Michigan considers $10 minimum wage

[Lemanrussland]

That 3 dollar extra will just be added to whatever they produce meaning that they make 3 dollars more, and cost inflates to match it.

No.

There will likely be increased costs, but it's not necessary for all of these costs to be passed on the consumer. It depends on the elasticity of demand.

This is right, they can always lay off workers, or eat some of the cost directly and have lower profits per unit of labor invested. There is no such thing as a free lunch.

[The Emerald Dawn]

I did not. Government introduces a potential option C, by mandating a higher minimum wage.

That is what we are talking about, after all. Option C is higher than the man's productivity. He does not have option C.

Sibirsky, if you seriously, truly believe that a significant fraction of the American workforce are incapable of producing $10/hour worth of goods or services - that their productivity is less than the proposed minimum wage in Michigan (which I might remind everyone is the topic at hand, not the Federal Budget or racism or other such tangents) - then one of two things must be true.

Either you have a very low opinion of huge chunks of the American workforce, or you've lost acquaintance with reality.

Because the US economy produced as of 2009 $59.00 of goods and services per hour worked - and while a lot of that is due to machinery etc. (ie capital, with the rewards rightly flowing to the owners thereof), I find it hard to believe that less than half is due to labor. In fact, I find that extrapolating from this (Table 1, near the end - it only goes to 2001), at least 65% of GDP is due to labor, yet the total compensation for labor is about 55%. Which means that instead of being a partner with labor in the production of goods and services as is the case in a functional economy, capital - in the USA - is instead taking the part of the rent-extractor, seizing virtually all of the production surplus instead of splitting it equitably, or at least partially, with labor.

*snips doomsaying about unsustainable socio-economic situations*

It's not lack of productivity that holds the average US worker back - it's corporate greed and determination to rake in every bit of the labor-added value that they possibly can, by any means within their grasp. And I'm frankly quite OK with the idea of forcing them to disgorge just a bit of their excessive profits.

Speaking of which, you responded to my earlier proof that corporate profits are at record highs by claiming that your concern is for the smaller, mom-and-pop businesses which will be "hurt" by this, and for the minimum-wage workers that they'll have to lay off due to increased costs. Well and well enough - I believe you given your history of honesty with me.

However, the largest minimum-wage (and in some cases, sub-minimum wage) employer in the USA is Wal-Mart, which pays its workers so little that they constitute the largest single bloc of food stamp and Medicaid recipients in many States (notably, a partial bill for this was $86 million per year in California alone in extra costs paid by the state government, money that effectively subsidises the lavish lifestyle of the Walton family). This despite being one of the most profitable corporations worldwide - and it's far from the only large company that pays rock-bottom wages. In fact, I'd hazard that most minimum-wage employees either work for a large corporation (say, with at least 2,500 FTE positions total) or for a franchise of one (such as most fast-food chain stores).

Can I get an OSNAP?

[Freiheit Reich]

In Michigan, or in one of the old slave states?

Obviously not in this State.

I mean, you try walking to work or riding a bike in the winter.

I lived in southern Indiana, not as cold as Michigan but harsh in winter so I know the winters can be tough. Yes, during the ice storms it would suck. Michigan people walked 2-3 miles to go to the store in town during the 19th century. People likely walked 2-3 miles to work in small towns and growing cities as well in the 1910's and 1920's (only a few people had cars then). It can be done.

I have seen nice used jackets for sale for $20-30. I paid $35 for mine (brand new and on sale) and it kept me warm in temps as cold as -5 degree (F) weather in Afghanistan and my job had a lot of outdie work. Gloves and hats are not expensive, my $5 winter hat kept me warm. $5-10 gloves not great but good enough for 1-2 hours. Snow boots, $25 brand new at KMart and surprisingly good quality, even in wet slush. These prices are reasonable for most people, even poorer ones. Charities will help as well.

