Minimum Wage & Corporate Profits

Ghibli · November 5, 2014, 7:40pm

“Sorry, I’m not allowed to employ anyone who produces less than $10.10 an hour. It is, in fact, now illegal. Go home and wait for your EBT card. Oh, and don’t trip over my new automated burger maker on your way out.”

Greenman72 · November 5, 2014, 7:42pm

I think Matt touched on this some, but I want to address it.

There are some jobs that are just menial labor, and menial labor is in ample supply in some places. That is, stocking shelves at the local grocery store is only worth, say $5.15 per hour. If you empower the stocker and make it easier for him to be employed, then you’ve helped that particular individual, but the shelves still need to be stocked, and the labor’s still only worth $5.15 per hour. So you really haven’t helped the low-income population at all–you’ve just changed the makeup of who’s in it.

(BTW–this isn’t purely a hypothetical. I used to stock shelves at the local grocery store for $5.15 per hour when I was in high school. This weekend, I was visiting my parents house, and saw some young high-school kid stocking shelves at my old grocery store, presmably for minimum wage, since labor is in ample supply in Nowehereville, TX.)

geo · November 5, 2014, 7:43pm

I know, that’s what I’m asking. What are the other options that are acceptable to Americans? Minimum guaranteed income, other social structures all accomplish the end game better. But these are tough sells in Canada, let alone in America. So what would you do differently if you eliminated minimum wage tomorrow?

Twice_the_man · November 5, 2014, 7:51pm

inkybinky:

Matt_Likes_Analysis:

if this is actually the case in practice, my question is, why do businesses employ so many people who are entirely expendable? i mean, a 20% increase in your labour costs, and a successful McDonalds franchise fires employees? no way. maybe barely profitable McDonaldses will go under but would this business have gone under eventually anyway? i’m not sure the effect is as linear as it may seem considering the major disallocation from historical norms between corporations/labour/government at the current time.

Technology is the reason that labor on the low end is increasingly devalued. Why hire call centers when you can use voice-activated phone systems that eliminate the need for most employees, for example? Low-level jobs tend to be monotonous and they can often be automated. Do you really think that many McDonalds employees can’t be automated away? Do you think that a marginal increase in wages wouldn’t encourage automation?

This past weekend I went to a new Whole Foods which had a restaurant upstairs. There were no waiters. Just a couple of point of sale systems with an easy-to-use touchscreen. You placed your order there and a server would later bring you your food. No need for regular waiters/waitresses or a hostess.

These systems are not costly and become cheaper all the time. Increasing minimum wage just increases the incentive to do this.

Things like automated cashiers make sense with or without a minumum wage. If replacing a $10 an hour worker makes sense, so to does replacing a $7 or $5 an hour worker. I get that theoretically the breakeven point could fall between those numbers, but in practice, the non-monetary gains achieved by replacing a $10/hr worker(speed, efficiency, quality, reliability, etc) would still have immense value if a $5 an hour worker could be replaced. We are talking about a worker pool that is so unskilled that they cannot command more than $10 an hour. They are almost certainly a liability, either through abysmal performance or through acquiring skills that make them more valuable outside the firm.

inkybinky · November 5, 2014, 7:55pm

Twice_the_man:

inkybinky:

Matt_Likes_Analysis:

if this is actually the case in practice, my question is, why do businesses employ so many people who are entirely expendable? i mean, a 20% increase in your labour costs, and a successful McDonalds franchise fires employees? no way. maybe barely profitable McDonaldses will go under but would this business have gone under eventually anyway? i’m not sure the effect is as linear as it may seem considering the major disallocation from historical norms between corporations/labour/government at the current time.

Technology is the reason that labor on the low end is increasingly devalued. Why hire call centers when you can use voice-activated phone systems that eliminate the need for most employees, for example? Low-level jobs tend to be monotonous and they can often be automated. Do you really think that many McDonalds employees can’t be automated away? Do you think that a marginal increase in wages wouldn’t encourage automation?

This past weekend I went to a new Whole Foods which had a restaurant upstairs. There were no waiters. Just a couple of point of sale systems with an easy-to-use touchscreen. You placed your order there and a server would later bring you your food. No need for regular waiters/waitresses or a hostess.

