Minimum wage/Livable Wage

The first minimum wage in the US in 1938 was $.25. From then to today that is an 29X increase, increase it another 29 times and unless we address the core causes of poverty nothing will change.

This seems circular to me. But, I have concluded that government can set the minimum at any amount it wants, it won't solve the problem you say you want to solve. Some will get helped, some will be harmed, most won't see a difference.

I have been clear that housing is the most pressing issue, not the only issue.

I fully support unionization and collective bargaining. I don't support people being forced into joining unions, it should be voluntary. If a union is beneficial (and many are, while some are not) people do not need to be forced into joining and paying dues - dues often for political purposes other than what is in the interest of the worker. There is some nuance in this issue. Don't always buy into the demagoguery.

Heath-care is an issue we need to fix. But, in terms of it being a root cause of poverty I do not see your argument. Most poor people go without routine healthcare services if they have to pay - the real issue is when an illness occurs there is a loss of income. Paid sick time is a luxury many do not have.
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At one point you argue that the minimum wage is the important factor regarding people avoiding poverty, while I have argued it has no impact. Your chart shows social security and tax credits (EITC which I have argued in favor of) as one and two reasons for people avoiding poverty with nothing about the minimum wage and with relatively few benefiting from section 8 housing (while others face higher rents because of it).

I do believe government has a role in eliminating poverty. Again, I suggest a start would be clean, safe and affordable housing.
--- merged: Jan 13, 2014 at 12:15 PM ---

If the minimum wage is below the market based wage, there is no impact. It is meaningless. If it is set arbitrarily higher, then alternatives to paying wages become more cost effective and there would be an adverse impact on employment in some cases.

I moved out of California for a reason, given that I did not need to be in the state to earn a living. In NC I can easily make less money and improve the quality of my primarily due to housing related issues.

 

Actually, I have said on more than one post in this discussion that I agreed with you (and Reagan) that the EITC is the more effective way to reduce poverty (or raise disposal income in working class families).

BUT, I also noted that it is the third most costly income support program (behind Medicare and SNAP) and that expanding the EITC (now at a cost of $50+ billion annually) would cost taxpayers signficantly more than raising the federal minimum wage. I am still curious how you would pay for an expanded EITC (details matter!)

And the new Census way of measuring poverty, SPM, factors in government benefits (tax benefits, SNAP, WIC, etc). A federal minimum wage is not included among the factors to reduce poverty because it is not a government benefit program.

 

Taxpayers generally support most social safety net and/or income support programs as well as raising the federal minimum wage by fairly wide margins, although voices on the right have been growing louder and nastier (led the Tea Party types) in stigmatizing recipients of income support program as "lazy freeloaders looking for a handout and ripping off taxpayers" and support for a higher minimum wage as "wealth redistribution and a socialist inspired attack on business"

 

And? What's your point here? These are not facts, these are assertions, and not even solid ones. The "Market Based Wage" is a theoretical construct that's never explicitly defined and has little actual meaning in the context of the highly regulated markets that exist in reality. People will adjust to increased minimum wages, yes, and the empirical evidence seems to suggest that reasonable increases in the minimum wage work as intended.

Right. What's your point? You seemed to earlier be suggesting that people in your situation would be forced to live in ways that would be unfavorable to domesticated animals. Are you backing off of this point now?

 

In regard to the alleged failings of poor people, perhaps this is a good time to mention John Scalzi's great essay/prose poem, "Being Poor".

 

I think this is super simple:

For ease of math, let's say current minimum wage is $8/hr, and the vast majority of minimum wage workers are part time (30 hrs/week)

That's $240/week pre-tax (and while, yes, those workers will see those taxes back as a refund at the end of the year, that doesn't help them on a weekly basis).

Now chances are that someone living on $240/week is spending every last cent on rent/food/gas/insurance. In other words, no extra spending money, and probably going into debt just making ends meet.

Now if you raise the minimum wage to $10/hr, that same person is now making $300/week.

Do we think that the extra $60/week is being saved in a bank somewhere, or is all $60 being spent to, again, make ends meet? I think it's pretty obviously the latter.

So in the simplest terms, you've just injected $60 straight back into the economy through this wage increase, which benefits the very companies who had to pay out more wages.

 

It would be nice if they were able to save $50/week though. At least some of the time to give them more of a cushion and to not have to put up with crappy work conditions.

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If home builders and cities allowed better insulated building (using the dirt from the job site), such that they would stay somewhat warm no matter the outside temp, and made houses that cost $50,000, it would go a long way to improving things. You don't need 40 acres either.

 

There are three possible market responses or combinations of the three to increased labor costs or an increase in a minimum wage. Only three.

1) The increased costs are absorbed and profits decline.
2) The increased costs are passed on in the form of increased prices.
3) The increased costs are absorbed and productivity goes up (more work by fewer people).

