Study: Raising The Minimum Wage Will Hurt Women And Restaurants

June 18, 2014 20:07 pm

by Buzz Brockway · 53 comments

Raising the minimum wage has been the topic of much debate. For several years now, President Obama has urged the wage be raised. The new desired minimum wage is $10.10 (up from the current $7.25). In general, the Left supports raising the minimum while those on the Right do not.

I’m sure all those reading this have an opinion on this subject, and I doubt you’ll be surprised where I come down. In my view, the best thing for those employed in minimum wage jobs is to have a thriving economy. In a thriving economy, many jobs are available and wages will rise for all jobs. Forcing wages up via government mandate will not accomplish the desired results.

Indeed a new study released by the Georgia Restaurant Association shows that an increase in the minimum wage to $10.10 would…

…eliminate 21,460 jobs – nearly half of which are held by women. According to data from the Census Bureau, the wages of approximately 60,562 state and local employees would be affected by a $10.10 increase in Georgia, for a combined cost to taxpayers of over $164 million annually.

“As our state’s economy begins stabilizing and adding jobs, now is not the time to prevent hiring and squeeze business owners already razor-thin bottom lines,” said Karen Bremer, executive director of the Georgia Restaurant Association. “We should focus on commonsense solutions that create jobs and promote opportunities for workers of all experience levels. Across the board wage increases will hurt those who need help the most.”

The full GRA press release as well as the study is below the fold.

So what about this? Is raising the minimum wage a good idea or not? Discuss.

Download (PDF, 245KB)


Download (PDF, 2.4MB)

John Konop June 18, 2014 at 8:26 pm

I remember when conservatives argued against tax on tips years ago…..the arguement was that money stimulates the economy….because in that income bracket they send and do not save on a macro…It seems the same logic would apply to raising min. wage….This is why the CostCo CEO supports it….if we raise it above the poverty line…..would it not save on entitlements? Most people would rather earn the money over getting government hand outs….

Hardly June 18, 2014 at 9:12 pm

JESUS H CHRIST ON A CRUTCH comrade, what part of “the Georgia Restaurant Association knows best” do you not understand!?!? These are business executives. Successful business executives!! They speak on behalf of the free market (think of them as the Invisible Tongue). And the Invisible Hand and the Invisible Tongue get their marching orders directly from God.

And don’t you dare suggest that a poll funded and promoted by an industry association would be even one iota self serving. DON’T YOU DARE!! I promise you every single member of the GRA was holding their breath just waiting to see which way this study was going come out. And when they saw those magic words “…now is not the time…” in the executive summary of their study about raising the minimum wage a few percent, well, it just felt so, so right. Please, please get with the program.

Bridget Cantrell June 18, 2014 at 9:43 pm

Wow – it’s almost bedtime….maybe layoff off the caffeine?

Hardly June 18, 2014 at 10:55 pm

No, Bridget. Now is most assuredly NOT the time to back away from the Red Bull ! ! ! And it’s always NOW! The future is an illusion!

The Last Democrat in Georgia June 18, 2014 at 11:27 pm

I like the way you think.

c_murrayiii June 19, 2014 at 12:06 am

This all sounds nice and pleasant, and like a great idea if you can somehow force every business to maintain current prices. However, as we all know, especially after the last minimum wage increase, raising the minimum wage, raises costs to everyone including those with a new, higher minimum wage. This means the poverty line will rise as well. And, as everyone else points out, jobs will be lost, which means a 7.25 an hour person will now be bringing home 0 an hour, which is certainly below the poverty line.

John Konop June 19, 2014 at 6:58 am

First the impact on prices would by less than 5 percent….The poverty line would not move much….Second, the spending power would create growth….good for the economy, jobs and wages…Finally, if you look at the highest point of min wage relative to real wages….it would normalize at about 15 an hour…and we had our longest sustained growth…..just the facts…

Bridget Cantrell June 18, 2014 at 8:43 pm

Buzz,

I sell architectural products installed in large retail/restaurant chains, so I’ve seen this article EVERYwhere. Being it’s my livelihood, I follow retail/restaurant news as closely as I follow politics and feel pretty well versed on the corporate, franchisee, and vendor sides of the equation and agree that raising the minimum wage is not the right approach.

My first job was taking orders at the Wendy’s on Austell Road and that position was never meant to be a career for ANYone. It’s high turnover by nature and high turnover multiplied by higher wages simply won’t make a franchise profitable enough for franchisees to repeatedly open new locations.

I have one client that will open or remodel 155 restaurants this year. Brick and mortar retail is lagging, but the quick service restaurants are exploding with growth. 155 projects that need construction workers, service equipment, food/product, employees, etc. Without profits, owners/franchisees have zero incentive to open more restaurants. Raising minimum wage chokes the entire cycle.

