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Peter Schiff On the Stimulus & Minimum Wage!
- Thread starter Lamarr
- Start date
The first idea that came to mind for me was: What if we tied minimum wage in with profits or revenue?
or, maybe we can have different minimum wage for minors and adults. I think Canada does that.
He's 100% right that you shouldn't be able to support an entire family on minimum wage. But, should it at least keep up with inflation?
And what about the fact that raising minimum wage in itself serves as a stimulus by greatly increasing consumer spending?
I think Schiff is overblowing it. 39 states are already at or above the Federal minimum wage. Not to mention the fact that in several states the company has to be of a certain size to be affected by the minimum wage.
or, maybe we can have different minimum wage for minors and adults. I think Canada does that.
He's 100% right that you shouldn't be able to support an entire family on minimum wage. But, should it at least keep up with inflation?
And what about the fact that raising minimum wage in itself serves as a stimulus by greatly increasing consumer spending?
I think Schiff is overblowing it. 39 states are already at or above the Federal minimum wage. Not to mention the fact that in several states the company has to be of a certain size to be affected by the minimum wage.
Simply, it's wage controls, like in command-control economies.
I find it interesting that the minimum wage was created under the great Totalitarian, Franklin Delano Roosevelt (like Hitler/Nazis, Stalin/Soviets, Sadaam Hussein/Iraq, etc.).
Basically, the government thinks it has the place to tell people what/how to pay workers.
It was stupid then, it's stupid now.
It only makes things worse by limiting economic flexibility. Plus, it takes freedom from American residents by forcing them to do things the government's way and not their own.
But, just like the Romans learned (or maybe didn't), it slowly strangles the economy and you get in this vicious cycle of never-ending minimum increases until shortages occur and poverty is rampant.
I find it interesting that the minimum wage was created under the great Totalitarian, Franklin Delano Roosevelt (like Hitler/Nazis, Stalin/Soviets, Sadaam Hussein/Iraq, etc.).
Basically, the government thinks it has the place to tell people what/how to pay workers.
It was stupid then, it's stupid now.
It only makes things worse by limiting economic flexibility. Plus, it takes freedom from American residents by forcing them to do things the government's way and not their own.
But, just like the Romans learned (or maybe didn't), it slowly strangles the economy and you get in this vicious cycle of never-ending minimum increases until shortages occur and poverty is rampant.
Expound on the bold...
Do you propose we do away with minimum wage at the state and federal levels?
The first idea that came to mind for me was: What if we tied minimum wage in with profits or revenue?
or, maybe we can have different minimum wage for minors and adults. I think Canada does that.
He's 100% right that you shouldn't be able to support an entire family on minimum wage. But, should it at least keep up with inflation?
And what about the fact that raising minimum wage in itself serves as a stimulus by greatly increasing consumer spending?
I think Schiff is overblowing it. 39 states are already at or above the Federal minimum wage. Not to mention the fact that in several states the company has to be of a certain size to be affected by the minimum wage.
You could make a case for profit-sharing. When I worked at Chrysler I was lovin' it! But, that's totally up to the discretion of the owners.
As far as minimum wage keeping up with inflation: Its a sad state of affairs cause SS payments doesn't keep up with inflation either. SS payments contribute to the most vulnerable in our society.
The chart, IMO, is not an accurate reflection of the impact of a higher min. wage because just "spending $$$" does not produce economic growth. Of course, economic growth comes from productivity & capital investment.
One thing is for sure, the govt. shouldn't mandate wages because it cannot mandate productivity! It's a tough subject for me to discuss but hard to argue with the theory
Yes, basically there should be no minimum wage. The whole concept is just irrational.
First, there are exceptions to minimum wage. Why? Who decides? Are we to believe the government, or some bureaucrat has complete understanding of the economic motivations of every single person in this country to know what exceptions should be allowed?
Second, who decides the minimum? Why is one person, group, organization setting wages for all sectors of the economy? Why can't we have that right instead of the government? What makes the government so knowledgeable about the economy that it can dictate wages in the whole country for every person?
Third, it creates an excuse for more government bureaucracy. They need cars, employees, lawyers, pensions, benefit plans. And for what? All this waste to tell people what to do when they are less informed than the people affected?
Fourth, it creates whole lobbying industries, labor "experts", litigation, enforcement, regulation and supervision, and so on. All of this is more waste. Who pays for all this?
Fifth, it raises the costs of doing business, startup costs and necessarily favors the largest and most well-capitalized concerns. This stifles competition and reduces productivity.
Sixth, it creates a persistent unemployable class. For example, a machinist may say you need to work for very little wage for 6 months while you are trained. After that, you are paid a substantial increase because you can compete in the marketplace as a trained machinist. Wage controls prevent this and keeps people out of the labor force. It causes a persistent unskilled labor pool.
Seventh, it is a mechanism of price fixing. Minimum wage keeps prices higher than they would if wages floated. This leads to unending inflation and of course favors the government, because it spends first and most.
The whole thing is just ridiculous. It is amazing the government has us convinced minimum wage makes any kind of sense.
The clip is right on. The majority of small business owners who bear the burden of wage controls are the very average working Americans whose interests liberals claim to represent. The losers end up being teenagers and poor minorities because demand for labor decreases.
Bottom line is, anytime the government interferes with the free labor market there is scarcities ( homes, jobs ), inflated prices ( mortage crisis ) and inferior quality of the product.
Bottom line is, anytime the government interferes with the free labor market there is scarcities ( homes, jobs ), inflated prices ( mortage crisis ) and inferior quality of the product.
The Wage-Earner’s Case for the Minimum Wage
The Wage-Earner’s Case for the Minimum Wage
By Michael Kinsley - Feb 20, 2013
Even a conservative who ordinarily doesn’t care much for government regulation of business ought to find the case for a government-mandated minimum wage pretty compelling. In brief: As a conservative, you believe in the dignity of work. And it sends a terrible message about the dignity of work when working full-time doesn’t earn you enough to live a decent life.
On the other hand, even a committed liberal who’s concerned about growing income inequality ought to have some doubts about the minimum wage. The minimum wage reduces employment (or “destroys jobs,” as the accusation is usually put) by pricing people out of the market.
When two people (let us call them “worker” and “boss”) voluntarily make a deal, we can presume it must be good for both of them. Otherwise, they wouldn’t do it. This logic applies to employment deals just like any others. No one is forced to take any job, so when someone does take a job, we may surmise that he or she finds this job, at the pay being offered, preferable to other available jobs -- or to no job at all. By what right and what logic do we step in and say: No, this is a deal you’re not allowed to make?
No Help
You may say that when an unemployed worker with a family to support takes a nasty job at a low wage out of desperation, this is hardly the kind of voluntary free-market decision contemplated by Adam Smith. But unless you’re offering a better job or a better wage, simply forbidding this particular deal is of less than no help. The minimum wage restricts workers as well as bosses: It forbids both categories of economic actor from making a deal they wish to make.
The current federal minimum wage is $7.25 an hour, a figure that reflects our ambivalence about the whole idea. A wage of $7.25 an hour amounts to $15,080 a year. At this rate, we’re violating the principle of free markets by having a minimum wage of any level. But $15,080 isn’t enough for anyone -- let alone any family -- to live on with dignity.
President Barack Obama proposes to raise the minimum wage to $9 an hour from $7.25 an hour. Economics tells us that this will destroy jobs. Anyone whose hourly work is worth more than $7.25 but less than $9 will become unemployable. What kind of favor is this to them?
Critics of the minimum wage like to say that it slices the bottom off the ladder of success. You might be able to work your economic value up from nothing to five bucks an hour to $9 an hour or (we may hope) even more. (Nine dollars an hour is still only $18,720 a year. Good luck.) But if you can’t even start the great game of life until you’re worth $9 an hour, the challenge is greater.
There are studies suggesting that the minimum wage doesn’t really destroy jobs. These get hauled out whenever an increase in the minimum wage is contemplated. They are hard to believe. In fact, I don’t believe them. The conclusion is just too counterintuitive and too convenient.
Critics of the minimum wage think this is the end of the story. To them, the minimum wage is just an anachronism from the New Deal, a sop to people who don’t believe or don’t understand the basic principles of economics.
Yet many government policies violate basic principles of economics and therefore reduce our prosperity. A perfectly legitimate answer to this objection is, “So what?” A prosperous society such as the U.S. can afford to give up some prosperity in exchange for more equality or some other social goal.
