Minimum Wage Increase (again)

Remove all ads!

It is really amazing what some of those top guys earn. It's like a different planet.

 

At first, it sounds good, the lower end workers get a little more money to support their families, or even a few luxuries. That sounds good for the economy.

But the problem is that companies have two choices to restore profitability: Reduce labour (even by a few man hours), or raise prices. If McDonalds can't cut labour, then they would raise prices. Then they'd tack on a penny or two on each product they sell. Other companies are in the same boat too, ultimately consuming that paltry raise, if not making the standard of living just a little lower...

 

I fail to see how somebody could even spend $200,000,000 in one year. I'd be happy with 0.5% of that.

 

I don't agree with that 'it won't make a noticeable difference' argument. When you've lived on a crappy wage, and you're having to support a family, any extra money is an absolute God-send. Say, $7.50 an hour rather than $5.15 can mean the difference between scraping and scratting for each penny, and sending your children to school in hand-me-down rags, and living in 'slightly' more comfort. That's just a get out argument. It needs addressing. Big time.

 

Yes, New Jersey is full of them! There are a few near my home in PA, as well, but they're in one of the most expensive towns in the area so maybe that doesn't count. It seems that the most you can get anymore is to have a few "full serve" islands at a "self serve" station. But you're right, the "service" rarely includes even a decent windshield-washing anymore.

Back on topic... why isn't anyone addressing the 800-pound gorilla of a flaw in this situation? What I find most disgusting is that families are trying to live on what should be a training wage that's reserved for people who are relatively new to the work force. The path out of poverty is via improving your job by whatever means you can find, not waiting for someone else to improve it for you.

And before you jump down my throat about how hard this can be, let me say that I already know. No one ever said life was easy, and for every sad story that someone puts forth, someone else can find an inspiring one. There's always SOMETHING that one can do for oneself.

 

Chandos, do you really expect that the government is going to fix this injustice? Sorry but when the government starts tilting with "injustice" it creates far more injustice than it cures.

Your statement of "Everyone knows that when there was no standard, workers were abused by big business" seems to imply that you believe the government set these standards...which is far from the truth, at least in the US. Here the driving force in eliminating employer abuse was organized labor, both directly and through legislation by extension. The balance of power between workers and employers is very fluid and somewhat cyclical in nature. I will concur that at the moment employers hold a slight edge in power of the employee...much to the fault of corrupt over reaching labor unions, but that is the nature of the relationship.

As far as executive compensation goes...that is between the shareholders and the board of directors. If the owners of the business (stockholders) do not have an issue with the pay of their employees (executives) then I don't think anyone has any business sticking their noses in it, least of all Uncle Sam.

Rally, well said!

 

"Sorry but when the government starts tilting with "injustice" it creates far more injustice than it cures."

Can't say I agree there, DW. No solution, least of all one that has to be agreed upon by a large number of people with different interests, is perfect. However, the residual problems are usually smaller than the initial ones, at least if the people writing the policy are remotely competent. If they are not, of course, someone has to be held responsible one way or another. There's a lot of talk how raising the minimal wage would cause loss of jobs, but to be honest I haven't seen any empirical evidence of a wage raise triggering a recession or that it often causes economic slowdown. It might cause a small raise of inflation, but that would happen only if the wage of a significantly high number of people was raised by a serious amount. Now, had the minimal wage been raised to $15, that might have interesting consequences, for good or bad. Besides, didn't most states have higher minimal wage than the federal one anyway?

I believe, firmly, that a person who is working the regular 40-hour week should be perfectly able to sustain themselves with the basic necessities of comfort and in good health, and also that they should have a bit of money for a rainy day in case they fall ill, lose their job, or need it in a hurry (say, they're getting married). This is grounded in my belief, which I hope is shared by most people here, that if you work full-time you should receive enough money to lead a full, meaningful life with. I'm not quite familiar with the costs of living in the US, but the current minimum wage strikes me as somewhat low, especially if you need to maintain a parent or a family of your own. Sure, you can and should try to get more, and it's usually possible. However, that doesn't mean that if it so happens that you can't, you shouldn't be able to have a decent life. To put it simply: the minimal wage should be high enough that you have a chance of living on it and possibly raising a family. Even if only 5% of the people get that much or more and are not able to lead sustain themselves, there's a problem. It's like saying "well, 5% of the workers in factory X need to steal in order to send their children to school, that's acceptable." No, it's not.

