Franchise group files to block [Seattle's] $15 minimum-wage phase-in

[Loren Pechtel]

After everything is settled *ALL* of their costs will have increased.

Probably not and certainly not by the same %. No firm's costs consist entirely of MW labour, and for most it's a small fraction. You're now asserting that all firms put their prices up in unison by more than the increase in costs. It'd be a good argument for regulation if it wasn't laughable.

Yes, you can keep increasing the minimum wage to keep it ahead but you'll just be driving inflation up and hurting everyone.

Ahead of your supposed above-costs price hikes, you mean?

Workers who get more than MW do so because they are able to demand the higher wages. They're not going to accept now getting effectively less than they were, they'll demand and get similar increases.

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wages have been flat with prices

No they haven't. Real wages have fallen.

Only in the eyes of the unions.

More and more the good paying jobs are salaried, not hourly. Thus the average hourly rate falls behind.

 

[ksen]

wages have been flat with prices

No they haven't. Real wages have fallen.

Only in the eyes of the unions.

Only in the eyes of everyone that actually looks at inflation adjusted numbers.

More and more the good paying jobs are salaried, not hourly. Thus the average hourly rate falls behind.

I do believe "falls behind" is equivalent to "have fallen."

I accept your apology.

 

[Emily Lake]

I'm just trying to dispel this ridiculous notion that if MW goes up 25%, prices also go up 25% negating the increase in wages. It's a stupid argument.

Well, I think it depends on what you consider to be dispelling. If you're assuming that it's a one-to-one relationship between the MW and the price increase, then perhaps that won't come to bear. But if you're assuming that MW can be increased with no effect on price, that is equally ridiculous. It depends very much on how large the increase in MW is, relative to the cost of production and the current price. If the increase in MW pushes the total cost of production above the current sales price, then the price will have to change. If the increase cuts into the target profit margin too much across the industry, then it's very likely to show up as an increase in price, although it may not be immediate.

Profit isn't always a bad word, you know. It's contribution to capital, it's how companies grow, it's how they buy new equipment and hire new people, and expand.

 

[Emily Lake]

Hmm, interesting. I point out the fact that *gulp* costs are not always passed on and that *gulp* higher labor costs can lead to higher profits and we have the straw man of infinite profits. Amazing!

Okay, perhaps I'm having an apoplexy if ignorance here... but I don't understand your reasoning. How is it possible for labor costs to increase, prices NOT increase, but somehow the profits increase?

 

[ksen]

Profit isn't always a bad word, you know. It's contribution to capital, it's how companies grow, it's how they buy new equipment and hire new people, and expand.

lol

 

[Emily Lake]

Profit isn't always a bad word, you know. It's contribution to capital, it's how companies grow, it's how they buy new equipment and hire new people, and expand.

lol

Why do you laugh?

 

[ksen]

Because it's funny that you think companies are using their record profits to hire new people in any significant way.

eta: http://www.americanthinker.com/blog/2014/08/a_jobless_recovery_according_to_the_new_york_times.html

eta2: good lord

Perhaps someone at the White House will read this editorial and propose something serious to make life easier for the nation's employers.

 

[Emily Lake]

Because it's funny that you think companies are using their record profits to hire new people in any significant way.

In retort, I find it funny that you seem to think that not a single company anywhere in the US has ever grown or expanded.

Or alternatively, perhaps you skimmed over the meaning of my post, in preference for confirming the bias you already have?

 

[Loren Pechtel]

wages have been flat with prices

No they haven't. Real wages have fallen.

Only in the eyes of the unions.

Only in the eyes of everyone that actually looks at inflation adjusted numbers.

More and more the good paying jobs are salaried, not hourly. Thus the average hourly rate falls behind.

I do believe "falls behind" is equivalent to "have fallen."

I accept your apology.

I was speaking English--do you know the language??

I'm not agreeing with you. I'm saying that the best jobs are increasingly not hourly jobs. Thus if you look only at hourly jobs wages are falling behind. That's not saying all wages are falling behind.

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Hmm, interesting. I point out the fact that *gulp* costs are not always passed on and that *gulp* higher labor costs can lead to higher profits and we have the straw man of infinite profits. Amazing!

Okay, perhaps I'm having an apoplexy if ignorance here... but I don't understand your reasoning. How is it possible for labor costs to increase, prices NOT increase, but somehow the profits increase?

Because business is a magical entity responsible for great evil but not required to follow basic laws of the universe in doing so.

