A higher federal minimum wage […] would destroy lower cost of living states.
No. It would probably be better for it to come in incrementally, but increasing wages would help, even if it might squeeze some small businesses. Having looked at the balance sheet for more than one small business, wages are rarely the most significant cost, and when they are the profit margins are larger.
Every time the minimum wage increased while I was a kid, my father (a small business owner) complained, but the county got better overall. Any business that closed was replaced with two that provided the same goods/services within 6 months.
If you look at the data from states raising their minimum wages, you won’t see either massive price increases (some, tho generally tracking inflation) or a large decrease in small businesses per capita.
You’re correct that payroll is not the most costly part of overhead in a business. Most of the time it’s rent. However, payroll is one of the larger controllable components of overhead. Keep in mind, the percent of increase that your dad experienced would not result in the large reduction in force of the current increase.
Federal minimum wage went from $5.15/hr to $7.50/hr, a 41% increase that could result in some layoffs coupled with a hit to profit margin. If we were to go up to a federal minimum wage of $25, that would be a 245% increase. No small businesses have markup that high, so that would result in a devastating blow to payroll.
Increases that substantial directly impact the cost of goods as well. Let’s say you own a pizza place. The cost of at least two of your primary ingredients go up immediately, flour and mozzarella. Those domestic products are now being harvested, refined, milked, cultured, and delivered by employees making 245% more. Farmers have to cover their overhead too, so that’s passed on to the customer. The imported canned tomatoes aren’t impacted at first, but as the domestic supply struggles to compete with imported tomatoes, tariffs are implemented on foreign supply to keep domestic farms competitive.
You need to make a choice. Either you can only afford to pay one employee during peak hours, and you essentially live at your pizza place to keep the doors open, effectively driving your own hourly rate far below minimum wage (since you’re not paid hourly, you’re not breaking the law). Or you keep a second employee and hope the locals are willing to pay well above the cost per slice as Domino’s down the road, who gets wholesale deals on all of their ingredients and can afford to operate at a loss in some areas while increasing markup in others. It’s a losing battle, that inevitably ends in closing your business and going to work for Domino’s.
I skipped the details and mathematics of the latter half of that example to save a lot of typing, but that’s the effective result of an increase that substantial on an area with a lower cost of living.
Here are a couple of examples. According to what I’ve learned in school, and as I’ve written, these are only factors if the rate is raised too high. Specifically Cons 1 & 3 are what I’ve been talking about.
The data given there doesn’t support your assertions. Rent and other prices went up, but not as much as incomes. Hours were lost, but fewer people were in poverty. If 40 hours was a living wage, plenty of people in our community would be comfortable working fewer hours. They might only need 40 to survive.
Raising the federal minimum wage immediately would be shocking, but we’d be better off for it, especially in Arkansas.
It was the first link I found. Believe me or not. I don’t care. I was just sharing what I learned in school on the matter. Look for papers discussing the cascading economic impacts of setting a federal minimum wage at the national mean income. That’s basically what you’re proposing at $25/hr.
I never proposed $25/hr. I proposed a living wage based on the poorest/cheapest state of the union.
You did the math, introducing my state, and illustrating that 17 $/hr is still a bit low, but in the right region. That might be why Sanders chose his 17 $/hr number, but I have no special insight to his process.
While I’m sure I don’t live up to it, I am trying to be convinced by data, and the data I’ve seen (including the data you cited) shows that increasing the minimum wage to a living wage is good for everybody, even tho it does have trade-offs. I’ve never seen any economic change that didn’t have some negative metric associated with the change in some implementation.
I apologize. I was responding to several people on this post and mistook you for someone else. $17/hr is the median income in the lowest cost of living state. It may not be the exact answer, but all of the debates began when people were suggesting higher rates based on their area, or ignorantly stating that everyone should have the same minimum wage as if cost of living didn’t exist.
Simply put, the federal minimum wage is intended to prevent the states with the lowest cost of living from paying at or below the poverty line. Each state has the responsibility of adjusting its minimum wage accordingly to prevent the same exploitation.
I’m sorry for getting frustrated. You wrote nothing to warrant my intolerance.
No. It would probably be better for it to come in incrementally, but increasing wages would help, even if it might squeeze some small businesses. Having looked at the balance sheet for more than one small business, wages are rarely the most significant cost, and when they are the profit margins are larger.
