The costs to make a burger at McDonald's include property taxes/rent, food costs, utilities, other things, and labor. Labor is only one part of it. If a burger costs $1, and labor is 50% (very generous estimate), and minimum wage doubles, the burger now costs $1.50. Now at the end of a 4 hour shift the employee now has, say minimum wage rose from $7 to $14, $56 instead of $28. If they were going to spend that all on burgers, they used to be able to buy 28/1=28 burgers, while now they can buy 56/1.5=37 burgers.
So even with extreme examples, the minimum wage worker comes out ahead here. People who made more before can buy a bit less now but it's not as drastic as it's made out to be.
Beyond this hypothetical, here's a study that says rising wages to $15 would only increase prices by 4%. https://www.marketwatch.com/story/raising-fast-food-hourly-w...
The real impact is on the smaller burger joint that does less business and has higher costs on everything already. Now their burger - which was already more than the McD's one - is even more expensive, so fewer people go there, so profits drop, and the business owner either has to drum up business, raise prices further and hit a death spiral, or fail....
(Of course, this is me pretending that people who earn minimum wage are often financially prudent; in reality they'll just buy the burgers on a credit card and worry about it later)
It's often argued that nobody can afford to, but here you seem to be assuming that it is possible, but it's important to preserve the companies that are uncompetitive.
"[I]n a new research paper by Doruk Cengiz, Arindrajit Dube, Attila Lindner and Ben Zipperer that looks at data during the period from 1979 to 2016 in 138 U.S. states and regions where minimum pay was increased[, t]he conclusion is that low-wage workers had a pay gain of 7 percent after a minimum-wage law was enacted, but there was little or no change in employment."
https://www.bloomberg.com/opinion/articles/2019-01-24/u-s-ec...
Businesses can adapt, like they do when unions negotiate better pay.
If you make vastly more than minimum and are a consumer of fast food, then don't you think that you will get better service from the one person making $15/hr? Plus, they're less likely to spit on the burger.
The thing about the minimum wage is that there is a market determined wage for a minimally effective employee, but if the official minimum is lower, and it generally is these days, business owners and managers will keep trying to hire at the legal minimum instead. You'd think the invisible hand, etc. but it doesn't work that way. The rule is "the law says X, so we do Y, the minimum required".
Potential bad effects from the top of my noggin:
* You've compressed the compounding growth in prices (inflation) by two years in one stroke.
* You've instantly decreased the buying power of a lot of people; worst affected are those not affected by the bump (recipients of disability, recipients of social security)
* Fun addenda: You've set the precedent for a 100% bump from the current federal rate, and its more likely to happen again, once more compressing the inflation timeline and further pressuring people that don't work a waged job.
Oh, and the reason putting pressure on inflation like this is bad is that it discourages investment, which leads to weakened economies.
You might want to double-check your perspective here - a lot of these assumptions are overstated or just incorrect, and the effect of raising wages is well studied, no need for guesswork.
$15 now, $20 in 2025, it won't end. Inflation has some bearing on this, but largely the effect of raising the minimum wage is simply to hurt the lower middle class who have managed to climb one or two rungs up from the bottom.
I mostly wanted to point out the incongruity in your putting down of the article/author, when your argument is based on superficial assumptions.
Not so different, in terms of how they impact purchasing power. If anything, though, inflation is more egalitarian because it impacts everyone and everything.
See: https://www.bls.gov/opub/reports/minimum-wage/2017/home.htm
I planted a row of blueberry bushes 10 years ago. I now have essentially infinite blueberries when they are in season. I invite all friends, coworkers, and neighbors to come and take as much as they want each year. Most of them gift me things they grow or make in return at various times.
Blueberries are highly seasonal and perishable. It's not surprising at all that they cost a lot for fresh not frozen at the supermarket.
Fortunately blueberries are close to being a weed and require virtually no care to flourish.
As the price and demand increases more will be planted in backyards.
That's the most important thing. There is not an incentive to move to smaller, cheap towns since there are not jobs there. Until remote work becomes more commonplace, people are de-facto stuck in expensive cities.
Not everyone has the right to live in the Bay Area or NYC. These are top cities. If you're not top financially, then go live somewhere else.
I could buy a house in the middle of nowhere for pennies, but it doesn't matter since there are no jobs there.
