Will an increase in the minimum wage hurt business and

[sagesnow]

the economy? Has this myth been dispelled yet? If anyone has any information that refutes this claim please let me know. I'm sure the RWers around here will be yelling this at the top of their lungs.

original discussion here: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x2721896

[dcfirefighter]

1. Not really

if only because the minimum wage laws that get passed only raise MW a tiny bit. A few companies won't be able to compete, but most will.

A better tactic for raising the real minimum wage is to do everything we can to increase the demand for labor.

I suggest a two-pronged approach:
1) reduce, or preferably elimate, all taxes, direct or indirect, that fall on labor. Most obviously are wage taxes: the payroll tax and that portion of income taxes that fall on wages, salaries, and tips. Less obviously are sales taxes - a portion of which falls on the consumer, reducing his effective wages; a portion of which falls on the retailer, which reduces the number of people employed in retail; and a portion of which falls on the producer, which reduces the number of people employed in production. Even more controversial would be eliminating annual taxes on manufactured goods - namely buildings, but also business equipment and other personal property.
Note that, effectively, there is at least a 15.3% direct tax on labor, plus several percent each from indirect taxes. Even if the demand for labor is relatively inelastic, employing the 4.6% that are officially unemployed would be relatively easy.
2) making sure that all of the other resources needed for employment are used efficiently and productively rather than held speculatively. We need to spend less money (time & effort) on paying for natural resources (land real estate, oil, broadcast rights, etc.) and more time & effort on transforming labor and resources into products that people want.

On the Federal level,
we need to collect pollution taxes;
auction temporary leases on: federal lands for timber and minerals, fcc licenses, offshore fishing licenses, and long-term patent protection
and change the nature of money creation, such that the public benefits rather than the private banks of the Federal Reserve System.
As a catch all we should retain a simple income tax of 33% on all income over $150,000
We also need to slash our federal spending by at least 50%

On the State level,
we need to collect local (groundwater) pollution taxes
charge market rate fees for use of limited state infrastructure (assets not near capacity could be free of charge), for example, road tolls during congestion; toll bridges, tuition at state colleges
charge market rates for recognizing corporate charters - IOW make corporations pay for the benefits of liability protection that they receive.
Periodically bid the rights to operate a utility monopoly
Auction various extraction licenses, such as fishing, timbering, and mineral extraction.
Auction landing slots at state airports.

On the Local level
we need to collect the value of recognizing land titles
charge market rate fees for use of limited local infrastructure; for example street and public parking

The total collected would be more than equal current total collections. I roughly, but conservatively, estimate it would be more than $5 Trillion. We currently collect a little more than $4 Trillion. The presense of an surplus shouldn't indicate a need for less taxation, but rather an opportunity to share privilege (each of the things I want to 'tax', is in reality, a fee for a government-granted privilege). These could be shared by spending additional money on public goods, or they could be returned directly to the citizenry in the form of a dividend, a la the Alaska Permanent Fund.

It's also important to note that the proportion collected by each level of government would be turned upside down: local governments would collect the most, followed by state governments, and finally the federal government. It is likely that states would have to petition localities for funds; and the federal government would have to petition states for funds.

It's a pipe dream, of course, but several steps can be taken soon:
1) stop giving away access to federal lands.
2) enact pollution taxes, rather than giving away 'tradeable permits'.
3) enact split rate property taxes at local levels: a higher rate on land than on improvements.

[izzie]

2. Well I worked for 35 cents an hour in the 50's and

It is pretty high now and if I understand it the country is now richer and better off then ever. My guess is it has not hurt at all.

[TreasonousBastard]

3. There really isn't anything convincing to...

dispell the myth of raising the minimum destroying the country. Unfortunately, there just is no really accurate study, and there never will be one.

The problem is that you can't set up a proper double-blind study tht can be replicated for repeatability when you are dealing with people's lives. So, what everyone does is look at BLS, Census, and other gummint statistics and interprets them. Very few do this without an axe to grind.

