I had a long post about this issue citing examples and studies but, really, is there any point? It’s so ideologically divided no one will read it.
The upshot is that the demand for labour isn’t a straight line - not every movement of the minimum wage has the same effect at every price level - and it’s entirely possible that a minimum wage hike will have almost no impact on employment levels. Conversely, it won’t really have much of an impact on helping people because surprisingly few people hold down a minimum wage job who represent significant family breadwinners, so really it’s kind of a low-impact policy either way.
All of that are arguments to raise the minimum wage (or the sickness benefits) of the mom in that scenario. Not to pay her kid adult wages so he will work instead of staying in school.
If Mom got enough to live on, and support her family, her oldest could stay in school and maybe the mom could get by on one job instead of two, so she would have had time to watch her own health and take her daughter to the GP to get free birth control.
And teens should get less wages because, in general, they still need to learn on the job.
But really, the Netherlands and the US can’'t really be compared because there are far more differences in this regard.
Almost no-one works two jobs here;
A very high percentage of women work half a job once they have young kids;
Unemployment benefits (and benefits for people who are almost unemployable) are widely availlable;
But most importantly, many, many entry level jobs and service jobs that exist in the US simply don’t exist in the Netherlands. You have Walmart greeters: we have.. nothing, not even a sign by the shop entrance. You have waiters that cater to your needs attentively in a restaurant; we have either self-service restaurants, or we have waiters who bring you drinks, a menu (oh, wait, they don’t bring the menu either, the menu is already on the table), your order, and that’s it. If you want any more attention from them, you have to ask for it. And Dutch waiters don’t expect tips, because 15 % tips are mandatory and automatic.
You have people bagging your groceries; we have specially designed check-outs with two “lanes” behind the cash register, so people have time to bag their own groceries while the caissier rings up the next customer.
We have reduced low level jobs by mechanisation and Do-it-yourself structures and attitudes. Which is better? I don’t know. Our low-level workers sit home unemployed with benefits; with you, they greet you at Walmart. Both systems have pros and cons.
Because for most people the value of a first job is not primarily the money but the experience. It is part of the transition from childhood to adulthood, learning to be responsible, show up and work hard. That is why over half of all minimum wage jobs are held by people under 25. The low wages allow businesses to take chances on the young and inexperienced.
Given that the unemployment rate for young and unskilled people is already multiples of the rate for the rest of us, this is a horrible time to make it harder to hire these people.
I saw nothing in the OP’s linked article about how the minimum wage hike would be great for the economy. As stated all it says is that the literature on minimum wage hikes is mixed. Probably because it is so hard to study. But given that one of the fundamental laws of economics is that demand curves slope down, it should take very strong evidence to convince anyone that it is not true that it is not true for this market.
The idea that this would be good for the economy as a whole is mistaken. Even if the money just comes out of profits and does not cause unemployment it is just a transfer from stockholders and business owners to entry level workers. There is no new money or value created, it is just moved around.
However, if the money comes from the wages of others who are not hired or businesses that have to close then it would be bad for the economy to have people sitting around who are willing to work and people who want to hire them but have the government outlaw it. Long periods of unemployment hurt people alot more than a small raise helps them.
No, they have as many on the payroll as they can afford, based on the cost of hiring and retaining workers in a given labor pool. If you raise the cost of hiring a worker, businesses can then afford to keep fewer, so they either lay people off, or raise prices.
That’s going to make it difficult for the adult head of household to compete with the teenager for jobs, isn’t it?
I have an open slot. I can either hire Deserving Poor Parent for $9 an hour, or some pimply putz for $5.75. Sorry, DPP.
Actually I imagine if the company needs 10 people it will hire 10 people and if it needs 9 people it will only hire/retain 9 people. I don’t think small businesses have been padding their payrolls out of the goodness of their hearts because of the low minimum wage.
