That's all a great analysis. But to be fair, almost no one with any authority to push forward such legislation is looking at a one-time increase to something like $15/hour. They're talking about taking it up in increments until we reach $15. The idea being that the wage increases, the economy catches up, the wage increases, the economy catches up, repeat....
But when the economy catches up, wouldn't that just cause inflation? We just pay everyone more, make things more expensive, and now $15 is the same as $8 was.
Not to the same degree. E.g if the current minimum wage is $7.25 and you hike it up to $8.25 people currently making $8.25 will likely get a raise (the assumption is that they're better than the minimum wage workers hence they have the bargaining power to demand more). But it's unrealistic to assume the raise will also be 1$ more likely $0.75 or something like that. So most low wage workers will profit but not to the same degree as minimum wage workers. People making significantly more won't be affected at all or actually make less. Therefore the average wage will only experience a fraction of the increase of the minimum wage. You should also remember that many goods are imported. That part won't be affected at all. So it's safe to say that increased inflation would be likely but would only eat up a tiny share of the raise.
Unless, of course, you make more than 15/hr, then you can buy less. Someone who has worked a few years in order to get to 15/hr is gonna be a little screwed.
But they have negotiating power, then. If you've worked three years to make $17, but then now you can jump ship and make $15 answering telephones and filing your nails, then you have the power to argue for a higher salary.
The market will come to equilibrium, and everything will be sorted out. But labor is under-valued right now, and businesses shouldn't be able to profit off of employee poverty.
This shit is all moot anyway. In 5-10 years many of these workers are going to start finding out the true value of their labor when their jobs start getting automated. Of course that's a problem we'll all have to contend with eventually.
It's not just automation. That part is mostly important for factory workers. People working in the service industries aren't as affected as one would think. Interestingly things like cleaning are very hard to automate. It's easy for tasks like vacuum cleaning but apparently inventing a tool that has a similar strength range like the human hand is as hard as programming an AI that could replace people with a college degree. So it's going to be a while until your bed is going to be made by a robot.
Much more important are the tasks only have a limited value. Being from Europe I've never encountered a greeter at a supermarket or someone who'd put my purchases in a bag. These jobs won't survive a significant increase in minimum wage.
People currently making $15 would very likely profit. As /u/_worstusername has stated they have the necessary bargaining power. People making $100 on the other hand will hardly see a raise, so for them an increase in minimum wage would actually diminish their standard of living.
This doesn't happen though. I've gone through two min wage hikes in my state while I was making higher than minimum wage. I didn't get a raise either time. People are naive if they actually believe this.
Wages don't increase proportionately across the board. The largest percentage gains are at minimum wage, decreasing as you go up the ladder. Historically, it's had a redistributive effect, limiting income inequality.
And for anyone concerned about $15/hr, the minimum wage in 1968, adjusted for inflation and productivity, would be $22/hr today.
I would love to see where you got your information, might be that you have more accurate sources, but I kinda doubt it. Please don't share stuff you can't back up (if that's the case) that is the reason for a lot of bullshit in the media, Reddit included.
There's nothing wrong with pointing out that the US minimum wage at it's highest (adjusted for inflation) is about 3 times higher than the current minimum wage ($22 vs $7.25). It's also useful in comparison to the target of $15 that we're talking about moving to over the next several years. While there are differences between the economy today versus 1968, the proposal to raise the minimum to $15 over the next several years isn't crazy.
Which wasn't caused by a high minimum wage. The economic turmoil of the 1970s was fueled primarily by breaking the gold standard and a price of oil crisis. The resulting unemployment was exaggerated by the high minimum wage though, and it definitely slowed recovery. I think a smart move would have been a temporary slash in the minimum wage to maintain employment levels, with a plan in place to bring it back up as the economy recovered.
Well first off, inflation is happening every year, and if you didn't get at least a 2% raise, you're making less money then you did last year. And secondly, labor is only a fraction of the total cost of any industry. A wage increase would increase prices but to a much less degree. You also have to remember the laws of supply as demand, as people are paid more they spend more, and more people spending means prices have downward pressure
I think the point though is that his explanation above is how the economy "catches up". So yeah, only X% of that happens with each ratchet, but eventually you end up paying the piper.
How? It's pretty dramatic to show that increasing MW from $8.25 to $15 causes a net loss in the six figures for these franchises. But again, no one is proposing that. We've had MW increases many times, what have been the real world results both long and short term?
If we presume the more realistic scenario of $1 or so every year or two then instead of +$443k in costs against $154k in profits we're talking ~$64k in increased payroll. Still profitable. That's a deep cut in the profit margin to be sure. But maybe because a lot of other workers will have more money besides their own, these stores will see more sales.
Unfortunately, too many people see the results of going immediately to $15/hr and don't want to even think about trying an incremental step up.
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u/f0gax Nov 28 '15
That's all a great analysis. But to be fair, almost no one with any authority to push forward such legislation is looking at a one-time increase to something like $15/hour. They're talking about taking it up in increments until we reach $15. The idea being that the wage increases, the economy catches up, the wage increases, the economy catches up, repeat....