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Because it's funny that you think companies are using their record profits to hire new people in any significant way.

eta: http://www.americanthinker.com/blog/2014/08/a_jobless_recovery_according_to_the_new_york_times.html

eta2: good lord

Perhaps someone at the White House will read this editorial and propose something serious to make life easier for the nation's employers.

They are hiring new people--just not enough to get rid of the backlog.

 

[ksen]

wages have been flat with prices

No they haven't. Real wages have fallen.

Only in the eyes of the unions.

Only in the eyes of everyone that actually looks at inflation adjusted numbers.

More and more the good paying jobs are salaried, not hourly. Thus the average hourly rate falls behind.

I do believe "falls behind" is equivalent to "have fallen."

I accept your apology.

I was speaking English--do you know the language??

I'm not agreeing with you. I'm saying that the best jobs are increasingly not hourly jobs. Thus if you look only at hourly jobs wages are falling behind. That's not saying all wages are falling behind.

- - - Updated - - -

Hmm, interesting. I point out the fact that *gulp* costs are not always passed on and that *gulp* higher labor costs can lead to higher profits and we have the straw man of infinite profits. Amazing!

Okay, perhaps I'm having an apoplexy if ignorance here... but I don't understand your reasoning. How is it possible for labor costs to increase, prices NOT increase, but somehow the profits increase?

Because business is a magical entity responsible for great evil but not required to follow basic laws of the universe in doing so.

- - - Updated - - -

Because it's funny that you think companies are using their record profits to hire new people in any significant way.

eta: http://www.americanthinker.com/blog/2014/08/a_jobless_recovery_according_to_the_new_york_times.html

eta2: good lord

Perhaps someone at the White House will read this editorial and propose something serious to make life easier for the nation's employers.

They are hiring new people--just not enough to get rid of the backlog.

Oh, so kind of what I exactly said.

 

[Canard DuJour]

Probably not and certainly not by the same %. No firm's costs consist entirely of MW labour, and for most it's a small fraction. You're now asserting that all firms put their prices up in unison by more than the increase in costs. It'd be a good argument for regulation if it wasn't laughable.

Yes, you can keep increasing the minimum wage to keep it ahead but you'll just be driving inflation up and hurting everyone.

Ahead of your supposed above-costs price hikes, you mean?

You are right that they don't all shift at once, but it's where equillibrium goes to over time and hence why wages have been flat with prices since costs are tied to labor.

I can't tell what exactly that means. It'd be surprising if prices weren't related to labour costs in all sorts of ways, but astonishing if prices rose in 1:1 proportion with MW, for reasons already pointed out.

 

[Canard DuJour]

Probably not and certainly not by the same %. No firm's costs consist entirely of MW labour, and for most it's a small fraction. You're now asserting that all firms put their prices up in unison by more than the increase in costs. It'd be a good argument for regulation if it wasn't laughable.

Yes, you can keep increasing the minimum wage to keep it ahead but you'll just be driving inflation up and hurting everyone.

Ahead of your supposed above-costs price hikes, you mean?

Workers who get more than MW do so because they are able to demand the higher wages. They're not going to accept now getting effectively less than they were, they'll demand and get similar increases.

They'll demand and get increases commensurate with price increases, which will be less than MW increases since MW labour is a typically small fraction of costs. Dollar MW increases will put cents on a typical household budget.

 

[Axulus]

Yes it's part of it, but to maintain their profit down the line, each step will be increasing their prices to compensate for the increased labor costs to them.

Not necessarily and probably not at all. Jeesh, the understanding of how businesses function is really lacking in this thread.

It doesn't need to be all. If your competition drops out due to the rising labor costs, you can raise your prices regardless.

 

[Axulus]

What he is saying is that a lot of the costs that get passed on are the labor costs from a previous step, with a lot of it being cyclical.

And costs are also absorbed. And profits sometimes grow. Etc. Etc...

Absorbed temporarily or permanently? How much absorption slack is there for businesses that rely on unskilled/low wage labor, and how do you know?

 

[Togo]

So let's take an example:

Wallmart returned $12.8 billion dollars to shareholders
http://news.walmart.com/walmart-facts/corporate-financial-fact-sheet

Wallmart number of employees - about 2.2 million
same source as above

Increasing the wage for all of these people by 500 bucks a year would cost 500*2.2million or about $ 1.1 billion, roughly a 9% decrease in profits.
But this is misleading, because most of these people are not on minimum wage to start with. Wallmart themselves state that 99% of their employees are on above minimum wage. (http://www.forbes.com/sites/clareoc...t-taxpayers-6-2-billion-in-public-assistance/)
So if we take them at their word, then spending that same $1.1billion would be enough to give their minimum wage employees $500*100= $50,000.

