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That actually makes sense in a perverse way. From the poll, one can see that most business owners would like to pay more wages. Well, they own the business, so

That actually makes sense in a perverse way. From the poll, one can see that most business owners would like to pay more wages. Well, they own the business, so they could just raise wages if they wanted to, without a legal minimum wage. Then why don't they? Competition. A business owner won't raise wages because his neighboring business will have lower costs and be more competitive. However, by forcing all business owners to give raises, competitive pressure is lost. Raising the minimum wage still defies economic sense, however, in that it distorts the marketplace and causes job loss.

smsm42 11y ago
If everybody raises wages, and consequently prices (that is assumed since that's the only way you could have lost competitive edge after raising wages) - then what's the point of it? Of course, employees would be paid more numerically, but they could not buy more with this. Unless, of course, some production would be moved overseas, where prices are not affected by wage raise. So in essence, these people are betting on more goods manufactured out of the country - no doubt decrying "job loss to foreign countries" at the same time.
- cowardlydragon 11y ago
  Unless of course all large companies are already sitting on large profit margins (they are, either explicit or just structurally sitting on them with bloated management structures), in which case the increased pay will simply help alleviate a demand starved economy, which will increase flow of money / rate of transactions and, guess what, everyone makes more money.
- wallacoloo 11y ago
  I believe the theory is that the price of goods/services created by high-wage workers would not substantially increase, and thus the minimum-wage workers would be able to achieve a higher quality of life at the cost of slightly degrading that of the high-wage workers (since the price of some of the goods those high-wage workers buy has increased). Minimum wage can be an attempt to fight income inequality. Not that it's necessarily the best approach for that though (as mentioned elsewhere in these comments).
  - smsm42 11y ago
    >> I believe the theory is that the price of goods/services created by high-wage workers would not substantially increase That is a pretty big assumption. If you are a high wage worker and your favorite supermarkets, restaurants and resorts all raised their prices, wouldn't you feel you are less high-wage than before? Wouldn't you demand to restore the buying power of your wages - or, alternatively, wouldn't you switch to a company that offers you such restored power? High wages are not something valued for the numbers, it's valued for what you can afford. And a lot of places that you want to afford are in service industry - which is highly dependent on labor costs, and even if they did not pay minimum wage, once minimum wage raises they'd have to raise pay too - because otherwise they would be now paying minimum wage or very near to it, and the workers would not tolerate being paid minimum wage now while only year ago they were paid 150% of it. >> at the cost of slightly degrading that of the high-wage workers How do you know it would be slight? And how do you know high-wage workers - which are high-wage for a reason, they probably command some economic power, otherwise they wouldn't be able to demand high wages and would agree to work for minimum wage - would tolerate it and would not attempt to restore their buying power? For example, some union contracts have CPI/cost of living increases baked in. Would you expect them to give up those for the sake of their lower paid brethren? >> Minimum wage can be an attempt to fight income inequality. Quite a bad one. If you are secure in belief of it affecting only minimum wage workers, you at best can influence 5% of the workers (that's how many get minimum wage), and even if you assume all of them get the pay raise and not the pink slip the effect still will be rather small. If you however (correctly) believe the effect would be much bigger, then pay differentials would be preserved, because they are reflection of many structural and market conditions, none of which would be improved by it.
    - deleted 11y ago
      [deleted]
    - wallacoloo 11y ago
      > That is a pretty big assumption. Yes, it is - I am not at all confident in my understanding of the subject (so thanks for sharing your views with me). >> at the cost of slightly degrading that of the high-wage workers > How do you know it would be slight? "Slight" was a bit of a red herring. Whether the impact on high-wage workers is slight of not, so long as it's negative, it is causing incomes to be more equal. > If you however (correctly) believe the effect would be much bigger, then pay differentials would be preserved, because they are reflection of many structural and market conditions, none of which would be improved by it. If these assumptions hold, does that mean that pretty much any attempt at leveling the wage distribution within a capitalist system is destined to failure? i.e. negative income tax, basic income, etc. would also do nothing, as the wage distribution would adjust itself to revert the effects? The only workaround (in which workers are compensated only in cash) is to outright fix wages across the board? (Not that I am suggesting this). Or am I misinterpreting this?
