Ontario raising minimum wage to $15

[Loren Pechtel]

Nor have we tried. It is illogical to seek to prove a negative.

Have YOU established that raising the minimum wage would cause an across-the-board drop in profit margins for every corporation in America? That should be easy enough to prove.

It turns out that 43% of All Americans make less than $15/hour. Assuming an even distribution between 7.50 and 15, and assuming that we for no reason round this up to 50%, and assuming for no reason we assume that all of the 320 million people living in America are part of the work force, then that's 160 million people all getting a pay raise of $3.75 an hour.

$3.75 x 160 million x 40 x 52 = $1.2 trillion in new income for American workers.

Total corporate profits in FIRST QUARTER of 2017 = $1.567 trillion.

So even in this totally unrealistic nationwide minimum wage hike under the worst conditions imaginable, the result would be a 20% reduction in corporate profits in exchange for a 7% increase in GDP per capita. At the same time, the Median income for American workers would increase to about $72,000 per year.

Have you established that American corporations cannot survive a 20% decrease in profits?

Have you established that the increased demand for goods and services implied in a 7% increase in GDP -- and a 15% rise in median income -- is smaller than what is needed to balance the loss of revenue?

Have you established that the minimum wage increase would actually affect ALL industries and not just the ones whose employees make less than $15 an hour?

You're the one with the active position, you need to support it.

Actually, YOU are the one with the active position that raising the minimum wage would cause corporate profits to fall and therefore result in economic disaster. You don't get to demand everyone else prove you wrong when you haven't done anything to back it up except special pleading and generalizations. You can start by answering the questions above and showing your work while you're at it.

Showing that there is enough total profit in the business world doesn't show that there is enough profit in every industry, or in every business. The distribution is very uneven.

 

[Crazy Eddie]

Showing that there is enough total profit in the business world doesn't show that there is enough profit in every industry, or in every business. The distribution is very uneven.

Indeed.

This is exactly why your argument is invalid.

Because a minimum wage increase wouldn't affect all industries or all businesses. It would only affect businesses that are very marginal AND depend on low wages to maintain their profit margins. Not all businesses fit this description. Not even MOST of them do. Marginal businesses that do not depend on unskilled labor will not be affected and profitable businesses that use a lot of min-wage labor will be able to easily absorb the increase.

Marginal businesses that cannot afford the increases will either get their act together, or they'll go under.

 

[PyramidHead]

Actually, marginal business that do not depend on unskilled labor will BENEFIT from their customers having increased wages.

 

[Crazy Eddie]

Actually, marginal business that do not depend on unskilled labor will BENEFIT from their customers having increased wages.

Unless, of course, all of those businesses inexplicably cut the hours of ALL of their min-wage workers in order to preserve their profit margins.

On the other hand, firms that slash their workforce under such conditions are making a conscious effort to be less productive at a time when at least SOME of their customers are suddenly going to be making a lot more money. Firms that have already taken a conscious effort to keep wages liveable and train the best employees they can will be in a much better position to capitalize in this since the demand for their services will rise while the McService sector will be struggling with profit margins it can no longer sustain.

There will be losers and there will be winners. Business owners that are innovative and forward thinking will make a killing off the wage hike. Business owners that are trying to squeeze blood from the financial stone of low-skill labor will loose out big time.

 

[Loren Pechtel]

Showing that there is enough total profit in the business world doesn't show that there is enough profit in every industry, or in every business. The distribution is very uneven.

Indeed.

This is exactly why your argument is invalid.

Because a minimum wage increase wouldn't affect all industries or all businesses. It would only affect businesses that are very marginal AND depend on low wages to maintain their profit margins. Not all businesses fit this description. Not even MOST of them do. Marginal businesses that do not depend on unskilled labor will not be affected and profitable businesses that use a lot of min-wage labor will be able to easily absorb the increase.

Marginal businesses that cannot afford the increases will either get their act together, or they'll go under.

You're making the assumption that it's profitable businesses that use a lot of minimum wage labor. Strangely enough, minimum wage jobs tend to be concentrated in highly competitive areas where there aren't a lot of profits. (Fast food is a good example.)

 

[Hawkingfan]

You're making the assumption that it's profitable businesses that use a lot of minimum wage labor. Strangely enough, minimum wage jobs tend to be concentrated in highly competitive areas where there aren't a lot of profits. (Fast food is a good example.)