These systems are not costly and become cheaper all the time. Increasing minimum wage just increases the incentive to do this.

Things like automated cashiers make sense with or without a minumum wage. If replacing a $10 an hour worker makes sense, so to does replacing a $7 or $5 an hour worker. I get that theoretically the breakeven point could fall between those numbers, but in practice, the non-monetary gains achieved by replacing a $10/hr worker(speed, efficiency, quality, reliability, etc) would still have immense value if a $5 an hour worker could be replaced. We are talking about a worker pool that is so unskilled that they cannot command more than $10 an hour. They are almost certainly a liability, either through abysmal performance or through acquiring skills that make them more valuable outside the firm.

By that reasoning, we may as well raise the minimum wage to $50. Because marginal costs don’t matter!

Matt_Likes_Analysis · November 5, 2014, 8:05pm

+1. minimum wage is set so that powerful employers cannot coerce desperate low IQ people into accepting far below the living wage through intimidation and necessity. those who are homeless and starving to death aren’t going to have great bargaining power. minimum wages protects these people. the discussion of minimum wage shouldn’t be should we have minimum wage or not, it should be, is the minimum wage the living wage (i.e. is it enough to afford basic necessities of food, shelter, lowest cost transportation and clothing).

Greenman72 · November 5, 2014, 8:13pm

Are you suggesting that a minimum wage is actually preferable for those who are unemployable at any price?

Twice_the_man · November 5, 2014, 8:18pm

inkybinky:

Twice_the_man:

inkybinky:

Matt_Likes_Analysis:

if this is actually the case in practice, my question is, why do businesses employ so many people who are entirely expendable? i mean, a 20% increase in your labour costs, and a successful McDonalds franchise fires employees? no way. maybe barely profitable McDonaldses will go under but would this business have gone under eventually anyway? i’m not sure the effect is as linear as it may seem considering the major disallocation from historical norms between corporations/labour/government at the current time.

Technology is the reason that labor on the low end is increasingly devalued. Why hire call centers when you can use voice-activated phone systems that eliminate the need for most employees, for example? Low-level jobs tend to be monotonous and they can often be automated. Do you really think that many McDonalds employees can’t be automated away? Do you think that a marginal increase in wages wouldn’t encourage automation?

This past weekend I went to a new Whole Foods which had a restaurant upstairs. There were no waiters. Just a couple of point of sale systems with an easy-to-use touchscreen. You placed your order there and a server would later bring you your food. No need for regular waiters/waitresses or a hostess.

These systems are not costly and become cheaper all the time. Increasing minimum wage just increases the incentive to do this.

Things like automated cashiers make sense with or without a minumum wage. If replacing a $10 an hour worker makes sense, so to does replacing a $7 or $5 an hour worker. I get that theoretically the breakeven point could fall between those numbers, but in practice, the non-monetary gains achieved by replacing a $10/hr worker(speed, efficiency, quality, reliability, etc) would still have immense value if a $5 an hour worker could be replaced. We are talking about a worker pool that is so unskilled that they cannot command more than $10 an hour. They are almost certainly a liability, either through abysmal performance or through acquiring skills that make them more valuable outside the firm.

By that reasoning, we may as well raise the minimum wage to $50. Because marginal costs don’t matter!

I’m not advocating for a minumum wage. I’m saying that raising the minumum wage from 8.00(the state minumum in Minnesota) to 10.00 shouldn’t be the catalyst for suddenly replacing a worker with a machine. As a shareholder, if management told me it made sense to replace a $10 an hour worker with a machine, but it didn’t make sense to replace that same worker at 8.00 an hour, I’d have lost a good deal of faith in management.

I don’t have a problem with a minimum wage at $8.00 an hour. I would have a problem with it at $15. Somewhere in between that position changes for me, based on local economic factors, the type of labor being performed, etc.