- aptwebapps 11y ago
  If everybody raises wages, and consequently prices (that is assumed since that's the only way you could have lost competitive edge after raising wages) - then what's the point of it? For one thing, labor costs are only one part of the larger economic picture. For another, labor costs at the bottom end of the pay scale are only a portion of overall labor costs. So if you raise the minimum wage by ten percent for five percent of the workforce, you have not raised it by ten percent for everyone. Even if you do raise it by ten percent for the whole workforce, you have not raised business expenditures by ten percent because there are other costs as well.
- chongli 11y ago
  People who make minimum wage aren't the only ones who buy stuff. When prices go up to cover the wage increase the cost will be spread out over all consumers, not just minimum wage earners. You can argue that those at the very top spend far, far less of a percent of their income on consumer goods and services provided by minimum wage earners and that's totally fair. But it's not credible to claim that a minimum wage increase will do nothing at all for people after a price increase.
  - gozur88 11y ago
    The people who still have jobs will benefit, sure. We're making some poor people (including teenagers living at home) a little better off at the expense of a smaller number of poor people who be much worse off for not having a job.
  - bsbechtel 11y ago
    Keep in mind that a wage increase affects not only one business's profit margins and pricing, but also the prices of all of their goods from suppliers too. Consider that fast food needs to pay 30% to labor, mostly at minimum wage. Another 30% or so usually goes to food costs. Those food supplies are the product of farm labor and food processing plant labor, both of which pay close to minimum wage as well. If minimum wage doubles, that means the fast food business now has a labor cost of 60% of his original pricing, plus the increases in food costs he is going to see as well. Those food cost increases could be 30-40%, meaning he will likely need to raise prices significantly to keep the lights on. For a company like McDonald's, who do you think is their target market when they try to keep prices as low as possible? The rich? They're trying to make food affordable for everyone, including minimum wage earners. When McDonald's costs nearly double, what do you think is going to happen to their prices?
    - crdoconnor 11y ago
      If you're curious to see what American McDonalds' would look like where workers have higher spending power and McDonalds has higher costs, take a look at an Australian McDonalds where they already reacted to exactly that. This is pretty much what the future of fast food restaurants is like when you raise the minimum wage: http://www.businessinsider.com.au/mcdonalds-australias-upscale-burgers-2014-10 http://www.businessinsider.com.au/mcdonalds-australias-upsca... McDonalds is usually able to adapt better to changing market conditions than other restaurants. Many restaurants do go out of business when their prices rise, which is why they hate the idea of raising the minimum wage so much. However, those restaurants are quickly replaced by other restaurants, which is why employment is never affected.
- IanCal 11y ago
  > If everybody raises wages, and consequently prices (that is assumed since that's the only way you could have lost competitive edge after raising wages) - then what's the point of it? Why would prices increase by the same amount as minimum wage was increased by? Pay the attendant 5% more and the total cost of obtaining, refining and delivering gas doesn't increase by 5%.
  - bsbechtel 11y ago
    Refining and delivering gas requires labor too. While many in that industry may earn more, I'm sure there are minimum wage workers employed by that industry that will affect their costs. It doesn't help right now that oil and gas are at rock bottom prices either.
    - XorNot 11y ago
      The notion that oil prices are remotely connected to the cost of labor in any effectual way is laughable.
    - JoBrad 11y ago
      Oil rig workers do not make the minimum wage, at all. Neither do most refinery workers. I say this as someone who knows several people who work on oil rigs off the Louisiana coast, and have worked with (but not at) several petrochemical companies.
    - IanCal 11y ago
      Right, but your point hinges on not just the price rising, but rising by the same as or more than the increase in minimum wage.
- Gibbon1 11y ago
