.

As for the two parent family thing; I'm a single parent of an autistic child, and through no fault of my own. When I hear "incentives for two parent families" what I really hear is "lets find ways to penalize single parents because they're generally bad people".

I live in the rual Midwest. I live on a small family farm, which means I actually make less than the minimum wage, and government subsidies only help Archer Daniels Midland, not small fry like me. But out here the Wal-Mart workers make minimum wage, part time. There was a giant rush for jobs as prison guards when the prison opened, and our town fought like hell to be allowed to have a maximum security prison nearby. Things aren't exactly rosy in the heartland. What I see are people who think the welfare of corporations and rich people are more important than families struggling to get by. It almost seems to be the motto of the Bush Administration, in fact. Seems like it's the Democrats who are on the side of Christ when it comes to the poor, which is why I became one about 20 years ago.

I've seen the minimum wage go up several times in my lifetime. Every time I've heard the doom and gloom predictions, and each time they didn't come true. Same thing for tax increases, come to think of it. Reagan, Bush I, and Clinton raised taxes, and somehow we didn't end up begging for bread. Sometimes I think the economy just acts exactly opposite what economists say it will, although fact is you can find Nobel laureates in economics who will take opposite sides of any issue you want. So forgive me if this non-economist jumps in here.

Posted by: Norman at December 30, 2003 09:31 PM | PERMALINK

Rachelrachel said: "You could eliminate these "supply/demand" issues by substituting for the minimum wage some sort of negative income tax system. If you get less than the "minimum wage" you would get money back from the government."

Rachel, this is what the Earned Income Tax Credit is. It's a weirdly effective way to fix income inequalities. (Ford brought it back in 1975, the thing was thought up by Republicans.) Milton Friedman was big on it, the whole negative-tax idea, like you mentioned. The vast majority of people who get the EITC take it in a lump sum at the end of the year though, which seems to me to lessen its impact. People living on the margins don't need annual sums, they need extra cash every week.

I think we ought to get rid of minimum wage, and
start pouring much more money into EITC, increase the sums given out, increase the number of people who take it, educate more people on the EITC, and start pushing people to take the EITC on a paycheck by paycheck basis.

People seeing the EITC on their paycheck every week as a negative tax (offsetting payroll taxes) will make a much larger psychological difference.

I don't know enough about health care to know whether single-payer health care is economically wise or feasible.

I'd rather use the EITC to pay people to buy health insurance. (tax rebates on health care).

Posted by: Stone at December 30, 2003 09:53 PM | PERMALINK

No minimum wage = full national employment, right?

Posted by: Stone at December 30, 2003 09:54 PM | PERMALINK

"I?m sorry Lonewacko, I mistook you for a rational debater ? a link to the loons from Frontpage quickly disabused me of that notion"

They might be loons, or they might be completely normal. In any case, addressing their points is "rational debate," not ad hominem attacks.

"the support for hunting Mexicans was really over the top"

Here we have a "liberal" parroting the statement of a Mexican government official (?hunt illegals like animals in Arizona")

Tell me, do you support the Shadow Wolves? They track and capture Mexicans - both "immigrants" and drug runners - who cross into the U.S. Would that be referred to as "hunting?" Or, wouldn't that be referred to as enforcing the laws? Would it help if you learned that they're all Native Americans and they work on the Tohono O'odham Indian reservation?

Ranch Rescue works on private property, and helps the landowners enforce their rights against trespassers. They may or may not have had abuses, however the goal is not to "hunt," it's to keep trespassers off private property. Anyone who refers to that as "hunting" is just a useful idiot for the Mexican elite.

Posted by: Lonewacko: I visited Sierra Vista, AZ at December 30, 2003 09:57 PM | PERMALINK
Excellent points. Now I?d like you to cite statistics concerning how many economists believe there is a correlation between rising wages (without concomitant productivity gains) and unemployment.

Do you need remedial reading comprehension courses too? I asked you to provide studies showing empirical evidence for YOUR claims. Tim, and others, have provided empirical evidence that such correlations are weak at best. Our side has ALREADY PROVIDED EMPIRICAL EVIDENCE. It is now UP TO YOU to provide empirical evidence to the contrary. We are still waiting.

Posted by: Dr. Morpheus at December 30, 2003 09:58 PM | PERMALINK

I wonder what would happen if we had some sort of ultra high tax tier where all earnings over $100 million/year (or something similarly super-high) were taxed at some absurd rate, 60% or 70%.

Posted by: Stone at December 30, 2003 09:59 PM | PERMALINK

Someone said, (I think an economist) that even if Americans worked for zero dollars they would still be underpriced by the Chinese. The reason is that American poor people have to cover the cost of 40 years of liberal big government lunacy by folks like Kevin Drum.

If I were a poor person, my one single cry would be to cut the government, and cut it deep.

Posted by: Matt Young at December 30, 2003 11:30 PM | PERMALINK

at some point we should probably take a look at our "economy" from a political point of view. an economy that is served best by keeping the price of labor low will inevitably produce lots of low paying jobs.

one of the potential benefits of democracy is that we do not need to simply kowtow to economic power. we could do that in a monarchy.

the only thing that has ever created widespread prosperity in the working class is organization.

Posted by: Olaf glad and big at December 30, 2003 11:40 PM | PERMALINK

To Whom it may concern,

Please cut funding for public public schools!

Please do not let me receive social security benefits or medicare when I become 65!

Please throw mentally disabled kids and adults into the streets!

Please do not provide job training programs!

Please eliminate the military and police force and the fire department!

Please do not inspect our food supply!

Please allow companies to pollute our air and water!

Please let all of the criminals out of jail!

Please stop providing poor children with health care!

Please do all of things so that I will no longer be poor!

Posted by: Poor Person at December 30, 2003 11:47 PM | PERMALINK
Some of the minimum wage opponents around these parts seem to be using the old chestnut of "increased prices passed on to the consumer", as well as the ad hominum of "go back to economics 101." You really ought to choose one and not the other, because they don't go together. Assuming businesses are run by good businessmen who understand economics 101, they'll already be charging the optimum price, based on people's willingness to purchase their products at various prices. In other words, if you've priced your product properly, any increase or reduction in price will result in less gross income. Notice this determination can be made entirely without reference to costs associated with production.

Can you try that again, this time so it makes sense? This part really needs attention:

In other words, if you've priced your product properly, any increase or reduction in price will result in less gross income.

So if the price goes up, you get less gross income. If the price goes down you...get...less gross income. Basically you're screwed no matter which way the price goes, have I got that right?

Assuming businesses are run by good businessmen who understand economics 101, they'll already be charging the optimum price, based on people's willingness to purchase their products at various prices.

Obviously this is a bad businessman. A business charges the profit maximizing price. Such a price may or may not (the latter is usually far more likely) to be an "optimal" price. You know there is more to economics that economics 101. Try economics 102, then public finance and even some industrial organization.