Every time the minimum wage increased while I was a kid, my father (a small business owner) complained, but the county got better overall. Any business that closed was replaced with two that provided the same goods/services within 6 months.
If you look at the data from states raising their minimum wages, you won’t see either massive price increases (some, tho generally tracking inflation) or a large decrease in small businesses per capita.
You’re correct that payroll is not the most costly part of overhead in a business. Most of the time it’s rent. However, payroll is one of the larger controllable components of overhead. Keep in mind, the percent of increase that your dad experienced would not result in the large reduction in force of the current increase.
Federal minimum wage went from $5.15/hr to $7.50/hr, a 41% increase that could result in some layoffs coupled with a hit to profit margin. If we were to go up to a federal minimum wage of $25, that would be a 245% increase. No small businesses have markup that high, so that would result in a devastating blow to payroll.
Increases that substantial directly impact the cost of goods as well. Let’s say you own a pizza place. The cost of at least two of your primary ingredients go up immediately, flour and mozzarella. Those domestic products are now being harvested, refined, milked, cultured, and delivered by employees making 245% more. Farmers have to cover their overhead too, so that’s passed on to the customer. The imported canned tomatoes aren’t impacted at first, but as the domestic supply struggles to compete with imported tomatoes, tariffs are implemented on foreign supply to keep domestic farms competitive.
You need to make a choice. Either you can only afford to pay one employee during peak hours, and you essentially live at your pizza place to keep the doors open, effectively driving your own hourly rate far below minimum wage (since you’re not paid hourly, you’re not breaking the law). Or you keep a second employee and hope the locals are willing to pay well above the cost per slice as Domino’s down the road, who gets wholesale deals on all of their ingredients and can afford to operate at a loss in some areas while increasing markup in others. It’s a losing battle, that inevitably ends in closing your business and going to work for Domino’s.
I skipped the details and mathematics of the latter half of that example to save a lot of typing, but that’s the effective result of an increase that substantial on an area with a lower cost of living.
Do you have data to back up your assertions or are you idly speculating?
Here are a couple of examples. According to what I’ve learned in school, and as I’ve written, these are only factors if the rate is raised too high. Specifically Cons 1 & 3 are what I’ve been talking about.
https://www.britannica.com/procon/minimum-wage-debate/Pro-Quotes
The data given there doesn’t support your assertions. Rent and other prices went up, but not as much as incomes. Hours were lost, but fewer people were in poverty. If 40 hours was a living wage, plenty of people in our community would be comfortable working fewer hours. They might only need 40 to survive.
Raising the federal minimum wage immediately would be shocking, but we’d be better off for it, especially in Arkansas.
At this point I don’t think they want to understand anything other than high wages bad
It was the first link I found. Believe me or not. I don’t care. I was just sharing what I learned in school on the matter. Look for papers discussing the cascading economic impacts of setting a federal minimum wage at the national mean income. That’s basically what you’re proposing at $25/hr.
Or you could actually cite them as they’re apparently the entire basis for wanting to low ball workers
I never proposed $25/hr. I proposed a living wage based on the poorest/cheapest state of the union.
You did the math, introducing my state, and illustrating that 17 $/hr is still a bit low, but in the right region. That might be why Sanders chose his 17 $/hr number, but I have no special insight to his process.
@WalrusDragonOnABike@reddthat.com said it should be 25 $/hr. I agree that would, at this moment, be too high for Arkansas.
While I’m sure I don’t live up to it, I am trying to be convinced by data, and the data I’ve seen (including the data you cited) shows that increasing the minimum wage to a living wage is good for everybody, even tho it does have trade-offs. I’ve never seen any economic change that didn’t have some negative metric associated with the change in some implementation.
I apologize. I was responding to several people on this post and mistook you for someone else. $17/hr is the median income in the lowest cost of living state. It may not be the exact answer, but all of the debates began when people were suggesting higher rates based on their area, or ignorantly stating that everyone should have the same minimum wage as if cost of living didn’t exist.
Simply put, the federal minimum wage is intended to prevent the states with the lowest cost of living from paying at or below the poverty line. Each state has the responsibility of adjusting its minimum wage accordingly to prevent the same exploitation.
I’m sorry for getting frustrated. You wrote nothing to warrant my intolerance.