  One thing to consider is percentage of gross revenues spent on payroll varies by type of industry but is somewhere between 10 and 30%. 10% would manufacturing. 30% would be a restaurant. Most everything else would be around 15%. Likely the businesses that would see the largest increases are those that can't be outsourced easily. The ones that are already paying well above minimum wage. Difference between a business owner and an economics professor is the later writes equations down to describe how he thinks thinks business should work. And then blathers about hedonistic adjustments. A business owner stares at his books every week and thinks 'my problem is my customers have no money' Really easy for a business owner or accountant to get that customers with more to spend outweighs small increase in payroll expenses.
  - deleted 11y ago
    [deleted]
  - Tideflat 11y ago
    The business owner also doesn't have the training to account for the actions of all the other businesses. The economics professor does.
    - Gibbon1 11y ago
      Business people I deal with are highly aware Macro issues. If you ask them what they think of things like minimum wages or other regulatory costs their usual concern is that their' particular entity doesn't suffer an unfair burden. Academic Economists know pretty much nothing of Macro.
partiallypro 11y ago
It's more than that. If you have higher margins or more discretionary pricing power than your competitors and they are forced to raise wages (as you are,) by law, you can squeeze them out of business entirely by raising the minimum wage and destroying their margins. You're not likely to make minimum wage at Wal-Mart, but some of their small shop competitors do pay lower wages. In the end it's in Wal-Mart's interest to push for minimum wage hikes for this very reason (which they have in the past.)
- _red 11y ago
  Exactly, for a company like Walmart, they know that (a) small competitors are not as efficient has they are, (b) small competitors will not able to invest in large scale capital projects to ameliorate wage increases (eg. robotics, self-checkout, etc) It is simply a game of eliminating competition.
  - cowardlydragon 11y ago
    Well, unless people then make enough money to not shop at Wal-mart and shop at less dystopian visions of the future.
    - Natsu 11y ago
      If people suddenly have more cash, prices will rise until equilibrium. After all, if everyone has $1 million and you auction off something in demand, you're likely to get a lot more currency than if everyone had only $1,000 to spend. Of course, the money will be worth more when it's scarcer too.
      - xenadu02 11y ago
        You can't have capitalism both ways. Either the market will result in lower prices / greater efficiency (which negates your argument) or it won't (which means we need more regulation to correct market distortions). The reality is a lot of companies, banks, and politicians have finally recognized that the US consumer class is tapped out and a significant portion of the world relies on that as a central economic engine. Even China isn't ready to fully switch away from being export-driven. To have consumers you need people with money in their pockets to spend. That means management and capital need to move back toward the historical division of profits with labor. We'll all end up better off in the long run. California raising the minimum wage will barely impact unemployment. A few prices will rise a bit but the net effect should be positive. Some of the money will be due to multiplier effects but some will come from obsessively high corporate profits which is fine (companies are so overflowing with cash many are doing record stock buybacks for lack of a better ROI).
cowardlydragon 11y ago
UNLESS it is a fundamentally demand starved economy where the wealth is concentrated in the hands of people that don't know how or have no clue how to increase flow of money. Here's a clue: GDP goes up if people have money to buy things, which then causes people to get paid more and more jobs, which then gets more people money to buy things. The "marketplace" or "free market" doesn't exist. Poof. Unless you are blind, "free markets" stabilize into cartel or monopoly power. Pick a goddamn industry, it is dominated by 1-4 players.
- bsbechtel 11y ago
  Why are most industries dominated by a few? It's not because they pay the lowest. It's because consumers chose to support those few businesses.
  - tma-1 11y ago
    Nope, they're dominated by a few because when a specific company becomes successful enough it can buy out the rest of the players.
    - Tideflat 11y ago
      This only works when there are economies of scale. If there are significant dis-economies of scale smaller firms can out-compete the large firms. The large firm can't just buy up all the small firms either because new firms are started all the time, and if every person who starts a small firm is rewarded with a buyout, the industry will attract more and more new firms until the large firm can no longer afford to buy out new firms. --------------- Examples of industries that not dominated by three or four large companies: mining, farming, house cleaning, and being a land lord.
      - tma-1 11y ago
