Minimum wage in USA (fight for 15)

[LeSedna]

Hello,

Was wondering as many of you guys come from USA.

Can someone explain me how it would even be possible to widstand an almost double of the minimum wage income without destroying the whole economy pretty much instantly ?

Almost every qualified job I know is paid these 15 dollars an hour, or less, after years of studying which is qualification, and time and money sacrifice to get there. Obvious example in my case : airline pilot in USA, 60 to 100k investment and years, for earning easily less than this during a few years. Engineer, similar. Medical assistant, even officer, is not paid more than that, after several years.

So I get the idea of "give people more money they will spend more in USA" but where is the backing of this statement, and how would it work ? Would they raise all jobs accordingly ? How will that not kill half the little businesses including some macdonalds which are not as profitable as those in the center of a major city ? How will that not force bankrupt and lay overs all over the country ?

So far even after some googling I couldn't find any decent explanation of that. Only "I want more money because I have 3 kids and can't make the ends meet with my macdonald job".

EDIT : to be clear, I'm specifically addressing the relationship between minimum wage, and qualified jobs, and pay scales. Norway pays people 3 times more than in most countries, however the whole economy widstand it and pay scales are all according to that minimum wage. My question is more about how will the whole country react to doubling the minimum wage (more or less), not simply about "increasing it" which is something that happens regularly and needs to be done.

 

[He's Dead, Jim]

You have to take into account that the U.S. doesn't tie the minimum wage to inflation, so the value of wages relative to the price of goods declines over time until finally, at some point once every couple of decades, Congress decides to increase the minimum wage. That's become an especially prominent issue because wages here have been stagnant for a long time. So those are the issues causing various groups to push for a $15 minimum wage. But in terms of economic results, I don't have a PhD or anything, but I suspect you're correct; it would cause some major structural problems to just go and double it. But that would probably vary by sector; you need a bare minimum number of employees to run a 7/11 or McDonald's, and that isn't going to change no matter what the wage rate is.

 

[Ermz]

possible to widstand an almost double of the minimum wage income without destroying the whole economy pretty much instantly ?

I'm not an economist either, but I imagine they could begin by diverting some funds away from the nation's ridiculously high military 'defense' budget. Ease taxes on the so-called 'job creators', and allow them the leeway to adjust the minimum wage to where it should've been if it had accounted for inflation in the first place.

So I get the idea of "give people more money they will spend more in USA" but where is the backing of this statement, and how would it work ?

It's a simple facet of market economics. Money needs to be circulating in order to achieve balance, and growth. The people whose wages are increased will gain capital they can spend back into the system, thus accounting for the higher costing goods and services which come about as a result of the increased business costs.

I imagine this will become a hugely divisive issue in the US, as many of its nature are intended to be. It's perfect for the existing power structure, as it can continue to siphon away the true wealth while the majority squabble over something essentially meaningless.

There's a brief TED talk which summarizes it:



In this video, he specifically addresses the $15 minimum wage at around 13 minutes in:

 

[kass]

It wouldn't "destroy" the economy, but it would suck.

The standard economist's view is that an increase that large cause observable unemployment, most of whom would be unskilled labor (ie. the poor people who are the target of min. wage legislation).

Labor is one of the biggest costs of running a business, so shut-downs are likely.

you need a bare minimum number of employees to run a 7/11 or McDonald's, and that isn't going to change no matter what the wage rate is.

The minimum number is zero for the ones that are shut down/never opened.:Spin:


For the record, I'm against any minimum wage on economic grounds. There is healthy debate among economists about the desirability of marginal min. wage increases, but large agreement about large increases above market wages.

 

[JeffTD]

An increase in minimum wage in the US has never been shown to categorically or empirically raise prices, inflation, or unemployment in any significant way; in fact, it's been shown that an increase in 10% of the minimum wage raises prices by .1% in the field in question (fast food).

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.15.5661&rep=rep1&type=pdf

http://www.cepr.net/documents/publications/min-wage-2013-02.pdf


Jobs are created by demand. Demand only exists when consumers have surplus cash to spend. A Rich man does not buy 10x as much just because he makes 10x as much.

If you're running a business such that paying your employees a living wage would put you out of business, then you don't deserve to be in business in the first place.

http://www.dol.gov/minwage/mythbuster.htm

 

[He's Dead, Jim]

I'm not an economist either, but I imagine they could begin by diverting some funds away from the nation's ridiculously high military 'defense' budget.

