Fast Food and Minimum Wage

[Lucrum]

The unemployment rate unexpectedly dropped to 7 percent last month as employers added 203,000 people to their payrolls.

This should be good news, right?

Not to the folks at the perilously liberal Huffington Post who actually published an article Friday with the hysterical front page headline, "Strong Jobs Report Could Doom Unemployment Benefits."

Read more: http://newsbusters.org/#ixzz2miKkCT3w


THIS is how touchy feely bleeding hearts "think".

 

[piezoe]

Quote from Lucrum:

1) Congress does almost nothing judiciously.
2) I agree strikes don't always end well. I don't see how that proves market forces don't work. As you're asserting.

Now do you have evidence of you're other assertions on productivity and welfare rolls vs min wage? Don't tell me those are just leftist talking points you pulled out of your <s>ass</s> hat.

Market forces work reasonably well sometimes and sometimes they don't. Consider the recent financial crisis, if you would like an example of when market forces push things further from equilibrium rather than toward equilibrium. Read Soros if you have a real interest in this topic.

 

[Lucrum]

Quote from piezoe:

Market forces work reasonably well sometimes and sometimes they don't.

I can say exactly the same thing about congress and government's intervention of...well...just about everything

....Read Soros if you have a real interest in this topic.

Right now my interest is in your evidence that supports your assertions about the min wage. How it's out of sync with current productivity and how raising the min reduces welfare roles.

I won't ask again. At this point I have to assume you have no such evidence.
It's increasingly apparent you're merely repeating the bleeding heart talking points conceived by thoughtless liberal loons.

 

[piezoe]

Quote from Max E. Pad:

Raising minimum wage is an excercise in futility, you raise minimum wages all that happens is prices go up leaving the person in the exact same spot they were to begin with.

That is certainly the common wisdom, and it is always voiced anytime their is discussion of the minimum wage. However that's an example of a case where the common wisdom could be very wrong! It depends on where real labor costs are relative to the wage scale and were a minimum wage businesses profit point is relative to costs.

Consider that the current real cost of minimum wage labor is well above $7.25/hr. How do you suppose the difference between the real cost and the minimum wage gets made up? Under these circumstances if you raise the minimum wage to exactly its real cost, you could expect relatively little increase in retail prices, assuming competitive markets and sufficiently high profit margins. Higher profits have a way of disappearing into higher executive salaries, bonuses, and dividends. This can create some slack for absorbing higher labor costs in highly competitive markets.

If, however, the only reason a business can turn a profit is because they are able to acquire labor below its real cost -- an unsound business model, to be sure -- then naturally higher labor costs must be reflected in higher prices.

Consider this however. Even if the common wisdom is right, and prices go up to match the wage increases, you don't end up in the "exact same spot," because now you have created a more realistic labor market and reduced hidden cost shifting; hopefully, if you set the minimum wage at the correct level, you've stopped it completely..

What is the real labor cost? It is essentially the actual cost of housing, feeding, bathing, clothing, transporting, and maintaining health in the minimum wage worker. I think the actual average cost nationally is probably a little above the proposed $10.10/hr. So I would expect the impact on retail prices in competitive markets of a raise in the minimum wage to $10.10/hr to be close to negligible, because I am assuming there are excess profits created by an artificially low labor cost. I certainly could be wrong about that. But I strongly favor a more honest labor market in any case.

 

[jem]

Piezoe... your entire premise violates the basic premise of economics. Marginial this equals marginal that. If you hire cheaper labor so can your competition. When you go to bid a job your competition lowers their bid so you have to lower yours.

The reason labor costs seem low to you is supply --

The govt will not close the borders... so over supply is almost guaranteed under this set of elected officials.

Note... the govt gives out generous welfare, unemployment, housing and other give aways... These give aways distort the market for the very goods housing and services... new workers compete for. driving up everybodys cost.


The "true cost of labor" or whatever you called it is a fabricated number and if used to create a higher minimum wage will only cause more jobs to be destroyed.

If that is what the left wants to do fine.

But lets not pretend such a market distortion is anything but what it is.

Quote from piezoe:

That is certainly the common wisdom, and it is always voiced anytime their is discussion of the minimum wage. However that's an example of a case where the common wisdom could be very wrong! It depends on where real labor costs are relative to the wage scale and were a minimum wage businesses profit point is relative to costs.

Consider that the current real cost of minimum wage labor is well above $7.25/hr. How do you suppose the difference between the real cost and the minimum wage gets made up? Under these circumstances if you raise the minimum wage to exactly its real cost, you could expect relatively little increase in retail prices, assuming competitive markets and sufficiently high profit margins. Higher profits have a way of disappearing into higher executive salaries, bonuses, and dividends. This can create some slack for absorbing higher labor costs in highly competitive markets.

If, however, the only reason a business can turn a profit is because they are able to acquire labor below its real cost -- an unsound business model, to be sure -- then naturally higher labor costs must be reflected in higher prices.