McDonald's 2016 net income was $4.7 billion after taxes from $24.6 billion in revenues.
http://www.nasdaq.com/symbol/mcd/financials?query=income-statement
Competitor Burger King's 2016 net income was $3.5 billion after taxes from $15.2 billion in revenues.
https://finance.yahoo.com/quote/BK/financials?ltr=1

 

[Crazy Eddie]

Indeed.

This is exactly why your argument is invalid.

Because a minimum wage increase wouldn't affect all industries or all businesses. It would only affect businesses that are very marginal AND depend on low wages to maintain their profit margins. Not all businesses fit this description. Not even MOST of them do. Marginal businesses that do not depend on unskilled labor will not be affected and profitable businesses that use a lot of min-wage labor will be able to easily absorb the increase.

Marginal businesses that cannot afford the increases will either get their act together, or they'll go under.

You're making the assumption that it's profitable businesses that use a lot of minimum wage labor.

No, I'm making the assumption that there are UNprofitable businesses that use a lot of minimum wage labor and that they would not be able to stay in business otherwise.

To be clear: i'm assuming there are four types of businesses:
1) Profitable enterprises that don't use min-wage labor
2) Profitable enterprises that DO use min-wage labor
3) Unprofitable enterprises that don't use min-wage labor
4) Unprofitable enterprises that DO use min-wage labor

The first type of business will not be affected at all or will see a boost in demand in for its products
The second type of business will be affected but will survive and eventually flourish.
The third type of business will neither not be affected or will see a boost in demand for its products
The fourth type of business will strongly affected and will probably tank

Strangely enough, minimum wage jobs tend to be concentrated in highly competitive areas where there aren't a lot of profits. (Fast food is a good example.)

Seems like an argument for thinning the field a little, no?

 

[LordKiran]

You're making the assumption that it's profitable businesses that use a lot of minimum wage labor.

No, I'm making the assumption that there are UNprofitable businesses that use a lot of minimum wage labor and that they would not be able to stay in business otherwise.

To be clear: i'm assuming there are four types of businesses:
1) Profitable enterprises that don't use min-wage labor
2) Profitable enterprises that DO use min-wage labor
3) Unprofitable enterprises that don't use min-wage labor
4) Unprofitable enterprises that DO use min-wage labor

The first type of business will not be affected at all or will see a boost in demand in for its products
The second type of business will be affected but will survive and eventually flourish.
The third type of business will neither not be affected or will see a boost in demand for its products
The fourth type of business will strongly affected and will probably tank

Strangely enough, minimum wage jobs tend to be concentrated in highly competitive areas where there aren't a lot of profits. (Fast food is a good example.)

Seems like an argument for thinning the field a little, no?

Fast food joints are the most curious and hardest to predict businesses. On one hand, their administrative structure means that most individual stores are licensed out to individual entrepreneurs, with thin profit margins (The corporation gains the lions share) this means a few things will likely happen.

-Corporate profits will go down as individual store owners will require keeping more of the individual store's profits to pay their employees.

-There will be a large push to automate and mechanize the process as much as possible in the name of maintaining the status quo on the top end.

-The less successful chains will go under and likely be bought out by larger chains that can more effectively absorb the pay spike in the short term.

To put Crazy Eddie's overall point another way since some people don't seem to understand: Chain stores (In the sense that they follow the above mentioned admin. structure) are the only businesses that are really vulnerable to pay increases putting them under since their profitability relies on public subsidies, which means they were never economically viable to begin with. Thus rendering LP's objections totally and completely moot.

 

[OLDMAN]

Yeah, do we need a fast food joint on every corner? Every town has the same stores, restaurants, gas stations, etc... Original business is a thing of the past.

 

[Loren Pechtel]

-There will be a large push to automate and mechanize the process as much as possible in the name of maintaining the status quo on the top end.

We are already seeing this happen--machinery taking over parts of the job to keep labor costs down.

To put Crazy Eddie's overall point another way since some people don't seem to understand: Chain stores (In the sense that they follow the above mentioned admin. structure) are the only businesses that are really vulnerable to pay increases putting them under since their profitability relies on public subsidies, which means they were never economically viable to begin with. Thus rendering LP's objections totally and completely moot.