My particular comment is on how the press release is framed. Positions that are non-hazardous and require little education are mostly going to be 50/50 male/female. To frame “nearly half of which are held by women”(!!) is common sense math and a bit sensationalized.

To me, the post should’ve been more like “Study: Raising The Minimum Wage Will Eliminate Jobs of 21,460 Georgians”.

Chris Huttman June 19, 2014 at 1:39 am

While I think you make many valid points, I will quibble with one set of logical reasoning. I will agree with you that fast food (etc) is high turnover and turnover in and of itself adds a non-wage cost that cuts into business profitability (although since the start of the recession turnover at fast food restaurants is down by about 30%). At $7.25, one “employee year” (52 weeks, 40 hours a week) costs $15,080 in raw wages and at least 10% more in other costs (Social Security, Medicare, unemployment insurance etc). So let’s say $16,588.

A $10.10 minimum wage would cost $23,108.80 under a similar metric. That’s a $6,520.80 difference. So let’s just assume the average franchisee has a marginal tax rate of 35% making that a net cost of $4,238.52/year. Even assuming the study is correct (I read it, it’s pretty weak) the 21,460 Georgians who will see their jobs eliminated are sure to be the least valuable employees (if you own a fast food joint and have to pay $10.10 instead of $7.25 you probably have a good idea of who is actually worth $10.10).

The bottom line is for businesses there would be a value – maybe not the full $4,238.52 (but maybe so!) – but a return nonetheless to the weeding out of suboptimal employees (the study itself says that about half would be teenagers).

Now in the interest of intellectual honesty, my analysis does raise two questions – the first is if there is some value (reducing turnover and related costs) to paying higher wages why isn’t this already happening in the market? The answer is either that there isn’t (for example maybe the existing minimum wage already exceeds the turnover value in which case conservatives should just be honest and argue for no minimum wage) or that all things being equal the minimum wage acts as a deterrent for all participants in the market to not try to find that sweet spot – in other words let’s say paying $8 instead of $7.25 increases your labor costs by $0.90/hour but reduces your turnover costs by $1.00/hour – a net gain of $208/year per “Full Time Equivalent” employee – a fast food franchise that that 15 FTEs could in theory gain $3,120 by paying this optimum wage (total salary costs $28,080, return on investment $31,200) or all things being equal they could avoid the risk of being wrong and just spend $28k on the latest milkshake machine instead and get a guaranteed return on profitability there instead.

By paying $7.25 to everyone they essentially enter into a compact with all of their competitors that whoever has the best milkshake machine will win, not who has the best employees (because on average every employee will be the same). Essentially as long as a minimum wage exists, the only way to increase pay for those workers is to raise the minimum wage – even if raising the minimum wage by say $0.05/hour would have no effect or a positive effect, the incentives are aligned such that no business will be the first mover.

Though $10.10 is more drastic than $7.30 would be, a very similar thing happened with smoking bans in bars. Many conservatives argued that if banning smoking was such a great thing to do then the market would have some bar take the lead and then all bars would follow. The counter to their argument (again industry funded like this study) was that smoking bans would reduce employment and sales for bars (think of the women who work in these bars…just don’t think about their lung health). What actually happened when smoking bans were put in place? One study showed that bars in smoking ban areas sell for the exact same amount as in non-smoking ban areas (so there was no adverse or positive economic effect). Another study showed that smoking ban areas saw restaurant and bar employment actually go up by 1%.

So the bottom line for point #1 is that there could actually be a minimum wage increase that would be beneficial for these employers – in other words there could be some number out there (maybe $10.10 is not it) where the gains from reduced turnover exceed the additional salaries. We don’t know – the study doesn’t try to quantify turnover costs. But this all leads to point #2 which is that there is likely to be some reduction in employment among the least skilled. What do we do about these people?

Good question – not sure I have all the answers. About half of the 21,000 are teens, so we know right off the bat most of them aren’t actually working 40 hours. We have to assume that as the least skilled employees, most of the rest probably aren’t working full time (even if they want to). 20% of workers in Georgia over the age of 30 make less than $10.10/hour so the question ultimately becomes is it worth it to increase government payments to the 21,460 at possibly an annual cost of $200m ($10k/person) so that 20% of workers who keep their jobs earn more – some as much as $3/hour more?