No Thanks
If we were to ask people who actually do work at the minimum wage whether they would like to see it abolished, most undoubtedly would say, “No, thank you.” Is this because they don’t know economics? Because they don’t realize how the minimum wage could take away their jobs? Because they’re crazy or duped by left-wingers who love red tape and hate America and want to see our economy strangled?
Not necessarily. Minimum-wage workers might quite reasonably think: “This is a gamble. But it’s a gamble worth taking. Maybe I’ll end up without a job, but maybe I’ll end up with a raise of $1.75 an hour.” That doesn’t sound like much of a raise, but it’s 24 percent.
You can’t know for sure in advance which effect the minimum-wage increase will have on any particular person: A raise? Or unemployment? But it’s far from irrational for minimum-wage workers to conclude at some point that the risk of losing their jobs is worth taking in exchange for the certainty of a raise. It depends on the size of the risk and the size of the raise.
Of course, it’s possible that a policy such as the minimum wage might be bad for society even if it’s good for the individuals most closely affected by it. So you go and tell someone making $7.25 or even a whopping $9 an hour that you want to eliminate the minimum wage for his or her own good. I’m not going to.
http://www.bloomberg.com/news/2013-02-20/the-wage-earner-s-case-for-the-minimum-wage.html
The Wage-Earner’s Case for the Minimum Wage
By Michael Kinsley - Feb 20, 2013
Even a conservative who ordinarily doesn’t care much for government regulation of business ought to find the case for a government-mandated minimum wage pretty compelling. In brief: As a conservative, you believe in the dignity of work. And it sends a terrible message about the dignity of work when working full-time doesn’t earn you enough to live a decent life.
On the other hand, even a committed liberal who’s concerned about growing income inequality ought to have some doubts about the minimum wage. The minimum wage reduces employment (or “destroys jobs,” as the accusation is usually put) by pricing people out of the market.
When two people (let us call them “worker” and “boss”) voluntarily make a deal, we can presume it must be good for both of them. Otherwise, they wouldn’t do it. This logic applies to employment deals just like any others. No one is forced to take any job, so when someone does take a job, we may surmise that he or she finds this job, at the pay being offered, preferable to other available jobs -- or to no job at all. By what right and what logic do we step in and say: No, this is a deal you’re not allowed to make?
No Help
You may say that when an unemployed worker with a family to support takes a nasty job at a low wage out of desperation, this is hardly the kind of voluntary free-market decision contemplated by Adam Smith. But unless you’re offering a better job or a better wage, simply forbidding this particular deal is of less than no help. The minimum wage restricts workers as well as bosses: It forbids both categories of economic actor from making a deal they wish to make.
The current federal minimum wage is $7.25 an hour, a figure that reflects our ambivalence about the whole idea. A wage of $7.25 an hour amounts to $15,080 a year. At this rate, we’re violating the principle of free markets by having a minimum wage of any level. But $15,080 isn’t enough for anyone -- let alone any family -- to live on with dignity.
President Barack Obama proposes to raise the minimum wage to $9 an hour from $7.25 an hour. Economics tells us that this will destroy jobs. Anyone whose hourly work is worth more than $7.25 but less than $9 will become unemployable. What kind of favor is this to them?
Critics of the minimum wage like to say that it slices the bottom off the ladder of success. You might be able to work your economic value up from nothing to five bucks an hour to $9 an hour or (we may hope) even more. (Nine dollars an hour is still only $18,720 a year. Good luck.) But if you can’t even start the great game of life until you’re worth $9 an hour, the challenge is greater.
There are studies suggesting that the minimum wage doesn’t really destroy jobs. These get hauled out whenever an increase in the minimum wage is contemplated. They are hard to believe. In fact, I don’t believe them. The conclusion is just too counterintuitive and too convenient.
Critics of the minimum wage think this is the end of the story. To them, the minimum wage is just an anachronism from the New Deal, a sop to people who don’t believe or don’t understand the basic principles of economics.
Yet many government policies violate basic principles of economics and therefore reduce our prosperity. A perfectly legitimate answer to this objection is, “So what?” A prosperous society such as the U.S. can afford to give up some prosperity in exchange for more equality or some other social goal.
No Thanks
If we were to ask people who actually do work at the minimum wage whether they would like to see it abolished, most undoubtedly would say, “No, thank you.” Is this because they don’t know economics? Because they don’t realize how the minimum wage could take away their jobs? Because they’re crazy or duped by left-wingers who love red tape and hate America and want to see our economy strangled?
Not necessarily. Minimum-wage workers might quite reasonably think: “This is a gamble. But it’s a gamble worth taking. Maybe I’ll end up without a job, but maybe I’ll end up with a raise of $1.75 an hour.” That doesn’t sound like much of a raise, but it’s 24 percent.
You can’t know for sure in advance which effect the minimum-wage increase will have on any particular person: A raise? Or unemployment? But it’s far from irrational for minimum-wage workers to conclude at some point that the risk of losing their jobs is worth taking in exchange for the certainty of a raise. It depends on the size of the risk and the size of the raise.
Of course, it’s possible that a policy such as the minimum wage might be bad for society even if it’s good for the individuals most closely affected by it. So you go and tell someone making $7.25 or even a whopping $9 an hour that you want to eliminate the minimum wage for his or her own good. I’m not going to.
http://www.bloomberg.com/news/2013-02-20/the-wage-earner-s-case-for-the-minimum-wage.html
Re: The Wage-Earner’s Case for the Minimum Wage
How can anyone listen to someone who says this? He just says "F_ck science and math, I believe something else and that's what counts."
How about producing contrary, reputable studies instead going off your "gut"?
What was the Roman minimum wage and did slaves get that too?
How can anyone listen to someone who says this? He just says "F_ck science and math, I believe something else and that's what counts."
How about producing contrary, reputable studies instead going off your "gut"?
What was the Roman minimum wage and did slaves get that too?
The Business of the Minimum Wage
The Business of the Minimum Wage
By CHRISTINA D. ROMER
Published: March 2, 2013
RAISING the minimum wage, as President Obama proposed in his State of the Union address, tends to be more popular with the general public than with economists.
I don’t believe that’s because economists care less about the plight of the poor — many economists are perfectly nice people who care deeply about poverty and income inequality. Rather, economic analysis raises questions about whether a higher minimum wage will achieve better outcomes for the economy and reduce poverty.
First, what’s the argument for having a minimum wage at all? Many of my students assume that government protection is the only thing ensuring decent wages for most American workers. But basic economics shows that competition between employers for workers can be very effective at preventing businesses from misbehaving. If every other store in town is paying workers $9 an hour, one offering $8 will find it hard to hire anyone — perhaps not when unemployment is high, but certainly in normal times. Robust competition is a powerful force helping to ensure that workers are paid what they contribute to their employers’ bottom lines.
One argument for a minimum wage is that there sometimes isn’t enough competition among employers. In our nation’s history, there have been company towns where one employer truly dominated the local economy. As a result, that employer could affect the going wage for the entire area. In such a situation, a minimum wage can not only make workers better off but can also lead to more efficient levels of production and employment.
But I suspect that few people, including economists, find this argument compelling today. Company towns are largely a thing of the past in this country; even Wal-Mart Stores, the nation’s largest employer, faces substantial competition for workers in most places. And many employers paying the minimum wage are small businesses that clearly face strong competition for workers.
Instead, most arguments for instituting or raising a minimum wage are based on fairness and redistribution. Even if workers are getting a competitive wage, many of us are deeply disturbed that some hard-working families still have very little. Though a desire to help the poor is largely a moral issue, economics can help us think about how successful a higher minimum wage would be at reducing poverty.
An important issue is who benefits. When the minimum wage rises, is income redistributed primarily to poor families, or do many families higher up the income ladder benefit as well?
It is true, as conservative commentators often point out, that some minimum-wage workers are middle-class teenagers or secondary earners in fairly well-off households. But the available data suggest that roughly half the workers likely to be affected by the $9-an-hour level proposed by the president are in families earning less than $40,000 a year. So while raising the minimum wage from the current $7.25 an hour may not be particularly well targeted as an anti-poverty proposal, it’s not badly targeted, either.
A related issue is whether some low-income workers will lose their jobs when businesses have to pay a higher minimum wage. There’s been a tremendous amount of research on this topic, and the bulk of the empirical analysis finds that the overall adverse employment effects are small.
Some evidence suggests that employment doesn’t fall much because the higher minimum wage lowers labor turnover, which raises productivity and labor demand. But it’s possible that productivity also rises because the higher minimum attracts more efficient workers to the labor pool. If these new workers are typically more affluent — perhaps middle-income spouses or retirees — and end up taking some jobs held by poorer workers, a higher minimum could harm the truly disadvantaged.