1) This is based on the assumption that companies have an obligation to maintain a standard of living of their employees.

2) Note that the automation removes the jobs entirely, reducing the employees to $0. Why is that better than the low wage?

The only thing I can think of here is that you don't understand that destroying low-wage jobs doesn't make good jobs appear. It means desperate workers which will drive labor rates down.

 

[LordKiran]

We are already seeing this happen--machinery taking over parts of the job to keep labor costs down.

To put Crazy Eddie's overall point another way since some people don't seem to understand: Chain stores (In the sense that they follow the above mentioned admin. structure) are the only businesses that are really vulnerable to pay increases putting them under since their profitability relies on public subsidies, which means they were never economically viable to begin with. Thus rendering LP's objections totally and completely moot.

1) This is based on the assumption that companies have an obligation to maintain a standard of living of their employees.

2) Note that the automation removes the jobs entirely, reducing the employees to $0. Why is that better than the low wage?

The only thing I can think of here is that you don't understand that destroying low-wage jobs doesn't make good jobs appear. It means desperate workers which will drive labor rates down.

1. People are entitled to a reasonable profit for contracting out their services, yes.

2. Wrong. Automation creates new jobs for the manufacturing and maintaining of those automated machines and computer systems. Beyond that, do you really need the benefits of automation explained to you?

 

[laughing dog]

Your argument has been shown to be incoherent. That is not a derail - it is a relevant fact.
To repeat "you have not connected that a minimum wage necessarily drops the profit rate too low", so your responses are simply more examples of incoherent babbling.

Moving the goalposts.

The issue was that your side hasn't established that taking it from business profits will not drop the profit rate too low. You're the one with the active position, you need to support it.

Wrong. You are the one claiming that an increase in the minimum wage will necessarily drop the "profit rate" too low without an mechanism that necessarily connect an increase in the minimum wage to a "too low" drop in the undefined "profit rate" or any data to support your claim.

It is not shifting the goal posts to expect you to substantiate your claim about reality. At this point, your claim has as much validity as "An increase in the minimum wage will cause the extinction of unicorns".

 

[Crazy Eddie]

1) This is based on the assumption that companies have an obligation to maintain a standard of living of their employees.

No, it's based on the assumption that companies have an obligation to be economically viable and not depend on public subsidies for their survival. You would surely agree that taxpayer subsidies were NOT intended to prop up business owners and shield them from the consequences of their own mistakes.

2) Note that the automation removes the jobs entirely, reducing the employees to $0.

No, automation replaces inefficient manual labor with far more effective technical support work. Someone still has to build and maintain the machines, keep them clean, keep them running, debug and fix them when they break down (which they will, FREQUENTLY) and deal with anything unusual that the machines can't handle.

The only thing I can think of here is that you don't understand that destroying low-wage jobs doesn't make good jobs appear.

Often times it DOES. In a situation of creative destruction, it removes businesses that aren't productive enough to pay their employees a decent wage and leaves their more productive competitors with less competition and a larger share of the same market. Those businesses now have room to grow and can hire more workers.

In the case of automation, it raises demand for automated systems and thus the makers of those systems get more work and make more money. Technicians and specialists have more work too, since now there are a lot more automated systems in restaurants for them to have to fix.

 

[Loren Pechtel]

We are already seeing this happen--machinery taking over parts of the job to keep labor costs down.



1) This is based on the assumption that companies have an obligation to maintain a standard of living of their employees.

2) Note that the automation removes the jobs entirely, reducing the employees to $0. Why is that better than the low wage?

The only thing I can think of here is that you don't understand that destroying low-wage jobs doesn't make good jobs appear. It means desperate workers which will drive labor rates down.

1. People are entitled to a reasonable profit for contracting out their services, yes.

Who pays for that entitlement, god?

2. Wrong. Automation creates new jobs for the manufacturing and maintaining of those automated machines and computer systems. Beyond that, do you really need the benefits of automation explained to you?

If automation created as many jobs as the automation eliminated there would be no point to the automation in the first place, it wouldn't be done. (Note that this can be masked by the fact that in many cases automation increases output rather than reducing the number of workers. There are still lost jobs, they're just at the companies that don't automate and thus are not competitive with the automated firms.)

