minimum wage hikes(follow-up)...not so good

[Jockey]

What are the horrible consequences of free markets that you fear? If there are abuses (child labor, monopolies that restrict competition, etc.,) societies are free to enact common sense laws for its citizens protection.

Glad to see you coming out of the closet in favor of regulation

[Lennys Tap]

Regarding your earlier post, how do you define "free market principles?" To me that seems exceptionally vague. So vague that one could find "free market principles" at work in nearly every country on earth. Even the most socialist countries on earth, particularly in the Western world, have extensive free market elements.

If you think that voluntary interactions between free people (consumers and businessmen) generally produce better results than government decrees you believe in free market principles.

If you think that individuals will spend their own earned income more wisely and carefully than government bureaucrats you believe in free market principles.

If you think competition is more likely to produce innovation and prosperity than government or government/private "partnerships" (crony capitalistic quasi monopolies) you believe in free market principles.

I could go on and on, but hopefully you get my drift. That doesn't mean that government can't protect its citizens from businesses (or individuals) who would do them harm. That's government's most vital role, so you can't shoot somebody or poison them with toxic waste - etc., etc., etc.

We are imperfect and so is our world. That vexes us so we want to eliminate those imperfections. If you think that the world, as imperfect as it is, is a better and more prosperous place when men and women are most free, you believe in free market principles.

[Lennys Tap]

Glad to see you coming out of the closet in favor of regulation

Problem is, government is better at creating monopolies (FCC) than regulating them. Also, it's not uncommon for special interest groups to co-op the agencies who are supposed to control them.

[TAMU, Knower of Ball]

If you think that voluntary interactions between free people (consumers and businessmen) generally produce better results than government decrees you believe in free market principles.

If you think that individuals will spend their own earned income more wisely and carefully than government bureaucrats you believe in free market principles.

If you think competition is more likely to produce innovation and prosperity than government or government/private "partnerships" (crony capitalistic quasi monopolies) you believe in free market principles.

I could go on and on, but hopefully you get my drift. That doesn't mean that government can't protect its citizens from businesses (or individuals) who would do them harm. That's government's most vital role, so you can't shoot somebody or poison them with toxic waste - etc., etc., etc.

We are imperfect and so is our world. That vexes us so we want to eliminate those imperfections. If you think that the world, as imperfect as it is, is a better and more prosperous place when men and women are most free, you believe in free market principles.

So not a truly free market. A socialist government that leans heavily towards capitalism instead of communism. I think most people in the country agree with that. We just disagree on how much protection people need (though its a lot closer than our polarized parties would have people think).

Going back to the original topic. I think everyone should be paid a living wage. I question that raising the minimum wage is an effective way to do that. Reading this thread has been for the most part enjoyable because I have gotten to hear a lot of different perspectives.

[Lennys Tap]

Going back to the original topic. I think everyone should be paid a living wage. I question that raising the minimum wage is an effective way to do that. Reading this thread has been for the most part enjoyable because I have gotten to hear a lot of different perspectives.

Going back to the original topic, I think that demanding employers pay a "living wage" (enough to support a family of 4) for unskilled, entry level workers is one of the reasons (along with a monopolistic, failing public school system, draconian drug prohibition laws and various welfare programs) for the cycle of inner city poverty we still see today. Good intentions, bad results to me = bad policy.

[Pakuni]

Going back to the original topic, I think that demanding employers pay a "living wage" (enough to support a family of 4) for unskilled, entry level workers is one of the reasons (along with a monopolistic, failing public school system, draconian drug prohibition laws and various welfare programs) for the cycle of inner city poverty we still see today. Good intentions, bad results to me = bad policy.

So you think living wages and welfare programs are responsible for the cycle of inner city poverty, but no mention of a few centuries of institutiional oppression based on race? No mention of voter suppression, school segregation, unequal treatment by the justice system, redlining, workplace discrimination, etc.
I mean, there's some truth in what you say ... the schools are bad (why?) and the drug war has inordinately targeted inner city users/dealers (again, why?). But while you're pointing out that the house needs a new paint job, you're ignoring the crumbling foundation and collapsing roof.

[mu03eng]

So you think living wages and welfare programs are responsible for the cycle of inner city poverty, but no mention of a few centuries of institutiional oppression based on race? No mention of voter suppression, school segregation, unequal treatment by the justice system, redlining, workplace discrimination, etc.
I mean, there's some truth in what you say ... the schools are bad (why?) and the drug war has inordinately targeted inner city users/dealers (again, why?). But while you're pointing out that the house needs a new paint job, you're ignoring the crumbling foundation and collapsing roof.