        It happens when large firms have a lot of extra liquidity and cheap debt. Look at FB and Google.
michaelmrose 11y ago
At the bottom end we see companies offering wages that aren't survivable without welfare and food stamps effectively forcing the tax payers to subsidize their low wages. Effectively setting a sane floor prevents this abuse.
- cmdrfred 11y ago
  This is the reason I give to republicans for raising the minimum wage? Why are your taxes paying for that low wage workers salary?
Arnt 11y ago
The Economist had a lucid interview with someone who ran a cleaning business in London not long after the minimum wage was introduced there. Abbreviating: "Now that I know what my competitors pay, there's no point in trying to beat my own labour costs below that point, and I spend my time in ways that benefit my business more." He didn't say "I felt like a soulcrusher when I beat down the wages of people who earned very little, and now I spend that time on positive improvements instead". Maybe it was in his mind though. Managers are people too.
MaysonL 11y ago
Of course the fact is, if you pay better wages, you get better workers. In 'n Out Burger restaurants pay substantially better wages than most of their fast food competion, and they're doing fine. Many years ago I read an article in Forbes which cited a study finding that fast food franchises which paid somewhat above minimum wage were more profitable than those which paid only minimum wage. They had better motivated employees, and substantially lower turnover and recruitment and training costs.
- bsbechtel 11y ago
  So raising wages across the board would mean those worse workers who cause higher turnover and other costs are now going to earn the same amount as the better workers who don't cause businesses those problems, right?
  - SolaceQuantum 11y ago
    I'm confused. Where did you get this idea from the information "an article has concluded certain businesses that pay more to their employees are more efficient"?
    - douche 11y ago
      I think the idea is that if the minimum wage is $15, then you'd have to pay $17, $18 to get yourself above the froth of the marginally employable people again and hire the higher-quality workers.
      - SolaceQuantum 11y ago
        Isn't that good for the workers who are higher quality and were previously earning 15$?
        douche 11y ago
        Sure, it's good for them. But it's a little nuts that you can make that kind of money saying "Hello, can I take your order?", when I know welders and millwrights that have decades of experience and uncommon skills that only make $20 an hour. What I think is going to happen, is that the McDonalds' of the world will fire 75% of their staff, and just turn around the POS system so that the customer punches in their order themselves
Certhas 11y ago
There is no empirical evidence that it causes job loss. Nor a complete, coherent economic argument. It's perfectly plausible, even likely, that an increase in the minimum wage leads to an increase in the demand for labor. On the empirical side, Germany just introduced a minimum wage for the first time and unemployment is at all time record lows. The estimated job losses did not materialize. The labor market is incredibly fucked anyway. Imagine you, and everyone else has a gold nugget. However, by law you, and everyon else, are required to sell it by the end of the month. Do you think you could get a fair price? There is no free labor market, as long as not working is not a feasible option. That's why an unconditional basic income makes a tremendous amount of sense if you want to make the labor market more efficient.
brightball 11y ago
It makes sense in other ways too. Specifically because it hurts potential new entrants to the marketplace. You've got to keep in mind that for every business or franchise that starts, it first is a small business that has to open it's doors with little cash and no advertise, build up a customer base and hopefully be able to hire people while it's owners have zero income for what's usually 3-4 years if they survive. Add higher minimum wage to that formula and the whole thing gets even harder. People take for granted that the reason we have a 1% problem is that as a society we continually make it harder and harder to start a business without lots of capital. When you do that it means that you've got to have somebody very wealthy invest in your business meaning they're going to own a piece of it too. That's how "the rich get richer" as the saying goes. If you aren't starting a service business where you're selling your own skillset or a business where employees are paid contract / commission it's incredibly expensive and risky. The first time you hire somebody and realize the responsibility and financial pressure that comes with it...along with no guarantees on whether or not that person will actually do their job...your entire point of view on minimum wage will change. That's the ENTIRE reason that I support a basic income of about $700 / month. It would have the effect of doubling the minimum wage WITHOUT passing the cost on to businesses.

