Minimum Wage Increases May Backfire

Toro

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Sep 29, 2005
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I'm sympathetic about people making low wages, but I'm not sure if raising the minimum wage will help the poor, at least if it goes up by 40% as mentioned in the article.

This minimum wage business is tricky. On its face, raising the wage seems an easy way to fight poverty. Just pay low-wage workers more. After all, some scholarly research finds that, within reasonable limits, there’s no job penalty. A higher minimum doesn’t reduce employment much, if at all. By and large, that’s the position of the Obama administration, congressional Democrats and liberal groups. Unfortunately, it may not be that simple.

Democrats propose raising the present federal minimum of $7.25 an hour to $8.20 this year, $9.15 in 2015 and $10.10 in 2016. Assuming no job losses, almost 28 million workers would benefit by 2016, estimates the Economic Policy Institute (EPI), a liberal think tank. ... Someone working 40 hours a week at the minimum would see annual wages go from $15,080 now to $21,008 in 2016. ...

For starters, the minimum wage is a blunt instrument to aid the poor because it covers many workers from families that are well above the federal poverty line. By the administration’s figures, 53 percent of workers who would benefit from a higher minimum come from families with incomes above $35,000, including 22 percent with incomes exceeding $75,000.

Next, economists still disagree on the job effect. In studies — and their review of other studies — economists David Neumark and J.M. Ian Salas of the University of California at Irvine and William Wascher of the Federal Reserve conclude that higher minimums do weaken low-wage employment. ...

But scholarly research, regardless of conclusions, may be beside the point. Businesses don’t consult studies to decide what to do. They respond based on their own economic outlook. They may not react to a higher minimum wage now as they did in the past. Two realities suggest this.

First, the proposed increase is huge. By 2016, it’s almost 40 percent. Similar gains usually have occurred when high inflation advanced all wages rapidly. The minimum mainly kept pace. That’s not true today. Compared to average wages, the proposed hike in the minimum appears to be the largest since the 1960s.

Second, businesses have been reluctant job creators. They curb hiring at the least pretext. They seem obsessed with cost control. The Great Recession and the 2008-09 financial crisis spawned so much fear that they changed, at least temporarily, behavior. Firms are more cautious.

Robert J. Samuelson: Minimum-wage mirage? - The Washington Post
 
I think the curbing hiring argument might not apply to minimum wage earners. When one thinks about curbing hiring it usually refers to more median range salaries.
 
Economists agree: Raising the minimum wage reduces poverty

One funny part of watching journalists cover the minimum wage debate is that they often have to try and referee cutting-edge econometric debates. Some studies, notably those lead by UMass Amherst economist Arin Dube, argue that there are no adverse employment effects from small increases in the minimum wage. Other studies, notably those lead by University of California Irvine economist David Neumark, argue there is an adverse effect. Whatever can we conclude?

But instead of diving into that controversy, let’s take a look at where these economists, and all the other researchers investigating the minimum wage, do agree: They all tend to think that raising the minimum wage would reduce poverty. That’s the conclusion of a major new paper by Dube, titled “Minimum Wages and the Distribution of Family Incomes.”
 
The minimum wage debate is becoming moot. Layoffs due to Ocare overly narrow networks have already begun and that will drive up UE.
 
i hope it does backfire.....I hope it hurts so much they cry for years to come. I hope it makes life worse and worse for the ones who keep voting for these dumb asses who promising the world for free on someones elses dime.
 
i hope it does backfire.....I hope it hurts so much they cry for years to come. I hope it makes life worse and worse for the ones who keep voting for these dumb asses who promising the world for free on someones elses dime.
You really think that will change voting habits this side of the grave? I find your reasoning dubious.
 
i hope it does backfire.....I hope it hurts so much they cry for years to come. I hope it makes life worse and worse for the ones who keep voting for these dumb asses who promising the world for free on someones elses dime.
You really think that will change voting habits this side of the grave? I find your reasoning dubious.

no, i dont think it will change their voting habits. All i really care about is it hurts the ones who voted for to bring it about.
 
I think the curbing hiring argument might not apply to minimum wage earners. When one thinks about curbing hiring it usually refers to more median range salaries.

I think you forget that it is easier, and less expensive, to hire one man at a decent salary to maintain robots to do the menial tasks than it is to hire 10 minimum wage workers. Even the post office is switching to robots rather than hire people to do the scut work. Keep kicking up the minimum wage and you might even price that maintenance guy out of a job.
 
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I don't look to Bill Gates for economic analysis but I will cede that small increases will not have that much of an effect in the short run.

First, Gates reasoning is incomplete. The substitution effect will be partially mitigated by an income effect as low wage workers will spend more. The economic debate is about how larger increases than we have historically had will work out, and nobody really knows.

There is a further issue. Can we grow an economy by hanging on to low wage, low productivity jobs? Not very well.
 
i hope it does backfire.....I hope it hurts so much they cry for years to come. I hope it makes life worse and worse for the ones who keep voting for these dumb asses who promising the world for free on someones elses dime.

What a profound description of the idea of people to no longer be working for something slightly above a slave wage. How awful to see people become able to buy a TV set. Where do they get off thinking they would have such a right, just because of working their asses off for 40 hours a week. Just shocking!!! :doubt:
 
I think the curbing hiring argument might not apply to minimum wage earners. When one thinks about curbing hiring it usually refers to more median range salaries.

I think you forget that it is easier, and less expensive, to hire one man at a decent salary to maintain robots to do the menial tasks than it is to hire 10 minimum wage workers. Even the post office is switching to robots rather than hire people to do the scut work. Keep kicking up the minimum wage and you might even price that maintenance guy out of a job.

Relatively, there are very few jobs that robots can do in lace of human beings. And where they can be used, robots aren't always as economical as one might think. In a sense a microwave oven is a robot which take the place of a human heating food with fire. I just threw out a microwave last month. Bought a new one. $60 (and that was one of the cheaper ones).
 
When I owned a business, my biggest problem was the large # of people in my sales area whose incomes were too low to enable them to buy my products. My wish was for big raises in the minimum wage.
 
When I owned a business, my biggest problem was the large # of people in my sales area whose incomes were too low to enable them to buy my products. My wish was for big raises in the minimum wage.

:lmao:

and what stopped you from paying them more???? It was after all.... your business.
 

I don't look to Bill Gates for economic analysis but I will cede that small increases will not have that much of an effect in the short run.

First, Gates reasoning is incomplete. The substitution effect will be partially mitigated by an income effect as low wage workers will spend more. The economic debate is about how larger increases than we have historically had will work out, and nobody really knows.

There is a further issue. Can we grow an economy by hanging on to low wage, low productivity jobs? Not very well.

In other words, Gates got it right, but you don't want to admit it.
 

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