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A minimum-wage increase is unnecessary

A minimum-wage increase is unnecessary
Establishing a minimum wage is universally popular in America even though it is not much different from setting a maximum price for shoes and butter.

 

The minimum-wage-increase discussion is under way in Minnesota and nationwide. It looks like most politicians – to say nothing of multiple poverty-fighting organizations – support the idea. The question is just by how much it should be increased. Shouldn’t we all slow down a little bit?

People who promote minimum-wage increases look mostly at one thing: how much a person must earn in order to be able to afford all of the life necessities. That, of course, varies greatly to the point of almost $60,000 for a family of four, according to JOBS NOW Coalition. It is hard to take this number seriously (not everyone is entitled to a single family house and a new car), but regardless of what people suggest one may ask a simple question: If we can raise the minimum wage with no negative consequences (and supporters of the increase usually trivialize the possible problems), why not raise it to $25 an hour and thus bring everyone into middle class?

The prime example of this approach is Rep. Ryan Winkler, who said that “raising the minimum wage is a win-win. If you put an extra $700 or $800 in a worker’s pocket, that money is going to be spent. Everybody will benefit.” If $700 is good, why not make it $7,000? Everyone will look at this as nonsense, making it clear that basing a minimum wage on the so called “living wage” is nonsensical as well. Even though the proposed numbers are different, the approach is the same: Get the figure from nowhere so we will feel good. Establishing and changing the minimum wage are economic decisions, not social ones, as some people want to present them.

Free market should establish wages

Karl Marx said that labor is a commodity, so establishing a minimum wage is the same as establishing a maximum price for bread and cars. The latter is never suggested in America even though in socialist countries all prices were set by the government and Venezuela is doing it as well. However, establishing a minimum wage is universally popular in America even though it is not much different from setting a maximum price for shoes and butter. The free market establishes the prices for all goods, and should be used to establish the wages as well.

Now let's talk about some specifics. The main thing is that practically no one lives on a minimum wage. People earning minimum wage are qualified for free health insurance, food stamps, free lunch at school for kids, earned income credit, and multiple other benefits. So in real life they do not have to survive on their minimum wage — it is a myth.

Based on this, another argument is used quite often in support of the minimum-wage increase:  It is unfair that we, the people, subsidize the businesses that pay minimum wage by providing governmental assistance to people who cannot survive on this money. Of course, this is a false postulate: Businesses would pay what market dictates regardless of whether government provides additional support or not to the workers – they have always been doing it even before the age of welfare. However, even if the minimum wage is raised, prices, driven by the increased labor cost (many other wages will have to be raised as well – a restaurant manager can’t get the same as a server) will inevitably rise as well contributing to overall inflation.

That means that we all will be paying more for many things, and it is hard to say whether it will cost people more or less than subsidizing government assistance to low-wage workers. What can be said for sure, though, is that low-wage workers themselves will be paying a disproportionally high share of the raised prices, since it will be mostly low-end goods and services that will see the most significant jump in pricing and they are the ones buying these goods and services. Therefore, at the end, minimum-wage earners will not see any improvement in their economic state. Ironically, this motion also contradicts the very core of liberal beliefs that the government shall be responsible for helping the poor and the means shall come from the rich.

The demographics of minimum-wage earners

Secondly, let's look at the demographics of the minimum-wage earners. According to the 2011 Minnesota Minimum Wage Report, about 50 percent of those receiving minimum wage work in restaurants, meaning that most of them receive tips in addition to their minimum wages. About 60 percent of those earning the minimum wage were younger than 24 years old, 70 percent worked part time, and 30 percent didn't even have a high school diploma, meaning that most of them were still their parents' dependents and the income was supplementary. Of the 40 percent minimum-wage earners older than 24, quite a few are retirees working to feel better and supplement their pensions. And of course, most deserving people are eventually promoted and start earning more. The above facts again show that very few actually rely on their minimum wage as a main income for a significant period of time.

And finally, let's think of those few who actually do live on their minimum wage. Obviously, those are the least educated and least ambitious people (I do not include here those who couldn't advance for various reasons not under their control such as disability or other medical problems because they definitely must receive additional government benefits). Are these the people the minimum-wage increase is intended for? Is this the message we want to send out — you do not need to work hard in school and at work in order to live well?

Of course, there are plenty of economists, including Nobel laureates, who support an increase in the minimum wage. However, there are about an equal number of economists who don’t support it. The problem is that for many supporters of a minimum-wage increase, ideology tramples economics. A glaring example is Paul Krugman, a self-proclaimed liberal, whose New York Times columns can hardly be an example of academic writing; it’s interesting though that when he looks at minimum wage as an economist, he doesn’t like it.  And when ideology runs supreme, we get … the Soviet Union.     

In real life, the way to get out of poverty is to get an education and work hard, and it should be each individual's responsibility, not the government's. Relying on government subsidies or a government-established minimum wage will not help. Karl Marx's slogan "from each according to his ability, to each according to his needs" was supposed to be achieved during communism only. Even socialism was going to give each "according to his contribution." Why should capitalism try to materialize a communist utopia? It didn’t work anywhere before and it will not work here either. 

Ilya Gutman is an immigrant from the Soviet Union who now lives and works in Marshall, Minn. 

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Comments (148)

The author starts out with an absurd argument.

Why is it that in every piece that decries a minimum wage increase, the author invariably says why not raise it to $25/$30/$500 per hour?

The point of a minimum wage is not to make a worker wealthy; rather, I think it serves to provide a reasonable level of income that keeps up with inflation and enables a worker to avoid having to work 50 or more hours per week.

Let no ideology enter in here !! Heaven forbid !!

“…for many supporters of a minimum-wage increase, ideology tramples economics.”

Oh boy. How reassuring that the opponents make such crystal-clear, rational argument, such as Ms. Gutman's claim above that increasing a worker’s wages won’t help them at all, and that raising the wages of the “Obviously…least educated and least ambitious people” would send the message “you do not need to work hard”. Need I mention her added comment that “most deserving people are eventually promoted and start earning more” is cited as amongst your “facts” ??

We sure wouldn’t want any ideology to muddy the waters here, would we, Ms. Gutman ?

An expanded version

of points already made here and refuted.
Noting to see here .... move on ....

How Appropriate!

"Noting [sic] to see here .... move on ...."

Whenever this cliche' in invoked, there is something to see, but someone is standing in front of it, attempting to hide it from view. How appropriate, in this context? So you expect the readers to believe that all points have been refuted, just because you say so? That will not even earn you a "nice try".

In the comments below, others attempt to gen-up some outrage that MinnPost would print such a non-lefty piece, claiming that it isn't a very good non-lefty piece. Whenever I see those comments, I know that the piece challenged the thinking of some readers. Not all MinnPost pieces need to preach to the choir.

Oh yes, the Soviet Union . . .

Where some well-connected people have become billionaires (and are busy sending their money outside the country), while meanwhile pensions and job opportunities are tanking.

We certainly wouldn't want that for the US, would we? Oh wait - that's our problem too!!

I would be willing to bet that the author, coming from the Soviet Union, was fairly well-educated. If so, in spite of the possible language barrier), he already had more of an advantage than many citizens, for whom education is becoming very expensive.

Let's cut out the capitalist vs. communist rhetoric, shall we? The Soviet Union was never an example of total "communism", nor was the US ever a totally free market.

Pieces of Late

I'm disappointed that MinnPost would let this (and the recent piece on Global Warming denial) piece on their page. I understand that this isn't their writing, and maybe they have some responsibility to report many different viewpoints. However, this piece really calls into question MinnPost's ability to curate pieces which reflect those different viewpoints. Surely there are rational arguments for and against this idea; this is not one of them. MinnPost, step it up!

Minnpost

is an opinion forum.
Diversity of opinion is good, even when the opinions themselves aren't.
As Mr. Gutman might put it: let the marketplace decide.

