Impending Minimum Wage hike causing restaurants to close

[Starlight]

Yes, because employers saying that they will not be able to remain profitable if the minimum wage is increased is "imaginary evidence".

Yes.

For starters you are imagining that they said that. On page 1 of this thread Carrikature explained that they actually said they expected they would raise prices.

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.

It is very difficult to predict in advance exactly how these two effects balance out since it depends on where the people choose to spend their extra money and to what extent the various businesses in the area can afford to pay employees more and/or need to employ more staff to service the increased demand. Existing empirical studies show that these two effects tend to balance each other out, giving a net result of very little change in the overall employment numbers.

As your link said:

"More than 600 economists, including seven Nobel Prize laureates, recently affirmed the growing consensus that low-wage workers benefit from modest increases in the minimum wage without negative consequences for the low-wage job market"

Poorer people, unlike richer people, spend all or nearly all of their income from week to week. If the income of poor people is increased, then immediately more money is spent by them in purchasing goods and services. (And poorer people, far more than richer people, are more likely to spend their money purchasing from local businesses) This has a multiplier effect throughout the community, as the businesses that are selling more goods then in turn need to employ more people to sell them, who in turn then have a job with more money to spend etc. Various empirical studies have suggested the multiplier effect is around 4x, so every additional $1 you give to a poor person there will be $4 total economic growth.

The most effective way to stimulate any economy is therefore to give more money to poor people (regardless of whether it is by entitlement increases, minimum wage increases, or union negotiations for higher pay). Conversely, too much wealth inequality hurts the economy, because the richer people simply store the money away in savings and investments (often offshore) and it goes out of circulation, while the poorer people are unable to buy the amount of goods and services they would have otherwise purchased, and due to less demand for products the local businesses will have less income and need fewer staff. The OECD recently published an analysis looking at how increasing income inequality is harming economic growth. They note, "In particular, what matters most is the gap between low income households and the rest of the population."

[Sam]

Yes, because employers saying that they will not be able to remain profitable if the minimum wage is increased is "imaginary evidence".

Even the Conressional Budget Office says that raising the minimum leads to job loss.

Source: USA Today

CBO examined the budget impacts of raising the minimum wage to $9 and $10.10. The report concluded that a $9 increase would lift 300,000 workers above the poverty line, but cost 100,000 new jobs as employers are expected to reduce workforces to make up for higher wages. A $10.10 increase would lift 900,000 workers above the poverty line, but cost 500,000 jobs.

http://www.usatoday.com/story/news/p...-jobs/5582779/

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Nope ... what the CBO said was that there was a great deal of uncertainty regarding the employment impact of increasing the minimum wage, with estimates ranging anywhere from 1,000,000 jobs reduced to virtually zero jobs reduced with a $10.10 minimum wage. The 500,000 number is just taking the middle number of two unlikely extremes.

And, again, it's totally reasonable to expect an increase in labor costs to result in some reduction in employment. The question is whether that reduction is 1) large or small, 2) temporary or permanent, and 3) offset by the positive aspects of increasing the minimum wage. Economists have largely agreed

[Cow Poke]

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? If he raises his prices, his customers will have LESS money to spend in the local businesses, and so will the proprietor himself. You are simply forcing the proprietor to give up more of his money to allow others to spend it.

[lilpixieofterror]

And from whence does this new magic stream of money flow? If he raises his prices, his customers will have LESS money to spend in the local businesses, and so will the proprietor himself. You are simply forcing the proprietor to give up more of his money to allow others to spend it.

Trying to explain basic economics to Starlight or Sam is a waste of time. You're better off trying to explain it to a brick, a block of concrete, or almost anything or anybody else.

[Mountain Man]

The most effective way to stimulate any economy is therefore to give more money to poor people (regardless of whether it is by entitlement increases, minimum wage increases, or union negotiations for higher pay). Conversely, too much wealth inequality hurts the economy, because the richer people simply store the money away in savings and investments (often offshore) and it goes out of circulation, while the poorer people are unable to buy the amount of goods and services they would have otherwise purchased, and due to less demand for products the local businesses will have less income and need fewer staff. The OECD recently published an analysis looking at how increasing income inequality is harming economic growth. They note, "In particular, what matters most is the gap between low income households and the rest of the population."

