If minimum wage were raised ...

[zeke]

I've seen it posted here that if minimum wages were raised 20%, then fast food prices would have to be raised by 20% to pay for the increase, and prices on other goods and services would also have to rise by 20% and the minimum wage workers would be no better off. Posters further said that liberals were too stupid to understand this basic premise.

Well, I'm a liberal and the idea that raising minimum wages by 20% would cause fast food prices, or prices on anything would have to rise by 20% is so completely inaccurate, I question the intelligence of anyone who believes this and I can explaiin why. The cost of the labour to make the burger is not the ONLY cost which is factored into the price of the burger. In fact, it's only a small fraction of the price of the burger. There's the cost of the ingredients, the capital costs of the equipment, furniture and fixtures in the store, the costs of mortgage/rent and utilities for the store, franchise fees and profit - none of which is affected by the wage increase given to the staff cooking and serving the burgers.

This is not just true of the fast food industry, but of any business which employs people at minimum wage. Wages are just one component of the costs of goods and services sold, so that raises in wages may increase the cost of producing the item, but they're not the ONLY cost involved. This is a detailed study which says that raising the minimum wage to $10.50 per hour would lead to a price increase of only 2.7%, which is a far more realistic figure than 20%.

http://www.peri.umass.edu/fileadmin/pdf/research_brief/PERI_fast_food_wages.pdf

MacDonalds and Walmart are two of the most profitable corporations in the world. Both do business in countries where the minimum wage is much higher than in the US, and both are very profitable in those jurisdictions. If Walmart can be very profitable in Canada, where minimum wages are over $10 an hour, taxes are higher, and costs generally are higher, why can't they pay decent wages in the US? Why are American taxpayers subsidizing Walmart employees with food stamps, and Medicaid while Walmart is the 2nd most profitable company in the US, and why do right wingers think this is a GOOD thing?

Shouldn't Walmart and MacDonalds (another of the most profitable corporations in the US whose employees heavily rely on government programs) be required to pay their employees enough in wages to keep their employees off public assistance?

my suggestion to you is to pick up a book on earned value & read it. Companies hire/fire people based on the profit margin that person produces. For example, on an engineering project, my engineers produce profit for me with the hours they put in. They also do so at different rates, so a senior engineer (who I pay more) might cut more so into my profit margin than a junior one. That isn't to say that I just use junior guys, since I might need a senior engineer to handle a tricky piece of the project. Ok, cost of doing business. Anyway, when you raise the minimum wage, you aren't getting 20% more profitability out of the same employee, you are just getting 20% more cost.

Restaurants price food items down to the ingredient. These prices rise & fall over time so they are not a constant. They also portion meals accordingly so they aren't wasting their profit margin. Watch any episode of Restaurant Impossible & you'll see what I am talking about.

Back to why McDonalds & Walmart make a profit in places like Canada with higher social costs. Simple. The earned value per employee allows them to do so. Plus, they might have different procedures on containing food costs, shipping fees, leases, etc. In other words, the business climate is different. However, the earned value margin gives them the flexibility to do this & still make a profit.

In other words; Canadians and other who still make a profit and pay their employees better (for doing the exact same job, selling the exact same product) are just better business
people than Americans.

Or are they less greedy?

Or did the Canadian government get tired of subsidizing employees with jobs and made the employer pay a better wage.

Of course, the Canadian McDonald's don't have to worry about health care costs for employees.

 

[Foxfyre]

Higher wages in Canada correspond with significantly higher costs of living in Canada. Significantly increase wages in the the USA and we will see significantly higher costs of living here too. Local purchasing power in the USA averages 25.4% higher than the same purchasing power in Canada.

The devil is always in the details isn't it.

The USA is not mistreating its people by not having a higher minimum wage.

Cost Of Living Comparison Between Canada And United States

 

[OnePercenter]

Higher wages in Canada correspond with significantly higher costs of living in Canada. Significantly increase wages in the the USA and we will see significantly higher costs of living here too. Local purchasing power in the USA averages 25.4% higher than the same purchasing power in Canada.

The devil is always in the details isn't it.

The USA is not mistreating its people by not having a higher minimum wage.

Cost Of Living Comparison Between Canada And United States

I see you link forgets to mention healthcare, which makes it moot.

 

[Dragonlady]

Canada also had Old Age Security which is an income supplement to low income seniors over and above the Canada Pension Plan which is like your social security.

We have a lot of cradle to the grave social programs which the US doesn't have which contribute to the higher costs of goods.

We also spend more money on education and infrastructure. All of this extra spending on people, improves the overall quality of life in Canada.

One thing that also impacts prices is higher energy costs because we live in a colder climate so we use a lot more energy. This impacts our costs across the board.

 

[Tresha91203]

I found cost of living to be similar enough. My lifestyle did not change much financially. We remained on the same rung of the ladder as we were in the US.

The countries are very different, though. Prices are higher, but so are wages. Children are less expensive. I dont have kids so didnt get all the details, but you get money every year for each kid. Real estate prices are astronomical in the cities, and it is common to rent out your basement to ease the sting; however, you can get land in more rural areas cheaper, and if you are willing to move out of the more moderate zone, really cheap.

