I have a question about the effect of raising the minimum wage:

[Worst Username Ever]

I have often wondered how a bump in the min. wage would effect the rest of us. Picture this: If I were flipping burgers, and I started at 5.15/hr, and over the next couple of years with some raises, etc, I make my way up to 7/hr. Now, if the minimum wage were suddenly brought up to 7 dollars an hour, I would pretty much demand that with my burger flipping experience, that I be paid more than the entry level people who are going to enter at the same pay rate that it took me 2 years to achieve. So maybe they bump me up to 9. Well, the assistant manager who is being paid 9/hr is going to say that if that guy who just flips bugers gets 9, I should get a bump too. So the ass't manager gets bumped to 12 and hour. Then the manager, who gets paid 13, says I should be getting more that just 1 dollar an hour more than the assistant, bump me too. Etc. And this continues all they way up the chain. Do you think this would be the effect? A raise in the minimum seems like it would have to translate into a raise for everyone. I mean the 25K/yr guys would move up to being 28K/year, the 30K would have to be bumped to 33K, and on and on.

What do you think? Any armchair econimists in the crowd? I would imagien that this would be a chief reason that repubs would not want a raise; they would say that it would increase costs and therefor increase prices for all consumers, etc.

[rfranklin]

1. Perfectly acceptable if...

the CEO takes a 2% cut in compensation, everyone's raise is paid for.

[redqueen]

6. Exactly - excessive exec./CEO pay takes money from workers' families

For some reason, we've watched as their income goes into orbit, while everyone else's stagnates or barely stays above inflation.

[DoctorMyEyes]

2. I'm certainly no economist

so in my own uninformed opinion - I see it the same way you do. Everybody right on up the line gets their wages adjusted, prices go up, and we all end up with the same buying power that we had before the raise.

Though I have heard that the minimum wage hasn't kept up with inflation through the years and is really worth like 38% less than when it was first instituted.

I'm eager to learn more.

[papau]

3. Having been through this in the 50's, you can demand - but they will not

listen.

When the minimum wage is lifted, and you are a few cents per hour over the minimum, you get the minimum.

When the next aniversary comes along, they are likely to restore the wage difference you had before - but it is not automatic - and it is not immediate.

These minimum wage increases have always had a very minimum effect on the cost of living (See the DOL and Census and DOC.BEA data).

Kerry is being too conservative in my opinion - the living wage concept would argue for a $10.00 minimum - rather than the $7.00 minimum he is proposing (from the current 5.15 - indeed mamy states, counties/towns are already close to $7.00 with their local minimum wage rules).

[HereSince1628]

10. Having gone through this in the late 60's upto Nixon's wage freeze

I would say there is a ripple effect both in wages and in costs of goods and services, but it takes a while for it to work it's way through.

In the inflationary period leading to Nixon's wage and price freeze, my hourly rate as a fast food worker began as 95 cents and ended up at something beyond 1.35. Everyone thought it unfair that starting employees made as much as kids who had worked for several years.

At the time of the wage freeze I was getting paid $2.10 an hour as an assistant manager ($4200/year ... but then a Ford Maverick only cost $1800).

Then my lottery number pushed me into service where I earned $41 a month for the first several months.

[papau]

40. I agree - and ripple effect is small in terms of overall CPI :-)

:-)

[bleedingheart]

4. Has milk gone up in price? Rent? Cars? Diapers? etc..

a hike in the minimum wage is overdue.

[Worst Username Ever]

8. I am aware that it is overdue

But am curious about the effect on the rest of us who don't make the minimum...

[qazplm]

5. well not an economist

but while theory may suggest that, reality and history have not.

Raising the minimum wage quickly and precipitiously MIGHT do something like that, but most wage increases have been slow or incremental.

The fact of the matter is most minimum wage jobs are in the service industry, so I would think goods wouldnt go up because of a small uptick in the amount of money the poorest groups have to spend.

I mean while a few extra thousand a year means a lot to a guy getting minimum wage, it isnt enough to affect prices...and you notice, when tax breaks come, and a similiar amount is increased for people, you dont see those on the right arguing tax breaks will mean higher prices.

[primavera]

15. Especially in light of globalization

Since most of our goods are now manufactured in places like China and Indonesia by sweat shop workers forced to work long hours for slave wages, the cost of goods here is unlikely to be seriously affected.

[Squeech]

7. Experience doesn't seem to count for much

Kids fresh out of college get pretty near what I make, and I've got 15 years experience in my line of work. Of course my line of work is computer programming, where they think youngsters are more flexible and innovative and guys my age are so stodgy as to be near useless.

As a practical matter, I don't think the bumping-up effect will be near that extreme. If the minimum becomes $7, the comparative stars who'd made $7 will get a raise to $7.50 or $8, and by the time you get to brackets accounted for in weekly or yearly numbers, you won't see any difference.

