HERE IS A PIECE OF AN ESSAY I AM EMAILING TO EVERY JOURNALIST ON A NEWSPAPER OF 100,000 CIRCULATION OR MORE. As a 30 year taxi driver (N.Y., Chicago, S.F) I am flabbergasted at the shallowness of professional economists’ thinking on the minimum wage — even Card’s and Krueger’s. And that old 101 supply and demand chart: it should have a separate line denoting how big a component of the product’s price is labor cost (typically around 10% — fast food way up there at 33%) — said line making plain that a 10% increase in labor’s price typically means only a 1% increase in the product’s price; a thought that seems totally missing from PhD. heads as far as I have ever been able sense. ??? ****** Decades of de-unionization have left half our hourly wage workforce earning less than what the minimum wage woulda-coulda-shoulda been. Today’s median (not minimum) wage is $15/hr.
LBJ’s 1968 minimum was $10.15/hr ($1.60/hr adjusted). Doubled per capita output since 1968 — as jet engines, copying machines (put millions of pool typists out or work), computers and improvements in between made us twice as productive per capita – would expect the minimum wage to increase at least 50% — to $15/hr.
After the “big” $2.10/hr federal minimum wage hike, in early 2007, it remains $3/hr below LBJ’s. A $15/hr federal minimum wage would give half of America’s hourly wage earners a raise at an easily computed cost of 3% direct inflation. My Chicago neighborhood Mac’s traffic seemed to go up with Governor Blagojevich’s $8/hr minimum wage (Ike’s 1956 level!) – mostly in the third world end.
well, i don’t know why an increase in wages should lead to an increase in inflation. lets say you add a dime or thirty cents to the cost of that sawdustburger. since all the competitors have had to increase wages the same, they increase prices the same. then most people just pay the extra 30 cents and don’t even notice it. maybe a few decide to bring a pnut butter sandwich to work, in either case there is no pressure to raise prices generally. just at the end of the week the consumer has a dollar fifty less to spend on something else. he won’t even notice, let alone clamor for a raise.
to get inflation you have to have a general expectation of higher prices that feeds on itself.
i don’t know what “most economists” think inflation is, but from what i have read… including the real Samuelson’s Econ 101…. they don’t think. [the real Samuelson thought it came from people sitting around unemployment offices refusing to take jobs until they were offered unsustainable wages… ]
Dentists — oral surgeons for sure — seem to have doubled their prices in real terms over the last 15 years. I had root canal done for $500 around 1996. At the same place it was $1400 for the exact same procedure recently — which seem universal; I checked for a cheaper price around the country.
Maybe dentists watching medical prices double and redouble because of new treatments figured they could double theirs for the same old and nobody would notice. ???
Crazy idea: freeze today’ prices and then tax enough off those prices to put dental coverage back in Medicaid. Better yet, government dental insurance for all back at the old price level (allow for average income increase since 1996 — which average I suspect medical doctors have not kept up with since the early 70s; which may be why cutting doctors fees are the wrong place to look for Medicare and Medicaid savings) paid for with a dental tax that would take less than they pay from everybody on the average.
Good idea for a dental care dictator. For current democracy: make enough stink about doubling dental prices — looking like under cover of exploding medical prices — and something like the above might get done (whenever Democrats go back to being 1960 Democrats)
i don’t follow the logic. you got that money by taking it away from people who had more… i don’t have a problem with that, but i don’t see where the inflation comes from.
meanwhile my earlier objection still stands. you can raise wages without causing inflation unless there is some “mechanism” in the economy that leads the raise to cascade through most other employees and prices. which would make it problematic about what you accomplished by raising their wages in the first place.
i am all for dental insurance for the masses. and i see no reason why it can’t be done with a tax… except the usual politics. but i have my doubts about your equations. for one thing a tripling in price over fifteen years looks fairly close to me to average “inflation” as i experience it in my life, as opposed to whatever it is the CPI measures.
don’t like price freezes or dictators. but the way the hard right is going, we may get them yet.
i went to a dentist about fifteen years ago. she wanted 3500 to do a root canal. i went to another dentist. he repaired the cavity for 80 bucks. no problem since.
Between the $500 root canal and the $1400 price — prices overall only increased 50% — so the procedure would only have cost $750 if inflation were the only factor.
I follow what you are saying wrt. raising wages and inflation. However, for that to happen producers must be able to raise prices, which, depending on the industry, can be a very difficult thing to do. So if the producer is unable to raise prices, he would bear the brunt of the increase in cost, which impacts investment.
As a low wage employer, I can tell you that the minimum wage has significantly screwed up the labor market here in Oregon, which has one of the highest minimum wages in the country, $8.50/hr.
1) When you add FICA match, workman’s comp, mass transit tax, unemployment insurance etc. (believe it or not I got a bill from Oregon for $1,000+ dollars labelled “Employment Tax”)on top of that you are looking at maybe $12 per hour, for unskilled labor. It can be difficult for employers to to justify the extra $100 per day in costs based on productivity of unskilled labor. Result: less jobs.
2) The OR minimum wage does not exempt waiters and bartenders, whose compensation in tips is several times the minimum wage. As a result, except for high end restaurants, traditional entry level jobs, such as bus boy and bar back jobs have disappeared.
3) I can put an ad on Craigslist for $9/hr. and get 100 applicants with experience and skills. The new labor force entrant has NO CHANCE at $8.50/hr.
