The Dangerous Minimum Wage Mirage

Why raising the minimum wage will hurt workers and worsen the economy

Steve Chapman | July 23, 2009

The federal government is trying to strengthen the U.S. auto industry. So here's a great idea for what it can do: Tell the Big Three to raise their prices across the board.

That would help in some obvious ways. Higher prices would mean bigger profit margins on every sale. Bigger profits would mean more jobs. More jobs would mean more workers buying new American cars.

But anyone can see that raising prices wouldn't work, because it would dry up sales. If American consumers were willing to pay more for American cars, dealers would already be charging higher prices. This is such an obviously boneheaded idea that no one would ever dream of doing it.

But in the realm of employee compensation, the federal government is taking that absurd notion and putting it into law. Come Friday, the federally mandated minimum wage will jump from $6.55 an hour to $7.25—an 11 percent increase. At a time when employers are laying off workers, Washington is going to make it more expensive to keep them.

If you're a minimum wage employee, your job will pay more, but only if it still exists. These days, most companies are scrutinizing every position on the payroll to make sure it's worth the cost. Raise the toll, and some employees will find they are no longer valuable enough to make the cut.

Economists generally agree that increases in the minimum wage cause unemployment even when the economy is prospering—something it has not been doing for the last year and a half. David Neumark, a professor at the University of California, Irvine, estimates this rise will destroy some 300,000 jobs among teens and young adults.

Even proponents of the increase understand the tradeoff. Otherwise they would demand an even bigger hike. If you can force employers to pay higher wages without reducing employment, why set the minimum at $7.25 an hour? Why not $17.25? Why not $37.25?

The suspension of disbelief required to support the minimum wage will only take you so far. It's impossible to deny that if it were illegal to pay someone less than a mere $36 an hour, a lot of jobs would vanish. But a small dose of poison is still poison, and in this case it's being administered to a patient who is already ill.

Supporters make a virtue of bad timing by claiming the change will provide a stimulus exactly when the economy needs it. The liberal Economic Policy Institute in Washington insists that a minimum wage increase "would not only benefit low-income working families, but it would also provide a boost to consumer spending and the broader economy."

Not likely. Companies, unlike the government, can't create cash at will. Any money they give to workers has to be obtained by cutting jobs, reducing employee benefits, or slashing other expenses that happen to be someone's income. Net stimulus: zero.

Besides eliminating minimum wage jobs, the increase stands to have another little-noticed effect: pushing people into jobs that pay even less. Some employees are exempt from the law, including those working in newspaper delivery, fishing, and seasonal amusement parks, as well as staffers at companies with annual revenues of less than $500,000 a year.

Doesn't sound like a big group, does it? But in 2008, reports the Bureau of Labor Statistics, 1.94 million Americans were below the "minimum" wage—compared to 286,000 getting the actual minimum. When the floor went unchanged for 10 years, the number of workers in sub-minimum jobs steadily declined. But in 2007, when the mandate went from $5.15 to $5.85, the total climbed by 14 percent, at a time when overall employment was stable.

That's not a coincidence. Economist Alan Reynolds of the libertarian Cato Institute in Washington has found that when the minimum wage went up in 1996 and 1997, the number of workers beneath the floor expanded by more than 75 percent—even though the economy was booming. It looks like the minimum wage destroys some low-paying jobs and replaces them with lower-paying ones, to the detriment of the people who are supposed to benefit.

Economics punctures alluring myths about the sources of material improvement, which is why it is known as the "dismal science." But the victims of the minimum wage will find that the truly dismal thing about economics is what happens when you ignore it.

COPYRIGHT 2009 CREATORS.COM

Comments

Anonymous|7.23.09 @ 7:13AM|#

Even proponents of the increase understand the tradeoff. Otherwise they would demand an even bigger hike. If you can force employers to pay higher wages without reducing employment, why set the minimum at $7.25 an hour? Why not $17.25? Why not $37.25?

I haven't bothered to look, but by any official and reasonable indexes -- including at least inflation, official CPI against a basket of goods, and any unofficial CPI that makes the real one look like a bald-faced lie -- isn't minimum wage rising in real terms, as well as nominal ones*?

*That would be a great slang term for fiat money.

MNG|7.23.09 @ 8:02AM|#

Of course supportes (like me) realize it is a trade-off. The question is, is the protection given to those workers who would be bargained down below the wage worth the incentives such a law creates to pay less?

|7.23.09 @ 8:23AM|#

The question is, is the protection given to those workers who would be bargained down below the wage worth the incentives such a law creates to pay less?

Don't forget the counterpart to that question, "Who are you to judge?"

Hugh Akston|7.23.09 @ 8:23AM|#

Of course supportes (like me) realize it is a trade-off.

The problem, MNG, is that trade-offs are generally best decided by the people who are actually affected by them.

If I were a high-school kid looking for my first job, I'm not sure how comforting I would find the assurances of the self-congratulating political class in Washington that they are protecting me from injustice, especially when I have to compete for ever scarcer jobs.

|7.23.09 @ 8:28AM|#

Continued nanny state encroachment on basic human interactions. Same gov't that dictates what two consenting adults will do in the bedroom or injest into their bodies, will no doubt dictate the minimum fees that one party can negotiate with another. Given that we have employment at will in this country, you would think that legally hiring persons at such low wages would make it difficult for an employer/business to negotiate too hard. Of coure, if we artificially set a wage that is too high, then there is the incentive for illegal hiring at lower wages... but then again, we don't have an immigration problem in this country.
Move along, nothing to see here.

|7.23.09 @ 8:40AM|#

Oh, where is joe? He always entertained us with his insistence that minimum wage doesn't adversely effect the number of people who are hired.

Xeones|7.23.09 @ 8:43AM|#

For Congress so loved the unemployed, they took necessary steps to see more of them.

|7.23.09 @ 8:53AM|#

This hike comes at a perfect time for me to impart a valuable lesson to my job seeking 16 year old. Obama would be wise to pull the plug on it. He looks bad enough already, imagine how he's going to look when unemployment is twelve percent.

Rich|7.23.09 @ 8:55AM|#

Here we go again.