More like 'have surprising insights and arguments about economics that I don't wish to engage with.' I have really had it with people who know a little bit of economics lecturing everyone else, it's like listening to someone dismissing calculus because they only know about arithmetic.
Work conditions become crap? GOOD. Can't run a business without slaves in shanties tough shit. Free market right?
Product quality goes to shit because you can't afford decent employees in reasonable working conditions? GOOD. The free market in action!
Are you afraid of a free market?
Why is this good? Do you not want to have access to a wide array of foods? Isn't it nice to have blueberries? Isn't it good that someone can have a farm as their family business and make it work, agriculturally? Would it somehow be better to just let that land do nothing while we all drink Soylent?
I'm not a free market absolutist. If I was, I'd have no problem with illegal labour or buying from slave labour in some other country. Yes, I am afraid of a completely free market, because I understand the Tragedy of the Commons. It doesn't mean I'm going to flip directions and become an advocate of complete state control of industry.
Your over-the-top rhetoric serves no-one and illustrates no point.
You keep using that word. I do not think it means what you think it means.
My definition is pretty simple, but it may surprise you if you think regulations go against a free market. To me, a free market is one that is transparent and has low transaction costs. And I think this is only possible if it is well regulated by an authority or government.
Minimum wage is $7.25 so $15 would double the wage cost worst case. The price raising to $10 due to that makes two incorrect assumptions: 100% of the cost is labor and blueberry price is determined by the supply side cost. There is no world that doubling the minimum wage result results in quadrupling the blueberries to $20 in your example.
In reality labor costs from the farm to the market are at most 10% (rice in 2018 was 3%) assuming no profit margin from there to purchasing from the store you could have at most a 5% increase in prices caused directly by this rise. And that assumes everyone is paid minimum wage. BTW a random search points to the average wage of a blueberry picker being $16 which is already over the $15 mark.
> fight for people working illegally under the table for less than the minimum (which has to be part of the plan if you intend to have any honesty in your approach)
I don't know why we have to mix the two, either can be done on their own.
> If this pushes the cost of blueberries to the point where normal people won't buy them anymore, the business model becomes unsustainable.
To reiterate the price of blueberries isn't based on their costs, it is based on how much people are willing to pay for blueberries.
> As the wage rises
You do realize that 75% of US workers make more than $15/hr right? And that the bottom 25% makes the smallest impact on the economy due to making the least right?
> And yet, we'll survive it. But let's not kid ourselves: the standard of living for the poor isn't going to get any better by changing this number.
Only in your weird economic world where you have decided that the cost of everything is decided purely on the minimum wage.
You are predicting the outcome that was the start of your argument. "If everything goes up because minimum wage goes up there is no point in raising the minimum wage" however you totally failed to make any effort to prove your point beyond if people make more things cost more. While true in an absolute sense it is not at all a 1:1 relationship that you have decided it is with no references.
> try calculating your salary as a function of the minimum wage - if you made 3x before, maybe you make 2.5x now; if you made 1.25x before, maybe you make 1x now....
So if we halved the minimum wage my cost of living will go down by half?
> For brief periods of time while the market settles, those at the minimum wage line will have an advantage, but once the price of goods and services finishes rising to compensate, it's back to square one.
You have put zero effort to show that this is a true statement yet you keep repeating it.
The price of everything is based on its cost, in the sense that nobody is going to lose money in order to get them to you.
> You do realize that 75% of US workers make more than $15/hr right? And that the bottom 25% makes the smallest impact on the economy due to making the least right?
It's the group of people right above minimum wage who are harmed the most, because they won't see any proportional raise. Of course, even if they did, it'd just amplify the negative effects. If we did have some proportional wage adjustment mechanism, it'd almost be better to just scale it _down_, instead.... but a steady state at the very least allows natural price discovery to have a chance to adjust everything back to natural levels.
The continual raising of the minimum wage (among other factors, of course) contributes to distortions in pricing that will eventually resolve themselves, but once they do, advocates will get right back out there and ask for $20, $25...
> So if we halved the minimum wage my cost of living will go down by half?
Obviously not, it's a nonlinear relationship, but just because it's not a simple or well defined function presently doesn't mean the relationship is not there. It's absolutely the case that some things would get cheaper for you, yes. Probably not luxury goods, but a lot of your staples would - and these are things that all of us need.
