Minimum Wage Study - MW Does Not Kill Jobs

[Loren Pechtel]

The average ratio of CEO to average paid worker in a corporation, was about 20-1 in 1965. Now, it's as high as 300 to 1, and always at least 70 to 1. Look it up, if you don't believe me. WTF! Nobody is worth that much pay and how many millions does one need to live? Yet, we shouldn't raise the minimum wage? I've got news for Loren. Even Walmart is now starting it's new employees at 14 to 15 dollars per hour, not great but about twice what the legal minimum wage has been since about 2009. So, while it certainly does need to be increased, supply and demand has already increased it to some extent. There is a small nonprofit in my town that has been begging for help for well over a year. The starting pay is only 11 dollars per hour, poor pay but still more than the current minimum wage, and at least this organization provides good benefits and a pension. It's crazy to say that raising the minimum wage, which is currently pauper pay is gong to cause job losses. There are too many jobs that can't be filled, from retail to nursing assistants, to entry level mechanics etc. etc. Does Loren even realize what companies are paying these days? I don't think anyone is paying 7.25 an hour because nobody is going to work for that pittance. It needs to be 15 dollars an hour at a minimum, which most employers are already paying.

As I've pointed out before this is deceptive data.

There has been a lot of consolidation. Fewer, bigger companies. The bigger the company the higher the ratio of CEO to average worker pay.

The market isn't driven by what people need to live on, it's driven by what you need to pay to get sufficiently qualified people. The minimum to live on is welfare--the government's job, not businesses job.

 

[lpetrich]

1) American Samoa says it kills jobs.

2) Basic economics says it kills jobs.

Thus the burden of proof is on the side that claims it's harmless.

But killing jobs is good for fighting inflation, right? It's necessary to keep people out of work to preserve the value of money, right?

 

[laughing dog]

If minimum wage earners are less than 1% of workers, you need to carefully explain how their x% wage increase gets transformed into x% inflation. Because your response appears to have many implicit unrealistic assumptions.

Because the higher wage workers see the gap between them and the ones below going away and demand more.

Do you have any empirical evidence to support your claim?

Your assumption of a completely pass through to inflation is unreasonable for a number of reasons. Here are just 2 of them.
First, since labor is not the entire cost of production, there is no reason to think that the cost of production would go up by x%. Using GDP data (which excludes intermediate product production), labor compensation bounces around 60% of GDP and minimum wage workers are 1% of workers, which suggests prices rise 0.6% of x%. Gross output (which includes the production of intermediate goods), is output double GDP, which suggests 0.3% of x%. Even if every worker in the US gets the same x% raise (a very dubious behavioral result), that gives a range of 30% to 60% of x%.

As an aside, please don't trot out your Marxist dogma that all production costs are either labor or taxes. Capital has an opportunity cost of non-use which does not depend on labor.

Second, it completely ignores demand for products. Domestic producers are limited by the price sensitivity of their customers. Even to get the results above, customers would have to be completely insensitive to price increases (very unrealistic assumption) or that demand for each product would have to shift out (increase enough) just enough to increase to the price by x%.

Your analysis is based on extremely unrealistic assumptions and poor economic analysis.

 

[laughing dog]

Price fixing always harms the economy. (And minimum wage is a form of price fixing.)

That is wrong. Basic economics shows that price fixing does no harm to an economy if the fixed price is ineffective and that it improves the economy if it is done to incorporate the effects of external effects.

 

[Jimmy Higgins]

Labor is not the only cost of production (for the trillionth time). So increase wages doesn't lead to equivalent product price increases. And if prices go up a little to allow wages to go up a decent amount, there is a net gain and the customer is paying what could be a more fair value for the labor in the production of the product they are buying. Yes, this will lead to automation, but automation is an on going process that doesn't need minimum wages to create its existence.

Yeah, you've claimed this before.

All costs of production are either labor or taxes. Sure, companies buy things--but you have to follow the chain all the way up (careful, it's recursive.) Eventually you'll either find labor or tax.

That is nonsense and not related to what I stated. Costs of labor include many things, like wages, FICA, health insurance, training, etc... So even when increase wages, the cost of the employee isn't increasing at 1 to 1. Forget about the cost of wages as a function of the needed cost of sale for a profit of whatever rate of gain.

