[polar]

(05-20-2015 10:00 AM)lemko Wrote:  

(05-19-2015 08:34 PM)kbell Wrote:  

Won't the cost of the food have to simply go up to afford the help? And would people be willing to pay much higher costs for the same food?

Either that or the quality will have to be diminished to meet a certain price point.

A Big Mac will now consist of:

Two All ??? Patties
Spoiled Sauce
Wilted Lettuce
Fake Cheese
Sour Pickles
on a Stale Bun!

And the size of a slider.

[Grange]

(05-20-2015 09:32 AM)Suits Wrote:  

That's not actually how it works.

You're assuming that labour is these employer's only cost.

In reality, they also pay rent / property expenses, ingredients, supplies, licensing, insurance, electricity, gas, maintenance etc.

I'm just guessing, but let's say that cost of paying staff at Burger King for 1 hour (during a period where they sell 100 burgers) is $100 before the wage increase and then $150 after.

However, when you factor in property costs and other costs, the real cost of running the Burger King for one hour (while selling 100 burgers) is $300 before the minimum wage increase and $350 after.

Your per burger cost has gone up from $3 before the wage increase to $3.50 after the wage increase.

The result of the legal minimum wage increase will result in every burger on the meaning costing about 50cents more to the customer.

Employers would maintain the same margins after the slight increase, which customers wouldn't make a big deal about, because 50cents doesn't seem like much and it could be phased in gradually at a rate where they don't even notice that they are paying more.

The real problem is that with everyone who was making $10 an hour now getting $15 an hour, is that demand would increase for various products on the marketplace and when demand increases where supply remains stable, the price that sellers can get away with charging increases.

So, a little ways down the road, everyone is earning $5 more per hour, but due to the inflation that has occurred, they can't actually buy more with their money than before the minimum wage increase.

Your assumption that the demand for things is essentially inelastic on the margin sounds plausible in this case but can't be generalized to all of the things produced by low wage labor.

[FrenchCanadian]

Why not 15,50$ ? or 14,50$ or 16,00$ ???

What is this magic formula and what is it based on?
Minimum primary/basic needs??

Who decides what is the bare minimum for one to survive on... ?
....and could it be possible that different people have different ''minimum'' standards?

California 2020 ≈ North Korea

[Suits]

(05-20-2015 10:22 AM)Grange Wrote:  

(05-20-2015 09:32 AM)Suits Wrote:  

....

So, a little ways down the road, everyone is earning $5 more per hour, but due to the inflation that has occurred, they can't actually buy more with their money than before the minimum wage increase.

Your assumption that the demand for things is essentially inelastic on the margin sounds plausible in this case but can't be generalized to all of the things produced by low wage labor.

That's a fair criticism, but the point that I wanted to make was that expecting unemployment to double is insane.

To assume that all industries would be relatively unaffected would be a bold claim. Assuming that number of minimum wage jobs would be halfed, as eradicator has done, however, is definitely an even bolder claim.

The number of jobs lost would be determined instead by what percentage of the total cost of each unit goes to wages and, as you've very astutely pointed out, the elasticity of the price of those goods.

eradicator, on the other hand, seems to be arguing that an approximate doubling of minimum wage, will result in an approximate doubling of unemployment. I'm failing to understand his math and how he reached that very specific conclusion.

[DannyAlberta]

Raising the minimum wage across all of Alberta from $10.20 to $15.00/hr CAD was in the platform of the recently elected new government (albeit that is really only $12.50 US with the current difference in currencies). Not sure how long they will take to implement it.

I am pessimistic about it.

Peter Schiff, Stefan Molyneux and Captain Capitalism all make very convincing arguments that it is bad for the labour market and the local economy, particularly in the long-term. Unemployment, hiring freezes, replacement of low-skilled labour with automation and inflation for low-cost goods seem to be inevitable in such a move. Also, those things appear to hurt the people the most that a raised minimum wage is designed to help, i.e. younger and lower-skilled workers with lower disposal incomes.

