
Raising Floor for Minimum Wage Pushes Economy into the Unknown - danso
http://www.nytimes.com/2015/07/27/business/economy/scale-of-minimum-wage-rise-has-experts-guessing-at-effect.html
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bko
> Their evidence rests largely on comparisons between neighboring areas with
> different minimum wages. The seminal study in this vein examined fast-food
> restaurants on both sides of the Pennsylvania-New Jersey border before and
> after New Jersey raised its minimum wage in the early 1990s. It found no
> evidence that employment there fell as a result.

This is often cited in publications that generally support a higher minimum
wage. It is unfortunate that this is never challenged as there are studies
that show that an increase in minimum wage does in fact result in lower
employment:

> Raising the minimum wage would increase family income for many low-wage
> workers, moving some of them out of poverty. But some jobs for low-wage
> workers would probably be eliminated and the income of those workers would
> fall substantially. [0]

Logic itself would suggest that an increase in minimum wage would result in at
least some unemployment:

No employer would hire you if you make them less than the amount that they
have to pay you. There are people that make more than the old minimum wage and
less than the new proposed minimum wage. Therefore, those employment
opportunities will no longer exist. It may not happen overnight as there is
some momentum, but you can't deny this effect. Also, you can't exactly measure
the people that would have been hired with a lower minimum wage.

The other interesting this is how vernacular plays such a strong role in
people's opinions. Imagine if "minimum wage" was replaced with "prohibition of
employees whose contributions to employers is less than the mandated minimum
amount of finding legal employment"

[0]
[https://www.cbo.gov/publication/44995](https://www.cbo.gov/publication/44995)

~~~
erikpukinskis
Your assertion may or may not be true, but there's no way I am willing to
accept that as "logic". Your assumption is that the profit margin on labor is
0% which logic would suggest is pretty universally false.

Here's my logic, maybe you can help me find the flaws in it: businesses are
trying to maximize sales and minimize costs, which means they have the
smallest possible workforce required to support their current sales. Less
staff means less sales. They are also making some profit. As long as the wage
increases are less than their profit margin, they have no reason to fire
anyone. They lose revenue if they fire anyone, or they would've already done
it.

So to me he relevant question is: what is the ratio between profit and minimum
wages at most companies? I looked at Wal-Mart as an example and they make way
more in profit than they spend on wages.

~~~
bko
In traditional economics you want to look at marginal cost versus marginal
revenue. If it costs you $10 to produce another widget you can sell at $10.01,
you will in order to maximize profits.

You will hire people up until the point where the marginal revenue that
employee provides is equal to that of the marginal cost of that employee.

Of course companies make profit, but that's because the marginal cost curve is
upward past a certain point. So on average, the average cost is less than the
marginal cost

A visual representation explains it well. When you talk about profits, you're
talking about average cost. When you're talking about whether you should hire
an extra worker, you're talking about marginal cost versus marginal revenue.

[https://apecon3.wikispaces.com/Marginal+Revenue](https://apecon3.wikispaces.com/Marginal+Revenue)

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crazy_geek
I find it interesting that when the government distorts a market via pricing
controls, taxes, or other means, the law of unintended consequences almost
inevitably kicks in and it's result is either "bad luck" or calls to "fill in
the loopholes!" Distort the market and people are rational-enough agents and
will change their behavior, just not necessarily entirely in the way you
hope/want. There is no free lunch.

Either the economic distortion makes it cost-effective to pay people to find
ways to dodge the distortion and come up with strange, but legal, means to
avoid it, or there are shortages, or the price of things go up.

It's like trying to squish one part of a water balloon -- the other part of
the balloon will deform in some way.

Some examples: "The Double Irish arrangement" for tax avoidance, ObamaCare
effectively limiting part timers to 30 (or 35, I forget which) hours/week, or
strict zoning laws causing property values to skyrocket due to lack of supply
of housing in SF.

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civilframe
I don't believe that raising the minimum wage will trigger businesses to cut
jobs significantly. They will probably pass the higher cost onto the consumer.
Ultimately, it's a method of wealth redistribution, which is sorely needed in
our economy.

~~~
rhino369
Passing costs on the client isn't something you can just do. Many products and
services have elastic demand. Fast food, for example, has been has found it
very hard to raise away from their dollar menu pricing.

Businesses don't have to cut jobs either. They just have to move them.

Edit2: Costumers can also shift to lower cost alternatives. Online retailers
have less overhead and lower labor costs. If you make Walmart more expensive
than Amazon, Walmart will shutter stores laying massive numbers of people off.

Edit: Some economists have argued that past raises in min wage have not made
noticeable impacts in employment. But this is way outsides of a normal rise in
minimum wage. Going to 9 or 10 makes a lot sense. 15 dollars will put people
in most of the country out of work.

~~~
toomuchtodo
>15 dollars will put people in most of the country out of work.

So be it. Can't find a job that offers a living wage? We provide a social
safety net and increase taxes on the wealthy to pay for it.