> You have put zero effort to show that this is a true statement yet you keep repeating it.
I've put in a lot of effort commenting all around this thread. No need to result to this kind of rhetoric. If you don't understand price discovery, that's fine; it's a natural phenomenon that happens whether you do anything or even believe in it or not.
I feel this is a case where an intuitive feeling for Amdahl's law might be useful. Although maybe people in these threads aren't typical HN types.
And yet all of your rhetoric doesn't attempt to show how they would suddenly be losing money if minimum wage went up. You need to at least talk about profit margins, portions of costs that are wages as well as the relative impact of that wage cost based on how expensive they were before the minimum wage hike.
For instance if someone is making $45/hour they aren't going to suddenly go to $90/hour because minimum wage doubled. Obviously everyone above gets bumped and anyone near it is going to go up as well but the overall amount doesn't double so your wage adjustment should include that.
> It's the group of people right above minimum wage who are harmed the most, because they won't see any proportional raise.
Only if you believe the cost of everything is based exclusively on the minimum wage.
> The continual raising of the minimum wage (among other factors, of course) contributes to distortions in pricing
Feel free to point to anything that shows this is true
> but once they do, advocates will get right back out there and ask for $20, $25...
Please stop presupposing your argument and going off on tangents. My point of contention is that you cannot say that prices will linearly go up with minimum wage.
> Obviously not, it's a nonlinear relationship
But yet everything you say very explicitly says it isn't just a non-linear relationship but a 1:1 relationship.
> It's the group of people right above minimum wage who are harmed the most, because they won't see any proportional raise
To reiterate your previous point which again says "all prices are a multiple of minimum wage"
> If you don't understand price discovery
I do understand macro economic effects including price discovery but you haven't brought up any actual macro economic effects beyond the cost of things.
> No need to result to this kind of rhetoric.
I will keep using it as long as you keep failing to support your central point. Heck the only time you even acknowledge you then contradict yourself on it.
No one who is fighting for a minimum wage of $15 is saying that everyone who is making minimum wage is going to be twice as rich if we make the change. Obviously it will result in increased costs in certain areas. For instance anywhere that relies on 80% minimum wage labor and a 30% labor cost will see a price increase of approximately 24%. However that is no where near the effect you are claiming.
I understand the sentiment, but the problem is that a rising minimum wage is guaranteed to result in rising prices for staple products, while the majority of the people purchasing them aren't earning any more.
Facile example: as a middle class guy, I can pay $5 for a box of blueberries and just have them in the house. $10 pushes it to be a treat that I would buy ten times less often. $20 makes it a luxury I buy once a year at most.
If we increase the minimum wage, and fight for people working illegally under the table for less than the minimum (which has to be part of the plan if you intend to have any honesty in your approach), the result is necessarily that the price of blueberries will rise. If this pushes the cost of blueberries to the point where normal people won't buy them anymore, the business model becomes unsustainable.
As the wage rises, during the process, we'll see worker conditions deteriorate, an increased turn to illegal labour (and a commensurate demand for illegal immigrants to do it, which furthers that problem), and eventually either farms folding, changing crops to something more profitable, or perhaps subsidies coming in. Of course, we should have learned from corn what happens when we oversubsidize crops; at the very least price discovery is somewhat removed from the market and so things are priced cheaply that shouldn't be, people overconsume while tax dollars make up the difference, etc. One can probably argue that staple crops (wheat, etc) should be subsidized, but blueberries aren't quite as critical, are they?
To make an example more germane to this particular issue: if the minimum wage increases and all of the people involved in the chain leading to these food delivery drivers costs too much, when the potential consumer sees that ordering food is simply too expensive for them, they'll just give up. Entire industries that function because intelligent people have carefully budgeted around wages and expenses to eke out a living will be negatively impacted, and parts of them will fail.
And yet, we'll survive it. But let's not kid ourselves: the standard of living for the poor isn't going to get any better by changing this number. Instead, what happens is that the middle class effectively earns less (try calculating your salary as a function of the minimum wage - if you made 3x before, maybe you make 2.5x now; if you made 1.25x before, maybe you make 1x now....) while the rich don't even notice the change. For brief periods of time while the market settles, those at the minimum wage line will have an advantage, but once the price of goods and services finishes rising to compensate, it's back to square one. The purchasing power of the dollar simply drops to match.