Corrupt overreaching labor unions... Hmm. I always thought the US labor unions were quite weak, both in terms of power and membership.

[ January 11, 2007, 16:14: Message edited by: The Shaman ]

 

In Finland the situation is basically the opposite. Labour unions have a stranglehold on larger corporations. They sometimes launch illegal strikes which costs the company millions of euros while the unions get away with a small slap on the wrist and a fine of 10 000 euros or so. The government almost never intervenes with these struggles since it's a huge political risk to intervene in labour struggles. Also to staying out of the unions is almost impossible, corporations can't hire people outside an union because their contract with the union prevents this. In many way I think the unions have started to act like corporations many times acting for the sake of the union itself instead of representing the people who are members. Often strikes are just matters of principles trying to show the strenght of the union while damaging the production and the union members.

Despite of this I do think that our labour markets have a better balance than in most countries but it's very far from perfect and can allways be improved.

 

Yes, in 1997, the minimum wage increased from $4.75 per hour up to the current $5.15 per hour, or about an 8.5% increase. The cost of living goes up about 3% per year, and since it's been nearly 10 years (it was September 1, 1997, so technically it's only 9 years and 4 months) since the last increase, I do not think that raising the minimum wage to even $7 per hour would be excessive. $7/hour is an increase of about 36% of the current $5.15/hour, and matches well with the cost of living increase over the same time frame.

There are very few occupations where a significant portion of your salary comes from tips. Waiters and waitresses are tipped, barbers and hairdressers are tipped, and that's about all that I can think of off the top of my head. But the thing is, in occupations where tipping is a major source of income, those people aren't guaranteed the minimum wage! They typically get about $3/hour. The only reason waiters and waitresses are paid an hourly wage at all is for tax purposes. Tips are estimated for income purposes and nearly the entirety of the person's paycheck is paid in taxes. From people I know who work as waitresses, their typical paycheck is usally less than $50 for two weeks. They basically work for tips alone.

Rally beat me to it by saying:

Some of my wife's family live in New Jersey, and evidently, there is a state ordinance that prevents non-gas station employees from pumping gas. As a result, you probably pay a few pennies more per gallon to tank up your car, but I doubt an extra dollar per tank up puts a major dent in anyone's budget.

Basically, it's the same arguement for gas stations as here. The only difference is that people who eat frequently at McD's do so because it's cheap. It will still be cheap to eat at McD's if they have to raise the price of their value meals by a nickel each.

And why doesn't the arguement of "If an employee's salary does not equal or exceed the value of the work (s)he producecs, then the company will not pay that salary" work in Nardelli's case? The company tanked, yet he was still given a severence package in excess of $200 million.

Combining regular income, stock options, pension and a golden parachute, Nardelli received $274 million for six years of work. That's $34,250 an hour. That's about 3,000 times the hourly wage of a Home Depot worker. That's $275,000 per day – five times as much per day as the typical American family earns in a year.

If not Uncle Sam, how about common business sense? I will acknowledge that CEOs bear far more responsibility than the typical worker, and as a result, their compensation should far exceed the typical worker, but some of these salaries amount to pillaging. Home Depot's stock price actually dropped during Nardelli's tenure, and for this he is awarded $274 million? That's over a quarter billion dollars. Almost as bad as Exxon's old CEO who was given a golden handshake of nearly half a billion dollars.

I find it impossible to believe that a principled company cannot find anyone willing to take the job as CEO for a fraction of what some of these guys make. A fair way to do it would be to tie it to workers salaries. Say you make the CEOs salary 100 times that of the average worker. So if the average worker makes $30,000 per year, the CEO gets $3 million. That's still a very nice salary, but with many CEOs making $20 million, $30 million, or even more per year, it's a fraction of the current pay. The savings from the CEO alone would be millions per year, and would likely pay for the minimum wage increase for the company's workforce!

 

@AFI:

Actually, NJ gas is almost always several cents per gallon CHEAPER than PA gas. Go figure!

@The Shaman:

Here, we disagree. Where's the incentive to improve your lot in life, if you can sustain yourself with minimal effort. I think the minimum wage should be a floor established to make sure that people are being completely raped by an employer while they're preparing themselves to take on a better job with better pay. No one should expect to LIVE on minimum wage.