Boy have you been drinking the socialist Kool-Aid.

If any of this were even remotely true then our economy should be roariing along like Reagan was back in office when you consider that Obama's policies have led to record numbers of people receiving government handouts.

[Mountain Man]

Nope ... what the CBO said was that there was a great deal of uncertainty regarding the employment impact of increasing the minimum wage, with estimates ranging anywhere from 1,000,000 jobs reduced to virtually zero jobs reduced with a $10.10 minimum wage. The 500,000 number is just taking the middle number of two unlikely extremes.

And, again, it's totally reasonable to expect an increase in labor costs to result in some reduction in employment. The question is whether that reduction is 1) large or small, 2) temporary or permanent, and 3) offset by the positive aspects of increasing the minimum wage. Economists have largely agreed that modest minimum wage hikes would have net positive effects.

And it bears reminding folks that the federal minimum wage at the end of the 1960s was over $10/hour if adjusted for inflation. It's not like this is uncharted water.

"Two-likely extremes"... so what you're saying is that it's likely that as many as 500,000 people will lose their jobs if the minimum wage is increased. In other words, you agree with the basic point I was making even as you go through the motions of disagreeing (force of habit, I guess. ) But the fact remains that minimum wage increases have historically had a negative impact on the labor market.

Source: Heritage

http://www.heritage.org/research/tes...on-the-economy

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The study also notes, interestingly, that "2.9 percent of all workers in the United States" would benefit from a minimum wage increase and that while "some minimum-wage workers do struggle with poverty, they are not representative of the typical worker in minimum-wage jobs. The data simply does not support the stereotype of minimum-wage workers living on the edge of destitution. [...] The notion that workers are trapped earning $7.25 an hour for much of their working lives is mistaken and ignores the primary value of minimum-wage jobs. Their importance lies not so much in the low wages they pay in the present, but in making workers more productive so they can command higher pay in the future." Finally, "Two-thirds of the studies in this 'new minimum wage research' utilizing state variation in minimum wages came to the same conclusion that previous economists had: higher minimum wages reduce the employment of less-skilled workers. Among the most methodologically rigorous studies, 85 percent came to this conclusion."

In summary, raising the minimum wage would end up hurting the very people that it is supposed to help.

[Jesse]

Here is a little something from the man that has had more minimum wage jobs than all of us combined:

Source: Mike Rowe

• Edited by a Moderator •Source

© Copyright Original Source

And just for a little perspective. As a home healthcare worker, I work for the state yet I do not make minimum wage.

[Sam]

And from whence does this new magic stream of money flow? If he raises his prices, his customers will have LESS money to spend in the local businesses, and so will the proprietor himself. You are simply forcing the proprietor to give up more of his money to allow others to spend it.

[Sam]

Boy have you been drinking the socialist Kool-Aid.

If any of this were even remotely true then our economy should be roariing along like Reagan was back in office when you consider that Obama's policies have led to record numbers of people receiving government handouts.

Do we need to see those private and public sector job growth comparisons between Reagan and Obama again?

[Sam]

"Two-likely extremes"... so what you're saying is that it's likely that as many as 500,000 people will lose their jobs if the minimum wage is increased. In other words, you agree with the basic point I was making even as you go through the motions of disagreeing (force of habit, I guess. ) But the fact remains that minimum wage increases have historically had a negative impact on the labor market.

No, I'm saying that the amount of uncertainty in estimating the number of job losses is so high, there's no "likely" scenario — you are again simply taking the middle number between two very unlikely estimates and saying "Well, it's not likely I'll die this morning and it's not likely I'll die tonight; therefore, it's likely I'll die this afternoon." Doesn't make a lick of sense.

