Social Security Again Again???

[greg]

So, it appears that the minimum wage will be raised from $5.15/hr to about $7.15/hr this winter or early spring--an increase of about 40%. This should increase the funds flowing into the SS lock box :. How do you think this may play out (the increase not the fight beforehand)?

 

[FinanceDude]

So, it appears that the minimum wage will be raised from $5.15/hr to about $7.15/hr this winter or early spring--an increase of about 40%. This should increase the funds flowing into the SS lock box :. How do you think this may play out (the increase not the fight beforehand)?

Small businesses will bitch about it, and some will close. At $7.15 an hour, it's not going to impact a fund that is basically a bunch of IOUs anyways.

Most of those minimum wage jobs are parttime anyway. For SS to carry on 100 more years, they'll have to get at the wage earners at $40K a year an up..........

 

[lets-retire]

I read, within the last two or three days, there are only about 500,000 minimum wage employees, who don't earn tips. The article also stated, like Financedude, that most are part time employees.


Edited to add: found the article. http://money.cnn.com/2006/08/18/mag...imumwage.fsb/index.htm?postversion=2006082109

When they raised the minimum is Florida all it did was give resturants the opportunity to raise prices or cut extras. If you want the bowl of chips at your favorite Mexican resturant it would cost you an extra $1 per bowl.

 

[laurence]

This is mind-blowing. I would have expected 500,000 full time workers at the minimum wage, but that includes full and part time. 30% are the full time "head-of-household" types a raise would be targeting. So we are talking 150k who this would seriously benefit. Depending on how you look at it, it's an inexpensive way to help those on the lowest rung or a meaningless token move.

Quick math, ~$3 per hour (to include employer tax) * 500,000 employees @ 25 hours a week * 40 weeks a year ( rough estimates blending full time vs. summer job and part time workers) = $1,500,000,000 a year cost to business.

 

[Martha]

You can't look at just the minimum wage workers, you have to account for some "trickle up." If minimum wage went from 5.15 to 7.15, it would catch all the people between 5.15 and 7.15. Plus, there likely would be some pressure to pay those who make between the new minimum wage and maybe around eight dollars an hour to pay them more.

 

[astromeria]

According to Wikipedia, 20% of US households (the lowest quintile) have a household income under $18,500 (in 2005). That would indicate about $9/hour of full-time pay for a single earner (for 40 hrs/week, 52 weeks/yr)--so ~20% of households make less than $9/hour. I imagine that most of them will be affected by a change in the minimum wage.

Quintil info is about 1/3 of the way down:
http://en.wikipedia.org/wiki/Household_income_in_the_United_States

 

[youbet]

According to Wikipedia, 20% of US households (the lowest quintile) have a household income under $18,500 (in 2005). That would indicate about $9/hour of full-time pay for a single earner (for 40 hrs/week, 52 weeks/yr)--so ~20% of households make less than $9/hour. I imagine that most of them will be affected by a change in the minimum wage.

Quintil info is about 1/3 of the way down:
http://en.wikipedia.org/wiki/Household_income_in_the_United_States

Astro, they also said:

Due to high unemployment among those in the lowest quintile the mean number of income earners for this particular group was determined to be zero.

Would this have any bearing on your calculation?

BTW, thanks for the link. Interesting read.

 

[laurence]

You can't look at just the minimum wage workers, you have to account for some "trickle up." If minimum wage went from 5.15 to 7.15, it would catch all the people between 5.15 and 7.15. Plus, there likely would be some pressure to pay those who make between the new minimum wage and maybe around eight dollars an hour to pay them more.

Good point! I had a boss at my first job who thought he was generous because he paid us 75 cents more than minimum wage. (that was only 12 years ago, for those of you who remember gas costing a nickle etc. )

 

[greg]

astromeria:

While looking at the site you offered I found this info by state:

http://en.wikipedia.org/wiki/Household_income_in_the_United_States#Income_by_state

It seems Arkansas, Mississippi, and West Virginia have the lowest mean income, so the effect of a new minimum wage down there will probably be greater than the local effect on New Hampshire. It might even shake up their local economies a bit for a couple of years, but afterwards improve things significantly. Oh, boy. More SS contributions.