Ok, so you agree in principal that worrying about a living wage (painting the house) while allowing the institutional issues to continue (crumbling foundation) is a pointless exercise. Good, so let's get the politicians to focus on the foundation first shall we?

[Pakuni]

Ok, so you agree in principal that worrying about a living wage (painting the house) while allowing the institutional issues to continue (crumbling foundation) is a pointless exercise. Good, so let's get the politicians to focus on the foundation first shall we?

Clever rhetorical trick, but that's a complete bastardization of what I wrote.

That said, if there were a way for Washington to magically do away with the consequences of institutional racism in one fell swoop and they could only do that or deal with stagnant wages among the working classes, then I would choose the former.
But it's not possible  for Washington to magically do away with the consequences of institutional racism in one fell swoop, and if there were, there's no reason they couldn't do that and deal with stagnant wages among the working classes.
See: False dilemma.

[Juan Anderson's Mixtape]

Going back to the original topic. I think everyone should be paid a living wage. I question that raising the minimum wage is an effective way to do that. Reading this thread has been for the most part enjoyable because I have gotten to hear a lot of different perspectives.

Here's the thing: Not every worker needs a living wage. I'm talking about high school students, retirees, and 2nd income earners like a stay at home mom or dad.  These workers are looking for a little extra cash, a little work experience for HS students, and sometimes in the case of the retiree or stay at home parent, something to do.

There main source of income is parents, retirement savings, or a financially successful spouse.  So there is a market for workers that do not need a living wage.

I view minimum wage as a starting point to make sure companies aren't paying slave wages.  Plus, cost of living varies greatly from state to state and even regionally within states.  So the federal minimum wage is yet again a starting point. States, counties, and cities can all tailor their minimum wage to the cost of living.

But again, the bigger issue is getting more money into the middle earners.  The median household income in the US went down 2.5% from 1999 to 2015.  Cumulative inflation during that time was 42%.  So how do we get the median household income to go up? My opinion is that raising the median household income will spur the economy by getting more money into the hands of consumers.

That will hopefully cause a domino effect where consumers spend a little more, prices can rise a little bit, and thus wages can increase for the bottom 20%.  Right now our economy has depressed wages, which leads to pressure to keep the costs of goods and services low.  The end result is a widening wealth gap.  I don't think that is ultimately sustrightble.

I'm not sure what the solution is.  But that is the problem more so than minimum wage.  If the middle class is strong, money will trickle in both directions to the upper and lower class.

[mu03eng]

Clever rhetorical trick, but that's a complete bastardization of what I wrote.

That said, if there were a way for Washington to magically do away with the consequences of institutional racism in one fell swoop and they could only do that or deal with stagnant wages among the working classes, then I would choose the former.
But it's not possible  for Washington to magically do away with the consequences of institutional racism in one fell swoop, and if there were, there's no reason they couldn't do that and deal with stagnant wages among the working classes.
See: False dilemma.

Didn't think it was particularly clever but thanks. My ultimate point is that stagnant wages are a symptom of the underlying issues that we refuse to address...fix the problem, the symptom goes away. However politicians use things like "living wage" as a mechanism to perpetuate the system that is causing the issue in the first place. The institutions and policies this country has been running on the last 60 years are no longer sustainable and need to be replaced with new, modern policy....a living wage is not one of those policies because it's contrary to modern economic and technological reality.

[GGGG]

But again, the bigger issue is getting more money into the middle earners.  The median household income in the US went down 2.5% from 1999 to 2015.  Cumulative inflation during that time was 42%.  So how do we get the median household income to go up? My opinion is that raising the median household income will spur the economy by getting more money into the hands of consumers.

The solution is to make money worth more in the long term - to raise interest rates.

Yeah that would suck in the short term.  Borrowing would cost more which means people would buy less things.  Furthermore people would be incentivized to save money versus spending it.  But in the long run, I think that is the only way to push wages up.  And that mortgage payment becomes relatively cheaper.  And the saved money earns more interest and would eventually be injected back into the economy.

And I'm not talking about going back to the 80s and early 90s when it was around 9 or 10.  But around the late 90s, early 2000s when it was around 8.  Right now it is at 4.25. 

[mu03eng]

The solution is to make money worth more in the long term - to raise interest rates.

Yeah that would suck in the short term.  Borrowing would cost more which means people would buy less things.  Furthermore people would be incentivized to save money versus spending it.  But in the long run, I think that is the only way to push wages up.  And that mortgage payment becomes relatively cheaper.  And the saved money earns more interest and would eventually be injected back into the economy.

And I'm not talking about going back to the 80s and early 90s when it was around 9 or 10.  But around the late 90s, early 2000s when it was around 8.  Right now it is at 4.25.