 

We disagree indeed. If you are content with living in a rented room or a two-room apartment, and always buying discounted products from the supermarket except for your birthday, and sending your kids to a public school, well, why not?. However, I think 99% of all people are more ambitious or, if you want, simply greedier than that. If my neighbor has a BMW, and I have a bicycle, and if my friends order freely in a pub while I count every penny, I personally will not be quite happy with my lot in life. Even in countries with a high minimum wage people imo still try to be richer than their neighbors and friends. However, for me the matter lies elsewhere: it's simply that if you work well, you should be paid well, no matter how much of a stingy idiot your boss is or how much your colleagues malign you. It's a minimum wage, that's all: you can always get more, but it tries to set a minimal standard for the renumeration of anyone doing an honest day's work.

What's being proposed now - btw I think it passed the House - would do little more than adjust the minimal wage for inflation. I don't really see a problem with that.

 

Given the location of my family and my wife's family, we are frequently in PA and NJ. The reason PA gas is more expensive is the state tax on gas is higher in PA. In NJ you pay 14.5 cents per gallon in taxes. PA is the second highest in the nation at 31.2 cents per gallon. Here's all the state tax on gas in 2006. So if you take into account that PA is charging an extra 17 cents per gallon in tax, that's probably the difference.

Your definition matches closely with what the original definition of minimum wage was during FDR's presidency. As defined then, it was the minimum salary on which to support a family of three. Today, even if two people have minimum wage jobs you can't support a family of three.

 

Nice one. I was wondering if anyone was going to be bold enough to raise that point.

 

That's no reason to have a horrendously low minimum wage.

 

This is true, but you have to remember that at the time FDR was in office we had a major economic depression...the Federal government was taking drastic and desperate measures to create any kind of economy for people. At that time there weren't enough jobs for people...the are plenty of jobs to be had now.

However as HB pointed out, many middle class jobs are off-shoring and the global economy is siphoning off jobs from developed countries. This is all the more reason that the Federal Government needs to cut spending and provide tax incentives to businesses (I know, that dreaded "corporate welfare") to encourage them to keep jobs in America. The current tax system does nothing to provide incentives for businesses to keep jobs in the US, and provides lots of incentive to off-shore. If it mollifies those opposed to any further tax incentives for businesses, I really don't care if we increase corporate taxes in other areas to offset the tax incentives we give to keep jobs here, but we have to be careful of the law of unintended consequences.

If we don't do something at some point we will be back in the same situation that FDR faced...only with a crushing Federal debt...and will find it all the more difficult to turn it around as the types of programs that FDR pushed through will not be viable.

 

Any job sent off-shore due to the minimum wage increase is a job that should be sent off-shore. An American is far better educated and in far better physical condition that your average Chinese/Indian/Mexican wage earner. That American should do a different job, one which requires more skill and/or physical conditioning. Resources are limited, and America's people are a very limited resource; resources should be used to their maximum efficiency. The world is a much better place---America is a much better place---by the deportation of low-skilled jobs to lesser nations. There is a temporary bit of pain to be sure, but after that brief restructuring phase the American will go from manufacturing parking cones for $8/hour to manufacturing iPhones for $25/hour. And the world will keep spinning---expect with cheaper parking cones and people now being able to jam out to their cell phones.

It is kind of ironic because the one thing I really dislike about the Democratic party, the threat of instituting protectionist economic policies, is the one thing you seem to like about them.

 

Strongly disagree. Employers have had a significant advantage since 1870ish. They figured out how to effectively organize on a national scale; labor never did (but, you'll counter, look at those periods when labor had millions of organized members. Yes, look at them; they lasted a handful of years before membership plummeted and the organizations imploded).

Nope. Organized labor was not a significant force in the Progressive era, which was when most of these reforms occured. The end to the abuses were something people did for labor, not something labor did for itself.

Organized labor has never been a significant force on a national scale except during WWI--and that was because government took labor's side in order to avoid disruptive strikes. Unfortunately, immediately after the war government and business went back to working together against labor, and the significant gains unions had made were lost, as was something like 4/5 of their membership.

 

DW - And his fellow employees. Ask yourself if it matters to you what your peers are receiving in compensation. If you are any kind of businessman, I'm sure you do.

I just wanted to make this point about how bloody those years were:

Workers have always had to struggle, to different degrees, to get fair treatment from employers. What has changed is that the executives at the top receive so much compensation, that they really don't care about much else, even if the company does poorly. It is really no longer in their interests to bother with long-term issues that can have drastic effects on a company down the road. A lot of them just take the money and run, and look for another group of suckers somewhere else.

http://www.hfmgv.org/exhibits/fmc/battle.asp

Sorry, Rally. Very few of those born into poverty ever escape it. Those that do are few and far between....

