That isn’t true. Labor is the largest component of the price of most goods. A TV set contains probably $10 worth of raw materials. A car probably has $250 worth of steel in it. Where do you think the rest of the costs comes from? It’s the combined costs of all the laborers who are involved in all the thousands of value-added activities required to transform that $250 piece of steel into an automobile.
A slight increase in minimum wage will not dramatically effect the economy. Raising the wages of everyone to at least middle class standing would significantly cause an increase in the cost of goods. Not only that, the increased demand caused by the larger number of people who could afford those goods would furthur drive their price up. Remember we are talking about the entire world here, not just the US.
Unless you can increase production to keep up with the increased demands of your new global middle class, prices would just rise until the people at the new minimum could no longer afford them anyway.
The limiting factor is not that we can’t afford to pay everyone the same wage. If it were that easy the nations of the world would simply enact a global minimum wage law and we’d all be living well. The problem is that there are not enough resources on the planet to support all those people. We would need like 6 Earths for the entire world to live at a Western standard of living. Oil is expensive now. Imagine what the price would be if all of China, India and Africa lived like we do.
And screw their employees who would now make nothing instead of minimum wage?
What if it was 2-tiered? Min-wage for 16-25yr olds and ‘living wage’ for 26+ ?
I don’t think taking 2-income households into consideration is really fair though, especially for those with pre-school-aged children. If it is a dual-income family they have the added expense of child care.
There is no subsidy here. Businesses do not have a duty to ensure that their employees earn enough so that these employees can meet their every want and desire. Businesses have a duty to pay an employee for services provided. Some employees earn high wages because of education, skills, or a desire to do a risky/dirty job. Those who do not have these things are paid lower wages. If that means they must seek government assistance, that is not the fault of the business. And it certainly isn’t a subsidy for the business. Their business will work just fine without these government programs.
That’s a very good point. What a terrible, deleterious effect indeed that would have on businesses everywhere, having such a huge, affluent market for their goods!
I weep for the future of American business when I see its defenders missing points like this in their zeal to keep wages down.
The rest of your arguments sound like a bunch of classic, “Machines will never fly” stuff based on false premises.
Don’t you think that all the manufacturers of these goods would have to increase their prices to cover the increased salaries (and the increased prices of all their providers who also had to start paying higher prices)?
That maybe these increase in prices would get to the point where all these new customers with their new salaries would no longer be able to afford these goods at their new price?
That to ensure that these newly re-impoverished wagers would need an additional wage increase to cover that gap?
That this new increase would further drive prices up and so on?
To me, this is really the bottom line. If you increase everyone’s wages to a “living wage,” no matter how you want to define it, goods will increase a certain amount, until the living wage isn’t a living wage anymore. The increased prices don’t just affect someone who makes well above the living wage, they affect everyone. There is just no way that I can see to control wages and prices in a way that will KEEP everyone at a “living wage” indefinitely.
This doesn’t always work as planned. In addition to the education, you still have to work, still have to provide childcare for your kids, and there is no guarantee that education is going to get you a good job. Your chances are better, but sometimes it makes no difference. If you’re not in the right place at the right time, that education can be an anvil around your neck. Paying off the loan can be an insurmountable obstacle.
and as it rises, this moving “living wage line” catches more and more people who were formerly above it.
The question is: Will that wave stop before it reaches Bill and Melinda?
If it does, fine. I am willing to do without cable TV if it means an end to most crime and suffering on the world. If it gets to the point where Gates can’t buy a can of SPAM and crackers, then we are screwed.
How would you know? You have consistently demonstrated to have little to no understanding of business or economics. Case in point:
First of all you are overstating business’ influence and treating it as too much of a monolitic entity. Businesses have very little power to set wages. The evidence for this is the fact that everyone doesn’t make the bare minimum wage allowed by law.
Secondly, businesses DO welcome the fact that new markets are developing in places like India and China because of the emergance of a middle class. A point the critics of outsourcing tend to miss. And as companies continue to do business in those countries, their raises will continue to rise.
As a matter of fact, the rise of China has a great many people concerned as that increased wealth will create a greater demand for energy, raw materials and so on as well as a greater effect on the environment.
