*The idea of working less because one makes an extra $4 or so per day is ridiculous. The reason that total hours worked would ever decrease is due to job loss, caused by increased operating costs. This also means greater efficiency (or sweat) from existing workers (because output doesn't change) and the shifting of a percentage of the workforce to other sectors of the economy.*What about states with different min. wages? i think in california its about 6.75 by law, hows the employment or cost of living for basic services (which is what minimum wage earners usually do) affected there.
No I’m not kidding, and that’s really what this debate boils down to. You can either believe “big business” and market forces will take care of its employees, or you believe that the government needs to step in and mediate. As a third option we can always leave it up to the unions…
Surfs back in the Middle Ages had to pay their King to work which would be like working for -$6/hour. At the very least we should all agree that slave labour is wrong, and that’s a minimum wage of $0 per hour.
My flawed reasoning is as follow: There is a legal MW. And currently lots of people are paid that wage. Which to me sujests that if it was lowered companies would happily pay the lower value. So in this instance, it seems dangerous to wait for companies to decide just how little their employees are worth.
My personal belief is that its better to be unemployeed that earning less than the poverty level. There is a tendency in these types of debates to simply argue against raising the MW, but if you’re against raising it, can I assume you’d rather it lowered or done away with?
$5.50 seems appallingly low to my outsider eyes. How adequate is such a wage for basic living needs given American prices? How is the minimum wage determined in the US and how often is it updated? In Australia the ACTU (Australian Council of Trade Unions) annually puts forth a submission for an increase to our Industrial Relations Commission and its there supported or opposed by federal and state governments, business organisations and charity groups, and a decision made. Minimum wage here is currently $11.80 an hour or $23,316 a year. Current increase sought is to $12.50 an hour. Granted our pricing structures arent identical but I’m pretty sure I’d rather be earning $11.80 an hour in Australia then $5.50 in the US. Our businesses are accustomed to these higher wages, no real downside is evident and our experience suggests that higher minimum wages have a very beneficial effect for society overall.
Even in low rent areas, not very. And I’m not talking about 5.50: you cannot survive on that much on your own almost anywhere in the U.S. That’s why many of the people at this income level have to work two jobs at least to make ends meet, and that’s just for supporting themselves.
There is a lot of interesting debate about the MW in practice and in theory. If a higher min wage does increase employment as most economists expect, that’s not necessarily bad for workers (10% more chance of not having a job for 10% higher wages if you do might be a gamble the majority are willing to take, especially with a safety net). But it’s definately bad for producers. The main question is: why should producers have to pay their workers anything other than what they feel like paying them?
If there is a moral obligation for working poor to recieve more income, then that obligation cannot fall on the employer they have to be working for at the time. Moral obligations are univerisal, if they are moral obligations at all. How can McDonalds have a moral obligation to offer a worker a job at 7$ an hour when I, sitting here on my fat tush eating a freezie pop, do not? What kind of moral obligation is that?
I have to ask what standards are you using to determine “better”?
I assume you meant “unemployment” for “employment” here. I agree with you on this tradeoff possibly being beneficial for workers. However, in addition, there is also debate about whether a higher minimum wage…at least up to a certain point…really does increase unemployment. Clearly, the standard Econ 101 arguments that treat the labor market like any other market would suggest it would…You set a price floor and therefore you get less of the “product” (in this case jobs) because the supply at that price exceeds the demand at that price.
However, a recent book “Myth and Measurement” by David Card and Alan Krueger argues, based on empirical studies, that this does not seem to be the case for the modest minimum wage increases that they have looked at. And, they have some theoretical notions of why the labor market might not behave like a standard market. I can’t recall what they are exactly…but I they involve things such as the fact that people are not so easily substitutable one-for-the-other and that people who are paid better might be more motivated to work harder. (Part of the problem is that although I own this book, I haven’t read very much of it. If I had read all the books I own, I would be much more knowledgeable than I am…But, I may have to become unemployed first before I have the time to do so.)
I don’t know how well-received Card and Krueger’s arguments have been. And, clearly it is hard to sort out effects of minimum wage increases on employment in the “messy” real world where more than one variable changes at a time. But, it does provide an interesting counterpoint to the views of those who are quite sure that modest increases in our quite low minimum wage will lead to quite dramatic losses in employment. (And, of course, when the minimum wage was raised in the late 1990s, such claims turned out to be wrong…Or, at least, unemployment levels dropped so low that it is kind of absurb to believe they would have been much lower still in the absence of this increase.)
In the United States, only an act of Congress can raise the federal minimum wage, although as we’ve mentioned some states have a higher one. On average it seems to get raised about once every five years. There have been some proposals made to have the minimum wage automatically adjusted to match inflation, but they’ve been shot down.
Ironically the public is usually most receptive to raising it during god economic times rather than recessions. Of course, this is counterintuitive because when unemployment is low, companies have to offer higher wages to bottom rung workers just to get any applicants at all, so the percentage of workers on minimum wage. During recessions it increases.
I have to ask you as well. When you use the term “workers” who are you refering to? A mythical “average worker” or simply most workers? If 10% of low wage workers lose their jobs, (very) roughly 200,000 workers (see link below) while the remaining 1.8 million get a 10% wage increase, isn’t that a net (gross) decrease to the 2 million workers in question?
hypothetical minimum wage of $5.00 an hour or 10,000 per year
increased to $5.50 an hour or 11,000 per year:
2,000,000 X 10,000 or 20,000,000,000 Baseline
1,800,000 X 11,000 or 19,800,000,000 10%MW increase/job loss
1,600,000 X 12,000 or 19,200,000,000 20%MW increase/job loss
1,400,000 X 13,000 or 18,200,000,000 30%MW increase/job loss
Before you flame me, I know this is not an economic analysis. I certainly do not propose that this is a prediction of how any economy would react to a MW increase. It is simply a back of the napkin exercise using a back of the napkin proposal.
