Minimum Wage hike defeated.

[Cerbaho-WG]

There's a cost to raising wage floors, and that's more unemployment. This classic example is found in textbooks because, well, it is true. Those who have disagreed have stated that they don't like this proposition, but disliking an idea does not make it false.

 

Intuitively this makes sense in the world; many small businesses for example can only afford to pay individuals so much. So in a sense the socialist position of raising wage floors not only generates more unemployment, it helps big business at the expense of growing smaller businesses.

 

Raising the minimum wage isn't socialist, but believing that it is, as well as generalizing a labor market as perfectly competitive, is ignorant. I'd tend to believe that you're the kind of person who believes that unions are the economical antichrist, and some sort of Keynesian who believes that full employment is actually attainable. Anyone could abolish the minimum wage and I'd guarantee you that more unemployment would result because of it, not less.

 

You can make jokes all you want to but the fact remains that people in those jobs get paid what they do for a reason.  Its called supply and demand.  There are far too much unskilled labor in this country to support high wages for them.  But why let something like economic reality get in the way of a good emotional liberal cry-fest about the poor.

 

I'd love for you to then explain through supply and demand why CEOs of MNCs and oligarchs get paid hundreds upon hundreds more than the average worker. Through your logic, these people must be absolute f***ing geniuses, and people working minimum wage jobs are obviously doing something wrong because they're not rolling in cash. Kennedy and others aren't pushing for $40,000/year fastfood jobs, they're asking for money to sustain the cost of living, and I don't see why this is such a huge problem. It's always been the laissez-faire argument that the economy isn't to blame for people being where they are, it's the people's fault.

[3E8]

Rex --

 

Supply and demand isn't a difficult concept to understand. I suppose that you would have me believe that in the world as the price of an arbitrary good increases, more people buy it, or that increases in supply raise prices. Analytically, this isn't the case, and it isn't what we find in markets, including the labor market, either. The idea is rock solid.

 

If you're still not convinced, I recommend looking at other industrialized countries of the world. In Germany, for instance, the unemployment rate is 13%, while in Japan and the United States the unemployment rate remains under 5% even in sluggish economic conditions. There are reasons for this, and wage floors are one of them. Germany, for instance, has very high rates of unionization, and the bottom union wage, much higher than the minimum wage in the United States, is the de facto minimum wage.

 

I'm not denying that it is possible for a growing economy to absorb losses in employment caused by wage floors. I'm merely pointing out that there will be some unemployment one has to take into account. There is no free lunch.

 

I don't think Germany's unemployment rate is that high. It's closer to 11%. In addition, it's not like this is very typical for Germany. Their current unemployment rates are the highest they've experienced in about 70 years.

[JHBowden]

cerbaho--

 

It was claimed that wage floors don't put people out of work because there is a dislike of the fact that many CEO's of many very large companies are paid too much. That's not an argument my friend.

 

The problem with increasing the existing wage floor is that it will put people out of work. That's life, no matter how much love and good intentions one has for low-wage earners.

 

I'm not saying it is prudent for large corporations to overpay their CEO's, but if the stockholders are cool with it, it isn't my decision. There is a reason why 16 year-olds still in high school and housewives without skills aren't running these companies, and I shouldn't have to spell it out. Moreover, most people don't run corporations for good reasons -- they didn't get into Harvard Business School, they don't like the risk and hassle of starting and/or running a company, or, as in my case, they simply don't like the corporate environment.

 

Compared to most people, I am a "f***ing genius," but I'm not the only one, which is why scientific research isn't as remunerative as, let us say, knocking in 100 runs for the Chicago White Sox.

Edited October 31, 2005 by JHBowden

[jackie hayes]

Most careful studies have found that increasing the minimum wage has no effect on jobs. Probably that's not quite true, and there are some measurement questions about those results -- but the effect will be very small.

[Balta1701]

If you're still not convinced, I recommend looking at other industrialized countries of the world. In Germany, for instance, the unemployment rate is 13%, while in Japan and the United States the unemployment rate remains under 5% even in sluggish economic conditions. There are reasons for this, and wage floors are one of them. Germany, for instance, has very high rates of unionization, and the bottom union wage, much higher than the minimum wage in the United States, is the de facto minimum wage.

Ok, this is one of those issues close to my heart for some strange statistical reason, so I have to chime in now.

 

It is totally impossible to take the current "US Unemployment percentage" and compare it to anything, whether it is the unemployment rate in another country, or even the unemployment rate in the U.S. 5 years ago.

