I know when I was a kid I sure couldn't live on minimum wage. When did things change?
Minimum wage, or Living wage
- Thread starter nitro
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In truth raising the minimum is either inconsequential, good, or bad depending on where you raise it to and how fast you raise it. Most of the discussion I've seen on ET ignores these factors.
There is practically no one making minimum, as Nitro's chart shows. It was about 3 million in 2014, and it's less today of course. If you go from 7.25 to 7.75 it will have virtually no effect on anything other than being a small help to a few workers and not a problem for any employers except those few who shouldn't be in business anyway. But there's a huge number of workers in the 8 to 15/hr range. If the minimum is raised too much too rapidly, undesirable short term effects could be exacerbated .
It is essential that the minimum be raised everywhere in the entire economy at the same time and not piecemeal State by State. The latter approach has the potential to create economic dislocations. It is fine for some locations to adopt higher minimums, but it is not fine for Portland or California to jump to 15 when Alabama is stuck at 7.25. Everyone has to be in similar economic boats for hikes in the minimum to work as they should to strengthen the overall economy.
Simple calculations like the one Forbes published from the CEO of McDonald's Corporation are useless and strictly self-serving. It's a difficult call, and that's why there will be a huge range of impact estimates computed by the GAO for a given rise in the national minimum. It is not just labor costs and profits that could be affected, but all operating costs, and sales too could be affected. In McDonald's case, their gross sales figure will increase when they pass some or all of their additional labor costs on to the customer.
Among other things, the government's inflation figure has a profound influence on wage metrics and must be an important consideration in setting minimum wage targets. If the real inflation rate experienced by the lower middle class is say 4% rather than 2% that seemingly small difference has big affect on real wages when compounded over a number of years. Everyone knows that the real wages, i.e., wages in constant dollars, of the lower middle class have declined and continue to decline. But that gentle slope down becomes much steeper if real inflation experienced by these workers is actually 4% and not 2%. A mere 2% difference in the CPI when compounded over time makes a huge difference against a backdrop of constant nominal wage! That's why we should all be concerned about the changes, starting in the 1980s, in the methods used to compute the CPI
We mustn't fool ourselves by thinking that when we are talking of raising the minimum we are talking about those few 7.25/hr workers. We are really talking about those 8-10/hr hour workers and what's a logical target for these worker's wages; a target consistent with wages that can effectively compete with welfare, that will minimize taxpayer subsidy of low wage workers, and that will leave some disposable income in the pockets of minimum age workers so that they can afford at least some of the products they make and sell.
A rise in the minimum that is consistent throughout the economy, set at the right level and phased in at the proper rate, will help nearly every business in the long run, and will, as Donald Trump has famously said (more than once) make "America Great Again."
There is practically no one making minimum, as Nitro's chart shows. It was about 3 million in 2014, and it's less today of course. If you go from 7.25 to 7.75 it will have virtually no effect on anything other than being a small help to a few workers and not a problem for any employers except those few who shouldn't be in business anyway. But there's a huge number of workers in the 8 to 15/hr range. If the minimum is raised too much too rapidly, undesirable short term effects could be exacerbated .
It is essential that the minimum be raised everywhere in the entire economy at the same time and not piecemeal State by State. The latter approach has the potential to create economic dislocations. It is fine for some locations to adopt higher minimums, but it is not fine for Portland or California to jump to 15 when Alabama is stuck at 7.25. Everyone has to be in similar economic boats for hikes in the minimum to work as they should to strengthen the overall economy.
Simple calculations like the one Forbes published from the CEO of McDonald's Corporation are useless and strictly self-serving. It's a difficult call, and that's why there will be a huge range of impact estimates computed by the GAO for a given rise in the national minimum. It is not just labor costs and profits that could be affected, but all operating costs, and sales too could be affected. In McDonald's case, their gross sales figure will increase when they pass some or all of their additional labor costs on to the customer.
