We have a couple of teenagers living with us who both work about five days a week with (usually) five or six hour shifts. I think they’re both making about nine bucks an hour. After the tax withholding, that’s about $230 a week for each of them, or $460 combined. The cheapest apartments in the area are over $700 a month. If one of them tried to get an apartment, it would cost more than three full weeks of pay. If they shacked up together, it would be close to two weeks of pay. And then they have to pay for utilities, phone, car, and car insurance, before they even get to groceries or internet and cable. Nine bucks an hour means that they can’t move out and start a life of their own unless they start working 50, 60, or even 70 hours a week, and that leaves no time for taking college classes or otherwise working to improve their employment opportunities.
In his State of the Union speech, the president proposed raising the minimum wage to nine dollars an hour. Here’s how Paul Ryan responded.
RYAN: I think it’s inflationary. I think it actually is counterproductive in many ways. You end up costing job from people who are the bottom rung of the economic ladder. Look, I wish we could just pass a law saying everybody should make more money without any adverse consequences. The problem is you’re costing jobs from those who are just trying to get entry level jobs. The goal ought to be is to get people out of entry level jobs into better jobs, better paying jobs. That’s better education and a growing economy. Those are some of the things he talked about and I don’t think raising minimum wage — and history is very clear about this — doesn’t actually accomplish those goals.
It’s like these Republicans think being an asshole is a full-time job. It’s like they feel like they can never take a break from being an asshole. They have to be an asshole one hundred percent of time during all their waking hours or they’re betraying the cause or something.
Nine dollars an hour isn’t shit. It’s a dead end.
It’s just more proof that the Zombie-eyed Granny-starver has no frackin’ clue what he’s talking about. In fact, I find it funny, in a black humor way, that people like Ezra Klein ever treated Ryan as a serious thinker.
The notion that lowest rung jobs will go away if wages go up also assumes that demand will go down if wages go up.
People will want fewer cheeseburgers if the cheeseburger maker are making more money? Makes no sense. If anything demand will do up because more people can afford them.
But for the Right, wages are like taxes, they can never be low enough. That wrong and stupid. If prices need to go up some to cover the higher wage, then in most cases that will largely be picked up by people well above the bottom because there are more of them. So people who can afford it have to pay more than prices depressed by obscenely low wages? What is the problem with that?
If anything demand will do up because more people can afford them.
This is especially true of the burger joints in the lower-income neighborhoods in which these workers live. The burger joints at the new mall or near the office parks are going to do fine either way. It’s the establishments in the marginal areas that would benefit the most from the boost, and it’s in those areas – say, the old neighborhood centers in the old, inner-city neighborhoods – where providing a little bit more of a boost will do the most good.
If the Repugs understood that I would sleep a lot better.
You are right, Andrew, it’s the same thing, but you are wrong in how you describe the situation.
The Right sees everything (wages, taxes, donations, medical care, …) as a zero sum game. You know, like Poker. If you win I lose.
Fortunately, large scale economies don’t work that way. Unfortunately, the R’s are so damned uneducated that they can’t see that.
It would be inflationary if we weren’t still in a demand-deficit economic hole. What it does is gets the business sector, who is hoarding cash, to do the stimulating of the economy and affects the consumer spending demand part of the gross domestic product calculation.
True that.
It is why Henry Ford paid much above the prevailing wage ($5 day IIRC) so that his workforce would earn enough to buy the car they were making. And he knew it would drive up wages generally, thus making a market for his car.
I don’t believe it would be inflationary under any circumstances. I’m told that there are a number of studies that show inflation and business activity essentially uncorrelated with the minimum wage. It seems plausible that many workers accept a below market wage because they are lousy negotiators. Similarly, there is no connection between union membership as a percentage of the work force and inflation, in the USA anyway. In fact given that the 1950’s were low inflation and highly unionized, the opposite seems true.
Correct, the minimum wage has been raised many times and there was never a measureable decrease in jobs. Interestingly this is true even in situations where one bordering locality raises the minimum and the other does not.
If you’ve been indoctrinated in the basic supply/demand equilibrium graph then that result puzzles you, but that’s because we tend to assume that every supply and demand curve is at a roughly 45 degree angle. However, in many cases that isn’t true.
Consider, for example, gas prices. In recent weeks prices have gone up about 40-45 cents per gallon relative to their recent trough at the end of 2012 (at least they have in our area). There’s not been much news coverage about this (however – if you’d tried to pass a 40 cent tax it would have been the #1 news issue for months) and demand has continued at about the same rate. That’s because gasoline demand is inelastic in the short term AND people were used to these prices just 3-4 months ago so the price change isn’t enough to force behavior changes.
Something similar happens with minimum wages. Minimum wage job demand is very inelastic. These are the lowest level of workers that are being hired – as an employer you have work to be done, the lowest-level worker can do it, and you need X amount of hours of work to meet your business needs. If the price of your minimum wage workers goes up you still need those X hours, so even if you try to cut some hours out in response you’ll end up going back to X hours. If the price goes down far enough you might decide to add some extra hours in the short run because you’re used to paying more for labor, but eventually you’ll go back to paying for X hours.
Where things run into trouble is if you are running so break-even that the extra wage can kill off the business. But, in practice, this isn’t common except among businesses that are headed for sale or bankruptcy anyway – all it does is slightly accelerate the inevitable.
