Minimum Wage Increase Impact/Effect

eyephone

Well-known member
This deserves it's own thread. What are the impact of the increase of minimum wage? (good or bad for workers, business)
 
A long time ago when I used to listened to talk radio, I think it was Larry Elder who said there should be no minimum wage.

I thought that was ridiculous but if you read economic articles about the pros of it, it starts to make sense.

Obviously, that will never happen here but it was interesting to read about the effects of what a minimum wage does and how increasing it isn't actually beneficial.

Some pros of no minimum wage:

- Less unemployment
- Lower costs for business to allow them to grow
- Longer tenure as employees stay with companies in order to move up
- More skilled workers due to more experience
- Natural increase in salaries to match talents

I understand there is a "living" wage but do you think it's more useful for society if a new or unskilled worker starts of at $5/hr or stays unemployed because no one wants to hire them at $10/hr?

And naturally, the market will dictate what the "minimum" is. If no one will work for $5/hr... then companies will have to pay more.
 
I'm not against min wage, just don't like it raising by 66% in such a short timeframe. It needs to be gradual.

I have to find that article up in Seattle area where they have the $15 rate but people are purposely working less hours to still qualify for govt benefits which was going against their plan
 
AW said:
I'm not against min wage, just don't like it raising by 66% in such a short timeframe. It needs to be gradual.

I have to find that article up in Seattle area where they have the $15 rate but people are purposely working less hours to still qualify for govt benefits which was going against their plan

I've read that article too, here you go.
http://www.youngcons.com/seattle-workers-already-feeling-negative-effects-of-15-minimum-wage/

Some workers across the city are left telling bosses to give them fewer hours at the higher wage because a full week?s earnings now puts them past the threshold for some welfare payments such as food stamps and assistance with rent.
 
It going to be interesting to see the effect here in LA and unincorporated area of LA county.

Rowland Heights for example, is an unincorporated area of LA county and it's going to have $15 minimum wage where its adjacent city like Hacienda Height and Walnut are not.

We probably going to see increase menu prices and some restaurant closure in Rowland Height. 
 
incentivize lowest tier workers to be even less productive and still have the same burden to society

There's another Seattle area article on chipotle raising prices already due to labor costs

Small businesses will get affected the most, either layoff, move, raise prices.

Man. I'd like a 66% raise in 2 years. 
 
I'm not in favor of increasing the minimum wage. In fact, I am more likely to support a lower wage, perhaps five dollars per hour.

Every minimum wage increase we incur forces businesses to raise prices or lay off their employees. Should we really support job loss in exchange for higher wages for some?

Additionally, a lower wage increases the potential for an employer to reward a hard working employee with a raise. If the employer does not feel the employee is deserving, then that worker can prove their value and search for employment elsewhere.

For those who are truly working to survive, I would support the Earned Income Tax Credit. This would incentivize those to work more and file their taxes for this credit. This credit would not go to teenagers because they are claimed as dependents, many of which who want the minimum wage increase.

It does not make sense to take wage decisions away from the business owners. A minimum wage does take away their power and increase their overall expenses as well.

Finally, we all know that increased wages leads to increased prices which definitely harms the retired on fixed incomes who saved appropriately years ago.
 
Yeah, I would favor tax credits over this large wage increase.

I do see a point of having some min wage, otherwise it'll be like less developed countries with crazy wealth disparity
 
Another way to view a minimum wage is that you are banning anyone (with some exceptions) from selling their wages for less than that amount. So it particularly hurts those who are uneducated and less intelligent who might have found buyers for their time at $9/hr but not at $15/hr.

Minimum wages are being used right now to substitute for the role unions used to have in negotiating salaries. Unfortunately neither system is perfect.
 
I think lower wages could work if housing costs were lower. A person working $5/hr full-time (for 2080 hours, so let's assume this person never gets sick and gets zero vacation days) makes only $10,400/year. If this person spends 1/3 of his income on housing, that leaves only $289 per month for housing expenses.

Totally impractical anywhere in Orange County, including in Santa Ana (I've looked at buying there for income property). And if this mythical $5/hr person was forced out to Riverside County, they would be spending 15 hours a week commuting plus gas etc.
 
HMart said:
I think lower wages could work if housing costs were lower. A person working $5/hr full-time (for 2080 hours, so let's assume this person never gets sick and gets zero vacation days) makes only $10,400/year. If this person spends 1/3 of his income on housing, that leaves only $289 per month for housing expenses.

Totally impractical anywhere in Orange County, including in Santa Ana (I've looked at buying there for income property). And if this mythical $5/hr person was forced out to Riverside County, they would be spending 15 hours a week commuting plus gas etc.
But minimum wage (or no minimum wage) isn't for workers who need to pay for housing.

It could be for teens, adults who have their housing covered for them, or even adults who pool together their money for housing.

And to your point, the market in Irvine or Orange County would determine what minimum wage would be. If there are people in OC who will work for $5/hr, let them worry about their other expenses.

