Thread: How the minimum wage works

Originally Posted by astralis

zraver,



you have it the wrong way around. it is a boon to most, and a bane to some.

were it the other way, we would have had a revolution a long time ago.

We did have a revolution, after non-stop disaster after disaster following the civil war culminating with the great Depression the voters through the Republican's out of Congress for 40 years. The Democrat's then re-made America in to one that restrains the invisible hand negative effects. The British had almost the same revolution a century earlier. The number of people the invisible hand made rich vs the number it impoverished is not even close.

Originally Posted by gunnut

But every time you raise minimum wage forces me to increase my already high wage to my workers. I need to raise my workers who are $1/hr above minimum wage to be higher. I need to pay those who were making 3 times minimum wage even more because they only make 2.5 times the minimum wage now. All these costs will have to be passed on to the consumers. Or I will need to lay off some people to contain costs. Even worse, I will need to shut my business down because it's no longer worth my time to run.

And who are the must vulnerable to a hike in minimum wage? Mom and pop shops. Small time operations that simply cannot cope with this kind of increase.

If your operating in a vacuum yes I ceed your point, but we are not. The poor spend, so an increased minimum wage goes directly into the goods and services economy. Your business will go up, not down- and thats what the data shows.

Originally Posted by Shek

In many cases, I'd argue that the increase in income due to increased minimum wages is simply a shell game. It's a transfer from one person to another, and therefore, a zero sum game in those cases. New wealth was not created, simply redistributed.



Your argument here is flawed because the premise is flawed.



False dichotomy / strawman.

I fail to understand how lifting people in poverty a bit is a bad thing

zraver,

We did have a revolution, after non-stop disaster after disaster following the civil war culminating with the great Depression the voters through the Republican's out of Congress for 40 years. The Democrat's then re-made America in to one that restrains the invisible hand negative effects. The British had almost the same revolution a century earlier. The number of people the invisible hand made rich vs the number it impoverished is not even close.

neither the civil war nor the great depression was caused by the invisible hand, but as a result of a distortion of the invisible hand: slavery in the one, poor monetary policy/breakdown in int'l trade/weak structures in the other.

yes, the invisible hand does need to be restrained- i've made a few posts here about how extreme capitalism is antiethical to democracy. however, just because we need to control the worst aspects of capitalism, does not mean capitalism/the invisible hand is one great disaster which impoverishes the many at the expense of the few.

think about what middle-class americans enjoy today and what middle-class americans could enjoy fifteen or thirty years ago. or, for that matter, what a poor american enjoys today compared to a rich american one hundred years ago.

I haven't seen anyone posting that capitalism is evil only that it needs some regulation/moderation from Govt to prevent abuses of the people. After all we are a govt of the people for the people. I'd hate to live in Europe where it's choked. I think the U.S. has a good formula for the most part. i only argue to protect the formula that has worked the last 75 years to create the largest middle class in the world. Everyone in this country is essential for the system to work. We are a democracy and the working class and poor are a large part of the system that creates vast wealth. I don't think it's outrageous to have programs that might cause a minuscule amount of drag on capitalism but benefit many of those not lifted up by it.

Originally Posted by ba1025

I fail to understand how lifting people in poverty a bit is a bad thing

Strawman.

Originally Posted by astralis

zraver,



neither the civil war nor the great depression was caused by the invisible hand, but as a result of a distortion of the invisible hand: slavery in the one, poor monetary policy/breakdown in int'l trade/weak structures in the other.

I said disaster after disaster, the unregulated markets and banking of the post civil-war to the great Depression era saw an economic depression not recession about every 20-30 years. Worker death/maiming was high, child labor in some sectors and illegal immigrants were brought in to depress wages.

yes, the invisible hand does need to be restrained- i've made a few posts here about how extreme capitalism is antiethical to democracy. however, just because we need to control the worst aspects of capitalism, does not mean capitalism/the invisible hand is one great disaster which impoverishes the many at the expense of the few.

I never said capitalism is bad, but an unregulated market is becuase it advantages only a few at the expense of the many. With the proper regulation designed to open the market place to fair competition for goods and services including a persons labor every one who wants to can get ahead.

think about what middle-class americans enjoy today and what middle-class americans could enjoy fifteen or thirty years ago.

You mean that mythical time when one income could support an entire family in what was considered comfort for the times, when savings were up and debt was lower? Granted that particualr period is now closer to 50 years ago.

or, for that matter, what a poor american enjoys today compared to a rich american one hundred years ago.

Discounting technology which because it did not exist for either class then cannot be considered now. The big things the poor enjoy now that the rich had then is clean water and plentiful food. The poor still don't have access to the same type of education, housing, healthcare, upward mobility.

The two things they have gained water and food are a direct result of government intervention to fix unethical imbalances.

Originally Posted by zraver

The poor still don't have access to the same type of education, housing, healthcare, upward mobility.

Government intervention exacerbated many of these issues. The former Cabrini Green is a poster child for this. Also, the upward mobility argument is just plain wrong. Gini coefficients, quantile income stats, and like do not capture mobility, but instead give a static picture. Mobility is a dynamic effect, and as an example, 4 out of 5 millionaires in the US are self-made. The Paris Hiltons of the US are the exception, not the rule.

