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I suppose my real point is increasing the minimum wage has never, to my knowlege lifted the poor out of poverty.
The MW has never been high enough to lift the working poor out of poverty. That's the problem.
Getting back to your "spending" question, if prices increase just enough to offset costs, then there is zero reason for spending to decline. Rather it will rise, because you've effectively shifting income from the wealthier demographic which is more likely to save and invest, to the poor who are more likely to spend.
I don't understand why people have so much trouble with this. If a person's wage goes up 50% and prices rise 2%, are they better off or not?
I suspect they have trouble with it because that is not always the case. What makes you think prices would only increase 2%. Some products and services have a very large labor content. Let's take a simple example: A widget costs $15 to produce. 50% of this cost is in labor. The production of a widget requires exactly 1 hour of labor at $7.50. The widget is sold for $19.50. Now what happens when the labor cost increases to $15.00? Assuming the widget is still sold at 30% above cost the new price is $29.50. I kept this example simple but in reality other costs will also increase (social security, medicare, materials, etc). That is hardly 2%. Now let us assume the demand for this widget is elastic. People who would purchase the product at $19.50 may not be willing to pay the new price. What happens then???
Now, while I prefer that the market sets the wage for a given job, I'm also a realist and understand this will never happen as it it not politically correct. I also understand that in areas of our country where the cost of living is high, $15 may be the right wage. I also understand in other areas of the country where the cost of living is much lower, $15 is not the right wage.
I suspect they have trouble with it because that is not always the case. What makes you think prices would only increase 2%. Some products and services have a very large labor content. Let's take a simple example: A widget costs $15 to produce. 50% of this cost is in labor. The production of a widget requires exactly 1 hour of labor at $7.50. The widget is sold for $19.50. Now what happens when the labor cost increases to $15.00? Assuming the widget is still sold at 30% above cost the new price is $29.50. I kept this example simple but in reality other costs will also increase (social security, medicare, materials, etc). That is hardly 2%. Now let us assume the demand for this widget is elastic. People who would purchase the product at $19.50 may not be willing to pay the new price. What happens then???
Now, while I prefer that the market sets the wage for a given job, I'm also a realist and understand this will never happen as it it not politically correct. I also understand that in areas of our country where the cost of living is high, $15 may be the right wage. I also understand in other areas of the country where the cost of living is much lower, $15 is not the right wage.
You do know that other things effect price increase other then min wage? There is plenty of evidence that prices do not rise much with wage increases.
... While you are correct that labor costs only make up a portion of cost and that it varies with the type of business, I believe there are leverages that will also play a part throughout the chain. One must also consider that poor households are most likely disproportionately the consumers of goods and services that are made with minimum labor, thus bearing the cost of the increased prices. I suppose my real point is increasing the minimum wage has never, to my knowlege lifted the poor out of poverty.
CarCrazy67, thank you for bringing up a facet to this discussion that I and apparently no one else have given any thought to.
The greatest portion of USA working poors’ spendings are for food and housing.
Within USA’s urban areas in particular, the working poor spend a much greater portion of their incomes for housing rather than for food.
The proportion of labor imbedded within the costs of food goods, (excluding personal services such as professional cooking in or out of the home and/or home delivery or waiter services), is not greater than most other products but I would agree that there is certainly no less proportion of lower wage labor within food goods as compared to most other goods.
There’s less (than most other products) proportions of low wage labor attributable to the housing costs.
Wealthier people spend proportionally much less of their incomes for food goods alone but much more for professional food services outside or within their homes, and/or home delivery of food.
Wealthier persons spend greater proportions of their incomes for intangibles (such as services).
Labor is a greater proportion of most service products and low wage labor accounts for much of those service products costs.
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Despite the increase of cost for their purchased products that are likely to occur due to an increase of the FMW rate, the portion of their incomes spent by the wealthy for products increased costs (due to the FMW rate increase) are surprisingly not less than the portions of incomes spent by less wealthy persons for the same purposes.
Only extremely rare service products’ costs are entirely attributable to labor costs and it could rarely if ever be found any products with costs entirely attributable to USA low wage labor. That’s why the oppositions’ predicted radical price increases due to increasing the FMW rate do not occur.
Thus the increase of USA’s working poors’ wages due to an increase of the FMW rate will always exceed the aggregate price increases of the working poors’ purchases.
For these reasons I do not agree that “poor households are most likely disproportionately the consumers of goods and services that are made with minimum labor, thus bearing the cost of the increased prices (due to an increase of the FMW rate)”.
... I suppose my real point is increasing the minimum wage has never, to my knowlege lifted the poor out of poverty.
Transcription of this thread’s post of 7:29 PM, 22Nov2015:
Rom, The “working poor” proportionally benefit the most due to FMW rate increases; but you’re disappointed because the federal minimum wage, (FMW) rate isn’t an economic panacea?
The FMW rate cannot remedy people’s lack of education or training or experience.
The FMW rate reduces poverty incidences and their extents by preventing “races to the bottom”.
The FMW rate somewhat reduces the wage negotiating disadvantages of our least qualified or undesirable workers.
The FMW rate’s effectiveness is reduced when its purchasing power is reduced. (The FMW laws could be eliminated or inadequately enforced or we could permit the minimum rate to lose purchasing power to the extent that the remaining rate would be of absolutely ineffective.
It is preferable that we have a FMW rate. It would be more preferable that we do not permit the rate to be effectively reduced by our currency inflation. It would be more effective if its purchasing power were increased.
The only time minimum wage can help, is if it only affects workers that would employed anyway. Hence, many states could probably increase the minimum wage to $10, and get benefits from that.
But liberals got this debate wrong. They don't want to increase it to $10 in some states, they are trying to increase it to $15 nationwide and that will be devestating for the working poor. It is way too close to the median wage, hence it will lead to less unskilled jobs, and lower turnover in unskilled jobs, and the people who do get a job will be trapped and never get promoted.
Liberals are very stupid picking $15 as their target, because they will prove conservatives right. Had they targeted a lower amount, then they could get better results, and hence it would have benefited their agenda.
Given the average hourly wage stats, the only sector that would be hit hard by a minimum wage hike would be leisure and hospitality. Retail trade would face a moderate hit.
Frankly, we spend to much on that crap & the more we spend, the more crappy, dead-end jobs it creates.
If the minimum wage increase resulted in increased automation in those sectors, we'd probably be doing the country a favor. I don't see why we have a love affair with fast food jobs.
Those jobs go NOWHERE. There is no "moving up" in those jobs. I had them for years. You cannot "move up" - there are 25-50 people that work in a McDonalds. There are 5-6 asst. managers, 1 store manager, 1 regional director. How much "moving up" is there really in that context?
Of course other things impact the price of goods but we are specifically talking about labor cost. Over the last 30 years I have built 3 businesses in different sectors. In one business, the primary content was, by and large, labor. It has a direct impact on prices. Obviously labor content varies by product as will its impact on prices. In some cases the impact will be minimal in others it can be severe. Now if you don't believe that is the case, I suggest you build a widget business and see for yourself!
I'm not gone to get into a posting links war that support my premise that increasing the minimum wage (or any wage for that matter) will increase prices. I assure you that I can post plenty to refute the left leaning links you have posted. In the end, you are going to believe what YOU want to believe.
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