6 ms·

Supersize My Wage

26 points by tristanj 13y ago

TrainedMonkey 13y ago
I think implied point was, that while raising minimum wage also forced fast food joint to raise prices, demand stayed same. Things to be wary about - this is limited experiment with two fast food joints. 1. This might be a fluke, with only two fast food places compared data sample is very small - at best it is case study. Apparently this is incorrect, see comment below. 2. Their monitoring period was only 11 months. Who knows what will happen in 5 years? All that said, I applaud their effort. Too many things are taken for granted in Economics because they "make" sense. Real world is so complex that things are often counter intuitive.
- brey 13y ago
  I don't think they only surveyed two - the article doesn't say how many or link to the paper, but this could easily be misread as 'they found two fast-food joints': The two found fast-food joints along the New Jersey-Pennsylvania border edit: found it: http://www.nber.org/papers/w4509 http://www.nber.org/papers/w4509 - 410 restaurants
- norswap 13y ago
  To me, it seems common sense that the fast-food will simply increase wage and keep the same amount of people. The fast-food is profitable up to a wage of X, but it prefers to pay the lowest it can to attract workers instead, which happens to be (by law) the minimum wage. And I'm convinced fast-foods can afford to pay employees more.
  - aetherson 13y ago
    What's your theory for why competition doesn't solve this problem? That is, if I am opening a new Wendy's in this area you're postulating, and the deal is that I can have generous profits despite a substantial increase in my employee's wages, why don't I offer $1 more than the other fast food joints in the area and steal all of their best employees? I see a few possible explanations: 1. Fast food employees do not substantially differ in quality. The best fast food employee in the world is not really better than the median, in terms of their ability to drive additional business to a location. 2. The owners of the fast food restaurants in the area have formed a cartel, and are (flagrantly illegally) engaged in anti-competitive practices. 3. There is simply no competition among fast food restaurants -- the field is so sparse that when I open a new restaurant, there are no competitors to steal from. 4. The labor market is incredibly overpopulated such that every fast food restaurant can fill its ranks with employees who are first-tier, without raising their wages. What's your theory?
    - jacalata 13y ago
      From when I worked in fast food - 1, absolutely. The big corporations can't afford to allow variation in employee quality to change their food/experience, so instead it is all run as though they are all low-quality employees, which means it doesn't really benefit you to get higher quality employees (who in any case probably can't stand the micro-management and will quit as soon as they get another option).
      - aetherson 13y ago
        It seems kind of impossible to me for that to be the whole story. I mean, I totally buy that it doesn't matter how competent or incompetent a cook you are in terms of assembling McDonald's meals, but there are a lot of axes that employees can vary on: 1. Speed. Employees are going to be better or worse at turning orders quickly, and I can't see how good preparation from the corporate overlords can entirely compensate for this. 2. Graft/Wastage/Slackery. If your employees steal from you, that's going to affect your bottom line real fast. If they're dropping burgers on the floor all the time, that's a big deal. If they are chatting with each other instead of serving your customers, that's a big deal. 3. Customer Service. It has traditionally been the case that a bright smile, eye contact, and polite language has seen some reward among food service workers, and again it doesn't seem possible that McDonald's has figured out how to make all employees great at this. I would be provisionally ready to believe that the combination of corporate work to provide a simplified work experience plus a slack labor market has created a situation where there's a glut of potential fast food workers who are somewhere between the 60th and 99th percentile in worker quality, and the difference between 60th and 99th percentile is small enough that it doesn't warrant paying a higher wage.
        jacalata 13y ago
        Well, where I worked they solved a lot of it with literally constant supervision and feedback by managers - like 'hey Jane, smile more! Tom, don't just stand there, wipe that bench again. And again, if you have nothing else to do.' That cuts stealing and slacking down pretty fast. Customer service - pretty clear scripts, constant reminders to smile, warnings about mystery shoppers (and actual mystery shoppers), to keep you focusing on it. A three part diagram of something like 'hello - SMILE - can I take your order please?' on each register. Speed - yea, I guess there's a few clumsy workers who just aren't going to be able to do it, but it's like a factory line - a small set of tasks that you pretty much memorize then do over and over. In very busy times where every second counts, you'd put the slightly faster people on the register and have about two runners for each three registers to actually bring the food, which is simpler. I guess there must have been a reasonable availability of workers behind this, because all the pressure was based on 'or you'll be fired'. Or they just relied on us taking them seriously - the city was at about 4% official unemployment (Brisbane, 2006), so it can't have been that bad a glut.
  - brc 13y ago
