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Impending Minimum Wage hike causing restaurants to close

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  • #46
    Originally posted by jordanriver View Post
    would you be willing to pay 20 more cents for a dollar menu item, so the minimum wage workers could get a $6.00 an hour increase (Go from $8.00 hr to $14.00 hr)

    IOW , a simple 20% (thats 2 dimes for every dollar) increase , for a 75% wage increase for the laborers...
    Excellent example Jordan. Correspondingly, a 10% wage increase for the workers would lead to a 2.5% total price increase at most.

    And that is not taking into account the fact that, as I explain below to Cow Poke, the employers end up seeing a much higher income anyway, so they do not end up funding anything close to 100% of the increase.

    Originally posted by Cow Poke View Post
    More importantly, the common mistake that people often make when thinking about minimum wage increases is that they only consider the fact that some employers will have to pay staff more. But the equally important effect is that those staff then have a higher income and will spend it, meaning businesses in the area will have more income. This will result in local business making greater profits and/or needing to employ additional staff to meet the higher level of demand for goods and services.
    And from whence does this new magic stream of money flow?
    On day one, the proprietor will reach into his own pocket and hand over more money to his staff. Over the following week they will spend ~100% of that additional money on goods and services, because people at the minimum-wage kind of income levels tend to spend their entire income every week. They also tend to spend on local businesses. Thus, every single extra dollar that the proprietor pulled out of his pocket will go straight back to local businesses like his in the form of increased income. So within one week he will get a percentage of his extra money back again in the form of increased income.

    However, any businesses that were already paying above the minimum wage, and hence did not have to raise the wages of their employees, will also get a percentage of that extra money in the form of income from increased business. They may then hire more staff to service the extra business, or pay their existing staff more as a result of their higher income, or the owners may spend the additional money themselves. Their staff or them spending a percentage of that money at any local business in turn results in increased income for whatever local business they spend it on, and the cycle of growth continues. Empirically speaking, that $1 raise that the original proprietor pulled out of his pocket, on average ends up being spent by 4 different people in sequence (well, more people than that, at a diminishing percentage, but we can think of it as 4 individuals spending the entire dollar each), resulting in $4 worth of increased business within the local economy.

    So if businesses paying the minimum wage constitute one quarter of the local businesses, then that original employer will get his $1 back in additional income and he is no worse off at all financially: His income and expenditure have both gone up by $1. (Okay, he may have a cost in raw materials for his products in addition to wage costs if he is selling a product and not a service - Jordan's data suggests 31% of income goes into paying for food at restaurants. But if the business is a service, eg hair-cutting, selling insurance etc, then there are negligible additional raw materials costs due to extra business) The net outcome would be that nobody at all is substantially worse off financially, but that lots of businesses in the area are now doing much better and many may need to employ more staff to service the higher demand.

    If the fraction of businesses paying minimum wage is higher than that, the original proprietor will make a profit on his $1 additional wages, receiving more than $1 in additional income as a result. If it's lower than that, then he'll make a slightly loss as some fraction of that $1 doesn't come back to him in terms of additional business. In this case, yes, the proprietor would be significantly funding the minimum wage increases, but he'd be only paying a small percentage of the increase not the whole increase.

    A lot of business owners make the mistake of assuming in advance of any minimum wage increases that they are likely to end up funding the entire increase, which is absolutely not the case. One reason Walmart has recently had a change of heart about it's initial opposition to minimum wage increases was that it realized that a lot of its minimum wage employees spend most of their money at Walmart. Business owners of minimum-wage businesses are consistently surprised after-the-fact about how little they are affected by minimum wage increases, because they go into it expecting to have to fund 100% of the wage increases and so they worry about how on earth they will get all that the extra money, but they don't realize that their income will proportionately increase and that they hence don't have to find a novel way to pay all that extra money at all, and that the pay rise actually largely pays for itself in terms of increased business.
    Last edited by Starlight; 03-15-2015, 04:07 PM.

    Comment


    • #47
      Originally posted by Sam View Post
      The general point is to distribute wealth downward from the very top tier (0.01% - 1%)
      Because you know better how to spend other people's money than the people themselves?

