I need information about raising the minimum wage

[retrowire]

I was having a conversation with someone who said they felt raising the minimum wage was a stupid idea because it would lead to inflation that would make the cost if living higher for everyone.

how and why is this not true, and if it is true, how is it bypassed with other benefits?

[Warpy]

1. Tell him the billionaires thank him for his support

but won't contribute a dime to his family budget without being forced to. Start here: http://www.dol.gov/minwage/mythbuster.htm

Finish with the remark that the ignorant wingnuts all scream poverty before it goes up but six months later, there has never been any sort of movement calling for a wage rollback. Business always increases more than their bill for labor does, even in labor intensive areas like retail. Nobody wants to lose that business.

[DrewFlorida]

2. Robert Reich is a professor at UC Berkley, he is an economist who explains complex ideas.....

Such as the minimum wage issue in layman's terms, making them easily understood.

Here is a link to his 2 1/2 minute video about the minimum wage.

http://robertreich.org/post/118372382285

[Sherman A1]

4. Robert Reich always puts things in

such simple and eloquent terms...

[Paulie]

10. And here's he video

[Rochester]

3. Ok, here goes.

By raising the minimum wage, businesses would have to charge more to pay their workers, and the workers would have more money to bid up the prices. That's true as far as it goes, but it's incomplete.

Labor is only one of the costs of business. They also have to pay for energy, raw materials, taxes, etc. To grossly oversimplify, let's assume that Kittycat Industries can produce widgets for $20 each, of which $10 is for labor and $10 is for everything else. If the minimum wage is increased and KI has to spend $12 for labor, a widget now costs $22 to produce (assuming everything else stays the same), a 10% increase, but the workers got a 20% increase (10 to 12) and thus come out ahead.

On the other hand, there are still some problems. The workers who were making a little bit above the old minimum wage will come out behind if prices increase, even by a little, if they don't get a raise to compensate for that. It creates more room for people to undermine the system by working under the table for less than minimum wage, a big temptation when there are so many people out of work or underemployed. Also, there's the issue of perverse incentive; businesses may respond by seeking alternatives such as offshoring or automation rather than pay a living wage. The conclusion I draw from this is that raising the minimum wage piecemeal is generally good, but any plans to really help the working classes will have to be based on suppressing competition. When businesses don't have any profitable alternatives to paying a living wage, they'll pay a living wage then and not before.

[Scuba]

5. Funny how they never make this argument in response to CEO salaries skyrocketing.

[Cassiopeia]

6. This is brought up every single time anyone brings up minimum wage.

I remember when they wanted to lift it from $4/hr to $4.35. Burgers at McDonalds were supposed to go from $5 to $15 overnight.

Flash forward 24 years. Minimum wage is now nearly double that $4/hr rate and so many other real life costs are much higher and a burger at McDonalds still costs $5.

The real life consequences of raising the minimum wage is that the people that make minimum wage are more likely to participate in the economy and their employers just make more money.

[TexasBushwhacker]

7. It's not that simple

The cost of labor is only one part of the cost of the product being sold. There's rent, utilities, materials, possibly advertising, legal expenses, franchise fees (fast food) etc.

Certainly companies have to cover their costs, but to maximize profits, prices are set at the highest price that will produce the most sales - good old supply and demand. Prices are not set so high that they invite competition from lower priced competitors.

For example, if McDonald's paid their workers $15 an hour, they would theoretically have to raise their prices 17%. However, a higher minimum wage may also mean that more people can afford to buy their food and that they can buy higher priced items. Increased business could cover the cost of the wage increase. They might even be able to increase their prices by more than 17%.

McDonald's in Australia pays a minimum of $17.03 per hour, plus generous benefits. A Big Mac costs $4.95 vs. an average of $4.20 in the US.

Increased wages also means less worker turnover. Training new workers is expensive. Walmart's hourly workers make $12.85 on average and even full time workers work less than 40 hours a week. Their turnover rate is 44%. Costco pays an average $20 an hour. It's turnover rate is 6%.

[LiberalArkie]

8. And by the very nature that is an across the board minimum wage, all the lower paid workers,

the store clerks, the kmart workers, the McDonalds workers, the guys at the shoe store are all making and taking home more money. Sure that burger might cost a little bit more in labor, but they are selling more because more people have a little of money to buy it. And sure the store owner might take a little hit, but they make it back because the store has more sells.

It has always worked that way. When the person on the bottom has more money to spend the whole regions economy gains from it. That is why (in my opinion) when Clinton did his welfare reform and welfare to work programs, the local economies went down the tubes. The people at the bottom no longer had any money even when working 2 and 3 jobs.

[TexasBushwhacker]

9. We all do better when we all do better

If Walmart devoted its spare cash to workers' salaries they wouldn't have to raise their prices a penny. Even if they passed the entire cost of raising workers pay on to customers, they would still only have to raise their prices by around 2%, and that's not counting increased sales volume. Instead, full time workers have 34 hour schedules the whole year except the Christmas season and Walmart spends billions buying back shares which benefits the biggest stockholders - THE WALTON HEIRS!