Minimum wage - leads to price increases more regressive than sales tax, only 35% of the benefits go to those under 2x poverty line

[Duke Leto]

You are basing your argument on the fantasy that Wal-Mart pays below-average wages.

OK, what argument have I based on that?

He doesn't actually read complex arguments. Generally, he goes as far as the first thing he disagrees with and then stops, and constructs a straw man out of vague recollections of other people's arguments.

 

[laughing dog]

Actually economics says just what you just said. And then it adds thing like less profits means more marginal businesses close and fewer MW employing businesses open. And that higher prices for those products you raised the price of means less demand for them, and this means less profits still and fewer businesses that employ MW workers still. And all those things you euphemistically refer to as "how they employ people" cut in the direction of employing fewer MW people and perhaps thus reducing the quality of the service and experience for customers causing demand for these employers to fall further still.

So when you enter the economics zone it means MW workers get fewer jobs, fewer hours, and places that employ them will be more likely to shut down.

These are realities people in the ksen zone usually seem to deny.

I call it the kzone.

Interestingly, the article on which the OP is based, is written by a well-known labor economist and it assumes away the very effects that dismal points out.

MaCurdy's study had a chance to be useful. Looking at the minimum wage as an implicit value added tax is a clever insight to use to measure its empirical incidence on consumers. His assumptions insure that any estimate is the maximum effect on prices so it is the upper bound on the actual incidence. If he had then relaxed the assumptions to get more realistic estimates, his study would be more useful.

 

[fromderinside]

I call it the kzone.

Interestingly, the article on which the OP is based, is written by a well-known labor economist and it assumes away the very effects that dismal points out.

MaCurdy's study had a chance to be useful. Looking at the minimum wage as an implicit value added tax is a clever insight to use to measure its empirical incidence on consumers. His assumptions insure that any estimate is the maximum effect on prices so it is the upper bound on the actual incidence. If he had then relaxed the assumptions to get more realistic estimates, his study would be more useful.

I thought I'd just pile on here. Sorry Dismal. Yes it's a Seattle study. Local Minimum Wage Laws: Impacts onWorkers, Families and Businesses http://www.homeworkmarket.com/sites/default/files/q5/11/07/berkeley-minimum-wage-study.pdf

That concludes

Finally, raising the minimum wage is not a cure-all, especially in the face of larger forcesgenerating inequality that require national attention. Still, our assessment of the research evidence is that these policies have worked well. They raise the incomes of low-wage workers and their families. The costs to businesses are absorbed largely by reduced turnover costs and by small price increases among restaurants. Additional benefits, such as reduced spending on public assistance programs and the local stimulus of additional spending by low-income families, might also occur. But we do not yet have enough definitive research on these effects

BTW: What was the effect of Henry ford raising the daily wage minimum for his workers to $5 from an average of $2.31 in 1915? Oh. Turnover dropped, quality increased, productivity increased, profits increased, etc, etc.etc. I wonder why many of the larger corporations provided paid sick days, health insurance, and the like to their employees? Exactly. they saw gains in quality of work, retention of workforce, worker confidence, etc.

Amazing how all those conservative chart makes miss all this stuff.

 

[Loren Pechtel]

Awful for your position, that is. Just because you don't like this reality doesn't make it go away, though.

No, but just because you like it doesn't make it reality either. Higher costs do not necessarily get translated completely into higher prices. That is taught in economics 101. In order that those costs to be completely translated into higher prices, demand for the output has to be completely unresponsive to price changes or that supply has to basically completely responsive to costs changes (the terminology is perfectly elastic). Now the assumptions (demand is perfectly inelastic or that supply is perfectly elastic) is as unrealistic as it gets.

Of course there's a bit of a change but when the profit margins are low (and in such jobs they usually are) there's not really anything else to do but pass it on or quit providing service in the first place.

 

[Axulus]

No, but just because you like it doesn't make it reality either. Higher costs do not necessarily get translated completely into higher prices. That is taught in economics 101. In order that those costs to be completely translated into higher prices, demand for the output has to be completely unresponsive to price changes or that supply has to basically completely responsive to costs changes (the terminology is perfectly elastic). Now the assumptions (demand is perfectly inelastic or that supply is perfectly elastic) is as unrealistic as it gets.

Of course there's a bit of a change but when the profit margins are low (and in such jobs they usually are) there's not really anything else to do but pass it on or quit providing service in the first place.