> If I were a high-school kid looking for my first job, I'm not sure how comforting I would find the assurances of the self-congratulating political class in Washington that they are protecting me from injustice, especially when I have to compete for ever scarcer jobs.

Well said, Hugh. I don't know why these guys don't just cut to the chase and pay everyone a "living wage" just for toeing the line.

|7.23.09 @ 8:56AM|#

is the protection given to those workers who would be bargained down below the wage worth the incentives

Are you suggesting that these minimum-wage employees are participating in bargaining against their will? More to the point, where is it that you believe the federal government derives the authority to interfere in the wage transaction between an employer and an employee?

|7.23.09 @ 9:01AM|#

I'll ask again the question I asked last time Hit & Run posted a discussion of minimum wage: where are the workers who earn this? Hiring unskilled (or minimally skilled) laborers for entry level jobs in Brooklyn, even in this economy, our company needs to offer $8.50/hour just to get people who can be relied on to show up 4 days out of 5 each week. I understand the principle of opposition to a minimum wage, but it's hard for me to imagine it really has a signficant effect on the economy overall.

Joe M|7.23.09 @ 9:03AM|#

I have the strangest feeling of deja vu. Surely, I've read this exact same article at least three times before in the last two decades. And yet here we are again, lesson unlearned.

MNG|7.23.09 @ 9:05AM|#

"Are you suggesting that these minimum-wage employees are participating in bargaining against their will?"

Yes, since they have to eat, and it takes money to rent, and the only way they will get money is if someone gives it to them in exchange for services, and for the people in question they may be in a position in which they can either work for less than the wage or not eat. So yes.

"where is it that you believe the federal government derives the authority to interfere in the wage transaction between an employer and an employee?"

Commerce clause.

MNG|7.23.09 @ 9:09AM|#

SF
I don't know what joe used to argue. It makes sense to me it will affect unemployment some, though I think it's pretty marginal and outweighed by the protections it bestows.

Spoonman|7.23.09 @ 9:11AM|#

Yes, since they have to eat, and it takes money to rent, and the only way they will get money is if someone gives it to them in exchange for services, and for the people in question they may be in a position in which they can either work for less than the wage or not eat. So yes.

Isn't it more likely that they will now be earning zero, instead of earning more?

|7.23.09 @ 9:13AM|#

Yes, since they have to eat, and it takes money to rent

The definition of duress only includes force or compulsion. It does not consider why it is that someone needs the money.

Commerce clause.

Really? So all employees of mom-and-pop operations that do not engage in commerce "among the states" are exempt? Could you point me to that in the legislation?

Barry Loberfeld|7.23.09 @ 9:13AM|#

How to explain the minimum-wage fallacy to liberal and conservative, secular and religious.

MNG|7.23.09 @ 9:18AM|#

The current reading of the clause allows for regulation when economic actitity considered in the aggregate would substantially affect interstate commerce, so that's how they fall under.

"The definition of duress only includes force or compulsion."

Correction, YOUR definition only includes that. It's a strange definition to most.

|7.23.09 @ 9:21AM|#

Whenever the Government raises the min wage, what they actually are doing is giving Government a pay raise. The employer is required to divert more business capital to cover increase of Social Security & medicare. Also workmans comp increases & even business liability. But not only does this hurt the business, but the employee ends up paying atleast 25% of his increase back to "The Gov" State, Local, Fed, SS & Medi.

|7.23.09 @ 9:24AM|#

I don't know what joe used to argue. It makes sense to me it will affect unemployment some, though I think it's pretty marginal and outweighed by the protections it bestows.

Oh, really, MNG? That's what you think, but it seems you don't have any experience or actual knowledge of the matter, do you?

Go talk to a few small business owners who are currently paying up to 40% in taxes of various sorts, including unemployment insurance. Ask them why they're working more and more hours every week, instead of hiring employees to do the work. Ask them why they can't even afford to pay themselves. Ask them if they notice their employees performing better with higher pay but fewer coworkers to share the workload.

And it's about to get even worse, with government-mandated employer-provided insurance.

I'm talking from first hand experience in two small businesses, MNG. What have you got? Your spectacular intuition?

You think it's better to have more people unemployed and on the dole if the ones who keep their jobs get a little more pay? I'm trying to be polite, but the fucking arrogance of this assertion is infuriating, especially when it's coming from people who have none of the experience and are taking none of the risk on themselves.

|7.23.09 @ 9:28AM|#

MNG, get a dictionary and look up duress.

You'll find the words, "force", "coercion", "compulsory force or threat".

|7.23.09 @ 9:35AM|#

So why not pass a single payer health program and ease the labor costs of all businesses without harming workers?

Xeones|7.23.09 @ 9:39AM|#

You know, Tony, at a certain point you're just proudly wearing a tshirt around that says "I'm With Stupid" and has an arrow pointing up toward your own face.

comrade|7.23.09 @ 9:42AM|#

"So why not pass a single payer health program and ease the labor costs of all businesses without harming workers?"

Yeah! Hell, the government can print its own money to pay for it without levying new or more taxes on firms or people. It's a win-win!

|7.23.09 @ 9:51AM|#

swilfredo pareto and Bronwyn, I don't think your argument by definition is terribly compelling. Let's grant you the work "force" as an element of duress,and weigh it against MNG's claim that "they have to eat" might reasonably be considered evidence of duress. Take a sentence like "He was a vegetarian, but after 3 days in the life raft, hunger forced him to eat a fish he'd caught with s simple hook and line." Does the word "forced" seem out of place to you in that sentence. If the vegetarian later explained he at the fish under duress, would you understand what he meant?

|7.23.09 @ 9:56AM|#

MNG,

50-70 undergraduates won't have a job in the libraries on campus for the 2009-2010 as a direct result of the hike in minimum wage. The university wide figures are close to a thousand unemployed or underemployed student workers for the entire university.

Sure, it's just an anecdote, but I don't believe that my situation is somehow unique. And these kids would rather have a $6.55/hr job than no job at all.

Not every job is worth $7.25/hr. Mandating that they all are costs jobs. Yes, they are jobs on the margins, but a marginal job is still a prize find for somebody.

