Minimum wage as economic stimulus

[erowe1]

If a MW bill passed congress and was signed into law, what would the MW workers do with the higher amount of cash they are now earning? Would they not spend it, thus increasing the sales and productivity of companies and stores experiencing the new demand? Wouldn't this new demand cause business owners to produce more, thus increasing the amount of jobs available?

Good question.

Along with that, what would all the unemployed people, who would otherwise have jobs if the MW were not raised spend that money on which they would be earning, but aren't, since it was raised?

 

[erowe1]

This is precisely why unemployment is such a terrible thing.

You seem to have forgotten which position you are advocating.

A supporter of minimum wages must be someone who considers unemployment a good thing.

 

[Zippyjuan]

Historically, increases in the minimum wage in this country have not led to higher unemployment.

The relatively small numbers of people on minimum wage combined with the amount of the increase in the minimum wage were not big enough compared to the overall economy and all workers to make much difference. As as "stimulus" it doesn't do much either. If the federal minimum wage was raised to $10 an hour, a majority of low wage workers are in the $9 to $10 category and would only get less than one dollar an hour increase. For a full time worker that is under $40 a week before taxes.

 

[VIDEODROME]

I'm not sure a Consumption based economy is such a great thing anyway. We should find a way to turn our system around to reward Saving/Investment and Tax Consumption.

 

[Zippyjuan]

You need both savings and consumption. Right now savings seems to be plentyful (at least the banks have tons- $2 trillion more than they can loan out) and demand for goods is weak so no hiring of more people.

 

[Boshembechle]

In theory, increasing minimum wage has a neg effect on the economy. The job loss is greater than the increase in consumption. You also have to take into account the fact that people might save more. In reality, it doesn't harm the economy overall depending on the cut. It will harm specific industries. Currently now, even if you raised the minimum wage, it wouldn't help because people would still need more money.

But these firms that are forced by law to pay more can afford it because they will be making more money due to increased consumption on the part of the now richer MW workers.

 

[angelatc]

But these firms that are forced by law to pay more can afford it because they will be making more money due to increased consumption on the part of the now richer MW workers.

Then why not raise the minimum wage to $1000 an hour? We could all be millionaires by the end of next year, right?

Again, it is screamingly obvious you have never run a business.

A company like McDonald's and WalMart can probably afford to pay both the salary increase and the tax hikes that go along with it, but small businesses will immediately fold. But hey - WalMart thanks you for your assistance in shuttering their up-and-coming competitors.

 

[angelatc]

Historically, increases in the minimum wage in this country have not led to higher unemployment.

I don't argue that, but the last time they raised it there was a big labor shortage anyway, and almost nobody was working for minimum wage. Even the fast food joints were offering signing bonuses to people that would stay for 3 months. As usual, it was just a tool to cripple the start ups.

We don't have that now. Also, a better comparison would be to look at states with higher minimum wages vs states that use only the federal minimum wage. And unemployment in those states is almost always higher.

 

[erowe1]

Historically, increases in the minimum wage in this country have not led to higher unemployment.

That's clearly false.

Historically, every single raise in the minimum wage has led to the unemployment rate being higher than it would have been if the mw weren't raised.

This is as indubitably true as 2+2=4.

 

[erowe1]

But these firms that are forced by law to pay more can afford it because they will be making more money due to increased consumption on the part of the now richer MW workers.

Why do you keep saying this after we've already debunked it?

 

[2young2vote]

In my experience, the poorer you are, the more smartphones, Big TVs, laptops, tablets, bad habits, and children you can have. Why do we need to raise minimum wage when minimum wage earners (and near-minimum wage earners) already spend plenty of money?

 

[euphemia]

What do you think would happen in those workplaces where many people are already in that $10-$12 an hour range?

 

[Boshembechle]

Why do you keep saying this after we've already debunked it?

What have you debunked? What are the those people going to do with the extra money they are now being paid? They'll spend it, which helps firms.

 

[erowe1]

What have you debunked?

The claim that raising the minimum wage raises consumption.

What are the those people going to do with the extra money they are now being paid? They'll spend it, which helps firms.

Of course they'll spend it. It doesn't follow from that that total consumption will go up.

These people who have more money will consume more. Other people who have less money will consume less. The net effect will be a worse, not better, economy.

 

[euphemia]

Um, no. The people who make more money will pay more taxes.

 

[Vanguard101]

But these firms that are forced by law to pay more can afford it because they will be making more money due to increased consumption on the part of the now richer MW workers.

If that's the case, why don't they raise the wage to 600 dollars an hour? It's because they lose profit and their growth isn't determined only by consumption. Factor productivity is the main reason. A decline in workers decreases factor productivity more than an increase in wages increasing productivity.

 

[angelatc]

That's clearly false.

Historically, every single raise in the minimum wage has led to the unemployment rate being higher than it would have been if the mw weren't raised.

This is as indubitably true as 2+2=4.

Eh, I think in a managed economy that is growing too fast to suit our overlords, raising the minimum wage can be an effective tool to slow growth down. But it's hard for me to believe that slowing this economy down is a good idea.

 

[MelissaWV]

Let's take some of these ideas at face value even if they make me wince.

* Min wage worker gets a raise. Yay!
* Min wage worker buys more things.
* Stores catering to min wage workers (which often also hire min wage workers) have to hire more workers to keep up with demand at all levels.

Okay there is one big piece missing here.

* Stores have to pay each of those min wage workers more money and provide benefits to mid-level workers who are entitled to them per the company's hiring practices.
* STORES RAISE THEIR PRICES.

So...

* Min wage worker finds that their raise doesn't seem to buy a whole lot more than their pre-raise income did.


(And please do not correct me... I know it's not as simple as that, but this should be the first realization the "min wage raises solve everything" people need to come to)

 

[jclay2]

The op is probably a government/special interest group paid troll, but I will bite nonetheless.

Yes, obviously, the money could lead to higher consumption via spending. Other than the classic example of lower unemployment, the problem is that the money is not allocated in the most efficient manner. This money could have been used to hire more productive workers or invest in new capital which expands production. When you view the problem through the production, you see the true problems with minimum wage.

The main conundrum of this issue is that proponents break it down into a simple a causes b idea. But it is not a simple direct relationship. A might cause B, but also 1000's of other consequences which could over ride the benefit of B (higher wages for workers who are employed after the wage increase).

 

[euphemia]

Question: What happens to the people who started out at $8.25 and have worked their way up to $11? Do they get a raise, too, or do brand new hires get their $10.10 and phooey on the rest?

Answer: Once they finish training the newbies, the more expensive people lose their jobs. Thanks so much.