Biden

[C0|dB|00ded]

Does anybody on here really have a problem with the concept of "minimum wage"? If not, and with the acceptance of the reality that it hasn't kept up with inflation and/or the increased cost-of-living in many areas of the U.S., what's wrong with raising it?





Maybe a rising minimum wage is the tide that lifts all boats...

A plausible theory as higher wages amongst a large segment of society will lead to higher expenditures. Considering the middle-class is heavily involved in small businesses, that should bolster their sales. Minimum wage workers return the vast majority of their income back into the economy. So a 50% pay raise will be quite the stimulus. The top 5% won't even notice what happened.

[C0|dB|00ded]

An increase in the minimum wage will absolutely increase consumer prices. The question is not the direction of the movement, but the degree. The idea is basic enough that is has a name, cost-push inflation: prices increase (inflation) due to increases in the cost of wages and raw materials. This is contrasted by demand-pull inflation, which is inflation due to a reduction in supply.

We have had a once in a lifetime chance to study cost-push inflation in the real world with the enormous amount of coronavirus stimulus funding that flooded the market throughout 2020. Nearly $20 trillion globally was spent to combat the economic consequences of the virus, with the US total being around $3 trillion. My understanding is that our inflation went from 1.9% in 2019, to 2.3% in 2020. If we abstract this out, we could make the hypothesis that $3T in additional spending caused an additional 0.4% rise in consumer prices. Probably grossly too simple, but at least it gives a ballpark figure.

This figure is important, because an increase in wages is also likely to cause the same sort of inflation: cost-push. How much money does a $15 minimum wage put into the economy? I've heard around $600 billion per year. If this has the same effect as the coronavirus stimulus in a smaller scale, we'd expect it to be equivalent to an additional 0.1% inflation rate which may be unevenly distributed; the cost of a new commercial jet may not rise the same percentage as the cost for a burger made by minimum wage employees. But still, even doubling the minimum wage will result in a smaller ripple than what a lot of people might believe.

There are other concerns however. Doubling a minimum wage worker's hourly pay may lead to a relatively small increase in inflation, but as they economically associate largely with businesses that employ minimum wage workers like retail stores and fast food joints they will experience the majority of the increases in cost. They also are affected by all the negative consequences of such a change: employers demanding higher entry-level skills, lower hours, less overall youth employment, etc. Taken altogether, while doubling hourly pay will not double costs to compensate (or anything close to it), it also won't double take-home pay. Even if the net benefit is positive for minimum wage workers, the results will be uneven. Some will lose their job entirely, some will see a smaller gain due to cutbacks to hours, some already at $15/h will see costs rise with no increased pay, and a few will keep their job and hours and see their purchasing power increase significantly.

Now a better question might be if there are solutions to the issues of income inequality that do not have the same issues. Most economists agree that the Earned Income Tax Credit (EITC) is a near ideal solution that addresses inequality efficiently. In this case, efficiently means a lot of things: evenly, without the risk of an inflationary cycle, without overly affecting employment, etc. However, the EITC in a simple model does have the ability to reduce wages by encouraging work and devaluing labor. A combination addresses poverty from both ends and puts less pressure on businesses.

To be honest, I don't think the minor increase in prices is a major factor against raising the minimum wage. I'd argue that the best solution is increasing both the minimum wage and the EITC, and if I were applying a price tag to each I'd probably go with $600B for the minimum wage and $1.2T for the EITC at a maximum and $300B / $600B at a minimum. This would address the bigger problems raising the minimum wage raises, while probably doing a better job at stabilizing the economy during the recession and working to actively reduce poverty.

You are correct, too simple.

Academic economic concepts do not always hold true in the real world, particularly macro-economic. Inflation has not behaved as it should for decades while government spending and borrowing remains "out of control". We are printing money as fast the presses can go, interest rates are zero, and inflation is steady. A national currency that also happens to be the world's currency, has it's advantages...

...as long as the world continues to buy our treasury debt...

[MikeKennedyRulZ]

Does anybody on here really have a problem with the concept of "minimum wage"? If not, and with the acceptance of the reality that it hasn't kept up with inflation and/or the increased cost-of-living in many areas of the U.S., what's wrong with raising it?





Maybe a rising minimum wage is the tide that lifts all boats...

A plausible theory as higher wages amongst a large segment of society will lead to higher expenditures. Considering the middle-class is heavily involved in small businesses, that should bolster their sales. Minimum wage workers return the vast majority of their income back into the economy. So a 50% pay raise will be quite the stimulus. The top 5% won't even notice what happened.

No problem with raising it. Also no problem with businesses getting rid of half their employees and automating their businesses and raising prices. That's what will happen. Book it.

[C0|dB|00ded]

No problem with raising it. Also no problem with businesses getting rid of half their employees and automating their businesses and raising prices. That's what will happen. Book it.

You act like automation is a switch you just flip. The investment/maintenance cost is incredibly high and/or it's impossible. How do you automate all the Wal-Mart jobs outside of self-service checkouts? Will a $15.00 minimum wage cause robots to spontaneously appear in all big box stores handling customer requests, complaints, stocking, cleaning, and security? It would be worth all the lost jobs just to see us catapult into The Jetsons Era overnight.

