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One percenter businessman warns: 'The pitchforks are coming"

  1. rhamson profile image77
    rhamsonposted 2 years ago

    A one percenter from Seattle named Nick Hanauer published a piece in Politico Friday warning his "fellow zillionaires" that a revolution à la France 1789 is coming to the United States if America's wealthiest don't take drastic steps to reduce inequality.

    Read more: http://www.upi.com/Top_News/US/2014/06/ … z368WhykKw

    The conservatives want this guy silenced. He is everything they despise.

    http://www.forbes.com/sites/timworstall … omic-plan/

    Good points are made in both pieces.

    1. GA Anderson profile image88
      GA Andersonposted 2 years ago in reply to this

      You have opened a very emotion-driven topic, one I bet a lot of folks agree with, including me:

      The rate of increase in U.S. income disparity is a problem.

      But I think you may have picked the wrong advocate to support it. Nick Hanauer might be putting his voice to the problem, but his solutions, (and personal actions), don't support or solve the problem he discusses, and the Forbes link pretty much proves the shallowness of his proposals.

      You did say both links had good points, and you are right, (except for the part about conservatives wanting to silence him).

      If your own Forbes link is followed to the articles below it, Hanauer's points are pretty much destroyed by facts. At least that is how I see it.

      I happen to agree with the Forbes article, so my examples might seem to be paraphrasing them, but...

      I particularly liked this point;
      "Costco has sales of $51 billion, 110,000 employees (45% part time, similar to WalMart isn’t it?) and WalMart has sales (in North America) of $191 billion and 1.3 million associates. So Costco has sales of some $465,000 per employee and WalMart $147,000 per employee. That sounds about right to me, it’s been a number of years since I lived in the US but Costco is the place where you drag that 50lb bag of rice to the door yourself, right? WalMart is the one where cheery souls are employed solely to bid you good day as you enter? So, in theory, we could in fact get WalMart to pay the same as Costco by making similarly efficient use of labor: that is, firing between two thirds and three quarters of their staff."


      Labor cost is a business cost, just like your utility bill is a living cost. If labor increases and a business has a fixed labor budget, (a reality determined by sales profit), just as your utilities increase and you have a fixed income - something else has to decrease. For businesses it will probably be the number of employees, (or a price increase to customers),  for you it will probably be a second tier expense - like gas for the car, so your use of the car is restricted - no more unplanned excursions. Errand consolidation becomes a priority.

      As the Forbes article points out, modest minimum wage increases are not the job killer opponents proclaim, but neither are they the solution proponents proclaim.

      At the most basic level, increasing the minimum wage is not adding new money to the economy - it is just redistributing it. (ps. I am a minimum wage as a wage floor proponent - but not a living wage advocate)

      There have been a lot of threads about this topic, but I have seen none that present facts instead of emotions. Increasing the minimum wage is not the solution.

      GA

      1. rhamson profile image77
        rhamsonposted 2 years ago in reply to this

        I don't know if a minimum wage increase will have much to do with regards to moving people out of debt but it may spark the economy.

        My concern is that corporate America is heading out of the country to escape taxes that they feel are too heavy. Walgreens is considering it even though they were given a 46 million dollar tax credit from Illinois over a ten year period.

        http://finance.yahoo.com/news/renouncin … 40207.html

        With net gains of 880 million dollars reported for the second fiscal quarter 2014 I have to wonder how much more in tax credits (free money) they need to stay?

        http://news.walgreens.com/article_displ … le_id=5856

        1. wilderness profile image97
          wildernessposted 2 years ago in reply to this

          When net gains are a lousy 4% of sales, I'd say all they can get.

          1. John Holden profile image59
            John Holdenposted 2 years ago in reply to this

            On the contrary, with profits in the grocery trade running between 1% and 3% any company making 4% would be over the moon.

        2. GA Anderson profile image88
          GA Andersonposted 2 years ago in reply to this

          Ha! Hijacking your own thread. But it is an interesting topic

          Just for conversation's sake, and using really rough ballpark numbers...

          $880,000,000 x 4 (quarters) = $3,520,000,000

          times a 14% tax saving = $492,800,000

          What would you do if you had a choice to save half a billion dollars - per year?

          GA

          1. rhamson profile image77
            rhamsonposted 2 years ago in reply to this

            I wouldn't expect to carry on business in a country I don't support. You see that is the crux of the matter. Is it legal? Thanks to a bought congress who enjoys the payoffs to make it happen, it is absolutely legal. And we wonder why the middle class taxes have gone up. Because we have to pay the corporations share they vacated.

            1. GA Anderson profile image88
              GA Andersonposted 2 years ago in reply to this

              Can you validate that comment with more than just "feelings" and "talking points" and "sound-bytes?"

              With all the deductions, exemptions, credits, and other devices that allow both corporations and individuals/families to decrease their tax liability - simple overviews are probably the most understandable examples to illustrate our current "real" tax burden.

              ps. I know we can all find stats and graphs to "prove" whatever point we want to make - but I am comfortable referencing the Center on Budget and Policy Priorities, (cbpp.org)

              Regarding middleclass taxes, Cbpp.org says this:

              Federal Income Taxes on Middle-Income Families Remain Near Historic Lows
              "Income taxes:  A family of four in the exact middle of the income spectrum filing its taxes for 2013 this filing season paid only 5.3 percent of its 2013 income in federal income taxes, according to estimates from the Urban-Brookings Tax Policy Center (TPC).[3]  Average income tax rates for these typical families have been lower during the Bush and Obama Administrations than at any time since the 1950s.  (See Figure 1.)  As discussed below, 2009 and 2010 were particularly low because of the temporary Making Work Pay Tax Credit."
              Source:Cbpp.org

              http://s1.hubimg.com/u/9070864_f248.jpg

              Conversely, setting aside the standard corporate chart tax rate of 35% - after various manipulations, the average U.S. corporation pays a 13% tax bill - still more than double the middleclass tax burden you are lamenting.