      I'm just glad that your superpowers are limited to googling, and you have no real authority to make any of this nonsense actually happen.

      And, I ask again -- have EVER signed the FRONT of a paycheck?
      "Neighbor, how long has it been since you’ve had a big, thick, steaming bowl of Wolf Brand Chili?”

      Comment


      • #48
        Originally posted by Starlight View Post


        Thanks, those are useful charts which show the issue more clearly than other graphs I've seen on that subject.
        Yes, in particular it shows that inequality was driven highest by Clinton and Obama's policies. Reagan looks like a stumpy midget compared to them.

        Actually, the article you got those from has some other really clear and useful graphs on the subject (as well as some really unclear and useless ones)... Also useful to consider is:

        Productivity is steadily increasing, but employees who are working harder than ever aren't seeing their fair share of it.
        They are, actually. Their labor becomes less and less valuable as competition from immigrants, the third world and automation is eating into their utility. So they guys who own everything can get more for less. The rest of your post confuses cause and effect, mostly to hide the devastation caused by liberal social policy. The fall of unions, for example, is the product of increased competition from non-union workers thanks to mass immigration and free trade agreements. Previously unions used to have leverage as the pool of employees was limited and it was hard for employers to replace them easily. There's a reason why historically unions and immigrants clashed (often violently). Now it's easier than ever for corporations to either outsource what they can and hire cheap, desperate workers for what they can't. Corporations have done a great job channeling anti-racist retardation into fat profits. Take for example the tech giants, who lay people off by the tens of thousands while demanding more H1B visas because they don't have enough programmers (or something):

        http://www.computerworld.com/article...0-workers.html
        Last edited by Darth Executor; 03-15-2015, 04:21 PM.
        "As for my people, children are their oppressors, and women rule over them. O my people, they which lead thee cause thee to err, and destroy the way of thy paths." Isaiah 3:12

        There is no such thing as innocence, only degrees of guilt.

        Comment


        • #49
          Originally posted by Darth Executor View Post
          Yes, in particular it shows that inequality was driven highest by Clinton and Obama's policies. Reagan looks like a stumpy midget compared to them.
          Um, do you mean Clinton and Bush? Your graphs don't cover the Obama years. Also, the rate of divergence since 1980 has been (on average) fairly steady (the sudden spikes and drops are various bubbles + recessions), so every administration since 1980 is relatively equally to blame.

          All the graphs start diverging at about 1980 and have continued to diverge at approximately the same rate ever since. Clearly something fundamentally changed with regard to economics around 1980-1981, and has had a steady and continued effect ever since. An obvious candidate is the introduction of Reaganomics under Reagan in 1981, which was a deliberate attempt to fundamentally change how the government interacted with the economy, and which has been largely followed by governments since that time.

          Previously unions used to have leverage as the pool of employees was limited and it was hard for employers to replace them easily.
          The diminishment of unions is significantly the result of deliberate laws passed to limit them and a long series of deliberate judicial decisions against them. They have not simply faded away because of immigration policy or globalization, although those have certainly had an impact. Primarily it's the fact that the rich have waged a war against unions and won.

          Comment


          • #50
            Originally posted by Starlight View Post
            Um, do you mean Clinton and Bush? Your graphs don't cover the Obama years. Also, the rate of divergence since 1980 has been (on average) fairly steady (the sudden spikes and drops are various bubbles + recessions), so every administration since 1980 is relatively equally to blame.
            Yeah sorry.

            All the graphs start diverging at about 1980 and have continued to diverge at approximately the same rate ever since. Clearly something fundamentally changed with regard to economics around 1980-1981, and has had a steady and continued effect ever since. An obvious candidate is the introduction of Reaganomics under Reagan in 1981, which was a deliberate attempt to fundamentally change how the government interacted with the economy, and which has been largely followed by governments since that time.
            Reagan opened the illegal immigration floodgates by legalizing millions, though I doubt a democrat president would have done otherwise. The trends were already swinging in that direction.

