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A Fine Time to Raise the Minimum Wage

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July 15, 2009 – Comments (37)

In this world, there are dreamers and there are doers.  The dreamers sit around all day and imagine grand schemes that will lift everyone magically out of poverty.  They rarely own businesses themselves, or manage the day to day operations that people's livelihoods depend upon.  On the other hand, there are doers.  Small business owners like my best friend Joe are doers.  He opened up a dinner a few months ago in the middle of the greatest economic contraction of the last 70 years.  Why in the world would he do that?  Because people need to eat, he said. So true.

Dreamers on the hand would like to dictate to Joe at what rate he should pay for labor.  Only the market can dictate that.  So now Joe, having seen the wages of his 4 minimum wage employees rise by 11% with the stroke of a pen, will have to compensate in other ways or lose money.  He will have to lay off a worker.  

You don't have to like it.  But keep your eyes wide open when you raise the minimum wage.  To be honest, what is there to like about you?  The dreamy vision of the world you are trying to impose upon the doers?  Apologize to them, and then apologize to all the low skilled laborers that you are forcing into unemployment. 

On a humorous note, here is Richard Daughty's (aka Mogambo Guru for those that read The Daily Reckoning) take on raising the Minimum Wage during a Depression:

David in Qatar

(http://www.facebook.com/dvdburns)

==================================================================

 

A Fine Time to Raise the Minimum Wage?

by Richard Daughty

 

http://www.lewrockwell.com/daughty/mogambo18.1.html

To show you the kind of idiocy that passes for economics, The Wall Street Journal, in a story about the imminent rise in the minimum wage from $6.55 to $7.25 an hour, notes that the Economic Policy Institute “estimates that the minimum-wage increase will add $5.5 billion to the economy” which makes me laugh – Hahaha! – in a mocking-yet-scornful way as my humble way of saying, “These guys are idiots!”

If another lousy 70 cents an hour will add $5.5 billion to the economy, then raise the minimum wage by $7 an hour and add $55 billion! Or raise the minimum wage by $70 an hour and add $550 billion! Hahaha!

So I’ve got a real Hot Mogambo Tip (HMT) for these Economic Policy Institute (“a liberal think tank” says the WSJ) weenies: Wrong-o! Morons!

For one thing, money does not appear out of nowhere, including that $5.5 billion. It has to come from somewhere. And since these dorks obviously have no idea what in the hell they are talking about (which explains why the WSJ called them a “liberal think tank,” which is a euphemism for “idiots in a room”), the fact is that the businesses that pay the higher wages are going to have to charge more for their output to make up for the higher labor expenses or make $5.5 billion less in profits, which does not even include the higher charges for the employer-half of taxes on wages, higher unemployment insurance premiums or other expenses linked to wages.

In short, the whole $5.5 billion that will theoretically end up in the paychecks of low-wage employees will all be spent by them paying the higher prices that businesses will have to charge! Surprise! No free lunch! Hahaha!

And the businesses and employees that buy materials and supplies, but do not have any minimum-wage employees, will end up paying the higher prices charged by businesses that do, and they will have to raise prices, too! Hahaha! Surprise!

Apparently, the halfwits at the EPI never heard of the famous book by the famous Austrian-school economist Henry Hazlitt, Economics In One Lesson, where the One Lesson is that “The art of economics consists in looking not merely at the immediate but the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

And although some doofus “economist” named Heidi Shierholz at the EPI says “it is actually a good time” for an increase in the minimum wage, the fact is that businesses are not making any money as it is with the lower minimum wage… Bankruptcies are soaring, businesses are folding, consumers are broke and the economy is in a mess, which is NOT a “good time” to be raising the prices of anything, including labor, although the idiot state and local governments think it is a FINE time to raise taxes! Hahaha!

And for proof of the decline in the economy, all one needs to do is look at the earnings of the S&P500, the 500 biggest corporations in America, which are down to a measly $6.86 in earnings, down from last year’s $84, which, with a current price of $896 for the index, gives a laughable P/E ratio of 130 for the S&P500! Hahaha! “Invest for the long-term by buying stocks that are so ridiculously overpriced that it makes you laugh so hard that it would make Graham and Dodd pee in their pants!” Hahaha!

