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#361113 - 28/02/2014 10:09 Re: "Living wage" and minimum wage [Re: drakino]
Tim
veteran

Registered: 25/04/2000
Posts: 1487
Loc: Arizona
"Still, economists on both sides tend to agree that the minimum wage itself isn't that big of a factor for America's working poor. For one thing, many of the people earning the minimum aren't poor at all; they're teenagers or middle-class part-timers looking for extra income.

The working poor tend to earn more because they have to if they're supporting a family. For them, the benefit of recent minimum-wage hikes has been relatively small, especially when compared with other anti-poverty programs such as the federal Earned Income Tax Credit."

http://www.npr.org/2012/01/03/144594861/raising-the-minimum-wage-who-does-it-help

Another telling article is this opinion piece. The person who actually owns a business says they are going to have to increase their margin by about 7% to stay afloat. I liked how the recent graduate complained about the cost of living, naively thinking that raising the minimum wage somehow wouldn't contribute to increased prices.


Edited by Tim (28/02/2014 10:23)
Edit Reason: Added the opinion piece.

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#361116 - 28/02/2014 15:52 Re: "Living wage" and minimum wage [Re: Tim]
drakino
carpal tunnel

Registered: 08/06/1999
Posts: 7868
Loc: Seattle, WA
Originally Posted By: Tim
The person who actually owns a business says they are going to have to increase their margin by about 7% to stay afloat. I liked how the recent graduate complained about the cost of living, naively thinking that raising the minimum wage somehow wouldn't contribute to increased prices.

I don't see this as a point against the wage hike. 7% increase in margin is less then the percentage increase for the workers. Workers at the minimum level could absorb that 7% rise in living expenses and still come out with more leftover money to spend elsewhere.

I personally see these minimum wage increases as a short term solution to the overall welfare situation though. Long term, I'd like to see the discussion and possible fixes move more towards either a gaurenteed minimum income or universal basic income.

It would help cut down on some of the government bureaucracy with people needing to seek independent housing, food, medical, and income welfare. While still having enough controls in place for the minimum to allow for proper housing, etc.
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Tom

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#361117 - 28/02/2014 16:21 Re: "Living wage" and minimum wage [Re: drakino]
Tim
veteran

Registered: 25/04/2000
Posts: 1487
Loc: Arizona
Originally Posted By: drakino
I don't see this as a point against the wage hike. 7% increase in margin is less then the percentage increase for the workers. Workers at the minimum level could absorb that 7% rise in living expenses and still come out with more leftover money to spend elsewhere.

You aren't including the other costs or the increase in taxes paid. Overall, the increase in amount spent won't keep up with the increase in amount coming in and people will be right back to where they are now. Except, the pool of folks in trouble will be larger, and the jobs will be fewer (even the CBO agrees with that).

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#361118 - 28/02/2014 17:36 Re: "Living wage" and minimum wage [Re: Tim]
drakino
carpal tunnel

Registered: 08/06/1999
Posts: 7868
Loc: Seattle, WA
Originally Posted By: Tim
You aren't including the other costs or the increase in taxes paid. Overall, the increase in amount spent won't keep up with the increase in amount coming in and people will be right back to where they are now.

Can you provide examples with numbers that show this? It looks like even the CBO opted not to cover the tax angle in their study.
Originally Posted By: CBO
CBO has not analyzed the effects of minimum-wage increases on a measure of income that accounts for taxes, tax credits, or noncash transfers.


Originally Posted By: Tim
Except, the pool of folks in trouble will be larger, and the jobs will be fewer (even the CBO agrees with that).