Of course biz owners scream like stuck pigs. Look at it from their point of view – maybe you have a chain franchise restaurant and require 250 hours/week of employee work. If the minimum wage goes up a dollar thats $250/week less that you’re getting as business income. Someone who owns a franchise of that size may be bringing home $75k-$125k depending on how many hours they personally put into the business – a $12k/year difference is a big deal.
But it doesn’t result in fewer jobs, just angrier biz owners. And society is better off. Because, as others have pointed out, if ALL businesses are forced to pay more then there will be more money out there to spend – and as a result business tends to pick up. Maybe not enough to compensate fully, but it does to a large degree. And, meanwhile, the society as a whole is much better off.
Excellent analysis. BTW, my cost for gas has gone from $3.149 to $3.979 in little more than a month. (I only drive to and from work as I am working 7 days a week at this time. I have to buy that gas. Long term, I might buy a 4 cylinder car/hybrid instead of a 6. But for the next three years (payments), my buying habits can’t change.
I wonder what they are blaming this price increase on? Crude oil prices have actually dropped.
Excellent analysis. BTW, my cost for gas has gone from $3.149 to $3.979 in little more than a month. (I only drive to and from work as I am working 7 days a week at this time. I have to buy that gas. Long term, I might buy a 4 cylinder car/hybrid instead of a 6. But for the next three years (payments), my buying habits can’t change.
I wonder what they are blaming this price increase on? Crude oil prices have actually dropped.
Exactly its demand we need. We are in no danger of inflation at this time. There is not a too much money and too few goods scenario.
Raising the minimum wage would be a wonderful way to involve corporations in stimulus and job creation. Even if we have to drag them kicking and screaming.
The Kingdom of The Netherlands (unemployment overall 6% – youth 15%)
Minimum wage per age group:
15yr $ 3.44 – 17yr $ 4,58 – 20yr $ 7,00 – 23yr $ 11,44.
Before Reagan, the US workers had about twice the buying power vs an European worker. Today it’s about equal. Of course
the assets needed inside the economy are stashed away outside in tax havens or Caribbean banks.
EU leaders agree to push for U.S. free trade deal
[Motto: make peace, not war]
“It’s like these Republicans think being an asshole is a full-time job. It’s like they feel like they can never take a break from being an asshole. They have to be an asshole one hundred percent of time during all their waking hours or they’re betraying the cause or something”
This is exactly right. From Hayek and Von Mises to Rand and Friedman, the philosophy of the right is based on the assumption of the utter rightness of being an asshole. Hayek more or less explicitly states that the desire not to be an asshole is an atavism of the inferior classes who don’t understand how the market works. Realizing the rightness of being an asshole is a sort of shibboleth that credentials you as one of the higher classes, the productive randian overlords…
My thoughts exactly. Here in the Chicago Suburbs, after deducting SS/Medicare tax and Illinois Income tax, you would have just about enough to pay rent on an apartment. Forget about food, telephone, clothes, transportation, health care.
When I heard that he wanted $9 an hour “because people working full time should not be in poverty”, I immediately thought, “What do you call $18K a year? Did you ever try to live on it?” Here in Illinois, $12 an hour has been proposed by serious politicians as a “living wage” for adult workers. I would go higher at $20. Then two people have a reasonable chance to raise one child with a grandmother doing day care for free.
Totally agree. Look, I worked minimum wage at $2.65, $2.90, $3.10, and $3.35. Adjusted for inflation those amounts were higher than what minimum wage is today.
And as a high school or college student (with lots of grants and loans – this was before Reagan’s War On College for the Non-Wealthy) minimum wage was fine. In most cases I had free housing – one summer I paid my own heavily discounted housing because college apartments in summer in that area were dirt cheap. I even saved money because in the restaurants I worked that summer food was free to workers. But geez, my parents still covered medical, I rode a bike, and I had no real-life expenses like family.
In short, it was a temporary gig and I knew it and therefore was fine with it. There is no fucking way an adult can have a life of any kind on that kind of pay.
The real problem with the kids nowadays is, they have it too soft. Nine dollars an hour. Why when I was a boy we were so poor I had to walk eight miles barefoot through the snow every day just to get to work. I made 10 cents an hour and I paid the boss for the privilege of working Sundays. And I respected him for it. Nowadays the kids expect molasses on their white bread, like it’s a privilege. And when we got sick, you know what we did? We died. That sorts you out pretty quick. This Mr Ryan understands that government has no business telling me or anybody else what to pay their help.
you were lucky prisc. I had to do the same only since we lived at the back of the hollow it was uphill both ways.
‘Sides, we only got 8 cents of the 10/hour wage because 2cents went to the poor peoples fund.
Well I’m glad somebody agrees with me.
I feel you Booman. Its fucking irritating.
The response misses the obvious point that at $9 an hour, regardless of the shape of the macro economy, the wage earner is way below what his parents’ wage was when they started out. It was welcome news when the Pres expanded the conversation to add that the min wage should be tied to cost of living inflation.
These days when you have the giants like WalMart designing their employment offerings to take advantage of every penny of govt subsidies for their workers so they don’t have the cost of covering them, only the govt can step in to block them; capitalism can’t make that correction.
I can do you better than this:
Making minimum wage is “supposedly” living in poverty, but what about all the unemployed who just can’t wait to work for even less than 7.25?!?!?:
The real tragedy isn’t that some full-time workers are initially earning $7.25 per hour and supposedly “living in poverty,” but that there are millions of unemployed Americans willing to work but are earning $0.00 per hour and living in poverty because of the minimum wage law.
tell that truth, BooMan.
tell it.