Comrade 'biter, the raising of anyones salary will necessitate a raise in prices to keep profits up.This presumes that prices aren't sticky, and aren't already as high as the market will bear.
Well if the prices are "sticky" and expenses go up, then profits drop. If profits drop then corporations decide whether the lower profits are worth keeping the business open. More than one corporation has closed a business because the profit was too low. Then people lose jobs and that raise in minimum wage is meaningless.
Yeah, you're not going to convince me that we need to protect the profits of the wealthy over the well-being of the poor. I'd have a hard time caring less if the Koch brothers investment portfolio takes a hit. Investors will still want to make money and if some of the extremely high rate of returns start to dry up, the lower rate of returns (slimmer profits) will become more attractive.
Interesting side note: Evil Hat Games published their financials (even though they're privately owned). With gross revenue a little over $800k, Fred Hicks took home about $60k, his take home being the companies profit, that's about a 7.5% profit margin on the year.
Yeah, you're not going to convince me that we need to protect the profits of the wealthy over the well-being of the poor. I'd have a hard time caring less if the Koch brothers investment portfolio takes a hit. Investors will still want to make money and if some of the extremely high rate of returns start to dry up, the lower rate of returns (slimmer profits) will become more attractive.
Interesting side note: Evil Hat Games published their financials (even though they're privately owned). With gross revenue a little over $800k, Fred Hicks took home about $60k, his take home being the companies profit, that's about a 7.5% profit margin on the year.
And for every full time employee he has (I have no idea if he has any) a $3/hr raise would take more than $6k out of his pocket.
It's not the Koch brothers I'm worried about. It's people like Fred Hicks and all the other small business owners.
Comrade 'biter, the raising of anyones salary will necessitate a raise in prices to keep profits up. Twenty years ago I worked for Taco Bell and the cost of a taco was 49¢, now it is over a dollar. According to the CPI constant dollar calculator, that same 49¢ should be 79¢ today. Oddly though the minimum wage here has gone from $4.25 to $8.25.
Checking inflation vs minimum wage doesn't work because inflation doesn't include food prices. The food industries have a large number of minimum and low wage workers.
I was busy looking up the price of beef and Yum! Brands corporate history while Citizen K(e)rensky beat me to the punch.
Here's what I had before I pressed "Preview":
My state's minimum wage has increased over the same time period from $4.25 to $7.25. I have no idea how much an individual taco cost in 1994, but I believe it's a buck for a crunchy taco and a buck ten for a soft taco (before taxes).
Doesn't sound like that extra dollar in the minimum wage had much impact on the price of a taco.
Fun articles about Taco Bell:
Immokalee Workers Take Down Taco Bell
How Yum! Brands' Low-Wage Model Costs the Rest of Us
Raising the minimum wage isn't going to get anyone out of poverty. All it will do is raise the cost of living negating the raise in wages. If McDonald's has to spend 30% more on salaries, don't you think they will raise prices to offset those costs? The same with their suppliers, and every other company out there.
Assuming 100% of the costs are passed on to consumers (which is probably a reasonable, if somewhat disappointing assumption), it would be spread out across all consumers, not just those earning minimum wage. The net effect will still be meaningful gain for those who are.
Most of his "employees" ate probably freelancers who make significantly less than minimum wage when all's said and done as, to my understanding, that's the norm in the industry.
Freelancers such as artists, etc. are not employees. He is not paying them wages, and paying all the taxes on those wages.
Since most, about 80% of McDonald's and Taco Bells are franchise store, meaning that they are not owned by the corporation, blaming the corporation for wages, like in the Huffingtonpost article, is a distortion or out right lie.
Go and ask the owner of your local stores and shops what will happen to their stores with any of the proposed minimum wage increases.
"The chain’s 350 existing operators currently average roughly 20 units each. Thirty-five percent of franchisees have over 25 years of experience....In the third quarter, parent company Yum Brands reported gains of $53 million tied to its refranchising efforts in the U.S., primarily at Taco Bell. As of the end of September, Yum had refranchised 151 Taco Bell units in 2013, in addition to opening 68 new franchised Taco Bells.
"Taco Bell has served as a bright spot for Yum's same-store sales, with 2-percent growth, compared to a 1-percent decline at Pizza Hut and a 4 percent decline at KFC. The taco chain has produced seven consecutive quarters of positive same-store sales growth."
I guess I don't have much sympathy for franchise owners, but maybe that's colored by the fact that the last time I worked for a fast food franchise, the company owned all of the Dunkin Donuts in the downtown Boston area. As you may imagine, that is a lot of Dunkin Donutses.
But, it's been brought to my attention that I am an unrepentant class warrior and a left-wing ideologue.