 

[Leonidas]

Depending on how you look at it, it's an inexpensive way to help those on the lowest rung or a meaningless token move.

Quick math, ~$3 per hour (to include employer tax) * 500,000 employees @ 25 hours a week * 40 weeks a year ( rough estimates blending full time vs. summer job and part time workers) = $1,500,000,000 a year cost to business.

Someone said something to me the other day that made me look at this in a whole new light. According to him, many union contracts have the pay figured as a factor of the minimum wage (i.e. employees' hourly rate will be 3.4 times the federal minimum wage). I don't know if that's true, my contacts always had a $ amount stipulated. But, it is a plausible explanation as to why this is such a big deal in the political arena. If it were just the small amount of folks getting minimum wage, and the math shows the $ amount is so small - why would anyone care? But, if it does affect lots of union workers, that would add up to big money - I can see why interest groups draw sides on the issue in that case. Especially when a $2 raise for minimum wage folks could equal 2,3,4....times $2 for people working under such a contract.

 

[greg]

Leonidas: After reading your thoughts and Laurence's, I'm thinking this boost could also significantly dampen the housing bust dip as it rolls through the economy. This could prevent billions in home equity from going poof. Or pooves.

 

[REWahoo]

Or pooves.

What do unicorn feet have to do with the potential effects of increasing the minimum wage?

 

[lets-retire]

Someone said something to me the other day that made me look at this in a whole new light. According to him, many union contracts have the pay figured as a factor of the minimum wage (i.e. employees' hourly rate will be 3.4 times the federal minimum wage). I don't know if that's true, my contacts always had a $ amount stipulated. But, it is a plausible explanation as to why this is such a big deal in the political arena. If it were just the small amount of folks getting minimum wage, and the math shows the $ amount is so small - why would anyone care?

I've never had any of the contracts I worked under tie the pay to minimum wage. All of them stipulated a certain amount. The unions I was a member of normally opposed minimum wage hikes because it put the unit farther back as far as pay. So if the minimum went up $2 at the next contract we had to negotiate no less than about $3.00 otherwise we wouldn't gain anything. No employer in their right mind would allow a 20% pay raise.

The reason the Dem's care is because it makes people think they are looking out for the little guy, when really they are doing very little to help many people.

 

[perinova]

astromeria:

While looking at the site you offered I found this info by state:

http://en.wikipedia.org/wiki/Household_income_in_the_United_States#Income_by_state

It seems Arkansas, Mississippi, and West Virginia have the lowest mean income, so the effect of a new minimum wage down there will probably be greater than the local effect on New Hampshire. It might even shake up their local economies a bit for a couple of years, but afterwards improve things significantly. Oh, boy. More SS contributions.

good source thanks for the link.

I noticed that... sadly... there was wage compression of about 6% 1999-2005 adjusted for inflation.

 

[greg]

What do unicorn feet have to do with the potential effects of increasing the minimum wage?

Plenty. Pooves happen when unicorns step into a big pile of . . . um . . . poo. It's very dangerous. Don't ask about multi-corns either. Mixing inflated but flattened piles and multi-corn feet causes all sorts of complications. Don't go there. Not even for a brief visit at a higher level.

 

[Mr._johngalt]

There should not be a "minimum wage". Not ever. Not for any reason.
Let the market take care of it. Just get out of the way. EOR.

JG

 

[Martha]

JG, I figure if you are against something, I must be for it. Heck, I don't even have to think an issue through.

There is no free market. Never has been never will be.

At least on the short term it is good for economies to stimulate spending. Things like raising minimum wages, increasing unemployment benefits, earned income credit, and cutting taxes for lower middle incomes increase spending because odds are they will spend nearly all the money. They need to.