Second the price the firm charges is not cast in stone somewhere. If the price of the inputs change then the output changes (this will change the supply function) which in turn will change the price. You know, its that silly thing in economics we call derivation of factor demand functions.

So yes, an increase in the minimum wage could, all other things equal, increase the price of the good.

*, since you obviously live near a University library why don't you trot out one of these gazillions of empirical studies that prove your point?

Paper 1

Paper 2

Paper 3 This one will cost you $5 to get the full version.

Paper 4 This one too will cost you $5.

*, asking for supporting evidence for wild assertions is the heart of rational debate. If you don?t have any evidence then your assertions have all the merit of a ten-day-old tuna and peanut butter sandwich.

Try the above for starters.

Oh and Card & Krueger have been rather debunked.

Link

Note Card & Krueger relied on phone survey data while Neumark used actual payroll records.

We re-evaluate the evidence from Card and Krueger's (1994) New Jersey-Pennsylvania minimum wage experiment, using new data based on actual payroll records from 230 Burger King, KFC, Wendy's, and Roy Rogers restaurants in New Jersey and Pennsylvania. We compare results using these payroll data to those using CK's data, which were collected by telephone surveys. We have two findings to report. First, the data collected by CK appear to indicate greater employment variation over the eight-month period between their surveys than do the payroll data. For example, in the full sample the standard deviation of employment change in CK's data is three times as large as that in the payroll data. Second, estimates of the employment effect of the New Jersey minimum wage increase from the payroll data lead to the opposite conclusion from that reached by CK. For comparable sets of restaurants, differences-in-differences estimates using CK's data imply that the New Jersey minimum wage increase (of 18.8 percent) resulted in an employment increase of 17.6 percent relative to the Pennsylvania control group, an elasticity of 0.93. In contrast, estimates based on the payroll data suggest that the New Jersey minimum wage increase led to a 4.6 percent decrease in employment in New Jersey relative to the Pennsylvania control group. This decrease is statistically significant at the five-percent level and implies an elasticity of employment with respect to the minimum wage of -0.24.

So let me see, which one am I going to believe....? The phone survey with greater variance or the payroll data which seems to be far more accurate? Gee that's tough.

Posted by: Steve at December 30, 2003 11:50 PM | PERMALINK
If you have a persuasive argument as to why a $2 dollar increase in the minimum wage will NOT be passed along in the price of the product please present it.

Supply and demand. There are special cases when the costs are fully passed on, but generally this is not the case. What will happen is that the firm's will reduce their demand for the factor that has increased in price (and they may substitute towards other, relatively cheaper factors of production such as capital--i.e., machinery). This will reduce output. As the supply curve shifts inwards the price will rise, but the consumer will respond to the rising price by cutting back on consumption and substituting away to other goods (the income and subsitution effects). This will limit how much the price will be able to rise.

Dr. Morpheus,

That extortion claim is a load of bravo sierra.

Posted by: Steve at December 30, 2003 11:58 PM | PERMALINK

steve--

the cost of production is not really related to the price that the market will bear.

price is more closely related to other factors. utility to the consumer. availability and effectiveness of lower cost alternatives. effectiveness of marketing and advertising. degree of success in attempts to collude with "competitors". stuff like that.

Posted by: Olaf glad and big at December 31, 2003 12:04 AM | PERMALINK

what i am saying is this--

the extra cost of production can only be passed on to the consumer if the consumer is willing to pay a higher price for the product. the consumer may or may not be willing to do that. whether the consumer is willing to do that or not is not dependant on the cost of production. if the consumer is willing to pay more then you should have been charging more anyway.

Posted by: Olaf glad and big at December 31, 2003 12:11 AM | PERMALINK

While I almost always agree with Kevin, here I can't seem to. The most important thing to help the working poor is to increase taxes on the rich and distribute those funds in subsidies like education funds or healthcare. This helps both poor and employer alike, without driving costs up.

Posted by: TOTL at December 31, 2003 12:31 AM | PERMALINK

"Someone said, (I think an economist) that even if Americans worked for zero dollars they would still be underpriced by the Chinese. The reason is that American poor people have to cover the cost of 40 years of liberal big government lunacy by folks like Kevin Drum."

The Chinese (still considered by some to be "communist"), of course, are well known for their small and unobtrusive government.

Posted by: McDruid at December 31, 2003 02:52 AM | PERMALINK

Stone asks:

I wonder what would happen if we had some sort of ultra high tax tier where all earnings over $100 million/year (or something similarly super-high) were taxed at some absurd rate, 60% or 70%.
-----------------------------------------------------

The answer is not much, taxes were this high in the "rober baron" days that many liberals bemoan.

Taxes have much less effect than people emotionally believe, for the simple reason that rich folks will adjust their consumption to reduce the tax burden.

If you tax capital, well... this, in reality, means kicking people out of their jobs and taking over the building and machinery to be used by government.

However, the later is not progressive taxation, it is government consumption increasing at the expense of the private sector. This is precisely what we had decided to do 40 years ago. We decided that private sector jobs were no good, and it is best to put folks on the government check. We can continue to do this now only with the support of Asia, which takes up the jobs that we cast off when we vote.


Posted by: Matt Young at December 31, 2003 03:00 AM | PERMALINK

Matt - what happens if Bill Gates only earns $.20 on the dollar for every dollar he makes over, say, $20 million each year. (the sub-$20 million is taxed at a different rate).

The lack of impetus to make more than $20 mil a year disappears, and we suffer a drain of powerful businessmen from the market as soon as they hit that $20 million mark?

Posted by: Stone at December 31, 2003 08:08 AM | PERMALINK

"what happens if Bill Gates only earns $.20 on the dollar for every dollar he makes over, say, $20 million each year. (the sub-$20 million is taxed at a different rate)."

Stone, what will happen is that Bill Gates will revise his compensation package so that he will only earn 20 million.

CEO salaries already get taxed higher after a million dollars (or 2 mil or something). The result was that their compensation packages changed to include lucrative stock options - which weren't taxed at the higher rate.

Posted by: Black Oak at December 31, 2003 08:57 AM | PERMALINK

The answer is not much, taxes were this high in the "rober baron" days that many liberals bemoan.

BZZZZT!

Wrong answer. The "Rober (sic) Baron" days were those before the turn of the century (pre-income/inheritance tax) and thus before the start of the New Deal. It's the resultant explosion of economic activity and American global economic dominance that conservatives seem to bemoan.

But thanks for playing.

Posted by: Thumb at December 31, 2003 09:27 AM | PERMALINK

A great discussion. A little stupid, but a very valuable discussion.

However, this is what made me loaug out loud. Re-read it a few times and you'll get the real real BigMacAttac, who wrote it, doesn't hav emuch credibility from me.

