Increasing the Minimum Wage (Part II)

Yesterday, we had a good discussion about increasing the minimum wage. Our pal Heidi Moore tackled the issue in The Guardian today:

Business leaders and plump Washington lawmakers would do well to try to step back from their fat bank accounts and their sense of entitlement and put themselves in the shoes of someone who works part-time just to be able to afford food to eat and a bed for the night. Is that the America they want to create? Because keeping poor people down so that they can’t even dream of being middle-class seem like a full-time task – although it seems to pay those corporate leaders a lot more than minimum wage.

The response on Twitter has been supportive, and well, not so supportive:


 

It didn’t stop there. Actually it’s still might be going on. Brent Cox says it best:

 

 

An actual small business owner, Selwyn Yosslowitz of the Marmalade Café in El Segundo, Calif. told Marketplace that there wouldn’t be layoffs if the minimum wage were to be raised:

“It wouldn’t be layoffs,” Yosslowitz says. “But maybe you make the hours more efficient. There’s lots of people who come in at 9 o’clock right now. I would make sure they come in at 9:30 and cut off half an hour across the board to be able to afford the increase.”

Serbin and a co-worker from Peru say their hours are sometimes cut when business is really slow and management sends them home early.

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19 Comments / Post A Comment

Wow, I really dislike that DividendMaster guy.

@Hayley Judd@twitter You should see how he treats the dividends.

Actually, minimum-wage workers are the cheapest and most efficient they have been since the minimum wage was enacted. A minimum-wage worker in 2013 produces almost three times as much output per dollar spent on their wages than a minimum-wage worker in 1968.

Another way of looking at it: if we treat America in 1968 and America in 2013 as different countries, minimum wage workers in 1968-America were earning an American wage for a Chilean level of output, while minimum wage workers in 2013-America earn a Chilean wage for an American level of output. (Does that even make any sense? I think my analogy got away from me.)

@stuffisthings made sense to me

@stuffisthings Yes, I think you’re saying American minimum wage earners should go to Chile?

@forget it i quit Sure why not! They’ve got good ceviche and their unemployment rate is lower than ours.

jr (#3,151)

I hate when people refer to the poor as lazy/stupid/wanting the government to take care of them. It’s the same as claiming there is voter fraud or welfare misuse. There will always be someone who misuses the system but the total amount is so low that it really doesn’t make a difference.

The truth is most people in poverty come from single families with little to no education and multiple kids. They come from families who have been in this situation for generations and the system makes it hard for anyone to break thru. You always hear “well i was able to make it out and i worked so hard through college.” Good for you but even the thought of having a chance to go to college isn’t an option for so many people and that is sad. The entire process of paying for college is so overwhelming that many can’t handle it. The government should setup offices in inner cities and poverty stricken areas whose sole purpose is to help students and their families apply for the federal loan process.

If you can raise the minimum wage to a living wage that will allow single parent families to not have to work 2 jobs or 60-70 hours a week and spend more time with their family. They will be able to provide a stable environment to raise kids.

BCarlson (#3,206)

@jr Um, no. The amount of welfare fraud is not low. There is ALOT of welfare fraud. Why do you think the federal and alot of state governments have entire units dedicated to fighting this?

And there are alot of poor, lazy, stupid people in this country and in the world in general. You think everyone has the capability to be a great success? Nope, alot of people are mediocre (see previous Billfold article) and alot of people are stupid and lazy and will become addicted to any government that gives them an IV drip of benefits.

jr (#3,151)

@BCarlson where do you get making enough money to provide your family a stable life as something more than mediocre? not everyone is going to become millionaires. Do you know who commits the majority of welfare fraud? it isn’t the families its companies that process the benefits. Everyone needs help sometimes, even the mighty banks who can do whatever they fuck they want.

i got an idea why not end all assistance programs and spent it on defense.

Sean Lai (#559)

@BCarlson No, the amount of extreme welfare fraud is pretty low. Also, the number of people on welfare is actually pretty low, compared to the number of Americans with low incomes. There are anti-fraud units for the same reason there are firefighters in every little county across the country – it’s a good idea to have them even if the problem is rare.

