Question about the effect of Minimum wage law on emplyment

[Attic]

Over time they are. Late 70's/early 80's Inflation was very high. Prices doubled in 7ish years. Since that time and especially the last decade or so Inflation has been very low.

The difference is largely due to a change in the calculation of inflation. We are currently running at 8-9% inflation when using the measurement we used back then.

Either inflation wasn't that bad back then (it was) or it's worse now than current CPI indicates.

 

[sandorski]

The difference is largely due to a change in the calculation of inflation. We are currently running at 8-9% inflation when using the measurement we used back then.

Either inflation wasn't that bad back then (it was) or it's worse now than current CPI indicates.

If your 8-9% figure is accurate, that's high. Not quite as high as it occurred back then, but high nonetheless.

 

[Tom]

Increasing minimum wage will also increase unemployment.

Think about it. EVERYTHING is now more expensive to produce. If minimum wage goes from $8 to $10, it's not just the people making $8 getting raises. People making $9 also get raises. People who used to make $10 are now going to want $12. Et cetera.

Now, think what that does all the way up the production line.

Sure, you can of soup probably only goes from $1.99 to $2.49...but that's a fairly large increase in price...one that a $2/hr raise doesn't really pay for.

People who make more money spend more money. Which increase commerce which increases employment.

There's no easy correlation between wages and employment.

 

[nextJin]

If your 8-9% figure is accurate, that's high. Not quite as high as it occurred back then, but high nonetheless.

The difference is largely due to a change in the calculation of inflation. We are currently running at 8-9% inflation when using the measurement we used back then.

Either inflation wasn't that bad back then (it was) or it's worse now than current CPI indicates.

According to our local economics experts that inflation level is dead wrong and it is absolutely disengenuinous to reality. If that is true then the whole Ron Paul predictions become true so believe what you want.

 

[fskimospy]

The difference is largely due to a change in the calculation of inflation. We are currently running at 8-9% inflation when using the measurement we used back then.

Either inflation wasn't that bad back then (it was) or it's worse now than current CPI indicates.

This is false and there have been several other discussions in other threads on this.

To learn more about CPI and why this is wrong, check these two links:
http://www.bls.gov/cpi/cpiqa.htm

http://www.bls.gov/cpi/cpifaq.htm

Furthermore, independent estimates of inflation correlate extremely well with CPI. The idea that CPI somehow understates inflation has been gone over in several other threads, but it is a common myth that keeps popping up.

 

[s0me0nesmind1]

People who make more money spend more money. Which increase commerce which increases employment.

There's no easy correlation between wages and employment.

... I'm sure it wouldn't be hard to find a study saying that people that make money are more frugal. Go to any finance forum. Do you think that forum comprises mostly of poor people, or middle to upper middle class?

Exactly.

Whats the average 401k again? OH yeah, ~$25k. Who cares if their car has new rims? Who cares if they have the latest shoes?

 

[Anarchist420]

How you doing, Anarchist? Keep up the good fight. -John

I'm doing okay Thanks

 

[berzerker60]

Hmm, here's a meta-analysis of 30 papers from physicists and engineers who studied how baseballs fly when they're hit, mapping out the path, and they found that its flight path isn't actually parabolic

but I learned in physics 101 that a ball will travel in a parabolic arc

guess the physicists are wrong and my ~*gut instinct*~ is right. The ball really must travel in a parabolic arc.

Think about it! What other factors could possibly upset simplified Newtonian physics?

 

[yllus]

I quizzed a couple of economics professors on this topic a few years ago - I got back a reading list of formal papers and conclusions that I'll try to re-paste here:

Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor?

Using data drawn from the March Current Population Survey, we find that state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates.

When we then simulate the effects of a proposed federal minimum wage increase from $7.25 to $9.50 per hour, we find that such an increase will be even more poorly targeted to the working poor than was the last federal increase from $5.15 to $7.25 per hour.

Assuming no negative employment effects, only 11.3% of workers who will gain live in poor households, compared to 15.8% from the last increase. When we allow for negative employment effects, we find that the working poor face a disproportionate share of the job losses. Our results suggest that raising the federal minimum wage continues to be an inadequate way to help the working poor.

