Social Question

annabee's avatar

As long as the government provides welfare, would it be a good business practice to pay workers the bare minimum and not provide benefits?

Asked by annabee (414points) July 8th, 2013

From a business perspective, why pay more when you can get away with paying less? By paying employees the bare minimum and not providing benefits, employees will be eligible for welfare, which means the business is transferring its costs to the government because the government will be providing welfare for these employees.

Is this a common practice among employers? Is this a good business practice?

A similar question can be asked: why give money to charity if there is welfare? You’re already giving charity by paying taxes which funds welfare.

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75 Answers

johnpowell's avatar

It works for walmart.

jerv's avatar

The simple answer is that doing so will raise taxes (thus keeping overhead high) while at the same time reducing the disposable income of those most likely to want your goods/services.

Increased costs combined with reduced revenue may make short-term profits but is unsustainable. Of course, if you can dodge taxes well then that isn’t an issue; make others pay your share… at the expense of the economy as a whole.

It is, sadly, a common practice. Then again, many people are short-sighted, greedy, stupid, or some combination thereof.

Also, welfare exists because charity isn’t enough. If more gave to charity, there wouldn’t be so many government programs for the poor. But the Bible-thumping anti-government crowd isn’t Christ-like enough to put their money where their mouth is and give enough to charity to negate the need for the government programs they despise so much….

@johnpowell And look how well Walmart is not growing. In fact, it’s kind of a bubble there, and with each store costing taxpayers nearly half a million dollars, how much are we really saving?

BBawlight's avatar

I don’t think people should survive off of welfare alone because those hard working citizens who actually pay taxes are pretty much handing their money over to a bunch of free-loaders.

Plus, I don’t think you’ll attract the type of employees most businesses are looking for. Which will, in time, attract unsatisfied customers, and you may get several service complaints.

It’s not good for the economy as @jerv said, it’s not good for your employees, or your customers.
Overall, I think you should think a little more before starting a business… :)

annabee's avatar


Isn’t welfare causing employers to not pay more or provide benefits? Isn’t Welfare the enabler? If it wasn’t for welfare, employers would have to provide better pay. Wouldn’t it make more sense not to raise taxes? The idea being that if you raise taxes then employers will most certainly never raise pay or give benefits, but if you cut welfare, then employers will be forced to pay better and provide benefits.

As for disposable income for goods, why would an employer set a price that people are unwilling to pay for? The employer knows that people have less so he/she will charge less. johnpowell mentioned Walmart. Walmart pays little but charges little. They make more and more billions every year, why would you say they’re not growing? Though they do transfer their costs to the government.

annabee's avatar


It is not a question of should/shouldn’t. Businesses do what makes them the most amount of money. If putting people on welfare saves them money, then it would make sense to do it.

What do you mean by “attract the type of employees businesses are looking for”? Are you saying those who work for minimum wage are not normal?

BBawlight's avatar

@annabee Yes, but they also take the customer’s opinions into account. If the majority of their customers are unsatisfied, that means that they lose money. So it wouldn’t be very profitable when they lose half of their business due to unpleasant service, correct?

I’m not saying that those who work for minimum wage are not normal. Where I come from, many people live off of minimum wage without government assistance. So I’m imagining the people who live off of welfare as nasty, rowdy, and overall unpleasant for working in a business that serves it’s customers.

annabee's avatar

But then how do you explain all the successful businesses that pay minimum wage? Walmart, Mcdonalds, etc.?? Doesn’t that tell you that customer service is more than tolerable?

flutherother's avatar

Is it good business practice to treat your workers with contempt and not pay them enough to live on? I’m not so sure. But if this is how business people think then it is a good argument for legislating a decent minimum wage

johnpowell's avatar

@annabee :: You need to read a American History book. We have already gone through the scenarios you describe. All ended badly.

YARNLADY's avatar

It only works in the very short run for a company bottom line. In the long run, such corporate policy is not good for the economy and does not help grow the GNP.

annabee's avatar

@johnpowell (

History according to who? A libertarian? A liberal? A conservative? Keynesian? Chicago? Austrian?

Catch my drift? They all take credit during the good times, and they all blame each other during the bad. One will blame it on welfare, the other on something else, one will favor, etc.


Why would businesses profit at the expense of ruining the economy? That is self-defeating.

