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Retail is what the consumer pays for everything. It is distinct from prices at other stages of production.
The price of everything you buy is the aggregate compensation x time of everyone who had a hand in getting it to you.
If MW wages go from 4% to 6% of national compensation, then that is how much aggregate prices will increase. Individual businesses will need to increase prices more or less than this amount, but 2% is the average.
So health care, lawyers, and IT is retail?
Retail has a larger share of minimum wage workers, hence if MW wages go from 4% to 6% of national compensation, then the price will increase more than 2%.
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You seem to be focused on individual businesses. Ones that hire a lot of low wage workers will experience a higher cost increase, but most of them also serve the lower income demographic, and will experience a net increase in sales. There is a good reason why Walmart advocates a higher MW.
You probably also overestimate how much of a business's cost is wrapped up in MW salaries. It isn't a lot, even for businesses like Walmart.
Walmart is a business that has a lot of customers per employee, so obviously they would welcome a minimum wage increase. The ones who won't welcome is businesses who has a lot of MW workers per customers. And those businesses recieve most of their money from the rich and the middle class.
The fact that you think Walmart is the one who suffer shows that you don't understand how subtitutes work. When prices of food increases, them people won't eat less food, but they will find cheaper alternatives. Thats Walmart. And since businesses like Walmart employ fewer employees per customer, then the number of jobs decrease.
The flip side of this is the minimum wage workers will have a lot more Money to spend and that stimulates the economy.
You are forgetting that peope who do not earn minimum wage will have less money to spend, the net result for all business is 0. Business that employ a lot of minimum wage workers will lose.
I guess you could talk about savings, but that is only a short term boost. Over time low savings rates do not lead to less unemployment.
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Also if we get THE US minimum wage to apply to the whole word then we can largely crank it indiscriminately.
You want India to have a minimum wage of $7.25. Thats not going to work.
Also, massively increasing the MW in a closed economy leads to inflation. Many South American nations has tried to do that, and it failed miserably.
You are forgetting that peope who do not earn minimum wage will have less money to spend, the net result for all business is 0. Business that employ a lot of minimum wage workers will lose.
I guess you could talk about savings, but that is only a short term boost. Over time low savings rates do not lead to less unemployment.
The limit to The FED's printing press' effectiveness is the ability to take on more debt. Upping the minimum wage has the effect of increasing the amount of unleveraged income. It gives something to loan against. Higher future wages makes bad debts good. I advocate pushing the minimum wage far enough to push the median wage significantly.
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Originally Posted by Camlon
You want India to have a minimum wage of $7.25. Thats not going to work.
Also, massively increasing the MW in a closed economy leads to inflation. Many South American nations has tried to do that, and it failed miserably.
If you just start with workers that are doing work for foreign markets then you have the money to spend on them in the foreign employers pocket. And we can use our tax code to enforce the change, all you need is a 110% tax penalty on capital gains on stocks for not paying any worker doing work for you anywhere at les than US minimum wage.
Inflation is the point. Far better than deflation. And if they get paid valued in USD not the local currency then inflation in the local currency is not an issue.
It would get everyone to devaluate their currency hard.
The ones that will suffer the most are those on fixed incomes that are unemployable and barely getting by, ie: a huge percentage of retirees living on just SS, that are already low cost, low income purchasers, that, unlike their employed MW counterparts, will not have increased spending ability. Eventually, the higher prices that would have to be charged to maintain sales at a profitable level, will be reflected in higher inflation, which eventually will adjust in the COLAs for higher SS benefits. COLA adjustments are not based on actual inflation, and always are less, and lag behind, but the increased COLA amounts, will make SS less sound, and cause higher increased taxes, then are reflected in the cost of everything, and the inflation spiral continues.
What happens in countries with high minimum wages, is eventually the cost of everything gets so high, that only very well employed people can afford to live a standard that we consider normal now. The larger and more diverse the ethnicity of the countries population is, and the land mass is, the harder it is to maintain a high MW, because people just move to a lower cost of living area. In European countries with high MW, the unemployed immigrate to wherever the cost of living is lower, and they can work. Many retirees already (often unhappily, but many not) try to relocate to other countries where they hope their income is higher in respect to the local economy.