Thank you for pointing out all the inaccuracies

"Some responsibility"? Actually MinnPost can (and does) print what it wants with no particular claim to even-handedness, as is their right.

A free market

would not be subsidized by government benefits which sustain the availability of those willing to and capable of working for minimum wage. Take away that assistance and I expect minimum wage industries would be organized in a heartbeat and wages would rise, likely well beyond any government mandated minimum.

Recipients of government provided benefits typically are considered free riders in the U.S. Why is that not also the case for those whose labor supply is subsidized? Does anyone really want to argue for the social utility of cheap fast food?

The Soviet Union was not communist;

The U.S. is not capitalist; there is no "free market."

These are concepts - heuristics - that serve as a starting point for thinking about how to structure an economic system. They do not exist in the real world.

That said, I tend to agree (though could be persuaded otherwise) that wage-setting for the local small business is close enough to the "free market" construct that a mandated minimum wage is not appropriate. However, wage-setting for WalMart or McDonald's employees has nothing to do with the free market (it's about monopoly and externalized costs) and a minimum wage is a very rational way to correct the market failure.

Also, we have no thoughtful, intentional approach to allocating social wealth in this society. Instead, our distributive mechanism is an ad hoc growth policy that we hope creates enough jobs to give everyone willing & able to "do their share" a slice of the collective well-being. In that sense, our private economy carries a distinctively public element and it is quite legitimate for us collectively to dictate the basic rules by which the private economy needs to discharge its public distributive function.

Let's argue about facts and logic

I am reading the comments here and wonder if their authors have even read what I wrote. If one can’t argue, the easiest way is to pretend that things don’t exist. I expected more to the point arguments!

So $10/$15/$25 per hour suggestions are all without economic basis and that was my point. Minimum wage proponents do not advocate making people wealthy but who makes a decision what a “reasonable level of income” is? As I said, some think it is $60,000 a year – that is middle class.

Economics, like math and physics, has laws and wishful thinking can’t change them. If a minimum wage is raised, the money must come from somewhere; so prices will be raised, people will be fired, and so on and obviously the minimum wage earners will suffer the most. Really, give it some thoughts. I also wonder who those highly educated and ambitious people are who earn minimum wage. All the articles I read about those people say just the opposite. And yes, employers are interested in promoting good workers; what an interesting concept that some people may be unfamiliar with!

Yes, I did come with good education but I was not able to make a phone call when I came and when I tried, my accent was the first thing that would be noticed. I am not complaining; I just making things clear.

No, we cannot dismiss the experience of other countries as non-existent if it relates to us. Smart people learn from the mistakes of others. Of course, the Soviet Union never claimed that it was “communist,” just “socialist.” And if someone wants to counter that it was the wrong socialism and the right socialism works in Western Europe, please think again. European countries could provide cradle to grave support for everyone only because America took care of their security in the Cold War and spent way more on common defense than any NATO country. But even this way Europe is struggling now and has to use austerity to survive; its way is not sustainable..

Ilya, I misread the intent of part of your argument.

Ilya, I apologize that I misread the part of your argument referring to the possible range of ideal minimum wages. I have read many articles on the minimum wage, and unfortunately, many of them state a rather cynical "why don't we make it [insert ridiculously huge wage]."

I think we can find ways to argue within the laws of supply and demand what are reasonable levels of minimum wage. I believe most people who argue for increasing the minimum wage, including myself, do not want to put an undo burden on employers or cause a large increase in prices. I believe there is room to improve the minimum wage that will not cause much harm.

However, some large companies end up gaming the system by providing a low wage to many of their employees and making the rest of us taxpayers foot the bill for the difference in their wage and what might constitute a living wage. I'm glad that there is a safety net for those who are not able to make ends meet--the safety net takes care of some of the market failure of providing appropriate wages to people. However, I don't like it when that appears to be part of a company's intentional business strategy. It's not fair to the low wage employees, and it's not fair to society as a whole.

Sorry Ilya....

Your 'justifications' do not cut it. If the minimum wage was a 'living wage' there would be little need for the free health insurance, free lunch at school, food stamps, earned income credit, and "multiple other benefits" you state.

not so sure about that living wage

From the recent CBO report....Congressional Budget Office showed that raising the minimum wage from $7.25 to $10.10 would lift 900,000 people out of poverty but still leaving 45 million people in poverty.

So those programs (as you state) are not going away. In fact, I would bet that those workers companies choose not to hire at the higher minimum wage would need even more of those services.

While even 1 fewer person/family in poverty is important, I have to ask if there isn't a better way considering the pros and cons of the minimum wage proposal effecting less than 2% of all those in poverty.

I want to raise a second point. In my nearing 30 years in working in manufacturing and/or owning a manufacturing business, I have found that workers who

1 - shows up on time for work each day

2 - who tries his/her best to do the job(s) assigned

are quickly identified as valuable employees. My experience says that they are always paid more than the minimum wage - usually within just a few months of employment. I am not even talking skills or skills level - I just mean having a work ethic that says I show up for work each day and try my best.

Unfortunately, there are a substantial number of people that do not have such a work ethic who find themselves perpetually stuck at the entry level position.

In a global economy, why is it a business's responsibility to pay such workers a "livable" wage? Should not the wages have some relationship to the employee's effort in his/her job and the value they create?

Why change this?

The people who need the benefits get the benefits and they are mostly paid for by the wealthy via our progressive income tax system.

Also if this gets passed, are you okay with cutting medicaid, TANF, etc?

A Very Teachable Moment

Ilya Gutman's informative insights relative to the minimum wage easily earns a "Teachable Moment" label for the the vast array of liberals who rely on the establishment media for information.

Revealingly, one MinnPost responder to Gutman's essay even raised the question as to why such information is made available. Censorship is the liberal's last resort.

Of course, all of this discussion would be moot if just a handful of the concerned liberals calling for a minimum wage increase would start their own businesses and pay that very attractive minimum wage of $15 or $20 per hour. But starting a business takes courage, so that will not happen. Liberals are much, much better at sitting on the sidelines telling others what they should do — and pay.

For example...Costco

There already are companies out there with societal morals.

Societal Morals or Sound Business Practices?

An article regarding the apples vs. oranges, or MicroSoft vs. Starbucks, comparisons between Wal-Mart and Costco.

http://www.usatoday.com/story/money/business/2014/01/29/costco-wages-wal...

Ahhh....the "estsablishment media"

as opposed to whatever approved media that you consume that helps you to believe that liberals don't own businesses. I'll file this along with the inevitable, "low information voter" ad hominem into the nearest appropriate receptacle.

Liberals don't run businesses?

That's quite the statement. Would I find other gems of knowledge such as this from this "anti-establishment media" that you speak of? Where should I begin my quest for the truth...Breitbart? Redstate?

Liberals Last Resort?

Censorship as a tactic knows no limits on the political matrix. Need we fit EVERYTHING into some limited bi-polar political continuum?

Sorry, Tim...

"My experience says that they are always paid more than the minimum wage" is just that...your experience. Productivity levels are at all time highs while wages have been stagnant for a long time. While agreeing with you that at one time, your observation was probably true, but now, outside of your own plant, working hard and showing up on time guarantee nothing.

"Free Market Capitalism" Has NO Inherent Morality

And when practiced according the dictates of the Chicago School and the Harvard school where maximizing shareholder value and profit (together with executive compensation) will ALWAYS,...

I repeat ALWAYS cut corners and cheat workers to the point where it eventually destroys the economy on which every corporation depends for it's very existence. The last corporations to survive, of course, being those with government contracts (such as defense contractors supplying armament and other equipment and industries supplying logistical supplies such as food, shelter, etc., to the troops),

"Free Market Capitalism," by it's very nature, will ALWAYS kill the goose that is responsible for its golden eggs.

Raising the minimum wage represents nothing short of a small effort to forestall the efforts of our "free market capitalists" to commit group economic suicide. If this and other efforts are not successful, it's VERY likely that the rabble of low wage workers (which, of course, includes more and more of our society) will take up their pitchforks and torches (likely in electronic/internet form) or even (God forbid) the guns the NRA has been so busy convincing them to buy and take back our nation from the people who have stolen it out from under us: the 1%.

