Effectively banning/exporting any jobs that aren’t productive enough to be worth paying as much. Price fixing always creates shortages and is an inefficient way of allocating resources. Less people will be hired, businesses will go under. Stupid idea and should be a constitutional violation, you should have the right to work for whatever wage you want.
Right, plus there are plenty of Americans who want to work for say $13/hr if the job is a rewarding one. The current federal minimum wage of $7.25 is arguably low enough to raise somewhat because why not, but $15/hr is clearly high relative to the current supply/demand equilibrium.
Whether someone is an employee vs a contractor solely depends on the "economic reality" of their job. Neither the employer nor the employee can choose to have it classified as a contractor relationship if it isn't actually one.
For example, if Subway determines how, where, and when I make the sandwiches, and provides all the equipment and materials, then I am a de facto employee. Even if both Subway and myself voluntarily agrees that I am a contractor for whatever reason (sidestepping minimum wage laws in this case), and signs a service contract to that effect, I am still treated as an employee under the Fair Labor Standards Act.
I disagree completely that employees and employers can't choose whether they are contractors. It's almost always better for companies to hire contractors, that's why they work really hard to structure it that way (see uber). Employees are more mixed in their preferences, but in my long career as a dev I've seen that being an employee is better than being a contractor.
It seems market forces are already working to do that with out the need for government intervention.
Many Companies (walmart, Amazon, Target, etc) have all raised their companies minimum starting wage to well above the federal minimum, some even to $15
This is correct way for wages to raise, not by government demand
I suspect those companies have raised their minimum wages not because of the local labor market, but instead because of nationwide PR risks.
That is just as bad as a law really. The companies will end up employing fewer people at higher wages, while other people end up unemployed, and the total nationwide labor salary gets reduced.
Another reason to increase the minimum wage is to reduce the number of workers who get such low wages that we give them welfare on top of their low wages so they can survive. We already have the situation that Walmart was kind of shamed into paying higher wages; huge amounts of their employees had their wages "subsidized" because their employees were on welfare! This isn't good for anyone. [1] 2014: walmart employees get 6.2 billion in public assistance. [2] 2018 thousands of amazon employees get welfare. Article 2 says paying a living wage (a higher minimum wage) could save 150 billion in government benefits. [3] 2015 Americans pay 153 billion in public assistance for low wage jobs at McD and Walmart. Underlying research in [4].
Counterpoint those making $10 an hour are on Medicaid and employers are freeloaders. Help if Medicaid had a 5% wage garnishment and all could be on it; just those making $$$ would scoff and take lower cost private insurance.
The purchasing power angle makes no sense. Purchasing power will only be diminished if you increase the total money supply. Minimum wage won’t do that.
Bloomberg ran a nice piece on what it's like to own a McDonald's franchise here [1]. The raw numbers sound nice - $2.7 million gross, $1.8 million in gross profit. But after your various expenses come into play, the honeymoon ends - you end up taking home about $150k for a mountain of work that's required to keep a franchise running in good shape. You're buying a job.
The reason this matters is because those numbers are is pretty representative of many regular businesses; well outside 'our' world of VC driven mutual lotteries. You're taking home $150k yourself, but you're paying $540k in crew (non-managerial) payroll. And many of these guys are at or near minimum wage. Increase their wages just 30% (and going from $7.25 to $15 is a > 100% increase) would cost you $162k. And now you're losing money. And McDonalds are pretty primo in terms of profit. Life's often much harder for for the countless no-name businesses out there.
It's the really counter intuitive nature of business. A company can make millions, yet have owner(s) that are, out of necessity, living relatively modestly. So imagine your labor costs skyrocket. What do you do? You really don't have any options. You increase prices or you go out of business.