You are not economically illiterate, but for the ones who are... If the government suddenly decided that milk was worth 11% percent more and applied that as a surcharge, would any of you be stupid enough to argue that it wouldn't affect the sales of milk at all? If higher prices don't lower consumption, then what's the point of sin taxes on gasoline, cap and trade, etc.?

Mike Laursen|7.23.09 @ 10:06AM|#

It probably won't make a clearly measurable difference in the economy since most states have a higher minimum wage and most jobs already pay more than the minimum wage. Now, if the politicians started passing "living wage" laws left and right, we'd definitely see unemployment and business failure -- but most politicians like to keep minimum wage levels right there in the token pandering zone.

|7.23.09 @ 10:14AM|#

If the vegetarian later explained he at the fish under duress, would you understand what he meant?

I understand exactly what he means and it is crap. When a judge says join the Army or go to jail that is duress. No one is forced to accept a job. The fact that an employer is offering me an opportunity to earn money to feed myself (one I am completely free to reject) is an offer I would look at with gratitude rather than derision. I've got a better scenario. Walk into a grocery store, help yourself to some food and leave without paying. When you are detained explain to the officer that you had not eaten in three days and that you stole under duress. See how well that keeps you from being charged with theft.

|7.23.09 @ 10:16AM|#

What have you got? Your spectacular intuition?

MaunderingNannyGoat is working from his AFL-CIO fact sheet.

|7.23.09 @ 10:20AM|#

Those of you from areas like New York city, might be appalled to learn that there are whole areas in this country where the majority of jobs pay minimum wage. With each increase in mandatory minimum wage, there is reduced employment, and increased cost of living. People pretend that legislation like this is somehow without cost. It's easy to believe, when you can't see any of the effects.

This is an area where I fall in line with libertarians. What whacked out justification is there for the feds to be legally allowed to regulate wages?

"The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Sure wish they'd stick to it.

|7.23.09 @ 10:22AM|#

these kids would rather have a $6.55/hr job than no job at all.

This is why we must protect these poor, innocent, deluded lambs from themselves. They're children; we cannot allow them to make their own decisions.

|7.23.09 @ 10:27AM|#

The current reading of the clause allows for regulation when economic actitity considered in the aggregate would substantially affect interstate commerce, so that's how they fall under.

Yes, the current reading of the clause essentially vests the federal government with plenary power over all economic life in the US. We understand that. We reject that reading as being inconsistent with the purpose and intent of the Constitution.

|7.23.09 @ 10:31AM|#

This is why we must protect these poor, innocent, deluded lambs from themselves. They're children; we cannot allow them to make their own decisions.

I realize of course that this was sarcasm, but the simple idea that there are those out there that live by such an idea really riles me up.

They just need to start adding the G-23 Paxilon Hydrochlorate to the air, and get it over with.

robc|7.23.09 @ 10:31AM|#

So why not pass a single payer health program and ease the labor costs of all businesses without harming workers?

A single payer health program harms workers.

Warty|7.23.09 @ 10:32AM|#

Oh, where is joe? He always entertained us with his insistence that minimum wage doesn't adversely effect the number of people who are hired.

Turn off the light, look in the mirror, and say his name three times.

|7.23.09 @ 10:35AM|#

Turn off the light, look in the mirror, and say his name three times.

And douse him with Holy Water when he manifests himself.

|7.23.09 @ 10:36AM|#

Warty,

No! He'll eat my skin! I'm so pink and smooth.

Pendulum|7.23.09 @ 10:37AM|#

Swillfredo,

If you were actually at risk to starve, you'd likely be aquitted. It's called the affirmative defense of duress, and it dates back to English common law.

Cabeza de Vaca|7.23.09 @ 10:48AM|#

"No! He'll eat my skin! I'm so pink and smooth."

Joe doesn't like the taste of diabetics, not sweet enough.

|7.23.09 @ 10:50AM|#

It's called the affirmative defense of duress, and it dates back to English common law.

That's great but it's not the point. By no definition of the word can employment between consenting adults be said to involve duress. Advocating government interference in the process only serves to further infantilize the population.

|7.23.09 @ 10:57AM|#

infantilize the population, which one might add, is clearly detrimental to the prosperity of the society as a whole.

The Angry Optimist|7.23.09 @ 11:06AM|#

Yes, the current reading of the clause essentially vests the federal government with plenary power over all economic life in the US. We understand that. We reject that reading as being inconsistent with the purpose and intent of the Constitution.

The sad part, RC, is that even MNG has rejected that reading (he supported the decisions in Morrison and Lopez).

|7.23.09 @ 11:11AM|#

Cabeza de Vaca,

You don't understand. Diabetics are sweeter! Sweeter!

It's a cookbook! A COOKBOOK!

Rhywun|7.23.09 @ 11:16AM|#

where are the workers who earn this?

Away from the coasts? All over. Minimum wage is basically the default income for unskilled jobs in places like Buffalo and anywhere else with low cost of living.

Hiring unskilled (or minimally skilled) laborers for entry level jobs in Brooklyn, even in this economy, our company needs to offer $8.50/hour

That seems kind of low. I moved to NYC 12 years ago and took a job for $10 an hour that offers only the minimum wage where I'm from. No wonder they only show up 4 days a week :P

DamaskinosWasRight|7.23.09 @ 11:32AM|#

+

Where in the USA can anyone live on $14,500 dollars per year ?

This is a very reasonable adjustment.

It should be $10 at least, preferably $15.

+

DamaskinosWasRight|7.23.09 @ 11:33AM|#

I doubt the author is living on less than 14.5 K

kilroy|7.23.09 @ 11:34AM|#

Any time you hear someone defend their position by saying something like "the current reading of the clause", you should know they're about to vomit up some bullshit.

|7.23.09 @ 11:46AM|#

I would note that "duress" is defined legally along the lines of wrongful and/or unlawful compulsion, such as threats of violence. A threat of not giving you a job has never, as far as I know, been considered duress.

If you are starving and you steal, your affirmative defense is, really, "necessity." Unfortunately for the latter-day thief, it is unlikely to be available, as it requires (roughly) that you had no alternative to committing the crime in order to avoid an immediate danger to yourself or someone else.

