The real fascinating part is how quickly we'll have robotics doing a lot of those job when municipalities push out mandatory $15 to $20 an hour laws. These low level fungible workers have been mislead by the far left into thinking this is all "free money" and things like unemployment, lay offs, automation, etc can't happen. A lot of companies have tested automation solutions and have been shy to launch them for a variety of reasons, mostly political.
$15 an hour full time is a $31,000 a year job. In most markets that's entry level white collar college educated material that will work exempt for you. Fry cooks and dishwashers who think they can get that via legislation are going to be surprised at how quick they can be replaced with machines or in other ways be made redundant.
Personally, I think we should just move to as much robotics as possible and setup some kind of minimum welfare income and call it a day. All this pussy-footing around with unions, minimum wages, etc just delays the inevitable.
Yes. If you're some teenager selling ice cream for the summer and being taken care of by your parents, you shouldn't be making $35,000 a year.
The larger question, of course, should be answered by the customers of McDonalds or Target. Are they willing to pay twice the cost of goods so everyone who works there can make more money? Probably not, and those businesses will probably fold. Now you have everyone complaining about unemployment and the lack of affordable goods. Do you pass yet another law to make those cheap? Who pays for this stuff in the end? You can't economically dictate everything unless you want to migrate into command-economy communism, and the world tried that fairly recently with disastrous results.
Not to mention price inflation for common goods once the local econony has everyone getting $15 an hour. Great, now everything costs more and the people who weren't minimum didn't get a raise.
One argument that can be made is that everyday services are needed and won't be automated in the near future. Also, rich people like going to cafes and restaurants, and it's nice to live in a place where everybody goes out in the city.
So, you end up with places like Australia and Switzerland where wages are high, but everyday costs are very high. I would be shocked if this didn't end up happening in the US.
Ultimately, do we want a two-class society, or do we want something more egalitarian (Brazil vs Germany)? I know which one I prefer living in!
>Also, rich people like going to cafes and restaurants
I wouldn't use restaurants as some example of progressive and egalitarian labor. They're the number one source of black market labor today, let alone what would happen if you double these wages.
>I know which one I prefer living in!
The countries with the terrible disparities in living are usually the ones that flirted with communism in the past and are largely socialist and anti-free market today. They put in these policies which caused depressed entrepreneurial activities, lack of free markets, heavy corruption, etc and have a legacy of poverty from these failed leftist policies. More leftist policies aren't the solution here (see: Greece).
>(Brazil vs Germany)
New data shows Germany is not egalitarian. In fact, its the worst in the EU.
Earlier this year, the German Economic Institute (DIW) had released a study indicating that contrary to common conceptions, Germany had the most unequal distribution of wealth in the eurozone.
this is a ridiculously warped view on minimum wage
1) The average age of a minimum age worker is 35, and 88% are not teenagers. So no, the example in your first line should not be "you're some teenager", it's "you're a parent working two jobs and still on food stamps". http://www.nytimes.com/2014/06/10/upshot/minimum-wage.html
2) Talking about the cost of goods doubling is straight-up fear-mongering. Walmart set their minimum wage to $9, so raising it to $15 wouldn't even be doubling if minimum wage labor was literally their only cost of business. That's not even close to true, of course, but let's be generous and assume it's 1/3 of their sales minus CGS (~120B, so 40B). Their sales were ~500B last year, so with literally no other changes, they would only have to raise prices by 5% to go to $15 minimum wage.
The 35 - 64 band is especially egregious because it includes both people at the peak of their careers and retirees (who often take throwaway jobs to stay busy or supplement early SS @ 62).
Ok, so everyone's got an agenda, no real news there. The money shot is here:
> “All of us used to think minimum wage meant a wage you could live on,” de Blasio said
Wat? Who used to think that? Roosevelt didn't think that when he introduced the FLSA, actually the major win there was the abolition of child labor in America. At some point the thought around minimum wage went from "the minimum amount you have to pay so you're not basically whipping child slaves all day" to "the wage we need to buy iPhones and 2 cars".
The actual question is, what level of lifestyle should minimum wage/basic income/whatever support? Is that level adjusted for local prices, or do you have to live in a "designated poor person area" to survive (ie, is the amount the same in SF as it is an Akron)? What about if someone blows all their BI on liquor or gambling and becomes homeless, do we give them more? Who is responsible?
I don't have the answers, and ultimately the discussion is pointless because no group of people will ever agree on this.
> The actual question is, what level of lifestyle should minimum wage/basic income/whatever support?
Enough to enable the barista, garbage collector, concierge, etc, to live in the same city they work in. It produces nicer cities. Like reserving and maintaining park-space, it's a cost you pay for for a nice place to live.
If some coffee shops want to automate, great. They'll be competing with vending machines, not the remaining human-staffed cafes.
They can live in those cities already. They're not buying houses, but they can live there.
Again the question is what standard of living is the goal? Homeownership? Eating out? New electronics? That's the question that will never have a universal answer.
... are you replying to the right comment? i didn't talk for a second about what de Blasio said, and those age bands don't do anything about the stat i cited: that 88% of minimum wage employees are 20 or older.
I was responding to the "average age is 35" portion; the average is useless without more discreet bands because the post-retirement and going back to work post-empty-nest communities are so large. 88% being non-teens is a meaningless metric without more information -- I had a few minimum-wage jobs in college, and I was not a teenager then.
>> The larger question, of course, should be answered by the customers of McDonalds or Target. Are they willing to pay twice the cost of goods so everyone who works there can make more money?
In most cases the cost of labor is not a large percentage of the purchase price. When the cost of labor is doubled, passing this on to the consumer will not double the price. In many cases it won't even be close.
So the 6 dollars I pay for a fast food lunch take nearly a man-hour of labor? Once you get beyond the few minutes of handling my individual order its all bulk back to the source, so I have a hard to time believing that. OTOH the prices farmers get paid would suggest you're correct.
