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Minimum Wage

 

 

NEW YORK (CNNMoney.com) -- On Friday, the federal minimum wage rises for the third year in a row, sparking the perennial argument among economists: Will it help workers at the bottom of the ladder, or will it kill their jobs?

 

The U.S. minimum wage goes to $7.25 an hour, from $6.55, according to the U.S. Department of Labor. Most states have their own minimum wage, and employers are required to pay whichever is higher. That means minimum wage workers will get a raise in 29 states. In the remaining 21 states and Washington, D.C., they'll see no change.

 

In some states, the increase will be more modest. In New York, the state minimum wage is $7.15 an hour, so workers there will be paid an extra dime an hour, which means another $4 for a 40-hour week. But in states like Georgia, Virginia and Texas, workers are paid the current federal minimum of $6.55, so they'll get the largest raise of 70 cents, which translates into a $28 bump for a full-time week, or more than $1,400 a year.

 

Injecting money into the economy?

Kai Filion, an economist with the Economic Policy Institute in Washington, estimated that more than 2.8 million workers will have their wages lifted to $7.25 an hour on Friday. More than 1.6 million workers will also be indirectly affected, according to Filion, meaning their above-minimum wages will increase as the rising tide lifts all boats.

 

That adds up to nearly 4.5 million workers who would get a raise. The impact varies widely from state to state, depending on state minimum wages and population. In New York, with its $7.10-an-hour state minimum, 63,000 workers would be directly impacted, according to the EPI, compared with 632,000 workers in Texas.

 

0:00 /0:50Minimum wage hike kicks in

"Because it's not a big increase, any impact will be modest, but it will be good," said Heidi Shierholz, a minimum wage expert with the EPI. "You're seeing people say this is a wrong time to do this, but I think that is entirely wrong-headed. They could not have planned this for a better time."

 

Based on Filion's estimates, the wage increase will inject $5.5 billion worth of extra spending into the economy over the next year.

 

"It gets additional money to low-wage workers," said Shierholz. "These are workers who are mostly struggling to get by and will spend that extra cash. This is actually stimulus."

 

Or fewer jobs for low-wage workers?

Back in 2007, before the current recession began, Congress passed a bill to increase the minimum wage, which was then $5.15 an hour, three times over three years.

 

Some economists believe that the Friday increase couldn't be happening at a worse time. The U.S. economy lost nearly 3.4 million jobs in the first half of 2009, which is more than the 3.1 million lost in all of 2008.

 

Suzanne Clain, professor and living wage expert at the Villanova School of Business in Pennsylvania, said that increasing the minimum wage would create additional financial hardships for employers, driving the nationwide unemployment rate above its current 9.5%.

 

"My feeling is that increasing the minimum wage is going to put additional strain on the economy," she said. "Additional jobs will be lost as a result. It puts stress on employers who are currently having very small profit margins."

 

Clain conducted an analysis showing that the 13 states with the highest minimum wage -- exceeding the upcoming federal minimum of $7.25 an hour -- experienced higher unemployment levels than the other 37 states. She said the unemployment rates were higher by an average of between 1.75% and 2% in those 13 states during the three-month period ending in May.

 

"Raising minimum wage rates will generally discourage businesses from employing people," Clain said. "We're already suffering from a downturn phase."

 

What about the waitresses?

Regardless of whether Friday's increase has a beneficial or negative effect on minimum-wage workers, there is one group that it always seems to leave behind, according to the National Employment Law Project: waiters, waitresses and other workers who rely on tips.

 

NELP, a New York and Washington-based advocacy group for low-wage workers, released a recent study highlighting the fact that the minimum wage for tip workers has remained frozen at $2.13 an hour since 1991. According to NELP, the buying power of this wage has fallen 36% over the last 18 years.

 

"This disproportionately affects women," said Raj Nayak, a lawyer with NELP. "Waiters around the country have three times the poverty level of other workers. It's hard to depend on tips."

 

To NELP, the solution is obvious: Raise the minimum wage for tipped workers. In the study, the group said the federal government could follow the lead of some 13 states that guarantee tipped workers 60% of the minimum wage, which was actually a federal policy until 20 years ago.