Our economy has people using their own cars as taxis, food delivery, and part-time parcel delivery. That isn't good. The austerity that the Reaganites convinced America was good is in full swing these days. We are in dire need of medical assistant and home care labor, but we've decided cheaper is better and instead of using people that need better paying jobs to train for those fields, they are driving around, barely making money as self-employed contractors, so the companies that use their labor don't even need to contribute to benefits or FICA.

The economic priorities of too many Americans are in the gutter and we are developing shortfalls in areas we need to address, and have the labor to do it, just not the will to see it through, or to pay a couple bucks.

Of course it's not good. This comes back to the fundamental problem I've been pointing out--bad jobs exist. Good jobs drive out bad jobs, thus it's clear that there are not enough good jobs to go around. Minimum wage laws can't create good jobs, they'll just convert bad jobs into unemployment.

Automation transitions dispensable jobs into unemployment. Higher wages, when applied evenly across the board do not necessarily kill jobs, because price hiking can occur (and when one place does it, the others will follow suit). And those price increases will be a fraction of the wage hike, as the cost of production is not 1 to 1 with wage increases (presuming we aren't increasing wages 1000%).

 

[bilby]

This comes back to the fundamental problem I've been pointing out--bad jobs exist. Good jobs drive out bad jobs, thus it's clear that there are not enough good jobs to go around. Minimum wage laws can't create good jobs, they'll just convert bad jobs into unemployment.

Perhaps, if you think that this problem is fundamental, you might:

A) Define what makes a job "good" or "bad" in this argument, as it is very unclear indeed what the fuck you mean here; and

B) Explain why unemployment is necessarily and/or obviously worse than "bad" jobs, and for whom.

 

[Jimmy Higgins]

This comes back to the fundamental problem I've been pointing out--bad jobs exist. Good jobs drive out bad jobs, thus it's clear that there are not enough good jobs to go around. Minimum wage laws can't create good jobs, they'll just convert bad jobs into unemployment.

Perhaps, if you think that this problem is fundamental, you might:

A) Define what makes a job "good" or "bad" in this argument, as it is very unclear indeed what the fuck you mean here; and

B) Explain why unemployment is necessarily and/or obviously worse than "bad" jobs, and for whom.

What he means is good paying jobs and bad paying jobs. Bad paying jobs pay poorly because the value of the labor isn't valued enough... despite clearly the job existing implying a need for said value... which then probably implies the labor isn't a value issue, but it is a skill issue and plenty of other people can do the job for the measly wages being offered, therefore... everything is fine!

 

[bilby]

Price fixing always harms the economy.

As "the economy" isn't a thing that can be harmed, this argument is less than compelling.

People can be harmed; Economies just change.

Whenever I hear someone saying that something will harm "the economy", I usually discover that "the economy" is being used as a placeholder for "wealthy people", and that the argument boils down to that taking from the rich to give to the poor is fundamentally unfair and immoral, while the opposite is virtuous and equitable - but that the speaker is wary of explicitly saying so, because for some inexplicable reason, most people don't agree with that.

An economy is a tool for making a society function. It can be used to benefit everyone, or to benefit only a small subset of people; It can be structured in a bewildering variety of ways. But it cannot be "harmed".

People can be harmed; One way in which people can be harmed is by living in a society that doesn't provide them with basic needs such as food and shelter; or with protection from random events such as ill health, injury, or natural disasters.

Modern developed nations can easily afford not to harm any of their people in this way. But instead of helping them, you want to permit their suffering to worsen, to protect "the economy". That's seriously ugly and misguided.

It's not the middle ages anymore. Society need not be terrified of freeloaders, and restrict their numbers to traditionally permitted freeloading classes such as children, the elderly, the disabled, and the clergy. If there are no "good jobs" for healthy young adults to perform, then let them live comfortable lives without jobs. It's neither necessary nor helpful to enslave them in "bad jobs".

 

[bilby]

The minimum to live on is welfare--the government's job, not businesses job.

Exactly.

So I presume that you favour massive increases in welfare, paid for through highly progressive taxation?

I mean, that's the logical conclusion of your position here.

And it renders minimum wages moot - a person who is provided with a basic income that's adequate for the provision of food, shelter, healthcare, and other essentials, doesn't need a minimum wage.

All that's required is to make that basic income easy to collect, and available to anyone - ideally, it could be paid universally and automatically to everyone.

 

[ZiprHead]

All that's required is to make that basic income easy to collect, and available to anyone - ideally, it could be paid universally and automatically to everyone.

