HuffPo.com: Elizabeth Warren: Minimum Wage Would Be $22 An Hour If It Had Kept Up With Productivity

[HOF44]

Don't get caught up in a 22/hour minimum wage. It was done as a point to illustrate how much wealth hording has been going on by the very upper echelons of society. A much better way to do it would be to frame how much everyone's salary would have risen if ties to productivity had been passed along. Instead those gains went to mostly the .01 percent.

[Larry]

What many times gets lost in this debate is the transitory nature of minimum wage jobs: they're intended for the younger demographic and statistically these people, by and large, don't stay at this pay rate or in these jobs, for an extended period of time.

But what also gets lost (or, sometimes, intentionally, deceptively, ignored) is that the minimum wage has a ripple effect on lots of other low-end jobs. Lots of jobs which don't pay minimum wage, but which are only somewhat above it, would also have to be somewhat above a new minimum.)

Funny thing, free markets.

Employees who have more skills, or are otherwise more attractive to employers than the typical minimum wage worker, will still me more attractive than the typical minimum wage worker.

Similarly, employers who want employees who are better than what they can get for minimum wage, and have to pay more than minimum to get those workers, will still be in the same situation.

Raise the minimum from $7.25 to $12, and the worker who's currently making $11 is going to want $16. (And he will get it. Because that's what the market will work out to.)

---------- Post added March-20th-2013 at 02:51 PM ----------

Using averages doesn't serve well here. Those making minimum wage performing low-skilled jobs are likely not three times more productive than their peers a few decades ago.

Not certain about that, though.

Look how much automation your average McDonald's worker has, compared to when I first worked there. (When I worked my first McDonald's, the cashiers had to memorize the prices of every item on the menu, because they didn't have electronic cash registers.)

(Insert Old Fart joke, by reference.)

Although, obviously, how much automation an employer puts into a work place depends on the cost of the worker. When workers are cheap, it's cheaper to add more workers than it is to improve productivity.

[mcsluggo]

What many times gets lost in this debate is the transitory nature of minimum wage jobs: they're intended for the younger demographic and statistically these people, by and large, don't stay at this pay rate or in these jobs, for an extended period of time.

there is some of this... and also this highlights some of the problem of setting a universal min wage, particularly in an economy as huge and vast as teh USA. since 1960 SOME workers labor productivity has skyrocketed (say computer programers? auto workers? morgage backed securities bundlers?? ) but others have not. I assume that hair stylists productivity really hasn't changed all that much over the last 40 years, right? it is equally hard to conceive of a single minimum wage that is eqaully appropriate in downtown San Francisco AND 40 miles outside Tuscaloosa.

but then the next question is what do you do with this information? you could either conclude: "minimum wages don't work so great, therefore let God (or teh markets) sort it out //QED", or you can conclude ""minimum wages don't work so great, therefore lets think of a different way to address the ever expanding income gap...."

perhaps better services specifically targeted to workers that make low wages ? personally i would love to really subsidize childcare (for instance) for really low income workers. People should NEVER have to make the choice between working productively and caring for their children... from a societal standpoint that one is a no-brainer to me.

edit:: to pile on Hubbs point, the value to both society and to the individual from somebody having a job, versus not having a job, is MUCH higher than their actual wage at that point in time--- the lifetime and economy wide effect fro the buld-up in skills and employability is huge. From a society standpoint we NEED to build up that stock.

[Larry]

It sounds nice and all, but I'm not sure how businesses would swallow the extra costs. McDonald's is one thing, they're a giant corporation that's really profitable. But I'm thinking back to some of the jobs I held when I was younger.

Video store employee - I made about $7.25 an hour, but I was a manager. There were maybe six to eight of us at that location, though most of them were making minimum, which I think was $5.50 or so at the time (1999). $7.25/hour is $15,080 a year. $22 an hour is $45,760/year. The owner was a second generation immigrant who worked hard and opened two locations, so I'll conservatively estimate that he had 12 or so employees making near minimum wage. Again, these are estimates, but you're talking about tripling this guys payroll costs, incrementally, by more than $350,000/year by the end of year two.