So far this hasn't seemed to occur in Washington, per my Bloomberg link earlier. Even if it does though, this is why my long term view includes the minimum/basic income routes, since already many of the poor are unable to hold a job where a minimum wage increase would benefit them.
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Tom

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#361130 - 03/03/2014 17:06 Re: "Living wage" and minimum wage [Re: drakino]
tonyc
carpal tunnel

Registered: 27/06/1999
Posts: 7058
Loc: Pittsburgh, PA
This is by far the best and most accessible treatment of the issues surrounding minimum wage policy that I've seen in a long time:

7 Bi-Partisan Reasons to Raise the Minimum Wage

Worth reading in its entirety, but I'll quote a section that deals with some of the previous discussion in this thread regarding why "Econ 101" analysis doesn't cut it.

Quote:

Many have claimed that raising the minimum wage will lead to significant job loss. The phrase "that's Economics 101" is thrown around often in this argument, usually to shut down debate. It refers to the abstract, perfect, frictionless model of supply and demand. In this model, if the price of labor goes up-possibly because a floor has been set on the least amount a worker can be paid-the amount of employment goes down. Full stop.

But a wave of research since the 1990s finds little impact on employment due to a higher minimum wage, and some findings suggest that states with higher minimum wages see no negative employment effects at all.

In the world of economics beyond introductory supply and demand, you can find an explanation for why small changes in the minimum wage have little effect on employment. The economist John Schmitt notes three such explanations.

The first is consistent with the Economics 101 model but considers more factors. Here the higher price for labor is simply pushed onto customers. This is what people assume will happen when they say they are willing to pay a few extra cents for a hamburger if doing so will help millions of people escape poverty. In this story, a minimum wage increase would result in a one-time bump in the prices of goods produced by low-wage industries. And in these disinflationary times, a small boost to the price level might help with the greater problems in our stagnating economy.

The second explanation for the small impact of minimum wage increases is institutional. Here people look at mechanisms within firms that adjust to a higher minimum wage-for example, an increase in the productivity of workers that compensates for their extra pay. The minimum wage becomes an incentive for bosses to do a better job managing their employees. Higher earnings also encourage employees to work harder. Economists call this the "efficiency wage": when workers have more to lose, they do their jobs better in an effort to keep their gains.

The third explanation adds two complications to the Economics 101 model. First, it is a pain to search for a new job. Second, employers pick the wages they offer their employees. This sounds obvious, but you won't find it in Economics 101, according to which bosses pay a "market wage." In such a scenario, if your boss paid a dollar less than the market wage, he wouldn't be able to hire anyone at all, and if he tried to pay you a dollar less than the going wage for your labor, you would effortlessly get a new job at that old rate. Yet this is not how things work. People celebrate when they find a job because that search took real effort. It is not like buying a bag of apples or gas to fill your tank, tasks so simple that one can speak realistically of a market price.

This helps to explain why there are so many vacancies in the low-wage job market-vacancies that would be filled if the minimum wage were raised, thereby combating the fear of unemployment that accompanies any discussion of minimum wage hikes. A more generous minimum wage is not essential to hiring for these open jobs; employers could fill vacancies by offering higher wages, but they would in turn have to pay other workers this higher wage as well, meaning that filling vacancies would produce a higher overall wage either way. And since workers have to search for jobs, a higher minimum wage will increase the rate at which employees search for, take, and keep jobs. Empirical work by Arindrajit Dube, T. William Lester, and Michael Reich has found that a higher minimum wage leads to less turnover in low-wage jobs. This effect is visible in the international data as well.
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- Tony C
my empeg stuff

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#361545 - 01/05/2014 18:46 Re: "Living wage" and minimum wage [Re: drakino]
tonyc
carpal tunnel

Registered: 27/06/1999
Posts: 7058
Loc: Pittsburgh, PA
_________________________
- Tony C
my empeg stuff

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#361552 - 02/05/2014 11:23 Re: "Living wage" and minimum wage [Re: tonyc]
Tim
veteran

Registered: 25/04/2000
Posts: 1487
Loc: Arizona
This will be interesting. Minimum wage of $19.94 by 2030.

What could possibly go wrong?


Edited by Tim (02/05/2014 11:24)

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