(and just as a side note, why does Mr. Gutman's thinking sound so much like that other well-known Soviet emigre and anti-Christian social gadfly, Ayn Rand?)

Some immigrants

of former "communist" countries are the hardest core right-wingers there are.

A few more comments

First, I appreciate the thoughtful comments of many readers, and not necessarily only those who agree with me. That is why I write this and that is why MinnPost is generally a good place for discussion because people with different views read it.

Enough people commented on the one who doesn’t want to see anything that is not a straight propaganda piece. I liked a motion that maybe, just maybe, MinnPost is obligated to report different points of view. Well, they are a “non-partisan” publication according to their “About Us” page but some people are so used to seeing mostly left-leaning pieces, that they forget it and are appalled to see something different. However, MinnPost did reject two of my pieces, and I still can’t quite figure out why. Anyway, I can understand that for some people it is extremely uncomfortable to learn that what they think is an absolute truth may be challenged so they try to cover their heads as much as they can and complain if someone takes their blankets away. But that is exactly what the free media is supposed to do…

I have mentioned in my piece that businesses paying minimum wages are not subsidized by the taxpayers – they would be paying what the market dictates no matter what. Without government assistance, the people on the minimum wage would earn the same but live much worse, just like in the 20’s and 30’s, but that would be the only change.

How can anyone say that McDonalds is a monopoly considering an extremely tight competition in the fast food market? Plus, all McDonalds are franchises operated independently. And even if Wal-Mart CEO’s entire annual salary were given to Wal-Mart minimum wage workers, each would get about $50 (in a year) at best so high executive’s salaries are not the reason for low wages. And if Costco can pay high wages, more power to them but it should come from their business model, not from the government.

Of course, I never said that existing minimum wage is a living wage (what is a living wage anyway – see my examples in the article). I was saying that it is not government’s business to set the minimum wage. How come no one suggests that the government sets up a maximum price for popcorn in movie theaters (they sell it at 900% (nine hundred percent) mark up) or pop in restaurants where we pay $1.50 for about a nickel worth of Coke? Oh, wait, they did limit the fees that banks can charge at ATM machines!

There is a maximum limit for Coke

In New York City, it is 16 ounces.

Ilya, thanks for contributing to MinnPost, and thanks especially for supporting your piece on the comments board. Many times, comments and questions posted go un-addressed by the author. It really helps the conversation when the source pipes in.

Market Expectations

"that businesses paying minimum wages are not subsidized by the taxpayers – they would be paying what the market dictates no matter what."

Right. A market that expects government assistance to workers.

Nice discussion

First, I appreciate the thoughtful comments of many readers, and not necessarily only those who agree with me. That is why I write this and that is why MinnPost is generally a good place for discussion because people of different views read it.

Enough people commented on the one who doesn’t want to see anything that is not a straight propaganda piece. I liked a commenter’s motion that maybe, just maybe, MinnPost is obligated to report different points of view. Well, they are a “non-partisan” publication according to their “About Us” page but some people are so used to seeing mostly left-leaning pieces, that they forget it and are appalled to see something different. Actually, MinnPost rejected two of my pieces, and I still can’t quite figure out why. I also liked the guy who dismissed me as an immigrant from the USSR – what a tolerance. Anyway, I can understand that for some people it is extremely uncomfortable to learn that what they think is an absolute truth may be challenged so they try to cover their heads as much as they can and complain if someone takes their blanket away. But that is exactly what the free media is supposed to do…

I have mentioned in my piece that businesses paying minimum wages are not subsidized by the taxpayer – they would be paying what the market dictates no matter what. Without government assistance, the people on the minimum wage would earn the same but live much worse, just like in the 20’s and 30’s, but that would be the only change.

How can anyone say that McDonalds is a monopoly considering an extremely tight competition in the fast food market? Plus, all McDonalds are franchises operated independently. And even if Wal-Mart CEO’s entire annual salary were given to Wal-Mart minimum wage workers, each would get about $50 (in a year) at best so high executive’s salaries are not the reason for low wages. And if Costco can pay high wages, more power to them but it should come from their business model, not from the government.

Of course, I never said that existing minimum wage is a living wage (what is a living wage anyway – see my examples in the article). I was saying that it is not government’s business to set the minimum wage. How come no one suggests that the government sets up a maximum price for popcorn in movie theatres (they sell it at 900% (nine hundred percent) mark up) or pop in restaurants where we pay $1.50 for about a nickel worth of Coke? Oh, wait, they did limit the fees that banks can charge at ATM machines!

All in all, that was a nice discussion but I did not see anyone really refute my arguments.

I'm sorry Ilya

I came to this discussion late. I was shocked reading some of the comments here from people who don't even understand the evils of communism. I am tempted to say "Forgive them, Ilya, for they know not what they do (or say)." But that's not true. They really believe there was no reason to escape the soviet union because they weren't, you know "really communist" after all. Unbelievable.

All you need to know about communism is that people lost and risked their lives escaping it. No other system on earth has had to build a wall to keep its citizens captive.

The reason I was prepared to lose my life to defeat it is because it is the very antithesis of freedom. I assumed at the time that the risk was worth it because everyone in this country believed the same thing. I was wrong. I'm now beginning to regret my sacrifice to this nation.

You know, there ARE data points between Soviet Communism

and Ayn Rand-style capitalism.

Just because I think that some of the hardest working people in America deserve to be able to pay for both rent and groceries, especially if their employers are billionaires, that doesn't make me a Soviet apologist.

One of the most educational experiences of my life was working as both an industrial and clerical temp during three years of being a proverbial "unemployed Ph.D" back in the early 1980s. I highly recommend it, not as a pleasant experience, but as an instructive glimpse at the physical exhaustion, petty demands, harsh schedules, sometimes hazardous working conditions, and bullying by often incompetent bosses that America's lowest-paid workers have to put up with.

I was able to escape the world of aching backs and people who slept rather than ate during their twenty-to-thirty-minute lunch breaks (that's right, some places gave only twenty minutes for lunch and one extra ten-minute break in a physically demanding workday that lasted from 7:00AM to 3:30PM) as soon as teaching jobs opened up in my field. Most of my co-workers were not, not because they were lazy or stupid or immoral, but because life had thrown too many burdens at them.

Free Market?

What a joke!

Those who wish wages to be based on the "free market" can start with CEO pay, which is as far from the free market as it possibly could be.

Once CEO compensation is market-based, then we can move down the wage scale. Until then, this is more heads-I-win-tails-you-lose economics.

Huh?

The CEO pay is free-market based because the board of directors is paying him what the market demands. If he's any good, they don't want to lose him to their competitors and so they pay him accordingly.

That's what the free market is ... competition. People who work in government don't understand the concept of a free market because they don't live it in their place of employment.

Actually, CEO pay is determined by the Board of Directors

which is made up of other CEOs and high corporate mucky-mucks who sit on one another's boards and grant one another outrageous compensation. If it's a market, it's a closed and rigged one.

Somewhat Correct

My friend who is an HR Compensation expert said almost the same thing when we last met for lunch.

I wouldn't call it a closed system, but it certainly is not focused on the best interest of the investors/owners/company like it should be.

I Was Born At Night

But it wasn't last night.

These clowns get paid bonuses WHEN THEY FAIL.

Oh yeah that happens in free markets all the time.

Corporate boards that give away the store are denying the liberty and freedom of the stockholders, which is me via my IRA and pension plans.

(Progressives can blow that dog whistle too.)

Funny

I hate to say it but some people just don't know how recognize "facts" or ideology when they see them. For instance pointing out that a certain percentage of workers are younger than 24 or senior citizens, which is a fact derived from a report, and then making up claims about these workers motivations for working, i.e., "they work for the fun of it". Gutman has absolutely no facts to support the claim that young people and senior citizens aren't working for the money, no such data is presented in the report she references. This claim is pure conjecture that not only defies common sense, but also defies numerous other studies that have found in fact that seniors have had to go back to work or delay retirement for purely financial reasons, and that young people are working to pay for education and relieve financial stress on their families.