Translation: One local business closed, 12 kids looking for new jobs. I mean, his business closed years later anyway, I think Netflix probably did him in, but at the time, it's not like he could have raised his movie rental prices to $10/night to make up the costs, he would have been out of business anyway.

Really, I would like to see the minimum wage raised some, but how many small businesses could truly eat those kinds of costs? And how many larger ones would want to, without cutting jobs? How tripling the minimum wage so quickly not cause a bunch of problems?

Yeah, I get the "raising minimum wage can hurt businesses who hire minimum wage labor".

But I also suspect that a lot of that get drastically inflated, too.

Back when I was working fast food, the chain restaurants I worked for had a target for labor to be 17% of gross.

What that tells me is that, if the minimum wage were to double, they would have to raise prices by 17% to make up for the money.

And I think that doubling the income of everybody at the low end of the pay scale, and suffering 17% inflation, is a trade off I'd be perfectly willing to make.

(But then, I'm also willing to agree that my analysis is overly simplistic, too. If minimum wage doubles, then the prices McDonald's has to pay for two all beef patties, lettuce, and special sauce all go up, too. It's not like the store's payroll would double, and all other costs would stay the same.)

(But then, I also have a strong suspicion that, if minimum wage doubles, that the resulting inflation is guaranteed to be less than 100%. Even if you look at all of McDonald's, their suppliers, and all of their suppliers, ad infinitum, the store isn't spending 100% of it's gross on labor.)

[rictus58]

perhaps better services specifically targeted to workers that make low wages ? personally i would love to really subsidize childcare (for instance) for really low income workers. People should NEVER have to make the choice between working productively and caring for the children... from a societal standpoint that one is a no-brainer to me.

Just to address this specifically....this isn't an issue for only really low-income workers.

My daughter's day care costs $136/wk for 2 days a week care. If she were enrolled full time, it would be roughly $1000/mo. Between my two kids, I spent more than $10k last year in day care costs. I've known people who have quit their jobs because it made more economic sense than sending the kid to day care.

[mcsluggo]

Just to address this specifically....this isn't an issue for only really low-income workers.

My daughter's day care costs $136/wk for 2 days a week care. If she were enrolled full time, it would be roughly $1000/mo. Between my two kids, I spent more than $10k last year in day care costs. I've known people who have quit their jobs because it made more economic sense than sending the kid to day care.

agreed. and this sort of thing should NEVER have hard and abrupt lines. subsidize very strongly (i am against EVER completely subsidizing--- in order to keep incentives aligned) this for very low wage workers, and then at some wage gradually phase out the subsidy as wages increase, EVENTUALLY having it completely disappear somewhere inteh middle-income wage territory.

[jpyaks3]

Have there been any studies on the stimulative effects of a higher minimum wage? I know all the supply side arguments, but I haven't seen any study which looks at where the money would go and since lower income earners spend a much much higher percentage of their money on goods and services wouldn't that in theory have a stimulative effect on the economy?

[Corcaigh]

Not certain about that, though.

Look how much automation your average McDonald's worker has, compared to when I first worked there. (When I worked my first McDonald's, the cashiers had to memorize the prices of every item on the menu, because they didn't have electronic cash registers.)

What I meant to convey is that the low skilled worker has typically not driven the improvement in productivity. It has come through advances in technology which the company invests in. If you look at the skilled workforce, it's harder to make the argument. They are typically working in a more self-driven and less hierarchical organization, and also handling administrative tasks that others would have supported in the past.

[mcsluggo]

this highlights a problem with reforming assistance programs.

The left loves these programs (sees great value from them). THe right hates these programs (sees great waste from them).

the right points out criticisms of these programs, all of which have SOME validity. The Left usually essentialy denies ALL criticisms. It would be best for EVERYONE to come up with something better...something that better aligns with individual's incentives, but the right basically just always wants to get rid of everything, and the left wants whatever new program while the old one also.