              So if middleclass income taxes are at historic lows - how can you substantiate your claim they are increasing to pay for the corporation's evil tax dodges?

              Also, how do you reach the claim that corporations don't support their home countries if they don't pay the maximum tax burdens?

              What situations in your life would you pay more for something than you have to? Are you unpatriotic because you don't strictly "Buy American Made?"

              And are all the pensioners in the pension funds that are frequently the major corporate stock holders, and depend on corporate performance to increase the value of the retirement investments, unpatriotic too?

              Come on rhamson, I know my examples can be validly debated, but I think your emotional contentions would be much harder to support.

              GA

              1. rhamson profile image77
                rhamsonposted 2 years ago in reply to this

                A study done on the top Fortune Five Hundred revealed that out of 280 corporations 111 of them paid an effective tax rate of 17%. That's half of the 35% tax rate required under the tax code. This study also finds that through donations to congress many have had the tax code changed to favor their actions. Sure it is a feeling, but one based on experiencing the pitfalls of being a little fish self employed sole ownership business that can't buy a politician to give it a break. I don't know where you think that the mega corporations that are buying up the smaller ones are having a hard time. Sure Walgreens went from around 7500 stores to 7300 stores but that isn't because of taxes. It is a bad business plan that put them there just like Rite Aid did.

                http://money.cnn.com/2011/11/03/news/ec … /index.htm

                1. GA Anderson profile image88
                  GA Andersonposted 2 years ago in reply to this

                  I was more generous, the data I found said 13%.

                  So yes, 13% - 17% is a lot lower than the charted 35%. (52% to 63% lower)

                  But so is 5.3% a lot lower than the 15%-25% individual charted rate. (65%-79% lower)

                  (ps. I did not say mega corporations were having a hard time.)

                  Your original point was that middleclass taxes have gone up to compensate for the less than chart rate taxes corporations are paying. I think I have shown that is not true.

                  So now your point appears to be a complaint that your business isn't big enough to buy political favors. Hmm... two thoughts occur; either your business isn't eligible for the type of tax breaks "mega" corporations use, or you need a new accountant.

                  I do understand your feeling, but appearances and rhetoric aren't always supported by facts; no matter how strong the feeling is.

                  pss. yes, there are crooked corporations out there, (think Enron), but there are also money-laundering, merchandise-fencing, deposit-stealing small businesses out there too. Do you feel their activities and description fit your small business? Or all small businesses?

                  Just sayin'

                  GA

                  1. rhamson profile image77
                    rhamsonposted 2 years ago in reply to this

                    I think you may have forgotten Obamacare in your retort. This article clearly shows that the tax on the middleclass has jumped squarely into their laps.  I did not see this in your report.

                    http://blogs.wsj.com/washwire/2014/06/2 … d%20Policy

                    As for as the uncommon (for you) snarky remark about my business having some sort of clandestine application I will forgive you as I know you were trying to make an analogy. Whatever graph or chart you come up with will not change that corporate America is abandoning the country in search of ever more escalating profits. The corporations of the sixties and seventies accepted a more realistic compensation knowing that they lived where they worked. This latest trend to vacate the country by large corporations is cashing in on the tax haven drive by the lobbyists to cheat and improve their bottom line at the countries expense.

                    Trade agreements that were pioneered in the nineties to lower tariffs from foreign imports has greatly inhibited their competitive domestic prowess. The companies that produce the goods want to be foreign based as well as the manufacturers and the only thing that will be produced in-country is the consumers who will pick up the tax burden. It is the complete rape of our economy and way of life.

        3. rhamson profile image77
          rhamsonposted 2 years ago in reply to this

          Former Secretary of Labor Robert Reich weighs in on the Walgreens impending move. It is quite simple. Merge with a foreign business in a lower tax bracket and carry on business as usual. As is usual with this type of move a corporation must follow suite to remain competitive. What's wrong with this picture.

          http://www.salon.com/2014/07/08/robert_ … socialflow

      2. secularist10 profile image91
        secularist10posted 2 years ago in reply to this

        GA:

        "At the most basic level, increasing the minimum wage is not adding new money to the economy - it is just redistributing it."

        Of course, but it is redistributing it to the area of the economy where it will do the most good overall. One dollar in the hands of a middle class or lower class person will, on average, do more to stimulate overall growth and prosperity than one dollar in the hands of a top 1% person.

        1. Shawn McIntyre profile image86
          Shawn McIntyreposted 2 years ago in reply to this

          Speaking personally as a 1%'er (although nowhere nearly as 1% as Nick Hanauer), I'm curious to know what makes you say something like this.

          From what I've seen over the last few years, people seem to think that the wealthy keep their money in large, Scrooge McDuck style vaults.

          http://www.granitetransformations.com/blog/wp-content/uploads/2012/01/scrooge-mcduck-swimming-in-money.jpg

          We don't have these ^^^

          The truth is, that dollar (and the rest of them) help build the companies I invest in. That dollar helps fund medical research, build electric cars, grow green energy sources, and, over the last few days, helps build amazing cameras that people use to take breathtaking videos (yes, a shameless GoPro plug, lol). That dollar gets loaned out to people who are buying houses, and cars, and vacations, and computers, and iPads, and all sorts of things.

          If you wanted to get technical, due to Fractional Reserve Banking, that money actually has more utility with a "1%'er".

          1. secularist10 profile image91
            secularist10posted 2 years ago in reply to this

            Shawn:

            So if you think about it, businesses are going to get the money one way or another. If you're a company, there are basically three ways to get capital: sales, investment or loans.

            You are talking about investment and loans. I am talking about sales, which is really what a successful business is made of at the end of the day.

            "That dollar helps fund medical research, build electric cars, grow green energy sources, ... cameras..."

            Each of those examples can be (and are) funded through sales. In fact validation from the market is the real test of a successful business (that is, it is the real test as to whether that electric car or green energy source is something anybody actually wants to buy).