From an economic perspective it doesn't actually matter why people work, THAT they work, earn income, and spend it, is the critical factor. Dollars that young people spend are no less valuable than dollars anyone else spends. In fact, dollars that young people spend as disposable income boost certain sectors of the economy. Employers have no business deciding what their employees spending priorities ought to be. Who's to say that saving for education, or car insurance, even spring vacation, is less important than rent? Basically employers are saying that unless an employee is on the verge of economic catastrophe they're not entitled to a living wage... and even then they should apply for food stamps.

Others have already pointed out that the whole idea that some kind of labor "free market" exists is pure fantasy. Labor isn't a product that's developed and sold by entrepreneurs. Labor is required to survive, and at a time when 90% of all of our labor is "at-will" the disparity in power between employers and employees is greater now than it has been in over a hundred years. Job applicants are even supposed to ask how much a job pays lest they sabotage their job interviews.

No matter what anyone says, employers, given a choice, will invariably pay workers as little as they can. The only exception are employees with contracts i.e. executives or unionized work forces. It's not about what's good for business, its about putting as much of the business revenue as they can in their own (or investors) pockets. There's nothing "fair" about this. when you pay your workers less than a living wage your not only harming your worker, your taking money out of my pocket because I'm making up the difference with my tax dollars and safety nets.

Look, here's what we know about trickle down economies: they're bad for everyone below the top 10%. It's not that trickle down doesn't work, it just doesn't work for the vast majority. All economies and all governments redistribute wealth. The only difference is to whom and to what extent a given economy or government redistributes.

Here's another fact: the US has now sunk to the bottom of developed nations in terms of class mobility. The wealthy stay wealthy, the poor stay poor. If you want people to have a shot at the American dream you have to make it possible earn a living and have time to pursue interests. As long as people have to work 70 hours a week just to get by, they can't explore their dreams.

There's one last thing we need to start clearing up. Liberals invented "limited government" AND Capitalism. Historically conservatives were Monarchist that believed in absolute rule by absolute rulers and resisted the transition from the feudal economy to the capitalist economy. This idea that conservatives are responsible for "liberty" and liberals are enemies of "liberty" is simply ridiculous, on the contrary. This is why totalitarian regimes always emerge from the conservative end of the spectrum. There was by the way nothing even remotely Liberal about the Soviet Union, the Soviets hated liberals and established totalitarian regime that violated almost every liberal principle of individual liberty. "Left" and "Right" don't always align with "Liberal" and Conservative" on the political spectrum when you get to the extremes. This is why Libertarianism and Anarchism share some basic principles although there's are considerable qualitative differences.

The root cause for the reduction

in class mobility can be placed at the feet of the teachers unions. The ability to move up in a society has always been a function of knowledge and skills brought to the marketplace. The education that kids receive today is barely enabling them to get a fast food job.

And the reason fast food workers are begging for a raise in minimum pay is because they lack the skills to move up and out of poverty. And for that you can thank the democrats and their teacher unions.

Teacher's unions?

Seriously?

Good Lord, Dennis...

I don't even want to know how you arrived at this hypothesis. Teachers unions are to blame for class mobility...my head is spinning. Perhaps after a Dewars it will become clear to me.

Cites please.

"Here's another fact: the US has now sunk to the bottom of developed nations in terms of class mobility."

We'll wait.

These figures are easy to find Tom

http://economix.blogs.nytimes.com/2010/02/10/are-you-better-off-than-you...

There are one or two countries depending on who you look at that have lower mobility than the US.

Historical

Views of the 1800's during the biggest growth this country has ever seen also brought with it 7 major recessions between 1873 and the 1920's and the first stock market crash in 1873 and brought with it the first great depression. Wages were unregulated and poverty grew because of it. The multiple rise and fall of the stock market finally led to the 1920's great depression. The Vanderbilt's, Carnegie's and Morgan's of the time were immune from recessions and depressions and invented the hostile takeover, adding fuel to the growing fires.

Donald Trump said about this that hard times are when he makes the most money. He's not the first to recognize that. That's true in many ways. Low wages and low employment mean more people willing to work for even less. This insures a cheap labor market which the free enterprise system encourages. It's not meant to support small businesses but rather make them vulnerable and available to being bought out cheaply during market crashes. These small businesses are already established businesses so the money needed to create a startup business has already been spent, just not by the corporations who'll buy them up. That's the free market in it's 'glory'.

Thankyou Ilya and MinnPost

For posting a very rational communication regarding the likely consequences of a raising the minimum wage. I am unsure why the pro-wage folks think that there will be no negative consequences. For some reason they think that companies just absorb higher costs. (ie higher fuel, material, real estate and labor costs) Whereas we are very aware that they have to react in someway to stay in business. (ie automation, off shore, price increase when possible)

Here is the question I am hoping a pro-minimum wage increase supporter will answer.

If we raise the cost of doing business in America by arbitrarily raising salaries above what the market can justify, will this encourage American consumers to buy more or fewer US products and services?

My simple belief is that until Americans consumers are willing to pay more for American goods and services. It is going to be real hard to pay more to American workers...

In summary, raising the costs will encourage more American's to buy more foreign goods and services, because in relative terms they will be even cheaper yet... Let's hope that wages in China, Vietnam, etc increase even faster...

Answer

"Here is the question I am hoping a pro-minimum wage increase supporter will answer.

If we raise the cost of doing business in America by arbitrarily raising salaries above what the market can justify, will this encourage American consumers to buy more or fewer US products and services?"

I'm pretty sure we've answered this question already and multiple times but I'll give it short go:

1) We're not raising wages arbitrarily, and we're not raising wages for all Americans (although that would be a good idea). We're raising minimum wages in accordance with data on poverty rates.

2) The fact this may raise some expenses for some business doesn't make it bad policy.

3) Business expenses fluctuate, rise and fall all the time, that's the nature of economies. If you have a solid business model by definition, you can cope with fluctuations within a certain range.

4) Consumers deal with fluctuating prices all the time, most fluctuations have little effect if any on consumption. Do you even know how much more or less you're paying for a Taco Bell burrito from year to year? fluctuations in business expenses don't necessarily translate into a rise in prices. Businesses cope with additional expenses in a variety ways without going bankrupt.

5) If price hikes in an industry are across the board as would be the minimum wages hikes, there would likely be no effect on buying. You can't buy a cheaper Big Mac in China and eat in it Edina. Nor can you have your house cleaned or your car washed in Bangladesh.

"My simple belief is that until Americans consumers are willing to pay more for American goods and services. It is going to be real hard to pay more to American workers..."

I'm afraid this is a simplistic belief. It assumes that consumers only pay what they are "willing" to pay for goods and services as if we negotiate the price of everything we buy. In reality, if a gallon of milk is $3.00 and you want milk, you pay $3.00. Everything we know about consumers is that in general they will buy what they want to buy and they will pay the price.

No studies suggest that this minimum wage hike would trigger significant inflation. People like you keep claiming it will, but all you gotta do is tell me how much more my taco will actually cost... I'm waiting?

Response

1. I think the increase will cause a compression affect in the short term. (current $9.50/hr people wil get a bump, $15/hr a smaller bump, etc)

2. It may be good policy if you want to make those tacos more expensive.

3. This is a permanent cost increase, not a fluctuation. The businesses will need to manage it by compressing profits, automating, off shoring, raise prices, etc. Which do you think they will do since the cost is going up for almost all of their direct domestic competitors?