Originally Posted by zraver

You mean that mythical time when one income could support an entire family in what was considered comfort for the times, when savings were up and debt was lower? Granted that particualr period is now closer to 50 years ago.

Your claim is wrong. Over the past two decades, net worth (assets minus liabilities) for the median family is up:



Here's another depiction of net worth in the aggregate (i.e., not at the median level, or 50th percentile). You cannot just look at debt levels to make a pronouncement that increases in the standard of living is debt inspired.



Now, before you get all excited about how the median salary (wage) has fallen over the past 7 years, this stat doesn't measure total compensation and so is a bit of a red herring statistic. Total compensation has increased over time, and while it takes some ability to extrapolate, you can use this graphic to illustrate. For example, you can see the huge (graphical) spread between benefits and wages, and with inflation being 3.1% over this same time period, while wages themselves don't keep pace, you can see where total compensation does beat inflation, meaning that real compensation has increased since 2000. (I haven't taken into account the fact that the inflation rate that is used actually overstates inflation).

Originally Posted by zraver

Discounting technology which because it did not exist for either class then cannot be considered now.

Where do we draw this magical line where technology no longer counts? 5 years? 15 years? 25 years? 50 years?

This line of thinking misses the point, as there is a causal impact between the profit motive that capitalism provides and the advance of living standards. Why have we seen technologies grow so fast? Profit.

A Brief History of Economic Time

Modern humans first emerged about 100,000 years ago. For the next 99,800 years or so, nothing happened. Well, not quite nothing. There were wars, political intrigue, the invention of agriculture — but none of that stuff had much effect on the quality of people’s lives. Almost everyone lived on the modern equivalent of $400 to $600 a year, just above the subsistence level. True, there were always tiny aristocracies who lived far better, but numerically they were quite insignificant.

Then — just a couple of hundred years ago, maybe 10 generations — people started getting richer. And richer and richer still. Per capita income, at least in the West, began to grow at the unprecedented rate of about three quarters of a percent per year. A couple of decades later, the same thing was happening around the world.

Then it got even better. By the 20th century, per capita real incomes, that is, incomes adjusted for inflation, were growing at 1.5% per year, on average, and for the past half century they’ve been growing at about 2.3%. If you’re earning a modest middle-class income of $50,000 a year, and if you expect your children, 25 years from now, to occupy that same modest rung on the economic ladder, then with a 2.3% growth rate, they’ll be earning the inflation-adjusted equivalent of $89,000 a year. Their children, another 25 years down the line, will earn $158,000 a year.

Against a backdrop like that, the temporary ups and downs of the business cycle seem fantastically minor. In the 1930s, we had a Great Depression, when income levels fell back to where they had been 20 years earlier. For a few years, people had to live the way their parents had always lived, and they found it almost intolerable. The underlying expectation — that the present is supposed to be better than the past — is a new phenomenon in history. No 18th-century politician would have asked “Are you better off than you were four years ago?” because it never would have occurred to anyone that they ought to be better off than they were four years ago.

There is more from the article at the link.

Originally Posted by zraver

If your operating in a vacuum yes I ceed your point, but we are not. The poor spend, so an increased minimum wage goes directly into the goods and services economy. Your business will go up, not down- and thats what the data shows.

1 dollar more for the minimum wage worker, 1 dollar less for the businessman (I am ignoring that payroll tax will increase, so the businessman loses more, although that is a transfer and therefore simply a redistribution). How does spending in the goods/services market change in your story?

Originally Posted by Shek

1 dollar more for the minimum wage worker, 1 dollar less for the businessman (I am ignoring that payroll tax will increase, so the businessman loses more, although that is a transfer and therefore simply a redistribution). How does spending in the goods/services market change in your story?

1 dollar more is what 160 more a month or there abouts. Now is the poor going to save that 160 under a matress- no. They will spend it as they make it so sales go up. More sales mean more business means more profit. Even if they don't spend it, and put it in a savings account thats more capitol banks have to lend.

When said technology actually exists. Sure the average poor today has a car and the rich 150 did not, but in equivalency the rich then with their carriage and well bred horses vs the foot slogging or mule riding poor enjoyed the same disparity as a lambo driving investment banker vs a 40 hour a week pick up driving plumber.

Originally Posted by zraver

1 dollar more is what 160 more a month or there abouts. Now is the poor going to save that 160 under a matress- no. They will spend it as they make it so sales go up. More sales mean more business means more profit. Even if they don't spend it, and put it in a savings account thats more capitol banks have to lend.

You just took away 160 dollars from the business owner. 160 dollars less to save or spend. So where's the change?

Originally Posted by zraver

The Democrat's then re-made America in to one that restrains the invisible hand negative effects.

Really? Tell that to inner city urban centers, almost all of which are run by Democrats. Tell that to the education industry at almost all levels, almost solely dominated by Democrats. Tell that to the union industry, effectively 100%-controlled by Democrats.

Restraining negative effects indeed.

-dale