David:
The Democrats have already made a National Minimum Wage a part of their platform for the upcoming election. Is it a good idea, or an obviously bad decision?
Doug:
A National Minimum Wage is a good idea. Do you mean, is it a good idea to mention it now? Or wait until we get elected, and then start working on it?
David:
Discussing the proposition now, while it is an election issue would be wise.
When I was in medical school, in Kirksville, Missouri, I was able to live on around $3500 annually. This included room and board, gas for the car, and eating out occasionally at the Golden Corral restaurant. How was I able to accomplish this? It was Kirksville, Missouri. That amount of money wouldn't last a month in Manhattan. Or Seattle. But it would probably provide me with plenty in Keokuk, Iowa. Or Stuart, South Dakota. But if you had to pay someone $15 / hour to work any job in those towns, the businesses would go out of business. You see, there is something called the cost-of-living, and in many places around the country, the cost of living is pretty low, so wages don't need to be as high as they may need to be in L.A., or Washington D.C.
Now, states (or even counties or cities), may wish to establish a minimum wage, and that might make sense, because there is some uniformity in the cost-of-living on the smaller scale. A national minimum wage, however, just doesn't make any sense.
Doug:
Sure, I think it would make sense to make a National Minimum Wage be dependent on the local cost of living. Are we in agreement then?
David:
That may be the dumbest thing you've ever said. I hate to ask, but what in the world are you even talking about?
Doug:
How can it be dumb, and you have no idea what I am talking about? I thought I was agreeing with you. You said that the cost of living differs in places, and I thought that having a minimum wage tied (say, as a percentage) to the local cost of living would be a good idea. Make it a federal law, and you have a National Minimum Wage As A Percentage of Local Cost of Living. Why is that dumb?
David:
I was afraid you were heading in that direction. Sure, exactly what we need is an additional layer of bureaucracy and government to decide what the cost of living is going to be in every town across America. And that is what it would take, because now everyone's paycheck would be riding on what the government calculates as the cost. I'm not sure why you are so opposed to letting market forces of supply and demand, along with local pressures provide the answer to what a paycheck should be, for any job, anywhere. Why does the Federal government need to be involved at all? But, at least you seem to agree that a National wage, that doesn't take into consideration local variances, doesn't make sense.
Doug:
I am opposed to "letting the market forces" decide what is the least amount of money to pay someone because it doesn't work. If a person doesn't have enough money to pay for their healthcare and food, then we all have to pay for it in other ways. But if you give someone a wage that they can live on, then they can proudly support their own family. I don't know why you want to pay for other people's healthcare and food. I'd rather let them do it.
David:
So, if someone can proudly support an entire family working a job that requires no skills and no education, why would anyone stay in school or develop any job skills?
Doug:
Do you actually know anyone that works an unskilled job? Would they like to make more money? If your point is that people who have jobs that require less skills should not make enough money to live on, then we have very different ideas about the world. To answer your question: absolutely! Anyone should be able to proudly support a family working a job that requires no skills. Those jobs exist, and someone has to do them. And people do try to support a family working such jobs. That is reality.
David:
There are jobs that require no skills that are available for young people to make some money and gain skills for better jobs later on. You and I both worked those types of jobs in high school, and then in college we were able to work jobs that paid more. And so on, and so on. Right now, those kids have no chance at finding a job like that because of the dismal economy that President Obama has perpetuated, and those jobs are taken by folks who would much rather be working full time in a job they are trained for. You don't need to pay a skilled wage for an unskilled job, you need to create more skilled jobs for those people.
A job that requires no skill should not pay the same as a job that does require education and skill.
Doug:
I didn't say pay the same; I said pay enough to live on. This is called a "living wage."
David:
Those are entry level jobs where people can gain experience and certain skills. And, as we have seen with unemployment benefits (that pay a similar "wage"), as long as people make enough money to live on, they will continue to live that way until the money runs out. Only then, will they seek employment. People making a higher minimum wage will neither strive for a better job, seek education, nor learn more skills. You'd be paying people to remain uneducated.
http://economix.blogs.nytimes.com/2010/03/17/do-jobless-benefits-discourage-people-from-finding-jobs/?_r=0
Doug:
We aren't talking about unemployment benefits... we are talking about employed people not being able to survive on their pay. Increasing the minimum wage makes an even larger difference between being unemployed and having a job.