smsm42 11y ago

If everybody raises wages, and consequently prices (that is assumed since that's the only way you could have lost competitive edge after raising wages) - then what's the point of it? Of course, employees would be paid more numerically, but they could not buy more with this. Unless, of course, some production would be moved overseas, where prices are not affected by wage raise. So in essence, these people are betting on more goods manufactured out of the country - no doubt decrying "job loss to foreign countries" at the same time.

cowardlydragon 11y ago
Unless of course all large companies are already sitting on large profit margins (they are, either explicit or just structurally sitting on them with bloated management structures), in which case the increased pay will simply help alleviate a demand starved economy, which will increase flow of money / rate of transactions and, guess what, everyone makes more money.
wallacoloo 11y ago
I believe the theory is that the price of goods/services created by high-wage workers would not substantially increase, and thus the minimum-wage workers would be able to achieve a higher quality of life at the cost of slightly degrading that of the high-wage workers (since the price of some of the goods those high-wage workers buy has increased). Minimum wage can be an attempt to fight income inequality. Not that it's necessarily the best approach for that though (as mentioned elsewhere in these comments).
- smsm42 11y ago
  >> I believe the theory is that the price of goods/services created by high-wage workers would not substantially increase That is a pretty big assumption. If you are a high wage worker and your favorite supermarkets, restaurants and resorts all raised their prices, wouldn't you feel you are less high-wage than before? Wouldn't you demand to restore the buying power of your wages - or, alternatively, wouldn't you switch to a company that offers you such restored power? High wages are not something valued for the numbers, it's valued for what you can afford. And a lot of places that you want to afford are in service industry - which is highly dependent on labor costs, and even if they did not pay minimum wage, once minimum wage raises they'd have to raise pay too - because otherwise they would be now paying minimum wage or very near to it, and the workers would not tolerate being paid minimum wage now while only year ago they were paid 150% of it. >> at the cost of slightly degrading that of the high-wage workers How do you know it would be slight? And how do you know high-wage workers - which are high-wage for a reason, they probably command some economic power, otherwise they wouldn't be able to demand high wages and would agree to work for minimum wage - would tolerate it and would not attempt to restore their buying power? For example, some union contracts have CPI/cost of living increases baked in. Would you expect them to give up those for the sake of their lower paid brethren? >> Minimum wage can be an attempt to fight income inequality. Quite a bad one. If you are secure in belief of it affecting only minimum wage workers, you at best can influence 5% of the workers (that's how many get minimum wage), and even if you assume all of them get the pay raise and not the pink slip the effect still will be rather small. If you however (correctly) believe the effect would be much bigger, then pay differentials would be preserved, because they are reflection of many structural and market conditions, none of which would be improved by it.
  - deleted 11y ago
    [deleted]
  - wallacoloo 11y ago
    > That is a pretty big assumption. Yes, it is - I am not at all confident in my understanding of the subject (so thanks for sharing your views with me). >> at the cost of slightly degrading that of the high-wage workers > How do you know it would be slight? "Slight" was a bit of a red herring. Whether the impact on high-wage workers is slight of not, so long as it's negative, it is causing incomes to be more equal. > If you however (correctly) believe the effect would be much bigger, then pay differentials would be preserved, because they are reflection of many structural and market conditions, none of which would be improved by it. If these assumptions hold, does that mean that pretty much any attempt at leveling the wage distribution within a capitalist system is destined to failure? i.e. negative income tax, basic income, etc. would also do nothing, as the wage distribution would adjust itself to revert the effects? The only workaround (in which workers are compensated only in cash) is to outright fix wages across the board? (Not that I am suggesting this). Or am I misinterpreting this?
aptwebapps 11y ago
If everybody raises wages, and consequently prices (that is assumed since that's the only way you could have lost competitive edge after raising wages) - then what's the point of it? For one thing, labor costs are only one part of the larger economic picture. For another, labor costs at the bottom end of the pay scale are only a portion of overall labor costs. So if you raise the minimum wage by ten percent for five percent of the workforce, you have not raised it by ten percent for everyone. Even if you do raise it by ten percent for the whole workforce, you have not raised business expenditures by ten percent because there are other costs as well.