The answer to that on the part of governments, will be to tax and regulate robot labor. They will attempt to force a gradient simulation of human costs onto robotics. We'll see serious efforts made toward those types of laws within a decade. Countries, to the extent they resist such taxes and regulation, will become new hot zones for robotic manufacturing etc.
Automation (or AI) is coming for all of our jobs sooner or later. We need to start talking about how our society can pay for Basic Income for all the unemployable former fry cooks, truck drivers, lawyers, anesthesiologists and software developers.
>A land value tax is said to be a progressive tax, in that the tax burden would fall on landlords and cannot be passed on as higher costs or lower wages to tenants, consumers, or laborers.
The stereotype of rich landlords hoarding money is a falsehood. Every landlord I know here either makes a very modest income or loses money because of shady tenants and the incredible amount of pro-tenant legislature they take advantage of. In Chicago, an eviction takes 6-12 months.
Are you guys going to take these laws off the books then? You can't have it both ways, really. Poor urban areas have enough abandoned buildings as-is without punishing landlords further. If you make rental properties a poor value proposition then squatting takes over. We've seen this a million times. Landlords, are unfortuantely, an easy target for politicians looking to score voting points from the non-land owning rabble.
All the landlords I know are really whiny that they have to actually maintain their properties and provide services to their customers. They seemed to assume they could just get free money for owning a building. I've suggested they sell their multimillion dollar asset and retire or go get a job, but they don't seem to want to do that.
At any rate, the point of the land-value tax is that it would encourage land owners to build larger and better improvements on their property, instead of just holding the land and waiting for its price to increase. Think building a high-rise apartment building instead of leaving it as a parking lot.
Further making everyone a renter, and eliminating any chance of widespread economic security as there will be even greater dependency on month-to-month cash flow.
What needs to happen is the exact opposite, via eliminating repossession of residences in bankruptcy or otherwise breaking the financial abstractions that create the never ending positive feedback in housing prices. Then we can finally have a housing correction and people will be able to buy homes instead of only renting them from banks. Labor will then have more bargaining power and wages will raise naturally.
What makes you think you can own land in the first place? The land belongs to the US, and is the birthright of every US citizen. You should have to pay rent to the actual owners (the US citizens) to use it.
> What makes you think you can own land in the first place
Well sure, if you want to define it that way. But my argument is coming from pragmatic utility - when people own things, they are freer to choose their own path as they are less encumbered by obligations.
A major assumption of the concept of free markets is that the parties to a transaction are coming from roughly equal bargaining positions with regards to walking away. But a starving man doesn't have much choice of what job he takes or how much it pays when he just needs to eat.
If everybody had their basic needs taken care of and people were working solely for extra gadgets, which job do you think would command more compensation - sitting in front of a computer writing CRUD crapps or arduously picking up garbage while wrecking your body? Is the current gradient of pay rates actually inevitable or simply just convenient?
So what I'm pointing out is that in my opinion, the main problem with our economic conditions is that the concept of ownership has been greatly eroded. People that have to continually pay rent don't have much choice whether to work (whether scraping by minimum wage or hitting it out of the park with an in-demand job), and your proposal makes the problem even worse.
> The land belongs to the US, and is the birthright of every US citizen
Now you're proposing your own narrow framework, which actually contradicts your previous sentence - why wouldn't it be the world population? (USG holds a force monopoly on one chunk, but one can make the same argument about individual self-defense bootstrapped up through game theory and pooling in a sheriff)
You will probably just see labor intensive operations leave LA or shut down. LA proper is too small of a market to debut robotic replacements for workers.
I'm guessing this will just lead to higher food service costs and the disappearance of lower margin fast food.
What about groceries? Farm worker salaries? Now you have to absorb those new costs. Food, in general, will skyrocket.
There's this narrative that the left is playing up of "It'll be great, we'll kick out McDonalds!" Any industry that has low wage workers will suffer. Think the lines to return something in a retail store are long now? Wait until they have half the staff.
More than likely privatization services will move in the same way MSP's have taken over the role of well paid IT people in smaller organizations today. Mega-grocery co will eliminate ma and pa groceries because they will only be the ones with the scale of industry to have competitive prices. Boutiqe restaurants will be replaced with franchises for the same reasons. Mail/internet ordering from other jurisdictions with lower wage prices will hurt local retail.
This is neither good or bad, imo, but I don't think the people on the left are really considering what happens when you radically change wages by fiat. You get the Walmart-ization of all things because only organizations like Walmart can compete on price.
>These low level fungible workers have been mislead by the far left into thinking this is all "free money"
Economically it's pretty much a direct transfer from profits to workers.
Given that corporate profits are at an all time high and are largely being hoarded instead of being invested (and thus not generating new jobs), it pretty much is free money. It's money that's only going to be spent and drive economic growth if given to a worker on minimum wage.
If it gets creamed off as corporate profits it will just end up in one of the many ultra-high-net-worth sinkholes, like Manhattan real estate. As if that hasn't been bidded up enough.
And it's already pretty large: 3.3 million legal workers at or below minimum wage [1] vs 12 million illegals in the United States. That's almost 80% of low wage workers.
Forgive my ignorance but how are they regressive? If you tax the money people spend and the rich spend more, that's neither regressive or progressive right? And to get the right amount of progressiveness we could just adjust the percentage tax on luxury items.
It should be, but right now we give tax breaks for capital expenditures (software, robotics, the things eating the world's labor market). Also, it doesn't work if you can get your effective tax rate down to zero through loopholes.
That's my underlying point. Everyone complains that the minimum wage is going to drive more work to automation. Good. That's exactly what it should do. Those efficiency gains fund a basic income.
I can envision a future where we have two tiers of income. One for basic necessities everyone gets, and another "luxury" tier, for services and goods not necessary to survive.