However, it's possible that some of the labor cost increase can be mitigated through greater productivity (by using more capital and attracting slightly higher quality employees). Also, some companies have higher than average profit margins (and can thus absorb some of the cost with reductions in such margins). We can be almost certain that not 100% of the cost increase will be passed on into higher prices.

 

[laughing dog]

No, but just because you like it doesn't make it reality either. Higher costs do not necessarily get translated completely into higher prices. That is taught in economics 101. In order that those costs to be completely translated into higher prices, demand for the output has to be completely unresponsive to price changes or that supply has to basically completely responsive to costs changes (the terminology is perfectly elastic). Now the assumptions (demand is perfectly inelastic or that supply is perfectly elastic) is as unrealistic as it gets.

Of course there's a bit of a change but when the profit margins are low (and in such jobs they usually are) there's not really anything else to do but pass it on or quit providing service in the first place.

Or swallow it, depending on the circumstances.

- - - Updated - - -

Of course there's a bit of a change but when the profit margins are low (and in such jobs they usually are) there's not really anything else to do but pass it on or quit providing service in the first place.

However, it's possible that some of the labor cost increase can be mitigated through greater productivity (by using more capital and attracting slightly higher quality employees). Also, some companies have higher than average profit margins (and can thus absorb some of the cost with reductions in such margins). We can be almost certain that not 100% of the cost increase will be passed on into higher prices.

And yet, the author of the simulation made explicit assumptions to rule out a less than 100% pass through.

 

[Underseer]

So long story short, the original paper and allegedly this paper make a great argument for conservatives to increase welfare distributions because they are more effective in getting money to those in poverty.

I have access to the paper. It's not a study but a thought experiment and lit review to support a preconceived conclusion. There are no hard numbers only a lot of "shoulds" and "we thinks". I could do the same thing and "prove" the Koch Bros are Bolsheviks.

That's where you would be wrong.

The thought experiment in this paper is valid and true because it arrives at a conclusion that is approved of by the aristocracy, where as your proposed idea that the Koch brothers are Bolsheviks is obvious lunacy. How can you be so ignorant about what makes things true or false in our world? [/concservolibertarian]

 

[ZiprHead]

Yeah, that's a pretty impressively Newspeaky argument.

"We are not allowing you to work for less than minimum wage, therefore we are declaring any work you would be willing to perform at less than that wage to be worthless." Yeah, I don't actually think most minimum wage employees think like that.

Also, I had Axulus pegged as significantly younger than late 60s/early 70s. My mental picture of him had been some Libertarian Hedge Fund salesman in his 20s or 30s. Quite a shame to see repeated proof that age confers no wisdom.

Minimum wage when Axulus was getting it (+ 16%) was worth a lot more then than it is today.

 

[Loren Pechtel]

Of course there's a bit of a change but when the profit margins are low (and in such jobs they usually are) there's not really anything else to do but pass it on or quit providing service in the first place.

However, it's possible that some of the labor cost increase can be mitigated through greater productivity (by using more capital and attracting slightly higher quality employees). Also, some companies have higher than average profit margins (and can thus absorb some of the cost with reductions in such margins). We can be almost certain that not 100% of the cost increase will be passed on into higher prices.

More capital: Sure--but that means workers losing their job, something the left says won't happen.

Higher quality: While increasing wages can attract higher quality workers that's only because they have an advantage. With the minimum wage there's no such advantage, thus the worker quality won't go up.

- - - Updated - - -

Of course there's a bit of a change but when the profit margins are low (and in such jobs they usually are) there's not really anything else to do but pass it on or quit providing service in the first place.

Or swallow it, depending on the circumstances.

Once again, the infinite pool of profits.

 

[HaRaAYaH]

Maybe I'm not bright enough to follow this. But, isn't this a binary question? Either you believe in God or you don't. Like being pregnant, you either are or you are not. Can't be strongly pregnant or strongly atheist.

 

[Jimmy Higgins]

However, it's possible that some of the labor cost increase can be mitigated through greater productivity (by using more capital and attracting slightly higher quality employees). Also, some companies have higher than average profit margins (and can thus absorb some of the cost with reductions in such margins). We can be almost certain that not 100% of the cost increase will be passed on into higher prices.

More capital: Sure--but that means workers losing their job, something the left says won't happen.

Higher quality: While increasing wages can attract higher quality workers that's only because they have an advantage. With the minimum wage there's no such advantage, thus the worker quality won't go up.

- - - Updated - - -

Of course there's a bit of a change but when the profit margins are low (and in such jobs they usually are) there's not really anything else to do but pass it on or quit providing service in the first place.

Or swallow it, depending on the circumstances.

