How to Stimulate the Economy: What will happen if we get rid of / abolish minimum wage? Will there be more jobs?

Introduction

People talk about how to stimulate the economy all the time. Federal Reserve is trying to pump more money into the economy through "quantitative easing", but the money seem to be stuck in the banks, and not trickling down to the people.

There is actually a very simple solution: abolish minimum wage EVERYWHERE in the US.

Why? Because this still stimulate hiring and expansion, and in return, actually move the money from the banks into the economy. And it really has very little downside.

However, let us go into the history a little... Why is there a minimum wage at all?


A (Very) Short History of Minimum Wage

For the first 50 years of the United States, there was no such thing as a minimum wage. In fact, Supreme Court had once outlawed labor unions, ruling that collective bargaining infringed upon the rights of individual workers to negotiate their own wages. As a result, wages are extremely low, and got even lower during the Great Depression, when jobs are even harder to come by. People are paid pennies a day for a full day's work.

Theodore Roosevelt used the wage issue in his 1936 campaign for the presidency, promising to solve the problem if he elected. He won, and minimum wage was introduced in 1938 in the "Fair Labor Practices Act" that set the national minimum wage at 25 cents per hour. Ever since, the Federal Minimum Wage was revised upward (and occasionally, downward) by Congress every few years.

In 1997, President Clinton signed legislation that allowed each state to set its own minimum wage.


Why Minimum Wage Hurts The Economy

Why does minimum wage hurts the economy? Because this disrupts the balance between employer and employee.

Think of employer and employee as engaged in a tug of war, with the "middle" being the current salary level.

If the two sides are balanced, the salary remains stable.

If a new pool of labor is opened up, more people competing for the same jobs, salary will fall, because some people are willing to accept less money for the same job.

If some sort of law is passed shrinking the labor pool (some sort of training requirement), then the salary will rise, because there are less people willing to accept the job for same amount of money.

A new equilibrium will be reached, and that is the new salary level.

Minimum wage upsets that balance. The wage was simply a line drawn somewhere.

To employer: "You must pay at least this much!"

To employee, "You must accept at least this much, and you are not allowed to work for less!"

That arbitrary line simply makes no sense. Freedom to choose on both sides had been restricted, and to what purpose?


What if the employee work for too little?

The employee have his or her reasons to work for the wage s/he chooses to. Maybe she can live leaner than others, or have other sort of support system. One "living wage" or "minimum wage" does not apply to everybody. Everyone is different.

Besides, if an employee doesn't make enough to make ends meet, then s/he will leave for a job that would, and that don't-pay-enough job will go unfilled and goes to another employee that CAN work for that price.

If nobody is willing to work for that salary, then the employer have to raise the salary to attract candidates.

Why Minimum Wage Does NOT Help the Employee Much

Labor activists and liberals claim that without minimum wage, the wages will be too low to live on. This is a bogus argument, and smacks of "Big Brother". Basically, they are saying the workers are too stupid to realize they are selling themselves too cheaply, so the government must protect them from their own stupidity.

How does the supply and demand of labor balance out? Let's say the employers, instead of paying $10 dollars per hour, only wants to pay $5 now. Since the existing workers can't live on $5 per hour, they will quit and find a higher paying job. Elsewhere, people who CAN afford to work for only $5 per hour (less skilled, etc.) will come to work for this employer.

What if this employer wants to go even lower? Let's say, 1 dollar per hour? If there are NO people willing to work for $1 per hour, then the job won't get filled. So the employer will have to find a wage for the job he needs done, and $1 is clearly too low.

Besides, a single person working at a minimum wage job is WAY BELOW the Federal "poverty line", usually only 75% of the poverty line threshold, sometimes lower.

Furthermore, living conditions for each worker varies. Different areas have different costs of living. Furthermore, some may be able to live for less if he's living back home, with someone else, sharing a flat, and so on.

A national "minimum wage" just doesn't work. It will be too high for some areas, not enough for other areas, and the bureaucracy needed to maintain such a thing can be better spent on other things.

In fact, another study says that for every 10% increase in minimum wage, the population of 16-24 year old with less than high school diploma fared worse. Whites lost 2.5%, Latinos lost 1.2%, and Blacks lost 6.5%. (Link broken)

Furthermore, a minimum wage will often encourage the company to move the jobs overseas where the wages are much cheaper. Why do you think the iPhones and iPads are made in China?

Even if the jobs stay domestic, it basically encourages hiring of illegal workers, who are willing to accept less than minimum wage as they are already illegal, breaking another law is not a problem.

Minimum wage doesn't help the workers much. It simply makes sure the employers hire LESS people (if they stay legal), or go extra-legal (like going overseas or hire illegals).


Why Minimum Wage Makes the Employer Worse Off

A business have various expenses: equipment, material, overhead... and labor.

