Is indexing minimum wage to inflation a good or bad idea?

[k9bfriender]

@Voyager

As for marginal workers, one reason that job growth is slowing is that we are getting into the marginal worker population now. We need to train them somehow. But if a worker can’t get it together to offer value, with help from the employer, I’m not too upset about him being unemployed.

I have yet to meet anyone who does not qualify for disability that I could not train to be a highly productive employee. I’ve dealt with drug addicts, people who were probably pretty close to clinical retardation, and people from ages 16-70.

You can have personality/attitude issues that means you refuse to learn and be trained and become a valuable member of my team, but I’ve never hired them.

@Ruken

first, there are plenty of people hiring just to maintain their business. And second, no, it’s not whether I “need another employee”, it’s whether investing in an additional employee has not just a positive value, but one that exceeds my other investment options.

Do you mean that people are increasing their staffing to maintain their business, or hiring an employee to grow back to where they were when they lost one? If someone leaves, and you are understaffed, is MW going to be a hindrance to hiring?

Have you ever hired an employee when you didn’t need one? Have you refused to hire someone when you were understaffed, and unable to meet your clients demand?

You hire people based on your business needs, and if you are running things right, then that’s also when it is profitable to hire someone.

Only if there aren’t better things do with the money. At 90, there’s increased likelihood of something else winning.

Do you mean using that money for personal use, or reinvesting into the business? There’s only so much investment you can do, before you need another employee to make it make sense. You are not going to buy another work van, if you don’t have an employee to use it, for instance. A larger shop that is empty is not going to do much good.

That’s not my point. But yes, you appear to understand that money may be better spent elsewhere.
My point is that just because the next employee you hire, or in the case of a MW increase, the last dozen that your hired, are unprofitable, doesn’t mean that the business is unprofitable. Even at a wage of $0, the cost of employment is not zero. And at some point, for every single business out there, hiring another person isn’t worth it.

That’s the point where that business stops growing. If you are happy where you are, you think you are making enough money, and are hedged against the likely decline in revenue over time that stagnating companies experience, that’s great.

If you are looking to grow then you would never get to the point where hiring another is not worth it, long term. Sure, short term, you may hold off on hiring more employees as you train the ones you have, or grow your client base to meet and exceed your staffing capabilities. You may even physically run out of room, and need to add on or relocate to a larger facility. But you would never say, “Yes, I will never need any more employees!”

Sure, a business can be profitable with individual employees that are unprofitable, but why would you hire them? If they are somehow not bringing at least the value that I am paying them, I am not going to keep them around. I either need to terminate or retrain the employee. If you are saying that their is not enough business to justify that employee, then it sounds like it’s time to drum up more business.

Your quote from Shodan said nothing about the business not being competitive, so this is irrelevant.

Businesses are by their very nature competitive. If you are competitive, you stick around, if you are not, then you go away. Competitiveness is very relevant to everything business related. My point there is that the playing field is level. If you need to cover a higher MW, while the business next door doesn’t, then it’s hard to compete fairly. If they are effected and follow all of the same labor laws you do, then those laws should have no bearing whatsoever on how well you do.

[Shodan]

@Voyager

Yeah, if a MW increase (which ones competitors are also going to face) makes ones competitive disadvantage worse so you go out of business, tough.

And if you can’t get hired because you aren’t worth the increased cost of hiring you, tough. Right?

Regards,
Shodan

[k9bfriender]

@Shodan

And if you can’t get hired because you aren’t worth the increased cost of hiring you, tough. Right?

Regards,
Shodan

My responsibility is to my employees. I wish them to be the best employees possible, so I do my best to make sure that they have decent lives outside of work. If they are food insecure, or worried about losing their housing, or having to work two jobs, that impacts their performance.

I also like my employees. I would not have hired them if I thought they were assholes who didn’t deserve a dime more than I can get them to work for. I put alot of time and energy into training them, and I get quite a bit more productivity out of them. Right now, in fact, they are all busy working away, making me pretty good money, while I am typing this here on this message board. (Though I did check out 3 clients and took 4 phone calls in the duration of typing this.)

I do not wish to take welfare, so I try to ensure that none of my employees will ever need to apply for benefits, as, if I pay them little enough that they qualify, and I am making a profit, then I am taking welfare, and I don’t wanna. Those employers who do wish to suckle at the taxpayer’s teat like Wal-Mart and McDonald’s can do so. It bothers me a bit that my taxes go to businesses that are unable to make a profit without public assistance, but what can you do? Most of my competitors break labor law and pay less than MW under the table anyway.