This seems likely to have a paradoxical effect. It means company with large profit margins are fine, but you squeeze the very low profit margin companies. And the low profit margins companies tend to have low profit margins because they're providing products at extremely cost to cost. E.g. company selling $50 steaks = no problem. Company selling $1 tacos = problem. So the very businesses who are doing to their most to cater to lower income people end up being the most negatively affected. Of course now their customers can afford to pay more, but that's precisely the definition of a reduction in a purchasing power per dollar.
you make it sound so bad to own a mcd's franchise, but most people would be ecstatic at the chance. $150k roughly puts you in the top 10% by individual income. most people are quite happy working hard for that amount of money.
and raising prices as a result would be fine since other minimum wage earners (i.e., customers) would now have more money to spend on fast food. (estimating based on your numbers, prices would have to increase about 10%)
> and raising prices as a result would be fine since other minimum wage earners (i.e., customers) would now have more money to spend on fast food. (estimating based on your numbers, prices would have to increase about 10%)
And what about the customers that aren't minimum wage earners and don't have more money to spend? And what about the formally minimum wage workers who no longer have a job or have fewer hours (reduced total wages) because the business cut head count and/or reduced hours? Just because the minimum wage is increased doesn't mean that it makes business sense to keep the same headcount/hours at the increased wage.
what small business owner really wastes money by carrying extra headcount though? if the business could have cut headcount before and still have done all the work needed, they would have done that already regardless of a change in minimum wage. small businesses just don't generally carry extra overhead the way a larger organization does.
For example, a grocery store might have minimum wage workers who help bag groceries to provide a better service to their customers. If the minimum wage goes up, then the store might decide to eliminate that service.
My local Dairy Queen, for example, might decide that two people getting paid $15/hour will just have to do instead of three people getting paid $10/hour. Maybe that isn't for all shifts/times, but just on the margins.
And of course it isn't just the lowest paid workers that are affected by this. Let's say there are two tiers of jobs at a particular business. One that pays $15/hour and one that is $10/hour. If the lowest tier must be paid $15, what happens to those workers at the next tier of $15/hour? Either their pay must be increased or they are going to be unhappy about having more responsibilities/skills for the same pay as the person that was just hired. Alternatively new hires will have little incentive to work harder to fill the next tier (since they won't get paid any more). So wages for the positions just above minimum wage also have to go up increasing total payroll costs.
IMHO, Anyone who thinks that hourly wages can be increased by 50% ($10 to $15, for example), without having a significant impact on any business that depends on low-skilled labor isn't thinking very deeply about this sort of change. I'm being generous also since the federal change is almost a 100% increase.
If the minimum wage increased fast food joints would, as you note, just have to raise their prices. There is McDonalds in Norway and Switzerland too.
I find it quite disturbing that McDonalds prices are about the same in SF as else where. There is no way that is working out for the employees. If people want to live there they would have to be prepared to pay not just for their own housing ...
Of course, some businesses would not be profitable at raised prices.
> Of course, some businesses would not be profitable at raised prices.
It is hard to tell from your comment, but you see that as a problem, right?
I agree that some people will benefit from an increased federal minimum wage, but I don't understand how the negative aspects can be dismissed:
* some people will be unemployable at $15/hour
* some business models will be unworkable at $15/hour
* some people will lose jobs as headcount is reduced
* some people will lose jobs as businesses fail
* some businesses will be less profitable
* $15/hour ignores geographic cost of living differences
* consumers will pay more for good/services
In a free market, all these competing problems are resolved through millions of independent decisions by business owners, employees, and consumers for their particular situation. The idea that a bunch of politicians have magically come upon a single hourly wage that is optimal for all these situations is just non-sensical to me.
Ye, it's a problem if businesses fail. For both the owners and the formerly employed employees. And I think the concerns you present are valid.
Where I live now (Denmark) there are not even any minimum wage. So having one is probably not really important. Any large coorparation that would pay "too low" would be blocked by unions. Small companies can pay whatever.
In practice a minimum wage is like a really crappy government worker union. It's some protection against usary but the worst usary is not legal businesses anyway.
Raise prices then. Wages are usually said to be a lesser part of the cost of a restaurant. Raise prices 10%. The gross goes up $270k, give yourself 20k more, give your employees 250k more. They get a 50% raise, that will make people want to work for you. My hamburger costs $3.30 instead of $3.
In Seattle the restaurant industry said it was going to be all doom and gloom when they raised wages incrementally to $15/hour. Restaurants open and close all the time. There were a few that claimed they closed because of wages. Plenty of other restaurants succeed just fine, some put a small specific charge on the bill for this living wage instead of just raising prices. It didn't make much difference.