SuperMouse's avatar

Welfare provides the bare minimum for workers to squeak by, keeping a roof over their heads and food on the table. Families who are living on welfare have less disposable income than families earning a living wage. People with less disposable income have less money to spend at these businesses. These decreased sales and erode profits.

zenvelo's avatar

@annabee Why would businesses profit at the expense of ruining the economy? That is self-defeating That is a false statement; lots of companies profit at the expense of the economy. The economy is much bigger than an individual corporation; even WalMart knows it can benefit at the expense of the economy, and does so regularly.

Economic theory is based on the idea that a multitude of individual decisions form an economy; each independent decision is based on what is best for the entity making that decision.

The premise of this thread is based on the idea that having welfare as a supplement would be good for workers. But welfare is a lousy way to live; it involves a lot of time and effort to get a minimal amount of money. No one really wants to be on welfare if they can get a decent wage. And having medic-aid as a health care provider is a lousy way to have a decent work force.

One big reason for employer provided health insurance is that a healthy cared for work force is more productive and valuable to the corporation. That’s why a lot of companies subsidize gym memberships, people work better when they are healthy and in shape and treated well.

trailsillustrated's avatar

Where is the welfare? When I was in the US a single person got $290 per month in food stamps and their income had to be less than $1100 per month. So who are these people that are living off of this? Food stamps and that is all. Do families get more? And there was no health care, it was for children only. So really, people would ever elect to live this way? Explain it to me, I really don’t understand.

annabee's avatar


I don’t understand. Yes, people do what is best for them. but you just repeated what I said without answering the question. I asked you why would a business make profits at the expense of ruining the economy? This isn’t a statement. It’s a question.

I didn’t say it was good for the workers. I asked if it was good for the business. In fact, I didn’t say anything. I asked a question. If medicaid provides the health care then the worker is healthy. As an employer, you wouldn’t need to provide it. The government is picking up the slack. Problem solved.

annabee's avatar


I don’t know who they’re are but there are about 60 million people on welfare. If you have a family, you get more, yes. Once you qualify for welfare, you get a section 8 house if you need it, you get health care (medicaid) including dental and eye care. You get cash-aid, food-stamps. You get free cell phone service, your utility bills are reduced, you’re exempt from federal taxes, and bunch of other stuff.

trailsillustrated's avatar

@annabee so this is for people with children only. So children only get healthcare. I know because I got food stamps for a minute. There was a years and years long wait for the housing, it was foodstamps and that was it. Why would anyone elect to live that way.

jerv's avatar

@annabee Obviously the concepts of selfishness and greed are foreign to you. From the tone of many of your replies, it seems like the well-being of others and even the thought that business could ever possibly act less-than-perfectly are likewise alien.

Also, you obviously never paid bills, and likely never even knew/believed that some people pay $1000/month or more just for a basic apartment; there isn’t a state in the US where a single income of 40 hours a week of minimum wage can even rent an average apartment, let alone utilities, food, insurance… and that’s gross income without even reducing for taxes.

You’re either very naive or intentionally obtuse.

annabee's avatar


No, it is for everyone. I’m not sure what your situation was, I’m just telling you what it official offers if you qualify.

No one would elect to live that way, but if the employer doesn’t pay enough, then they have to live that way.

trailsillustrated's avatar

@annabee no it isn’t. I am not mistaken. This is recent, too. Single adults do not get healthcare, or anything else. They get foodstamps. This is in the pacific northwest, perhaps in other parts of the country they get more. I did qualify. I was homeless. And that’s what single people get. Ps—I’m in australia now and everybody gets healthcare.

annabee's avatar


It’s not foreign for me, I’m just not interested in psychobabble like “selfish” or “greed”. You could have just said you don’t know why and you don’t know if they’re actually ruining anything.

I’m not sure what your other point was about.

SuperMouse's avatar

@annabee, food stamps are barely enough to put food on the table. Cash assistance comes in the form of Aid to Families with Dependent Children which is rarely available to people with some form of income from working. The scant help provided to help defray the cost of utilities is typically limited to seasons and areas where extremes of weather can be dangerous. The waiting lists for section 8 housing are ridiculous. My step daughter applied for section 8 housing benefits over a year and a half ago and just last week received notice that she finally made it onto a years long waiting list. She has two young daughters and a minimum wage job as a CNA – with no benefits. She has since entered college on a full scholarship and is living on campus. Children from low income families do typically qualify for Medicaid, their parents do not.

It sounds like you are talking about big business sacrificing the health and well being of the working poor – who also happen to be their customers – for the sake of their bottom line. That is a pretty loathsome business philosophy.

annabee's avatar


Ok, so your answer is that it is bad for business and bad for workers? Bad all around?