People I did not hire are not my responsibility as an employer, so yeah, tough. As a citizen, I do support a social safety net to take care of those who are unable to find work, whether due to their lack of skills (which can be trained), or simple lack of job availability.

[D_Anconia]

@k9bfriender

My responsibility is to my employees.

Are you a sole proprietor?

[Slash1972]

@k9bfriender

If they are food insecure, or worried about losing their housing, or having to work two jobs, that impacts their performance.

Here’s a question I have about this. This might be another thread, I don’t know. But if you think that having employees that are NOT food insecure, or NOT losing their housing, or NOT having to work 2 jobs makes them better employees and will end up making your business more money, why don’t the big companies like Walmart think the same way?

I mean, are the big companies saying “Yeah, we know that if we pay the employees more, they will be more productive, and make us more money, but we are not going to do it anyway because we are the Evil?”

[aag3981]

@mbh

Anyone who can get 10 times the old minimum wage, will be able to get 10 times the new minimum wage. When the price of unskilled labor rises, the price of every other category of labor will rise soon afterward. And soon after that, the prices of everything they produce will rise. You have changed the measurements from inches to centimeters, but you have not changed the things being measured. Raising the minimum wage lets people congratulate themselves on their compassion, but in the long run, it is an illusion.

My issue with this argument is when you look at executive and management pay increases over the last couple of decades compared to minimum wage. When you consider that in 65 CEO to worker compensation ratio was 1-20 and in 2014 it’s 1-300, it’s a really hard sale to say that increasing minimum wage would cause all things to get more expensive. Sure, there are a portion of middle income workers that will get pay increases as well, but I would argue, they likely deserve it too.

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[aag3981]

@DonLogan

I’m not sure what you mean by the mechanism, but the theory is that #1’s job doesn’t change but he’s worth more. So in theory, everybody on up the line says I’m worth more today than I was yesterday. And the nice trick is the only thing it depends on is that the fact the MW went up is a known event.

It’s bullshit. It just gets trotted out sooner or later every time MW is discussed.

If you attach minimum wage to inflation the increase in pay does not mean the worker is worth more, it maintains their buying power. If their wages do not rise with inflation, then their labor has reduced in value.

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[aag3981]

@UltraVires

If a Wal-Mart employee only has enough skills to make minimum wage and must rely on public assistance, how is that Wal-Mart’s fault? Should Wal-Mart, or any business owner, shoulder the burden of providing to a person above his market wage? If an employer hires an employee, that is simply an exchange of labor for payment of market value of that labor, not an agreement to take the employee on as a ward. If Wal-Mart fires the guy and thereby pays him $0/hr, does that make Wal-Mart better?

IOW, why is that Wal-Mart’s duty and not the taxpayers’ duty? It is not “corporate welfare” as it was never Wal-Mart’s duty to provide all of these things in the first place.

There is a minimum amount of money needed to live. Companies that don’t pay that and instead refer their staff to government assistance so they can continue to pay low wages is essentially corporate welfare.

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[Voyager]

@Shodan

And if you can’t get hired because you aren’t worth the increased cost of hiring you, tough. Right?

Regards,
Shodan

Right. Time to get some more skills or time to improve your work habits. I know people who didn’t appear to be worth their salary and so got fired a lot, and it was neither the fault of society or their employers.
We should make sure people have the opportunity to get new skills, but that’s another matter.

[Voyager]

@Slash1972

Here’s a question I have about this. This might be another thread, I don’t know. But if you think that having employees that are NOT food insecure, or NOT losing their housing, or NOT having to work 2 jobs makes them better employees and will end up making your business more money, why don’t the big companies like Walmart think the same way?

I mean, are the big companies saying “Yeah, we know that if we pay the employees more, they will be more productive, and make us more money, but we are not going to do it anyway because we are the Evil?”

Easy. Salaries are very easy to measure, improved productivity from happier employees is a lot harder to measure. Wall Street will criticized increased labor costs - I think Costco got shit for this for a long time. Decreasing salaries is immediate, better working conditions takes a while to have an impact.

[k9bfriender]

@D_Anconia

Are you a sole proprietor?

LLC, but for the purposes of your probable question, same thing. I have no shareholders or other investors who can tell me how to run my business.

