Nay to Minimum Wage Increase

[WMahoney]

A minimum wage is needed to provide essential regulation to the job market. Even the most laissez-faire person understands that *some* regulation is needed to protect the worker. The Lowell factories and coal mining children in the 1800s come to mind as good examples of the need for regulation.

However, **raising** the minimum wage is VERY short sighted. Many mfg goods are already produced outside of the country, by workers getting paid much less than 5.15 per hour. Raising the min wage will only increase this, because it will be more expensive to pay for the factory labor here.

Let me give an example that helps explain why increasing the minimum wage is bad. Business owner A makes $200 dollars a day at his flower shop. He has two employees, who work 7 hour shifts each day for 5.15 an hour, and one who works 5 hour shifts for 6.50 an hour. The first two employees, X & Y, make $36.05 each day, and the 3rd employee, Z, makes $32.50 a day. This costs him $104.60 a day to keep all 3 employees. In addition to this, he has to pay rent on the building, the water and electricity bills for the store, buy the flowers to sell, and pay an insurance premium in case his employees get hurt on the job. In the end he doesn't have much to spare. Hey, the guy's a small business owner, not Wal-Mart (who BTW he is most likely competing with)

Everything is fine until some democrat/socialist in congress is up for re-election, and decides to pass a bill which raises the minimum wage to 6.50, so he can make a speech to the working class in his district about how much he cares about them and is helping them by doing this and forcing their EVIL employers to cough up more money to pay them.

Unfortunately for said working class employees at owner A's flower shop, their raise in pay means owner A can no longer afford to have three employees, because he must pay them a total of $123.50 each day. He has several options.

He can either fire an employee, putting one of the democrat/socialist's constituents out of work (good job socialist), or he can lower everyone's hours until they still get the same amount of money they did before. This second one is worse for employee Z, because Z didn't get a raise. "A" can cut "Z"'s hours from 5 to 3, but he won't increase his wage from 6.50 to something higher, because he is trying to cut costs to stay afloat, and "Z" is out of luck thanks to the socialist in congress.

He can also pass his costs onto the consumer. His flowers could be $10 a flower instead of $7. Of course, people don't really need flowers, its a luxury, so his sales would probobly drop as a result of the price increase. After all, with the minimum wage now higher across the board, everything would either cost more, or more people would be fired and go on welfare. And the increase in welfare would mean an increase in taxes to pay for it.

It gets even more complicated as you go down the line, but you get the basic idea.

And to the bleeding hearts who say "but 5.15 isn't enough to live on for 40 hours a week *sob* " I say you need to take an economics class or two. Of course 5.15 for 40 hours a week isn't enough to live on, thats why people who make 5.15 an hour work 60-70 hours a week at 2-3 jobs. "Oh no!" you say, that's not fair at all! Yeah, it is, if you consider how much time a small business owner (the worker's *evil* boss) spends working on his business a week. My father owned several optical (glasses and contacts) shops for years, and his work log showed 100+ hours at work a week (he paid all his workers better than minimum wage).

Besides, inflation from the increase in minimum wage will make the 6.50 an hour worth only as much as the 5.15 was before the increase. This helps no one.

Being a poor worker or a small business owner is NOT easy, and nothing you socialists do will make it any easier. But don't blame the owner when he has to fire a worker because YOU increased the worker's wage more than the owner could pay.

[Begoner]

There are a multitude of factors that you do not consider.

Take the old example of the national guardsman who earns $30 each month. A rich man can afford to buy an expesnive and well-crafted pair of shoes for $50 dollars which will last him for a matter of years, if not for his whole life. The national guardsman, on the other hand, does not have $50 dollars to spend on shoes. Thus, he must buy cheaper $10 dollar boots each month. However, since the boots are so cheap, they break down easily. Month after month, the national guardsman needs to buy a new pair of boots. Overall, the poor national guardsman will end up spending much more than the rich man on footwear, despite the fact that he earns much less money. This same example can be applied to many different situations -- in the end, it means that it is extremely difficult, if not impossible, for somebody who earns minimum wage to earn enough money to do something productive -- namely, start a business. That means that unemployment will increase because the minimum wage workers will never be able to hire anybody.

