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A minimum wage would stop companies indirectly sucking the 'welfare-tit', where their employees are forced to have welfare/food stamps in order to just survive.

A minimum wage would stop companies indirectly sucking the 'welfare-tit', where their employees are forced to have welfare/food stamps in order to just survive. http://www.theguardian.com/commentisfree/2013/oct/30/mcdonalds-helpline-food-stamps-minimum-wage http://www.theguardian.com/commentisfree/2013/oct/30/mcdonal...

zo1 12y ago
Probably would, but it's really just shifting the costs elsewhere. With the "welfare-tit" as you call it, the taxpayers are paying the cost of the poorish via welfare paid for by taxes. But when you increase the minimum wage, it'd end up just shifting the costs to higher overall prices, which everyone will bear... including the poor it's meant to help. I suppose you could argue that this might cut into business owners' profits, but that's a stretch. As they'd most likely just raise prices to cover the new operating costs.
- rahimnathwani 12y ago
  "As they'd most likely just raise prices to cover the new operating costs." If they could raise prices to completely offset an increase in costs, they would have done that already, and have higher profits as a result. They may raise prices, but it will not be revenue-neutral of profit-neutral for them.
  - benmmurphy 12y ago
    if you face strong competition then it may not be possible to raise prices even if consumers would pay higher prices.
    - isleyaardvark 12y ago
      The competition would also have to deal with an increased minimum wage.
- bakhy 12y ago
  "it'd end up just shifting the costs to higher overall prices, which everyone will bear" -- not true. fact is, everyone bears those costs now, through the tax money going out for those social security programs. minimum wage will make it a burden just of those businesses, and not obligate society as a whole to subsidize their workers pay. as for the supposed price hike, rahimnathwani already covered that ;)
  - fdr234rd22 12y ago
    This argument really needs to stop. 89% of minimum wage workers do not live in poor households. (see my Marginal Revolution citation on this page). It's extremely misleading to insinuate otherwise.
    - bakhy 12y ago
      what about that McDonalds story, fabrication? also, for me it is far more improtant to note that, if i may guess, >90% of companies paying most of their workers a minimum wage do not operate on zero profit.
  - zo1 12y ago
    I take it you didn't read the rest of my comment? The business will just shift the costs off to the consumers again. They will not "take one for the team" by reducing their profits.
- digitalengineer 12y ago
  Thank you for your feedback. It would increase the prices of fast food, but not everyone would bear the costs. Just the customers of McDonalds. As it should be in my humble opinion. (McDonalds in the Netherlands pays a 23 y/old $ 11,23 / € 8,24 an hour).
- eitally 12y ago
  They will likely (some) raise prices with this excuse, but really just to increase their margins. I have to admit, this would be tempting.
- whimsy 12y ago
  • Studies of the impact of minimum wage increases on restaurants’ operating costs find that an increase of 10 percent in the minimum wage increases operating costs by about 1 to 2 percent. • Researchers find small one-time price increases in the restaurant industry (of about 0.7 percent following a 10 percent minimum wage increase), but not in other industries. from "University of California, Berkeley study: Who Would be Affected by an Increase in Seattle’s Minimum Wage?" which is one of the two pieces of research commissioned in the development of the Seattle ordinance.[1] The research explored empirical evidence provided by similar minimum-wage increase ordinances in other cities. (9 total, I believe, including San Francisco.) [1] http://murray.seattle.gov/wp-content/uploads/2014/03/UC-Berkeley-IIAC-Report-3-20-2014.pdf http://murray.seattle.gov/wp-content/uploads/2014/03/UC-Berk...
  - zo1 12y ago
    Okay, and? We all know that operating costs will rise if the wages paid to employees goes up. The question is, how will those cost increases be paid for. Less profit, higher price of service/product? Not to mention that a 1-2% in operating cost could be a drastic reduction in profit, or increase in price. It depends on the business. And the proposed increase is 100%, not 10% as cited in the article so can we assume that "operating costs will go up by 10-20%? Not sure.
  - todd8 12y ago
    You continue to cite this study in several comments here. It's true, that under the assumptions of the paper, a 10 percent increase of the minimum wage increases operating costs by about 1 to 2 percent. However, the paper assumes that this increase only affects a small number of workers by a small amount (1/3 of the workers have their wages increased by 5%). A 100 percent increase in wages will affect almost everyone working in the restaurant industry (not just the 1/3 of workers the paper assumes). And it will affect them by a large amount, not 5%. Thus, the results of the paper don't simply scale linearly with the size of the increase in the minimum wage. Under simple assumptions (of the kind made by the paper cited) I calculate that costs to restaurants will rise by over 30%. It could end up more or it could end up less, the paper didn't provide a distribution of wages in the restaurant industry which would more accurately answer this question. In any case, you should realize that this is a major increase in costs to restaurants, not just 1 or 2 percent. The numbers I've seen for profit margins in restaurants range from 2 to about 3 percent. Since 1/3 of costs in restaurants come from labor, a 30% increase in labor costs will mean that restaurants will have a negative profit margin of around 7 or 8 percent after the new minimum wage goes into effect. This means that eventually there will likely be less workers, higher prices for food, and less restaurants.
yummyfajitas 12y ago
Do you believe reducing welfare/food stamps would increase or decrease costs for employers? Please explain your reasoning.
fdr234rd22 12y ago
That is wrong. Minimum wage workers are not in dire poverty. "Only 11.3% of workers who will gain from an increase in the federal minimum wage to $9.50 per hour live in poor households." http://marginalrevolution.com/marginalrevolution/2014/01/how-well-does-a-minimum-wage-boost-target-the-poor.html#sthash.2ZgEi7g4.dpuf http://marginalrevolution.com/marginalrevolution/2014/01/how...