You know if you lowered the minimum wage to $1 an hour or eliminated it you could theoretically slam the unemployment rate to an historic low…assuming you get get people to take those jobs.This has actually been suggested by that great economic genius Michelle Bachman.
But when fully employed people still need government assistance to afford basic necessities then the unemployment rate becomes meaningless.
As mentioned, Obama’s idea on how to increase employment is to make hiring less profitable. As I mentioned earlier, this is one of the drawbacks of electing a President with so little experience in full-time work - he has no idea how the world operates.
And the rest seem to have difficulty grasping the concept that, the more expensive it is to hire someone, the less likely it is that he will be hired.
This exchange highlights another point. It the goal is actually reducing poverty, raising wages is just one part of the equation.
Juan Williams identified a “formula” for staying out of poverty, and it’s heartbreakingly simple. He’s specifically referring to urban black poverty, but the formula is universal.
I’d rather see the administration tackling the more sensitive and difficult-to-grapple-with cultural factors that lead to poor choices and cyclical, generational poverty. That is where the true solution lies.
I’d like to see how anyone can figure this could produce a measurable effect on the economy. As I noted in another thread, we’re talking about an amount of money “injected” into the economy that is on the order of 1/100 of a percent of the size of the economy.
If Obama had proposed a $10B stimulus package to help the economy, he’d be laughed at.
Having said that, I agree with RickJay. The move proposed by Obama is unlikely to have a measurable negative effect on the economy or unemployment. It’s just too small an amount. The one good thing about the MW vs welfare (and the MW is just a form of welfare) is that it has pretty much ZERO overhead cost. No government agency has to be created to cut millions of checks.
Most people, or most middle class people? I am not really arguing for a minimum wage hike. I am arguing that a two-tiered age-based system, based on the idea that teens are mostly working for pizza and beer money, is really based on a skewed vision of why teens work. A lot of them are paying real bills with their income.
In my experience, one major problem is that the kid bearing the burden may not be the one that made poor choices: a pregnant sister is a biggler blow than a pregnant girlfriend, frankly. And parents who can’t work due to illness, or can’t work enough, are distressingly common. And generally, those kids are still more likely to not be in poverty as adults: they get through a really rough time, and pull themselves out (and likely continue to support those they were supporting in high school). Reducing that kid’s income just because of his age would be awful.
Cut questions of whether anyone deserves anything. Why should businesses cut their own throats to please you? Why should the small business owner (whom we’re mostly discussing here) take that loss so you can feel warm-n-fuzzy over some abstract social goal?
And since you haven’t convinced us it would work even in a cold economic sense, why should anyone support you in this? You seem to think there’s basically no social cost to this, but haven’t explained who would benefit or how much. All we’ve got are hypotheticals. And you seem to be claiming there’s no cost to doing so, when economics is pretty much all about trade-offs.
… Yes, they do. That you seem to think otherwise would imply that you never paid any attention to one. A business - any business - will hire as many people as can make a profit, and as many as they need on top of that level to maintain a profit. But they absolutely can cut back, and it’s often quite wise to do so.
Secondly, businesses can and will hold onto its workforce, at least for a while. There are a lot of reasons for this, but at the basic level businesses are usually reluctant to fire people. Even if you’re just thinking in cold economic terms, there’s a lot of reasons to delay on that, and studies have shown that bosses are often hesitant to fire people. This is one reason businesses go under: both wages and jobs are sticky. it’s also why some aggressive cost-cutters are well-respected: they’re known for making those choices early and thus making that recovery more likely.
But this doesn’t mean that they won’t or can’t fire people if they start losing money. In fact, it’s probably more likely to happen at the minimum wage level, for two reasons. First, the information gap between management and worker is a lot less. Management usually knows who’s the most profitable employees and who’s likely to stick around given a chance. Second, it’s often easy to compare the number of employees to profits.
I’m just saying that if the administration really wants to reduce poverty, policies need to be reevaluated to avoid perverse incentives, and to address and counter cultural factors that lead to poverty.
