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Old 09-04-2014, 11:26 PM   #21
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... That said, if you make adjustments for employee productivity, depending on your methodology (or spin), you could argue for as much as about $22 per hour. ... .
How can you 'argue' for anything other than what supply and demand determines for the price of an hour of labor?

Let's say I start making woodcarvings, and it takes me 5 hours to make one. Can I 'demand' $40 plus materials based on an $8 minimum wage? What if nobody wants my woodcarvings for $40+ ? Then I settle for what the market will bear. Should the govt dictate that a person buys my woodcarving at my price? Or should the buyer/seller come to an agreement?

What if no business wants $15/hour non-skilled labor, when they can get what they need for less? Should the govt dictate that a business buys labor at a set price? Or should the buyer/seller come to an agreement?

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The amount of a worker's wage should be negotiated between the two parties involved: The employer and the employee. Who else knows (and rightly has the standing to dictate) what the labor is worth to those two parties?
Exactly. I have yet to see any proponent of a minimum wage be willing to let others set the prices for the things they buy - they typically shop for the best value for themselves. Why should some one else's business be held to a different standard?

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Old 09-05-2014, 01:55 AM   #22
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The Seattle experiment should be interesting. I imagine that both conservative and liberal think tanks are already doing studies on Seattle.

One of the great things about the US is that individual states are (generally) free to conduct social experiments. Unfortunately the results of these experiments tend to be politicized. Although education changes seem to be at least adopted based on primarily on results

The good thing about the Seattle experiment is that is significant I believe the current min wage in Washington is $9.25 and phased in relatively quickly.

My prediction is you'll see a lot of stores and fast food places pop up just outside the city limits.
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Old 09-05-2014, 07:40 AM   #23
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Since a lot of union wages are tied to the minimum wage, an increase of the minimum wage would result in an increase in union wages.
I was unaware of this, and I'll add it to my mental database of what I think could happen if there were a steep increase in the minimum wage. It doesn't happen in a vacuum, after all.

1. The workers will immediately see a bigger tax bite, both Federal and SS/Medicare. Some could lose their Earned income Credit and might end up paying taxes.

2. The price of many goods and services will go up (or quality will suffer). I think that would have the most effect on lower-income workers, who probably spend more of their money at businesses employing a lot of low-wage workers.

3. They may lose social benefits that are based on income. Sadly, sometimes the benefit scheme is set up so that with a small increase in income you lose benefits worth far more than the increase.

4. If they're on subsidized health insurance the subsidy is likely to decrease.

5. Workers who were already making the "new" minimum wage because they'd been at the job a few years and gained some experience will expect increases, too. The union contract provision FlyBoy noted above is a good example.

I don't have a good feel for whether or not minimum wages will be bumped up, but I do think that many proponents haven't thought through all of the implications.
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Old 09-05-2014, 08:53 AM   #24
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As much as I'd like to see everyone make a decent living, I don't think it's government's job to mandate wage levels. But it will be good for some workers if they do. And not good for the others that lose their jobs when businesses cut workers to keep costs down.


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Old 09-05-2014, 08:59 AM   #25
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I do not think there has been much productivity in fast food over the last 50 or so years.... back then they could get our burgers out pretty fast...
Well, true. I was speaking more of the general case. It's not like you can force a burger to cook in 3 minutes instead of 8 minutes.
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Old 09-05-2014, 09:01 AM   #26
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How can you 'argue' for anything other than what supply and demand determines for the price of an hour of labor?
I'm not specifically. I'm just throwing it out there about how various people with various points of view may see it. Not everyone feels the same way, and not everyone is so sure their way is the only way and that only they can be right.

From an economic point of view, I think the theories of people on both sides of the debate will be tested as some cities jack up their minimum wages to well over the state and federal rates. I'd rather let these experiments take place and govern according to results than dogmatically stamp my foot into the ground and insist I'm right.
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Old 09-05-2014, 09:08 AM   #27
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I'm not specifically. I'm just throwing it out there about how various people with various points of view may see it. Not everyone feels the same way, and not everyone is so sure their way is the only way and that only they can be right.

From an economic point of view, I think the theories of people on both sides of the debate will be tested as some cities jack up their minimum wages to well over the state and federal rates. I'd rather let these experiments take place and govern according to results than dogmatically stamp my foot into the ground and insist I'm right.
+1, esp the let's see what happens with Seattle et al.
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Old 09-05-2014, 09:16 AM   #28
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It would seem that the wage inflation would trickle up such that the net effect would be to just have higher inflation of goods at all levels.

If I can get $15 an hour at a min. wage job, then I am going to want more than $15 an hour starting out after graduating from a 2 year trade school. I am going to want at least $20 an hour or why bother wasting 2 years? If I just finished 4 years of college and see someone getting $20 an hour after 2 years of trade school, then I am going to want $50,000 a year in an environment that normally pays $40,000 a year (non STEM).

So everyone gets a higher wage but everything starts costing more. No net winner except the government?
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Old 09-05-2014, 09:20 AM   #29
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The Seattle experiment should be interesting. I imagine that both conservative and liberal think tanks are already doing studies on Seattle.