Another reason that employment may not fall is that businesses pass along some of the cost of a higher minimum wage to consumers through higher prices. Often, the customers paying those prices — including some of the diners at McDonald’s and the shoppers at Walmart — have very low family incomes. Thus this price effect may harm the very people whom a minimum wage is supposed to help.
It’s precisely because the redistributive effects of a minimum wage are complicated that most economists prefer other ways to help low-income families. For example, the current tax system already subsidizes work by the poor via an earned-income tax credit. A low-income family with earned income gets a payment from the government that supplements its wages. This approach is very well targeted — the subsidy goes only to poor families — and could easily be made more generous.
By raising the reward for working, this tax credit also tends to increase the supply of labor. And that puts downward pressure on wages. As a result, some of the benefits go to businesses, as would be the case with any wage subsidy. Though this mutes some of the direct redistributive value of the program — particularly if there’s no constraining minimum wage — it also tends to increase employment. And a job may ultimately be the most valuable thing for a family struggling to escape poverty.
What about the macroeconomic argument that is sometimes made for raising the minimum wage? Poorer people typically spend a larger fraction of their income than more affluent people. So if an increase in the minimum wage successfully redistributed some income to the poor, it could increase overall consumer spending — which could stimulate employment and output growth.
All of this is true, but the effects would probably be small. The president’s proposal would raise annual income by $3,500 for a full-time minimum-wage worker. A recent analysis found that 13 million workers earn less than $9 an hour. If they were all working full time at the current minimum — and a majority are not — the income increase from the higher minimum wage would be only about $50 billion. Even assuming that all of that higher income was redistributed from the wealthiest families, the difference in spending behavior between low-income and high-income consumers is likely to translate into only about an additional $10 billion to $20 billion in consumer purchases. That’s not much in a $15 trillion economy.
SO where does all of this leave us? The economics of the minimum wage are complicated, and it’s far from obvious what an increase would accomplish. If a higher minimum wage were the only anti-poverty initiative available, I would support it. It helps some low-income workers, and the costs in terms of employment and inefficiency are likely small.
But we could do so much better if we were willing to spend some money. A more generous earned-income tax credit would provide more support for the working poor and would be pro-business at the same time. And pre-kindergarten education, which the president proposes to make universal, has been shown in rigorous studies to strengthen families and reduce poverty and crime. Why settle for half-measures when such truly first-rate policies are well understood and ready to go?
http://www.nytimes.com/2013/03/03/b...-income-distribution.html?smid=pl-share&_r=1&
The Business of the Minimum Wage
By CHRISTINA D. ROMER
Published: March 2, 2013
RAISING the minimum wage, as President Obama proposed in his State of the Union address, tends to be more popular with the general public than with economists.
I don’t believe that’s because economists care less about the plight of the poor — many economists are perfectly nice people who care deeply about poverty and income inequality. Rather, economic analysis raises questions about whether a higher minimum wage will achieve better outcomes for the economy and reduce poverty.
First, what’s the argument for having a minimum wage at all? Many of my students assume that government protection is the only thing ensuring decent wages for most American workers. But basic economics shows that competition between employers for workers can be very effective at preventing businesses from misbehaving. If every other store in town is paying workers $9 an hour, one offering $8 will find it hard to hire anyone — perhaps not when unemployment is high, but certainly in normal times. Robust competition is a powerful force helping to ensure that workers are paid what they contribute to their employers’ bottom lines.
One argument for a minimum wage is that there sometimes isn’t enough competition among employers. In our nation’s history, there have been company towns where one employer truly dominated the local economy. As a result, that employer could affect the going wage for the entire area. In such a situation, a minimum wage can not only make workers better off but can also lead to more efficient levels of production and employment.
But I suspect that few people, including economists, find this argument compelling today. Company towns are largely a thing of the past in this country; even Wal-Mart Stores, the nation’s largest employer, faces substantial competition for workers in most places. And many employers paying the minimum wage are small businesses that clearly face strong competition for workers.
Instead, most arguments for instituting or raising a minimum wage are based on fairness and redistribution. Even if workers are getting a competitive wage, many of us are deeply disturbed that some hard-working families still have very little. Though a desire to help the poor is largely a moral issue, economics can help us think about how successful a higher minimum wage would be at reducing poverty.
An important issue is who benefits. When the minimum wage rises, is income redistributed primarily to poor families, or do many families higher up the income ladder benefit as well?
It is true, as conservative commentators often point out, that some minimum-wage workers are middle-class teenagers or secondary earners in fairly well-off households. But the available data suggest that roughly half the workers likely to be affected by the $9-an-hour level proposed by the president are in families earning less than $40,000 a year. So while raising the minimum wage from the current $7.25 an hour may not be particularly well targeted as an anti-poverty proposal, it’s not badly targeted, either.
A related issue is whether some low-income workers will lose their jobs when businesses have to pay a higher minimum wage. There’s been a tremendous amount of research on this topic, and the bulk of the empirical analysis finds that the overall adverse employment effects are small.
Some evidence suggests that employment doesn’t fall much because the higher minimum wage lowers labor turnover, which raises productivity and labor demand. But it’s possible that productivity also rises because the higher minimum attracts more efficient workers to the labor pool. If these new workers are typically more affluent — perhaps middle-income spouses or retirees — and end up taking some jobs held by poorer workers, a higher minimum could harm the truly disadvantaged.
Another reason that employment may not fall is that businesses pass along some of the cost of a higher minimum wage to consumers through higher prices. Often, the customers paying those prices — including some of the diners at McDonald’s and the shoppers at Walmart — have very low family incomes. Thus this price effect may harm the very people whom a minimum wage is supposed to help.
It’s precisely because the redistributive effects of a minimum wage are complicated that most economists prefer other ways to help low-income families. For example, the current tax system already subsidizes work by the poor via an earned-income tax credit. A low-income family with earned income gets a payment from the government that supplements its wages. This approach is very well targeted — the subsidy goes only to poor families — and could easily be made more generous.
By raising the reward for working, this tax credit also tends to increase the supply of labor. And that puts downward pressure on wages. As a result, some of the benefits go to businesses, as would be the case with any wage subsidy. Though this mutes some of the direct redistributive value of the program — particularly if there’s no constraining minimum wage — it also tends to increase employment. And a job may ultimately be the most valuable thing for a family struggling to escape poverty.
What about the macroeconomic argument that is sometimes made for raising the minimum wage? Poorer people typically spend a larger fraction of their income than more affluent people. So if an increase in the minimum wage successfully redistributed some income to the poor, it could increase overall consumer spending — which could stimulate employment and output growth.
All of this is true, but the effects would probably be small. The president’s proposal would raise annual income by $3,500 for a full-time minimum-wage worker. A recent analysis found that 13 million workers earn less than $9 an hour. If they were all working full time at the current minimum — and a majority are not — the income increase from the higher minimum wage would be only about $50 billion. Even assuming that all of that higher income was redistributed from the wealthiest families, the difference in spending behavior between low-income and high-income consumers is likely to translate into only about an additional $10 billion to $20 billion in consumer purchases. That’s not much in a $15 trillion economy.
SO where does all of this leave us? The economics of the minimum wage are complicated, and it’s far from obvious what an increase would accomplish. If a higher minimum wage were the only anti-poverty initiative available, I would support it. It helps some low-income workers, and the costs in terms of employment and inefficiency are likely small.
But we could do so much better if we were willing to spend some money. A more generous earned-income tax credit would provide more support for the working poor and would be pro-business at the same time. And pre-kindergarten education, which the president proposes to make universal, has been shown in rigorous studies to strengthen families and reduce poverty and crime. Why settle for half-measures when such truly first-rate policies are well understood and ready to go?
http://www.nytimes.com/2013/03/03/b...-income-distribution.html?smid=pl-share&_r=1&
A Better Way to Help the Working Poor
A Better Way to Help the Working Poor
By Edward Glaeser
Feb 19, 2013 6:23 PM CT
U.S. President Barack Obama wants to raise the federal minimum wage to $9 an hour from $7.25 as a way to alleviate the pain of poverty and make work more attractive for the poor.
These are worthy goals, but they should be paid for by taxpayers nationwide, not just by the businesses that employ lower-wage workers. Instead of redistribution through regulation, Congress should enhance and improve the earned income tax credit, or start a new taxpayer-financed program that makes working more attractive for the poor.
