Raising the minimum wage is good for the economy.

Under every premise or assumption or science- there is a foundation, some fundamental truths that remain consistent, and that must be accurately contained in any theory that is truly valid. In the matter of economy, that foundation might be considered mathematics. No matter who you give the money too or how you play with values, 2+2 is still four.

When you raise a wage arbitrarily, you declare an arbitrary change in value of the product or service that wage comes from- and raise it's price. Temporarily, you increase the relative economic position of those who benefit, but at the same time, you decrease the relative economic position of those who absorb the increased costs. Thus one side of the relationship see an apparent increase, while another loses- it simply balances itself. Not naturally; but by the arbitrary decision to give some benefits by taking them from others. There may be many times more people on the losing side, which allows the individual penalty to be less noticeable- but in the big picture, every penny of it is there. You did not create wealth or money- you simply shift the benefits by adjusting, arbitrarily, the value of a service.

It's the same as deciding that water in a blue bucket has more value than water in a green bucket, in order to benefit those who carry water in the blue buckets.... who sell their water to those who carry it in the green buckets.

There is no free money. Normal business is the voluntary exchange of goods or services at an agreed compensation. That is the nature of competition and the free market. While many think employment has nothing to do with that, they are wrong. The wage earners is marketing his services just as his employer is. He has the right, and should, sell his services to the highest bidder, allowing for all factors of the deal. The employer is buying those services, just as the employee buys the services of the store that provides groceries or anything else. Huge company or individual workman; we are all in business for ourselves. We already have a vast number of laws that provide protections and benefits for employed people- where we have virtually none for employers, large or small. The efforts to provide benefits for one side of the labor market at the expense of the other is a comforting illusion, because when those companies provide more unearned benefits, the money comes from the price of the products which those same employees buy everyday. There simply is no free money tree in the economic process. We manipulate it, and produce various effects- but they are temporary in nature and invariably create an imbalance, which the foundation will eventually adjust for.

Socialism such as that so clearly exposed as the economy in Venezuela is a good example. These people have been trying to create wealth by manipulating values for almost 40 years- and have driven their nations economic condition to one of the worlds worst. I have seen this first hand; being a contractor there 30 years ago and being able to see then that there was disaster in their future.This is a beautiful country with many resources and good people- that are starving because of stupid economic management and manipulation.

Like most things in the world- when we fix something that isn't broken.... we break it. Free trade follows the fundamental principles of sound economy, and that includes the sale of services for wages.

 

Bottom line is simple. The more you concentrate wealth the worse the economy. Without consumers there is no movement in the economy. The more money in the hands of the lower and middle class consumers the more money that moves keeping the economy alive. Sometimes those hoarding the money have to have it pried out of their hands to the benefit of the majority and that's where unions and minimum wages come in.

The theory of trickle down is that with more money the wealthy will invest in factories to build more making it cheaper for the consumer. The reality is that no investor ever invests unless there is a market to begin with. All trickle down does is to concentrate the wealth and since that additional wealth is more than can be invested in growth it is invested in durable, long term investments like solid gold bidets for the cabin in the woods taking more money out of circulation. Whereas someone that buys a pound of chicken today will by a pound of bacon tomorrow, their money keeps moving.

So why don't employers raise workers pay themselves since that livens up the economy and ultimately their bottom line? Because if they do but their competitors don't they are put at a distinct disadvantaged. If every pizza joint has to pay their workers a minimum wage then they have a level playing field.

Seriously, The Jungle by Upton Sinclair should be reread by anyone against unions and minimum wage to remind them of what happens when the employers hold all the cards.

 

The actual implementation of an increased minimum wage does provide for increases in the compensation for those close to the minimum wage because a progressive increase in compensation is necessary as an incentive but that does not include those at the top end of the compensation. No one has their compensation reduced but over time the compensation range is compressed slightly where the differences are not as great as they are today. The CEO is not going to see a 30% increase because the lowest level employee see's a 30% increase in their compensation. The CEO and high paid executives and management won't get an increase at all and future increases will be less to balance out the overall costs of compensation to the enterprise. The lower level management would see an increase because management must earn more than the people that work under them.

In the end raising the compensation at the bottom reduces income inequality that has been a documented problem that's been getting worse over time.

 

This is false because labor is not priced based upon value. The value is always equal to or greater than the cost to provide the product/service.

Compensation is based upon the market that has literally driven the compensation (price) below the value (cost) to provide the labor.