This is correct and largely the reason the gap between the haves and have nots has widened in the last 10 years. As the adage goes it takes money to make money, and lower income earners have fewer mechanisms for wealth generation than do those who are 1. high income earners 2. significant in place wealth(inheritance, etc) 3. Both. The two main mechanisms for low income earners to generate additional wealth is savings and investment in properties. Both of these mechanisms have been severely retarded based on fiscal policies in the last 10 years.

[forgetful]

Here's the thing: Not every worker needs a living wage. I'm talking about students, retirees, and 2nd income earners like a stay at home mom or dad.  These workers are looking for a little extra cash, a little work experience for students, and sometimes in the case of the retiree or stay at home parent, something to do.

There main source of income is parents, retirement savings, or a financially successful spouse.  So there is a market for workers that do not need a living wage.

First, lets look at students.  Yeah, what you say may be true for students that come from upper middle class/wealthy families, that their main source of income may be their parents, but for the majority of the population (and myself growing up) that is not the case.  For the poor, if they want anything in life, the kids are on their own. 

In that regards, in 1979, working minimum wage you could pay for an entire year of tuition working less than 400 hours in the year.  That means you could pay tuition and have extra cash for spending by just working a full-time summer minimum wage job. 

Today, to pay for college you would have to work 3400 hours at minimum wage. So almost 2 full time jobs year round.  Add in attending school full-time, and every waking hour of your day would be spent in school or at work...forget studying.

For 2nd income earners/retirees the minimum wage is so low that it does not make economic sense for them to enter the market, and because of this they are a rarity in the labor pool.  An example would be a 2nd income earner.  Child care averages $200 per week.  Working 40-hours a week at minimum wage will make you $290 before taxes.  It is a losing proposition.  Even if you worked part-time, simply getting child care for after school (after-school baby sitter) costs $214 a week.  You lose either way.

Bottom line is, your statement has no merit for the bulk of the population.  The minimum wage is absurdly low. 

[forgetful]

It may be just another study, but found it remarkable it was done by University of Washington, commented on by the Washington Post, and if the article was read, backed as very credible by MIT.  That is why it has received the coverage it has, even in left of center periodicals.

What struck me is wages go up, which is not surprising.  However, total take home pay goes down, which is also not surprising.  A business has to make money to survive.

Those that challenge this notion here, where a fixed cost (labor) rises unfettered by a gov't action without the ability to recoup those costs in a market environment (raising prices suppresses demand), leads me to believe those individuals have never had to meet a payroll, owned a business.  Merely my opinion.

Such statements are not well formulated, at least you added "merely my opinion".  The reason this article received so much coverage is that its conclusions refute decades of economics research.  That means to the people that have had to meet payrolls, and have owned business, and have studied this their entire lives, the article was shocking, because it refuted the vast majority of knowledge. 

Now, on to other parts of your statement.  There is a difference in sciences between credible and correct.  The article is indeed credible, it used methods consistent with the field and where potential flaws and errors exist, they noted the problems.  That means the data is credible and because it is transformative in disagreeing with the bulk of the field, has high merit (coverage).  It doesn't mean it is accurate at all though.  They developed new methodology that even they note has flaws (and as I noted in my original post that you truncated).  Over the next several years, that new methodology and their results will be checked and cross checked to see if their method and conclusions were remotely valid. 

Credible and merit worthy, yes.  Valid...too early to tell.  Just another study in a lengthy literature history of minimum wage studies.  And it disagrees with the vast majority of published studies and experience.

[mu03eng]

First, lets look at students.  Yeah, what you say may be true for students that come from upper middle class/wealthy families, that their main source of income may be their parents, but for the majority of the population (and myself growing up) that is not the case.  For the poor, if they want anything in life, the kids are on their own. 

In that regards, in 1979, working minimum wage you could pay for an entire year of tuition working less than 400 hours in the year.  That means you could pay tuition and have extra cash for spending by just working a full-time summer minimum wage job. 

Today, to pay for college you would have to work 3400 hours at minimum wage. So almost 2 full time jobs year round.  Add in attending school full-time, and every waking hour of your day would be spent in school or at work...forget studying.

For 2nd income earners/retirees the minimum wage is so low that it does not make economic sense for them to enter the market, and because of this they are a rarity in the labor pool.  An example would be a 2nd income earner.  Child care averages $200 per week.  Working 40-hours a week at minimum wage will make you $290 before taxes.  It is a losing proposition.  Even if you worked part-time, simply getting child care for after school (after-school baby sitter) costs $214 a week.  You lose either way.