            The test is not whether a millionaire thinks it is a great idea. The test is whether customers buy it.

            "That dollar gets loaned out to people who are buying houses, and cars, and vacations, and computers, and iPads..."

            You are conflating two different things. In every one of these cases, the buyer is rarely getting his loan from a rich individual. Rather he is getting the money from a bank or other financial institution (credit card companies, etc).

            "If you wanted to get technical, due to Fractional Reserve Banking, that money actually has more utility with a "1%'er"."

            It makes no difference who owns that dollar as long as the dollar is deposited in a bank for FRB to have its effect. It is the bank, not the rich man, who uses the magic of FRB to create wealth.

            (You could argue that the very poor/ destitute are less likely to have bank accounts, but I don't think you would argue that's a very significant factor.)

            1. Shawn McIntyre profile image86
              Shawn McIntyreposted 2 years ago in reply to this

              But you're talking about it after the fact. The money has already been through that process when it was initially earned, we're talking about what comes next, once the business already has the money.

              If you want to make the argument that it's better for that money to go to workers instead of the company because the workers need it more, then that's a different discussion (and one certainly worth having), but the assertion that redistribution has an Economic benefit is simply not accurate.




              True, but again, these companies have already been through that process. They grew to a point at which they could no longer grow from sales alone, and so they went public.

              It's no different than a farmer who buys a tractor to increase productivity: he already had a successful farm, but he had reached the limits of what he could do with the tools he had at his disposal.

              It's not like someone woke up one morning and said: "GoPro is going to be a successful company and have a great IPO" (another shameless plug, I don't know what's wrong with me, lol), there was a successful company there already, before it went public.




              I don't see how they're different. The argument was that a dollar has more utility with someone from the middle class than it does with a 1%'er; and I was pointing out that that's hardly ever the case. The marginal utility is different, to be sure, but that's a different argument. 



              Yes, but it's only with the "rich man" that that dollar is likely to spend any time in a bank account.  Again, spending habits and marginal utility come into play.

              1. John Holden profile image59
                John Holdenposted 2 years ago in reply to this

                But it's not redistribution, it's circulation which does have a definite economic advantage.
                There is no shortage of money at the moment, just a shortage of money in circulation.



                And that's part of the problem, businesses don't need money to invest when the market is flat, they'll only do that in a buoyant market. So money in the bank is money not working.
                Pass that dollar onto somebody who doesn't have surplus income to invest in banks and they will immediately go out and spend it, supporting others in their community and the workers producing what they have spent their dollar on.

                1. Shawn McIntyre profile image86
                  Shawn McIntyreposted 2 years ago in reply to this

                  You're making the same assumption that I was talking about initially.

                  Just because the money is in a millionaire's bank account does not mean it's "not in circulation", in fact it's quite the opposite.




                  That's simply not accurate.

                  When you say "pass that dollar on" let's be honest about what you're really saying: redistribute that dollar. Whether it's through taxes, or higher mandated wages, you're not adding anything to the Economy, you're simply taking from one individual and giving to another: redistribution is not addition.

                  To use a simplistic example:

                  There are two kids in a classroom: Tom, and Dick. In this classroom there are 10 apples:

                  Tom has 7 apples.
                  Dick has 3 apples

                  You're talking about a system where the teacher takes apples from Tom and gives them to Dick: she redistributes them. There are still only 10 apples in the classroom, nothing was added.

                  It's the same with wages and the Economy: redistributing wealth doesn't add anything to the Economy because that money was already in the Economy. Again, if you want to have a discussion on the morality of wealth redistribution, then that's a fair point, but the Economics are clear.

                  1. John Holden profile image59
                    John Holdenposted 2 years ago in reply to this

                    But money in a bank account is quite patently not in circulation!
                    As you seem to like analogies let's try a more pertinent one.
                    Fred has a haulage company. There is not enough work for all his trucks so several sit in the garage unused and not earning.  Those trucks haven't ceased to exist because they are not used but they don't earn.




                    I suppose by that reckoning the whole economic system is based on redistribution. Fred redistributes some of the rental for his trucks to the drivers.



                    That is so simplistic as to miss the whole point entirely. A much closer one would be a teacher demanding 100 apples a day whilst only paying one apple a day and then demanding a part of that apple back.

                    I'm afraid when the rich get even richer and everybody gets less well off it is impossible to avoid the moral question. The whole question of a minimum wage is a moral one.

                  2. John Holden profile image59
                    John Holdenposted 2 years ago in reply to this

                    There is a bakery somewhere, I know not where but that doesn't matter. It runs at 50% capacity because that is all its customers can afford to spend on bread.
                    One day the customers get a pay rise which allows them to increase their bread supply from one small loaf a day to two or more.  The bakery goes from 50% of capacity to being over capacity. They have to hire more workers and start another shift.
                    The money is already in the economy, nothing has been created at below bakery level but demand has been increased and the economy is lifted.

              2. secularist10 profile image91
                secularist10posted 2 years ago in reply to this

                Shawn:

                Let's make sure we're talking about the same thing. My original statement was that $1 on average will do more for the economy in the hands of a lower class person than a rich person.

                IOW you shut down the economy for an hour, everybody freezes, nobody does anything, and you have one dollar to give. Do you give it to the poor guy or the rich guy? I say give to the poor guy. The biggest reason is what I mentioned to GA--the poor spend a higher percentage of their income than the rich. So the money is more likely to be moving through the economy if it's in the hands of the poor than the rich.

                Now you argue that the rich man can either invest that dollar in a company, or park it in a bank where it will be lent out to the company, but in reality those are both minor contributions to businesses. (And bank lending is irrelevant again because the poor guy puts the dollar in a bank too--so it's six-in-one.)

                Sales are much more important. Why? Because (a) businesses ultimately only survive on sales, and (b) the rich guy, if he invests, will probably only invest in large established companies. This is exactly where the majority of economic activity and the majority of jobs do NOT happen.