You can't ignore economics here. When you raise prices, sales tend to decrease. This sounds peculiar because it seems difficult to imagine that somebody would be "Okay, I will pay $3 for my burger, but $3.30? Oh no way." But of course if this did not happen then you'd see an annual 10% inflation on just about everything. This is compounded further because people buying cheap food tend to be buying it precisely because it's cheap, so they're generally going to be more responsive to price changes than the general population. There are also various cost increases that go along with higher wages such as increased payroll taxes and higher supply side costs as your suppliers also see their labor costs increase.
I think the biggest issue here is determining results. Did the wage increase work, or not? The problem is that you can create compelling hindsight arguments showing either argument. And indeed there are now numerous studies that all show different results. None are lying, they're just prioritizing and organizing data in different ways. The problem is this introduces bias. If you want to show it was a good idea, you can. If you want to show it was a bad idea, you can.
More needs to be done in terms of formal predictive hypotheses published ahead of time, rather than compiling data after the fact. In other words invite a large balance of both critics and proponents of minimum wage increases. Have these individuals come to a supermajority consensus on exactly what the goals would be in increasing the minimum wage and how the success or failure to meet these goals could be measured. And make the entire process completely visible and transparent. This, actually putting ideas to critical and impartial tests, would also hamstring demagoguery or accusations of such.
Correct. It will apply substantial political pressure on Mitch McConnell, as everyone who would see a benefit (anyone making under $15/hr) is unable to if he won't bring it up for a vote.
He’s running for re-election in 2020. Amy McGrath [1], the democratic challenger, is polling within two percentage points of him. There are more lower income voters than wealthy conservatives in Kentucky.
Of course nothing will happen today, it’s for campaigning.
Was just referenced in a Ditch Mitch PAC marketing email that went out an hour ago. I've contacted their team to ask for a citation and will report back with it when I receive it.
“Change Research conducted a poll of 1,629 likely 2020 voters in Kentucky from June 15-16 and found that retired Marine Amy McGrath is already essentially tied with Senator Mitch McConnell in a hypothetical 2020 general election Senate matchup, despite half of Kentucky voters not even having an opinion of her yet. If the election were held today, 47% would vote for McConnell compared to 45% for McGrath, a deficit well within the margin of error.
Ayoub added, “Senator McConnell is extremely unpopular in Kentucky, with 22% viewing him favorably and 61% viewing him unfavorably. Even among Republicans, roughly as many view him favorably (40%) as unfavorably (39%). This stands in stark contrast to other prominent Republicans like President Trump, who is overall well-liked in Kentucky (58% favorable, 40% unfavorable) and nearly universally beloved among Republicans (92% favorable, 4% unfavorable)."
McConnell was approximately as unpopular in Kentucky leading into the 2014 election, when he trounced Alison Lundergan Grimes (KY's Secretary of State) by 16 points.
All politics serves a policy goal, and all policy exists in a political context. The two are inseperable.
Moreover policy pursued for political ends becomes a policy goal simply by the action of the propaganda it initially serves; appeal to racism was about politics more than immediate policy when the Republicans adopted the Southern Strategy in ’68
How might a $15 minimum wage might affect the current (engineering) internship system?
Almost every non-software engineer I know earned $15, or marginally more, during undergraduate for internships related to their field. If minimum wage jobs are price-competitive with an internship, what is the impact? Will large employers of engineers raise internship pay? Will they continue to hire as many interns?
I don't think engineering internships are price-competitive with minimum wage jobs. So I wouldn't expect any direct impact.
Perhaps an indirect impact though, especially if the company overall is dependent on minimum wage labor in other areas (i.e. the business is less profitable and so overall budgets change to address the changed business model). So that might show up as 1 intern vs. 2, for example. Another example of how an increased minimum wage might reduce overall job openings.
$15/hour would be unlikely to have any impact on engineering internship wages, it's far too low. $15/hr is $31k per annum. 20 years ago we paid interns a pro rated wage higher than that! Today we pay our interns a pro-rated wage over 80k at the startup where I work. Are there any engineering interns paid such low wages in the western world? Double or trip $15 and you might have some impact.
>Are there any engineering interns paid such low wages in the western world?
Yes, absolutely: your experience is certainly not everyone's.
The 80k salary for an intern sounds nuts to me...in the Netherlands, interns in my engineering field usually make less than minimum wage. Usually it's a few hundred euros per month.