Minimum Wage Increases as an Anti-Poverty Policy in Ontario

In this article, we consider the possibility of alleviating poverty in Ontario through minimum wage increases. Using survey data from 2004 to profile low wage earners and poor households, we find two important results. First, over 80 percent of low wage earners are not members of poor households and, second, over 75 percent of poor households do not have a member who is a low wage earner.

We also present simulation results which suggest that, even without any negative employment effects, planned increases in Ontario's minimum wage will lead to virtually no reduction in the level of poverty.

The Empirical Literature on the Minimum Wage

There have been dozens of articles in the academic literature on the impact of the minimum wage on employment, particularly on the employment of low-skilled workers. Virtually every one of these articles finds that an increase in the minimum wage reduces employment. As Don points out, this is just one of the negative impacts of the minimum wage. There are other effects that are harder to observe and measure—on the job training, the expected level of effort to be put forth on the job and so on.

Economists have done an immense amount of work trying to measure these effects and the overall impact on the poor. The overwhelming consensus has been that minimum wages serve the poor very poorly. The standard finding is that a 10% increase in the minimum wage reduces employment among low-skilled workers from 1% to 3%.

This consensus was challenged in 1993 in a series of papers by Card and Krueger. Using a very different methodology from previous research, they found virtually no effect on employment and some evidence that an increase in the minimum wage might increase employment among low-skilled workers. Card and Krueger’s work generated a critical response questioning the reliability of their findings.

I do not find the Card and Krueger findings compelling. Some do.

Even if you don’t, you can still think it a good idea to put 1% or 3% of low-skilled workers out of work in return for a 10% increase in the wage of those who keep their jobs. Personally, I find that to be a very unattractive trade-off, especially when you consider the non-employment effects, but that is a judgment call.

I think it's that last bit - that a 10% increase in the minimum wage reduces employment among low-skilled workers from 1% to 3% - is what you're looking for.

 

[Tom]

... I'm sure it wouldn't be hard to find a study saying that people that make money are more frugal. Go to any finance forum. Do you think that forum comprises mostly of poor people, or middle to upper middle class?

Exactly.

Whats the average 401k again? OH yeah, ~$25k. Who cares if their car has new rims? Who cares if they have the latest shoes?

I was talking in the context of people making minimum wage, not the well-heeled.

You have a good point about a real cause of unemployment, the concentration of wealth in fewer and fewer hands.

 

[Hugo Drax]

lets say you have the soup can polisher who makes 6 dollars an hour. now they double his wages to 12 dollars an hour.

He still polishes 100,000 soup cans a day (8 hour work day). but his wage went up 100%.

The cost of polishing each soup can goes up from .00048 cents a can to .00096 cents a can.
His salary was doubled but the cost of soup can polishing is insignificant to the end buyer.

Now to the CEO though, over millions of cans his salary might be impacted.


Same thing with burger flippers.

Lets say burger flipper flips 800 burgers a day. over an 8 hour day. wages 6 bucks an hour.

48/800 = his hourly wage contributes to 6 cents to the cost of the burger. Doubling his salary now contributes to 12 cents of the cost of a burger.

Does paying 6 cents a burger more mean the end of the world to Americans?

I think not.

But doubling the salary of a minimum wage employee trying to make ends meet, does it make a big difference. Shit yes.

Now The CEO though will not be happy since 6 cents over millions of burgers flipped will have an impact on his salary. He might only be able to make 90 million dollars a year instead of 180 million dollars a year.

 

[jackstar7]

Now The CEO though will not be happy since 6 cents over millions of burgers flipped will have an impact on his salary. He might only be able to make 90 million dollars a year instead of 180 million dollars a year.

But it's not the CEO who is actually impacted. It's the shareholders demanding quarterly short-term profits with relentless unwavering growth lest they all jump away to some other means of faster wealth accumulation.

 

[s0me0nesmind1]

I was talking in the context of people making minimum wage, not the well-heeled.

You have a good point about a real cause of unemployment, the concentration of wealth in fewer and fewer hands.