Even fewer actually go out into the field and try to find actual cases where the minimum wage has had an impact.

So, realizing that no one who comes up with that argument has any intention of changing his mind anyway, I simply throw the burden of proof back on them-- make them come up with proof that this will happen.

The question really is-- how do we as a society value workers, and are we willing to put up with the small risk of businesses losing profitability in order to raise the living standards of the worker. Thereby raising the standards of us all, btw.

I also ask why these people are so much more interested in their boss's welfare than their own...

[Sammy Pepys]

4. Only businesses that actually pay MW...

...will ultimately feel it. I welcome my ignorance to be addressed, but I don't think many places pay minimum wage to the penny anymore. Most folks I know in hourly positions (sans restaurant workers) make between $8 and $9 an hour.

[Uppanotch]

10. Many people do live on such poor wages, and it's a shame and an outrage

that ought to be addressed by the Congress of the richest nation on Earth. $8 or $9 per hour is not enough for most Americans to rise above the level of poverty.

[stevebreeze]

5. a reasonable minimum wage has no ill effect on the economy

In fact it is a great help. Of course if you raised the minimum wage to $100 an hour it would have an extreme effect, but no one is contemplating anything of the sort. In a consumer society keeping wages of so many people down below subsistence level is bad for the economy as a whole as they stop being consumers.
Here is a link to a great source on the minimum wage and other workers issues.
http://www.epi.org/content.cfm/issueguides_minwage_minwagefacts

[Warpy]

6. Of course it's been disproven. It's been disproven every time

a minimum wage hike has gone through over the shrieks and howls of employers.

Yes, they see a reduction in profit for the first few pay cycles. Then demand for whatever goods or services they provide goes WAY UP, meaning their profits go way up, far above what they've had to shell out in a wage increase.

It sounds paradoxical, but that is exactly what happens.

Money only works when it's MOVING. Money that is hoarded at the top generally stops moving in the larger economy, and is only traded back and forth among the rich for increasingly scarce goods like art, antiques, prime real estate, and prime stocks. Anything that causes money to be pumped in at the bottom will cause money to keep flowing throughout the economy, creating more wealth as the demand for the wealth creation labor supplies goes up.

This happens every time the minimum wage increases, which is why we never hear anyone scream for a rollback once it does. However, they trot out the same old, tired lies the next time it needs to rise.

They just never get tired of lying, do they?

[DocSavage]

7. So, if I

as a business owner have say 70% if revenue sloted for salaries (from the bottom to the top of the company) and an increase of say 3 bucks is legislated to the current minumum wage, what will that do to my budget for salaries. It will increase them. How do you as a manager pay for the increase in salaries? Remember, not only does the hourly rate go up, your componnet to withholding and SS goes up proportionally with an increase in pay.

You have 2 options, raise prices to pay for it or decrease the labor pool. If everyone raises prices, well then the market employment stays the same, if prices due to market pressure stays the same, sorry, I get rid of an employee or 2 and pay overtime.

an increase in mimimum wage of say .50 to .75 per hour would be OK for business, but if you force me to increase wages by 3-4 dollars or more per hour, there will be people looking for work.

[Warpy]

8. You'll be desperate to hire them back once your business

increases, so don't be too quick to fire those good employees.

[unpossibles]

15. bingo

which gets the money back into the economy faster? Someone who can afford to hoard it (and some investments count as hoarding, imo), or someone who has to spend it out of necessity? I've never understood this argument against it - and if it hurts the economy so much, then they should get rid of it all together - but they know better.

besides, most increases are done in steps, not $2-3 at once, which gives employers time to adjust. And frankly, if more of the CEO's/owners would be willing to take the temporary hit in their own usually inflated salaries, they would not need to raise prices and could remain competitive.

[LSK]

16. you are assuming 70% for salaries which is quite an assumption

You are also assuming that your business never turns a profit which is another amazing assumption.