I don't want to derail this thread, but you might be surprised if you google some pie charts at how the defense budget breaks down. A huge portion of it is human capital costs like medical care, housing, etc. At any rate, the defense budget still hovers between 3-5% of U.S. GDP, so it may be rising in absolute terms but shrinking or staying constant in real terms. The reason it's so enormous compared to other countries is because we have a really big economy. It's an interesting topic. Anyway, back OT, sry

 

[egan.]

One thing getting lost here is that federal minimum wage isn't actually the be-all-end-all in the US. Cities and states can set their own standards and should. Also, "Fight for Fifteen" is a catch phrase and maybe a negotiating point but it isn't going to be the federal minimum wage. $15/hr is however a totally realistic and achievable number for cities like San Francisco and NYC. I'm not sure about NY but the current minimum wage in SF is $11.

 

[kass]

To say that it has never been shown to cause unemployment isn't a good way to put it at all, because most of the literature shows just that. The tide started changing a lot with Krueger and Card's work (which you posted), but again, the issue is certainly still debated among experts about small increases. To give some quick evidence of this: http://www.igmchicago.org/igm-economic-experts-panel/poll-results?SurveyID=SV_br0IEq5a9E77NMV

And yet again, that still doesn't apply to large increases. If you raise the minimum wage marginally, we expect a marginal effect on other variables. And when were talking about doing econometrics on whatever natural experiments we can find, there's lots of judgment calls and potential for error. That is pretty much the reason for the disagreement about the sign of the effect. Everyone agrees the effect size is small for a small increase. I'm not aware of experts who don't expect a noticeable negative effect of large increases above market wage (like a $15 federal MW). For some quick evidence of this, here is Krugman (MW proponent):

So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This theoretical prediction has, however, been hard to confirm with actual data. Indeed, much-cited studies by two well-regarded labor economists, David Card and Alan Krueger, find that where there have been more or less controlled experiments, for example when New Jersey raised minimum wages but Pennsylvania did not, the effects of the increase on employment have been negligible or even positive. Exactly what to make of this result is a source of great dispute. Card and Krueger offered some complex theoretical rationales, but most of their colleagues are unconvinced; the centrist view is probably that minimum wages “do,” in fact, reduce employment, but that the effects are small and swamped by other forces.

What is remarkable, however, is how this rather iffy result has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda–for arguing that living wages “can play an important role in reversing the 25-year decline in wages experienced by most working people in America” (as this book’s back cover has it). Clearly these advocates very much want to believe that the price of labor–unlike that of gasoline, or Manhattan apartments–can be set based on considerations of justice, not supply and demand, without unpleasant side effects.

 

[JeffTD]

Chicago Booth is a SUPER conservative/free-market driven org/school, and what you linked to only shows agreements/disagreements between a bunch of economists. I'd hardly say that counts as data to counteract the studies I posted, more just evidence that certain schools of thought will find any way to not use data to contradict facts that aren't convenient for them.

I'll give you that it's being used to justify an expansion of MW orders of magnitude higher than was done in the studies; I don't actually think $15/hr is reasonable to expect for most low-skilled jobs; the minimum wage war has become a proxy battle for livable wage arguments.

 

[Genius Gone Insane]

Increasing the minimum wage isn't important. What is important is getting rid of the estate tax. The estate tax is ruining the trickle down economics that our country thrives on. If you support estate tax you must be a communist. Or maybe even a terrorist. The estate tax hurts everyone. Minimum wage only affects people who aren't important.

 

[kass]

Chicago Booth is a SUPER conservative/free-market driven org/school, and what you linked to only shows agreements/disagreements between a bunch of economists. I'd hardly say that counts as data to counteract the studies I posted, more just evidence that certain schools of thought will find any way to not use data to contradict facts that aren't convenient for them.

I'll give you that it's being used to justify an expansion of MW orders of magnitude higher than was done in the studies; I don't actually think $15/hr is reasonable to expect for most low-skilled jobs; the minimum wage war has become a proxy battle for livable wage arguments.

Well, my point was to provide evidence for the disagreement between experts...not to use that as evidence for either claim. Just FYI, the surveyed panel members aren't Chicago Booth faculty. The expert panel members are from elite universities, selected specifically to have a diverse panel of Democrat, Republican, and Independent members. I'm going to assume that is true, but the panel members are all listed so anyone can check for a biased sample. As you can see in question 2, the panel as a whole is pro minimum wage.

I agree the issue is conflated with whether or not we should help poor people, and thats just too bad. There are different ways of helping the poor, and IMO the MW is at best an inferior one, and at worst a negative one.