The problem with wealth in this nation has spread across many many levels. A good chunk of it is the cultural game of "My yard looks better than Sally's"... or more appropriately, "My Jordan's look better than Marcus' shit shoes". Or "My New Mustang that I'm going to spend the next 10 years paying off is SUPER COOL!". You're bound to stay put when you play games like that, it doesn't take a rocket scientist to figure that out, nor should we feel sorry for them. The answers are there, but we can't make you read the book on how to save now can we? These aren't secrets.

Our market is now based on everyone spending every dollar they have the moment they get it. Now that our economy is used to that, We MUST do that or our economy will crash. Literally, the stock market would crash in half if tomorrow the lower to middle class learned how to save. Dead. My 401k would be sliced.

 

[s0me0nesmind1]

lets say you have the soup can polisher who makes 6 dollars an hour. now they double his wages to 12 dollars an hour.

He still polishes 100,000 soup cans a day (8 hour work day). but his wage went up 100%.

The cost of polishing each soup can goes up from .00048 cents a can to .00096 cents a can.
His salary was doubled but the cost of soup can polishing is insignificant to the end buyer.

Now to the CEO though, over millions of cans his salary might be impacted.


Same thing with burger flippers.

Lets say burger flipper flips 800 burgers a day. over an 8 hour day. wages 6 bucks an hour.

48/800 = his hourly wage contributes to 6 cents to the cost of the burger. Doubling his salary now contributes to 12 cents of the cost of a burger.

Does paying 6 cents a burger more mean the end of the world to Americans?

I think not.

But doubling the salary of a minimum wage employee trying to make ends meet, does it make a big difference. Shit yes.

Now The CEO though will not be happy since 6 cents over millions of burgers flipped will have an impact on his salary. He might only be able to make 90 million dollars a year instead of 180 million dollars a year.

It's not about the CEO salary you dumb fucking baffoon's. It's about meeting stockholder's expectations. Jesus fuck you people need help, all you can do ALL day is look at other people's salary and bitch bitch bitch.


The case isn't about the CEO salary, it's about the company surviving and not being beaten into the ground and having thousands lose their job altogether

 

[glenn1]

lets say you have the soup can polisher who makes 6 dollars an hour. now they double his wages to 12 dollars an hour.

He still polishes 100,000 soup cans a day (8 hour work day). but his wage went up 100%.

The cost of polishing each soup can goes up from .00048 cents a can to .00096 cents a can.
His salary was doubled but the cost of soup can polishing is insignificant to the end buyer.

Now to the CEO though, over millions of cans his salary might be impacted.


Same thing with burger flippers.

Lets say burger flipper flips 800 burgers a day. over an 8 hour day. wages 6 bucks an hour.

48/800 = his hourly wage contributes to 6 cents to the cost of the burger. Doubling his salary now contributes to 12 cents of the cost of a burger.

Does paying 6 cents a burger more mean the end of the world to Americans?

I think not.

But doubling the salary of a minimum wage employee trying to make ends meet, does it make a big difference. Shit yes.

Now The CEO though will not be happy since 6 cents over millions of burgers flipped will have an impact on his salary. He might only be able to make 90 million dollars a year instead of 180 million dollars a year.

You're working under several assumptions that may not be necessarily correct:

1. The company would be able to absorb/pass on the costs, and not either go out of business or divest the canned soup product; thus making the can polisher job go away.

2. The company decides to keep the soup polisher position instead of automating it, or not bothering to polish cans anymore; thus making the can polisher job go away.

3. The company decides not to hire a second can polisher to increase their output to 200k cans daily; thus making an incremental polisher job go away.

4. After paying an additional $.00048/can for soup, extra $.06/burger, etc. for every product a consumer buys, it adds up to a significant amount and thus allowing the consumer to buy less soup or no soup at all; thus making the can polisher job go away.

 

[fskimospy]

You're working under several assumptions that may not be necessarily correct:

1. The company would be able to absorb/pass on the costs, and not either go out of business or divest the canned soup product; thus making the can polisher job go away.

2. The company decides to keep the soup polisher position instead of automating it, or not bothering to polish cans anymore; thus making the can polisher job go away.

3. The company decides not to hire a second can polisher to increase their output to 200k cans daily; thus making an incremental polisher job go away.

4. After paying an additional $.00048/can for soup, extra $.06/burger, etc. for every product a consumer buys, it adds up to a significant amount and thus allowing the consumer to buy less soup or no soup at all; thus making the can polisher job go away.