With labor "fixed" at minimum wage (or higher), and overhead probably fixed as well, this gives the business far less flexibility to control expenditure. Let us study this very hypothetical example:

Let's say the business owner has studied the expenditures of his proposed store. He knows the cost of his goods, his overhead, his equipment, and so on. Those are pretty fixed. He knows what sort of profit margin he wants, so he budgeted for 2 employees at what he considers to be a fair price, and set the item prices accordingly.

Now let us study the possibilities.

Let's say there is a large flux of immigrants into the area, expanding the labor pool considerably. So there are a few possibilities... Either the quality of the candidates go up (and productivity goes up), or the actual pay per employee goes down, as the immigrants are willing to sacrifice pay to get work. Very often, BOTH happens, as productivity gains are very hard to measure, but salary cuts are easy. Either way, the business profit improves, and the business can expand, and more money gets pumped into the economy.

However, the "minimum wage" is implemented, and the salary does NOT fall, then the profit will NOT improve, and economy will not expand. The only gains are through productivity, and that's usually higher equipment expenditures and so on.

If that example didn't quite work, think of it this way: with all the competition (all the other jobs out there), the wage level is "self-regulating". You have to offer a "fair" wage or you will have few if any to work for you. The difference is what is the definition of "fair", and who are the best judge for that other than the employer and the employees themselves? Nobody!

In fact, a study shows that the increase of minimum wage in July 2009 may have caused a LOSS of 800000 jobs. The math and explanations are a little thin, but people are raising the issue.


Why Abolish Minimum Wage?

  1. The vast majority of economists believe the minimum wage law costs the economy thousands of jobs.
  2. Teenagers, workers in training, college students, interns, and part-time workers all have their options and opportunities limited by the minimum wage.
  3. A low-paying job remains an entry point for those with few marketable skills.
  4. Abolishing the minimum wage will allow businesses to achieve greater efficiency and lower prices.
  5. When you force American companies to pay a certain wage, you increase the likelihood that those companies will outsource jobs to foreign workers, where labor is much cheaper.
  6. Non-profit charitable organizations are hurt by the minimum wage.
  7. The minimum wage can drive some small companies out of business.
  8. A minimum wage gives businesses an additional incentive to mechanize duties previously held by humans.
  9. Cost-of-living differences in various areas of the country make a universal minimum wage difficult to set.
  10. Elimination of the minimum wage would mean more citizens and fewer illegals would be hired for low-pay hourly jobs, leading to greater tax revenues and less incentive for illegal immigration.
  11. The minimum wage creates a competitive advantage for foreign companies, providing yet another obstacle in the ability of American companies to compete globally.
  12. The minimum wage law is just another example of government condescendingly controlling our actions and destroying personal choice. Citizens do have the ability to saynoto a lower wage.

See full list by Joe Merseli

Conclusion

Reduce or eliminate minimum wage will stimulate the economy, as hiring workers, who are flexible, is cheaper than purchasing equipment for automation and other productivity multipliers. This would fix unemployment, get money circulating in the economy, and thus, improve overall conditions.

Why keep the minimum wage? There really isn't much reason to.


More by this Author


47 comments

PETER LUMETTA profile image

PETER LUMETTA 5 years ago from KENAI, ALAKSA

China and India are both considering expoting jobs to the US because even though the wages are slightly higher the productivity is much higher. They don't seem to mind a minimum wage, because they get more for their money. The minimum wage i don't think has anything much to do with the fact that the banks and big corps are siting on trillions of dollars. They will go wherever they can to make more money. I think your argument really doesn't hold water when even India and Thailand have minimum wage requirements. Let's not give the money master more reasons to gut the American workers for their last drop of blood. Thanks for the intersting point of view,

Peter


Jennuhlee profile image

Jennuhlee 5 years ago from Pennsylvania

You obviously don't have a minimum wage job.Also I'd love for you to find one person who can live off five dollars an hour, I barely get by on minimum wage as it is. Maybe pay athletes and actors less, not the hard working middle class who need every bit of that seven twenty five an hour. Or here's a thought lets stop giving criminals free healthcare, minimum wage is the last thing that should go.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@Peter Lumetta -- which kind of jobs are they considering to export? Certainly not the minimum wage jobs. Please cite the source? Banks and corps are sitting on profits because they don't see how to get the money INTO the economy if people don't have money to buy things. It has always been the middle class that is the true jobs generator, and abolishing minimum wage helps THEM.

@Jennuhlee -- So your sole logical reason for minimum wage is "it's not enough to make a living", as if it's a universal truth? All other reasons you cited are either not directly relevant or appeal to emotion.


SpiffyD profile image

SpiffyD 5 years ago from The Caribbean

This was a very interesting hub on the effect of minimum wage. The idea was implemented in a period when it was necessary. However, some things continue well past their usefulness. We have minimum wage in Trinidad as well; employers always complain when it is increased. It is true that minimum wage alters the natural forces of demand and supply.

However, if this were an ideal world, employers would not short-change employees and vice-versa. The problem with abolishing the minimum wage is that some employers would abuse it; this will affect the majority of workers. Not only that, the power of an employer is not equivalent to the power of an individual employee. Workers may not be adequately compensated for the profits they help to generate or the risk that they take in doing the job. To say that the market forces would automatically correct the situation is to have too much faith in it. Then, governments worry about persons seeking alternative to legal employment and social ills that result.

