OT: Minimum wage proposal in SD

[EconProf]

SK and CAR:
If you really, truely want to help the poor, let’s raise the minimum wage to $15. What would be the various results, short term and long term? This is a serious question.
Please be detailed and specific.

[SK in CV]

[quote=EconProf]SK and CAR:
If you really, truely want to help the poor, let’s raise the minimum wage to $15. What would be the various results, short term and long term? This is a serious question.
Please be detailed and specific.[/quote]

Walmart’s profit would skyrocket.

[CA renter]

[quote=EconProf]
Thank you SK and CAR. You are both revealing two common mistakes about the economy that cloud your thinking. One is that the economy’s output is a fixed amount to be divided up, like a pie. That’s true in the short run, but in the long run, which is what really counts, it is dynamic and grows. So increased productivity tends to benefit all groups, albeit disproportionately. Your comment about wages being flat or declining for three decades shows this mindset. Total compensation, including health and other fringe benefits are clearly up, and actual living standards, which include technological changes in goods and services we buy push up living standards further. Secondly, you are ignoring incentives, for both workers and employers. Supply-side advocates, like myself, stress incentives and expanding the overall economy, while your demand-side approach only divides what exists in the short run.
We have now had six years of demand side monetary and fiscal policies, begun by Bush and expanded by Obama. We all know the dismal results in terms of employment, the growth in poverty, and weak increase in living standards. The increased taxes and regulations are the exact opposite of what supply-siders advocate. Result–1/10 of one percent growth in the latest quarter. Perhaps it is time to try something different.[/quote]

I’ve never suggested that output was static, but the world’s natural resources are finite. To me, the important question is: how is the “ownership” and control of these resources allocated among the world’s population? If, over time, it is concentrated in fewer and fewer hands (relative to the population), then wealth is not being shared, and the economy is not improving.

As for the argument that the poor are wealthier: technological changes and improvements over time are expected, and they are shared across the board with the greatest benefit usually going to the very wealthiest. After all, the world’s most powerful kings and emperors from hundreds or thousands of years ago didn’t have indoor plumbing, central heat and A/C, technologically advanced medical care, phones, grocery stores, etc. Does that mean that Joe Sixpack, who might have these conveniences today, is wealthier than yesterday’s kings? Wealth is relative; it is a measure of how much one has compared to one’s contemporaries. Wealth is not measured in retrospect.

The problem with supply-side economics is that it misses entirely the fact that people will not produce things for which there is no demand, or they will quickly go out of business. That demand has to come in the form of customers who are *willing and able* to pay for those goods and services. This is only possible if workers — the masses — make enough money to enable them to buy these products and services.

Which came first: labor or (private) capital? Capital could not exist without labor; labor creates capital. With industrialization and rentier capitalism, the profits created by labor are skimmed from every transaction. The people who own and control these profits and resources are today’s capitalists; most of them produce nothing of their own.

It is the denigration and exploitation of labor that has caused the problems we’re experiencing today. Research this on a historical basis, and you’ll see that when wealth and income are extremely concentrated, and when taxes are lowest for the wealthy, economies collapse. Conversely, when income/wealth are more widely distributed, and when taxes are progressively steep, economies thrive.

[joec]

Does anyone else see this minimum wage fight as simply being welfare so the poor masses don’t revolt and start doing bad things to everyone else?

I suppose I look at it as not really a “business” case or logical analysis, but as shown time and time again in history, the “haves” really don’t want to see what will happen when the have-nots get too pissed off with the current situation. I think in France, some kids and young people torched hundreds of cars in a street. This isn’t good for anyone.

I also just read today some young kid (23 maybe) near UC Santa Barbara kill 6 people and injure 13 others because he was lonely and girls didn’t like him…

If the poor people (and there are a LOT of them) decide that things suck too much and things aren’t fair (they never were), it wouldn’t surprise me for some of these pissed off people to take it out on everyone else.

Also note that in America, guns are cheap and it’s probably already happening.

Maybe it’s their fault and all that, but at the end of the day, I think people and society in general would be better served if the top top execs and ultra wealthy .1 – 1% made less so the other 99% don’t go crazy and just start offing people that they think are cheating the system or taking advantage…Maybe like some people have suggested, instead of raising the minimum wage, make it so the poor say aren’t taxed at all or something or given more credits, etc…

Ultimately, like with health care, we’re paying already one way or another…

[CA renter]

[quote=joec]Does anyone else see this minimum wage fight as simply being welfare so the poor masses don’t revolt and start doing bad things to everyone else?

[/quote]

This was the real reason behind the New Deal. It was not enacted so much for the benefit of the poor, but for the benefit of the wealthiest Americans. It was done to stave off the communist threat that had been gaining momentum during the Great Depression.

[spdrun]

joec — the guy who went berzerk in Santa Barbara was pretty well-off by all accounts. The ironic thing is that most of the rampages we’ve seen recently have been done by middle-class to wealthy men in their teens to early 20s.

[Reality]

[quote=ltsdd]Here’s a data point. Rent for a studio in a SD community where I grew up is renting for $900+/month. That same studio rented for $75/month 34 years ago. Today’s minimum wage – $9/hour, 34 years ago $3.10/hour.

Let me know if you seriously believe that living standards has gone up for those earning minimum wages.[/quote]

That can’t be correct, unless the renters were in the home forever by 1980 and the rent didn’t come close to keeping up with the market.

I rented a studio that went for $360 in 1987 and was going for a bit under $800 in 2010.

[CA renter]

I rented a 3/2 apartment in LA that was going for ~$710/month in the late 80s. That very same apartment now goes for around $2,200. The job I had at the time pays the exact same today as it did then, nominally.

In the meantime, healthcare costs have quadrupled or more, education costs have done the same, food is probably double, and gas is ~4 times what it was then.