You're also no taking into account that the can polishers that have more money spend more money, creating additional demand for polished cans, necessitating the hiring of more can polishers.

If each individual business' costs were the only issue of course minimum wage increases would decrease employment. They aren't though.

 

[DucatiMonster696]

People who make more money spend more money. Which increase commerce which increases employment.

There's no easy correlation between wages and employment.

No according to the progressive mantra, "People who make more money horde more money which belongs to other people."

 

[jackstar7]

No according to the progressive mantra, "People who make more money horde more money which belongs to other people."

So you don't believe there is a wealth tipping point?

Is there no amount of wealth you could have where you would be content and then pursue other goals?

It would seem that people pursuing vast amounts are effectively wealth addicts. They need the need to get more beyond their actual physical needs.

But we rarely, if ever, look at them as troubled. Rather they are just stuck with the label of greedy and villainized. It's a shame really.

 

[nextJin]

So you don't believe there is a wealth tipping point?

Is there no amount of wealth you could have where you would be content and then pursue other goals?

It would seem that people pursuing vast amounts are effectively wealth addicts. They need the need to get more beyond their actual physical needs.

But we rarely, if ever, look at them as troubled. Rather they are just stuck with the label of greedy and villainized. It's a shame really.

If I were a multi millionaire or billionaire I wouldn't stop. I'd ensure my families legacy and ensure future generations of my bloodline wouldn't have to go through what I did or my own parents did.

 

[glenn1]

You're also no taking into account that the can polishers that have more money spend more money, creating additional demand for polished cans, necessitating the hiring of more can polishers.

If each individual business' costs were the only issue of course minimum wage increases would decrease employment. They aren't though.

Don't look now, but you've created a perpetual motion machine. Let's raise the minimum wage to infinity so we can have 100% employment and all be infinitely rich.

 

[glenn1]

So you don't believe there is a wealth tipping point?

Is there no amount of wealth you could have where you would be content and then pursue other goals?

It would seem that people pursuing vast amounts are effectively wealth addicts. They need the need to get more beyond their actual physical needs.

But we rarely, if ever, look at them as troubled. Rather they are just stuck with the label of greedy and villainized. It's a shame really.

Yes, Steve Jobs should have stopped innovating after he made his first couple million. We'd be so much better off if he retired and spent the rest of his days composing poetry rather than chasing after the filthy lucre at Apple and coming up with the iPad and such.

 

[fskimospy]

Don't look now, but you've created a perpetual motion machine. Let's raise the minimum wage to infinity so we can have 100% employment and all be infinitely rich.

Are you being serious right now?

There are all sorts of complex feedback mechanisms that happen within an economy, and the increase in wages absolutely leads to more spending for those making the increased wage, offsetting the impact to a certain extent. This is one of the reasons why the evidence is so conflicting on the impact of the minimum wage on employment.

 

[sandorski]

This is false and there have been several other discussions in other threads on this.

To learn more about CPI and why this is wrong, check these two links:
http://www.bls.gov/cpi/cpiqa.htm

http://www.bls.gov/cpi/cpifaq.htm

Furthermore, independent estimates of inflation correlate extremely well with CPI. The idea that CPI somehow understates inflation has been gone over in several other threads, but it is a common myth that keeps popping up.

Thanks for the clarification.

 

[jackstar7]

Yes, Steve Jobs should have stopped innovating after he made his first couple million. We'd be so much better off if he retired and spent the rest of his days composing poetry rather than chasing after the filthy lucre at Apple and coming up with the iPad and such.

I'm confused because you quoted me, but nowhere did I suggest people stop innovating or pursuing goals. And just because you don't value art doesn't mean it has no value.

Switch to de-caf maybe?

 

[jackstar7]

If I were a multi millionaire or billionaire I wouldn't stop. I'd ensure my families legacy and ensure future generations of my bloodline wouldn't have to go through what I did or my own parents did.

Why not? Doesn't the struggle shape you and build your character? You want to populate the world with more assholes?

That aside, I'm quite sure there's even a point where your family would be comfortable and secure for generations given interest and investments of that wealth you made.

Why should you be the last one to work though?