 

Please re-read my post as I didn't say anything about minimum wage jobs being out sourced. My point is that off-shoring MIDDLE CLASS jobs deteriorates the number of good paying jobs, and stopping this trend will do far more to raise the standard of living of the poor than any raise to minimum wages.

I don’t' think that people realize how few "families" or even independent singles actually work for minimum wage. The vast majority of minimum wage workers are students who unfortunately have very little of value to offer employers. Raising minimum wages makes some of these tasks less valuable to employers...like the examples provided in the article I provided and a couple I provided. Keeping middle class jobs in the US makes it harder for companies like Wal-Mart to exist as people have more discretionary income to spend at other more expensive establishments, and alternatives for employment (Wal-Mart is the largest employer in the US...and by the way, the vast majority of their workers make considerably more than minimum wage).

AMaster, I have to say that I strongly disagree with your opinions on the power of organized labor. I will agree that labor unions are certainly on the decline at the moment, but assure you that the gains that they made are still felt in society. Labor unions to not have to have a majority of workers belonging to them to create an atmosphere of change and the gains they make with one employer or one industry trickle through other employers and industries. Vacation time, health care, sick time, even family leave are a result of the initiative of organized labor. If the labor unions are so weak why do so many politicians spend so much time speaking to them in election years? You underestimate them because you only look at them from their direct impact to single industries and employers. They were at one time, for a long time, the strongest voting block in the US, and I believe are only second now to the baby boomers that are fast approaching AARP/retirement age. If you want to see the legislative power of unions you simply have to look at the almost complete stranglehold the teachers unions have been able to coerce the federal government to create in education. Unions have never been able to break into private education, so they have made sure that no tax dollars go to people to allow them to go or send their children to private schools. I could go on with more examples like the IBEW, the Teamsters, the UAW...the list of influential labor unions is very extensive, as is their accomplishments, both for good and ill.

Labor unions are in the decline now because they pushed too far and it was less costly for employers to go out of business or hire entire new, non-union staffs. The airline workers unions have put more than one airline to death…by their direct actions. The UAW’s refusal to come back to a reasonable wage for auto workers has almost broken the back of GM and Ford, and forced the manufacture of many cars and parts overseas. That said when things get bad enough…and they will, people will again return to organized labor, and regardless of laws or government action they will hold employer’s feet to the fire and force them to provide fair treatment. However, before this can happen labor unions must be cleaned up, as they are as strife with corruption and graft as any corporation or government agency.

edit to respond to Chandos:

Damn straight, and if I hear that someone making more doing a comparable job to mine at an equal level of quality I request a raise...and if I don't get it I leave. That is my duty, and the duty of every person out there who says they are underpaid. You must leave so that your employer is forced to go back into the labor pool to find someone else to do your job, and if you are correct and you were underpaid they will have to pay more for your replacement, and then given training costs they will re-evaluate their pay practices...especially if enough people do it. Of course if you were paid fairly you are screwed because you are going to have to start over someplace new, but hey, choices have consequences, and we have to take responsibility for the choices we make.

It is funny because your question is exactly how CEO compensation got so high in the first place...one CEO gets X, and the next wants X+1%. The same thing can be seen in College Football programs...Nick Saban is reportedly going to make something close to $4 million per year at Alabama, Bob Stoops makes $3.4 million at Oklahoma, and Pete Carol is making $2.8 million at Southern Cal...how many students could that pay for at each of those universities? Life isn't fair...but attempts to make it so are invariably also unjust.

Finally:

So are you saying that the ones that get out of poverty just got lucky? I know you aren't because that would be a slap in the face of those who have worked hard to do it, and I know you better than that . The problem is that if we don't say that those who escape poverty are lucky, and we concede that they some it by hard work, then the corollary is that those who remain in poverty do so by their own choice...it is a nasty position to be in isn't it?

[ January 12, 2007, 04:32: Message edited by: Darkwolf ]

 

DW - No, I don't agree. I think people have argued this point since the beginning of time: what is it that causes one to excel, while others, regardless of economic or social backgorund, fail to do so? It is an age old question and there have been countless answers. But I don't think that it is economics alone that determines the fate of most of those in any given society - I believe it is a number of factors that are interconnected: There is for sure an economic component, a social one, a spiritual one; one that is based on intelligence, talent or personality; education is probably a large part of it as well. But I don't think that it is dertermined by economics alone.

Good point...