4) Finally, the OR unemployment benefit is very generous – $400 per week (or $10 per hour) + food stamps. As a result, many people willingly languish on unemployment benefits rather than take relatively low paying jobs. (I have a friend, who has considerable assets, that has been going to school for the past 2 years while collecting unemployment). There is a thriving black market in labor also. If someone calls in sick, I have a list of people that will come in and work on a cash basis so as to preserve their safety net benefits.
Is it any wonder that Portland, a relatively thriving city in general, has one of the highest unemployment rates in the country?
So an increase in the minimum wage might not cause inflation, but instead affects investment and employment, which is being borne out in the data.
Well, if you can’t pay a living wage, maybe we don’t need your business.
You see, “productivity” is not a measure of the stupidity of the worker. It is a measure of how much the economy values the product.
sure some people aren’t worth the min wage. but if you can get 100 applicants at 9 an hour, someone else can get 99 at 8.50 and hour. especially if the word is out that as an employer you reward competence with early raises.
What you would like is a business environment similar to what exists in China? All you provide in a breakfatst, lunch, a snack if they work OT, and transortation back and forth to work. Your issue is not direct labor and the ~10% of the cost of manufacturing it typically represents. You have a problem with burden. Can I build a plant next to your home or your kids school and create another Hooker Chemical dump or posion the water with Hexavalent Chromium? Why do we need zoning laws or planning commissions as business is responsible?
That China is not budened with such laws is why it is easier to have a profit there than in the US. It has nothing or very little to do with direct labor costs.
well, while we’re waiting for spencer’s report, i now have my weekly letter posted, which includes some background on how the two surveys of the unemployment reports are arrived at, if anyone’s interested: notes on the week ended Sept 3rd
I don’t see where you have considered the effect of a rise in the minimum wage… so that all your competitors are facing the same higher labor cost. They and you should be able to raise your prices and not suffer a competitive disadvantage. I doubt many people would skip that happy meal if it cost them an extra quarter.
The other thing you don’t seem to have considered is what if you took home 30,000 less per year so each of your workers could take home 3000 more.
and for what it’s worth, when my daughter was in the fast food business she said she could not hire competent help at min wage. so she had to pay more, be more careful who she hired, or kept, and be a more efficient manager.
Thirty years of free trade and open borders has caused the “skilled laborer” to sell his his life for nine bucks an hour relative to four dollar a gallon gas. How many more years before that “skilled worker has to work for more than an hour to buy a gallon of gas?
Gaddafi held the price of gasoline to 14 US cents per gallon. He founded a banking system that gave interest free loans to all Libyans. Libya provided free health care and education to all it’s citizens as well. Each Libyan family was given 50,000 dollars to buy a house. Gaddifi even tried to give the black man a leg up. If I had to pick between two African’s I’d take Maummar over Obama any day of the week.
Sammy, Quick reply, though it deserves a deeper one, which I am working towards (some day): After the Illinois minimum wage jumped pretty quickly from $5.15/hr to $8/hr (the 1956 federal minimum adjusted!) business in my average middle class neighborhood McDonalds took a noticeable (as in I’m not the only one who noticed) upturn — mostly in the third world end (Mexican). Their employees were starting to be able to buy what they sold. Fast food product costs is 33% labor — the highest.
Wave a magic wand and make the minimum $15/hr and half the country gets a raise — the half that patronizes McDonalds. Ditto for other products. 3% direct inflation is not going to kill business the way new buying power is going to help (so says I anyway :-]). But you get the gist.
LBJ went to $10/hr in one jump at half today’s average income. Nixon went to $9/hr in one jump at 60%.
American wages have been involved in a race to the bottom since 1973. No force of nature says wages have to be at such a low level (by early 2007, LBJ’s minimum had dropped almost in half while the average income doubled — 1968 Americans would have wondered what happened; a comet strike? :-]).
Together with sector-wide labor negotiations the idea is to move money back to the whole field who have fallen behind — starts from 90 percentile earners down believe it or not — the biggest jump on the bottom of course. The whole field like in a magnetic field. Has to be doable or most of us had better move to Germany with the Arabs. 🙂
It depends on 1) what industry you are in, and 2) what you raise the minimum wage to.
I don’t know what you consider a “living wage” but let’s just say it is $15 per hour, or a 50% hike over current (unloaded) costs. If labor costs are 33% of total costs, this implies an approximate 17% increase in prices making a $10 tab nearly $12, much more than the “quarter” you mentioned. In addition, the labor involved in getting the raw material to me will have increased say 18%, so to stay even my prices will go up $34%, making a $10 tab $13.40. Would this cause people to brown bag it? Probably. So a lot more people get canned, and a lot of businesses suffer or go under. Not to mention the people having to brown bag it, instead of a nice hot lunch.
If one were in a more labor intensive business, say landscaping or maid service, the owner would have to raise prices 50%, making “do it yourself” a lot more attractive. Again more jobs lost, and more people having to do their own work or having a crappy house.
Finally, if you are in a business that competes against foreign labor you will immediately find yourself at even more of a disadvantage as you will not have the your competitors having to raise their costs.
So, as usual, your uninformed and sanctimonious commentary is misguided.
please notice who started the “ad hominem” crap this time. i’d invite you to examine the reality of your fantasy projections if you showed the least ability to think.
No force of nature says wages have to be at such a low level
No, but markets do.