The great appeal of raising the minimum wage is that it appears to reduce inequality without increasing budget deficits. That seductive glimmer is the policy’s greatest flaw. We should have a debate about how much to spend to promote opportunity. We shouldn’t embrace policies that make politicians look caring without requiring them to pay the cost of justifying higher taxes. We should abhor cheap tricks, such as unfunded mandates, and the minimum wage is a bit like an unfunded mandate.
Like the minimum wage, the Americans with Disabilities Act was motivated by worthy goals. I care deeply that disabled Americans suffer less. But instead of funding remedies with taxpayer dollars, the ADA pushed the burden downstream to local public transit systems, declaring that it was discrimination for a system to “fail to provide” alternatives such as “paratransit and other special transportation services to individuals with disabilities.”
Transit Costs
This means that the finances of the Boston area’s transit system, for example, have been deeply strained by the $40-a-trip cost of paratransit, which leads to more than $100 million of annual spending that is only trivially offset by $5 million in federal aid. The costs of righting a widespread social wrong shouldn’t have to be paid for by bus and train riders, who face higher fees and reduced service, as systems work to cover the law’s mandated costs.
Likewise, why should the costs of making the U.S. more egalitarian be paid by the employers that happen to hire lower- wage workers? In January, the unemployment rate among high school dropouts was 12 percent. Only 40 percent of that group was employed at all.
Those scary numbers reflect a failure of entrepreneurial imagination: an inability of American companies to figure out ways to productively employ the less skilled. The most skill- intensive sectors, including my own, won’t pay the price of a higher minimum wage, precisely because they provide so few jobs for people at the low end of the skill spectrum.
The debate over the minimum wage is often depicted as a battle of social justice, calling for higher wages instead of economic efficiency, which operates best with fewer regulatory restrictions. Although providing more for the poor may be social justice, there is nothing just about loading all the costs onto the employers and customers of lower-wage workers. For 20 years, there has been a fierce debate about the impact that minimum wage laws have on unemployment.
Alan Krueger, now chairman of the Council of Economic Advisers, and David Card, of the University of California at Berkeley, are responsible for the research that reopened the debate on the efficiency costs of the minimum wage. They compared fast-food workers in New Jersey and Pennsylvania and found little decline in employment after New Jersey raised its minimum wage in 1992. Their 1997 book brings together five years of their serious scholarship, which suggests that at low levels an increase in minimum wage does little to discourage employment.
Economists David Neumark and William Wascher provide the strongest alternative voice. Summarizing a large body of recent research, they write that “the oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect.”
Reducing Employment
Changes in the minimum wage have been found to reduce employment by Kevin Murphy of the University of Chicago and economists Donald Deere and Finis Welch of Welch Consulting as well as by Janet Currie and Bruce Fallick. These findings are sufficiently disparate so that progressives can plausibly claim that Obama’s proposed minimum-wage increase will do little harm to employment, while libertarians can argue that a 24 percent increase in the minimum wage will lead to more unemployed teenagers and high school dropouts.
We would be stuck between two ideologically driven viewpoints if the minimum wage was our only tool to help lower- income Americans.
There are better ways of making work pay. The earned income tax credit has helped make work pay since 1975. It rises initially with income up to a maximum of $5,236 for families with two children, and then it phases out.
It has downsides, such as administrative complexity and monitoring, but it has been shown to increase employment, especially for single mothers. It can be improved and increased, and it remains the best alternative to raising the minimum wage.
Perhaps the simplest way to alter the credit is for it to provide a clear per-hour benefit directly to workers earning less than $9 an hour. An extra $1.75 an hour, the proposed increase in the minimum wage, for the 1.67 million workers who currently earn the minimum wage, would cost about $4 billion, which could be easily funded with minor cuts to other programs such as highway spending.
The federal government enacted another smart policy when it gave workers a payroll tax holiday during the recession that also helped make work pay more for lower-income Americans. That tax holiday ended last month.
Bashing Employers
The New Year’s Eve budget deal would have done more to encourage employment if it had kept the tax holiday, rather than the unemployment insurance extension.
Political progressives see raising the minimum wage as a tool to promote equality without raising taxes. Some of them even seem to like the idea of punishing big business. But such anti-enterprise authors are wrong to bash those employers who are helping to solve the American underemployment problem. The economy’s larger challenge isn’t the companies paying $7.25 an hour, but the companies that only employ workers at the top end of the skill distribution and pay much more.
Redistribution through regulation has a long history in Europe, where abundant labor market regulations materially reduce work hours. Raising the minimum wage wouldn’t turn the U.S. into Greece, but it is a step in the wrong direction --away from smart egalitarianism toward a policy that is popular only because it seems cheap.
It would be odd for the U.S. to ramp up its labor market rules at a time when unemployment remains high and even President Francois Hollande of France is pushing for less labor market rigidity.
The free market doesn’t provide opportunity equally and Obama is right to want work to pay more. But smart egalitarianism aids the poor, encourages work and is paid for by everyone who has a stake in a fairer nation with less unemployment.
The Republicans have a chance to show their support for the working poor if they counter the president’s minimum wage proposal not with an angry “No way,” but with a smarter alternative, such as increasing the earned income tax credit and making its benefits simpler and more salient. For once, they could make the Democrats seem like the dinosaurs trapped in their New Deal past, while the Republicans are offering anti- poverty policies designed for the 21st century.
(Edward Glaeser, an economics professor at Harvard University, is a Bloomberg View columnist. He is the author of “Triumph of the City.” The opinions expressed are his own.)
http://www.bloomberg.com/news/2013-02-20/use-tax-credit-not-minimum-wage-to-help-poor.html
A Better Way to Help the Working Poor
By Edward Glaeser
Feb 19, 2013 6:23 PM CT
U.S. President Barack Obama wants to raise the federal minimum wage to $9 an hour from $7.25 as a way to alleviate the pain of poverty and make work more attractive for the poor.
These are worthy goals, but they should be paid for by taxpayers nationwide, not just by the businesses that employ lower-wage workers. Instead of redistribution through regulation, Congress should enhance and improve the earned income tax credit, or start a new taxpayer-financed program that makes working more attractive for the poor.
The great appeal of raising the minimum wage is that it appears to reduce inequality without increasing budget deficits. That seductive glimmer is the policy’s greatest flaw. We should have a debate about how much to spend to promote opportunity. We shouldn’t embrace policies that make politicians look caring without requiring them to pay the cost of justifying higher taxes. We should abhor cheap tricks, such as unfunded mandates, and the minimum wage is a bit like an unfunded mandate.
Like the minimum wage, the Americans with Disabilities Act was motivated by worthy goals. I care deeply that disabled Americans suffer less. But instead of funding remedies with taxpayer dollars, the ADA pushed the burden downstream to local public transit systems, declaring that it was discrimination for a system to “fail to provide” alternatives such as “paratransit and other special transportation services to individuals with disabilities.”
Transit Costs
This means that the finances of the Boston area’s transit system, for example, have been deeply strained by the $40-a-trip cost of paratransit, which leads to more than $100 million of annual spending that is only trivially offset by $5 million in federal aid. The costs of righting a widespread social wrong shouldn’t have to be paid for by bus and train riders, who face higher fees and reduced service, as systems work to cover the law’s mandated costs.
Likewise, why should the costs of making the U.S. more egalitarian be paid by the employers that happen to hire lower- wage workers? In January, the unemployment rate among high school dropouts was 12 percent. Only 40 percent of that group was employed at all.
Those scary numbers reflect a failure of entrepreneurial imagination: an inability of American companies to figure out ways to productively employ the less skilled. The most skill- intensive sectors, including my own, won’t pay the price of a higher minimum wage, precisely because they provide so few jobs for people at the low end of the skill spectrum.
The debate over the minimum wage is often depicted as a battle of social justice, calling for higher wages instead of economic efficiency, which operates best with fewer regulatory restrictions. Although providing more for the poor may be social justice, there is nothing just about loading all the costs onto the employers and customers of lower-wage workers. For 20 years, there has been a fierce debate about the impact that minimum wage laws have on unemployment.
Alan Krueger, now chairman of the Council of Economic Advisers, and David Card, of the University of California at Berkeley, are responsible for the research that reopened the debate on the efficiency costs of the minimum wage. They compared fast-food workers in New Jersey and Pennsylvania and found little decline in employment after New Jersey raised its minimum wage in 1992. Their 1997 book brings together five years of their serious scholarship, which suggests that at low levels an increase in minimum wage does little to discourage employment.