Bill Bonner sums it up as, “No consumer spending, no sales. No sales, no revenues. No revenues, no one can stay in business. No small businesses. No new jobs. No new jobs, no economic recovery. No economic recovery and the meddlers are back on the Hill asking for more power and money.”

You can almost hear the sarcasm in his voice when he says, “No surprise there.”

And if you want another surprise, go look at the last 4,500 years of history and see how gold and silver fared against everything else, particularly paper currencies, economies based on paper currencies and assets whose value is reliant on paper currencies, and then you, too, will come to the conclusion, “Whee! This investing stuff is easy!”

July 15, 2009

Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron’s, The Daily Reckoning, and other fine publications.

37 Comments – Post Your Own

#1) On July 15, 2009 at 11:26 AM, JTShideler (81.54) wrote:

Thanks for the post, its tiring that we have to fight this battle every time a minimum wage increase is talked about.  There is a direct and immediate coorelation between jobs and an increase in the minimum wage.  The proof is in all the data but somehow every time the topic comes up people think that a different outcome will happen.  The economy does not live in a vaccum everything is interconnected.

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#2) On July 15, 2009 at 12:31 PM, ChannelDunlap (< 20) wrote:

Well I read the article till he equated "liberal think tanks" to "idiots in a room."  All I can say is that your friend "joe" (is he a plumber on the side, by chance?) is cutting 25% of his staff for an 11% wage increase, which doesn't quite balance out.  sounds to me like Joe is taking a convenient excuse to make more money and squeeze more work out of the now-properly-paid employees. 

It's funny how one minute people talk about how they have to be right in it to really understand something (like Joe being a small business owner directly affected by the minimum wage raise), and the next they're talking about how they have to be removed from something to get a clear picture of it (like Sarah Palin never having served on the Federal Government making her more qualified to do so).  In this sense somebody who isn't going to be directly affected might look at it and say wow, if we let him he would probably pay those people $2/hr.  Nothing market-based about it, the cheaper he can get it the cheaper he will take it.  We HAVE to mandate that he pay them a livable sum because he WON'T on his own.

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#3) On July 15, 2009 at 12:34 PM, devoish (99.07) wrote:

There is a direct and immediate coorelation between jobs and an increase in the minimum wage. 

I posted about minimum wage and job losses with the Best Actual Factuals Found Languishing Easily (BAFFLE) showing that the correlation was a very small positive one and actually reduced unemployment, when it was done.

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#4) On July 15, 2009 at 12:44 PM, whereaminow (42.76) wrote:

ChannelDunlap,

Joe is barely breaking even, on good days, and losing money on bad days.  That's called "starting a new small business."  Have you ever tried it?  Ever?  No?  Didn't think so.  Does forcing him to pay higher labor rates sound like a good idea?

I don't know what Joe's motivations are, but I'm pretty sure that he would laugh at you.  He doesn't vote.  He doesn't know anything about economics.  He doesn't care about Sarah Palin or Keith Olbermann.  He just wants to own a restaurant.  He went to school to be a chef.  He's worked in the food service industry his whole life.

Oh yeah, and he wants to exploit labor.  I remember him telling me that while he was picking out menu items.  He couldn't wait to exploit labor.  You idiot.

Again, he awaits your apology.

This is an economic argument, not a political one.  I don't care about your politics.

David in Qatar

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#5) On July 15, 2009 at 12:46 PM, whereaminow (42.76) wrote:

devoish,

I remember my math teacher saying correlation isn't causation.  So was he wrong?

David in Qatar

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#6) On July 15, 2009 at 1:02 PM, ChannelDunlap (< 20) wrote:

I wasn't trying to make a political statement at all.  I just used the Palin reference as... well, a reference.  A reference to a different, but still very popular, way of thinking that those affected by something are incapable of making an unbiased decision on it.  In the same that Californians would never raise taxes on themselves, Joe would never voluntarily pay more, unless he had an alterior motive for doing so.  Again, not to make it political, but a political example is the first that came to mind.

