Social Question

Dutchess_III's avatar

Could increasing the minimum wage have unintended, negative consequences for some people?

Asked by Dutchess_III (28286 points ) May 4th, 2014

For example, if you make minimum wage now, and you have children, you qualify for SRS provided daycare and other kinds of assistance. Daycare averages about $6.00 an hour (much lower than that in Kansas, though and higher than that in places like Seattle.) If they increased minimum wage to $10.00 hour I wonder how many folks would no longer qualify for SRS assistance? People would go from making $7.25 an hour and having their daycare paid for, to $4.00 an hour, after paying the babysitter.

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39 Answers

Hypocrisy_Central's avatar

Like most things, there are always unintended circumstances that arise. I can see people losing hours, or future employees coming in as p/t only, and then there is no penalty of overtime pay if they work more than 8 hours that day. Some business might move from the state they are in to a state where they can benefit in other ways to make up for the increase in wages they have to pay.

elbanditoroso's avatar

Sure, no doubt it could, and would.

But the question goes to a greater point: should we NOT do something if it affects a small number of people negatively, even if it benefits overwhelming numbers of people positively?

Everything has consequences:
– penicillin: cures most people, but some people have allergies
– Obama care
– traffic laws – some people get to work late, but more people stay alive
and so on

Everything has consequences.

JLeslie's avatar

Of course there will be. Wouldn’t it be better to afford everything on ones own wage rather than on the government dole? It should feel better to people to earn enough to pay for their life. People can get around it by working less I guess so they still make under the threshold. That would be really annoying.

Dan_Lyons's avatar

It could have negative unintended consequences for the person receiving the higher wage as they may wind up in a higher tax bracket, pay more in taxes and have even less money than they were receiving before at the lower wage/lower taxes.

Another possible unintended negative consequence is that the higher wage might put hundreds even thousands of small business owners out of work. [i.e. shut down the business].

Dutchess_III's avatar

I understand what you’re saying @JLeslie, but paying for their own way means they’ll go from $7.25 an hour down to $4.00 an hour. Hard to feel proud of anything at those levels.

Dutchess_III's avatar

And out of that $4.00 an hour they have to pay for rent and groceries.

talljasperman's avatar

Maybe we could have a sector by sector minimum wage?

SavoirFaire's avatar

Like everyone has said, there are always unintended consequences. But if we’re careful, we can fix those at the same time (or shortly thereafter). For example, we could change the qualifications for SRS assistance at the same time.

JLeslie's avatar

@Dan_Lyons You don’t make less money by going into a higher tax bracket. You only get taxed a higher tax amount on the amount in that bracket, the amount below that bracket is still taxed at the lower amount. It probably wouldn’t move anyone into a different bracket anyway, but it is worth mentioning how brackets work since so many people don’t understand it.

@Dutchess_III Well, that is a problem for anyone making $10 an hour. So the question should not be will the minimum wage worker get screwed if they make more, but what is the situation for people who make $10 an hour. We need to look at all of it.

Dan_Lyons's avatar

And yet you make of mention of the small business owners who will shut down their businesses @JLeslie

JLeslie's avatar

@Dan_Lyons Huh? Where? When?

Dan_Lyons's avatar

@JLeslie The same place you must have read my answer about tax brackets,
Another possible unintended negative consequence is that the higher wage might put hundreds even thousands of small business owners out of work. [i.e. shut down the business].

JLeslie's avatar

@Dan_Lyons Did you mean to write I make no mention of? I thought you were saying I was the one who said it. I got confused because of your typo maybe? If it was a typo.

eno's avatar

Regarding your detailed example, it causes consequences up to a certain threshold. Here is a an example, link

Outsourcing is a much worse consequence. The guys in India that I outsource my work to are paid $2.25 an hour by me. There is no way the U.S can compete with those rates, so they lose out on a chance to work for me. Consider how much outsourcing/offshoring is done lately, you can see the consequences are quite severe.

There are also the standard consequences which is layoffs, less employment, and more workload for those who are employed with a combination of increased prices of goods and services.

Dutchess_III's avatar

^^^^^ Economic 101 right there. Thanks @eno.