The best the Keynesians seem to be able to come up with is that it will lead to a short-term increase in purchasing power for the minimum wage makers, and "has no long term marco-economic effect." Assuming that last part is even true (and I cannot see how changing the minimum wage of an entire Province won't have a macro-economic effect), what about the micro-economic effects that the Austrian economists warn about? We don't use minimum wage employees in the business I'm in, but the ripple effect across the local economy, which effects us way more than the world economy, could be significant.

Forbes magazine is tracking the changes to the Seattle economy reverberating from the recent change to $15/hr there. It isn't all wine and roses. Many small business, particularly in the food service industry, cannot cope.

[Grange]

(05-20-2015 10:39 AM)Suits Wrote:  

(05-20-2015 10:22 AM)Grange Wrote:  

(05-20-2015 09:32 AM)Suits Wrote:  

....

So, a little ways down the road, everyone is earning $5 more per hour, but due to the inflation that has occurred, they can't actually buy more with their money than before the minimum wage increase.

Your assumption that the demand for things is essentially inelastic on the margin sounds plausible in this case but can't be generalized to all of the things produced by low wage labor.

That's a fair criticism, but the point that I wanted to make was that expecting unemployment to double is insane.

To assume that all industries would be relatively unaffected would be a bold claim. Assuming that number of minimum wage jobs would be halfed, as eradicator has done, however, is definitely an even bolder claim.

The number of jobs lost would be determined instead by what percentage of the total cost of each unit goes to wages and, as you've very astutely pointed out, the elasticity of the price of those goods.

eradicator, on the other hand, seems to be arguing that an approximate doubling of minimum wage, will result in an approximate doubling of unemployment. I'm failing to understand his math and how he reached that very specific conclusion.

eradicator's hyperbole has something true in it: for certain segments of the population, unemployment might double or worse. The segments it's supposed to help. For example:



Among the young of each of these groups, those most likely to be at or near minimum wage, the percentages are much higher, and could feasibly double.

[Veloce]

The big question here is, How are companies going to manage this? Large, medium, and small sized companies/corporations will each have a different strategy, also depending on their sector.

Restaurant profits, if they exist at all, are small compared to other industries. If a restaurant can get 4% of their gross sales, they are doing exceedingly well. It usually takes a few years to get there, assuming they do at all. Considering the immense amount of work and start up required to operate a successful restaurant, it's no surprise why so many fail. In very rare cases, there are places that hit up to 8%, usually large corporate restaurant groups that have really nailed a successful formula.

Dishwashers typically make $9/hr. You cannot automate this position.
Line cooks make on average $11/hr. You cannot automate this position.

As of a few years ago, I got offered a sous chef position for $32,000. This was at a very highly regarded restaurant. And now you're telling me the DISHWASHERS make that much....haha okay.

Restaurants, and I imagine many other industries, are going to have to drastically change, and I don't see it for the better. This is going to be the end of restaurants as we know them. The classic kitchen structure was to have a hierarchy brigade that went something like:

Chef
Sous chefs
Cooks
Apprentices
Dishwashers

The chef took home the profits, the sous chefs made a low salary, the cooks made a low hourly rate, the apprentices worked for free, and the dishwashers made the lowest hourly rate.

This model was common until the last decade or so. I came up in this system. The idea was that you would work your way from the bottom and put in 10 years of crushing gruntwork to make it to the top spot and finally get your $60k/year (or more)

Now, you've eliminated the apprentices, and the two next categories of employees make as much as sous chefs! Ha! This isn't just going to eliminate some positions, this is going to drastically change the way restaurants operate. Say goodbye to fine dining. Fine dining restaurants are going to have to charge a ridiculous amount, you think they're expensive now? It's already common for fine dining restaurants to charge anywhere from $300-$700 per person, you're going to see restaurants at the high end charging $1000 per head soon enough.

[lemko]

(05-20-2015 11:02 AM)Grange Wrote:  

(05-20-2015 10:39 AM)Suits Wrote:  

(05-20-2015 10:22 AM)Grange Wrote:  

(05-20-2015 09:32 AM)Suits Wrote:  

....

So, a little ways down the road, everyone is earning $5 more per hour, but due to the inflation that has occurred, they can't actually buy more with their money than before the minimum wage increase.

