Increased unemployment vs raising minimum wage

[sv2007]

It's beginning to happen as cities raise minimum wage, employers decrease the number of workers. Is this a good thing?

In some ways, I think it is. The better workers should get to keep their jobs and earn a living wage. It helps motivate people by rewarding performance.

But on the flip side, now there are a few more unemployed people that we all must support.

I guess there's no free lunch.
What's your take?

[DaveInPgh]

You are naive if you think "better workers" is the deciding factor as to who stays and who goes.

[frugalNH]

One thing you've left out of the equation- the (relatively) sudden and large forced increase in minimum wage is pushing smaller businesses out of business when they can't afford to pay for their help anymore.

I think the answer lies somewhere in the middle- wages NEED to go up, but not over 50% in only a few years' time. Raise the minimum wage slowly, bit by bit, and give the system time to adjust instead of jacking it right up. Also, in the future, don't leave it stagnant so it becomes a crisis like now.

[pflyers85]

It's beginning to happen as cities raise minimum wage, employers decrease the number of workers. Is this a good thing?

In some ways, I think it is. The better workers should get to keep their jobs and earn a living wage. It helps motivate people by rewarding performance.

But on the flip side, now there are a few more unemployed people that we all must support.

I guess there's no free lunch.
What's your take?

Better workers are keeping their jobs and they earn well in excess of minimum wage or this fabled "living" wage. If anything it would likely serve as a disincentive to those who went out of their way to obtain licenses or certifications for jobs that start out just above the proposed $15/hr minimum wage.

[sv2007]

One thing you've left out of the equation- the (relatively) sudden and large forced increase in minimum wage is pushing smaller businesses out of business when they can't afford to pay for their help anymore.

I think the answer lies somewhere in the middle- wages NEED to go up, but not over 50% in only a few years' time. Raise the minimum wage slowly, bit by bit, and give the system time to adjust instead of jacking it right up. Also, in the future, don't leave it stagnant so it becomes a crisis like now.

It isn't suddenly an increase; in many areas, like where I am now, there is a gradual increase adjustment over 3-4 years. Even in other areas, the laws were passed with 2-3 years when it takes effect.

I personally prefer to let the free market take care of things, but I try to find the sliver lining with what's given.

[sv2007]

Better workers are keeping their jobs and they earn well in excess of minimum wage or this fabled "living" wage. If anything it would likely serve as a disincentive to those who went out of their way to obtain licenses or certifications for jobs that start out just above the proposed $15/hr minimum wage.

Say a McDonalds worker, the increased pay should provide him/her with a living wage so the work becomes meaningful. Since the increase wage also means fewer workers, there's incentive to work harder to be retained. Although I think most min wage jobs are menial, so maybe the "work harder" doesn't make too much sense, I mean one can only stand so straight (if the job is to just stand there).

I'm curious to see the long term effects.

[snafu]

On the other side...The best paid CEOs run the worst performing companies

http://www.wsj.com/articles/best-paid-ceos-run-some-of-worst-performing-companies-1469419262

I can't imagine why people believe $ 15. minimum wage is excessive.

[pflyers85]

On the other side...The best paid CEOs run the worst performing companies

http://www.wsj.com/articles/best-paid-ceos-run-some-of-worst-performing-companies-1469419262

I can't imagine why people believe $ 15. minimum wage is excessive.

It is excessive in the sense that it distorts the marketplace and value of human labor. Some current jobs no matter how proficiently performed will never be able to yield at least $15/hr of value added human labor. Couple that with the fact that there are people that no matter how hard they work or how much they try they have physical, mental, and/or emotional limitations that make it impossible for them to have anything more than a minimum wage job that pays significantly less than $15. Some people through no fault of their own are simply not employable at $15/hr.

[pflyers85]

One thing you've left out of the equation- the (relatively) sudden and large forced increase in minimum wage is pushing smaller businesses out of business when they can't afford to pay for their help anymore.

I think the answer lies somewhere in the middle- wages NEED to go up, but not over 50% in only a few years' time. Raise the minimum wage slowly, bit by bit, and give the system time to adjust instead of jacking it right up. Also, in the future, don't leave it stagnant so it becomes a crisis like now.

Is there really a crisis today? I mean less than 5% of all workers earn the Federal minimum wage today. Within that figure under 5% are teenagers that don't need to earn a living wage but are merely working for entry level experience and spending money. Also in that figure are people that are working a low skilled menial job part time for supplemental income but have primary income from another full time job or a spouse with a lucrative career. The actual number of people trying to make a living wage on the minimum when you take out the above is quite low. That is not to say that we should ignore those that do but raising the minimum wage is not a viable long term solution to their ills.

