A Primer On The Minimum Wage That Even A Liberal (hopefully) Could Understand

A little primer regarding the ‘minimum wage.’

Understand exactly what a hike in the ‘minimum wage’ entails.

A compulsory hike in the minimum wage means that the price of productivity will increase.

This means that the level of what one used to purchase per dollar is less; therefore, one will be required to spend more to get the same amount of productivity.

What a set amount of money bought before the hike in the minimum wage, can no longer be bought for the same amount of money. After the hike, more money must be spent, to get the same level of productivity.

Money, is then, by definition, devalued. When money is devalued, the amount of it required to purchase a given good or service increases.

This increase is called INFLATION.

One of two things MUST happen in order to regain equilibrium between resources spent and goods produced or purchased:

1. Pass along the increased price (inflation) of goods or services to the customer; or

2. Make sure the money you spend on the manufacturing/service end results in more productivity.

Option number one results in inflation in the marketplace (rise in prices to purchase goods or services) passed on to all. This means that the money earned after the minimum wage hike has less purchasing power than the money earned prior to the minimum wage hike. This effectively negates the purchasing power experienced via any raise in pay to the worker as a result of hiking the minimum wage.

Option Number Two results in fewer workers doing more work per hour for the increased pay they get. Instead of seven people on a shift, to keep the same productivity without passing increased costs to the consumer, there may be only five people required to do the work that seven people once did. This effectively results in a reduction in the present work force at worst, or in preventing the company from hiring additional workers after attrition, at best.

This, of course, results in higher unemployment and/or lower labor participation rates, as there are now fewer jobs to be had.

In other words, contrary to all the magical thinking going on in the White House and in the war rooms of the DNC, and yes, among the democrat party faithful, there are no sustainable benefits to a *compulsory* increase in the minimum wage.

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28 thoughts on “A Primer On The Minimum Wage That Even A Liberal (hopefully) Could Understand

  1. Robert Boxer January 29, 2014 / 9:38 pm

    I recently wrote an article about how an increase in the minimum wage rate increases unemployment. You can read it here: http://wp.me/p3N9zD-4e

  2. Leo Pusateri January 29, 2014 / 10:08 pm

    Well written, and spot-on, Robert.

  3. bardolf2 January 30, 2014 / 1:13 am

    “Unfortunately since many have little or no training in economics.” – Robert Boxer

    Over on CNN
    “A Democratic proposal to raise the federal minimum wage to $10.10 an hour got the backing Tuesday of 75 leading economists. The group includes seven Nobel laureates, among them Joseph Stiglitz and Peter Diamond, and several former Obama and Clinton administration economists.”

    Clearly having lots of economic training doesn’t lead one to believe that increasing the minimum wage is bad for the economy.

    “The employer would like nothing more than to add this increased-productivity gain to his own profits. Indeed, that’s why he’s in business. But ultimately one of his competitors will realize that he would have a competitive advantage by using at least a portion of this “excess” capital to raise the pay rates of his employees, allowing such a competitor to attract better employees (better in the sense that he expects to gain more profit from their services), and thereby gain a competitive advantage. It should be noted that when such a competitor raises wage rates in this manner he does so not out of the kindness of his heart, but instead out of his own self-interest. Such is the beauty of capitalism.’ Robert Boxer

    In real America, well heeled gentleman make agreements about keeping the excess gains for themselves by not bidding for ‘competitors’ employees. Even highly skilled ones
    http://pando.com/2014/01/23/the-techtopus-how-silicon-valleys-most-celebrated-ceos-conspired-to-drive-down-100000-tech-engineers-wages/

    Is that article a Primer on reality that even Leo could understand? Some of the most highly skilled people in the world, those in Silicon Valley worked for employers who made more money for themselves by not competing for labor. And we’re supposed to believe that companies will be fighting to pay an extra 25 cents over the best burger flipper?

    • M. Noonan January 30, 2014 / 2:39 am

      Well, you can also get 2 out of 3 dentists to endorse a toothpaste. Big deal. Economics is the only profession where one can be consistently wrong and still get a Nobel Prize. Remember, most economists are Keynesian – which is nonsense from start to finish.

      • neocon01 January 30, 2014 / 4:38 pm

        Mark

        BRILLIANT!!

      • bardolf2 January 30, 2014 / 8:42 pm

        And that was my only point. You seem to agree that the sentence “Unfortunately since many have little or no training in economics.” is neither a source of shame nor a badge of honor.

        All the carefully reasoned economic arguments which ignore nonlinearities and unintended consequences aren’t worth zip.

        Therefore the entire thread based on Leo’s deep economic thinking is pointless. Maybe some empirical evidence (not anecdotes) could be offered to show that the increase in the minimum wage will do the claimed damage, not a pseudo-philosophical essay.