Economists David Neumark and William Wascher provide the strongest alternative voice. Summarizing a large body of recent research, they write that “the oft-stated assertion that recent research fails to support the traditional view that the minimum wage reduces the employment of low-wage workers is clearly incorrect.”
Reducing Employment
Changes in the minimum wage have been found to reduce employment by Kevin Murphy of the University of Chicago and economists Donald Deere and Finis Welch of Welch Consulting as well as by Janet Currie and Bruce Fallick. These findings are sufficiently disparate so that progressives can plausibly claim that Obama’s proposed minimum-wage increase will do little harm to employment, while libertarians can argue that a 24 percent increase in the minimum wage will lead to more unemployed teenagers and high school dropouts.
We would be stuck between two ideologically driven viewpoints if the minimum wage was our only tool to help lower- income Americans.
There are better ways of making work pay. The earned income tax credit has helped make work pay since 1975. It rises initially with income up to a maximum of $5,236 for families with two children, and then it phases out.
It has downsides, such as administrative complexity and monitoring, but it has been shown to increase employment, especially for single mothers. It can be improved and increased, and it remains the best alternative to raising the minimum wage.
Perhaps the simplest way to alter the credit is for it to provide a clear per-hour benefit directly to workers earning less than $9 an hour. An extra $1.75 an hour, the proposed increase in the minimum wage, for the 1.67 million workers who currently earn the minimum wage, would cost about $4 billion, which could be easily funded with minor cuts to other programs such as highway spending.
The federal government enacted another smart policy when it gave workers a payroll tax holiday during the recession that also helped make work pay more for lower-income Americans. That tax holiday ended last month.
Bashing Employers
The New Year’s Eve budget deal would have done more to encourage employment if it had kept the tax holiday, rather than the unemployment insurance extension.
Political progressives see raising the minimum wage as a tool to promote equality without raising taxes. Some of them even seem to like the idea of punishing big business. But such anti-enterprise authors are wrong to bash those employers who are helping to solve the American underemployment problem. The economy’s larger challenge isn’t the companies paying $7.25 an hour, but the companies that only employ workers at the top end of the skill distribution and pay much more.
Redistribution through regulation has a long history in Europe, where abundant labor market regulations materially reduce work hours. Raising the minimum wage wouldn’t turn the U.S. into Greece, but it is a step in the wrong direction --away from smart egalitarianism toward a policy that is popular only because it seems cheap.
It would be odd for the U.S. to ramp up its labor market rules at a time when unemployment remains high and even President Francois Hollande of France is pushing for less labor market rigidity.
The free market doesn’t provide opportunity equally and Obama is right to want work to pay more. But smart egalitarianism aids the poor, encourages work and is paid for by everyone who has a stake in a fairer nation with less unemployment.
The Republicans have a chance to show their support for the working poor if they counter the president’s minimum wage proposal not with an angry “No way,” but with a smarter alternative, such as increasing the earned income tax credit and making its benefits simpler and more salient. For once, they could make the Democrats seem like the dinosaurs trapped in their New Deal past, while the Republicans are offering anti- poverty policies designed for the 21st century.
(Edward Glaeser, an economics professor at Harvard University, is a Bloomberg View columnist. He is the author of “Triumph of the City.” The opinions expressed are his own.)
http://www.bloomberg.com/news/2013-02-20/use-tax-credit-not-minimum-wage-to-help-poor.html
Should We Abolish The Minimum Wage?
If you aren't familiar with the Intelligence Squared debate series, then just think the opposite of BGOL.
It's a debate contest with a pretty high class list of participants competing every debate and some interesting topics.
Should We Abolish The Minimum Wage? (50:30)
In the 75 years since it was introduced, Americans have been arguing over the minimum wage.
Some say government intervention to artificially raise wages lowers demand for workers and interferes with economic freedom — preventing people who would be willing to work for less from getting jobs at all. They argue that the minimum wage especially hurts teenagers and young adults with few or no skills.
But getting rid of the minimum wage would hurt low-paid workers, opponents argue. They say the minimum wage helps to make up for the way economic growth is no longer reaching down to working families. And they say keeping the minimum wage is particularly important for low-income parents trying to raise children.
Four economic experts recently took on that battle, facing off two against two in an Intelligence Squared U.S. debate. The motion for the Oxford-style debate: "Abolish the Minimum Wage."
Before the debate, 21 percent of the audience voted in favor of the motion, while 58 percent were against and 21 percent were undecided. After the debate, 26 percent favored abolishing the minimum wage, while 67 percent were against — making the side arguing for keeping the minimum wage the winner.
Those debating were:
FOR THE MOTION
James A. Dorn is the Cato Institute's vice president for academic affairs, the editor of the Cato Journal and director of Cato's annual monetary conference. His research interests include trade and human rights, economic reform in China, and the future of money. From 1984 to 1990, he served on the White House Commission on Presidential Scholars. He has lectured in Estonia, Germany, Hong Kong, Russia and Switzerland and has directed international conferences in London, Shanghai, Moscow and Mexico City. Dorn has been a visiting scholar at Central European University in Prague and at Fudan University in Shanghai and is currently professor of economics at Towson University in Maryland. He has edited 10 books, and his articles have appeared in numerous publications.
Russ Roberts is a research fellow at Stanford University's Hoover Institution. He is the host of EconTalk, an award-winning weekly podcast. His rap videos, created with filmmaker John Papola, on the ideas of Keynes and Hayek have been viewed more than 6 million times on YouTube and have been subtitled in 11 languages. Roberts blogs with Don Boudreaux at Cafe Hayek. His latest Web-based educational project is The Numbers Game, in which he discusses data and charts in annotated videos. Roberts is the author of three works of fiction that teach economic principles and lessons, and numerous journal articles. Roberts was a professor of economics at George Mason University from 2003 to 2012. He has also taught at Washington University in St. Louis, the University of Rochester, Stanford University and the University of California, Los Angeles.
AGAINST THE MOTION
Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities. From 2009 to 2011, Bernstein was the chief economist and economic adviser to Vice President Joe Biden; executive director of the White House Task Force on the Middle Class; and a member of President Obama's economic team. Bernstein's areas of expertise include federal and state economic and fiscal policies; income inequality and mobility; trends in employment and earnings; international comparisons; and the analysis of financial and housing markets. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute in Washington, D.C. Between 1995 and 1996, he held the post of deputy chief economist at the U.S. Department of Labor. He is the author of Crunch: Why Do I Feel So Squeezed? He is an on-air commentator for cable stations CNBC and MSNBC and hosts jaredbernsteinblog.com.
Karen Kornbluh recently stepped down as U.S. ambassador to the Organization for Economic Cooperation and Development, where she negotiated international Internet policymaking principles and launched a new OECD gender initiative. She previously served as policy director for then-Sen. Barack Obama, as deputy chief of staff at the U.S. Treasury Department, and in a number of roles at the Federal Communications Commission. She has been awarded several fellowships, including a visiting fellowship at the Center for American Progress and a Markle technology fellowship. She founded the Work and Family Program at the New America Foundation and has written for publications including The New York Times, The Washington Post, The Atlantic Monthly and the Harvard Journal of Law and Technology.
http://intelligencesquaredus.org/debates/upcoming-debates/item/853-abolish-the-minimum-wage
If you aren't familiar with the Intelligence Squared debate series, then just think the opposite of BGOL.
It's a debate contest with a pretty high class list of participants competing every debate and some interesting topics.
Should We Abolish The Minimum Wage? (50:30)
In the 75 years since it was introduced, Americans have been arguing over the minimum wage.
Some say government intervention to artificially raise wages lowers demand for workers and interferes with economic freedom — preventing people who would be willing to work for less from getting jobs at all. They argue that the minimum wage especially hurts teenagers and young adults with few or no skills.
But getting rid of the minimum wage would hurt low-paid workers, opponents argue. They say the minimum wage helps to make up for the way economic growth is no longer reaching down to working families. And they say keeping the minimum wage is particularly important for low-income parents trying to raise children.
Four economic experts recently took on that battle, facing off two against two in an Intelligence Squared U.S. debate. The motion for the Oxford-style debate: "Abolish the Minimum Wage."
Before the debate, 21 percent of the audience voted in favor of the motion, while 58 percent were against and 21 percent were undecided. After the debate, 26 percent favored abolishing the minimum wage, while 67 percent were against — making the side arguing for keeping the minimum wage the winner.