What is more important is not the abolition of minimum wages but properly setting it to reflect market conditions. This does not happen currently, since minimum wages are normally revised upwards and do not change according to the economic conditions. To avoid the minimum wage being onerous to anyone, it should be monitored and increased or decreased accordingly.

This is a nice, informative hub. Voted up, useful and interesting.


CHRIS57 profile image

CHRIS57 5 years ago from Northern Germany

kschang - may i disagree with almost every point on your 12 point agenda? Just read the paper linked below.

http://www.irle.berkeley.edu/workingpapers/157-07....

Any issue on minimum wages reflects the real status of the economy. Minimum wages apply mostly on service related jobs. With little true prosperity created in an economy from the lack of producing industries, there is little to distribute, and service, its employers and employees have to take the blow.

That is the macro economic view on the situation.

Now a little math: Lets assume 20 Million Americans work part time 80 hours/month (roughly 1000 hours per year). Assuming every one of those jobs is payed 7 bucks/hour (minimum wage), that totals to 140 Billion USD/year. Raising minimum wage 1 USD is 20 Billion/year. What are we talking about? Thats what public dept piles up in less than a week.

Adding or taking away one dollar from the minimum wage people does not stimulate economy, in comparison it is not even worth the first letter (2%) of the monster wording "quantitive easing".


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@Chris57 -- that's why we're having a civil discussion. :) And I must admit, those 12 points were written by Joe Merseli, not me.

As for the math, do you think raising the minimum wage would just make those employers suddenly come up with extra 20 billion dollars? What'll happen is mix of:

a) layoff

b) exporting of jobs

c) employment of illegals / paying LESS than minimum

d) raising prices so LESS goods gets sold because cost went up.

WHICH one of these helps the economy, pray tell?

I am reading that UCB paper now. What it says is they studied contiguous counties (i.e. arguable "same" job market) with different minimum wage, primarily restaurant workers (who mainly earn minimum wage), and found little if any effect on job loss to minimum wage increase.

Is this applicable across the board? Not exactly. At best, this proves that SERVICE industry jobs at minimum wage will not be affected much by minimum wage increase. After all, service industry jobs are not exportable (for the most part, unless you're talking tech support), but not all jobs are service jobs.

But if you set minimum wage to only manufacturing jobs then people will be screaming discrimination. So ain't gonna happen.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

Slight clarification: at a restaurant, you can't hire 1.8 workers when the cost went up 10% (well, you *could* reduce the hours slightly) So price must be raised. In the long-term, it encourage automation so LESS people overall will be employed in the long-run.

Or to put it another way: which is better, many people have SOME work, or a few people having a lot of work? Minimum wage encourages the latter.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@SpiffyD -- The real question is... can the government can do a better job on regulating the labor market / minimum wage than the market itself?


SpiffyD profile image

SpiffyD 5 years ago from The Caribbean

kschang: That's where the problem comes in. Ideally, it'd be best to have a minimum wage, but one that can be monitored and not only adjusted upwards for the purpose of appeasing workers (and many voters in the next election). In reality, it'd be very hard to get that ideal, especially with the constant monitoring and bureaucratic efficiency of government. This is not saying that it is impossible - just unlikely.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@SpiffyD -- Perhaps part of the solution is to let businesses vote. After all, business can't vote now, and thus workers have all the power. (Radical idea, I know)


GoingOnline profile image

GoingOnline 5 years ago

All of that is really cool if it wasn't that since there aren't enough jobs for 100% unemployment there always will be somebody willing to work for less, as opposed to work for nothing.

People who get the minimum wage are already screwed enough, if you remove that as well eventually they'll work at least for free because the alternative is somebody else working.

On the meanwhile, the business owner can get higher profits. Lovely.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@GoingOnline -- so what you're saying is those who work for minimum wage are too stupid to know how much they need to make to live on, is that right? Because you seem to be implying that they'll end up working for pennies if we abolish minimum wage.

I don't buy your argument that there aren't enough jobs for 100% employment, so someone always will work for less. If salaries decrease enough, businesses will hire more workers.


GoingOnline profile image

GoingOnline 5 years ago

They are not too stupid, they just prefer $2 per hour and working 20h per day than 0.

Look at the prices for online writing. As soon as somebody is willing to work for free (and be thankful to be published), people expect an essay for $3.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@GoingOnline -- how do you explain the success of HuffingtonPost then? Seems most of the writers (not staff, those are paid) are writing for free. (Most of them seem to write for fame, not fortune)

I think the problem with Online Writing market is the amount of **** we're getting on the Internet. People can't tell what's **** and what's gold any more, and that brought down the average price.


GoingOnline profile image

GoingOnline 5 years ago

I doubt people who need the money to pay the bills are writing for free at the Huffington Post... Would you let your (hypothetic) children starve or would you accept a job for $2 if there's nothing else available?