Not sure I have the “right” answer, though to me I support raising the minimum wage to $10.10. I do know it will take more than a 3 page industry funded study to convince me one way or the other. And I do have a problem with any business that employes minimum wage people in an implicit bargain with society that we will make sure they have the housing and food (thru things like Section 8 and food stamps) to actually do their job because the salary the business pays doesn’t actually provide for an employee that would actually be able to show up for work. If $10.10 means some of these companies employ fewer people on welfare, then that’s a no brainer.

Bridget Cantrell June 19, 2014 at 9:38 am

“the weeding out of suboptimal employees” .. you heartless corporate pig. Kidding, I like you, let’s be friends. A culling can be a good strategy with salaried employees, but has much less effect on less-educated hourly workers. The difference between your A-player and D-player is minimal, so there’s not much “optimal” work to gain.

You bring up reasonable arguments, but we have different approaches to “what do we do about these people?” I have a low base salary. If I want to pay my mortgage and car payment, I have to make things happen – educate myself, reach for the next rung, provide value that someone is willing to pay for.

Is everyone overlooking that the minimum wage worker in store #172 can be the shift leader in store #202? This week she’s mopping floors, next week it’s the fries?

Minimum wage jobs are meant to be a springboard. A chance, an extended job interview for the next opportunity. Higher profits reinvested into future stores opens up additional shift leader and management positions. If minimum wagers want to be make more money… there’s opportunity for the taking.

Chris Huttman June 19, 2014 at 4:35 pm

For some people sure minimum wage was a springboard – I had minimum wage jobs at Harris Teeter, Media Play, Barnes and Noble. But there are some people who don’t have some combination of skills, education, opportunity, ability whatever it is and they do end up in minimum wage+ jobs (for instance some might be making $8 instead of $7.25).

From a policy perspective it’s pretty hard to make a one rule fits all scheme – I’d argue that a lower minimum wage could ultimately hurt some of the upwardly ambitious because employers attitudes are just if we have to pay everyone $7.25 we’ll just hire randomly and it might take longer for that person to get on the first rung of the ladder (or whatever).

You know I think 90% of people in the workforce don’t necessarily need a minimum wage and we have a tendency to confuse ourselves (in that 90%) for some of the people in the 10% – and some of those people might literally work for $1/hour if given the opportunity (it did used to happen).

Historically the minimum wage was closer to 45%-50% of the average wage, right now it has fallen to about 37%. So maybe $8.85 is a reasonable compromise (45%) as $10.10 would be actually a little above 50% and there is evidence that there start to be adverse effect on employment at a level above 50%.

John Konop June 19, 2014 at 7:05 am

How does raising min wage choke growth? You realize the impact is less than 5 percent….if you have buyers with way more money….Henry Ford advocated that workers need enough money to buy products….The father of the free market system Adam Smith warned about distribution problem with wages.,..spread between rich and poor….Strong middle class drives growth.,..

Bridget Cantrell June 19, 2014 at 9:12 am

John,

Cost + Margin = Revenue. I know you know this. Consumers are used to the 99 cent (sidenote: cent signs are no longer to be found on computers?) value meals. We could get into the psychology of why Americans don’t value the food they put into their bodies enough to pay more for food, but that’s another tangent. The point is that the QSR market dictates that Revenue per person will have to stay effectively constant.

If cost goes up and revenue stays constant….it’s the profit that suffers. No entrepreneur runs a business like a charity. Unless there is enough profit to reinvest in additional franchise locations, growth is choked.

John Konop June 19, 2014 at 9:29 am

The biggest issue in the economy is demand….demand is down via spread between rich and poor growing…If you increase demand via more wages in the middle class than revenue will grow ie Henry Ford 101….

Also you realize on a macro workers below poverty line are tax payer subsidized ie peach care, free school lunches…….I would rather see people earn the money than get government hand outs….

You might find this interesting:

………..As the debate rages on whether an increase in the U.S. minimum wage will boost or hinder hiring, one aspect is more unambiguous. It would almost surely lift consumer spending.

While the effect will probably be positive, the magnitude of the improvement remains up in the air. A pay hike of $1.75 an hour, smaller than currently proposed, would augment purchases by at least $48 billion in the first year, according to a 2013 paper by Federal Reserve Bank of Chicago economists. Analysis by private researchers points to a smaller gain

A raise would help lower-income earners contend with a decrease in government assistance such as the food-stamp program and the increase in the payroll tax that have hurt household purchases, which account for almost 70 percent of the economy. The Congressional Budget Office estimates there are about 16.5 million Americans who make less than $10.10 an hour, the new minimum being proposed by the Obama administration.