Good luck on your project. I get what you are saying, but from where I am sitting, raising the minimum wage will to $15 will cost a lot a lot of jobs and therefore purchasing power for the bottom percentiles than will be gained. Only 1 in 3 minimum wage employees has to lose his job for it to be a wash. I guess you can factor in unemployment benefits, but then you’d have big increases in unemployment insurance costs.
Try selling your choice to the families and friends of the 270 individuals who died as a result of the bombing of Pan Am flight 103. Too bad President Reagan didn’t finish the job and kill Gaddifi.
Sammy, No force of nature says wages have to be at such a low level
No, but markets do.
Yes, a labor market where there is no ability to withhold your labor if you don’t get the price you want — you can go down to the next place to work but that hardly supplies the same bargaining power. The minimum wage has that same pay or close up effect.
I should note here that the minimum wage is the lessor of the two things I want — the bigger is sector wide labor agreements where everyone doing the same job in the same locale works under a single, uniform contract. That prevents the race to the bottom which race undermines labor’s ability to withhold when each employers says in turn I have to pay less because the competition is cutting pay — another deadly bargaining power leak even if you have a union. Look at what Wal-Mart is doing to the supermarket union contracts.
Ironically sector-wide was invented to avoid the race to the top by labor after WWII — so more money could go into rebuilding — the welfare state was to compensate for sector-wide — which seem to create a perfectly fair and balanced labor market (read: no leaks of labor’s bargaining power?)
Here is the middle third of my essay of last week — on sector-wide: Opps; message must not contain more than 10000 characters; I’ll post it below. 🙂
Sammy you also have to calculate how many jobs are created by the maids and landscapers and other minimum wage earners who would have more money to spend and, indeed, would spend it. Though not on maids and landscapers. Also, some people who hire landscapers and maids would either absorb the increased cost because they can afford it or would choose to spend there money on other things. You are overstating the problem of lost jobs–it’s not at all clear that the net would be negative and it probably would be positive, as has been the case in the past. But clearly there would be winners and losers–that’s why this is a political issue–and the impact would look different depending on where you “sit.” In general, I’d think a raise in the minimum wage would put a little upward pressure on non-management wages, thereby increasing demand that currently is quite depressed in our economy. It also would put a little upward pressure on inflation–though far less than ddrew calculates–at a time when inflation is low.
i did say a quarter for the happy meal. if happy meals are 10 bucks at Sammy’s restaurant, the increase would indeed be two dollars as he says. But as a sometimes eater in restaurants i can say that even i would not notice a difference of two dollars on a ten dollar meal.
on the other hand i wouldn’t propose an increase in min wage to $15/hr either. I’d take the incremental approach.
And sammy forgets that the whole point of a minimum wage is to address the “market” failure that results in a large number of people working for poverty wages.
there is a lot to be said for “do it yourself.” maybe those one in three kids who lose their min wage jobs could spend the time learning a useful trade.
i put ad hominem in quotes to remind you that you don’t know what the expression means. i had been careful to avoid any sanctimonious or insulting commentary. As for uninformed… well, i can’t control what i don’t know. But inviting you to inform me doesn’t seem to have gotten either of us anywhere.
fact is, Sammy, you… and MG and CoRev…. are the regular resorters to offensive language and cheap rhetorical tricks to cover the fact that you haven’t got a case.
While I am flattered you have picked up my “factual descriptions” line, you aren’t qualified to make the distinction.
I have hated Maummar sinse I can remember. Particullarly after the Berlin disco bombing. I celibrated when president Reagan bombed him.
What makes me mad now is that Obama totally ignored congress and the constitution and used instead a UN mandate as a fig leaf for a war against a people who have not attacked us.
That the French, British and American intellegence services acted in concert to over throw Gaddafi, while all the while deceiving thier citizens that they where subverting the Libyan government, shows for all that there is a deep government that controlls western democracies, and is in no way beholden to the will of the people.
I have always liked populist nationalist leaders, but they are anathema to those who aspire towards global governance, and to me global governance means global tyranny.
Like all good revolutionaries Gaddafi is part Jewish. His grandma converted to Islam to marry his grandfather. Looking at Gaddifi’s nappy head makes me believe that there is more then a jew in the wood pile.
Gaddifi was a propenent of sound money. Now Libya will be just another country that is part of the Rothschild debt based fractional reserve hell.
i’m not even sure there would be “losers.” People like sammy just knee jerk a response that has no analysis whatsoever, based on the idea that any increase in their costs is bad. Compensating consequences are way beyond what they can think of in their busy day.
People from the North who visited the Ante Bellum South were struck by the level of poverty there. A level that Southerners managed to preserve for a hundred years after they lost the War, by preserving the low-wage, slavery in all but name, conditions they had taught themselves to believe were necessary to their own safety if not prosperity. These are the same people and the same ideas that are preaching low wages, low taxes, pfreedom today. Their rhetoric is unchanged from the editorial pages of 1850.
The Pan Am flight bombing was two years after Reagan bombed Libya.
Evidence is coming to light that Gaddifi’s adopted daughter was not really killed during the US bombing of Libya. Looks like Muammar might have lied about that one.
i got a little annoyed with Godaffy when he was accusing the Bulgarian nurses of infecting Libyans with AIDS. I even proposed a Buff type solution and made enemies of all my friends… the peace at any price folks who don’t think the under dog is ever a son of a bitch who will murder you in your sleep if you don’t make him afraid of you.
But, y’know, there are manlier ways of making him afraid than murdering his children from a high altitude.
