Minimum wage going up

[Lunican]

Minimum wage hike kicks in

National rate will rise 70 cents Thursday to $6.55 per hour in the second phase of three-stage increase.

NEW YORK (CNNMoney.com) -- The federal government is set to boost the nation's minimum wage Thursday in the second of three increases mandated by Congress.

The national minimum wage will increase by 70 cents to $6.55 per hour as part of the Fair Minimum Wage Act of 2007.

Before last year's legislation, the national minimum wage had been left unchanged at $5.15 an hour since 1997.

The act calls for a third and final increase, scheduled to take place on July 24, 2009, that will raise the minimum wage to $7.25 per hour.

Full Article

[RiversideGator]

Prepare for more job losses.

[Charleston native]

And for increases in prices on goods.

[vicupstate]

Prepare for more job losses.

Any increase in unemployment in the near future is FAR, FAR more likely to be a result of Oil prices and the housing market tanking. 

[RiversideGator]

This is why today is exactly the wrong time to be doing this.

[Doctor_K]

Prepare for more job losses.

Any increase in unemployment in the near future is FAR, FAR more likely to be a result of Oil prices and the housing market tanking. 

No it's not:

Businesses, meanwhile, are concerned that higher labor costs will make an already adverse enconomic environment even more difficult.

"With inflation pressures increasing for small business owners, this is not the best time to be forcing employers to pay workers higher wages," said William C. Dunkelberg, chief economist for the National Federation of Independent Business, in a statement.

With labor costs accounting for 70 -80% of business costs, raising the minimum wage will force producers to pass on the added expense to consumers, Dunkelberg said.

What's more, lifting the minimum wage deters employers from hiring young and unskilled workers, since they become more expensive, according to the NFIB.

"So, the increased minimum wage makes it more difficult to hire those who are most adversely affected by the economic slowdown," Dunkelberg said.

That's from the same article cited by Lunican.  I can afford 7 employees at $5 minimum wage; therefore I can only afford 5 employees at the $7 minimum wage.  The other two I have to either fire if they're currently working for me, or I won't be able to hire them in the first place if they're potential hires.

[Jason]

Fire 2 or just work them all less.

[Charleston native]

What if he needs more workers to ease the heavy workload that they currently have?

Sounds very counterproductive to me. Actually, it's pretty regressive.

Then, business productivity will fall due to either current workers being overwhelmed, or worse, business declining due to higher prices and/or people's frugality.

[Eazy E]

Prepare for more job losses.

This is not an attack (sucks that I have to state this at all): but I just don;t get this line of thinking. Won't paying people more lead to them spending more which will lead to the creation of more jobs and then more spending and more creation of jobs, etc?

[RiversideGator]

Prepare for more job losses.

This is not an attack (sucks that I have to state this at all): but I just don;t get this line of thinking. Won't paying people more lead to them spending more which will lead to the creation of more jobs and then more spending and more creation of jobs, etc?

The short is answer is no. 

The somewhat long answer is that labor costs are typically set by the market and people are paid based on the difficulty of the work and the ease of substituting in other workers.  For example, very few people are qualified and have the skill to perform brain surgery.  So, because these people are very rare and their services are highly desirable, they earn more money.  On the contrary, it is very easy to flip a burger and most anyone who is physically fit can do it. So, because this job is one which anyone can do and there is a large pool of potential workers, burger flippers do not get paid very much. 

With the minimum wage, you have government arbitrarily raising the costs of burger flippers and other entry level workers.  In response, businesses will do one of two things (or both).  They will (1) cut some positions and increase the workload on the remaining employees in an attempt to hold the line on prices or (2) they will raise prices and pass the new cost onto customers.  If they do (1) some of the intended recipients of the government largess will actually lose their job thereby harming them.  If they do (2), which is what will ultimately happen in the long run, prices will go up to reflect the new base cost of labor.  So, minimum wage causes job losses for its supposed beneficiaries and cause inflation generally.  It really is nothing more than a political ploy to attract the votes of the economically illiterate among us.

[Eazy E]

Prepare for more job losses.

This is not an attack (sucks that I have to state this at all): but I just don;t get this line of thinking. Won't paying people more lead to them spending more which will lead to the creation of more jobs and then more spending and more creation of jobs, etc?

The short is answer is no. 

The somewhat long answer is that labor costs are typically set by the market and people are paid based on the difficulty of the work and the ease of substituting in other workers.  For example, very few people are qualified and have the skill to perform brain surgery.  So, because these people are very rare and their services are highly desirable, they earn more money.  On the contrary, it is very easy to flip a burger and most anyone who is physically fit can do it. So, because this job is one which anyone can do and there is a large pool of potential workers, burger flippers do not get paid very much. 

With the minimum wage, you have government arbitrarily raising the costs of burger flippers and other entry level workers.  In response, businesses will do one of two things (or both).  They will (1) cut some positions and increase the workload on the remaining employees in an attempt to hold the line on prices or (2) they will raise prices and pass the new cost onto customers.  If they do (1) some of the intended recipients of the government largess will actually lose their job thereby harming them.  If they do (2), which is what will ultimately happen in the long run, prices will go up to reflect the new base cost of labor.  So, minimum wage causes job losses for its supposed beneficiaries and cause inflation generally.  It really is nothing more than a political ploy to attract the votes of the economically illiterate among us.