            The diminishment of unions is significantly the result of deliberate laws passed to limit them and a long series of deliberate judicial decisions against them.
            Nope, confusing cause and effect again. Business got better at limiting them because their power waned. Their power waned because business can more easily avoid their labor monopolies. Once the dominoes started falling there was no stopping them.

            They have not simply faded away because of immigration policy or globalization, although those have certainly had an impact. Primarily it's the fact that the rich have waged a war against unions and won.
            Yes, and globalization is that war. One the rich were bound to win in the long term anyway but also rapidly expedited by progressive social policy.

            I should note that this hasn't been the first time it's happened, the current situation is more normal than the pre-80s anomaly:






            (union membership by year)

            Bigger labour pool (or more efficient workers) = weaker unions and richer rich.
            "As for my people, children are their oppressors, and women rule over them. O my people, they which lead thee cause thee to err, and destroy the way of thy paths." Isaiah 3:12

            There is no such thing as innocence, only degrees of guilt.

            Comment


            • #51
              Let's return to whether wage floors are good ideas or not. They are not, it's been explained why not. Neither Starlight nor Sam did anything to really refute the common sense conclusion that people are likely to be hurt or harmed.

              I wonder: Do Starlight and Sam really care how many people get hurt as long as the economy does better after minimum wage hikes?
              The greater number of laws . . . , the more thieves . . . there will be. ---- Lao-Tzu

              [T]he truth I’m after and the truth never harmed anyone. What harms us is to persist in self-deceit and ignorance -— Marcus Aurelius, Meditations

              Comment


              • #52
                Originally posted by Truthseeker View Post
                Let's return to whether wage floors are good ideas or not.
                It depends on the environment. That's the problem with the endless commine/austrian/keynesian nonsense arguments, you have fanatics who think X is either always good or always bad and they stick with it no matter what.
                "As for my people, children are their oppressors, and women rule over them. O my people, they which lead thee cause thee to err, and destroy the way of thy paths." Isaiah 3:12

                There is no such thing as innocence, only degrees of guilt.

                Comment


                • #53
                  I don't think the economy is going to tank if Americans have to pay $1.20 for a mcchicken sandwich.
                  To say that crony capitalism is not true/free market capitalism, is like saying a grand slam is not true baseball, or like saying scoring a touchdown is not true American football ...Stefan Mykhaylo D

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                  • #54
                    Originally posted by Darth Executor View Post
                    Reagan opened the illegal immigration floodgates by legalizing millions, though I doubt a democrat president would have done otherwise. The trends were already swinging in that direction.
                    Your immigration graph doesn't really show any spikes during the Reagan years. It shows a fairly steady rate of increase from 1950 to the present, with numbers fluctuating a bit more extremely since 1990.

                    I am initially skeptical that a relatively steady trend in immigration from 1950 to the present is the correct explanation for a trend in income disparity that started relatively suddenly in 1980.

                    However, I have not seen immigration previously suggested as the explanation for the inequality, so you have my attention. Can you flesh out for me the details of the theory behind it?

                    My initial thought is that we can test the various hypotheses by looking at other countries. So picking on my own country (New Zealand), since it's one I have good political knowledge of: We had a Reaganomics-style change occur in economic policy occur in the period 1984-1988 (and reenforced by further changes in the 1990-1993 period), but have not had the same level of increase in immigration the US has experienced:
                    8c53.jpg
                    The above graphs appear to show that here in NZ, the increase in income inequality coincides with the introduction of neo-liberal economic government policies in the period 1984-1988, but there is nothing in the immigration rates during this period that would suggest a causal relation there. The was a law change in 1987 to stop giving preference to British immigrants, with the result that a lot of immigration is now Asian in origin. (But as far as I can tell, you're not suggesting that the race of immigrants is relevant, only their number... which largely didn't change) There were, however, various laws about the globalization of trade that were enacted in the 1980s - eg the removal of tariffs and subsidies, the introduction of free trade agreements etc... so you could argue that globalization itself may have had something to do with it, but not immigration.

