Raising the minimum wage?

[hinkage]

So we're in this nasty recession. Normal, everyday Americans are struggling to get by. People aren't making enough money to do the things they want.

How do we solve this?

I believe the answer is simple: raise the minimum wage to $50/hour.

Now I know that some of you might immediately write me off as a lunatic and object to this. But if you do, then you'd better reexamine the situation. Look at the facts:

(1) People don't have a lot of money and so the economy is bad.
(2) If the minimum wage is increased to $50/hour, these people will have more money to spend and the economy will be good.

It's really that simple. It's a wonder this hasn't been implemented already. People who own and run businesses are extremely rich, and it's time we level the playing field by taking it from their greedy hands and giving it to the people who need it.

In addition to aiding the poor and needy, this plan would be giving blacks and other minorities the money previously being hoarded by greedy white capitalists. It's time for equality. It's time for change.

 

[Flushed]

More money does not necessarily cure problems. I'm no econ expert, but I'm sure inflation somehow applies here. You jack up everyone's pay and make the average salary substantially higher, then the economy is going to change drastically. We'll start paying a hella lot for stuff that we already deem expensive. And what about small business owners who can't afford to dish out such large wage raises?

 

[Silais]

The minimum wage in the United States should be $12 an hour, not $7.25 an hour. Companies do not want to share a slice of their profits with their workers because it reduces their own yearly checks, even if that reduction is absolutely minimal compared to the amount they are making regardless.

 

[Sopheria]

So we're in this nasty recession. Normal, everyday Americans are struggling to get by. People aren't making enough money to do the things they want.

How do we solve this?

I believe the answer is simple: raise the minimum wage to $50/hour.

Now I know that some of you might immediately write me off as a lunatic and object to this. But if you do, then you'd better reexamine the situation. Look at the facts:

(1) People don't have a lot of money and so the economy is bad.
(2) If the minimum wage is increased to $50/hour, these people will have more money to spend and the economy will be good.

It's really that simple. It's a wonder this hasn't been implemented already. People who own and run businesses are extremely rich, and it's time we level the playing field by taking it from their greedy hands and giving it to the people who need it.

In addition to aiding the poor and needy, this plan would be giving blacks and other minorities the money previously being hoarded by greedy white capitalists. It's time for equality. It's time for change.

I'm not one of those people who believes that minimum wage should be $2 an hour, but...no. Just no. This is the kind of thinking that only exacerbates economic problems. Raising the minimum wage to such large amounts will do way more harm than good. What if, for example, companies don't have the money to pay their employees that much? Then people will either get laid off, or the business will go bankrupt, which results in all the workers losing their jobs anyway.

On the other hand, suppose a company is filthy rich--like, say, McDonald's. As it'll be more expensive to hire people, they won't hire anybody. At least, they'll hire less people, and possibly even fire some people because they don't feel like paying them $50/hour. Overall, this will result in less jobs, and less jobs = a bad economy.

Personally, I think minimum wage in the US of A is okay where it is. Raising it will only result in less jobs. And during hard economic times, getting more people jobs is the top priority.

 

[Kanzler]

Well, no, if that was the case American workers should probably be productive enough to justify said wages. Which is impossible considering the diversity of the American economy.

However.

Nice move at a political joke, but I think you're missing the point (not sure if deliberately). Raising the minimum wage isn't about giving people "who" need it, or whatever moral imperative.

Rather by giving poorer workers more spending power, that will create demand in the American market. Countries like Mexico are shifting their exports away from the US market because they're not confident that the demand for their products will be there. If the internal market has weak demand, how will it attract investment - both internal and external? Why would even an American company want to invest more domestically and increase their operations (and jobs) when there are growing markets in developing countries that could provide higher growth rates?

I've always felt that the state should be in charge of promoting a country's development. I think the role of the state in "giving people jobs" has been meaning "giving people ****** jobs" lately and that's really missing out on the state's developmental capabilities. Rather the state should have an interest in giving people "awesome ****ing jobs". Unemployment is going down, but a lot of it (so I've heard or read, but not in detail so I may be wrong) came back with crappy service sector Walmart jobs which is more or less a bandaid? and not a solution.