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@GoingOnline -- So it's "some income is better than no income", eh? But that's assuming NOTHING is available, isn't it? Is that a realistic expectation?


TTanglewood profile image

TTanglewood 5 years ago

There are a couple of flaws in your premise. Our government is suppose to represent the people. It is suppose to be the collective will of the people.

As such, the premise that individual employees will be able to negotiate a "fair" wage with today's mega corporations is patently false. More likely to happen is that the company considering hiring a new employee would just as soon hire the individual willing to work for the least.

It is the role of government to focus the power we have collectively for the greater good of all of us. We would not be able to accomplish this individually.

The other flaw with your premise is that you base your rationale on the belief that the recovery will be Big Business driven.

The reality is that Big Business is currently doing fine. Most big companies are profitable, and managing to get peak productivity out of the workers they currently have to satisfy current demand.

The reality is that any true recovery will need to be driven by the consumer. Until consumer demand is greater than a company's ability to fulfill at its present rate of productivity, that company will not hire. No matter how cheap the employee will be.

Until consumer demand goes up, the jobs will not return. Businesses don't hire because workers are inexpensive. They hire to meet consumer demand.

By the way, minimum wage has continued to increase as the cost of everything else increased. Remember what eggs, a gallon of milk, and bread cost in 2000?


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@TTanglewood -- so what you're saying is when a business gets to a certain size it needs to have a minimum wage, because it's too powerful. Is that right? You are worried about the rights of individual workers being trampled, so you want the government to "fight" for the workers with laws and such.

Isn't the unions supposed to do that? Big companies are pretty much all unionized (except Walmart, I think).

I don't believe I said recovery will be big business driven, but if I gave that impression, I'll correct it now. Recovery is always driven by the middle-class (but there needs to be some other spending to trigger it). This is not happening, and a minimum wage cut or abolishment (temporary or permanent) for small business (I dunno, less than 10 employees?) should stimulate hiring.

"Consumer demand" is a chicken and the egg thing along with jobs. No demand, no jobs. No jobs, no income to buy demands. Someone or something needs to give it a push, and I suggest that a temporary cut in minimum wage (however restricted) will give it a good kick in the rear.


TTanglewood profile image

TTanglewood 5 years ago

@kschang

Not a particular business, but business in general. I guess we view businesses differently. I don't trust private industry to do what is in the best interests of the individual. And to say I want government to fight for workers overstates my position. I just don't agree that abolishing the minimum wage will have the effect of increasing jobs.

By the way, many companies are non unionized, including the production plants of Toyota and Honda that are located in non union states. But that is a different story. Unions, to me are a double edged sword. They have contributed to the solution as much as to the problem.

We do agree on one point: the chicken and the egg analogy. You are right that something needs to drive the income, jobs, demand dynamic.

But I don't believe it will begin with removing the minimum wage. Minimum wage earners are not a significant cost center for many businesses. The premise that businesses would hire IF they didn't have to pay employees as much is one I don't buy.

Abolishing the minimum wage will only result in low wage jobs being created. Hardly the middle class driven recovery that is needed. And that is already occurring. It's called the Wal mart effect.

Replacing well paying, blue collar jobs with low paying retail positions will not get the economy humming along. The focus should not be just creating jobs, but rather, creating QUALITY jobs that drive the development of the middle class.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@TTanglewood -- but modern manufacturing jobs require training. The days of minimally trained people making good wages in manufacturing is over, at least in the US. Closest to low-skilled manufacturing is construction, and that is very much controlled by unions or guilds (except day laborers in border states).

As for would businesses hire more workers if minimum wage is lower... Well, if such a business needs more minimum wage (unskilled) labor, I believe the answer is yes. It is cheaper than buying machines to increase productivity of existing workers or make existing workers do overtime.

As for does low-wage job creation actually fund middle class recovery... It won't be direct. It is about the middle-class going into business for themselves that will be doing the hiring.

Quality jobs require quality people. Our educational system K-12, and our colleges, aren't quite producing the people we need.


TTanglewood profile image

TTanglewood 5 years ago

@kschang

Your first paragraph is correct to a point. The first step would be the development of domestic industries. I saw a story someplace where unemployed auto workers were re trained to manufacture wind turbines. That would be on a micro level, but the same theory could be applied on a greater scale. Unfortunately, our current Congress is unable to discern between spending and investment.

Once again, economic theory holds that organizations won't hire until demand is greater than their current production capabilities. If they need more labor, then yes, they will hire. But a business won't hire just to have additional people on the payroll.

We agree on entrepreneurship being the true driver of the middle class. But not everyone is built for running their own business. And when you hire low wage individuals to staff your company, then you know the adage: you get what you pay for.

We also agree in the last paragraph. Our educational system is sorely outdated and needs to be better designed to fulfill the demands of the coming economy.

Unfortunately, it is currently still administrated by individuals who were molded by the 20th century model. But once again, our current political system doesn't allow for such grand changes to the educational system. And of course, there is the whole expense vs. investment thing.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@TTanglewood -- then the companies who is able to anticipate the demand will get rich while the other companies play catch-up, yes?