Furthermore, the argument against the minimum wage, although it sounds good in theory, has been disproved time and time again in practice. There is no correlation in the US between the minimum wage and the strength of the economy -- in fact, states that have raised their minimum wage in fact have growing economies. Consider the way money is spent. Lets say, for the sake of argument, that you give $1000 more a year to a poor person. What is he going to do with it? Well, he's going to go to the bakery to buy another 100 loaves of bread of the course of the year. With that extra money, the bakery will be able to buy a new oven to bake bread. The oven installer will then take that money and spend it on a new lamp. The lamp company will invest in a new cash register. And so on and so forth, each person will spend it on something else in turn. In effect, the velocity with which the money is spent is much greater among the poor. They live a more hand-to-mouth existence, so they must spend their money more rapidly than a rich person. How is this benefical to society? Well, that money is used to purchase more goods over a shorter period of time than if the money had been given to a rich person. Society benefits from the improvements to various businesses caused by the high cycling of the money. With that $1000, the bakery, has been improved, as has the lamp company, the cash register company, etc. The money has been put to good use -- it is not sitting under the bed of a rich person, or being spent on stores which cater to the rich.

Also, this ties in to another factor. If the minimum wage is increased, workers will have more money to spend on other things, contributing to business. If the minimum wage was increased, the flower store could sell more flowers to workers who had no way to afford them before, thus increasing the revenue of the flower store, and allowing them to keep the third worker on. Did you hear about what Ford did? He raised his employees' wages far above what everyone else was paying them. Why? Because they could then afford to buy the cars they were producing, and it was an added incentive to work hard. Guess what -- Ford didn't run out of business. It was the most successful car company of the day.

An excellent example of minimum wage laws is Oregon and West Virginia. Oregon has a minimum wage of $7.50 dollars per hour. West Virginia, on the other hand, has a minimum wage of $5.15 dollars and hour. West Virginia has an unemployment rate of 5.9% while Oregon has one of 5.5%. Obviously, an increased minimum wage does not have that great an impact on unemployment.

[MrBibz]

Not a bad argument. I've thought about this myself, considering that minimum wage will always decrease the bussinesses net profit (if net is the right term). On first thought increasing minumum wage seems like a good thing, but it also has it's downsides. Isn't this partialy the cause of inflation?

Anyway, I thought minimum wage varied from state to state.

[JakeHero]

Increasing mininum wage is the bollocks for one simple reason: people who get such blue-collar jobs are usually teenagers who want to buy an IPod or save enough money to help pay college tuition. These jobs were not designed to support a family or let alone someone for the rest of their life.

[Begoner]

Anyway, I thought minimum wage varied from state to state.

Indeed it does. An excellent site on state minimum wage laws can be found here:

http://www.dol.gov/esa/minwage/america.htm

If you wish to compare that to unemployment rates by state, you can check out this site for unemployment rates:

http://money.cnn.com..mployment/index.html

I think it's interesting to note that Mississippi, which has no minimum wage laws, has the highest unemployment rate in the country, with 8.0%.

[LoneFalcon1989]

At 9/20/06 04:46 PM, Begoner wrote:

Consider the way money is spent. Lets say, for the sake of argument, that you give $1000 more a year to a poor person. What is he going to do with it? Well, he's going to go to the bakery to buy another 100 loaves of bread of the course of the year.

Suply and demand, buddy! If all the poor workers want to buy more stuff, the demand goes higher and so does the price. So basically all you did by giving the poor man $1000 extra is make prices go up in the long run. WHEEEEEEEEEEE!!!!!!! Inflation!!! Just what every American wants more of!