Your assumption that the demand for things is essentially inelastic on the margin sounds plausible in this case but can't be generalized to all of the things produced by low wage labor.

That's a fair criticism, but the point that I wanted to make was that expecting unemployment to double is insane.

To assume that all industries would be relatively unaffected would be a bold claim. Assuming that number of minimum wage jobs would be halfed, as eradicator has done, however, is definitely an even bolder claim.

The number of jobs lost would be determined instead by what percentage of the total cost of each unit goes to wages and, as you've very astutely pointed out, the elasticity of the price of those goods.

eradicator, on the other hand, seems to be arguing that an approximate doubling of minimum wage, will result in an approximate doubling of unemployment. I'm failing to understand his math and how he reached that very specific conclusion.

eradicator's hyperbole has something true in it: for certain segments of the population, unemployment might double or worse. The segments it's supposed to help. For example:



Among the young of each of these groups, those most likely to be at or near minimum wage, the percentages are much higher, and could feasibly double.

Those are the "official" numbers. What are the real ones? I imagine they're a lot higher.

[TooFineAPoint]

(05-19-2015 07:17 PM)TigerMandingo Wrote:  

I think it's a good idea. Even low-skilled, low IQ, or whatever designation the elite have for them people deserve a decent wage.

Employers don't pay wages based on what third parties think they deserve, they pay them based on how much profit that particular function/employee brings to the bottom line.

[Que enspastic]

http://www.swifty.com/lifestyle/4767/14-...rld#page=9

Cost of a Big Mac in Australia is basically the same despite one country having a massively higher minimum wage.

Pizza at an Italian restaurant is like $13-16 (no 20% tips or hidden taxes), fine cuts of steak at the market is under $10, fresh fruit and veg at the market is cheap too.

US minimum wage in most states is appalling even when considering country is relatively cheaper on the whole.

[kaotic]

Good luck with that.

The $15 number isn't a number I'd want to live on.

[heavy]

Does California think its citizens are or want it's citizens to be choosing burger flipping as a career path?

[kerouac]

Inflation is pretty high already. I'm surprised it isn't $15 already. Even In N Out, our much beloved California fast food staple, is about twice the price that it was 10 years ago. The only thing that's still cheap in this country is shit that we import from China or elsewhere where they can get away with minuscule wages.



I'm not even going to go against Veloce, because he has a strong point that particularly affects smaller businesses and the traditional way they run things, but considering what a "living wage" needs to be in Los Angeles, it should be way higher than $15. The problem is, as a previous poster already mentioned, that there are way too many people willing to come here and live 10+ to a one bedroom apartment just to make $8/hr that holds everyone in the lower-income levels hostage.

[Captainstabbin]

(05-20-2015 11:38 AM)TooFineAPoint Wrote:  

Employers don't pay wages based on what third parties think they deserve, they pay them based on how much profit that particular function/employee brings to the bottom line.

And, when the cost of labor gets too high, they either eliminate the position or pick up and move to an area of lower labor cost - whether it's Detroit or the US in general.

Businesses don't even pay what the worker is "worth". They pay based on what competing labor can be purchased for. It's no different than any other resource a company uses. If you suddenly make wood twice as expensive in one city, a builder will simply buy it in another city.

Economic truths can't be overturned because a politician "feels" like an employee should make more money. The only time that works is when labor is a highly inelastic resource and that's usually only the case with highly skilled labor - and they don't need to worry about this problem.

But that's the entire argument in favor of forcing companies like McDonald's to raise it...they don't have machines ready to replace labor (yet) and they can't move the job overseas. But you can't fool economics forever, McDonald's will either raise prices and lose business, close marginally profitable (now rendered a loss) stores in affected areas or figure out a way to automate those jobs.

[SunW]

(05-20-2015 11:02 AM)Grange Wrote:  

What's the Asian unemployment rate?

Just a quick lesson for you all I learned in Communism clas ... I mean college - when you see any racial comparison and it excludes Asians, never trust it.

As for the topic, Mike weighs in:

Quote:

I side with Gonzalez on the "simple math" and Englander on competitive disadvantages.

This move is 100% guaranteed to cost jobs. Proponents of such measures inevitably say things like "studies show that hikes in minimum wages don't hurt employment."