Canadians are an awesome people. They are aliens, but cool ones ;-) Most of America think in terms of the individual, even the ones who think they are for the group. I did not find that worldview there from the Canadians.

 

[Roguewave]

When President Obama demands a 39% minimum wage increase for his chosen beneficiaries does he factor in the commensurate decrease in buying power of those on fixed income from the resulting inflationary spiral?

 

[Joe Steel]

When President Obama demands a 39% minimum wage increase for his chosen beneficiaries does he factor in the commensurate decrease in buying power of those on fixed income from the resulting inflationary spiral?

No. Why should he? Neither of those things will occur.

The decrease in buying power assumes prices will rise. However, the overwhelming weight of evidence says that won't happen.

 

[Iceweasel]

The decrease in buying power assumes prices will rise. However, the overwhelming weight of evidence says that won't happen.

Overwhelming? Prices haven't gone up in your neck of the woods?

 

[Roguewave]

When President Obama demands a 39% minimum wage increase for his chosen beneficiaries does he factor in the commensurate decrease in buying power of those on fixed income from the resulting inflationary spiral?

No. Why should he? Neither of those things will occur.

The decrease in buying power assumes prices will rise. However, the overwhelming weight of evidence says that won't happen.

It's good to know that business owners will just subtract the forced wage increases from their bottom line. We should not stop at 39% in bestowing favors then, and pry, say, 100% raises out of the bastiches, if there are no consequences. I love this kind of math.

 

[BillyZane]

When President Obama demands a 39% minimum wage increase for his chosen beneficiaries does he factor in the commensurate decrease in buying power of those on fixed income from the resulting inflationary spiral?

No. Why should he? Neither of those things will occur.

The decrease in buying power assumes prices will rise. However, the overwhelming weight of evidence says that won't happen.

It's good to know that business owners will just subtract the forced wage increases from their bottom line. We should not stop at 39% in bestowing favors then, and pry, say, 100% raises out of the bastiches, if there are no consequences. I love this kind of math.

What a bunch of nonsense and I can't believe it's allowed to be used in a supposed clean zone.

Plenty of businesses could pay better wages if they wanted to, they of course don't want to.

 

[SwimExpert]

Plenty of businesses could pay better wages if they wanted to, they of course don't want to.

So what makes you think that they'll simply roll and accept a lower profit margin if Congress passes a minimum wage increase?

 

[Foxfyre]

Higher wages in Canada correspond with significantly higher costs of living in Canada. Significantly increase wages in the the USA and we will see significantly higher costs of living here too. Local purchasing power in the USA averages 25.4% higher than the same purchasing power in Canada.

The devil is always in the details isn't it.

The USA is not mistreating its people by not having a higher minimum wage.

Cost Of Living Comparison Between Canada And United States

I see you link forgets to mention healthcare, which makes it moot.

No dear. Purchasing power is purchasing power. That 25% additional purchasing power would buy a lot of healthcare.

 

[BillyZane]

Plenty of businesses could pay better wages if they wanted to, they of course don't want to.

So what makes you think that they'll simply roll and accept a lower profit margin if Congress passes a minimum wage increase?

To some degree, yes.

If I'm selling hamburgers, I'm ALREADY selling them at the highest price my customers will pay. If my costs go up, my customers don't care, my burgers are only worth so much to them. Price them too high and they won't sell.

Some of you guys forget this simple economic fact, if you ever knew it in the first place. Labor costs are the same as any other cost and the customer doesn't care what your profit margin is. Of course inflation could change things, but there is no evidence that supports the theory that a min wage increase causes inflation.

 

[Roguewave]

...there is no evidence that supports the theory that a min wage increase causes inflation.

If you really believed that, then why on earth would you stop at a mere 39% raise in gifting your beneficiaries? When you are dealing in magic, ask for the moon.

 

[FA_Q2]

Plenty of businesses could pay better wages if they wanted to, they of course don't want to.

So what makes you think that they'll simply roll and accept a lower profit margin if Congress passes a minimum wage increase?

To some degree, yes.

If I'm selling hamburgers, I'm ALREADY selling them at the highest price my customers will pay. If my costs go up, my customers don't care, my burgers are only worth so much to them. Price them too high and they won't sell.

Some of you guys forget this simple economic fact, if you ever knew it in the first place. Labor costs are the same as any other cost and the customer doesn't care what your profit margin is. Of course inflation could change things, but there is no evidence that supports the theory that a min wage increase causes inflation.

Except that is absolutely incorrect. You are acting as though the prices and sales are static – they are not.
It is correct that they are charging what they perceive to be the best price point for their hamburgers BUT it is not the only price point. IF you decrease the profit margin per hamburger than the business needs to find a new price (likely higher) point. That means they will sell fewer hamburgers but at a better profit margin. If you eat into the profit margin by increasing wages then it is quite possible the company is going to find a new price point that gets them the best profitability.

So what does that mean?

It means that the burger joint is going to make fewer burgers ergo have fewer employees. They are also likely to have more expensive burgers. Who have you helped then? No one.

