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> Mandating a minimum wage, and letting those workers become unemployed, just makes things worse. I'm not sure what you mean by "My point was the reverse" - "p

by rskar 11y ago

> Mandating a minimum wage, and letting those workers become unemployed, just makes things worse. I'm not sure what you mean by "My point was the reverse" - "public good" is not charity I guess? I'm trying to wrap my head around how a less-than-living wage is a necessity for certain kinds of industry to function profitably, and that, furthermore, indirect government subsidies to them via handouts are essential enablers. Is it that consumers perpetually undervalue the products of retailers and restaurants? Or is it that without the subsidies many retailers and restaurants would face much "pent-up demand" (as economists may call it)? Frankly, for money to have any meaning to it, this situation must somehow have a cash-flow that at minimum breaks even. I.e., if these industries are gainful, that gain should somehow be reflected in the tax revenue back to government, the compensations to executives, the dividends to shareholders, etc. Which means if this is a good deal for the government, does it at least breakeven on the handouts it has made? Not sure if that is happening - there's certainly plenty of think-tank whitepapers available that declare social programs as unsustainable (e.g. http://budget.house.gov/uploadedfiles/rectortestimony04172012.pdf http://budget.house.gov/uploadedfiles/rectortestimony0417201...). But here are some fun factoids: From http://www.marketwatch.com http://www.marketwatch.com, I get for McDonald's a net income about $5 billion on revenue over $25 billion; for Walmart it's a net of $15 billion on revenue over $480 billion. marketwatch.com also shows revenue per employee of $60,507 for McDonald's, and $209,622 for Walmart. So there's money to be made in cheap food and cheap goods. So, let's see, a $5/hr increase for a 35 hr workweek and 50 workweeks in a year comes to a $8,750 hit to the revenue per employee amount. So maybe a 14% increase in the price of fast-food burgers and 4% increase in white socks? So in light of growing government deficits, growing corporate profits (well, we'll see about 2016 - http://www.bea.gov/newsreleases/national/gdp/2016/gdp4q15_3rd.htm http://www.bea.gov/newsreleases/national/gdp/2016/gdp4q15_3r...), and reasonable (whitepaper-ishly anyway) suggestions on the unsustainability of the "public goods" collectively known as the "Welfare State", in this discussion on whether wages need to have some sort of mandatory minimum - well, what are we to make of this? Too many economically useless people?

ikeboy 11y ago
You'd need to increase profits, not revenue. If profit margins are around 3%, you'd need to more than double revenue per employee for Walmart. And of course, doubling prices makes less sales, so doesn't double revenue, it might even reduce revenue. Re reverse: you said "above taxes paid" for roads, which I didn't mean to imply. Regarding your "break even" idea: suppose the most someone's labor is worth is $22500 a year. Suppose the minimum required to live is $30000. The government has decided that nobody should starve, and so any outcomes where this person starves are not to be considered. There are two options: allow them to work for $22500 or less, whatever the market will pay, and pay $7500 from welfare, or forbid them from working, and pay them $30000. I don't see how the second is preferable to the first. So if you believe that raising minimum wage hurts jobs (an empirical question that has economists on both sides), then you shouldn't support. The other model you could have is: Value of labor is $30000, but there's so much labor available that the market will only pay $22500. Then, mandating a minimum wage does raise the amount paid, although it can still have negative effects elsewhere. Probably both models are correct for different jobs, and the question is which one is more often correct. I'm also neglecting inflation, part time, disincentives to work, and so on. As I understand it deficits have been shrinking. Where are you getting the growing stat from?
- deleted 11y ago
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- rskar 11y ago
  >You'd need to increase profits, not revenue. I wonder if we're starting to talk past one another. I'm just a layperson here, but I believe I got the meaning of revenue (http://www.investopedia.com/terms/r/revenue.asp http://www.investopedia.com/terms/r/revenue.asp) and net income (http://www.investopedia.com/terms/n/netincome.asp http://www.investopedia.com/terms/n/netincome.asp) right. So, revenue is all the money coming in, and revenue per employee really is all money coming in divided by the number of employees. If more money is needed to cover a wage increase, one needs an increase in revenue. Apparently, profit is sometimes synonymous with net income, and sometimes it means what's left of net income after taxes and dividends are paid. In any case, it is not impossible for profit to stay about the same while revenue is increased; that all is dependent on where you're at on your supply-and-demand curve on whether sales are terribly affected by a price increase. E.g., remember when gasoline approached $3.50/gal (http://www.statista.com/statistics/204740/retail-price-of-gasoline-in-the-united-states-since-1990/); http://www.statista.com/statistics/204740/retail-price-of-ga... didn't effect sales by much (http://www.statista.com/statistics/189424/us-alternative-and-traditional-fuel-consumption-of-highway-vehicles-since-1992/ http://www.statista.com/statistics/189424/us-alternative-and...). I'm willing to bet that burgers and white socks will move about the same. >As I understand it deficits have been shrinking I get where you're coming from, in the past few years deficits have decreased, and considering the mess that revealed itself months before President Obama's inauguration, one would certainly hope dramatic decreases would come and soon. However, I've been around long enough (ok, alive in the 1970's) to remember when deficits began to be so on the minds of people generally and be a general concern. Check out https://www.whitehouse.gov/omb/budget/Historicals https://www.whitehouse.gov/omb/budget/Historicals, and http://mediamatters.org/research/2015/10/19/new-data-debunks-years-of-fox-news-paranoia-abo/206262 http://mediamatters.org/research/2015/10/19/new-data-debunks.... Aside from several good years in the Clinton administration, it's been mostly deficits at substantial or significant levels. Pick a reasonable window of time between now and 10 years or 20 years or 30 years ago, and fit a trend line. You'll find the trend is still highly suggestive of increasing deficits (no matter if Obamacare makes these future increases smaller, https://www.cbo.gov/publication/50252 https://www.cbo.gov/publication/50252 and https://www.cbo.gov/publication/49892 https://www.cbo.gov/publication/49892 and https://www.cbo.gov/sites/default/files/51118-2016-03-BudgetProjections.xlsx https://www.cbo.gov/sites/default/files/51118-2016-03-Budget...). >Regarding your "break even" idea Yep, it's just my conjecture. But your counterpoint conveniently side steps on just how the government produces the $7500 in your example. Raising taxes? Issuing more Treasury bonds? Perhaps you could elaborate on this?