Many poor people are obese, the daily walk/ride will be good for them. Car pooling is also possible and expenses will be reasonable if 3-4 share a ride. Many cities have buses as well but transport costs vary greatly, this will be good for semi-poor people.

My $4 estimate was southern Indiana. If you want my living expenses for my 2 years there I will provide it. I am frugal and I gave an example of how it can be done. Indiana is near Michigan and cost of housing is lower in Flint than where I lived (for good reasons ).

[Freiheit Reich]

The opportunity existed because the employer was willing to offer the job at $5 an hour BUT decided he would not offer the job at $7 an hour.

Let me stop you right there. No. No such opportunity exists unless the employer wants to break the law. End of discussion.

1) Job created at $5 an hour wage
2) Job NOT created at $7 an hour wage

Only 1 thing stopped the job from being created, that was the minimum wage law.

Yes, the opportunity was lost BECAUSE of the minimum wage law. This is a fast decision by the manager as soon as he does his calculations. He has a maximum hiring price (perhaps $6 in this case, anything over is not worthwhile, we will call $6.50 the Breakeven Point). Are you familiar with the term: Breakeven Point? Minimum wage changes do not change breakeven points (unless company raises prices which can be risky in a competitive market).

This is a lost opportunity, I don't know why you can't see that. The job-seeker just didn't know about this lost opportunity by the law abiding employer but the employer knows about it.

Oh, side effect: Company lost opportunity to make a projected $1.50 per hour in profits ($6.50-$5 for worker's wage). Company is not maximizing production which is not ideal in economic theory.

[Alien Space Bats]

Michigan people walked 2-3 miles to go to the store in town during the 19th century. People likely walked 2-3 miles to work in small towns and growing cities as well in the 1910's and 1920's (only a few people had cars then). It can be done.

That was before snow ploughs became a common feature of our landscape. I tried that two years ago on a day I took my wife's wheelchair van in for some brake work; I thought I'd drop it off at the brake shop and walk the 200-300 feet to a nearby restaurant, where I could sit and enjoy some coffee.

Then I discovered that the space where the sidewalks had once been were covered with 4-8' piles of hard packed ice, snow, and slush, forming a treacherously uneven barrier that most people would find uncrossable. The only way to walk to the restaurant was to walk right on the fucking road, where every idiot driver zipping along at 40-50 mph could try to fucking kill me. It took me 15 minutes in busy traffic to cover that 200-300' distance, and another 15 minutes to get back.

This year, when I took my own vehicle in, I simply slept in the waiting area; it wasn't worth the effort to leave the shop.

This is typical of Michigan towns and suburban areas in winter. The roads are immediately plowed and the snow is heaped up over the sidewalks/bike paths. Nobody bothers to clear those walks or paths all winter, and walking along the gutter-edge of the road is both dangerous and illegal. A century ago, our towns and cities were designed and managed in such a way as to accommodate pedestrians; in this day and age, if you're a pedestrian, you're totally fucked. Nobody expects anybody to walk anywhere outside our city centers, which are among the most expensive places to live in America.

So no, I reject your example. My personal experience here in Michigan beats the fuck out of yours in Southern Indiana.

[Frisivisia]

Let me stop you right there. No. No such opportunity exists unless the employer wants to break the law. End of discussion.

1) Job created at $5 an hour wage
2) Job NOT created at $7 an hour wage

Only 1 thing stopped the job from being created, that was the minimum wage law.

Yes, the opportunity was lost BECAUSE of the minimum wage law. This is a fast decision by the manager as soon as he does his calculations. He has a maximum hiring price (perhaps $6 in this case, anything over is not worthwhile, we will call $6.50 the Breakeven Point). Are you familiar with the term: Breakeven Point? Minimum wage changes do not change breakeven points (unless company raises prices which can be risky in a competitive market).

This is a lost opportunity, I don't know why you can't see that. The job-seeker just didn't know about this lost opportunity by the law abiding employer but the employer knows about it.