You can make a pretty compelling argument that we are already at a two tiered system (at least in the west).
The problem is the definition of "basic necessities".
Imagine that functional immortality becomes a possibility. Does it fall into the "basic" tier or the "luxury" tier. Drawing those lines is precisely what we are doing everyday with politics.
Efficiency can be understood as maximizing output for a given input (vernacular definition in use here). The morality of slavery is a red herring. We will ignore the research that suggests there was actually an efficiency cost to utilizing slavery over voluntary paid labor, because that is also irrelevant to the question.
The question is whether forcing costs to be higher is an efficiency gain - it is not.
We can now consider economic efficiency. One common measure is Pareto efficiency, which any change to the minimum wage cannot be in isolation, as one of the criteria is that no one be made worse off. The existence of a minimum wage also implies the existence of a Pareto optimal point.
Another common measure of efficiency is Kaldor-Hicks efficiency, which basically takes the Pareto efficient criteria and modifies them such that there is a hypothetical compensation such that those being made better off could compensate those being made worse off to the point where all are made better off as a result. Essentially positive net utility change from some intervention. Note that the compensation is purely hypothetical, not necessarily monetary, and consequently unmeasurable.
Kaldor-Hicks is the efficiency model wherein forcing a higher price can increase efficiency. You've not addressed this with a vague appeal to morality.
Note: I am not trying to be hypercritical, only very clear in my statement.
Except not; BI proponents -- even left-of-center BI proponents -- generally propose it as an alternative to the minimum wage. BI, in principle, solves the same problem as minimum wage -- substandard wages cease to be exploitive if people are no longer compelled to work for those wages by the threat of not having minimal needs met if they choose no to accept them, they are genuinely voluntary.
I'm holding my breath waiting for a robot that can really clean my house (not a roomba). Any. Day. Now.
Economists are always telling me that robots are going to start taking over all jobs everywhere. Given their stellar record of predicting economic outcomes, why wouldn't we believe their technological predictions?
Due to the excessive amounts of labor in the market especially at the low end there was never a reason employers would need to pay more other then retention for business stability reasons. The minimum wage is just a needed correction for this oversupply of labor otherwise the market would have corrected itself already. Republicans argue for no minimum wage so more low end positions can be created but it is unlikely we have the infrastructure to compete with China or to turn ourselves back into a 3rd world nation.
> Due to the excessive amounts of labor in the market especially at the low end
Why is this true? It's not a natural condition. The natural condition of a free market is an equilibrium between supply and demand. If you have excess supply, it means the market is not at equilibrium, which means either (a) it's in transition because of some recent change (not likely since the oversupply of low-end labor has been around for quite a while), or (b) the market is not free--something is skewing the supply-demand balance. The obvious candidate for that is...existing minimum wage laws.
> The minimum wage is just a needed correction for this oversupply of labor
Raising the minimum wage will not "correct" the oversupply of labor; it will make it worse. There will be more people wanting jobs, and businesses will be able to afford fewer of them.
> It's not a natural condition. The natural condition of a free market is an equilibrium between supply and demand.
That's the natural condition of a theoretical free market, real markets are not theoretical. As Keynes said, the market can stay irrational longer than you can stay solvent.
Also, poor people have more children than rich people.
They very often aren't, that's true. And in many cases, that's because real markets are not free markets; they are skewed by government intervention. The market for labor in the US, and indeed in most countries, certainly fits that description.
> As Keynes said, the market can stay irrational longer than you can stay solvent.
Yes, and he did his level best to make that prophecy come true by getting governments to intervene to keep markets irrational.
It's almost ridiculous to bring up government intervention in labor markets, and I'm not just saying that for effect.
A million things skew the labor market away from the theoretical: people are irrational, information is wildly asymmetric, wages are sticky, there aren't an "arbitrarily large number of firms", the factors of labor (people) aren't liquid or mobile, etc.
To pick 'price floor' from the long list of things that distort the labor market while ignoring the rest is strange enough that I chalk it up to politics any time I hear it.
Since I studied economics I can attest that what you say is true for markets of n infinitely lived households that require no minimal sustenance, given a few technical conditions such as free disposal of excess supply and such. In a world perfectly corresponding to this model the supply and demand relation is perfectly understood. How it changes when the conditions are not exactly equal to those used to solve the model is much less clear
> How it changes when the conditions are not exactly equal to those used to solve the model is much less clear
The model I'm describing, while it is certainly an idealization, is not for that reason inapplicable to the real world. Idealized models are useful in understanding the underlying factors at work in a real situation, even if the real situation contains other factors that are not modeled. Often you can add those other factors in as constraints (for example, there's no reason why a microeconomic model has to assume "no minimal sustenance"; you just add the minimum requirement for sustenance as a constraint). Or you can expand the model to include interactions that were not previously captured (for example, if waste disposal is a significant factor, you can expand your model to include the economic transactions involved).
Anybody consider the plight of the skilled laborer who invested time and potentially money into being more marketable and is making $15, who is now brought down to the level of people working menial unskilled jobs? Is this fair? You can almost certainly be sure nobody will be given raises to maintain wage parity.
- How do you call a skilled laborer being fairly compensated for his work having a "plight"?
- Also that laborer isn't being "brought down"; others are being "lifted up." Others don't have to lose for you to win.
And anyway, if the proponents of a higher minimum wage are correct, then this will result in a boom in the gross domestic product of LA as people who previously couldn't afford homes, appliances, or better food will be spending money on those things, increasing the income of LA businesses, which in fact would lead to rising wages for those skilled laborers you're so worried about… this is textbook Keynesian economics.
> this will result in a boom in the gross domestic product of LA
At the expense of what? If you raise wages but don't increase productivity, you're just robbing one sector of society to pay another. And nobody has mentioned any change accompanying this that would increase productivity.