4. My family is in about the 85th percentile income level and we live pretty conservatively. I do not and will not notice the price increases that will be introduced due to this action. I am thinking those who will soon be making $9.50 will notice them much more. (ie regressive "tax")

5. I agree, we will all just pay more. (ie regressive "tax")

As I have said before, I am indifferent to if it is passed or not. I just disagree with Liberals denying the likely negative consequences of the action. (ie higher prices, increased automation, off shoring, etc) Somehow you seem to think the business will just take it out their profits... Which of course us American stock, mutual fund, 401K, pension, etc investors would never allow. Since like us American consumers, we want the most bang for our buck...

Thanks for the answers !!!

Regressive taxes?

John, wages are not taxes nor will these increased wages be paid for with tax revenue, nor will the extra 15 cents I pay for my Big Mac be in the form of sales tax. Every time the price of something goes up it's not a tax.

Consumers deal with permanent price increases all the time. And making something more expensive isn't in and of itself isn't "bad" in terms of the economics, when businesses raise prices to boost profits you have no problem with it and consumers make do.

As for negative consequences and liberals all I know is I focus on facts and economic reality. I don't think anyone has denied that higher prices may result, we just understand that some modest price raises can be beneficial to the over all economy even if they make our tacos a little more expensive. I don't know how you're going to get cheap Bangladesh labor to clean your house or work in your McDonald's in Edina but service sector jobs like that can't off shored. And since we're not talking about manufacturing jobs automation isn't an issue. At any rate, automation, when it happens, happens no matter how cheap labor is. The fact is that the majority of your negative consequences have nothing to do with this sector of the economy.

Like a sales tax...

I like to think of this as similar to a sales tax... We are all going to pay a bit more to cover the additional cost. Liberals consider the sale tax to be regressive, therefore I think of it as a "regressive tax".

Whereas government programs for the low income folks are paid for mostly by us who pay income taxes. (ie progressive taxes)

You are correct, automation happens. I am just saying that the automation adoption rate increases as the labor cost increases. An additional $80/wk per employee may pay for some creative concepts. Remember that serve yourself pop was one of those...

Well...

"I like to think of this as similar to a sales tax... "

You're entitled to your own opinion, but not your own facts. Wages are not taxes.

Thank you

A government law mandating that we all pay more for our products so that some small group of low income people get more income than the market would normally provide.

It definitely sounds like welfare without the government bureaucracy. I guess that is an upside, no inefficient collection and distribution system required. And people have to work for the benefit.

Maybe we should increase it more? If only we would could get rid of that bureaucracy and reduce the cost of government to offset the price increases...

Uh huh

And poverty wages that require workers be enrolled in taxpayer funded government safety nets in order to find housing, pay for food, and have access to health care are.... what? Your arguing in circles, we're back to your incoherent claim that free markets exist. They don't. That's why we had to fight a war to end slavery. That's why workers had to fight and die to get 40 hour works weeks and overtime pay. Again, this is just class warfare pretending to be economics.

Remember

I am indifferent to if the higher wage is passed or not. There will be good and bad consequences.

For me personally there will be little to no impact. I am concerned for those in the lower 50th percentile though. The impact on job availability, service costs, etc could hurt.

Concern for the poor?

John says:

""2. Society is subsidizing the poor who are unwilling to work hard to improve their income earning potential. (ie progressive tax)"

Yes John, your concern for the poor is obvious and I'm sure they thank you.

3 paradigms

Since I am sure you don't want to mislead the other commenters, I proposed 3 possible paradigms as to who is being subsidized by a low minimum wage, that is offset by tax payer funded programs for those with low incomes.

1. Society is subsidizing the businesses by paying their expenses. (ie neutral to regressive tax?)

2. Society is subsidizing the poor who are unwilling to work hard to improve their income earning potential. (ie progressive tax)

3. Society is subsidizing all of us by keeping our "Service/Product Industries" less expensive. And they are doing this at the expense of the tax payers. (ie progressive tax)

Perhaps,

if the American worker had more disposable income to spend on the more expensive American goods and services, the demand for American goods and services would increase.

Or better yet, perhaps American corporations could show some loyalty to America and American citizens and workers?

Republicans always give corporations and businesses a free pass, while placing blame on the people that have the fewest options and lowest ability to make changes.

Really

Do you really think people will buy the more expensive "high content American good or service" just because their income increases?

Personally I think they will simply buy more of what they are currently buying. And in our culture, that is whatever they believe gives them the most bang for their buck.

Would that Subaru or Samsung buyer really start buying Chevy or General Electric/Motorola/Apple?
http://kogodnow.com/autoindex/

I'll agree that there are many greedy companies that moved jobs just to increase profits, if you are willing to agree that there are many greedy consumers who bought the cheapest/best product they could know matter how many American jobs it cost...

Yes "really"

"if the American worker had more disposable income to spend on the more expensive American goods and services, the demand for American goods and services would increase."

John, this isn't a theory, this the experience with the American economy over the last 8 decades. It's called the American Middle Class... Google it. This is what happens when median household incomes increase.

That Was Then

Prior to ~1980, I would agree.

Since then the tastes of American consumers have changed, other countries have recovered from the wars, transportation costs have dropped, communication costs have plumetted, etc...

Cars are just one example.
http://www.aei-ideas.org/wp-content/uploads/2013/07/big3.jpg

Thank you

The purely “free market capitalism” does not indeed exist because government meddle with it so much. In some cases it is OK and in some cases it is not. But it was a free market capitalism that made America (and all other western countries) prosperous by the beginning of the 20th century. Of course, it has drawbacks, but would you want to experience other options? As for people taking guns, they will not do it because they don’t have anything, like, presumably, during Russian revolution. They may do it because the government will try to take something away from them that they think they are entitled to, like in Greece recently…

I am not a right-winger or even Republican – I am an independent leaning libertarian. Unfortunately, for some people anyone who is not a liberal is a right winger. As for why so many Soviet immigrants (and I guess, Eastern Europeans, too) disagree with liberal points, can it be that those points sound so much like socialist propaganda and those people can detect it right away?

CEO’s pay is based on free market to the degree that the government doesn’t have a say. I agree that they are quite often overpaid but it is not my business if the companies can sustain it. And it is a minuscule part of total labor cost for most major companies (see my previous post). If I were a shareholder, I would probably complain. But most federal employees are overpaid, too, (with the same justification) in which case it is my money.

All retiree get pensions and all I said was that they do not live on their minimum wage only. And I do know people who did it for fun (even though I did not say that) – nothing wrong with it. So all I did was making a logical conclusion from the facts. And sure, some young people work for education but that was actually my point that you supported: They will get that education and move on to higher wages. They would want to get more but so will anyone else, including CEO’s. And employees don’t care about living wage and don’t need to, the same as they don’t care what their employees spend money on.

Unfortunately, some people don’t understand what a free market is. Yes, labor is not a developed product and is required to survive (well, not really nowadays, considering how many people are on government support) but it is something a person sells to an employer who will get a profit and that is why it is a part of the free market. And of course, employers will pay as little as they can as long as they can find someone to work for that money, the same as they will charge as high as possible for their goods as long as there is someone who will be buying it; that is what makes it a free market. Of course, an alternative is the government setting all salaries and prices and that was tried as well… (Don’t they have a shortage of toilet tissue in Venezuela? It’s interesting that there was a huge shortage of this product in the Soviet Union as well. I wonder why?)

And I believe I have already addressed the point about us paying for low wages employers pay (lower than living wage – what is that? Who determines it? $60,000?). By the way, if that is the case, how come no one suggests combining higher minimum wage with reduction in entitlements in the budget? As for mobility, why bother? If people make enough between minimum wage and government benefits, they do not want to try hard. In the Soviet Union there was a saying “It’s better to do nothing for 100 rubles than to do something for 200 rubles.” We are getting there…

Here I want to clear up one thing with Mr. Udstrand. He said that historically conservatives were monarchists. On the other hand, last time he said that Communists were conservatives. I am confused – I thought they were mortal enemies….Anyway, I never implied that communists were liberals. Unfortunately, modern liberals, or neo-liberals as I call them, are not the same that Lenin hated. Isn’t it amazing how modern liberals can always find a common language with people like Castro, Chavez, and Saddam but they hate Pinochet who gave up power to let his country be free? Sean Penn and Jesse Jackson even attended Chavez funeral…

I can only laugh at the statement that minimum wage is not raised arbitrarily but on the basis of poverty rates. Considering how many proposals are around, there is no science behind it. But even if it were based on the poverty data, it is still not an economic indicator that can serve as a basis for minimum wage. And of course, any price hike will be felt more by the minimum wage earners, as I pointed out in my article. CBO report also suggests the same http://cnsnews.com/news/article/cbo-minimum-wage-hike-would-lift-pay-cos....

