A straightforward, real world example of why minimum wage laws = FAIL

The Coffee Shop
21

“For instance why start this graph at 4$ rather than 0$? Makes the rise look a lot more than it really is, no?”

It wouldn’t matter whether the increase was as small as 5%, if that 5% happened to move a large number of workers into the submarginal category.

The major problem with arguments like this one, however, is that when one analyzes real-life economic trends, it can never be a controlled experiment. There will inevitably be confounding factors that some critic can point to as an alternative cause for the effect under discussion. That’s why a rigorous case for or against an economic policy can only be based on fundamental economic reasoning, as deduced from the underlying laws of human action.

22

For once I was trying to be smart, and was very specific in my language. I only said “market” regarding efficiency, not “companies”.

23

it would require the cooperation of all companies to keep wages down

It would not require all companies, that’s not correct.

**to say that minimum wage does not cause unemployment is to say that the law of supply and demand (increase in cost will lower demand) does not apply to the labor market. **

Interestingly enough, I never wrote that.

24

“After all having a job for $2.00 an hour is better than being unemployed, right?”

If one chooses to take a job at that wage, obviously it’s the better alternative from one’s personal perspective.
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25

I would love to hear your tune if your boss decided to lower your salary to $200/month because somebody else somewhere around the world could do your job for exactly that amount

If someone could do my job and would be willing to do it for $200/month, my boss would be an idiot not to lower my salary or hire that person! I would then take my talent elsewhere, or upgrade my skills to increase my value within the market.

Fortunately for me, the market is such that people with my skills and experience command greater compensation than that. The same cannot be said for relatively unskilled individuals who are working in minimum wage level jobs.

26

Making 3rd world country wages = FAIL.

Naturally, you would completely forget the issue of rising health care costs, rising energy costs that no doubt increased raw material costs, and the snippet in the article that says ‘they couldn’t increase the cost of the bows without losing sales.’

No, no there are always only two things that cause a business to fail. Taxes and worker pay. Clearly there is nothing a business can do to increase sales, improve efficiency, or in any way embrace innovation in order to stay in business.

I think you should move to either china or mexico. Minimum wage is basically 0, taxes are low, and most regulations do not exist. You would be in heaven. Except that you would be making about $2000 a year (working 70hrs a week), never be able to see blue sky, not able to drink the water coming out of your own faucet, and you would generally be in a terrible state of mind due to your living conditions.

Keep looking for articles that support your philosophy. Maybe you can convince all of us to make less money, pay more for our healthcare, and deal with more pollution. You had your eight years of bullshit thanks to Bush. Time to evolve.

27

Total increase from September 1997 to July 2007: 0.0%.

That has nothing to do with the decision that companies are making today to reduce their workforce related expenses in the current economic environment.

28

Which option is better for the Wee Ones workers: Continued employment at $5.15 per hour, or being now unemployed at $0.00 per hour? I bet if they had a choice, they’d take the first option. Unfortunately, that would be illegal.

Why stop at $5:15? Why not lower the prices to those of China or India? That’s the only real way to remain competetive and increase employment, right?

And why is the other question not asked? “Continues employment at $5.15 per hour or continued employment at $7.00 per hour?” Or realistically, maybe we should be comparing $3.20 per hour, because wages weren’t raised to $5.15 by the shear good will of the companies. Laws were passed to get the price up to $5.15.

Yeah, it sucks when people lose jobs. But it also sucks to make $5.15 per hour.

29

Making 3rd world country wages = FAIL.

Naturally, you would completely forget the issue of rising health care costs, rising energy costs that no doubt increased raw material costs, and the snippet in the article that says ‘they couldn’t increase the cost of the bows without losing sales.’

No, no there are always only two things that cause a business to fail. Taxes and worker pay. Clearly there is nothing a business can do to increase sales, improve efficiency, or in any way embrace innovation in order to stay in business.

I think you should move to either china or mexico. Minimum wage is basically 0, taxes are low, and most regulations do not exist. You would be in heaven. Except that you would be making about $2000 a year (working 70hrs a week), never be able to see blue sky, not able to drink the water coming out of your own faucet, and you would generally be in a terrible state of mind due to your living conditions.

Keep looking for articles that support your philosophy. Maybe you can convince all of us to make less money, pay more for our healthcare, and deal with more pollution. You had your eight years of bullshit thanks to Bush. Time to evolve.