Once again, the infinite pool of profits.

Or the cost of goods goes up. From the 2000 report, they stated that the poorest quintile spent $84 more a year due to the increase of goods and services related to the minimum wage hike. OMG!

 

[DBT]

The US is not the only nation on Earth, other countries have a higher minimum wage without higher unemployment level than the US. Raising the incomes of those on the bottom of the heap can be done without major drama. A fair pay rate for productive work performed is not too much to ask of the US, being one of the richest countries in the world.

 

[laughing dog]

Once again, the infinite pool of profits.

Accepting a lower profit margin in the short run does not imply or require an infinite pool of profits. It simply requires the owner to compare her/his long-run outlook in other ventures versus staying in the current business. Really, what on earth would prompt anyone to post such an irrelevant and ignorant meme like "infinite pool of profits"?

 

[Duke Leto]

Once again, the infinite pool of profits.

Accepting a lower profit margin in the short run does not imply or require an infinite pool of profits. It simply requires the owner to compare her/his long-run outlook in other ventures versus staying in the current business. Really, what on earth would prompt anyone to post such an irrelevant and ignorant meme like "infinite pool of profits"?

Irrelevance AND ignorance?

 

[Loren Pechtel]

Once again, the infinite pool of profits.

Accepting a lower profit margin in the short run does not imply or require an infinite pool of profits. It simply requires the owner to compare her/his long-run outlook in other ventures versus staying in the current business. Really, what on earth would prompt anyone to post such an irrelevant and ignorant meme like "infinite pool of profits"?

You continue to prove that you believe this supposedly irrelevant and ignorant meme.

You say "accepting a lower profit margin" implies that in all cases there is enough profit margin to pay the extra cost and still make profit. Since you haven't made any attempt to prove that there are enough profits to fund this that means the profits must be always greater than the costs--but since you made no attempt to figure this value the profits must be infinite.

 

[DBT]

Perhaps within some sectors of the economy there are too many firms competing for a slice of the pie, driving down prices, profits and incomes? A race to the bottom.

Not that any of this effects the super rich, who are accumulating an ever greater slice of the pie....50% of the worlds wealth in the hands of 1% of the worlds population and growing, yet still propogating the 'trickle down' myth.

 

[Canard DuJour]

You say "accepting a lower profit margin" implies that in all cases there is enough profit margin to pay the extra cost and still make profit.

Nobody but you has said anything of the kind.

For 100% of a given cost increase not to be passed on to consumers, it need only be that not all businesses are on the margin of profitability. Which they patently aren't.

 

[laughing dog]

Accepting a lower profit margin in the short run does not imply or require an infinite pool of profits. It simply requires the owner to compare her/his long-run outlook in other ventures versus staying in the current business. Really, what on earth would prompt anyone to post such an irrelevant and ignorant meme like "infinite pool of profits"?

You continue to prove that you believe this supposedly irrelevant and ignorant meme.

I fail to see how anyone could draw that conclusion from the original statement of "Or swallow it, depending on the circumstances or from bolded and italicized statement above.

You say "accepting a lower profit margin" implies that in all cases there is enough profit margin to pay the extra cost and still make profit.

No it doesn't. Originally, I wrote "depending on the circumstances" which clearly does not mean in all cases. Even if you are incapable of understanding that (or forgot it), then the statement that the owner needed to compare his/her long run outlook in other ventures versus staying in the current business" should clearly indicate that there may not be sufficient profit margin to remain in business EVEN IF THERE IS enough to pay the additional cost.

Since you haven't made any attempt to prove that there are enough profits to fund this that means the profits must be always greater than the costs--but since you made no attempt to figure this value the profits must be infinite.

How on earth do you come up with this nonsense?

 

[ksen]

why does loren think there is an infinite pool of wages from which owners can extract more and more profits?

 

[dismal]

BTW: What was the effect of Henry ford raising the daily wage minimum for his workers to $5 from an average of $2.31 in 1915? Oh. Turnover dropped, quality increased, productivity increased, profits increased, etc, etc.etc. I wonder why many of the larger corporations provided paid sick days, health insurance, and the like to their employees? Exactly. they saw gains in quality of work, retention of workforce, worker confidence, etc.

Amazing how all those conservative chart makes miss all this stuff.

Argh, the fact that employers voluntarily raise wages to lower turnover because there is competition for good workers etc cuts against the argument that government needs to ban low wages.

You should be spouting the typical implausible bullshit about how there is a labor market oligopoly and employers beat down wages to subsistence levels if you want to argue for a Minimum Wage.