One of the great things about the US is that individual states are (generally) free to conduct social experiments. Unfortunately the results of these experiments tend to be politicized. Although education changes seem to be at least adopted based on primarily on results
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From an economic point of view, I think the theories of people on both sides of the debate will be tested as some cities jack up their minimum wages to well over the state and federal rates. I'd rather let these experiments take place and govern according to results than dogmatically stamp my foot into the ground and insist I'm right.
I haven't followed economics literature on this very closely but from what I understand there are still dueling philosophies as to whether raising minimum wage helps or hurts (and whom it hurts/helps). I think running experiments is a great way to see. The only problem is that there will be no true control to see what would have happened in the other condition so the results will always be up for debate unless they are strongly one-sided.

My former home town (San Jose) raised the minimum wage by $2 over a year ago. As a consumer I didn't notice this at all. NPR has a few stories on this and interview a few business owners:

In Booming San Jose, Businesses Settle Into A Minimum Wage Hike : NPR

Interesting one Pizza my Heart owner raised the wages at all his locations not just the ones in San Jose (he has 4 in the city and 20 outside). He found that it helped with reducing turnover.

A Mall With Two Minimum Wages : Planet Money : NPR
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Old 09-05-2014, 09:24 AM   #30
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I haven't followed economics literature on this very closely but from what I understand there are still dueling philosophies as to whether raising minimum wage helps or hurts (and whom it hurts/helps). I think running experiments is a great way to see. The only problem is that there will be no true control to see what would have happened in the other condition so the results will always be up for debate unless they are strongly one-sided.
Fair point about the lack of control, but as more cities do this we have more data points. Collectively comparing their economies to other similarly sized cities might not prove anything either way beyond a doubt, but with a preponderance of evidence it would give a good idea. I have much more faith in observation and empirical evidence than in talking heads with an agenda.
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Old 09-05-2014, 09:26 AM   #31
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The current federal minimum is definitely too low but raising it to $15/hr is a bit much. I would say a 3-year phase-in to $10/hr is reasonable. Then it should be indexed to inflation after that.
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Old 09-05-2014, 09:28 AM   #32
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I've read that if we went to a $15/hr minimum wage, McDonalds is the only fast food chain that could actually absorb those costs, simply because they're that profitable. In general, fast food (or all restaurants in general) don't have that high of a profit margin, yet McDonalds does. All the others (Wendy's, Burger King, etc) would have to raise their prices, cut their staff, etc.

I own some McDonalds, and for awhile it was doing great. I bought in initially back in October 2006, at $39.84 per share. In those days, it only paid a dividend once per year. It paid $1/share in December 2006, and $1.50 in December 2007. Then in 2008 they started going to quarterly distributions.

Looking at my dividend history, it looks like it's gone up pretty consistently since then. Here's the quarterly payout...
2008: $.375/sh
2009: $.50
2010: $.55
2011: $.61
2012: $.70
2013: $.77
2014: $.81

I've heard that they haven't been growing as quickly though, so the next dividend increase, which is usually in December, may not be that big this time around. And notice the last jump, from 77 cents to 81 per share, while still a 5.2% increase, was down considerably from earlier years.

In general though, I think McDonalds, and other restaurants and industries, will find a way to make these higher minimum wages work. They have in the past, and they will in the future.
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Old 09-05-2014, 09:42 AM   #33
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How can you 'argue' for anything other than what supply and demand determines for the price of an hour of labor?
I'm not specifically. I'm just throwing it out there about how various people with various points of view may see it. Not everyone feels the same way, and not everyone is so sure their way is the only way and that only they can be right. ...
OK, clearly people have different viewpoints (or this wouldn't be debated) but I do have trouble seeing how anyone can reasonably argue against letting supply/demand set prices (assuming there is no monopoly, and then I prefer the breakup of the monopoly over 'band-aid', micro-managed-from-afar fixes).

If the price of a menial job can be fixed at $15, then why not any other arbitrary transaction? Should the govt set the price if I want to sell my car? Maybe a poor person needs it to get to work, so it could be 'justified' that I sell it to them at below market prices. It just seems totally inconsistent to me to price fix a select transaction.

I keep hearing from some sides that anyone should be able to earn a 'living wage', even if there isn't enough demand for those skills to support those wages. So like my woodcarver example - shouldn't I be able to sell every woodcarving I make at a minimum wage rate, even if there isn't enough demand for my lousy woodcarvings, just because 'everybody should be able to make a living wage', regardless of demand?


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From an economic point of view, I think the theories of people on both sides of the debate will be tested as some cities jack up their minimum wages to well over the state and federal rates. I'd rather let these experiments take place and govern according to results than dogmatically stamp my foot into the ground and insist I'm right.
Unfortunately, I don't think this will happen. People with an agenda on either side will twist the stats to say whatever they want it to say, and people on the same side of that agenda will eat it up. Cause/effect will be thrown to the side, we've seen it time and time again.

