Raise minimum wage can increase employments

Great Debates
1

Most economists tell me otherwise.

But I say they are lying (–> who’s paying their salary?)

To those stinggy employers, maybe that’s half true; but to society as a whole, that’s pure BS.

Why? More money to employees means more money to be spent, and means more money to the economy, that in turn will created more jobs.

Let’s not only just raise the minimum wage, let’s link the minimum wage to inflation of CEO’s compensation and that of the consumer price index - that’s would solve lots of problems in America.

2

So what do you think would be the optimum minimum wage? Would $100/hr be adequate for spending power or would $500/hr be better?

3

The optimum minimum wage should not be considered in terms of dollar amount, because that’s rather meaningless and relative.

I think the current system of labor compensation is rather out of step with time in terms of economic efficiency of the society.

4

Quite frankly, your idea is a recipe for runaway inflation.

And most economists say otherwise because they know more about economics than you. And while I don’t want to see a removal of the minimum wage, your proposal will cause more problems than it will solve.

And what happens when the rate of increase of CEO’s salaries doesn’t match the CPI? Do we just take the mean?

The one interesting thing about your idea is what effect it will have on the salaries of CEOs. Just off the top of my head, it may act as a sort of salary cap if the Board knows that by increasing the CEOs rate of pay, their salary expenses will sky rocket. Of course, that may just cause more people to be laid off to make ends meet, so who knows.

5

Afraid not. The money to pay higher wages would have to be added to the price of the product, so it would come right out of the economy.

Furthermore, US products would become less competitive with foreign products, so our economy would actually decline.

6

However, the extra money a business would pay out to its employees as a result of an increase in minimum wage has to come from somewhere. This would mean price increases to cover the increased operating expenses brought on by the minimum wage increase.

So while the employees would have more money to spend, the things they spend their money on would cost more since it would cost more for the providers of those products and services to provide them. And then we’re right back where we started, only it costs more money to purchase the same thing (in other words, the dollar is worth less).

In this case, raising the minumum wage does nothing but encourage inflation. The minimum wage employees would only benefit for the amount of time it takes for businesses to adjust their prices to account for the increase in costs, which I don’t imagine would be very long.

The other option for businesses would be to eliminate some employees to keep their operating expenses the same, and just expect the remaining employees to pick up the slack.

In this case, raising the minimum wage increases unemployment.

7

First of all, verybdog’s theory, as proposed, is actually not at all new. It was known as “high wage theory” I believe (pretty clever name, huh?) and if I recall correctly it was a modestly popular theory in the early 1900’s. Henry Ford subscribed to this notion. Modern economists, of course, correctly point out that it is a ridiculous fantasy for reasons most of which have already been explained in this thread.

BUT, a couple of much more recent economists, Card and Krueger of Princeton, have theorized that modest increases in minimum wages may not have the dire consequences that Econ 101 suggests. The book is “Myth and Measurement” and here’s a link:

http://pup.princeton.edu/titles/5632.html

This theory is completely different from the one proposed in the OP, and works for reasons completely different from the ones explained by the OP (if it works at all, that is), it only works with relatively modest minimum wage increases, and is probably one of the most hotly debated topics in economics (at least it was several years ago when it was first published). Still, playing the devil’s advocate, it’s at least one tiny weak point in the OP’s favor.

8

All other things remaining the same, raising the minimum wage means instantaneous inflation and unemployment. It really is just that simple. Raising the MW by gov’t fiat is an excellent example of an artificial, direct inflationary pressure on the economy (akin to OPEC arbitrarily raising prices), and pushing inflation very far beyond current levels would be a bad idea indeed.

I’m not quite sure where you’re going with this one, but I think you’re looking toward a managed compensation scheme… yet another bad idea.

Perhaps you could spend a year or two somewhere where this type of thing is well-established. Try Cuba, maybe, or North Korea. You might come back just chock full of ideas…

9

Maybe the minimum wage idea isn’t the one. I’ve seen that hashed over and over, with Ph.D’s on both sides instructing the General Populace in what they regards as basic and irrefutable proofs. To my mind, it doesn’t seem like there is an Economics 101, some set of utterly accepted principles like the Laws of Thermodynamics.

That said, if a minimum wage law isn’t the answer, then, what is? It is obscene to ponitificate and bluster about a work ethic when we have people with full time jobs living in homeless shelters. Here in Mpls., they have nightly lotteries at the shelters. The winners get to sleep indoors.

If they aren’t our people, whose are they?

10

Jobs are created by investment not spending. Investment is made by people who will invest, not spend, their marginal income. Higher minimum wage would decrease investment. And the minimum wage is linked to CPI - it’s just not formulaic.

11

Yes, this study would give credence to the OP in a very restricted situation. However, even in that situation, the study has been criticized by many economists. The critics say that the methodology was quite weak. IIRC it involved telephone calls questioning various fast food franchises.

12

Simple. Better funding for public education, especially in inner cities. Government spending on job training courses for the poor, or anyone who wants it really. Of course, this could be in the form of scholarships, not necessarily government run courses.

And modest boost to the minimum wage, up it to $6.50 or something. This won’t have the dire effect on product prices as many people think, as the minimum wage is often used in service fields employed by businesses that aren’t going anywhere.

More government assistance in small business creation.

A shift in how drug laws are enforced towards legalization of some drugs and greater use of treatment, rather than prison.

13

Let’s pretend you’ve started your own business. In other words, you’re living out what you’re fantacizing about. Where will you get the money to pay your suggested minimum wage?

Lucy wrote:

Freedom, in my opinion. Make it so that a homeless working man does not need to hire lawyers, tax accountants, and government regulation consultants to start up a simple business of his own.

