Min Wage up by $2+ an hour? What are they REALLY planning.

[Nikepallas]

I was on my way to work today (which pays better than min wage but not by much--perhaps I am a bit concided I think it should pay 10 an hour...) Anyways my radio station was fading in an out and I was trying to listen but from what I heard Senator Kennedy wants to raise the min wage to $7. 25(I think) an hour.


I can hear the complaints already about how it would make the economy suffer BUT I am wondering if anyone has ever done a study on how much the economy suffers after a wage increase. I can only see it as having a good impact on it.


I also heard they wanted to tack it onto a bill(couldn't hear which bill it was) But I am wondering if this is just a way to get an unpopular bill passed or a popular bill tabled (depending on the spin.)

[Zuni]

1. I thought that giving people more money helped the economy

I think it would be a far better boost than giving another 500 or so billion to fat cat investors...:eyes:

[Canuckistanian]

2. Nah.

Studies show that if you give more money to the poor, they tend to blow it all on drugs or at the racetrack. /sarcasm off

[Nikepallas]

6. I can't image that. I know Hubby and I would love an increase just so we

can pay bills. I think the country needs a living wage to help people .



My mother was a single parent who was lucky and made 20+ a year which would have been okay for just her herself (we live in an area where a person could get by and live comfortably on that.) BUT she was raising my sister and I. Now because she was making what she was she couldn't get any help from the gov't BUT she made too little to really make it easy on her.



That idea needs to be changed in a lot of people's minds.

[AP]

11. Less personal debt financed at 16%-25% (not including fees/penalties)?

It would kill credit card company profits!

So Kennedy should tack this on to the credit card company profit protection bill (the new Bankruptcy legislation).

[Tux]

3. Generally

Prices go up. It reflects wages but nowdays, prices are artificially increased (software and video games are good examples). If it goes through, everything will increase dso the proportion will remain the same or get worse.

No matter what, we're screwed by greedy CEOs and fundie Christians.

[Stand and Fight]

17. Hogwash!

Prices are always going up! You speak as if we are at a stand-still and then the minimum wage increases and ((BAM!!!!)) prices go rise. There is no study that substantiates that to my knowledge... Even after googling, I could not find anything to confirm that bit of "knowledge" you imparted... Nonetheless, I do agree with you that prices are always being played with in our laissez-faire economy, and it is literally screwing the working man over.

[RaleighNCDUer]

24. Not if they get their shit together and make it indexed to inflation.

If indexed to inflation, the minimum would hold at a steady relative rate, instead of decreasing in value every year that it does not get an increase, as is the current system. The minimum wage today is worth something like 15% less than it was worth in '94 when it went up to its current level.

If that was enforced, and the corporations had to reduce CEO compensation by .05% to cover the increase, well that would just break my heart.

[CitySky]

26. i think the story mentioned that right now,

minimum wage to average wage ratio is at an all-time low

[punpirate]

4. Studies on living wage...

... laws instituted in specific locales or states indicate that the economy improves--lower wage earners pretty much have to spend what they make to keep body and soul together, so any extra income goes into quality of life improvements almost immediately. Businesses that were sure that having to pay their employees more would hurt the bottom line found that their overall business improved, usually to the extent that there were net gains.

The economics are sound--in an economy largely driven by consumer spending, giving ordinary consumers more to spend gets a lot more money circulating than handing tax cuts to the already wealthy.

[AP]

12. This is basically Keynsian/New Deal economics: spread wealth down to

people who work for a living and you're planting the seeds for a better overall economy.

The guaranteed wealth rich take a hit in the short term, but it creates a bigger pool for the people willing to work for wealth to strive for.

[Langis]

18. NO! this is all wrong

Don't you know that if you raise the minimum wage it will make employees go broke! Then they will fire people and everyone will suffer! Damn liberals....

[amjucsc]

5. The drawback is...

that corporations will probably offset the increase in their expenses by raising prices. Thus if the guy behind the counter at McDonalds is making more money the cost of your hamburger goes up as well. Do this to an entire economy and you get inflation. I don't think the inflation would be enough to entirely cancel out a $2 wage increase, but I'm not an economist...

[Discord]

7. do away with federal minimum wage entirely.

Let each state set the minimum wage based on the current average cost of living. I noticed someone saying that they wanted to make $10/hour at thier job. All I could think was... wow! I make more than that and I can't even get by without 2 roommates working full time to split the bills. In Massachusettes, I would need to be making over $25/hour to even CONSIDER living being single and living alone here. Rent for a 2 bedroom apartment within a 10-15 mile radius from Boston average at about $1500/month before anything like utilities or other necessary expenditures like food and transportation to get to and from work. Now about 8 years ago while I was living in Louisiana for a couple years, I was making $8/hour and getting by just fine.