Comrade Kshama and co. have suggested that, for example, Washington stop giving Boeing billions in subsidies and tax breaks and, instead, subsidize small business owners who can't afford to pay their workers $15/hr. Seems a little reformist to me--I'd prefer to take them into state ownership--but I keep getting the impression that the comrades think I'm an ultraleft.
The franchise thing is a great scam for abusing workers. The corporation gets to say it's not their fault, wages are set by the individual franchise owners, even while they dictate many other details of how the business gets run.
The franchise owners pay so much for the franchise that their margins are paper thin, so they can't raise wages either.
But of course forcing them to raise the pay of their workers won't affect the cost of what they sell...
But of course forcing them to raise the pay of their workers won't affect the cost of what they sell...The franchise thing is a great scam for abusing workers. The corporation gets to say it's not their fault, wages are set by the individual franchise owners, even while they dictate many other details of how the business gets run.
The franchise owners pay so much for the franchise that their margins are paper thin, so they can't raise wages either.
Exactly. You're finally starting to get it.
The cost of what they sell will remain constant but their staffing overhead will go up. In theory that will push up their overall costs but if the poorest in society have more money to spend, places like Taco Bell will get more customers pushing income and profits up.
Plus less of your tax money will be needed to ensure those same people are kept out of abject poverty leading to either 1) more investment in government services, leading to more jobs and hence more customers for Taco Bell, or 2) tax cuts for large corporations, leading to lower overheads for Taco Bell (and those like it).
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To be honest, I would hope (but not expect) that an increase in the wages of fast food workers would lead them to stop shopping off the dollar menus at Taco Hell, et al, and go to a real Mexican restautant.
The whole point of the structure is avoiding responsibility.
Hey look, you just summarized Corporate America in one sentence! Although they'd probably call it "risk externalization."
The whole point of the structure is avoiding responsibility.Hey look, you just summarized Corporate America in one sentence! Although they'd probably call it "risk externalization."
The word commonly used is "mitigation" in this context. Risk mitigation.
And it can get perverse. There are plenty of reason to want to mitigate risk, for all parties, in creating agreements and contracts that are clear, enforceable with common and positive outcomes.
BUT the flip side to that trend is a desire to "mitigate" it to entities that are not responsible or into black holes of complexities that everyone can nod and claim that the system is just messed up and no ones "fault".
And that is not a corporate failing, its a large institutional failing as this happens in government too...not that I would...uh...know that...
Is it too late to hop in here? I thought this article might prove helpful.
Protip: Not everybody who disagrees with you is stupid or malicious. It is possible for intellectually honest people to disagree with each other.
Yes, even people who don't share your politics can be right about some things. I'm as shocked as you are!!!
I would like to point out that if I'm a low-skilled minimum wage worker, I'm worried about a raise in the minimum wage pricing me out of a job. But if I'm a skilled worker whose wage is above, but tied to, the minimum wage, I don't necessarily give a damn about the people who are now unemployed because I was (indirectly) lobbying for a raise for myself.
The word commonly used is "mitigation" in this context. Risk mitigation.
And it can get perverse. There are plenty of reason to want to mitigate risk, for all parties, in creating agreements and contracts that are clear, enforceable with common and positive outcomes.
BUT the flip side to that trend is a desire to "mitigate" it to entities that are not responsible or into black holes of complexities that everyone can nod and claim that the system is just messed up and no ones "fault".
And that is not a corporate failing, its a large institutional failing as this happens in government too...not that I would...uh...know that...
Thank you, you are correct. I have mixed "risk mitigation" and "cost externalization."
But of course forcing them to raise the pay of their workers won't affect the cost of what they sell...No, it won't. Owners of (inter)national franchises almost never set prices, outside of exceptional circumstances.
It's as almost as if you have no idea what you're talking about.
Ever hear in those commercials prices may vary? Franchisees are not required to follow prices set by the corporation. That is why a Big Mac in NYC costs more than one in Ames Iowa. That's why you pay more at a place just off the highway than one in a town. Corporate owned stores have their prices set by the HQ, but the others can do what they want.
And yes it will raise prices, because if Joe Franchisee is making $100k a year from his store, he certainly isn't going to take a pay cut while all his employees get a raise.
Protip: Not everybody who disagrees with you is stupid or malicious. It is possible for intellectually honest people to disagree with each other.
That is SO not true. I disagree with this statement you stupid malicious jerk...er...
I agree with this, there are a lot of moving pieces and economics is a bit more "elastic" than some topics so demonizing intellectual opponents is problematic in trying to understand the arguments.
And yes it will raise prices, because if Joe Franchisee is making $100k a year from his store, he certainly isn't going to take a pay cut while all his employees get a raise.
He won't? He might if his competition is willing to drop their profit margin.
I work in a sector of the government where I have seen people tank their profit margins in the economy of the last few years to keep any income through the door. I think they think of it as an investment in the long run; steady business at lower profit is better for prospective clients then refusing to drop your prices and lose your business.