Among other things, the government's inflation figure has a profound influence on wage metrics and must be an important consideration in setting minimum wage targets. If the real inflation rate experienced by the lower middle class is say 4% rather than 2% that seemingly small difference has big affect on real wages when compounded over a number of years. Everyone knows that the real wages, i.e., wages in constant dollars, of the lower middle class have declined and continue to decline. But that gentle slope down becomes much steeper if real inflation experienced by these workers is actually 4% and not 2%. A mere 2% difference in the CPI when compounded over time makes a huge difference against a backdrop of constant nominal wage! That's why we should all be concerned about the changes, starting in the 1980s, in the methods used to compute the CPI
We mustn't fool ourselves by thinking that when we are talking of raising the minimum we are talking about those few 7.25/hr workers. We are really talking about those 8-10/hr hour workers and what's a logical target for these worker's wages; a target consistent with wages that can effectively compete with welfare, that will minimize taxpayer subsidy of low wage workers, and that will leave some disposable income in the pockets of minimum age workers so that they can afford at least some of the products they make and sell.
A rise in the minimum that is consistent throughout the economy, set at the right level and phased in at the proper rate, will help nearly every business in the long run, and will, as Donald Trump has famously said (more than once) make "America Great Again."
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No one has ever been able to live on minimum wage without scrimping, and nowadays without taxpayer funded welfare. Even with that, you'll be impoverished if your trying to get by on minimum wage. We were close to being able to get by on the minimum in the mid 1960s when the minimum in constant dollars, depending on whose inflation numbers you use, was ~$10.50/hr.. Actually you'd get a higher 1965 minimum if you used the pre-hedonics method of computing the CPI to discount 2016 dollars. Today of course the Federal minimum is nowhere near a living wage. What that means is that you and I are both helping McDonalds support their employees. We Deserve a big discount on a Big Mac and Fries.
And what is your solution to the massive demographic of boomers who have hit retirement years and will have to survive on ZIRP/NIRP while you are busy unleashing this wage inflation upon the economy (not that we haven't seen a bunch of inflation since 2008 already)...
All of this central planning is leading us to hell in a handbasket...The "know it all" elitist leftist's who have decided what the "cost of capital" should be and what the "minimum wage" should be have created this zombie economy...
The problem with reason on this issue, and why the best evidence is ignored in favor of the anecdotal, or worse, is twofold. One, having a mw and raising it are both violations of Laissez Fairey orthodoxy, which faith is that leave it alone and all will be well. A case which has never been present since the first Europeans landed on this continent. Second, it violates and challenges one of the right's core hierarchy pairs: capital > labor.
Take this analysis on more step. Consider, what if Capitalism had arisen everywhere at once in the world? It would be a fascinating experiment to run to follow the analysis you give about creating imbalances state-wide vs imbalances between countries. Economics is all about allocating scare resources and finding the cheapest way to bring it to market. What if there was no cheap way [comparatively] from the labor point of view? In this case Capitalism != Free Market?
In essence, Capitalism from the point of view of labor, is nothing but wage arbitrage. That is why NAFTA and TPP are extremely dangerous to a population, and must be handled with extreme care.
Does the same logic of uniformity apply? I think that the devil is that we don't see the world as one people, and therefore not "one country." It serves Capitalists greatly to divide peoples. Racism is good for profit.
Think about it.
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That's a point of view I respect, though I think it's not quite right. I believe the Baby boomers will do better in retirement than the those in their twenties right now. What is important to retirees is return on their investments and fortunately many of the baby boomers have actual defined benefit pensions to fall back on plus social security, and some of them have their own private accounts on top of that. They will do just fine. . It's the generations that come after them that I'd be more concerned about. Defined benefit plans that weren't stolen from, and were properly managed by their corporate sponsors, had the attribute of shared risk. 401K, and similar, don't have that attribute and they are a high risk form of retirement plan that requires that one put in much more per month than does a defined benefit plan. This is the right direction for Wall Street but the wrong one for humanity. Bond holders will be fine so long as the spreads are maintained. Low interest doesn't matter, it's the spread that counts. I do worry about the government cheating on inflation numbers.
Did you ever consider that minimum wage was not meant to be lived on?
I will think about that. We are by far the most capitalist large economy on Earth. But we are not entirely capitalist. We have a mixed economy. Do we have the right mix though? There are good analogies in your comments. We must be very careful in trade negotiations not to create unfavorable imbalances. It seems nafta has been a learning experience. Trade is good. Trade is unavoidable in an interconnected world. The benefits of nafta have been substantial, but we created to many losers with nafta. We must do better going forward. We should not try to compete where we are at a big disadvantage. Instead we should compete where we can do as well, or better , than anyone else. To that end, we may be forced to lower elementary school class size! And hire more teachers! Some of the States are moving in the wrong direction! The first step is to recognize what must be done. The next step is to do something, and then have great patience. Solutions to long festering problems may take a generation to come to fruition.