 

Better yet, the study suggests, the government could extend the same federal minimum wage to tipped workers as to any other wage earners, noting that this is already practiced in seven states, including California and Nevada.

 

 

 

Human labor is just like any other good. When the price for a good increases, people buy less of that good. By increasing the wage that employers have to pay to their workers, the government is only causing the unemployment rate to go up. I encourage anyone who would like to know more on the subject to research price controls and what effect they have on economies.

 

This page explains minimum wage laws very clearly

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Human labor is just like any other good. When the price for a good increases, people buy less of that good. By increasing the wage that employers have to pay to their workers, the government is only causing the unemployment rate to go up. I encourage anyone who would like to know more on the subject to research price controls and what effect they have on economies.

 

This page explains minimum wage laws very clearly

 

Couldn't have said it better myself. Excellent take.

 

I snipped this qoute from the article:

 

"It gets additional money to low-wage workers," said Shierholz. "These are workers who are mostly struggling to get by and will spend that extra cash. This is actually stimulus."

 

Just another example of the ignorant, main-stream economist thought process. Only looking at those who benefit and not those who the policy hurts. As if spending is the solution to our economic problems, it's the problem not the solution. Also, where does she think this money is coming from? First of all, it either comes from the pockets of the productive workers of society, who would have probably spent it on something productive, or it comes fresh of the press.

 

If it comes from the productive sector, how is it stimulus? That is merely redistributing wealth from productivity to unproductivity, there's no stimulating involved. If it comes out of thin air, which is fresh off the Feds press, you then have a case of inflation. Inflation is the devaluation of the currency by increasing the total money supply. This causes prices to rise and all other types of nonsensical destruction. If this is the case, are the worker's really better off, or are they merely playing keep up while the rest of us lose value on our money?

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Another valuable resource is Henry Hazlitt's Economics in One Lesson.

 

Here's his take on Minimum Wage Laws (Read the rest at the link above)

 

We have already seen some of the harmful results of arbitrary governmental efforts to raise the price of favored commodities. The same sort of harmful results follow efforts to raise wages through minimum wage laws. This ought not to be surprising, for a wage is, in fact, a price. It is unfortunate for clarity of economic thinking that the price of labor’s services should have received an entirely different name from other prices. This has prevented most people from recognizing that the same principles govern both.

 

Thinking has become so emotional and so politically biased on the subject of wages that in most discussions of them the plainest principles are ignored. People who would be among the first to deny that prosperity could be brought about by artificially boosting prices, people who would be among the first to point out that minimum price laws might be most harmful to the very industries they were designed to help, will nevertheless advocate minimum wage laws, and denounce opponents of them, without misgivings.

 

Yet it ought to be clear that a minimum wage law is, at best, a limited weapon for combatting the evil of low wages, and that the possible good to be achieved by such a law can exceed the possible harm only in proportion as its aims are modest. The more ambitious such a law is, the larger the number of workers it attempts to cover, and the more it attempts to raise their wages, the more certain are its harmful effects to exceed any possible good effects.

 

The first thing that happens, for example, when a law is passed that no one shall be paid less than $106 for a forty-hour week is that no one who is not worth $106 a week to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation.

 

The only exception to this occurs when a group of workers is receiving a wage actually below its market worth. This is likely to happen only in rare and special circumstances or localities where competitive forces do not operate freely or adequately; but nearly all these special cases could be remedied just as effectively, more flexibly and with far less potential harm, by unionization.

 

It may be thought that if the law forces the payment of a higher wage in a given industry, that industry can then charge higher prices for its product, so that the burden of paying the higher wage is merely shifted to consumers. Such shifts, however, are not easily made, nor are the consequences of artificial wage-raising so easily escaped. A higher price for the product may not be possible: it may merely drive consumers to the equivalent imported products or to some substitute. Or, if consumers continue to buy the product of the industry in which wages have been raised, the higher price will cause them to buy less of it. While some workers in the industry may be benefited from the higher wage, therefore, others will be thrown out of employment altogether. On the other hand, if the price of the product is not raised, marginal producers in the industry will be driven out of business; so that reduced production and consequent unemployment will merely be brought about in another way.