>>Tim,

You are making the assertion. You are asserting that an increase in the minimum wage would be beneficial. You need to back up your assertion. I am asserting that you are incorrect. I really don't need to prove that you are incorrect. (It is impossible to prove a negative.)

In short, he starts out saying that Tim's assertion is "an increase in the minimum wage would be beneficial" and ends with BMA saying Tim's assertion is a negative. It is not.

BMA needs to do some research not just whine that he shouldn't have to. He's lazy and probably earning minimum wage ;).

Posted by: Andrew | BYTE BACK at December 31, 2003 09:50 AM | PERMALINK

Steve,

Can you really substitute for labor or labor intensive goods so easily? Would I eat less fast food? Buy less retail?

What impact would that have on the labor market?

I think a fair starting assumption would be less demand for minimum wage labor.

As is in more unemployment.

As I was looking around yesterday I quickly skimmed something from CATO that seems to have said something similar to what you said.

No inflation but definitely unemployment.

Please continue.

Posted by: BigMacAttack at December 31, 2003 09:57 AM | PERMALINK

Andrew | BYTE BACK,

You are right about the negative.

But wrong about everything else.

I actually did do a bit of research. As I note in my post to Steve I saw something from CATO which seemed to contradict my claims about inflation.

You can also see that I am prepared to listen to any persausive arguments to why inflation would not occur. Steve made such an argument.

Tim hasn't. All Tim has really done is cherry pick studies and attempt to shift the burden of proof. Proving almost any macroeconomic theory via statistics is virtually impossible. Same thing goes for climatology.

Tim is supporting the policy proposal. Tim is required to provide a plausible theory as to why the policy would be beneficial and some modicum of proof. He has not provided any of these things.

Like I said it could be done. Tim hasn't done it. Tim wants to pretend like no costs exist. With the stroke of a pen, a presto magic increase in income.

The NathanNewman site provides some persuasive arguments. Heritage and CATO provide some insight as to what the costs might be and who might pay the price. Other lower income workers.
That is the conclusion of most economists.(Though I am a bit out of date and never more than a mediocre student)

If one mistaken comment equals a lack of credibility who do you find credible?

Posted by: BigMacAttack at December 31, 2003 10:17 AM | PERMALINK

DJW,

In a competitive market their price will essentially have been set for them. In a competitive market that price will result in 0 'profit'.

Unless they want to run a 'loss' they will have no choice. They have to raise their prices.

That is my understanding of macroeconomics 101 and 201. But it has been a while.

Posted by: BigMacAttack at December 31, 2003 10:28 AM | PERMALINK

Dr. Morpheus,

I am confused as to why you feel providing basic income support for the poor and renumeration in the form of some basic health care coverage would

'that simply shifts the costs from businesses (and the rich) to everyone else (through Federal income taxes)'

Please explain.

Posted by: BigMacAttack at December 31, 2003 10:35 AM | PERMALINK

Olaf glad and big,

I think you Steve and CATO are all making the same point.

Producers cannot just pass on the costs since consumers can substitute.

Originally I missed your post.

I hadn't thought of that. It makes sense.

Posted by: BigMacAttack at December 31, 2003 10:37 AM | PERMALINK

Sym asks we conservatives to demand our man W do away with the min wage. That would be lovely. However, many decades of braindead economics disguised as compassion have unfortunately had their effect and the reality is that most of us would be pleased to see it locked where its at and let growth and inflation take care of this job killer on their own. This was the case in the 80's when some 20 mln new jobs were created.

Tim appears to be on a never to be satiated spiral of demands for "studies" and data to be researched and provided by those of us on the other side. Well, I'm killing enough time as it is on this, but I will suggest looking up the comparitive unemployment rates of various populations, say those aged 15-25 vs those aged 25-35, and see where the higher unemployment levels lie.

Finally, its been a few years since my BA in Econ, so I'll be very careful here, but I would venture that the consequence of a govt imposed wage above that obtained in an otherwise free labor market will cause some combination (depending on elasticity of demand/supply) of a) lower employment and overall compensation among affected labor pool, b) lower output of goods and services, c) lower profits (tho at unchanged profit margins), d) higher unit prices for said goods/services, e) higher wages for remaining, presumably more productive employees partially compensating for a) above, and f) politically and psychologically astute, economically illiterate politicians putting one over on the public with the assistance of Kevin, Tim, Lori, et al as well as majority of newsmedia. Net effect is a not insignificant negative impact on economy (read wellbeing of population at large).

Posted by: Lloyd at December 31, 2003 01:01 PM | PERMALINK

In other words, if you've priced your product properly, any increase or reduction in price will result in less gross income.

So if the price goes up, you get less gross income. If the price goes down you...get...less gross income. Basically you're screwed no matter which way the price goes, have I got that right?

That?s why it?s called an optimum price point. This really is Econ 101. At the optimum price point you have the largest number of people buying your product at the highest price. It really is that simple: the higher your price, fewer people will buy your product. Since your revenues are the product of the number of people who will buy your product and its price, all you do is draw that function and look at the maxima ? you set your price there and no matter where else you place it, you will get less gross income. That there are complexities that undermine this is why this is Econ 101. But if you don?t understand something this fundamental then the rest of us are going to have a hard time accepting your ?wisdom.?

Unfortunately, there is always a question when a debunking of prominent economics professors is done by a group like Cato with an axe to grind and a history of, shall we say, less than honest analysis. As to your link to the study, ?Do Minimum Wage Increases Lower the Probability that Low-Skilled Workers Will Receive Fringe Benefits?? I fail to see what this unrelated information has to do with the topic at hand ? the effects of minimum wage on employment levels. In fact, it leaves to a footnote the fact that some studies have found the conservative position credible, but the text simply states: ?Journal articles and books, as well as the national media, have reported the empirical studies that have found that increases in the minimum wage seem to have had at most only small negative employment effects.?

Finally, note that this study you pointed to says 1988 had an exceptionally low federal minimum wage in real terms. Looking, not at a single industry, or at same store data (which is more likely to correspond to the Econ 101 model you seem so enamored with), but the economy as a whole one finds an odd result: 1988 did not have the lowest unemployment rate. If your model reflected reality, one might expect that this would be the case. If your argument is that the effects were swamped by other factors, then there is no reason to hold out against this small change in the minimum wage; it too is likely to be swamped by other factors and more money in the pockets of the employees is, in general, better than less.

Posted by: Lori Thantos at December 31, 2003 04:58 PM | PERMALINK

Lloyd?s claims of expertise in the area are undermined by theorizing results that simply aren?t borne out in the world at large. Looking at the history of unemployment and inflation in the wake of the creation of, and increases in, the minimum wage, one finds no credible evidence of statistically significant increases in either. In fact his whole litany of economic devastation is merely the laundry list of wishful thinking on the part of anti-individualist ?libertarians.? Let me be clear, it isn?t that I?m suggesting that Lloyd doesn?t have a BA in Econ, but he apparently is not a much better economist than Dick Armey whose predictions of massive inflation owing to the Clinton tax hike in ?93 were based on the same kind of wishful thinking. Empirical evidence ought to be the starting point for theories, but then there wouldn?t need to be any debate on this issue.