Does that mean I was bluffing about Buff? maybe, but I was also letting you know how i felt… a distinction hard for some of our listeners to make. As it happened wiser heads than mine solved the problem. They paid the ransom.
I have no knowledge whatsoever of the recent events in Libya. But I think I smell oil.
and maybe i’ll have to give up my faith in fractional reserve that i learned along with free trade.
but from out here in neither a borrower nor a lender land, it seems to me that fractional reserve banking is a good enough idea, if the borrowers and lenders are not fools and crooks.
even i would not propose a 50% increase in the minimum wage all at once. and there is no evidence that previous incremental increases have resulted in net job losses at all. which tells you how complicated those econometric models are.
but its good of sammy to propose that the rest of us pay for his labor force with a tax for EITC, not that Sammy favors taxes or government programs, or subsidies for businesses.
and we note he paid no attention whatsoever to ddrew2u’s report that an increase in the min wage led to an increase in business at the local macdonaldses… presumably by putting money in the pockets of people who would eat if they could afford to.
coberly – “fact is, Sammy, you… and MG and CoRev…. are the regular resorters to offensive language and cheap rhetorical tricks to cover the fact that you haven’t got a case.”
Standard con game from coberly, trying to attack others who aren’t involved in an ongoing discussion. LOL.
Have you followed the rich Morman approach to slave labor? People like Bill Marriot Think Mitt Romney who though Bain Capitals has a ownership position in Marriot Hotels and the Morman church which runs a ranch in Florida that is so big it comprises one percent of Florida, yet claims it only has seventy employes. These rich Mormans have gotten laws passed that them to expand the number of Mexican workers who can come legally into the US.
Marriot does not really even want American workers. Marriot Hotels advertise job openings directly to Mexican population in Mexico. Romney and Marriot each got there billions, but thats not enough for those greedy bastard’s. By dumping additional labor onto a market that already has high unemployment, these rich Mormons are driving down the price of American labor, and spitting on the very text of their church doctrine of common consent, because the majority of the church membership is opposed to this new guest worker law.
Mitt Romney might be smooth and competent, but a Samuel Gompers he is not.
Fractional reserve banking by its very nature concentrates a nations wealth into the hands of the few, and must have an ever expanding base, or it will collaspse. Think about it. Under it’s original charter the Bank of England was able to issue bank notes for twice the amount of gold it had in it’s vault. For instance if the bank had 100,000 pounds sterling in it’s vault, it was allowed to loan and expect payment of 200,000 pounds sterling plus interest.
Fractional reserve banking means the money supply must always expand, or else bankers cannot be repaid.
The bank of England is the product of rulers desperate for money and bankers eager for access to the crown’s ablity to tax the English people. This enabled the government to wage war and or suppress the people on credit, and the bankers got the oportunity to make money. Literally.
Today the guys who own the bank of England also have a ownership position in the Federal Reserve bank as well as most other European central banks, so they can pretty much call the shots.
What was in it for the English? England’s best sons died at Passchendaele and thousands of others pointless battles. They brought opprobruim and shame upon England for the profit of bankers. Today Caliban is more at home in Londen then is an Englishman.
all that may be true. But it seems to me to be a little hard to lay at the feet of fractional reserve.
it’s a little like blaming war on the invention of K-rations.
I don’t think holding the “money” supply constant, or hostage to the luck of gold prospectors, makes nearly as much sense as looking at a guy’s business plan and deciding to lend him some money to give it a try, while keeping a “reserve” to pay the people you have borrowed the money from in case they have a sudden need for it.
over the long run you expect to guess right more often than not about the business plan, and you don’t expect everybody in the country to demand their “money” back at the same time. of course if they do, the government just prints more dollar bills, and doesn’t tell anybody. no one panics. and as long as the guys who borrowed the money and can’t pay it back are not a huge percent of the economy,,, well, no one gets hurt.
i think i like the idea of having a public bank compete with the private ones. surely it could be structured so that it was not “tax supported” but simply offered an honest business model.
on the other hand, corruption in government is not unheard of and there is some danger in too much power in the hands of government… as there is danger in too little… so i’d be a little slow to close the doors of the private banks.
meanwhile i got a little lost in the transition from fractional reserve to public banking.
again, that’s all very likely. but what does it have to do with fractional reserve? Buff says the reason NoDak is so prosperous is because of all the tourists who go there to escape the heat in Texas.
Zero.
Sandwichman,
Can I quote you?
Zero???
speaking of zeo, is spencer going to be covering the employment report this month?
LEFT THIS COMMENT YESTERDAY TO ARIN DUBE’S POST AT RORTYBOMB: [ http://rortybomb.wordpress.com/2011/09/01/guest-post-minimum-wage-laws-and-the-labor-market-what-have-we-learned-since-card-and-krueger%E2%80%99s-book-myth-and-measurement/ ]
HERE IS A PIECE OF AN ESSAY I AM EMAILING TO EVERY JOURNALIST ON A NEWSPAPER OF 100,000 CIRCULATION OR MORE. As a 30 year taxi driver (N.Y., Chicago, S.F) I am flabbergasted at the shallowness of professional economists’ thinking on the minimum wage — even Card’s and Krueger’s. And that old 101 supply and demand chart: it should have a separate line denoting how big a component of the product’s price is labor cost (typically around 10% — fast food way up there at 33%) — said line making plain that a 10% increase in labor’s price typically means only a 1% increase in the product’s price; a thought that seems totally missing from PhD. heads as far as I have ever been able sense. ???