JLeslie's avatar

@syz At $2.25 an hour it doesn’t matter if the US minimum wage is $7.25 or $10.00. As far as workers getting more loaded onto them, I think the media and all our neighbors telling us we should be grateful we have any job has been the worst for employees. Companies that are making huge profits are squeezing their employees because they can. That is the climate right now.

I have to agree some businesses will be hurt by having to pay $10 an hour, but a lot of businesses won’t be, they will just have smaller profits, oh wait, they will probably just pass the expense onto the consumer if the market will bear it. I wonder what percentage of workers actually only make $7.25? I also wonder how many businesses will be driven out of business with a rise to $10. I have never seen hard numbers, just people talking. I have no real guess what the answers to my questions will be. I don’t expect you to do the work, I just think we should not necessarily buy into the hysteria that is politically motivated and also of course greed motivated. Right now, the adults who are paid $7.25 get public assistance from my tax money. I’m not thrilled about. I rather a company pay better and make only $5million in profit rather than $40million. Or, whatever the numbers are.

eno's avatar

That is why I said it is a much worse consequence. The minimum wage, period, makes the U.S uncompetitive with the global market. That is a huge consequence for those who are looking for employment in the U.S.

The climate will always be like this. A good employer will always try to make the most of his business. If that entails squeezing the life out of the employees, then it is the logical move. Why keep 10 guys when 5 guys can do the workload for 10 for half the salary?

The biggest problem with these government regulators is that they think they know the results of their policies. They think they know the business better than the business man. They follow the same line of argument as you “but a lot of businesses won’t be, they will just have smaller profits”. They end up finding out the hard way that it didn’t go according to plan and things are much worse than intended. Hence, the unintended consequences.

JLeslie's avatar

@eno Squeezing employees to the brink invites government regulation and unions. I’d rather not have too much of either.

eno's avatar

And those regulations and unions drive businesses to the global market for a much cheaper rate (outsourcing/offshoring) or to the point where the regulators/unions win and get what they want, but then the employer balances out his losses with more layoffs, less employment, more workloads and higher prices.

jerv's avatar

This is where government and the private sector need to work together. The reason we need wages high enough to make us un-competitive in the global market is our high cost of living. If I have to pay $10,000 for medical care that others can get for free,and pay $1200/month for rent and utilities when others can get the same for $500/month elsewhere, you know I’m going to need (not want, need) more money for the same work.

And it’s a vicious cycle since increased wages lead to higher costs, which lead to needing more wages, ad infinitum, ad nauseum.

But what can be done about high costs? Small businesses already operate on razor thin margins, and big businesses won’t comply with policies that cut into their profits, preferring to move their money and jobs offshore instead, so all we can really do is try to cushion the impact of the fall by delaying the inevitable crash of our flawed economics.

JLeslie's avatar

@eno I agree that unions and regulations can make things worse. There is some sort of better solution in the middle.

jerv's avatar

And then there is Seattle pushing for $15/hr over the course of the next few years. (Source)

One thing that is telling here is, “The speed of the hike for individual employers would depend upon how many workers they have and the value of the non-wage benefits they offer.” For instance, if employers pay more for their employee’s health insurance, they will be able to pay lower wages longer. Sure, total cost to employers will still go up, but I think that that is the price they pay for allowing others to pass their costs on to taxpayers for so long.

As for how well it will work out, well, we’ll have to wait and see….

Dutchess_III's avatar

@jerv I think Seattle IS at $15 now. That’s twice what Kansas minimum wage is…but the cost of living in Seattle is about 3 times what Kansas’ is, so that’s kind of a no-win situation.

Dan_Lyons's avatar

@jerv @Dutchess_III So you see that no matter how they tinker with raising the minimum wage, it will never never ever reach the cost of living yearly explosions, no matter what part of the US in which you reside.

Hypocrisy_Central's avatar

@JLeslie Squeezing employees to the brink invites government regulation and unions.
Sometimes the unions are the problem, not with every union but with some; and I was a union man once. If a job or business gets bogged down because a worker who could perform the work to make something more expedient, even if for that day, can’t because the union says he can’t, then the union becomes part of the problem.