There's nothing righteous about politics at all. You have to do what you have to do. The United States should not advocate for free markets per se, but make its priority to create economic conditions that favour growth and good jobs. Don't get me wrong, to the extent that free markets cause economic and social growth we should support it - but it's about time that we start defining goals in terms of results instead of conditions that may or may not lead to results. If that involves distortion of the market, so be it. But we should keep our minds open to alternative models instead of what's been championed by neoliberals - and is now the consensus mind you - for the past thirty years.

In addition to a critique of the economic situation, I'd like to make a critique of the critique. I think we should understand economic rationale and explain our favoured policies in terms of what it means for economic development - material terms - instead of framing it in ideology and moral terms - "what's right", etc.

 

[T The Manager]

Uh no. It is not a good time to jack with the min wage at this point. Why raise the min wage when companies are already being effected by Obamacare? Obamacare is putting people out of "full time" jobs because companies don't wanna pay for it. If you raised the min wage it's gonna lower the unemployment rate even more and the price of everything will go up making the economy worse than it already is. The min wage is $8.25 (i think) where I'm at and it's $7.50 in my hometown. Hometown is cheaper living but lower pay, the min wage will be effected by inflation. Say if the min wage dropped, the prices of everything would drop as well to balance it.

Talk about an American crisis...

 

[Rezilia]

Each state has its own minimum wage. Although the fed govt could definitely impose a national minimum wage - what with no one caring about states' rights anymore - this would devastate the states, as they each have their own enclosed economies. If you force minimum wage to be the same throughout the nation, economic hysteria will occur - which is never a good thing.


While I agree that we should have a higher minimum wage, we CANNOT produce anymore money. We have to first put a hold on the production of money itself - that way, employers will be forced to give more money to the employees through their own companies, since they can't just raise the amount of money flowing throughout the nation. In addition, you'd have to make national laws which keep employers from pink-slipping their employees, that way they can't fire people just because the company is having economic problems.

 

[LoudSilence]

Unfortunately, like the others have said hinkage, economics do not work that way. It would be impossible to simply up pay to 50$/hr (!!) and expect everything else to fall into place. Most economic models actually show that minimum wage and employment rate are inversely proportional.

That said, I don't really know what should be done. Minimum wage (at least in America) is indeed too low to subsist off of IMO, but raising it mainly benefits the people already working and not those who are unemployed (since businesses would want to cut back hiring to save money). Big name corporations like Wal-Mart (which is kind of a monopsony in certain markets) have such ridiculous profit margins that it wouldn't be a problem for them and they could theoretically help employment rates, but what about the smaller businesses which are struggling to stay afloat now?

Not really sure what to make of the mess, to be honest. I think we can agree though that there is no magic bullet in this case, and if there were one, an exorbitant minimum wage would not be it.

 

[PokemonLeagueChamp]

Minimum wage jobs are not meant to be livelihoods. That's the problem, really. The media and the politicians will tell you that the economy recently added new jobs when the only reason for that is because Wal-Mart, Target, and other such retailers needed seasonal help. Of course, the government and media considers that a reduction in unemployment and an increase of jobs so that they can claim things are getting better, when in fact they are not. Not to mention the people they don't even count because they've given up looking for work.

Just shooting up the minimum wage wouldn't fix things. Either businesses would be forced to lay people off(especially smaller businesses), or the government would print enough money to enable the wage raise, which would cause inflation and ultimately leave Tue situation about the same, save for further inflation on a currency that's already having issues.

 

[Kanzler]

It's not clear empirically if business would lay people off, in any case it's a stretch to say they are "forced" to do anything at all. It would create an incentive for businesses to create higher productivity jobs to justify wage raises, and in doing so create an incentive for skills investment. I think that's a responsibility of businesses, as again, nobody can force them to have one provide one kind of job or another. I'm not too knowledgeable about inflation, but I thought the biggest factor in that was the Federal Reserve increasing money supply to pay for its own loans. In any case, inflation is reducing the purchasing power of the minimum wage as it is - so workers are having to deal with effectively reduced wages, year on year. This tells me if that the minimum wage doesn't increase, purchasing power and demand will surely fall.