******
Decades of de-unionization have left half our hourly wage workforce earning less than what the minimum wage woulda-coulda-shoulda been. Today’s median (not minimum) wage is $15/hr.
LBJ’s 1968 minimum was $10.15/hr ($1.60/hr adjusted). Doubled per capita output since 1968 — as jet engines, copying machines (put millions of pool typists out or work), computers and improvements in between made us twice as productive per capita – would expect the minimum wage to increase at least 50% — to $15/hr.
After the “big” $2.10/hr federal minimum wage hike, in early 2007, it remains $3/hr below LBJ’s. A $15/hr federal minimum wage would give half of America’s hourly wage earners a raise at an easily computed cost of 3% direct inflation. My Chicago neighborhood Mac’s traffic seemed to go up with Governor Blagojevich’s $8/hr minimum wage (Ike’s 1956 level!) – mostly in the third world end.
ENTIRE ESSAY AT: http://ontodayspage.blogspot.com/2011/08/normal-0-for-30-years-republicans-have.html
ddrew
well, i don’t know why an increase in wages should lead to an increase in inflation. lets say you add a dime or thirty cents to the cost of that sawdustburger. since all the competitors have had to increase wages the same, they increase prices the same. then most people just pay the extra 30 cents and don’t even notice it. maybe a few decide to bring a pnut butter sandwich to work, in either case there is no pressure to raise prices generally. just at the end of the week the consumer has a dollar fifty less to spend on something else. he won’t even notice, let alone clamor for a raise.
to get inflation you have to have a general expectation of higher prices that feeds on itself.
i don’t know what “most economists” think inflation is, but from what i have read… including the real Samuelson’s Econ 101…. they don’t think. [the real Samuelson thought it came from people sitting around unemployment offices refusing to take jobs until they were offered unsustainable wages… ]
ddrew
i have to say i don’t understand a word you said. i still don’t see why an increase in min wage leads to an “easily calculated 3% inflation.”
Spencer came back from vacation to downed trees and non-functional wifi, even at a neighbor’s. He will try. He did get an e-mail out.
Dentists — oral surgeons for sure — seem to have doubled their prices in real terms over the last 15 years. I had root canal done for $500 around 1996. At the same place it was $1400 for the exact same procedure recently — which seem universal; I checked for a cheaper price around the country.
Maybe dentists watching medical prices double and redouble because of new treatments figured they could double theirs for the same old and nobody would notice. ???
Crazy idea: freeze today’ prices and then tax enough off those prices to put dental coverage back in Medicaid. Better yet, government dental insurance for all back at the old price level (allow for average income increase since 1996 — which average I suspect medical doctors have not kept up with since the early 70s; which may be why cutting doctors fees are the wrong place to look for Medicare and Medicaid savings) paid for with a dental tax that would take less than they pay from everybody on the average.
Good idea for a dental care dictator. For current democracy: make enough stink about doubling dental prices — looking like under cover of exploding medical prices — and something like the above might get done (whenever Democrats go back to being 1960 Democrats)
Just a couple of crazy equations.
ddrew
i don’t follow the logic. you got that money by taking it away from people who had more… i don’t have a problem with that, but i don’t see where the inflation comes from.
meanwhile my earlier objection still stands. you can raise wages without causing inflation unless there is some “mechanism” in the economy that leads the raise to cascade through most other employees and prices. which would make it problematic about what you accomplished by raising their wages in the first place.
ddrew
i am all for dental insurance for the masses. and i see no reason why it can’t be done with a tax… except the usual politics. but i have my doubts about your equations. for one thing a tripling in price over fifteen years looks fairly close to me to average “inflation” as i experience it in my life, as opposed to whatever it is the CPI measures.
don’t like price freezes or dictators. but the way the hard right is going, we may get them yet.
just a word
i went to a dentist about fifteen years ago. she wanted 3500 to do a root canal. i went to another dentist. he repaired the cavity for 80 bucks. no problem since.
there is a moral to this story.
Between the $500 root canal and the $1400 price — prices overall only increased 50% — so the procedure would only have cost $750 if inflation were the only factor.
ddrew,
I follow what you are saying wrt. raising wages and inflation. However, for that to happen producers must be able to raise prices, which, depending on the industry, can be a very difficult thing to do. So if the producer is unable to raise prices, he would bear the brunt of the increase in cost, which impacts investment.
As a low wage employer, I can tell you that the minimum wage has significantly screwed up the labor market here in Oregon, which has one of the highest minimum wages in the country, $8.50/hr.
1) When you add FICA match, workman’s comp, mass transit tax, unemployment insurance etc. (believe it or not I got a bill from Oregon for $1,000+ dollars labelled “Employment Tax”)on top of that you are looking at maybe $12 per hour, for unskilled labor. It can be difficult for employers to to justify the extra $100 per day in costs based on productivity of unskilled labor. Result: less jobs.
2) The OR minimum wage does not exempt waiters and bartenders, whose compensation in tips is several times the minimum wage. As a result, except for high end restaurants, traditional entry level jobs, such as bus boy and bar back jobs have disappeared.
3) I can put an ad on Craigslist for $9/hr. and get 100 applicants with experience and skills. The new labor force entrant has NO CHANCE at $8.50/hr.