I'm sorry if I offended Joe through my analysis of his situation (he's cutting twice as much as his cost is increasing... fact.  He will be having 3 people do the work of 4... fact.  This will result not just in a balance of his budget, but in more profits for him... fact.), but this is how I see it.  And you're the one who started the name calling, so I won't be doing any appologizing today.  

Joe is barely breaking even, on good days, and losing money on bad days.  That's called "starting a new small business."  Does forcing him to pay higher labor rates sound like a good idea?

His employees, if they're making mimum wage, are struggling to pay bills and keep a roof over their head let alone any of the luxuries I'm sure small-business-owner Joe takes for granted.  Does he own a car?  Probably a house?  That's more than any minimum wage grunt could say.  That's called "making a crappy wage", ever done it?  Now I'm sure Joe has worked hard for these things, went to school, spent his time as a grunt, whatever, that's great, and I'm glad things have worked out so well for him.  But don't make it sound like he's struggling to get by when his employees literally are.

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#7) On July 15, 2009 at 1:08 PM, whereaminow (42.76) wrote:

Of course, I can be sporting about it, since that's what I do.

If you want to study the correlation of minimum wage increases and changes in unemployment, here's how you could do it.

Take all the historical data you can find on minimum wage increases and all the data you can find on unemployment  (good luck with that.)

Dump them into an excel spreadsheet in two columns.  One for changes in minimum wage and one for corresponding chanes in unemployment. 

Insert a XY scatter chart.  Add a trendline and format it to display "r-squared" on the chart.

The r-squared is the correlation.  It's the coefficient of determinants.  If the r-squared is greater than 0.7, a good correlation is found.  If it is greater than 0.9, we say that there is a strong correlation.  A r-squared of 1, means that the two are perfectly correlated.

I would love to see this done with minimum wage increases. I'm guessing we'd see a correlation below 0.1.  The lower the correlation, the more certain we can be that outside factors are influencing both events.

Of course, even if r-squared is 1, that doesn't mean causation.  The two items could have been influenced in exactly the same way by another outside factor.  

In other words, statistics take us only so far.  

David in Qatar

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#8) On July 15, 2009 at 1:48 PM, dbjella (< 20) wrote:

ChannelDunlap

 

Why do think business owners are so well off?  To me you sound jealous.  Where does your class envy come from?   

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#9) On July 15, 2009 at 2:25 PM, instaboxx (46.86) wrote:

Raising minimum wage is pointless because poverty is relative.  Whether the minimum wage is $2 and hour or $10 an hour the person is still making minimum wage and at the bottom.  All it really does is make $10 the new $2.  Inflation hurts the elderly more than anyone since they depend on fixed incomes and benefits only those who are heavily in debt.  Good way to reward the responsible.

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#10) On July 15, 2009 at 2:31 PM, devoish (99.07) wrote:

 In other words, there is no evidence for the oft- repeated free market claim that minimum wage increases cost jobs.

Good for you for figuring that out.

But there is some very slight statistical suggestion that minimum wage increases create jobs.

Correlation is not causation,

But it's more than imagination,

So if your Mises would guide our Nation,

Away from economic stagnation.

The result of wage propogation,

More likely is job creation.

I hope you enjoyed my little poem. I am going to write one more post concerning the false claim that minimum wage increases cause job losses, and your claim that other factors matter more based upon additional data that I have uncovered.

It is not "all that and then some", so don't get exited.

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#11) On July 15, 2009 at 2:55 PM, whereaminow (42.76) wrote:

devoish,

I'm sure it will be hilarious.  Can u figure out a way for me to make more money? Or do you only do low skilled laborers?

David in Qatar

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#12) On July 15, 2009 at 3:04 PM, rofgile (99.33) wrote:

Cheers devoish - nice poem and nice data! 

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#13) On July 15, 2009 at 3:30 PM, whereaminow (42.76) wrote:

Well, devoish, I have 4,000 years of wage and price controls to work with, and we can see the economic failures of all them.

Now, you would think that 4,000 years would be enough for you to cast aside your ridiculous ideas.  If you could present me with 4,000 years of horror because of free market policies, I'd give up mine.

Cute poem, though.  And what is the r-squared for your study?

Again, it's the difference between dreamers and doers.  That's why I offered to help you get into government work.  I think you need to fulfill your calling.