Fewer people working and STILL more expensive product.

 

[bayoubill]

If minimum wage were raised, presumably many people's wages would be bumped at least a little. Even though only a small percentage of workers earn minimum wage, the people who started out at minimum wage and got raises would get upset if brand new employees suddenly got as much as they did, so lots of wages would go up.

So how many jobs would be created or saved by this move -- for instance because of the increase in spending money available for local spending?

And how many jobs would be lost -- for instance because the increase in American wages would make offshore labor look more appealing, or because business owners' profit margin wouldn't support a 20% hike in labor costs so they would let a small portion of their workforce go and hope for more productivity from the rest?

The most immediate effect most folks would see would be that it costs more for their breakfast at McDonald's.... and it would take 'em longer to get it... and the place wouldn't be kept up as well as it had been before...

 

[SwimExpert]

Plenty of businesses could pay better wages if they wanted to, they of course don't want to.

So what makes you think that they'll simply roll and accept a lower profit margin if Congress passes a minimum wage increase?

To some degree, yes.

If I'm selling hamburgers, I'm ALREADY selling them at the highest price my customers will pay. If my costs go up, my customers don't care, my burgers are only worth so much to them. Price them too high and they won't sell.

Some of you guys forget this simple economic fact, if you ever knew it in the first place. Labor costs are the same as any other cost and the customer doesn't care what your profit margin is. Of course inflation could change things, but there is no evidence that supports the theory that a min wage increase causes inflation.

Burgers are not the economy. Goods and services are different. Some are more luxury, some are necessity, some are convenience. Most are some combination of the two. By providing something that the consumer requires the company has leverage over the consumer. Thus, raising the price of what you are selling is not likely to prove harmful, so long as the increase is not extraordinary.

But since you used burgers as an example, so will I. If I'm a greedy, evil business owner who sells burgers, and my labor costs go up, I can very easily offset those costs. Chances are, the increase will amount to somewhere around $.02 per meal. So I'm going to raise my prices $.10 a burger. And $.10 a soda. And $.05 per order of fries. Nothing extreme. Just something small that the consumer will scarcely register. If some people start to make some noise about it then I'll tell them the truth. That it's a reaction to the increased minimum wage. I'll also tell them some tripe about how I allegedly managed to minimize the price increases. This will make people think I care about them and will help them to quickly forget about their concerns. After all, it's just a few cents.

So while I'm spending an extra $.02 per meal in labor, I'm collecting an extra $.25 per meal in revenue. What a profit margin! Meanwhile, I'm not the only one doing this. Every other business is out there doing the same thing. Price increases here and there that are pretty negligible for the consumer, but a huge profit for the business. It doesn't take very long for a consumer doing grocery shopping to fill up their cart with food that is now $25 more expensive than before, across a month's food buying. Then there's that tiny extra they're paying in gas. Maybe only adds up to $10 a month. Then there's their miscellaneous things like soap, shampoo, toilet paper, shaving cream and razors. It's not that big of a deal, only $5 a month those nickel-and-dime price increases.

And one of the reasons I can get away with these little increases is because there are people who now have more money in their pockets. Their ability to pay has increased, so their willingness to pay increases. And since my price increases are seemingly negligible, my business is giving them a deal, it seems.

And it increases, on and on. That minimum wage worker quickly ends up in the same position as before. Their increased pay is worth no more to them than their previous pay. But you know the real kicker to all of this? There is one person who does actually benefit. And that's me, the greedy, evil business owner who managed to turn the increase of minimum wage into increased profit margins for myself, simply by nickel-and-diming each and every single person who walks through my door with seemingly negligible increases in my prices.

And this is how the rich get richer, and the poor get poorer.

 

[BillSPrestonEsq]

Though I'm hesitant to support any government intervention, I don't think raising minimum wage is necessarily a bad thing. I could be good for the country IF, at the same time government handouts were cut and the savings passed on to business in the form of a corporate tax cut.

It doesn't mean everyone would cooperate. But, it could give uneducated unskilled workers the ability to make a reasonable amount of money without hurting business and without rising prices for consumers or hurting other employees wages or work week.
Maybe even give those living off government the motivation to cut the cord and find a job. Especially if those government programs took cuts. Just an idea, I don't think m.w. requirements would be necessary if we didn't have the level of government involvement in business we do now, but since this is where we are at it could actually be a move towards less government involvement.

 

[Dragonlady]

I fail to understand why people are so deeply concerned about raising the minimum in wage when most people who work for minimum wage are employed by the most profitable companies in the USA - including MacDonalds and Walmart. These are companies which openly assist their workers in applying for government assistance programs to supplement their wages.

These are companies which pay their executives millions of dollars while helping their front line workers apt for food stamps. There is something very wrong with this. Especially considering these companies also operate very profitably in other countries with higher minim wages than the USA.

I don't think there should be cutbacks in programs which assist the poor but I do think that wages should be increased to the point that those who have full time jobs shouldn't need government assistance to get by.

 

[Politico]

Because who they are employed by is irrelevant.