Raising the minimum wage to cover the fundamental costs imposed on the person providing the labor is an adjustment to ensure that the "value" of the labor is being paid for by the enterprise.

For an employer to pay less than value (the cost of living) is the fundamental theft of labor from the person providing the labor. Correcting the minimum compensation so that it provides for the "cost of living" with wages and benefits is to eliminate the theft of labor from the workers.

Not all increases in compensation at the bottom end of the pay scale result in increased costs of the products/services provided for by the enterprise. In fact raising prices is the least desirable means for providing for the increased expenditure that only affects a part of the total compensation funded by the enterprise. The preferred means of accommodating an increase in compensation is to increase gross revenue by modifying the business plan. Compensation is always a percentage of gross revenue and increasing gross revenue increases the amount of funds available for compensation. Often increased revenue can be achieved without additional cost by such means as simply improving customer relationship in simple ways. The employee always saying "Good Morning" or "Good Afternoon" first to a customer can enhance the customer relationship and result in more revenue to the enterprise.

2+2 always equals 4 but that's not what a change in compensation at the bottom end represents. We're really starting with something like 1.5+2.5=4. The change at the bottom (over time when adjusted for inflation) can result in the equation changing to 1.75+2.25=4 reflecting a compression in the pay scale for the enterprise but it does take time for that to occur because the current compensation of 2.5 cannot be reduced. It requires inflation over time where the top paid workers don't receive percentage increases but instead receive dollar increases equal to the lower paid employees. It's for that reason that increases in the minimum wage are generally a phased implementation over time to allow the enterprise to accommodate them by changes in the funding of the entire compensation paid by the enterprise.

 

And when the Fed's money policy creates inflation and the value of the dollar declines, that is an arbitrary change in the value of what workers can afford at their current income level.

 

Hang on.

The point of this graph, literally, is to show that... states that raise their minimum wage.... pay their workers more per hour....

And... that's it?

Man you guys are starting to get lazy.

 

In your business education did they fail to teach you economics and statistics? In my own business the less I pay my employees, the more profit I make. Yet, economically, across society, the more employees make the better for everyone.

I happen to live in one of those states that has long had one of the highest minimum wages in the country. Consumer prices here are not any different than in those states that keep their minimum wage as low as possible. We also have one of the lowest unemployment rates.

Plus, if you studied economics, you'd know that any rise in the income of those at the bottom results in increased economic activity. Whereas increases in wealth of those at the top tends to stagnate the economy.

 

As I keep saying. Regardless of the right wing economic theory...in practice...when minimum wages go up...economies do NOT suffer and in most cases improve

 

And which ones were worse? Under Bush there was a net loss of jobs.

I see that you got the party line down, but like the rest of the Republican economic ideology it doesn't square with reality. Part in partial in this is the silly practice of conservatives/conformists/Republicans/fascists insisting that modern liberalism is wrong because of some other place and time that have no relation.

If one looks around the country, one finds that in those places where the minimum wage is higher, the economy is doing well. Of the states at the bottom of the economic ladder, their minimum is the federal minimum.

The economic ideology that you are following is the one that gave us such economic powerhouses as Mississippi and Kansas. Whereas the west coast states have taken the opposite thinking. Is there little wonder why the economy is growing faster on the west coast, than else where.

And where ever did you get the silly notion that employees have all the rights and protections and employers have none. I've been running my business for a little over 14 years now. I'm laughing at you. I'm laughing at your delusions, I'm laughing over the fact that you would have thought anyone knowledgeable on the subject would take your arguments seriously.

 

If you compare those states that pay higher minimum wages with their overall economy, you'll see that those states with higher minimums tend to have more robust economies. In Oregon and California the minimum wage is more than $3 higher than the federal minimum. Oregon and California are tied for the fastest growing economy in the country. We also have the most stringent environmental laws, as well as robust social safety nets.

 

No, what that graph showed is that the states that are raising minimum wage pay their workers more per hour, which any idiot can understand without the aid of a graph.

As far as "fastest growing economies", I wouldn't believe this even with a dozen graphs. Liberals do the same thing, every year, when it comes to jobs and unemployment. They utilize a lot of sheeny magic when it comes to trying to prove to everyone else "look gais, we're doing it!" and it always blows up within a few years. See: Illinois.

 

I *did* read the entire study! The operative word you used is "some". High end restaurants saw hardly any impact, largely because they were already paying more than minimum wage. It was the marginal restarurants, i.e. those with cheaper prices that the poor tend to use, that saw the largest impact!