[RedSkunk]

At 9/20/06 03:46 PM, WMahoney wrote: However, **raising** the minimum wage is VERY short sighted. Many mfg goods are already produced outside of the country, by workers getting paid much less than 5.15 per hour. Raising the min wage will only increase this, because it will be more expensive to pay for the factory labor here.

This was your first incorrect assumption. Since, as you pointed out, manufacturing goods are produced outside of the US by workers making much less than $5.15, then why would anyone manufacture goods inside the US? The future of manufacturing in the US is high-quality, low-production "specialized" products. These required skilled workers, therefor higher wages. The people making minimum wage in the US are not in the manufacturing sector. The people making minimum wage in the US are in the services industry, one of the most rapidly growing sectors in most of the post-industrial world.

The service industry can not outsource their jobs. You can not have people in China flipping burgers at the local fast food chain, or selling [Chinese] goods at Wal-Mart. Can't be outsourced. The outsourcing argument fails.

Now the increased unemployment argument. This again does not work in the real world. Your theoreticals might make sense, but they don't make for a good argument. Businesses do not pay for people to sit around idly. They pay people to work. In the US, it is especially true that people are not over-compensated – especially those working at / slightly above minimum wage. Meaning, your local burger chain can not fire anyone should the minimum wage rises. They are already stretching their human resources.

Why would your theoretical flower shop pay three people to work if they could easily get by with two employees? A well-run business would not. A well-run business is not paying people more than they need to. And the companies that do? If you're supporting inefficient businesses, then who is the real capitalist here?

Finally comes the "inflation argument." Yes, companies will offset wage increases by increasing prices. However, these price increases are insulated by being spread throughout society. The increased cost of a burger will be placed onto everyone in society. The person earning $6.50 an hour instead of $5.15 will be making a much higher wage, even taking into consideration inflation. You have no basis to claim that inflation will rise with the minimum wage linearly. That doesn't make sense, and that's not what happens. If you are going to make that claim, show some statistical evidence. And be sure to make a credible case that all of the inflation is due to minimum wage increases. Correlation does not equal causation, take into consideration other historical factors. Thanks.

[RedSkunk]

At 9/20/06 05:54 PM, LoneFalcon1989 wrote: Suply and demand, buddy! If all the poor workers want to buy more stuff, the demand goes higher and so does the price. So basically all you did by giving the poor man $1000 extra is make prices go up in the long run. WHEEEEEEEEEEE!!!!!!! Inflation!!! Just what every American wants more of!

You're saying that all inflation is a bad thing. Economic growth is tied to a certain amount of inflation. Controlled inflation that is the result of controlled economic growth is not necessarily a negative. Think about it.

[Begoner]

If all the poor workers want to buy more stuff, the demand goes higher and so does the price.

Err...you do realize that if you buy anything at all, that decreases the supply and consequently raised the price, albeit slightly? You're not seriously advocating that we should buy nothing so that we don't risk inflation. It's like RedSkunk said -- economic growth is necessary, regardless of some inflation. The thing that you have to avoid is uncontrolled inflation.

[Der-Lowe]

The funny? thing is that the same people that say nay to raising minimum wage, are ok with lowering taxes to the rich; they agree on giving more money to the rich, but not to the poor, despite the fact that giving money to the poor strenghtes demand much more than giving money to the rich.

[Neoptolemus]

Minimum wages should always increase. Just think, the price of living a comfortable life in the west increases with more technological advances. If you think about it, you Americans do get paid horribly if you're on minimum wage.

The minimum wage in America is what? $5.15
while the minimum weage here is Britain is £5.05

mid-market rates as of 2006.09.22 03:38 GMT

1 USD = 0.525821

£5.05 is $9.60

damn.. sucks to be earning minimum wage.