How do you explain a Corporation like walmart then?

zenvelo's avatar

@annabee The answer to your question why would a business make profits at the expense of ruining the economy? This isn’t a statement. It’s a question. is that companies do it because they increase their profits, and their owners make more money. That’s all it is. And if they can do so without having any other repercussions for tehm selves, so much the better.

And medicaid is basic level health care to keep people from dying, it is not quality health care to help people thrive and live well. You don’t get a physical on medicaid, you don’t get nutrition advice, you don’t get smoking cessation encouragement, you don’t get diabetes prevention efforts. That’s one reason it is so damn expensive, because people don;t get any treatment until it is too late and they are sick!

And @SuperMouse didn’t say it is bad for business, he/she said it is a pretty loathsome business philosophy.

annabee's avatar

That doesn’t make sense. You said that they do it at the expense of ruining the economy, but if they’re part of the economy, then you’re saying that they’re ruining themselves. Why would intelligent, successful people engage in ruining themselves? Your answer doesn’t add up.

SuperMouse said “people with less disposable income have less money to spend at these businesses. These decreased sales and erode profits.”

That sounds like he/she is saying it is bad for business.

jerv's avatar

@annabee Actually, that was my way of determining whether you really wanted an answer, or whether you were just proselytizing.

You’re not here for an answer.

annabee's avatar

I’m here for decent answers. Yours was psychobabble.

zenvelo's avatar

@annabee You didn’t read, or understand, my previous response. A company or an individual, even Walmart, is so small a part of the overall economy that they make decisions independent of what the country is doing. Walmart may feel it, but they will make decisions such as foisting healthcare for its workers onto the states because it boosts their bottom line, even though it negatively affects its best customers.

annabee's avatar

Ok, I see. So your answer is that it is bad for workers, but good for business.

jerv's avatar

@annabee If you honestly believe that, then you are incapable of understanding the truth of the matter. It’s been made pretty clear in the above answers. The fact that you return to talking points instead of asking for clarification means you either cannot understand, or you willingly refuse to.

annabee's avatar

Like I said, more psychobabble. What else you going to tell me about myself that I clearly don’t know?

zenvelo's avatar

Yes, @annabee, that’s exactly what we’re all saying.

SuperMouse's avatar

@annabee through strong arming what few American manufacturers they do work with into lowering their profit margin, forcing smaller mom and pop stores without the distribution channels or quantity discounts Wal Mart enjoys out of business, exploiting low wage workers in third world countries along with their own work force, and other less then ethical tactics, Wal Mart has achieved an economy of scale. That doesn’t make their business model any less wrong. In the short term it is working for them, in the long run companies such as Costco will win the race.

@annabee you really need to pull back on the arrogance and insistence that you are the only person in any conversation who knows what you are talking about. It is not wise to always believe you are the smartest person in the room because I guarantee you won’t always be. Your parents may have raised an honor student in an all white subdivision, but that honor student seems incapable of listening to, let alone respecting the opinions of others.

annabee's avatar

Ok, got it. Your answer is a bit different than everyone elses since you believe it will eventually annihilate them.

If I thought I was the only one who knew what I was going on, I wouldn’t be asking this question.

SuperMouse's avatar

@annabee you would also be actually considering the answers instead of arguing with everyone and tossing around words like “psychobabble”. So far that has been you MO with both questions. Your arrogance is astounding!

FYI, unlike you I am not out to annihilate anyone, just to participate in a Fluther discussion.

annabee's avatar

Tell me then, how would you respond to someone who gave you an answer like this: it is “selfishness” and “greed”?

harangutan's avatar

I’m not answering the question. I would just like to make two corrections if I may.

@zenvelo You can get quality health care on Medicaid and you also get complete physicals. I have. It’s just difficult to find a doctor who will accept Medicaid now. Some people need to travel over 60 miles to find a doctor who will accept patients on Medicaid. :(

@annabee The only dental care adults receive on Medicaid is getting a tooth pulled. No cleanings, fillings or root canals allowed. You are basically screwed unless you don’t mind being toothless.

SuperMouse's avatar

@annabee I would take it as that person’s opinion and not be so disrespectful as to call it psychobabble. Believe it or not there are businesses and business people who believe that a greedy, huge profit at all costs approach is not a good business model. To people who feel this way a company that does business the Wal Mart way is selfish and greedy.