That's one possibility, yes. But if you think that Walmart, for example, is just going to roll over and accept decreased profits without trying to finagle a way out of it, you might want to think again. See below.
> won't somebody think of the poor Waltons
Who said they would be taking the hit? In fact, they're much more likely to figure out some way to have either their customers or the other companies in their supply chain take the hit.
>That's one possibility, yes. But if you think that Walmart, for example, is just going to roll over and accept decreased profits without trying to finagle a way out of it
Of course they won't. However, they know as well as anybody that their ability to finagle themselves out of it is limited to their ability to lobby and shape public opinion - against minimum wage hikes.
>Who said they would be taking the hit?
Economic studies on this generally all show that profits get hit first and hardest. Inflation happens in some industries, but only generally industries with wafer thin profit margins. If that phrase accurately described Walmart, the Waltons wouldn't be the richest family in America.
> Who said they would be taking the hit? In fact, they're much more likely to figure out some way to have either their customers or the other companies in their supply chain take the hit.
Likely, both:
* customers - pass the cost on via higher prices
* suppliers - either force them to use overseas suppliers, or skip them and user overseas suppliers (where, conveniently, minimum wage, OSHA, ObamaCare(tm), etc etc etc simply don't apply)
Yes, software certainly increases productivity, and that often results in decreasing the need for low wage human workers. And if companies choose to respond this way to increases in the minimum wage, it's not going to increase the number of people who are able to make a living at low wage jobs, which was supposed to be the point of increasing the minimum wage.
What makes you think productivity necessarily needs to be increased? The United States has the most productive workers in the world. There's plenty of wealth here to go around, and this "experiment" is happening because a lot of us believe that it isn't going around fairly.
And stop acting like wealth redistribution is "robbing", unless you're willing to admit that when the rules changed from Keynesian guidelines in the 1950s to supply-side guidelines in the 1980s as "robbing" from the middle class and the poor.
> What makes you think productivity necessarily needs to be increased?
I wasn't saying it "needs" to be increased. I was saying that, if it doesn't increase, the value of whatever the workers are doing doesn't increase. So any increase in their wages means an increase in what they are being paid, relative to the value of what they are producing. Someone else has to make up that difference by accepting a decrease in the the value of what they are getting, relative to what they are paying for it--either they pay more for the same product, or they pay the same as before but get a product of less value.
> stop acting like wealth redistribution is "robbing"
Wealth redistribution in itself is not "robbing". I redistribute wealth every time I buy something.
What is "robbing" is wealth redistribution disguised as something else, so the people whose wealth is being taken don't know it and don't make a voluntary choice to give it up.
> What is "robbing" is wealth redistribution disguised as something else, so the people whose wealth is being taken don't know it and don't make a voluntary choice to give it up.
Strictly speaking, I voluntarily choose to be taxed, because I vote for representatives that make laws that impose those taxes. So I can't say I object to taxes as robbery (though there are extreme libertarians who do view taxation that way).
Again, if elected representatives pass laws that take tax money and give it to people for various reasons--welfare programs--that's not robbery, strictly speaking, because people voluntarily elect the representatives knowing that they are going to redistribute wealth in this way.
What's different about a minimum wage is that the wealth redistribution is covert, not overt. The government claims that the minimum wage won't take anything away from anybody. But it does.
There will also be increased demand for the goods the skilled person is producing since more people can now afford them, so there is a counterbalance to that too.
1. They aren't being brought down. 2. People who feel 'stuck' in their job because it pays better than minimum wage can switch jobs a lot easier now. Because of that, you'd probably see wages rise, since it takes time for those skills to develop after people leave.
Shouldn't a higher minimum wage drive additional spending, which depending on the skilled laborer's market, potentially increase their wage.
Hopefully the minimum wage will be enough of a boost that their children can then become a skilled laborer.
Even so, so what? I'm making more than some people with more education, and there are morons who were in the right place at the right time who spend more in a year than I'll ever be worth.
If you no longer need as much training or education to make $15/hour, then wouldn't the supply of workers decrease for skilled jobs that don't increase their pay?
Look, here's the basic calculation... Fast food wages are about 26.5% of cost, including 3.3% profit. [1]
I inflated wages to $15 from L.A.'s current $9. I maintained 3.3% profit.
Old Wage New Wage
Wage Rate $9.00 $15.00
Wage 26.5% 37.3%
Other Expense 70.2% 59.4%
Profit 3.3% 3.3%
100.0% 100.0%
Cost Increase 18.3%
Old Big Mac Meal [2] $7.00
New Big Mac Meal $8.28
+1 for sources and data, but keep in mind that the minimum rate hike doesn't fully rise to $15 until 2020. If this were happen immediately, then I'd probably concede your point.
But we've got a while between now and then, and I think both inflation and the rising cost of beef will play a role. And who knows if automation will play a part?
I bet that $8.28 for a Big Mac meal in 2020 will seem like a good deal.
I'm surprised that two other outcomes are not posited by this article:
1) Rise in inflation (this is ultimately going to hit the price of goods and services)
2) Rise in cash under the table employment. People already can't afford union work - this seems to push even more people to "hire the guy standing at the corner outside Home Depot".
Both of these might happen but are somewhat independent of the question how many jobs will be lost. If jobs are not lost but under the table employment increases that would realistically be an even bigger win. If lots of jobs are lost the reason might be one of the things mentioned by you but I cannot see local wage increases drive inflation on its own, with a federal increase it seems more realistic
A few years ago I actually read the experiment regarding the NJ fast food workers and the PA fast food workers shortly after NJ passed a minimum wage. I saw it consistently being brought up in conversations regarding minimum wage, which is very interesting to me for some reason.