Such studies only look at the "seen". Population trends and productivity have kept growth intact. Employment rose in spite of hikes in minimum wages, not because of those hikes.

The obvious fact is many struggling businesses will go under. That effect will be seen, but perhaps small. What we won't see is how many stores, businesses, and franchises will not open because of labor costs.

And it's hard now to estimate the push on businesses to further automate, but wage and benefit hikes pressure businesses in that direction.

[Dismal Operator]

At the end of the day, this is all about tradeoffs. You trade a higher number of employed workers being paid a lower wage for a lower number of employed workers being paid a higher wage. You trade some businesses benefiting from the increased sales thanks to increased purchasing power for some businesses having to downsize or shut down because labor costs rise.

The costs of this are going to have to be borne by someone, and as others have said it will be the middle class via potential wage freezes on the income end, and paying the same, or more for an inferior product on the expenditure end.

More broadly though, the real culprit behind the failure for American wages to keep pace with productivity has been a double barrel of inflation and regulatory compliance. On one hand, if you employ someone, you're instantly exposing yourself to all sorts of potential legal issues, which are increasing by the day. If you manage to do well and grow your business, you will more than likely have to deal with some sort of regulatory body which means wasting resources just to hire people for compliance purposes. Then of course, there are taxes and healthcare.

When it comes to actually producing the product, non-labor costs have risen generally for a long time, thanks to inflation. Those sort of costs are out of your control as an employer. If you want to buy raw materials for a project, you have to pay what the rate is. What you CAN do is stop raising your wages for a while, or even cut them. Or you can look to machines or outsource.

The gold standard was mentioned earlier, and I have mentioned it before on here as the biggest single reason explaining most of the economic problems we face today. As we get more productive, the end result is a greater volume of goods, or the same volume of goods produced at a much lower cost.

Either way puts a downward pressure on prices for goods and services, and to the extent that the entire economy is productive, prices across the board will fall. Look at computing. The ubiquity of computers across the globe is down to the fact they went from $25,000 for a piece of shit that could barely add properly to a few hundred for a product tens of millions of times more powerful than in the early days. If they still cost $25,000 a pop, they would be a toy for the rich, and no one else. It's the price mechanism, via declining prices, which spreads that progress to the masses.

Our current monetary system, unattached to gold, just enables prices to rise forever, no matter how productive the population is. And for the reasons I mentioned above, the wage is ALWAYS the last price to rise. A raise for most people just means you've now relatively returned to where you were a few years ago, rather than actually progressed further.

In a properly functioning system, where productivity gains meant price declines, you might see wages decline, but not as fast as everything else. Again, look at the tech world. Established companies have little problems paying relatively high wages even though their products have fallen in price over time. This is because their inputs have also fallen over time, which still enables their revenue to be greater than their costs, which is all that matters. The fact that the actual profit per unit might be a lower figure is more than made up for by the fact that volume of sales is larger.

Another way to see it, although not perfect, is to convert the wages of a earner in the past to ounces of gold. In 1968, the minimum wage was $1.60/hr, which was roughly 1/20 oz. Today, 1/20 oz. is about $60. Even at $15/hr, the 1968 minimum wage earner was 4 times better off in real terms than today. It's not a perfect comparison, because the $35/oz price in 1968 was an artificial price. But it is absolutely true that the 1968 earner was a lot better off in relative terms, despite the 2015 worker having the benefit of an extra ~50 years of increased productivity.

[VolandoVengoVolandoVoy]

Couldn't a company reclassify their hourly employees as salaried full time employees, pay them a full time minimum wage salary (40hrs@15/hr equivalent), and then require them to work 80-90 hours a week so they effectively pay $7.50 an hour?

[Socrates]

There are labor laws that restrict who can be labeled as "exempt" (salaried) employees. They have to demonstrably serve in a management capacity. I'm not positive, but I believe their calculated hourly rate can't fall below minimum wage either. I've seen rumblings that the requirements to be considered as "exempt" status are going to be made more stringent in the near future, and the minimum permissible salary will be upped as well.