    • neocon01 January 30, 2014 / 4:46 pm

      silicone valley imports “tech engineers” from india, pakistan, china, etc …so did the railroads.
      Ill tell you in my business I was constantly being “hounded” by recruiters for major companies with fists full of dollars and bennie’s. When I retired from corporate America I made more than some airline pilots (not 747) and air line mechanics UNION ones, and green card computer geeks in silicone valley.
      Most likely NOT as much as some one who teaches math in a university (ahem) though…. 🙂
      Today I live off my SS, 401k, and three pensions…ugh things are tough!!

      • bardolf2 January 30, 2014 / 8:43 pm

        I’ll wager you make/made more than a humble servant of the people working in the adobe tower.

      • neocon01 January 31, 2014 / 12:07 pm

        baldork

        Ill wager I DONT….now the princess?……THATS another story.
        the old adage whats hers is hers, whats mine is hers… LOL

  4. Amazona January 30, 2014 / 12:55 pm

    I think dolf should use his school as a test tube for income equality. I think he should go to the faculty and say “I want the incomes of everyone who works here to be averaged out, so we all make the same. It’s only fair.”

    My own experience regarding competing for employees is very simple, but I think it can be applied to many situations.

    I had a gorgeous ranch in a gorgeous mountain setting, breeding and training and showing international champion horses. A lot of young people, and quite a few not-so-young, thought this seemed like a wonderful place to work, and I wasted a lot of time and money hiring people who were passionate about wanting to work at a place like this, who made wonderful pitches for why they were great choices.

    I finally came up with a different approach. Remember, this was more than ten years ago—keep that in mind when looking at the dollars.

    I started to say “I will pay you $5.00 an hour till I know you are worth more. That will depend on how hard you work, how effectively you work, how dependable you are.” Person after person failed to get it. Person after person would object, rebel at the low wages. One girl said she was not going to work more than half a day for only $5.00 an hour.

    But one day I hired a young woman, on the same terms, and she started in by working ten hour days, learning everything she could as quickly as she could, and having a great attitude. A week later I raised her wages to $12.00 an hour retroactive to the day she started. (Average employees got $10.00.)

    I have always paid according to the value the person has to my company. I think this is quite common.

    As for paying an additional 25 cents for a “better burger flipper”, sometimes on my way to work I stop by McDonald’s for a breakfast sandwich. The girl who hands out the food at the pick-up window is a mess. Cars are always backed up because she has so much trouble picking up a bag of food set down in front of her by someone else, filling a drink cup, and getting this order out the window. I have sat there and watched her struggle with figuring out which button to push on the drink dispenser, dropping bags of food, mixing up bags of food and then having to sort out what is in what by looking at the receipts, and so on. Do I think they would pay an extra $4.00 per 8-hour shift for someone who could get the cars through the line faster? You bet. I seldom go there any more because it is no longer convenient, and I get ticked off sitting there waiting when I know what is going on at the head of the line.

    Do I think she is underpaid? No. I think the bosses are trying to do their best to get her trained, to be a better and more efficient employee. Everyone else there seems to do a good job. Does her inefficiency mean the whole staff is underpaid?

    I also understand that the cost of doing business is ALWAYS passed on to the consumer. Whether it is “corporate taxes” or the cost of the fuel used to get the material to the store, there is a point at which the purveyor will not absorb any more of increased cost and will tack it on to the cost of what he is selling or providing.

    This emotionally gratifying little exercise of raising the minimum wage is just a stutter-step, a kind of economic hopscotch. Some Liberal decides that Susie can’t make enough, working at a fast food place or other entry-level job, to make him feel she has an adequate lifestyle, so he forces employers across the board to pay more. They do, they raise their prices across the board, and the distance between what Susie makes and what she needs to buy ends up being the same, after a brief interlude until the increased costs of good and services catches up with the hike in minimum wage. During the settling-in process, some businesses go under because they can’t stay in business if they have to pay more. There is fallout, there are jobs lost, and the end result is no real advancement, just inflation.

    The only real way to earn more is to be worth more.

    • neocon01 January 30, 2014 / 4:37 pm

      ama

      I had not read your post until after I posted mine…yours was much more eloquent, but both made the same REALISTIC point!!

      The only real way to earn more is to be worth more.
      aaaaaaand the EMPLOYER NOT!!!!! the government decides that worth and value.

    • bardolf2 January 30, 2014 / 8:47 pm

      “I think dolf should use his school as a test tube for income equality.” Amazona

      I’d be willing to average over the faculty with similar years experience (and credentials) with all in my university as is done in the military. Better yet I’d really love to average out against faculty across the country instead of just my poor university.

