Living wage: effects upon the economy ?

[steve2470]

Here I go with another question that hopefully will help others. Not being an economist, I don't know what the effects of a widespread "living wage" would be upon the economy. My guess is that prices of goods and services would have to go up, but that's only my guess. Anyone want to take a crack at this ? TIA for your time :)

[Flabbergasted]

1. The living wage debate is really silly in my opinion.

For one thing you the term "living wage" is very ambiguous, and refers more to the amount of discomfort people expect to receive from a given culture's perspective. For example a living wage in Vietnam (in other words what one expects) would be very different in the US. US citizens expect phone access, a bus line, etc etc. Chinese people are willing to and happily live without some luxuries we take for granted!

The debate needs to be waged on a "restructuring of the entire economic system" level. When you have corporations paying their share in taxes and some effective social programs, we can discuss this. Otherwise you are just going to put every mom and popper out of business. Is that what we want?

[Neil Lisst]

5. It is important.

You wouldn't so readily dismiss it.

We're talking about a living wage in the US, and it is whatever people think of it as being. It's an important topic, and quibbling over terms that have meaning in the lexicon is silly.

[Flabbergasted]

7. I still think it is important for americans to realize that we should be

thankful for some of the luxuries we have instead of just demanding more. I have no problem with raising min wage with an appropriate policy shift in all areas of our economy.

But I'm telling you, if you just decided to raise minimum wage you would have alot less cafes to eat at.

[Neil Lisst]

9. no, we wouldn't, because demand would not lessen

cost might go up, but people have to eat lunch, and whether it's burgers, or pizza, or chicken, they all have to pay their workers.

Price goes up, consumers pay it.

[Flabbergasted]

12. Who is more able to absorbe this increased cost a small cafe

or a McDonalds franchise. In this case I'm talking about reality. If the cafe has to now charge $12 it would make many people decide to spend $4 at Mcdonalds. It also effects the supply chain.

All I'm saying is we are taking the idea out of context. A "living wage" requires complete economic reorganization.

[Terran1212]

18. Have you read Fast Food Nation?

Raising the wages of all workers 1 dollar brings about 3 cents more cost added to the food, according to a study cited in that book.

[Flabbergasted]

29. Which is exactly my point!

[mike_c]

17. a living wage always has to be defined in local terms...

...to fit a local economy. One such definition might be that minimum monthly take-home wages must be at least four times the monthly rental cost of average three bedroom housing, i.e. so that housing costs need not exceed 25 percent of wages. That might be several thousand dollars in a metropolitan area like San Francisco, and considerably less in rural areas elsewhere.

[cornermouse]

2. Wouldn't it be advisable to determine how much a living

wage is per hour, week, or month? Although to some extent, I think a wage that a family would require depends on the area they're living in.

[brainshrub]

3. I am ignorant of any case where prices rose due to a living wage.

Unhealthy Inflation is due five factors:

1) Scarcity of an important resource.
2) Govt prints to much money.
3) War.
4) Natural disaster.
5) Monopoly

The fears of hyper-inflation are what corporate apologists scream about, but ultimately a living wage increases economic activity and social stability.

[Flabbergasted]

4. True except that ultimately we'd need a new economic paradigm

or it would kill off all the small business.

[Iris]

21. Like maybe a Wal-mart model?

[brainshrub]

25. Easy solution:

Any business that employees less than 100 people would only need to pay a minimum wage, but not a living wage.

This would encourage new businesses and not run small families out.

I am simply not convinced that a living wage would hurt most businesses.

[Terran1212]

30. The last minimum wage hike didn't hurt businesses

There was actually a net increase in employment.

I agree with your idea that small businesses can pay less, but I don't know if corporate-controlled legislators would by that -- probably would call it "discrimination"

How about a universal healthcare system so employers aren't burdened by that cost anymore and then wage increases?

[Neil Lisst]

6. a living wage would be higher than what many now have, and that

and that would be inflationary, and things would go up in price.

[rodeodance]

8. Henry Ford gave enough for workers to buy cars (Fords of course)--but

it was considered a living expendable wage--the middle class came into being. And people were able to buy goods and live comfortable-not wealthy--but a 'living' wage.

[EFerrari]

10. rodeodance, have you read Joan Didion's last book?