Oh, side effect: Company lost opportunity to make a projected $1.50 per hour in profits ($6.50-$5 for worker's wage). Company is not maximizing production which is not ideal in economic theory.

Your hypotheticals are fine and dandy, but unfortunately the facts belong with my side.

[Khadgar]

Since it was ignored earlier with some blithe Ignorance is Strength nonsense I'll repost two links.

Minimum wage by state
Unemployment by state


Actually, here's some pretty maps, makes it easier to spot any correlation.

Unemployment by state for February
Minimum wage map

Despite the "Higher minimum wage means higher unemployment" shit that's been repeated, there doesn't appear to be any correlation at all.

[Caninope]

Despite the "Higher minimum wage means higher unemployment" shit that's been repeated, there doesn't appear to be any correlation at all.

There's a definite theoretical correlation between minimum wages and unemployment, assuming (a) that minimum wage is above the equilibrium price for low skilled labor, and (b) the supply curve is upward sloping (which is should predominantly be in the segment that will be most affected).

The problem is that trying to compare between states runs into a lot of comparative issues. Time series econometric models would probably be better, and the findings on those are generally mixed (I've seen both ways).

[The Joseon Dynasty]

There's a definite theoretical correlation between minimum wages and unemployment, assuming (a) that minimum wage is above the equilibrium price for low skilled labor, and (b) the supply curve is upward sloping (which is should predominantly be in the segment that will be most affected).

I can't find it in my books, but it would be interesting if there are any models where labour productivity is a function of the wage, holding all else equal. It would correlate with some of the empirical evidence, and I'd expect the marginal productivity of wages would be upward-sloping with a negative second derivative. If that's the case, the change in labour demanded from a minimum wage increase would probably be ambiguous in the affected sectors, since the supply curve is derived from the production function.

Edit: I Cocked Up^TM. I mean the productivity of wages will be logarithmic, not the marginal productivity.

[Caninope]

There's a definite theoretical correlation between minimum wages and unemployment, assuming (a) that minimum wage is above the equilibrium price for low skilled labor, and (b) the supply curve is upward sloping (which is should predominantly be in the segment that will be most affected).

I can't find it in my books, but it would be interesting if there are any models where labour productivity is a function of the wage, holding all else equal. It would correlate with some of the empirical evidence, and I'd expect the marginal productivity of wages would be upward-sloping with a negative second derivative. If that's the case, the change in labour demanded from a minimum wage increase would probably be ambiguous in the affected sectors, since the supply curve is derived from the production function.

I don't think that would be particularly true of minimum wage, TJD. Workers with the tendency to be productive in relation to their peers should have (theoretically) already increased in wages. AFAIK, individual wage is thought to be a function of productivity, not the other way around.

Perhaps there could be increases in productivity as minimum wage increases, TJD but I sort of doubt it. The minimum wage normally applies to the least productive workers or subset of workers (for whatever reason or another). I see no reason to think that workers would be more productive, except in a very indirect way*.

*The indirect way would be the increase of the minimum wage could lead to a steeper isocost line, and thus a preference for capital over workers. This would make each individual worker more productive; at the same time, this would have little to do with the worker him or herself becoming more productive because of a change in behavior.

[The Joseon Dynasty]

I can't find it in my books, but it would be interesting if there are any models where labour productivity is a function of the wage, holding all else equal. It would correlate with some of the empirical evidence, and I'd expect the marginal productivity of wages would be upward-sloping with a negative second derivative. If that's the case, the change in labour demanded from a minimum wage increase would probably be ambiguous in the affected sectors, since the supply curve is derived from the production function.

I don't think that would be particularly true of minimum wage, TJD. Workers with the tendency to be productive in relation to their peers should have (theoretically) already increased in wages. AFAIK, individual wage is thought to be a function of productivity, not the other way around.