chongli 11y ago
People who make minimum wage aren't the only ones who buy stuff. When prices go up to cover the wage increase the cost will be spread out over all consumers, not just minimum wage earners. You can argue that those at the very top spend far, far less of a percent of their income on consumer goods and services provided by minimum wage earners and that's totally fair. But it's not credible to claim that a minimum wage increase will do nothing at all for people after a price increase.
- gozur88 11y ago
  The people who still have jobs will benefit, sure. We're making some poor people (including teenagers living at home) a little better off at the expense of a smaller number of poor people who be much worse off for not having a job.
- bsbechtel 11y ago
  Keep in mind that a wage increase affects not only one business's profit margins and pricing, but also the prices of all of their goods from suppliers too. Consider that fast food needs to pay 30% to labor, mostly at minimum wage. Another 30% or so usually goes to food costs. Those food supplies are the product of farm labor and food processing plant labor, both of which pay close to minimum wage as well. If minimum wage doubles, that means the fast food business now has a labor cost of 60% of his original pricing, plus the increases in food costs he is going to see as well. Those food cost increases could be 30-40%, meaning he will likely need to raise prices significantly to keep the lights on. For a company like McDonald's, who do you think is their target market when they try to keep prices as low as possible? The rich? They're trying to make food affordable for everyone, including minimum wage earners. When McDonald's costs nearly double, what do you think is going to happen to their prices?
  - crdoconnor 11y ago
    If you're curious to see what American McDonalds' would look like where workers have higher spending power and McDonalds has higher costs, take a look at an Australian McDonalds where they already reacted to exactly that. This is pretty much what the future of fast food restaurants is like when you raise the minimum wage: http://www.businessinsider.com.au/mcdonalds-australias-upscale-burgers-2014-10 http://www.businessinsider.com.au/mcdonalds-australias-upsca... McDonalds is usually able to adapt better to changing market conditions than other restaurants. Many restaurants do go out of business when their prices rise, which is why they hate the idea of raising the minimum wage so much. However, those restaurants are quickly replaced by other restaurants, which is why employment is never affected.
IanCal 11y ago
> If everybody raises wages, and consequently prices (that is assumed since that's the only way you could have lost competitive edge after raising wages) - then what's the point of it? Why would prices increase by the same amount as minimum wage was increased by? Pay the attendant 5% more and the total cost of obtaining, refining and delivering gas doesn't increase by 5%.
- bsbechtel 11y ago
  Refining and delivering gas requires labor too. While many in that industry may earn more, I'm sure there are minimum wage workers employed by that industry that will affect their costs. It doesn't help right now that oil and gas are at rock bottom prices either.
  - XorNot 11y ago
    The notion that oil prices are remotely connected to the cost of labor in any effectual way is laughable.
  - JoBrad 11y ago
    Oil rig workers do not make the minimum wage, at all. Neither do most refinery workers. I say this as someone who knows several people who work on oil rigs off the Louisiana coast, and have worked with (but not at) several petrochemical companies.
  - IanCal 11y ago
    Right, but your point hinges on not just the price rising, but rising by the same as or more than the increase in minimum wage.
Gibbon1 11y ago
One thing to consider is percentage of gross revenues spent on payroll varies by type of industry but is somewhere between 10 and 30%. 10% would manufacturing. 30% would be a restaurant. Most everything else would be around 15%. Likely the businesses that would see the largest increases are those that can't be outsourced easily. The ones that are already paying well above minimum wage. Difference between a business owner and an economics professor is the later writes equations down to describe how he thinks thinks business should work. And then blathers about hedonistic adjustments. A business owner stares at his books every week and thinks 'my problem is my customers have no money' Really easy for a business owner or accountant to get that customers with more to spend outweighs small increase in payroll expenses.
- deleted 11y ago
  [deleted]
- Tideflat 11y ago
  The business owner also doesn't have the training to account for the actions of all the other businesses. The economics professor does.
  - Gibbon1 11y ago
    Business people I deal with are highly aware Macro issues. If you ask them what they think of things like minimum wages or other regulatory costs their usual concern is that their' particular entity doesn't suffer an unfair burden. Academic Economists know pretty much nothing of Macro.