                    Business got better at limiting them because their power waned. Their power waned because business can more easily avoid their labor monopolies. Once the dominoes started falling there was no stopping them.
                    Okay, that explanation sounds plausible. (I'm not convinced it's true, but it's plausible, and I'm not committed to any single view of cause and effect here)

                    Would you therefore support laws to help support unions - eg incentivizing union membership etc?

                    I should note that this hasn't been the first time it's happened, the current situation is more normal than the pre-80s anomaly

                    [ATTACH=CONFIG]4644[/ATTACH]
                    Yes. The real historical anomaly is the rise of equality and the middle class in the period 1940-1960. The authors of that graph have spent decades doing excellent work compiling figures about income inequality in dozens of Western countries over the last couple of hundred years. I highly recommend Piketty's recent book Capital in the 21st Century as it presents the factual information in clear ways that are easy to follow, with plenty of graphs. His personal opinion about why the period 1940-1960 was so unusually equal is primarily that taxes on the rich were incredibly high during that period (~90% income tax rates). He thinks we should return to those kinds of taxation rates for very-high earners, as well as introduce an annual tax on wealth (ie where very wealthy people have to pay a small percentage (<5%) of their total wealth (not income) to the government each year).


                    (union membership by year)

                    Bigger labour pool (or more efficient workers) = weaker unions and richer rich.
                    Well, it seems union membership declined in the 1970s, and then really plummeted in the 80s and onwards, and were very high in the 40s through to 60s. So chronologically speaking, the presence/absence of union power looks like a really good explanation for income inequality. This ought not to be overly surprising to anyone, since higher wages for workers is almost precisely what unions are all about. Can we therefore agree that bringing back / strengthening unions will have a significant positive effect on income equality?

                    I guess what we are left with unresolved are: (a) what historical factors most contributed to the fall of unions? (b) to what comparative extents are unions vs high taxes on the very wealthy responsible for the historically unusual period of relative income equality in the 40s to 60s?

                    Incidentally, D.E., thanks for the civil and fact-based discussion, and surprisingly high level of agreement!

                    Originally posted by Truthseeker View Post
                    Let's return to whether wage floors are good ideas or not.
                    Of course they are. The number of people you'd harm significantly by removing wage floors is huge. The more interesting question is whether raising wage floors slightly above current levels is helpful or not overall. I'd say current levels are too low, and thus a rise would help the economy significantly.
                    Attached Files
                    Last edited by Starlight; 03-15-2015, 07:43 PM.

                    Comment


                    • #55
                      Originally posted by jordanriver View Post
                      I don't think the economy is going to tank if Americans have to pay $1.20 for a mcchicken sandwich.
                      [ liberal think ] But this is a tax that disproportionally impacts POOR people! [ / liberal think ]
                      "Neighbor, how long has it been since you’ve had a big, thick, steaming bowl of Wolf Brand Chili?”

                      Comment


                      • #56
                        Originally posted by Cow Poke View Post
                        I don't think the economy is going to tank if Americans have to pay $1.20 for a mcchicken sandwich.
                        [ liberal think ] But this is a tax that disproportionally impacts POOR people! [ / liberal think ]
                        That is actually a good point, and is worth bearing in mind.

                        However, at worst, the poor people are basically going to end up paying for their own wage increases out of their wage increases via increased prices of goods. So while they might turn out to not be better off due to inflation, they're not going to be any worse off. However, the extremely-poor minimum-wage earners will be better off relative to everyone else, which is what the OECD found was the most damaging part of income inequality to the wider economy - the increasing gap between the poorest and the average income earners (apparently worse than the ultra-rich getting ultra-richer), especially if the poorest people cannot afford the levels of education that everyone else is obtaining.

                        Looking over the past 80 years, inequality is at historically high levels in our current society, which implies strongly that if ever there was a time to be raising the minimum wage and increasing rates of redistribution, it is now.