Consider this however. Even if the common wisdom is right, and prices go up to match the wage increases, you don't end up in the "exact same spot," because now you have created a more realistic labor market and reduced hidden cost shifting; hopefully, if you set the minimum wage at the correct level, you've stopped it completely..

What is the real labor cost? It is essentially the actual cost of housing, feeding, bathing, clothing, transporting, and maintaining health in the minimum wage worker. I think the actual average cost nationally is probably a little above the proposed $10.10/hr. So I would expect the impact on retail prices in competitive markets of a raise in the minimum wage to $10.10/hr to be close to negligible, because I am assuming there are excess profits created by an artificially low labor cost. I certainly could be wrong about that. But I strongly favor a more honest labor market in any case.

 

[piezoe]

Quote from Lucrum:

I can say exactly the same thing about congress and government's intervention of...well...just about everythingRight now my interest is in your evidence that supports your assertions about the min wage. How it's out of sync with current productivity and how raising the min reduces welfare roles.

I won't ask again. At this point I have to assume you have no such evidence.
It's increasingly apparent you're merely repeating the bleeding heart talking points conceived by thoughtless liberal loons.

Lucrum, I like you, but frankly I can understand bigarrow's frustration with you. You are obviously smart, so why do you insist on being spoon fed?

I gave you all the sources you need to figure things out for yourself. And I suggested looking up the size of the welfare roles relative to population in 1968 versus 2012. Did you do that? Apparently not. So, frankly you don't deserve the help I am going to give you, you lazy bum.

The market I trade sucks today, by the way, so i'm going to hang out over here for awhile, and be nicer than I ordinarily would..

Fortunately, we don't have to know the productivity of the low wage worker. We can use relative measures of productivity to wage in 1968 and 2012 to answer most of our questions. Start by assuming that the productivity of the 2012 minimum wage worker is exactly the same as it was in 1968. (Obviously today's worker is more productive because of automation and economies of scale, but we are going to use the safest, most conservative productivity assumption for our comparison.)

Next, the minimum wage in constant 2012 dollars was $10.50/hr in 1968. In 2012 it is $7.25 (isn't it?).

Now here is the part that is going to be difficult for you, so please pay close attention. If the productivity of the 1968 worker is the same as the 2012 worker, how much do we have to raise the 2012 minimum wage by in order to bring it into exactly the same relation to productivity as existed in 1968. (I know it's difficult, but I also know you are smart enough to do it.) OK did you do it? The answer is below if you're having trouble. Don't peek!

Now I am not inclined to look up the real cost of labor (defined however you like as long as you use a consistent definition, e.g, poverty level for a single person) in 1968 versus 2012, but I'll give you a hint. It is very likely going to come out somewhere between 10 and 11$ per hour, or more in 2012. And in 1968 it is going to come out at between 1 and 2$ per hour, or more. At $1.75/hr (the minimum wage in 1968) it would be $10.50/hr in 2012 dollars.

The final step, and you're completely on your own here, because to get good at this stuff you have to practice. Compare the real cost of minimum wage labor in 1968 to the real cost in 2012. Take the difference between those real costs and the actual hourly wages in nominal dollars in 1968 and 2012. Which year has the biggest gap between hourly wage and real labor cost. Then as I suggested, look up the size of the welfare roles in those two years per capita, and see if you can come up with a reasonable hypothesis for how the gap between real labor cost and the minimum wage is made up. I know that is a lot to ask, but that's all the help you're going to get from me young man.

_____________________________
answer: $3.25/hr. (I hope you didn't have to peek!)

P.S. You might want to know what some arbitrary cost of living equivalent to what we call a "living wage", or say the poverty level, has to do with the real cost of labor. Well, consider if you can hire a worker who can not afford clean clothes, basic dental and healthcare, a shower, transportation to work, a good night's sleep, and enough to eat to keep from starving. There is obviously, then, some minimum cost associated with the minimum wage worker, regardless of whether you pay it all or someone else pays part of it. That minimum cost is the real cost of labor.

 

[LEAPup]

Quote from Lucrum:

The unemployment rate unexpectedly dropped to 7 percent last month as employers added 203,000 people to their payrolls.

This should be good news, right?

Not to the folks at the perilously liberal Huffington Post who actually published an article Friday with the hysterical front page headline, "Strong Jobs Report Could Doom Unemployment Benefits."

Read more: http://newsbusters.org/#ixzz2miKkCT3w


THIS is how touchy feely bleeding hearts "think".

"Strong Jobs Report Could Doom Unemployment Benefits."

Not that's completely mind boggling! Words don't describe my disgust for these parasites who are ripping America to shreds!

 

[piezoe]

Quote from jem:

Piezoe... your entire premise violates the basic premise of economics. Marginial this equals marginal that. If you hire cheaper labor so can your competition. When you go to bid a job your competition lowers their bid so you have to lower yours.