    I live in a country with one of the highest mandated minimum wages in the world. Guess what I saw passing by a KFC the other day? An automated ordering kiosk. Just use a touch screen to place your order, swipe your card and your food will come out with your number. It is just wishful thinking to think that raising minimum wages makes people better off. At best, it just creates inflation for the very products that those workers buy. At worst, it cuts the rungs off the bottom of the job ladder and increases the incentive to permanently replace low-wage employees with automation. Most people start work on the lowest wage there is. I certainly did. Making it harder to employ people at low cost removes the ability to start working your way up the ladder. You can argue the morality of the minimum wage - whether it should exist or not, what the level should be, but you can't argue the marketplace effects.
    - swang 13y ago
      Are you talking about those self-serve kiosks that they have next to the ordering station or do these robots actually cook the food as well? The reason I ask is because no one wants to use those self-serve kiosks. They've had them everywhere as a means to "free" an employee up but what ends up happening is an employee has to come by and help the customer because 1) the interface sucks and 2) people dont want to read screens then tap then read more screens, they'd rather just tell a cashier what they want and have the cashier press the buttons. But if you mean the robots also serve and cook the food... where do you live again?
      - AjithAntony 13y ago
        > The reason I ask is because no one wants to use those self-serve kiosks. I could totally see automated ordering happening. Look at big box stores and self-checkouts. At my local home depot, walmart, and mejier, and smaller stores like county market, there are often only two cashiers for the whole store (I only go at night, i guess). One oversees a bank of 4-8 self-service check-outs, and the other handles one full service checkout. Self-service grocery store checkout is way more complicated than fast-food ordering. There are coupons, produce codes, scales, large qty of items, and the actual act of scanning and bagging. By intentionally under-staffing the full service lanes, people naturally adapt to self-service. This is the standard now. Imagine how efficient fast food could be. One touch for predefined meal, accept the defaults or maybe one more touch for size change, tap your NFC credit card or device, done.
ronaldx 13y ago
Fast-food employees are pretty much the canonical beneficiaries of a minimum wage law. Fast-food outlets can afford to spend more on salary (in that, they will still be profitable and it doesn't affect their viability as a business) but have no inclination to, and therefore must be forced by law. As an additional bonus, they can't outsource their work to another, cheaper state. Great - the minimum wage law works exactly as intended, in this particular case. It's less obvious that this applies to other industries. Will average households employ a domestic cleaner at minimum wage? Small, near-viable businesses where salary is the largest expense: what happens to them when the minimum wage increases? What happens to people who are thinking about starting businesses with that as a risk?
- rogerbinns 13y ago
  > they can't outsource their work to another, cheaper state They have done some of it for almost a decade http://www.nytimes.com/2006/04/11/technology/11fast.html?pagewanted=all http://www.nytimes.com/2006/04/11/technology/11fast.html?pag... They can also use more automation - "outsourcing" to machines. There are far more subtleties that the article didn't cover as you partially point out. There is a good article on cafehayek about it. (eg the nature of work done can change). http://cafehayek.com/2013/12/again-more-on-the-minimum-wage.html http://cafehayek.com/2013/12/again-more-on-the-minimum-wage....
nahname 13y ago
>It helps low-wage workers to raise their family above the poverty line. Wouldn't someone earning minimum wage define the poverty line?
- itsybitsycoder 13y ago
  What if there was no minimum wage -- would someone pulling in $10 a month be above the poverty line in that case? The poverty line is the minimum income you need to get by, not the minimum you can pull in with a full-time job.
- chad_oliver 13y ago
  No, because you can have different numbers of people supported by a single minimum wage job. A single mother might have to split her income among three people (herself and her kids), but an older woman who takes a job just to get out of the house is obviously not in the same category.
- jacalata 13y ago
  No - that's what is called a 'living wage' or sometimes 'family wage' to be clear that it should support a family and not just the worker. The minimum wage is in some places intended to meet that definition, but I don't know if the USA intended that when they created theirs, and because the federal minimum wage is only raised haphazardly instead of by indexing to living costs, it doesn't now meet it if it ever did (some states do index their minimum wage). I've heard people argue that minimum wage jobs are intended for teenagers who don't need to support anyone, for instance. The poverty threshold, on the other hand, is based on actual costs - apparently it is "three times the cost of a minimum food diet in 1963, updated annually for inflation using the Consumer Price Index, and adjusted for family size, composition, and age of householder." [http://www.irp.wisc.edu/faqs/faq2.htm http://www.irp.wisc.edu/faqs/faq2.htm]
- lmkg 13y ago
  IIRC, the poverty line in the US is the cost of food, multiplied by three. Minimum wage can be below this, depending on region and number of dependents. Poverty is defined by the means you can afford, and if that meets some rough threshold of basic necessities (food, shelter, possibly transportation, etc). In a perfect world where policy is defined justly and the economy can support it without repercussions, the minimum wage would be defined by the poverty line, no the other way around. In the real world, there's no fundamental reason why the minimum salary in an economy would pass any particular bare-minimum lifestyle threshold. I believe the magic number three was derived from one study decades ago, that found that food accounted for one-third of poor people's spending on average. There is no reason to think it has remained constant, or that it is stable to begin with, but that became the formula used in the US.
Zhenya 13y ago