Here’s an article I googled: http://www.eia.doe.gov/emeu/cabs/chinaenv.html
Anyhow, the OP is too broad anyhow. Poverty in the US is not the same as poverty in Africa. With many nations, there are severe political and structural problems that make reducing poverty there far more complex than reducing it in modern Western countries. They are different problems and require different solutions.
If anyone cares to listen to the story, last week NPR touched on this very topic. Here in Florida, the minimum wage has been increased. And to the surprise of both sides, the market is still chugging along quite well and the poor folks are still quite poor:
I just finished listening to Barbara Ehrenreich’s book Nickel and Dimed. The message I took away was not that living on minimum wage is hard (duh), but that trying to find permanent housing while living on minimum wage is often close to impossible Often, those areas with the most bustling economies (like Florida)–where minimum or near-minimum wage jobs are easy to get–also suffer from the most expensive housing markets. Without affordable housing, money that might be invested in upward mobility (education, books, internet access etc.) goes to rent and transportation costs.
I think increasing affordable housing would go further than minimum wage hikes in improving the standard of living of poor people.
Agreed. In Working Poor, they laid out a scenario where the condition of the apartment aggravated the child’s asthma, which required an ambulance ride to the hospital, which wasn’t covered by the insurance, which went against the woman’s credit rating, which made it impossible to get a decent car, which thwarted her efforts to get a promotion because she was always late due to car trouble, which kept her from getting a better place to live. It’s a vicious cycle with no way out for some people.
Again, like most of your arguments involving economics, this can be re-read as “Oh, just print more money and give it to the masses.”
And, like many others will tell you, and what msmith537 was originally stating was that this will lead to monstrous inflation. My company produces 1000 widgets a year. We sell them at X price because that is what the market can afford. We also sell it because we make Y profit. If I increase the price of X, I will not be increasing my Y. In fact, I will be lowering my Y because not many people are going to be able to buy my widgets at such a high price.
“Aha!” you say, “Let’s just give everyone more money (nevermind where it comes from)!” I still only have 1000 widgets. It’s all I can produce. There are limited resources on this planet. Like money, my widgets do not grow on trees, and even then, there is still a maximum yield a tree can produce.
So now, at my original price X, more people with money are going to be able to afford my widgets. I guess I could be the nice guy and keep my price Y the same before everyone got money, but will my suppliers who provide my raw materials going to be equally nice? What is going to stop someone from buying all my inventory and setting a new price himself? So, to counteract all this, you guessed it, I have to raise my prices. This is how we get to $10 slurpees and $30 hamburgers.
Remember people, it’s not about the money, it’s about value.
Here’s why I object to the Living Wage/Minimum Wage argument. Every public policy should set out it’s objectives clearly. So here the objective is to make sure folks who have trouble supporting their family don’t have that trouble. So the LW/MW argument fails on this point because it does not target those people, but attempts to cast a wide net hoiping to “Capture” a most of the prblem. Ok so that it the first are of this public policy I object to.
The second is similar, once you have a pblic policy in place you need to determine how it will be financed. In general there are two philosophies: the first one is based on equity or the ability-to-pay, this is generally the philosophy behind a progressive income tax. The second is efficiency, so a gasoline tax that funds the use of roads would be a simplified example of such a tax. LW/MW fails both these. There is no targeting businesses that make a lot of money or people that have the ability to make these above-market wages, from an equity standpoint. It just makes it the responsibility of any business owner, regardless of their means to fund this policy program. So the equity argeument fails. The efficiency argument fails mainly because artificially setting the wage is not an efficient way to allocate labor.
I think we tried that before. It’s often called “the projects.” Unfortunately, we humans are such bastards that we never allow the projects to really appreciate in value (unless of course economic activity trickles down to that area where a developer will tear it down to make new condos). In addition, we will also look down on people who come from the projects and view them with less worth because they did not have the opportunity to learn or develop skills (unless it’s sports – might as well take this stereotype to its logical conclusion )
The best way to help these people is to increase their access to education and reliable transportation (but even that transportation becomes a bit burdensome for the community, unless you’re going to tax the crap out of cars and gasoline, might work in the UK, but not in the spacious US). Also, continue to give them tax subsidies.