Fair enough. I think that is a well-reasoned explanation of an argument frequently made, but rarely explained. I would daresay that it even-- gasp!-- kind of changed my thinking on the matter.

[Eazy E]

But, at the same time, RG, i would also say that places like McDonalds should see the benefit of just paying their workers more and not firing some to offset the difference.  I like your logic for smaller companies, but for behemoths of retail and fast food world, for example, I do not.

[Doctor_K]

But, at the same time, RG, i would also say that places like McDonalds should see the benefit of just paying their workers more and not firing some to offset the difference.  I like your logic for smaller companies, but for behemoths of retail and fast food world, for example, I do not.

But the logic is the same, regardless of the size of the business.  It's just easier to wrap your head around a mom-and-pop shop rather than a multinational corporation (at least, it is for me!).

If each individual McD's store paid their workers more, and did not fire others, as you suggest, their bottom line would suffer.  If they pay all their employees $100 a month, and they make $1,000 a month in sales, they've got a $900 profit (leaving out the whole re-stocking thing.).  If they raise their workers' pay to $200 a month, and their sales don't increase, they've made $800 instead.  Now, for McD's, we'd obviously add several more zeroes to the end of those figures, but that's how I understand it. 

If I can make $900 instead of $800 in a certian stretch of time, I'm going to do it.  Especially if my stockholders are expecting me to make more.  At the end of the day, the individual McD's stores' net profits and profit margins are what drive the figures of the parent corporation. 

Mom-and-Pops are in the game for the $, same as the big corporations ('Big Burger' to join the catch-phrase world of Big Oil and Big Tobacco?  ).  Employees try to get hired to make money for and to better themselves.  It's not the company's duty to better the lives of its employees, per se.  (I can see the heat I'm going to get for that one!) 

Unless you're specifically a non- or not-for-profit, you don't go into business to not make money.

[vicupstate]

Prepare for more job losses.

This is not an attack (sucks that I have to state this at all): but I just don;t get this line of thinking. Won't paying people more lead to them spending more which will lead to the creation of more jobs and then more spending and more creation of jobs, etc?

 
The short is answer is no. 

The somewhat long answer is that labor costs are typically set by the market and people are paid based on the difficulty of the work and the ease of substituting in other workers.  For example, very few people are qualified and have the skill to perform brain surgery.  So, because these people are very rare and their services are highly desirable, they earn more money.  On the contrary, it is very easy to flip a burger and most anyone who is physically fit can do it. So, because this job is one which anyone can do and there is a large pool of potential workers, burger flippers do not get paid very much. 

With the minimum wage, you have government arbitrarily raising the costs of burger flippers and other entry level workers.  In response, businesses will do one of two things (or both).  They will (1) cut some positions and increase the workload on the remaining employees in an attempt to hold the line on prices or (2) they will raise prices and pass the new cost onto customers.  If they do (1) some of the intended recipients of the government largess will actually lose their job thereby harming them.  If they do (2), which is what will ultimately happen in the long run, prices will go up to reflect the new base cost of labor.  So, minimum wage causes job losses for its supposed beneficiaries and cause inflation generally.  It really is nothing more than a political ploy to attract the votes of the economically illiterate among us.

Fair enough. I think that is a well-reasoned explanation of an argument frequently made, but rarely explained. I would daresay that it even-- gasp!-- kind of changed my thinking on the matter.

or (3) the company will eat the difference by adjusting to a lower level of profit.  Corporate profits have held up to inflation far better than the minimum wage.  Easy's point of

[Eazy E]

But, at the same time, RG, i would also say that places like McDonalds should see the benefit of just paying their workers more and not firing some to offset the difference.  I like your logic for smaller companies, but for behemoths of retail and fast food world, for example, I do not.

But the logic is the same, regardless of the size of the business.  It's just easier to wrap your head around a mom-and-pop shop rather than a multinational corporation (at least, it is for me!).

If each individual McD's store paid their workers more, and did not fire others, as you suggest, their bottom line would suffer.  If they pay all their employees $100 a month, and they make $1,000 a month in sales, they've got a $900 profit (leaving out the whole re-stocking thing.).  If they raise their workers' pay to $200 a month, and their sales don't increase, they've made $800 instead.  Now, for McD's, we'd obviously add several more zeroes to the end of those figures, but that's how I understand it. 

If I can make $900 instead of $800 in a certian stretch of time, I'm going to do it.  Especially if my stockholders are expecting me to make more.  At the end of the day, the individual McD's stores' net profits and profit margins are what drive the figures of the parent corporation. 

Mom-and-Pops are in the game for the $, same as the big corporations ('Big Burger' to join the catch-phrase world of Big Oil and Big Tobacco?  ).  Employees try to get hired to make money for and to better themselves.  It's not the company's duty to better the lives of its employees, per se.  (I can see the heat I'm going to get for that one!) 

Unless you're specifically a non- or not-for-profit, you don't go into business to not make money.

Fair enough. But my point is: when you are already making hundreds of millions of dollars, how can you not go 'Hmmm, well, paying people MORE is better for the country, not just me and the stockholders' bottom line, so maybe i'll make $250M this quarter instead of $300M because it is obviously better for everyone involved if I do so'?

There comes a point, to me, when ridiculous, huge profits are enough and I don't need to be driven by making even more money, I need to be drived by actually doing waht is good for my country.