In my opinion is all these studies are myopic. The reality is probably more complicated and can be broken down into a few steps Short term: Employees get paid more and the number of employees stays close to the same. The businesses must operate as they did before Medium Term: The quality of employee goes up. The people who are willing to trade their time for more $ is a different demographic as you climb the $/hour slope. Long Term: Businesses find a way to remove high costs out of their operating costs and will automate the jobs were possible. This will improve productivity of each paid employee but the total employee count will go down (all other things held constant). The productivity and manual labor has been shifted from person to machine.
- hkmurakami 13y ago
  In economics, we consider "capital (machinery, automation, software, etc) input" to be fixed. Only labor input can change. But in the long term capital investments can be made to reduce labor in the input mix. That's probably what you're referring to here.
  - robomartin 13y ago
    And in economics you are wrong. In the real world everything is variable. Many eons ago --before surface mount was commonplace-- I was employing engineering students to stuff circuit boards for a low volume product (a few thousand units per year). Part of the job entailed bending component leads based on how they had to be mounted to the board. I didn't have the money or the volume for fancy automated tools. We used prototyping-level hand tools to bend the components. After wave soldering we'd clip the leads by hand and test. Back then minimum wage was $6 or $7. I was paying the kids $10. I bought an old Bridgeport CNC milling machine for $1,800. I devoted a week to making better lead-forming tools and a mass lead cutting machine using a cheap router motor. Within a week the same worker could do nearly ten times more work. I eventually let go of half the crew. Costs are everything in business. If government unilaterally and unnaturally forces an increase in costs businesses will naturally respond with cost-saving measures and technology. This can also include taking the work to lower labor cost markets...forever. That's how it works in the real world. At one point an artificially high minimum wage will result in less jobs, not more.
yetanotherphd 13y ago
People often assume that the role of economists is to answer the question "will raising the minimum wage increase unemployment" or even "will raising the minimum wage increase inflation". In fact most economists would rather answer the questions "why should we increase the minimum wage" or "should we increase the minimum wage". Most economists would say that interfering with the market is bad in general. If we wanted to help people with low incomes, it would make more sense to decrease taxes for people on low incomes.
- thecage411 13y ago
  Most economists wouldn't say that because it is wrong. At least in the US, people with low incomes pay little to nothing in (income) taxes. They may face high "effective" tax rates due to losing low-income benefits, but that's a separate discussion.
  - yetanotherphd 13y ago
    If a person pays any income tax, it can still be lowered. And low income benefits are not a separate discussion. It is more fair and efficient to redistribute money to people on low incomes through taxes and other benefits than through raising the minimum wage.
    - thecage411 13y ago
      As another poster pointed out, some people with low income pay a negative income tax. I guess it could be "lowered" but I don't think that's what you meant, or at least you didn't make it clear. Do you have any evidence for the claim about efficiency regarding taxes vs minimum wage?
      - yetanotherphd 13y ago
        Either income tax means the actual income tax you pay to the IRS, in which case it can be lowered if it isn't already zero, or it means income tax minus various benefits, in which case it can be "lowered" by increasing benefits. It's not my fault that people are using different meanings for the term and somehow my writing is expected to be consistent with all of them :) >Do you have any evidence for the claim about efficiency regarding taxes vs minimum wage? No, I think theory is enough for this point.
bonemachine 13y ago
Y'know, a bump from $4.25 to $5.05 per hour is hardly "supersizing."
grecy 13y ago
Rather than worrying about raising prices or cutting the number of employees, what about if the burger joint just made less profit? McDonald's could double wages and it's operating profit would still be $5.5Billion. What's wrong with $5.5billion in profit? http://www.businessinsider.com/mcdonalds-could-double-wages-for-employees-and-make-less-money-2013-7#ixzz2aZHNwoL5 http://www.businessinsider.com/mcdonalds-could-double-wages-...
- Domenic_S 13y ago
  Read the article. One effect of raising wages would be that McDonald's would then have access to a larger pool of labor (people who would not work there at $7/hr but absolutely would for $15/hr). As a result, the poorest & least skilled labor may not benefit at all from a raise in wage, rather, they'd be priced out completely because of a huge influx of "better" workers.
  - drabiega 13y ago
    They said this in the article, but it doesn't make any more sense here than it did there. If unemployment remains the same, where are these 'better' workers coming from?
    - thecage411 13y ago
      One possibility: unemployment is defined as someone who is not working AND actively looking. If wages at McD went up to $15 an hour, some people who were not actively looking may enter the workforce.
      - drabiega 13y ago
        That is certainly true. However, if I had said 'employment is not decreasing' instead of 'unemployment is not increasing' it would still have been a valid critique without being vulnerable to that response, however.
        13y ago
drabiega 13y ago
If you don't get enough value from your employees to pay a living wage such that they need government assistance, then your business is a misallocation of resources. You are literally profiting at the expense of tax payers.