 

When such consequences are pointed out, there are those who reply: “Very well; if it is true that the X industry cannot exist except by paying starvation wages, then it will be just as well if the minimum wage puts it out of existence altogether.” But this brave pronouncement overlooks the realities. It overlooks, first of all, that consumers will suffer the loss of that product. It forgets, in the second place, that it is merely condemning the people who worked in that industry to unemployment. And it ignores, finally, that bad as were the wages paid in the X industry, they were the best among all the alternatives that seemed open to the workers in that industry; otherwise the workers would have gone into another. If, therefore, the X industry is driven out of existence by a minimum wage law, then the workers previously employed in that industry will be forced to turn to alternative courses that seemed less attractive to them in the first place. Their competition for jobs will drive down the pay offered even in these alternative occupations. There is no escape from the conclusion that the minimum wage will increase unemployment.

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I really feel like this will affect the smaller businesses tremendously.

 

I used to work in a REALLY small town, as a waitor/cook (Before I got in the tech support business ;)) making minimum wage, so lets consider the position of a restaurant owner. I am not an economist by any means, but believe that if you are an employer, you are used to sustaining a certain profit margin. Now lets say you have to start paying your employees more, on top of already rising food costs...something is going to have to give.

 

1. The owner takes the profit cut, and continues on

2. Owner fires employees

3. Owner raises prices

 

The restaurant I worked at raised prices last year, due to the increase, and suspect they will do the same this year. I suspect the same thing will happen at the local grocery store, too. I know that if I still lived in that small town, I would much rather drive 20 miles (to Bartlesville) to get more affordable groceries, and restaurants. If minimum wage continues to rise, could it lead to more urbanization, and depletion of small towns?

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I really feel like this will affect the smaller businesses tremendously.

 

I used to work in a REALLY small town, as a waitor/cook (Before I got in the tech support business ;)) making minimum wage, so lets consider the position of a restaurant owner. I am not an economist by any means, but believe that if you are an employer, you are used to sustaining a certain profit margin. Now lets say you have to start paying your employees more, on top of already rising food costs...something is going to have to give.

 

1. The owner takes the profit cut, and continues on

2. Owner fires employees

3. Owner raises prices

 

The restaurant I worked at raised prices last year, due to the increase, and suspect they will do the same this year. I suspect the same thing will happen at the local grocery store, too. I know that if I still lived in that small town, I would much rather drive 20 miles (to Bartlesville) to get more affordable groceries, and restaurants. If minimum wage continues to rise, could it lead to more urbanization, and depletion of small towns?

Yes, the ill-effects of this type of intervention are unlimited.

 

More than likely it will lead to high unemployment, more dependency on the government, the need for more controls, leading to less social and economic freedoms and eventually the complete ruination of the dollar and the country.

 

Government set the course for failure when it came into existence, but Congress sped it along in this country when it gave complete control of the monetary policy to the Fed. The solution isn't more government, it's freedom from government.

Link to comment

I really feel like this will affect the smaller businesses tremendously.

 

I used to work in a REALLY small town, as a waitor/cook (Before I got in the tech support business ;)) making minimum wage, so lets consider the position of a restaurant owner. I am not an economist by any means, but believe that if you are an employer, you are used to sustaining a certain profit margin. Now lets say you have to start paying your employees more, on top of already rising food costs...something is going to have to give.

 

1. The owner takes the profit cut, and continues on

2. Owner fires employees

3. Owner raises prices

 

The restaurant I worked at raised prices last year, due to the increase, and suspect they will do the same this year. I suspect the same thing will happen at the local grocery store, too. I know that if I still lived in that small town, I would much rather drive 20 miles (to Bartlesville) to get more affordable groceries, and restaurants. If minimum wage continues to rise, could it lead to more urbanization, and depletion of small towns?

Yes, the ill-effects of this type of intervention are unlimited.