Strawman much? You can, of course, quote the post where I said the economy will “tank” due to this type of increase.
Why? Besides, there are other ways to adjust to increased labor costs. Outsource more, cut back on future employment (who cares if the customers have to wait a bit longer in lines at McDonalds). Raising prices is probably the last resort, not the first since customers are sensitive to price at the low end.
But raising prices is only one option. Some businesses will raise prices, some will cut back on overtime, some will cut back on employement, and maybe some will cut back on executive pay/bonuses and the like. Which do you think is more likely to happen? Be honest.
No, it wouldn’t. If we, as a society, think it is a social good that we raise everyone above the poverty line, then we, as a society, should pay for that thru our taxes to spread the burden evenly throughout society. One key reason is that you can, thru food stamps and other social progrrams, target those individuals and families who actually need the help. Mandating higher wages is a blunt instrument that affects everyone who has a job, whether they are the sole breadwinner for a struggling family, or a rich college kid earning beer money, or the spouse of some gainfully employed person who just wants to earn a few extra bucks so the family can buy a big screen TV.
There is no way to gaurantee that management or stockholders is going to eat the increase (unless you really start interfering with how people manage there business), and if it’s the customers who eat the increase, just exactly who do you think these customers are? Who shops at the low end retail stores and goes to McDonalds as their idea of “eating out”?
As for subsidizing companies, that’s just nonsense. Why should we pay for schools thru taxes, since we’re just subsidizing comapanies to be able hire skilled workers? We should make companies pay for the education of the workers they hire, no? We can make it more palatable by creating an education tax on busniess that spreads the cost of K-12 education over the average life of a worker.
That’s another fatal flaw in your argument. You are saying that it is better for a person not to have any job at all than to have one paying less than a living wage. And remember, not all workers are the sole breadwinner for the family. I supect that most are not.
If a company can’t pay for the education costs of its workers without a direct handout from us, then I say screw them. Right?
I think I’ve refuted that in the rest of this post.
We don’t have a living wage law now. How many people starved to death in the US last year?
Way more than they should have. Do a Google search of Hunger in America. Or try the euphemism-du-jour: Food insecurity. There is a scandalously high number of americans malnourished or poorly nourished. Take a walk around the smaller towns in Alabama or Arkansas (and all states in between). The situation is pretty grave. I think the US Census Bureau estimated over ten millions of “food insecure” americans.
You are going to need to do your own research if you want to back up the claim that large numbers of folk starved to death in the US last year (which was the question John Mace asked in response to Voyager’s statement). A quick google search of my own reveals that the number of folk that starved to death in the US due to a lack of food (as opposed to those who starved themselves to death due to psychological conditions) is…well, vanishingly small. Perhaps you could do more than simply say to do a google search and give us some credible cites on the subject…because simply through observation of the poor in the US vs the poor in other countries where people REALLY starve seems to indicate that the claim is full of shit. Feel free to provide data to the contrary though.
That’s not the way it works around here. You make a claim, you back it up with cites. You don’t tell people to do a google search. Besides, if people are really “starving”, there are other solutions for that problem than instituting a living wage law. Food stamps serve that purpose, and if that program isn’t working effectively, we can change it.
Chicago buried its projects and is opting for subsidized housing that is spread out throughout the city. Back in the day, I was on Section 8 housing and my totally great apartment was located in a middle-class neighborhood amongst regular folks who could afford to pay rent. The fact that we weren’t being housed one on top of the other in a joyless shithole of crime and danger allowed me to concentrate on changing my situation rather than worrying about how I was going to get from point A to point B without getting shot. I was able to get off the dole in just over a year’s time.
I think that is one likely scenario, but I don’t think it HAS to happen like that. If it did, there would BE no middle class – every attempt to improve the lot of the poor and the middle class would be counterbalanced by market forces that would drive them back into poverty, wouldnt’ it? Since this has clearly not happened in Europe and America, it does not NEED to happen elsewhere.
But since most of the Third World is governed by kleptocracies, what I suspect would happen is what you describe or worse unless some sort of method were employed to prevent it.
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