Loudsilence brings up a good point with monopsony depressing wages - excessive competition among workers for jobs and too little competition among firms for workers. There seems to be agreement that small businesses pay higher than minimum wage as it is to attract workers, so their wages will still be competitive in the case of a wage increase. I would disagree with the statement: Most economic models actually show that minimum wage and employment rate are inversely proportional. What about Japan or Australia or Scandinavia or Germany (no minimum wage in the last two countries/groups, but wages are collectively bargained and averages are quite a bit higher than America's minimum/average)? I think the important thing here is "all other things being equal", thus the problem is with America's model, not just one metric. That being said, if the current economic model sees wage increases as against its interest, then I don't think it's working for the American people.

The central issue might not be minimum wage at all, but wage disparity in general. My parent can earn 30-50% more in the US for jobs equivalent to their current work, as well as pay less taxes. On the other hand, minimum wage workers in the US earn much less than their Canadian counterparts. I think these examples illustrate how America's "prosperity" is built on the backs of poor median (average joe) workers. I don't think that's a good model moving forwards.

 

[LoudSilence]

I would disagree with the statement: Most economic models actually show that minimum wage and employment rate are inversely proportional. What about Japan or Australia or Scandinavia or Germany (no minimum wage in the last two countries/groups, but wages are collectively bargained and averages are quite a bit higher than America's minimum/average)? I think the important thing here is "all other things being equal", thus the problem is with America's model, not just one metric. That being said, if the current economic model sees wage increases as against its interest, then I don't think it's working for the American people.

Oops, I meant specifically the American model. We've got more than a few screws loose in our operation, that's for sure.

The central issue might not be minimum wage at all, but wage disparity in general. My parent can earn 30-50% more in the US for jobs equivalent to their current work, as well as pay less taxes. On the other hand, minimum wage workers in the US earn much less than their Canadian counterparts. I think these examples illustrate how America's "prosperity" is built on the backs of poor median (average joe) workers. I don't think that's a good model moving forwards.

That's an interesting perspective. You know, I kind of wish we'd be willing to try a basic income + negative income tax combo. Unfortunately it depends a little too much on our honesty though and it's kind of a cultural norm for Americans to take advantage of any loopholes they can find.

Apparently some experiments were carried out using the NIT model on the state level and people actually cut back work due to guaranteed income (even though it would just meet the poverty threshold), hahaha.

People are silly.

 

[Karinmo]

I get around 10 usd an hour and im a lifeguard at a local pool - its good, and above minimum wage- but for others , it should be raised go atleast 12-20 usd an hour. This would allow the economy to grow enough that the buissnesses only giving minimum wage can easily afford it. 50$ an hour is outrageous, because of the probability of an underage 16-18 year old like myself taking advantage of it, and being rich too early to care in life much.

 

[darkredwing]

Minimum wage is a double edge sword, as consumers and employees we of course want to earn more money. But think of it from the business stand point(i'm not saying businesses are innocent here so I'd like to get that out of the way.) Wages are an expense, employees necessary to operate of course, but when those wages go so do expenses, and to continue making profits and allowing the company to grow, prices of their products must also go up, there for not really fixing anything.

Minimum wage here in California is 8 dollars, imagine if that were to go up a mere .50 cents to 8.50. For a company that has lets say 100k employees just on minimum wage you're talking about 50k dollars for a single hour suddenly thrown on top of your other expenses. Of course if some employees were making wages above minimum wage, they would expect their own wages to increase by a similar amount. Increases in minimum wage increasing is often a sign that cost of living is also increasing. Also consider businesses that already pay their employees above minimum wages, many banks for example, they too would need to increase wages to allow their employees to meet the rising costs of living.