Those debating were:
FOR THE MOTION
James A. Dorn is the Cato Institute's vice president for academic affairs, the editor of the Cato Journal and director of Cato's annual monetary conference. His research interests include trade and human rights, economic reform in China, and the future of money. From 1984 to 1990, he served on the White House Commission on Presidential Scholars. He has lectured in Estonia, Germany, Hong Kong, Russia and Switzerland and has directed international conferences in London, Shanghai, Moscow and Mexico City. Dorn has been a visiting scholar at Central European University in Prague and at Fudan University in Shanghai and is currently professor of economics at Towson University in Maryland. He has edited 10 books, and his articles have appeared in numerous publications.
Russ Roberts is a research fellow at Stanford University's Hoover Institution. He is the host of EconTalk, an award-winning weekly podcast. His rap videos, created with filmmaker John Papola, on the ideas of Keynes and Hayek have been viewed more than 6 million times on YouTube and have been subtitled in 11 languages. Roberts blogs with Don Boudreaux at Cafe Hayek. His latest Web-based educational project is The Numbers Game, in which he discusses data and charts in annotated videos. Roberts is the author of three works of fiction that teach economic principles and lessons, and numerous journal articles. Roberts was a professor of economics at George Mason University from 2003 to 2012. He has also taught at Washington University in St. Louis, the University of Rochester, Stanford University and the University of California, Los Angeles.
AGAINST THE MOTION
Jared Bernstein is a senior fellow at the Center on Budget and Policy Priorities. From 2009 to 2011, Bernstein was the chief economist and economic adviser to Vice President Joe Biden; executive director of the White House Task Force on the Middle Class; and a member of President Obama's economic team. Bernstein's areas of expertise include federal and state economic and fiscal policies; income inequality and mobility; trends in employment and earnings; international comparisons; and the analysis of financial and housing markets. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute in Washington, D.C. Between 1995 and 1996, he held the post of deputy chief economist at the U.S. Department of Labor. He is the author of Crunch: Why Do I Feel So Squeezed? He is an on-air commentator for cable stations CNBC and MSNBC and hosts jaredbernsteinblog.com.
Karen Kornbluh recently stepped down as U.S. ambassador to the Organization for Economic Cooperation and Development, where she negotiated international Internet policymaking principles and launched a new OECD gender initiative. She previously served as policy director for then-Sen. Barack Obama, as deputy chief of staff at the U.S. Treasury Department, and in a number of roles at the Federal Communications Commission. She has been awarded several fellowships, including a visiting fellowship at the Center for American Progress and a Markle technology fellowship. She founded the Work and Family Program at the New America Foundation and has written for publications including The New York Times, The Washington Post, The Atlantic Monthly and the Harvard Journal of Law and Technology.
http://intelligencesquaredus.org/debates/upcoming-debates/item/853-abolish-the-minimum-wage
Re: Should We Abolish The Minimum Wage?
A statement in the audio:
"I can tell you why employers are against raising the minimum wage. becuase it cuts in to their profit."
Somebody is lying!
A statement in the audio:
"I can tell you why employers are against raising the minimum wage. becuase it cuts in to their profit."
Somebody is lying!
Re: Should We Abolish The Minimum Wage?
I guess you're right with your world renown business acumen!
source: Think Progress
Starbucks CEO Comes Out In Favor Of A Minimum Wage Increase
I guess you're right with your world renown business acumen!
source: Think Progress
Starbucks CEO Comes Out In Favor Of A Minimum Wage Increase
Re: Should We Abolish The Minimum Wage?
You ever wonder why only the highly-profitable industry leaders are advocating for business cost to be increased suddenly through government decree?
Re: Should We Abolish The Minimum Wage?
Never really thought about it from the "big & highly-profitable company" perspective. I do think about it from my own business' small and profitable perspective and I KNOW that the more we provide for our employees (in terms of bonuses, increased base pay, training at resort locations, etc., the more in productivity that we tend to get back from them -- which reflects in our bottom line.
But, why do you think the "highly-profitable industry leaders are advocating for business cost to be increased suddenly" ???
Never really thought about it from the "big & highly-profitable company" perspective. I do think about it from my own business' small and profitable perspective and I KNOW that the more we provide for our employees (in terms of bonuses, increased base pay, training at resort locations, etc., the more in productivity that we tend to get back from them -- which reflects in our bottom line.
But, why do you think the "highly-profitable industry leaders are advocating for business cost to be increased suddenly" ???
Re: Should We Abolish The Minimum Wage?
... which in turn allows more money for the employees to recirculate back into the economic stream, which causes the economy to expand.
Evidently not everyone paid attention in Econ 101, if they every took it at all!
... which in turn allows more money for the employees to recirculate back into the economic stream, which causes the economy to expand.
Evidently not everyone paid attention in Econ 101, if they every took it at all!
Re: Should We Abolish The Minimum Wage?
The productivity argument is likely valid across classes, but the sensitivity to the magnitude of the increase is probably what differs the most between them all. A two dollar increase is likely to be viewed differently by someone making $7/hour compared to someone making $27/hour. Same goes for a percentage based increase. There is also the question of what does an increase in productivity mean for someone labeled as skilled compared to non-skilled and what impact would that have on a business as a whole. That impact is likely to be more marginal the more a worker is unskilled.
It also doesn't sound like you're dealing with an army of minimum wage workers, so in general, I wouldn't project the reasoning you cited above.
If you wonder why only the highly-profitable industry leaders are advocating for business cost to be increased suddenly through government decree, then ask yourself what happens to the marginally-profitable businesses under these conditions.
Will marginally-profitable businesses be able to survive under these arbitrary political cost increases? If not where will their market share go? Will the market share go to another small business or will it go to the big corporations who can set up a store in a newly underserved area quicker than someone who's margins are paper thin because of a government dictate?
I don't know if you find the same value in the opinion of big corporations as thoughtone, but if you do, then you should figure out their motivations beforehand.
I wouldn't equate the motivations and responses of workers between classes for this topic.
The productivity argument is likely valid across classes, but the sensitivity to the magnitude of the increase is probably what differs the most between them all. A two dollar increase is likely to be viewed differently by someone making $7/hour compared to someone making $27/hour. Same goes for a percentage based increase. There is also the question of what does an increase in productivity mean for someone labeled as skilled compared to non-skilled and what impact would that have on a business as a whole. That impact is likely to be more marginal the more a worker is unskilled.
It also doesn't sound like you're dealing with an army of minimum wage workers, so in general, I wouldn't project the reasoning you cited above.
When a big company endorses an economic policy by politicians, it's usually because it will ultimately raise the cost of doing business and lead to a reduction in competition.
If you wonder why only the highly-profitable industry leaders are advocating for business cost to be increased suddenly through government decree, then ask yourself what happens to the marginally-profitable businesses under these conditions.
Will marginally-profitable businesses be able to survive under these arbitrary political cost increases? If not where will their market share go? Will the market share go to another small business or will it go to the big corporations who can set up a store in a newly underserved area quicker than someone who's margins are paper thin because of a government dictate?
Re: Should We Abolish The Minimum Wage?
Remember when the Democratic model didn't put big business endoresements over Mom and Pop concerns, at least in rhetoric.
Regarding your love for Econ 101, did you know there are classes after that? Econ 101 is basic theory with the assumption that the world is simple.
You should look into taking Econ 102.
Remember when the Democratic model didn't put big business endoresements over Mom and Pop concerns, at least in rhetoric.
Regarding your love for Econ 101, did you know there are classes after that? Econ 101 is basic theory with the assumption that the world is simple.
You should look into taking Econ 102.
Re: Should We Abolish The Minimum Wage?
Southern Poverty Pimps
The “original sin” of the Southern political class is cheap, powerless labor
Southern Poverty Pimps
The “original sin” of the Southern political class is cheap, powerless labor
McDonalds and the minimum wage
McDonalds and the minimum wage
John H. Cochrane
Thursday, September 19, 2013
Recently, on a long car trip returning from a glider contest, I did something unusual among our liberal elite: I actually went to a McDonalds and ate there.
The lady who took my order must have been about 19, as were all the other employees I could see, and pretty clearly new on the job. Getting the order right took some effort. I made the mistake of paying cash. The bill was something like $7.62. I first offered a $10, and she rang it up. Then I found 12 cents in my pocket, and offered it. This was a big mistake, as the cash register had already computed my change, and adjusting to my offer of 12 cents was beyond her abilities.
Most people might have been annoyed, but as an economist and an educator, I'm happy to see human capital building. OK, I was a little annoyed.
