Is a minimum wage necessary?

question
was I off topic?

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No, not at all, ragman. Not at all.

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thanks

realjohnboy wrote:

No, not at all, ragman. Not at all.

thanks. appreciated

FWIW, I'm a former member of Abuzz for many years and a member in good standing on A2K, but for some reason (old age) I've forgotten what nick I used.

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Oops C.I.
Oh..sorry...You're in agreement with me, totally. As Roseanne Rosanandanna said, "Never mind" (about my rebuttal to you)

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A little more to think about

Quote:

Employment Outcomes: Does the Minimum Wage Hurt Small Businesses?

Despite the fact that contemporary economic research casts a long shadow of doubt on the contention that moderate minimum wage increases cause job losses, opponents still lead with this argument. This so-called "disemployment" argument is particularly difficult to maintain given two relatively recent developments in the history of minimum wages. First, the quality of empirical minimum wage research rose steeply over the last decade, due largely to economists' ability to conduct pseudo-experiments3. Such experiments, rare in empirical economics, typically utilize the fact that numerous states (12 as of today) have raised their minimum wage above that of the federal level. This variation between states gives researchers a chance to isolate the impact of the wage change and test its impact on employment and other relevant outcomes. As stressed in the Card and Krueger book cited above, these studies reveal employment elasticities that hover about zero, i.e., they solidly reject the conventional hypothesis that any increase in the minimum wage leads to job losses among affected workers.

Second, following the most recent increase legislated in 1996, the low-wage labor market performed better than it had in decades. The fact that the employment and earnings opportunities of low-wage workers grew so quickly following that increase continues to pose a daunting challenge to those who still maintain that minimum wage increases hurt their intended beneficiaries.

Recently, the Fiscal Policy Institute (FPI) released a study of the impact of higher minimum wages on small businesses4. Their analysis focuses on various outcomes for businesses with less than 50 employees, comparing these outcomes between states with minimum wages above the Federal level and those at the Federal level. If the theory that higher minimum wages hurt small businesses is correct, then we would expect there to be less growth in such enterprises in states with higher minimum wages. In fact, as shown in Figure 5, the opposite is the case.

Between 1998 and 2001, the number of small business establishments grew twice as quickly in states with higher minimum wages (3.1% vs. 1.6%).
Employment grew 1.5% more quickly in high minimum wage states.
Annual and average payroll growth was also faster in higher minimum wage states.

http://www.epinet.org/content.cfm/webfeatures_viewpoints_raising_minimum_wage_2004

It seems there isn't much evidence one way or the other on this issue. Modest increases in the minimum wage aren't going to change the employment situation.

Businesses always are looking for ways to cut labor costs by increasing productivity. Increasing the minimum wage may cause more of that in labor intensive businesses but the cuts by companies like GM, IBM, and Boeing, that have paid higher wages have been absorbed by the economy with more work becoming available in the long run. Why would cuts in employment in lower end businesses be any different? The machines that are used to replace workers have to be built by new workers. The people that run those machines have more money to spend.

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parados, What was found by research were simply discouraging. During the past several years while productivity of American workers increased, and profits increased, their wages remained stagnant while CEO's salaries and bonuses jumped by double and triple digits. Many middle-class families fell into poverty, and medical insurance disappeared for five million more people in our country.

Personal and public debt have incrased dramatically during the past six-seven years.

If this is any sign of an improving economy, I'm glad we're not working or looking for a job to make a "living wage."

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CEOs salaries grow as low wage earning held at bey

cicerone imposter wrote:

parados, What was found by research were simply discouraging. During the past several years while productivity of American workers increased, and profits increased, their wages remained stagnant while CEO's salaries and bonuses jumped by double and triple digits. Many middle-class families fell into poverty, and medical insurance disappeared for five million more people in our country.

Personal and public debt have increased dramatically during the past six-seven years.

If this is any sign of an improving economy, I'm glad we're not working or looking for a job to make a "living wage."

Here are some interestring stats:

http://www.newsreview.com/chico/Content?oid=oid%3A46851

"Avg. annual CEO pay at top 367 U.S. corporations, 2004 $11.8 million

Ratio of CEO pay to avg. production worker, 2004 431 to 1

Ratio of CEO pay to avg. production worker, 1990 107 to 1

Hourly min. wage today, had it risen as fast as CEO salaries $23.03

No. of women among the 150 highest-paid CEOs since 1990 0

No. of non-white males among the above 1 (C. Wang, Computer Assoc.)