Bottom line is, your statement has no merit for the bulk of the population.  The minimum wage is absurdly low.

Your comparison doesn't work, simply because very few students pay for all college out of pocket. Inevitably loans are taken out at a minimum for tuition. That means for an in-state student at UW Madison the worst case scenario is a student would have to cover the real time cost of ~$14,860 a year so 2050 hours which would be the equivalent of a full time job. OK, so that's not good, I agree. However, why is the solution to increase wages as opposed to reducing the cost of college? Furthermore, the types of jobs college students can do during the year or in the summer are preciously the types of jobs that are ripe for automation and most likely impacted by a wage increase.

This is a primary example of acting the symptom without impacting the root cause. And usually when you treat symptoms instead of the cause you get side effects that are usually not good.

[jficke13]

[...]

In that regards, in 1979, working minimum wage you could pay for an entire year of tuition working less than 400 hours in the year.  That means you could pay tuition and have extra cash for spending by just working a full-time summer minimum wage job. 

Today, to pay for college you would have to work 3400 hours at minimum wage. So almost 2 full time jobs year round.  Add in attending school full-time, and every waking hour of your day would be spent in school or at work...forget studying.

[...]

That may have something to do with the divergent increase* in the cost of tuition relative to other goods/services rather than the relative decrease in the earnings of minimum wage jobs.

*An increase made entirely possible by the federal guarantee of student loan debt, but that's a whole 'nother argument for a whole 'nother day.

[forgetful]

Your comparison doesn't work, simply because very few students pay for all college out of pocket. Inevitably loans are taken out at a minimum for tuition. That means for an in-state student at UW Madison the worst case scenario is a student would have to cover the real time cost of ~$14,860 a year so 2050 hours which would be the equivalent of a full time job. OK, so that's not good, I agree. However, why is the solution to increase wages as opposed to reducing the cost of college? Furthermore, the types of jobs college students can do during the year or in the summer are preciously the types of jobs that are ripe for automation and most likely impacted by a wage increase.

This is a primary example of acting the symptom without impacting the root cause. And usually when you treat symptoms instead of the cause you get side effects that are usually not good.

The question is, how do you reduce the cost of college without impacting education?  Remember, when you use a state college as an example it is heavily subsidized by taxes/state government.  So that is well below actual cost.  One solution is to increase the amount paid by the state.  People will balk at that, but state funding for colleges have not kept up with inflation.  Cutting costs is not as trivial as you think it is, and people are working on it. 

When it comes down to it, using the college example, there are two problems.  College has outpaced inflation, and minimum wage has not matched inflation.  I would also argue that inflation is not a good metric for matching how one would expect college/healthcare to increase in cost (GDP is a better metric as these entities are a microcosm of the entire economy).  Tuition still outpaces GDP, but largely because of a massive increase in demand. 

So what is the real problem?  The biggest source of all these problems is that wages for the working class have failed to keep up with increases in productivity (and with it GDP growth), that means the working class is less and less able to maintain their position in the economy.  The problem is infinitely larger for those making minimum wage.  The source of the problem is WAGES.  The question is how do we solve that problem.

You are correct, this will get worse with automation, which is why there is a big question on what we will do as a society when the bulk of the population is unemployed at no fault of their own.  That is a separate, but connected problem, than the issue of WAGES in the US and our inability to match wages to productivity growth.

[forgetful]

That may have something to do with the divergent increase* in the cost of tuition relative to other goods/services rather than the relative decrease in the earnings of minimum wage jobs.

*An increase made entirely possible by the federal guarantee of student loan debt, but that's a whole 'nother argument for a whole 'nother day.

I discuss it a bit in the post above.  But suggesting the cost of tuition/room and board should scale with inflation isn't very accurate. 

I agree that student loan debt guarantees are a part of the problem, but it is way more complicated than that.

I also agree that it is a whole 'nother argument for a whole 'nother day.

I only brought it up, because there was the suggestion that "students" didn't need more than minimum wage.  If there was ever a time that they did it is now.

[mu03eng]

The question is, how do you reduce the cost of college without impacting education?  Remember, when you use a state college as an example it is heavily subsidized by taxes/state government.  So that is well below actual cost.  One solution is to increase the amount paid by the state.  People will balk at that, but state funding for colleges have not kept up with inflation.  Cutting costs is not as trivial as you think it is, and people are working on it. 

When it comes down to it, using the college example, there are two problems.  College has outpaced inflation, and minimum wage has not matched inflation.  I would also argue that inflation is not a good metric for matching how one would expect college/healthcare to increase in cost (GDP is a better metric as these entities are a microcosm of the entire economy).  Tuition still outpaces GDP, but largely because of a massive increase in demand. 