Again, great discussion – thank you.

assume

"All retiree get pensions and all I said was that they do not live on their minimum wage only. And I do know people who did it for fun (even though I did not say that) – nothing wrong with it. So all I did was making a logical conclusion from the facts. And sure, some young people work for education but that was actually my point that you supported: They will get that education and move on to higher wages. They would want to get more but so will anyone else, including CEO’s. And employees don’t care about living wage and don’t need to, the same as they don’t care what their employees spend money on."

You assume too much. Not all retirees get to live on pensions. Social Security maybe and that might be below the poverty level also. People go without their pensions for fun?? Or are you mixing metaphors here?? Many who expected pensions have found they have none now.

Not all who get an 'education' will go on to higher wages! Not yet anyway! And if they have to live on minimum wage now it's not just for fun. You assume there's a glut of higher wage jobs out there just waiting for people to take those jobs. They just must not be visible now. Actually, as a glut, I think they don't exist. There's no evidence for them. Some people get trade school educations in specific fields and find they must work on contract if they are to stay in their 'field of education'. Sure they can take another very expensive trade school course and find themselves in the same position. Contract work which is basically part time work. While they may be paid wages higher than minimum, the majority will find they are also unemployed at least part of the year. Even those positions can't truly be considered full time work...although they are. Contract work is a fine example of a labor pool, something the free market depends on, correct? The more people in the labor pool the more companies have to choose from and the lower the wage is that they can offer those positions for. ....and Saddam?? Pinochet?? What??

Free markets

Markets are always influenced by many factors, governmental actions always among them. If we insist that only markets that aren't influenced by such factors are "free", the concept of a free market becomes meaningless, sort of like discussing the dietary requirements of a unicorn.

"CEO’s pay is based on free market to the degree that the government doesn’t have a say."

The pay of CEO's is not market based. You can't buy a CEO on eBay. CEO's do not bid for their jobs. Shareholders certainly have a right to speak about executive compensation, but corporations make a practice of ignoring shareholder comments and complaints.

"And of course, employers will pay as little as they can as long as they can find someone to work for that money, the same as they will charge as high as possible for their goods as long as there is someone who will be buying it; that is what makes it a free market. Of course, an alternative is the government setting all salaries and prices and that was tried as well"

Note that this is not the practice with regard to CEO's. When is the last time you heard of a CEO lose his job because some other CEO was willing to the job for less money?

I forgot

I forgot to mention one thing: Here is a MinnPost article comparing Minnesota with Washington State. Washington has high minimum wage and a much higher unemployment rate and, surprise, higher poverty rates. See it here: http://www.minnpost.com/politics-policy/2014/01/raising-minnesotas-minim....

1980?

"Prior to ~1980, I would agree."

Dude, SINCE 1980 middle class wages have stagnated and buying power decreased, the result... a great recession. Did you miss that?

Ilya, all you have to do is demonstrate that the only or even the major factor affecting unemployment rates is minimum wage: Hint... it isn't, the majority of unemployed workers in WA are NOT minimum wage workers.

This is the problem with so many conservative trains of thought, they're tunnel vision pretending to be economic theory. Tax rates alone make and break economies, and any minimum wages higher than $7.25 an hour will unleash havoc upon our entire economy. And it's all just a matter of "principle", there's no information or data to support this.

Causation...

"SINCE 1980 middle class wages have stagnated and buying power decreased"

Exactly... Starting in ~1980, many American consumers decided they liked foreign products that they deemed to be better, more cost effective, more fashionable, etc... (look at the

No wonder wages stagnated... American consumers severely curtailed their "Buy American" belief and started spending massive amounts of money overseas... I mean just automobiles were billions and billions of dollars by themselves
http://www.aei-ideas.org/wp-content/uploads/2013/07/big3.jpg

And yes American companies also moved production offshore to save money. However most Americans didn't care as long as they got the right good at the right price.

Until this changes back, we will keep sliding the wrong direction...

Stay focused

John, I notice you have a real hard time sticking to the subject at hand. Every time your argument stalls you try to shift to some other topic. You should know this doesn't go unnoticed. And you should know that your new arguments are no more sound than the old ones that keep stalling.

Goes Directly to Your Comment

I think your comment implied that you believe that wage stagnation was caused exclusively by businesses and their government lackeys... Whereas I believe this is in large part a self inflicted wound....

I believe that forcefully raising the cost of doing business and cost of living in the USA may actually encourage us consumers to start shooting at the other foot. Only time will tell.

So...

it's the financially strapped consumer who is responsible for their own wages stagnating. Good God....

Yes Somewhat

Isn't that a bummer...
Did you look at the KOGOD auto index?

Almost every Lexus, Scion, Subaru, Nissan, Infiniti, Mazda, Mercedes, Volkswagen, Audi, Volvo, Porsche, Hyundai and Kia score low on the list. And the imports that are built here are in "right to work" states.

So yes American consumers are gladly choosing to send their money to overseas workers, managers, governments, etc. Instead of supporting American workers and domestic jobs.

Per the graph I shared, the big 3 had ~75% of the car market in 1980 and now they have ~45%.

A question: do you look for the Made in America stamp before buying products, and pay a little extra if necessary to buy them? Or do you just buy low price things that you like?

And about those job loss estimates...

Here's what the CBO actually says:

"Once fully implemented in the second half of
2016, the $10.10 option would reduce total employment
by about 500,000 workers, or 0.3 percent, CBO projects.
As with any such estimates, however, the actual losses
could be smaller or larger; in CBO’s assessment, there is
about a two-thirds chance that the effect would be in the
range between a very slight reduction in employment and
a reduction in employment of 1.0 million workers"

Note the qualification, this is not a solid prediction of job loss the range could be anything from zero to a million. Meanwhile the White House point out:

"CBO’s estimates of the impact of raising the minimum wage on employment does not reflect the current consensus view of economists. The bulk of academic studies, have concluded that the effects on employment of minimum wage increases in the range now under consideration are likely to be small to nonexistent. CBO also agrees that the employment effect could be essentially zero, but their central estimates are not reflective of a consensus of the economics profession."

Please forgive the cross posting.

Clarifications for the end

People are trying to read too much between my lines. I said all retirees get pensions and I did include SSI into this category even though it technically may be incorrect. So, to make it factually correct, I can say that all people after retirement age get either pension or SSI unless they chose not to get it. Whatever they get may not be a lot but it is something so even if they work for a minimum wage, they do not live on a minimum wage. Next, there are people who have enough money at the old age but still want to work to stay active and that are those whom I refer to as “working for fun.” Again, minimum wage is irrelevant here.

Young kids working to support their education eventually, if they work hard enough, get a degree. They may not find a good job right away but I have never heard of a 50 year old with a college degree working for minimum wage and never holding a better paying job. And even if there are some out there, they are not typical. So same thing: these people will move on from the minimum wage and that was all I wanted to say.

As for Saddam and Pinochet, that was directed at Mr. Udstrand’s statement that communists were conservative and not liberal. It has nothing to do with the discussion but he brought it up.

Of course, I never said that wage is the major factor affecting unemployment but it is A factor. And no one knows who majority of unemployed people in Washington State are. Actually, the fact that poverty rate in Washington State is higher than in Minnesota is much more telling. Neither have I ever said that raising a minimum wage will cause havoc in the economy. I just said that there is no economic and even moral reason to do it.