So Wallmart, with a less than 10% decrease in their realised profits (that is, cash extracted from the company by its owners), can afford to give their minimum wage employees just over 50k a year each.

Of course no one is asking for that much, but the figures show that Wallmart can, in fact, very easily afford a wage increase. Note I've ignored any benefits that might accrue from increases wages, and haven't included the boost this would give to the taxpayer by reducing the same employees dependence of food stamps, medicare, and other forms of income support.

 

[Axulus]

So let's take an example:

Wallmart returned $12.8 billion dollars to shareholders
http://news.walmart.com/walmart-facts/corporate-financial-fact-sheet

Wallmart number of employees - about 2.2 million
same source as above

Increasing the wage for all of these people by 500 bucks a year would cost 500*2.2million or about $ 1.1 billion, roughly a 9% decrease in profits.
But this is misleading, because most of these people are not on minimum wage to start with. Wallmart themselves state that 99% of their employees are on above minimum wage. (http://www.forbes.com/sites/clareoc...t-taxpayers-6-2-billion-in-public-assistance/)
So if we take them at their word, then spending that same $1.1billion would be enough to give their minimum wage employees $500*100= $50,000.

So Wallmart, with a less than 10% decrease in their realised profits (that is, cash extracted from the company by its owners), can afford to give their minimum wage employees just over 50k a year each.

Of course no one is asking for that much, but the figures show that Wallmart can, in fact, very easily afford a wage increase. Note I've ignored any benefits that might accrue from increases wages, and haven't included the boost this would give to the taxpayer by reducing the same employees dependence of food stamps, medicare, and other forms of income support.

I agree that this is an example with hard data, but how much of the labor market does Wal-Mart employ at this wage range? How typical are Wal-Mart's levels of profit for those who hire labor within this wage range? Are you using the most profitable example you can find, or a typical example representative of these companies in general?

 

[ksen]

Axulus asking the hard questions.

 

[Nice Squirrel]

And costs are also absorbed. And profits sometimes grow. Etc. Etc...

Absorbed temporarily or permanently?

I'm not sure what you mean by permanently? Are you talking about depreciation of capital investitures? One time costs? Loss of investment revenue? Acquisitions?

How much absorption slack is there for businesses that rely on unskilled/low wage labor, and how do you know?

There is a whopping huge gap, great deal, and a small amount. I know by looking at the numbers and by setting prices and by hiring workers, etc. Yes, I've done this type of work.

 

[Togo]

So let's take an example:

Wallmart returned $12.8 billion dollars to shareholders
http://news.walmart.com/walmart-facts/corporate-financial-fact-sheet

Wallmart number of employees - about 2.2 million
same source as above

Increasing the wage for all of these people by 500 bucks a year would cost 500*2.2million or about $ 1.1 billion, roughly a 9% decrease in profits.
But this is misleading, because most of these people are not on minimum wage to start with. Wallmart themselves state that 99% of their employees are on above minimum wage. (http://www.forbes.com/sites/clareoc...t-taxpayers-6-2-billion-in-public-assistance/)
So if we take them at their word, then spending that same $1.1billion would be enough to give their minimum wage employees $500*100= $50,000.

So Wallmart, with a less than 10% decrease in their realised profits (that is, cash extracted from the company by its owners), can afford to give their minimum wage employees just over 50k a year each.

Of course no one is asking for that much, but the figures show that Wallmart can, in fact, very easily afford a wage increase. Note I've ignored any benefits that might accrue from increases wages, and haven't included the boost this would give to the taxpayer by reducing the same employees dependence of food stamps, medicare, and other forms of income support.

I agree that this is an example with hard data, but how much of the labor market does Wal-Mart employ at this wage range? How typical are Wal-Mart's levels of profit for those who hire labor within this wage range? Are you using the most profitable example you can find, or a typical example representative of these companies in general?

I'm using a famous and well-known company with easily accessible data. They represent about 1% of the US market. Smaller companies would be harder to source. Wallmart is probably more profitable than most corporates, but then we don't need to fund anything like a 50k increase. For the franchise operations we're talking about a small increase seems not only feasible, but actually quite easy.

Let's turn the question around. Do you have any hard data to support the idea that such an increase is not affordable?

 

[ksen]

And in the Wal-Mart example you can compare how they do compared with another giant in that industry, Costco, which routinely pays their employees much better than Wal-Mart pays its employees.