David in Qatar

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#14) On July 15, 2009 at 3:37 PM, ChannelDunlap (< 20) wrote:

dbj - it's not that I think they're "well off", but they're certainly doing better than someone making minimum wage.  I currently make considerably more that minimum and I know I can't afford to start my own business.  And neither are 95% of people I know.  

As for jealousy, yeah, kind of.  I'd love to own my own business, who wouldn't?  That doesn't mean I harbor any ill will towards people who do.  My opinion on the issue is based entirely on my experiences making minimum wage and the laughable idea that it's enough for someone to support themselves on.

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#15) On July 15, 2009 at 3:37 PM, Roxx (58.97) wrote:

Totally off topic, but relevant, I just wanted to say that this country owes a medal to Henry Paulson and a very heartfelt debt of gratitude. Of course, the media will do what it usually does and they will smear him because its politically expedient but just from one citizen who understands what he did for this country, thank you Mr Paulson.

 rxx

 ps, and Mr Bernanke too

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#16) On July 15, 2009 at 3:50 PM, whereaminow (42.76) wrote:

Hey look at that.  In 5 seconds, I found six studies that show minimum wage laws increase unemployment:

"Minimum Wages and Teenagers' Enrollment-Employment Outcomes: A Multinomial Logit Model." Ronald G. Ehrenberg; Alan J. Marcus The Journal of Human Resources V17 N1 (Winter, 1982), pp. 39–58

"Teenage Employment Effects of State Minimum Wages." Arnold Katz The Journal of Human Resources V8 N2 (Spring, 1973), pp. 250–256 Brozen, Yale. 1969.

"The Effect of Statutory Minimum Wage Increases on Teen-age Employment." Journal of Law and Economics, vol. 12 (April): 109–122

"Recent Department of Labor Studies of Minimum Wage Effects." George Macesich; Charles T. Stewart, Jr. Southern Economic Journal V26, N4 (Apr., 1960), pp. 281–290

"The Marginal Productivity Theory of Wages and Disguised Unemployment." Dipak Mazumdar The Review of Economic Studies V26 N3 (Jun., 1959), pp. 190–197

"The Economics of Minimum Wage Legislation." George J. Stigler The American Economic Review V36 N3 (Jun., 1946), pp. 358–365

Why was that so easy?  Because it's the most studied oncept of economic theory. 

From Wikpedia:

The classic exposition of the minimum wage's shortcomings in reducing poverty was provided by George Stigler in 1946:

Employment may fall more than in proportion to the wage increase, thereby reducing overall earnings;

As uncovered sectors of the economy absorb workers released from the covered sectors, the decrease in wages in the uncovered sectors may exceed the increase in wages in the covered ones;

The impact of the minimum wage on family income distribution may be negative unless the fewer but better jobs are allocated to members of needy families rather than to, for example, teenagers from families not in poverty;

The legal restriction that employers cannot pay less than a legislated wage is equivalent to the legal restriction that workers cannot work at all in the protected sector unless they can find employers willing to hire them at that wage.

Economist Thomas Sowell has argued that regardless of custom or law, the real minimum wage is always zero, and zero is what some people would receive if they fail to find jobs when they try to enter the workforce, or they lose the jobs they already have.

============================================

Again, it's dreamers versus doers.  I realize it's not better than a poem or anything, but I have no need for poems.  

David in Qatar

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#17) On July 15, 2009 at 3:51 PM, dbjella (< 20) wrote:

ChannelDunlap

Why can't you own your own business?

Also, I once made minimum wage and was able to support myself.  A group of guys live next to me and they "appear" to make minimum wage. They seem to "eek" out a living.  Why is it so laughable? 

 

 

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#18) On July 15, 2009 at 3:54 PM, whereaminow (42.76) wrote:

ChannelDunlap,

Just FYI, my buddy makes less than the people who work for him.  At the end of the year, he probably won't even break even. That's the breaks when you are starting a new business.

And if he lets go of one worker, who will make up that work?  It still has to be done right?  Can he order his other workers to do it for him?  Work extra hours?  Pay them overtime?  No, he has to do it himself.  That means longer hours for him, which means he earns less per hour.  So as a result of short sighted political policy, one guy is out of work and another now has to work longer hours for less money.