And finally, yes, CBO report is just an estimate, not a solid prediction. However, CBO is nonpartisan while the White House is anything but. So forgive me if I do not trust what the White House said in this situation and neither should anyone else.

You miss the point Ilya

Neither the CBO or the White House offer strong support for you argument. And at any rate, the White is simply pointing to an actual consensus amongst economists, you don't have to trust the White Hose you can go to the primary source.

As for all this stuff about teenagers and senior citizens and blah blah blah, it's irrelevant. Employers don't hire employees to do people favors or train them for the future, they hire employees because they need them, without them they have no business. Every employee is entitled to a fair wage and most of us think it's the employers responsibility to pay that wage, not underpay it and let taxpayers make up the difference. It doesn't matter what employees are doing with their wages, employers have no business establishing financial priorities for their employees. The idea that employers don't need to pay a fair wage because they only hire people who don't really need jobs or aren't spending their wages in some way or another is simply absurd.

well

As I said, "not all" retirees get pensions." And if they don't get a pension doesn't mean they can get SSI. Saying that they do is factually wrong. Know that Social Security isn't SSI. A person on Social Security might get extra help with medical bills and get food stamps if they qualify by being under the poverty level. That is determined by the State. That should be clear to anyone who has listened to the news in the last 30 years. Not "Faux News" but real news. People on Social Security who have 'enough money' that they don't have to work is irrelevant. Other than the fact they are taking a job from someone else who might need it "if" they decide to work.

Actually there are older people with degrees, including 50 year olds, while they may have had a high paying job that they were laid off from, do find that if they want work it's for minimum wage. True, it's not true for everyone one of them, just a lot of them.

Saddam was definitely not a communist, nor was he a liberal. He was a right wing dictator. Pinochet overthrew Socialist Salvador Allende. Saddam was instrumental in overthrowing Abd al-Karim Qasim because Qasim had formed an alliance with the Iraqi Communist Party.

Why is there no economic or moral reason to raise people out of poverty?

The effects of minimum wage

One of the problems with this piece is that it makes some pretty unfounded assumptions.

Assumption: "Ironically, this motion also contradicts the very core of liberal beliefs that the government shall be responsible for helping the poor and the means shall come from the rich."

This is ridiculous. I may not be a flaming liberal, but I'm pretty sure that liberals that believe this are common. It is a twisted version of what many liberals actually believe, and that is that society has a moral imperative to provide a minimum standard of living for its members. This is not purely altruistic, but rather a foundation for stable society. Besides being morally right for individuals, it is morally right as a means to retain power and stability of the society itself. Unfortunately, societal welfare measures have slowly been redesigned to help support an argument that poor people are inherently lazy (which Ilya Gutman was all to happy to parrot). This is a purely political problem, not an ideological problem, and one that has both reduced the ability of the poor to contribute meaningfully to society, and given ammunition to those who would make it even harder.

Assumption: "People earning minimum wage are qualified for free health insurance, food stamps, free lunch at school for kids, earned income credit, and multiple other benefits. So in real life they do not have to survive on their minimum wage — it is a myth."

It's no myth. Not everyone who makes minimum wage is qualified for any of these things, let alone all of them. In fact, it is not uncommon for a person to lose any or all government assistance if income exceeds an artificially low level. This is particularly distressing to those who find themselves working long hours at a minimum wage job only to find that they pay more in child care than they make because they've lost eligibility for child care assistance.

As for free health insurance, well, that is a myth in and of itself. Prior to "Obamacare," there was no guarantee that any family member in a minimum wage household would get any health insurance. And under "Obamacare," it's still not guaranteed, let alone free. Subsidized, yes. If you input an example and figure out what the cost is, you have to be pretty danged poor to get "free" health insurance. And even if the health insurance is "free," that does not mean that health care is free. Most health insurance plans require some sort of monetary input other than premiums up to an out of pocket maximum. When you're living on next to nothing, that's significant.

Regarding food subsidies, including "food stamps" and reduced/free school lunches, these are not intended to provide full sustenance. A single meal at school is not sufficient to feed a child an entire day, let alone with full brain function (the brain demands a remarkably large proportion of daily sustenance). Food stamps are intentionally lower than the calculated minimum needed to fully feed those eligible. Sure, you can keep yourself pretty full on beans, rice, and milk purchased with food stamps, but you will be lacking in a lot of nutrients.

Assumption: "Karl Marx said that labor is a commodity, so establishing a minimum wage is the same as establishing a maximum price for bread and cars."

Karl Marx may have been right about labor being a commodity, but that does not equate establishing/raising a minimum wage to setting a maximum price on bread and cars. First, let's talk about bread and cars. One is a necessity, the other is not. Furthermore, one is more likely to be produced by low wage laborers, while the other is not. In other words, while an increase in minimum wage might actually increase the cost of bread, it probably won't increase the cost of a car.

You might exclaim that this proves your point that increasing a minimum wage doesn't actually help poor people out. That's not quite correct because not all products and services that are served by low wage labor are necessities. For example, a Big Mac. Even if the price of a Big Mac increased somewhat due to increased labor costs (realistically, it won't be very much, especially considering that the cost of a Big Mac has exceeded the growth of wages, or even inflation for that matter), so will the competition. Big Mac buying will adjust based on demand and the new price, but the profit margins are high enough that it's more likely that they will shrink before reduced demand actually does much damage. In the end, Big Macs will still be sold, but economic pressure will be at a slightly higher income level. It might even help reset price disparities (a Big Mac here is nearly $5, while in China, it's less than $3). The Big Mac Index is commonly used to determine disparities in currency value, but it might just mean that we pay too much for a Big Mac.

Thus, increasing labor costs does not necessarily lead to increased costs of all goods. And even if some necessities increase in cost, middle and upper class purchasing of non-necessities served by low wage labor will supplement the flow of cash in the downward direction.

I will make one negative point about increasing minimum wage--it should be done in conjunction with economic protection measures to support domestic goods and services. The US is not a true free market and countries like China are not true communist markets, but they just as well be in a global market. Unless the global economy is normalized to a single economic standard (not going to happen), protective measures need to be in place to protect higher valued economies from being cannibalized by artificial price lowering of aggressively expanding economies and third world economies. An increase in minimum wage will be less effective because companies can play in both first world economies and second/third world economies. Until it becomes more painful to outsource labor, companies will be able to access resources that your average American cannot, resulting in the devaluation of American labor without a concommitant reduction in prices.

Protective / Painful

Rachel,
"Protective Measures" and "Painful to Outsource". Please elaborate. Since I work for a MN company who does 2/3's of its business overseas, most of it as exports from MN, these words sound very non-Free Trade and therefore very scary.

I keep hoping that consumers would just choose to Buy American, however that hasn't been much of a priority for ~30 years. It would have the benefit you want without the potential trade war and loss of exports.

Maybe the government could pass a law to make it painful for us consumers to buy those high foreign content goods. Maybe doulble the sales tax on them. I wonder what the consumers would say about that?

OK, quickly John

John your buy American wage stagnation arguments make no sense because US economy didn't stagnate, wages stagnated. Since 1980 US GDP has tripled from $5 trillion to nearly $16 trillion. Wages didn't stagnate because people weren't buying American, wages stagnated because employers stopped handing out raises and paying employers good wages. 90% of all the economic growth the US has seen over the last three decades or so has been captured by the top 5% or so of the population. You're ignoring the phenomenal growth in disparity. Your argument assumes that wages stagnated because the money's not there, not true, our economy has grown by more than 300%. The moneys there, it's just not going to labor regardless of who's cars their buying. The growth of the economy is charted here... and elsewhere.

http://www.rcgroups.com/forums/attachment.php?attachmentid=3636109

Capital and Automation

Here is an interesting link.
http://andrewmcafee.org/2012/12/the-great-decoupling-of-the-us-economy/

The reality is that myself and other investors make money whether consumers buy from Ford or Subaru. My mutual funds own both.