  5. Amazona January 30, 2014 / 4:11 pm

    By: John Hayward | January 29th, 2014

    Shilling for minimum-wage increases is one of the laziest moves a desperate politician can make. President Obama took it to a new level in his State of the Union address, investing just enough effort to sharpen an embarrassing pander into another weapon in his endless class warfare:

    http://www.redstate.com/2014/01/29/we-are-all-capitalists/

    • neocon01 January 30, 2014 / 4:32 pm

      baldork
      those who can…. DO
      those who cant….TEACH.

      BFD on the “economists” it is ALL BS. It is inflationary PERIOD!!
      within six months those mw employees are back on the lowest economic rung still struggling. WHY? joe the useful employee will now want $15.00, because if freddy the schlep is worth $10…then Joe HAS to be worth more than freddy.
      I will then raise my prices accordingly as will my suppliers. Gas that cost me $300.00 a month under W now costs me $1000.00+ a month. Raise the minimum wage for the drones and we will find a way to do with out them rather than lose business……..
      ignore any of the so called experts that never worked a day in their life or owned a business…….kind of like our community agitator CEO, and his turbo tax cheating minions.

      • neocon01 January 30, 2014 / 5:09 pm

        EVERYBODY knows MW is for suckers…..AA .grifters like these NEVER made MW

        “Michelle Obama Wore an ‘a-what-a?’ to the SOTU
        Jeannie DeAngelis

        One week after partying in the White House with millionaires and billionaires for Michelle’s 50th, the pre-SOTU buzz was that the president was planning to address income inequality and the minimum wage, among other non-issues Americans aren’t concerned about.

        Determined to get the president’s attention, notorious aisle-hugger Sheila Jackson Lee showed up in a two-piece suit the color of a wad of Bazooka bubble gum or perhaps a drippy bottle of Pepto-Bismol.

        As for Michelle Obama, in an effort to counterbalance the ocular assault, the woman who spends America’s money like a drunken sailor must have thought it would be a good idea if she wore the dress she had on for Barbara Walters’ 2012 Christmas interview.

        Burrowing deep into her closet, Michelle located the dress, which was designed by Azzedine Alaïa, a Tunisian Paris-based couture designer whose shoes start at $2,000 a pair. Then, like the moneyed elitist she is, the FLOTUS subjected a nation in economic pain to the sight of her descending the stairs and making her way to her seat wearing a shade of forest-green that came curiously close to the color of money.

        more

        Read more: http://www.americanthinker.com/blog/2014/01/michelle_obama_wore_an_a-what-a_to_the_sotu.html#ixzz2ruzUrQCI

      • bardolf2 January 30, 2014 / 8:50 pm

        Neoconehead

        Would a deflationary economy be good?

      • neocon01 January 31, 2014 / 12:10 pm

        baldork

        No not at all,
        some inflation will necessairly occur,
        a massive hit on pay increases of tens of millions of people simultaneously….not so good.

    • neocon01 January 30, 2014 / 5:15 pm

      yup

      In Their Own Words: Lenin, Stalin, Obama, and Hillary
      By Andrew Thomas

      It is beneficial to remind ourselves periodicallyof the realities in the struggle between Constitutionalism / Capitalism and Marxism-Leninism. It is a continual struggle, whether we acknowledge it or not. And the enemy of America as a constitutional republic with a capitalistic economic system is Marxism-Leninism, whether it be characterized as communism, socialism, progressivism, leftism, statism, or liberalism (in its current state).

      Read more: http://www.americanthinker.com/2014/01/in_their_own_words_lenin_stalin_obama_and_hillary.html#ixzz2rv1J2kDp

      • Fredrick Schwartz, D.S.V.J., O.Q.H. [Journ.] January 30, 2014 / 5:44 pm

        Please stop fighting the cold war. It’s over.

      • neocon01 January 31, 2014 / 12:10 pm

        forker freddy

        the “cold war” is over.
        marxist communism isnt, fool!

      • neocon01 January 31, 2014 / 4:42 pm

        Exclusive – Ted Cruz: House GOP’s Amnesty Push Will Ruin Hopes of Retaking Senate

        Sen. Ted Cruz (R-TX) thinks that the House GOP leadership’s renewed push this week to grant amnesty to illegal aliens would destroy the Republican Party’s chances at retaking the Senate in 2014.

        Cruz questioned how establishment Republicans unilaterally caving to Democrats on everything from the farm bill to the budget to the debt ceiling and more could think amnesty is a good idea at this time.