[JaneDoughnut]

9. Definitely depends on where you live

Shreveport and most of LA has very low living expenses. When I first started college, I was able to get by on minimum wage, though not very comfortably, and it sure wouldn't have worked if I was raising a family. Today I'm making abt 12.50/hr, working slightly less than 40 a week, and feel pretty darn rich.

Related topic - who read the article on the home page about basic income guarantee and what do you think? I had never heard of it before.

[Zuni]

14. That is a good point

making a certain amount in California or New york might leave you starving and cold, but in Florida or Alabama it is enough to live more than comfortably

[AP]

13. There is so much room for corporate profits to absorb this hit before...

...they were forced to pass it on to the consumer, and there are not so many people who make minimum wage (ie, people who would see imediated wealth increases) that it would cause inflation.

They'd probably increase prices a little when the knock-on effects came to pass (a wealthy middle class), but they'd be held back by all the formerly poor who open their own restaurants and compete for customers with McDs -- ie, there'd always be competition, and unless ALL the restaurants and fast food places colluded to protect 30% profits margins, there'd be price competition holding prices at a reasonable level.

Furthermore, McDonalds is often a desperation purchase for people who have no time because they're working 60 or 70 hours a week. If people had more time and more money, they'd probably not spend so much at McD's -- McDs would be forced to price compete with a lot of other types of restaurants which would see increased business and profits.

[amjucsc]

25. But they wouldn't...

Bear in mind that McDonalds isn't the only company in America that pays minimum wage, or near minimum wage. Virtually all fast food joints (In and Out Burger being the sole exception of which I am aware) and a lot of restaurants pay poorly. They'll all come under the same bottom line pressure, and they'll all know that their customers have more cash to spend.

While a lot of corporations could probably absorb an increase in their business costs, major corporations are generally under significant pressures to increase their earnings in order to satisfy shareholders. If McDonalds growth rate slackens investors will head for the hills, and the company's executive officers will soon find themselves looking for employment. This holds truth for just about any other company you could name. So if costs go up, you can bet prices will as well. Also the increase in minimum wage would probably have spillover effects. Companies that pay a bit over minimum wage might also have to hike their own wages in order to attract employees who otherwise might give a second thought to working at McDonalds, and so on.

Oh, and I doubt that you'll see a lot of people making $7.50 an hour opening their own restaurants. And even if they do manage that trick they probably won't make it very far-- chains killed Mom n'Pop joints before, and I doubt the later will make a come back.

Anyway, I'd like to be wrong about this.

[AP]

28. The late 40s, 50s, parts of the 60s show you what happens to an economy

that pushes more wealth down to the people who work for a living: it makes economy grow, and it creates a pot of wealth people willing to work for it can get, so even the rich get richer.

The argument about satisfying shareholders raises an entirely separate matter, and that's that corporations today are often run in a way designed to drive up share price over short periods of times so that insiders can get in and out with big profits.

If McDonalds could no longer report big profit margins so that they could inflate stock prices so that insiders can get out with big profits taxed at low rates, then maybe they'll just try to go back to the old business model: conducting business for the sake of the business rather than for the sake of Wall St and the few insider shareholders who get a head start on the 401(k) schmoes who buy on the peaks from the insiders.

McDonalds is not going to be killed by having to share some of the massive profits they make with the people who work to create them, and it's not going cause inflation to have a more fair allocation of the wealth capitalism creates.

It's going to improve the economy, and I'm not sacrificing a good economy so that McD's can give Wall St orgasms with short term good news, which is actually part of an overall system that is probably driving America to the brink of economic collapse by further concentrating wealth in fewer hands (which they do twice: once by not paying fair wages, and second time when insiders sell all their shares to middle class 401(k) holders who don't realize the true nature of the ponzi scheme that is the capital markets).

[amjucsc]

30. While I don't argue that a change in attitudes on Wall St would be good...

...I don't think major corporations are going to move away from the current dynamic that concentrates on meeting the next quarterly earnings estimate.

As an investor I would actually greatly appreciate it if companies switched over to a longer term view (the world needs more Warren Buffets) but I don't see that happening any time soon.

Thus while I'd agree that corporations won't be forced to raise wages, I'd be very surprised if they don't.

At, any rate, a pleasure debating with you.

[AP]

31. I think the sort of reforms that Levitt and Clinton pushed for...

...would have taken some of the boom and bust, insider-profit dynamics out of the stock market.

So there is definitely a way to reform Wall St to force it to be more honest, and to make sure that the public markets work fairly for all s/h'ers and not just the connected ones.