“Pretty much every penny of the extra wages these minimum-wage workers get they’ll be spending,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “I doubt they have any scope for saving. They’re barely getting by.”
………

http://www.bloomberg.com/news/2014-02-27/minimum-wage-increase-in-u-s-will-probably-promote-spending.html

Three Jack June 19, 2014 at 10:05 am

Using your logic John, why not just raise it to $15, $20 or $25. More money in the economy and it will only hurt businesses by whatever % you come up with depending on the increase. Hell businesses have a ton of disposable income that is just sitting around waiting to be forcibly redistributed by all knowing government bureaucrats, let it rip!

This is nothing more than an election year ploy by dems hoping somehow to generate interest in their otherwise failed agenda. GOPers will be cussing Obamacare, dems will be looking for votes wherever they can gen up some anger, it’s an election year and so far, nobody cares.

John Konop June 19, 2014 at 10:59 am

Not really the key it being above the poverty line….ie concept is better for consumers to spend money rather than get hand outs…..Much more efficient use of cash….The stronger the middle class…stronger the economy….

Three Jack June 19, 2014 at 2:22 pm

Not sure of your perception of middle class, but I can pretty much assure you it does not involve making minimum wage. An increase to $10 will not propel minimum wage workers to middle class status. Instead it will likely increase unemployment rates thus increasing the need for more redistributed handouts. It is a losing proposition except for dems pandering to their base of minimum wage/government handout recipient supporters.

John Konop June 19, 2014 at 4:04 pm

It will left about 900k people over the poverty line….I guess you would rather give them hand outs….

Three Jack June 19, 2014 at 5:14 pm

They will still get handouts John, possibly even more as many of those 900K will be laid off.

It is a DEM election year red herring. They could care less about getting folks out of poverty…they want/need votes.

John Konop June 19, 2014 at 5:28 pm

Three Jack,

70 percent of our economy is consumer spending….if you give consumers more money to spend especially low wage workers they will spend it….How could you see less jobs with 48 billion dollars of extra buying power….it makes no sense….

Three Jack June 19, 2014 at 5:48 pm

So again I get back to my earlier point, why stop with $10 if the more government forces businesses to pay their workers, the more they will spend.

And once more, this is a politically motivated solution looking for a problem. Dems need votes, they think this is the tool. Don’t be a tool and fall for it.

John Konop June 20, 2014 at 9:31 am

Your point we should have no min. wage, child labor laws….. and like India and China have a bunch of 2 dollar a day workers dependent on the government…

Three Jack June 20, 2014 at 11:42 am

John,

Now you’re talking. No FEDERAL minimum wage! Seattle set theirs at $15 per hr, let it be done by locals based on local factors like cost of living, average wage, etc.

But my point was/is to stop worrying about it because this is nothing more than a vote buying attempt by the dems.

analogkid June 18, 2014 at 9:09 pm

This post is kind of the definition of confirmation bias.

That said, I tend to agree that raising the minimum wage is a bad idea in isolation. So, as a policy guy, let me propose a compromise that both sides should be able to support (until President Obama gives it the thumbs-up, that is):

Let’s say the min wage is set at $10. $10 x 40 hours x 50 weeks (allowing 2 weeks for vacation, of course) is $20,000 per year. Set the Federal poverty guideline at this number and, boom, everyone with a job is no longer eligible for federal assistance. Tie all future increases in the minimum wage to a corresponding increase in the federal poverty line.

It would obviously be a little more complicated than that, but that’s the basic premise.

joe June 18, 2014 at 9:25 pm

When I was a contractor for the Dept of Defense, we were required to use an area wage determination for a minimum wage, so if a mechanic averaged $20.00 an hour in Atlanta, we had to pay a minimum of $20.00 in Atlanta. This was true everywhere (I managed people in 12 states), except where there was a union. There we used a union negotiated rate. Some of the unions used a percentage of the area wage determination, and some used a formula that was tied to the minimum wage. As the minimum wage goes up, there will be other wages that go up also, A clerk making twice minimum wage would go from 14.50 to 20.20. Increasing the minimum wage is fraught with complications.

pucillo.oscar June 18, 2014 at 10:54 pm

The people who support raising the minimum wage know that it will cost jobs. Their position is that it is better to be unemployed and on public assistance than work for anything less than a living wage. They do not exactly shout this from the rooftops, but it is what they believe. They equate working for less than a living wage to be (capitalistic) exploitation and oppression, and since they know that there will never be enough jobs to provide an adequate wage for everybody even if the entire population was industrious and resourceful (a fact that progressives are more honest about acknowledging than are conservatives) then their position is that welfare is preferable to a job that pays what they consider to be an unfair wage.

The Last Democrat in Georgia June 18, 2014 at 11:33 pm

“In my view, the best thing for those employed in minimum wage jobs is to have a thriving economy. In a thriving economy, many jobs are available and wages will rise for all jobs. Forcing wages up via government mandate will not accomplish the desired results.”