Perhaps there could be increases in productivity as minimum wage increases, TJD but I sort of doubt it. The minimum wage normally applies to the least productive workers or subset of workers (for whatever reason or another). I see no reason to think that workers would be more productive, except in a very indirect way*.

*The indirect way would be the increase of the minimum wage could lead to a steeper isocost line, and thus a preference for capital over workers. This would make each individual worker more productive; at the same time, this would have little to do with the worker him or herself becoming more productive because of a change in behavior.

Yeah, I can't think of an immediate incentive for our dear friend homo economicus to be more productive once wages have already increased, although some studies seem to find a correlation. Since there's a much stronger positive correlation between turnover rates and the wage, perhaps productivity is, conversely, more a function of the opportunity cost of being unproductive, which is now higher with an increased minimum wage (because of the wage you now have to give up when fired), and exacerbated still by a saturated, low-skilled labour market.

[Alien Space Bats]

There's a definite theoretical correlation between minimum wages and unemployment, assuming (a) that minimum wage is above the equilibrium price for low skilled labor, and (b) the supply curve is upward sloping (which is should predominantly be in the segment that will be most affected).

The problem is that trying to compare between states runs into a lot of comparative issues. Time series econometric models would probably be better, and the findings on those are generally mixed (I've seen both ways).

The problem with most theoretical analyses of the relationship between wages and labor is that they fail to take into account that one man's wage is another man's income. Thus an increase in the minimum wage may not just make labor more expensive, it may also affect both the supply and the quality of labor at the low end of the marketplace; then, too, it may affect the work-leisure balance of labor, and not just for minimum wage workers (since some minimum wage workers are married to people who earn more than the minimum wage).

[Caninope]

There's a definite theoretical correlation between minimum wages and unemployment, assuming (a) that minimum wage is above the equilibrium price for low skilled labor, and (b) the supply curve is upward sloping (which is should predominantly be in the segment that will be most affected).

The problem is that trying to compare between states runs into a lot of comparative issues. Time series econometric models would probably be better, and the findings on those are generally mixed (I've seen both ways).

The problem with most theoretical analyses of the relationship between wages and labor is that they fail to take into account that one man's wage is another man's income. Thus an increase in the minimum wage may not just make labor more expensive, it may also affect both the supply and the quality of labor at the low end of the marketplace; then, too, it may affect the work-leisure balance of labor, and not just for minimum wage workers (since some minimum wage workers are married to people who earn more than the minimum wage).

Such is the price when we begin to start making such broad simplifying assumptions, ASB.

EDIT: I'd also like to point out the fact that the empirical data is not clear cut, at all, and I noted this.

[Cannot think of a name]

The problem with most theoretical analyses of the relationship between wages and labor is that they fail to take into account that one man's wage is another man's income. Thus an increase in the minimum wage may not just make labor more expensive, it may also affect both the supply and the quality of labor at the low end of the marketplace; then, too, it may affect the work-leisure balance of labor, and not just for minimum wage workers (since some minimum wage workers are married to people who earn more than the minimum wage).

Such is the price when we begin to start making such broad simplifying assumptions, ASB.

EDIT: I'd also like to point out the fact that the empirical data is not clear cut, at all, and I noted this.

Noted, but not provided.

[Cannot think of a name]

The problem with most theoretical analyses of the relationship between wages and labor is that they fail to take into account that one man's wage is another man's income.

Like suddenly people who spend every cent of their income have slightly more income to spend.

[The Joseon Dynasty]

There's a definite theoretical correlation between minimum wages and unemployment, assuming (a) that minimum wage is above the equilibrium price for low skilled labor, and (b) the supply curve is upward sloping (which is should predominantly be in the segment that will be most affected).

The problem is that trying to compare between states runs into a lot of comparative issues. Time series econometric models would probably be better, and the findings on those are generally mixed (I've seen both ways).

The problem with most theoretical analyses of the relationship between wages and labor is that they fail to take into account that one man's wage is another man's income.

I don't think it does. They're just separate models to consider.