As I posted earlier, it is no fact that minimum wage increases have historically had a negative impact on the labor market. This is not substantiated.

[Darth Executor]

Do we need to see those private and public sector job growth comparisons between Reagan and Obama again?

How about income inequality charts?

[lilpixieofterror]

The problem with your argument Sam is pretty obvious, to anybody with a fully functional brain. For starters, there's a huge difference between Wal-Mart and that local diner's owners/ stock holders. Primarily, the Walton's have billions of dollars while your local business owners do not and as a result of that, they can afford changes in labor rates better than your local business owners can. Think about this for a second... if you can kneecap your completion and keep them from challenging your lead, is it worth spending a bit more money to accomplish this goal? Of course because remember, the nearly bankrupt companies of Sears, JC Penny, etc were once the rulers of the roost (Sears was the largest retail company, back in the 1970's and JC Penny was huge back in the day too) because upstarts uprooted them from their lead (IE Wal-Mart or Amazon). Naturally, when you come to realize that the biggest threat to your lead, is an upstart company rising up and taking your share of the market, reducing you to the level of Sears or JC Penny is at today; you might want to take steps to uproot your competition before they ever get the chance to uproot you. Thus, big business become partners of the government and tries to use the government to help them kneecap their competition. Big government is the best thing for Wal-Mart and those rich people, you so hate, because the government helps them to kneecap their competition and they give huge sums of money for their political campaigns. So the rich can end up getting richer, the politicians can keep their cushy government jobs, and the rest of the country gets screwed. You really want to help the poor and keep those rich fat cats from making too much money, free market competition is the best way to do this vs trying to use the government to achieve this. After all, stock prices of these rich fat cats keep souring, while the rest of us keep getting poorer.

[jordanriver]

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...

Average Fast Food Costs Percentages.jpg
SOURCE (I'm using a source that is critical of any wage increase, Heritage.org)

look, 100% of sales on this example chart is $821,256

$821,256 x 20% = $164,251

the payroll and taxes is $217,484

$217,484 x 75% = $163,113 (close to the 20% increase of price which was $164,251 two lines above)

[Sam]

Here is a little something from the man that has had more minimum wage jobs than all of us combined:

Source: Mike Rowe

• Edited by a Moderator •Source

© Copyright Original Source

And just for a little perspective. As a home healthcare worker, I work for the state yet I do not make minimum wage.

In 1979, $2.90/hour was the equivalent of $9.34/hour in 2015. An increase to $10/hour in 1979 would be the equivalent of a $32.19/hour minimum wage today.

The current federal minimum wage is $7.25/hour, about $1.10/hour less than what the author was making in 1979, when he was "earning every penny." A minimum wage of $10.10/hour would be only about $0.75/hour more than he was earning back then.

Puts it in perspective when you adjust for inflation.

[Starlight]

How about income inequality charts?

Thanks, those are useful charts which show the issue more clearly than other graphs I've seen on that subject.

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.

This is resulting in pretty serious wealth imbalances, which are much worse than what the average person assumes:


From what I've read / heard, the primary causes of this appear to be:
(1.) A series of Supreme Court decisions in the 70s that allowed more money into politics, paving the way for rich people to use financial leverage on politicians.

...which resulted in:
(2) Reaganomics - Reagan's deliberate introduction in the early 80s of new economic policies designed to favor the rich - lower taxes for the rich etc. Allegedly wealth was going to 'trickle-down' to everybody else, however as the graphs make clear this simply hasn't happened as a matter of empirical fact. Reagan's changes of favoring the rich were a paradigm shift that all governments since have bought into to a greater or lesser extent. Federal income tax rates for the rich have halved since 1980:
US top tax rates.jpg
(from here)
The halving federal income tax rate for the rich is not even the full story, as the rich have been able to influence tax policy sufficiently to get a large number of loopholes written into laws, allowing the rich to pay accountants, lawyers and financial managers to claim back or avoid most of their taxes, and to hide their money in tax havens. This means the rich often pay a much lower effective tax rate