Yeah, that's social justice all right.

David in Qatar

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#19) On July 15, 2009 at 4:05 PM, mpendragon (59.34) wrote:

If we are going to have a minimum wage then we should try to keep the buying power of that minimum wage fairly constant with regular adjustments for inflation every 3-5 years.  By not raising the minimum wage periodically we are effectively cutting it.

One drawback to not having a minimum wage is that a town with very few large employers could rig the job market and poor people often lack the resources and support to move to areas with a higher wage.

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#20) On July 15, 2009 at 4:21 PM, fransgeraedts (99.94) wrote:

Yes, it is a question of social justice  -and therefore of politics. Look at the development of wage-related incomes in the last 35 years  -and compare them with the development of profit-related income. See any difference? (Wages are flat to down over that period)(Profits however were at a historical high -both in 1999 and then again in 2005).

But it is also a question of economics  -that is a question of growth. There are periods (long waves) when the best way to produce growth is by raising profits. Basically that are periods where a lot of investment in new technologies and/or new markets is necessary. There are however also periods when the best way to produce growth is by raising wages. Basically that are periods when the investment in new tech and markets has to be put to best use by maximizing output and revenue. I believe we are leaving the first kind of wave, and entering the second.

For a historical period that was, as i think our near future should be, look at 1948 till 1970. Not a bad period in economic history was it? especially in the US?

Imagine wages going up by 50% in real terms over the next 15 years. Would that be so bad?

fransgeraedts

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#21) On July 15, 2009 at 6:05 PM, whereaminow (42.76) wrote:

fransgeraedts,

Imagine the standard of living going up.  That's what is important.  Focusing on wages is an error Econ 101 students make.  If productivity increases, prices fall, and then it doesn't matter if wages went up.

From the late 1700's until the 1930's prices fell.  And the standard of living exploded for all people, especially the poor.

The ability to look beyond the immediate impacts of the policy is what separates the good economists from the rest.

David in Qatar

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#22) On July 15, 2009 at 6:22 PM, imeasure (< 20) wrote:

Minimum wage laws are economic slight-of-hand. The costs of doing business are simply redistributed in the cost of the services provided to everyone (including those who got the raise).

e.g. Cheesburger goes from $2 to $2.50 and the folks spending their new found pay increases are no better off than before. It's simply a way for politicians to persuade the simple minded folks they care.

The real issue is a question of freedom. Should the government have a right to dictate salaries or should every man / woman be responsible and free to negotiate whatever salary they can get.

This will keep salaries proportional to effectiveness of the employee and the market value of the work being performed.

 

 

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#23) On July 15, 2009 at 7:34 PM, bostoncelitcs (59.34) wrote:

I guess you believe in limiting excessive "executive compensation" too then.  I would suspect.

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#24) On July 15, 2009 at 8:38 PM, RonChapmanJr (97.20) wrote:

I think one aspect of this discussion that is often overlooked is the idea that people working minimum wage jobs deserve a middle class lifestyle.  They don't. 

If you work a minimum wage job, you should be able to afford a small apartment somewhere with enough food to keep you alive.  Minimum wage jobs should not support a family.  Someone with a minimum wage job should be using birth control if they are married because they can't support kids with it.  Just because people work all day does not mean they are entitled to anything other than the basics. 

And before anyone screams at me, I have worked as a waiter, a cashier at Target and Walmart and as a janitor making all sorts of low wages so I know what it takes to survive on that type of money.

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#25) On July 15, 2009 at 8:54 PM, Option1307 (29.90) wrote:

I think one aspect of this discussion that is often overlooked is the idea that people working minimum wage jobs deserve a middle class lifestyle.  They don't. 

That's the best line I've heard in a long time!

Along this same line of thinking, minimum wage jobs are not meant to be a career, they are for young adults/students/etc. There is a distinct difference between a  career and simply a job. People need to learn the difference.

 

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#26) On July 15, 2009 at 9:33 PM, angusthermopylae (40.04) wrote:

#20 and #21,

Both, possibly correct, and not directly opposed.