4) Finally, the OR unemployment benefit is very generous – $400 per week (or $10 per hour) + food stamps. As a result, many people willingly languish on unemployment benefits rather than take relatively low paying jobs. (I have a friend, who has considerable assets, that has been going to school for the past 2 years while collecting unemployment). There is a thriving black market in labor also. If someone calls in sick, I have a list of people that will come in and work on a cash basis so as to preserve their safety net benefits.
Is it any wonder that Portland, a relatively thriving city in general, has one of the highest unemployment rates in the country?
So an increase in the minimum wage might not cause inflation, but instead affects investment and employment, which is being borne out in the data.
Well, if you can’t pay a living wage, maybe we don’t need your business.
You see, “productivity” is not a measure of the stupidity of the worker. It is a measure of how much the economy values the product.
sure some people aren’t worth the min wage. but if you can get 100 applicants at 9 an hour, someone else can get 99 at 8.50 and hour. especially if the word is out that as an employer you reward competence with early raises.
So Sammy:
What you would like is a business environment similar to what exists in China? All you provide in a breakfatst, lunch, a snack if they work OT, and transortation back and forth to work. Your issue is not direct labor and the ~10% of the cost of manufacturing it typically represents. You have a problem with burden. Can I build a plant next to your home or your kids school and create another Hooker Chemical dump or posion the water with Hexavalent Chromium? Why do we need zoning laws or planning commissions as business is responsible?
That China is not budened with such laws is why it is easier to have a profit there than in the US. It has nothing or very little to do with direct labor costs.
well, while we’re waiting for spencer’s report, i now have my weekly letter posted, which includes some background on how the two surveys of the unemployment reports are arrived at, if anyone’s interested:
notes on the week ended Sept 3rd
Sammy,
I don’t see where you have considered the effect of a rise in the minimum wage… so that all your competitors are facing the same higher labor cost. They and you should be able to raise your prices and not suffer a competitive disadvantage. I doubt many people would skip that happy meal if it cost them an extra quarter.
The other thing you don’t seem to have considered is what if you took home 30,000 less per year so each of your workers could take home 3000 more.
and for what it’s worth, when my daughter was in the fast food business she said she could not hire competent help at min wage. so she had to pay more, be more careful who she hired, or kept, and be a more efficient manager.
tough, i know.
Thirty years of free trade and open borders has caused the “skilled laborer” to sell his his life for nine bucks an hour relative to four dollar a gallon gas. How many more years before that “skilled worker has to work for more than an hour to buy a gallon of gas?
Gaddafi held the price of gasoline to 14 US cents per gallon. He founded a banking system that gave interest free loans to all Libyans. Libya provided free health care and education to all it’s citizens as well. Each Libyan family was given 50,000 dollars to buy a house. Gaddifi even tried to give the black man a leg up. If I had to pick between two African’s I’d take Maummar over Obama any day of the week.
Sammy,
Quick reply, though it deserves a deeper one, which I am working towards (some day): After the Illinois minimum wage jumped pretty quickly from $5.15/hr to $8/hr (the 1956 federal minimum adjusted!) business in my average middle class neighborhood McDonalds took a noticeable (as in I’m not the only one who noticed) upturn — mostly in the third world end (Mexican). Their employees were starting to be able to buy what they sold. Fast food product costs is 33% labor — the highest.
Wave a magic wand and make the minimum $15/hr and half the country gets a raise — the half that patronizes McDonalds. Ditto for other products. 3% direct inflation is not going to kill business the way new buying power is going to help (so says I anyway :-]). But you get the gist.
LBJ went to $10/hr in one jump at half today’s average income. Nixon went to $9/hr in one jump at 60%.
American wages have been involved in a race to the bottom since 1973. No force of nature says wages have to be at such a low level (by early 2007, LBJ’s minimum had dropped almost in half while the average income doubled — 1968 Americans would have wondered what happened; a comet strike? :-]).
Together with sector-wide labor negotiations the idea is to move money back to the whole field who have fallen behind — starts from 90 percentile earners down believe it or not — the biggest jump on the bottom of course. The whole field like in a magnetic field. Has to be doable or most of us had better move to Germany with the Arabs. 🙂
coberly,
It depends on 1) what industry you are in, and 2) what you raise the minimum wage to.
I don’t know what you consider a “living wage” but let’s just say it is $15 per hour, or a 50% hike over current (unloaded) costs. If labor costs are 33% of total costs, this implies an approximate 17% increase in prices making a $10 tab nearly $12, much more than the “quarter” you mentioned. In addition, the labor involved in getting the raw material to me will have increased say 18%, so to stay even my prices will go up $34%, making a $10 tab $13.40. Would this cause people to brown bag it? Probably. So a lot more people get canned, and a lot of businesses suffer or go under. Not to mention the people having to brown bag it, instead of a nice hot lunch.
If one were in a more labor intensive business, say landscaping or maid service, the owner would have to raise prices 50%, making “do it yourself” a lot more attractive. Again more jobs lost, and more people having to do their own work or having a crappy house.
Finally, if you are in a business that competes against foreign labor you will immediately find yourself at even more of a disadvantage as you will not have the your competitors having to raise their costs.
So, as usual, your uninformed and sanctimonious commentary is misguided.
Sammy
please notice who started the “ad hominem” crap this time. i’d invite you to examine the reality of your fantasy projections if you showed the least ability to think.
Ddrew,
No force of nature says wages have to be at such a low level
No, but markets do.