                Most econ. activity and most jobs exist in the small and medium businesses, not the big businesses. A rich guy will invest in an IPO or a startup, but as a rule that is not where the jobs are, and that's not where the growth is. The growth and jobs are in the millions of tiny businesses in local communities around the country. Exactly where the poor guy is likely to spend his dollar.

                (We are also assuming a closed system, which is NOT a safe assumption. In reality, the rich guy is far more likely to send that dollar to Switzerland or Aruba, whereas the poor guy is almost guaranteed to spend that dollar in the domestic economy.)

                "True, but again, these companies have already been through that process."

                (The process of market validation.) I don't agree. A business is constantly going through that process. Every month, every year, you need to adapt to changing market conditions and serve the customer. There is never an "end" to it.

                An investor only invests if he thinks there is future in the market. He doesn't say, "Wow, that was a great sales run, let me give them my money so they can close their doors" haha. He invests because he thinks, in his infinite wisdom, that future customers will buy more stuff. It always goes back to sales.

                "I don't see how they're different."

                Please re-read it again. You spoke about housing loans (to take just one). Housing loans basically only come from banks (banks which have the deposits of everybody, rich or poor). They do not come from rich people as individuals.

                So whether that dollar is owned by a rich or poor person makes no difference, as long as it is deposited in a bank. The bank will lend it out regardless.

                "Yes, but it's only with the "rich man" that that dollar is likely to spend any time in a bank account.  Again, spending habits and marginal utility come into play."

                Why do you say that? All money is pretty much constantly in someone's bank account. You're implying that the poor person will withdraw cash and the money is lost to the financial system forever. To the contrary, he takes that cash and spends it at the liquor store, and then the liquor store puts that money in a bank account. So the FRB is (almost) always in effect regardless.

                It doesn't matter who owns the money, rich or poor. As long as the money is in a bank account somewhere (which I concede is slightly more likely to be the case among the rich), FRB will be in effect. It basically has nothing to do with spending habits.

                1. Shawn McIntyre profile image86
                  Shawn McIntyreposted 2 years ago in reply to this

                  See, we weren't actually talking about the same thing. What you're talking about is Marginal Utility and that's a different (though related) concept altogether from what I was discussing, which was Total Utility (i.e. "A dollar is a dollar, is a dollar")..




                  I don't accept your premise.

                  To a company in need of financing, there is nothing "minor" about it. A guy selling 100 Widgets a week want's to expand but can't, so he goes public to raise money, which allows him to:

                  Buy a new factory (which has to be built, creating jobs for construction workers),
                  Buy new machinery (creating business for the Widget machine maker).
                  Hire more sales and support staff.
                  Hire drivers and buy trucks to deliver the product.

                  And all this allows hit to now sell 1,000 Widgets a week.


                  And since when do small businesses not need financing? Sure, they might not be traded on the NYSE or the NASDAQ, but they still have investors. Even if it's in the form of loans from the bank, the money to loan has to come from somewhere.



                  Granted, but I don't see the correlation. Yes, I spend money outside my local market, but there are a great number of people from outside my local market who bring their money in.

                  (Not really a fair example in my case, I live 10 minutes from Disney World, Universal, and Sea World, lol)

                  It can also be argued that the wealthy person provided fair value for the money when it was earned, so the net for the economy is still a positive.




                  True, but I don't see how that relates to our conversation.





                  Which reinforces my initial point that money in a bank account still has a great deal of utility.



                  Again, that was the point I was making initially: that savings have a great deal of utility and that money in a bank account is not "out of circulation", it's still being used.

                  1. secularist10 profile image91
                    secularist10posted 2 years ago in reply to this

                    "To a company in need of financing, there is nothing "minor" about it."

                    I meant minor in the sense of the total contribution to the economy/ businesses.

                    I wrote a hub called "The Rich Do Not Create Jobs" a while back. There I give a chart showing that investment as a percentage of GDP in the US declined gradually from 1980 to 2011. This is despite the meteoric rise in the number of millionaires and billionaires, and their concentration of total income, during this time period.

                    More rich people did not lead to more investment.

                    "And since when do small businesses not need financing?"

                    I never said that. Financing/ investment is a relatively minor part of the success of businesses, in the aggregate.

                    Sales are the main factor. Everything is oriented towards sales. Investment is done for the sake of sales. Borrowing is done for the sake of sales. And, crucially, the investment or the loan only makes mathematical sense if the ultimate sales that result from it are greater than the investment/ loan itself.

                    I think you missed the reference. By Switzerland and Aruba I was referring to offshore banking and tax havens, which only the rich take part in, and which siphons dollars out of the domestic economy. In other words, Scrooge McDuck is alive and well.

                    "Which reinforces my initial point that money in a bank account still has a great deal of utility."

                    I never said otherwise. But that is irrelevant to the topic of rich people, which was your argument.

                    "...money in a bank account is not "out of circulation", it's still being used."

                    Again, you are arguing against something that I never said. The issue is not whether it's being used, the issue is what specific use it is being put towards.

                    The bottom line is that the stats simply do not support your side. We have more rich than ever, a higher concentration of income in very few hands than ever, and yet we see no effect (or a detrimental effect) on Unemployment and growth in the overall economy.

                    I understand it makes a certain kind of sense in theory. But reality does not bear it out. In other industrialized nations with very high tax rates on the rich where disposable income among the upper classes is much lower, we often see unemployment and growth rates just as good if not better than in the US.

                  2. secularist10 profile image91
                    secularist10posted 2 years ago in reply to this

                    Here's another way to think about it, very simplified:

                    Imagine 2 economies. In the first, everybody spends everything, and nobody saves or invests anything. In the second, everybody saves/ invests everything, but nobody spends anything.

                    Which economy would be more appealing to a business owner? The one where it is known that nobody will spend anything nor buy anything you produce, but where you will get lots of support from investors, or the one where you will get zero investment or financing, but where people just love to spend?