 

[indecizo]

Increasing the minimum wage isn't important. What is important is getting rid of the estate tax. The estate tax is ruining the trickle down economics that our country thrives on. If you support estate tax you must be a communist. Or maybe even a terrorist. The estate tax hurts everyone. Minimum wage only affects people who aren't important.

truth

 

[Vice//Versa]

The Chicago school of economics is historically responsible for promoting unregulated, neoliberal, laissez faire economic policy (particularly during the Cold War). Countries like Chile, when overtaken by a military dictatorship aligned with the US, sent their economist there in order to learn those tenant which are mostly aligned with Milton Friedman. I'm sure things have changed in Chicago, but historical legacies don't fade from the city's consciousness over night.

In regards to raising the minimum wage, the reality is that increasing the pay of low wage workers would also create pressure to raise the pay of educated/trained labor. Employees like pilots and educators have been famously underpaid and that is something that needs to be addressed. The impact could be absorbed by most major employers (which will whine just like Walmart when Washington DC moved into this direction).

Robert Reich is a generally awesome guy who directed the US during the 90's administration which did pretty well economically.

 

[Vice//Versa]

Increasing the minimum wage isn't important. What is important is getting rid of the estate tax. The estate tax is ruining the trickle down economics that our country thrives on. If you support estate tax you must be a communist. Or maybe even a terrorist. The estate tax hurts everyone. Minimum wage only affects people who aren't important.

Poison the Well? :Spin:

 

[kass]

The Chicago school of economics is historically responsible for promoting unregulated, neoliberal, laissez faire economic policy (particularly during the Cold War). Countries like Chile, when overtaken by a military dictatorship aligned with the US, sent their economist there in order to learn those tenant which are mostly aligned with Milton Friedman. I'm sure things have changed in Chicago, but historical legacies don't fade from the city's consciousness over night.

That's certainly true about Chicago, but keep in mind that typical economist is far more market-oriented than the typical citizen, especially the typical Democrat. The usual explanation for that is that economists are a bunch of libertarian Chicago school righties, but the typical economist is a moderate Democrat...so there goes that.

 

[JeffTD]

I think it could be that being an economist tends to make you aware of facts, and being aware of facts tends to make you a moderate Democrat in this country.

 

[LeSedna]

Increasing the minimum wage isn't important. What is important is getting rid of the estate tax. The estate tax is ruining the trickle down economics that our country thrives on. If you support estate tax you must be a communist. Or maybe even a terrorist. The estate tax hurts everyone. Minimum wage only affects people who aren't important.

State tax is why, for example, Norway is Norway. I cite those nordic countries (Norway, Swedden, and in a similar manner Finland and Denmark) because I am related to them now that I work in one of their companies. From my experience, your comment just shows how ignorant you are about tax and states. States are, in fact, good. I live in spain now. The country is corrupted as hell, and is selling everything, privatising everything. It's just getting worse. Countries where things are statal and based on taxes, work way better, and feel more fair. Just go to Norway have a look, set aside cultural or personal preferences, and ask them what benefits they get out of their 40ish % of taxes. Trust me, you'd want to pay taxes too.

 

[Clockwork]

State tax is why, for example, Norway is Norway. I cite those nordic countries (Norway, Swedden, and in a similar manner Finland and Denmark) because I am related to them now that I work in one of their companies. From my experience, your comment just shows how ignorant you are about tax and states. States are, in fact, good. I live in spain now. The country is corrupted as hell, and is selling everything, privatising everything. It's just getting worse. Countries where things are statal and based on taxes, work way better, and feel more fair. Just go to Norway have a look, set aside cultural or personal preferences, and ask them what benefits they get out of their 40ish % of taxes. Trust me, you'd want to pay taxes too.

This is what he means.

http://en.wikipedia.org/wiki/Estate_tax_in_the_United_States

 

[JeffTD]

State tax is why, for example, Norway is Norway. I cite those nordic countries (Norway, Swedden, and in a similar manner Finland and Denmark) because I am related to them now that I work in one of their companies. From my experience, your comment just shows how ignorant you are about tax and states. States are, in fact, good. I live in spain now. The country is corrupted as hell, and is selling everything, privatising everything. It's just getting worse. Countries where things are statal and based on taxes, work way better, and feel more fair. Just go to Norway have a look, set aside cultural or personal preferences, and ask them what benefits they get out of their 40ish % of taxes. Trust me, you'd want to pay taxes too.

He was being totally sarcastic, but the trigger to notice that wouldn't have translated well. "Trickle Down" economics or Reagonomics is the public policy equivalent of "if you use enough shampoo, you won't have to wash your feet."

 

[LeSedna]

This is what he means.

http://en.wikipedia.org/wiki/Estate_tax_in_the_United_States

Oh sorry I didn't know he meant this. Sorry then !