[speakeasy]

A question for everyone, have past minimum wage hikes ever actually led to all the dire predictions we here about? Does anyone have case-studies proving that raising the minimum wage raised the unemployment rate?

(05-20-2015 12:38 PM)kerouac Wrote:  

Inflation is pretty high already. I'm surprised it isn't $15 already. Even In N Out, our much beloved California fast food staple, is about twice the price that it was 10 years ago. The only thing that's still cheap in this country is shit that we import from China or elsewhere where they can get away with minuscule wages.



I'm not even going to go against Veloce, because he has a strong point that particularly affects smaller businesses and the traditional way they run things, but considering what a "living wage" needs to be in Los Angeles, it should be way higher than $15. The problem is, as a previous poster already mentioned, that there are way too many people willing to come here and live 10+ to a one bedroom apartment just to make $8/hr that holds everyone in the lower-income levels hostage.

Los Angeles is a hopeless city. One of the main reasons I left. You can never do anything about the housing shortage there because NIMBYism and anti-development culture is so deeply entrenched that any effort to densify is shot down. Building more high-rise apartment towers would give LA a chance to produce affordable housing in sufficient numbers to make. This will never happen on any large scale there.

It's a city where wages are actually falling while cost of living in skyrocketing.

http://la.curbed.com/archives/2015/02/lo...es_lag.php

Between the NIMBYs, nonstop stream of poor immigrants who think LA is paradise(compared to where they left), incompetent government, low wages(for most), failed educational system, traffic and lack of good transit, unaffordable housing, it's a city without much of a future for anyone middle class. Without the good location that attracts wealthy people and the entertainment industry, L.A. would be Detroit with palm trees.

[eradicator]

(05-20-2015 10:39 AM)Suits Wrote:  

eradicator, on the other hand, seems to be arguing that an approximate doubling of minimum wage, will result in an approximate doubling of unemployment. I'm failing to understand his math and how he reached that very specific conclusion.

I never said we would see doubling of the unemployment, I think I said we would see unemployment greater than it was during the great depression, which it soon will be in Los Angeles as a result of the minimum wage shooting up.

It is not a bold claim at all:

many small businesses that rely on low wage workers will simply go out of business.

Other businesses will just fire half their staff and ask the half that keeps their job to pick up the slack. a music store that had 8 employees will now have 4. Those people here are those 4 people going to find jobs exactly when all other businesses are downsizing as well?

In what world can a business stay afloat by giving all of their employees raises when they are not actually generating more money, they are going to be selling the same amount of product. They will have to fire half their staff rather than double their wages. Surely this makes sense?

[Suits]

(05-20-2015 04:50 PM)eradicator Wrote:  

(05-20-2015 10:39 AM)Suits Wrote:  

eradicator, on the other hand, seems to be arguing that an approximate doubling of minimum wage, will result in an approximate doubling of unemployment. I'm failing to understand his math and how he reached that very specific conclusion.

I never said we would see doubling of the unemployment, I think I said we would see unemployment greater than it was during the great depression, which it soon will be in Los Angeles as a result of the minimum wage shooting up.

You're right. But you did argue this:

Quote:

You do the maths mister tuthmosis: if you double the minimum wage, the number of minimum wage jobs will be cut in half and that will leave a lot of workers out of work. A lot of small businesses that rely on low wage employees will go out of business.

Quote:

It is not a bold claim at all:

many small businesses that rely on low wage workers will simply go out of business.

Other businesses will just fire half their staff and ask the half that keeps their job to pick up the slack. a music store that had 8 employees will now have 4. Those people here are those 4 people going to find jobs exactly when all other businesses are downsizing as well?

In what world can a business stay afloat by giving all of their employees raises when they are not actually generating more money, they are going to be selling the same amount of product. They will have to fire half their staff rather than double their wages. Surely this makes sense?

No, it does not. As I explained above, a doubling of wages would only "logically" lead to half of the staff being let go if staff wages were 100% of the business' costs.

As I demonstrated in a previous post, due to other fixed and variable costs, a doubling of minimum wage will not lead to the doubling of the cost of producing one unit.

There may be layoffs, but actually if we are talking about industries where staffing is a high percentage of total costs to a business (maid-cleaning services, for example), it'd be far more likely that the business simply shut down, than that they expect half the people to do twice the work.