At least, if a municipality decides they want a minimum wage locally, that is theoretically what those local residents want, and they can live with any pros/cons. Having it done at a Fed level makes the 'experiment' tougher to sort out, or to see the pros/cons.

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Old 09-05-2014, 09:46 AM   #34
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OK, clearly people have different viewpoints (or this wouldn't be debated) but I do have trouble seeing how anyone can reasonably argue against letting supply/demand set prices (assuming there is no monopoly, and then I prefer the breakup of the monopoly over 'band-aid', micro-managed-from-afar fixes).
In theory I think this is ideal (and I don't think there's any such thing as a labor shortage for most professions). But there are a lot of distortions to the labor market besides the presence of monopolies (and oligopolies like the wage fixing scandal in silicon valley) and I think people have very different high level goals for what they want to achieve with the minimum wage.
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Old 09-05-2014, 09:54 AM   #35
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The current federal minimum is definitely too low but raising it to $15/hr is a bit much. I would say a 3-year phase-in to $10/hr is reasonable. Then it should be indexed to inflation after that.
But this gets right to heart the problem - you might feel $10 is reasonable and $15 unreasonable. But someone else will feel that $10 is unreasonable and $15 is reasonable. So why should your feeling have precedence over anyone else's?

If the market decides, then in effect everyone involved in the transaction agrees. Isn't that 'fairer'?


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I've read that if we went to a $15/hr minimum wage, McDonalds is the only fast food chain that could actually absorb those costs, simply because they're that profitable. ...

In general though, I think McDonalds, and other restaurants and industries, will find a way to make these higher minimum wages work. They have in the past, and they will in the future.
OK, so getting back to the OP and the effect of any wage increases specifically on MCD....

I think your first paragraph is looking at this in a vacuum. If wages go up for all, they will all be able to increase their prices (and I think someone mentioned labor costs are ~ 7% of costs - if so, not a huge increase). They may lose some marginal sales due to price increases, and that may lead to some marginal job cuts. But since we can't go out of the country for fast food, I don't think it will have a huge effect on their profitability. So I agree with your last sentence.

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Old 09-05-2014, 09:54 AM   #36
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It will happen soon, althought it may be 5 years. There are millions of people that the most they will ever achieve is a fast food job. They need those jobs to be a career, not a stepping stone. It will be the way we keep America a 'fair' place to live.
This has been the case for a long time in some communities. In 1978 in Saint Louis, a friend was in the McDonald's (hamburger) management training program, and was the manager of a restaurant in an urban part of town. He used to describe how, when business was slow, he only sent home the kids, as some of the staff were adults who supported their family with that job.

But out in the suburbs, it was all children barely of working age at the local McDonald's.
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Old 09-05-2014, 10:03 AM   #37
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The debate over the minimum wage masks what I believe is the real problem: For some reasons people who are working in low wage jobs are stuck there and can't or won't work their way up to higher paying jobs.

I never viewed a fast food job as a job that was supposed to pay a living wage so a person can live independently. I always thought of them as money for 'extras' or jobs for people in high school and college who still live at home.

So, the question in my mind is why there are so many people who view fast food jobs as a 'career' type job worthy of the higher pay.

IMHO, there are several reasons that vary from people who simply won't do what is necessary to better their economic conditions, to greedy/heartless folks with power who have tilted the playing field so that low income people have a steeper than necessary climb to economic independence.
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Old 09-05-2014, 10:35 AM   #38
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How can you 'argue' for anything other than what supply and demand determines for the price of an hour of labor?....
While I'm normally am very free-market oriented, I have seen way too many situations where employers have all the power and take advantage of employees who have little power. I'm not a big advocate of unions either, but I concede they do add some balance but in too many cases go overboard.

I think that the minimum wage should be higher but I concede that $15/hour is probably too much. My view is that the minimum wage should at the least be set at a level where someone is working full-time doesn't have to live in poverty and where a family of four with two full-time workers don't have to live in poverty.

Assuming a 2,000 hour work year, a $7.25/hour minimum wage single would gross 124% of the poverty level and after SS and FIT that would drop to about 113%. A working couple with two-kids would gross 122% of the poverty level and after SS and FIT that would drop to about 110%. If they live in a state with state income taxes, they would be even closer to living in poverty at minimum wage.

After taxes, I don't think 110-115% of the poverty level is sufficient. If we increased the minimum wage to $9/hour then minimum wage workers would gross about 150% of the poverty level so, depending on the cost of living in the area they live in, they should be able to "get by" but at the same time would have incentive to improve their skills and hustle to climb the ladder.

If an increase was implemented gradually (say, over 3-5 years) it should not be too harmful to the economy.

Just my opinion.
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Old 09-05-2014, 10:43 AM   #39
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The current federal minimum is definitely too low but raising it to $15/hr is a bit much. I would say a 3-year phase-in to $10/hr is reasonable. Then it should be indexed to inflation after that.
I agree with this. $10 an hour is about what the minimum wage would be had it been indexed to inflation since the late 1960s or early 1970s, a common benchmark I see for comparison.
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Old 09-05-2014, 10:58 AM   #40
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That sounds very sensible to me.
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