So this is the report that was supposed to show that minimum wage increases don't affect employment rate (infact, they actually might improve it), however, when you look at the data presented within the study itself, you find that indeed, the NJ employment rate seemed to increase, and the PA employment rate seemed to decrease slightly. However, when you look at the number of employees per fast food restaurant, you'll see that the NJ restaurants started at a much lower number per restaurant than the PA restaurants, and then that employees per restaurant metric raises up by the end of the study but it never reaches the same number as the PA restaurants.
What that study actually seemed to show to me, is given the ample notice that business owners had about the minimum wage increase, they thinned out their workforce. Then the minimum wage increase came (the study actually started shortly after the increase had already been put in place, I believe), and the business owners realized they over thinned out the workforce, hired a few more people to get to the right number which was still less than the PA number with lower labor costs.
And since we don't exist in a vacuum, once a business owner realizes their store in NJ can run on 18 people, why should they run their store in PA with 20? It could probably make due with 19.
However, no one ever brings up the point that per restaurant, NJ never had as many employees as PA, essentially stating that PA was using more employees to accomplish the same job as NJ, which is exactly what you would expect to happen from an increase in labor cost.
Instead, everyone only focuses on the jobs added/lost during the short time of the study. It's like I'm the only person in the world who actually looked at the data in the report, instead of just reading the author's findings. Very Frustrating to consistently seeing this study shown as proof that minimum wage doesn't affect employment numbers.
That study was replicated across other state borders. Same outcome. No statistically significant change in employment detected.
The amount of vitriol thrown at that particular study is pretty shocking. You can tell it's a threat. One "researcher" (Neumark) even went as far as to redo the study with a restricted, smaller data set in order to yield the preferred outcome - a decrease in employment.
Perhaps the other studies were "better" and not as flawed in their methods (starting a study after the minimum wage was put in place to see if there was a decrease in employment leading up to the wage increase is a huge flaw, and then failing to address why NJ had so fewer employees per restaurant is another related big flaw). However, if these other studies take into consideration these components, they would be very interesting. However, if they are actual copies of the previous methodology, then I'm not interested in them.
>Perhaps the other studies were "better" and not as flawed in their methods
Their methods weren't flawed.
That study undermined the arguments of a very powerful group of lobbyists and left them exposed. Of course they were going to do everything they could to discredit it, including but not limited to outright lies and dubious reinterpretation of the results.
OK, I'll retract my statement about the study starting after the minimum wage was put in place, it looks like that isn't true. Furthermore, I will admit that the results have been replicated in other studies.
After researching more into the subject I have come to the following conclusion:
Raising Minimum Wages marginally has no effect on employment rates, only when the increase in pay can be tolerated by employers by absorbing the increased cost by increasing prices, reducing higher paid employee's wages, reducing employee turnover costs, and reducing profitability.
The end result is a smattering of higher priced goods, lower paid managers, and less incentive to start a business relying on low skilled workers. Also, you can throw in some lower job turnover as well, since the cost of losing your job is greater.
Of course, the next question is, when is "marginal", no longer "marginal"? Is it $15/hr, $20, $50? At some point, alternative methods to manual labor will become cheaper (such as dropping $100k upfront for a burger making robot). Once we hit that point, things will get ugly fast.
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[ 2.8 ms ] story [ 165 ms ] thread$15 an hour full time is a $31,000 a year job. In most markets that's entry level white collar college educated material that will work exempt for you. Fry cooks and dishwashers who think they can get that via legislation are going to be surprised at how quick they can be replaced with machines or in other ways be made redundant.
Personally, I think we should just move to as much robotics as possible and setup some kind of minimum welfare income and call it a day. All this pussy-footing around with unions, minimum wages, etc just delays the inevitable.
The larger question, of course, should be answered by the customers of McDonalds or Target. Are they willing to pay twice the cost of goods so everyone who works there can make more money? Probably not, and those businesses will probably fold. Now you have everyone complaining about unemployment and the lack of affordable goods. Do you pass yet another law to make those cheap? Who pays for this stuff in the end? You can't economically dictate everything unless you want to migrate into command-economy communism, and the world tried that fairly recently with disastrous results.
Not to mention price inflation for common goods once the local econony has everyone getting $15 an hour. Great, now everything costs more and the people who weren't minimum didn't get a raise.
So, you end up with places like Australia and Switzerland where wages are high, but everyday costs are very high. I would be shocked if this didn't end up happening in the US.
Ultimately, do we want a two-class society, or do we want something more egalitarian (Brazil vs Germany)? I know which one I prefer living in!
I wouldn't use restaurants as some example of progressive and egalitarian labor. They're the number one source of black market labor today, let alone what would happen if you double these wages.
>I know which one I prefer living in!
The countries with the terrible disparities in living are usually the ones that flirted with communism in the past and are largely socialist and anti-free market today. They put in these policies which caused depressed entrepreneurial activities, lack of free markets, heavy corruption, etc and have a legacy of poverty from these failed leftist policies. More leftist policies aren't the solution here (see: Greece).
>(Brazil vs Germany)
New data shows Germany is not egalitarian. In fact, its the worst in the EU.
Earlier this year, the German Economic Institute (DIW) had released a study indicating that contrary to common conceptions, Germany had the most unequal distribution of wealth in the eurozone.
http://www.theguardian.com/world/2014/oct/23/wealth-gap-ineq...
1) The average age of a minimum age worker is 35, and 88% are not teenagers. So no, the example in your first line should not be "you're some teenager", it's "you're a parent working two jobs and still on food stamps". http://www.nytimes.com/2014/06/10/upshot/minimum-wage.html
2) Talking about the cost of goods doubling is straight-up fear-mongering. Walmart set their minimum wage to $9, so raising it to $15 wouldn't even be doubling if minimum wage labor was literally their only cost of business. That's not even close to true, of course, but let's be generous and assume it's 1/3 of their sales minus CGS (~120B, so 40B). Their sales were ~500B last year, so with literally no other changes, they would only have to raise prices by 5% to go to $15 minimum wage.