Most successful businesses are good at squeezing as much labour as they can out of people. If a company really had to lay off half its employees, it probably wouldn't be able to reach the same level of production and due to reduced scale, the price per unit would actually increase to a higher point, than if they simply kept all their employees on and increased the per unit price to cover the extra labour.

Remember, you still have to pay rent on your property lease, regardless of whether you have 5 employees working each day or 10 employees coming in each morning. If you can't pull a profit with ten employees that maximize your space, you definitely won't be pulling a profit with five employees who fail to maximize your work space. Businesses with elastic demand will raise prices and business with inelastic demand will simply go out of business altogether.

So, I'm not arguing that raising the minimum wage is a good thing. I don't think that it is smart at all. I'm arguing that your guestimation math does not reflect economic reality.

Also consider that roughly 25% of the US workforce earns less than $10.55 per hour. If what you're saying is true and employers responded to a minimum wage doubling by laying off half their workers, that lay off would mean that about 12.5% of the workforce would be laid off.

This minimum wage increase is just for Los Angeles, but if it was nation-wide and what are arguing is correct, the unemployment rate would not go to 30% based on your argument.

The current nationwide employment rate is 5.5%. If 12.5% of the work force was laid off tomorrow, we'd still be talking an employment rate of less than 20%, not the 30% you've predicted.

[lurker]

(05-20-2015 01:35 PM)VolandoVengoVolandoVoy Wrote:  

Couldn't a company reclassify their hourly employees as salaried full time employees, pay them a full time minimum wage salary (40hrs@15/hr equivalent), and then require them to work 80-90 hours a week so they effectively pay $7.50 an hour?

Sure, if they want to get fucked in the ass by a wage and hour suit. They would also end up paying more money in statutory benefits and health care and face ungodly training and inefficiency costs through massive turnover. Would you work 80-90 hours a week at minimum wage with no hope of advancement?

(05-20-2015 01:47 PM)Socrates Wrote:  

There are labor laws that restrict who can be labeled as "exempt" (salaried) employees. They have to demonstrably serve in a management capacity. I'm not positive, but I believe their calculated hourly rate can't fall below minimum wage either. I've seen rumblings that the requirements to be considered as "exempt" status are going to be made more stringent in the near future, and the minimum permissible salary will be upped as well.

In CA, salary for exempt employees has to be at least double minimum wage.

[Dantes]

I support this increase. I am
fortunate to come from an educated family who placed an emphasis on hard work and education. They paid for most of my education which helped me seize opportunities for well paid career and quality of life.

Many don't have the opportunities I had but still have a strong work ethic and want to move ahead, often supporting families in the process. Some of these workers hold more than one job and bust their asses. A few extra bucks might go along way in terms of their quality of life. Since I know how hard it is to get up every day and work, I don't criticize other workers no matter how menial their job.

[Tuthmosis]

As far as I can tell, no one has discussed this being a gradual change. It's to take place over the next five years. A lot of guys are talking as if this shit is happening overnight.

(05-19-2015 11:46 PM)KorbenDallas Wrote:  

It's almost as if a large amount of unskilled workers have flooded the United States labor market in the last 30 years that has stagnated wages and depressed the negotiating power of workers.

I agree this is at the core of the problem. We should take any CEO, small business owner, or individual caught hiring an illegal immigrant into the street, beat him to within an inch of his life, and toss his ass in jail for 15 years, minimum. People have to take personal responsibility for contributing directly to this problem.

We also should place tariffs on anything made with cheap overseas labor (e.g., Apple products) and put that money toward publicly funding our elections, so that banks, the Koch Brothers, George Soros, and Agri-Business can't determine the results anymore. If you think that's going to raise the price of products, so be it. I, for one, wish an iPhone were $1,000. Maybe American bitches would look up for once and cut down on the Starbucks Milkshakes. More likely, the higher-ups might have to reduce their fleet of yachts or cut down on their houses.

People talk a big game about "the founding fathers," but this is the kinda shit they did.

[Alfa]

Minimum Wage Adjusted for Cost of Living