                        Comment


                        • #57
                          Originally posted by jordanriver View Post
                          I don't think the economy is going to tank if Americans have to pay $1.20 for a mcchicken sandwich.
                          It wouldn't, but the key to remember is large companies can afford to take some hits on their bottom line while smaller shops; not quite so much. If you can make more barriers for competition to have to cross; the better it is if you happen to be a large company. That is a key that many people miss. Raises in min wage don't hurt those rich fat cats. It hurts middle class people though.
                          "The man from the yacht thought he was the first to find England; I thought I was the first to find Europe. I did try to found a heresy of my own; and when I had put the last touches to it, I discovered that it was orthodoxy."
                          GK Chesterton; Orthodoxy

                          Comment


                          • #58
                            Originally posted by Starlight View Post
                            That is actually a good point, and is worth bearing in mind.

                            However, at worst, the poor people are basically going to end up paying for their own wage increases out of their wage increases via increased prices of goods. So while they might turn out to not be better off due to inflation, they're not going to be any worse off. However, the extremely-poor minimum-wage earners will be better off relative to everyone else, which is what the OECD found was the most damaging part of income inequality to the wider economy - the increasing gap between the poorest and the average income earners (apparently worse than the ultra-rich getting ultra-richer), especially if the poorest people cannot afford the levels of education that everyone else is obtaining.

                            Looking over the past 80 years, inequality is at historically high levels in our current society, which implies strongly that if ever there was a time to be raising the minimum wage and increasing rates of redistribution, it is now.
                            It's too bad that only 10% of American workers make min wage and most of those workers are in the under 25 age range. Don't worry though, if you keep pretending that you are hurting those rich fat cats (who don't mind using the government to kneecap their competition), it will become true! I can tell you ways to help the poor, raising min wage isn't going to help them out nor is it going to help you with the problem of 'income inequality' that you complain about.
                            "The man from the yacht thought he was the first to find England; I thought I was the first to find Europe. I did try to found a heresy of my own; and when I had put the last touches to it, I discovered that it was orthodoxy."
                            GK Chesterton; Orthodoxy

                            Comment


                            • #59
                              Originally posted by Starlight View Post
                              Your immigration graph doesn't really show any spikes during the Reagan years.
                              There were already millions of illegal immigrants before Reagan could legalize them. If there hadn't been any he couldn't have legalized them. Immigration started increasing steadily earlier.

                              It shows a fairly steady rate of increase from 1950 to the present, with numbers fluctuating a bit more extremely since 1990.

                              I am initially skeptical that a relatively steady trend in immigration from 1950 to the present is the correct explanation for a trend in income disparity that started relatively suddenly in 1980.
                              The inequality trend started before Reagan took office, which would indicate that his policies didn't have much to do with it either. What started the trend was a recession. In my opinion economies always calibrate after a shock to better reflect the actual market. I suspect that's what happened during the Carter-Reagan years. Reagan's policies simply caught up with the transition of power.

                              However, I have not seen immigration previously suggested as the explanation for the inequality, so you have my attention. Can you flesh out for me the details of the theory behind it?
                              Sure, it's quite simple: you can earn as much as you can get other people to pay you. With a limited labor pool you can ask more for your work because your employer doesn't have a lot of choices. The more you expand the labor pool the more people will compete for jobs, so the employer can pay less and still get someone to do the job. This isn't necessarily bad, if more jobs are needed than the labour pool increases, but with more and more efficient technology companies need fewer workers to satisfy more customers. As a result his profit relative to your income grows.

                              My initial thought is that we can test the various hypotheses by looking at other countries. So picking on my own country (New Zealand), since it's one I have good political knowledge of: We had a Reaganomics-style change occur in economic policy occur in the period 1984-1988 (and reenforced by further changes in the 1990-1993 period), but have not had the same level of increase in immigration the US has experienced:
                              [ATTACH=CONFIG]4643[/ATTACH]
                              I think calling New Zealand's policies "Reagonomics" is really stretching it, but sure. I'd rather stick to the US since that's what we were originally talking about. I'll take a look at your numbers at least:

                              The above graphs appear to show that here in NZ, the increase in income inequality coincides with the introduction of neo-liberal economic government policies in the period 1984-1988, but there is nothing in the immigration rates during this period that would suggest a causal relation there. The was a law change in 1987 to stop giving preference to British immigrants, with the result that a lot of immigration is now Asian in origin. (But as far as I can tell, you're not suggesting that the race of immigrants is relevant, only their number... which largely didn't change) There were, however, various laws about the globalization of trade that were enacted in the 1980s - eg the removal of tariffs and subsidies, the introduction of free trade agreements etc... so you could argue that globalization itself may have had something to do with it, but not immigration.
                              Yes, as I said immigration isn't the only factor, technology and outsourcing (made easy by free trade agreements and raising tarrifs, etc.) also factor in.

                              Those are some pretty bad graphs. I can barely read the second one and the first one stops in 2001. According to this gap net migration does appear to have increased somewhat in NZ since the 80s, though it oscillates wildly in some years:



                              NZ inequality also doesn't appear to have risen at the same rate as the US. On the whole it looks within the parameters of my theory, though I'm loathe to use a small country like NZ as a datapoint since I suspect your policies are as much driven by international reality as they are by its inhabitants' whims.

                              Okay, that explanation sounds plausible. (I'm not convinced it's true, but it's plausible, and I'm not committed to any single view of cause and effect here)

                              Would you therefore support laws to help support unions - eg incentivizing union membership etc?
                              No, unions participated in their own destruction and I'm not really into bailouts. They're structurally indistinguishable from corporations, except they're government instituted monopolies so they don't have to answer to customers which makes them even more prone to management corruption. I could make recommendations but they're even less likely to get passed than yours are.

                              Yes. The real historical anomaly is the rise of equality and the middle class in the period 1940-1960. The authors of that graph have spent decades doing excellent work compiling figures about income inequality in dozens of Western countries over the last couple of hundred years. I highly recommend Piketty's recent book Capital in the 21st Century as it presents the factual information in clear ways that are easy to follow, with plenty of graphs. His personal opinion about why the period 1940-1960 was so unusually equal is primarily that taxes on the rich were incredibly high during that period (~90% income tax rates). He thinks we should return to those kinds of taxation rates for very-high earners, as well as introduce an annual tax on wealth (ie where very wealthy people have to pay a small percentage (<5%) of their total wealth (not income) to the government each year).
                              Capital gains taxes (which is how people get really, really rich) have been fairly uniform, so his theory is unlikely. It's possible that income taxes helped "reduced inequality" by just leaving a handful of super-rich dynasties at the top and smacked everybody who's rich but not bill gates rich back into the middle class.

                              Well, it seems union membership declined in the late 1970s, and then really plummeted in the 80s and onwards, and were very high in the 40s through to 60s. So chronologically speaking, the presence/absence of union power looks like a really good explanation for income inequality. This ought not to be overly surprising to anyone, since higher wages for workers is almost precisely what unions are all about. Can we therefore agree that bringing back / strengthening unions will have a significant positive effect on income equality?
                              No, it started declining in the 50s, at about the same time as immigration went on the rise again. I don't think any effort should be made to bring back unions. If they are useful to workers once the labour pool is limited again the workers will bring them back themselves.

                              Incidentally, D.E., thanks for the civil and fact-based discussion, and surprisingly high level of agreement!
                              We haven't gotten into any heavy differences yet, give it time. For example, I don't think income inequality is inherently bad. I still want to eat the rich though, because they do bad things like support gay marriage.
                              "As for my people, children are their oppressors, and women rule over them. O my people, they which lead thee cause thee to err, and destroy the way of thy paths." Isaiah 3:12

                              There is no such thing as innocence, only degrees of guilt.

                              Comment


                              • #60
                                Well guess I know what's gonna be talked about in my Economics class tomorrow.
                                Oh sweet TINSTAAFL
                                "Kahahaha! Let's get lunatic!"-Add LP
                                "And the Devil did grin, for his darling sin is pride that apes humility"-Samuel Taylor Coleridge
                                Oh ye of little fiber. Do you not know what I've done for you? You will obey. ~Cerealman for Prez.

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