Finding examples of this is like shooting fish in a barrel. When the economy is better firms have more leeway to absob these artificially mandated increases in their P&L, but now given that demand is contracting, unemployment is rising and business conditions generally suck, companies are doing what they need to in order to survive. This means that exmaples like this will only continue to make headlines.

You want to brush aside the Missouri company example while at the same time making sweeping generalizations about my “philosophy.” What I find ironic is that you are exactly the type of poster that would talk out of both sides of your mouth. On the one hand you villify companies that pay low wages for unskilled workers, yet at the same time look on in disgust at firms that pay highly skilled and specialized workers 6 and 7 figure salaries.

By the logic of your world view, low-skilled workers would earn more than their labor is worth–defying all economic law and rationality–while highly-skilled employees would be paid significatnly less than their value to employees.

I’m sure you are also in favor of maximum wage policies controlled, implemented, and monitored by the government–any good socialist would–and yes, I’m making sweeping generalizations about your “philosophy.”

30

why then, following this line of thought, not make the minimum wage $2/hr so we can compete better against 3rd world countries? After all having a job for $2.00 an hour is better than being unemployed, right?

No need to type that in pink. I agree 100%…better yet, no need for any minimum wage laws. That’s what the free market is for.

 Would you prefer to live in a country that has no minimum wage laws? Sure some countries like France are over the top with everyone unionized, but this is not a bad medium.
31

Which option is better for the Wee Ones workers: Continued employment at $5.15 per hour, or being now unemployed at $0.00 per hour? I bet if they had a choice, they’d take the first option. Unfortunately, that would be illegal.

Why stop at $5:15? Why not lower the prices to those of China or India? That’s the only real way to remain competetive and increase employment, right?

And why is the other question not asked? “Continues employment at $5.15 per hour or continued employment at $7.00 per hour?” Or realistically, maybe we should be comparing $3.20 per hour, because wages weren’t raised to $5.15 by the shear good will of the companies. Laws were passed to get the price up to $5.15.

Yeah, it sucks when people lose jobs. But it also sucks to make $5.15 per hour.

Marx used an interesting term to describe what you are illustrating. He said that as automation and mechanization improves the marginal cost of production, the employee becomes simply an “appendage of the machine.” And as a workers value in the productive process falls, naturally the wage paid to the worker also falls. And at some point, the only wage necessary is the one that will keep the worker alive. Thus, Marx’s use of the phrase “*labour created man himself.” *
**
Ironically, those in this thread that fail to see that minimum wage laws displace workers, aren’t even aware that proponents of minimum wage have pretty much abandoned that stale line of thinking in the face of empirical research.

Most opponents, take a more holisitc view–and one that is much more worthy of debate–arguing that those that remain in wage controlled jobs see economic benefits that outweigh those that are displaced (I don’t necessary agree, but that is besides the point). Make no mistake, the displacement argument is pretty much dead, it is the big picture argument that really matters–i.e., what is happending in the aggregate.

Try telling that to someone like art vandaly though and it’s like talking to a wall–he doesn’t even know what stance his side of the debate is even taking these days, which makes it much easier to dismiss his pithy remarks and flawed “logic.”

32

And you who use the Missori case as a huge victory slogan also ignore the millions of people who will make a better wage and lead a better life. Those 200 people will not be forever unemployed, they will eventually find work at a higher rate.

You also don’t know that the government loves to give tax advantages to companies that buy equipment, usually foreign made, that actually displaces workers in the bizare “hope” of stimulating the economy. Lets see, lets build up sales of stuff made in china so that Best Buy or Toyota can make a few dollars more profit, what a stupid way to lead a country.

And responding to a previous post, anybody that thinks decisions left to corporations is the way to go is nuts. Just check out all of the financial derivative garbage that was thrown around in the name of getting commissions, or the hundreds of chemical dump sites that kill or severly injure people which were created by companies that try to hide their garbage and walk away from their destruction.

33

By the logic of your world view, low-skilled workers would earn more than their labor is worth–defying all economic law and rationality–while highly-skilled employees would be paid significatnly less than their value to employees.

The problem is, the value of labor is largely dictated by power. Companies don’t simply pay employees some percentage less than what they earn for the company (ie…if my work makes them $300K/year, they don’t give me $250K of it). Companies pay as little as they absolutely need to in order to get the employess that can do the job.

This isn’t to say that some companies don’t earn more than $6/hr for an employee (plus ovehead, of course). The problem is, if that same company were to earn $25/hr off of the same employe, they still pay them 5 and some change.