There was a chapter in it that argues the defense industry created the middle class (I hope I don't misrepresent this out of stupidity). Once the contracts dry up and the plant closes down, so does the middle class in that community. It was pretty scary -- especially if you grew up in Silicon Valley which was powered by Lockheed before those kids started tinkering with machines in that garage.

[Flabbergasted]

11. You are talking about manufacturing.....which we do comparatively little

of now.....however a government sanctioned raise in minimum wage to a "living wage" is drastically different and needs to be viewed holistically

[TreasonousBastard]

13. There is only one study I know of...

that actually tracked the effect of artificially raising wages. Unfortunately, I can't find anything about it, but maybe 10 years ago in Philadelphia the minimum was raised and there was no adverse effect.

Truth is, everything anyone writes about raising wages is based on theory and bullshit-- you can't have controlled studies in economics, so most results and "studies" are slants taken from whatever numbers are available, usually from the BLS.

There is no doubt that any increase in wages, from whatever source, is somewhat inflationary-- people have more to spend and prices could go up. But, simply raising the cost of labor itself is not by itself inflationary, and doesn't necessarily affect the price of goods. Pricing is subject to market forces, and labor is just one of many costs that businesses have to deal with.

[Flabbergasted]

14. This is highly unsatisfactory. I'd like to know the amount the min wage

was raised, the time frame of the study, if the raise was a "living wage" etc?

[Iris]

22. You should check out Boortz.com. You'd probably find everything you need

there to justify your stance.

[TreasonousBastard]

27. Unsatisfactory to me, too, but..

I'm working on a vague memory from years ago.

I only remember it at all because whatever I was reading at the time made a lot of sense. Something about burger joints and such being forced to increase wages by a couple of bucks an hour, poossibly because they couldn't find kids to work at minimum, and it had no ill effects.

[Flabbergasted]

15. BTW Steve thanks for wording that in this way....

"....question that hopefully will help others.".....I like that!

[steve2470]

20. thank you ! I'm trying not to be too selfish here nt

[starroute]

16. The Fed is more likely to head the other way

There was a really scary article a couple of days ago at
http://www.bloomberg.com/apps/news?pid=10000103&sid=acqbH7wK9LK8&refer=us

A new Federal Reserve study has shaken economists' forecasts by suggesting the U.S. economy will have to decelerate much more over the next decade than most now expect.

The study, to be published in July, finds that the retirement of the Baby Boom generation will force far-reaching adjustments in the way the economy works. Forecasts for everything from growth and employment to corporate profits and interest rates will have to be recast.

The Fed's report "is such a revolutionary shot," said Ian Morris, chief U.S. economist at HSBC Securities USA Inc. in New York. "Something like this is going to take time to digest."

The study projects a slower pace of workforce growth than most economists now forecast, suggesting the economy can't keep growing at the present-day pace without generating pressure for higher wages and inflation. To prevent that, the Fed will have to enforce a lower speed limit on the economy by pushing up interest rates.

If I'm reading that correctly, what they're saying is that as the baby boomers retire, the workforce will shrink to the point where it could actually push up wages unless the Fed deliberately shrinks the rate of economic growth to match.

In other words, if the Fed has its way, ain't never gonna be no more good times ever. We're doomed to live in our current state of marginality and insecurity from now until the end of eternity, because that's what keeps business happy.

[demosincebirth]

19. Every time they increase the min wage some always starts crying

"the sky is falling...the sky is falling." They can raise the min wage to $14hr(and they should) and it will only affect prices slightly at the Mall. Small businesses will, maybe, have to let one or two employees go, but those let go will, eventually, find $14hr jobs.

[Flabbergasted]

28. I don't think it would work unless we had corps. paying their share

Socialist economic policy needs to be views holistically.

[demosincebirth]

34. It'll work. We just don't have the guts to go up

against big businses.

[Flabbergasted]

35. Exactly!

[EstimatedProphet]

23. No. They only have to go up if corporate pigs take 500x a living wage

which is what they've been doing for some time now.

The fact that people aren't making a living wage anymore serves 2 purposes, not just one: the obvious one, that CEOs and their evil ilk can suck up the slack into their own salary; and a less-realized one, which is that it keeps the 'rabble' down.