…+1

Chris Huttman June 19, 2014 at 2:38 am

The last federal minimum wage increase round was 2007, 2008 and 2009. The minimum wage had been $5.15 since 1997 and increased to $5.85 in July 2007, $6.55 in 2008 and to the current $7.25 in 2009. Helpfully, McDonalds breaks out the Sales and Profit margin for company operated stores in their annual report each year and specifically they show just the stores in the US.

Here is the profit margin from 2005 to 2011 (two years before and two years after minimum wage increases)…
2005 – 18.7%
2006 – 19.1%
2007 – 18.7%
2008 – 18.5%
2009 – 19.4%
2010 – 21.3%
2011 – 20.6%

2008 would have been the first full year of the higher minimum wage and operating margins reduced by 0.2% even though the federal minimum wage increased by nearly 14%. By 2010 the minimum wage was nearly 41% higher than it had been (similar to what $7.25 to $10.10 would be) and yet operating margins were the same. This strongly suggests that when it comes to the business owners side higher salaries for minimum wage employees are offset by productivity gains and reduced turnover expenses related to the employees that no longer make the cut.

If anyone can find average McDonalds franchisee profit data over a period of time that includes minimum wage increases, I’d love to see it. Again – the question of what to do with the people who lose out due to their economic output not being equal to the new minimum wage is a valid question, but the idea that fast food restaurants lose profits due to minimum wage increases is not supported by the available data from when the wages went up in the past.

Chris Huttman June 19, 2014 at 3:18 am

More research – Yum Brands (KFC/Taco Bell/Pizza Hut) restaurant margins decreased 0.8% from 2007 to 2008 even though minimum wage went up 13%. They did not cite labor costs but commodity costs as the primary factor.

Kroger – 2007 operating margin (profit/sales) = 1.68%, 2008 = 1.68%. No change.

OK – so maybe there is some business out there that has mostly minimum wage employees but doesn’t sell stuff regularly to minimum wage type people – a business that wouldn’t benefit in increased sales (like Kroger/McDonalds/Taco Bell seem to) when their employees have more money to spend in higher wages…something like the Cheesecake Factory – and they did have higher labor expenses and lower profitability over roughly this period – margins went from 4.9% in 2007 to 3.3% in 2008. But guess what – probably just problems with the business as they’ve rebounded back to 6.1% now and were back to 4.9% by 2010 (right after the minimum wage had jumped 40% since the start of the rise).

Well – what about something like Dick’s – probably a lot of at or near minimum wage but selling more of a premium product. 2007 operating income/sales = 6.9%. By 2010 = 6.3%. As of 2012, 8.9%.

I’ll preempt Charlie – I know his eyes roll back into his head when he sees comments filled with stats but these giant corporations weathered the last minimum wage increase without significant changes in their profit margins. None of their 10-K’s mentioned minimum wage increases specifically as having an adverse impact on their businesses. We can and should debate what happens to the potential low-skilled employees who may lose out with minimum wage increases, but we should stop pretending that it really has an adverse effect on the employers.

Ed June 19, 2014 at 8:02 am

I generally think raising the minimum wage is a bad idea but I find it hard to believe that with wages and employment rates increasing (and more people dining out etc) an appreciable number of restaurants would be willing to cut back on employees. Especially considering how, you know, in the service industry, having adequate service is a bit important.

seenbetrdayz June 19, 2014 at 8:26 am

It will be good for female computers. Or female robots. They don’t usually complain about the wages they get paid.

I really hate it though. You know those late night trips to Wal-Mart when the only line open is the ‘self-checkout’ line? It goes like this:

Computer: “please place the item in the bag.”

*places item in the bag*

. . . “please place the item in the bag.”

*picks item up and places item back in bag* . . . . . . . . . . . . .

. . . . . . . . “please place the item in the bag.”

Oh for ***k’s sake. Where’s a human being when you need one?

Chris Huttman June 19, 2014 at 9:47 am

One reason I personally don’t usually shop at Walmart is because (not to sound like a snob) my time is too valuable. I believe one of the bargains Walmart has made with their shoppers is that since poorer people’s time isn’t worth that much, Walmart will just have fewer lines open/lower labor costs which they pass on to the customers in the form of lower level of service/more waiting around.

I can afford to pay 5% more and go to Publix instead where they use that 5% to open additional checkout lines and get me out of there faster.

Lea Thrace June 19, 2014 at 12:12 pm

This just about sums up why I shop at Whole Foods/Trader Joes as much as I can. I will pay extra for the privilege of better service and quality food.

