$9 Minimum Wage

[Son of Mulhalla]

I love it, raise it to $10 and run more companies off US soil to foreign countries!! Oh and plus let increase the welfare programs and the unemployment program so no one ever has to work. I love how the government is destroying this country and the majority is clapping and cheering. The only hope I have is that heaven awaits me!

[beholderthedm]

I don't know that we can gain much insight from invented numbers but I suppose we can try. Say this fast food restaurant just saw expenses increase by 30k a year. Let's say they are an average McDonalds with profits of about 230k a year. I'm not going to cry for the owners now making 200k a year, especially since they are selling McDonalds and costing me lots of money by inflating the nation's healthcare costs.

Don't discount the effect of a minimum wage increase on fast food. A huge number of fast food restaurants are owned by franchisees, not the corporation. These are small business people that don't make millions a year. Let's say one restaurant has 30 employees averaging 20 hours per week. When minimum wage goes up $1, that's $20 more per week for each employee, or $600 per week for the restaurant. That translates into $31,200 more in direct labor costs alone to that small business man. There are not alot of small business people that can absorb that sort of pay cut without making changes - higher prices, fewer hours, fewer benefits. Then, factor in the higher prices that small business man will end up paying to his suppliers when they, too must raise their prices because their direct labor costs increased.

This example was for fast food, but it applies to every small business out there.

Not to every small business because not all businesses rely on minimum wage employees.

Edit: oh and multiply this effect 100-fold, 1000-fold, or even 10,000-fold for those corporations you feel can afford it.

I'm not sure I follow.

[caps]

Originally Posted by beholderthedm

I don't know that we can gain much insight from invented numbers but I suppose we can try. Say this fast food restaurant just saw expenses increase by 30k a year. Let's say they are an average McDonalds with profits of about 230k a year. I'm not going to cry for the owners now making 200k a year, especially since they are selling McDonalds and costing me lots of money by inflating the nation's healthcare costs.

Right, because if I franchise a McDonald's I get all the profit.

Anyways, you're focusing a little too much on this example. What about a mom and pop store or restaurant?

Raising the cost of operations, or raising taxes, is easy for big successful companies to handle.

Not so much for small companies that are already struggling.

[mac122]

[quote=beholderthedm;1764162]I don't know that we can gain much insight from invented numbers but I suppose we can try. Say this fast food restaurant just saw expenses increase by 30k a year. Let's say they are an average McDonalds with profits of about 230k a year. I'm not going to cry for the owners now making 200k a year, especially since they are selling McDonalds and costing me lots of money by inflating the nation's healthcare costs.

Don't discount the effect of a minimum wage increase on fast food. A huge number of fast food restaurants are owned by franchisees, not the corporation. These are small business people that don't make millions a year. Let's say one restaurant has 30 employees averaging 20 hours per week. When minimum wage goes up $1, that's $20 more per week for each employee, or $600 per week for the restaurant. That translates into $31,200 more in direct labor costs alone to that small business man. There are not alot of small business people that can absorb that sort of pay cut without making changes - higher prices, fewer hours, fewer benefits. Then, factor in the higher prices that small business man will end up paying to his suppliers when they, too must raise their prices because their direct labor costs increased.

Not to every small business because not all businesses rely on minimum wage employees.

I'm not sure I follow.

Before I respond directly to your post, let me say this. The minimum wage was not put in place to guarantee people a good living. It's there to set the low end of the pay scale. It's not intended to be a living wage. It sets the starting point. If you want to make more money than minimum wage, then keep working to improve yourself and make yourself more valuable to an employer.

Not every business relies on minimum wage employees, true, but when you raise the low end of the scale, that bumps the whole scale up, raising labor costs across the board.

Is that $230k gross profit or net profit? Let's assume it's net. First off, that's not rich. It's more than 4 times what I make, but it's not rich. Also, even if it's net, it doesn't mean that business person put $230k into their bank account. A typical small business person will plow a large percentage of their net income back into their business to make it better and probably bigger (which also creates more jobs). OK, $30k is about 13% of $230k. So, that small business person is supposed to take a 13% pay cut? They earned that money. They put in the hours building that business and risked their own capital to get it going - sorry, our President is wrong - the small business person DID build it. So, either their own personal income they draw from their business goes down or the amount of cash they can put back into their business goes down (though probably a combination of both).

The 100, 1000, and 10,000 fold comment (first, ignore the 10,000 as that example does go too far - that's OK, the other 2 will still make my point)? Take that $30k per year and multiply by 100 for a business with 3000 employees. That turns into $3 million per year in increased direct labor costs. That is not chump change. It directly impacts the bottom line, affects the amount of investment the company can invest in growth, development of new products to keep the company strong, etc, etc.

1000-fold? Super big companies with 30,000 employees could see a $30,000,000 increase in their direct labor costs. See all the reasons from the last example to see why that's bad.

Now, will these companies see this dramatic increase? Probably not, because they will mitigate it by cutting back on labor. Reduced hours, lay-offs, hiring freezes, etc. So you'll have your $9 an hour jobs, just not as many of them to go around.