Jaxk's avatar

There is a theory that all workers are of equal value. Whether a CEO or Janitor, you contribute equally. Carl Marx was a big proponent of that theory and it sounds appealing. The problem is that if all workers are of equal value then all workers are of very low value. If you can change out the CEO with the janitor then both have the value of the janitor, not the CEO.

Low wage jobs are low skill jobs. There is a place for that and it serves a purpose. for both young and old. We bemoan the loss of the middle class but what we are losing are the middle class jobs. Our own government is driving those over seas. You can’t make up for that by simply making low wage jobs middle class jobs. All, that will accomplish is to drive the remaining middle class jobs overseas. If I have to pay the stock boy $50k/yr, I’m out of business. Instead of improving the lot of anyone, you’ll destroy the jobs of everyone. Your work has value but not all work has the same value. Yes some CEOs get paid more than they are worth but guess what, some janitors do as well.

The best way to reduce or eliminate welfare is to create jobs, not destroy them.

jerv's avatar

@Jaxk The more widespread theory is that all humans deserve a certain minimum standard of living, that anyone who works 40 hours a week deserves enough to live self-sufficiently regardless of skill, and those who want luxury must learn marketable skills in order to earn more.

The best way to eliminate welfare is to get everybody working and to pay workers enough to live without taxpayer subsidies.

Aside from that, I agree with you.

WestRiverrat's avatar

@jerv Welfare may actually reduce the amount people give to charity. People who would otherwise help someone will say let the government do it. The more aid the government gives the fewer people will be inclined to help.

The more government gives, the less people feel they need to give.
The less people give, the more government has to provide, which causes more people to give less. It is a vicious cycle.

Back to the OP. If you want to attract and retain good, loyal workers, you have to pay them what they are worth. Cutting benefits doesn’t usually help.

Jaxk's avatar


Not that I really want to pursue this with you but I can’t help but wonder what your number is. What is a living wage in your book. Is it enough to support a family of 4? Is it per household or per job? Should it be set for Manhatten where a 2 bed apt goes for more than $5,000/month or for Armore Ok, where it goes for $500/month.

My curiosity knows no bounds. Do you worry that if we have the guy flipping burgers making the same as engineers, are we in danger of creating fewer engineers? Should we then escalate the salaries all up and down the range to keep equitity? Not for CEOs that goes without saying but for everyone else?

tom_g's avatar

@Jaxk: “Do you worry that if we have the guy flipping burgers making the same as engineers, are we in danger of creating fewer engineers”

Anyone who would prefer to flip burgers over being an engineer would not be a good engineer, and they likely have bigger problems. I didn’t say, “I’d love to flip burgers, but it just doesn’t pay enough. I guess I’ll have to get into software engineering.”

I hear this all the time, as though the vast majority of doctors, scientists, and engineers are really fantasizing about their dream jobs of flipping burgers, cleaning toilets, or picking strawberries.

jerv's avatar

@WestRiverrat The fewer people that need help, the less welfare and charity is needed, and workers that can make rent and still eat are more likely to give to charity than those who can’t.

@Jaxk Since cost of living is variable, so too is that number. That is also why some places have a minimum wage above the federal minimum wage.

I feel that the burger-flipper deserves enough to pay rent and utilities with enough left over for food, basic healthcare, and a beater car like mine. An engineer deserves enough for a nicer place, better food, and a car less than 10 years old. I’m not a Communist; I just don’t want so many people living at taxpayer expense just because some executive wants a sixth mansion.

Jaxk's avatar

So you have no number, just more. Is that about it? Honestly I didn’t expect one but as always you didn’t surprise me.

harangutan's avatar

@tom_g You are assuming the strawberry picker has dreams of becoming a doctor or scientist? I’d be happy picking strawberries if the pay would support my basic needs.

Jaxk's avatar


When you finish HS you need to decide whether to go to work or continue your education. Is it better to wait another 4 years and accrue substantial debt or go to work. Regardless of your personal decision on this there are many that already choose work. If you can earn a substantial salary as a walmart greetor, why incur a $100,000 in debt to earn the same? Or worse in this job market you may still be a Walmart greetor.

tom_g's avatar

@harangutan: “You are assuming the strawberry picker has dreams of becoming a doctor or scientist?”

I did nothing of the sort.

@Jaxk: “If you can earn a substantial salary as a walmart greetor, why incur a $100,000 in debt to earn the same?”