I own a small business, and when the minimum wage went up, I was basically for it--it had been too long since there was a raise, but between inflation and record profits for several years, minimum wage folks were not able to keep up.

On the other hand, "A Fine Time to Raise the Minimum Wage" is absolutely correct...if "anyone" could have foreseen a coming economic...."imbalance".

("anyone" fully meant to be sarcastic--Fools here have been talking about serious flaws in the economy for a couple of years...including me.)

But it is politics--it takes a while for Congress to gain speed on anything, and by the time everyone was willing to vote for a raise in the min. wage, the fuse had been lit....BOOM!

In full disclosure, my employees make far above minimum wage---we're a very specialized company.  We've had a few people who had to work under dual employment for regulatory reasons, and their "other" employer paid them minimum wage.  That helped our employees out, which is always a good thing.

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#27) On July 15, 2009 at 10:21 PM, ralphmachio (23.67) wrote:

oooooo! 7.25?  Awesome, can I trade all my waking hours for 7.25 to support your business?  Pretty please!!!  

20 years ago, when I was 14, I had better sense than to squander my time for 7.25.  If that is the glue keepin this ship together, we're done.  Simple.   

Let's see, 3 hours at 7.25 is 21.75.  The man gets a 7$ cut.  Pardon me, I'm trying to keep it together over here.  So after 3 hours, an employee getting this new minimum wage would be about 15 dollars richer.  So after 30 hours at 7.25, your lookin at 150$  A full time week gives you 200$.  10,000 a year.  

Employers are looking to pay this little, and can actually look their employees in the eye?  They deserve to be put in a cage and poked with sticks if so. 

What kind of bonuses are those turds at GS getting?  7.25 an hour?  

This is unsustainable.  Maybe it's just not worth sustaining.  Either way, if life is more complicated than hunting, fishing, farming, building your own house, raising your family, than you have become a slave to your stuff, and the manner in which you get it.  The innovations in life were supposed to make life better.  Now we work all day long at the same thing just to go home and spend one quarter of our time watching TV.  That's some life.  

Enjoy! 

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#28) On July 15, 2009 at 11:29 PM, devoish (99.07) wrote:

"Minimum Wages and Teenagers' Enrollment-Employment Outcomes: A Multinomial Logit Model." Ronald G. Ehrenberg; Alan J. Marcus The Journal of Human Resources V17 N1 (Winter, 1982), pp. 39–58

Not available online.

"Teenage Employment Effects of State Minimum Wages." Arnold Katz The Journal of Human Resources V8 N2 (Spring, 1973), pp. 250–256 Brozen, Yale. 1969

Security warning on the Mises link.

"The Marginal Productivity Theory of Wages and Disguised Unemployment." Dipak Mazumdar The Review of Economic Studies V26 N3 (Jun., 1959), pp. 190–197

security warning on the Mises link. The Geocities link is  a defense of Mises theory, no Actual Factuals, evidence or stats of any kind. Just more theoretical discussion.

"Recent Department of Labor Studies of Minimum Wage Effects." George Macesich; Charles T. Stewart, Jr. Southern Economic Journal V26, N4 (Apr., 1960), pp. 281–290 

Here is a link to the work of Ellen Dannin, which the your Mises Institute lobbying paper disputes on theory, not evidence

Here is a link to a study and discussion you can actually read and critique. For the most part it concludes that minimum wage has a very minimal effect upon employment.

Alaska's job growth has been among the strongest in the country since the recession hit. Persistently high unemployment in Alaska is the result of growth in the labor force, not layoffs of minimum wage workers. Weakness in Washington's labor market has primarily been caused by the severe decline in manufacturing employment (19.7% from 2000 to 2003), a relatively high-paying industry largely unaffected by the minimum wage. In Oregon, minimum wage increases have not coincided with increases in the unemployment rate. The large uptick in Oregon joblessness occurred in 2001, although the state minimum wage had not increased since 1999.

The bold should answer some peoples questions. Even the one study that claimed a 10% minimum wage increase would cost 1-3% of jobs was theoretical and described itself with "mays" and "mights". I prefer the studys of actual results.

At this point the burden of proof lies upon those who claim that raising the minimum wage costs jobs to show the connection because the quick check that I did indicated it increased jobs.

