Thread: How the minimum wage works

"Our federal government started to expand exponentially after the passage of income tax law. There was excess funds. A government CANNOT have a surplus. A surplus means the tax rate is too high"

Really????? how about that social security tax surplus?????? I mean if it's in deficit in a few years shouldn't we maybe stop collecting so much now? Can I get all my excess wages back? I've sat near but never over the cap for years....would be a nice boon...who would pay it?
Or do you believe all that extra money collected from labor should be paid back into the fund thereby extending solvency way farther out than any other U.S. social program? If you don't believe it should be.

Do you believe it's wrong to stop taxing people 6% when they go overcap since it really isn't about the payout it's about increasing revenue to fund govt today? Do you also believe it was wrong to give the Investor class my excess social security payments ( the surplus) and call it their money? You do know it takes in twice it's cost and has for a while

Originally Posted by ba1025

As a business owner how mmuch higher was your net income( the real one) between 2001-2007? Did it grow faster than inflation? Please think about it you don't have to respond. is there any reason to think those paying minimum wage didnt see an increase in profits during an economic expansion?

To be honest, I don't know. My sense is that it kept pace with increases in wages and material costs since two components of billing are percentages of the base cost of materials and labor. Indirect costs and a builders fee.

The building boom, however, presented builders with an opportunity to cherry pick jobs. Demand was so strong until a year ago that there was little pressure to underbid the competition and vice versa. That doesn't mean we overcharged, but that we were able to place bids with full fees. Now we are likely to shave our fees to compete. We can't shave labor and materials because they're fixed costs. I know builders, remodelers, etc. who are bidding to break even. Of course, their salary and overhead is in the bid, but they're foregoing profit which they need to make capital purchases(equipment), cushion against overruns, and, I might add, take a vacation. That's dangerous when you are using your own labor because construction jobs can easily overrun.

"Our federal government started to expand exponentially after the passage of income tax law. There was excess funds. A government CANNOT have a surplus. A surplus means the tax rate is too high. So politicians make up programs to drain this surplus. You can see that even in larger businesses. Department "wastes" money to justify the budget. Otherwise their budgets get cut. Except in a business, when times are tough, it must cut expense or it'll cease to be. A government can just borrow against the future indefinitely and increase our tax load unilaterally."

off the top of my head the only real surpluses we have had in the last 80 years was one year under Kennedy. The Clinton surplus really was just some of the exorbitant excesses in social security payments the govt started to collect under Reagan finally showing up.

Originally Posted by ba1025

Really????? how about that social security tax surplus?????? I mean if it's in deficit in a few years shouldn't we maybe stop collecting so much now? Can I get all my excess wages back? I've sat near but never over the cap for years....would be a nice boon...who would pay it?
Or do you believe all that extra money collected from labor should be paid back into the fund thereby extending solvency way farther out than any other U.S. social program? If you don't believe it should be.

Do you believe it's wrong to stop taxing people 6% when they go overcap since it really isn't about the payout it's about increasing revenue to fund govt today? Do you also believe it was wrong to give the Investor class my excess social security payments ( the surplus) and call it their money? You do know it takes in twice it's cost and has for a while

I don't understand what you're trying to say here...

Originally Posted by Shek

I updated it through 2006, which means that three years of data has been added, and adjusted figures for 2001-2003 based on BEA updates have been entered. There's still one piece of information that BEA has not published for 2007, and so I don't have a figure for last year. You'll see for the majority of the current expansion, labor's share has remained above average. You should also notice that peaks tend to occur during a recession, and troughs during the middle of an expansion - in other words, labor's share tends to be countercyclical and this expansion has proven thus far to be no exception.

Your chart shows a steady decline in a time of expansion.

Wages made up a record low share of national income. In the third quarter, wages and salaries made up 51.4 percent of national income, the smallest share since the U.S. government began to collect this data in 1947. Total compensation, which includes benefits, dropped to the lowest share in nine years. At the same time, profits grew to the largest share of national income since 1947.

Now, no matter your politics isn't this a disturbing situation in a consumer economy..especially one that is the world's economic engine?

I don't understand why construction pay didn't rise in relation to the huge demand Builders were getting during the boom. Profits were up just look at the financials of big firms 2001-2007. Maybe it was the illegal immigrants so many employed and continue too and never paid a cent of taxes on.

We had one fall and crack a vertebrae in his neck at a construction site here. Someone saw him fall. They called an Ambulance . His co-workers tried to to prevent the Ambulance personnel from assisting him. Assign your own motives I think we know what they were. Anyway, the police came, the Paramedics accessed him and a life star helicopter flew him out. How many other Builders in this country are employing cheap illegal labor and avoiding . social security, workers comp and all those other add ons as well as driving down the prevailing wage. I get up for work early. I see the vans of people who can't speak a lick of English and are either of Mexican or south American heritage. i don't really blame them for wanting to get ahead but man I think those hiring them should be sent back to Mexico with them

Originally Posted by gunnut

I don't understand what you're trying to say here...

