You open up a whole can of worms with these questions. Individual companies can’t just increase production without a market for their products. That is both common sense and an economic law.
A whole suite of government regulations (not just a minimum wage increase) may or may not be able to spur economic growth based on your assumptions. Even if they could, it would be a consumer economy that creates long-term problems of its own. You are just creating supply, demand and excess consumption just for the sake of trying to sustain a system that isn’t sustainable in the long-term just based on resource limits alone. That can and does create other really bad side-effects like depleting fossil fuels at an alarming rate and global warming. The U.S. already adopted that model and it worked out quite well in isolation in the post WW-II period but it doesn’t work nearly as well when we are competing in a global a economy and it will be a complete disaster if other large nations in the world adopt the same strategy.
The core problem is none of this and I want people to realize it. We simply have 3x or more as many people are needed in the world. Until you address that, all other problems are secondary. Poverty will increase and environmental concerns will grow rapidly over the next few decades.
It is the responsibility of the companies to create the market for their products. They can’t just say, ‘I want more money. Let’s cut the workforce.’ They have to innovate if they want to remain successful. Remember when car companies would introduce new models every year? Nobody needed a new car every two years. The car companies created the ‘need’ through marketing.
And speaking of cars, Henry Ford instituted automation on an unprecedented scale and he expanded his workforce and he paid that workforce a far higher wage than anyone else and – even with the costs of building factories and paying a larger workforce higher wages – production costs fell tremendously. He didn’t invest in automation just to save money by cutting his workforce. He invested in automation to make more money. He knew that it takes money to make money, unlike so many companies nowadays that want to make money without having to spend any. With their higher pay, workers could now afford to buy the now-less-expensive cars. By investing in his workforce, by paying them much more than just a living wage, he created his own market.
That’s the crux of the problem. Too many people. Capitalists would let them starve, live under bridges, and die in the streets, and ‘decrease the surplus population’. Or you could ‘eat the poor’. Or there’s always euthanasia. But we can’t do that. Dickens’s ‘Scrooge’ and Swift’s ‘modest proposal’ are not models for dealing with the situation.
Didn’t make the argument that they were higher than ever, although for the average family Tax Freedom day is in April. That means that your average family surrenders a third of their income in taxes at all levels. Lots of families wouldn’t need any help if the government wasn’t impoverishing them.
That’s precisely what can happen in good economic times, which is why the 90s minimum wage increases didn’t cause any problems. But an even bigger rise in 2013 would be more likely to be noticed, especially since the ACA employer mandate is in effect a wage increase already.
Is there any evidence that increasing minimum wage has a positive effect? And that it doesn’t just get cancelled out by a corresponding increase in inflation?
I am a big believer in the Ayn Randian view that your misfortune or poor choices do not give you the right to make a slave out of those who work harder or are more fortunate.
That said, I don’t believe it’s good for society to potential future businessmen, architects, engineers and entrepreneurs toiling away in a McDonalds because they fall into a poverty trap they can’t get out of.
Here are some charts showing inflation adjusted minimum wage. Note that it rose in the 1950s. I don’t recall a lot of inflation then. The stagnation in the '70s and '80s did not come from lots of increases, but rather from a lack of increases. (As is true today.) The chart here shows this more clearly. Minimum wages did increase in the late 1970s along with inflation, but they were driven by inflation, not driving it. All wages grew then also, including mine.
Note the lack of correlation between unemployment and increases in the minimum wage in the first cite.
Is being born without the intelligence of the Randian superman count as a choice? How about having a disability which prevents one from having the type of job you think should be the minimum to survive on. How about kids, some of whom I knew, who were damaged in utero and had significant problems even after being adopted by upper middle class loving families?
I agree with the first part of your sentence, but no, we do not have the power to create justice, at least not without the tradeoff of creating new injustices.
One of which, as it applies to wages, is paying people more based on their needs, rather than their contributions to the employer. Even if that was fair to an employer somehow, it would incentivize discrimination against people with kids to the point where even draconian anti-discrimination enforcement would probably not work.
And how do we get people to spend money, so that we are in good economic times?
One way is to raise taxes on the wealthy so that they pay their fair share back to the country that allowed them to be so successful.
Another way is to raise the minimum wage so that low-income workers can stimulate the economy.
Businesses want people to buy their stuff, but ask them to invest in the country and the economy so that people can do that, and they squeal like stuck pigs. They can either have consumers, or they can have their pile of treasure. They can’t have both.
That works fine if it means an overall increase in the income held by workers, which can happen if demand for labor is high. If demand for labor is low, pushing its price up just makes it lower, erasing the aggregate gains that higher wages would bring.
Demand for labour is high when demand for the goods it produces is high. Demand for goods will continue to be low until people have the money to buy those goods. You seem to believe that demand for goods will magically spring forth, despite wages remaining low. You have to spend money to make money.
Come to Norway (or Sweden for that matter, if you’re going to throw the oil argument at me). Maybe we get to eat out a little less, because prices are higher. But as an engineer, it doesn’t bother me the slightest that the McD employee makes 20 dollars an hour. It’s not some theoretical impossibility. We still study and try to get those high skill jobs. There is no economic law saying you need to have that extreme underklasse for society to function.