[Jumbo]

I like your framing there, mcsluggo, if a bit over-generalized. Hard not to do that though and be as brief as you were.

[Larry]

Just to address this specifically....this isn't an issue for only really low-income workers.

My daughter's day care costs $136/wk for 2 days a week care. If she were enrolled full time, it would be roughly $1000/mo. Between my two kids, I spent more than $10k last year in day care costs. I've known people who have quit their jobs because it made more economic sense than sending the kid to day care.

Yeah, this is one of the things I see that I think keeps some people trapped on welfare.

The idea that if they get a job, then the welfare cuts off, and there are other expenses that kick in, too.

IMO, we really need to be looking at ways we can encourage people on welfare to become "double dippers". And IMO, child care is very high on the list.

[rictus58]

IMO, we really need to be looking at ways we can encourage people on welfare to become "double dippers". And IMO, child care is very high on the list.

I would love to have another kid, but we simply couldn't afford MORE day care.

Anyway, providing a safe quality day care for children of any economic background would have huge long lasting benefits to society I believe.

[Larry]

I would love to have another kid, but we simply couldn't afford MORE day care.

Anyway, providing a safe quality day care for children of any economic background would have huge long lasting benefits to society I believe.

Might have some positive effects down the road on their education, too. :halo:

[Destino]

$22 an hour min wage would not work for many small businesses. While there is certainly a problem with income being concentrated people need to remember that most businesses are not owned and operated by a member if the tiny fraction of the super wealthy. Most don't make very much money. Too many businesses in America are barely scraping by as it is and anything that makes life harder on them isn't going to solve problems. Everything costs too damn much and families are already spread thin trying to simply pay for their standard simple lives. Perhaps instead of focusing on increasing pay at the bottom it's time to look at decreasing pay at the top for a time being. Not that it's possible, but simply for the mental exercise to get people looking at the problem differently.

I think the global economic system as a whole is facing challenges that are only going to get worse as populations increase and a greater percentage of them refuse to toil in misery. The bottom of the pyramid is always going to be the largest and economies absolutely depend on large middle classes (and those just above and below) to thrive. Taking income from them to distribute to the bottom isn't going to make things better. The share of wealth is going to need to come from higher up on the pyramid.

[johnbent]

this highlights a problem with reforming assistance programs.

The left loves these programs (sees great value from them). THe right hates these programs (sees great waste from them).

the right points out criticisms of these programs, all of which have SOME validity. The Left usually essentialy denies ALL criticisms. It would be best for EVERYONE to come up with something better...something that better aligns with individual's incentives, but the right basically just always wants to get rid of everything, and the left wants whatever new program while the old one also.

True. To argue that no-one cheats the system and collects benefits that they don't deserve is ludicrous. As is the argument where someone points at an egregious abuser and then tries to extrapolate that the entire system is broken. I think of course we try to minimize the malingers but eliminating them entirely would prevent many deserving people from receiving benefits. I guess the choice is whether a few cheaters bothers you so much that you want to scrap the whole program. Personally I'm willing to accept a few cheaters to make sure that the deserving don't suffer. In the same way that I'd rather abolish the death penalty because, to me, it's a lesser evil to not kill the guilty than to occasionally kill the innocent.

[alexey]

...

the right points out criticisms of these programs, all of which have SOME validity. The Left usually essentialy denies ALL criticisms.

...

There is a difference between saying "I deny all validity" and saying "validity that you have doesn't take you where you want it to go".

[mcsluggo]

I like your framing there, mcsluggo, if a bit over-generalized. Hard not to do that though and be as brief as you were.

in my opinion, its the inevitable outcome when every-single-issue becomes center front for posturing and theatrics, and every-single-negotiation is viewed as a zero sum game in the larger struggle for overall political domination. Maybe 1 in 10 in congress are honestly looking for solutions to real issues these days, the other 9 are CONSTANTLY posturing.

(more generalizations... i know!)

[Larry]

True. To argue that no-one cheats the system and collects benefits that they don't deserve is ludicrous. As is the argument where someone points at an egregious abuser and then tries to extrapolate that the entire system is broken.

