General Question

pleiades's avatar

What are the main arguments against minimum wage increases and why are they fallacious?

Asked by pleiades (6538 points ) July 14th, 2014

So my city (San Diego) is going to have a council about the raise of minimum wage.

Hence my question.

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35 Answers

talljasperman's avatar

If everyone gets a raise then no one does. It is a relative income that matters. Prices for products level off. Another point is how valuable is a humans hour of work is. Better educational systems mean better pay. 150 years ago people didn’t go to school for 18 years or more. Better health means fewer sick days and more profit from a humans perspective,

SQUEEKY2's avatar

Companies cry they can’t afford it, and will have to lay people off, thus putting more people out of work, or have to raise the price of their products or services,sometimes it works and sometimes it doesn’t.
But on the other hand what good is minimum wage if one can’t live off it, now I know there will always be different wage scales, but EVERYONE deserves a living wage.

whitenoise's avatar

@talljasperman
We are not talking about raising everyone’s pay, merely the pay of people at the bottom of the food chain.

trailsillustrated's avatar

the minimum wage here is $16.40. Yes I am paying absurd amounts for sinful things like cigarets and booze! But that’s ok. I think it’s terrible to hear people make 8$ an hour or something, indentured labour.

ragingloli's avatar

The main one is that it will lead to large scale layoffs.
Well, we did increase minimum wage for certain sectors in Germany, and there were no significant layoffs.

jerv's avatar

Historical precedent proves them fallacious. Compare Costco to Walmart; one pays their workers well and the other is showing corporate losses. Seattle is experiencing record job growth. Australia weathered the recession. The list goes on….

Haleth's avatar

The main arguments against it are that it will lead to job losses and that companies can’t afford it.

People with the very lowest incomes spend a much greater part proportion of their income than people with the very highest incomes. If you’re a struggling single mother on food stamps, you’ve probably been scraping by without all kinds of things that you actually need, and very few personal luxuries. My experience of being totally fucking broke is that first, I went without basic necessities. If I ended up with more money, then I spent it on food, clothes, rent, and transportation. (As opposed to crashing on people’s couches, going to the food bank, or walking to work.) Even later, extra money was divided between fun and savings.

Raising the minimum wage will actually increase consumer spending, because you’ll have all these people who can suddenly participate in it, who weren’t before. That will stimulate the economy.

The second argument, that companies can’t afford it- isn’t the success or failure of a company its own business, and not that of the government? Isn’t that the free market that republicans are always arguing for? Large companies have so much lobbying power with the government that I suspect minimum wage is being kept artificially low, beyond what the free market would support on its own. In many ways, the government is actually supporting these businesses. For instance, local governments provide subsidies and tax breaks when a large company opens a new store in its area. When low-income employees turn to government programs to make ends meet, we are essentially paying part of their salaries.

If their business model is so flawed that they need all this help… why the fuck are they in business? What benefit does that create for anybody, except the people who own the business?

SQUEEKY2's avatar

@Haleth Super great answer!

talljasperman's avatar

@whitenoise When you raise the bottom wages the top wants a bigger cut to balance out relative to the poor.

jerv's avatar

@talljasperman And that’s when revolutions start. Over 90% of all economic gains have gone to the top, the average worker now earns less despite increased overall wealth in the system, and that’s unsustainable. It will end relatively soon, but will it end peacefully?

talljasperman's avatar

In Alberta our minimum wage is $10.20 less for under age 18 and those professions that gets tips (like a waitress). As soon as the minimum wage went up so did my rent. I am waiting for a cost of living increase just to keep the same quality of life.

jerv's avatar

@talljasperman Our minimum wage for tipped workers hasn’t increased in decades; $2.13/hr. Yes, just over two dollars! Washington state has the highest state minimum wage at $9.32/hr, and we’re doing better at business growth/profits than many other states. Besides, rent is more a function of property tax rates and interest rates on mortgages/loans than minimum wage; how many employees do your landlords have?

talljasperman's avatar

@jerv What is the rent of a one bedroom apartment for places with minimum wage of $2.13? My rent is $550 month plus cable and internet. $750 plus meals on wheels ($400) 1250, extra food , taxi, bus pass and clothing and entertainment $300 $1588…. I can save $50 a month.

jerv's avatar

@talljasperman Rent and minimum wage are unrelated; if you don’t make enough to pay rent, you’re either on government assistance or (more likely) homeless.

My rent is slightly below-average for a 2-bedroom around here at $935, though electricity, heat/hot water, and internet bring it up to ~$1100. That’s about what my take-home pay was at $12/hr. A single-income person on minimum wage around here won’t have their own place; they’ll be splitting rent with a roommate or two.

dappled_leaves's avatar

@talljasperman You are spending way too much money for someone who doesn’t appear to actually do anything.

— $550 is an incredibly low rent for where you live. Given this, you should do fine on your budget, and be able to save a lot more than $50/month.
— Do I understand correctly, you pay $200 for cable and internet? That’s way too much.
— $400 “plus extra” is a lot for one person to pay for food for one month, even if you’re having everything delivered.

In other words, I think the budget you’ve presented is way off – or if it’s not, you should do some shopping around. Or become more active. You could stop meal deliveries and get more of your “entertainment” (reducing these costs) by doing things outside.

Haleth's avatar

@talljasperman $400 per month for meal delivery is insane. If you shopped and cooked for yourself, you could at least halve that.

jerv's avatar

For comparison, my wife and I both eat (and occasionally eat out) for about $400/month.