I'm not seeing anything in either legal doctrine (which are affirmative defenses, anyway, not claims for recovery) that would support a minimum wage.

|7.23.09 @ 11:47AM|#

Where in the USA can anyone live on $14,500 dollars per year ?

I've lived on much less than 14.5k/yr. In fact I'd estimate that I did so until I was roughly 25, and no, I didn't live in my parents basement for all of those years. For the last couple of years of that, I had a couple of room mates, ate primarily ramen, and thoroughly enjoyed my life.

People like you conflate the costs involved in the normal life, or a family supporting job, with all jobs. Why can't a high school kid get a job that wouldn't be enough to support a family? Or a person in college, just to earn some extra spending money? What's wrong with a single guy doing something he enjoys, and living simply and inexpensively off the value of his work? Why do we feel that the feds need to protect us from ourselves?

comrade|7.23.09 @ 11:58AM|#

Why do we feel that the feds need to protect us from ourselves?

No, you've got this all wrong. They're protecting us from Big Exploitation.

Naga Sadow|7.23.09 @ 11:59AM|#

DamaskinosWasRight,

My first two years out of high school, I made only 12k a year. I lived like a prince. Split an apartment, went to community college, worked a 32hr a week job, and still managed to go drinking two or three times a week. It can be done. You just don't have any room to be stupid.

|7.23.09 @ 12:00PM|#

Those of you who believe that employment is always one-sided in favor of the employer need to get out into the world more. Employees have considerably more power than you believe. Employers at all wage levels are looking for conscientious, reliable, competent people. If you meet that definition your time earning minimum wage or unemployed will be minimal in life, and your leverage at the bargaining table will be significantly greater than the government wants you to believe. I'm living proof. I am none of those three things and still successful.

Anonymous|7.23.09 @ 12:01PM|#

What's wrong with a single guy doing something he enjoys, and living simply and inexpensively off the value of his work? Why do we feel that the feds need to protect us from ourselves?

You answered the former with the latter. As for the final answer: because they outwardly hold collective benefits, and therefore collective decision-making, above individual benefits (regardless of their true intentions, which are doubtless nasty).

Further, they consider poverty combined with equality in wealth more beneficial than wildly diverse wealth allowing risk and reward (astonishingly captured by LBJ -- no champion of individual rights -- with "rising tide") because, to them, the humanistic sin of envy of disparate wealth levels is a greater cost to society than poverty to which they damn that society with their programs of central planning.

In other words: they'd rather see you dead than see you use your faculties on your own terms.

Rich|7.23.09 @ 12:18PM|#

> It can be done. You just don't have any room to be stupid.

But don't we have a *right* to be stupid? Isn't that what the gov't safety nets are for?

Seriously, incentivizing stupidity (in your alluded sense) is part of the downfall.

|7.23.09 @ 12:24PM|#

No, you've got this all wrong. They're protecting us from Big Exploitation.

Hah, your statement makes the assumption that I have not the means to protect myself. If you believe that, then you don't believe that we can live in a free society, where we can make choices. I can choose not to work for an exploitive company. I can choose to band together with my fellows to fight for better pay, better working conditions, shorter hours, or whatever we decide is in our best interests. Or I can choose to put up with the crap, and work to get myself in a better situation. My situation is always, primarily, in my own hands.

d|7.23.09 @ 1:03PM|#

"injest"? Please, people. Turn on the spell checker in your browser. Anyhow, of COURSE raising the minimum wage will work. Just do what the French do: make it illegal to fire people. Or you could make it your God-given right to retire at 52 and sit around and drink wine (or pastis, as the case may be) all day, to the tune of about 90% of your overinflated base salary. That way, you force companies to hire new workers at the new minimum AND take care of the "elderly" (read: those perfectly capable of continuing to work) all at once.

Now if we just had a single-payer healthcare system, we could all be happy (and dream about emigrating to New Zealand or Hong Kong -- which will be to the US as Texas or New Hampshire used to be to the French, if you get my drift).

|7.23.09 @ 1:13PM|#

Clearly, the government hates America

Old Bull Lee|7.23.09 @ 1:19PM|#

aelhuse @ 11:47am - I did the same thing, with my wife as roommate. No precious health insurance, one old used car and a one-bedroom apartment. Oh, and BIRTH CONTROL. We live better now but we weren't suffering or deprived then.

|7.23.09 @ 1:25PM|#

I notice MNG disappeared. Did he wimp out?

MNG|7.23.09 @ 1:26PM|#

"even MNG has rejected that reading (he supported the decisions in Morrison and Lopez)."

You're wrong TAO, the reason why I agree with those cases is because the acitivty regulated was not economic. IIRC Rehnquist affirmed the "substantial effects on commerce in the aggregate" holding in those cases, he just said that clearly non-economic activity fell outside that. Thats my position

So economic activity that, considered in the aggregate, would substantially effect interstate commerce=ok for fed regulation, but non-economic activity that may have some remote but-for effect on interstate commerce=not ok

MNG|7.23.09 @ 1:31PM|#

I'm not going to take much time on this old debate, but the very first definition that came up when I googled "duress" was: Constraint by threat; coercion

If I coerce or threaten you by saying "hey, I will kill your kid if you don't do x" that's duress. If I have something your kid needs to live and I say "do x or I will not give you it" then most people would find that "constraining by threat" or "coercive".

Right?

|7.23.09 @ 1:38PM|#

Ah, yes. The summer solstice approaches, and, like the movement of the stars, the libertards must inevitably predict the hellfire doomsday of a nominal increase in the minimum wage. Just as they have done for time immemorial. Like a prophet that issues a prediction, each and every evening without fail, "tomorrow will be an earthquake," some day they will have to be right. Maybe not this time; maybe not next time; but some time between now and our Sun's nova explosion, to their everlasting self-congratulations.

eurgh|7.23.09 @ 1:49PM|#

Uh, Danny? Did you RTFA? At the very bottom:

"Doesn't sound like a big group, does it? But in 2008, reports the Bureau of Labor Statistics, 1.94 million Americans were below the "minimum" wage-compared to 286,000 getting the actual minimum. When the floor went unchanged for 10 years, the number of workers in sub-minimum jobs steadily declined. But in 2007, when the mandate went from $5.15 to $5.85, the total climbed by 14 percent, at a time when overall employment was stable.