David:
Ah, but the second key problem with raising the minimum wage is that you hurt the very group of people you say you are trying to help. Raising the minimum wage eliminates low-skilled jobs. When you use the data at hand, your argument is thus: It is better pay some people more, even though it will cause others to lose their job completely, and leave those unemployed with fewer options.
http://www.nber.org/papers/w5224
Doug:
If you are going to cite 40-page academic papers, then I'm going to make you read them! This paper is a comparison of two studies that are over 20 years old. The studies were during a time when the minimum wage was changed in New Jersey from $4.25 to $5.05. The studies attempt to compare business hiring in NJ and Pennsylvania immediately afterwards. One study found a huge hiring increase because of minimum wage; the other found a slight decrease. The studies included fast-food chains like Roy Rogers, Burger King, and Kentucky Fried Chicken. These studies assume that a change in minimum wage will have an immediate effect on hiring practices.
But perhaps a better measure is the long term effect: do these businesses go out of business? Or do they change their pricing in order to accommodate increased costs? Does fast-food get so expensive that we can't afford it?
I am happy (or sad, if you consider health issues) that Roy Rogers, Burger King, and Kentucky Fried Chicken are all doing fine, and people can still afford their food. In fact, you might find that business has increased, because there are now more people that can afford their food.
David:
A Big Mac was just under a dollar in 1980. Now, it's just under five dollars.
There are many studies that have been done for the last 90 years, since the first minimum wage was mandated. Overall, they have shown elimination of individual jobs, and higher prices. Again, there are other variables to consider, but the data supports this conclusion. McDonalds is eliminating front-line jobs, and replacing them with robotic kiosks as we speak. Why? Because they have become cheaper than an employee.
In this study by Mark Wilson, all of these effects are noted, but a key finding is that raising the minimum wage had little to no effect on reducing poverty, which I think is the key argument Socialists and Democrats are making for its enactment.
http://object.cato.org/sites/cato.org/files/pubs/pdf/PA701.pdf
Doug:
Egads... another 20 page academic paper! I forbid you from citing these and not reading them! Ironic that the author uses the phrase "there is no free lunch" because minimum wages were enacted in 1938 because too many people were in the free lunch lines of the depression. So, the argument is, that since 1938, minimum wages have harmed the economy? How could it be much better than it is for CEOs!?
Today, the wage differences (the "pay gap") between workers and CEOs has never been larger. It used to be 20 times larger; now it is approaching 400 times larger! Ironically, at the same exact time the study above increased minimum wage, CEOs pay began to skyrocket.
So, if this is a zero sum game, then an easy solution is to pay the workers more of what the top executives are getting. There is enough money being made, it is just going to a few at the top. With this great of an imbalance, you're going to see revolt. A minimum wage can help narrow this gap, and create better living for all citizens.
David:
Counting the pages in a report is not quite the same as reading it. Perhaps you can just read the summary, so your brain doesn't get too tired with details and facts. Sometimes, an issue is complicated enough to require a lengthy study to examine what is really going on.
Doug:
Ah, yes, I'm a college professor, remember? But you can't just point to a 40-page study and say, "See? I told you so." What part of that report supports your claim?
David:
Yes, and I'm a physician, which means we both should know how to read and interpret a study.
So you should know it isn't a "zero-sum game". There isn't a pot of magic money somewhere, and if a dollar goes to Joe, then that's a dollar that was taken from Suzy. Creating animosity for those who are making a top-dollar wage, doesn't create more jobs or better jobs. Paying a bigger salary for an unskilled job doesn't either. It does the opposite. Nice pivot from the real argument to class-envy. You may have a career in politics ahead of you!
Doug:
It is a zero-sum game, unless you charge more money. A company makes X dollars. How do you split those X dollars up? You could do it fairly, and everyone could live happily ever after. Or you could have most of the money go to the top and purposefully make the low-wage earners not make enough to live on. There is nothing classy about that.