Matt_Likes_Analysis · November 5, 2014, 8:21pm

the bottom line is that the government shouldn’t have to subsidize those who work full-time doing any job. the fact that it does is a direct subsidy to corporations as it means corporations are not paying an adequate wage. if we eliminate this subsidy, we make the economy more efficient, and only jobs that can support an individual are available (i.e. the only jobs that are worth creating, for the individual, employer and government).

no minimum wage = less efficient government spending due to subsidizing brain dead jobs which drain labour’s skillset and destroys the economic ladder for the lower end of the socio-economic scale, something America apparently prides itself on having.

higher minimum wage = more efficient government spending as it can be focused on the skills building process for the unemployed and zero subsidy to the working poor (which no longer exist). probably lower crime in this scenario as well as you either work and make enough or if you don’t work, you’re building skills through government programs.

Matt_Likes_Analysis · November 5, 2014, 8:25pm

minimum wage should benefit all works in that income tier but only if the minimum wage is the living wage and if there are social programs to take care of those who are temporarily unemployed.

inkybinky · November 5, 2014, 8:26pm

Twice_the_man:

inkybinky:

Twice_the_man:

inkybinky:

Matt_Likes_Analysis:

if this is actually the case in practice, my question is, why do businesses employ so many people who are entirely expendable? i mean, a 20% increase in your labour costs, and a successful McDonalds franchise fires employees? no way. maybe barely profitable McDonaldses will go under but would this business have gone under eventually anyway? i’m not sure the effect is as linear as it may seem considering the major disallocation from historical norms between corporations/labour/government at the current time.

Technology is the reason that labor on the low end is increasingly devalued. Why hire call centers when you can use voice-activated phone systems that eliminate the need for most employees, for example? Low-level jobs tend to be monotonous and they can often be automated. Do you really think that many McDonalds employees can’t be automated away? Do you think that a marginal increase in wages wouldn’t encourage automation?

This past weekend I went to a new Whole Foods which had a restaurant upstairs. There were no waiters. Just a couple of point of sale systems with an easy-to-use touchscreen. You placed your order there and a server would later bring you your food. No need for regular waiters/waitresses or a hostess.

These systems are not costly and become cheaper all the time. Increasing minimum wage just increases the incentive to do this.

Things like automated cashiers make sense with or without a minumum wage. If replacing a $10 an hour worker makes sense, so to does replacing a $7 or $5 an hour worker. I get that theoretically the breakeven point could fall between those numbers, but in practice, the non-monetary gains achieved by replacing a $10/hr worker(speed, efficiency, quality, reliability, etc) would still have immense value if a $5 an hour worker could be replaced. We are talking about a worker pool that is so unskilled that they cannot command more than $10 an hour. They are almost certainly a liability, either through abysmal performance or through acquiring skills that make them more valuable outside the firm.

By that reasoning, we may as well raise the minimum wage to $50. Because marginal costs don’t matter!

I’m not advocating for a minumum wage. I’m saying that raising the minumum wage from 8.00(the state minumum in Minnesota) to 10.00 shouldn’t be the catalyst for suddenly replacing a worker with a machine. As a shareholder, if management told me it made sense to replace a $10 an hour worker with a machine, but it didn’t make sense to replace that same worker at 8.00 an hour, I’d have lost a good deal of faith in management.

I don’t have a problem with a minimum wage at $8.00 an hour. I would have a problem with it at $15. Somewhere in between that position changes for me, based on local economic factors, the type of labor being performed, etc.

Thanks to Google, I know that the $8 minimum wage took effect in Minnesota 3 months ago. It was a $1.85 (30%) increase from the prior minimum. Now you’re advocating another $2 (25%) increase on top of that. That’s a 63% increase compared to three months ago.

If you have two employees manning a POS at a 24 hour McDonalds, you’re talking about a $185/day increase in wage costs (excluding tax implications or benefits compared to three months ago). That’s an additional $67k/year in higher wages.