partiallypro 11y ago

It's more than that. If you have higher margins or more discretionary pricing power than your competitors and they are forced to raise wages (as you are,) by law, you can squeeze them out of business entirely by raising the minimum wage and destroying their margins. You're not likely to make minimum wage at Wal-Mart, but some of their small shop competitors do pay lower wages. In the end it's in Wal-Mart's interest to push for minimum wage hikes for this very reason (which they have in the past.)

_red 11y ago
Exactly, for a company like Walmart, they know that (a) small competitors are not as efficient has they are, (b) small competitors will not able to invest in large scale capital projects to ameliorate wage increases (eg. robotics, self-checkout, etc) It is simply a game of eliminating competition.
- cowardlydragon 11y ago
  Well, unless people then make enough money to not shop at Wal-mart and shop at less dystopian visions of the future.
  - Natsu 11y ago
    If people suddenly have more cash, prices will rise until equilibrium. After all, if everyone has $1 million and you auction off something in demand, you're likely to get a lot more currency than if everyone had only $1,000 to spend. Of course, the money will be worth more when it's scarcer too.
    - xenadu02 11y ago
      You can't have capitalism both ways. Either the market will result in lower prices / greater efficiency (which negates your argument) or it won't (which means we need more regulation to correct market distortions). The reality is a lot of companies, banks, and politicians have finally recognized that the US consumer class is tapped out and a significant portion of the world relies on that as a central economic engine. Even China isn't ready to fully switch away from being export-driven. To have consumers you need people with money in their pockets to spend. That means management and capital need to move back toward the historical division of profits with labor. We'll all end up better off in the long run. California raising the minimum wage will barely impact unemployment. A few prices will rise a bit but the net effect should be positive. Some of the money will be due to multiplier effects but some will come from obsessively high corporate profits which is fine (companies are so overflowing with cash many are doing record stock buybacks for lack of a better ROI).

cowardlydragon 11y ago

UNLESS it is a fundamentally demand starved economy where the wealth is concentrated in the hands of people that don't know how or have no clue how to increase flow of money. Here's a clue: GDP goes up if people have money to buy things, which then causes people to get paid more and more jobs, which then gets more people money to buy things. The "marketplace" or "free market" doesn't exist. Poof. Unless you are blind, "free markets" stabilize into cartel or monopoly power. Pick a goddamn industry, it is dominated by 1-4 players.

bsbechtel 11y ago
Why are most industries dominated by a few? It's not because they pay the lowest. It's because consumers chose to support those few businesses.
- tma-1 11y ago
  Nope, they're dominated by a few because when a specific company becomes successful enough it can buy out the rest of the players.
  - Tideflat 11y ago
    This only works when there are economies of scale. If there are significant dis-economies of scale smaller firms can out-compete the large firms. The large firm can't just buy up all the small firms either because new firms are started all the time, and if every person who starts a small firm is rewarded with a buyout, the industry will attract more and more new firms until the large firm can no longer afford to buy out new firms. --------------- Examples of industries that not dominated by three or four large companies: mining, farming, house cleaning, and being a land lord.
    - tma-1 11y ago
      It happens when large firms have a lot of extra liquidity and cheap debt. Look at FB and Google.

michaelmrose 11y ago

At the bottom end we see companies offering wages that aren't survivable without welfare and food stamps effectively forcing the tax payers to subsidize their low wages. Effectively setting a sane floor prevents this abuse.

cmdrfred 11y ago
This is the reason I give to republicans for raising the minimum wage? Why are your taxes paying for that low wage workers salary?