It seems to me shifting the economic power would make some owners reign in their own expectations. That and business owners with varying levels of expectations always will compete with one another. Not every music player needs 10 million dollars to live, not every business owner feels the need to get $100k.
If the income rises for those at the bottom doesn't that create a circumstance were capital might flow enough that if a business dumps all their added costs to price it opens a scenario for competition? Especially with more and more mechanisms around crowd funding? I don't know it just doesn't seem clear to me that the outcome is simply: prices go up, everyone is screwed. Wash rinse repeat.
Edit: to be absolutely clear, my second half questions here are questions and musings. Not sneaky jerkface asshatery or sarcasm.
I agree with this, there are a lot of moving pieces and economics is a bit more "elastic" than some topics so demonizing intellectual opponents is problematic in trying to understand the arguments.
Yeah that's what I hate about internet arguments. It's not like anybody arguing here has any power whatsoever to change the minimum wage, or even much influence over the people who do, but by gum they've got strong opinions on the subject and everybody who disagrees is a liar or a moron or whatever.
If the argument were about the price of dicebags or something (something emotionally and politically neutral), nobody would disagree that raising the price above a certain level would discourage buyers. But when it's about the price of labor suddenly the factors that affect every other good or service don't apply.
I think there's some wiggle room for me to be convinced on this topic - labor is not as fungible, for instance, because it's easier to ship widgets across the country to save a few bucks than it is to uproot and move to achieve the same end. But at the end of the day, if you really think that raising the minimum wage doesn't raise marginal unemployment, why stop at 10? Why not 100?
Relevant: Politics makes people innumerate.
If the argument were about the price of dicebags or something (something emotionally and politically neutral), nobody would disagree that raising the price above a certain level would discourage buyers. But when it's about the price of labor suddenly the factors that affect every other good or service don't apply.
Because people tend to forget that currently low cost labor is heavily subsidised by the government (medicaid, food stamps, cash assistance etc.). There are very few other goods or services where you can insist on paying less than the cost of production and/or maintenance and still be able to find it.
If the minimum wage were abolished but government assistance was only made available to the unemployed, the effective minimum wage would have to go up because no one could support a family on the current amount. (I still don't recommend it as a strategy)
I'm not even sure I see a problem with it putting prices up. Labor is a relatively small overhead for most businesses that only pay minimum wage. Prices may go up as a result of an increase but not by anywhere near the same percentage. Leaving workers enough money to live on and forcing employers (and indirectly their customers) to pay their own staff rather than expecting everyone else to cover the shortfall.
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If the minimum wage were abolished but government assistance was only made available to the unemployed, the effective minimum wage would have to go up because no one could support a family on the current amount. (I still don't recommend it as a strategy)
Alternatively, we could just find ourselves returning to the living conditions of the early 20th century, when...
...crowding of industrial workers and their families in tenement districts worked against the kind of neighborliness that characterized life in small towns. The saloon was the social club for many immigrants. It provided cheap or free lunches, warmth, banking and notary services, gambling, party rooms, and political headquarters. Premature death disrupted many families. At the turn of the century, life expectancy at birth for white males was 46.6 years; for black males, 32.5 years; for white females, 48.7 years; and for black females, 33.5 years. (In 1995 the figures for the comparable groups were 73.4, 65.2, 79.6, and 73.9.) The maternal mortality rate in 1915 was 61 per 1,000 live births (compared to 8 in 1990); the infant mortality rate stood at 100 per 1,000 live births (compared to 7.6 in 1990), and was twice as high for blacks...[the] high juvenile delinquency and crime rates (the homicide rate had quadrupled in New York in the last two decades of the 19th century), and widespread prostitution were coupled with health problems: diseases and epidemics resulting in part from water and sewage disposal deficiencies.
In other words, the ability to effectively support a family is irrelevant. History demonstrates that, in an unregulated environment, you'll find yourself working for scraps -- and you'll like it.
@Bob790 Good point - some employers can afford to pay a lot less because they are being de facto subsidized via food stamps, etc.
If the minimum wage were abolished but government assistance was only made available to the unemployed, the effective minimum wage would have to go up because no one could support a family on the current amount. (I still don't recommend it as a strategy)Alternatively, we could just find ourselves returning to the living conditions of the early 20th century, when...
<snip>
Hence my point about keeping assistance for the unemployed. A very different scenario to the situation in the early 20th. And as I said, I don't recommend it.
Hence my point about keeping assistance for the unemployed. A very different scenario to the situation in the early 20th. And as I said, I don't recommend it.
Sorry, wasn't trying to imply that you were suggesting otherwise. Unfortunately, there seems to be no shortage of those who do.