The marginal restaurants were more than *slightly* likely to close. And there aren't enough minimum wage workers to support "new", higher quality restaurants. That's just another canard used by the Marxist Democrats as a rationalization for them being shown as not really caring for the poor that both worked at the closed restaurant and the poor that couldn't afford a higher quality restaurant!

SF's unemployment remains low because they don't count all the homeless and poor that no longer get unemployment because they have timed out!

 

The net impact was nothing like what was claimed it would be. Wrong again conservatives

 

Yeah and fiscal conservative George W. Bush was a great asset to have in the White House. Trillions blown away in imperialist wars and bailouts for the financial marauders of Wall Street.
Needless to say, I disliked Obama intensely.

 

I find it rather curious that conservatives/conformists keep harping on Illinois when one conciders that there are 15 Republican dominated states that are doing much worse. Or the fact that out of the top ten performing economies, nine of them are in Democratic dominated states.

Take one of those political maps where the Republican dominated districts are red and the Democratic districts blue. Then plot out a map of the US showing economic activity. By overlaying the two maps, one sees that the greater amount of economic activity, and growth, are occurring in those bright blue blobs while the least economic activity is occurring in those dark red patches. Even in Texas, the greater economic activity is occurring in Democratic dominated districts.

There are two primary reasons for this. The one being Republican politicians enacting Republican economic ideology into law. The second one being that innovators, practically by definition, are overwhelmingly liberal.

 

If one takes the position that most Republican ideas are made up silliness that doesn't square with reality, one would rarely be wrong.

 

I dislike liberals and Democrats. I'm a deep-red socialist, not a pinko like Bernie Sanders.

 

Like most who have been employers, I have also been and employee. The last time was 1968- since then, I've started seven businesses, been bankrupt once, and become wealthy. I gave one business idea to other members of my family- now, three out of the six of us are self-made millionaires. Point is- I know a bit about all sides of the game. Money is not a commodity that can be distributed and produce value; it is a compensation for value produced and distributed. If money is free, then- it becomes worthless. Why produce anything, when money is free? If we produce nothing, what happens to the quality of life? If we double the cost of making anything without some kind of value or production gain to support it, we then have double wages and double cost of living. Zero gain, just higher numbers... which will make those who don't understand how economy works feel better and then vote for politicians who tell them someone else will pay.

I can tell you that the idea that the wealthy employers hoard money is ludicrous. May 6th I was at a stockholders convention, where Warren Buffet personally stated "I hate cash". Why? because cash isn't working- it produces nothing until you do something with it. Actually, it loses money sitting in the bank, because of inflation. So while you need profit to build a large business, you acquire the cash to put it to work, to build better things- and that means hiring people, building infrastructure such as factories, and providing the products and services that make the economy work for everyone.

Some people use money for entertainment- such as the many lottery winners who spend like drunken sailors because they are "rich", and wind up broke because they never put the money to work. They did return it to circulation, but the return when you buy depreciating goods or services if no where near the return for investing and building bigger things.

The rich are rich because they think differently- and they manage their money and resources well. The minute the quit doing that, they are on their way down. The poor (generally speaking) have but to change the way they think to alter their future- but despite the knowledge of how to do this being widespread and free, they just can't make themselves use it.
We make our world what it is, by our own decisions- and nobody becomes rich by getting it free except as a temporary condition, which will soon pass...

 

When you buy a loaf of bread, you control the exchange of value for a price. If enough potential buyers don't like the asking price- things will change, not necessarily for the good. So, how much of your grocery bill (just as an example) goes into that nasty category of "profit" which should have been used to raise wages?

Well- when you spend $100, if the store you are buying from is well managed, the store nets $1.00 That dollar pays the interest on the investment costs, meaning the value of the building, the inventory and all the money it took to make that store exist. If the store is poorly managed, the net will be about 50 cents... and the store will soon fail.

You have the ability to control your costs of living. You are free to sell your services to the highest bidder. In fact.... you are in business for yourself just like the grocer, just with a hell of a lot more benefits and protections, but a lot less risk and responsibility. The store profits because of excellent management... something most of those who complain never consider as their responsibility.

Every generation before you has done more with less- and made it easier for the next. Obviously, too easy.

 

Do you think that such an event affects workers, but not their employers?