In any event, I'm not going to turn my back on raising the minimum wage -- which would have positive FDR/Keynsian benefits in a society which right now has some of the most extreme polarizations of wealth in our history (how much has the ratio of average:CEO salary increased in the last 30 years? -- that's where they're really going to find the money to pay for these raises!). And I'm definitely not going to turn my back on it so that corporations can pad their quarterly reports with happy talk so that insiders can dump shares on unsuspecting 401(k) holders, on mutual fund managers who don't have clients' best interests at heart, and on whomever Martha Stewart's broker was unloading her shares (some doctor in Kansas City who didn't have the privelege of being Waksal or Stewart or a friend or close family member??)

[Psephos]

8. The Law of Unintended Consequences may apply here

Labor is one of the costs that contribute to the price that must be charged. Others are raw materials, overhead, capital investments (machinery, building, etc.). I've grossly oversimplified here - but generally, a company that has just had its costs increased reacts in one of two ways: it raises prices, or it increases productivity.

Raising prices is hard when market forces reward lower prices, but if everyone's costs are increased at the same time, then it's easier. Rising prices, of course, are the definition of inflation.

Increasing productivity can be accomplished by more capital investment (for example, buying new production machinery that makes twenty whatchamacallits an hour instead of fifteen), or by squeezing more work out of the labor force through a variety of techniques, many of which make the workplace less pleasant and more stressful. One of the simplest techniques is to understaff - reduce the workforce through attrition or even firing, and then use less people to do the same amount of work that more people did earlier. This creates a lot of stress, naturally. It's also not a good long-term strategy, because staff turnover increases, and that's also expensive.

The effects of raising minimum wage often follow the Law of Unintended Consequences. There is at best conflicting evidence about how much good it does, versus how much damage. So what is the answer? I don't know. What I do know is that it's not simple.

[Zuni]

15. If a business can't afford to pay more than $5.15

than it is either already dying or it should scale back it's overhead entirely

[Discord]

21. bite the McBullet

Hey, if I have to pay $1.50 for a cheeseburger instead of $1.15 so that the people who work there can make an honest living...

I'LL TAKE TWO PLEASE!

and make that to go. :P

[Psephos]

23. I'm with you n/t

[rman]

10. Dems have been trying for decades to get min wage increased,

Repubs have always blocked the vote on it.

There probably will be complaints about how it would make the economy suffer, from republicans.
But at least traditionally the left is more inclined towards demand-side economics: with better wages people will have more money to spend.
So it would be better for the economy if there would not be a significant part of the work force with a wage that is lower then what people would reasonably need to spend in order to live at least at a reasonable minimum level of comfort (by standards of the developed world).

[Zuni]

16. Demand side economics is the way to go

increasing demand is the only way to boost the economy. Increasing supply does nothing if people don't demand more

[housewolf]

19. What are they REALLY planning?

More stealing of Democratic issues, like medicare rx last year.

[joanski01]

20. Senator Kennedy introduced this

amendment this afternoon to the bankruptcy bill. It will be further discussed on Monday, and maybe voted on. Santorum introduced his version of the amendment for something like a $1 increase an hour. The important thing is that last year, when Kennedy tried to get a minimum wage increase amendment on another bill, the bill failed.

I think the Dems want this bankruptcy bill to fail, and the Repukes will never allow a $2.10 increase in the minimum wage. Hence, if the Repukes want the bankruptcy bill, they will probably allow the $1 increase. So the fight will begin on Monday.

[CrownPrinceBandar]

22. I have heard some pundits proffer........................

that $10/hour should be the minimum wage! Also, I heard Thom Hartmann agree with a caller today on his show who suggested that if the min. wage was raised to $8.86 an hour, it would eliminate the debate on the SS cap and make the system solvent again.

However, these things are not likely to happen with this Congress. With overwhelming support for the Bankruptcy bill and the rumblings of a consumption tax which may drastically shift the tax burden to the lower and middle classes, it seems the Republicans are well on their way to returning feudalism to the worldview.

[FtWayneBlue]

27. Bump it up to $10/hr, effective immediately

People need a living wage. If that hurts Wally's world and MickyD's corporate fatcats, too bad. It would help local people.

[MAlibdem]

29. Probably not the best idea

People are already paid beneath the minimum wage illegally, especially undocumented workers. The minimum wage is already below the minimum wage for most jobs, except for unskilled labor. We'd be better served trying to get worker training programs to increase people's skills.

All a minimum wage does is set a price floor on the supply of unskilled labor. Because unskilled labor is pretty much a perfectly competitive good, setting a price floor creates excess supply of labor because companies demand less labor (b/c it costs more). Firms who are willing to pay less to people who are willing to work for less cannot do so. It is highly political and not economically very effective (or possibly harmful to workers).