Category: Think Tank, Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “The Spending and Debt Responses to Minimum Wage Increases”

  1. DeDude says:

    That would give minimum wage increases a multiplier above anything else you can think of as an economic stimulus. So the best thing to do to get the economy going after a recession is to hike the minimum wage.

  2. sditulli says:

    You love this issue. I think its awful policy, but as an economists would have to ask who do you think actually pays for the higher minimum wage in the short/long term?

    In the short-run since businesses can not adjust their investment plans its probably right that fast food owners/Wal-Mart etc pay the higher minimum wage in terms lost profits. In the longer-term you would have to assume customers pay the higher minimum wage as businesses adjust their investment plans either by being more capital intensive with less workers or exiting less profitable business ventures that would have to pay higher wages.

    So do you think its right that our lowest wage workers are A) subsidized primarily by Wal-Mart Stockholders and fast food franchise owners B) In the medium term those businesses adjust their practices and customers pay higher prices….note that the customers at fast food restaurants/Wal-Mart are heavily low wage workers?

    I’m in favored of a guaranteed minimum income along the lines of what MIlton Friedman proposed but find it politically impossible. This spreads out the costs of subsidizing low wage workers though our entire society instead of forcing that costs onto some combination of owners/customers of businesses that employ low wage workers.

    • tdotz says:

      Presently Walmart is subsidized by all US taxpayers through the subsidies paid their low wage workers (foodstamps, Section 8 housing, etc).
      So, yes, I would much prefer that the real costs are appropriately paid by the company and its customers.
      You, I, and theri employees can choose to patronize Walmart, or not. The same is not true for our taxes.

    • DeDude says:

      You certainly know what conclusion you want to end up with, but my goodness the contortions and blind spots you have to go through to get there are amazing to observe. Are you sure you are an “economist” or is that just something you say to try and gain more weight behind your arguments?

      Yes in a world without sticky prices the corporations would just pass all cost immediately to customers. But then why would they not just increase prices right now for no other reason than that they would like some more profits to show on the quarterly statements. But even if all increased wage cost was transferred 100% to customers it would be transferred to all high and low income customers and the net result would be transfers from high income earners to low income earners. So yes the low income earners would pay a part of the price by paying more for their burgers, but how much of their income is used to purchase burgers?

  3. LeftCoastIndependent says:

    Wages need to go up, which might be inflationary, so govt. spending needs to go down, to fight the inflation and needs to be done anyway. The sooner this economy is returned to the private sector, and taken away from the public sector, the better off we will be.

  4. spencer says:

    Nice theory.

    But the relative performance of the S&P index of restaurant stocks has a strong positive correlation with the minimum wage and real average hourly earnings.

    This implies that investors in restaurant stocks believe that the increases demand from a higher minimum wage has a stronger positive impact than the negative impact of higher labor costs.

  5. DeDude says:

    If I can play economist too – lets imagine a burger flipper getting a 25% raise because we came to our senses and increased the minimum wage by 25%. The burger flippers employer would see his labor cost increase by 25%, but the rest of his cost would not increase that much. But to play it safe lets say the burger corporation has a 20% increase in total cost and pass all of that to the costumers such that burgers cost 20% more. That is still a pretty darn good deal for the burger flipper; 25% more in salary and only 20% increase (at the most) in those minimum wage labor intensive product that he spend less than half of his income on. The majority of his income is spend on things that would not change more than a few % due to increased minimum wages. As an “economist” I would consider that a pretty good deal for this burger flipper.

  6. ashpelham2 says:

    I have a BS in accounting and no post-grad degree, though I’ve worked toward it. So, in the interest of full disclosure and all…..

    Anyway, I just really strongly think that minimum wage increases will just start a trickle up policy of inflation. Thus a reason to raise interest rates to curb inflation. Now, fixed income holders are gonna take it on the chin, but rates cannot stay this long forever, and we are long in the tooth on ZIRP. I say, if it’s min. wage that needs to raise dramatically in order to get rates back to healthy, sustainable levels, then why not? The only losers are bond holders, and if rates are raised slowly and orderly, then bond holders can mitigate their losses somewhat.

    But, I’m just an accountant, what do I know?