Yup. Universal basic income. Take it back from those who don't need it through a very progressive tax system.

 

[Elixir]

"You can't detect it, but it's really happening" is a bad argument for ghosts, a bad argument for Gods, and a bad argument for psychic powers.

But apparently it's a good argument for not raising minimum wage in case it causes unemployment.

We have one data point where the signal could have shown up above the noise floor--and it was obviously seen. Attempting to bury that in measurements where there's no hope of seeing a signal won't change that.

OTOH we have American Samoa?
A standout data set that you are convinced is a perfect proxy for the US economy?
C’mon Loren! The Thread title’s “negative claim” is not the thread subject. It’s about the positive claim depicted below. If you believe that claim to be false or needing modification, you’re going to need more than American Samoa and an erroneous, oversimplified fear of repercussions if you hope to dissuade anyone that raising the MW is a good idea. Which reminds me - been meaning to ask; do you believe in any minimum wage?

And you have yet to address the claim that the dollars paid to MW employees recirculate in the economy rather than being diverted to stockholders and executives, whose usual tendency is to hoard wealth.

 

[Worldtraveller]

Price fixing always harms the economy. (And minimum wage is a form of price fixing.)

That is wrong. Basic economics shows that price fixing does no harm to an economy if the fixed price is ineffective and that it improves the economy if it is done to incorporate the effects of external effects.

Anytime Loren uses "always" in an argument, it's always wrong.

I'd call it intentional, but that's not allowed here.

Re: capping the ratio of min/max salary. It would not be that hard to close off loopholes, including contractors and any other non-W-2 employees in the law. But the first thing that jumps to LP's brain is immediately enough to make the idea "not work". Funny how that works.

 

[Loren Pechtel]

1) American Samoa says it kills jobs.

2) Basic economics says it kills jobs.

Thus the burden of proof is on the side that claims it's harmless.

But killing jobs is good for fighting inflation, right? It's necessary to keep people out of work to preserve the value of money, right?

Red herring. I presume you have no actual rebuttal.

 

[Loren Pechtel]

Do you have any empirical evidence to support your claim?

Your assumption of a completely pass through to inflation is unreasonable for a number of reasons. Here are just 2 of them.
First, since labor is not the entire cost of production, there is no reason to think that the cost of production would go up by x%. Using GDP data (which excludes intermediate product production), labor compensation bounces around 60% of GDP and minimum wage workers are 1% of workers, which suggests prices rise 0.6% of x%. Gross output (which includes the production of intermediate goods), is output double GDP, which suggests 0.3% of x%. Even if every worker in the US gets the same x% raise (a very dubious behavioral result), that gives a range of 30% to 60% of x%.

As an aside, please don't trot out your Marxist dogma that all production costs are either labor or taxes. Capital has an opportunity cost of non-use which does not depend on labor.

Capital is simply stored labor--and since you can't actually store labor it's just a matter of directing labor to various objectives.

I do not agree with Marx--just because he got a lot of stuff right there are also critical flaws in his work.

Second, it completely ignores demand for products. Domestic producers are limited by the price sensitivity of their customers. Even to get the results above, customers would have to be completely insensitive to price increases (very unrealistic assumption) or that demand for each product would have to shift out (increase enough) just enough to increase to the price by x%.

Your analysis is based on extremely unrealistic assumptions and poor economic analysis.

In the long run that's what will happen--it percolates through the whole economy. It's never going to actually reach a stable point because the market keeps changing.

 

[Loren Pechtel]

Price fixing always harms the economy. (And minimum wage is a form of price fixing.)

That is wrong. Basic economics shows that price fixing does no harm to an economy if the fixed price is ineffective and that it improves the economy if it is done to incorporate the effects of external effects.

Of course it does nothing if it does nothing. That's irrelevant nonsense.

And how does price fixing incorporate external effects???

 

[Loren Pechtel]

Labor is not the only cost of production (for the trillionth time). So increase wages doesn't lead to equivalent product price increases. And if prices go up a little to allow wages to go up a decent amount, there is a net gain and the customer is paying what could be a more fair value for the labor in the production of the product they are buying. Yes, this will lead to automation, but automation is an on going process that doesn't need minimum wages to create its existence.

Yeah, you've claimed this before.

All costs of production are either labor or taxes. Sure, companies buy things--but you have to follow the chain all the way up (careful, it's recursive.) Eventually you'll either find labor or tax.