[Crixus33]

Just curious here as I don't know much about economics, but is there a point where minimum wage gets too low because a laborer can no longer support themselves because food prices, rent, taxes ect. are to expensive for those at the bottom to pay?
(sorry if this thread is just about the raising of the minimum wage)

[mac122]

Originally Posted by Crixus33

Just curious here as I don't know much about economics, but is there a point where minimum wage gets too low because a laborer can no longer support themselves because food prices, rent, taxes ect. are to expensive for those at the bottom to pay?
(sorry if this thread is just about the raising of the minimum wage)

The minimum wage is not intended to be a living wage - high enough to cover all living expenses. It sets the floor, the lowest level employers are allowed to pay (with a few exceptions). It's not intended to be the career wage for someone trying to support a family. If someone is trying to support a family off of a single minimum wage job, they will be below the poverty line. However, there is additional assistance available through WIC, food subidies, earned income credit, housing subsidies, education assistance. These help ease the burden on low-wage earners. The key is to get a job, even if it's minimum wage and then work your way up. If the company you work for doesn't have opportunities for advancement, then you must continue to work and keep your eyes open for other opportunities. Take advantage of education money available from the government to better yourself and make yourself better equipped to land a better paying job.

[Crixus33]

Originally Posted by mac122

The minimum wage is not intended to be a living wage - high enough to cover all living expenses. It sets the floor, the lowest level employers are allowed to pay (with a few exceptions). It's not intended to be the career wage for someone trying to support a family. If someone is trying to support a family off of a single minimum wage job, they will be below the poverty line. However, there is additional assistance available through WIC, food subidies, earned income credit, housing subsidies, education assistance. These help ease the burden on low-wage earners. The key is to get a job, even if it's minimum wage and then work your way up. If the company you work for doesn't have opportunities for advancement, then you must continue to work and keep your eyes open for other opportunities. Take advantage of education money available from the government to better yourself and make yourself better equipped to land a better paying job.

Thanks for the answer.
Follow up question: is there a point where minimum wage is too low?

[mac122]

That depends on your viewpoint and what you are measuring against. I believe beholderthedm would say it is too low now. Too low for what or compared to what?

[Crixus33]

Originally Posted by mac122

That depends on your viewpoint and what you are measuring against. I believe beholderthedm would say it is too low now. Too low for what or compared to what?

Too low were it seems a worker is being taken advantage of or it is so low that it is not worth having the job because it is of no help financially.

[Anonymous]

Originally Posted by Crixus33

Thanks for the answer.
Follow up question: is there a point where minimum wage is too low?

The point of a minimum wage is to legally force employers to pay a higher wage than they normally would absent a minimum wage. Eventually, if the minimum wage is never raised, the minimum wage would become moot because inflation would push the price of living higher than the minimum wage.

For example, if the government decades ago had passed a minimum wage law of two dollars an hour and never raised it again, it wouldn't matter. Employers wouldn't be able to find enough people willing to work for two dollars an hour. They would thus be willing to pay more than two dollars an hour for labor. So, if the naturally occurring market price for labor (where the amount of labor demanded at that price point by employers equals the number of workers willing to work at that price point) is higher than the minimum wage, the minimum wage becomes moot and doesn't matter.

So, yes, there is a point where the minimum wage is so low it ceases to matter economically because the market equilibrium sets the price higher than minimum wage anyway.

If your question was whether minimum wage is "too low" in a moral sense (fairness, income disparity sense) then you're in for a whole different discussion with no concrete "correct" answer.

Edit: Ninja'd by mac and Crixus.

[Anonymous]

Originally Posted by Crixus33

Too low were it seems a worker is being taken advantage of or it is so low that it is not worth having the job because it is of no help financially.

Economic theory would state that a worker is paid whatever they are willing to work for. If wages are too low than workers won't work for that wage. As a result the employer is forced to pay a higher price if they want to hire more laborers.

Here's a useful graph that shows how a minimum wage works.

http://thefreeeconomy.com/wp-content...nimum-Wage.jpg

[Anonymous]

[QUOTE=Anonymous;1764327]

Originally Posted by Crixus33

Too low were it seems a worker is being taken advantage of or it is so low that it is not worth having the job because it is of no help financially.

Economic theory would state that a worker is paid whatever they are willing to work for. If wages are too low than workers won't work for that wage. As a result the employer is forced to pay a higher price if they want to hire more laborers.

Here's a useful graph that shows how a minimum wage works.

http://thefreeeconomy.com/wp-content...nimum-Wage.jpg

At the point where the demand curve (How many people businesses are willing to hire at each wage rate) and the Supply Curve (How many laborers are willing to work at each wage rate) intersect is where the market will naturally set prices. In the hypothetical graph we see the market equilibrium is 5 workers each working for $5 an hour. When the government sets the minimum wage rate at 7$ an hour, as shown in the hypothetical situation on the graph, less workers are hired because the demand for laborers is only 3. So, in the hypothetical, instead of hiring 5 workers at $5 dollars an hour, the minimum wage causes employers to hire 3 workers at $7 an hour.