                    The choice is obvious. (Indeed, the second economy is not even possible because an economy could not exist in the first place if nobody was buying anything from anybody. And workers would have nothing to save if businesses had no revenue to pay them.)

                    This helps to explain why America is such an attractive market to companies around the world, domestic or foreign. Americans love to spend, spend, spend (too much of course). We have a strong consumer culture here that is often lacking in other places. It often goes too far, but it has been a powerful force in our prosperity.

        2. GA Anderson profile image88
          GA Andersonposted 2 years ago in reply to this

          Are you sure you meant to include the Middleclass in that statement? Do you think they are minimum wage earners?

          Most sources I have seen put the median hourly wage, (the one middleclass earners would be getting), at around $16.71 p/hr.

          But lets look at your contention that it would boost the economy. And lets look at it from an easy to describe small business perspective. A design shop, retail store, franchise eatery, etc. Because I don't think this issue has anything to do with the top 1%

          Every dollar redistributed to a minimum wage earner is a dollar less the businessman has.

          I read somewhere that many businesses are moving to a part-time model of 29 hrs. instead of a full-time 40 hrs. Lets split the difference say a work week of 34 hrs. Or $34 more per week. But, reduce that by taxes, say 16.5% (6.5% Fica + 10% Fed. Inc.), so now it's $28 extra bucks.

          Where do you think the majority of those workers might spend that windfall?

          I would guess that the majority are responsible folks, and might buy some needed items like shoes and clothing, etc. but would mostly spend it buying some more food or paying some past due bills. Of course the smaller number of these workers that are irresponsible will spend it on nights out and trendy stuff, which would boost the economy while doing nothing to improve their condition - but how much economic power would that group exert?

          So now take the businessman, who has $36 less per worker, and pick a small random number of say 10 workers. So now they have $360 less per week. What will that loss take from the economy?

          Maybe some new equipment purchase? An advertising budget cut? The expense of a new product line? Or, *gasp* a canceled new hire or even a layoff, etc. etc. - all of which has a very direct economic effect.

          It appears to me that it is a sure thing that each dollar lost to the businessman would directly impact the economy, whereas it is an iffy maybe/maybe not thing with the minimum wage worker.

          With that said, I am not against a minimum wage as a floor wage. I think there are too many unscrupulous people and too many desperate workers to let the market have free rein. History shows us plenty of examples.

          But I am not convinced your scenario, or anyone's scenario, that increasing the minimum wage is a magic bullet to boost the poor out of poverty and boost the economy out of recessionary conditions.

          Minimum wage jobs are, generally speaking, such because that is what the work is worth. Minimum wage workers, again generally speaking, are more likely to be such, (of course our current economic conditions provide a lot of exceptions to this), because they are either new to the work work, unskilled, or just not productive enough to warrant higher wages.

          Minimum wage increases will help folks of course, but they are probably not the economic cure proponents claim.

          GA

          1. secularist10 profile image91
            secularist10posted 2 years ago in reply to this

            GA:

            Clarifying, the lower class is the main beneficiary of the min. wage. My point was that the lower class and the middle class together have more consumer power than the rich (which is Hanauer's main argument throughout).

            "Every dollar redistributed to a minimum wage earner is a dollar less the businessman has."

            Not exactly. Every dollar given to a MW earner will in turn be spent on another business. So ultimately, "business" in the aggregate gets the money anyway.

            What they spend their extra wage on, whether we approve of it or not, of course makes no difference. It's all going back through the economy one way or another. But mostly it does help their own quality of life.

            "...but how much economic power would that group exert?"

            A significant amount, for two reasons: (a) there are many more of them than the rich or the businessmen, and (b) studies have consistently shown that the poor spend a much higher percentage of their income than the rich.

            How many people are making $20k per year? Millions. So that group accounts for literally tens of billions of dollars (if not more) of potential spending power. Now how many people are making $1 million per year? Far, far fewer. Probably in the tens of thousands, if that.

            We all know about someone like Warren Buffet or Bill Gates. No doubt they are, individually, spending more than the typical low-wage worker individually, in a given year. But there are only a couple of those guys, and their total spend will never compare to the armies upon armies of low-wage workers.

            "So now they have $360 less per week. What will that loss take from the economy? Maybe some new equipment purchase? An advertising budget cut?"

            But you said yourself earlier that this is all just moving money from one pocket to the other, remember? It's not like that money is disappearing from the economy. It will just go to other businesses instead, in the form of sales.

            "It appears to me that it is a sure thing that each dollar lost to the businessman would directly impact the economy, whereas it is an iffy maybe/maybe not thing with the minimum wage worker."

            Again, that worker will spend almost everything he earns. That much is clear. So if anything, giving money to the worker is the sure thing, very likely to stimulate the economy, and allowing the businessman to keep it is "iffy": he may decide to sit on his cash because he's afraid of market conditions in the next 6-12 months for instance. In which case he will not hire or purchase anything.

            Now I never said minimum wages were a magic bullet. But they can and do contribute to less poverty and more growth.

            "Minimum wage jobs are, generally speaking, such because that is what the work is worth."

            But the "value" of the work is itself determined by a negotiating process in the market. If one side (i.e. the worker) is significantly handicapped in their negotiating ability (this is their only option, they are desperate for work, etc), then we actually have a skewed system. Not a situation where free private parties are mutually agreeing on a price.

            1. GA Anderson profile image88
              GA Andersonposted 2 years ago in reply to this

              With your more detailed response, I think we may be just quibbling about the details. I agree with the point about the consumer power of the lower and middleclass in the economy.

              It also appears we agree that a minimum wage is a redistribution, although we have different perspectives of the utility, (thanks Shawn), of that redistribution.