Are you really trying to suggest that the annual cost of purchasing and supporting two touchscreen POS that are customer-facing (keeping in mind the ones they have are designed for half-retarded employees) is greater than $67k?

ohai · November 5, 2014, 8:28pm

Matt, I am having trouble following basically all of your arguments. As in, I don’t know if I disagree. I just can’t connect the logic. Maybe it will help to explain it another way…

Matt_Likes_Analysis · November 5, 2014, 8:32pm

inkybinky:

Twice_the_man:

inkybinky:

Twice_the_man:

inkybinky:

Matt_Likes_Analysis:

if this is actually the case in practice, my question is, why do businesses employ so many people who are entirely expendable? i mean, a 20% increase in your labour costs, and a successful McDonalds franchise fires employees? no way. maybe barely profitable McDonaldses will go under but would this business have gone under eventually anyway? i’m not sure the effect is as linear as it may seem considering the major disallocation from historical norms between corporations/labour/government at the current time.

Technology is the reason that labor on the low end is increasingly devalued. Why hire call centers when you can use voice-activated phone systems that eliminate the need for most employees, for example? Low-level jobs tend to be monotonous and they can often be automated. Do you really think that many McDonalds employees can’t be automated away? Do you think that a marginal increase in wages wouldn’t encourage automation?

This past weekend I went to a new Whole Foods which had a restaurant upstairs. There were no waiters. Just a couple of point of sale systems with an easy-to-use touchscreen. You placed your order there and a server would later bring you your food. No need for regular waiters/waitresses or a hostess.

These systems are not costly and become cheaper all the time. Increasing minimum wage just increases the incentive to do this.

Things like automated cashiers make sense with or without a minumum wage. If replacing a $10 an hour worker makes sense, so to does replacing a $7 or $5 an hour worker. I get that theoretically the breakeven point could fall between those numbers, but in practice, the non-monetary gains achieved by replacing a $10/hr worker(speed, efficiency, quality, reliability, etc) would still have immense value if a $5 an hour worker could be replaced. We are talking about a worker pool that is so unskilled that they cannot command more than $10 an hour. They are almost certainly a liability, either through abysmal performance or through acquiring skills that make them more valuable outside the firm.

By that reasoning, we may as well raise the minimum wage to $50. Because marginal costs don’t matter!

I’m not advocating for a minumum wage. I’m saying that raising the minumum wage from 8.00(the state minumum in Minnesota) to 10.00 shouldn’t be the catalyst for suddenly replacing a worker with a machine. As a shareholder, if management told me it made sense to replace a $10 an hour worker with a machine, but it didn’t make sense to replace that same worker at 8.00 an hour, I’d have lost a good deal of faith in management.

I don’t have a problem with a minimum wage at $8.00 an hour. I would have a problem with it at $15. Somewhere in between that position changes for me, based on local economic factors, the type of labor being performed, etc.

Thanks to Google, I know that the $8 minimum wage took effect in Minnesota 3 months ago. It was a $1.85 (30%) increase from the prior minimum. Now you’re advocating another $2 (25%) increase on top of that. That’s a 63% increase compared to three months ago.

If you have two employees manning a POS at a 24 hour McDonalds, you’re talking about a $185/day increase in wage costs (excluding tax implications or benefits compared to three months ago). That’s an additional $67k/year in higher wages.

Are you really trying to suggest that the annual cost of purchasing and supporting two touchscreen POS that are customer-facing (keeping in mind the ones they have are designed for half-retarded employees) is greater than $67k?

except it was already $6.15/hr x 2 x 24 x 365 = $107,750 plus SS contributions and other deductions before the recent increase. are you telling me that it wasn’t already worth switching to an automated system at ~$115,000 in labour cost annually? this is the wrong way to look at this issue any way. the right way is to look at it is, does the job pay enough such that the government doesn’t have to subsidize it?

geo · November 5, 2014, 8:38pm

What I got from it was: if companies pay workers too little, government needs to keep them alive, so government is in fact subsidising companies that employ low wage earners. Its a free lunch for McD’s, et al. A full time job should pay a wage to sustain oneself in the local market. Otherwise that company is receiving a subsidy from government. There is some rational logic there.

