The unaffordable higher minimum wage fallacy

a reply to: bigfatfurrytexan

It's nothing to do with your business model specifically but rather with everyones model combined. If the bottom x% of people in your town had additional wages, they would shop in your business (assuming it's not some luxury tier business). Your customer base broadens.

The problem comes from human nature, everyone is acting on a level playing field in this situation, but if one person cuts wages a little bit they will bring in much more profit which leads to your competitors following your example. At the same time, if wages were increased largely overnight nothing really changes because a sudden shock in wages results in a sudden shock in pricing.

If minimum wage were going up 4% per year however, while inflation is going up 3% per year, then 50 years in the future the problem would be solved as things could gradually adjust, just as they've gradually declined. Solutions that call for 50 year plans don't exactly have the political support to be implemented though. People working at minimum wage want the situation remedied for themselves, not for their potential grandchildren.

originally posted by: Phage

The 1st-40th income percentiles combined have a total share of the national net worth of 1%.

This is not about net worth. That's a different topic.

I could use net income instead if you would prefer. The bottom 40% have an even smaller share by that metric.

I don't believe that. Can you provide some actual numbers on the income and spending of that 40%?
Here's the breakdown on amount available to spend, note that I was being generous by calling it 1%, it's actually 0.8%.

99 - 35%
98 - 10%
97 - 8%
96 - 7%
95 - 5%
94 - 4%
93 - 3%
92 - 3%
91 - 2%
90 - 1.2%
89 - 1.1%
88 - 1.1%
87 - 1%
86 - 1%
85 - 0.9%
84 - 0.9%
83 - 0.8%
82 - 0.8%
81 - 0.7%
80 - 0.7%
79 - 60 - 8%
59 - 40 - 4%
40 - 20 - 0.75%
20 - 1 - 0.05%

That's 40% of the population, who collectively has no ability to impact the economy. That's broken down by percentile, so it's an equal number of people per point. As for spending habits, people in that income range spend 100% of everything they have, however to be matched in spending those in the time 40% only need to be spending 1% of their income. The question you should be asking is how much are those on top spending? 5%? 10%? From everything I've read those in the 60-80 range feel like they live paycheck to paycheck and are spending virtually all of it.

What happens to that buying power when prices increase due to increased costs?

It goes down, but that's where higher volume comes in. When previously you're only serving the 40th-80th income percentiles, you're now serving most of that entire range. That increases volume and can make up for lower margins.

originally posted by: bigfatfurrytexan
The 1% will not change. What WILL change is more compression downwards, as middle class wages won't be raised. At least not for a few years. So raise minimum wage to $10/hr. All that ends up happening is we will make $10/hr a poverty pay wage. And devalue the remuneration received by everyone above that $10/hr rate.

The "fix" isn't to raise wages. It is going to have to be top down, with regulations at the highest levels. Bottom up only compresses the middle class. It has no effect on the upper class. They are going to still have the same 99%. Well, plus the part vacated by folks who use to be in that upper 60% of earners you references, but now see their wages being matched by the lowest earners.

Minimum wage increases are less about improving the wages of those at the bottom and more about compressing the gap between the highest and lowest paid. It gets into the concept of wealth inequality, and is the same idea as where people suggest a maximum wage ratio as another way to fix the issue. It simply doesn't lead to a healthy economy when people who are working in that economy aren't actually participating in it.

originally posted by: coop039
If I may ask, what are your degrees in? I would think doing anything that by now you could be making more.

Associates in Game Design, Web Programming, Digital Graphics, Bachelors in Computer Science.

You would think I could be making more, but you fail to account for the fact that it's now a minimum wage economy. The most common wage in the country is at minimum wage or within 10% of it, which is basically the exact same thing. The work being done doesn't really matter.

Those degrees and you have never made above min wage? Somethings wrong.
Here in St. Louis you could get an entry level IT job for at least 15 an hour. Hell, you could get a job at Best Buy with the Geek Squad and make more than min wage.
Even if you worked at Mcdonalds, after 3 and 6 months youd make more than min wage. Somethings not adding up.

originally posted by: coop039
Those degrees and you have never made above min wage? Somethings wrong.
Here in St. Louis you could get an entry level IT job for at least 15 an hour. Hell, you could get a job at Best Buy with the Geek Squad and make more than min wage.
Even if you worked at Mcdonalds, after 3 and 6 months youd make more than min wage. Somethings not adding up.