Boosting the minimum wage from $7.25/hour to $9/hour would increase wages by $1.75/hour. But workers wouldn’t be able to spend all of that: the payroll taxes for Social Security and Medicare are taken off the top. That knocks it down to about $1.62/hour in added purchasing power.
Let’s say the equivalent* of 10 million full-time workers will receive this boost.
$1.62/hour * 2080 hours in a full-time year = $3370. $3370 * 10,000,000 = $33.7 billion.
Now, let’s say a quarter of a million people lose their jobs as a result of the hike, going from $7.25 to zero. That $7.25, after payroll taxes, was $6.70/hour in actual purchasing power, which is $13,936/year. Multiplied by 250,000, we get $3.5 billion.
Net is about $30 billion increase in purchasing power, in the hands of a class of people who are likely to spend it all.
Obviously, there are some major assumptions there, but we’re talking about something that’s on the order of 4% of the 2009 stimulus bill. Even if we assume its bang for the buck will be twice as good, that’s still only about 8% the effect.
Every little bit helps, of course. It’ll boost the economy a little bit at the margins, and I suspect it’ll be enough of a boost to be measurable even if my assumptions are optimistic, but it won’t be a huge boost.
Only those currently making $7.25/hour are guaranteed to receive the whole boost - IIRC, there are something like 4 million workers actually getting paid minimum wage - but my assumption is that persons will benefit on something of a sliding scale: if an employer is paying workers in job X $7.25/hr, workers in job Y $7.50, and workers in Job Z $8, she will probably want to maintain that hierarchy, but may well reduce the intervals between the steps, so that job X gets $9, job Y gets $9.20, and job Z gets $9.50, or something like that. Probably somewhere around (WAG alert) $11/hour, you hit the point where workers receive zero benefit from the minimum wage hike. Probably a good deal more than 10 million workers get some benefit, but when we translate that into full-time equivalents, we take the full-time worker that got a $1.50 boost, and the full-time worker that got a $0.25 boost, and combine them into one $1.75 boost FTE.
RTF: It’s unmeasurable at that rate. Your numbers are the same order of magnitude as mine, and represent a few hundredths of a percent of the GDP.
There might be good reasons for raising the MW, but “it will help the economy” isn’t one of them. If you’d like, I’ll go to the coast this weekend and pull a few gallons of water out of the ocean, and put them in my basement. It’ll help slow down the rise in the oceans due to Global Warming.
I’m not seeing any studies linked to in the OP that support this claim (emphasis added):
All the studies quoted in that article refer to whether or not raising the MW has a measurable affect on unemployment, either way. That statement, AFAICT, is made without any supporting reference. And the implication that there is a “consensus” on this fact is, frankly, absurd.
This seems to me to be a very good summary. The MW hike may have a big effect on the economy of MW earners, or course!
For a 10% MW hike to result in 10% or more MW layoffs, we’d need elasticity |E[sub]d[/sub]| ≥ 1. Instead, I think Minimum-Wage elasticity is generally estimated at |E[sub]d[/sub]| ≤ 0.4, no? Stated differently, those in the thread pretending that demand for minimum wage workers is fully “elastic” are uninterested in any actual economic facts, and just blowing smoke based on what they’d like to be true to fit their dogmas.
Pretending that the unassisted free market finds a “perfect” price for everything is ignorant.
Thank you for your post, BrainGlutton. Linking to actual (gasp!) real information is a welcome change from ignorant posts based on what one might like to be true. (A complaint that applies also to those on the left, though much much less so than those on the right.) The posts of BobLibDem also seemed intelligent and right-minded.
Note that the present minimum wage is lower in real dollars than that of 1951. I started a related thread recently
That might be one of the good reasons I mentioned upthread for increasing the MW. I’m sure it means quite a bit to the folks affected. I also agree that, if you’re going to have a MW, it makes sense to simply tie it to inflation (maybe with some upper limit in case things get out of hand) and then we don’t have to have this same debate every year.