You are right that this is one of the chief Repuglican talking points on the minimum wage, the other being that some people whose work may just barely be worth $5.15 won't be worth $7 and will end up unemployed. But if they had their way they wouldn't hire anyone at any price, just engage "independent contractors" with no rights or benefits, like those janitors who get locked into Wal-Marts after hours...

[GreenPartyVoter]

9. That's pretty much the NeoCon line of thinking

[seabeyond]

11. i hear a lot on this board take business concern to the ceo

the big man that has million dollar packages. the reality is the majority business is small business, and they are also the ones paying the majority of the taxes. my father owns businesses, my husband owns a business. he bought it over two years ago. he is taking all the risk,. his home is the one that can be taken away. he worked for the company for a decade before he bought business. he hasnt had a raise in five years, because he cant afford it. he had given business a loan at one point, and because they were cash shy, his pay came back in form of his loan, so basically he worked for free for 6 months.

to automatically go to as long as the ceo takes the cut too, isnt fair, nor is it reality. minimum wage increase will effect the small businesses barely surviving if that, many bankrupt. between trying to pay a fair wage, the taxes, oh the taxes and the outrages healthcare for employees, i promise, my husband, who works 14 hour days, at least 6 days a week is struggling and not profitting, let alone in the millions

btw, we pay well above minimum cause i am a believer people should be able to have opportunity to pay bills if they are going to put in 40 hours. so i dont need to hear what a pig i am. got that in another thread, when talking from employeer point of view

[redqueen]

12. If large businessess paid THEIR taxes, small ones

wouldn't bear an unfair portion of the burden.

Put the blame where it belongs. Don't let the upper class divide the middle from the lower.

[seabeyond]

17. i totally agree with you redqueen

and it isnt a challenge for me to put the blame directly on where it goes. i dont feel though, that i need to be lumped with those that abuse and manipulate and use and steal from the people

Don't let the upper class divide the middle from the lower.

i guess this is why i shared my story. i dont know if people necessarily see a difference from small business and large corporation whores

[redqueen]

28. I see a difference between large corporations and small businesses

Small Businesses create most new jobs.

Small Businesses by and large pay their fair share of taxes.

And in my experiences, at least, small Businesses are more responsive to their employees.


By contrast...

Large Corporations shift jobs overseas, or import cheap labor, cheating the system in order to work around having to hire out-of-work Americans.

Large Corporations LIE to us, and have SUED to keep that right, because they can afford armies of ecxessively compensated attorneys.

Large Corporations weasel out of paying their fair share of taxes.

[primavera]

30. Oh, give us more credit than that

I don't think many of us are picking on small businesses or their hard-working owners. The more widespread concern has to do with the Enrons and Halliburtons of the world that chuck business ethics out the window, bilk their employees out of their pension plans, willfully evade taxes, and retain a host of highly paid attorneys to protect them from the consequences of their misdeeds.

[seabeyond]

34. talk minimum wage who do you think the majority of business

is effected by a raise in min wage. small business. and the first posts i saw in talking min wage was saying if the ceo's take a cut in their pay.........or something. so i would give "yawl" more credit but was refering to what i was reading

[Worst Username Ever]

18. Well said.

So is the minimum related to the larger tax issues?

[redqueen]

29. Undoubtedly

When one sector shirks its duty, someone else has to pick up the slack.

Small business owners and middle and lower class Americans are footing the bill for multinational execs to own lots of mansions and boats and whatnot.

[seabeyond]

33. absolutely if they could do something

about the large share of taxes and high cost of health care, then there would be more money to pay employees. i am telling you all the small business owners i know, not a problem giving valued employee a good wage, to have an employee that appreciates his job and values it and wants to come into work every day, big thumbs up and more than willing to pay. always i have always wanted to pay more than i was able. why would i want a disgrunted unhappy employee around me all day long, dragging feet not wanting to be productive. not healthy for business all the way around

my husband in computer business pays a higher wage. my father owns dry cleaners and he pays employees minimum wage, and i managed these business and so wanted to pay these gals more, that i hired.

somewhere along the way, the employee stopped appreciating and the owners stopped appreciating. the work place of late has shifted the last 20 years from what i have seen. i see a different employee coming to workforce than before. it becomes frustrating on both sides. but the ultimate in a good healthy business is a balance of value equally between employee and employer

[primavera]

25. Well put

Small businesses pay the majority of taxes because the big corporations route their mail through their "official headquarters" PO Box in the Cayman Islands in order to escape having to pay taxes. Repukes love to claim that big business pays the lion's share of taxes in the US. But a more illuminating look would be at the percentages. Since the big corporations own 90% of the wealth in the country, they bloody well ought to be paying the lion's share of the taxes. If you own a $10 million mansion, do you not pay, and appropriately, more property tax than someone living in a $25,000 studio condo? Yet, although these behemoths own 90% of the wealth, they are paying far less than 90% of the taxes thanks to the ingenuity of unscrupulous accountants. Indeed, as a percentage of their wealth, they are paying far less in taxes than you are paying as a small business owner, even though their total dollar payments are undeniably greater than yours. As the percentage they pay drops, the percentage you pay goes up. You really sure you want to defend that state of affairs?