Another reality is that few to no American employees are needed to design, test, build, etc that Subaru car, or clean, do accounting, work IT, manage, etc at their corporate headquarters.

Therefore people like myself still get wealthier and buy services, while the number of higher paying jobs at Ford and other USA manufacturers are eliminated. And to make things worse for the American workers, the American manufacturers need to automate or off shore to compete with Subaru.

So yes, what the consumer's choice does matter.

By the way, on the upside my company does sell equipment to almost all of the foreign car manufacturers. So some of those dollar do make it back to the USA, unfortunately most of them stay over there and not in the US worker's pocket.

exporting is not outsourcing

I also work for a Minnesota business that does a lot of foreign trade. I think we're doing pretty good business and also doing fair business. It can be done. Exporting is very different than outsourcing. One involves selling a finished product or service to foreign countries. The other involves a domestic company importing finished goods or services. The problem is that the labor is not domestic, but the company gets domestic benefits, including tax breaks. And for the record, I don't have a huge problem with taxing goods made from outsourced labor. But I'd rather see domestic companies financially discouraged from outsourcing labor, and definitely get rid of any tax breaks that encourage it.

Questions

"domestic companies financially discouraged from outsourcing labor"

So you want to financially penalize domestic companies to discourage them from outsourcing labor and reducing their product costs?

While foreign firms are free to to use low cost labor and reduce their product costs?

Now whose product will have the larger margin that can be used for R&D, capital investments, cost reductions, product advancements, etc? Will this lead to the domestic firm's world market share growing or shrinking from your perspective? If the domestic firm can not stay competitve and therefore goes bankrupt, how many Americans will be employed by that domestic firm?

Case in point: Samsung is giving Apple a run for their money as it is. Imagine what would be left of Apple if they had been been allowed to use FoxConn as a manufacturer...

Samsung is a better product

Yet, people will pay a premium for the inferior one, even though the Apple product costs very little to produce. That's not a very convincing example.

Capitulation?

So, buy the Samsung and wave good bye to more high paying American jobs? And American tax revenues...

Maybe Apple's mistake was that they didn't offshore more jobs sooner?

Maybe that's the answer... Move all of our R&D overseas with the manufacturing?

GM did that with the Spark, Sonic and Captiva, maybe Americans will buy those...

Personally I like my Motorola Droid 2 with sliding keyboard better than my Apple Iphone 5...

Marx

At any rate, Capitalism converted labor into a commodity, not Marxism. Marx was simply making common sense observation.

Fallacy of composition

The argument that what's good for small numbers is good for large numbers, and vice versa, is known as a fallacy of composition. Just because it might be good to take one vitamin pill a day, doesn't mean it's good to take a hundred vitamin pills. We understand this logic fairly readily in the employment sector. Just because we might think it's a good idea to give a valued employee a hundred dollar raise, doesn't imply and no one thinks that it implies that logic compels us to give that same employee a thousand or a million dollar raise. For some reason, only in a minimum wage context do many people not find this form of argument obviously absurd.

Here's the thing...

You have to remember that those of us who have argued for living or higher minimum wages have been studying this for decades. This didn't come out of nowhere and it didn't just pop up last week. We've seen all these arguments.

One difference between liberals and contemporary Tea Partyish conservatives is intellectual integrity. Absolutely you have to try to measure the benefits against the costs of any public policy. Absolutely you have to look whether or not a living wage will do more harm than good for minimum wages workers. Absolutely you have to consider the effects on the over-all economy, inflation, and unemployment. Thing is unlike Tea Party conservatives liberals aren't don't let ideology or "principles" displace reality or reason.

These guys are all pointing to a CBO study released a few week ago while living wages advocates have been studying this for decades. Sure these are legitimate questions, but lets not pretend these questions have no answers or have been answered, they have. I think anyone reading these comment threads can see that. You can read the CBO document for yourself, it's really only 21 pages, the remaining pages are index materials. All of these questions are asked and answered:

1) There is no reliable prediction regarding over-all employment effects, it cold be zero, or it could be a million, this is the conclusion of the authors themselves, they have no confidence in their own projection. However if you look beyond the CBO to the aforementioned decades of research you find that the current consensus is that wage around $10.00 an hour indexed to inflation will NOT cause any significant long term unemployment numbers. In some scenarios it could actually create jobs and decrease unemployment.

2) The effect on government budgets is probably zero.

3) 16 million people will see rise in their income and almost a million will be lifted out of poverty.

4) In general the benefits for low wage workers, other workers, and the economy in general outweigh the negatives.

My experience is that resistance to living wages is driven (and I've seen this for decades) by simple contempt for low wages workers and disdain for any sympathy for anyone other than the wealthy or employers. You can see it here, low wage workers are lazy, don't really need the money, can't raise themselves up etc. etc. I don't think I even need to respond these claims, their absurdity is self evident. Suffice to say that this is not about economics although it may be about maintaining economic oppression.

What's funny is that the same Tea Party conservatives that are constantly complaining about having the "fruits" of their labor outrageously "taken" by the government (taxes) are arguing that low wage workers are entitled to less fruit than anyone else despite the fact they are often laboring harder than many other people. I say we're all entitled to the fruits of our labor, included low wage workers, and our fruit should be enough for us to live on although with varying degrees of affluence.

Listen: Ayn Rand's Utopia of free markets and self leveling power is actually nightmare. Opponents of living wages don't simply want to hold them down, the want to eliminate minimum wage altogether. And they want to eliminate Social Security, unemployment benefits, food stamps, etc. all because the "markets" will provide. We've seen what that world looks like, and if you want to see it today go to Bangladesh. I'm guessing you wouldn't want to live there and I notice there's no great exodus of Tea Party conservatives to the low tax free market Utopia otherwise known as Somalia.

Rather than reading Ayn Rand

or suggesting we do, why don't you read Milton Friedman. Like we do.
You might learn something about free market capitalism.

http://www.youtube.com/watch?v=ca8Z__o52sk

Here's all you need to know about Friedman...

It takes a Dictatorship to implement Friedman's economic policies. See Chile just for one example.

That about settles it!

Paul, thanks for your patient, logical, and empathetic reasoning throughout this thread.

I really appreciate MinnPost for those times when mangled arguments (like this oped) are deconstructed and laid bare for all to see.

Paul...

John ignores the obvious disparity issue because it doesn't fit his narrative. After blaming the worker for buying cheaper goods and causing their own wages to stagnate (still reeling over that one), he naturally connects the dots to his theory that those same workers are lazy, uneducated and unwilling to make themselves more marketable for employment or advancement into positions that are more highly compensated. It's the perfect conservative dogma.

Your Theory?

Why do you believe these rare "long time minimum wagers" are still in that role within their company?

This should be interesting.

I couldn't care less

I don't paint those less fortunate than myself with some stereotype to justify keeping my boot on their throat. I think you've got that market cornered. They could be in that situation for a variety of reasons, none of which you and I are privy to and most that don't include incompetence. If that were the case, they wouldn't be employed at the same company very long at any price.

Good Point

"If that were the case, they wouldn't be employed at the same company very long at any price."

The lowest income of my friends seem to have a habit of shooting themselves in the foot... (ie tell woman co-worker an inappropriate joke, argue with supervisor, late/miss work, cause co-worker drama, night shift guard found sleeping, not working to improve productivity, etc) I love these folks, however they keep having to start over...

So you have no opinion on how capable, responsible or effective these 22+ yr old minimum wage employees are, yet you want to force companies to pay them more.

There's easily

just as much anecdotal evidence that people in upper echelon positions in business do stupid, inappropriate things as the examples you provided. The difference is that that those people are either not harmed or shown the door with a generous package.I've already given you my opinion on minimum wages employees. I don't pass judgement on them as I don't know the individual situations and challenges that have placed them in that position. They deserve to earn a couple of bucks more. Franky, I find your obsession with arguing that these people are somehow beneath you and deserve their lot in life, quite troubling.