Unplug.

P.S. If the robots are coming on the eve of any minimum wage increase, then all those displaced will be needed in robot factories. Unless the robots are going to build the robots... Enter: The TeRmInAtOr ErA!!111

Unplug.

[MikeKennedyRulZ]

You act like automation is a switch you just flip. The investment/maintenance cost is incredibly high and/or it's impossible. How do you automate all the Wal-Mart jobs outside of self-service checkouts? Will a $15.00 minimum wage cause robots to spontaneously appear in all big box stores handling customer requests, complaints, stocking, cleaning, and security? It would be worth all the lost jobs just to see us catapult into The Jetsons Era overnight.

Unplug.

P.S. If the robots are coming on the eve of any minimum wage increase, then all those displaced will be needed in robot factories. Unless the robots are going to build the robots... Enter: The TeRmInAtOr ErA!!111

Unplug.

Have you been to a Walmart with self checkouts? One person manning 8 stations. Do the math. It's not as cost prohibitive as you think. This is coming from someone who actually has knowledge of it. Nobody is talking about robots.

#unity

[wufan]

Does anybody on here really have a problem with the concept of "minimum wage"? If not, and with the acceptance of the reality that it hasn't kept up with inflation and/or the increased cost-of-living in many areas of the U.S., what's wrong with raising it?





Maybe a rising minimum wage is the tide that lifts all boats...

A plausible theory as higher wages amongst a large segment of society will lead to higher expenditures. Considering the middle-class is heavily involved in small businesses, that should bolster their sales. Minimum wage workers return the vast majority of their income back into the economy. So a 50% pay raise will be quite the stimulus. The top 5% won't even notice what happened.

I have a problem with the minimum wage: There is a minimum amount of labor that someone must perform in order to justify their wages. The military did a study on this in the 60s. They found that anyone with an IQ of less than 84 required help from higher IQ folks and caused a negative output. As such, IQ tests are used in the military, but were outlawed elsewhere.

As minimum wage increases, the IQ required to meet minimum profitability in the free market goes up. As it increases, an ever growing population is unable to perform the minimal tasks, and no longer has a place in the workforce. These people have to be supported through some social means (usually government) further increasing the burden on the working and further increasing the cost of goods through lost profits in the form of taxes.

[wufan]

Does anybody on here really have a problem with the concept of "minimum wage"? If not, and with the acceptance of the reality that it hasn't kept up with inflation and/or the increased cost-of-living in many areas of the U.S., what's wrong with raising it?





Maybe a rising minimum wage is the tide that lifts all boats...

A plausible theory as higher wages amongst a large segment of society will lead to higher expenditures. Considering the middle-class is heavily involved in small businesses, that should bolster their sales. Minimum wage workers return the vast majority of their income back into the economy. So a 50% pay raise will be quite the stimulus. The top 5% won't even notice what happened.

While wages have not kept up with inflation, the cost of goods has actually decreased and most of the difference between inflation and labor wages is seen in capital investments, i.e. automation.

Additionally, the adjusted dollar value is based on the index which lists apartment rental (which has doubled in size per person), health care (paid for by the stat for those earning less than the poverty line), and education (which hopefully landed you more than a minimum wage job if you went to college) as the greatest burdens.

As you take these things into account, the graphs, while accurate in what they present, don’t present an accurate reflection of reality.

For all the Econ majors, please point out my errors so I can adjust accordingly.

[C0|dB|00ded]

I have a problem with the minimum wage: There is a minimum amount of labor that someone must perform in order to justify their wages. The military did a study on this in the 60s. They found that anyone with an IQ of less than 84 required help from higher IQ folks and caused a negative output. As such, IQ tests are used in the military, but were outlawed elsewhere.

As minimum wage increases, the IQ required to meet minimum profitability in the free market goes up. As it increases, an ever growing population is unable to perform the minimal tasks, and no longer has a place in the workforce. These people have to be supported through some social means (usually government) further increasing the burden on the working and further increasing the cost of goods through lost profits in the form of taxes.

You've weaved a mighty dismal scenario out of a premise that is based on likely outdated, erroneous, or just plain wrong scientific assumptions. Modern-day managerial systems and technological advancements have likely made it much easier in 2020 to keep a bunch of dummies on task than back in 1960.

With that all aside...

We have low-skill jobs in this country. Somebody has to do it. Who's gonna do it? Immigrants living 3 generations deep in a single home? Robots? You, Lt. Weinberg???

Fully aware that "minimum wage" hasn't kept up with inflation, regional cost-of-living, and even average national productivity, do you not think the "lesser folk" deserve an income befitting a citizen of a first world country? What about the aged who just want to be a greeter at Wal-Mart. Wouldn't five extra bucks an hour go a long way towards maintaining their independence? Raising the minimum wage could also put upward pressure on middle-class wages which are sorely in need of a "market adjustment". Wages are set by the marketplace which is set by supply/demand, which is heavily influenced by perception. If Boner is getting 15 bucks to pump gas, then I'm getting 30 to manage the gas station. If wages go up over a broad spectrum of the public there will be some inflation, but it likely won't be commensurate. Everybody in here acts like the employer has all the say in the hiring, but from a market standpoint, the employee has most of the power because he/she gets to choose where/when to work. Without employees, a business ceases to function.