That's not a coincidence. Economist Alan Reynolds of the libertarian Cato Institute in Washington has found that when the minimum wage went up in 1996 and 1997, the number of workers beneath the floor expanded by more than 75 percent-even though the economy was booming. It looks like the minimum wage destroys some low-paying jobs and replaces them with lower-paying ones, to the detriment of the people who are supposed to benefit."

Nobody predicts doomsday, just more unfortunate consequences similar to what's in the above quoted paragraphs. And in that prediction, libertarians have been right time and again.

|7.23.09 @ 1:59PM|#

If I coerce or threaten you by saying "hey, I will kill your kid if you don't do x" that's duress. If I have something your kid needs to live and I say "do x or I will not give you it" then most people would find that "constraining by threat" or "coercive".

Right?

I would certainly disagree, unless the act being requested is illegal, or in some other way significantly outside the norm. Just because I or someone I care about has a need, does not give me the right to what fulfills that need. I haven't the right to a new heart, without cost, if mine is nearing immanent failure (Or is that eminent ;-) ).

Granted, in most every life and death situation in our society, aid will be provided without question of cost until after the event.

|7.23.09 @ 2:09PM|#

predict the hellfire doomsday of a nominal increase in the minimum wage.

Nothing like seriously exaggerating to make your point. No one here that I saw (I could have missed something), suggested any kind of doomsday scenario as a result of an increase in minimum wage. It's just that it is simply bad economics, bad for many who will lose their jobs, bad for inflation, and in many of our opinions, outside of the mandate of the federal government. If you can't make a point without completely misconstruing your opponent, you have nothing positive to contribute.

|7.23.09 @ 2:09PM|#

Oh, of course, eurgh. There is only one conclusion to draw from the statistics. Minimum-wagers got demoted from min-wage jobs to sub-min-wage jobs in a zero-sum deadweight loss. It is impossible to imagine that min-wagers got a boost, and that a bunch of new sub-min-wage jobs got created, as well, sucking part-time and casual employees into the job market who otherwise would have stayed on the sidelines. Behold the mathematical rigor of the One True Tribe of Adam Smith. Nothing is a zero-sum game to them... except the minimum wage.

EscapedWestOfTheBigMuddy|7.23.09 @ 2:28PM|#

I'll ask again the question I asked last time Hit & Run posted a discussion of minimum wage: where are the workers who earn this? Hiring unskilled (or minimally skilled) laborers for entry level jobs in Brooklyn

They're in flyover country, of course. All the world, or even the country isn't a big, expensive coastal city.

dmoynihan|7.23.09 @ 2:39PM|#

I don't know about Brooklyn, but I'm sure you could hit the Fulton Fish Market and find a bunch of places paying $50 a 10hr/day under the table (given Bronx poverty.) Mebbe less.

Also, check some of the restaurants in Chinatown before they shut down and run...

Maybe Korean enclaves in Queens 'n elsewhere...

... Garment District...

Areas with a high concentration of illegal aliens aren't really noted for paying the Fed.-mandated rate.

d|7.23.09 @ 2:40PM|#

Re Danny's comment:
It is impossible to imagine that min-wagers got a boost, and that a bunch of new sub-min-wage jobs got created, as well, sucking part-time and casual employees into the job market who otherwise would have stayed on the sidelines.[sic.]

Danny, I'll forgive your improper punctuation, but not your bullshit counter-scenario. In order to buy this, you'd have to believe that forcing employers to pay more for their current employees suddenly causes them to create even more jobs in addition to that burden. In other words, you have to believe that business owners and managers are idiots who respond in a perfectly anti-logical way every time the minimum wage is raised.

QED. Now shut up, and go away.

|7.23.09 @ 2:40PM|#

Behold the mathematical rigor of the One True Tribe of Adam Smith.

Feel free to read the thread again. The libertarian point is simple: it is none of either your or the state's business what two consenting individuals arrive at in the way of compensation. The rest of the liberal noise is irrelevant. Especially coming from the side of the spectrum that advocates "my body, my choice".

EscapedWestOfTheBigMuddy|7.23.09 @ 2:43PM|#

"The definition of duress only includes force or compulsion."

Correction, YOUR definition only includes that. It's a strange definition to most.

and

If I have something your kid needs to live and I say "do x or I will not give you it" then most people would find that "constraining by threat" or "coercive".

MNG: The way I read this, you're claiming that I am responsible for all of everyone's conditions all the time and that "need" trumps everything else. And that people other than me get to decide what is "needed". No?

And if so, where does it stop? What if someone else "needs" a highdef cable connected television? What if they have a roof over their heads, a blanket to wrap themselves in and enough rice and cabbage to stay alive, can they "need" a cheeseburger? What about a pacemaker?

Do you, in fact, admit any limits?

|7.23.09 @ 2:52PM|#

the libertardian "d" says:

"you'd have to believe that forcing employers to pay more for their current employees suddenly causes them to create even more jobs in addition to that burden."

No, d. You'd just have to entertain the possibility that an economy with a higher min-wage stimulates more demand for services, including services provided by the sub-min-wage sector. The employers who HIRE the min-wagers as EMPLOYEES are NOT the ones who have to create the new jobs. The employers who SERVE min-wagers as CUSTOMERS or CLIENTS can create the jobs.

Quit pretending that you have some God-Like ability to map out all the incentives, side-effects, and unintended consequences of a wage policy, and then speak authoritatively from on high. You don't, I don't, and no mortal does. Your libertard dogma is not "science," nor does it have mathematical certainty. And nothing in the article or any of these libertard posts is an argument-ender on the minimum wage, or even close to it.

EscapedWestOfTheBigMuddy|7.23.09 @ 2:59PM|#

Uh, Danny.

Are you really positing a positive feedback mechanism where raising the cost of labor will create more demand for labor?

Do you really believe that if we just set the minimum wage high enough, we could have full employment?

Really?!?

If so, are you advocate making it higher still? How high? Any reason not to go to $20/hr? $30?