It's like paperboyNC is saying. This is partly why there is a day worker market in the OC, cheaper labor.
 
I think a free-market approach to wages is totally reasonable for many of the reasons you outlined. I just feel awful for people who would be working for an income that would not be able to support their housing costs. I don't think it's good for society to have a bunch of people who are unable to be self-supporting.

I would feel a lot better about abolishing the minimum wage if someone would be able to rent a small apartment for $300/mo, for example.

 
I think it depends who you are having live in this apartment. It is very possible for someone to share a room for $300. Obviously not in Irvine, but many people live in Tustin, Lake Forest, etc.
While this is not anyone's first choice it is real life and many people do it.
This would encourage people to work hard in hopes of earning that raise or moving up to the next level of employment.
 
HMart said:
I think a free-market approach to wages is totally reasonable for many of the reasons you outlined. I just feel awful for people who would be working for an income that would not be able to support their housing costs. I don't think it's good for society to have a bunch of people who are unable to be self-supporting.

I would feel a lot better about abolishing the minimum wage if someone would be able to rent a small apartment for $300/mo, for example.
This is catch-22.

Again... a low wage job is not for someone so they can afford their own housing, it's for someone to get work experience or to do labor more highly skilled workers won't.

But, as a result, you may see lowered price housing (not $300/mo) as a response to attract low wage workers. That's another theoretical benefit of no minimum wage, lower cost for goods, services etc because of the lower cost of labor.
 
Should there not be a corresponding call for a free-market approach to zoning in Irvine, then? Abolish zoning, and allow developers to build a towers wherever they please?

Just like (federal/state) government is artificially propping up wage prices and restricting quantity of jobs, (local) government is also artificially artificially propping up housing prices and restricting quantity of living units.
 
We can look at real world macro application as I pointed out in the Greece thread when an imposed minimum wage in Puerto Rico have contributed mightily to its predicament or look at more micro example with the failing $70,000.00 minimum wage imposed at Gravity Payments.  That disastrous experiment has had a very predictable outcome....

Company?s $70,000 Minimum Wage Works Out Just Like Atlas Shrugged Predicted

The Starnes heirs thought the company should be run like a family, that everyone should work according to their ability and be paid according to their need. It was a move celebrated by some and protested by others.

The results were disastrous. Production fell, as did quality of workmanship. Demand for ?needs? increased, while claims on ?ability? dwindled. In short order, the factory failed.

Rand wrote of her fictional Starnesville in 1957. Today, a Seattle company has followed her script with predictable results. From Business Insider:


When Dan Price, founder and CEO of the Seattle-based credit-card-payment processing firm Gravity Payments, announced he was raising the company?s minimum salary to $70,000 a year, he was met with overwhelming enthusiasm.

?Everyone start[ed] screaming and cheering and just going crazy,? Price told Business Insider shortly after he broke the news in April.

But in the weeks since then, it?s become clear that not everyone is equally pleased. Among the critics? Some of Price?s own employees.

From Fox News:


Dan Price, 31, tells the New York Times that things have gotten so bad he?s been forced to rent out his house.

?I?m working as hard as I ever worked to make it work,? he told the Times in a video that shows him sitting on a plastic bucket in the garage of his house. ?I?m renting out my house right now to try and make ends meet myself.?

The Times article said Price?s decision ended up costing him a few customers and two of his ?most valued? employees, who quit after newer employees ended up with bigger salary hikes than older ones.

Grant Moran, 29, also quit, saying the new pay-scale was disconcerting

?Now the people who were just clocking in and out were making the same as me,? he told the paper. ?It shackles high performers to less motivated team members.?

The Times said customers who left were dismayed at what Price did, viewing it as a political statement. Others left fearful Gravity would soon hike fees to pay for salary increases.

Brian Canlis, co-owner of a family restaurant, already worried about how to deal with Seattle?s new minimum wage, told Price the pay raise at Gravity ?makes it harder for the rest of us.?

Rand would say she told you so. The solution to any perceived need is not merely to get more. It?s to produce more. Even charity relies on someone being productive. And people aren?t going to be productive if 1) they?ll get paid regardless or, 2) they won?t get paid better for producing more.

http://pjmedia.com/tatler/2015/08/03/companys-70000-minimum-wage-works-out-just-like-atlas-shrugged-predicted/
 
yup that CEO is dumb.  instead of absolute minimum of 70k, he should've just greatly increased the bonus pool, based on performance, title/position, and company's profit.
 
If I were one of his clients, I'd be leaving too (part of the business fees goes to pay low productivity workers)
Wonder if his company would survive
 
AW said:
If I were one of his clients, I'd be leaving too (part of the business fees goes to pay low productivity workers)
Wonder if his company would survive

I wouldn't care. Just like I don't buy a smartphone based on CEO compensation packages. I look at criteria that directly affect me.
 
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