Minimum Wage

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Minimum wage is the delusion that bureaucrats and politicos know more about what's fair than the laborer and the employer, and that there's a magic round number that fair for everyone, everywhere, at the same time.

Issue Lie Truth
Minimum Wage

Labor costs

Minimum wage hasn’t kept up with inflation, and we can just raise the minimum wage to give a “living wage” to the millions of working poor, with no negative consequences, it’s only been the heartless and greedy conservatives that refuse to allow this (because the less the poor have, the more they have). If it wasn't for Democrats the Republicans would make everyone wage slaves because they're only out to help the rich. Minimum wage did keep up with inflation, most minimum wage workers are teens and elderly or part-time supplemental jobs, and there’s no one wage that would be equally fair in NYC and rural Idaho at the same time. Economists know that raising the minimum wage is the same as increasing discrimination against the least skilled or experienced: increasing the costs to hire, will reduce hiring (increase automation, offshoring, etc) and increase the cost of goods. The people championing minimum wage are failing to point out that if you un-employ many, to help a few, and drive up the costs of goods and services by more than you help, then no one is really coming out ahead.

Minimum Wage


Does minimum wage impact employment?

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This is of course hotly contested, but it breaks down into two camps: (1) "No" (2) Those who have a clue as to what they're talking about.

The problem is (of course) that it doesn't always, and doesn't always immediately impact it. So there's some plausible deniability for the economics deniers out there to find edge cases and say, "see". But as soon as you look deeper than the surface, you find that it does suppress growth, or increase a decline, sometimes ahead of the law and sometimes well behind it but it happens, and it especially hits certain segments and groups of people harder than others (like teens, starting out, part time work, and so on). Let's dive into the evidence. more...


Livable Wage

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Ignoring the stupidity that there's one magic "livable wage" that would be equally fair on both sides of the same city, let alone country, the left tries to sell the gullible that setting a salary minimum will set a salary minimum, but it doesn’t.

Progressives often see the choice as: (a) A livable minimum wage (b) A lower minimum wage.
But that's a fantasy. The real choice is: (a) What the market will bear (b) Unemployment ($0/hour).

The choice isn't pulling people out of poverty or not, it's about what value an opportunity is worth to an employer, before they skip the job, automate, outsource, or just give up. more...


Minimum Wage Laws

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The minimum wage and living wage warriors seem reluctant to accept the economic realities: price and wage controls almost never work. There are extremely rare cases where they can work (or do minimal damage) in one small location for short amounts of time, but there's no magic wage that's right for everywhere and everywhen at once. Thus wage controls start out bad and get worse over time. While a few discredited studies (like Card & Krueger) show that raising minimum wage doesn't have large impacts, in a few situations, for short periods of time. But each study like that has dozens of rebuttals and refutations that show the flaws in their methodology, and counter studies that it does impact employment (and wages), in the wrong way. So if you see a Study or News that claims minimum wage doesn't hurt employment, you know it's Fake. A few socratic questions show the problems: (a) What's a fair wage for both NYC and B.F. Idaho? If $15/hr is good, why not $150/hr? If only 9% of minimum wage workers are below the poverty line (and 91% are not), wouldn't giving money directly to that 9% be better? If minimum wage is a starting salary, why should it have an ending value (be a livable wage)?

more...


Minimum Wage and Automation

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Value (Money) is derived from the product of work (productivity/results), not based on what you paid for it. Thus the less you pay, the better off you are. The more you pay, the worse. This is why despite the doomsayers automation is good, and despite what the Social Justice Warriors (also known as economically illiterates) will tell you, minimum wage is not good. Despite the B.S. they're selling, you can't lose more money on every transaction and make it up in volume. more...


Minimum Wage: Cost basis

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I hear all the time, that McDonald’s can afford to pay a “livable wage” without raising costs, or "it’s just a few cents a burger", by people that don’t understand basic economics, or business.

Here’s some notables taken from the average McDonald's balance sheet:

  • The average McDonald's generate about $2.5 million in gross revenue, but then they have a lot of expenses like rent/mortgage, taxes, utilities, food, taxes, and labor (and their taxes).
  • The average McD's Employs 61 people in operations and restaurant management positions, and spend nearly $507,595 on wages (about $800K or 32% of gross revenue, when you factor in benefits, tax liability, and other costs around employment).
  • A McDonald's ends up with an average net profit after those expenses of 6%. Or about $150K/year in net revenue (for about $2M in initial investment/risk).
  • A jump from $7.25->$15/hour means $264K in increase wage costs, on profits of about $150K…. so they’re now losing $114,000.00 on each store per year. How many new McDonald’s will open with that as their forecast, how many will close because of it?

The store (and chain) must respond, or the average store will go out of business. They must: raise prices, trim staff, automate (or some balance of these), or shut down. more...


Minimum Wage: Poverty

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Poverty (and who makes minimum wage) gets even more complex:

  • 75% of it is due to underemployment (which is more insidious than unemployment)
  • Most poverty is short term (short term unemployment that effects people in one year).
  • Most of the rest is due to under-education, immigration, fatherless families, and finally bad social program programs (which holds more people down than they helps people up).

Explain to me how raising minimum wage helps with any of those things?

I can explain how fewer teenage jobs means more teenagers doing other things, like getting pregnant. Fewer opportunities for the less educated and immigrants doesn't help them out. And so on. So target the right people, instead of offering blanket subsidies to the wrong ones. Instead of raising the minimum wage, Congress should look at other ways to aid the working poor that actually focus on providing help to those who need it.

And that' the first rule of economics: do no harm. If you can't show how you're making something better, and the other side can show how you're not, then you're wrong. Or don't knock down fences without understanding why they're there. more...



Conclusion

Of course both sides want to help people. The left just believes that the way to do it is through government. And the right understands that even if there was some benefit, it's only in the short term and for a few -- to help the most people, you need to help the economy. If you increase demand for labor (and supply goes down), then salaries will go up naturally -- and you don't increase demand for workers by putting a burden on hiring and allowing unfettered illegal immigration. Compassion is putting reality above your desires, and looking at what works better. Historically, that's never been the more socialist/government centric approach... at least not for long.

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📚 References