JLeslie's avatar

@Hypocrisy_Central Absolutely sometimes the Union is the problem, that is my point.

jerv's avatar

@Dutchess_III No, it’s the WA rate of $9.32 except for Sea-Tac. But I think it also shows how costs vary too much for one number to work everywhere.

@Dan_Lyons It’s really a downside to too free a market. One of the worst threats to Seattle’s economy is outsourcing… to South Carolina.

Dutchess_III's avatar

I agree Jerv. I mean, my house here appraises for $80,000. In Seattle it would probably go for $500,000. I’ve thought of loading it up and trucking it to Seattle to sell it! :D

eno's avatar

@JLeslie There is some sort of better solution in the middle

Like what? I don’t think there is an argument in the world that would convince me why I should pay $15 an hour to employees within the U.S when I only have to pay $2.25 an hour to my employees in India.

JLeslie's avatar

@eno I don’t think we are talking about $15 but even at $10 I agree, you most likely will outsource. However, some jobs you cannot outsource. Paying someone a reasonable wage, with decent working conditions, helps keep the union away.

An example I have used before is stores opening at midnight the morning of Black Friday; stores that typically are not open 24 hours. Employers try to say the employees want to work it, but many many employees are forced to or lose their job. They are up all night and then drive home, and shift work during a late shift when you typically work days is simply dangerous. Dangerous, sleepy, driving. People are more vulnerable to illness, because they are exhausted; it has gone too far. The exhaustian of the Christmas season is alread incredible without adding jet lag to it. Not to mention they have to leave the even of Thanksgiving to go to work. Bad enough retail (and other professions) work so hard when most of America is enjoying a long weekend. Not only Thanksgiving, but New Years, Christmas Eve Day, Memorial Day, Labor Day. It’s part of the job, but midnight Black Friday morning I find to be disgusting.

I think employees should band together across America and refuse to work it. Refuse to come in before 7:00 for stores that normally open at 10:00. It’s just too much. My solution is treat employees as you would want to be treated, golden rule within reason. We can expect high productivity withut torturing and abusing people. Retail is abusive in the swings of the Christmas season. People have no idea if they have never worked it. When I worked in FL we went through receiving tons of stock October and November, then the Christmas season working 6 days a week, then the worst day of the year Jan 26th. Then preparing for inventory and finally inventory mid January. Then, we were expected to take our comp days by April 1st for the 6 day weeks we worked, but wait! We are in “season” through Easter. Use or lose comp days. Finally, my third Store Manager while I worked there decided she didn’t care what the home office said, and we only wound up workin 3 six day weeks and we could take our comp days through the end of May. She just didn’t tell them and they never knew.

The home office who worked M-F and took holidays off had shown know empathy nor appreciation nor understanding of our market, That sort of thing is annoying.

eno's avatar

Jobs that cannot be outsourced are replaced with offshoring. Same benefit.

Using your own Black Friday example, you’re showing no solution can be met. Any solution in favor of the employees is a huge profit loss for the business. Any solution in favor of the business is a loss for the employee. The two cannot and will not be reconciled. It is just a pipe dream. A good business would not be tolerant of any of that and so unintended consequences will happen the moment you try and control the business.

The employees can refuse to work across America, but they’re easily disposable. You can fire and rehire young, eagerly able bodied men/women within a few hours. Such labor is easily replaceable and craved. In fact, we’re moving to an era where they will soon be replaced by sophisticated robotics.

jerv's avatar

@eno My job really can’t be. I setup what you might call “robotics” to do things regulated by ITAR. Even if security allowed for shipping my job overseas, the skills required are uncommon enough that not only does it take more than a few hours to replace someone who does what I do.

But really, business is what caused the problem in the first place by creating something unsustainable. If they won’t regulate themselves then they will self-destruct, causing massive collateral damage in the process. Just as ecosystems can only sustain a certain population and size of predators, economies can only support a certain amount of businesses, and only those under a certain size, lest the resources run out.