To be fair, nobody (including @jerv) is advocating that burger-flippers make the same amount of money as engineers. It’s the income gap that some people find disturbing. I was merely pointing out that for many of us, the “burger flipper vs. software engineer” life decision wasn’t a matter of what pays more.

jerv's avatar

@Jaxk Apparently you’ve never seen any areas where even a basic 1-room studio in the bad part of town runs $750/month or more. And it sounds as if you refute their very existence.

Now, considering that rent is by far the largest expense for low-income people/families, anything that qualifies as “living wage” will vary by region as rents do. The federal minimum wage would do fine in the South or Midwest where rents are half of what they are anyplace I’ve ever lived, but try getting a place to live in Boston and still have enough to do anything like eat, pay utilities, or even save up to move. Solve the housing costs and you’ll go a long way towards solving many other problems.

Just compare rents across the nation and you’ll see why a single number is impossible, and your expectation of one unreasonable.

Dutchess_III's avatar

My daughter started a fast food job here in Kansas. She was paid $7.50 an hour. My 18 year old grandson started a fast food job in the Seattle area. His starting was $9.50 an hour….$9.50 an hour around here is pretty much what office assistants start out at.

jerv's avatar

@Dutchess_III That ties into cost of living varying by region. How much is rent in your part of Kansas? Here on the outskirts of Seattle, a modest 2-bedroom apartment runs around $900/month, and closer to downtown (like Capitol Hill) it’s closer to $1100 for a 1-bedroom. That’s with nothing included. Plus, King County has 9.5% sales tax, which I believe is higher than Kansas.

That “extra” $2/hr isn’t really helping your grandson; it’s pretty much required to live here. That’s also why WA has a higher minimum wage.

Dutchess_III's avatar

I know. I’ve had relatives from Seattle tell me my $80,000 house would probably sell for $500,000 in their area!
I was just confirming your comment that one number won’t fit all.

trailsillustrated's avatar

I just realised she’s talking about social security disabilty (‘its for everyone’) that is if you can jump through all the hoops. I knew people on this and they got food stamps, a whopping 650$ a month, I guess some live in section 8. An old lady I remember got $1000 a month. All these people lived in squalid apartment buildings and paid upwards of $500 a month. I think they did get some sort of health insurance or care thing. None of them worked, so I don’t know what it would have to do with any business… That’s the only welfare that I can think of that ‘everyone’ can get.

GoldieAV16's avatar

If government providing welfare means that people give less to charity (let the government do it – we already pay taxes), wouldn’t it follow that a society that wants smaller government and less government involvement in our private lives would all roll up our shirtsleeves pronto and get to work providing all the charity that is needed, so that government would shrink up and disappear?

Somehow I don’t think it works that way.

Asking why a business would make decisions that are bad for workers and bad for the economy is a bit like asking why a bank robber would rob banks, since it’s bad for the banks and bad for the workers at the banks. “Eventually wouldn’t all the banks disappear, and the robbers put themselves out of business?” Do you think they care when they’ll have more than enough loot for themselves and all their future generations socked away in the Cayman Islands?

tomathon's avatar


It is really good for business and whatever problems the workers face is a result of government policies, not salaries. I just read a recent article that relates to your question. D.C. City Council Proposes Super-Minimum Living Wage of $12.50 an Hour; Wal-Mart Threatens to Pull Out

jerv's avatar

And before anybody says that that’s too much take a look at something that @Jaxk will insist is Liberal propaganda; the average rents for the Washington DC area.

At $12.50/hr, and assuming that net income is about 70% of gross income, we’re talking about 185 hours per month just to pay rent in DC; no food, no utilities. By comparison, somebody earning the federal minimum wage won’t need overtime to pay rent on the average 1-bedroom in the Fort Worth metropolitan area despite the far lower wage.

tomathon's avatar

You should have read the article. Why should the private sector have to increase salaries, if it is government policies that cause increased prices for homes and healthcare? It should be the government that changes its policies so that prices can decrease and so that wages don’t need to be artificially increased.

Not only that, but if you mandate laws to force companies to pay higher salaries because of the increased prices for homes and healthcare that is caused by government policies, then as the article puts it “The net effect will be higher prices for everyone, a net loss of jobs, subsidization of weak uncompetitive companies, and a big round of cheers from union sympathizers who will benefit at the expense of everyone else (with the real problem not remotely addressed).”