On another note, one of the problems with the anti-individualists is that they have conveniently forgotten the difference between a free market, where all players are equal, and the labor market where employers hold a considerable advantage. Once again history demonstrates the difference between theory and practice; in a system where there are no minimums and the employee is forced to bargain from a position of weakness there has always been a race to the bottom. This is the basis for unions and the notion of collective bargaining as a tool of the individual against the (also) collective employer. This relates back to the topic at hand because the breakdown of the union system has forced the government to provide a solution, despite the inadequacies already discussed (fairness for workers and employers in Montana v. NYC, for example). It may not be the perfect solution, but it is the only politically feasible one at the moment.

Posted by: Lori Thantos at December 31, 2003 08:52 PM | PERMALINK

Kevin,

You're wrong when you say that service jobs can't be exported.

For example, Internet sales uses far less labor than B&M store sales.

Increasing the minimum wage will increase the cost advantage of Amazon, eBay, Yahoo! Stores, etc.

Moving more sales to those channels increases the percentage of foreign labor in the total labor content of making the goods and geting them to the consumer.

Net impact is exporting jobs - more people working in factories in China, fewer in Wal-Marts in California.

Posted by: Mike at December 31, 2003 09:46 PM | PERMALINK

Warning ----------------- long post, and hostile to many sacred cows in this discussion.
Warning
Warning


What the trolls have consistently missed is that, as in the case of ANY government policy there are trade offs.

Would increasing the minimum wage affect prices, logically yes, and probably in reality to a small extent.

The 600 pound gorilla in the corner is would there be any positive effects? Again, logically yes, in reality probably yes. Now comes the trade offs.

Let?s start with the basics. The conservative business is ALL lobby wants to limit this discussion to professional economists only. Great, except economics is not a hard science. It is not like Geology or physics where there are exact physical properties that can be measured. Economics is the exact opposite of engineering disciplines where empirical evidence trumps theory.

Economists develop theories and then spend their lives trying to make a system that is literally impossibly complex match there projections, continently fudging to make reality seem to fit their idea.

(do you think I am hostile to economists????) I see major corporations that follow the economic models, and have NO CLUE that the very things that economics can not qualify, and therefore discounts, are the ?Intangibles?. But those intangibles are what makes one bossiness successful and an other fail.

Now, over the course of the last several minimum wage increases there have not been any of the well publicized nightmare scenarios that were predicted.

As I recall, and no I have not researched studies or even compiled the data myself, I am just going from my MEMORIES of how events transpired, after each round of minimum wage increases, there was an INCREASE in economic activity.

This is easy to provide a very plausible theory to support. While the negative effects are VERY small to factors to most of the institutions, disposable income to those affected is increased dramatically.

If Wal-Mart employees can not afford to shop at any where but Wal-Mart, that helps Wal-Mart to a certain extent, but is screws the rest of us, when you consider that Wal-Mart now employs on the order of a few percent of THE ENTIRE WORKFORCE. Increase disposable income at the bottom end, and spending increases. Does that drive inflation, possibly, but again the EVIDENCE is at best that that is a very small effect compared to the increase in buying power for a large number of people that comes from increasing disposable income.

Argue about the numbers, some one said 15 million workers are in households that are at or below 25,000, the amount that is at the top of the range that two min-wage earners would reach after the increase. While there are 270, (actually I think closer to 310 now) million PEOPLE, there are closer to 150 million HOUSEHOLDS, and on the order of 100 million households that are in the working population. (rough numbers, again arguable, but certainly closer enough to accurate to work with.

This puts 10 percent of all households DIRECTLY tied to an increase in the minimum wage, and closer to 15% of working households.

This means that 10 % of the population, (as the members of 10% of the households) will get a massive, to them, increase in income. If labor were 30% of costs, (a number that if I recall seems to be close to the middle, of what is quoted for the industries affected) then price PRESSURE would increase by ( let?s say a 20% percent increase in labor costs, If every single employee?s wage increased by this amount ) * .30 (the percentage of costs that labor represents.) or an increase of 6%. ONLY IN THE LOW WAGE INDUSTRIES. Again, to pull a number out of my butt, 10% of the employers, (by virtue of 10% of the population being employed by them, and again, MAXIMIZING THE AFFECTS OF THESE VARABLES BY ASSUMING THAT everyone of these minimum wage employees are employed a company employing minimum wage employees, and those companies ONLY employ minimum wage employees.

This would give us an increase in inflation of .6%. Sorry, I am not enough of a statistician to calculate the increase in spending. In numerical terms it would be ( 20K in round numbers, or the household income of the minimum wage households, * 20% again someone?s number for the increase for the minimum wage to increase to $7, * 15 million households.) or 30 some odd billion increase in consumer spending.

Now in the REAL world, since most of the industries that have minimum wage workers, have only a small percentage of there workers at the minimum wage, and there are other factors that would cause a business to resist passing the whole cost of the increase on to consumers.

I have also over simplified the increase in spending as a Certain, small percentage of the increase in income would go to savings or in other ways not directly dive consumption, but that is a small drop.


Some for a certain decrease in spending power due to inflation, and a much larger increase in spending power, because the wealth is being distributed to people that will return it to the economy instead of hording it, and for this modest increase in minimum wage there would be a very large net positive effect on the economy.

Larger increases are of course going to drive up labor costs as a percentage of costs, both because minimum wage earners wages have increased and because as the floor goes up and crosses the wages of higher earners they become minimum wage earners and increase as well. To find the optimum minimum wage would then be a ?simple? matter of determining what we would view as a socially acceptable trade off ratio between the drag of the inflation increases, to the spending increases. This ratio would have no scientific basis at all but would be purely an arbitrary social policy goal, so the minimum wage would still be a number pulled out of someone?s ass, but at least we would be trying to establish a rational as opposed to just completely guessing. Also the cost benefit curve would be established. Then we could actually have a measure of the pluses and minuses, and the debate would become where to set that balance, not arguing in complete ignorance, and we would be arguing apples to apples.

All of this is of course a first order approximation. Very thumbnail, but I will stand by my numbers as close enough to use as a starting point.

Second order would of course refine the inflation calculation based on a more realistic distribution of minimum wage earners in a ?typical? business, and would recognize that those above minimum wage get some increase when the minimum wage is increased.

Third order would separate the effects that paying more to low skilled workers would have on higher skilled wages. (as lower skilled workers pay increased, entry level pay in semi- and skilled industries would increase to continue to draw incoming entry level people. At this level you would also start attempting to measure the secondary consumption caused when the increased spending caused by the wage increase causes businesses to need to produce more and therefore INCREASE HIRING.