 

Why? Because that number has become the single most heavily politically spun number in existence.

 

In the past decade or so, the way that number is calculated has undergone several fundamental shifts that no one has been told about. First and foremost, in 2002-2003, the Department of Labor phased in what they call the "Birth/Death" model indicator, which is basically a statistical trick designed to account for jobs the government basically assumes are being created based on past performance...but I for one have virtually no confidence in this number...it is included as-is in the unemployment figures every month, but never are we given a margin of error on the number. The margin of error on that number has to be huge, somewhere between 10's of thousands to hundreds of thousands depending on how rapidly shifts are taking place in the economy. Even the DOL admits that their model currently cannot account for rapid shifts in employment, and it will tend to smear them out.

 

Furthermore...the unemployment percentage does not count people who go on programs like disability, government assistance, etc. The numbers of these folks have absolutely exploded in the past 5 years...increasing by an amount in the millions.

 

On top of that, the unemployment percentage draws some sort of line along the long-term unemployed, such that people who reach a point where they stop looking for jobs are also not counted. This number has also dramatically increased under the Bush administration.

 

With these facts, I contend that it is absolutely impossible to judge anything using the unemployment percentage, because the number it measures is actually meaningless. It measures the percentage of a certain portion of the labor market which is employed, but it ignores a portion of the labor market where the unemployemnt is much higher - the long-term unemployed and others.

 

Here are a few sources (data linked to by Brad Delong...used since his site has free access only) that illustrate this phenomenon. The "unemployment rate" has become decoupled from other indicators such as the percentage of the total population which is employed, which is what we'd really like to understand.

 

Link 1

Link 2

[kapkomet]

The unemployment rate for MANY reasons is skewed, no matter what you want to use it for.

[jackie hayes]

In the past decade or so, the way that number is calculated has undergone several fundamental shifts that no one has been told about.  First and foremost, in 2002-2003, the Department of Labor phased in what they call the "Birth/Death" model indicator, which is basically a statistical trick designed to account for jobs the government basically assumes are being created based on past performance...but I for one have virtually no confidence in this number...it is included as-is in the unemployment figures every month, but never are we given a margin of error on the number.  The margin of error on that number has to be huge, somewhere between 10's of thousands to hundreds of thousands depending on how rapidly shifts are taking place in the economy. Even the DOL admits that their model currently cannot account for rapid shifts in employment, and it will tend to smear them out. 

Can you point to something which states that this adjustment is done on the Household Survey data (from which the unemployment rate is derived)? B/c I can only find evidence that the adjustment is made on Establishment Survey data (which is not used to calculate the unemployment rate), and really, it wouldn't make any sense to use it on Household Survey data.

[Balta1701]

Can you point to something which states that this adjustment is done on the Household Survey data (from which the unemployment rate is derived)?  B/c I can only find evidence that the adjustment is made on Establishment Survey data (which is not used to calculate the unemployment rate), and really, it wouldn't make any sense to use it on Household Survey data.

No I can't right now and I think you're right...I don't think I should have included that in my rant at present, but I believe my point still stands about the nature of the household survey, and I still don't like the B/D model anyway. It works and is useful, but it needs to have a published margin of error in any given month.

[Rex Kickass]

Germany's 10% unemployment rate takes into account people that we would consider "no longer in the workplace," i.e. people not having been in a job for longer than six months.

[Texsox]

cerbaho--

 

The problem with increasing the existing wage floor is that it will put people out of work. That's life, no matter how much love and good intentions one has for low-wage earners.

 

 

 

 

You are assuming that corporations currently have, on their payrolls, people whose job is not essential. People who can be laid off if their pay is increased $40 per week.

 

Not in any companies I have worked for in the past 20 years. Lean is the mode of business. What will happen is middle earners will be squeezed. The top execs will get their piece of the pie but the level or two above minimum will stagnate until the effects of the minimum wage is absorbed.

 

The above was not based on college economic courses, just based on years as a business owner, corporate salaryman, and middle manager.

[Balta1701]

Not in any companies I have worked for in the past 20 years. Lean is the mode of business. What will happen is middle earners will be squeezed. The top execs will get their piece of the pie but the level or two above minimum will stagnate until the effects of the minimum wage is absorbed.

Which is, by the way, an absolute cry out for reform of the way corporate governance is handled in this country.

[SleepyWhiteSox]

or, as in my case, they simply don't like the corporate environment.

 

Compared to most people, I am a "f***ing genius,"

 

You forgot "humble"...