 

[Loren Pechtel]

Moving the goalposts.

The issue was that your side hasn't established that taking it from business profits will not drop the profit rate too low. You're the one with the active position, you need to support it.

Wrong. You are the one claiming that an increase in the minimum wage will necessarily drop the "profit rate" too low without an mechanism that necessarily connect an increase in the minimum wage to a "too low" drop in the undefined "profit rate" or any data to support your claim.

It is not shifting the goal posts to expect you to substantiate your claim about reality. At this point, your claim has as much validity as "An increase in the minimum wage will cause the extinction of unicorns".

Reality, rather than your economic fantasies:

1) There is no magical "too low" point. It's a continuum. As you take away profit you reduce the chance that a failing enterprise gets replaced.

2) You're the one that's claiming they can eat the cost. I see no reason they will, they'll just pass it on like usually happens. Some businesses will fail as a result and are unlikely to be replaced.

3) You are claiming they will eat the cost and not be harmed. That's two active claims which you have made no effort to support.

 

[Loren Pechtel]

No, it's based on the assumption that companies have an obligation to be economically viable and not depend on public subsidies for their survival. You would surely agree that taxpayer subsidies were NOT intended to prop up business owners and shield them from the consequences of their own mistakes.

And here you have it bass-ackwards. The companies are not depending on the subsidies. If there were no subsidies would the companies have to pay any more to attract labor? (Actually, they would because a lot of inferior workers would have starved and died, thus shrinking the labor pool. I'm figuring a world where we don't allow that, though.)

2) Note that the automation removes the jobs entirely, reducing the employees to $0.

No, automation replaces inefficient manual labor with far more effective technical support work. Someone still has to build and maintain the machines, keep them clean, keep them running, debug and fix them when they break down (which they will, FREQUENTLY) and deal with anything unusual that the machines can't handle.

No. I've spent almost my whole career doing that automation. I've watched the workersroduct ratio drop fivefold due to said automation. While it didn't result in job losses for my employer (over the same interval our output increased 20x) we did destroy some less automated competitors.

The only thing I can think of here is that you don't understand that destroying low-wage jobs doesn't make good jobs appear.

Often times it DOES. In a situation of creative destruction, it removes businesses that aren't productive enough to pay their employees a decent wage and leaves their more productive competitors with less competition and a larger share of the same market. Those businesses now have room to grow and can hire more workers.

Wishful thinking. There's no reason to think the ones that grow pay more than the ones that die. Chances are the ones that grow are the ones that figured out how to lower costs.

In the case of automation, it raises demand for automated systems and thus the makers of those systems get more work and make more money. Technicians and specialists have more work too, since now there are a lot more automated systems in restaurants for them to have to fix.

But it's not one technician replacing one worker.

 

[Crazy Eddie]

If automation created as many jobs as the automation eliminated there would be no point to the automation in the first place, it wouldn't be done.

FALSE. Automation isn't intended to eliminate the need for labor, it's intended to maximize the OUTPUT of labor. The goal of automation systems is maximum productivity for minimal human effort.

Note that this can be masked by the fact that in many cases automation increases output rather than reducing the number of workers.

That's not "masking" at all. That's the entire point of automation. You eliminate the need for your workers to do stupid repetitive tasks, you can get your workers to do things that are actually constructive and helpful.

Your entire objection to minimum wage hinges on the idea that a certain group of workers (apparently mostly consisting of "black teenagers") are incapable of doing anything constructive and helpful. This is a curious kind of objection.

There are still lost jobs, they're just at the companies that don't automate and thus are not competitive with the automated firms.

There is no such thing as an "automated firm." EVERYONE uses some degree of automation, some more or less than others. It's even more interesting when some systems (e.g. voice recognition telephone helplines and menu navigation systems) give some business options they never would have been able to afford manually. Hell, my office just paid $200 for a self-feeding document scanner, thus eliminating 80 man hours of work per year and the need to file/transcribe/archive paper documents on a quarterly basis. We have literally never paid any one person purely to do that job, and our lowest-paid employee could have done that work for about $1300.

$200 is a good deal for a stupid and repetitive task that serves no purpose except to keep us in compliance with record-keeping laws.