Its true many businesses will be able to afford a small increase without raising prices, but often times it's not just a small case. When I started working in '06 minimum wage was a mere 6.75, it went up to 7.50 in 2007, increased again to 8 dollars by 2008. There's already talk of increasing it to 9 dollars next year and to 10 dollars by 2016. That's $3.25 increase per hour per employee in a 10 year period, in my state.

 

[Kanzler]

On the other hand, minimum wage has lagged behind inflation for a long time, so companies are used to paying their workers low wages. The cost of living is increasing though, so wages should catch up. I think it's well known that raising prices are the last thing a company does for its products. They would sooner cut sizes without the consumer noticing - it's a psychological thing. That's the thing about economics, it's never as black and white as the theory says it is, we're human after all. But if a company wants to make sure its workers are worth their wages, they can cut costs or make their workers worth their wages. Raising prices isn't really desirable on the company's part and for the most part they don't have to.

One person put it this way. If a company is going to be put out of business from such a wage increase, it might as well be out of business anyways.

 

[Silais]

Someone who works a minimum wage job at a full-time schedule should be making enough to pay their bills and be able to buy food and clothing on that salary. When full-time workers are forced to go on government assistance programs to survive, we know that there is a problem with the minimum wage and wages in general. Raising the minimum wage by two or three dollars will NOT ruin any company, especially massive corporations like Walmart and McDonalds.

 

[PokemonLeagueChamp]

Someone who works a minimum wage job at a full-time schedule should be making enough to pay their bills and be able to buy food and clothing on that salary. When full-time workers are forced to go on government assistance programs to survive, we know that there is a problem with the minimum wage and wages in general. Raising the minimum wage by two or three dollars will NOT ruin any company, especially massive corporations like Walmart and McDonalds.

They aren't making a salary, though. And the fact is, minimum wage jobs are/were never meant to be how people pay for their necessities. The fact that some people now feel they should indicates severe problems with the other sectors of the economy, rather than a minimum wage that is too low. It wouldn't be considered too low if the job market had more employment opportunities that paid more reasonably, but there really isn't. Most of our manufacturing being overseas at this point really doesn't help matters.

 

[Silais]

They aren't making a salary, though. And the fact is, minimum wage jobs are/were never meant to be how people pay for their necessities. The fact that some people now feel they should indicates severe problems with the other sectors of the economy, rather than a minimum wage that is too low. It wouldn't be considered too low if the job market had more employment opportunities that paid more reasonably, but there really isn't. Most of our manufacturing being overseas at this point really doesn't help matters.

A minimum wage job is meant to support you; that's why it a minimum wage. Meaning, it's the least amount of money you can make to survive. However, this is no longer the case. Minimum wage jobs for full-time employees at Walmart make an average of $17,000 a year, while the poverty line is $23,000. There is something wrong with this picture.

 

[Kanzler]

It means with the minimum wage being the way it is right now, it's not the government's job to lift people out of poverty. At least they won't do it this way. That's the message it sends me.

 

[Sopheria]

It's not clear empirically if business would lay people off, in any case it's a stretch to say they are "forced" to do anything at all. It would create an incentive for businesses to create higher productivity jobs to justify wage raises, and in doing so create an incentive for skills investment.

I don't think it works like that though. They already have incentive to create higher productivity jobs, and that's making more money. The more productive they are, the more money they'll make. But increasing productivity and creating high productivity jobs doesn't happen overnight. For example, how could a business get started in the first place? Raising minimum wage actually favors the big greedy corporations and hurts the small businesses. It wipes out the competition from smaller businesses and businesses that are just starting.

Take for example, Walmart. They're one of the biggest businesses in the US, and employ the most people. Minimum wage goes up, they can afford it, because they already have enough capital to pay the new minimum wage without taking a significant hit to their profits. Smaller retail providers (aka competition to Walmart) with less capital will take a bigger hit, some may go out of business, and it will be harder for new retail providers to start up unless they already have a significant amount of capital to start with. Walmart just got a lot less competition.

That might sound like a bit of a stretch. But still, consider what it will do to the smaller businesses?