Just pointing out:

I have never seen a single person do the former. (Claim that no one cheats the system).

I have seen numerous attempts to do the latter. (Point at a cheater and tar the entire system.)

In fact, usually, the pattern is:

Poster 1 does the latter.

Poster 2 points out what he's doing.

Poster 1 then accuses Poster 2 of saying the former.

(In short, both of the arguments that you've listed, are done, by the same person.)

[Jumbo]

in my opinion, its the inevitable outcome when every-single-issue becomes center front for posturing and theatrics, and every-single-negotiation is viewed as a zero sum game in the larger struggle for overall political domination. Maybe 1 in 10 in congress are honestly looking for solutions to real issues these days, the other 9 are CONSTANTLY posturing.

(more generalizations... i know!)

but far more true than not...sadly...looking here and around the globe, i understand how some despair for the state of humanity, and some for better reason than others....maybe it will come to another asteroid being the only thing to really help the global situation...:pfft: :evilg:

[alexey]

...

every-single-negotiation is viewed as a zero sum game in the larger struggle for overall political domination.

...

I'd say it becomes a fight with or about memes. Those, in turn, were created for purposes you are describing.

I think it generally would be a mistake to say that political motives are driving people in these discussions.

[Popeman38]

Why shouldn't minimum wage be anywhere near that? Because they didn't go to college? Perhaps college grads should make more. Shouldn't people working fulltime earn a living wage? How would it hurt society for our working poor to be comfortable?

Can you define "living wage"?

If the minimum wage were $22/hour, the value menu at a fast food restaurant would not be $.99, it would be $3.99. Milk? About $10/gallon. Gas? About $15/gallon. Bread? About $9/loaf. Why? Because every person that works in creating/making/delivering these product would make at least $22/hour. Every employee you have that makes $23/hour doing something skilled will now demand a raise proportional to those that are unskilled just got. Management? Double their salaries. Anyone proposing seriously that the minimum wage should be $22/hour is living in la-la land. There are wide-ranging ripple effects of raising minimum wage so drastically.

[yank]

What I meant to convey is that the low skilled worker has typically not driven the improvement in productivity. It has come through advances in technology which the company invests in. If you look at the skilled workforce, it's harder to make the argument. They are typically working in a more self-driven and less hierarchical organization, and also handling administrative tasks that others would have supported in the past.

Ding ding we have a winner. Pay the man.

Productivity goes up when there is more output per unit of labor cost. More output averaged across the labor staff comes from being able to decrease the number of workers and produce the same amount or more. Technology makes up the difference. Many fewer clerical jobs (e.g., in accounting, finance, word processing, IT) since people can do more than multiple people used to do.

So the argument by Warren then is that people should be paid more to make up the difference. If that were the case productivity by definition wouldnt have gone up.

Productivity is supposed to spur profits which creates growth which benefits business, labor, and especially government revenues via larger tax base (see 1980s to 2000s). Companies are pocketing the cash for reasons that are the big source of debate dependingon your political view. But Warren's initial point was self defeating.

[Jumbo]

Cool to see you posting, yank.

[ncr2h]

Does anybody find it hilarious that the "Why shouldn't minimum wage increase with productivity?" question was posed by Ms. You Didn't Build That herself? I guess when CERTAIN people build things, they shouldn't be rewarded. After all, they couldn't have built the business without the education system, the roads, the law enforcement, etc. But when it comes to the guy making minimum wage? He DID build that! Why doesn't he get his share of the reward?

[deejaydana]

Does anybody find it hilarious that the "Why shouldn't minimum wage increase with productivity?" question was posed by Ms. You Didn't Build That herself? I guess when CERTAIN people build things, they shouldn't be rewarded. After all, they couldn't have built the business without the education system, the roads, the law enforcement, etc. But when it comes to the guy making minimum wage? He DID build that! Why doesn't he get his share of the reward?

I don't expect cogent business arguments from her, nor honesty. It does serve to stir people up and elicit a populous response, which was ostensibly the original intention.