 

I have no idea what kind of thing you are calling a business- and what the range of experience is. I will say that I have about 35 years more in the game than you... that has included everything from basic services to manufacturing, from local to world wide. And, I'm not a republican- although I am what I consider a conservative, which in my mind means prudent,
careful management with an objective of positive results. It also means building partnerships, working together and all who participate doing their share rather than spending all the energy fighting over who will do the work, but producing nothing. I'm also not for low wages at all. I've done far better with well-paid people, but the catch is they have to be worth what they are paid- not just demand it. There are a lot of people who hold jobs, but should be paying their employer because they are more trouble than they are worth.

Where minimum wage is higher, you find cost of living higher in proportion. Try to rent an apartment in New York city on Michigan wages, and it looks grossly unfair- but then, try to rent an apartment in Michigan out at New York city prices. These things (geographical variables in earnings and cost of living) drive each other, but don't necessarily create an advantage. They do illustrate that you can live well in either of those economic areas; it is the balance that makes that possible, not the wage. No matter how you cut it- there is no free money tree, despite the vast illusions that somebody else has more than you, and the progressive assumption that calls that proof that you have been cheated out of your share. We have way too many people who can't see the direct correlation between planting and tending the garden and what they will have on the dinner table later on. It is really that simple.

 

The fallacy is that labor costs are the only costs. When I buy fuel, how much of that cost is labor for minimum wage workers?

Same for fast food, hotels, retail... what percentage of costs are minimum wage labor costs?

Surely you learned this in your economics class.

 

Labor costs are, by far, the biggest expense for most companies. 70% or more of a company's total costs are eaten up in labor. People want to double their largest cost, and expect a negligent effect on the cost of their goods and services? That's the kind of naïve ignorance and stupidity I was referring to. Too bad Economics isn't required in the pursuit of liberal arts degrees.

 

There is an aspect of your argument that needs to be considered a little more broadly.

When we look at labor costs for a company, we usually think about the labor wage, not the labor costs built in to all the other costs.

IF we manufacturer for example a hammer- the product is steel, formed to shape. But the real costs start with the iron ore. While a landowner would have been paid a royalty for it, then we add labor- to mine it, labor to build the equipment that mined it labor to built the machinery that refines it into steel, labor to build the means used to do these jobs, to transport the steel to the hammer factory, to build the tires the delivery truck rolls on. ALL those costs of labor become built into the cost of the "material" for the hammer... but in fact, the bulk of that material cost accrues back to labor.

I used to teach a class to business people, in which we had each student grab a handful of peanuts as they came in, and put them in a dish of their own. I explained that this represents what you produced today, and the total number the class collected is like the total production of an economy. Now you can trade them, save them and do all kinds of manipulation with these peanuts EXCEPT increase their total number. The lesson is that manipulation is not production, and while manipulation may shift benefits of what is on hand from one person to another, it will not put any more food on the nations table than what you gathered- what you produced today.

Production is what is genuinely valuable- and those who are real producers are in high demand, not minimum wage earners. The employee who brings results that benefit the company is the most likely to see promotions and higher wages, and the most likely to get offers from other companies, because they are worth more. At the same time, the employee whose attitude is adversary, who thinks he is being taken advantage of- produces far less in both volume and quality, is less reliable and requires a lot more management time to get anything done. Thus he is far less likely to see advancement or better offers, but most likely to complain and cause discord. When all things are considered- labor is the biggest expense of production. It is the biggest headache as well, in part because it has extreme variables in quality.

What is unfortunate is that it is difficult to pay the best what they are worth, because they are rare and you usually need numbers. If your business needs 100 people on staff and 90 of them are poor producers being paid minimum wage because you can't pay them less- the person worth much more is penalized. I've seen many situations where 1 man produced as much as 5 others, just by working diligently and steadily. He makes more- but rarely 5 times more. I'd like to see people paid according to their production and their contribution to the harmony and efficiency of the place they work- and let the wage rate be whatever that dictates. I'd also like people to realize that the cost of labor goes back to the first step of production of the product they buy- not just the final one. Labor is the big contributor to economic balance, not something trivial that won't matter if we give it a wage it hasn't earned.

 

Just to enlighten you, liberal arts is defined as "wide ranging knowledge and skills" and has nothing to do with political liberals or art. When one goes to college to learn economics, one majors in economics at a liberal arts college.

Let's illustrate your 70%. Say there is something that customers will willingly pay $100. Yet I can hire someone, pay them 70%, taxes and all, and keep the other 30%. If demand is up, I can hire 10 workers, all with the 70/30 split. By then I'd be making $300 while each of my workers, would be getting $70, wages, insurance, taxes, and all. Which translates to something like $50 take home pay.

They did all the work, under my direction, and I got the much larger chunk of the pie.