For the most part I agree with the people who consider minimum wage as having minimal effect. If any it seems to lean toward the positive, not the negative.

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#29) On July 16, 2009 at 4:12 AM, kaskoosek (92.46) wrote:

The wealth pie needs to be redistributed more fairly.

The income disparity the last 20 years has caused a lot of angst.

 

However the minimum wage might not be the best way to do it, due to jobs migration. In my oppinion there should be some kind of cap on wealth.

By doing that we will provide the basic needs for humanity including universal health care and a top notch education system similair to Canada's.

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#30) On July 16, 2009 at 8:26 AM, toopersent (74.63) wrote:

I wanted to comment on several things, but I'm too lazy, so I'll comment on something a more recent poster said.

Employers are looking to pay this little, and can actually look their employees in the eye?  They deserve to be put in a cage and poked with sticks if so. 

Well, take McDonalds for example...that pay increase costs them a lot of money because they have thousands of employees.  So yes, they are looking to pay them as little as possible.  Also keep in mind you can be a manager in a McDonalds and make over $30,000 year without a degree...

Also, a point was made very early in this conversation and has been overlooked.  Gov't should NOT be determining fair value of wages....the market should.

You could try to get away with paying someone $2/hr, but if that person can get a job down the street at $2.50/hr, so be it.  Competetive wages are already at work for anybody making more than minimum wage. 

It also sucks for the guy that was already making $7.25 hour before the wage hike.  Sorry little buddy, now you're making minimum wage.  Everyone else just got a pay bump, but not you.  Either that, or the company ends up paying him $8/hr which is unlikely. 

 

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#31) On July 16, 2009 at 10:32 AM, devoish (99.07) wrote:

Ok lets use Mcd's as an example.Mcd has 465,000 employees worldwide in 2007. If every one of them was a minimum wage employee, affected by the $.70/hour 2008 federal increase it would cost them $950 million. 465,000 employees divided by three eight hour shifts equals 155,000 employees working every hour. 155,000 times the $.70 increase $108,500 every hour in additional expense. $108,500 x 24 hours x 365 days equals $950,460,000.00 in additional expense.

Revenues of $950mil divided by earnings of $21,586 equals a .044% increase in expenses.

To make up the difference McD's could choose to cut employees at the risk of being able to sell fewer burgers, or raise the dollar menu to a "buck and nickel" menu at the risk of losing customers.

They could choose to eat the cost themselves and reduce profits of $3,500bil by 27% leaving them $2,550bil.

But closer to reality is the fact that a very small percentage of employees make minimum wage. About 2.5% in the USA. let's assume, as you did that, Mcd's pays a higher than average percentage of employees minimum. Let's say 5%. Also your last sentence about "pay bumps" or "income creep" is innaccurate. The studies I saw show that income creep does exist and is an additional cost cited by those who are against setting a minimum. It typically is described as affecting only near minimum wage employees, and the effect is less than the minimum increase. Lets quadruple that 5% to adjust, and say 20% of Mcd's employees will get the whole $.70.

$950 mil in additional expense becomes $190 mil, the "buck and nickel" menu becomes a "buck and a penny" menu or the earnings impact becomes 5.5% instead of 27%.

Or the remaining 80% of Mcd's employees can take a $.18/hour hit to their paychecks.

Or the top forty percent of Mcd's employees can take an $.36/hour hit.

Whether additional expenses are imposed by Gov't, nature, suppliers, all business's have choices how to deal with them.

Also, a point was made very early in this conversation and has been overlooked.  Gov't should NOT be determining fair value of wages....the market should.

Where does free market theory not cause increased poverty? The closer a country gets to it, the worse off the majority of its people are.

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#32) On July 16, 2009 at 11:03 AM, Option1307 (29.90) wrote:

devoish

I don't care to debate this topic with you, both sides raise valid points IMO. However, what is your response to comments #24/25?

On a side note, have you heard of Dr. Stuart Altman? I recently went and saw a presentation he gave about healthcare reform. Interesting person with a interesting take on things, you should look into him.

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#33) On July 16, 2009 at 7:07 PM, imeasure (< 20) wrote:

post #29 "The wealth pie needs to be redistributed more fairly...there should be some kind of cap on wealth...."

