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i dont get this country, people want a higher wage, but companies will use that to raise prices of their items. say if it gets raised to 12-15 an hour, then burgers will soon cost 8-9 $ just for a burger. its not like if the wage gets raised their not going to raise their items high, so why raise the wage so high ?
I have heard this before: If you raise wages, the companies will just raise prices.
Its a half truth at best. What it boils down to is a concept that economists call "elasticity of demand". If raising prices does nothing to decrease demand, than economic theory would hold that prices will rise to reflect the increase of cost in the supply curve. However, few industries and businesses have "inelastic demand". The reality is that prices are not higher than they are in many businesses and industries because businesses understand their customers can find substitutes for their product or do without it entirely. Industries that supply essential services and products are those that come closest to having "inelastic demand". Demand can be temporarily inelastic in some industries, but over time alternatives and substitutes are found for the product. Perhaps, the product with the most inelastic demand in this country would be health care services. People will go to the hospital emergency room and the doctor when they are sick and price is not likely to play too much of a role in that decision. The same is not true for fast food.
The demand for fast food is actually pretty elastic. You raise the price of a hamburger by $1 and people will start finding other ways to eat cheaper. People who go out for fast food during their lunch hour from work will start packing a sack lunch and taking it with them to work. Some people may stop eating lunch entirely and choose to diet instead. Other people will eat out, but will cut back on their purchases. An example would be ordering a hamburger, when in the past they ordered a hamburger, fries, and a drink. A prime factor in determining price elasticity is the amount of competition within the business or industry. There is great competition within the fast food industry. Many locations fail over time. Many fast food restaurants are forced to shut down. I can down Main Street in my community and pick between KFC, McDonalds, Arby's, Wendy's, Pizza Hut, Taco Bell, and Domino's. Not all those chains will react to a $15 minimum wage by passing all costs onto customers. Some will instead find ways to cut costs. Maybe they can get their meat, cheese, and bread products cheaper. Maybe they will make staff clean up the place at night rather than hiring a janitorial service for that purpose.
Don't make the assumption that these costs will all be passed on to consumers. Since consumers have a choice to eat somewhere else (or not eat lunch out at all) it is in fact unlikely that this will happen.
FTR, I do not favor a $15 an hour minimum wage. I do favor raising the minimum wage gradually. I would raise it now to $10 an hour and than raise it incrementally over the next few years until its about $12 an hour. Even my 16 year old daughter is earning more than minimum wage at her job with Wendy's.
Some mom-and-pop businesses will go under. But no one cares about mom-and-pop businesses because people prefer national chains, like Panera versus local sandwich place, CVS vs. local pharmacy, etc. No one reads books, so who cares if the last few book stores are driven under?
No one cares about black and Hispanic unemployment rates, which are astronomical compared to White/Asian. Black youth unemployment is 20-30% which feeds into gangs which cause much of the violence in the inner cities.
High minimum wage makes it harder for unskilled youth to compete for jobs. The jobs will go preferentially to higher skilled unemployed people.
In fact, the original minimum wage in 1932 was intended to keep Blacks from undercutting higher cost white labor. Liberals don't know this, and of course they don't bother to check on these facts before stupidly calling for ever higher baseline pay which prices the lowest skilled workers out of the market, and also spurs more automation.
In a few years, fast food and some retail operations will be completely automated. You can thank min wage for spurring this on, not completely to blame but a major component.
We should adopt the German model of two-tier min wage -- one for skilled, one for unskilled/youth workers.
Depends. If the employees aren't adding $X amount value, there will be layoffs. I know it sounds good to arbitrarily say $X an hour is what the wage should be, but that's not how economics works. If the salary exceeds the value added, there will be jobs lost.
That is precisely correct. A higher MW shifts income to low wage workers and away from everyone else. The question is how much?
Per capita GDP is ~$55k/yr. 60% of the population is employed. If 20% of workers (12% of the population) get a $5.5k/yr raise, you'd expect aggregate real prices to increase by 10% x 12% or 1.2%, for the 80% of the population that didn't get a raise. It's trivial.
I don't think we are talking about the same MW increases. Last year there were discussions of a MW in the $9 range or perhaps the catchy amount of $10.10. In 2014 the GAO did a study and came up with estimates of a small impact consistent with your 1.2%.
Even at $10.10, the GAO estimated the loss of 500,000 jobs. Obama and others thought the outcome would justify the relatively small increased costs and relatively small job losses. BTW, the GAO report was very thin on data and mainly seemed based on speculation. It is by no means clear what the impact will be.
In any case this year the talk is about $15/hr MV. That is coming from many politicians in an election year. The most vocal is Sanders and of course the big unions are also pushing for that. Seattle is already phasing in the $15 amount with a time period that depends on the size of the employer. NY State seems close or may have approved the $15 amount already. The impact of a $15 amount is likely to be very large. That not only impacts the bottom quintile but includes part of the next quintile. It is also very likely that a huge number of other employees in the $15-20 range will be impacted. This amount includes a number of entry college level jobs. I think this will be like a snowball rolling down hill and it will lead to significant salary inflation...and of course a lot of jobs lost at the low end. Of course, I also think of my own situation. Without a salary, I will see no benefits just costs that could easily be in the 5-10%.
Totally agree. When upper level company employees get million dollar bonuses while the actual workers can barely affordbasic living expenses, things have to change. And the idea that pay should be based on job title is outdated. If a job is necessary, the compensation for it should be a living wage, regardless if it's flipping burgers, scrubbing toilets, or crunching numbers in some white collar bastion.
Not very job deserves a living wage. Flipping burgers does not. WHy? Because any 12 year old with half a brain could do it. Basically, zero skills are involved. Zero skills equals nearly zero dollars. The position is worth what the skills are for the position. Let's pay the pizza delivery guy $30 for the pie because the driving took him an hour.
Living wages require some sort of skill or knowledge. No way should the lazy partying dude who stays out all night drinking and gets up at noon to stack apples in the produce dept should get 1/4 of what a beginner accountant should get. This is what made our country so great. People wanted more from life than low wages so they bettered themselves and made themselves more marketable. They didn't ask mommy and daddy governemsnt to help. Government should have no input into this.
I know it sounds good to arbitrarily say $X an hour is what the wage should be, but that's not how economics works. If the salary exceeds the value added, there will be jobs lost.
Actually you don't understand how the economy works.
I need a job done that requires a human. I pay the person whatever I have to pay, and charge whatever I need to make a profit. The value they add is whatever I have to pay them.
Back when unions where strong plenty of guys made good money doing menial labor, and oddly that was our most prosperous period.
This link mentions the loss of jobs and also has an additional link to the GAO study.
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