Be Careful What You Wish For (RE: MW)

Discussion in 'The War Room' started by Lee978, Jul 31, 2015.

  1. Lee978

    Lee978 Seeking Alpha

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    http://www.economist.com/news/leade...higher-minimum-wages-dangerous-reckless-wager

    As evidenced from the last MW thread a few days ago, a lot of MW proponents argue quite strongly that raising the federal MW to $15/hour will be just fine. Most MW proponents in that thread refused to acknowledge the fact that MW hikes usually bring about layoffs but the few that did acknlowedge this fact argued that it was no big deal because the benefits of higher incomes far outweigh any costs associated with job losses from the MW hikes.

    Now as the article I reference points out, raising the federal MW to $15/hour, or 77%of median hourly income, is quite high and unprecedented even globally. The article also points out how by "moving towards sharply higher minimum wages, policymakers are accelerating into a fog" and "nobody knows what big rises will do, at any time horizon." While the latter is certainly true, I believe there does exist an example of what we could expect if MW proponents win this policy debate and the federal MW goes from $7.25/hour to $15/hour and that example is Puerto Rico.

    Puerto Rico has a far less productive economy than does mainland US yet since 1983 its MW was legislated to rise in tandem with mainland US MW. As a result, a full-time MW job in PR pays around 77% of PR's per capita income. If MW proponents have their way and the federal MW goes to $15/hour in mainland US, this will pay roughly around 65% of 2014 US annual per capita income. How has this policy worked out for PR?

    Well they've been in a recession for over a decade and...:

    .......

    http://nypost.com/2015/07/11/how-us-wage-laws-helped-sink-puerto-ricos-economy/

    Suffice it to say, be careful what you wish for because you might just get it and the results don't look good.

    ====================================

    TL/DR version:

    Moving towards a federal MW of $15/hour is unprecedented and no one knows what the consequences might be. A similar policy was tried in Puerto Rico back in 1983 and the results so far have been horrible. Therefore, be careful what you wish for.
     
  2. How does one then address the fact that today's minimum wage is lower than ever before when factoring in Inflation?

    I have a hard time believing that raising minimum wage to a modest $15 or even $12 will destroy the economy like right wing economists and scam artists tell me. Whats next I am to believe that corporations pay too much and therefore the Middle Class citizen should pay more and lets thus reduce the rate on the company.
     
  3. Lee978

    Lee978 Seeking Alpha

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  4. klnOmega

    klnOmega Double Yellow Card Double Yellow Card

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    I'm mostly just nervous about the big cost of living increase this will lead to.

    I make near just a bit below the US median income, so my story is pretty typical. When the minimum wage doubles, the cost of almost everything will also rise, but my wage probably won't. And hence, I will have a lot less buying power than before.
     
  5. 7437

    7437 Gold Belt

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    Threaten to quit. Median is about $16 now, so employers will either pay more or face a mass of personnel moving to easier jobs.
     
  6. klnOmega

    klnOmega Double Yellow Card Double Yellow Card

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    I think that is misleading. Even though our adjusted wage is low, our standard of living is much higher. Someone living on minimum wage now has access to all sort of amenities that working class people didn't have 40 years ago. Our people on minimum wage all have televisions, refridgerators, air conditioning, video games, cell phones with internet connections, laptops, tablets, and a sizeable portion will attend higher education.

    Sure, the rich keep getting richer, but our poverty line is a pretty cozy to be compared to most of the world.
     
  7. Jack V Savage

    Jack V Savage Secretary of Keepin' It Real/Nicest Guy on Sherdog

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    I was waiting for the TS to start a thread on this.

    The argument that a MW hike could lead to increased unemployment is legitimately controversial in that there is logic and data on both sides. But there's no reason at all to think that it would lead to an increase in cost of living.

    Personally, I like the idea that a lot of cities are doing it. That gives us a chance to really analyze the situation and find out what works best (I realize that that's not how it usually works in politics, but, as they say, knowing is half the battle--we can worry about the other half later). I am also very skeptical of opponents of MW increase. For the most part, these aren't people who spend a lot of time thinking about what's best for low-wage workers or craft policy designed to improve the lives of the poor.
     
  8. Lee978

    Lee978 Seeking Alpha

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    http://www.heritage.org/research/reports/2011/07/what-is-poverty

    Link has some information that supports what you're getting at.
     
  9. Lee978

    Lee978 Seeking Alpha

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    It's Friday, rather slow at work, and I haven't started in a thread in years (i think). :icon_chee
     
  10. klnOmega

    klnOmega Double Yellow Card Double Yellow Card

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    I don't know dick about economics, but it seems like in situations where the workers job just can't be cut, it would almost have to lead to price increases.