Take this table for example, where your linked article got its information: http://www.cepr.net/blogs/cepr-blog/update-low-wage-worker-1...
Notice anything interesting about the age bands?
16 - 19 (4 years)
20 - 24 (4 years)
25 - 34 (10 years (!))
35 - 64 (30 years (!!!))
65+ (? years)
The 35 - 64 band is especially egregious because it includes both people at the peak of their careers and retirees (who often take throwaway jobs to stay busy or supplement early SS @ 62).
Ok, so everyone's got an agenda, no real news there. The money shot is here:
> “All of us used to think minimum wage meant a wage you could live on,” de Blasio said
Wat? Who used to think that? Roosevelt didn't think that when he introduced the FLSA, actually the major win there was the abolition of child labor in America. At some point the thought around minimum wage went from "the minimum amount you have to pay so you're not basically whipping child slaves all day" to "the wage we need to buy iPhones and 2 cars".
The actual question is, what level of lifestyle should minimum wage/basic income/whatever support? Is that level adjusted for local prices, or do you have to live in a "designated poor person area" to survive (ie, is the amount the same in SF as it is an Akron)? What about if someone blows all their BI on liquor or gambling and becomes homeless, do we give them more? Who is responsible?
I don't have the answers, and ultimately the discussion is pointless because no group of people will ever agree on this.
Enough to enable the barista, garbage collector, concierge, etc, to live in the same city they work in. It produces nicer cities. Like reserving and maintaining park-space, it's a cost you pay for for a nice place to live.
If some coffee shops want to automate, great. They'll be competing with vending machines, not the remaining human-staffed cafes.
Again the question is what standard of living is the goal? Homeownership? Eating out? New electronics? That's the question that will never have a universal answer.
In most cases the cost of labor is not a large percentage of the purchase price. When the cost of labor is doubled, passing this on to the consumer will not double the price. In many cases it won't even be close.
[1] https://en.wikipedia.org/wiki/Land_value_tax
>A land value tax is said to be a progressive tax, in that the tax burden would fall on landlords and cannot be passed on as higher costs or lower wages to tenants, consumers, or laborers.
The stereotype of rich landlords hoarding money is a falsehood. Every landlord I know here either makes a very modest income or loses money because of shady tenants and the incredible amount of pro-tenant legislature they take advantage of. In Chicago, an eviction takes 6-12 months.
Are you guys going to take these laws off the books then? You can't have it both ways, really. Poor urban areas have enough abandoned buildings as-is without punishing landlords further. If you make rental properties a poor value proposition then squatting takes over. We've seen this a million times. Landlords, are unfortuantely, an easy target for politicians looking to score voting points from the non-land owning rabble.
At any rate, the point of the land-value tax is that it would encourage land owners to build larger and better improvements on their property, instead of just holding the land and waiting for its price to increase. Think building a high-rise apartment building instead of leaving it as a parking lot.
What needs to happen is the exact opposite, via eliminating repossession of residences in bankruptcy or otherwise breaking the financial abstractions that create the never ending positive feedback in housing prices. Then we can finally have a housing correction and people will be able to buy homes instead of only renting them from banks. Labor will then have more bargaining power and wages will raise naturally.
Well sure, if you want to define it that way. But my argument is coming from pragmatic utility - when people own things, they are freer to choose their own path as they are less encumbered by obligations.
A major assumption of the concept of free markets is that the parties to a transaction are coming from roughly equal bargaining positions with regards to walking away. But a starving man doesn't have much choice of what job he takes or how much it pays when he just needs to eat.
If everybody had their basic needs taken care of and people were working solely for extra gadgets, which job do you think would command more compensation - sitting in front of a computer writing CRUD crapps or arduously picking up garbage while wrecking your body? Is the current gradient of pay rates actually inevitable or simply just convenient?
So what I'm pointing out is that in my opinion, the main problem with our economic conditions is that the concept of ownership has been greatly eroded. People that have to continually pay rent don't have much choice whether to work (whether scraping by minimum wage or hitting it out of the park with an in-demand job), and your proposal makes the problem even worse.
> The land belongs to the US, and is the birthright of every US citizen
Now you're proposing your own narrow framework, which actually contradicts your previous sentence - why wouldn't it be the world population? (USG holds a force monopoly on one chunk, but one can make the same argument about individual self-defense bootstrapped up through game theory and pooling in a sheriff)
I'm guessing this will just lead to higher food service costs and the disappearance of lower margin fast food.
There's this narrative that the left is playing up of "It'll be great, we'll kick out McDonalds!" Any industry that has low wage workers will suffer. Think the lines to return something in a retail store are long now? Wait until they have half the staff.
More than likely privatization services will move in the same way MSP's have taken over the role of well paid IT people in smaller organizations today. Mega-grocery co will eliminate ma and pa groceries because they will only be the ones with the scale of industry to have competitive prices. Boutiqe restaurants will be replaced with franchises for the same reasons. Mail/internet ordering from other jurisdictions with lower wage prices will hurt local retail.
This is neither good or bad, imo, but I don't think the people on the left are really considering what happens when you radically change wages by fiat. You get the Walmart-ization of all things because only organizations like Walmart can compete on price.
Economically it's pretty much a direct transfer from profits to workers.
Given that corporate profits are at an all time high and are largely being hoarded instead of being invested (and thus not generating new jobs), it pretty much is free money. It's money that's only going to be spent and drive economic growth if given to a worker on minimum wage.
If it gets creamed off as corporate profits it will just end up in one of the many ultra-high-net-worth sinkholes, like Manhattan real estate. As if that hasn't been bidded up enough.
[1] http://en.wikipedia.org/wiki/Minimum_wage_in_the_United_Stat...
[2] http://en.wikipedia.org/wiki/Illegal_immigration_to_the_Unit... - assuming most of them don't work as investment bankers.