The endgame is worldwide poverty. The current issues in the US are just the beginning. But the big boys are profiting right now, so who that matters really cares?

eno's avatar

Depends where. I’m pretty certain it is quite common in various asian countries.

I agree that business cause the problem, but they also solve the problem (for themselves). Those who cannot, end up like Lehman Brothers while society experiences the consequence of it. However, likewise can be said about the employees and consumers. Just like businesses are able to adapt, so can the the employee and customers. Those who are aware and able to adapt do not experience the same consequences as everyone else.

jerv's avatar

@eno Able to adapt…

How many small towns have you lived in? Given a choice between shopping where you don’t want to or making a 30-mile round-trip, would you spend the extra money? If you even could, you’re luckier than many. Same with “refusing to work” being a valid option. Some people have fucked up ideas about “choice”, and think that just because nobody literally holds a gun to your head, there’s no duress and therefore everything is a free-willed decision.

Yes, business can, but won’t. So long as they can make short-term profits and shelter them somehow, why would they? Small businesses going under means less competition. High unemployment leads to desperate labor pools. They benefit from the destruction. Meanwhile, the middle class slides down, upward mobility lessens, and we wind up more stratified than feudal societies or third-world dictatorships.

Oh, and I checked; they import enough people like me that I think it safe to say that “local” talent isn’t that easy to find.

eno's avatar

None, I always lived in a big city.

None, I buy everything online, so I would disregard your choices and shop online. This would save me time, money, gas, and I would get what I actually want delivered to my door.

If you have no choice, then you’re unable to adapt and so you become either the working poor, or entirely destitute. Every situation is different. A rich man who invests poorly and becomes poor as a result, made a bad choice. He had other, better options, but chose the bad route instead. That is different than your example where one has no choice. It also depends on the history of events that put one in to a position where he no longer has a choice. Perhaps it was a poor choice that put him into a position where he has no choice.

I don’t think we’re on the same page with business. I’m talking about the problem employees have with the business owners. The problem arises because the business owner is unwilling to pay the fair wage, cuts benefits, etc. That is when regulators and unions come in to try and fix the problem, however, the business owner outsmarts them (including the original problem they caused) by outsourcing/offshoring their business. That is the adaptation i’m referring to on the business end. The one’s that don’t outsource/offshore move to business friendly environments like Texas which is anti-union and much less regulated. If that doesn’t help, they do what I spoke of earlier, layoffs, pay cuts, more work loads, higher less, and possibly increase prices. The one’s that finally cannot handle the burden of regulators and unions just close up shop and then everyone loses.

When you’re making a lot of short-term profits, you can reallocate it to more stable investments so when the day of reckoning comes, you’re still on top of the game elsewhere. It is bad investing to invest all your profits into one basket (the business).

jerv's avatar

Online… that proves that not only have you only ever lived in the city, but are probably under the age of 20. Try getting groceries that way miles away from anyplace with >1000 people. Try saving enough to move to.

You just wrote off about ¼of the nation as basically unfit to live. Maybe not your intent, but you did. Shooting the poor would be more humane.

Regulations and unions came about as a result of the stuff we’re seeing again now. Think about the self-defeating irony there.

eno's avatar

You couldn’t be more wrong. Two of my kids are almost 30 and I did tell you that I always lived in the city.

The situation you present is one where no choice is possible. What is your point? That they cannot adapt even if they wanted to? I agree. And? ...

That is where you’re wrong, though. It is not self-defeating if you’re not defeated.

eno's avatar

Also, look at it this way. A person who became addicted to heroin loses his choice since the strong urge now becomes a part of his biology, but it was his original choice to do heroin that got him into a situation where his choices are now gone, so this means that the original bad choice he/she made invalidates his/her’s current comment I have no choice

Now, just to balance it out, you can take a situation where a kid was born into poverty. That wasn’t his/her choice, so when the kid grows up and finds him/herself in a position as you describe, you cannot expect him to adapt or fault him for it.

So like I said earlier, it is situational. Not everyone is an innocent angel as you paint them out to be.

jerv's avatar

I’m just done with you. Not even finishing your first post. This just touches on things from my own past…

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