(also I’m a food snob apparently. :-D)

Jackster June 19, 2014 at 9:59 am

I just leave money on the scanner and leave. Most direct way to provoke human interaction.

Jackster June 19, 2014 at 9:58 am

So, is the demand for a higher wage artificially lowered by other welfare programs, such that instead of helping folks get back to a higher wage, those same folks are then stuck as working poor?

To me, it’s simple: You need $10 / hr to make due. Walmart will give you $5. So then, you have to make up that $5 somewhere else.

SNAP will give you $2/hr
HUD will give you $3/hr
Medicaid will give you $2/hr

Now you’re where you need to be, sure, but now there’s not a demand for a higher wage. And that’s represented by walmart thinking the market is at $5 / hr.

While cutting programs and such immediately will only shock most folks, isn’t there something we can do here to have wage demand not be lowered by these subsidies?

saltycracker June 19, 2014 at 11:53 am

Georgia Restaurant assoc:
Let’s compromise, raise the minimum wage 30% and include all services (food & tip) in your menu price. Everybody benefits….
Best idea the Europeans have…..

saltycracker June 19, 2014 at 4:09 pm

The primary purpose of the debate is to throw Republicans off balance, make them look mean and loose focus on the big, important issues. The GOP should stand for the opportunity of entry level jobs, jobs for our teenagers and jobs for seniors wanting to supplement income in low skill jobs. They should also encourage personal service many of these jobs represent, when feasible, in a world of increasing computerized self service. The GOP is not in the business of regulating income but making space for opportunity to thrive. Now get back to the big issues…..

Doug Deal June 19, 2014 at 8:15 pm

If raising the minimum wage is so good, why are you skinflints stopping at $10? Why not $100 so we can all live in luxury?

seenbetrdayz June 19, 2014 at 11:11 pm

Another problem no one ever really mentions about the minimum wage is that you’ll have to scale up pay for ‘higher skill’ positions or else there’s no incentive to move up. I’ve explained this before:

If a high-school dropout flipping burgers at McDonald’s in Seattle makes $15/hr (which I hear is what they want to raise it to), why on earth would he aspire to spend a year or two in tech school learning how to be a pharmacy technician or EMT in a healthcare field where he’ll make . . . wait for it . . . $15/hr (these technical positions actually pay less than that but since everyone is on the same min. wage baseline rate, it’ll be the same)? There’s no real advantage to move up, unless you just like the idea of school debt to do something which requires more skill and stress—only now, following the increased min. wage, there’s no difference in pay rate.

So, if you’re running a company, you have now raise the pay a fair amount beyond minimum wage if you want to attract workers to ‘higher skilled’ positions. The domino effect ensues. Now you have to raise the wages of nurses to encourage people to look beyond being an EMT. You have to raise the wages of nurse practitioners to encourage people to move beyond being a nurse. So on, and so on.

A few years later that burger flipper at McDonald’s starts talking about how $15 per hour isn’t enough, and the dominoes have been reset.

Raising minimum wage only works for politicians who can’t fathom the consequences of their actions beyond 2, 4, or 6 years.

John Konop June 20, 2014 at 9:32 am

You support government subsidized workers?

seenbetrdayz June 20, 2014 at 10:53 am

You support $9/gallon milk?

We’ll still get the subsidies john. Do you honestly think that subsidies will go away after wages go up and prices follow?

If I thought for even half a millisecond that raising the minimum wage would mean Washington, D.C. would shut down the freebie train, then I’d have pushed to see wages increased yesterday.

But we’ve been raising the minimum wage since minimum wage laws first came into existence, and I’ve never—I repeat—NEVER seen a welfare program cease just because wages went up. Have you?

. . . I didn’t think so.

Your debate tactics need work. Now please address my point about skilled and unskilled workers having to work for the same wages, and how exactly this is going to have a minimal impact on businesses, considering they’ll have to raise everyone’s wages on the company pay scale. Or keep throwing out red-herrings.

John Konop June 20, 2014 at 12:51 pm

Seen,

Your math is way off! The impact on labor cost would only be a few % points on a macro…No way products would go up over 300%…..it would be at the most 5%….Yes I would pay 5% more to lower the amount of tax dollars going to entitlements, welfare….. that bill shows up in FICA, county taxes. fees, income taxes, sales tax, bond deals……

Even if skilled labor went up….than the 46 billion dollars would grow….and stimulate the economy more…..70% of the economy is consumer spending…

seenbetrdayz June 20, 2014 at 1:15 pm

The $9/gallon milk was just a random example to show you how ludicrous your debate tactics are. You tried to pull that stunt on the healthcare debate when we said we didn’t support the ACA, you always came back with, “we just wanted people to die.” Because you couldn’t address the points we made. It’s incredibly disingenuous of you.

