Thread: How the minimum wage works

Originally Posted by zraver

here we agree, yet the Republicans are pushing for tort reform.

That's because we have a ton of regulations already. If we have no regulations, then yes, sue until the cows come home. We have all these regulations to stifle businesses already. Don't need more things to scare potential innovations from the market.

Originally Posted by zraver

without M$ trying to block innovations we would be further along the technology road.

You don't know that.

What we do know is MS has provided a standard, open platform for developers to freely write apps for it. Game developers can write a single code for the entire market. There's no need to spend extra resources to port Windows code to Linux, Mac, Amiga, Commodore, and whatever else people might use. That is a significant savings passed on to the customers.

Originally Posted by zraver

if tax payers foot the bill for development they should get a break at the counter. No break at the counter- no subsidies. yet as it stand nows we fund the research and get the highest prices.

Well, government should stop funding researches then. Let the market do its thing.

Originally Posted by zraver

How about this, with oil companies turning in record profits lets just remove the deductions and increase federal revenue to pay down the debt or force them to re-invest it in non-fossil energy sources.

Record profit is from high volumes of sale. The margin hasn't changed. We're buying more. What is your idea of a "fair" profit for the oil companies?

Originally Posted by zraver

I was just pointing out that the margin between profit and insolvency is not just minimum wage.

And my position wasn't that min wage increases will cause folks to go out of business, but that it can cause them to go out of business. They will pass on costs and drop employees as their first line of defense.

Originally Posted by zraver

is there any proof raising the minimum wage depresses small businesses in the real world?

Here's a specific case study where the "corporate HQ" doesn't go out of business, but minimum wage increases will force satellite operations to go out of business.

Coyote Blog: Case Studies on the Minimum Wage

Originally Posted by zraver

Minimum Wage and Small Business shows that it has not hurt small businesses and in fact such employers enjoyed better growth in higher wage states than those in federal minimum wage states.

This study is a red herring. They don't control for squat and it is written at a freshman year of college level in terms of the economic tools used.

Originally Posted by astralis

bonehead,

i'm no shek, but-

a high minimum wage does not necessarily equate to high unemployment or a bad economy- it just means that compared to somewhere else, other economic conditions being equal, the unemployment rate will be higher.

thus, in either one of your examples, the state in question could have been benefiting from other economic factors. the positives simply covered up the minuses.

Bonehead,

Astralis is on the money here. I'll try to follow up with an actual post addressing your post specifically in the next 1-2 days, but I don't have the time tonight or tomorrow during the day to develop it to where I'd want the post.

I'll address these issues in the post to lay out the empirical challenges that you need to address when trying to separate out the impact of something specific in a complex economic system:

correlation vs. causation - correlation means that two (or more) things move together, but just because they move together doesn't necessarily mean that one causes the other; if this is the case, then you have what is known as spurious correlation

reverse causality - it's possible to find correlation where there is a causal relationship, but that relationship is expressed in the wrong direction; an example of this is diet soda and obesity - I see lots of overweight folks drinking diet soda, therefore diet soda causes obesity (there is a complication here in that studies show that artificial sweetners can boost an appetite, and so there is actually some causality that runs in both directions; however, there are techniques to deal with determining this simultaneity, and I think the stronger argument is diet soda doesn't cause obesity, but that being obese causes folks to look for ways to reduce caloric intake, one case being the consumption of diet sodas)

I can't remember if you're a sports fan or not, but here are two posts that get at some of what I'll talk about and may provide a more user friendly example to discuss the technical concepts. I've attached a PPT presentation that looks at the information in these two posts - the slides are geared to show how to read results and relate them to what you see graphically, but they provide a feel for how the empirical analysis is interpreted and then put to the test in terms of methodology.

Sabernomics » Blog Archive » Payroll and Wins
Why we really, really believe that money cannot buy love in baseball « The Wages of Wins Journal

Originally Posted by Gun Grape

As a business owner, If I have to increase my outlay(raising the salary I pay my employees) you can darn well count on it that I will raise the prices that I charge you.