26 points by tristanj 13y ago

I think implied point was, that while raising minimum wage also forced fast food joint to raise prices, demand stayed same. Things to be wary about - this is limited experiment with two fast food joints. 1. This might be a fluke, with only two fast food places compared data sample is very small - at best it is case study. Apparently this is incorrect, see comment below. 2. Their monitoring period was only 11 months. Who knows what will happen in 5 years? All that said, I applaud their effort. Too many things are taken for granted in Economics because they "make" sense. Real world is so complex that things are often counter intuitive.

brey 13y ago
I don't think they only surveyed two - the article doesn't say how many or link to the paper, but this could easily be misread as 'they found two fast-food joints': The two found fast-food joints along the New Jersey-Pennsylvania border edit: found it: http://www.nber.org/papers/w4509 http://www.nber.org/papers/w4509 - 410 restaurants
norswap 13y ago
To me, it seems common sense that the fast-food will simply increase wage and keep the same amount of people. The fast-food is profitable up to a wage of X, but it prefers to pay the lowest it can to attract workers instead, which happens to be (by law) the minimum wage. And I'm convinced fast-foods can afford to pay employees more.
- aetherson 13y ago
  What's your theory for why competition doesn't solve this problem? That is, if I am opening a new Wendy's in this area you're postulating, and the deal is that I can have generous profits despite a substantial increase in my employee's wages, why don't I offer $1 more than the other fast food joints in the area and steal all of their best employees? I see a few possible explanations: 1. Fast food employees do not substantially differ in quality. The best fast food employee in the world is not really better than the median, in terms of their ability to drive additional business to a location. 2. The owners of the fast food restaurants in the area have formed a cartel, and are (flagrantly illegally) engaged in anti-competitive practices. 3. There is simply no competition among fast food restaurants -- the field is so sparse that when I open a new restaurant, there are no competitors to steal from. 4. The labor market is incredibly overpopulated such that every fast food restaurant can fill its ranks with employees who are first-tier, without raising their wages. What's your theory?
  - jacalata 13y ago
    From when I worked in fast food - 1, absolutely. The big corporations can't afford to allow variation in employee quality to change their food/experience, so instead it is all run as though they are all low-quality employees, which means it doesn't really benefit you to get higher quality employees (who in any case probably can't stand the micro-management and will quit as soon as they get another option).
    - aetherson 13y ago
      It seems kind of impossible to me for that to be the whole story. I mean, I totally buy that it doesn't matter how competent or incompetent a cook you are in terms of assembling McDonald's meals, but there are a lot of axes that employees can vary on: 1. Speed. Employees are going to be better or worse at turning orders quickly, and I can't see how good preparation from the corporate overlords can entirely compensate for this. 2. Graft/Wastage/Slackery. If your employees steal from you, that's going to affect your bottom line real fast. If they're dropping burgers on the floor all the time, that's a big deal. If they are chatting with each other instead of serving your customers, that's a big deal. 3. Customer Service. It has traditionally been the case that a bright smile, eye contact, and polite language has seen some reward among food service workers, and again it doesn't seem possible that McDonald's has figured out how to make all employees great at this. I would be provisionally ready to believe that the combination of corporate work to provide a simplified work experience plus a slack labor market has created a situation where there's a glut of potential fast food workers who are somewhere between the 60th and 99th percentile in worker quality, and the difference between 60th and 99th percentile is small enough that it doesn't warrant paying a higher wage.