Labor unions and labor laws shouldn’t be necessary, but there’s a reaon why they are there.

34

Dan? Is that you? Did your better half get to you? Didn’t expect you to take that side on the issue. Almost pragmatic. Maybe there is “hope” for the country. :wink:

On a side note, I’m still skeptical of the article, that their sales vs. employee number seems very skewed. $6 million in revenue with 250 employees? Doesn’t add up to me.

35

And you who use the Missori case as a huge victory slogan also ignore the millions of people who will make a better wage and lead a better life. Those 200 people will not be forever unemployed, they will eventually find work at a higher rate. I’m sure they will find you compassion and “guarantee” comforting as they stand in the unemployment line.

You also don’t know that the government loves to give tax advantages to companies that buy equipment, usually foreign made, that actually displaces workers in the bizare “hope” of stimulating the economy. Lets see, lets build up sales of stuff made in china so that Best Buy or Toyota can make a few dollars more profit, what a stupid way to lead a country. This is an incoherent paragraph, that likely mirrors your knowledge and understanding of capitalism, please try again.

And responding to a previous post, anybody that thinks decisions left to corporations is the way to go is nuts. Just check out all of the financial derivative garbage that was thrown around in the name of getting commissions, or the hundreds of chemical dump sites that kill or severly injure people which were created by companies that try to hide their garbage and walk away from their destruction. **Corporations don’t make decision, the agents of the company do. And any person found engaging in illegal activity–dumping waste–should be prosecuted by law. **

36

That number is also referenced on their website. Either way I don’t see it mattering much in this discussion. The bottom line is they are moving out of town. Whether it is all due to the wage increase is not known. Again, this is but one of many examples of the displacement of workers due to minimum wage laws.

Displacement is not the argument here. It’s empirically documented that unemployment rises when minimum wage laws are implemented. This is one of the most studied phenomenons in economics, with 50+ years of research behind it.

37

Would you prefer to live in a country that has no minimum wage laws? Sure some countries like France are over the top with everyone unionized, but this is not a bad medium.

When the choice is between the free market or government intervention, I’ll always choose the free market. So yes, I’d prefer no minimum wage law.

38

While I am not going to debates the merits or lack thereof of minimum wage - you gotta love the referenced company webpage - From today (so now a good few moths after the layoffs)

Our operation in St. Peters, MO is where the good time comes in. Each person contributes in his or her own special way to make Wee Ones a truly outstanding place to be every day. From karaoke to cooking experts, you will find them in the Wee Ones family. And more likely than not, they have a bow fetish as well. We are so lucky! "

Nice to know they are so up front and honest about where their operations are and what a happy little family they are. Also funny nothing about this shows up in their press link …

39

He He. I guess my wife is wearing me down a bit. Not really a big fan of living wage bill, but I really don’t think it is going to force businesses under. Like restaurants that don’t allow smoking… Heck, the restaurant business in my area of Montgomery County is going gangbusters. But I still think that I am holding true to my conservative values in many ways. :slight_smile:

I do think you are on to something with the numbers for her business, they really are skewed in an unrealistic proportion. Reminds me of Joe the Plumber.

A lot of the govt’s proposals seem very silly to me. The stimulous checks sent out to get people to spend money.(tax cuts no, but stimulous checks yes-wtf) Bonus depreciation on equipment purchased to propel the economy doesn’t make sense to me. Equipment made in china, a Toyota or Mercedes purchased to generate addtional depreciation deductions that don’t have a deep benefit to the economy, yet that is what is forced down our throats. The domestic Production tax credit for businesses that produce things and have a profit is a START. Although I have hated it from the start, I think it is a step down the right path. Help companies that hire people to do work stay in business. What a novel idea.

If the construction industry is the industry that started this weak economy, why not build things that we need? Over half of the bridges in the US are in dire need of repair so why not hire people to repair them? We have become such a reactionary country that nobody wants to invest in the future any more.

40

**Corporations don’t make decision, the agents of the company do. And any person found engaging in illegal activity–dumping waste–should be prosecuted by law. **

Sounds good to say it, but in reality it goes unpunished. Like all of those guys on wall street that won’t get punished for wreaking havoc on the financial world to get a commission. Sure, Madoff will get punished but only because he confessed to it. BTW, those agents of the company commit those acts with plausable deniability lined up, all the while they are taking out their money and then ditching the company when all heck breaks loose. They walk away with immunity because the Corporation was liable not them.