Sweep_the_Leg · November 5, 2014, 8:39pm

Matt_Likes_Analysis:

the bottom line is that the government shouldn’t have to subsidize those who work full-time doing any job. the fact that it does is a direct subsidy to corporations as it means corporations are not paying an adequate wage. if we eliminate this subsidy, we make the economy more efficient, and only jobs that can support an individual are available (i.e. the only jobs that are worth creating, for the individual, employer and government).

no minimum wage = less efficient government spending due to subsidizing brain dead jobs which drain labour’s skillset and destroys the economic ladder for the lower end of the socio-economic scale, something America apparently prides itself on having.

higher minimum wage = more efficient government spending as it can be focused on the skills building process for the unemployed and zero subsidy to the working poor (which no longer exist). probably lower crime in this scenario as well as you either work and make enough or if you don’t work, you’re building skills through government programs.

Yeah, that’s not at all the way it works. Besides, you’re stuck on this idea of government spending. What happens to consumer spending when the prices go up due to higher labor costs? Or, the people on the margins that get let go because employers can only afford to keep 10 people instead of 11? Who picks up those costs?

Matt_Likes_Analysis · November 5, 2014, 8:40pm

if minimum wage does not equal living wage, subsidy is required for that individual or family to survive. it is most often government programs (medicaid, food stamps, PHAP, head start, etc) that fill the gap.

http://livingwage.mit.edu/

Sweep_the_Leg · November 5, 2014, 8:46pm

Not really. Burger King is not supposed to be a full-time, forever type of job. It’s supposed to be for kids that need a first job and adults that don’t give a f’uck like Kevin Spacey in American Beauty. Working fast food should not pay a minimum living wage. Nor should the government indefinitely support people that try to make flipping burgers a full-time job. People should take some god damn responsibility. If they want a higher wage, what’s holding them back? Need more education? Get it. Socially retarded? Do sellside research. Whatever. Just stop complaining about how you want more for a job that a monkey on smack could do.

Edit: ^Exactly my point Matt, except I object to the use of “required.” The government isn’t required to hand out money. Force the people to figure out how to survive or let them die. No one is entitled to a free lunch.

Ghibli · November 5, 2014, 8:47pm

If with no minimum wage total productivity is X, What happens when minimum wage increases?

What would happen to total country production if minimum wage went to $100 an hour?

Are some suggesting this is similar to the Laffer Curve in that there is some specific wage minimum where total production would be highest that is other than zero?

Matt_Likes_Analysis · November 5, 2014, 8:47pm

Sweep_the_Leg:

Matt_Likes_Analysis:

the bottom line is that the government shouldn’t have to subsidize those who work full-time doing any job. the fact that it does is a direct subsidy to corporations as it means corporations are not paying an adequate wage. if we eliminate this subsidy, we make the economy more efficient, and only jobs that can support an individual are available (i.e. the only jobs that are worth creating, for the individual, employer and government).

no minimum wage = less efficient government spending due to subsidizing brain dead jobs which drain labour’s skillset and destroys the economic ladder for the lower end of the socio-economic scale, something America apparently prides itself on having.

higher minimum wage = more efficient government spending as it can be focused on the skills building process for the unemployed and zero subsidy to the working poor (which no longer exist). probably lower crime in this scenario as well as you either work and make enough or if you don’t work, you’re building skills through government programs.

Yeah, that’s not at all the way it works. Besides, you’re stuck on this idea of government spending. What happens to consumer spending when the prices go up due to higher labor costs? Or, the people on the margins that get let go because employers can only afford to keep 10 people instead of 11? Who picks up those costs?

government obviously. its about only offering jobs that are worth paying a living wage and supporting those who don’t have jobs when jobs are not available. minimum wage, and close to minimum wage jobs, are government subsidized jobs and wouldn’t exist without that subsidy. if we eliminate below living wage brain dead jobs and allocate some of the funds used to subsidize these jobs to training and education for people to self employ or fill job skills shortages, this will add some productivity gains to the economy.

it is my belief that economic growth is most hindered by the government subsidy to corporations that currently exists through a minimum wage that is far too low and the resulting brain drain that has on labour.

geo · November 5, 2014, 8:50pm

^ Its so easy to just get more education when your working 80 hours a week to keep yourself fed and warm. If we were to adopt your approach of perform or die, you’ve then got to give resources to people to adequately give them the opportunity to improve themselves. There are a lot of folks here born with a silver spoon planted firmly up their ass. EDIT: This was for STL.