3 ms·

This is a weird claim. At the federal minimum $7.25 and 2000 hours per year that's $14.5k. Overhead on an employee (taxes, insurance, equipment, office space, e

by _dps 8y ago

This is a weird claim. At the federal minimum $7.25 and 2000 hours per year that's $14.5k. Overhead on an employee (taxes, insurance, equipment, office space, etc.) is at least another 50% of that, call it $20k total. So just hiring someone merely to break even means you estimate they can generate something worth $20k over the course of a year. That's just about the price of a new mid-size economy sedan.

XorNot 8y ago
It's not a weird claim, it's minimum wage. It means you're operating a business where you are either fine with a long lead time to fill positions (since you're looking for someone who can execute a skilled job of some sort but will work for the absolute bottom-dollar of the market), or it is close to totally unskilled work which anyone can do, and which the moment they have any marketable skills (say, from just doing the job for any length of time) they have every incentive to move to another company. Literally every bit of improvement your employees make in their ability to do the job, implies that they should be paid more because their value per hour proposition, as you put it, is going up.
- TangoTrotFox 8y ago
  It's easy to see the logical flaw here by considering a reduction to absurdity. Imagine a minimum wage of $200/hour. This would of course lead to mass unemployment and collapse the market, except for a very minuscule percent of the labor force in extremely high skill high value positions. Just because somebody would now be earning $200/hour most certainly would not mean they were not valued. Instead you'd have simply squeezed everybody out of the market except these most incredibly valuable employees. But you can also see the same flaw by just considering a mathematical distribution of wages. That distribution would resemble a bell curve. There will be a small number of very low skill positions with very low wages. And on the other end there will be a small number of very high skill positions receiving very high wages. And in between you reach the fat of the market with average skill positions reaching average wages. The effect of the minimum wage is to create a clumping on the left side of this curve as the people earning wages for extremely low skill work are now earning exactly the same as the wages for those doing more skilled work. And those abnormally low skill jobs that cannot afford to be paid anymore simply disappear. For instance gas stations used to regularly be full service - you park, pay, and an attendant would fill you up or take care of any routine maintenance you needed. Those jobs went away, in the US at least. And similarly we're currently in the process of gradually phasing out cashiers, which I imagine our grandchildren will look back on with similar quaintness as we might full service gas stations. The point there being that you're left with a higher and higher skill level as the baseline just to enter the job market. And just because somebody's being paid the new minimum, does not mean they're not substantially more valued than others.
  - iciac 8y ago
    Wage distribution certainly does not resemble a bell-curve. It's a long-tail distribution. This is observed consistently across different economies. This US figure is from 2015, however it should give the right idea: https://www.census.gov/library/visualizations/2015/demo/distribution-of-household-income--2014.html https://www.census.gov/library/visualizations/2015/demo/dist...
- kgwgk 8y ago
  Doesn’t your argument apply for any value of the minimum wage, whether it is $7, $15 or $100?
  - XorNot 8y ago
    It applies anytime minimum wage is a separate number to market rates for work when there's a competitive hiring environment. The target demographic of HN, for example, we all value ourselves well above minimum-wage rates. You can always make the numbers really stupid if you want to get bizarre looking answers, but that's not the reality we live in - minimum wage just barely covers living expenses sometimes.
    - kgwgk 8y ago
      So your claim that "you clearly in no way value the skills any of these people bring to the business, otherwise you'd be inclined to offer more in the first place" is true whenever you're paying (the minumum wage that is) less than market rates. That's seems quite uncontroversial. If you pay less than market rates you may have a problem (in a perfect market, at least).
gaius 8y ago
Overhead on an employee (taxes, insurance, equipment, office space, etc.) is at least another 50% of that, call it $20k total. I think you are wildly underestimating that portion. It's at least as much again, and possibly a lot more. 2-3x isn't unusual.
- nl 8y ago
  It depends. It can be way less than 50% for so low wage positions too. Are you counting the cost of some expensive piece of industrial equipment used by a minimum wage person as part of those overheads? Or are you just putting minimum wage people on for more hours, using the same office space others are using at different times?
- _dps 8y ago
  Having run a small business myself I know, the hard way, it can be much higher :) I was just trying to pick a small uncontroversial figure.
Broken_Hippo 8y ago
I'll note that much of what you site as overhead doesn't increase with minimum wage. There are a few taxes that are higher, sure, but they are only a portion of the increase. If their pay goes from 15k to 20 k, it doesn't mean your costs jump from 7.5k to an evne 10k. Your portion of the taxes on the employees doesn't go up that much per employee. Equipment, office space, insurance, payroll costs, and so on do not increase with wage increases. I'll note that these are things you are likely going to pay no matter what the employees make as a minimum wage. At least one of these - insurance - can mostly be passed off onto the employee (save some time telling employees about the plan and even that can be passed onto someone else for a fee).