Seems we are in agreement more than we disagree. :D


Texasbeta 5 years ago

We have the largest income gap in the history of the country, the top 2% control 65% of the wealth in the country, corporations are sitting on record profits, not hiring and not investing back into the companies...and your solution is to make the poor take even less? Disgusting.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@Texasbeta -- Aren't you assuming something? That any sort of decrease in minimum wage would make the poor poorer?

So you don't trust the poor to not work for less than they need to make a living? That they must accept whatever's offered their way?

How else would you push the corporations to spend some money on the workers?

I offered an idea, and all you can throw my way is "it's not enough to live on", and "it's not fair"? let's see, what was it that JFK was reputed to have said?

Try again.


TTanglewood profile image

TTanglewood 5 years ago

@kschang

No disagreement. Anticipating trends and positioning for them has been the key to success for many Fortune 500 companies.

But expecting the economy to rebound quickly will require more than jobs paying less than 7.25 an hour. That's only $290 per week. Companies will always find someone willing to do work for peanuts, but that will never be the key to revitalizing the economy.

As for your question posed above about getting companies to hire, here's a suggestion: Remove all tax subsidies and incentives and replace them with tax credits tied to hiring. That gives businesses a reason to hire, which in turn creates jobs with incomes, which in turn drives demand. Now the wheel begins to turn.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@TTanglewood -- just imagine getting that through congress. :D Maybe a combo bill is needed:

minimum wage cut or exemption for 6 months to get some money into the economy now, and matching 6-months to 1-year salary for new hires (I think San Francisco tried the latter)

change subsidies to hiring locals instead of outsourcing (must be renewed every year by Congress, else it will phase out automatically in 4 years) for medium/long term

matching tax credit for worker education (esp. lower wage workers) for long term (sorta like GI Bill but for regular folks).


TTanglewood profile image

TTanglewood 5 years ago

@kschang

Now we're starting to reach some common ground and work on solutions.

I could get on board with most of the suggestions you outlined. Too bad our current Congress would never actually work together to make the country better if it means that the current administration gets the credit if things improve.


CHRIS57 profile image

CHRIS57 5 years ago from Northern Germany

kschang, you asked me questions 4 weeks ago in this hub discussion. Sorry coming back late. You wrote:

What'll happen is mix of:

a) layoff

b) exporting of jobs

c) employment of illegals / paying LESS than minimum

d) raising prices so LESS goods gets sold because cost went up.

WHICH one of these helps the economy, pray tell?

My answer:

a) and b) are linked together. So i might as well provide a hint on those two.

Ok, if you compare the American economic policy with policies of other developed countries, you may find out that every faily successful economy follows a set of rules to keep employment in the country. You may call this protectionistic, well - it is not. Because at the end all has to follow free world market laws.

For the US - there are no rules. The policy is called laissez faire, do nothing. This lack of firm rules, of strategic policies is what destroys jobs. That is important, and not the discussion about minimum wage.

c) that´s illegal, no comment from me, even though i accept reality

d) i don´t understand, what does this have to do with minimum wages? Any business owner doing this will go out of business very soon, this contradicts with market rules.


JON EWALL profile image

JON EWALL 5 years ago from usa

CHRIS57

With the exception of a government minimum wage standard there is nothing holding back an employer to paying a worker more money. Good workers are sometimes hard to find, good workers who produce more , get paid more. The cost of the service and what the service can charge is a factor in the wage battle. If the government raises taxes and costs to the employer, there is less for the employer to pay a certain wage.


Anonymous 5 years ago

What is stopping a business from saying that you must accept $0.50 an hour as your pay? Nothing. For those drawing unemployment, refusing a $0.50 an hour job, you mean their unemployment would be cut off, regardless of if the person can actually LIVE off that amount or not. Try going to the store with a $20 a week gross pay check (5 day work week), not counting taxes and with-holdings, and see what you can actually buy with that. You can't even feed yourself for a week for that amount.

I know you'd say they should work 7 days a week, but even then, they would only make a $28, not counting taxes and with-holdings.

Again, not enough to really buy any food, let alone live anywhere but the street.

As for the, businesses will be forced to raise wages if people won't take the jobs at the lower pay they set. What's stopping a business from deciding that they won't raise the wages, but instead, will find a foreign source that will give them that rate that they want? Nothing. It's all about paying the lowest possible amount for the most work. They don't care about what you want. So think again if you are foolish enough to think they will fairly pay people if they can abolish protections that workers have.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@Anonymous -- if unemployment was higher than work, then nobody should WANT to work. Your scenario makes no sense. Besides, the MARKET determines the wages. If people WANT to work for 50 cents an hour (knowing fully well it's not enough to live on), that is their choice. After all, isn't that what volunteering is: working for NO pay?

Companies are ALREADY moving jobs to foreign lands, and found it wanting. Dell have moved a lot of call centers BACK to the US from India. Not all jobs can be moved, after all.