I live in a poor area, our per capita income is only $11,000 per person that's less than full time minimum wage even.

Even McDonalds after 6 months if they give a raise is still very close to the minimum wage, it's just an issue of semantics there.

I guess I should replace the words minimum with minimum or close to it, I don't see 10% above the minimum as being any different from the minimum itself.

a reply to: Aazadan

I live in a poor area, our per capita income is only $11,000 per person that's less than full time minimum wage even.

Wow. Is that county or city? I just looked up the PCI of every state in the union, and it's not one of the states. Mississippi is the lowest as of 2010, and it had a PCI of $31,186 then (5 years ago)...

Yikes, yes - something's wrong. Your state government maybe?

OMG, and on that same table from 2010 - the HIGHEST PCI (income per person - kids included).......

is

the District of Columbia! At $71,044!!

The next highest state is Massachusetts, with $51,552.

Hmmmm.....
yes yes....something is VERY WRONG indeed.

Source

originally posted by: Aazadan
a reply to: bigfatfurrytexan

It's nothing to do with your business model specifically but rather with everyones model combined. If the bottom x% of people in your town had additional wages, they would shop in your business (assuming it's not some luxury tier business). Your customer base broadens.

The problem comes from human nature, everyone is acting on a level playing field in this situation, but if one person cuts wages a little bit they will bring in much more profit which leads to your competitors following your example. At the same time, if wages were increased largely overnight nothing really changes because a sudden shock in wages results in a sudden shock in pricing.

If minimum wage were going up 4% per year however, while inflation is going up 3% per year, then 50 years in the future the problem would be solved as things could gradually adjust, just as they've gradually declined. Solutions that call for 50 year plans don't exactly have the political support to be implemented though. People working at minimum wage want the situation remedied for themselves, not for their potential grandchildren.

This sums up the rock, and the hard place, quite well.

Add to it: we all want the best price for ourselves. That is why Wal Mart has a customer base, despite being hated by almost everyone.

a reply to: Aazadan

A side note: if you have never made above minimum wage, then you are in the wrong industry.

If i had your application in front of me in mid April, and we would have talked (and you would have presented yourself in the same way you have here), I would have tripped over myself to hire you.

You have insight...that isn't easy to come by.

originally posted by: BuzzyWigs
Wow. Is that county or city? I just looked up the PCI of every state in the union, and it's not one of the states. Mississippi is the lowest as of 2010, and it had a PCI of $31,186 then (5 years ago)...

Yikes, yes - something's wrong. Your state government maybe?

City. I'm in southern Ohio, basically the area where Kentucky/West Virginia/Ohio meet. As far as I'm aware it's the poorest area of the country but if not it's very close. The area was popular in the 60's but it's a lot like Detroit in that all the industry left and nothing ever replaced it.

Others have suggested I move which I probably should but I have a bit more schooling to finish and the poor area translates into a low cost of living which makes finishing school more affordable long term as rents and tuition are lower.

Note that this also gives me some perspective on minimum wage. Minimum wage is actually adequate where I live, almost by definition it has more purchasing power than just about anywhere else in the country (though some cities with a higher than federal wage might do better). I'm a believer in regional wages because cost of living is not equal everywhere in the country or even across the state. To take BFFT's example, his company should not be paying the same minimum wage that's required for one to make it in San Francisco.

That said, I think the wages are too low across the board and that they need to be adjusted, just at different rates for different areas. I think this is where the maximum ratio has a lot of appeal because it can apply to different areas with just one sentence of legislation. But, if a company is barely making it in the first place a maximum ratio doesn't actually solve any of the underlying problems and could actually make things worse. Lets say a small business owner makes $15/hour and the maximum ratio is 5:1, does that suddenly justify paying the lowest employee $3 per hour?

originally posted by: bigfatfurrytexan
A side note: if you have never made above minimum wage, then you are in the wrong industry.

I appreciate the kind words, a lot of it comes from the fact that my skills simply don't have regional value. Local companies don't need people that can build 3d models for rapid prototyping, design websites, create phone apps, code AI, or even build databases and spreadsheets. I know a local pizza shop where every employee holds an engineering or math degree actually. Because of the poverty in the area those sorts of skills just don't hold value. Eventually after finishing my education (2 years to go... hopefully) I'll move to an area where those abilities do hold value.