[JoS]

Your model is over-simplified. you are assuming all other things remain equal. well in the real world all other things do not remain equal. Savings rates and spending rates will change for one. And why is it that despite the fact the cost of everything is going up each year due to inflation wages (especiallya t the minimum level) are nto going up accordingly. In reality each year as inflation pushes up the cost of everything, real wages decline. So you may make $5.15 in year one but 5 years later you may only $5 when you tkae into account inflation. And some states haev not chanegd minimum wage in decades, which means at the minimum wage level some people have lost over $1 an hour. That definatly kills savings in an economy.

You say some small business owners work 100+ hours a week. this may be true, but they get a munch greater return than minimum wage in the end.

[morefngdbs]

At 9/20/06 04:50 PM, Begoner wrote:

Anyway, I thought minimum wage varied from state to state.

Indeed it does. An excellent site on state minimum wage laws can be found here:

http://www.dol.gov/esa/minwage/america.htm

In your example , Florida is shown with a min. wage of $6.40.
It doesn't note that if you work as a waitress or bartender they can get away with paying you $ 3.00 an hour.
The reason supposedly is you make up the difference in tips.
I think that sucks.
I was told this by friends I was visiting in Florida back in February.

[JoS]

Im guessing you just took a 1st ECON class on this too. A simple equalition like you presented for supply in demand in no way relates to the real world. It is over-simplification. Liek I siad before many factors go into unemployment. This also would imply that the minimum wage is set above the theoriltical equilibrium wage, but what if its set below tthat point? You say thats impossible, who would do such a thing. The answer is no one, but Im sure over the last decade that point would have changed, moving up so undoubtedly if it never chanegd it could be belwo that point.

Demand and Supply curve works for 1st year ECON, not real life.

And on the note about bartenders in Florida. Most jursidictions set a different minimum wage for people who serve alcohol or waitresses also in some cases and for students etc. People who serve alcohol get a smaller base wage but if they do not recieeve enough in tips to make it up to the minimum wage level their employer must make the difference. This is because you can make alot of money in tips, so I dont see how this is bullshit.

[BeFell]

You know, if people want to make more than minimum wage they could just go work at McDonalds or Wal-Mart.

[AdamRice]

I am completely against raising minimum wage. Your argument seems valid to me.

Raising minimum wage will also cause inflation which completely sucks ass.
Most jobs already pay slightly higher then minimum wage anyways. You have to have a pretty shit bottom of the food chain job to make the actual bare minimum rate.

The lowest I've ever been paid was $6.25 an hour.

[kidray76]

At least your 19, you made your opinions well known and is respectable. Though, your not looking at it from only one stand point, the business sense. True, costs would go up for that reason, but doesn't mean it would end up exactly like you said. There is a such thing as part time. Also, minimum wage is exactly what it says, just enough for one person. I'll do some math for you.

Standard full time is 40 hours. Times mininum wage 5.15. Before taxes 206 dollars. Two week pay period, 412 dollars before taxes. 412 dollars!!!! Shit, rent these days is around 500, so it would take two pay checks just to have a place to live. Oh wait, gotta eat, utlities, and find a way to travel. Car note, and insurance alone eats up the rest of the second pay check.

Let's face, you may come from a background where your parents had good paying jobs or owned a business, but what those people who never went off to college? They pay taxes just like the rest of us. So whats another .25 cents upgrade per hour to a business. If they can't afford that, then it is there problem. The economy can't worry about mom and pop shops all the damn time. If it did, wal mart would be out of business and you talkin about inflation? That is going to sky rocket because of middle man costs.

I'm a senior college student, studying managemtn information systems with a minor in economics and internation business. What I've learned in my studies that the poor are the most affected by change. If taxes increase, it will have a more devastating affect on the bottom brackets than any other. I also have a child, and minimum wage if I were to earn that at my job would be just enough to take care of his needs. Fortuanately, I dont have to worry about that, but I have alot of classmates who have to work two jobs just to even have a place to rest their heads at night.