I actually worked fast food jobs for the better part of 2 years, so I know how this minimum wage will affect the industry. Long story short, it will have a minimal impact.
Most fast food stores are franchises - some franchises are bigger than others, but they are "small" businesses. The ones I worked for had several dozen employees in a handful of stores. One was a 2-store franchise with about 20 employees. The corporation sells the franchises the food & products to sell and licenses, promo materials, etc... People who work corporate in McDonald's, etc... are regional coordinators, marketing people, etc.... Store managers and below work for franchises.
The things people on this board are complaining about ALREADY OCCUR regardless of minimum wage, at least in the fast food industry.
- They will cut people to part time. No fast food store employs any hourly worker full time. Only the store manager and assistant manager (the night manager typically) are full time, and they are salaried.
- They will automate. This is already happening, regardless of minimum wage. Corporate is always looking for ways to help franchisees maximize efficiency. No one in a fast food joint even "cooks." They are just heating up food. It is already a factory system where you place pre-fab food into machines or on a grill, oven, or microwave, push buttons, and it comes out done. As of now, depending on the size of the store, it can already be run by 7-10 people during rush times, 4-5 during slow times.
- They will cut cashiers in favor of electronic kiosks. They will not cut cashiers because there aren't any cashiers in fast food. You are trained in "back of house" and "front of house." If you are trained for front of house - you learn to do drinks, desserts, shakes, coffees, run drive-through, package material, clean the lobby, etc... AS WELL AS THE REGISTER. No worker in fast food exists solely as a cashier. If that job goes away that will not result in any appreciable layoffs because it is already just 1 duty in a front of house worker.
That was how it was in 2002-04 when I worked it, do you think there has been no innovation since then?
The drive for efficiency happens in every business regardless of minimum wage. That's capitalism for you. Capitalism and the businesses within it are not charities. They are not welfare agencies. They do not exist for the sake of workers. The exist to provide whatever service or product for a profit. If fast food, or whatever service, can be provided with minimal human input, THAT IS WHAT THE BUSINESS IS GOING TO DO because the goal of any business is to reduce its liabilities. Humans are always liabilities to businesses. People on here seem clueless about that.
Most economic studies show that minimum wage may accelerate that process slightly, but almost all studies I've ever read have ambiguous conclusions because there are always a complex multitude of factors that can be attributed to job loss.
A retail store can run with very few workers. As few as 2 - a manager and a cashier who can also double as a floor associate. They can have part-timers on call for rush hours or to do stocking, cleaning, organizing, etc... That's how they already operate. Go into a Wal-Mart and tell me how easy it is to get a human to help you find something.
Generally speaking, every business I've ever worked for - which includes fast food and retail - have never considered minimum wage or an increase of it to harm their interests. If a minimum wage increase will break your business's back, then you have a poorly functioning business.
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According to the Food Marketing Institute, the average U.S. food retail business had total labor costs of 14.6 percent of sales in 2007.
Walmart is a business that has a lot of customers per employee, so obviously they would welcome a minimum wage increase. The ones who won't welcome is businesses who has a lot of MW workers per customers. And those businesses recieve most of their money from the rich and the middle class.
What are these companies that have a lot of MW workers per customer, and cater to the middle and upper class? Also what % of these company's expenses is the compensation for these workers?
The important point is that even if one company takes a small hit in sales another will benefit from increased sales. There won't be any negative effect on the economy.
What are these companies that have a lot of MW workers per customer, and cater to the middle and upper class? Also what % of these company's expenses is the compensation for these workers?
The important point is that even if one company takes a small hit in sales another will benefit from increased sales. There won't be any negative effect on the economy.
A privately-owned oil change shop is one of many examples of this.
A privately-owned oil change shop is one of many examples of this.
How much of the gross sales is MW employee compensation, 20%? So a 50% pay increase will mean a 10% price increase, and then what? People will stop getting their oil changed? Or will they do more oil changes because now more people can afford it?
You are forgetting that peope who do not earn minimum wage will have less money to spend, the net result for all business is 0. Business that employ a lot of minimum wage workers will lose.
This isn't quite true. There was a natural experiment wherein minimum wages went up on one side of a state line, but not the other, but were previously equal. CoL was similar. Demographics were similar.
The increase in the wage floor produced a statistically significant increase in spending and a subsequent boost to the local economy.
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