JON EWALL profile image

JON EWALL 5 years ago from usa

kschang

Many years ago the motto was '' buy American''. All that sounded good except that the public bought foreign products before buying an inferior American product that cost more than the import from Japan. Recently President Obama preached that Americans should '' buy American''.

The US Government bought campaign buses made in Canada .Stimulus money went to China, Spain, Germany to purchase parts and equipment for the solar and wind industry.

The cost of union made products put America at a disadvantage. The highest taxes in the world are placed on our companies adding to the cost of products here in the USA.

http://jon-ewall.hubpages.com/t/28f658

http://www.gop.gov/indepth/jobs/regulations


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@ Ewall -- while I don't agree with you all the way, I do have to point at Greece... Part of their economic mess is the unions basically hooked up with the politicians: help us pass more labor protection laws and wage raises and pensions and we'll give you our member votes.


JON EWALL profile image

JON EWALL 5 years ago from usa

kschang

THE GOVERNMENT PASSING A MINUMUM WAGE HAS MERIT. Most companies recognize a good employee and that employee is awarded with higher pay. No one worker is the same as to how he/she does the job. We must recognize that the employer who has a product to sell or make needs the public to purchase that product to stay in business. The competition in the private sector is not the same as in the public sector, although it should be when it comes to comparing wages and benefits for similar work.

The US Government has a $15 trillion debt and $100 trillion of unfunded mandates, still is operating. Any business in the private sector would go out of business. Government takes other peoples money, private sector generally has someone losing his investment in the company.

Public sector unions are killing our economic system and the American taxpayer. The debt unleashed by their outrageous benefits plans simply cannot be paid. The union bosses have lied to their members about lifetime benefits and they have betrayed the American people. Public sector unions must be disbanded and outlawed before our country resembles Greece, Spain and other European countries that are teetering on the brink of destruction, thanks to unions just like ours.


kschang profile image

kschang 5 years ago from San Francisco, CA, USA Author

@Ewall -- wow, that's a quick derail. :D Can we get back to minimum wage? :) (Though I admit, I started it, but I meant it as part of minimum wage problem, not specifically union busting)

My observation is "minimum wage" encourages "barely good enough" performance. It's a simple incentive system: if you always earn this much, then you will work the bare minimum to earn this much. If you have a chance for more, then you can work harder (until you determine that the extra pay is NOT worth the effort).

Minimum wage imposes a bottom limit, where the only way a boss can FORCE minimum amount of work is to FIRE the worker who won't work enough to satisfy minimum wage. It's artificial, and it has a lot of unintended consequences (but then, most government restrictions do)

As a side-comment on unions, often unions are all about the members, when unions should have a responsibility to the employers as well by guaranteeing minimum competency and ethical standards, for example. We've all read horror stories about school districts can't get rid of bad teachers because unions protect them, so they are kept on the payroll but away from students. Government's mandate of minimum wage does not guarantee some sort of minimum work standard by workers. It's a burden on employers, and thus, a free ride for the employees, and THAT is fundamentally unfair already.


JON EWALL profile image

JON EWALL 4 years ago from usa

kschang

Enjoyed your hub and the debate from all sides.Unionized workers are not bad. they are bad when the union gets control over the employer, as in the public sector.

je


kschang profile image

kschang 4 years ago from San Francisco, CA, USA Author

@ewall -- or when unions get too big and collude with public officials, essentially selling member votes, who then buy votes with benefits and wage increases later. Or in other words, too much special interest "interest" in politics. :)

Minimum wage is supposed to ensure a "living wage", but in reality employers simply UNDEREMPLOY employees (work less than 40 hours). They STILL don't make enough to live on ANY WAY. Thus, minimum wage doesn't really make sense. :)


JON EWALL profile image

JON EWALL 4 years ago from usa

kschang

''Minimum wage is supposed to ensure a "living wage",''

A living minumum wage destroyed by our government with high gas prices,high food prices, higher taxation and the loss of buying power of our dollar.Socialism is not the way to solve the nations problems.The people want to go to work and earn a decent wage.


Blah blah 4 years ago

FINALLY SOME SENSE! Of coarse minimum wage is bad for the economy! For the people on minimum wage saying they couldn't afford a drop well think about this... If we were to drop minimum wage the ONLY people who are going to work for say 4 or 5 dollars an hour are the less experienced like say 13-15 year olds who right now are competing with the 16-19 year olds if those 16-19 year old kids or anyone on minimum wage say "hey I can't afford to work like this" they will quit and look for higher paying jobs so the employer will have to choose do I now higher the 13-15 year olds for lower quality work or do I pay a little more (around the current minimum wage) to keep the slightly higher quality workers or the 16-19 year olds... the people immediately think there pay would go down if minimum wage was gotten rid of well no but give it time it might go up... Stick with me, if the company instead of paying 8 dollars an hour is now paying 4 they will higher 2 people for the price of 1 now. There productivity almost doubles (maybe not quite because the quality of work may go down but for the sake of math) when it doubles they can expand there business now sense they have doubled there business they hire even more workers meaning higher competition and wages go up but now the company has twice the businesses as before doubling society's wealth as a whole!