[Worst Username Ever]

16. This is the kind of thing

that I was wondering about with my post. I am all for a raise in the minimum, and I agree that it is overdue, and I commend you for paying a living wage to your employees. My uncle has a gardening business and pays his laborers about 10/hr, and barely scrapes by. This helps in the perpective of the larger picture...

[redqueen]

31. It says a lot about the souls of top execs in big corporations

that small business owners are facing hard times to do right by their employees, while the fatcats continue to game the system so they can live the jetset life.

:grr:

[rkc3]

13. Has anyone looked at bottom line jobs recently?

I do not believe anyone is hiring at the minimum wage anymore. Most employers recognize no one is going to flip burgers or man the gas pumps for $5.15 an hour.

Even the telephone interviewers in my office are hired at $8.50 an hour.

Check with the people doing the hiring and ask what the going rate is for these jobs - you'll see very few people are at minimum wage any more.

[Slickriddles]

24. Labor Markets and Gov. wage subsidies

rkc3, I don't know where you are located but here in Central NY there are very few jobs available. Supply and demand determines that here there are many employers paying only the minimum. In fact most of the Fast food joints get even that minimum subsidized by the State by hiring disabled workers. Where unemployment is low wages have to go up which is why many business interests don't mind moderately high unemployment.

[Radical Activist]

26. Not true

It depends on where you live. Minimum wage is common in the south and rural areas where unions are less common and wages are low. I can believe minimum wage is very rare in major cities and certain states, but I know its common in Arkansas.

[Slickriddles]

14. Don't Mourn Organize!!

The minimum wage protects all workers by establishing a ceiling below which wages cannot legally go. They are absolutely essential and should keep pace with the cost of living. But they are a bone of contention between people who work for a living and people who earn their income from businesses. If all workers were in strong unions you wouldn't need a government(We the People)-mandated minimum wage.
The likely effect on a given worker who is paid at close to the new minimum wage is that he can demand but is not likely to get a raise.
The important point is this -- minimum wage laws come into being during the Depression New Deal as a way of picking up purchasing power, lack of which contributes to the collapse, among consumers. So, you raise the minimum wage, the worker spends the extra money, demand increases, business picks up -- it's good for wage earners. But business folks hate it because it cuts into their profits.
Now, imagine there is no minimum wage law. What do you suppose a Burger Flipper would be making? $1.00/hr? less? more? Could an employer get a kid to work for a buck an hour? Probably, and then that pulls down everybody's wages.
Slick

[datasuspect]

19. yeah, those poor corporations

why on earth would the cannon fodder have the audacity to expect a living wage?

[Arbustosux]

20. The knock on increasing the minimum wage is

that it leads to decreased employment opportunities for lower income groups.

Basic econ law states that if you raise min wage, you decrease overall employment.

[datasuspect]

22. maybe the corporations . . .

could take some of the redirected welfare dollars they receive (tax credits the govt pays companies to hire former/current welfare recipients) and spread that around.

the minimum wage "debate" is so much bullshit.

i've worked before for executives at major corporations as an executive admin.

these people, when they have their meetings, eat better than probably any of us. their housing (when they get an executive position) is often paid for, travel, vehicles, all manner of shit PLUS they get ungodly yearly salaries with stock options and all kinds of perks. all this for being (often not very bright, but very well connected) CHEERLEADERS.

that's right. the average ceo or senior level executive doesn't really do much. they travel a lot, they talk a lot, but they are way overcompensated.

that's part of the plan though. keep the proletariat (which includes lots of company men and middle class aspirants with high debt load) fighting against each other.

let's begrudge the poor and extra buck or two, but these CEOs MUST ABSOLUTELY eat 10 dollar fucking sandwiches for lunch.

PUHLEAZE!!!!!!!!!!!

[Delano]

21. Prices have gone up a lot in the Bush 2 years, but not wages for most...

whereas wages did improve under Clinton (Who raised the minimum wage and passed the Earned Income Credit)

I'm no economist, but it seems to me that modest increases in the minimum wage should have little effect on prices, but do have a stimulative effect on the economy. If the purpose of the minimum wage is to see to it that everyone who works gets at least a meager subsistence wage, I see no reason why it shouldn't be pegged to inflation and increased automatically every year. Having large, abrupt increases every 4 to 8 years or so seems more disruptive to employers. Gradual, predictable increases seem fairer to everybody to me.