Avg. CEO pay increase in 2004 7%"

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What I meant to suggest, ragman, is that somewhere between page 1 and 10, there was a discussion about the difference between a Minimum Wage and a Living Wage.
My argument was that the Federal Minimum Wage is way too low. But states should set the Minimum Wage rate. And the rate should not be, and I am sticking by this, necessarily a Living Wage..
Have you met Thomas yet, our resident economist. He will. I am sure, weigh in shortly.
Health care, CI, is a whole another scary issue. And it is going to get a lot worse.

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I know; the government is now preparing legislation to stop treatment of medical care for people who cannot prove their US citizenship.

Health care cost increases are still in double-digits every year, and most people working for minimum wage or contract will not be able to access health care facilities. The premiums for the uninsured are already prohibitive for most without health insurance; I wouldn't be surprised if the uninsured in the US hits over 50 million within the next year or two.

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Along the lines of healthcare's major cost factors, wonder what the US govt is planning to do about affecting a change in reduction of crime from drug-related costs and costs due to inner city and domestic violence? (pardon my poor wording)

But I digress

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found my old nick again
Sorry to drop in here with this off-topic entry. I found my old nick again. Rehi to those that recall me from the old (abuzz) days and not-so-old days here.

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ragman, It's a pleasure to see you on a2k. I remember you from the Abuzz days, and if my memory serves, we agreed on most of the important stuff.

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I agree Ragman completely that people making minimum cannot financially survive. That is not my contention of debate. My issue is that raising the minimum wage will not help - if it did I would support it. What you state is not basic economics - it is what many people assume happens. If you studied even Introductory economics you would realize that the math you state does not work.

The reason why so many Americans support an increase in minimum wage is because they understand there is a problem for people earning that amount, however, the average American doesn't understand what the downstream effects are.

Basic economics: As I stated before if you make $100 a month, but your costs to survive (food, rent and other basics) cost $200 you are out of luck. So one would think logically that raising your income by $100 would work - it would if everything remained the same. Unfortunately it will not. When doubling your wages - these costs then increase to your employer - the employer will either have to cut costs (i.e. lay someone off) or raise their prices. This same thing is happening to all the other businesses. Now the poor sap who either now does not have a job because he is laid off is now worse off. Or doubles his salary, but now his rent, food, etc. costs him $300 month. He is still $100 behind.

Can some one who supports minimum wage increase please give me some facts of how it will help some one? I haven't yet. It seems ragman tried, but his reasoning is flawed. He is not taking into consideration the downstream effects.

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An actual quote from ragman's article " "If we do not balance a minimum-wage increase with economic relief for the small businesses, we will stifle job creation and shut the employment door on the very individuals we are trying to help," said Sen. Mike Enzi (R-Wyo.), author of the GOP alternative. "

Just because the polls show it is overwhelmingly supported doesn't mean it is a good thing. Unfortunately people are naively thinking this increase will help people, whereas best case it leaves them where they are financially (their buying power will stay the same); worse case they lose their jobs.

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As in the article talking about disemployment - what else was going on in the economy at the time - many things effect the economy at the same time - did this happen to be a time of a growing economy? As a matter of fact these were years when the economy was growing. So an increase in minimum wage did not cause this increase in employment and hiring - our economy was already in a growing period. Perhaps employment went up, but would have gone up even more if it were not for an increase in minimum wage. Simply put just because something occurs after an event does not mean that event caused it.

Also, this increase in minimum wage could have still been below the normal market price for wages - currently in Mass this is the case, so I honestly see no or little effect to an increase in the minimum wage - which is essentially what I have been saying all along. Minimum wage really has little impact - and certainly does not help out people.

Everything was growing in those years, not as a result of minimum wage increase. Do you really think the stock market huge increases were a result of minimum wage increase? Most likely the reason that in high minimum wage states employment grew more quickly was more likely the opposite result. Minimum wage was increased because there was so much employment opportunity - not the other way around. Also higher minimum wage states also were higher cost of living states (like Mass).

