> Now, talks for a massive federal minimum wage increase means further sending people into poverty by destroying the value of what small savings anyone on the bottom might have.
are you suggesting the newly-proposed $15 minimum wage will cause inflation so bad it will destroy people's savings?
I think that's what OP is saying and if that's the case, they are wrong. Minimum wage is not inflationary. It has other problems like the fact it never ever decreases poverty, and has a good chance of increasing unemployment, and is a one-size-fits all ($15/hr in NY, is different than $15/hr in Alabama) ... but it isn't inflationary. You're not creating new money.
> it isn't inflationary. You're not creating new money
Nitpick. We have no evidence minimum wage increases are inflationary. (We have evidence it is not [1][2].) But something doesn't have to create new money to be inflationary.
Increasing money velocity causes inflation as much as printing bills. The poor spend their dollars in the real economy (as opposed to the wealthy, who buy GameStock calls). That increases demand for those goods and services, which can result in a price spike.
Again, we don't have evidence of this happening. But theoretically, it's sound. (And less theoretically, it's why central banks can print pots of money while still fighting deflation.)
> when price of flowers goes up prior to Valentine's day, that's inflation?
No. Inflation is a "a general rise in the price level in an economy over a period of time" [1]. A single product pricing up is not a "general rise," and a temporary spike before Valentine's Day isn't "over a period of time."
Agreed, the reason minimum wage is bad policy and unethical is that you're making it illegal to pay someone below a certain threshold, which stated differently is making it illegal for a sufficiently unskilled worker to get any job. But I don't see how minimum wage could be inflationary, but if it were it certainly wouldn't be enough to "wipe out savings" - that requires hyperinflation.
If you made a minimum wage that was significantly above the prevailing wage I'd expect to see inflation in a economy like the US. My wager would be that dollars that are currently chasing returns in the stock market may shift to wages resulting in those same dollars now trying to buy consumer goods rather than stock. We might not call that inflation in the economy generally as after all stocks would "deflate" during that time but in terms of living day to day it would be.
Another potential mechanism would be if unemployment went up high enough due to a minimum wage increase that productivity decreases so much that the same number to dollars are chasing the results of less workers.
That said, with the exception of very rural areas the wage floor for most moderately skilled or unpleasant work is above $15 an hour already, so this will probably not have much of a impact on poverty or inflation.
>My wager would be that dollars that are currently chasing returns in the stock market may shift to wages resulting in those same dollars now trying to buy consumer goods rather than stock.
OK ... but if the money supply stays the same, then all you're doing is just shifting the demand curves from one set of products (stocks) to another (TVs?). Put anther way, some things will go up, and some things will go down because spending habits changed. This happens now. It's not inflation just because the price of roses goes up in February.
I agree it isn't inflation in the classic sense, I'm not sure of a great term for this effect.
A thought experiment, if I printed up a dollar for each one in circulation then put them in a vault that shouldn't cause inflation even though the money supply has doubled, similarly if in a thousand years someone opens the vault and puts those dollars into circulation inflation happens even though the money supply has unchanged.
My thesis is dollars that go between hedge fund to hedge fund are "in a vault" compared to dollars that are buying food at the local Walmart. If some of those hedge fund dollars ends up in the hands of a individual (say a minimum wage increase causes firms to halt buybacks and direct that money toward payroll) that would cause inflation of consumer goods as now we have more dollars chasing the same output.
This is an empirical question (if raising minimum wage effects inflation) so what you expect in terms of inflation doesn't really matter. This isn't a philosophy question where you can imagine the answer and get a best in class result.
Since 2009 people on the Internet have been prophesizing about massive inflation and inflation has been extremely low.
Maybe they will one day be right, but like the boy who cried wolf nobody should be listening to warnings about inflation from people on the internet, as a class they don't have any idea what they are talking about.
Offhand, just from my own crummy bio memory of prices of things...
I'd estimate about a 50% increase in food prices in about the last decade.
I'd also estimate that the asking price of a house was completely out of whack even post the recession in 2008; it _never_ corrected in any of the west coast areas I live in. Still even that price has continued to go up due to inelastic supply and ever growing demand.
The government CPI statistics show 18.7% price increase between 2010 and 2020.
It's certainly possible that your expenses went up 50% in your presumably super-affluent area of the U.S. It wouldn't surprise me if booming tech companies in certain regions have caused this- but it is not the effect of monetary policy or government minimum wage policy- and my expenses have not gone up much in the last 10 years in my wealthy-but-not super-affluent east coast suburb.
Im from EU and I think that minimum wage is basically negotiation with employer on your behalf. Obviously the lowest earning people don't have resources to negotiate salary well. IMO it's probably better to define it on more granular lvl that federal.
If someone earns less it should be considered gig not work and basically non even taxed.
> But I don't see how minimum wage could be inflationary, but if it were it certainly wouldn't be enough to "wipe out savings" - that requires hyperinflation.
Inflation is a boogeyman. I heard a friend of mine not wanting any sort of covid stimulus checks because it would make his and his family's savings depreciate.