[fasttense]

9. Seems to me those CEO pay increases never hurt the companies

why would a minimum wage slave pay raise hurt the company? One huge pay increases of a CEO would more than compensate for the dribble of a raise the minimum wage slave gets. Seems neocons want it both ways with a pay increase at the top but none at the bottom.

[kineneb]

11. speaking from personal experience

Poor people don't buy stuff. If they get paid a little more for their labor, then they canpay for more than just housing/food/transportation. Stuff like... shoes, new clothing (instead of thrift shop specials), occasional goodies for the kids, eye glasses ...

Keep them poor, and they do not actually contribute to the circulation of money, but become a drain on local social services, which make up for what their employer does not provide. The employer gets off the hook for benefits, and makes extra profit. It is called "corporate welfare".

[ticktockman]

12. Will an increase in the minimum wage hurt business or lose jobs?

Will an increase in the minimum wage hurt business and the economy? Has this myth been dispelled yet? If anyone has any information that refutes this claim please let me know. I'm sure the RWers around here will be yelling this at the top of their lungs.

I believe that the minimum wage could be indexed to inflation without causing any overall harm to business. Since inflation tends to rise slower than average wages, most businesses should be able to handle such a rise. In addition, many businesses that pay minimum wages do not have any global competition since the workers must be on site. Their relative competitiveness would stay the same. If extraordinary circumstances should ever warrant, the Congress can always step in and delay a scheduled rise. That would seem greatly preferable to the current situation under which the minimum wage has been turned into something of a political football. In any case, the following graph shows the minimum wage in current and constant 2004 dollars from 1940 to 2004:



The actual numbers and sources are at http://home.att.net/~rdavis2/minwage.html . As can be seen, the minimum wage in constant dollars has reached its lowest level since 1949. Also, there is no obvious relationship between the minimum wage and unemployment. For example, unemployment reached a very low level in late 60s, a time of a relatively high minimum wage.

Unfortunately, it seems unlikely that the minimum wage will be indexed to inflation anytime in the foreseeable future. Doing so would have made it impossible to attempt to pass cuts in the estate tax under the guise that it was balanced by raising the minimum wage.

[ChiciB1]

14. Min. Wage Has Always Fallen Below Norm.... I Have Also Found

that other than places like Walmart, McDonald's, Burger Kind and places like that... many businesses actually start hires off at more than minimum.

That could have changed in the last couple of years since I left the work force though. I went on Disability myself because of an illness and a car accident. While I'm not double-dipping like I've heard some do, I get paid more than most on SS. But we're NOT talking BIG bucks, and I've been told that when I reach retirement age the amount will go down!

[Lefty48197]

13. It only hurt when Democrats propose it.

When Republicans propose a minimum wage increase, it doesn't do any harm to small businesses. When Democrats propose a minimum wage increase, it costs jobs.

[Artdyst]

17. It will actually help workers AND businesses.

Our economy is basically a consumer economy and the more money there is in the hands of more people, the more they're gonna spend.

[dcfirefighter]

18. Push v. Pull Pricing

I rarely advocate price controls or a command-based central authority setting prices - in this case, the price of labor. I don't support them in this case, either.

I *DO* support government policies that tend to increase employment - and thus make labor more rare and valuable, increasing real wages. I agree with the posters here who believe that money in more hands is good for the economy. To do this we should eliminate *all* taxes on the first $100,000 of wage, tips, & salary income.

I *DO* support government policies that decrease the investment value of land, decreasing the cost of living, and making homeownership realizable by many.

That being said, I've no problem with states, even local jurisdictions, setting a minimum wage. However, it's awful hard to set an effective national minimum wage. $5.15 in Boston is nothing, $5.15 in Fort Smith, AR is something. (equivalent to almost $8/h in Boston).

Raising the minimum wage to $8/h would likely put some companies in AR out of business, in which case they'd employ no one at any wage.