[C0|dB|00ded]

While wages have not kept up with inflation, the cost of goods has actually decreased and most of the difference between inflation and labor wages is seen in capital investments, i.e. automation.

Additionally, the adjusted dollar value is based on the index which lists apartment rental (which has doubled in size per person), health care (paid for by the stat for those earning less than the poverty line), and education (which hopefully landed you more than a minimum wage job if you went to college) as the greatest burdens.

As you take these things into account, the graphs, while accurate in what they present, don’t present an accurate reflection of reality.

For all the Econ majors, please point out my errors so I can adjust accordingly.

The reality is that average folks raising a family in 2020 must have both parents working, that wasn't the case 30 years ago. Inflationary pressure on some aspects of life that make up a "standard of living" have been held down thanks to technology advances, changes in tastes and preferences, and cheap labor as manufacturing has moved off-shore (an obvious double-edge sword).

It also takes K-12 + a 4 year degree to expect to earn relatively what a guy could earn in the 70's with only a HS diploma. So we've suffered from educational inflation as well.

Apartment sizes aside (???), pay for the low-to-middle class is far behind where it should be. This is not contested. And market forces are only driving the divergence further. Trump was able to slightly affect the issue by partially closing the economy, but that is a very dangerous and globally destabilizing ploy.

Raise the minimum wage and the jobs will dry up they say (in school). So that would mean businesses are currently not seeking to maximize profits by employing only the bare minimum of labor they need. In reality, they are donating profits to the workforce through unnecessary hiring. I'm dubious.

[wufan]

The reality is that average folks raising a family in 2020 must have both parents working, that wasn't the case 30 years ago. Inflationary pressure on some aspects of life that make up a "standard of living" have been held down thanks to technology advances, changes in tastes and preferences, and cheap labor as manufacturing has moved off-shore (an obvious double-edge sword).

It also takes K-12 + a 4 year degree to expect to earn relatively what a guy could earn in the 70's with only a HS diploma. So we've suffered from educational inflation as well.

Apartment sizes aside (???), pay for the low-to-middle class is far behind where it should be. This is not contested. And market forces are only driving the divergence further. Trump was able to slightly affect the issue by partially closing the economy, but that is a very dangerous and globally destabilizing ploy.

Raise the minimum wage and the jobs will dry up they say (in school). So that would mean businesses are currently not seeking to maximize profits by employing only the bare minimum of labor they need. In reality, they are donating profits to the workforce through unnecessary hiring. I'm dubious.

Please point out what I got wrong. Was I incorrect in my facts, or just my conclusion?

[C0|dB|00ded]

Please point out what I got wrong. Was I incorrect in my facts, or just my conclusion?

I don't know man. That sounds like too much work. :)

I don't work for the government so most of my macro knowledge is academic. I also don't use much fundamental analysis in my day-to-day.

I'm not familiar with the index you speak of that includes rental rates. There are a million different ways to figure CPI/inflation.

Here's a nice article on the history of the CPI:

https://www.investopedia.com/articles/07/consumerpriceindex.asp

Here's the first link I found on rental rates and inflation. It appears it's risen lock-step:

https://www.motherjones.com/kevin-dr...20income%20too.

If you push me further on this I will simply cry uncle and say you win! Calling for a minimum wage rate hike puts me at odds w/ 75% of economists anyways... ;)

But, I truly believe it could be beneficial at directly attacking an income problem we have in this country. Employment attrition should be minimal in the large companies of which I think this hike should be the focus.

The ol' standby of, "Go back to school kid if you want to make more money" is likely not applicable for the demographic we are discussing. Plus, there are menial jobs that have to be done and there are millions of adults working those jobs. It comes down to whether or not they should suffer for being "less than". Nobody's getting rich on $15. But perhaps they can afford a nice apartment, a used car, and Netflix now instead of living in a shanty (or w/ moms), riding the bus, and Netflix...

On the other hand... it does create an incentive problem and "incentives are everything" in Economics. But it's not paying someone to stay home like some ultra-liberals are suggesting. Compromise, slide a little back towards Center. Give everybody a small win. Then we move forward.

And if that's not enough I say this: What Would Jesus Do!!!???

[SB Shock]

So, in other words, my quarter pounder is going up a couple of quarters.

Personally I believe they should tax food by the calories + minimum wage increase

[SB Shock]

That is a good chart.

What happened around 1979 to cause the split?

[shocktown]

That is a good chart.

What happened around 1979 to cause the split?

Off the top of my head I will go with Jimmy Carter and super inflation.

[wufan]

Off the top of my head I will go with Jimmy Carter and super inflation.

A lot of the graphs I’ve seen show a split a little earlier in the decade, and then they get blamed the gold standard. It also corresponds to the rise in Asian manufacturing capacity.