Huh? Inflation is very real. The dollars I saved from 20 years ago buy a lot less across the consumer spectrum. Prices don't go up, the money's purchasing power goes down. That is not a "boogeyman", it's theft by the inflation tax.
yes it's very real, but it is used as a black-and-white "any and all inflation is bad" thing like in my example, especially when discussed on its own instead of holistically combined with things like economic growth and interest rates and other things.
>you're making it illegal to pay someone below a certain threshold, which stated differently is making it illegal for a sufficiently unskilled worker to get any job.
B does not follow from A if demand is elastic. Minimum wage proponents assume enough labor demand is elastic.
The minimum wage probably just increases costs if some items to cover minimum wage of those currently underpaid. You could argue about it, but calling it unethical seems far-fetched.
Minimum wage just forces some ppl to do more productive stuff. It will take away some jobs but you probably dont want such jobs in developed country. It's just better to allow more part-time work IMO. I would like some opinion of Dutch ppl on their part time work law, which seems interesting to me.
You want those jobs, but you don't want people to make careers out of those jobs. Someone in high school should be working those jobs, someone supporting a family or trying to build a career shouldn't be! Not sure how to solve this issue though... Age-based minimum wage? Something else?
Isn't this basically discrimination? Job is job. Even if you are 13 years old your should be paid the same for similar results. Instead of subsiding via parents.
This make it better for those unlucky youth to help themselves.
Wait, parents shouldn’t subsidize their kids?! As soon as my kid can get a part-time job as a teenager I should totally cut them off? That does sound tempting...
I’m pretty sure I’m feeding and clothing my kids. I mean, I get what you are trying to say, but the fact is, everybody has a different price they are willing to work for based on their circumstances. Sweeping nationwide minimum wage laws are not the best solution for that.
Everybody has a different price they are willing to work for based on their circumstances but that doesn't mean you let them do that. Allowing people to work for low wages drives down wages for others, which is undesirable for lots of reasons including income inequality and not wanting people with families to become poor. Sweeping nationwide minimum wage laws is certainly one solution for that.
Yes, something else. A reasonable education system, a reasonable regulatory framework that let's business success (we have both of these things), and repairing the hole in the bucket that is causing wages at the bottom to be stagnant - illegal immigration. But the majority of power on both sides of 'the aisle' don't want to tackle this for selfish reasons.
Yeah if you arent willing to pay them living wage you probably don't. I'm fine with paying little more than handling it myself. I think amazon Go style shops will get popular. These people probably can transition to different parts of service economy well.
Low skill call centers are total waste of human time, that's why most of it is outsourced. UX just can get improved instead.
>Yeah if you arent willing to pay them living wage you probably don't.
What if they are willing to work for less because it serves their purpose (like a foot in the door in the industry, or something else that you and I can't even think of). For example, we allow unpaid internships because we see the value of it. What about an internship that pays a little? Isn't that better for all?
The problem is you're taking choice away from people who may want it or need it. Why do you think you know better what's good for them than they do?
Yeah, foot in the door to work in McDonalds so you can what? Be manager one day and afford to have family?
Foot in the door as cleaning lady to be hired as secretary? Maybe.
Basically min wage should be defined as basic needs for individual. I don't think that many people will chose to go for lower than that for future personal gain.
If you're comfortable with democracy, why not also be comfortable with other people making their own employment choices, rather than assuming you know better or that they don't have a choice?
Because democracy is about society and not free will (it's about deciding what's better for majority) and yes, I do belive that limiting him that choice(not really him but his employer) is beneficial for society. It similar case to giving free access to alcohol, hard drugs, junk food etc. Someone has to pay this cost of nonoptimal choices.
EDIT: example: you don't provide living wage so some/more ppl will chose to steal. This might destroy their family, so social worker is needed, you also need more police, judges, prisons etc. All of them are employed, happily contributing to GDP. Success! Is it better world? I don't think so. It's much cheaper if with offering living wage. (as global optimisation, company owners and individuals do local optimisations)
Unpaid internships are gatekeeping at its finest: Poor folks can't do them. By expecting people to have someone to support them while they take a chance to get in the door, you are saying you don't want folks that don't have that or aren't rich enough to suffer through it.
Just because a few people are willing to work for less - or for free - to get in the door doesn't mean it is just to take advantage of them and pay them less than a living wage. Not everyone will be working x job for opportunity. Some folks need to eat. And yes, it is taking advantage of people - artists and musicians get offers to get paid in Exposure all the time. Which is really, "please work for free!".
The only real exception to this is, perhaps, when the work is actually part of schooling, and that should be limited. Teachers, doctors, and pharmacists come to mind, though we do treat the doctor interns quite horribly. (some pharmacist interns get a bit of pay).
My local school district employs 14-year olds to vacuum the floor after school each day. You really think that has no value for anyone involved? I know one of the kids and they are sad that they will lose that job if Biden’s minimum wage is passed.
They are being manipulated or are hired because they are cheaper than the staff custodians, who probably have fewer hours because of the school's practice of child labor.