But answer the question: Do you honestly think welfare will go away if wages go up? Be honest.

I’ll make it bold so you won’t accidentally miss it this time:

What reason do we have to believe that increasing wages will decrease welfare, when in actuality, welfare has gone up as wages have gone up? You make it sound as if it’s a choice of one or the other, when historically, it’s been both.

The poverty line rises as wages go up. There’s no way to simply raise an arbitrary wage minimum and propel people into the middle class. If that were the case, then as Doug and ThreeJack have suggested, we could simply raise everyone’s pay to $25 or $30 per hour and *poof* everyone’s in the middle class. (except they aren’t; in fact, everyone would then be, equally, the lowest-paid workers in society).

The 5% figure might apply to employer who largely hire minimum wage workers and have few other higher paying positions. But we’re not just talking about the impact on Wal-Mart or fast-food industries. There are other jobs out there which will be difficult to fill, if say, a patient care tech pays the same as a guy who sweeps the parking lot at Kroger. Again, why would someone pay for college to work a job which is more demanding and requires more skill than cleaning toilets at a truck stop, when they pay is nearly the same?

My first job was working at a tire shop. I spent my day putting new tires on rims and fixing flats for $7.50/hr. I went to college, graduated, went to work in a hospital as an RN for about $21/hr.

Now suppose some genius thought it was a good idea to make all the tire shop jobs pay $15/hr. I can tell you right now, given the stresses and responsibilities of being an RN, I’d probably still be working in that tire shop, because a mere additional $6 per hour wouldn’t be worth the college debt and mental taxation to try to keep up with several patients at a time. So they’d have to raise the pay of nurses to about $42/hr before those positions would become attractive again.

The impact on Wal-Mart would probably be about 5%. The impact on skilled-labor industries is going to be much higher. You’re only looking at a fraction of the picture with your 5% figure.

John Konop June 20, 2014 at 2:21 pm

……..What reason do we have to believe that increasing wages will decrease welfare, when in actuality, welfare has gone up as wages have gone up? ….

Not true…real wages have been declining for offer 20 years….As real wages went down poverty went up….

………Now suppose some genius thought it was a good idea to make all the tire shop jobs pay…

Auto shops jobs do have good pay, not sure about your point?

seenbetrdayz June 20, 2014 at 2:46 pm

How do we even know what ‘real wages’ are when the price of labor has been set by government for decades?

and . . .

You really think it’s good management to pay the guy who plugs air leaks in tires the same as the LPN who plugs incisions if a patient starts bleeding post-operatively? —That is my point. Certain jobs require more skill and responsibility and pay *must* reflect that or else no one in their right mind is going to take on that challenge.

Pay will have to go up across the board, which doesn’t necessarily benefit the lowest economic class, it just shuffles everything upward. If I’m working in the lowest economic class as a tire tech making 7.50/hr and the nurse across the street in a hospital is making $21/hr, and one day min wage goes up to $10/hr and now that nurse makes $28/hr, as a tire technician, I’m still not going to be considered ‘middle class’ because the bracket has simply shifted upward. If anything, the gap between poor and middle class has now widened by about 25%. You’re not even re-arranging deck chairs on the Titanic, you’re arguing about what color they should be painted.

seenbetrdayz June 20, 2014 at 3:11 pm

Funny thing about that tire shop.

A year ago, I had to go back and buy another set of tires for my truck, and the quote my former manager gave me stopped my breathing for about 3 seconds. I jokingly asked him if he could give me that employee discount, for old time sake. He laughed, and said, “that was the price with the discount.”

Gotta love Obama’s tire tariff, but I don’t want to derail the thread.

seenbetrdayz June 20, 2014 at 11:01 am

In fact, we have more welfare programs today than we did when minimum wage first came into existence.

I have no earthly idea how you could even suggest that increasing minimum wage is going to end welfare.

While you’re at it, how about addressing Doug’s point as well, because he’s got me curious.

Why stop at $10? If higher wages equals higher spending and awesome economic benefits, why not raise the minimum wage far beyond what is currently suggested?

John Konop June 20, 2014 at 3:06 pm

seen,

…How do we even know what ‘real wages’ are when the price of labor has been set by government for decades?…

1)HUH? Do you know what real wages mean?

…….I have no earthly idea how you could even suggest that increasing minimum wage is going to end welfare…

2)I never said that…just that it would create less people getting welfare…. and stimulate the economy….

