Economists: Raising the minimum wage might actually be good after all.

[Maniac]

You're still causing economic damage to these businesses which are the primary employers of low-wage labor

Only to the extent that increased prices for their goods will lower the demand. So again it all depends on the elasticity of the demand. You can't make simple generalizations.

and to the consumers who pay higher prices (these consumers comprise most of the population).

What all these economists who rightly so say free trade, low wages, etc are good for the consumers seem to forget is that you need to have money to be a consumer (ie most econ theories and models assume there's no unemployment, that all "production factors are perfectly allocated" ). So correct, people who earn much more than the minimum wage might not see any direct economic benefit from an increased minimum wage (though indirectly there's an increase in demand for the goods THEY're producing). For the minimum wagers the increase in price of the goods they buy made by minimum wagers will be smaller than the increase in their wage, so they will see an increase in purchasing power, extra money they can spend on other goods. So the question is not "would an increase of the minimum wage be economically good?" but "FOR WHOM would an increase be good/bad?". It's a primarily a question of politics and self-interest, not economical "science".

You only forget that some existing restaurants will be closed because the rise in minimum wages makes them not profitable enough, and new restaurants will not be opened for the same reason.

They'll all just increase their prices.

The demand to be referred to is not the demand of lunches but the demand of workers by restaurants owners.

That's what I was doing when I presumed the demand [for low wage workers] is rather inelastic. The demand of lunches is of course likely be more elastic.

Or the restaurant-owner will simply ignore the law all-together and employ personnel illegally. I'm surprised that a Belgian like Maniac doesn't think of that.

Employ more tax xontrollers.

[Lodi]

Could Adam Smith school me on how the increase of a national minimum wage would interact or have an effect upon the currency devaluation that the American dollar is experiencing? Would some segments of the economy be saved some hardship from the devaluation?

Forgive me if that is a poorly worded question.

[Ogie Oglethorpe]

Originally posted by Maniac

They'll all just increase their prices.

I remember when Herman Cain of Godfather's Pizza fame schooled Clinton for just such an inane comment.

[Drogue]

Surely this all depends on monopsony power. Maniac is right that the scale of the effect depends on the relative elasticities, and the general theory and evidence that raising the minimum wage decreases employment in most cases is also shown by many studies. However that doesn't say it works in all situations. It has an effect both ways - a disincentive to hire due to extra cost and the lessening of monopsony power by reducing the ability of a firm to keep wages down when it has the market power too. The exact details of how much power is necessary no-one knows, but it is possible for a rise in the minimum wage to move employment either way.

[Dinner]

Originally posted by Edan




Some statistics

Of workers paid hourly, 2.5% (ro about 1.9 million) make minimum wage or below, with .6% (or about 479,000) making minimum wage.

Edit: slightly newer numbers.

Small quibble. Those numbers only consider the federal minimum wage while several states have set their minimum wage higher then the federal level (and Arkansas actually has loop holes so that people can get paid lower then the federal minimum). If we looked at both the state and federal minimum wage then I imagine those numbers would be substantially higher especially since it is generally the big populous states which have increased their minimum wage.

[Kuciwalker]

Originally posted by Maniac
Only to the extent that increased prices for their goods will lower the demand. So again it all depends on the elasticity of the demand. You can't make simple generalizations.

You can't assume that demand for a huge sector of the economy is just inelastic, that's retarded.

What all these economists who rightly so say free trade, low wages, etc are good for the consumers seem to forget is that you need to have money to be a consumer

People who earn low wages primarily buy from places that pay low wages. So you've raised their prices by about as much as you've raised their pay. Brilliant

[Flubber]

hmmm interesting debate and one that occurred recently her in Alberta with a jump in the minimum wage. But its largely irrelevant anyway since hardly anyone pays the minimum wage anymore. IIRC minimum wage is 7.50 or so but the fast food joints are starting people at $10 AT LEAST. They still have not found enough workers and many of the chains such as Tim Hortons, Burger King, Macdonalds and Wendy's have drastically reduced store hours.