“To top it off, living wage laws (coupled with preposterously low interest rates from the Fed) provide further incentives for companies to look at software and hardware solutions to get rid of marginal workers”

mattbrowne's avatar

What you call good business practice I call unethical, irresponsible, greedy business practice. What you call “the government” I call all taxpayers.

jerv's avatar

@tomathon I was merely trying to frame things in “How many hours would it take to make rent”, and showing how even that number varies regionally. I would also rather see prices come down than see wages go up. But suppose we did get rid of the government policies that increase healthcare and housing costs; what then? Think about the reasons why such policies came about in the first place.

You apparently have far more faith in humanity than those of us who know anything about history. There are enough employers who will do anything for profit that it ruins things for everyone. You realize that if people were nearly as ethical and scrupulous as they’d have to be for deregulation to work, most of that regulation wouldn’t be there in the first place, right?

However, i agree that it doesn’t remotely address the real problem; that our society is inherently flawed. But that’s a whole other discussion. Suffice it to say, raising wages is far easier than total societal reform. None of this would be if the private sector was capable of self-regulation.

Bill1939's avatar

We had a president who wanted to limit the amount of profit that could be earned, but the Supreme Court ruled that it was not constitutional. We are free to charge as much as we want, limited only by the number of people who can or are willing to pay.

jerv's avatar

@Bill1939 And that’s the way it should be. However, there are enough that would (and do) rather charge what they can get away with for a fast profit than what the market will bear sustainably that the private sector cannot be trusted. Of course, neither can government, which means that we’re screwed either way. Business is screwed too, since we really have no choice but sit back and watch them cut their own throats.

The ideal would be if the free market actually worked as advertised. It’s the huge divide between theory and reality due to humans being humans that make that ideal a pipe dream.

jerv's avatar

Let us take a look at how things were back before everything went off the rails, and look at what’s changed since. That will give a big clue as to where things went wrong.

Supply-side economics is often blamed, and I’m not convinced that that’s totally wrong.

annabee's avatar


You know we spend like 500 billion dollars on welfare and so far everyone here has been complaining that they don’t get any or it isn’t enough. Where the hell is all the money going to then?

tomathon's avatar


Oh no, I’m not getting into this with you. Don’t start with history with me. I’ll quote you @annabee. “History according to who? A libertarian? A liberal? A conservative? Keynesian? Chicago? Austrian?”

You’re just being biased at this point. I’m not denying there were problems, but that is normal for capitalism. Another school will explain to you how regulations have actually caused more severe and larger problems than actually solving any of the original problem, so just don’t.

How much do you want the minimum wage to be for someone who lives in DC. Give me a number.

jerv's avatar

@tomathon Like you, I have no interest in getting too deep into history myself, and for pretty much the reasons you cited.

Some say over-regulation is the problem, others say we need more regulation, and my personal opinion is that we need a few intelligent regulations. You can’t let the inmates run the asylum, but our current system of many half-assed regulations is almost as bad as anarchy. Does it make me biased to want a simpler system that treats all sides equitably?

I could give you an equation, but that will have to wait; my break is too short to type it out on my phone. If you want just a single number,give me a date; inflation adjusts it upwards.

tomathon's avatar


Today, right now.

jerv's avatar

@tomathon Now that I am no longer at work and actually have both a little free time and a full QWERTY keyboard, I will indulge you, mostly because I am bored and for the moment I consider you amusing.

First, we must pin down what a dollar is really worth. In order to buy in 2013 what $1 would buy in 2000, you would need to spend $1.36. Any remotely fair wage must take the decreasing value of the dollar into account. If you wish to stop the dollar amount of wages from rising, then you must stop inflation. The 1980 minimum wage of $3.10/hr would be $9.28/hr in 2013; pretty close to where WA state has their minimum wage. Many of the problems we have right now are because minimum wage has not adjsuted for inflation.

Second, one must take into account the median cost of reasonable housing within a 10-mile radius. I’m not talking a fancy place with a nice yard or anything like that, merely something that would pass health and building code inspections, and secure enough that there is a reasonable expectation of not being mugged. In my area, that runs about $1,000/month for a 1-bedroom, but in the DC area, $1600 for a 1-bedroom is closer to average.

In order to have enough for things like utilities, food, healthcare/insurance, transportation, and the difference between net and gross income, we must determine what percentage of one’s income should go towards housing. Most of the advice I’ve heard over the years recommends no more than 35%, but since minimum wage earners are in lower tax brackets anyways, thus narrowing the gap between gross and net income, lets go with 50% just for the sake of discussion. Besides, utilities will take housing costs closer to 70% one’s gross income anyways, especially if you live anywhere where they have this thing called “winter” that can cost a couple of grand a year for heat alone.