I'm here to make money.

Therein lies the problem with minimum wage. The pockets the money is taken from sure isn't going to be the owners. What the minimum wage effectively does is redistribute wealth among the wage owners. It looks good in a speech though.

Originally Posted by ba1025

Great Society programs started were implemented in 65' coincidentally when the largest drop in the poverty rate occurred. it dropped 5% and stayed there! Where is your drop in the poverty rate the last 20 years???

So a socialistic program was implemented in 1965. Before that the poverty rate was dropping. After that it stopped. What does that tell you about government meddling?

Another thing, you keep talking about poverty rate, poverty line, poverty blah blah blah. What does "poverty" mean? Can you give me your definition of what poverty is?

Originally Posted by gunnut

So a socialistic program was implemented in 1965. Before that the poverty rate was dropping. After that it stopped. What does that tell you about government meddling?

Another thing, you keep talking about poverty rate, poverty line, poverty blah blah blah. What does "poverty" mean? Can you give me your definition of what poverty is?

???????????? There was a HUGE drop over the 5 years fro 65-70 then it leveled off. It had been flat previously

Would you argue with the example?

* Poverty thresholds were originally derived in 1963-1964, using:

o U.S. Department of Agriculture food budgets designed for families under economic stress

o Data about what portion of their income families spent on food



Computation:

* If total family income is less than the threshold appropriate for that family,

o the family is in poverty

o all family members have the same poverty status

o for individuals who do not live with family members,their own income is compared with the appropriate threshold

* If total family income equals or is greater than the threshold,the family (or unrelated individual) is not in poverty



Example:

* Family A has five members: two children, their mother, father, and great-aunt.

o Their threshold was $24,662 dollars in 2006.

Originally Posted by ba1025

My only issue what changed in our society during the last expansion. It's the first one since the Depression where real wages were stagnant while profits soared. I think a company making money is great. I think it's workers wges remaining stagnant isn't great for our country and only good for the shareholders in the short term....after all who will want more goods and services if only 10% of the population sees real wages increase. i don't think that's a Republican or Democratic thing it's a long term health of our economy thing. In a consumer economy consumers need $ to fuel it. They wont be able to fuel it with refinanced mortgages anymore.

You're using the wrong metrics again. Focusing on wages is myopic, as people make employment decisions based on compensation packages, of which wages are one part, albeit a big one. Thus, people look at the health/dental insurance that is offered, the vacation policy, the overtime policy, flexible work schedule policies, worker comp, etc.

So, the proper metric to use is to look at total compensation, not just wages/salary. When we do this, we see that labor's share of compensation has remained quite steady and is actually slightly above the longer-term historical average.

Originally Posted by Shek

You're using the wrong metrics again. Focusing on wages is myopic, as people make employment decisions based on compensation packages, of which wages are one part, albeit a big one. Thus, people look at the health/dental insurance that is offered, the vacation policy, the overtime policy, flexible work schedule policies, worker comp, etc.

So, the proper metric to use is to look at total compensation, not just wages/salary. When we do this, we see that labor's share of compensation has remained quite steady and is actually slightly above the longer-term historical average.

Total compensation plummeted in the last recovery according to that graph? 2001-2007. Am I missing something? it looks like we are at the lowest level in 40 years? it also looks like it took it's worst hit in the Reagan years???? So maybe it's a trend? is that a chart showing policy bias toward business over labor and it's results? i know it isn't but I am sure the Wingnutian left would seize upon it

Originally Posted by ba1025

Total compensation plummeted in the last recovery according to that graph? 2001-2007. Am I missing something?

It's share decreased from the max level towards a level that appears to be slightly higher than the historical average. That's not "plummet[ing]".

Originally Posted by ba1025

it looks like we are at the lowest level in 40 years?

Are you looking at the same graph I am? Start at the horizontal line that indicates the 70% and then work your way from right to left. Count the local minimums in the total compensation rate and you should find 6 of them below 70% by the time you reach the last data point, which is above 70%.