Workers have been getting squeezed to death, and it’s not because there is no money; it’s because of where the money has been going:

“Yet from 1980 to 2005, more than 80 percentof total increase in Americans’ income went to the top 1 percent. Economic growth was more sluggish in the aughts, but the decade saw productivity increase by about 20 percent. Yet virtually none of the increase translated into wage growth at middle and lower incomes, an outcome that left many economists scratching their heads.

Here is a snapshot of income distribution during the past 100 years:
Chart of the Top Ten Percent Income Share, 1917 – 2008.

[See chart, I’m not able to copy the image. -CAR]

http://www.slate.com/articles/news_and_politics/the_great_divergence/features/2010/the_united_states_of_inequality/introducing_the_great_divergence.html

[livinincali]

[quote=joec]Does anyone else see this minimum wage fight as simply being welfare so the poor masses don’t revolt and start doing bad things to everyone else?

I suppose I look at it as not really a “business” case or logical analysis, but as shown time and time again in history, the “haves” really don’t want to see what will happen when the have-nots get too pissed off with the current situation. I think in France, some kids and young people torched hundreds of cars in a street. This isn’t good for anyone.
[/quote]

Thanks for bringing up France it’s a great example of how minimum wage doesn’t necessarily help employment prospects. For example minimum wage in France is 1430 euros per month ($1959 in US dollar terms). France also has a work week of 35 hours per week so if you assume 4 weeks per month and divide by 35 hours per week you end up with a minimum wage of $14/hr in US dollar terms. In France youth unemployment is about 23.5% compared to the US’s 18.5%.

In Germany youth unemployment is less than 10%. Guess was minimum wage Germany has. That’s right, none. It has a law stating you can’t pay an immoral wage but that’s decided on a case by case basis by the courts. For example a entry level grocery store worker in Germany can be paid the equivalent of $7 US dollars per hour and it’s not immoral.

Also if you’ve every been to France and Germany you’ll know that’s it’s a lot cheaper to live in Germany than in France. Compare Berlin to Paris. Honestly you’d probably be better off in Germany as a cashier in Berlin than a cashier in Paris even though you might get double the monthly salary. It’s all relative.

Can Walmart afford to pay it’s workers $13/hr in San Diego. Sure. With automation, price increases, laying off the weakest performing staff, etc, they’ll make it work. Of course it’s only better for those that happen to work at Walmart and keep they’re job. Also those designing/building those automated systems. Anybody who was already making $15/hr and doesn’t get a corresponding raise loses because they are now forced to pay higher prices for things. In addition those that lose their job to automation are now on the welfare roles somewhere.

People posting here who are making $100K don’t really care. The price increases at the grocery store or restaurant are fairly negligible in their budget. Food/Entertainment is probably less than 10% of their budget so a 10% increase in prices for low skilled labor in restaurants and general goods/foods stores only adds 1% to their overall budget.

While people have linked studies that show minimum wage increases haven’t greatly negatively impacted the economy. Nobody has linked a study that shows major increases in minimum wage greatly improve the overall economy. I thing the realty is at best minimum wage increases changes the winners and loses and prefers experience over youth.

[scaredyclassic]

how about…

just test a rise for a year?

if the US economy collapses, or everyone gets fired, or robots take over, we can bring it back down.

[ltsddd]

[quote=JohnAlt91941][quote=ltsdd]Here’s a data point. Rent for a studio in a SD community where I grew up is renting for $900+/month. That same studio rented for $75/month 34 years ago. Today’s minimum wage – $9/hour, 34 years ago $3.10/hour.

Let me know if you seriously believe that living standards has gone up for those earning minimum wages.[/quote]

That can’t be correct, unless the renters were in the home forever by 1980 and the rent didn’t come close to keeping up with the market.

I rented a studio that went for $360 in 1987 and was going for a bit under $800 in 2010.[/quote]

$75/month is correct. Nearby, 2/2 duplexes were going for about $225-250/month back then.

Your numbers are not that far off. In your case, if the rent was $800/month in 2010, then how much do you think the rent is today?

Also, I am sure other factors played a role. The neighborhood is not anywhere as “bad” as it was back in the 70s & 80s, so I would expect that to be reflected in the rents.

[joec]

I guess this goes back to my other thought that we are just at an age and time of oversupply of labor/workers. There just aren’t enough decent paying jobs for most people and wages will just go down and revert to the norm of massive poor people and a few at the top.

I remember reading that the middle-class is actually an anomaly in regular society throughout history and we are just reverting back to what it should really be at.

One reason I don’t really see much positive developments politically for any of these situations and people (jobs/income inequality/dejected and crazed youths).

[UCGal]

Here’s another data point for you. I rented a studio in old town/mission hills area in 1979/1980. Rent was $120/month. I was making just above minimum wage working for Wawanesa insurance ($3.90/hour – I think minimum was either 3.10 or 3.35). I could survive (albeit my diet was more ramen than steak.) The place had a fabulous view – but was a dump.

The same apartment rents for $985 now. (Just googled the latest listing.

Minium wage did not go up 8x… but the rent did.

[an]

But don’t you think Old Town/Mission Hills is an anomaly (along with other Uptown areas) when it comes to cost of living? Here’s an example of Mira Mesa.

http://www.sdlookup.com/MLS-140023149-92126

This house was sold in 1983 for $96,500. Mortgage rates back then was ~12%. So, monthly payment back then was $794/month. Today, that house just went pending @ $465k and current mortgage rate is ~4.25%. Which puts the monthly payment @ $1830/month. You’re looking at an increase of 2.3x in housing cost for your average middle class family. That doesn’t seem to outrageous to me.

[CA renter]

You forgot about the down payment, taxes, insurance, etc.

[Author]

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