A funny story I like to tell. I once did some temp work for a local school, they gave me a bunch of items that needed input to their database (which was very poorly constructed), and some CD's that needed information extracted and turned into a text format. For the database I built a form that greatly sped up how fast I could input information (I type at approximately 120 WPM while not looking at the keyboard so I can process that type of information quickly if it's easy to input) and then I wrote a couple of scripts that extracted all the information from the CD's automatically. Those two tasks were projected to take over a week to accomplish and they were banking on two weeks for the temp contract. I had both done in 4 hours, and was fired by lunch time because they were out of things for me to do.

a reply to: Aazadan

I've lived all over the country and more than half the country is nearing a Detroit state.

The communities have been sucked dry.

a reply to: Aazadan

small towns...that is where its at. Or call centers.

If you can do excel and/or access (or have a solid grasp of SQL, and can manage query wizards for stuff like Crystal Reports), move to a small town and become the big shark in a shallow pond.

Im a blathering moron. But with excel, i am as good as it gets. Voila...marketable skill in a market that lacks that skill.

Not exactly on topic but....

I really don't get how those helpless rich folks could refer to anyone else as a "consumer"....

Just sayin....

originally posted by: pexx421
As to many others....your views of the poor and homeless are powerfully flawed. I worked in mental health for a long time. Most of my patients were homeless and abject poverty...

Take your blinders off, and find wherever you misplaced your heart, humanity, and compassion.

I'm not sure what "views about the poor and homeless" that you think I have expressed. I have not expressed any particular opinions of poor and/or homeless people in this thread. If you see some implied judgement or meaning in my words you should dismiss that notion, as it is likely inaccurate. I have no problem with poor or homeless people. What makes you so sure that I am above the poverty line myself? Is it because I portray myself as somewhat educated? Don't you think that's a biased point of view?

I'll say it again, the declining standard of living in this country affects everyone who isn't wealthy, and it has little to do with minimum wage laws. I think addressing the underlying causes directly contributing to the declining standard of living in this country is more important than a pretty looking feel good law that while popular with the voters will be soon offset by inflation, and leave us all more disadvataged in its wake due to the unintended unforseen consequences.

I'm not being insensitive to the plight of the disadvantaged, I'm just not sure that an abrupt and drastic federal level minimum wage hike would be a good idea. I am sure that it will not solve the problem of the declining standard of living in this country, however.

originally posted by: bigfatfurrytexan
a reply to: Aazadan

small towns...that is where its at. Or call centers.

If you can do excel and/or access (or have a solid grasp of SQL, and can manage query wizards for stuff like Crystal Reports), move to a small town and become the big shark in a shallow pond.

Im a blathering moron. But with excel, i am as good as it gets. Voila...marketable skill in a market that lacks that skill.

I'm in a small town. I'm pretty good with Excel, Access, MySQL, Open Office Calc, Open Office Base, and a few others. I've never used Crystal Reports but I can write queries in SQL without a wizard, make forms/reports, and even put it in web form if you want to work outside of the database software (such as accessing on the road with an Ipad). I can even write VBA code to customize Excel/Access to give your sheets and databases new features. It's not that I'm unskilled, it's just that those skills I do possess have very little demand where I live, but I can't move for another two years because I have a final college degree to finish in order to be able to do what I want to do.

Some areas of the country are just really bad off.

Prior to moving to the town I live in now, I did a little bit of freelance work designing databases but like I said it just wasn't a valuable skill and the work eventually dried up. One guy for example had a business with a need for a few software licenses. I built him a private website so he could do database updates and queries from his phone, and built the database itself for Access Runtime so he could cut down from needing 5 licenses to one full license for development and use Runtime (which is free) on his employees machines, plus a few custom features (which also removed some risk of his employees messing up the database). In other areas of the country such a job would pay very well, but here it doesn't. I ended up getting $500 for that particular job (after negotiating up from $300) but it took 80 hours.

I also taught or tutored Access and MySQL at the local community college (would vary by semester). That experience made me think that the skills just weren't valued in the area because most of the people who completed the classes still weren't any good with the software, so they couldn't show it's value to the employers.