              And on this point...
              "But the "value" of the work is itself determined by a negotiating process in the market. If one side (i.e. the worker) is significantly handicapped in their negotiating ability (this is their only option, they are desperate for work, etc), then we actually have a skewed system. Not a situation where free private parties are mutually agreeing on a price"

              I completely agree. This is why I support a minimum wage as a wage floor, but strongly oppose the concept of it as a "living" wage.

              GA

              1. Shawn McIntyre profile image86
                Shawn McIntyreposted 2 years ago in reply to this

                There is a number (and forgive me, I don't have the data right in front of me) at which you can increase the minimum wage in relation the the National Median Wage, and it will have zero negative impact on the Economy. It's around the neighborhood of 45%, again, I'm working from memory here, so don't set this in stone.

                The most recent final report on the Median Wage I could find, puts it at about $16.90 an hour. This means that you could raise the minimum wage to $7.60, and there would be no measurable negative effects. That's around a 5% increase from the current Federal Minimum Wage. It's not Earth shattering, but it's not nothing.

                1. GA Anderson profile image88
                  GA Andersonposted 2 years ago in reply to this

                  I have seen similar data. The way some economists explain it is that modest incremental  increases in the minimum wage rate, up to the point that it would equal 40%-45% of the median wage - would produce negligible impact on the rest of the labor market. So your recollection is the same as what I have seen.

                  But...  and it is a big but, those same economists also said that once minimum wage approaches 50% of the median wage, a dangerous ripple effect would be that every wage level would then need to increase proportionally to maintain the value of the median wage earner's productivity.

                  Simply put; a worker earning median wage, (your $16.90), would not be upset if a minimum wage co-worker was bumped from $7.25 to $8.00 - his skilled production is still worth twice as much. But jump that minimum wage to $10.00 and those skilled workers will be saying,

                  "What the hell? I was worth twice as much yesterday, why not today? I want a raise too!"

                  I won't bother with sources because I am sure there are a ton of counter-point writings out there - but it seems logical to me. That is how I would feel too.

                  GA

                  1. Shawn McIntyre profile image86
                    Shawn McIntyreposted 2 years ago in reply to this

                    It's also worth noting that one of the biggest proponents of the exorbitant minimum wage hikes (and I hate to bring up the "U" word) are the Labor Unions who have contracts that are tied to the minimum wage.

                    Like you, I'm a fan of there being some floor for wages, but it should be low... very, very low.

              2. secularist10 profile image91
                secularist10posted 2 years ago in reply to this

                Fair enough. I think we could even discuss abolishing a minimum wage altogether IF there was more freedom for unionization. In other words, the ability for workers to have more power in the negotiating process, relative to firms.

      3. moneymindit profile image72
        moneyminditposted 2 years ago in reply to this

        I could not agree with you more when it comes to minimum wage.  Increasing the minimum wage is not the solution.  A quick study of Economics 101 shows why increasing the minimum wage is not the answer. 

        Labor rates should be determined by supply and demand.  There was a time in this country's history when companies took complete advantage of its labor force, and so workers had to unionize.  However, for the most part, this is not the case anymore.  (In other countries, wages are truly a problem.  Ex. Mexico and China, but we are talking about the US.)  Nowadays, unions are crippling our economy.  Just look at how many cities around the country are in financial straits as a result of ludicrous pensions. 

        In the same way, increasing minimum wage, when the market does not demand it, will create more problems than it will solve.  The biggest problem will be inflation.  Back when I was growing up, minimum wage was about $3.  Now it is going to be $9.  The minimum wage has tripled, and yet people are still poor.  This is proof that doubling the minimum wage is not the answer.

        If people want to make more money, their skills and abilities need to become scarce.  You need to make yourself valuable.  If you want to make more money, then you need to bring more value to the marketplace.  I am not saying that this means you must have a degree.  Look at Steve jobs.  He did not have a degree.  Yet he was able to bring value to the marketplace.

        Bring value to the marketplace, and you will never have to worry about minimum wage.

        1. John Holden profile image59
          John Holdenposted 2 years ago in reply to this

          "Back when I was growing up, minimum wage was about $3.  Now it is going to be $9.  The minimum wage has tripled, and yet people are still poor."

          Might that not be because $9 is still not enough for most people to do more than exist on?

          1. moneymindit profile image72
            moneyminditposted 2 years ago in reply to this

            No.  Poverty is a condition of mind, not a condition of money.  Give a poverty minded person $1 million, and that person will be broke within 3 to five years or less.  This is not an opinion.

            1. John Holden profile image59
              John Holdenposted 2 years ago in reply to this

              Oh tripe! If I can't afford to pay my rent that's a condition of mind not money, absolute codswallop.

              1. moneymindit profile image72
                moneyminditposted 2 years ago in reply to this

                This is not at all codswallop.  We would have to evaluate how you came to be unable to afford your rent.  Then we can determine whether your present condition is a state of mind or money.  Did you save 5% to 10% of your income while you had a job in order to accumulate 6 months of income to prevent not being able to pay your rent in case of an emergency?  Were you living above your means while you were employed?  (Did you rent an apartment that was more expensive than what you could afford?)  Were you renting an apartment with a girlfriend, she left you, and now you have to pay the rent yourself? 

                Poverty minded people live above their means.  That is why they remain poor.  Just because a person makes $100,000 per year, does not mean that the person is not poverty minded.  So, yet again, I have shown you that poverty is a state of mind and not a state of money. 

                How many rich people have accumulated their wealth from humble beginnings?  How many rich athletes have squandered their fortunes?

                It is believed that if you took all of the money in the world and distributed it evenly to all 7 billion people, eventually those who are wealth minded now, would soon enough attain wealth again.  Those who are poverty minded now, would once again become poor.

                1. John Holden profile image59
                  John Holdenposted 2 years ago in reply to this

                  How about living on the minimum wage and being unable to save anything, let alone six months rent?
                  How about being unemployed for longer than you had saved to cover your rent?
                  Poverty mined people are in actual fact very good at living within their means, they have to be, they can't run to the bank for  a loan, they can't get credit.Their local services are often more expensive than their wealthier neighbours.