FWIW

 

[astromeria]

Astro, they also said:

Due to high unemployment among those in the lowest quintile the mean number of income earners for this particular group was determined to be zero.

Would this have any bearing on your calculation?

BTW, thanks for the link. Interesting read.

Puzzling! Are they saying nobody is poor? I went to the footnoted site for this bizarre statement (which I didn't notice before because it wasn;t in the quintile section), and found this:

* There were 37.0 million people in poverty (12.7 percent) in 2004, up from 35.9 million (12.5 percent) in 2003.

* There were 7.9 million families in poverty in 2004, up from 7.6 million in 2003. The poverty rate for families remained unchanged at 10.2 percent. The poverty rate and the number in poverty showed no change for the different type of families.

* As defined by the Office of Management and Budget and updated for inflation using the Consumer Price Index, the average poverty threshold for a family of four in 2004 was an income of $19,307; for a family of three, $15,067; for a family of two, $12,334; and for unrelated individuals, $9,645.

 

[astromeria]

It seems Arkansas, Mississippi, and West Virginia have the lowest mean income, so the effect of a new minimum wage down there will probably be greater than the local effect on New Hampshire. It might even shake up their local economies a bit for a couple of years, but afterwards improve things significantly. Oh, boy. More SS contributions.

Who would've guessed a higher median income in NH than MA--not me. The effect on SS is a great point--perhaps not increasing minimum wsge with inflation causes a drag on SS intake?

 

[Mr._johngalt]

JG, I figure if you are against something, I must be for it. Heck, I don't even have to think an issue through.

There is no free market. Never has been never will be.

At least on the short term it is good for economies to stimulate spending. Things like raising minimum wages, increasing unemployment benefits, earned income credit, and cutting taxes for lower middle incomes increase spending because odds are they will spend nearly all the money. They need to.


FWIW

It's worth a lot. You make a good argument (but then you should, right?)
Re. your first sentence (see smiley), it works just the same for me.

JG

 

[youbet]

Puzzling! Are they saying nobody is poor?

Yeah, I agree. I didn't have time to look further when I saw that but will try to later today.

* As defined by the Office of Management and Budget and updated for inflation using the Consumer Price Index, the average poverty threshold for a family of four in 2004 was an income of $19,307; for a family of three, $15,067; for a family of two, $12,334; and for unrelated individuals, $9,645.
[/i]

I know some sort of metric needs to be placed on levels of income vs. level of wealth or impoverishment. But, you really need to know the whole story on a person/family to know if they're going to have enough $$$ and cannot just look at income figures. I guess that's why they call these guideline income figures averages, some will justifiably need more to not be impoverished, some a little less.

 

[Craig]

OK, Martha ... want to place a bet on whether unemployment will increase if the minimum wage rises that much?

Markets are free or not free on a continuum ... just because there is no pure, free market from your perspective, doesn't mean embracing more government controls makes sense, or yields the intended results.

 

[Mr._johngalt]

OK, Martha ... want to place a bet on whether unemployment will increase if the minimum wage rises that much?

Markets are free or not free on a continuum ... just because there is no pure, free market from your perspective, doesn't mean embracing more government controls makes sense, or yields the intended results.

Man, I like this guy. He's a thinker.

JG

 

[donheff]

Man, I like this guy. He's a thinker.

JG

But he probably argues that tax cuts raise more money than they hand out.

 

[Martha]

OK, Martha ... want to place a bet on whether unemployment will increase if the minimum wage rises that much?

Markets are free or not free on a continuum ... just because there is no pure, free market from your perspective, doesn't mean embracing more government controls makes sense, or yields the intended results.

Hey, didn't I also say increase unemployment benefits?

In fact, economists dispute amongst themselves the effect of an increase in minimum wage on employment and on low wage workers in the short term.