If a Govt can't have a surplus and social security taxes are capped because they are a future benefit then all those saying it's in deficit in 20 years are speaking out of both sides of their mouths. It's not in deficit in 20 years unless we are worried about paying back all the money we are borrowing today in which case maybe those tax cuts that benefit Investors so many call to make permanent are a bad idea since the "surplus" that allowed them in the first place is social security tax over payments made today

You do understand for every $1 the govt collects in social security today it spends $.50?


Also we have been in deficit 79 of the last 80 years it wasn't surplus govt revenue that drove the development of social programs...probably responding to multiple posts

I feel like this is Crimea and I am the British Light Calvary btw

You do understand for every $1 the govt collects in social security today it spends $.50?

I'm pretty sure it spends it all... I mean, the government does owe the SSA $4-5 trillion.

Originally Posted by ba1025

If a Govt can't have a surplus and social security taxes are capped because they are a future benefit then all those saying it's in deficit in 20 years are speaking out of both sides of their mouths. It's not in deficit in 20 years unless we are worried about paying back all the money we are borrowing today in which case maybe those tax cuts that benefit Investors so many call to make permanent are a bad idea since the "surplus" that allowed them in the first place is social security tax over payments made today

You do understand for every $1 the govt collects in social security today it spends $.50?


Also we have been in deficit 79 of the last 80 years it wasn't surplus govt revenue that drove the development of social programs...probably responding to multiple posts

Social Secutiry is a slightly different type of government program than the others. The original intent is to have the presently working support those in retirement, in exchange for promises that in the future, someone else will pay for their retirement. The retirement funds for individuals were capped to ensure some surplus as "rainy day" fund.

Of course like any good politician would, that surplus was "borrowed" to pay for current deficit in the general budget.

And it was the surplus that drove social programs. Government surpluses aren't like the surpluses for us normal people. They are projected. Using a complicated and hokey formula only the politicians can dream up, they "project" future tax revenues against current spendings. As you can see these projections are anything but accurate. A downturn in the market or a bubble in the internet can vary the revenue wildly.

That surplus during the Clinton years wasn't really extra money on hand or in the bank like it is for us normal people. They were projections. Politicians see these "extra" money and spend accordingly, eventhough it wasn't really money on hand.

An added complication is the nature of government programs. They are eternal. A program added during the flush years don't go away during the lean years. But that bump in the business cycle resulting in a surplus of tax revenue goes away pretty quickly. Then we're left with a deficit.

Look at California's budget. Our population increased far slower than our state budget. We got by at $100 billion a year just a few years ago but today we need $140 billion a year. You can't tell me we had an increase of population and inflation resulting in a 40% increase in expense.

Originally Posted by ba1025

I don't understand why construction pay didn't rise in relation to the huge demand Builders were getting during the boom. Profits were up just look at the financials of big firms 2001-2007. Maybe it was the illegal immigrants so many employed and continue too and never paid a cent of taxes on.

Several reasons. Legal and illegal hispanic, Korean, Chinese and east europeans underbid the traditional suppliers of labor and finished materials. Cost for an old American firm to shingle a roof in new construction was running about $65-75 per square (100 sq.ft.), but a good hispanic crew (all legal) were doing it for $45. The American company was jobbing it with them and collecting the $20 difference until builders caught on and now they deal direct. A good crew does 15 square on a weekend, and do a good job. Try getting American crews to work weekends or late. Almost impossible. I could tick down the list: drywall, hispanic crew hung a 3000 sq.ft house in a day for me at $6.50 a board; Chinese countertop guys underbid $67/sq.ft. granite countertop company here by $20 a sq.ft. and do it fast and as good as the best; Korean siding crews work circles around American ones and charge less; Russian stucco guy is 20% less...etc. and they are all fast, so that means you finish the job sooner and save on carrying costs. That's one reason.

Another reason. Small construction companies, generals and subs, were hiring illegals and paying them cash and spreading it around on their books as vendor payments. That hides it from the insurance companies when they do their annual audits to see if companies are paying their full share of workers comp and it doesn't show up on Fed or state unemployment tax filings. Big companies didn't have to hire illegals; their smaller subs were doing it.

The only areas where American crews are still tops in small time construction is electrical, hvac and plumbing/mechanical where you have to have not only a contractors license, but also a trade license. Illegals don't take tests to become electricians, etc., but on other stuff they get away without having a license, because hardly anyone checks for one on jobs below $10k... Insuring them is a sticky problem. Essentially, an illegal is uninsured. And OSHA? They hardly ever bother checking small jobs for unsafe conditions; they don't have the manpower; so, they focus on the high profile companies who can pay the fines and gives them publicity. Only when all the workers are legal and the companies follow the law does the system work and the official stats jibe with reality.

Originally Posted by ba1025

Your chart shows a steady decline in a time of expansion.

This is like every other expansion. No matter how you try to slice it, labor's share of total compensation has been over the average labor share total compensation for almost the entire expansion.

Do you see this? Do you disagree?