The other reason that there is so much anti-fraud work in welfare is basically because of people like you: a lot of Americans believe people on welfare are parasitic, undeserving and sub-human and so welfare offices do a lot of work just trying to give themselves political cover from being stripped of further funding. Anti-fraud units are one such form of cover.

boringbunny (#3,260)

“it is essentially revolting for employers to say ‘if we have to pay a living wage we won’t hire people.’”

That might be true but it doesn’t mean that it won’t happen (see, e.g. companies cutting hours due to Obamacare.) And if even one person loses a job, in this economy, that’s too much. Why not just push for a higher Earned Income Tax Credit? Then you won’t be paying extra for teenagers just looking for side gigs, no one would lose a job because of the added expense and workers can actually get enough $ to support their families. ($9/hr is still below poverty for a family of 3, even assuming 40 hours/week). People would have to file tax returns (which they should do anyway) and they would only get the money come tax time, but they have a much better chance of getting the money they need.

@boringbunny Speaking as an old-school big-state leftist, the minute some libertarian think tank economist can show me the Republican votes in Congress, I’d happily take a guaranteed minimum income deal and scrap the minimum wage as well as food stamps, Section 8, etc. But that’s never going to happen and EITC is very, very imperfect substitute when it comes to putting extra money in the pockets of low-income workers each week.

The more important outcome — which everyone seems to be ignoring — is indexing the minimum wage to inflation AT LEAST, if not to labor productivity (in my Marxist fantasyland). Low income workers would be in a MUCH better situation if that had been done in the first place.

Sallymander (#3,159)

@stuffisthings Federal workers’ pay is indexed to inflation (at least, pre-2010 pay freeze), and some union contracts will also include that provision. There are interesting macroeconomic arguments for and against this practice. One of the primary arguments against is that it exacerbates inflationary pressure; i.e. inflation occurs, wages rise accordingly, spending rises, rinse & repeat. In a field where some of the basic questions can be bewilderingly fuzzy (What causes inflation? for example), there are merely “schools of thought” about what the truth is w.r.t. our Great American Economy.

boringbunny (#3,260)

@stuffisthings There probably aren’t enough votes for a minimum income deal but I doubt this minimum wage/indexing wage proposal has the votes either. This is all theoretical and I’m not a politician. EITC isn’t perfect but I like that it targets the right people, spreads the cost so it’s not just affecting a few companies, and seems to avoid the potential pitfalls MW has.

jr (#3,151)

@boringbunny Boehner’s face said it all when Obama brought up minimum wage “Over my dead body”

Sean Lai (#559)

@boringbunny It’s probably for the best not to index the minimum wage to COLI or inflation, since we don’t know what the ideology of central bankers will be in 30 years. I think if we could convincingly make the case that central bankers of the future will prefer low inflation to full employment and growth, as they do right now, then indexing wouldn’t be so bad, but we can’t know for sure. This is a tough one for me, because I’m also a big pinko who knows that indexing would help workers to keep a greater share of the surplus they produce, but I’d be concerned about getting in a stagflation situation like the 70s.

I think minimum wage vs EITC is sort of a political economy problem. The minimum wage is something everyone understands in a way that EITC expansion isn’t – EITC looks more like a “handout”, even though there’s no meaningful difference. Also, because EITC works through the tax code while minimum wage is self-enforcing, a lot of people who qualify for EITC don’t get it while most people do get at least minimum wage pay.

An increase in EITC AND the min wage would be good.

@Sallymander To your point, this is one reason why I think indexing to productivity is a good idea — if I’m not mistaken, this would eliminate the inflation feedback loop problem, and it’s not terribly hard to measure (GDP/hours worked). Plus it would be very hard for employers to dampen the effects by changing hours or driving employees harder — if the same amount of output is able to be produced with fewer workers, then their wage automatically goes up anyway.

Of course if this had been done in the 60s then the minimum wage today would be higher than the average producer wage which, given the outcry over a $1 increase, I imagine would not be politically acceptable.

Sallymander (#3,159)

Re: “plump Washington lawmakers”, one interesting point to consider about Washington itself: DC law fixes the District minimum wage at $1 more than Federal minimum wage. So upping the minimum wage to $9/hr would up the DC minimum wage to $10/hr, which is pretty steep if you consider the kinds of jobs that generally pay less than that today.

WaityKatie (#1,696)

@Sallymander Maybe consider the cost of living in DC or even the farflung suburbs of DC before you call $10 an hour “steep.”

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