Or are we to assume there exists a cut off?

|7.23.09 @ 3:07PM|#

this is one of the dumbest fear mongering pieces i have read in quite awhile... this was set into motion years ago and is the last increase... if these employers didn't factor this into their expenses from the beginning then so be it... they can fail. but if you think that the minimum wage workers make up enough of the population to affect the economy to the degree that this writer says then i would like to talk to you about a bridge i have for sale.

|7.23.09 @ 3:22PM|#

EscapedWestOfTheBigMuddy sez:

"Any reason not to go to $20/hr? $30?"

Are you really so thick in the skull that you think you are scoring some kind of reductio point here?

The minimum wage is functionally a government subsidy -- a tax on certain employers, given over to their low-end employees. It passes because of a political judgment that the affected employers will not change personnel policies at the threshold set. Minimum wage is irrelevant to $20-$30 wages for the same reason that food stamps and rent vouchers and Medicaid programs are irrelevant to $20-$30 wages.

So the answer is: yes, there's a cutoff. The cutoff is at the point where the voting majority concludes that forcing a subsidy from the employers of min-wagers to the earners of min-wages does not further the public's policy goals in favor of low earners.

Mike Laursen|7.23.09 @ 3:28PM|#

Quit pretending that you have some God-Like ability to map out all the incentives, side-effects, and unintended consequences of a wage policy, and then speak authoritatively from on high.

Well, I agree that nobody can map it all out. But you've just made the core libertarian argument: if you can't know what consequences some centrally-planned policy is going to have on the economy, then leave it alone.

|7.23.09 @ 3:30PM|#

The cutoff is at the point where the voting majority concludes that forcing a subsidy from the employers of min-wagers to the earners of min-wages does not further the public's policy goals in favor of low earners.

MNG's incredibly tortured reading of the commerce clause allows the federal government to intervene in any action that might "substantially affect interstate commerce". This includes things like serving burgers or mopping floors at the local peep show. Where do you find the Constitutional authority for a voting majority to decide on wage floors? Absent that (hint, there is none) feel free to share why it is any of your business.

Mike Laursen|7.23.09 @ 3:31PM|#

It passes because of a political judgment that the affected employers will not change personnel policies at the threshold set.

How can that be a "political judgement"? It will either happen or it won't. It's not subject to a vote.

EscapedWestOfTheBigMuddy|7.23.09 @ 3:32PM|#

"Any reason not to go to $20/hr? $30?"

Are you really so thick in the skull that you think you are scoring some kind of reductio point here?

No, it was a real question, put in rather stiff terms to make the choice stark. But you knew that.

Back to the meat of the matter:

Do you figure that there is a positive feedback between raising the minimum wage the the demand for labor (over some limited range which will be determined by "political judgment")?

I mean, unless I have misunderstood, that is what you wrote at 2:52pm, right?

Mike Laursen|7.23.09 @ 3:44PM|#

Do you figure that there is a positive feedback between raising the minimum wage the the demand for labor (over some limited range which will be determined by "political judgment")?

What he said is that there might be, might not be, but we have no way of knowing. But he seems to support doing something in spite of nobody being able to know what the consequences will be -- so, he's basically arguing, "We have to do something!"

|7.23.09 @ 3:53PM|#

"We have to do something!"

Little scares me more than politicians who just have to do "something". Stop throwing money at problems, expecting them to magically go away. Stop trying to micro-manage the states, cities, and people. Wages paid has nothing to do with regulating interstate commerce, except under a seriously tortured definition.

Here's what I want them to do; scour the books for any and all legislation that isn't mandated by the constitution, or is more complex than reasonably necessary, and eliminate it.

|7.23.09 @ 4:35PM|#

Danny, I am so glad to see you here! There are only a few Leftarded who post here and it is instructive to see that people actually do believe that government doesn't fuck up everything that it touches. MNG and Chad can't do all of the non-thinking.

The thing that always gets me about the sheer idiocy of minimum wage laws is when they are Nationalized. The cost of living on one of the Left Coasts has to be nearly double what it is here in fly-over country. So a National minimum wage is either screwing those hard working Brooklinites or screwing the businesses in fly-over by making them pay wages based upon a higher cost of living.

Oh, I almost forgot that the Leftard, yes, that is you Danny, doesn't care about actual results. Feeling morally superior is the name of the game and if the reality doesn't fit, deny it.

|7.23.09 @ 4:43PM|#

Marshall Gill is unaware of higher state minimum wages, which exist.

Marshall Gill has injected "moral superiority" into the discussion out of the thin blue air.

Marshall Gill, ipse dixit, announces his personal monopoly on measuring "actual results."

Marsh Gill: the perfect libertarian.

|7.23.09 @ 4:43PM|#

There are a few incorrect assumptions in this argument that the increase in minimum wage is going to cost jobs.
1. The assumption that minimum wage jobs are scarce. They are not. I employ 45 employees and can not get enough. This is true with most minimum wage employers.
2. Minimum wage employers have excess manpower and can reduce jobs. We have already done that.
This increase in the minimum wage is really not going to move the needle, for me or my employees. Labor is 4.5% of our cost. An 11% increase is just not going to make us change price and won't really effect profitability.
This is true for nearly every service company that relies on minimum wage labor.
They report to the contrary just to scare legislators. McDonald's can afford it. So can Burger King and Wendy's. An 11% increase in the minimum wage only effects about 20% of their employees. The rest make more over the new minimum already and they won't be obliged to raise their pay. That equates to about .2% of executive salaries and bonus for these three companies.
Let's not make a habit of scare mongering...

|7.23.09 @ 5:06PM|#

Marshall Gill is unaware of higher state minimum wages, which exist.

What is the need for a National one then?

Marshall Gill has injected "moral superiority" into the discussion out of the thin blue air.

Oh? You claim that "we can't know if it works or not" but insist that we must have it anyway. Why?

Marshall Gill, ipse dixit, announces his personal monopoly on measuring "actual results."

You have declared them unimportant. Have you any data to back up your claims? The article and several posts here do have, you know, data. You have presented exactly zero.

Marsh Gill: the perfect libertarian.