 

More than likely it will lead to high unemployment, more dependency on the government, the need for more controls, leading to less social and economic freedoms and eventually the complete ruination of the dollar and the country.

 

Government set the course for failure when it came into existence, but Congress sped it along in this country when it gave complete control of the monetary policy to the Fed. The solution isn't more government, it's freedom from government.

 

 

At the risk of inviting still more a/c intrution to every thread, I must say, you are correct sir.

 

At the further risk of sounding paranoid, I suspect big brother perfers economic distress as a means of gaining more power. Notice how every bill lately is so very important that it can't even wait to be read before it's voted on. By maintaining a constant state of crisis, this administration is forcing the ignorant and incapable to depend on it's gracious contenence rather than their individual abilities.

Minimum wage is the perfect vehicle by which to enslave the capable and placate the ignorant.

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"It gets additional money to low-wage workers," said Shierholz. "These are workers who are mostly struggling to get by and will spend that extra cash. This is actually stimulus."

 

What is the "cure" for low-wage workers? Individuals work hard, become valuable to their employer, earn a raise or promotion. Or get some education and get a better job.

Link to comment

I really feel like this will affect the smaller businesses tremendously.

 

I used to work in a REALLY small town, as a waitor/cook (Before I got in the tech support business ;)) making minimum wage, so lets consider the position of a restaurant owner. I am not an economist by any means, but believe that if you are an employer, you are used to sustaining a certain profit margin. Now lets say you have to start paying your employees more, on top of already rising food costs...something is going to have to give.

 

1. The owner takes the profit cut, and continues on

2. Owner fires employees

3. Owner raises prices

 

The restaurant I worked at raised prices last year, due to the increase, and suspect they will do the same this year. I suspect the same thing will happen at the local grocery store, too. I know that if I still lived in that small town, I would much rather drive 20 miles (to Bartlesville) to get more affordable groceries, and restaurants. If minimum wage continues to rise, could it lead to more urbanization, and depletion of small towns?

Yes, the ill-effects of this type of intervention are unlimited.

 

More than likely it will lead to high unemployment, more dependency on the government, the need for more controls, leading to less social and economic freedoms and eventually the complete ruination of the dollar and the country.

 

Government set the course for failure when it came into existence, but Congress sped it along in this country when it gave complete control of the monetary policy to the Fed. The solution isn't more government, it's freedom from government.

 

 

At the risk of inviting still more a/c intrution to every thread, I must say, you are correct sir.

 

At the further risk of sounding paranoid, I suspect big brother perfers economic distress as a means of gaining more power. Notice how every bill lately is so very important that it can't even wait to be read before it's voted on. By maintaining a constant state of crisis, this administration is forcing the ignorant and incapable to depend on it's gracious contenence rather than their individual abilities.

Minimum wage is the perfect vehicle by which to enslave the capable and placate the ignorant.

 

Thank you!!

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"It gets additional money to low-wage workers," said Shierholz. "These are workers who are mostly struggling to get by and will spend that extra cash. This is actually stimulus."

 

What is the "cure" for low-wage workers? Individuals work hard, become valuable to their employer, earn a raise or promotion. Or get some education and get a better job.

 

Only those that don't want it to be done, say and believe that it can't be done.

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At the risk of inviting still more a/c intrution to every thread, I must say, you are correct sir.

 

At the further risk of sounding paranoid, I suspect big brother perfers economic distress as a means of gaining more power. Notice how every bill lately is so very important that it can't even wait to be read before it's voted on. By maintaining a constant state of crisis, this administration is forcing the ignorant and incapable to depend on it's gracious contenence rather than their individual abilities.

Minimum wage is the perfect vehicle by which to enslave the capable and placate the ignorant.

 

 

yeah, all of the bills except for HR1207.... the one that'll actually HELP the people.

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There have been numerous minimum wage increases in the last 15 years. This isn't going to crash the economy and drive masses of people to unemployment. Well, not entirely because of the increase anyways.

 

That being said, it isn't going to fix the problem either, just like the last ones. It's a stupid endless cycle. When does it end? When people are making 10 dollars an hour? 20? 30?

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