14

Hang on here. Where are people with full-time jobs living in homeless shelters? Minnesota has a minimum wage of either $4.90 or $5.15. That’s about $800/mo. And people on minimum wage also qualify for various subsidies, and pay no income tax.

So if they are homeless, there must be another reason. Is the area rent-controlled? Is there a shortage of low-income housing?

I had an income lower than this for a good 6 years of my adult life, and I was never homeless. I just had a roommate.

15

verbdog: I believe, and am probably wrong (again!) that most of the respondants (myself included) don’t believe that the executive leadership of corprate America will voluntarily surrender salaries/benefits or cut shareholder dividends in order to pay their workers more money. And because of such, the increased costs of worker wages and benefits will be passed on directly to the consumer; hence, inflation.

After all, I believe the corporate reasoning goes: if they have more money to spend, then we can charge more money for our goods/services.

It’s kind of a Hobbesian Materialism, and I think that it is one of the underpinnings of the Liberal rabble-rousing rally cries that Conservatives are selfish (since most of corporate America is more closely affiliated with business-friendly conservatives/Republicans).

While CEOs of other countries get paid far less than their American counterparts, it would take a radical resturcturing of American corporate culture, with concomitant negative effects on the American economy (if even in the short- to intermediate-term) to try to change.

And that’s real, everyday people who would be affected the most, not CEOs and corporate board members.

16

As with most issues, the answer to the question of a
mandated minimum wage is not found in studies filled
with facts and figures. It is also not wise to use emotions
to come to any conclusions. As with most, if not all
issues, the answer to this question lies in a very basic
principle. Whether we tamper with the mechanisms or
not, free market dynamics always win out. Supply and
demand always balance eventually, whether we try to
hinder it or not.

   People will always have widely varying degrees of

education, skill, experience and drive when it comes to
employment. Those with the least education, skill,
experience and drive will always and naturally be valued
the least in the workplace. Those with the most education,
skill, experience and drive will always and naturally valued
the most. This can never change.

   Companies have to pay the rates that get the kind

of people in the door that they need to get the job done.
If they find that they are not getting the workers with the
right combination of education, skill, experience and drive
to adequately meet their needs then they must increase
their wages to attract the better workers. To get better
quality, they must pay more.

   If we are going to mandate a minimum wage, why

not mandate minimum prices for goods and services. We
don’t seem to have a problem with the free market when it
results in lower prices. Wages work the same as prices.
Higher prices bring higher quality in the goods and services
we buy. If the quality of a particular product decreases then
the demand should and does decrease. This lowers the
price. Wages should and will work this way.

   Tamper if it makes you feel better but those at the

bottom will always be at the bottom. Those at the top will
always be at the top. Any change will be temporary. All
wages will increase which will drive up prices. Supply and
demand works whether you want it to or not.

Joe Elliott
http://members.aol.com/joe4jesus/index.htm

17

The laws of supply and demand seem pretty well accepted among just about everyone.
Most people who have a general knowledge of economics understand that inflation, the money supply, wages and interest rates all interact with each other and one cannot simply change one variable without affecting the others.

18

A minimum wage increase doesn’t cause inflation (except wage inflation) in any real economic sense. Inflation is too much money chasing too few goods/assets. Wage increases are just redistributions of wealth.

19

If someone is willing to work for $2/hour then that’s what the job’s worth. Now I realize that’s a bit of an overstatement, but the minimum wage should not EVER have to be considered a living wage.

Raising the minimum wage does two things:[ul][li]It causes employers to raise prices which hurts those in the lowest income bracket (i.e. those who make MW) the most.[/li]It gets politians votes from those who make MW when they promise to do it (which is ironic given the above)[/ul]The minimum wage is a form of welfare. Nothing more. If you want or need to make more money you don’t wait for the MW to get raised. You do what it takes to get a better job.

20

—The optimum minimum wage should not be considered in terms of dollar amount, because that’s rather meaningless and relative.—

What could be LESS relevative and meaningless than a concrete dollar value? Certainly not a vague claim that wages should be “higher.”

The Princeton study, at best, suggests that sometimes owners are willing to eat the cost of extra workers at higher wages. Of course, many questions have been raised about how accurate the measurements were, as well as whether it was well controlled for various other changes that could have happened in local markets. Even it doesn’t, however, suggest that raising the minimum can RAISE employment, as the OP claims.

What IS wrong about the standard Econ 101 tale is that it is NOT true that “workers” are necessarily worse off with a minimum wage. Yes, if the standard story holds true then less people will be employed. But those that are will have higher wages. It’s not necessarily true that minimum wage range workers, would necessarily be less happy if they had an increase of risk of being unemployed by 10% in exchange for a raise wage of 10%. The possibility of losing a sucky paying job may not be as bad as a chance of a better paying job is good.

However, that does not exhaust the reasons why minimum wage is bad. It’s bad because it forces some people to pay more for a service than it’s actually worth to them: bussiness owners. And that’s not only unjust, but a burden they’ll undertake economically wasteful activity to avoid.

—To my mind, it doesn’t seem like there is an Economics 101, some set of utterly accepted principles like the Laws of Thermodynamics.—

There are some things in Econ that are pretty much akin to the laws of conservation: they are argued conclusively from concrete facts about the goods and services in the world. However, most of these agreements, to use practically, would involve measurements of an accuracy we can’t get (and may never be able to get). Further Econ has a wrinkle that most physical sciences outside of the quantum don’t: the fact that the objects of study can actually read up on Econ, and react to it by changing their behavior.