Hehehe, nope, I am actually a Republican. I favor the killing of Jihadists, here and abroad.

You don't get one.Single. Thing. Right. Do you? But hey, it has been fun playing!

|7.23.09 @ 5:35PM|#

corrupter, nothing like anectodal evidence to disprove a nation wide study.

|7.23.09 @ 5:45PM|#

corrupter, if what you say is true, what is the need for an increase? Simply to pay off the Unions who base their wages on the minimum wage?

You can't have it both ways. Since it doesn't effect anyone, why do it?

Are you really in management and believe that
Labor is 4.5% of our cost. An 11% increase is just not going to make us change price and won't really effect profitability.?!!

Why not simply give everyone the raise right now? Just go tell your boss, "this won't affect shit but even though they haven't earned it, lets increase our labor costs 11%"

Chrispy|7.23.09 @ 6:11PM|#

"An 11% increase is just not going to make us change price and won't really effect profitability."
Can I ask what type of business you are involved with? I'd like to get in on that racket.

|7.23.09 @ 8:12PM|#

McDonald's can afford it?

Well for one, McDonald's is a franchise organization, so a blanket statement like that is wrong-headed from the start.

For one, if you're trying to say big corporations can handle it, well no shit Sherlock. Big corporations love crap like this because it drives the competition out of business (Mattel and CPSIA, anyone?).

Again, though, McD's is a franchise organization so what we're really talking about are a host of medium and even more small businesses.

Try a real franchise picture, a pizza shop where an example labor goal is 27% of revenue. An 11% increase is going to mean a single-franchise owner can now afford 3 minimum wage employees on a given night, instead of 5.

That's somewhat anecdotal because it's my husband's business, but that labor goal is typical - standard, even.

|7.24.09 @ 12:59AM|#

Instead of slightly raising the pay of minimum wage employees, why doesn't the government just give them tax rebates of $300-$600? (We can also extend that to the middle class if it is so desired). I mean, that's roughly the amount of extra income they would earn through the pay raise, right? I think this untested idea is a surefire way to stimulate the economy.

|7.24.09 @ 12:32PM|#

I'm sorry, I have never met anyone who has lost their job because of a wage increase. I have met many people who can barely survive on minimum wage however, which is far from livable and in many cases includes various government assistance programs such as food stamps. Give the people a wage they can live on and they're depend less on the government.

|7.24.09 @ 12:39PM|#

And to the people who believe that there is no need for minimum wage laws, I suggest you look to the past and to every country that doesn't have one to see the exploitation and abuse that a lack of a minimum wage creates.

If the government did have tight labor laws then companies would have 12 year old work in coal mines for a dollar day.

|7.24.09 @ 1:21PM|#

The mandate was put into place 2 years ago under the Bush administration. Congress raised minimum wage before the economy took a downturn. http://www.newsy.com/videos/743

|7.24.09 @ 1:22PM|#

Oh JEEZ!
1/ Higher profits does not mean more employment!
2/"Economists generally agree that increases in the minimum wage cause unemployment" and if so, then economists are jiust generallly stupid.
3/"Even proponents of the increase understand the tradeoff." Or have been somewhat convinced of a tradeoff by the 'experts'
4/"It's impossible to deny that if it were illegal to pay someone less than a mere $36 an hour, a lot of jobs would vanish." You are stating that my position is impossible???? You are calling me a LIAR???? Why why WHY would you insult ME like this??
5/"But in 2007, when the mandate went from $5.15 to $5.85, the total climbed by 14 percent, at a time when overall employment was stable." And how long did this effect last?? Economic stats are fluid. Stating a specific number is meaningless in isolation. Such tactic is propaganda; purposely misleading.
"The liberal Economic Policy Institute in Washington insists that a minimum wage increase "would not only benefit low-income working families, but it would also provide a boost to consumer spending and the broader economy.""
Very well put!
"Not likely."
And THAT is the summation of the entire argument! How very non impressive.

|7.24.09 @ 1:42PM|#

Consumers spend their money. What goes out in wages comes back as sales. There is no cost in the macro economy. Competition pushes ALL prices (including wages) down below where they should be. Low prices result in stagnation... where the money just does not flow well at all. The minimum wage was outlawed in 1924, and I say that this move laid the foundation for the depression. The enactment of labor laws in 1932 spelled the end of the econommic slide. The FLSA of 1938 meant the permanent end of the depression
In every transaction, it is the man with the money that has the power, and not the the guy selling his work or his widget, and competiton between sellers always pushes the price down, and lower prices are not economically progressive, but repressive.
The minimum wage simply puts a floor to the negative effects that competition puts on the economy.

EscapedWestOfTheBigMuddy|7.24.09 @ 3:05PM|#

Competition pushes ALL prices (including wages) down below where they should be. Low prices result in stagnation... where the money just does not flow well at all.

So your theory is that competition makes the economy less efficient?

So we should, what, smash the power looms and go back to weaving by hand?!? Or just authorize only a single manufacturer of cloth, but let them use any tech the like?

I don't get it.

|7.24.09 @ 9:29PM|#

This hits the nail SQUARELY on the head! I think if anything we should LOWER the minimum wage to something like $2.00 an hour! That way businesses would be able to create enough new jobs for everyone (granted people would have to have about 5 of them in order to eat but hey, them's the breaks..)

|7.25.09 @ 1:14PM|#

"So your theory is that competition makes the economy less efficient?"
The most efficient economy is the completely stagnant economy... where nothing happens except what is absolutely required to preserve life and limb. The middle ages were very efficient. Economic 'progress' is not founded on increased efficiency, but upon increased (wasteful0 consumption. Pull down functional storefronts to replace with more attractive ones. Put out junk fliers on the offchance that you draw a single consumer dollar from your competitor, Efficient production develpement is a natural byproduct of greater consumption, and not at all a driver of greater consumption. Supply is reactive to demand. Demand is constricted by wage.
Your error is that you are altogether too focused on supply, just as Smith, and Marx and even Keynes was. The constrictor of the economy is the consumer dollar and the demand that it creates. The minimum wage is the foundation of the modern economy by protecting against the erosion of the consumer dollar (personal earnings) and the demand that it creates.

|7.25.09 @ 2:06PM|#

"If so, are you advocate making it higher still? How high? Any reason not to go to $20/hr? $30?"
Absolutely not. Maximum positive effect would be in the $20-30/hr range. As you approach the average earnings (50/hr) you are trying to say that everyone gets remunerated the same, and this would be a constrictor to the economy, probably as much a constrictor as the current situation of the enormous rich/poor gap.
Of course it is a mathematical impossibility to create a minimum that exceeds the average, and so a $100/hr minimum is impossible at the present time.
The minimum wage should be indexed to the GDP/capita at 50-100%, so that as the economy grows, so too does the incomes and consumption of the poorest workers.