Assuming you're not joking let me explain.

Distribution of wealth or limitation of wealth is not an appropriate role of government. To use government to accomplish these ends eliminates the freedom of the individual for self-determination.

Ben Franklin said "Those who would trade freedom for security deserve neither freedom nor security."

If you are willing to trade your freedom to negotiate your own wage for the security of a wage negotiated for you by the government - you are a serf and you deserve the facist government you will some day get. 

Every person of means I know is very generous and contributes to private charities helping the poor to better equip themselves.

Quick Quiz:

"which economic philosophy improves the plight of the poor?" without trampling on individual liberty and destroying individual incentive?"

A. the free market and private charity.

B. government central planning

C. a balanced mixture of both A and B.

ANSWER: A

B - clearly doesn't work (witness central american dictators and the former Soviet Union)

C -  doesn't work because central planners cannot resist enlarging their domains until you end up with B anyway.

Pure Capitalism may be an imperfect system. But it is a lot less imperfect than the alternatives. 

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#34) On July 17, 2009 at 9:42 PM, devoish (99.07) wrote:

imeasure,

Quick Quiz:

"which economic philosophy improves the plight of the poor?" without trampling on individual liberty and destroying individual incentive?"

A. the free market and private charity.

B. government central planning

C. a balanced mixture of both A and B.

ANSWER: A

B - clearly doesn't work (witness central american dictators and the former Soviet Union)

It is working for South Korea, Qatar, UAE, China.

C -  doesn't work because central planners cannot resist enlarging their domains until you end up with B anyway.

It is working for Germany, Norway, Sweden, Denmark

Pure Capitalism may be an imperfect system. But it is a lot less imperfect than the alternatives.

Your example of "A" is ?

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#35) On July 17, 2009 at 10:53 PM, imeasure (< 20) wrote:

Although America has a mostly free market (not totally free) - my first thought of an example of amazingly charitable persons are Bill and Melinda Gates who have given billions to combat global health issues such as malaria and AIDS in poor countries. Warren Buffet is another one. Heck the list is too long. And those are only the obscenely wealthy folks. Compare the generosity of Americans to the generosity of folks from more socialist countries. Americans out give everyone else on earth per capita. Last statistics I read on it - it wasn't even close. Such generosity is the fruit of born of the freedom to pursue our business as we see fit.

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#36) On July 18, 2009 at 10:48 AM, devoish (99.07) wrote:

I get it.

We can be even more succesful and generous if, through "free markets" we can only have more paupers:

1: a person destitute of means except such as are derived from charity ; specifically : one who receives aid from funds designated for the poor 2: a very poor person Report this comment
#37) On July 19, 2009 at 8:34 AM, imeasure (< 20) wrote:

Devoish - you said "We can be even more succesful and generous if, through "free markets" we can only have more paupers."

I would say it this way - poverty will ALWAYS exist - it is intriscally linked to poor choices made by individuals. And since some individuals will always make poor choices, you will always have it.

Whether it's the single mother on welfare spending her welfare check on lottery tickets. Or the thirdworld dictator who's rigid control ends up starving half the population of his country. It's the exercise of human choice that creates human consequence.

The question is not how can you eliminate poverty? It's which system provides the greatest opportunity for reducing it? I maintain that a system that respects individual property rights and individual freedoms provides the greatest economic hope for all people.

Only voluntary charity can bring the kind of accountability to individuals that they need. Coerced government charity pays little attention to the damage that the recipients are doing to themselves and others. I have stood in line at the gas station and watched people spend what was (obvious to everyone in line) their rent money on lottery tickets. How do you prevent that kind of insane behavior? answer: you cannot prevent it.

Here's a more personal example. A friend of mine has fallen on hard times having lost a high paying factory job. He worked for years there but never took advantage of their tuition plan to improve his skills and finish a degree program. He was confident his job wouldn't end. Now here he is with a high school education in a tough recession looking for a job.

I periodically help him financially but I set expectations on him to receive my help. If he doesn't remain accountable he won't receive my help. There is not a government program out there that can accomplisht that kind of one-on-one interaction with someone in need.

 

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