The point I was making is that I disagree with this:
The effective minimum wage would have to go up
It seems likely that people who simply suffer a sharp decline in their standard of living, returning to the unpleasant conditions of the early 20th century.
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Luckily we live in democracy, where we, collectively, have some small influence over such things short of actual rebellion.
I'd argue with live in a plutocracy; and that everything, even the framing of the debate, is largely controlled by money.
But maybe I'm just in a bad mood. ;-)
But that's their main power: Framing the debate. Persuasion. Selling it to us.
All we have to do is change the debate.
For $45/hr!
Vive le Dingo!
I, of course, think we will have much influence over such things if we actually rebel.
Vive le Galt!
The point I was making is that I disagree with this:The effective minimum wage would have to go upIt seems likely that people who simply suffer a sharp decline in their standard of living, returning to the unpleasant conditions of the early 20th century.
In the real world you are probably correct.
I was proposing this mostly as thought experiment to highlight the difference between labor and other goods and services. Namely that people cost money to maintain even if they'll never be wanted or needed as labor. I then attempted to create a system where those costs would be met by the state only if an employer was not involved.
I agree it was flawed and would never work in practice, not to mention the ways it would be exploited, but I hope it served its purpose.
Relevant: Politics makes people innumerate.
For example:
[Holds up hand, fingers splayed]
One plus one plus one plus one plus one equals:
[Closes each finger as he counts them off]
One
[Clenched fist salute]
U-nion! U-nion! U-nion!
.
HOW MINIMUM WAGE CAUSES UNEMPLOYMENT:
A minimum wage is considered a Price Floor. In other words, it is a
level below which the price of something is not allowed to fall.
(fyi and conversely, a Price Ceiling is a level above which the price of something is not
allowed to rise. Think of rent-control as a price ceiling.)OK, HERE WE GO ... Take a look at >this< graph of a labor market. AND DON'T FREAK OUT!
First:
♦ The Price of Labor (shown on the y-axis, P) is of course, the wage rate.
♦ The Number of Jobs (shown on the x-axis, is called Q for quantity.)
♦ The point where the two black lines cross is called equilibrium. At this point,
the "quantity of labor supplied by individuals is equal to the quantity
of labor demanded by firms" -- that is, everybody is happy. For this example,
let's say it's 6 mil jobs at a rate of $15 per hour.Second:
Think of the Supply Curve [the one going up from lower-left to upper-
right, labeled S] from your own personal perspective. It slopes upward
because at higher wage rates you'll choose to work more, right? The
Demand Curve [the one labeled D, going down] can be thought of from the
point of view of a firm. It slopes downward because the firm hires more
workers at lower wage rates and less at higher wages.(All we've done so far is define what we are looking at. NEXT, we'll
use it.)So it seems like a happy situation - no one is unemployed and the
company has enough workers to meet product demand. Again, the point
were the lines cross tells us at what Price level the labor force is
willing to wake up in the morning and goto work for the man.Now let's assume that legislation (a minimum wage law) is passed
that requires firms to pay workers $20/hour. (remember the equilibrium
is $15) At this wage rate, the Demand Curve tells us the company (where
you work) only demands about 4...
The Republicans did the right thing. [ url = good move ]
.
Well if you want demand for products to remain low, more people on government assistance, and the trend towards huge wealth inequality to continue, then yes, that would be the right thing. Which is great, because that certainly does seem to be what they're working for.
A minimum wage increase will not destroy the economy... not even a $3/hr one. It will just create a new equilibrium.
Business is all about maximizing profits. If you suddenly increase labor costs of some businesses then they will have to adjust their balance sheets somewhere. This will mainly impact minimum wage employers at first. Who are the minimum wage employers? Mostly firms that need a lot of unskilled people ... fast food and retail sales being the biggest, but it also includes any narrow profit small business who also needs unskilled help. Lets look at fast food. They employ a LOT of people below $10/hr and are the examples we see on the news. These companies make huge profits largely on the massive volume of food they sell. But if most of the people at the local McDonalds suddenly made $3/hr more what would happen to that McDonalds? At a top earning store the owner drops from about $1.5million in take home pay to about $1.2million. So clearly this isn't going to put a big chain like McDonalds out of business... what it IS likely to do is increase the prices you pay for a Big Mac in order to compensate the owner you may be paying 50 cents to a dollar more per visit. I mean lets face it these guys can afford the pay cut but they aren't going to take it unless they have to. So they pass the costs to you the customer. Now expand this across the entire service industry (these are the people who hire at low wages) and you can see costs of the stuff you buy will rise in price to accommodate the new wages. The people in skilled positions won't see any more money but their costs will go up while people in unskilled positions will be earning more than enough to offset cost increases. This won't hurt business... it will hurt the middle class.
So the real question is: do we want to make the middle class pay to improve the incomes of the poor? I guess your answer will depend on your own income bracket.