There. A reasonably cognizant theory proposing that minimum wage increases BELOW the point where inflation and other negative effects overcome the positive boost to the economy of the increases in consumer spending will INCREASE employment, NOT decrease it. And again, I don?t have the studies and data to prove it, but my memory is that that has been the net result of each of the last several rounds on minimum wage increases.

This also challenges the $2 dollar increase is the same as $100 increase arguments.

Now one last time. I am NOT an economist, I have NO formal training, but I am well read enough that I am going to state absolutely that I believe these numbers are accurate within the limits of approximation that I have presented.

Certainly refine my numbers, and if you think my approximations are wrong or even my conclusions, they are debatable, but I do have 20 years experience working for companies from three employees, to the very largest of media giants, so my arguments have some validity from DIRECT OBSERVATION. I also have lived through at least three rounds of increases in the minimum wage, both making a little bit above minimum and making over median income.

Please, if you are going to challenge this analysis, at least meet me part way, and directly argue why my conclusions are wrong, and don?t waste your time or mine claiming this theory or the economist says, without at least stating why that theory says that my theory is wrong. I am EMMENANTLY willing to learn, and would be happy to accept evidence that actually address the issues I have argued, but dogma, and the arrogance of technocrats are just not worth my effort to notice.

As always, my heresies

Mr TeK

Posted by: Mr Tek at January 1, 2004 12:48 AM | PERMALINK

One thing that amuses me here is the inane belief that if Wal-Mart paid its workers more Wal-Mart could be better off because its workers could buy more stuff from Wal-Mart.

This is as stupid as the story about the two guys marooned on a desert island who became millionaires by selling coconuts to each other.

Let's say Wal-Mart gives me an extra $1.00 in income and I therefore spend an extra $.50 at Wal-Mart. Is Wal-Mart better off? Obviously not.

OK. Say that they give me $1.00 and I spend $1.00. They aren't better off, but at least it's a wash, right? No, obviously not - Wal-Mart has to buy goods... we are comparing cost with revenue but we should be matching with profit.

Typical retail margins are under 5%. Let's assume Wal-Mart gives me an extra $1.00. For it to be a wash I would need to spend $20 at Wal-Mart.

Am I likely to do so? Obviously not.

Posted by: Mike at January 1, 2004 03:00 AM | PERMALINK

Sounds like a lot of you conservatives keep finding reasons why a whole lot of people *need* to, indeed must, remain poor. Oh my gosh, you do anything that helps people make more money than Wal-Mart wants to pay (as little as possible under any and all circumstances) and the sky will fall! It will be worse than if we'd just left them making less. We'll all be better off (except those people making the current minimum wage, I guess) if those people would just keep making less.

Pure selfishness. But what else can we expect from these folks, who have been so completely wrong on economic matters time and time again. Why do we even countenance these people as having any clue? Economics is the only science where two people can win Nobel Prizes for two completely contradictory theories. It's not a science at all, it's a mathematical model trying to navel gaze something far more complex than they can begin to understand. That's why you raise the minimum wage, things get better, when the economists say they will get worse. That's why when you raise taxes on rich folks, the economy prospers when the economists will tell you it will be a disaster. We've got numerous historical facts to refute these guys right down the line. Someday we will shatter their foothold on supposed economic wisdom, but for now they just keep blathering on. Lets objectively measure what works, and do that. Lets temper our greed with what is best for society as a whole, and we'd all be better off for it. But no, we will continue to war against the selfish and those without the empathy gene.

Posted by: Norman at January 1, 2004 10:30 AM | PERMALINK

Index it to congressional salaries--great idea! But don't be such a cheap tipper. Make it 15%.

Posted by: Kyle McCullough at January 1, 2004 11:32 AM | PERMALINK

Mike, you're an idiot. The world is not reducible to a single employee/company relationship. Nice try though.

Posted by: Che at January 1, 2004 02:18 PM | PERMALINK

This discussion is amusing. I think this is an example of what one pundit called 'the fevered swamps of Internet chat rooms'. It is simply astounding that anybody could believe that there have not been any empircal studies concerning the minimum wage. All you have to do is find one serious study, peruse its list of references, and you are well on your way. Those references will in turn have references, whose references will have references, whose references will references. Such is life in academia. The 'data' trail is for all intents and purposes as long and broad as you want it to be. Here is one example, from a study entitled "Winners and Losers of Federal and State Minimum Wages". I have met its authors, and they are far from partisan. There are no cabals. There are no conspiracies. This is not an issue that need be demagogued and postured over, my fevered Internet swamplings. Enjoy.

Aaronson, Daniel. ?Price Pass-Through and The Minimum Wage.? Federal Reserve Band of Chicago Working Paper WP-97-3, 1997.

Baker, Michael, Dwayne Benjamin and Suchita Stanger. ?The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law.? Journal of Labor Economics 17:318-350, 1999.

Barabak, Mark. Z. ?Public Calls Trial Partisan, Wants It to End Quickly.? Los Angeles Times, January 31, 1999. Section A, ID: 0990009554, 1999.

Boal, William M. and Ransom, Michael R. ?Monopsony in the Labor Market.? Journal of Economic Literature 35(1):86-112, 1997.

Brown, C., C. Gilroy and A. Kohen. ?The Effect of the Minimum Wage on Employment and Unemployment.?
Journal of Economic Literature 20(2):487-528, 1982.

Brittain, John. ?The Incidence of Social Security Payroll Taxes.? American Economic Review 61(1):110-125, 1971.

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Burkhauser, Richard V., Kenneth A. Couch and David C. Wittenburg. ?Who Gets What from Minimum Wage Hikes: A Re-Estimation of Card and Krueger?s Distributional Analysis in Myth and Measurement: The New Economics of the Minimum Wage.? Industrial and Labor Relations Review 49(3):547-552, 1996.

Card, David. ?Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage.? Industrial and Labor Relations Review 46: 22-27, 1992a.

Card, David. ?Do Minimum Wages Reduce Employment? A Case Study of California, 1987-1989.? Industrial and Labor Relations Review 46: 38-54, 1992b.

Card, David and Alan B. Krueger. ?Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania.? American Economic Review 84: 772-93, 1994.

Card, David and Alan B. Krueger. Myth and Measurement: The New Economics of the Minimum Wage. Princeton, NJ: Princeton University Press, 1995.

Currie, Janet and Bruce C. Fallick. ?The Minimum Wage & the Employment of Youth: Evidence from the NLSY.?

Journal of Human Resources 31: 404-428, 1996.
Deere, Donald, Kevin M. Murphy and Finis Welch. ?Sense and Nonsense on the Minimum Wage.? Regulation 18: 47-56, 1995.

Deere, Donald, Kevin M. Murphy and Finis Welch. ?Employment and the 1990-1991 Minimum Wage Hike.? American Economic Review Papers and Proceedings 85: 232-37, 1995a.