    2. Italktotheweb profile image61
      Italktothewebposted 2 years ago in reply to this

      Deleted

      1. GA Anderson profile image88
        GA Andersonposted 2 years ago in reply to this

        A summary would be more appropriate for these forums, then a "Read more..."  link to your hub, (for folks that wanted to read more). As it stands I can only guess at your response and your posts looks like hub spam to me.

        GA

        1. Italktotheweb profile image61
          Italktothewebposted 2 years ago in reply to this

          Whatever.  I have a detailed thought out response to this propaganda that was issued by this "one percenter."  Therefore, I offered it for people's consideration.  It is right on point and isn't spam at all.  If you don't care to evaluate it, that's your problem.  I will tell you this. Messaging like this as well as Obama's recent moves to increase the minimum wage isn't about helping people.  It is about consolidating the retail and service sectors of the economy, in a manner similar to what the banking bailouts and Obamacare did for their respective industries.  If you don't see how the globalists are consolidating power, as per their statist views, then there is no hope for you at this point.  You are lost. 

          Hanauer's a shill, as are a huge percentage of the people commenting on material such as this in the social media.

  2. John Holden profile image59
    John Holdenposted 2 years ago

    The man speaks a lot of sense. Unfortunately many hubbers will hoot with derision and insist that the rich should be encouraged to be even richer!

    1. Zelkiiro profile image85
      Zelkiiroposted 2 years ago in reply to this

      I know, right? You'd have to be a serious glue huffer to think that this...
      https://www.youtube.com/watch?v=QPKKQnijnsM
      ...is anywhere near acceptable.

      1. John Holden profile image59
        John Holdenposted 2 years ago in reply to this

        But so many seem to accept it readily, even defend it!

    2. Italktotheweb profile image61
      Italktothewebposted 2 years ago in reply to this

      Hanauer is shilling for the globalists and is using the leftist base in this nation to take a wrecking ball to the solid economic foundations that made our system work, in the first place. This makes sense to you? Why?

      1. John Holden profile image59
        John Holdenposted 2 years ago in reply to this

        So you don't believe that raising the pay for low paid workers would stimulate the economy and ultimately make everybody better off.
        Why?
        What do you base that belief on?

        1. Italktotheweb profile image61
          Italktothewebposted 2 years ago in reply to this

          I asked you a question first, to which you did not respond adequately.

          Whether or not a pay increase stimulates the economy depends upon the specific economic outlook for each individual business and the summation of them as a whole. Raising the minimum wage across the board doesn't automatically stimulate the economy. Only an idiot would think so.  Otherwise, why didn't they do this a long time ago. There are many people with economic degree who work for the federal government. Obviously, the intelligent ones that are not taking payment to shill for statist policies are saying this would be a mistake.

          1. John Holden profile image59
            John Holdenposted 2 years ago in reply to this

            In what way was my response inadequate?

            Even your country in the past has lifted itself out of depression by injecting cash into the economy.

            Economics isn't a science, it's an opinion and an opinion often formed by ones political beliefs rather than experience.

            1. Italktotheweb profile image61
              Italktothewebposted 2 years ago in reply to this

              It was inadequate in that you did not answer the question.  Instead, you responded with a question. Injecting cash into the economy at this point is going to drive up inflation.  The Fed has been holding back a few reserves, and when it and the banks it's been handing it to unleashes it, it is going to be bad. Economics is the hardest of the soft-sciences. It has sound theory to it that has been proven in many cases, much like the hard sciences. The problem we have is that the American people don't understand economics. If you are not a an American than why are you concerning yourself with American economic matters?

              1. John Holden profile image59
                John Holdenposted 2 years ago in reply to this

                If economics is a science why are there totally conflicting opinions that have both worked at sometime?

                I concern myself with American economic matters because our "leaders" walk down exactly the same road and when America sneezes the rest of the world catches a cold.

                You forget that the last global recession was largely caused by American economics.

                1. Italktotheweb profile image61
                  Italktothewebposted 2 years ago in reply to this

                  No, the last economic recession was caused by globalism and the corruption that it breeds in the nations whose sovereignty is being destroyed by it. No one took a lesson, so they are about to get hit with it again.

            2. moneymindit profile image72
              moneyminditposted 2 years ago in reply to this

              Economics is more a science than an opinion.  Sure, scientists are now finding that gravity may not be what we once thought it was.  Nevertheless, when an airplane loses its engines, it falls, whether gravity is an opinion or not.

              1. John Holden profile image59
                John Holdenposted 2 years ago in reply to this

                If economics was a science the vast majority of economists would broadly agree.

                1. moneymindit profile image72
                  moneyminditposted 2 years ago in reply to this

                  Again, scientists do not fully agree on what is gravity.  Would you want to be on an airplane with faulty engines?  I don't think so.

                  1. John Holden profile image59
                    John Holdenposted 2 years ago in reply to this

                    So which scientists don't agree that gravity exerts a downward force?

                2. moneymindit profile image72
                  moneyminditposted 2 years ago in reply to this

                  Scientists are constantly questioning Einstein's theories.  Yet differing views have not prevented astronomers from using those theories to travel through space. 

                  Even in the "science" of electricity there are differing views.  There is a conventional flow theory and the electron flow theory.  Yet, these differing views are not preventing you from using your electronic device to respond to these posts, are they?

                  1. John Holden profile image59
                    John Holdenposted 2 years ago in reply to this

                    The point is that they may question things, none of them claim that what they are questioning does not work.
                    Two economists will each claim the other is totally wrong and their theories will never work.