But back on-topic, wages for non-executives haven’t kept pace with cost of living, yet corporate profits are up, and executive compensation has skyrocketed. Yes, the cost of business has increased a bit as energy costs have risen, as has the cost of materials/ingredients, but if that were all there were to it, revenue would increase with only modest increase in profits due to increased overhead.

That’s not the the case though. Overhead costs have risen slower than revenue, leading to increased profits that average workers won’t see because all the money is staying up top. Sure, executives deserve to be compensated for their efforts, but so do their employees. If workers have less income, sales go down, so it’s unsustainable. The rhetoric is that investors and executives create jobs, but why invest if nobody can afford your goods/services and get you a return on that investment? Consumers create jobs by giving businesses revenue. Higher minimum wage, if done right, increases revenue more than it increases overhead; more discretionary income increases consumer spending. The Koch brothers don’t buy 10,000 pairs of pants at a time; saying that the rich consume more is a myth.

dappled_leaves's avatar

@jerv My comment was on-topic: @talljasperman‘s costs are not realistic, so it makes no sense to present his case as a representative example for the purpose of determining the fairness of minimum wage. The average minimum-wage earner certainly does not spend money that way.

jerv's avatar

@dappled_leaves Yes, true, and true.

trailsillustrated's avatar

Here in Australia the disbility pension is about 740$ a fortnite, meals on wheel is free, and I guess unless you live in public housing, all your pension would go to rent. Canada must have really high pension payments.

jerv's avatar

To put things in perspective, working full-time at the US federal minimum wage earns $1,260/mth (40*4.3*$7.25; the average month is 4.3 weeks). Gross. Net will be lower, of course; about $1000/month. I’ve heard of places where apartments are under $650/month, but I haven’t lived in any of those places in over twenty years. Utilities take a chunk of what’s left. Realistically, in at least half the country, it’s impossible to be self-sufficient on anything even close to minimum wage. Maybe you split rent, maybe you work two jobs, but it’s no way to live. The argument that minimum wage is enough to live on if you just give up luxuries is fallacious.

There are those who use that to “prove” that one must improve their skillset in order to get a job that pays a living wage. Those people haven’t seen people with Masters degrees stocking shelves at Home Depot because that’s the only place hiring. The argument that only the uneducated and unskilled work minimum wage jobs is fallacious.

whitenoise's avatar

One primary argument against increasing minimum pay, is that it would reduced the amount of available labour working at those lowest wage levels.

Many people at minimum wages work well over 40 hours on average per week. They need to, in order to make ends meet. Some may now instead of working 60 hours only be available for 50 hours per week.

At the low end of the labour pool, there is an inverse relationship between hourly wage and amount of time people are willing to work.

jerv's avatar

@whitenoise That sounds more like an argument supporting ownership over employment.

trailsillustrated's avatar

I don’t. get. it. If, the disability compensation is $740 a fortnite, and your rent is 350$ per week, and you have a car and electric bills and what not, how the hell are you going to live?? the average median rent is 740 per fortnite! there’s your pension!

jerv's avatar

Also, I might be odd here. When I was earning far less than I do now, my expense/income ratio was such that 60-hour weeks wouldn’t cut it. Often, my attitude was, “It’s worth $20 to leave 3 hours early since I’ll still be screwed!”. Now that I make considerably more, even working 5 hours overtime a week makes enough difference that (like many of my coworkers) I’ll work extra days; there’s actually incentive to do so that was lacking when my wages were lower.

trailsillustrated's avatar

I gave up on it all. That’s why I’m a sex worker with a dental degree. Go figure.

whitenoise's avatar

@jerv

Unfortunately it is reality. The minimum waged people cannot afford any time off.

They often have to work harder and longer than those above minimum pay.
Free market economics for you. I am all in favor of government taking its responsibility and protecting those that need protecting from those that want it all.

jerv's avatar

@whitenoise Well, for those that working that overtime or second job actually allows them to pay the bills, I can see it. Personally, I’ve never been in that position, and have seen few that are (my mother during my childhood being one). I can only really comment on my own experience and observations. I’m not saying you’re wrong though, just that I haven’t seen it work that way very often, and thus think of it as “special case” rather than the norm. Most of the people I see going for extra hours do so from greed rather than necessity, and when one extra day of work gets you more than a minimum wage earner gets in a week, it’s easy for me to see why.

whitenoise's avatar

http://www.bls.gov/cps/minwage2012.htm

Some statistics on who the people are that have these jobs…

Paradox25's avatar

The main arguments against it are that it would drive the cost of products and services up, and less people would end up being employed as a result. My counter to this argument is that the wage gap along with too many nonproductive people making more money than productive people are major factors in generating some of the issues I’d mentioned above. I also think we have an overly hedonistic and materialistic culture today too, so I’m not leaving consumers off too easily either here.

No matter what way we look at it, all current economic models would require persistent economic growth and inflation, especially with a growing population and having a currency that would be worthless without authority. Ultimately we’re going to have to change the way we live on this planet as a species. Perhaps a true socialist model is the only alternative, I don’t know.

jerv's avatar

@Paradox25 Considering that the states that raised minimum wage this last year are averaging ~50% higher job growth than those that haven’t, that logic is suspect at best. Then again, I’ve always thought historical fact trumped theory anyways.

Paradox25's avatar

@jerv I never claimed I’d agreed with the logic. I was just trying to answer the question.

jerv's avatar

@Paradox25 I know; I’m just pointing out the flaws in that argument.

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