Make more than a million dollars a year? 95% marginal tax rate. Tax rates are
the lowest they've been in the history of the US, and all we've seen is a
disgusting level of income equality.

~~~
JonFish85
"Make more than a million dollars a year? 95% marginal tax rate."

Great. Then what? Everyone currently making over $1m a year will cut their
salary to $1m. Then you gotta start taxing the upper middle class -- what rate
do you want to tax people making over $500k? $250k? $100k? Those are the ones
that will pay for this program.

As much as you want to tax "the wealthy", there really aren't enough wealthy
people to pay for everything, and it comes down to how much you want to tax
the moderately successful person who is trying to pay for their 2 kids'
college expenses while saving to have a retirement.

~~~
toomuchtodo
> Great. Then what? Everyone currently making over $1m a year will cut their
> salary to $1m.

Do wealthy individuals in other countries with a heavier tax burden (Europe,
Scandinavia to be specific) do this? Would be nice to see evidence of this
behavior before outright dismissing raising taxes.

~~~
caseysoftware
Yes. Google "millionaires leaving X" and see what the autosuggestions are for
X and choose one. While some are US states - NY, Maryland, etc - most are
countries.

Here's the top couple using France:
[http://www.forbes.com/sites/chrisconover/2012/07/23/flight-o...](http://www.forbes.com/sites/chrisconover/2012/07/23/flight-
of-millionaires-reasons-to-give-thanks-for-one-percent-taxes/)

[http://www.theguardian.com/world/2014/dec/31/france-
drops-75...](http://www.theguardian.com/world/2014/dec/31/france-
drops-75percent-supertax)

~~~
toomuchtodo
[https://en.wikipedia.org/wiki/Expatriation_tax](https://en.wikipedia.org/wiki/Expatriation_tax)

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Someone1234
I think the minimum wage is a helpful tool or has been historically. But as
others have said when you raise the minimum wage, prices increase, and by far
the largest groups that consume the same goods/services are also relatively
poor themselves (so essentially you increase pay but also costs to the poorest
in society).

More as a thought experiment than anything: What would happen if, instead of
increasing the minimum wage, we capped the MAXIMUM wage at companies to 500x
the lowest? That would effectively cap the CEO's pay at 6.9 million dollars
for ANY business which pays the national minimum wage. That might sound like a
lot but a lot of CEOs at larger corporations are getting in the order of 20
million right now (and this would have almost zero impact on small-medium
businesses, as their CEOs don't make enough yet).

I guess what I am asking is: Instead of increasing minimum wage, what would
happen if we could align the interests of the poorest employee and richest
employee in a business?

PS - I am well aware that CEOs often don't take direct pay and instead take
other financial instruments, such as stock. Instead of getting sidetracked
into all of the potential workarounds, can we discuss the
moral/legal/practical of tying the lowest/highest employee pay together?

~~~
erkose
Ben & Jerry's use to do this
[https://en.wikipedia.org/wiki/Ben_%26_Jerry%27s#Wages](https://en.wikipedia.org/wiki/Ben_%26_Jerry%27s#Wages)

~~~
moistgorilla
Yep, and they stopped it because the CEO they hired to replace Ben (or Jerry I
forget) was horrible and mismanaged the company

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Terr_
IMO one of the interesting ways to think about: "Overall, how does our economy
value human-time versus material-goods"?

Even if the cost is passed on to the consumer (many of whom will, in turn,
will have more to spend) it represents a shift in how we (implicitly, through
costs) balance "1x Acme Appliance" versus "1x hr child care", etc.

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dylanjermiah
The real minimum wage is always 0.

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SilasX
What's the difference between "raising the minimum wage" and "raising the
floor for the minimum wage"? Is that just a redundant headline?

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mring33621
Landlords will benefit, short term.

I suspect that people will move to areas offering higher minimum wages, which
will drive up rental housing costs in those areas.

~~~
maxerickson
I think in some places the people making the new higher minimum will already
be priced out of the housing market for the area the job is in. That doesn't
rule out housing price increases at the other ends of their commutes, but I
wonder if it will diffuse it quite a bit.

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kuni-toko-tachi
It is foolish to think that this won't result in unemployment. We live in a
time in which higher labor costs for marginal work can be eliminated through
automation and these higher labor costs will only accelerate that transition.
You may not like that fact, but that's what will happen. You don't a free ride
on planet earth and no foolish government policy can change that.

~~~
deciplex
Indeed. Minimum wage is a hack on labor that barely worked 60 years ago when
full employment was some sort of reasonable goal. It's a ludicrous
superstition now - better to just institute a basic income, abolish minimum
wage entirely, and let employers pay people whatever they want.

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grecy
This is absurd. The results of raising the minimum wage are perfectly known.
Learn from the other countries that have done it in the last 10-15-25 years.
Australia, Scandinavian countries, etc. etc.

Why can't America look outside it's own borders and learn from what other
countries have done and are doing?

i.e. watch this John Oliver video on gun control [1] where it's stated
Australia is not on this planet and America can't learn anything from what
they've done, because Australia is not the real world. Why do people think
this way?

[1]
[https://www.youtube.com/watch?v=9pOiOhxujsE](https://www.youtube.com/watch?v=9pOiOhxujsE)

~~~
dang
Please don't bring generic ideological tangents into already-controversial
topics. Any vector that runs through the points "minimum wage studies",
"American self-centeredness", and "gun control" is guaranteed not to lead to
substantive discussion.

The OP may be wrong, but it's hardly absurd. Let's stick to the substance.

~~~
deciplex
How can you stick to the substance if drawing on other examples is out of
bounds?