  3. maxoxam41 profile image80
    maxoxam41posted 2 years ago

    It is an interesting article. However who really started revolutions? Was it the people or the freemasonry? The people was the instrument of their anger and belief. It is historical. Look at the recent revolutions, they were orchestrated by us, where is the Occupied wall street movement, I personally believe that it didn't originate from the people. Its disappearance responds to no logic. What did change economically that could explain it? Nothing. People are still suffering, the oligarchy is thriving, no tax reforms were made...
    If revolution shall come, it is educated people that will start it.
    To the image of the world, one shall worry about our government. Since it was proven that when people protest, they were governmental snippers shooting at both sides (protesters and cops) envenoming and discrediting the legitimacy of the protest. Isn't it what happened in Ukraine recently? All independent sources will agree.

  4. Italktotheweb profile image61
    Italktothewebposted 2 years ago

    This is disingenuous bull plop from someone who is trying to manage his public relations for the same strategic reasons, which he admitted drive his business decisions in his letter.  All he is doing is promoting more of the same statist solutions that have stagnated the economy, in the first place, as he adds more fodder for those who support the further destruction of true free market principles, in this slick manner that was most definitely thought up by his public relations firm working in close connection with the political machinery that propositioned him to do it.  What amazes me is the number of people who buy into such nonsense and go along with it, because it's what's being pushed by all of their minions that they now have working the social media.  Don't people understand corporatist fascism when they see it in action? That's what I am seeing in terms of the messaging that this guy is most likely participating in. Pathetic.

  5. secularist10 profile image91
    secularist10posted 2 years ago

    Hanauer's main point has always been that rich people qua rich people do not create jobs and prosperity. I wrote a hub specifically on this topic.

    Rather, people get rich by selling stuff. They can only sell stuff if there are customers with enough money to buy from them.

    It's a feedback loop. (The customers themselves are employed by businesses who sell stuff.)

    But the real "source" of prosperity, if we had to point to one, would be the customers, not the businessmen. And customers usually means middle class people.

    This is the model that worked in the mid 20th century: middle class people had lots of money, and that enabled them to buy lots of stuff from businesses. As wages fell in the late 20th century, and the rich became richer and income was more concentrated at the top... sure enough, overall growth and prosperity has slowed.

    Hanauer gives the example of a businessman selling fruit in a destitute African country, vs. a startup guy here in the US. They are both smart and enterprising. But the African guy will be much less rich because his customers just don't have as much money to pay him as American customers do.

    1. moneymindit profile image72
      moneyminditposted 2 years ago in reply to this

      There was a time when a hamburger used to cost $0.10 in this country, and the owner of the hamburger chain was still able to accumulate wealth.  Why does a hamburger now cost upwards of $5?  Answer = wage increases.  Wage increases lead to price increases.  Inflation anyone? 

      Mark my words.  After all of these wage increases go into effect, we will be paying $10 for the same hamburger that costs us $5 today.  it is an unending cycle.  Wages go up followed by prices.

      1. John Holden profile image59
        John Holdenposted 2 years ago in reply to this

        So nothing to do with the cost of meat increasing, or rents increasing or shareholders expectations increasing, just those workers demanding more money and not being happy to live in poverty!

        By the way, have you seen the profits that owners of hamburger chains are still able to accumulate?

        1. moneymindit profile image72
          moneyminditposted 2 years ago in reply to this

          Certainly supply and demand in each of the categories you mentioned are contributing to increased prices.  Nevertheless, increasing wages isn't the solution.

          1. John Holden profile image59
            John Holdenposted 2 years ago in reply to this

            So if everybody was still earning as much (little) as they were when burgers were 10c then everything would be all right?

            Actually you're probably not too far off there, Wonder how many of the money men would agree though.

  6. GenerationWKshop profile image84
    GenerationWKshopposted 2 years ago

    I completely agree with the issues raised and points made in this article, and myself believe the pitchforks are coming if this country doesn't change.

    When education is putting my generation in debt; when the entry to owning your own small business is too high to accommodate; when the markets are not truly "free" but instead manipulated to reflect the business interests of Washington's most entrenched corporations, lobbyists and politicians, the result is clear; INCOME INEQUALITY is here to stay.

    Until the middle class stops fighting each other for crumbs while the 1% divides up 80% of the pie, there will be no change. The media would rather have us all fight each other than have us (the majority) make the realization that this is no longer a democracy. Its an oligarchy. There are multiple publications by creditable political science think tanks that have evidence to support all of my above statements.

    So for those of who want to argue that its all about personal choice, and that the system is not rigged to keep us on the hamster wheel, please save your breath. The reality that is bought by your exploitation of American families means that you don't live the reality of your struggling workers. Don't reply to this comment without significant and credible sources, and not only conservative banter about the "whining irresponsible poor man". Please and thank you.

    1. rhamson profile image77
      rhamsonposted 2 years ago in reply to this

      I agree with your post entirely. I invented and produce a small tool that has had a small success. After I spent a small fortune to protect the idea with a patent I looked to mass produce the product. The price to purchase a tool (plastic mold) in the US was close to $70,000. Many others hovered around the same number. Everyone told me I had to get the tool (plastic mold) made in China as well as the product itself. After a relatively short period of time I found a manufacturer from China who could produce the plastic mold for $5,000 and produce the product for less than I could in the US. It was about a 40% savings. The shipping and tariff was factored in and I could still save around 25% getting the product produced in China. Why was the tool so cheap? Because they want to get the business on the back end in production.

      I will get to my point. The US model of introducing a product is to get as much of the pie as they can right from the start. Whereas the Chinese are willing to accommodate the entrepreneur with a plan that gets the product out there for less and cheaper as well. This is how business is done and circumvents the tariffs through NAFTA, circumvents the higher US labor cost the same way and lastly puts higher profits in the pockets of the entrepreneur. To be competitive in the marketplace just about everyone does it this way. If you don't do it this way you will not get your product out there and if you happen to get it produced domestically you will not be successful. So to do this the American way requires that you get poor people to work for you in a foreign land and that you take the jobs away from the US. Some of the manufacturing coming back to the US in recent years is mostly farmed out to robotics which successfully has eliminated the need to hire a US worker.

 
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