Deere, Donald, Kevin M. Murphy and Finis Welch. ?Examining the Evidence on Minimum Wages and Employment.?
Mimeo, 1995b.

Employment Policies Institute. Understanding the Minimum Wage: Issues and Answers. Washington, D.C.:

Employment Policies Institute, 1995.
Employment Policies Institute. ?Most Americans Think State Should Set the Minimum Wage.? http://
www.epionline.org/survey.htm 1/23/2000.

Fuchs, Victor R., Alan B. Krueger and James M. Poterba. ?Why Do Economists Disagree about Policy? The Roles of Beliefs about Parameters and Values.? National Bureau of Economic Research Working Paper 6151, 1997.

Gramlich, Edward M. ?Impact of Minimum Wages on Other Wages, Employment and Family Incomes.? Brookings Papers on Economic Activity 2: 409-451, 1976.

Grossman, Jean B. ?The Impact of Minimum Wages on Other Wages.? Journal of Human Resources 18: 359-78, 1983.

Harris, Donald J. Capital Accumulation and Income Distribution. Stanford, CA: Stanford University Press, 1977.

Hashimoto, Masanori. ?Minimum Wage Effects on Training on the Job.? American Economic Review
72:1070-1087, 1982.

Horrigan, Michael and Ronald Mincy. ?The Minimum Wage and Earnings and Income Inequality? in Sheldon Danziger and Peter Gottschalk, eds., Uneven Tides: Rising Inequality in America. New York : Russell Sage Foundation, 1993.

Johnson, Harry G. Two-Sector Model of General Equilibrium. Chicago and New York: Aldine-Atherton, 1971.

Johnson, William R. and Edgar K. Browning. ?The Distributional and Efficiency Effects of Increasing the Minimum Wage: A Simulation.? American Economic Review 73:204-211, 1983.

Kelly, Terrence. Two Policy Questions Regarding the Minimum Wage. Washington, D.C.: The Urban Institute, 1976.

Kennan, John. ?The Elusive Effects of Minimum Wages.? Journal of Economic Literature 33: 1945-65, 1995.

Katz, Lawrence F. and Alan Krueger. ?The Effect of the Minimum Wage on the Fast-Food Industry.? Industrial and Labor Relations Review 46:6-21, 1992.

Kim, Taeil and Lowell J. Taylor. ?The Employment Effect in Retail Trade of California?s 1988 Minimum Wage Increase.? Journal of Business Economics and Statistics 13:175-82, 1995.

Kosters, Marvin H. The Effects of the Minimum Wage on Employment. Washington, D.C.: American Enterprise Institute, 1996.

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Lang, Kevin and Shulamit Kahn. ?The Effect of Minimum Wage Laws on the Distribution of Employment: Theory and Evidence.? Journal of Public Economics 69(1): 67-82, 1998.

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32(3):773-802, 1998.

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issues.htm 2/2/99, 1998.

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Research Working Papers 6127, 1997.

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Backgrounder Executive Summary, No 1162, March 5, 1998, 1998.

Posted by: Catalonia at January 1, 2004 03:12 PM | PERMALINK

If you had ever employed teenagers you would have a different "take" on the value of minimum wage laws. Most kids are not worth the minimum wage, and when they don't get hired they don't learn good work habits and don't have mad money for themselves, and so forth. They are living at home and need no money. What they need is apprenticeship in adult surroundings, and they need it badly, especially those who will never go to college. Yet, the small business cannot do uneconomic hiring and sustain its return on equity, i.e., remain viable. So what happens? The kid is out in the park selling grass, the business hires somebody overage who is responsible instead of somebody underage, and the jails continue to fill... All those who comment that nobody can live on the minimum wage are correct. It is a sideshow, and raising the amount is not a win-win for society.

Posted by: Exguru at January 1, 2004 03:34 PM | PERMALINK

I've had a number of crap jobs in the past few years... and the last time I made minimum wage was back in high school. Just how many people are making minimum wage? ANd keep in mind that the minimum is the minimum, and that I, mildly skilled college graduate, am not going to be happy getting paid the same as some semi-literate high school drop out. I'm going to cost more too. So will everyone else. Cost will go up in is proportion to the higher expense of keeping labor. Except for killing off all future manufacturing jobs that could possibly be exported (leaving more people unemployed and slowing growth) the working poor who are still employed will still be in pretty much the same situation, since everything will cost more, possibly a lot more as everyone gets a big fat raise (in teh case of the really high amounts proposed).

The dollar has no intrinsic value. It's not like gold or food or soemthing. Its value is relative. Simply hiking the minimum wage isn't much of a solution, since its relative value will decrease when the basic cost of business goes up.

You want to help the working poor? Fix the school system that let them out into the real world barely able to flip burgers. I've never heard anyone say that too many skilled and educated workers were trying to work at their company.

Posted by: Toxic at January 1, 2004 05:42 PM | PERMALINK

Che says:

Mike, you're an idiot. The world is not reducible to a single employee/company relationship. Nice try though.

So prove it Che... show me a model with two employers and two employees where a company is better off if it raises wages for its workers.

Or any other combination you want.

Saying "I can't come up with any model in which raising the minimum wage helps companies, but I feel that in the general economy it should be true" is just inane.

Posted by: Mike at January 1, 2004 06:21 PM | PERMALINK

Kevin says that raising the minimum wage "...is one of the most important things we could do to help the working poor".

I disagree. It's one of the least important measures that could be taken to help low income workers. In the short term, it would provide a minor benefit. In the long run, it would do next to nothing to improve their lot -- perhaps even do some harm.

Black Oak made a very good observation above that has been misinterpreted. He asked, why raise the minimum wage to 7$ per hour? Why not $10 or $20 per hour? Why not $100?

Other posters have been jumping on this as ridiculous, but it isn't. His point is that $7/hr is not near enough to constitute a minimum "living wage", and he's right. The argument that this will help the working poor, therefore, is specious. It would, temporarily at least, make them "slightly less poor". Is that the best deal we can or should offer? Wouldn't it be better to help them rise out of poverty and earn truly good wages instead?

The minimum wage currently is, effectively dead. Well, not completely, but pretty close. Even the lowest paying service jobs these days pay starting rates above minimum wage. I live in Oklahoma, which has one of the lowest costs of living in the nation, and even here, teenagers in high school get hired for at least $6/hr. at just about any place you can think of (fast food, grocery stores, department stores...). The 7-Eleven stores here start new clerks at $8/hr (or maybe it's $8.50 now) and that's non-skilled work. The few places that I've heard of that still pay $5.15 do so only for the first month or so and then jump it way up (iow, it's used to "filter" out kids that don't pan out, quit after two weeks, etc.)

So if minimum wage was eliminated, what would happen? Basically nothing. We're practically there right now. A few employers could try to pay less than $5.15, but since the labor market is already priced above that point, it would not succeed. Hell, employers would pay $0 if they could -- but they can't, the market won't support that. They'll pay whatever they have to keep their positions filled, period.