    Say I own a lemonade stand. It needs someone to squeeze lemons, and someone to be cashier. They both make minimum wage. If minimum wage increases, I can't simply fire one--I need them both to operate. So I have to pay them more. Unless the minimum wage increase puts so much more money into workers pockets that I am now flooded with more customers, I am probably going to have to raise my wages to maintain the profits I am accustomed to.
     
  11. kpt018

    kpt018 Gold Belt

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    Except the lemonade stand down the block maintains their price. So when you increase yours you do no business.

    People constantly forget that businesses cannot simply charge whatever they wish. And if you could get customers to pay a higher price, why wait for your costs to increase? You would have done it already!!!

    Besides, this shit is a lot more complicated than a lemonade stand.

    And the reason we are in this situation is we waited so long to address it (thanks Republicans!). If the MW was tied to some index and adjusted every year we would have small, manageable increases and the MW would reflect cost of living increases. Businesses can plan for the small adjustments and workers get their wages raised.

    $15/hour is nearly doubling the rate in some places. I personally think it's a good thing, but we will see if the increase is too aggressive.
     
  12. Cubo de Sangre

    Cubo de Sangre Titanium Belt

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    What are labor and consumer price trends looking like in Seattle?
     
  13. IDL

    IDL Gold Belt

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    What does the Federal MW apply to?

    States have their own rates do they not?
     
  14. klnOmega

    klnOmega Double Yellow Card Double Yellow Card

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    Poor people make a huge portion of the fast food industries customers. If McDonalds changed their dollar menu to a $2, it might run them all off because they can't afford it.

    Now minimum wage doubles. The poor people can afford a $2 burger because they have twice as much money, so McDonald's raises the costs.
     
  15. Lee978

    Lee978 Seeking Alpha

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    What do proponents of federal MW hikes to $15/hour think about the New York Post article that talks about Puerto Rico and its issues with the MW? Raising mainland US federal MW to $15/hour would be very similar to the current situation in PR and that doesn't seem to have faired to well.
     
  16. Lee978

    Lee978 Seeking Alpha

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    States can (and have) increased their own MW's above the federal level but moving the federal MW to $15 would mean that every state would have to follow suit. So to answer your question, it applies to everyone not earning a wage above $15/hour.
     
  17. Jack V Savage

    Jack V Savage Secretary of Keepin' It Real/Nicest Guy on Sherdog

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    See kpt's post. You can't just choose the profits you want and get them. Generally, businesses always want their profits to be as high as possible, which means that prices are already set at the level that maximizes revenue.

    In addition to that, note that labor costs are only a fraction of revenue (varies a lot by industry and individual company, but for fast foods, I think it's around a quarter) and that MW labor is (obviously) a disproportionately low percent of total labor costs. So a MW hike is generally going to lead to a negligible increase in total costs for a business, and then the business isn't necessarily going to be able to increase prices to match it even if it wanted to. What it looks like happens is that that very small bump in costs is absorbed by encouraging very small changes in a variety of other ways.

    States or cities can have MWs that are higher than the federal MW if they want to.

    You're talking about McDonald's maybe seeing a <1% increase in costs and responding to it by raising prices 100%. That wouldn't make any sense.
     
    Last edited: Jul 31, 2015
  18. IDL

    IDL Gold Belt

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    Hmm, thanks. Sounds like a major change.

    The state MW are well below $15 according to this
    http://www.ncsl.org/research/labor-and-employment/state-minimum-wage-chart.aspx

    To make that big of a jump would be very disruptive, unless they would phase it in and even then.. Makes me wonder if it would disrupt the economies of poorer areas moreso. Could it make cities more attractive for business by comparison? Or, it may make Mexico more attractive for some even.
     
    Last edited: Jul 31, 2015
  19. Jack V Savage

    Jack V Savage Secretary of Keepin' It Real/Nicest Guy on Sherdog

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    I'm not aware of any proponents of a $15 federal MW, but I'll say that the Post piece was pure hackery. I mean, look at PR's economy. You think that MW is a major factor in its struggles? Really? I thought Lane was going to acknowledge all the other factors working against it when he said "Puerto Rico&#8217;s dysfunctional labor market is not only due to the relatively high minimum wage" but then he followed with, "Also killing the demand for, and supply of, labor are the island&#8217;s onerous overtime, paid-vacation and job-security regulations," which got a literal LOL from me. That's not serious analysis, and you know it, Lee.

    That just gets to the point I made earlier. People are opposing MW increases precisely because they're afraid they might get good results. These are people who are uniformly against the interests of workers and the poor.
     
  20. klnOmega

    klnOmega Double Yellow Card Double Yellow Card

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    I get it now. Thanks for answering my questions.
     

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