Most full-time, experienced engineers in the entire country earn a whole lot less than $80k.
43 comments
[ 4.9 ms ] story [ 35.1 ms ] threadI mean, I think it's great, but it should have been sooner and/or more.
For example, if Subway determines how, where, and when I make the sandwiches, and provides all the equipment and materials, then I am a de facto employee. Even if both Subway and myself voluntarily agrees that I am a contractor for whatever reason (sidestepping minimum wage laws in this case), and signs a service contract to that effect, I am still treated as an employee under the Fair Labor Standards Act.
[0] https://www.dol.gov/whd/workers/Misclassification/misclassif...
[1] https://www.dol.gov/whd/regs/compliance/whdfs13.htm
Many Companies (walmart, Amazon, Target, etc) have all raised their companies minimum starting wage to well above the federal minimum, some even to $15
This is correct way for wages to raise, not by government demand
That is just as bad as a law really. The companies will end up employing fewer people at higher wages, while other people end up unemployed, and the total nationwide labor salary gets reduced.
1. 2014 https://www.forbes.com/sites/clareoconnor/2014/04/15/report-... 2. 2018 https://www.washingtonpost.com/business/2018/08/24/thousands...
3. 2015 https://www.washingtonpost.com/posteverything/wp/2015/04/15/... 4. http://laborcenter.berkeley.edu/the-high-public-cost-of-low-...
>$8.40 in 2019, $9.50 in 2020, $10.60 in 2021, $11.70 in 2022, $12.80 in 2023, $13.90 in 2024 and $15 in 2025.
I hope Congress also doubles all pour savings as well, because the purchasing power of those is about to be diminished.
The reason this matters is because those numbers are is pretty representative of many regular businesses; well outside 'our' world of VC driven mutual lotteries. You're taking home $150k yourself, but you're paying $540k in crew (non-managerial) payroll. And many of these guys are at or near minimum wage. Increase their wages just 30% (and going from $7.25 to $15 is a > 100% increase) would cost you $162k. And now you're losing money. And McDonalds are pretty primo in terms of profit. Life's often much harder for for the countless no-name businesses out there.
It's the really counter intuitive nature of business. A company can make millions, yet have owner(s) that are, out of necessity, living relatively modestly. So imagine your labor costs skyrocket. What do you do? You really don't have any options. You increase prices or you go out of business.
This seems likely to have a paradoxical effect. It means company with large profit margins are fine, but you squeeze the very low profit margin companies. And the low profit margins companies tend to have low profit margins because they're providing products at extremely cost to cost. E.g. company selling $50 steaks = no problem. Company selling $1 tacos = problem. So the very businesses who are doing to their most to cater to lower income people end up being the most negatively affected. Of course now their customers can afford to pay more, but that's precisely the definition of a reduction in a purchasing power per dollar.
[1] - https://www.bloomberg.com/features/2015-mcdonalds-franchises...
and raising prices as a result would be fine since other minimum wage earners (i.e., customers) would now have more money to spend on fast food. (estimating based on your numbers, prices would have to increase about 10%)
And what about the customers that aren't minimum wage earners and don't have more money to spend? And what about the formally minimum wage workers who no longer have a job or have fewer hours (reduced total wages) because the business cut head count and/or reduced hours? Just because the minimum wage is increased doesn't mean that it makes business sense to keep the same headcount/hours at the increased wage.
For example, a grocery store might have minimum wage workers who help bag groceries to provide a better service to their customers. If the minimum wage goes up, then the store might decide to eliminate that service.
My local Dairy Queen, for example, might decide that two people getting paid $15/hour will just have to do instead of three people getting paid $10/hour. Maybe that isn't for all shifts/times, but just on the margins.
And of course it isn't just the lowest paid workers that are affected by this. Let's say there are two tiers of jobs at a particular business. One that pays $15/hour and one that is $10/hour. If the lowest tier must be paid $15, what happens to those workers at the next tier of $15/hour? Either their pay must be increased or they are going to be unhappy about having more responsibilities/skills for the same pay as the person that was just hired. Alternatively new hires will have little incentive to work harder to fill the next tier (since they won't get paid any more). So wages for the positions just above minimum wage also have to go up increasing total payroll costs.