[Caninope]

Such is the price when we begin to start making such broad simplifying assumptions, ASB.

EDIT: I'd also like to point out the fact that the empirical data is not clear cut, at all, and I noted this.

Noted, but not provided.

Yes, mostly because I don't want to dig through my Internet history for the links.

[Caninope]

The problem with most theoretical analyses of the relationship between wages and labor is that they fail to take into account that one man's wage is another man's income.

Like suddenly people who spend every cent of their income have slightly more income to spend.

The question isn't whether people have more nominal income to spend, but whether they have more real income.

[Cannot think of a name]

Like suddenly people who spend every cent of their income have slightly more income to spend.

The question isn't whether people have more nominal income to spend, but whether they have more real income.

Thing is, dude, people who have come in supporting minimum wage, they've provided multiple studies showing an actual decrease in unemployment and at worst a marginal, nearly imperceptible increase in inflation that is a small fraction of the actual increase, so small that it's hard to actually attribute it to the increase in minimum wage.

The people opposed to it have provided theory and hypotheticals and, basically story time. Now, I've said this a few times, I come to this discussion convincable. There are a ton of things that sound good in principle that don't work out practically, I'm all for checking to see if shit causes more trouble than it's worth.

But, put yourself in my shoes. You have pages and pages of theory and stories, and a bunch of actual studies...which one would you find more convincing?

[Caninope]

The question isn't whether people have more nominal income to spend, but whether they have more real income.

Thing is, dude, people who have come in supporting minimum wage, they've provided multiple studies showing an actual decrease in unemployment and at worst a marginal, nearly imperceptible increase in inflation that is a small fraction of the actual increase, so small that it's hard to actually attribute it to the increase in minimum wage.

I'd actually love to see these posts if you don't mind linking to them. I jumped into the discussion late, and I'm sure I'd find some new sources there. Were I to have the time and inclination, I could provide studies showing negative effects of raising minimum wage (particularly on the employment rates of teenagers and African American men). I could also point to studies that show positive effects.

The people opposed to it have provided theory and hypotheticals and, basically story time.

Welcome to economics.

But, put yourself in my shoes. You have pages and pages of theory and stories, and a bunch of actual studies...which one would you find more convincing?

It actually depends on what we're talking about. Theory can become separated from reality, but empirical evidence (in and of itself) is useless without predictive power, which is what theory provides. What empirical evidence does often show economists is that we should never forget that theory is simplified.

[Cannot think of a name]

Thing is, dude, people who have come in supporting minimum wage, they've provided multiple studies showing an actual decrease in unemployment and at worst a marginal, nearly imperceptible increase in inflation that is a small fraction of the actual increase, so small that it's hard to actually attribute it to the increase in minimum wage.

I'd actually love to see these posts if you don't mind linking to them. I jumped into the discussion late, and I'm sure I'd find some new sources there. Were I to have the time and inclination, I could provide studies showing negative effects of raising minimum wage (particularly on the employment rates of teenagers and African American men). I could also point to studies that show positive effects.

Not to be a dick, but you're asking me to comb through this thread to site the stuff that's been sited over and over again when you're too lazy to provide any evidence to support your own argument. I mean, I already did more work than you're willing to do, as well as others. Just sayin'. You can't even be bothered to read the thread or do a search.

The people opposed to it have provided theory and hypotheticals and, basically story time.

Welcome to economics.

If the entire field is just 'making stuff up' it should really be held in that high of a regard.

But, put yourself in my shoes. You have pages and pages of theory and stories, and a bunch of actual studies...which one would you find more convincing?

It actually depends on what we're talking about. Theory can become separated from reality, but empirical evidence (in and of itself) is useless without predictive power, which is what theory provides. What empirical evidence does often show economists is that we should never forget that theory is simplified.

There's a great line that I can't remember precisely, but it's essentially that theory is not as important as reality. If the theory's predictions keep not happening the theory is pretty useless.