@Slash1972

Here’s a question I have about this. This might be another thread, I don’t know. But if you think that having employees that are NOT food insecure, or NOT losing their housing, or NOT having to work 2 jobs makes them better employees and will end up making your business more money, why don’t the big companies like Walmart think the same way?

I mean, are the big companies saying “Yeah, we know that if we pay the employees more, they will be more productive, and make us more money, but we are not going to do it anyway because we are the Evil?”

This does get into economic theory and philosophy that might be too great for the scope of this thread, but I’ll give an answer, if you want to continue, maybe we should get our own thread.

In the free market, profit is not guaranteed. In fact, in a true free market, profit is an inefficiency, and is unsustainable. This is a problem when you have investors and shareholders that demand not only a profit, but increasing profits. This has to come from somewhere. They can’t raise their prices, you’d just go get your tube socks somewhere else. So, rather than raising prices, they need to lower their costs. Labor is an easy way to do that, especially when you know that the government will pick up the tab.

The further one is from the actual production of their company, the more disposable and fungible those employees who are actually producing the revenue are. Managers that work in the stores may wish to give their employees raises, but are not allowed to by the higher ups. I was in that situation as a fast food manager several times. My store would be highly profitable, and yet I couldn’t get permission to go above the cap of $9/hr for some exceptional employees that made my restaurant successful, they ended up going somewhere else, and we lost far more than the $0.50/hr or so it would have cost to keep them around and happy. Shareholders are about as far away from the production that they wish to see a profit on as is possible. They don’t care about the employees, they only care about their dividend or stock price. This creates a race to the bottom.

In my case, I make a profit by raising my prices. I produce a higher quality service than my competitors, and so I can do that. That mean I can pay my employees more, which means they work to ensure I maintain and increase my quality, so I can charge more. It is my hope that by the time I am ready to retire, all of my current employees are running franchises of my business. This is not the hope of most corporations that employ MW workers. This creates a race to the top.

A corporation is not evil, nor is it good. It cannot be either, it has no soul. As it is legally a “person” the best that can be said is that it is a sociopath. It has to be guided by its managers or directors towards whatever ends it works towards. In these days of the shareholder being supreme, everything is directed towards increasing profits. In this zero sum game, if one profits, another must lose. That loser is the employee.

And then in the hours it took me to compose this post (I started it around 10, then had to go do actual productive work for a while), I see that voyager ninja’d me with a much simpler explanation. Hopefully, one or both can help answer your question.

[D_Anconia]

@k9bfriender

LLC, but for the purposes of your probable question, same thing. I have no shareholders or other investors who can tell me how to run my business.

That’s fine, of course, but the vast majority of for-profit companies are run for the benefit of their owners/shareholders, not the employees.

[k9bfriender]

@D_Anconia

That’s fine, of course, but the vast majority of for-profit companies are run for the benefit of their owners/shareholders, not the employees.

I understand that. The problem is, in a commodities market, long term profit, not to mention increasing profit, is unrealistic. In order for non-productive people to get paid (upper management, directors, ceo’s and shareholders), the productive people need to be paid much less than their added value. Generally, the further someone is from the actual production of a company that produces revenue, the greater the compensation.

[Ruken]

@k9bfriender

Businesses are by their very nature competitive. If you are competitive, you stick around, if you are not, then you go away. Competitiveness is very relevant to everything business related. My point there is that the playing field is level. If you need to cover a higher MW, while the business next door doesn’t, then it’s hard to compete fairly. If they are effected and follow all of the same labor laws you do, then those laws should have no bearing whatsoever on how well you do.

Competiventess is relevant to business, but is not relevant to the following:

@Shodan

Of course it’s relevant - if MW is set high enough that the employer doesn’t make a profit off hiring, he doesn’t hire.

To which you responded:

@k9bfriender

If an employer cannot make a profit off of MW workers, he should not be in business. Considering that an employer’s competition will need to raise their pay and prices the same, the only reason a business would be affected is if they are not able to adapt to change.

What is it with the need to protect failed business models?

An employer not hiring an individual who is not profitable does not mean that the employer is not overall making profit off of MW workers. It does not mean that there is a failed business model. It has nothing to do with the employer’s competitiveness with respect to peer businesses. It just means that a business is not going to hire someone if it doesn’t make good business sense to do so, and that is more likely if the hire costs more. That’s all.

[D_Anconia]

@k9bfriender

In order for non-productive people to get paid (upper management, directors, ceo’s and shareholders), the productive people need to be paid much less than their added value.