Here's the central problem: you can't set the minimum wage to anything significantly different than what the market would on its own. And in that case, why bother?

Consider raising the minimum wage to $20/hr. But we can't do that because it would have too many negative economic effects, as others have pointed out (increase inflation, increase unemployment, etc.). Ok, so let's cut it half to $10/hr. But that's still too high -- same bad effects (but milder). Ok, half it again to $5/hr. Nope, that's too low -- below the current minimum wage and below what every company already pays starting employees. Alright then, just push it half way back up to $7.50. Just about right? Maybe. Maybe it should go lower to about $7.00... or maybe up a smidge to $8.00...

Well, you can haggle the amount a bit, but it would inevitably land within the ballpark of the $7 amount originally proposed. Why? Because that represents, more or less, the standard entry level wage at most businesses these days. Not exactly...it will be above the amount for some types of business and some areas of the country, below for others.

So, in the end, what have we done? In trying to determine a fair minimum wage rate, we are only duplicating, via a bureaucratic process, what the labor market is already doing on its own every day. We don't want to set the minimum wage below this market rate, or the minimum wage is completely useless (pretty much the current situation). We can't set it too high or the economic effects are too deleterious. So we end up wasting a lot of time and tax payer money and extra bureaucracy in the way of rules and paperwork, only to enforce a rate level that is not significantly different from what the free market would arrive at without any interference. Except that the minimum wage is a rigid, enforced "guess" that is never as efficient as the fluid and more realistic wages set by the actual labor market.

Even if you do raise the minimum wage, as suggested, then still no one is happy. The business owners are pissed because of the extra paperwork, hassle, lack of flexibility with controlling labor costs, etc. The economy as a whole takes a minor hit, but only a minor one because the vast majority of workers earn above the minimum wage anyway. The "concerned" liberals who push for the legislation aren't really happy either, because $7/hr is not nearly enough for a "living wage" anyway, so they will continuously fight to raise it again, and again, and again, ad infinitum. But, as pointed out above, it will never be raised much more than about where the labor market itself actually prices entry level wages, in any event.

Thus, it's basically all an exercise in futility and stupidity. It doesn't REALLY help the working poor. Perhaps it gives some folks a "warm feeling" about doing good. But instead of doing pointless "feel good" things that only give the illusion of helping, why not actually help? How? By supporting measures to foster job creation, technical training, continued education, entrepreneurship, small business loans, etc. Make sure the environment for exisiting businesses is favorable. Help new businesses get started. Train workers to have marketable skills. Support education at all levels. Create win-win scenarious for all involved.

Yep, these are pretty much the things that our local, state, and federal government already do (or try to do). This type of stuff is more boring than the "central planning" ideas that intellectuals and social liberals tend to fall in love with, but it actually works.

The American economy is strong, dynamic and resilient. It has its ups and downs but it always comes roaring back. Hell, we're basically the economic engine for the whole world any more. It's truly amazing. No, raising the minimum wage won't destroy our economy, for heaven's sake, we're much stronger than that. Still, why do pointless things that have minor negative effects on the economy for tiny, temporary gains for so few? Just to make one feel like something good has been done? That's phoney and unnecessary. Given low wage workers real help instead.

Posted by: Daniel at January 1, 2004 11:09 PM | PERMALINK

What I gather from what I've read above and the links I've followed is that minimum wage policy is generally useless, because it's a fixed weapon against a floating target. Furthermore, that attribute is a good thing since none of us really know how to hit it. The well-meaning liberals will continue to float it, keeping the concept very much alive and watching high-volume employers, and the well-meaning conservatives will continue to trim it down so that it remains a non-factor. Excellent Daoist push-pull. Neither side would do half as well without the other.

Minimum wage seems to be the business degree of political programs. It has little to do with reality but it sure does look mighty good on certain types of resumes.

The larger elephant in the corner is healthcare. Few people understand why the US favors employer sponsored healthcare. The short version: it was a response to wartime wage freezes against an army-shrunken workforce, and it turned out to be such a decent idea that it was enshrined in tax policy.

Healthcare has a far greater effect on human resources within business than a minimum wage ever would. Minimum wage policy may charm those that do not think so deeply about it (another policy with similar underpinnings is that which sends one eerily Roman checks in the mail, presumably for spending at the circus) but healthcare is the real issue here. It seems more logical to attempt to slay the beast that people are fending off with their paychecks rather than fattening the thing up a bit so that when it is eventually slain by actors unknown, a big feast is in the works!

Posted by: a lesser mongbat at January 1, 2004 11:27 PM | PERMALINK

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Posted by: Lloyd at January 2, 2004 01:26 PM | PERMALINK

Daniel-
The minimum wage isn't "irrelevant" because "even 7-11 is paying better than the minimum wage". 7-11 and other service jobs are doing so because they can SAY to prospective workers that they are paying better than the minimum. The minimum wage is quite relevant; it creates a benchmark which even the service sector often feels it must best in order to attract employees. If the minimum goes to $7, those businesses now paying entry-level workers $7 will have to go to $8 or $9 to make the job applicants think they're getting a similarly good deal. See how it works?
Education, such as Daniel and many conservatives advocate, really isn't necessarily an answer to the problem, since the old considerations of supply-and-demand apply there too; if there's no demand for a large new group of professional and technical people, then what good is providing such training? And even where there is demand, a newly-trained techncial or professional American citizen may not find his economic situation improved, since the multinationals have discovered, for example, that a guy in India will write a piece of software for the same wages we're paying the clerk in the 7-11 on the corner.
Raising the minimum to $7 won't vastly improve anyone's lifestyle. But then, FDR'S New Deal didn't really end the Depression, either, yet both did one important thing: they made people on the low end of the economic totem pole feel a little better. At least for a while. Long-term, one option might be penalizing firms operating in America that don't hire substantial numbers of American citizens- not exactly "fair trade", but, as I believe Christopher Lasch pointed out, a lot of the people running those firms feel less loyalty to their country of birth than they do to their peers in the business world. It might be time to remind them they've got obligations to the country that they grew up in, and that nurtured their efforts.

Posted by: ALLENM at January 3, 2004 01:23 AM | PERMALINK

I'm all in favour of raising it. I believe, if guaged to inflation and cost-of-living since inception in the 30's, the minimum wage would be something like $15 an hour today. Which, depending on how it would be taxed and such, is probably just about barely a living wage in most parts of the U.S. ($600 a week minus, say, about 25% in taxes, Social Security, insurance, etc.)
You forget one other point - raising the minimum wage would mean millions of Americans living on government assistance could actually afford child care and actually make more money working than on welfare.
Of course, it will never happen. Laws are made for the rich.

Posted by: Charles at January 4, 2004 11:09 PM | PERMALINK

I worked near the minimum wage for 7 years. You can get by on the $12000 a year IF...