[Alien Space Bats]

AFAIK, individual wage is thought to be a function of productivity, not the other way around.

Which flies in the face of common experience, if not rigorous empirical evidence.

Common experience — which most of us who have spent any time as managers will confirm — is that human beings respond positively to positive stimuli, including appreciation. Right or wring, workers view the wage they earn as a symbol of how much their employers think they're "worth", and they also relate the importance of their job to their pay. Giving someone a token of esteem — a title, more independence, a tiny raise — can often trigger a strong response in that person leading to a definite improvement in their work performance. Consequently, I would not at all be surprised to find that higher wages lead to higher productivity, and not (just) the other way around.

Yet it doesn't surprise me that we visualize workers in almost mechanical terms, as though their performance is a given based on some fixed, exogenous quality ("character", "work ethic", or whatever). While military science broadly recognizes the supremacy of human factors in its sphere of influence ("The moral is to the physical as three is to one"), economics, as yet, generally does not.

So to you, Caninope, let me ask: Why do you think it unlikely that workers would become more productive if they felt their jobs were "worth more" or "more valuable", and why don't you think that workers might perform better if they thought their pay reflected greater employer and or societal "appreciation" of what they do?

[The Joseon Dynasty]

Like suddenly people who spend every cent of their income have slightly more income to spend.

The question isn't whether people have more nominal income to spend, but whether they have more real income.

I think economic theory can be used to argue that real income will unambiguously rise for minumum wage workers. I'll try to construct a model of my argument, but I'm keeping firmly in mind what happened the last time I attempted that.

Well, let's just assume that there's a theoretical economy of N firms, where the change in normalised price per firm P from a change in normalised wage W is equal for all firms, or dP/dW = 1 (which is clearly very rarely that extreme). If some n < N firms are paying workers at or below where the new minimum wage W₁ is to be set (and obviously at or above the old minumum wage W₀), then the proportion of those firms in the economy is n/N < 1. Suppose that minimum wage W₀ goes up by 1 to W₁, or dW = 1, then the price P will go up by 1 in n firms, but will remain constant in the other N - n firms, which implies that average dP in the economy is E(dP) = 1(n/N) + 0(N-n)/N = n/N < 1. In other words, even when we assume that (normalised) price is perfectly responsive to the (normalised) wage, dW > dP for minimum wage workers throughout the economy. Of course, I held employment constant for simplicity, but also because that has no effect on real income itself.

In short, real income will obviously go down for non-minimum wage workers, since their dW = 0 but dP = n/N, but should be unambiguously higher for the workers in minimum wage sectors. It's basically a wealth redistribution policy when looked at from this angle.

[Cameroi]

good, bad or indefferent would have to be relative to the cost of living. $10/hr = $80/8hr day =$320/after taxes per typical work week. so if typical rents locally there were less then $640/mo, that might be reasonably reasonable. have no idea what they actually are though, nor what kind of living conditions $640/mo would purchase.

we know that kid they've got for a gov has some pretty fashist ideas about how to run a government, so i would have to suspect, he's trying to lowball everyone who tries to earn an honest living.

[Caninope]

Not to be a dick, but you're asking me to comb through this thread to site the stuff that's been sited over and over again when you're too lazy to provide any evidence to support your own argument. I mean, I already did more work than you're willing to do, as well as others. Just sayin'. You can't even be bothered to read the thread or do a search.

Not tonight, no. I'm being lazy tonight.

If the entire field is just 'making stuff up' it should really be held in that high of a regard.

There are lots of reasons why economic theory is so separated from reality, and it's a common methodology found in every branch of science (be it natural or social).

There's a great line that I can't remember precisely, but it's essentially that theory is not as important as reality. If the theory's predictions keep not happening the theory is pretty useless.

That's not strictly true. If the theory's predictions keep no happening, it might simply be that the assumptions made by the theory are not being met in reality. That doesn't mean the theory is useless though.