      - jacalata 13y ago
        Well, where I worked they solved a lot of it with literally constant supervision and feedback by managers - like 'hey Jane, smile more! Tom, don't just stand there, wipe that bench again. And again, if you have nothing else to do.' That cuts stealing and slacking down pretty fast. Customer service - pretty clear scripts, constant reminders to smile, warnings about mystery shoppers (and actual mystery shoppers), to keep you focusing on it. A three part diagram of something like 'hello - SMILE - can I take your order please?' on each register. Speed - yea, I guess there's a few clumsy workers who just aren't going to be able to do it, but it's like a factory line - a small set of tasks that you pretty much memorize then do over and over. In very busy times where every second counts, you'd put the slightly faster people on the register and have about two runners for each three registers to actually bring the food, which is simpler. I guess there must have been a reasonable availability of workers behind this, because all the pressure was based on 'or you'll be fired'. Or they just relied on us taking them seriously - the city was at about 4% official unemployment (Brisbane, 2006), so it can't have been that bad a glut.
- brc 13y ago
  I live in a country with one of the highest mandated minimum wages in the world. Guess what I saw passing by a KFC the other day? An automated ordering kiosk. Just use a touch screen to place your order, swipe your card and your food will come out with your number. It is just wishful thinking to think that raising minimum wages makes people better off. At best, it just creates inflation for the very products that those workers buy. At worst, it cuts the rungs off the bottom of the job ladder and increases the incentive to permanently replace low-wage employees with automation. Most people start work on the lowest wage there is. I certainly did. Making it harder to employ people at low cost removes the ability to start working your way up the ladder. You can argue the morality of the minimum wage - whether it should exist or not, what the level should be, but you can't argue the marketplace effects.
  - swang 13y ago
    Are you talking about those self-serve kiosks that they have next to the ordering station or do these robots actually cook the food as well? The reason I ask is because no one wants to use those self-serve kiosks. They've had them everywhere as a means to "free" an employee up but what ends up happening is an employee has to come by and help the customer because 1) the interface sucks and 2) people dont want to read screens then tap then read more screens, they'd rather just tell a cashier what they want and have the cashier press the buttons. But if you mean the robots also serve and cook the food... where do you live again?
    - AjithAntony 13y ago
      > The reason I ask is because no one wants to use those self-serve kiosks. I could totally see automated ordering happening. Look at big box stores and self-checkouts. At my local home depot, walmart, and mejier, and smaller stores like county market, there are often only two cashiers for the whole store (I only go at night, i guess). One oversees a bank of 4-8 self-service check-outs, and the other handles one full service checkout. Self-service grocery store checkout is way more complicated than fast-food ordering. There are coupons, produce codes, scales, large qty of items, and the actual act of scanning and bagging. By intentionally under-staffing the full service lanes, people naturally adapt to self-service. This is the standard now. Imagine how efficient fast food could be. One touch for predefined meal, accept the defaults or maybe one more touch for size change, tap your NFC credit card or device, done.