That is nonsense and not related to what I stated. Costs of labor include many things, like wages, FICA, health insurance, training, etc... So even when increase wages, the cost of the employee isn't increasing at 1 to 1. Forget about the cost of wages as a function of the needed cost of sale for a profit of whatever rate of gain.

Have you never paid attention to your tax return?? FICA is a fixed percentage of income for most workers (and all minimum wage workers.) Thus it most certainly increases with wage cost.

Health insurance--that's wages to doctors, drug company workers etc.

Training--that's wages to the trainer.

Our economy has people using their own cars as taxis, food delivery, and part-time parcel delivery. That isn't good. The austerity that the Reaganites convinced America was good is in full swing these days. We are in dire need of medical assistant and home care labor, but we've decided cheaper is better and instead of using people that need better paying jobs to train for those fields, they are driving around, barely making money as self-employed contractors, so the companies that use their labor don't even need to contribute to benefits or FICA.

The economic priorities of too many Americans are in the gutter and we are developing shortfalls in areas we need to address, and have the labor to do it, just not the will to see it through, or to pay a couple bucks.

Of course it's not good. This comes back to the fundamental problem I've been pointing out--bad jobs exist. Good jobs drive out bad jobs, thus it's clear that there are not enough good jobs to go around. Minimum wage laws can't create good jobs, they'll just convert bad jobs into unemployment.

Automation transitions dispensable jobs into unemployment. Higher wages, when applied evenly across the board do not necessarily kill jobs, because price hiking can occur (and when one place does it, the others will follow suit). And those price increases will be a fraction of the wage hike, as the cost of production is not 1 to 1 with wage increases (presuming we aren't increasing wages 1000%).

You're showing your problem here--presuming that effects disappear when they drop below the noise threshold.

 

[Loren Pechtel]

This comes back to the fundamental problem I've been pointing out--bad jobs exist. Good jobs drive out bad jobs, thus it's clear that there are not enough good jobs to go around. Minimum wage laws can't create good jobs, they'll just convert bad jobs into unemployment.

Perhaps, if you think that this problem is fundamental, you might:

A) Define what makes a job "good" or "bad" in this argument, as it is very unclear indeed what the fuck you mean here; and

B) Explain why unemployment is necessarily and/or obviously worse than "bad" jobs, and for whom.

I've explained it before. Bad jobs are the jobs you're complaining about.

And how can producing nothing be superior to producing something?

 

[Loren Pechtel]

It's not the middle ages anymore. Society need not be terrified of freeloaders, and restrict their numbers to traditionally permitted freeloading classes such as children, the elderly, the disabled, and the clergy. If there are no "good jobs" for healthy young adults to perform, then let them live comfortable lives without jobs. It's neither necessary nor helpful to enslave them in "bad jobs".

Then there's no incentive to get the skills to be productive.

We are seeing problems develop from your approach--people who aren't productive enough to meet the minimum wage become permanent drains on society because there's no path out of it. As time goes on the economy will dig itself into a hole that will be very hard to recover from.

 

[Loren Pechtel]

The minimum to live on is welfare--the government's job, not businesses job.

Exactly.

So I presume that you favour massive increases in welfare, paid for through highly progressive taxation?

No, because I believe this will be counterproductive.

I mean, that's the logical conclusion of your position here.

And it renders minimum wages moot - a person who is provided with a basic income that's adequate for the provision of food, shelter, healthcare, and other essentials, doesn't need a minimum wage.

All that's required is to make that basic income easy to collect, and available to anyone - ideally, it could be paid universally and automatically to everyone.

Eventually that will be the case, but I do not believe we are to that point. And I don't think it should be enough to be comfortable--you still need an incentive to better yourself.

 

[Loren Pechtel]

Price fixing always harms the economy. (And minimum wage is a form of price fixing.)

That is wrong. Basic economics shows that price fixing does no harm to an economy if the fixed price is ineffective and that it improves the economy if it is done to incorporate the effects of external effects.

Anytime Loren uses "always" in an argument, it's always wrong.

I'd call it intentional, but that's not allowed here.

Re: capping the ratio of min/max salary. It would not be that hard to close off loopholes, including contractors and any other non-W-2 employees in the law. But the first thing that jumps to LP's brain is immediately enough to make the idea "not work". Funny how that works.

The whole economy is interlinked, you can't really draw a line.