zo1 12y ago

Probably would, but it's really just shifting the costs elsewhere. With the "welfare-tit" as you call it, the taxpayers are paying the cost of the poorish via welfare paid for by taxes. But when you increase the minimum wage, it'd end up just shifting the costs to higher overall prices, which everyone will bear... including the poor it's meant to help. I suppose you could argue that this might cut into business owners' profits, but that's a stretch. As they'd most likely just raise prices to cover the new operating costs.

rahimnathwani 12y ago
"As they'd most likely just raise prices to cover the new operating costs." If they could raise prices to completely offset an increase in costs, they would have done that already, and have higher profits as a result. They may raise prices, but it will not be revenue-neutral of profit-neutral for them.
- benmmurphy 12y ago
  if you face strong competition then it may not be possible to raise prices even if consumers would pay higher prices.
  - isleyaardvark 12y ago
    The competition would also have to deal with an increased minimum wage.
bakhy 12y ago
"it'd end up just shifting the costs to higher overall prices, which everyone will bear" -- not true. fact is, everyone bears those costs now, through the tax money going out for those social security programs. minimum wage will make it a burden just of those businesses, and not obligate society as a whole to subsidize their workers pay. as for the supposed price hike, rahimnathwani already covered that ;)
- fdr234rd22 12y ago
  This argument really needs to stop. 89% of minimum wage workers do not live in poor households. (see my Marginal Revolution citation on this page). It's extremely misleading to insinuate otherwise.
  - bakhy 12y ago
    what about that McDonalds story, fabrication? also, for me it is far more improtant to note that, if i may guess, >90% of companies paying most of their workers a minimum wage do not operate on zero profit.
- zo1 12y ago
  I take it you didn't read the rest of my comment? The business will just shift the costs off to the consumers again. They will not "take one for the team" by reducing their profits.
digitalengineer 12y ago
Thank you for your feedback. It would increase the prices of fast food, but not everyone would bear the costs. Just the customers of McDonalds. As it should be in my humble opinion. (McDonalds in the Netherlands pays a 23 y/old $ 11,23 / € 8,24 an hour).
eitally 12y ago
They will likely (some) raise prices with this excuse, but really just to increase their margins. I have to admit, this would be tempting.
whimsy 12y ago
• Studies of the impact of minimum wage increases on restaurants’ operating costs find that an increase of 10 percent in the minimum wage increases operating costs by about 1 to 2 percent. • Researchers find small one-time price increases in the restaurant industry (of about 0.7 percent following a 10 percent minimum wage increase), but not in other industries. from "University of California, Berkeley study: Who Would be Affected by an Increase in Seattle’s Minimum Wage?" which is one of the two pieces of research commissioned in the development of the Seattle ordinance.[1] The research explored empirical evidence provided by similar minimum-wage increase ordinances in other cities. (9 total, I believe, including San Francisco.) [1] http://murray.seattle.gov/wp-content/uploads/2014/03/UC-Berkeley-IIAC-Report-3-20-2014.pdf http://murray.seattle.gov/wp-content/uploads/2014/03/UC-Berk...
- zo1 12y ago
  Okay, and? We all know that operating costs will rise if the wages paid to employees goes up. The question is, how will those cost increases be paid for. Less profit, higher price of service/product? Not to mention that a 1-2% in operating cost could be a drastic reduction in profit, or increase in price. It depends on the business. And the proposed increase is 100%, not 10% as cited in the article so can we assume that "operating costs will go up by 10-20%? Not sure.
- todd8 12y ago
  You continue to cite this study in several comments here. It's true, that under the assumptions of the paper, a 10 percent increase of the minimum wage increases operating costs by about 1 to 2 percent. However, the paper assumes that this increase only affects a small number of workers by a small amount (1/3 of the workers have their wages increased by 5%). A 100 percent increase in wages will affect almost everyone working in the restaurant industry (not just the 1/3 of workers the paper assumes). And it will affect them by a large amount, not 5%. Thus, the results of the paper don't simply scale linearly with the size of the increase in the minimum wage. Under simple assumptions (of the kind made by the paper cited) I calculate that costs to restaurants will rise by over 30%. It could end up more or it could end up less, the paper didn't provide a distribution of wages in the restaurant industry which would more accurately answer this question. In any case, you should realize that this is a major increase in costs to restaurants, not just 1 or 2 percent. The numbers I've seen for profit margins in restaurants range from 2 to about 3 percent. Since 1/3 of costs in restaurants come from labor, a 30% increase in labor costs will mean that restaurants will have a negative profit margin of around 7 or 8 percent after the new minimum wage goes into effect. This means that eventually there will likely be less workers, higher prices for food, and less restaurants.

yummyfajitas 12y ago

Do you believe reducing welfare/food stamps would increase or decrease costs for employers? Please explain your reasoning.

fdr234rd22 12y ago

That is wrong. Minimum wage workers are not in dire poverty. "Only 11.3% of workers who will gain from an increase in the federal minimum wage to $9.50 per hour live in poor households." http://marginalrevolution.com/marginalrevolution/2014/01/how-well-does-a-minimum-wage-boost-target-the-poor.html#sthash.2ZgEi7g4.dpuf http://marginalrevolution.com/marginalrevolution/2014/01/how...