According to the 2000 census, there are about 1.7 million recieving hourly minimum wage (with another 5 million earning just over minimum). I don’t recall the exact number of workers, but doesn’t this work out to about 2% of the work force? I’m not sure what claims you are reffering to as being wrong, but it seems we could have fired all these guys and not dropped employment levels “so low”.
This is an article from the Heritage foundation discussing the 90s MW increases.
Please don’t flame me for the conclusions reached in this article. I am only linking to it because it is were I found the 1.7 million MW employee number (which I rounded to 2 million above)has a cute graph showing the relative emplyment rates of teenagers and adults (although, it seems to use teenagers under 23 in the article but adults over 20 in the graph). This make me suspicious, but I’m too tired to wade through the statistics here.
But this is not ironic at all. Do you ask for raises from your employer when he is doing well, or only when he is laying people off?
While more people need money in a recession, fewer businesses can afford it.
There is a “cost” associated with working. I remember my mother explaining this to me when I was very young but I only recently began to grasp this. She gave up her career to raise children. When the time came to going back to work the costs were insurmountable. Start with something as basic as transportation; how much does it cost to get to and from work? In Halifax it could cost as much as $1.75 per trip on the bus, Toronto it could cost as much as $2.25 per trip on the subway, in Ottawa is $2.50 per trip. How much does lunch cost you each day? How much is day care? (If your baby sitter is making minimum wage you’re screwed) And what I had never considered, how much does ‘business attire’ cost? Can you imagine making minimum wage and having to pay for suits? If you wanted to start a new job after being out of the work force you’d need an entire new outfit.
As a stupid example I was a lifeguard making way more than minimum wage. But I had to consider: If it cost me $2.25 to get to work, I need to earn more than $4.50 to make getting out of the house worth while. If I have to pay for a bathing suit I need to earn enough to pay for it. And worst of all, if I have to recertify my lifeguarding skills my income has to recoup me for those costs plus the swim suit plus the subway…then add rent, and phone, and food, and kids, and entertainment…
My point is that you could stay home in your pj’s while looking after your own children and end up “earning” more than going out and making minimum wage.
In the end, my argument is that minimum wage should ideally reflect the minimum income required to live. All of this falls apart though, when you try to distiguish between a highschool student making pocket change and a mother of three trying to feed her children.
I assume you mean collect welfare, at least partially, by “earning”. (I realize that there are other values than money especially when considering raising children)
The minimum wage is $7.01 here, and in January it’s going up to $7.16, which will be the highest minimum wage in the country. Perhaps we’ll be able to answer the OP first hand.
Would that it were true. It’s just too difficult to isolate the effect of a small change in one economic variable when all the miriad other variables are left to fluctuate. And given the extremely large growth rate of the economy right now, it’s particularly difficult.
It might well be a net loss in total wages earned by workers (though a 10% increase in the MW would not likely REALLY cause exactly a 10% drop in unemployment), but that’s not the point. The point is that it’s possible that the majority of workers would preffer this gamble to the sure thing. It’s simply a matter of preferences, risk aversion, and so on.
The minimum wage has nothing to do with people’s quality of life except in the very short term when the increase in price lags slightly behind the increase in wages. It simply makes no difference to the way people will live. Go ahead, set the minimum wage at $1000 an hour, and the price of a McDonald’s burger will simply rise to $450. The mimimum wage worker won’t be able to buy any more burgers than he could before.
The minimum wage is simply a political tool to trick the population into thinking that there is anything the gov’t can do to improve their standard of living. Go ahead, raise the minimum wage all you want, in the long run it makes no difference.
Of course, they might also prefer to lower it and have more jobs available. Remember these jobs are not exactly long term careers. There is a lot of turnover. What if we said that a 10% decrease would result in 10% more jobs being available so that the next time they needed one it would be easier to find. Perhaps they would prefer this.
Obviously not everyone would prefer either of these options. Though I concede that most people would not proceed past the “raise it and I’ll get more money” level of analysis.
They also might prefer any number of things. In case you missed it, I was simply pointing out possibilities, not trying to say that workers today empirically want this or that.
An econ 101 graph would demonstrate that it does indeed make a difference. Wages are not the only costs of production, and prices wouldn’t simply rise exactly to cover the extra cost of minimum wages (not to mention the fact that not all industries are even directly affected by the MW). When you set a price floor, there are consquences, permanent consequences. Just because a lot of this loss involves missed opportunities doesn’t make it any less of a real and lasting harm.
I agree. Distorting the market is rarely, if ever, a good thing to do for the overall economy. I say leave it up to individuals to contract between themselves for wages and benefits. After all, one consequence of a MW is to forbid someone from offering their services for less than the MW-- even if those particular services are worth less. Direct payments (wealfare) to the poor is a better way to go, especially if the goal is to aleviate the problem of poverty. More entry level jobs would be created and this also avoids the MW being a wealfare subsidy to teenage workers, most of whom would not be considered poor.
Is it just accepted as automatically true that minimum wagers are the start of all production? That’s the only way raising minimum wage would raise the costs of all goods. Are we also assuming that when we raise minimum wage, everyone’s salary increases the exact same amount? That’s the only way it wouldn’t make a difference.