…….Why stop at $10? If higher wages equals higher spending and awesome economic benefits, why not raise the minimum wage far beyond what is currently suggested?……

3)I never suggested an exact dollar amount….only that it should be above the poverty line so we do not end up subsidizing the workers through tax payers…

seenbetrdayz June 20, 2014 at 5:07 pm

1) I know what ‘real wages’ mean to the gov’t accountants who smudge numbers to make politicians look good. I also know that at one time in our history, wages were adjusted to reflect supply/demand for labor. That was the role of a wage in the free market. That is not the case anymore. It’s now an arbitrary figure used to, as someone put it, ‘gen up support’ during election time so that people won’t be mad at those same politicians for the true cause of poverty, which is inflation. If Coca Cola still only cost 15 cents for a 12oz, $2.15/hr would still be damn-good pay in this country. Rather than get mad at politicians for printing away the value of their money, voters are gonna go for the politician who offers pay raises as band-aids for a deeper problem.

I’d even argue that raising the minimum wage doesn’t counter-balance inflation, as you might hope, but rather, perpetuates it. If you raise wages, you have to either (a) raise the cost of your product or (b) find a way to meet production with less, albeit better-paid, workers.

Low wages keep producers aimed at providing a product which people can afford. For example, if you’re an entrepreneur who is trying to sell a $6 product to people who have a $5 spending limit, you won’t be in business very long unless you can find a way to make your product cheaper. But if the consumer has his spending limit raised to $10, now prices can go up to $9. Price inflation + monetary inflation means it won’t be long before the consumer once again starts griping that now, $10 isn’t enough.

2) Higher unemployment will not lead to ‘less welfare.’ The hospital I work at is already pressured to the limit to find ways to cut costs thanks to the ACA which you also thought was such a wonderful idea. Min-wage goes up at this time and they’ll start laying of workers. PERIOD. No ifs, ands, or buts about it. Other hospitals in the country have already started and we’re all sitting here biting our nails. This is going to widen the gap between poor and middle class even more, because you’re gonna have a few more people with decent paying jobs, yet many more people with absolutely no jobs at all.

3) You have seemed to suggest, several times, that there are only benefits to raising the minimum wage. You have given VERY little consideration to the drawbacks involved. And I suggest to you that if there are only benefits to raising the minimum wage, then why stop at a mere $10? Just as the government did in ’08, if they’re gonna print up a bunch of money, why stop at $800 billion? They could have made it $800 TRillion and we’d be good for a while, following that logic.

John Konop June 20, 2014 at 6:14 pm

Seen,

We already agreed that the wage increase would more then cover the product increase…I am lost by your comment…Second you keep saying higher unemployment without factoring the 46 billion of extra spending which is 70 percent of the economy……btw if I use your math on driving middle class workers higher even higher he spending will increase more…..btw I did not factor the savings from not paying welfare…..I am lost by you…

seenbetrdayz June 20, 2014 at 6:51 pm

We already agreed that the wage increase would more then cover the product increase

I think I agreed that we’re gonna have a handful of people working for slightly better pay, and still have a ton of people who need welfare more than ever because the jobs they used to hold were completely cut to make sure the lay-off survivors could get paid a few dollars more, in order for employers to meet government mandates you support.

John Konop June 20, 2014 at 7:18 pm

Why would jobs go away with 45 billion dollars of more spending power when our economy is 70 percent consumer spending?

seenbetrdayz June 20, 2014 at 8:11 pm

Would jobs increase if you multiply it by 10 and come up with another $450 billion in the economy? I don’t think a connection exists there, as badly as you may want it to. It’s more likely that the additional $45 billion is gonna be needed when welfare programs expand to cover those who lost their jobs. That money is going to go straight past the economy and straight into gov’t coffers.

I’m telling you, I work in a hospital. The budget is on the brink. You put one more straw on the camel’s back, and we’ll be eating camel soup for dinner, and healthcare is not the only industry in America which is suffering now.

You’ve completely ignored the relationship between supply and demand for labor:

High unemployment is a sign of low demand for labor which is reflected by low wages.

Low unemployment indicates high demand for labor and companies must compete for workers by raising wages.

Therefore, raising wages does not result in more jobs. I can hire 10 people at $10/hr, or I could hire 20 people at $5/hr. It doesn’t work to say that I can hire 30 people at $30/hr.

If it were true, let’s raise minimum wage to $40/hr and lets see how many jobs get created (not-counting those in the welfare department).

Forced increases in wages result in an artificially high demand for labor which means dozens of people waiting in lines to fill out job applications, and few people waiting in lines to buy goods. When the unemployment line is longer than the check-out line, it doesn’t matter if milk goes up by only 5%, 300% or 3,000%. People with NOTHING usually don’t buy ANYTHING, regardless of price.

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