Good luck on your project. I get what you are saying, but from where I am sitting, raising the minimum wage will to $15 will cost a lot a lot of jobs and therefore purchasing power for the bottom percentiles than will be gained. Only 1 in 3 minimum wage employees has to lose his job for it to be a wash. I guess you can factor in unemployment benefits, but then you’d have big increases in unemployment insurance costs.
coberly,
“Uniformed,” “sanctimonious” and “misguided” are not ad hominems. They are factual descriptions of your comentary, and rather polite ones at that.
runxxx – “Your issue is not direct labor and the ~10% of the cost of manufacturing it typically represents.”
runxxx pretends to know more about sammy’s business than sammy does.
Hilarious.
Muammar al-Gaddafi is an Arab.
Try selling your choice to the families and friends of the 270 individuals who died as a result of the bombing of Pan Am flight 103. Too bad President Reagan didn’t finish the job and kill Gaddifi.
Sammy,
No force of nature says wages have to be at such a low level
No, but markets do.
Yes, a labor market where there is no ability to withhold your labor if you don’t get the price you want — you can go down to the next place to work but that hardly supplies the same bargaining power. The minimum wage has that same pay or close up effect.
I should note here that the minimum wage is the lessor of the two things I want — the bigger is sector wide labor agreements where everyone doing the same job in the same locale works under a single, uniform contract. That prevents the race to the bottom which race undermines labor’s ability to withhold when each employers says in turn I have to pay less because the competition is cutting pay — another deadly bargaining power leak even if you have a union. Look at what Wal-Mart is doing to the supermarket union contracts.
Ironically sector-wide was invented to avoid the race to the top by labor after WWII — so more money could go into rebuilding — the welfare state was to compensate for sector-wide — which seem to create a perfectly fair and balanced labor market (read: no leaks of labor’s bargaining power?)
Here is the middle third of my essay of last week — on sector-wide:
Opps; message must not contain more than 10000 characters; I’ll post it below. 🙂
ddrew
yes, that’s what i said. caveat emptor
Sammy you also have to calculate how many jobs are created by the maids and landscapers and other minimum wage earners who would have more money to spend and, indeed, would spend it. Though not on maids and landscapers. Also, some people who hire landscapers and maids would either absorb the increased cost because they can afford it or would choose to spend there money on other things. You are overstating the problem of lost jobs–it’s not at all clear that the net would be negative and it probably would be positive, as has been the case in the past. But clearly there would be winners and losers–that’s why this is a political issue–and the impact would look different depending on where you “sit.” In general, I’d think a raise in the minimum wage would put a little upward pressure on non-management wages, thereby increasing demand that currently is quite depressed in our economy. It also would put a little upward pressure on inflation–though far less than ddrew calculates–at a time when inflation is low.
But he did kill Gaddafi’s two year old adopted daughter. That’s got to count for something.
Of course don’t know if the child was blown apart by the bomb, or just bled to death slowly while trapped in the rubble, or died of the burns.
It can make a fella proud.
btw
correct me if i am wrong, but didn’t the bombing of Pan Am flight 103 come AFTER the bombing of Tripoii?
i did say a quarter for the happy meal. if happy meals are 10 bucks at Sammy’s restaurant, the increase would indeed be two dollars as he says. But as a sometimes eater in restaurants i can say that even i would not notice a difference of two dollars on a ten dollar meal.
on the other hand i wouldn’t propose an increase in min wage to $15/hr either. I’d take the incremental approach.
And sammy forgets that the whole point of a minimum wage is to address the “market” failure that results in a large number of people working for poverty wages.
there is a lot to be said for “do it yourself.” maybe those one in three kids who lose their min wage jobs could spend the time learning a useful trade.
sammy
i put ad hominem in quotes to remind you that you don’t know what the expression means. i had been careful to avoid any sanctimonious or insulting commentary. As for uninformed… well, i can’t control what i don’t know. But inviting you to inform me doesn’t seem to have gotten either of us anywhere.
fact is, Sammy, you… and MG and CoRev…. are the regular resorters to offensive language and cheap rhetorical tricks to cover the fact that you haven’t got a case.
While I am flattered you have picked up my “factual descriptions” line, you aren’t qualified to make the distinction.
MG
I have hated Maummar sinse I can remember. Particullarly after the Berlin disco bombing. I celibrated when president Reagan bombed him.
What makes me mad now is that Obama totally ignored congress and the constitution and used instead a UN mandate as a fig leaf for a war against a people who have not attacked us.
That the French, British and American intellegence services acted in concert to over throw Gaddafi, while all the while deceiving thier citizens that they where subverting the Libyan government, shows for all that there is a deep government that controlls western democracies, and is in no way beholden to the will of the people.
I have always liked populist nationalist leaders, but they are anathema to those who aspire towards global governance, and to me global governance means global tyranny.
Like all good revolutionaries Gaddafi is part Jewish. His grandma converted to Islam to marry his grandfather. Looking at Gaddifi’s nappy head makes me believe that there is more then a jew in the wood pile.
Gaddifi was a propenent of sound money. Now Libya will be just another country that is part of the Rothschild debt based fractional reserve hell.
PJR
i’m not even sure there would be “losers.” People like sammy just knee jerk a response that has no analysis whatsoever, based on the idea that any increase in their costs is bad. Compensating consequences are way beyond what they can think of in their busy day.
People from the North who visited the Ante Bellum South were struck by the level of poverty there. A level that Southerners managed to preserve for a hundred years after they lost the War, by preserving the low-wage, slavery in all but name, conditions they had taught themselves to believe were necessary to their own safety if not prosperity. These are the same people and the same ideas that are preaching low wages, low taxes, pfreedom today. Their rhetoric is unchanged from the editorial pages of 1850.
coberly
The Pan Am flight bombing was two years after Reagan bombed Libya.