 

[laughing dog]

Wrong. You are the one claiming that an increase in the minimum wage will necessarily drop the "profit rate" too low without an mechanism that necessarily connect an increase in the minimum wage to a "too low" drop in the undefined "profit rate" or any data to support your claim.

It is not shifting the goal posts to expect you to substantiate your claim about reality. At this point, your claim has as much validity as "An increase in the minimum wage will cause the extinction of unicorns".

Reality, rather than your economic fantasies:

1) There is no magical "too low" point. It's a continuum. As you take away profit you reduce the chance that a failing enterprise gets replaced.

You are the one who talked about the profit rate dropping "too low", not me. Glad to see you have educated yourself a bit.

2) You're the one that's claiming they can eat the cost...

No, I am not. I asking you to substantiate your claim that a minimum wage increase necessarily causes the "profit rate" to drop "too low" . So far, your responses contain straw men, evasion and babble.

I see no reason they will, they'll just pass it on like usually happens. Some businesses will fail as a result and are unlikely to be replaced.

3) You are claiming they will eat the cost and not be harmed. That's two active claims which you have made no effort to support.

No, I am not. I asking you to substantiate your claim that a minimum wage increase necessarily causes the "profit rate" to drop "too low" . So far, your responses contain straw men, evasion and babble.

My point has been consistent - whether or not a particular minimum wage increase causes a net benefit or a net harm is an empirical question. You, on the other hand, claim it is always a net harm.

You have had numerous opportunities to substantiate your claim, and you have steadfastly refused to do so. It is reasonable to conclude that this is just another example of hiding your ideological biases with the mindless spewing of economic jargon.

 

[Crazy Eddie]

If there were no subsidies would the companies have to pay any more to attract labor?

More than they could AFFORD to, yes.

No. I've spent almost my whole career doing that automation. I've watched the workersroduct ratio drop fivefold due to said automation. While it didn't result in job losses for my employer (over the same interval our output increased 20x) we did destroy some less automated competitors.

You destroyed less EFFICIENT competitors. Not the same thing. And as before, you're implying the jobs lost when those competitors went under were 1) PERMANENT unemployment for those workers (as if they could never get another job afterwards at a more efficient company) and 2) caused by you. Never crossed your mind that they might have gone out of business entirely on their own? That's a thing that happens often enough, automation or not. I see no particular reason why state policy should make it super easy for unprofitable companies to stay in business. Do you?

Wishful thinking. There's no reason to think the ones that grow pay more than the ones that die.

Who said anything about paying MORE? A growing business hires more workers, and hiring workers means you must PAY them at some point. When a productive business can step into the hole left by an unproductive one, it needs workers to help fill that hole.

Chances are the ones that grow are the ones that figured out how to lower costs.

Indeed. And the businesses that are really good at raising productivity are the ones who understand that the cost of personnel isn't the best way to make those cuts, and that there's actually a certain ideal pay rate for workers in a particular field that is high enough to keep them motivated and feel appreciated but low enough that they will want to try and push harder to earn a raise.

But it's not one technician replacing one worker.

So what? You said: "destroying low-wage jobs doesn't make good jobs appear."

Yes it does. Technicians have more work to do in support of the automation systems that made those jobs irrelevant.

So now you're revising your complaint and saying "Destroying low-wage jobs doesn't make an equal number of good jobs appear."

What exactly is this exercise you're engaging in where no matter what you say or what you get wrong, you will keep up inventing new and slightly-different counter-arguments until you find something you're actually RIGHT about, even if that had nothing at all to do with the original question? Ah yes, now i remember:

 

[LordKiran]

1. People are entitled to a reasonable profit for contracting out their services, yes.

Who pays for that entitlement, god? [1]

2. Wrong. Automation creates new jobs for the manufacturing and maintaining of those automated machines and computer systems. Beyond that, do you really need the benefits of automation explained to you?

If automation created as many jobs as the automation eliminated there would be no point to the automation in the first place, it wouldn't be done. (Note that this can be masked by the fact that in many cases automation increases output rather than reducing the number of workers. There are still lost jobs, they're just at the companies that don't automate and thus are not competitive with the automated firms.)[2]

1. No smart ass, the people who pay for labor services.

2. As someone else already pointed out, this is you shifting goalposts. Anything to keep you from having to admit "Oh, well I guess you're right."