* Support the continuing automation of jobs away
* Tax the income stream from automation and use it to provide strong social safety nets
This should be covered by corporate income tax, no?
I can envision a future where we have two tiers of income. One for basic necessities everyone gets, and another "luxury" tier, for services and goods not necessary to survive.
The problem is the definition of "basic necessities".
Imagine that functional immortality becomes a possibility. Does it fall into the "basic" tier or the "luxury" tier. Drawing those lines is precisely what we are doing everyday with politics.
Efficiency can be understood as maximizing output for a given input (vernacular definition in use here). The morality of slavery is a red herring. We will ignore the research that suggests there was actually an efficiency cost to utilizing slavery over voluntary paid labor, because that is also irrelevant to the question.
The question is whether forcing costs to be higher is an efficiency gain - it is not.
We can now consider economic efficiency. One common measure is Pareto efficiency, which any change to the minimum wage cannot be in isolation, as one of the criteria is that no one be made worse off. The existence of a minimum wage also implies the existence of a Pareto optimal point.
Another common measure of efficiency is Kaldor-Hicks efficiency, which basically takes the Pareto efficient criteria and modifies them such that there is a hypothetical compensation such that those being made better off could compensate those being made worse off to the point where all are made better off as a result. Essentially positive net utility change from some intervention. Note that the compensation is purely hypothetical, not necessarily monetary, and consequently unmeasurable.
Kaldor-Hicks is the efficiency model wherein forcing a higher price can increase efficiency. You've not addressed this with a vague appeal to morality.
Note: I am not trying to be hypercritical, only very clear in my statement.
Except not; BI proponents -- even left-of-center BI proponents -- generally propose it as an alternative to the minimum wage. BI, in principle, solves the same problem as minimum wage -- substandard wages cease to be exploitive if people are no longer compelled to work for those wages by the threat of not having minimal needs met if they choose no to accept them, they are genuinely voluntary.
I'm holding my breath waiting for a robot that can really clean my house (not a roomba). Any. Day. Now.
Economists are always telling me that robots are going to start taking over all jobs everywhere. Given their stellar record of predicting economic outcomes, why wouldn't we believe their technological predictions?
https://www.youtube.com/watch?v=7Pq-S557XQU
http://www.cgpgrey.com/blog/humans-need-not-apply
Another bedtime story:
http://waitbutwhy.com/2015/01/artificial-intelligence-revolu...
Why is this true? It's not a natural condition. The natural condition of a free market is an equilibrium between supply and demand. If you have excess supply, it means the market is not at equilibrium, which means either (a) it's in transition because of some recent change (not likely since the oversupply of low-end labor has been around for quite a while), or (b) the market is not free--something is skewing the supply-demand balance. The obvious candidate for that is...existing minimum wage laws.
> The minimum wage is just a needed correction for this oversupply of labor
Raising the minimum wage will not "correct" the oversupply of labor; it will make it worse. There will be more people wanting jobs, and businesses will be able to afford fewer of them.
That's the natural condition of a theoretical free market, real markets are not theoretical. As Keynes said, the market can stay irrational longer than you can stay solvent.
Also, poor people have more children than rich people.
They very often aren't, that's true. And in many cases, that's because real markets are not free markets; they are skewed by government intervention. The market for labor in the US, and indeed in most countries, certainly fits that description.
> As Keynes said, the market can stay irrational longer than you can stay solvent.
Yes, and he did his level best to make that prophecy come true by getting governments to intervene to keep markets irrational.
> poor people have more children than rich people
How is this relevant?
A million things skew the labor market away from the theoretical: people are irrational, information is wildly asymmetric, wages are sticky, there aren't an "arbitrarily large number of firms", the factors of labor (people) aren't liquid or mobile, etc.
To pick 'price floor' from the long list of things that distort the labor market while ignoring the rest is strange enough that I chalk it up to politics any time I hear it.
The model I'm describing, while it is certainly an idealization, is not for that reason inapplicable to the real world. Idealized models are useful in understanding the underlying factors at work in a real situation, even if the real situation contains other factors that are not modeled. Often you can add those other factors in as constraints (for example, there's no reason why a microeconomic model has to assume "no minimal sustenance"; you just add the minimum requirement for sustenance as a constraint). Or you can expand the model to include interactions that were not previously captured (for example, if waste disposal is a significant factor, you can expand your model to include the economic transactions involved).
You misspelled "excessive constraint of demand caused by a debt crisis driven by a criminal financial sector".
Additionally, there is some evidence that minimum wage increases also have a "ripple effect" that increases wages for workers earning more than the minimum: http://www.brookings.edu/blogs/up-front/posts/2014/01/10-rip...
- Also that laborer isn't being "brought down"; others are being "lifted up." Others don't have to lose for you to win.
And anyway, if the proponents of a higher minimum wage are correct, then this will result in a boom in the gross domestic product of LA as people who previously couldn't afford homes, appliances, or better food will be spending money on those things, increasing the income of LA businesses, which in fact would lead to rising wages for those skilled laborers you're so worried about… this is textbook Keynesian economics.
At the expense of what? If you raise wages but don't increase productivity, you're just robbing one sector of society to pay another. And nobody has mentioned any change accompanying this that would increase productivity.
Profits.
>If you raise wages but don't increase productivity, you're just robbing one sector of society to pay another.
Yes, won't somebody think of the poor Waltons. They've worked so hard for their money.
That's one possibility, yes. But if you think that Walmart, for example, is just going to roll over and accept decreased profits without trying to finagle a way out of it, you might want to think again. See below.
> won't somebody think of the poor Waltons
Who said they would be taking the hit? In fact, they're much more likely to figure out some way to have either their customers or the other companies in their supply chain take the hit.