Which brings me, of course, to the proposals for a sharply increased minimum wage.
In the end, there really isn't much argument about what a substantially higher minimum wage will do.
Let us not deny the benefit. For the few people who work at minimum wage, but have worked their way up the ladder enough that they will keep their hours; who are actually trying to support themselves and a few children on these meager wages, it will mean a modest rise in income. The rise may be more modest once you account for taxes and reductions in transfers. There weren't any such people at my McDonalds, but NPR and the New York Times seem able to find them.
That transfer comes from somewhere. Some of it comes from a wealth levy on existing McDonalds shareholders. If a regulation lowers a company's profits, the stock price declines. Then the rate of return going forward is the same as always. So it's a one-time wealth tax on the existing shareholders. Economists are supposed to like wealth taxes, with an asterisk that it makes future investors a bit skittish.
Some of it comes from higher prices. I read estimates that a big mac might go up from about $3.00 to about $3.50, and dismissed those price increases as a small burden to bear. Looking around my McDonalds, I found this argument less persuasive. Because, of course, the kind of people who work at McDonalds are also the same kind of people who eat at McDonalds. If you're working at minimum wage in the middle of Oklahoma, you don't go out to a nice Greenwich Village restaurant to sample organic free range locally grown non-GMO gluten-free artisanal nuts and berries. McDonalds is a treat. And a pretty nice one at that. It's clean, healthy -- yes, some offerings are full of sugar and fat, but not of e coli, and you can get the grilled chicken if you want -- and reasonably tasty. Raising prices from $3.00 to $3.50 is not a small matter if you earn under $10 per hour and you're feeding a few kids too.
Still, that is the benefit.
The cost is just as easy to forecast. McDonalds cuts hours, and uses its most experienced and efficient workers more, and fewer people like my hapless server. And they don't get the oh-so-needed on-the-job training. The biggest impact of minimum wages is not so much on existing workers, but on new workers entering the labor force. (See a nice new NBER working paper by Jonathan Meer and Jeremy West.)
The effects fall heaviest on low-skill teenagers, especially minorities. Tom Sowell is eloquent on this point, for example in a recent New York Post OpEd. I was unaware until reading it that minimum wage laws were initially backed in part as conscious efforts to discriminate against minorities and preserve jobs for white people. Sometimes, I guess, policies do have their intended effects.
This much is pretty obvious. Looking around my McDonalds, though, I could see a deeper possibility -- an unexplored avenue for substitution away from low-skill labor.
Why, I wondered, after 10 minutes in line and the third effort to get my simple order right, did I not simply enter my order on my iphone, and then it's ready for me when I step up to the counter? Or why not enter it on a tablet provided right there? Why should ordering at McDonalds be any different than getting money from a bank, or getting a boarding pass at an airport? High end restaurants answer this question by saying they think their customers value the personal attention of a waiter. Maybe, but certainly not at McDonalds.
The answer, for now, is certainly that it's cheaper the way it is. But not for long.. At the left is the first image that popped up when I googled "restaurant ordering app."
And McDonalds is also reportedly testing an ordering and cellphone payment app. "Currently being tested at locations in Salt Lake City and in Austin, Texas, the app lets users order a meal remotely then collect it in person from a store or drive-thru window." My server's job days are already numbered.
Looking more inquisitively behind the counter, it struck me that the technology overall has changed little since the 1960s when my parents took me there as a child. The fry-o-lator beeps, a teenager picks the basket up and dumps it out, sprinkles salt, and uses a cute little piece of aluminum to neatly line them up in bags, just as they did back then. The main change I could see is that they annoyingly don't let you put your own sugar in your coffee any more.
It's clearly only a matter of time before this whole thing is automated. Industrial robots can assemble cars; designing a robot to operate the fry-o-lator, or even to cook and assemble the whole hamburger doesn't look that hard. Mechanization usually increases quality: your burger and fries could easily be cooked to order. Swipe your phone or card to pay and off you go. Or, a little drone helicopter delivers it automatically to your table.
(Update: The machine is here already. And planning a new chain to use it, rather than sell to McDonalds, as predicted. Thanks to Michael Ward for pointing it out.)
Reflecting on it, though, it's unlikely to be McDonalds. McDonalds has an amazing technology when you look hard at it: They have figured out how to run restaurants in a way that dramatically conserves on the world's scarcest resource, human capital. To run a McDonalds, you don't have to know how to cook, how to order food, how to buy kitchen equipment, or all the other hundreds of bits of tough knowledge and skill that it takes to run a restaurant. Hamburger U trains the rest.
The whole operation is about taking low-skill teenagers living typically unstructured lives, and training them to what it takes to work. Peering around the side of the cash register at an earlier trip, I noticed there were pictures on the buttons! You can work at McDonalds and operate its cash registers even if you're functionally illiterate! To say nothing of not knowing what to do when offered $10.12 to pay a $7.62 bill. And McDonalds has a big investment in that technology.
In the face of technical change, it is seldom the successful incumbents who adapt, even when they innovate. Kodak did not bring us digital cameras, trying to protect their film advantage. Print media did not bring us the internet, and are floundering at it. Walmart tries to go online, but Amazon.com is displacing it. The major airlines flop in every attempt to imitate Southwest.
So, as I gaze around the familiar golden arches, it strikes me that the automated fast food restaurant -- and the rapid decline in low-skill employment that it implies -- will likely not come from McDonalds itself. Rather, new competitors will arise that perfect the automated, people-less technology. In the same way that McDonalds displaced the previous era of fast-food restaurants, by perfecting a technology that brilliantly used lots of low-skill people and conserves on scarce human capital. For McDonalds to go automatic would be for it to throw away the key innovation that defines it and has made it such a success.
So we may be past the point that McDonalds sticks with 1950s technology because it's still cheaper to use people. We may just be waiting for the tipping point.
But robot repair technician is a high skill job. McDonalds provided a positive social externality -- it gave young people their first experience of work, of showing up on time, in a uniform, of learning to be pleasant to customers, to work within a heirarchical organization, and so on. Young people who work at McDonalds don't get internships at NPR, the New York Times, or Goldman Sachs to to develop work experience. As McDonalds goes, so will that process. All that will be left is cleaning.
A sturdy hike in the minimum wage, in today's economy, is basically an industrial policy subsidizing the transition to low-skill service industry automation.
http://johnhcochrane.blogspot.com/2013/09/mcdonalds-and-minimum-wage.html?m=0
McDonalds and the minimum wage
John H. Cochrane
Thursday, September 19, 2013
Recently, on a long car trip returning from a glider contest, I did something unusual among our liberal elite: I actually went to a McDonalds and ate there.
The lady who took my order must have been about 19, as were all the other employees I could see, and pretty clearly new on the job. Getting the order right took some effort. I made the mistake of paying cash. The bill was something like $7.62. I first offered a $10, and she rang it up. Then I found 12 cents in my pocket, and offered it. This was a big mistake, as the cash register had already computed my change, and adjusting to my offer of 12 cents was beyond her abilities.
Most people might have been annoyed, but as an economist and an educator, I'm happy to see human capital building. OK, I was a little annoyed.
Which brings me, of course, to the proposals for a sharply increased minimum wage.
In the end, there really isn't much argument about what a substantially higher minimum wage will do.
Let us not deny the benefit. For the few people who work at minimum wage, but have worked their way up the ladder enough that they will keep their hours; who are actually trying to support themselves and a few children on these meager wages, it will mean a modest rise in income. The rise may be more modest once you account for taxes and reductions in transfers. There weren't any such people at my McDonalds, but NPR and the New York Times seem able to find them.
That transfer comes from somewhere. Some of it comes from a wealth levy on existing McDonalds shareholders. If a regulation lowers a company's profits, the stock price declines. Then the rate of return going forward is the same as always. So it's a one-time wealth tax on the existing shareholders. Economists are supposed to like wealth taxes, with an asterisk that it makes future investors a bit skittish.
Some of it comes from higher prices. I read estimates that a big mac might go up from about $3.00 to about $3.50, and dismissed those price increases as a small burden to bear. Looking around my McDonalds, I found this argument less persuasive. Because, of course, the kind of people who work at McDonalds are also the same kind of people who eat at McDonalds. If you're working at minimum wage in the middle of Oklahoma, you don't go out to a nice Greenwich Village restaurant to sample organic free range locally grown non-GMO gluten-free artisanal nuts and berries. McDonalds is a treat. And a pretty nice one at that. It's clean, healthy -- yes, some offerings are full of sugar and fat, but not of e coli, and you can get the grilled chicken if you want -- and reasonably tasty. Raising prices from $3.00 to $3.50 is not a small matter if you earn under $10 per hour and you're feeding a few kids too.