by rskar 11y ago

ikeboy 11y ago

You'd need to increase profits, not revenue. If profit margins are around 3%, you'd need to more than double revenue per employee for Walmart. And of course, doubling prices makes less sales, so doesn't double revenue, it might even reduce revenue. Re reverse: you said "above taxes paid" for roads, which I didn't mean to imply. Regarding your "break even" idea: suppose the most someone's labor is worth is $22500 a year. Suppose the minimum required to live is $30000. The government has decided that nobody should starve, and so any outcomes where this person starves are not to be considered. There are two options: allow them to work for $22500 or less, whatever the market will pay, and pay $7500 from welfare, or forbid them from working, and pay them $30000. I don't see how the second is preferable to the first. So if you believe that raising minimum wage hurts jobs (an empirical question that has economists on both sides), then you shouldn't support. The other model you could have is: Value of labor is $30000, but there's so much labor available that the market will only pay $22500. Then, mandating a minimum wage does raise the amount paid, although it can still have negative effects elsewhere. Probably both models are correct for different jobs, and the question is which one is more often correct. I'm also neglecting inflation, part time, disincentives to work, and so on. As I understand it deficits have been shrinking. Where are you getting the growing stat from?

deleted 11y ago
[deleted]
rskar 11y ago
>You'd need to increase profits, not revenue. I wonder if we're starting to talk past one another. I'm just a layperson here, but I believe I got the meaning of revenue (http://www.investopedia.com/terms/r/revenue.asp http://www.investopedia.com/terms/r/revenue.asp) and net income (http://www.investopedia.com/terms/n/netincome.asp http://www.investopedia.com/terms/n/netincome.asp) right. So, revenue is all the money coming in, and revenue per employee really is all money coming in divided by the number of employees. If more money is needed to cover a wage increase, one needs an increase in revenue. Apparently, profit is sometimes synonymous with net income, and sometimes it means what's left of net income after taxes and dividends are paid. In any case, it is not impossible for profit to stay about the same while revenue is increased; that all is dependent on where you're at on your supply-and-demand curve on whether sales are terribly affected by a price increase. E.g., remember when gasoline approached $3.50/gal (http://www.statista.com/statistics/204740/retail-price-of-gasoline-in-the-united-states-since-1990/); http://www.statista.com/statistics/204740/retail-price-of-ga... didn't effect sales by much (http://www.statista.com/statistics/189424/us-alternative-and-traditional-fuel-consumption-of-highway-vehicles-since-1992/ http://www.statista.com/statistics/189424/us-alternative-and...). I'm willing to bet that burgers and white socks will move about the same. >As I understand it deficits have been shrinking I get where you're coming from, in the past few years deficits have decreased, and considering the mess that revealed itself months before President Obama's inauguration, one would certainly hope dramatic decreases would come and soon. However, I've been around long enough (ok, alive in the 1970's) to remember when deficits began to be so on the minds of people generally and be a general concern. Check out https://www.whitehouse.gov/omb/budget/Historicals https://www.whitehouse.gov/omb/budget/Historicals, and http://mediamatters.org/research/2015/10/19/new-data-debunks-years-of-fox-news-paranoia-abo/206262 http://mediamatters.org/research/2015/10/19/new-data-debunks.... Aside from several good years in the Clinton administration, it's been mostly deficits at substantial or significant levels. Pick a reasonable window of time between now and 10 years or 20 years or 30 years ago, and fit a trend line. You'll find the trend is still highly suggestive of increasing deficits (no matter if Obamacare makes these future increases smaller, https://www.cbo.gov/publication/50252 https://www.cbo.gov/publication/50252 and https://www.cbo.gov/publication/49892 https://www.cbo.gov/publication/49892 and https://www.cbo.gov/sites/default/files/51118-2016-03-BudgetProjections.xlsx https://www.cbo.gov/sites/default/files/51118-2016-03-Budget...). >Regarding your "break even" idea Yep, it's just my conjecture. But your counterpoint conveniently side steps on just how the government produces the $7500 in your example. Raising taxes? Issuing more Treasury bonds? Perhaps you could elaborate on this?