Now, let's think of the positives of a rase in minimum wage. Wait for it, Wait for it. People pay more taxes to the govt. I know your going to say thats a bad thing, but think of this. No new taxes, and plus people would be happier because they would be paying a percentage less tax on income rather than the new taxes that would occur without the raise. Speaking of business sense, they would get tax breaks if the raised occured so actually, ignoring the time value of money ( way over your league) could just balance out at the end.

In all, you try working for minimum wage and see how hard it is.

[X-0-r3d3mpti0n-0-X]

to the IDDIOT that started this thread..minimum wage SHOULD be increased

IDDIOT

[morefngdbs]

At 9/23/06 03:36 AM, X-0-r3d3mpti0n-0-X wrote: to the IDDIOT that started this thread..minimum wage SHOULD be increased

IDDIOT

;
Idiot-1 a retarded person mentally equal or inferior to a child 2 years old.,see mental retardation.
2 a very foolish or stupid person.

If you plan on shouting your abusive name(s) at the person who started the thread could you try to at least get the spelling of the insulting word or phrase right.
Everyone makes spelling errors, but this was so blatent I had to say something.

[JakeHero]

Minimum wage should be abolished.

[Begoner]

If you do not understand the negative consequences of abolishing the minimum wage, you do not have a firm grasp of economics at all. I made a graph comparing the minimum wage and the per capita personal income in all of the US states:

http://alemea.freeco..entVsMinimumWage.swf

As you can see, the higher the minimum wage, the higher the per capita personal income. Source:

http://www.infopleas..om/ipa/A0104652.html

http://www.dol.gov/esa/minwage/america.htm

[JMHX]

Now you see, people bitch to high Heaven about giving a two-dollar minimum wage increase to workers, but every single year, every SINGLE YEAR Congress votes itself between a $2,000 and $5,000 "working increase." That's an average $3,000 increase to over 550 members of Congress, totaling $2.75 million every year. If we look at that over the past decade, that's over $27 million in wage increases for Congress alone.

How fucking disadvantaged they are.

[kidray76]

At 9/23/06 01:31 PM, Truthiness wrote: Now you see, people bitch to high Heaven about giving a two-dollar minimum wage increase to workers, but every single year, every SINGLE YEAR Congress votes itself between a $2,000 and $5,000 "working increase." That's an average $3,000 increase to over 550 members of Congress, totaling $2.75 million every year. If we look at that over the past decade, that's over $27 million in wage increases for Congress alone.

How fucking disadvantaged they are.

Great job, I coudln't of said it better myself. It is interesting they woudl vote to give them more money, but for them to lose money and give it to someone else. It's just not civilized.

[JakeHero]

At 9/23/06 01:25 PM, Begoner wrote: If you do not understand the negative consequences of abolishing the minimum wage, you do not have a firm grasp of economics at all.

O rly? Care to explain how getting rid of a federal minimum wage would be bad, or are you just going to tell me it would be? Because if you actually feel like discussing economics I'll be more than happy to oblige you.

I made a graph comparing the minimum wage and the per capita personal income in all of the US states:

http://alemea.freeco..entVsMinimumWage.swf

Real impressive graph.

sarcasm

As you can see, the higher the minimum wage, the higher the per capita personal income. Source:

http://www.infopleas..om/ipa/A0104652.html

http://www.dol.gov/esa/minwage/america.htm

No shit. But this does not indicate economic success.

[BeFell]

At 9/23/06 01:40 AM, kidray76 wrote:

They pay taxes just like the rest of us.

No they don't.

I don't know why minimum wage is even an issue when McDonalds and Wal-Mart both start at least a dollar above the federal minimum wage level. Obviously supply and demand comes into play a little teeny tiny bit when it comes to wages.

[Begoner]

O rly? Care to explain how getting rid of a federal minimum wage would be bad, or are you just going to tell me it would be? Because if you actually feel like discussing economics I'll be more than happy to oblige you.

I already posted my reasons above.

Real impressive graph.

I never said it was impressive -- I said it was true. And per capita GDP is the best indicator of economic success we have, so you're without a leg to stand on, here.