The answer is in your very own response and jfickle's response just above yours: government has enabled college cost growth to exceed the fundamental economics that would otherwise govern the cost curve. Easy access to credit (college loan) as well as direct subsidization has given universities the ability increase "cost" without it actually being anchored to true CoGS. It's a false correlation to say that quality of education is directly related to the cost of delivering that education. There is a government-college complex (similar to the military-industrial complex) that exists within this country that is driving this impact...fix that and you don't have to artificially impact wages.

[Juan Anderson's Mixtape]

Forgetful-

I am a stay at home Dad so I know the economic equation.  My job paid me nearly twice the minimum wage.

For one child the cost of child care would've been about 3/4 of my take home pay.  Now with two children, I am coming out ahead by staying at home.

When both kids get to school age, I plan to re-enter the work force.  I've done some freelancing on the side but that still probably won't leave me positioned to get a full time job in my former career.  Nor is full time employment something I have time for.  I prefer having the freedom to run errands, clean the house, and whatever else to help our household run smoothly.

But even working at minimum wage for 15 hours per week would bring in about $3,500 net income to my family, in not more. That is not insignificant.

Second wage earners, retirees, and students may be a small part of the work force but they still play a part in the market.

[Juan Anderson's Mixtape]

Let me clarify, students should have been high school students.  I'll edit the above. College students are another matter.

[forgetful]

Let me clarify, students should have been high school students.  I'll edit the above. College students are another matter.

For high school students it largely doesn't work anymore either.  The majority of high school students no longer work.  There was another thread discussing this.  It is largely because of how much the time constraints of school have expanded and the expectations of massive extra curricular activities. 

In 2015, high school aged students (16-19) made up only 5.6% of those making minimum wage.  80% were 25-years or older.  74% of all minimum wage workers were working FT at minimum wage. 

It used to be more true, that high school students made up the bulk of minimum wage workers, but not anymore. 

[Juan Anderson's Mixtape]

For high school students it largely doesn't work anymore either.  The majority of high school students no longer work.  There was another thread discussing this.  It is largely because of how much the time constraints of school have expanded and the expectations of massive extra curricular activities. 

In 2015, high school aged students (16-19) made up only 5.6% of those making minimum wage.  80% were 25-years or older.  74% of all minimum wage workers were working FT at minimum wage. 

It used to be more true, that high school students made up the bulk of minimum wage workers, but not anymore.

Thanks for the info.

[warriorchick]

For high school students it largely doesn't work anymore either.  The majority of high school students no longer work.  There was another thread discussing this.  It is largely because of how much the time constraints of school have expanded and the expectations of massive extra curricular activities. 

In 2015, high school aged students (16-19) made up only 5.6% of those making minimum wage.  80% were 25-years or older.  74% of all minimum wage workers were working FT at minimum wage. 

It used to be more true, that high school students made up the bulk of minimum wage workers, but not anymore.

Which brings up a point -

Has anyone posted anything regarding the trend of the percentage of people working at minimum wage vs. the workforce as a whole?  For example, my kids did not have minimum wage jobs in high school - they had jobs that paid more than the minimum wage.

Also, the tighter the job market, the more employers have to pay - even if it is something that is traditionally a minimum wage job.  When I lived in Boston in the mid-80's, during the so-called "Massachusetts Miracle", I would often see signs posted at McDonald's that said they were paying $7 -$8 an hour.  At the time, Massachusetts Minimum Wage was $3.65.  I had friends back in Milwaukee who were Marquette grads who weren't making that.

[forgetful]

Which brings up a point -

Has anyone posted anything regarding the trend of the percentage of people working at minimum wage vs. the workforce as a whole?  For example, my kids did not have minimum wage jobs in high school - they had jobs that paid more than the minimum wage.

Also, the tighter the job market, the more employers have to pay - even if it is something that is traditionally a minimum wage job.  When I lived in Boston in the mid-80's, during the so-called "Massachusetts Miracle", I would often see signs posted at McDonald's that said they were paying $7 -$8 an hour.  At the time, Massachusetts Minimum Wage was $3.65.  I had friends back in Milwaukee who were Marquette grads who weren't making that.

It has not been brought up, that I'm aware of, but is a good point.  The percentage of workers being paid minimum wage is near historic lows.  Most are indeed making more than minimum wage. 


That is largely a product of saturation of the labor market and the cost/benefit analysis compared to welfare.  It was close to 15% of the working population back in 1970, below 5% now. 


Honestly, one of the best ways to reduce welfare rolls is to increase minimum wage (imo).