 

[Kanzler]

I don't think it works like that though. They already have incentive to create higher productivity jobs, and that's making more money. The more productive they are, the more money they'll make. But increasing productivity and creating high productivity jobs doesn't happen overnight. For example, how could a business get started in the first place? Raising minimum wage actually favors the big greedy corporations and hurts the small businesses. It wipes out the competition from smaller businesses and businesses that are just starting.

Take for example, Walmart. They're one of the biggest businesses in the US, and employ the most people. Minimum wage goes up, they can afford it, because they already have enough capital to pay the new minimum wage without taking a significant hit to their profits. Smaller retail providers (aka competition to Walmart) with less capital will take a bigger hit, some may go out of business, and it will be harder for new retail providers to start up unless they already have a significant amount of capital to start with. Walmart just got a lot less competition.

That might sound like a bit of a stretch. But still, consider what it will do to the smaller businesses?

You're right about higher productivity jobs not emerging overnight. However, any kind of transition takes time and if we want to move forwards we will have to deal with short term costs, such as potential layoffs (though as I addressed previously it's not as bad as theorized) and unemployment, but such costs would be inherent to any kind of change. There's no free lunch.

I would argue that worker productivity has no direct correlation to increased profit. If you think about e-businesses like Amazon and eBay, designing better systems and websites would do more for their bottom line than increase productivity at head office. Companies with a strong incentive to increase worker productivity are those who need to invest in their human capital. On the other hand, I don't think large corporations have an incentive to create higher productivity jobs - jobs like those at Walmart exist because in such an economy of scale you're able to create a division of labour so fine that you're a human drone. I would say for these kinds of corporations, their model disincentivizes creating higher productivity jobs, they don't need you to do good work and doing good work (as a Walmart worker) doesn't really help them. For this reason, most minimum wage workers work for said large corporations. Small business tend to pay higher than minimum wage and I'd imagine that the work is better.

Spoiler:

This is what fast-food managers did in response to raises in the minimum wage in Georgia and Alabama. Furthermore, this is what they did in terms of increasing efficiency:

Spoiler:

I think there is little evidence that increasing minimum wage would reduce employment and increase pressure on small businesses. I've worked for a smaller business before, and there was much more pressure on developing our ability to sell than workers in a larger business in the same industry (I've done mystery shopping as part of my work so I know we put a greater emphasis on selling :D). In a small business, workers worth relatively more (because as you mention there is less capital), and as a result they would do more work and be in turn paid appropriately. Like I've said before, most near-minimum wage workers work for large corporations, as smaller corporations have "better" (more complex) jobs and pay more in order to compete with large corporations for labour (as everybody thinks about applying to Walmart or American Eagle rather than your local electronics or clothing retailer). So, we can force businesses to be more efficient, which makes sense. Firing people is hard. And there's an alternative to doing so.

Furthermore, to expand on the increase in demand (which is the other main reason we should increase the minimum wage in addition to increasing productivity). The minimum wage would obviously affect low-income earners the most, and their increased wages will mostly go into increasing their spending power. Poorer people spend more money relative to saving it. While there's always fear that the money put into consumers hands won't be spent (which is the purpose), increasing the wages of the poor is more likely to translate into spending power than for any other group. It's something else I've learned at work (which catered more to poorer folks), that many poorer people don't save money - don't even have bank accounts.

I admit that I don't have much training in classical economics. However, my interest is in political economy and development. I've come to appreciate the role of the state in creating change in society. Crucial to that is improving skills and productivity. I believe that mission should be pursued by all actors in society, and if certain actors don't have an interest in doing so (like Walmart for example), we should give them incentives (to put it politely)/push them (or not) to do so. Regardless of whether we agree on the effects of this policy versus the next, we would agree on that the status quo must change, yes?

To put it simply, I don't think we should fear an increase in the minimum wage. We should not. Other countries have higher minimum (and average) wages than we do, and if we're concerned about American prosperity for the masses in addition to American prosperity in aggregate (which mostly benefits the wealthy or educated), then I think we can notice something is wrong when the median worker is paid so little for all the boasting we do about our wealth. That must change, doesn't it? And if the government won't lead the way, who will?