Getting money is satisfying only to a certain extent. Eventually the gathering of money in and of itself loses its rush, because more money doesn't keep putting more distance between you and the general public. You're a millionaire? You have a lot of economic distance between you and the average person. But the more you get doesn't mean that you still keep increasing that economic distance-eventually, adding on even millions won't push you that much farther ahead of the average person. The way you keep that rush going in that case is to make things worse for the average person, by holding down wages to where they can barely get by, overcharging on necessary items so that people have to use an increasing portion of their income to get by, etc. The people that are now in charge who think this way will only be happy when we a truly slaves, and they have ultimate control over all of us.

[burrowowl]

24. Gee that would mean that

the CEO making 500 times more than a worker, would only be making 499.99 times more! Terrible, just terrible! Rampart socialism!
In Japan and Europe it averages around 30 times.

[Hidden Stillness]

26. Effect on Prices, Minimal; Effect on Workers' Ability to Pay Bills--Great

The effect that the implementation of a living wage, (or raising of the minimum wage), has on prices of goods and services is minimal because--surprise, surprise--the wages paid to employees is a minute portion of the total expense of a corporation or other entity. Many studies have been done showing almost no cost increase at all, and even cost-savings, as they now experienced reduced absenteeism, lower turnover, increased productivity, etc. The Economic Policy Institute has studied this from many angles, and produced some really good study results: "The Economic Impact of Local Living Wages" www.epi.org/content.cfm/bp170 and "Higher Wages Lead to More Efficient Service Provision" www.epinet.org/content.cfm/ issueguides_livingwage_alexlivwg . It is interesting that this thing always gets tied to the small-business-can't-afford-it routine, because the fact is that smaller organizations tend to pay better and have better working conditions, more real advancement, etc., and as we all know, the huge, global/multinational corporations are the worst cheapskates, cheating people out of every dime the corporation's legal department can manipulate. The ones behind the endless attempts to depress wages are always the biggest multinational corporations, who can most afford to pay well. Their first allegiance is to their stockholders, consulting firms, etc., not to their employees, who are just like machine parts--replaceable.

A corollary to all this is the experience of supermarkets and others, during the Reagan '80s, when that bastard Reagan killed the contracts of the UFCW union (and others), who had negotiated a decent wage level for cashiers, etc., that was above minimum wage, and was actually a good living (I remember it as about $13-13.50 an hour, a livable wage at that time). Reagan busted it all back to the horrific minimum wage level of that time, (as I recall) about $3.75-4.00 an hour or so. This completely destroyed the job of cashier as a decent way to make a living, and killed the possibility of a normal middle class person being able to live on one single job--ever. You might expect that, after the complete collapse of the entire pay structure for all employees in large stores, that the price of groceries plummeted, and we all experienced a new golden age, as they passed on huge savings to us all. Of course, they did nothing of the sort; they did what they always do, and what the problem actually is--they price-gouged and stole the now-even-more-inflated profits. Wages are not the reason for high prices; all you have to do is notice what happens when a corporation outsources all its work to slave labor in a Third World country--does the price drop? Of course not; their profits increase.

[Cobalt Violet]

31. If there were a living wage payed to all.

More people would have the money to become customers of small businesses. I believe small businesses would do better by increasing their customer base and do more volume of business. Lots of low wage earners are don't have any spending money.

[Deja Q]

32. With executives' salaries and bennies HUNDREDS of times higher...

They can surely cut down a bit, themselves?

In 1980, exec pay was ~40x that of the average worker.

These days, and depending on the source, it's anywhere between 400x and 600x that the average worker.

If i bothered, I could find some stats documenting the decline of average worker pay as well - and there was no 8 year reprieve between 1992 and 2000 either.

Depends on the graph, its data, and what the graph is supposed to say. Hell, I could whip up a graph showing why the economy is doing good... and it won't crash, because other countries are picking up the slack being made in America by our job losses.

[Yollam]

33. Prices might rise somewhat, but the economy would boom.

Jesus, can you imagine all those millions of people would now have a little money not just for subsistence food and a crappy roof over their heads, but they might actually have enough to see a movie or buy something?

As a matter of fact, I personally believe that the increases in the Earned Income Tax Credit, which benefits lower-income families with kids, probably did more to sustain the Clinton boom and soften the Bush recession than the numerous tax cuts for the rich. Give a bunch of rich people some money and watch them hoard it away. Give it to the poor and watch them spend it ( at stores and companies owned by the rich - so everybody wins).