I just get sick of these leftist politicians that throw around the "Raise the minimum wage" talking point as some solution to helping the middle class. The middle class doesn't earn the minimum wage. They earn significantly more than the minimum wage. It's really just such a contrived economic red herring.

[dczech09]

On the other side...The best paid CEOs run the worst performing companies

What does this have to do with the current topic? Also, is it a matter that the current CEOs have ran the companies in the ground, or that a prior CEO did and now a new higher-paid CEO is in to help turn the company around?

I can't imagine why people believe $ 15. minimum wage is excessive.

It is excessive. Maybe not in the 2020's, but right now it is excessive.

Determining what the minimum wages "should be" today is a difficult task. Do you use nominal dollars since its inceptions? Do you use real dollars since its inception?

I have seen some studies conclude that the minimum wage should only have been $4.24 in 2012, while other studies have concluded $10.55 in 2014. The studies differ based on the starting point - $4.24 was based on the 1947 inception date, while $10.55 was based on the 1968 high inflationary periods as the starting point.

Either way though, we can see that even with the skewed $10.55 figure for 2014 (which would be about $11.19 tops for today's dollars) is much less than the much touted $15 per hour minimum wage. I would call that "excessive."

Assuming an average inflation rate of 3%, it would take until 2026 before minimum wage "should be" $15. The fact of the matter is that the $15 minimum wage idea is rooted more in emotion than it is in logic.

As far as the actual purpose of this thread...

I think a lower minimum wage with higher employment is better. The reason why is work experience. Most higher-paying jobs will not touch anybody with little or no work experience. I talk to human resources people everyday of my life, and most of them like seeing work experience (even in an unrelated job) when looking at a candidate's resume and application. Even a minimum wage job is better experience than no job, if only because that person is able to exercise their soft skills.

Assuming that a minimum wage increase results in lower employment (which is intuitive if you view payroll as a fixed pool of money), the problem would be more people unemployed. That is more people not exercising soft skills or any other work-related skill. That is more people who are going to have a tougher time finding employment in the future as they will be overlooked for some one who was working.

It is recommended that you never let yourself be unemployed for more that 6 months if you can help it. People with such long unemployment records have an extremely tough time finding work. Even a minimum wage job would be better. Problem is if minimum wage increases, we run the risk of those jobs drying up.

[parasush]

Increased Unemployment Versus Raising Minimum Wage

I think its the stagnation of the movement of money that is a culprit. For instance, money flowing to the top, and staying there. Full employment being the theoretical stimulus for wages, well, that’ just theoretical. Yes wages rise when demand for labor increases, but it tends to do that in one area (or Vertical).

[Fishindude77]

pflyer85 said it very well.

Minimum wage jobs are not intended to keep a roof over your head and support a family. These jobs at the fast food joints, putting together widgets, working at a store in the mall, etc. are entry level. They don't require any education or much skill and were traditionally filled by kids and part timers looking for a little extra income.

If you don't like minimum wage, learn something and get yourself into a better paying job. Numerous businesses and industries are starving for labor and pay very well.

[Nika]

Taxpayers are currently subsidizing those small businesses and large corporations alike. Anyone working current minimum wages cannot do so without state assistance, daycare assistance, etc. I have a relative that rents out cheap housing. Most tenants/applicants work in fast food (Mcdonalds) and are paying through section 8 (taxpayers). No fast food applicant is ever paying themselves. Taxpayers are covering difference between minimum wage and living wage, so that businesses get to keep more profits.

[frugalNH]

[QUOTE=sv2007;434585]It isn't suddenly an increase; in many areas, like where I am now, there is a gradual increase adjustment over 3-4 years. Even in other areas, the laws were passed with 2-3 years when it takes effect.
QUOTE]

Right, I'm aware. 3-4 years to go from $7.xx to $15 isn't much time at all.

[frugalNH]

Is there really a crisis today? I mean less than 5% of all workers earn the Federal minimum wage today. Within that figure under 5% are teenagers that don't need to earn a living wage but are merely working for entry level experience and spending money. Also in that figure are people that are working a low skilled menial job part time for supplemental income but have primary income from another full time job or a spouse with a lucrative career. The actual number of people trying to make a living wage on the minimum when you take out the above is quite low. That is not to say that we should ignore those that do but raising the minimum wage is not a viable long term solution to their ills.

I just get sick of these leftist politicians that throw around the "Raise the minimum wage" talking point as some solution to helping the middle class. The middle class doesn't earn the minimum wage. They earn significantly more than the minimum wage. It's really just such a contrived economic red herring.

I agree with much of what you've said, and I am no leftist. The last federal minimum wage raise was 7 years ago so I think a raise is long overdue. But I don't agree with more than doubling it to $15 an hour.