        “Right now, Republican leadership in both chambers is aggressively urging members to stand down on virtually every front: on the continuing resolution, on the budget, on the farm bill, on the debt ceiling,” Cruz said in a statement provided exclusively to Breitbart News on Thursday.
        more

        http://www.breitbart.com/Big-Government/2014/01/30/Exclusive-Ted-Cruz-House-GOP-leadership-s-amnesty-plan-would-destroy-chances-at-retaking-Senate-this-year

        PS
        I have NO, NONE, ZIP, NADA compunction to support, donate, vote for our gop governor scott this election.
        I will stay home or vote for some obscure iranian mula as a protest.
        Im DONE with these weasel rinos.

      • Amazona January 31, 2014 / 7:05 pm

        “…I will stay home…”

        Great plan, neo. This attitude is what put Barry in for a second term.

        My primary goal is to get people elected who will support and fight for a return to constitutional government.

        On the way there might be some who are not perfect, who are flawed, or who just have a different idea of how to achieve that goal. But if they are better than the alternative (and I would consider even the most tepid of the Right-wing candidates as better than “…some obscure iranian mula (sic)..”) then at least it is a step in the right direction.

        I just don’t understand this demand that a candidate meet every single purity test thrown up by a voter, especially because qualifying for one voter based on this purity test is likely to disqualify him with another.

        There’s politics, and there’s whatever you are talking about, and whatever you are talking about will kill the Right if you carry on with it.

      • Amazona January 31, 2014 / 7:07 pm

        “Please stop fighting the cold war. It’s over.”

        Poor poor Freddy, clinging to his foolish belief in foolish definitions.
        Hey, Fred—define “The Cold War” for us. Think you can do that?

        I doubt that you can, as it was an ideological war, and you don’t DO ideology, preferring the hyper-emotional feverswamp of half-grasped concepts, half-baked ideas, and half-assed “opinions”.

      • neocon01 February 1, 2014 / 11:20 am

        I just don’t understand this demand that a candidate meet every single purity test thrown up by a voter, especially because qualifying for one voter based on this purity test is likely to disqualify him with another.

        Not a purity test, he capitulated to a racist mob, allowed a Hit to be instituted against one of Floridas citizens by a terrorist group, and used the full weight of the law to prosecute an innocent man to satisfy the howling mob.
        There is no purity test, there is a HISTORY that I cant and will not accept. If we keep rewarding these foul cretins by electing them because they were the best of two evils Im out.
        Let the chips fall where they may, it might take a war in the streets to straighten things out I pray not but if thats what it takes so be it.

      • Amazona February 1, 2014 / 12:58 pm

        Enjoy Charlie Crist as governor, then.

        I do sympathize with your opinion of Scott. What he did was wrong on so many different levels.

        But my approach would be to do whatever it takes to keep Crist out, keep the pressure on Scott to shape up, and look for a better conservative candidate for next time.

        There’s winning battles, and there’s winning wars, and while I am sure it would be gratifying to send a message to Scott that he has just been spanked for a terrible decision, in the long run it just seems that it would be better to have him in office than Crist.

        We are suffering under another Obama term because a few million people had the same attitude you have—–rather than compromise and elect the lesser of two evils, they just handed the country over to the worse of two evils. Again, this might have felt good at the time, but I have only disdain and contempt for these people. They may have thought they were sending a message that they needed to be listened to, but the message I got was that I’d rather ignore them and let them have their temper tantrums, and go after reasonable people who have just not thought things through very well.

        Scott did some good things, like not wanting Florida to get involved in another federal boondoggle with light rail.

      • Cluster February 2, 2014 / 11:17 am

        I don’t understand this “all or nothing” attitude either, and it’s an attitude that has been exploited by the left and has hurt many common sense Americans. On Super Bowl Sunday I think that a football analogy is appropriate. Sometimes you have to play field position, you have to punt and you have to play good defense. It seems that our ideological pursuits don’t understand that and want to throw the long bomb on every play. If you do that, you are guaranteed to lose.

      • neocon01 February 1, 2014 / 3:30 pm

        But my approach would be to do whatever it takes to keep Crist out

        I know… when I am done huffing and puffing I will most likely pull the switch for scott UGH!!

      • Amazona February 1, 2014 / 7:23 pm

        I thought you probably would but couldn’t resist the opportunity to give you a hard time.

        In general, with politicians, I see Errors of Judgment, Errors of Character and Errors of Government. The latter is the one I can’t overlook or forgive, the middle one can definitely be a game-changer for me, but the first is something that we have all been guilty of, so without a pattern I can get past most of them.

        (Some of the really “special” politicians manage the hat trick of all three at the same time—-going upstairs in the White House to go to bed while our people were, undefended, dying in Benghazi comes to mind.)

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