Of course they won't. However, they know as well as anybody that their ability to finagle themselves out of it is limited to their ability to lobby and shape public opinion - against minimum wage hikes.
>Who said they would be taking the hit?
Economic studies on this generally all show that profits get hit first and hardest. Inflation happens in some industries, but only generally industries with wafer thin profit margins. If that phrase accurately described Walmart, the Waltons wouldn't be the richest family in America.
Likely, both:
* customers - pass the cost on via higher prices
* suppliers - either force them to use overseas suppliers, or skip them and user overseas suppliers (where, conveniently, minimum wage, OSHA, ObamaCare(tm), etc etc etc simply don't apply)
And stop acting like wealth redistribution is "robbing", unless you're willing to admit that when the rules changed from Keynesian guidelines in the 1950s to supply-side guidelines in the 1980s as "robbing" from the middle class and the poor.
I wasn't saying it "needs" to be increased. I was saying that, if it doesn't increase, the value of whatever the workers are doing doesn't increase. So any increase in their wages means an increase in what they are being paid, relative to the value of what they are producing. Someone else has to make up that difference by accepting a decrease in the the value of what they are getting, relative to what they are paying for it--either they pay more for the same product, or they pay the same as before but get a product of less value.
> stop acting like wealth redistribution is "robbing"
Wealth redistribution in itself is not "robbing". I redistribute wealth every time I buy something.
What is "robbing" is wealth redistribution disguised as something else, so the people whose wealth is being taken don't know it and don't make a voluntary choice to give it up.
Do you object to taxes in general?
Strictly speaking, I voluntarily choose to be taxed, because I vote for representatives that make laws that impose those taxes. So I can't say I object to taxes as robbery (though there are extreme libertarians who do view taxation that way).
What's different about a minimum wage is that the wealth redistribution is covert, not overt. The government claims that the minimum wage won't take anything away from anybody. But it does.
Except they are. It's called the ripple effect.
"skilled" is a function of rarity, as is price. So, if you aren't priced like a rare good, I'm willing to bet you aren't "skilled".
EDIT: Minor spelling fixes. Also, the whole position is odious--help those in need, amigo.
EDIT2: Minor language cleanup to assuage hivemind.
They will still be getting $15/hr, so they haven't been "brought down" to any level; others have been raised up.
Hopefully the minimum wage will be enough of a boost that their children can then become a skilled laborer.
Even so, so what? I'm making more than some people with more education, and there are morons who were in the right place at the right time who spend more in a year than I'll ever be worth.
I inflated wages to $15 from L.A.'s current $9. I maintained 3.3% profit.
We'll live.[1] http://www.heritage.org/research/reports/2014/09/higher-fast...
[2] http://www.expatistan.com/price/big-mac/los-angeles
But we've got a while between now and then, and I think both inflation and the rising cost of beef will play a role. And who knows if automation will play a part?
I bet that $8.28 for a Big Mac meal in 2020 will seem like a good deal.
http://globalnews.ca/news/2008258/ndp-will-move-forward-on-1...
It sounds like we will have a number of similar experiments to compare with each other.
1) Rise in inflation (this is ultimately going to hit the price of goods and services)
2) Rise in cash under the table employment. People already can't afford union work - this seems to push even more people to "hire the guy standing at the corner outside Home Depot".
Inflation follows for businesses with particularly thin profit margins, but the effect is usually muted.
So this is the report that was supposed to show that minimum wage increases don't affect employment rate (infact, they actually might improve it), however, when you look at the data presented within the study itself, you find that indeed, the NJ employment rate seemed to increase, and the PA employment rate seemed to decrease slightly. However, when you look at the number of employees per fast food restaurant, you'll see that the NJ restaurants started at a much lower number per restaurant than the PA restaurants, and then that employees per restaurant metric raises up by the end of the study but it never reaches the same number as the PA restaurants.
What that study actually seemed to show to me, is given the ample notice that business owners had about the minimum wage increase, they thinned out their workforce. Then the minimum wage increase came (the study actually started shortly after the increase had already been put in place, I believe), and the business owners realized they over thinned out the workforce, hired a few more people to get to the right number which was still less than the PA number with lower labor costs.
And since we don't exist in a vacuum, once a business owner realizes their store in NJ can run on 18 people, why should they run their store in PA with 20? It could probably make due with 19.
However, no one ever brings up the point that per restaurant, NJ never had as many employees as PA, essentially stating that PA was using more employees to accomplish the same job as NJ, which is exactly what you would expect to happen from an increase in labor cost.
Instead, everyone only focuses on the jobs added/lost during the short time of the study. It's like I'm the only person in the world who actually looked at the data in the report, instead of just reading the author's findings. Very Frustrating to consistently seeing this study shown as proof that minimum wage doesn't affect employment numbers.
The amount of vitriol thrown at that particular study is pretty shocking. You can tell it's a threat. One "researcher" (Neumark) even went as far as to redo the study with a restricted, smaller data set in order to yield the preferred outcome - a decrease in employment.
Their methods weren't flawed.
That study undermined the arguments of a very powerful group of lobbyists and left them exposed. Of course they were going to do everything they could to discredit it, including but not limited to outright lies and dubious reinterpretation of the results.
After researching more into the subject I have come to the following conclusion:
Raising Minimum Wages marginally has no effect on employment rates, only when the increase in pay can be tolerated by employers by absorbing the increased cost by increasing prices, reducing higher paid employee's wages, reducing employee turnover costs, and reducing profitability.
The end result is a smattering of higher priced goods, lower paid managers, and less incentive to start a business relying on low skilled workers. Also, you can throw in some lower job turnover as well, since the cost of losing your job is greater.
Of course, the next question is, when is "marginal", no longer "marginal"? Is it $15/hr, $20, $50? At some point, alternative methods to manual labor will become cheaper (such as dropping $100k upfront for a burger making robot). Once we hit that point, things will get ugly fast.