The reason labor costs seem low to you is supply --

The govt will not close the borders... so over supply is almost guaranteed under this set of elected officials.

Note... the govt gives out generous welfare, unemployment, housing and other give aways... These give aways distort the market for the very goods housing and services... new workers compete for. driving up everybodys cost.


The "true cost of labor" or whatever you called it is a fabricated number and if used to create a higher minimum wage will only cause more jobs to be destroyed.

If that is what the left wants to do fine.

But lets not pretend such a market distortion is anything but what it is.

I have no idea what the left wants, but their seems to be a consensus building in favor of a raise in the minimum wage. This will be beneficial in reducing some of the distortions you mentioned.

Of course badly regulated immigration can cause a distortion in labor markets as you point out, and that is a good example of a specific reason why market forces can not be depended on to achieve a balance between wages and productivity. That's not the only reason of course. There is sometimes quite a gap between practical economics and textbook economics.

 

[Scataphagos]

Quote from LEAPup:

"Strong Jobs Report Could Doom Unemployment Benefits."

Not that's completely mind boggling! Words don't describe my disgust for these parasites who are ripping America to shreds!

Aw, FUCK.... you mean we're gonna have to get a JOB??

 

[Lucrum]

Quote from piezoe:

...I gave you all the sources you need to figure things out for yourself.

Maybe I missed it, I only saw one graph posted by you on the topic at the time I asked.

And I suggested looking up the size of the welfare roles relative to population in 1968 versus 2012. Did you do that?

Then I guess you DID NOT give me everything I needed, now did you?

Apparently not. So, frankly you don't deserve the help I am going to give you, you lazy bum.

YOU MADE THE CLAIMS! Why do I have to prove them?

Fortunately, we don't have to know the productivity of the low wage worker. We can use relative measures of productivity to wage in 1968 and 2012 to answer most of our questions. Start by assuming that the productivity of the 2012 minimum wage worker is exactly the same as it was in 1968. (Obviously today's worker is more productive because of automation and economies of scale, but we are going to use the safest, most conservative productivity assumption for our comparison.)

1)I am going to continue reading the rest of your obfuscated diatribe. 2)But I'm not interested in your assumptions on anything. 3)I just want the facts, even if they disagree with my current opinion. 4)Nowhere on the graph you posted is productivity or welfare rolls mentioned. You said you provided all I needed. Again, you did not.

Next, the minimum wage in constant 2012 dollars was $10.50/hr in 1968. In 2012 it is $7.25 (isn't it?).

Now here is the part that is going to be difficult for you, so please pay close attention. If the productivity of the 1968 worker is the same as the 2012 worker, how much do we have to raise the 2012 minimum wage by in order to bring it into exactly the same relation to productivity as existed in 1968. (I know it's difficult, but I also know you are smart enough to do it.) OK did you do it? The answer is below if you're having trouble. Don't peek!

Now I am not inclined to look up the real cost of labor (defined however you like as long as you use a consistent definition, e.g, poverty level for a single person) in 1968 versus 2012, but I'll give you a hint. It is very likely going to come out somewhere between 10 and 11$ per hour, or more in 2012. And in 1968 it is going to come out at between 1 and 2$ per hour, or more. At $1.75/hr (the minimum wage in 1968) it would be $10.50/hr in 2012 dollars.

The final step, and you're completely on your own here, because to get good at this stuff you have to practice. Compare the real cost of minimum wage labor in 1968 to the real cost in 2012. Take the difference between those real costs and the actual hourly wages in nominal dollars in 1968 and 2012. Which year has the biggest gap between hourly wage and real labor cost. Then as I suggested, look up the size of the welfare roles in those two years per capita, and see if you can come up with a reasonable hypothesis for how the gap between real labor cost and the minimum wage is made up. I know that is a lot to ask, but that's all the help you're going to get from me young man.

_____________________________
answer: $3.25/hr. (I hope you didn't have to peek!)

P.S. You might want to know what some arbitrary cost of living equivalent to what we call a "living wage", or say the poverty level, has to do with the real cost of labor. Well, consider if you can hire a worker who can not afford clean clothes, basic dental and healthcare, a shower, transportation to work, a good night's sleep, and enough to eat to keep from starving. There is obviously, then, some minimum cost associated with the minimum wage worker, regardless of whether you pay it all or someone else pays part of it. That minimum cost is the real cost of labor.

The chart you provided compares the min wage to CPI, NOT productivity NOT welfare rolls. You claimed an increase in min wage is 1) beneficial economically 2) reduces welfare rolls 3) is necessary to compensate productivity of today's worker.

Unless I missed something your chart along with this commentary proves only that the min wage is relatively low due to inflation.(Inflation BTW your fellow liberals claim is non-existent.) I don't see how your assumptions prove anything about a productivity/pay discrepancy.
One may exist, but you have not proven it.