So in our case SUPPLY was insufficient to meet the demand so the demand curve adjusted. There are higher wages and fewer jobs but it was NOT the higher wages that eliminated the jobs

One of the biggest challenges for the chains in a boom town atmosphere is that they mainly have fixed nation-wide pricing. That doesn't work so well in a place where labour and leasing costs are much higher

[Flubber]

Originally posted by Kuciwalker



People who earn low wages primarily buy from places that pay low wages. So you've raised their prices by about as much as you've raised their pay. Brilliant

I don't really agree with that. Low wages predominate in fast food which I would argue a frugal person would avoid . Although it is not THAT expensive, a frugal person can eat so much cheaper

[Kuciwalker]

Also in retail. Especially places like grocery stores.

[Maniac]

Originally posted by Kuciwalker
You can't assume that demand for a huge sector of the economy is just inelastic, that's retarded.

I'm not assuming that. I just want to point out it all depends and you can't make simple generalizations for all situations.

People who earn low wages primarily buy from places that pay low wages. So you've raised their prices by about as much as you've raised their pay. Brilliant

People buy other stuff than food. Rent, electricity, going to the doctor who earns more than the minimum wage...

Suppose someone earns 10 Zenny Coins a month. His minimum wage gets raised to 11 Zenny Coins. As a consequence the hamburgers he makes rise in price too. Assume his wage is half of the production price of a hamburger, so the hamburger rises 5% in price. Assume he spends half his wage on eating his own hamburgers. That means instead of 5 out of 10 Zenny Coins, he'll now spend 5,25 out of 11 Zenny Coins. 0,25 Zenny Coins are wasted to inflation. 0,75 Zenny Coins are a real increase in purchasing power.

[Colon™]

Originally posted by Maniac
Employ more tax xontrollers.

Who work for free and who couldn't put their hands to work in other jobs, of course.

[Colon™]

Originally posted by Maniac
What all these economists who rightly so say free trade, low wages, etc are good for the consumers seem to forget is that you need to have money to be a consumer (ie most econ theories and models assume there's no unemployment, that all "production factors are perfectly allocated" ). So correct, people who earn much more than the minimum wage might not see any direct economic benefit from an increased minimum wage (though indirectly there's an increase in demand for the goods THEY're producing). For the minimum wagers the increase in price of the goods they buy made by minimum wagers will be smaller than the increase in their wage, so they will see an increase in purchasing power, extra money they can spend on other goods. So the question is not "would an increase of the minimum wage be economically good?" but "FOR WHOM would an increase be good/bad?". It's a primarily a question of politics and self-interest, not economical "science".

What economist says that low wages are good for the economy?

[Dinner]

Originally posted by Kuciwalker
Also in retail. Especially places like grocery stores.

Every grocery store in my area is union. They get fine wages.

[notyoueither]

Originally posted by Flubber
hmmm interesting debate and one that occurred recently her in Alberta with a jump in the minimum wage. But its largely irrelevant anyway since hardly anyone pays the minimum wage anymore. IIRC minimum wage is 7.50 or so but the fast food joints are starting people at $10 AT LEAST. They still have not found enough workers and many of the chains such as Tim Hortons, Burger King, Macdonalds and Wendy's have drastically reduced store hours.

So in our case SUPPLY was insufficient to meet the demand so the demand curve adjusted. There are higher wages and fewer jobs but it was NOT the higher wages that eliminated the jobs

One of the biggest challenges for the chains in a boom town atmosphere is that they mainly have fixed nation-wide pricing. That doesn't work so well in a place where labour and leasing costs are much higher

Have you taken into account people who are not employable at a higher wage?

They'll simply have jobs go poof because the 'businesses' that employ them are unable to pay the higher rate.

So they'll stay at home and go on welfare. I'll bet they'll feel better.

[notyoueither]

Originally posted by Oerdin


Every grocery store in my area is union. They get fine wages.

Your area. Big country. Lots of different situations.

Solutions from top down are about as smart as the Soviets, and lead to just as much success.