Originally Posted by ba1025

Wages made up a record low share of national income. In the third quarter, wages and salaries made up 51.4 percent of national income, the smallest share since the U.S. government began to collect this data in 1947. Total compensation, which includes benefits, dropped to the lowest share in nine years. At the same time, profits grew to the largest share of national income since 1947.

Now, no matter your politics isn't this a disturbing situation in a consumer economy..especially one that is the world's economic engine?

No, it is not disturbing. Pay comes in two basic forms - money and benefits. People are choosing to be compensated more in benefits and less in money. To look only at money is to miss a significant portion of compensation, and will only lead you to erroneous conclusions. Do you have a job where you have no benefits, and this is why you try to ignore them?

Originally Posted by Ironduke

I'm pretty sure it spends it all... I mean, the government does owe the SSA $4-5 trillion.

Yeah it only spends .50 of every dollar collected on actual social security benefits...the rest goes into the general fund. English is my second language I donot have a first.

Originally Posted by Shek

This is like every other expansion. No matter how you try to slice it, labor's share of total compensation has been over the average labor share total compensation for almost the entire expansion.

Lost in all this is what method is used to collect the statistics.

Unrelated to the above but of similar interest is the official poverty rate. When we say more people are slipping into poverty or escaping it, what is the dividing line and how is it set. And if there is a national definition used by gov't, does it take into account regional influences. An annual income of $25K in NYC goes a lot less farther than it does in Capon Bridge, WV.

Pay comes in two basic forms - money and benefits. People are choosing to be compensated more in benefits and less in money. To look only at money is to miss a significant portion of compensation, and will only lead you to erroneous conclusions. Do you have a job where you have no benefits, and this is why you try to ignore them?

Anectodal evidence may not count, but it seems to me just from conversation in my neck of the woods, benefits are being pared back, especially medical. Employers are struggling to keep up with rising premiums with the share they pay and workers are shelling out more for their part. I assume that employers who do pay the higher premiums are more reluctant to increase wages. I read an article about a company that is using full medical benefits as an incentive to lure tech workers, but the pay is less. Ostensibly, there is a tax advantage since med benefits are not taxed.

Originally Posted by Shek

This is like every other expansion. No matter how you try to slice it, labor's share of total compensation has been over the average labor share total compensation for almost the entire expansion.

Do you see this? Do you disagree?



No, it is not disturbing. Pay comes in two basic forms - money and benefits. People are choosing to be compensated more in benefits and less in money. To look only at money is to miss a significant portion of compensation, and will only lead you to erroneous conclusions. Do you have a job where you have no benefits, and this is why you try to ignore them?

No I have great benefits I am a unionized employee at Sikorsky Aircraft. Company profits have risen and although it's something bargained for my total compensation has risen as well. I've done very well. My company has treated me great. I have also made shareholders including myself quite a bit of money as a highly productive employee with the technical education and knowledge to take full advantage of efficencies gained from the use of cutting edge manufacturing technology. My productivity and the QA of my output has improved at minimum 500% in the last 25 years.
Our ROI could be better but we have spent a lot on capitol improvements to gear up to the tremendous commercial and military work we have and I am sure that's driven that ratio down a bit. I could get a non union job in a heartbeat but it would cost me about 25% of my total compensation and most job shops care about making parts "good enough". I want to make something I can be proud of. We are also an export driven company and have np competing in the world market even paying less skilled workers a solidly middle class wage. I am sure some here depend on our ships...for what it's worth the people making them know your life depends on it and have that level of care about quality. We have the best Military Personnel in history i want the ships they fly in to be the best as well. So, no it's a societal concern I have not a personal one. I'll retire and live well someday and from the job I have now in all likelihood.

Why are you ignoring the decline in TOTAL compensation this decade? It's back to 1996 levels now


Total compensation has dropped as well as wages. Here is another uh oh factor.
In 1993 63% of Employers offered some form of health insurance. In 2003 45% did. During that time most added big increases in deductibles and co pays. So, many of those people recieving the lower wages didnt get increased compensation in other forms they lost that type of compensation.

At the same time the level of compensation recieved by the rest only dropped slowly yet the percentage of workers recieving those "extra" wages dropped. 15% a year healthcare inflation is a boat anchor on our economy. it's caused some to build in Canada rather than here because we have 3 times the cost per employee for healthcare. i sure dont have answers but there seems to be an unsolved challange to us as a society and a nation.

Another thought is many of those who loose insurance loose preventive care. Not only do they become less productive employees but when they get emergent care it cost many times what preventive care would of cost thereby driving up the cost of those who still provide ins. and increasing the pressure to stop providing ins. It's a snowball rolling down a hill

At some point don't we really need to address this systemically? Or do we wait til the system just collapses under the weight of 15% yearly inflation?

Not only has total compensation fallen steadily the last 6 years but the number of workers whoose wages have lagged while they also lost much if not all of the extra compensation they recieved beyond salary has increased. People have not owned so little equity in their homes since right after ww2. Did they use equity to make up the differences? I am not chicken little but is our middle class majority paradigm cracking?