How many hours a month should a person need to work to afford a roof over their head? I feel that anybody working 40 hours a week deserves that right. (And the Universal Declaration of Human Rights says that all humans do even if they don’t work… but who cares about human rights?) That means that there are about 160 work-hours per month, and 70% of that is 112.

Put that together and you will find that a fair minimum wage would be ( Median rent / 112 ) $/hr, which would put a fair wage for the DC area that would allow for a dual-income household to live would be around $14.28/hr. Of course, that means that married people would need a working spouse and single people would require a roommate, but living on minimum wage is supposed to suck. If we want people to be able to live alone, that wage would skyrocket to about double that, and even I feel that would be unfair to employers, as well as to anybody who buys their goods/services and thus would bear the brunt of increased costs.

Truth be told, that is rather ridiculous, but so are the median rents in DC. And with the rising cost of housing and the declining value of a dollar, that number will probably be larger in 2014. But in Texas where rents are less than half what they are in DC< you could be paid less than our current federal minimum wage and still be fine.

There are other ways to do it, but that was the simplest one that came to mind, and a not-bad starting place for reasonable discussion. The original idea I had broke it down finer with regionally-adjusted median rent, healthcare adjustments that would incentivize employer-provided insurance through tax credits, and a little extra based on the historical cost of food in terms of hourly wages as opposed to dollars. But I’ve been dealing with numbers all day, and don’t feel like doing more of the same in my off-time simply for the sake of a discussion with an adversarial stranger on the internet who will likely disregard.refute anything I say anyways. Please prove me wrong on that one!

tomathon's avatar

I’m not going to try and disprove you jerv because I came to a similar number – $15 an hour.
So $15 an hour is a $30,000 yearly salary combined with another income will be $60,000, and if considering single individuals, they would have to be paid $30 an hour to have a $60,000 yearly salary.

Now that you have a number, all you need to do is calculate:

(1) How many people will be fired by their employers because of this minimum wage increase?

(2) How high will businesses raise their prices on goods and services?

(3) How many consumers will stop buying because of the higher prices on goods and services?

(4) I many businesses will move to states with lower costs of living (like texas) ?

(5) How many businesses will outsource jobs?

(6) How many businesses will go out of business?

If the benefits of the minimum wage outweigh the consequences, you win. If not, we all lose.

@Jaxk owns a business, right? Ask him to calculate the impact a $15 an hour wage will have on his business. Let see if he follows or ends up like any of the above questions.

tomathon's avatar

You could add a seventh and 8th calculation.

(7) How many job opportunities will be destroyed?

(8) How many businesses will stop expanding their business?

jerv's avatar

@tomathon Entirely correct! It’s also proof that there is no “magic wand” solution as any simple solution will screw somebody royally. Right now, it’s the working class that is getting bent over the barrel first and hardest.

First, your points…

1) If the people who profited greatly from the Bush tax cuts actually had their investment dollars lead to job creation, that wouldn’t be an issue. Theory versus reality :/

2) That depends on how well they can compensate with volume. On the one hand, that gives big companies a severe advantage over small businesses that stifles competition and promotes monopolies. On the other hand, that’s already been happening for so long that I am surprised that small businesses even still exist.

3) No easy answers there. To expect one is foolish.

4) Well, considering how many people would be forced onto government assistance which would result in higher tax rates, I’d say it depends on how many value a quick buck at the expense of long term sustainability and at the expense of the nation.

5 + 6 + 7) Those happen a lot already. The big companies are looking to maximize margins, and the small ones cannot compete due to volume, so I’m not entirely sure it would be appreciably different from the current situation.

8) How many slowed/stopped already because that cut into executive compensation packages?

So, how about we take steps to reduce the required minimum wage then? Of course, that would limit profit margins as companies would no longer be able to charge what they can get away with. On the other hand, Costco seems to be doing well for itself.

As for @Jaxk, I would think that (as a small business owner), he of all people would have a great interest in cost-cutting. After all, for him (and those like him), those profits aren’t just a way to buy Bugattis; @Jaxk has his own bills to pay too.

Raising the minimum wage is, admittedly, the worst way to handle things like this, but it’s also the only real feasible way as the alternatives would require regulating businesses in ways that they refuse to regulate themselves; an option I find unpalatable. Or a third option, and by far the least likely; massive reforms across the board.