ronaldx 13y ago

Fast-food employees are pretty much the canonical beneficiaries of a minimum wage law. Fast-food outlets can afford to spend more on salary (in that, they will still be profitable and it doesn't affect their viability as a business) but have no inclination to, and therefore must be forced by law. As an additional bonus, they can't outsource their work to another, cheaper state. Great - the minimum wage law works exactly as intended, in this particular case. It's less obvious that this applies to other industries. Will average households employ a domestic cleaner at minimum wage? Small, near-viable businesses where salary is the largest expense: what happens to them when the minimum wage increases? What happens to people who are thinking about starting businesses with that as a risk?

rogerbinns 13y ago
> they can't outsource their work to another, cheaper state They have done some of it for almost a decade http://www.nytimes.com/2006/04/11/technology/11fast.html?pagewanted=all http://www.nytimes.com/2006/04/11/technology/11fast.html?pag... They can also use more automation - "outsourcing" to machines. There are far more subtleties that the article didn't cover as you partially point out. There is a good article on cafehayek about it. (eg the nature of work done can change). http://cafehayek.com/2013/12/again-more-on-the-minimum-wage.html http://cafehayek.com/2013/12/again-more-on-the-minimum-wage....

nahname 13y ago

>It helps low-wage workers to raise their family above the poverty line. Wouldn't someone earning minimum wage define the poverty line?

itsybitsycoder 13y ago
What if there was no minimum wage -- would someone pulling in $10 a month be above the poverty line in that case? The poverty line is the minimum income you need to get by, not the minimum you can pull in with a full-time job.
chad_oliver 13y ago
No, because you can have different numbers of people supported by a single minimum wage job. A single mother might have to split her income among three people (herself and her kids), but an older woman who takes a job just to get out of the house is obviously not in the same category.
jacalata 13y ago
No - that's what is called a 'living wage' or sometimes 'family wage' to be clear that it should support a family and not just the worker. The minimum wage is in some places intended to meet that definition, but I don't know if the USA intended that when they created theirs, and because the federal minimum wage is only raised haphazardly instead of by indexing to living costs, it doesn't now meet it if it ever did (some states do index their minimum wage). I've heard people argue that minimum wage jobs are intended for teenagers who don't need to support anyone, for instance. The poverty threshold, on the other hand, is based on actual costs - apparently it is "three times the cost of a minimum food diet in 1963, updated annually for inflation using the Consumer Price Index, and adjusted for family size, composition, and age of householder." [http://www.irp.wisc.edu/faqs/faq2.htm http://www.irp.wisc.edu/faqs/faq2.htm]
lmkg 13y ago
IIRC, the poverty line in the US is the cost of food, multiplied by three. Minimum wage can be below this, depending on region and number of dependents. Poverty is defined by the means you can afford, and if that meets some rough threshold of basic necessities (food, shelter, possibly transportation, etc). In a perfect world where policy is defined justly and the economy can support it without repercussions, the minimum wage would be defined by the poverty line, no the other way around. In the real world, there's no fundamental reason why the minimum salary in an economy would pass any particular bare-minimum lifestyle threshold. I believe the magic number three was derived from one study decades ago, that found that food accounted for one-third of poor people's spending on average. There is no reason to think it has remained constant, or that it is stable to begin with, but that became the formula used in the US.

Zhenya 13y ago

In my opinion is all these studies are myopic. The reality is probably more complicated and can be broken down into a few steps Short term: Employees get paid more and the number of employees stays close to the same. The businesses must operate as they did before Medium Term: The quality of employee goes up. The people who are willing to trade their time for more $ is a different demographic as you climb the $/hour slope. Long Term: Businesses find a way to remove high costs out of their operating costs and will automate the jobs were possible. This will improve productivity of each paid employee but the total employee count will go down (all other things held constant). The productivity and manual labor has been shifted from person to machine.