One other thing to note - Anyone can twist stats to suit there needs. I am sure you can also go to a time period that will show the opposite affects of increasing the minimum wage too. When doing an analysis such as this several time periods should be viewed. By limiting your analysis to one 3 year period, right there the results cannot be verified - too many things affect the economy and when doing economic analysis (if you want an unbiased result) you will take these other things into consideration as well as look at various time periods.

I checked the source and don't let the name fool you EPI standing for Economic Policy Issue would lead one to think it was a non-biased Economic government type of board. It is not - it is a propaganda that "supports he economic condition of low- and middle-income Americans and their families". Not that there is anything wrong with supporting low and middle-income families (I fall into this), but right there you realize if they are supporting one group thus you are biased in your analysis.

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Linkat, Your assumption that increasing the minimum wage is the cause of inflation is not a proven fact. Inflation is a fact of life like death and taxes. Did you know we have continued to have inflation since the last minimum wage increase?

The poor spends more on the necessities of life like food and shelter.

If our country can afford to spend over two billion every week in Iraq, I don't see any harm in increasing the minimum wage for American workers.

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I don't have a problem with increasing the minimum wage - however, it will not help the people it is intended to help - that is the problem. Cicerone - take a basic economics class and you will learn. Minimum wage is not the only thing that causes inflation - I never said it was. If I could draw you a graph on this chat thing here I would that would better explain it.

A simple fact is if a companies cost increase they increase their prices. I will try to simply it for you. You own a farm stand and sell your apples for $1 a piece. It costs you $200 salaries, $300 in various other types of expenses. You pay yourself $500. All calculated monthly. On average you sell 1,000 apples. You break even. Now you are forced to pay salaries of $400 a month. What do you do? Take a cut of $200 in your salary - no way - you have a mortgage and kids to pay for private school - you aren't going to take a cut. You tried to review your other expenses of $300, but can't find anywhere to cut. Two other options - you cut your staff in half or raise prices.

I do think there is a problem with poor - I have no problem with increasing their wages, but it isn't going to help them. The government is not paying the wages so saying our country can afford to spend isn't the same thing. Thomas did mention a wage type credit - that makes more sense in that the government would pay - not pushing up prices via businesses, but increasing the poor's income.

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Linkat, I was a business major and studied economics - including macro and micro.

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Companies do not increase their prices based on your assumption. It's based on supply and demand.

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Linkat wrote:

I don't have a problem with increasing the minimum wage - however, it will not help the people it is intended to help - that is the problem. Cicerone - take a basic economics class and you will learn. Minimum wage is not the only thing that causes inflation - I never said it was. If I could draw you a graph on this chat thing here I would that would better explain it.

While I have not taken an economics class, I have worked my way through the "Prinicples of economics" textbooks of Samuelson (liberal) and Mankiw (conservative). So I can state the following two points with confidence.

1) Neither textbook claims that changes in the minimum wage affect inflation at all. And there's no reason why it should. Increasing the minimum wage increases aggregate demand by putting money into the hands of workers; but it decreases aggregate demand by taking the same amount of money out of the hands of firms. This is a net wash in aggregate demand, which cannot be expected to change the inflation rate.

2) Neither textbook claims that a rising minimum wage hurts all workers. They both apply the standard supply and demand analysis to the labor market. As price controls in any other market, a minimum wage hike can be expected to have the following consequences under this analysis:
a) if the minimum wage is lower than the market wage, it has no effect at all.
b) some workers gain by getting a raise, others lose by losing their job
c) as you raise the minimum wage, the benefit to some workers may well outweigh the cost to other workers. But the loss scales quadratically with the minimum wage hike, while the gain scales smaller than linearly with it. So there comes a point at which a rising minimum wage puts workers at a net loss.

In short: While there are good arguments against the minimum wage, it's not as easy as "take a basic economics class". Basic economics predicts that the minimum wage can never be a net gain for society in dollar terms. But someone who believes that an extra dollar is more valuable to a worker than to an employer, and who doesn't want to expand the Earned Income Tax Credit for some reason, may well conclude that a modest rise in the minimum wage is a good idea. Given this person's values, this conclusion would be consistent with basic economics.

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Is a minimum wage necessary?

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