JON EWALL profile image

JON EWALL 4 years ago from usa

kschang

‘’They STILL don't make enough to live on ANY WAY. Thus, minimum wage doesn't really make sense.’’

The minimum wage is not paid in all industries simply because certain jobs require more education . One must remember that the training grounds for our youth is important to them learning and understanding the word ’’ WORK’’. BECAUSE of today’s economy it is necessary for workers to accept minimum paid jobs .Shameful that our government is not working together to stimulate jobs in the private sector.

Today the President chided Congress not to derail the recovery. Not once did Obama refer to the Democrats in the Senate holding up 23 jobs bills passed by the House. The House is only one half of the Congress, to people in the know that understand that the other half, the Senate, aren’t getting the job done. Senator Reid should compromise and at least allow the Senators to debate, amend or approve/reject the House jobs bills. That’s the way Congress is suppose to work. The Guy in the Whitehouse should be kicking butts, Harry’s to be exact. Funny how Obama blames the minority, 1/3 of government, rather than the 2/3s who have been in majority control since 2007. To be continued.


kschang profile image

kschang 4 years ago from San Francisco, CA, USA Author

@Jon Ewall -- to be honest, our congress is much better than, say, the Israeli Knesset, or the British Parliament, or the Italian government. The idea of a "coalition rule" and the massive compromises needed to form such a coalition actually gave fringe parties enormous swing vote power. When the Congress and president align (both to the same party), things do happen more often than not.

But we're getting WAY off topic here. :) Back to minimum wage... The question here is: how exactly do you "stimulate the economy and create jobs"? There is only one way: pump money into the economy by increase Federal spending. The big question is how much and where.

In the Great Depression the attempt was to pump money into the bottom of the economy by creating work programs and build infrastructure projects like the Hoover Dam, Golden Gate Bridge, Bay Bridge, etc. It sort of worked, but we don't really know whether it's that, or the war effort, that actually broke the Great Depression.

Now, we're doing the opposite: feeding money from the top via the Federal Reserve and the big banks hoping the money will trickle down. That seem to have little effect, but perhaps we haven't waited long enough, and people are getting impatient.

Now is NOT the time to cut spending, but to INCREASE spending. You can save the surplus when the times are good. The 'economic stimulus' given to the various city and state governments to build roads and whatnot are a good start, but something more permanent needs to be done, like building subways, commute/HOV lanes, retrofit bridges, even high-speed rail. THAT sort of projects is far more effective than trying to feed money through the top, has far more immediate impact, actually create jobs immediately, and leaves a lasting legacy.

Unfortunately, those won't be minimum wage jobs. But feeding those workers and providing the supplies will lead to more jobs as well.


JON EWALL profile image

JON EWALL 4 years ago from usa

kschang

''Now is NOT the time to cut spending, but to INCREASE spending.'' ''The 'economic stimulus' given to the various city and state governments..'' ''trying to feed money through the top, has far more immediate impact, actually create jobs immediately, and leaves a lasting legacy.'' NOT SO!

THE SCORECARD

Tarp was $700 billion, the Stimulus started at $750 billion is now $1 trillion, 3 consecutive $1.2 trillion deficits which raised the National Debt over $16 trillion. It cost $1 billion a year to manage paying the debt. The US Government’s credit rating reduced from triple AAA by a credit agency.

President Obama and his party want to increase revenue by raising taxes on millionaires and billionaires. The Presidents plan is to get money into the economy . Obama extends unemployment benefit to 99 weeks, gives so called tax breaks to working citizens ( payroll taxes ) and continues funding the green energy industry. All of the above did not accomplish the main goal of getting people back to work as promised.

The solutions to stop the madness was when the house passed the Cut,Cap and Balanced Budget bill back in November2011.The Senate killed the bill and have done nothing to solve the problems.

The Senator Coburn report '' WASTE IN GOVERNMENT'' http://coburn.senate.gov/public/index.cfm/rightnow...

WASTE IN GOVERNMENT ALL IN THE RED

‘’ Back In Black’’

http://www.youtube.com/watch?v=3tVJ2gqqKWs


kschang profile image

kschang 4 years ago from San Francisco, CA, USA Author

@Jon EWall -- I think you quoted the wrong part and got the wrong context, but that could be just bad edit.

I thought most of the TARP money was either not spent at all or had been returned with interest?

In a bad economy credit itself is tighter, so losing a bit of credit rating is no surprise. You need to SPEND money during bad economy because money is CHEAPER to borrow than when times are good and interest rates are higher. And everything else is cheaper as well during bad economic times.

IMHO, the problem with the US budget was not merely spending, but actually NOT saving money when times are good (i.e. they can't stand a surplus, must spend everything). However, times are NOT good and thus worrying about that doesn't help.

Instead, Congress need to reform the budget process by passing a bill that mandates saving X amount of money when times are good (say, GDP growth of X percent) minus any emergency appropriations.