hkmurakami 13y ago
In economics, we consider "capital (machinery, automation, software, etc) input" to be fixed. Only labor input can change. But in the long term capital investments can be made to reduce labor in the input mix. That's probably what you're referring to here.
- robomartin 13y ago
  And in economics you are wrong. In the real world everything is variable. Many eons ago --before surface mount was commonplace-- I was employing engineering students to stuff circuit boards for a low volume product (a few thousand units per year). Part of the job entailed bending component leads based on how they had to be mounted to the board. I didn't have the money or the volume for fancy automated tools. We used prototyping-level hand tools to bend the components. After wave soldering we'd clip the leads by hand and test. Back then minimum wage was $6 or $7. I was paying the kids $10. I bought an old Bridgeport CNC milling machine for $1,800. I devoted a week to making better lead-forming tools and a mass lead cutting machine using a cheap router motor. Within a week the same worker could do nearly ten times more work. I eventually let go of half the crew. Costs are everything in business. If government unilaterally and unnaturally forces an increase in costs businesses will naturally respond with cost-saving measures and technology. This can also include taking the work to lower labor cost markets...forever. That's how it works in the real world. At one point an artificially high minimum wage will result in less jobs, not more.

yetanotherphd 13y ago

People often assume that the role of economists is to answer the question "will raising the minimum wage increase unemployment" or even "will raising the minimum wage increase inflation". In fact most economists would rather answer the questions "why should we increase the minimum wage" or "should we increase the minimum wage". Most economists would say that interfering with the market is bad in general. If we wanted to help people with low incomes, it would make more sense to decrease taxes for people on low incomes.

thecage411 13y ago
Most economists wouldn't say that because it is wrong. At least in the US, people with low incomes pay little to nothing in (income) taxes. They may face high "effective" tax rates due to losing low-income benefits, but that's a separate discussion.
- yetanotherphd 13y ago
  If a person pays any income tax, it can still be lowered. And low income benefits are not a separate discussion. It is more fair and efficient to redistribute money to people on low incomes through taxes and other benefits than through raising the minimum wage.
  - thecage411 13y ago
    As another poster pointed out, some people with low income pay a negative income tax. I guess it could be "lowered" but I don't think that's what you meant, or at least you didn't make it clear. Do you have any evidence for the claim about efficiency regarding taxes vs minimum wage?
    - yetanotherphd 13y ago
      Either income tax means the actual income tax you pay to the IRS, in which case it can be lowered if it isn't already zero, or it means income tax minus various benefits, in which case it can be "lowered" by increasing benefits. It's not my fault that people are using different meanings for the term and somehow my writing is expected to be consistent with all of them :) >Do you have any evidence for the claim about efficiency regarding taxes vs minimum wage? No, I think theory is enough for this point.

bonemachine 13y ago

Y'know, a bump from $4.25 to $5.05 per hour is hardly "supersizing."

grecy 13y ago

Rather than worrying about raising prices or cutting the number of employees, what about if the burger joint just made less profit? McDonald's could double wages and it's operating profit would still be $5.5Billion. What's wrong with $5.5billion in profit? http://www.businessinsider.com/mcdonalds-could-double-wages-for-employees-and-make-less-money-2013-7#ixzz2aZHNwoL5 http://www.businessinsider.com/mcdonalds-could-double-wages-...

Domenic_S 13y ago
Read the article. One effect of raising wages would be that McDonald's would then have access to a larger pool of labor (people who would not work there at $7/hr but absolutely would for $15/hr). As a result, the poorest & least skilled labor may not benefit at all from a raise in wage, rather, they'd be priced out completely because of a huge influx of "better" workers.
- drabiega 13y ago
  They said this in the article, but it doesn't make any more sense here than it did there. If unemployment remains the same, where are these 'better' workers coming from?
  - thecage411 13y ago
    One possibility: unemployment is defined as someone who is not working AND actively looking. If wages at McD went up to $15 an hour, some people who were not actively looking may enter the workforce.
    - drabiega 13y ago
      That is certainly true. However, if I had said 'employment is not decreasing' instead of 'unemployment is not increasing' it would still have been a valid critique without being vulnerable to that response, however.
      - 13y ago

drabiega 13y ago

If you don't get enough value from your employees to pay a living wage such that they need government assistance, then your business is a misallocation of resources. You are literally profiting at the expense of tax payers.