Still, that is the benefit.
The cost is just as easy to forecast. McDonalds cuts hours, and uses its most experienced and efficient workers more, and fewer people like my hapless server. And they don't get the oh-so-needed on-the-job training. The biggest impact of minimum wages is not so much on existing workers, but on new workers entering the labor force. (See a nice new NBER working paper by Jonathan Meer and Jeremy West.)
The effects fall heaviest on low-skill teenagers, especially minorities. Tom Sowell is eloquent on this point, for example in a recent New York Post OpEd. I was unaware until reading it that minimum wage laws were initially backed in part as conscious efforts to discriminate against minorities and preserve jobs for white people. Sometimes, I guess, policies do have their intended effects.
This much is pretty obvious. Looking around my McDonalds, though, I could see a deeper possibility -- an unexplored avenue for substitution away from low-skill labor.
Why, I wondered, after 10 minutes in line and the third effort to get my simple order right, did I not simply enter my order on my iphone, and then it's ready for me when I step up to the counter? Or why not enter it on a tablet provided right there? Why should ordering at McDonalds be any different than getting money from a bank, or getting a boarding pass at an airport? High end restaurants answer this question by saying they think their customers value the personal attention of a waiter. Maybe, but certainly not at McDonalds.
The answer, for now, is certainly that it's cheaper the way it is. But not for long.. At the left is the first image that popped up when I googled "restaurant ordering app."
And McDonalds is also reportedly testing an ordering and cellphone payment app. "Currently being tested at locations in Salt Lake City and in Austin, Texas, the app lets users order a meal remotely then collect it in person from a store or drive-thru window." My server's job days are already numbered.
Looking more inquisitively behind the counter, it struck me that the technology overall has changed little since the 1960s when my parents took me there as a child. The fry-o-lator beeps, a teenager picks the basket up and dumps it out, sprinkles salt, and uses a cute little piece of aluminum to neatly line them up in bags, just as they did back then. The main change I could see is that they annoyingly don't let you put your own sugar in your coffee any more.
It's clearly only a matter of time before this whole thing is automated. Industrial robots can assemble cars; designing a robot to operate the fry-o-lator, or even to cook and assemble the whole hamburger doesn't look that hard. Mechanization usually increases quality: your burger and fries could easily be cooked to order. Swipe your phone or card to pay and off you go. Or, a little drone helicopter delivers it automatically to your table.
(Update: The machine is here already. And planning a new chain to use it, rather than sell to McDonalds, as predicted. Thanks to Michael Ward for pointing it out.)
Reflecting on it, though, it's unlikely to be McDonalds. McDonalds has an amazing technology when you look hard at it: They have figured out how to run restaurants in a way that dramatically conserves on the world's scarcest resource, human capital. To run a McDonalds, you don't have to know how to cook, how to order food, how to buy kitchen equipment, or all the other hundreds of bits of tough knowledge and skill that it takes to run a restaurant. Hamburger U trains the rest.
The whole operation is about taking low-skill teenagers living typically unstructured lives, and training them to what it takes to work. Peering around the side of the cash register at an earlier trip, I noticed there were pictures on the buttons! You can work at McDonalds and operate its cash registers even if you're functionally illiterate! To say nothing of not knowing what to do when offered $10.12 to pay a $7.62 bill. And McDonalds has a big investment in that technology.
In the face of technical change, it is seldom the successful incumbents who adapt, even when they innovate. Kodak did not bring us digital cameras, trying to protect their film advantage. Print media did not bring us the internet, and are floundering at it. Walmart tries to go online, but Amazon.com is displacing it. The major airlines flop in every attempt to imitate Southwest.
So, as I gaze around the familiar golden arches, it strikes me that the automated fast food restaurant -- and the rapid decline in low-skill employment that it implies -- will likely not come from McDonalds itself. Rather, new competitors will arise that perfect the automated, people-less technology. In the same way that McDonalds displaced the previous era of fast-food restaurants, by perfecting a technology that brilliantly used lots of low-skill people and conserves on scarce human capital. For McDonalds to go automatic would be for it to throw away the key innovation that defines it and has made it such a success.
So we may be past the point that McDonalds sticks with 1950s technology because it's still cheaper to use people. We may just be waiting for the tipping point.
But robot repair technician is a high skill job. McDonalds provided a positive social externality -- it gave young people their first experience of work, of showing up on time, in a uniform, of learning to be pleasant to customers, to work within a heirarchical organization, and so on. Young people who work at McDonalds don't get internships at NPR, the New York Times, or Goldman Sachs to to develop work experience. As McDonalds goes, so will that process. All that will be left is cleaning.
A sturdy hike in the minimum wage, in today's economy, is basically an industrial policy subsidizing the transition to low-skill service industry automation.
http://johnhcochrane.blogspot.com/2013/09/mcdonalds-and-minimum-wage.html?m=0
CREDIBILITY!
Peter Schiff Offer Words Of Comfort After his Failed Prediction Of Great Riches In Gold and Silver
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Peter Schiff Offer Words Of Comfort After his Failed Prediction Of Great Riches In Gold and Silver
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Re: McDonalds and the minimum wage
This sums you up succinctly.
Schiff an economist?
Prove it!
Just another of those investment hustlers. His only interest in the economy is what he can get out of it, regardless.
And I guess if you can't read coherently, then I guess they are pictures.
This sums you up succinctly.
Schiff an economist?
Prove it! Just another of those investment hustlers. His only interest in the economy is what he can get out of it, regardless.
And I guess if you can't read coherently, then I guess they are pictures.
Re: McDonalds and the minimum wage
I posted three economist all critical of the minimum wage even though they all vote differently.
Minimum wage is a political construct that economists would rather replace.
But politicians and their lemmings keep endorsing it because it's easy to understand.
When did i call Schiff an economist or post anything by him in this thread?This sums you up succinctly.
Schiff an economist?
Just another of those investment hustlers. His only interest in the economy is what he can get out of it, regardless.
And I guess if you can't read coherently, then I guess they are pictures.
I posted three economist all critical of the minimum wage even though they all vote differently.
Minimum wage is a political construct that economists would rather replace.
But politicians and their lemmings keep endorsing it because it's easy to understand.
Re: McDonalds and the minimum wage
Investment bankers are all about politics.
Minimum wage has been proven successful 1938. it worked well until Reagan's restructuring of the economy.
And the trash you keep pushing is so difficult, the only way you can explain it is by this mythical "Free Market" ideology, that has no basis in reality.
Just like a hustler!
Investment bankers are all about politics.
Minimum wage has been proven successful 1938. it worked well until Reagan's restructuring of the economy.
And the trash you keep pushing is so difficult, the only way you can explain it is by this mythical "Free Market" ideology, that has no basis in reality.
Just like a hustler!
Re: McDonalds and the minimum wage
Have you ever considered not speaking to the choir?
That's good, economic freedom is a myth, but "Minimum wage has been proven successful 1938," is just spot-on reality.
Have you ever considered not speaking to the choir?
Schiff sells paper gold and silver and is not a coin or bullion dealer.
As long as the paper markets are around, gold and silver can only move so much and will never be priced at true value.
Paper markets will be around as long as the dollar is the world reserve currency.
If the dollar loses world reserve status, it won't much matter what paper investment you have (stocks, bonds, commodities, gold, silver), because who in the world is going to honor it?
Schiff expects gold and silver prices to rise to true value, yet expects the United States government to continue functioning.
If gold/silver went to the prices he expects (despite all the paper "gold" he owns), it won't make him rich(-er), but would make him poor.
Gold & silver are not an investment.
Gold & silver are INSURANCE!
And... like all insurance, you never want to be OVER-insured.
As long as the paper markets are around, gold and silver can only move so much and will never be priced at true value.
Paper markets will be around as long as the dollar is the world reserve currency.
If the dollar loses world reserve status, it won't much matter what paper investment you have (stocks, bonds, commodities, gold, silver), because who in the world is going to honor it?
Schiff expects gold and silver prices to rise to true value, yet expects the United States government to continue functioning.
If gold/silver went to the prices he expects (despite all the paper "gold" he owns), it won't make him rich(-er), but would make him poor.
Gold & silver are not an investment.
Gold & silver are INSURANCE!
And... like all insurance, you never want to be OVER-insured.
But his word is gospel to the likes of GREED.
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