Arnt 11y ago

The Economist had a lucid interview with someone who ran a cleaning business in London not long after the minimum wage was introduced there. Abbreviating: "Now that I know what my competitors pay, there's no point in trying to beat my own labour costs below that point, and I spend my time in ways that benefit my business more." He didn't say "I felt like a soulcrusher when I beat down the wages of people who earned very little, and now I spend that time on positive improvements instead". Maybe it was in his mind though. Managers are people too.

MaysonL 11y ago

Of course the fact is, if you pay better wages, you get better workers. In 'n Out Burger restaurants pay substantially better wages than most of their fast food competion, and they're doing fine. Many years ago I read an article in Forbes which cited a study finding that fast food franchises which paid somewhat above minimum wage were more profitable than those which paid only minimum wage. They had better motivated employees, and substantially lower turnover and recruitment and training costs.

bsbechtel 11y ago
So raising wages across the board would mean those worse workers who cause higher turnover and other costs are now going to earn the same amount as the better workers who don't cause businesses those problems, right?
- SolaceQuantum 11y ago
  I'm confused. Where did you get this idea from the information "an article has concluded certain businesses that pay more to their employees are more efficient"?
  - douche 11y ago
    I think the idea is that if the minimum wage is $15, then you'd have to pay $17, $18 to get yourself above the froth of the marginally employable people again and hire the higher-quality workers.
    - SolaceQuantum 11y ago
      Isn't that good for the workers who are higher quality and were previously earning 15$?
      - douche 11y ago
        Sure, it's good for them. But it's a little nuts that you can make that kind of money saying "Hello, can I take your order?", when I know welders and millwrights that have decades of experience and uncommon skills that only make $20 an hour. What I think is going to happen, is that the McDonalds' of the world will fire 75% of their staff, and just turn around the POS system so that the customer punches in their order themselves

Certhas 11y ago

There is no empirical evidence that it causes job loss. Nor a complete, coherent economic argument. It's perfectly plausible, even likely, that an increase in the minimum wage leads to an increase in the demand for labor. On the empirical side, Germany just introduced a minimum wage for the first time and unemployment is at all time record lows. The estimated job losses did not materialize. The labor market is incredibly fucked anyway. Imagine you, and everyone else has a gold nugget. However, by law you, and everyon else, are required to sell it by the end of the month. Do you think you could get a fair price? There is no free labor market, as long as not working is not a feasible option. That's why an unconditional basic income makes a tremendous amount of sense if you want to make the labor market more efficient.

brightball 11y ago

It makes sense in other ways too. Specifically because it hurts potential new entrants to the marketplace. You've got to keep in mind that for every business or franchise that starts, it first is a small business that has to open it's doors with little cash and no advertise, build up a customer base and hopefully be able to hire people while it's owners have zero income for what's usually 3-4 years if they survive. Add higher minimum wage to that formula and the whole thing gets even harder. People take for granted that the reason we have a 1% problem is that as a society we continually make it harder and harder to start a business without lots of capital. When you do that it means that you've got to have somebody very wealthy invest in your business meaning they're going to own a piece of it too. That's how "the rich get richer" as the saying goes. If you aren't starting a service business where you're selling your own skillset or a business where employees are paid contract / commission it's incredibly expensive and risky. The first time you hire somebody and realize the responsibility and financial pressure that comes with it...along with no guarantees on whether or not that person will actually do their job...your entire point of view on minimum wage will change. That's the ENTIRE reason that I support a basic income of about $700 / month. It would have the effect of doubling the minimum wage WITHOUT passing the cost on to businesses.