Who is proposing to pay people based on their needs, except in the very minimal sense of paying them enough to live on? The fact is, nothing forces employers to pay employees based on their contributions, especially in times of high unemployment. Since at least some of the productivity increases we’ve seen come from workers, who have gotten little of the benefit, so this is not happening.
If we were all islands, I would probably share this view.
But we’re not. So I don’t.
Knowing that I will have a pension is important to me. A pension through either from my employer or through SS. The only way this will happen is if the babies who are being born today make it successfully into adulthood. By “successfully” I mean they are healthy (good prenatal care, good childhood nutrition, etc.), they are well-educated (they go to school ready to learn, their parents read to them regularly and don’t neglect them, they are stimulated during the summer breaks, etc.), and they can afford higher education (their parents ain’t broke) so that they can get good, middle-class jobs that allow them to pay taxes. If we don’t produce a whole lot of future tax-payers in the coming years, a lot of people are going to be fucked. We will have to work till we die. I don’t want this to happen to me, if I can avoid it. I think a lot of people feel the same way. So we have a vested interest in keeping “poor choices” in one generation from cascading into the next. I don’t care so much about the McDonald’s cashier, who may or may not have made “poor choices”. I do care about the quality of life for her children and grandchildren. They haven’t made any choices at all, and yet the choices they make in the future rest on the choices that society makes right now.
I think it would be swell if tax-payers were able to put more money into research and development rather than Rice-a-Roni and diapers. Instead of pouring so much money into expanding SNAP/WIC and Medicaid, the federal government could be sponsoring scholarships and research grants in the STEM fields. Social welfare spending isn’t a waste and I’m glad we have a safety net. But if it could be trimmed significantly by bumping up the minimum wage by a couple of dollars, why WOULDN’T we do this? Just so a select few can buy an extra yacht every year?
Society has made them wealthy. So society has every right to set the rules of the game that enable them to accumulate that wealth.
Everyone is an island - and a peninsula ~Shagnasty 2013.
What you suggest is perfectly normal idea today yet it a type of pyramid scheme when it comes to pensions and SS at least in the way it is set up now. You can’t have an ever growing and more productive series of generations forever. It will come to an end at some point and that can fail in many ways. We have plenty of signs that particular model has already started to crumble. Sheer population numbers are one of those already (the worldwide population isn’t expected to subside until we hit the 10 billion mark later this century and that is certainly way too late to fix much of anything if that happens) but you also have natural resource constraints. The U.S. isn’t especially bad in that regard when it comes to First World countries. Japan and many European countries have a severe problem today with declining birthrates and an aging population that can’t continue to support promises made long ago.
What I am getting at is that we simply have several times more people than we need in the world today and the problem will only get worse over time. You only need a certain number of innovators like scientists, engineers or scholars of any stripe no matter what the population is overall because there are resource and time constraints for putting their ideas into action. We already surpassed that number overall and that is why people with Ph.D.'s often have trouble finding work that is meaningful for their expertise.
You can expand the sheer number of service workers (people that work to serve people) under some conditions but that also introduces resource constraints in the long-term. What I am saying is much more radical than even most Progressives propose. You run into the ‘stray cat’ problem. You can feed the stray cats you see in your neighborhood out of immediate sympathy but that just makes the overall problem much worse overall and all of them will die if you suddenly can’t afford to feed them anymore.
I say let people decide what conditions they can live with on their own and then find someone willing to pay them enough to support that. For some, that will not be enough to support a spouse or kids and that is a feature and not a bug.
I haven’t read the whole thread. Plan to do so.
In meantime will just throw this in…in 1963 the minimum wage was raised from $1 to $1.25 an hour. I remember those days because I was there. I thought $1 an hour was OK. $1.25 an hour was like manna from heaven.
And considering on average that things do cost 10 times more than they did in 1963—a nice house cost $15000 then. A nice house costs $150,000 today. A nice car cost $2500 then…costs $25,000 now. A gallon of gas cost 30 cents a gallon then… Costs $3.50 now. Electric bill was maybe $15 a month, $150 now. A pack of cigarettes cost 30 cents then, $5-6 now.
Some things have gotten cheaper…electronics for example. Some things haven’t risen so high…food for example.
But I think most would agree pretty much that things cost 10 times more today than in 1963?
The minimum wage in 1963 was $1.25 an hour.
Just to equal 1963 the minimum wage today should be $12.25 an hour. Is the average working guy of today getting royally screwed or not?
Rather than use your estimates, bls.gov has real numbers. The index for the most recent month (July) is 233.6. July 1963 was 30.7, so the increase is 7.61-fold.
The minimum wage in 1963 was $1.25 for certain categories of workers (involved in interstate commerce) and $1 for others, so to raise to current day = $9.51/$7.61.
Anyone who works full-time deserves to be able to survive on their wages. A simple but decent life should be affordable by anyone who puts in a full week of honest work. To argue otherwise is to return all of us to the sweat shops of the 19th century.