Right now Congress only job is to SPEND money, and all the lobbyists, in addition to help push laws, is to push for spending bills for the respective interests (could be businesses, and local governments). There needs to be some sort of accountability for Congress to 'save' money as well instead of spending every last dollar and boast about it to their constituents.

But now we're REALLY getting off the topic. :D


Susan 4 years ago

“Why Minimum Wage Hurts The Economy”

This section doesn’t explain anything; it only points a relationship between pools of labor and labor needs.

The minimum wage set does not have to be “arbitrary”, but can be set roughly equivalent to what it costs to stay alive in the United States. (Which can be set by states for precision. The federal minimum wage reflects the amount which is suitable for all regions of the US.)

“Why Minimum Wage Does NOT Help the Employee Much”

Liberals are not arguing that workers are too stupid to realize what they’re worth, but that the price of labor will fall so low that those working for the minimum wage will be forced into subsistence living. This trend is demonstrated by US and international history. This isn’t stupidity; this is an absence of options.

The false assumption here is that surplus jobs above that unlivable wage would exist for labor to take should they not be able to live off the wage they’re earning. This cannot be assumed and must be demonstrated.

(If additional jobs are created by the destruction of the minimum wage, certainly these jobs will be overwhelmingly by definition jobs below that wage, so these newly created jobs certainly cannot be the jobs you’re referring to.)

If you believe 7.50 before taxes is too high for anywhere in America, don’t just state it, demonstrate it. Find the place where someone can work a 9-5 and has excess living on that wage. Don’t just state it, show it.

“Why Abolish Minimum Wage?”

(1) According to The Economist circia 2006, the new economic consensus is that increasing the minimum wage has at least minor negative effects.

(2) Abolishing the minimum wage does not necessarily affect efficiency and prices. Prices are largely determine by what a competitor sets, not simply the price of production. Many sectors may not be forced to drop their prices and may use the money they’ve saving on wages as personal profit.

(3) American companies can be incentivized to create American jobs without providing them with employees working for subsistence wages.

(4) If a company can’t afford to give its employees’ wages sufficient to keep them out of poverty, they shouldn’t be in business.

(5) The government controlling our personal choices (like not allowing us to work for $3 an hour) is a matter of protection. Similarly, we’re not able to sell our organs so we’re not economically coerced into selling our bodies (a worse form of prostitution.)


kschang profile image

kschang 4 years ago from San Francisco, CA, USA Author

@Susan -- My point is pool of labor and labor need would have reached an equilibrium. Minimum wage mandate is an artificial status that prevents "natural" equilibrium.

Federal minimum wage is sustainable for all regions of the US? If that's true, San Francisco wouldn't have set its own minimum wage to $10.24 per hour. And that's above California's own minimum wage $8.00, which is above the Federal minimum wage.

Liberals are arguing that wages would be so low that people will starve? That argument is a "slipper slope" fallacy. Also, logically this makes no sense. People will refuse to work for that low (they make more getting government assistance and/or know that low is not enough to put food on the table), and wages have to rise or no work gets done.

Guess we both got a fallacy somewhere. :D

The point is minimum wage, while create lower wage jobs, would allow more people to be employed. Assume the "natural" equilibrium is slightly below the mandated minimum wage, enough so under minimum wage the baker could hire only 2, but with no minimum wage he could hire 3. Could he be more productive? Maybe. Or he could have only kept 2 employees and kept more money in his pocket... but that money has to go somewhere, right? In the bank, to be lent out, or spent on something... Money is not static. It will flow any way. The more money moves, the better the economy. Spreading the the money into hands of MORE people, even though individually they get less... should be good for the economy, should they not?

I don't buy the "protection" argument. One has a right to kill oneself, but not to sell an organ? Hah. (No, I am NOT arguing for sale of organs)

I think we'll agree to disagree. I think the "market" will reach a proper equilibrium if you let the labor pool and labor demand work out their differences without government interference other than prohibit abuses. You're basically saying that such an equilibrium may not be "optimal"... but optimal is in the eye of the beholder, is it not?


JON EWALL profile image

JON EWALL 4 years ago from usa

kschang

Today is 9/11/12, a date to be remembered in our history.The post is about wages. The government has a better plan''SEQUESTRATION''.

If the President and Congress do not act before Jan 02,2013, sequestration will cost the government a loss of 1 million jobs. One must wonder why the President and the Senate were quick to save the auto industry but completely ignores the damages that will be placed on the government agencies and the loss of workers and industries supporting government needs.

A budget has been passed by the House, the Senate refuses to debate, amend and vote on the House budget. The President leadership is so visually un- transparent, he can only be found campaigning somewhere in the USA.


tsadjatko profile image

tsadjatko 13 months ago from maybe (the guy or girl) next door

Higher minimum wage advocates need to leave Obamaville and enter the real world. The results of a higher minimum wage have been demonstrated time and time again, simply look at what happens in the real world when the wackos get their way...

http://dailysignal.com/2015/10/22/seattle-hiked-th...

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