Maybe the easiest solution that wont bone anybody too bad is to roll things back a bit. What has changed that caused things to go awry?

One change is wages that fail to keep pace with inflation for the majority while rapidly outpace it for the elite; a rising tide has failed to lift all ships. While it would be unfair to limit executive compensation as a multiple of the income of the average worker (especially since much of that is in the form of stocks/options) there is no denying that that is a rather drastic change. Sure, executives work hard to get results, but productivity per worker has also increased dramatically too; isn’t everyone entitled to compensation for work performed?

Another change is an increase in regulation of things that really don’t need to be regulated. Following rules isn’t cheap, and following stupid rules is an expensive waste of money that could be better spent elsewhere. Now, some of the newer regulations had to happen, but that doesn’t excuse the fact that many of the regulations (both new and old) really cause more harm than good.

There are many other things to consider, but by far the biggest obstacle (and something that that has also changed in recent years) is that hyper-partisanship has made compromise impossible. In fact, I am rather surprised that the two parties even agree to being the same chamber together, and am waiting for a filibuster against roll call. No matter what he optimal solution is, there is no way any reform will happen, especially not when a vocal minority amongst one party proudly proclaims that negotiation is weakness.

The only way we will get anything done is if all sides are willing to listen, and there is some give-and-take. Workers need a decent wage to live, but those wages are paid by businesses which need to keep costs down to survive. How do we balance those contrasting needs? The only answers I can give to that are, “better that we do now”, and, “We used to do better”.

BTW, by answering in a rational manner that promotes civilized discussion instead of party-line naysaying, you have proven me wrong by pleasantly exceeding my expectations. After so many of these discussions over the years, I expect to just be called a stupid Liberal/Democrat simply because I don’t toe the Republican line.

Jaxk's avatar


See that wasn’t so hard. Just for the hell of it, let me throw in a few flaws in the logic.

Using the average for rents is probably not appropriate. By design, minimum wage is low end. Rents in DC start around $700 for a 1 bedroom apt. in a reasonable apt building. Using something in the $700—$900 range might be more appropriate. And I might add that using a 10 mile radius would create significant differences even within a city. Hell, Joe Biden has bragged that he commuted from Maryland all his life. On the train, I might add.

As for @tomathon‘s question, it would kill my business. Of course on the upside, I could go to work as a Walmart Greeter and make more money.

jerv's avatar

@Jaxk It’s a starting point and not a final plan, but you have to admit that that’s a hell of a lot more than what someone in East Podunk, Mississippi pays. We have $700 apartments in Seattle as well, but I’m not sure that they’re exactly livable; maybe I’m just snobbish for not liking to walk on piles of used syringes and broken crack pipes only to find the door of my apartment kicked in and my stuff stolen. Still, valid point.

As for commuting, that isn’t always an option. Check the bus routes in Cheshire County, NH sometime.

Now, would you agree that it’d be better for all if we could find a way around this problem without raising minimum wage? But that would require massive changes that would be strongly resisted by those who profit greatly from our current system.

jerv's avatar

Also, @Jaxk, since you haven’t figured it out, I’ll spell it out for you. I see small business owners as being in the same boat as the working class, with the problems of big business without the big business resources to handle them. Small business is where most jobs are made, and the best opportunity for most Americans to prosper, yet it’s been increasingly hard for people like you. It’s hard to compete against those companies that get bulk discounts that you can’t; if you want to meet expenses, you can’t afford the slim profit margins they can because you don’t have the volume.

Much of mybitching is not just for workers;it’s for you as well. Is it fair for you to pay the healthcare costs of Walmart employees? Is it fair for you to pay more taxes so that multinationals can pay zero? I think not.

Just remember, I’m on your side.

jerv's avatar

I thought this was interesting.

Basically, McDonalds tried to show how it’s workers can survive on minimum wage, but makes enough mistakes that it backfires. First off, it assumes two incomes. Also, $600/month rent (which rarely occurs), $0 for heating, and health insurance for only $20/month.

Now, those costs may have been accurate 20 years ago, but are nowhere near what they are in 2013. If you cannot see why there is an increased reliance on government assistance, then you might want to re-read that article again. It’s ironic that the people who complain the most about taxes, spending, and big government are the ones that are increasing the revenue requirements and causing certain parts of the government to expand.

Dutchess_III's avatar

@Jerv….That diidn’t include gas, clothing, toilet paper and all that good stuff….or food. Who needs food?

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