Evidence is coming to light that Gaddifi’s adopted daughter was not really killed during the US bombing of Libya. Looks like Muammar might have lied about that one.
cursed
i am not sure what “evidence” means anymore when important people have a reason to lie.
either way. no doubt you know of a way to drop bombs on a residential complex without killing any women and children.
cursd
i got a little annoyed with Godaffy when he was accusing the Bulgarian nurses of infecting Libyans with AIDS. I even proposed a Buff type solution and made enemies of all my friends… the peace at any price folks who don’t think the under dog is ever a son of a bitch who will murder you in your sleep if you don’t make him afraid of you.
But, y’know, there are manlier ways of making him afraid than murdering his children from a high altitude.
Does that mean I was bluffing about Buff? maybe, but I was also letting you know how i felt… a distinction hard for some of our listeners to make. As it happened wiser heads than mine solved the problem. They paid the ransom.
I have no knowledge whatsoever of the recent events in Libya. But I think I smell oil.
and maybe i’ll have to give up my faith in fractional reserve that i learned along with free trade.
but from out here in neither a borrower nor a lender land, it seems to me that fractional reserve banking is a good enough idea, if the borrowers and lenders are not fools and crooks.
even i would not propose a 50% increase in the minimum wage all at once. and there is no evidence that previous incremental increases have resulted in net job losses at all. which tells you how complicated those econometric models are.
but its good of sammy to propose that the rest of us pay for his labor force with a tax for EITC, not that Sammy favors taxes or government programs, or subsidies for businesses.
and we note he paid no attention whatsoever to ddrew2u’s report that an increase in the min wage led to an increase in business at the local macdonaldses… presumably by putting money in the pockets of people who would eat if they could afford to.
coberly – “fact is, Sammy, you… and MG and CoRev…. are the regular resorters to offensive language and cheap rhetorical tricks to cover the fact that you haven’t got a case.”
Standard con game from coberly, trying to attack others who aren’t involved in an ongoing discussion. LOL.
coberly
Have you followed the rich Morman approach to slave labor? People like Bill Marriot Think Mitt Romney who though Bain Capitals has a ownership position in Marriot Hotels and the Morman church which runs a ranch in Florida that is so big it comprises one percent of Florida, yet claims it only has seventy employes. These rich Mormans have gotten laws passed that them to expand the number of Mexican workers who can come legally into the US.
Marriot does not really even want American workers. Marriot Hotels advertise job openings directly to Mexican population in Mexico. Romney and Marriot each got there billions, but thats not enough for those greedy bastard’s. By dumping additional labor onto a market that already has high unemployment, these rich Mormons are driving down the price of American labor, and spitting on the very text of their church doctrine of common consent, because the majority of the church membership is opposed to this new guest worker law.
Mitt Romney might be smooth and competent, but a Samuel Gompers he is not.
cursed
you have identified the basic law of politics: hypocrisy.
and yet here you are.
and look what’s in your mouth.
Fractional reserve banking by its very nature concentrates a nations wealth into the hands of the few, and must have an ever expanding base, or it will collaspse. Think about it. Under it’s original charter the Bank of England was able to issue bank notes for twice the amount of gold it had in it’s vault. For instance if the bank had 100,000 pounds sterling in it’s vault, it was allowed to loan and expect payment of 200,000 pounds sterling plus interest.
Fractional reserve banking means the money supply must always expand, or else bankers cannot be repaid.
The bank of England is the product of rulers desperate for money and bankers eager for access to the crown’s ablity to tax the English people. This enabled the government to wage war and or suppress the people on credit, and the bankers got the oportunity to make money. Literally.
Today the guys who own the bank of England also have a ownership position in the Federal Reserve bank as well as most other European central banks, so they can pretty much call the shots.
What was in it for the English? England’s best sons died at Passchendaele and thousands of others pointless battles. They brought opprobruim and shame upon England for the profit of bankers. Today Caliban is more at home in Londen then is an Englishman.
Cursed
all that may be true. But it seems to me to be a little hard to lay at the feet of fractional reserve.
it’s a little like blaming war on the invention of K-rations.
I don’t think holding the “money” supply constant, or hostage to the luck of gold prospectors, makes nearly as much sense as looking at a guy’s business plan and deciding to lend him some money to give it a try, while keeping a “reserve” to pay the people you have borrowed the money from in case they have a sudden need for it.
over the long run you expect to guess right more often than not about the business plan, and you don’t expect everybody in the country to demand their “money” back at the same time. of course if they do, the government just prints more dollar bills, and doesn’t tell anybody. no one panics. and as long as the guys who borrowed the money and can’t pay it back are not a huge percent of the economy,,, well, no one gets hurt.
or is there a secret clause i am missing?
cursed
i think i like the idea of having a public bank compete with the private ones. surely it could be structured so that it was not “tax supported” but simply offered an honest business model.
on the other hand, corruption in government is not unheard of and there is some danger in too much power in the hands of government… as there is danger in too little… so i’d be a little slow to close the doors of the private banks.
meanwhile i got a little lost in the transition from fractional reserve to public banking.
cursed
again, that’s all very likely. but what does it have to do with fractional reserve?
Buff says the reason NoDak is so prosperous is because of all the tourists who go there to escape the heat in Texas.