Justen Robertson|7.25.09 @ 3:29PM|#

Wow Manchester, you have some very... ah, interesting ideas about economics. They're probably very useful in a world of disinterested machines who require nothing above the bare minimum for satisfaction, where all depreciation and replacement happens on predictable cycles, where outside forces such as politics and nature do not impact the economy, and where the quantity of currency obtained is more important than the objective value of a unit of currency. When you find that world I wish you luck in it.

mark|7.25.09 @ 8:59PM|#

He made the fundamental mistake of thinking that money is the same thing as wealth. This is "demand side" economic thinking and it has been tried many different ways throughout history, and it doesn't work.

|7.26.09 @ 6:34AM|#

So you have no inteligent comment?
And severe labor protection laws are a part of every healthy economy. But according to conventional economic theory, such strong corelation is coincident. I am naive? No my friend, not at all.

Robert|7.26.09 @ 8:50AM|#

The hidden cost of minimum wage is the pay cut those of us that make more than minimum wage will suffer. My salary did not go up because minimum wage did but you can be sure that the cost of many items will now be going up to cover this increase. The cost of bread, gas, fast food, etc will be going up as these stores are forced to pay more to the employees. So if you make more than minimum wage you just had a pay decrease in the coming days.

|7.26.09 @ 1:10PM|#

"The hidden cost of..."
When it comes to the macro, you cannot differentiate between cost and income. Every exchange is a cost to one party and an income to the other party. There is no cost in macro economics! There is only monetary supply and flow.
"My salary did not go up because minimum wage..."
But you obviously think it should! Minimum wage hikes affect a positive pressure on all wages. A cut to minimum wage (even if it is through inflation) will have a strong negative effect on wages. The economy has not ever returned to the general affluence of the 50s and 60s because of the dollar devaluation (mw erosion) through the 70s. We have never really recovered from the stagflation.
All wages are derived from the minimum wage floor plus allowance for education and experience. All income depends on the minimum wage, just as all business depends on all personal income.

|7.26.09 @ 2:06PM|#

"This is "demand side" economic thinking.."
Usually, when economists think of "demand side", they don't really consider the inelasticity of the consumer dollar. Instead, they petition the government to spend and "create" demand. This is utter foolishness. The government only has the public's money to spend! Before it can spend the dollar, it has to get it out of my pocket, and that just reduces my ability to spend. When it goes and borrows from my bank, it reduces my ability to get a loan from my bank. Government only spends OUR money, and cannot possibly spend our money better than we do!

|7.26.09 @ 3:22PM|#

"So you have no intelligent comment?"
Perhaps I should elaborate. You see, you have not responded to a single one of my statements, but try to dismiss me with your blanket dismissal, as if I was an adherent to a group that might fit under your blanket dismissal. If you would consider my statements, one at a time, you will find them all very difficult to refute. Your dismissal of me as a part of a group clearly denotes a dearth of intellectual involvement with what I have said. Such behaviour is obstinate foolishness.

|7.27.09 @ 11:28AM|#

I believe that everybody who does his/her job deserves a decent wage, and I agree that minimum wage is not a decent wage.

But let's look at what happens when minimum wage goes up. Those who don't lose their jobs will not get a raise because they lose on April 15th by a reduced Earned Income Credit. Were does this money go? Back into Uncle Sam's pocket.

I think that minimum wage should be raised to the point where we can eliminate the EIC, and send double that amount of money to small businesses in tax cuts to offset the increased wage costs. I say double because over half the cost of any program in Washington goes to administration.

Another benefit: if McDonald's et.al. paid $15/hour, maybe I could deal with someone who can take an order correctly, fill it correctly, and give me correct change!

|7.27.09 @ 2:34PM|#

Mr Manchester, you have made many claims, none backed up with links, answered no pertinent questions, and blanketed all who disagree.

Answer me this. If $7.25 and hour is ok, why not $10? If you can simply increase economic activity by mandating higher wages, why so stingy? How is it that Congress, in their wisdom, has discovered the correct minimum amount for all people who work in a country of almost 300 million?

Oh, and one other thing. How many people have you employed in your life? Why didn't you pay them more?

|7.27.09 @ 3:24PM|#

"If you can simply increase economic activity by mandating higher wages, why so stingy? "
Because of people like you who think that MW hikes costs jobs, and the good job you'be done at conviincing the politicians of this! If you read my posts you would know that I say that 20-30 range would be optimal. You say that I haven't answered questions. How would you know if you haven't at all read what I've written?

|7.28.09 @ 12:04AM|#

"Why didn't you pay them more?

|7.28.09 @ 12:27AM|#

danny, i found your reference to "libertards" at 1:38 hilarious in light of your heralding the approach of the summer solstice in the same sentence.

|7.28.09 @ 2:33AM|#

Sorry. Some glitch truncated my response. Wish I could erase and do over like in other forums.

"Why didn't you pay them more?"
The single businessman must watch his competitive edge. Wages cannot be raised unilaterally, because the increased wages may well feed a competitors sales. Minimum wage hikes allow base wages to increase without hurting competitive position, and as the increased wages will find their way back into sales, often the profitability will be improved.
"How many people have you employed in your life?"
I find the question impertinent and irrelevant. I've had employees.

|7.30.09 @ 3:08PM|#

Oh come on! Why would you hold a position that you will not or cannot defend? If you have relented, why not have the courage to say so? This silence smacks of obstinate foolishness. Have I really explained my position so well that you have no question or comment?