Even after a minimum wage increase, the school will still have to vacuum the floor. I'm guessing it'll just have the other staff do this now, who aren't children.
Because we shouldn't be dependent on child labor, especially when they should be expected to do schoolwork. We can make children feel good about a paycheck by paying them to go to school if we'd like.
I can't verify they feel good about getting a paycheck. I have generally been happy to have a bit of money, but I've never cared that it came from a paycheck and realistically, despised that I had to work while going to school (mine was later, in college). I'd have went without if it were a reasonable option.
You might want to rethink yours. You are arguing for child labor with emotional manipulation (Some 14 year olds - children - will be sad to lose a job)
I realize that folks are different. However, In a lot of places and situations, child labor is illegal - and 14 is considered child labor in so many situations. When they do work, it comes with massive restrictions. This is soley because we, as a society, generally feel that the focus should be on school instead of work. If we cannot pay young folks on par with adults, we shouldn't hire them.
As a sidenote: I'm guessing that the real reason the school hired them is because they are cheap labor - soft exploitation - and so long as their rate is less than paying a member of the custodial staff (who would have to pick up the slack), they won't be out of a job.
You seem to put a lot of weight behind this term, Child Labor. I understand that in the past and in some places still today children were/are essentially treated as slaves, and that’s possibly what you are thinking when you write Child Labor. I agree 100% that that is evil.
I assure you that these teenagers are not being mistreated, and there are adults doing this same job with them. Our society has come a long way. No teen spends 100% of their time on school work. Like anyone, they have a price they are willing to trade their time and labor for. Why should they, or anyone not be allowed to make that trade?
And yes, it is an emotional argument. We are emotional beings. Doing a useful job and being rewarded for it satisfies those emotions immensely.
In addition to that, it teaches things in ways that a classroom simply cannot. In a very real way it is paying them to get some education, as you suggested.
If someone's skills do not justify $15/hr, they will get locked out of the labor market, keeping them in poverty. Many municipalities enacted the minimum wage as a way to keep blacks out of the workforce. It is literally an example of codified systemic racism.
There is only so much money for businesses to allocate towards labor, it is not infinite.
Eg: $15K per month for staffing translates to $3750 per week, which translates to $125 per hour at 30 hours per week on average, which translates to ~10 staff at $12 per hour.
At $15 per hour that is reduced to 8 staff. Alternatively the hours for 10 staff would be reduced from 30 hours per week to 24 hours per week.
The money doesn't come from thin air, raising minimum wage for 10 staff at $12 per hour to $15 doesn't mean there will be no layoffs or reduction in hours.
Increasing prices of products sold or services rendered would result in a reduction in products sold or services rendered. Again, the money doesn't come from thin air -- either prices are raised or staff costing is reduced through cut hours or cut headcount.
Who gets cut is another question too -- more than likely it is tied to appearance, education, likeability, or seniority. Who gets hired is another question too -- if the bar is too high for an uneducated black youth then they will simply not get hired. An increase in the minimum wage can result (and has historically resulted in) in higher unemployment among black youth.
A better way to think about this is for retail businesses the storefront landlord acts as a spring-loaded sink of money. The landlord will take all available money until the retailer has bare minimum margins, 2-5% typically. Retailers will trade away wages for rent because landlords are very powerful and retail labor is not at all powerful. Therefore the minimum wage is simply a way for the government to set a rule saying you can only trade down to this amount. To treat the staffing budget as a fixed thing isn't a proper model. You have to understand it as being in tension with other budgets.
It's a lot more complicated. Sometimes staff is set by the budget. Sometimes a business needs a certain amount of staff to function and can't get away with employing less. In a lot of cases, staff is set by the latter, and raising the minimum wage cuts into profit margins. It's potentially inflationary if product prices go up in response to higher costs, but often product prices are very demand sensitive and raising them will result in suboptimal net revenue. There is a reason a lot of studies show that increasing the minimum wage by small amounts has negligible effects on employment: there are many other factors to consider. That being said going from $7 to $15 in the US is an experiment for which there is little to no data, especially for rural effects (since only big cities seem to have tried it). I personally favor not having a minimum wage but only in a society with a UBI so you don't have people needing to make a living off what they earn in the labour market exclusively. In such a society people who's labour contributes negligible value to society can choose to do something other than work if they feel it would be a more valuable use of their time. People who earn a lot in the labour market still face a strong incentive to work. In current society the low-end employers appear to have oligopsony power which results in distorted downward pressure on wages, and many people are forced to take badly paying bad jobs in order to live.
This only holds true for places where there's no room to increase the staffing budget.
There are some industries where it might have an effect, restaurants/coffee shops in particular. But I wouldn't expect mass produced goods/foodstuffs to increase much if at all, simply because of how efficiently the labour is utilised.
There are also be potential productivity gains from having workers in a more financially stable position.
I'm sure Amazon isn't the only place that can afford to pay more, but they are definitely a great example for why our current economic system isn't fit for purpose.
are you suggesting the newly-proposed $15 minimum wage will cause inflation so bad it will destroy people's savings?