by _dps 8y ago

XorNot 8y ago

It's not a weird claim, it's minimum wage. It means you're operating a business where you are either fine with a long lead time to fill positions (since you're looking for someone who can execute a skilled job of some sort but will work for the absolute bottom-dollar of the market), or it is close to totally unskilled work which anyone can do, and which the moment they have any marketable skills (say, from just doing the job for any length of time) they have every incentive to move to another company. Literally every bit of improvement your employees make in their ability to do the job, implies that they should be paid more because their value per hour proposition, as you put it, is going up.

TangoTrotFox 8y ago
It's easy to see the logical flaw here by considering a reduction to absurdity. Imagine a minimum wage of $200/hour. This would of course lead to mass unemployment and collapse the market, except for a very minuscule percent of the labor force in extremely high skill high value positions. Just because somebody would now be earning $200/hour most certainly would not mean they were not valued. Instead you'd have simply squeezed everybody out of the market except these most incredibly valuable employees. But you can also see the same flaw by just considering a mathematical distribution of wages. That distribution would resemble a bell curve. There will be a small number of very low skill positions with very low wages. And on the other end there will be a small number of very high skill positions receiving very high wages. And in between you reach the fat of the market with average skill positions reaching average wages. The effect of the minimum wage is to create a clumping on the left side of this curve as the people earning wages for extremely low skill work are now earning exactly the same as the wages for those doing more skilled work. And those abnormally low skill jobs that cannot afford to be paid anymore simply disappear. For instance gas stations used to regularly be full service - you park, pay, and an attendant would fill you up or take care of any routine maintenance you needed. Those jobs went away, in the US at least. And similarly we're currently in the process of gradually phasing out cashiers, which I imagine our grandchildren will look back on with similar quaintness as we might full service gas stations. The point there being that you're left with a higher and higher skill level as the baseline just to enter the job market. And just because somebody's being paid the new minimum, does not mean they're not substantially more valued than others.
- iciac 8y ago
  Wage distribution certainly does not resemble a bell-curve. It's a long-tail distribution. This is observed consistently across different economies. This US figure is from 2015, however it should give the right idea: https://www.census.gov/library/visualizations/2015/demo/distribution-of-household-income--2014.html https://www.census.gov/library/visualizations/2015/demo/dist...
kgwgk 8y ago
Doesn’t your argument apply for any value of the minimum wage, whether it is $7, $15 or $100?
- XorNot 8y ago
  It applies anytime minimum wage is a separate number to market rates for work when there's a competitive hiring environment. The target demographic of HN, for example, we all value ourselves well above minimum-wage rates. You can always make the numbers really stupid if you want to get bizarre looking answers, but that's not the reality we live in - minimum wage just barely covers living expenses sometimes.
  - kgwgk 8y ago
    So your claim that "you clearly in no way value the skills any of these people bring to the business, otherwise you'd be inclined to offer more in the first place" is true whenever you're paying (the minumum wage that is) less than market rates. That's seems quite uncontroversial. If you pay less than market rates you may have a problem (in a perfect market, at least).

gaius 8y ago

Overhead on an employee (taxes, insurance, equipment, office space, etc.) is at least another 50% of that, call it $20k total. I think you are wildly underestimating that portion. It's at least as much again, and possibly a lot more. 2-3x isn't unusual.

nl 8y ago
It depends. It can be way less than 50% for so low wage positions too. Are you counting the cost of some expensive piece of industrial equipment used by a minimum wage person as part of those overheads? Or are you just putting minimum wage people on for more hours, using the same office space others are using at different times?
_dps 8y ago
Having run a small business myself I know, the hard way, it can be much higher :) I was just trying to pick a small uncontroversial figure.

Broken_Hippo 8y ago

I'll note that much of what you site as overhead doesn't increase with minimum wage. There are a few taxes that are higher, sure, but they are only a portion of the increase. If their pay goes from 15k to 20 k, it doesn't mean your costs jump from 7.5k to an evne 10k. Your portion of the taxes on the employees doesn't go up that much per employee. Equipment, office space, insurance, payroll costs, and so on do not increase with wage increases. I'll note that these are things you are likely going to pay no matter what the employees make as a minimum wage. At least one of these - insurance - can mostly be passed off onto the employee (save some time telling employees about the plan and even that can be passed onto someone else for a fee).