IMHO, Anyone who thinks that hourly wages can be increased by 50% ($10 to $15, for example), without having a significant impact on any business that depends on low-skilled labor isn't thinking very deeply about this sort of change. I'm being generous also since the federal change is almost a 100% increase.
I find it quite disturbing that McDonalds prices are about the same in SF as else where. There is no way that is working out for the employees. If people want to live there they would have to be prepared to pay not just for their own housing ...
Of course, some businesses would not be profitable at raised prices.
It is hard to tell from your comment, but you see that as a problem, right?
I agree that some people will benefit from an increased federal minimum wage, but I don't understand how the negative aspects can be dismissed:
In a free market, all these competing problems are resolved through millions of independent decisions by business owners, employees, and consumers for their particular situation. The idea that a bunch of politicians have magically come upon a single hourly wage that is optimal for all these situations is just non-sensical to me.Where I live now (Denmark) there are not even any minimum wage. So having one is probably not really important. Any large coorparation that would pay "too low" would be blocked by unions. Small companies can pay whatever.
In practice a minimum wage is like a really crappy government worker union. It's some protection against usary but the worst usary is not legal businesses anyway.
In Seattle the restaurant industry said it was going to be all doom and gloom when they raised wages incrementally to $15/hour. Restaurants open and close all the time. There were a few that claimed they closed because of wages. Plenty of other restaurants succeed just fine, some put a small specific charge on the bill for this living wage instead of just raising prices. It didn't make much difference.
I think the biggest issue here is determining results. Did the wage increase work, or not? The problem is that you can create compelling hindsight arguments showing either argument. And indeed there are now numerous studies that all show different results. None are lying, they're just prioritizing and organizing data in different ways. The problem is this introduces bias. If you want to show it was a good idea, you can. If you want to show it was a bad idea, you can.
More needs to be done in terms of formal predictive hypotheses published ahead of time, rather than compiling data after the fact. In other words invite a large balance of both critics and proponents of minimum wage increases. Have these individuals come to a supermajority consensus on exactly what the goals would be in increasing the minimum wage and how the success or failure to meet these goals could be measured. And make the entire process completely visible and transparent. This, actually putting ideas to critical and impartial tests, would also hamstring demagoguery or accusations of such.
This is best discussed as politics and not policy.
Even if Dems had the Senate, the would still face a presidential veto.
This isn’t an issue of one man preventing a change. Dems only control 1 of the 3 institutions required to pass this law.
Of course nothing will happen today, it’s for campaigning.
[1] https://twitter.com/AmyMcGrathKY
EDIT @ 1563753486: http://kentuckytoday.com/stories/mcgrath-comes-out-firing-in...
“Change Research conducted a poll of 1,629 likely 2020 voters in Kentucky from June 15-16 and found that retired Marine Amy McGrath is already essentially tied with Senator Mitch McConnell in a hypothetical 2020 general election Senate matchup, despite half of Kentucky voters not even having an opinion of her yet. If the election were held today, 47% would vote for McConnell compared to 45% for McGrath, a deficit well within the margin of error.
Ayoub added, “Senator McConnell is extremely unpopular in Kentucky, with 22% viewing him favorably and 61% viewing him unfavorably. Even among Republicans, roughly as many view him favorably (40%) as unfavorably (39%). This stands in stark contrast to other prominent Republicans like President Trump, who is overall well-liked in Kentucky (58% favorable, 40% unfavorable) and nearly universally beloved among Republicans (92% favorable, 4% unfavorable)."
I had, apparently incorrectly, assumed she'd get handily trounced.
Moreover policy pursued for political ends becomes a policy goal simply by the action of the propaganda it initially serves; appeal to racism was about politics more than immediate policy when the Republicans adopted the Southern Strategy in ’68
Perhaps an indirect impact though, especially if the company overall is dependent on minimum wage labor in other areas (i.e. the business is less profitable and so overall budgets change to address the changed business model). So that might show up as 1 intern vs. 2, for example. Another example of how an increased minimum wage might reduce overall job openings.
Yes, absolutely: your experience is certainly not everyone's.
The 80k salary for an intern sounds nuts to me...in the Netherlands, interns in my engineering field usually make less than minimum wage. Usually it's a few hundred euros per month.
Most full-time, experienced engineers in the entire country earn a whole lot less than $80k.