As for the impact of prices on consumers, it's low income consumers who are most impacted by rising prices. I'm sure there are a lot of min. wage workers who have cut their kids' food budget due to the soaring price of gas, and there has been no min, wage increase in many years.

Middle-class consumers may buy a few less useless knickknacks and TVs and such, and the rich might change their vacation destination from St. Moritz to Vail, but there is no real effecct on them. Their mortgages (at least they are fortunate enough to have ouses) will be paid, their kids will eat well, and they will still figure a way to senf their kids to college.

Those making minimum wage enjoy no such luxuries. No health care, no nothing. And contrary to right-wing spin, most people making the minimum wage are NOT "high-school kids flipping burgers for spending money". Millions of these people are trying to support a family on this meager income.

[redqueen]

36. Actually...

It was enacted under Ford, and raised or expanded under Reagan, Bush I, and Clinton.

Dubya, true to form, has not increased or expanded it. What a guy.

[Radical Activist]

23. Inflation was low during 90's minimum wage increases

and inflation was higher in the 80's when Reagan refused to raise it for 8 years. The inflation argument is BS and an excuse to keep wages low. Recent history shows it just doesn't happen that way.

Raising the minimum wage does increase business for companies across the economy though. When a low wage workers gets a raise they are going to spend it on commercial goods and services. Sales will increase, companies hire more people to increase production to meet the new demand, and everyone is better off. Its the same logic that Bush uses to argue that tax cuts help the economy, except that Bush's tax cuts go to the rich who aren't going to change their level of spending on basic consumer items that they can already afford.

[redqueen]

37. I wonder why economists are so silent about this

It was an accepted bit of conventional wisdom that when unemployment drops below a certain point (don't recall what if even there was a specific number), that inflation rises.

Under Clinton, this did not happen. He also raised the minimum wage, and that also did not trigger the kind of calamitous crap the reich-wing loves to spew.

Why do economists not discuss this more openly?

[Radical Activist]

42. I have two theories why

One might be that most economists are completely out of touch with reality. They can't accept that human behavior is not logical or predictable to the extent they pretend, in real life variables are never isolated or held constant like in their equations, and that most macroeconomic theory has absolutely nothing to do with reality. I think this is especially true of conservative economists.

My second theory is that many economists say whatever corporations want them to say. Some are paid by corporations directly or grants to universities. The rest just go along with the dominant theories. If reality doesn't match up to the conservative theories that benefit big-business, no one will mention it.

Another theory was espoused by Kucinich during the 70's inflation crisis when he was a mayor. He basically said that inflation was something business and economists made up to screw over working people and lower wages. Could be.

[immoderate]

27. And the CEO would have to go from $5M up to $7M?

Because of a raise in min wage?

Sure the repubs will say this. But this is not where the upward pressure comes from. It is the (imaginary?) increase in the cost of EVERYTHING!

--IMM

[dorktv]

32. This is the way a businesswoman once explained it to me:

Small business will not be that hurt by a raise in teh minimum wage because they generally pay very well.
Large corporations will get hit hard (for the upper management who like having the extra perks of lots of money being kept for them).

I believe that the minimum wage should be pegged to inflation, and raised to livible immediatly. This would cause an upswing in purchases, and taxes gathered so most companies would benifit.

[MUSTANG_2004]

39. Small businesses pay better?

Perhaps in a strict comparison of payroll dollars (even then I'm not sure that's true), but I doubt it is the case when benefits are included.
The small businesses I'm familiar with that pay a little better do so to make up for the fact that they don't offer benefits. As such, if the wages across the board increase, they'd have to raise their wages an equivalent amount.

[ArkDem]

41. You are right, I believe but would like for you to expound

on the minimal effect raising costs have on unit price.

[mzmolly]

35. Burger flippers are not in a position to *make demands* ...

Copied from another thread where you posed this question:

Sorry but this argument sounds like typical Republican dribble from people who dont know what it's like to uhm "flip burgers."

Clue #1. Burger flippers are a dime a dozen. Minimum wage workers often dont exceed that wage much regardless of so called experience. Minimum wage jobs don't generally entail much training, or experience - everyone is expendable.

Clue #2. People argue that minimum wage is meant to be a starting point, thus we should leave it alone. Well guess what, it's also an ending point for many people who haven't much of a choice in this life.

Clue # 3. It's not as though you can walk into Burger King and say, well sir I've flipped burgers for 10 years, I can't work for minimum wage (been there, done that)

This is such a ridiculous argument from the "let them eat cake crowd" I can hardly hear it without becoming totally enraged.

It's also a joke to suggest that anyone working for minimun wage, or managing said workers is actually in a position to uhm *bargain* ...

[wurzel]

38. Wages cause inflation. Profits don't.

Really??