So management is non-productive? How would the company run without it? And shareholders/investors are necessary for the company to even exist.

Even your own LLC wouldn’t exist if you didn’t put money into it.

[k9bfriender]

@D_Anconia

So management is non-productive? How would the company run without it? And shareholders/investors are necessary for the company to even exist.

Even your own LLC wouldn’t exist if you didn’t put money into it.

Store level management is useful, not that the managers that work in the store make all that more than their employees. Some level of upper management is also useful in consolidating stores and coordinating efficiencies of scale. PR, HR (though it is bloated in most companies), and managing supply lines of goods are examples of useful upper management.

Two problems there though. Their compensation generally goes up inversely proportionally to their actual value added. And there are more of them than is actually necessary for the efficient running of the company. There are many people in upper management whose job description could essentially be to justify their job.

Shareholders and investors are necessary, but we have created a culture where they come first, before any other considerations. They demand, and receive, increasing short term profits on their investment. This means that there is less money left in the company to invest in improvements in infrastructure, equipment, and personnel. This not only leads to poorly compensated employees, but to long term decreases in profitability as well. (Which is made up for by cutting labor cots even more.)

I put alot more than money into my business, though there was quite a bit of that. I put a ton of sweat equity into it as well. I contracted electricians and plumbers for the work I was not legally allowed to do, and did everything else myself. I put in 100+ hour weeks for the first year or so, and still clock nearly 80 most weeks. Last year, I paid myself a bit under $14k. (I am on track to take a much more substantial amount this year, as we are doing pretty well now). I hope and plan that my investment will pay off long term, and that I will be able to draw upon the equity I have put in to have a good retirement.

[D_Anconia]

@k9bfriender

Store level management is useful, not that the managers that work in the store make all that more than their employees. Some level of upper management is also useful in consolidating stores and coordinating efficiencies of scale. PR, HR (though it is bloated in most companies), and managing supply lines of goods are examples of useful upper management.

Management does much more than that. Who is going to finance new machinery for the production line, or even build a new factory?

Who is going to do the advertising, to create demand for the widgets that the “productive” employees are making?

Who is going to pay the company’s bills, including the payroll itself?

It’s not the “productive” factory workers themselves, it takes management.

Shareholders and investors are necessary, but we have created a culture where they come first, before any other considerations.

That’s the very definition of a corporation. It is called fiduciary duty.

[Slash1972]

@k9bfriender

Managers that work in the stores may wish to give their employees raises, but are not allowed to by the higher ups. I was in that situation as a fast food manager several times. My store would be highly profitable, and yet I couldn’t get permission to go above the cap of $9/hr for some exceptional employees that made my restaurant successful, they ended up going somewhere else, and we lost far more than the $0.50/hr or so it would have cost to keep them around and happy.

This is my question. You say “Well, we lost money because we didn’t give that one guy a $0.50/hr raise”

So that means you would have made more money if you HAD given that guy a $0.50/hr raise, right? Why would a corporation NOT want to make more money? I don’t get that.

[Voyager]

@D_Anconia

Management does much more than that. Who is going to finance new machinery for the production line, or even build a new factory?

Who is going to do the advertising, to create demand for the widgets that the “productive” employees are making?

Who is going to pay the company’s bills, including the payroll itself?

It’s not the “productive” factory workers themselves, it takes management.

What do you mean by management? I was a manager, and when we bought expensive software you know what I financed? Squat. Ditto for my VP. If you need to raise capital you sell stock or you sell bonds. If you are a startup you get the VCs to pay - who are usually not direct management. Or you borrow. You think even Trump uses his own money?
Who pays the bills? Worker bees in the finance department.
Who runs factories? Many levels of management. My old boss became the head of a giant AT&T factory, and he no more owned that place, or had his own money in it, than I did.

[Voyager]

@Slash1972

So that means you would have made more money if you HAD given that guy a $0.50/hr raise, right? Why would a corporation NOT want to make more money? I don’t get that.

See post 90. I used to have to justify my group’s budget by saying how much we were saving the company from our work. I was pretty good at it, having been trained by a master, and it was very convincing, and it was all bullshit. We got budget because we did help our internal customers, and because they got a budget from on high to fund us, and not funding us would be more trouble than giving us the money.
How would you measure how many customers go away if the lines get long because the new guy at a low salary is slow? How do you measure how many never come back because the new guy screwed up an order?
Measuring salary is easy.