Two of the three are not good for the working poor, and one of the three ain't gonna happen over the long-term.

All the studies cited on the question of job loss not correlated to minimum wage increases are flawed. Honest study of the question reveals that at certain cost points increasing the minimum wage will not make a difference - at other cost point increasing the minimum wage will make a difference. Time has to be factored into the study as well.

More on item 3, as it relates to the loss of jobs. McDonald's is a good real world case study. Value Line has a free report detailing McDonald's financials over a 10 year period - including instances when Federal and state minimum wages have been increased. One ratio of note is operating margins - currently at about 36% peak and has been trending up for 10 years. In order to accomplish this the company has had to improve employee productivity. Fewer employee work hours per dollar of revenue - but if you look at total employees the number is up! However if the same ratio was in play today as it was 10 years ago the employee number would be significantly higher. Now the company is at a point where future productivity gains will be much harder to achieve, not impossible. I worked at a McDonald's as a teenager, and I visit the restaurants regularly. Today they generally will have two cashiers, in the past during peak hours there were 4 to 6. If the minimum wage was still about $3 they would not have had much incentive to get those same productivity gains.

There are academic studies and there are studies of real world activities. Some here will go on and on about citing sources - look at some income statements - look at the over time - overlay legislation macro and socio-economic trends - observe the world with your own eyes.

 

Or

4) the extra income now earned by the working poor goes directly into the economy, balancing out (if not increasing) sales for several companies like Wal-Mart

 

But in that case, you have more demand for products and prices would increase. Now, not all of them would run out and buy the same products, but it would take more natural resources and increase the price of the products down the line.

Then again, they might just spend the money on paying off the debt they have and other bills, which is probably more likely. This would help banks out.

Either way, I think the policy makers should look at the self employed and how they would handle or have handled past minimum wage increases. You aren't going to see your wages/revenue go up 25% if you are a starving artist, small store vendor, or small scale author. Plus it raises the bar a little for what is considered "acceptable" work or wages.

And in the long term, it might help push wages up, but are people ready for California or New York wages in the other states? Even if the value of the dollar is less, I don't think our generation would pay someone 6x what they make today in 2050. But they did make on average $7,500 in 1970 and $47,000 today. That would mean that the average salary would be $294533 if that trendline would continue out to 2057... If you think that is crazy, what would you think if we were back in 1970 and were told that the average wage would be $47,000 in 2013, and people making $15,080 would be poor?

What I would worry about is the Mexico situation happening, where my job would need to pay $800,000 pesos to hire me at the same 'buying power'. It might be an exaggeration, but inflation has caused that much of an increase in the past. Now, not many companies would hire me at that salary I'm afraid. So you get a large underclass of people who can't find honest jobs outside of working for a few large corporations. And then you look at traveling to a different country to work at under minimum wage in order to make enough money to send back to family back in Mexico.

 

I don't quite know how to answer this.

People get accustomed to whatever the nominal dollar number is for prices and wages. What looks crazy from one standpoint is perfectly normal from another. The wages of 1970 or 2057 are not really relevant to today's economy.

Back around 1967, my father paid $18,500 for our perfectly ordinary house. If you spoke with him then, I don't think he'd be terribly surprised to hear that his house would be worth more than ten times that much in 2014.

(I bet he would be much more surprised to hear that it's in a designated historic district.)

Mexico's problems include rapid population growth, a vast unskilled labor pool, and uncontrolled random violence. The precise value of the peso at any given moment is not a problem as such. Remember when the French franc was worth about a thousand Italian lira? That didn't make Italy the equivalent of Mexico.

Tangentially, I have some $100 trillion bills from Zimbabwe. At the time that currency was discontinued, 100,000,000,000 Zimbabwe dollars were worth about 29 cents U.S. That low value wasn't because of a minimum wage, rather, it was due to irresponsible monetary policy.

 

Continuing what? I do not assume you understand what I write. If you have a question, ask. If you have a counter point, make it.

I follow MCD's financials, the number are what they are - not my assumptions. MCD is a company that has and would be impacted by a minimum wage change. Often analyst, incorrectly in my view, cite the risk of minimum wage legislation as a risk to future earnings per share growth.

I think their starting view points are often too narrow. I think some set out to support an ideology. I think some are wrong. I this some use fallacious argument. I think...
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Where does the extra income come from? Decreased profits? Increased productivity? Higher prices? Magic?

If we look at corporate profits on a whole over time the percentage is consistent. Productivity consistently increases over time. Prices (inflation) are consistently increasing over time.

Then you forget, even for the working poor there are payroll taxes. Every payroll dollar is taxed at least 15%. Business does not get the full benefit of the increase in terms of consumer spending.