*You have a roomate or two
*You have no car and/or insurance
*You have no family
*You have no healthcare and no injuries
*You have no Retirement planning
*You have no taste buds and skip breakfast
*You take no vacations
*You have parents that will loan you money from time to time

If all of the above holds true, you can make it month-to-month, but you will spend nearly all you have. The working poor are in deed the truely patriotic supporters of the economy.

Now give them a raise and they will still spend all of their money every month but maybe they get a few items on the above list. To them this is a substantial increase in quality of life. To the business owner it is more customers. To the nation it is a better future.

Posted by: Enterik at January 5, 2004 01:16 PM | PERMALINK

well i like wut ur talkin bout and as a wroking mother myself iam all for it and iam still in school iam 13 and iam for rasing minimum wage because we need things to

Posted by: angelica at January 11, 2004 03:46 PM | PERMALINK

Another way of putting it should be;

No one makes more than 10 times what the bottom worker makes.

If you can't live well on 10 times the bottom worker. Then that workers pay should be raised.

In response to the pizza response. Yes, one day it will cost $40 for a Dominos to be delivered. But your way then should be , let's keep enslaving people so you can afford to buy 2 med pizzas for 13.99. Hell, lets lower there wage to $2.00 an hour and get 2 med for 6.99. Yea, enslave people so you can afford to eat out (dine-in in this case) every day.

Remember your parents couldn't afford to eat out every day in the 60's. Because they couldn't afford to. Now by enslaving people at a minimum wage that hasn't keep up with inflation, business have been able to keep prices lower over the decades.
Big xtra $99 cents, Double cheessburger $99 cents
1957 minimum wage $1.00 Every thing has gone up at least 10 times but minimum wage. Oh yes a b&w tv was $500- $600 dollars back then. But that was hi-tech. Today's hi-tech tv is HD. You know th ones starting at $3,000 with no hd tuner.

Posted by: Edward Smith at January 13, 2004 02:33 AM | PERMALINK

Angelica,

If you're only 13, you don't need to worry about wages for another 2 1/2 years or so.

I recommend you work on your spelling though, or you won't even be qualified for employment.

Posted by: JB at January 13, 2004 10:31 PM | PERMALINK

I only have a few things to say.

1. If one has been through a Divorce, never had to work, One would know what it is like to go to work and make only 5.25 an hour to support your child, keep the house going and all the necessary items you need to live on. To try and get your child that vehicle she needs to drive to go to school and to get her self a job to start making her life better. Only to have to tell her no, I'm sorry but I can't afford to get you anything. Making ones credit score horrible, cause you couldnt make the payments on the credit cards that you got stuck with, cause they were in your name. Instead of dividing the balances of all credit cards. Yes, You can get help with food stamps, I get 10.00 a month rather we need it or not. Come on Everyone, listen up we need a scale raise on mininum wage.

2. If you got hired as a cashier for 5.15 and hour to stand for 8 hours would you feel complete? I know I didn't, I felt used and cheated.

Lets get mininum wage up to at least 6.50 an hour. By the way I live in Southern Illinois and you can have the same job up north in Illinois, amd make almost 1 and 1/2 times that you make down here.

Anyway. I just wanted to write a few things how I felt.... Thanks for listening!

Linda

Posted by: Linda Rainey at January 28, 2004 01:54 PM | PERMALINK

I am in need of help. What I am looking for is an article or law that states something to the effect that an employer cannot cut back your wage once you been making that hourly wage for the last 2 - 3 years. I would appreciate your help. Thank you!

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Posted by: Rhodes Mark at March 17, 2004 04:57 PM | PERMALINK

OK see things this way:

FIRST, there was a statement that $5.15 was not enough to live on and neither is $7 or anything below $10.
~If you can't get a better job that pays more, then reduce your standard of living. There is a thing called working your way up. There are government housing out there that only cost $100/month for a two bedroom. So it's not high classes, well, niether are you at this point. It might give people an incentive to put a little effort into their lives.

SECOND, as for minimum wage not effecting the economy:
~Minimum wage forces employer to pay a certain amount, so if someone can't work as quickly or learn as quickly as someone else, they are going to pick the more "qualified" person because they have to pay them a certain amount. BUT if they could pay a little less, maybe those who don't quite cut it could get a job and be making something, even if it's not much until they could aquire some skills worthy of a better job/more pay. Try taking some economic courses to see how it works. Plenty of people live comfortably on $8-$10/hr (This rate was taken from SW Virginia, not true for all areas.)

THIRD, What about high school students?
~MOST high school students are not working to necessarily support themselves. MOST are just working for spending money to go out and have fun. Do you really think that they need to make $7-10/hr? I know they would like to, but need to and like to are too different things.

FORTH, I'm debating on even getting started on the congressional payrate.
~$75/hr!?! Please, no one needs to get paid that much. If they are more concerned about their pockets then the people in America, maybe they should just go back to lawyers where they can make more. Sure they tax OUR income on an average of 40% between federal and state governments. And we call this nation a free nation. If they want to help the poor out so badly with welfare and unemployment, why don't they sell the Porche sitting in their driveway or garage or one of their 6 cars. It must be nice living a life of luxury at the costs of working class of America.

I ask you to think of this: What is America?

The land of the FREE: Hardly, we pay plenty to live here. The land of OPPORTUNITY: Yeah, if your lazy, you can live off the GOVT, but if your hard working you SLAVE away to have almost half of your money taken away.
The land of DEMOCRACY: Seems to be more Socialist anymore. Sure, why don't we just divide up the income to everyone equally. Then no one has to complain about minimum wage or "the rich" becuase they won't exsist. What do you know, we already take money from "the rich" to give to "the poor." That's where most of OUR tax money goes. If not into the congressional salaries.

When the congress was first formed, it was a side job for them to SERVE their country, not live off their citizens. Why shouldn't they have side jobs and only get paid an average salary? Maybe if they actually accomplished something that benefitted American's as individuals it would be worth my taxes to pay for them.

Posted by: Sheila at March 19, 2004 12:22 PM | PERMALINK

we could grind up all of you heartless bastards into hamburgermeat and feed you to the poor at a big picnic to kick off our new minimum wage law. that one heartless act (grinding up all of you cold-blooded, tight-fisted bastards) would creat a net gain in the goodness of the world. how's that for utilitarian economics?

Posted by: dvd at March 25, 2004 10:39 AM | PERMALINK

I don't know what I think about raising minimum wage. On the surface, it sounds like a great idea. However, I have a feeling it is much more complicated than it seems. I don't think your (Kevin) comparison to wage increases in the 50's and 60's is a valid argument against the threat of jobs moving overseas. The economy was much less globalized then. It is much easier for a company to move jobs now than it would have been in the 50's and 60's. You are comparing apples and oranges. Companies are going to do what is in their best interest economically. They have to make money, or they won't exist. If wage requirements are too high here, they will move elsewhere.

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