David:
Supply and demand still works in economics. To get the most successful CEO to improve your company or corporation may require outbidding another company. If the company does well, in the long run it helps all of the workers and our society as well, as new jobs are created in manufacturing, transportation, packaging, etc. Making sure your company has the best expertise at the top is only a bad idea if you believe bigger government is the key to success. Government rarely has the best minds at the top.
The big-government approach of mandating companies to raise their minimum wage doesn't help raise people out of poverty, it eliminates jobs for the very people that need them most, and will likely raise prices on goods overall (there is no free lunch…).
Doug:
That's what we call a fairy tale. In reality, the higher the minimum wage, the vastly more CEOs make. That is what we call a nightmare.
The Democrats have already made a National Minimum Wage a part of their platform for the upcoming election. Is it a good idea, or an obviously bad decision?
Doug:
A National Minimum Wage is a good idea. Do you mean, is it a good idea to mention it now? Or wait until we get elected, and then start working on it?
David:
Discussing the proposition now, while it is an election issue would be wise.
When I was in medical school, in Kirksville, Missouri, I was able to live on around $3500 annually. This included room and board, gas for the car, and eating out occasionally at the Golden Corral restaurant. How was I able to accomplish this? It was Kirksville, Missouri. That amount of money wouldn't last a month in Manhattan. Or Seattle. But it would probably provide me with plenty in Keokuk, Iowa. Or Stuart, South Dakota. But if you had to pay someone $15 / hour to work any job in those towns, the businesses would go out of business. You see, there is something called the cost-of-living, and in many places around the country, the cost of living is pretty low, so wages don't need to be as high as they may need to be in L.A., or Washington D.C.
Now, states (or even counties or cities), may wish to establish a minimum wage, and that might make sense, because there is some uniformity in the cost-of-living on the smaller scale. A national minimum wage, however, just doesn't make any sense.
Doug:
Sure, I think it would make sense to make a National Minimum Wage be dependent on the local cost of living. Are we in agreement then?
David:
That may be the dumbest thing you've ever said. I hate to ask, but what in the world are you even talking about?
Doug:
How can it be dumb, and you have no idea what I am talking about? I thought I was agreeing with you. You said that the cost of living differs in places, and I thought that having a minimum wage tied (say, as a percentage) to the local cost of living would be a good idea. Make it a federal law, and you have a National Minimum Wage As A Percentage of Local Cost of Living. Why is that dumb?
David:
I was afraid you were heading in that direction. Sure, exactly what we need is an additional layer of bureaucracy and government to decide what the cost of living is going to be in every town across America. And that is what it would take, because now everyone's paycheck would be riding on what the government calculates as the cost. I'm not sure why you are so opposed to letting market forces of supply and demand, along with local pressures provide the answer to what a paycheck should be, for any job, anywhere. Why does the Federal government need to be involved at all? But, at least you seem to agree that a National wage, that doesn't take into consideration local variances, doesn't make sense.
Doug:
I am opposed to "letting the market forces" decide what is the least amount of money to pay someone because it doesn't work. If a person doesn't have enough money to pay for their healthcare and food, then we all have to pay for it in other ways. But if you give someone a wage that they can live on, then they can proudly support their own family. I don't know why you want to pay for other people's healthcare and food. I'd rather let them do it.
David:
So, if someone can proudly support an entire family working a job that requires no skills and no education, why would anyone stay in school or develop any job skills?
Doug:
Do you actually know anyone that works an unskilled job? Would they like to make more money? If your point is that people who have jobs that require less skills should not make enough money to live on, then we have very different ideas about the world. To answer your question: absolutely! Anyone should be able to proudly support a family working a job that requires no skills. Those jobs exist, and someone has to do them. And people do try to support a family working such jobs. That is reality.
David:
There are jobs that require no skills that are available for young people to make some money and gain skills for better jobs later on. You and I both worked those types of jobs in high school, and then in college we were able to work jobs that paid more. And so on, and so on. Right now, those kids have no chance at finding a job like that because of the dismal economy that President Obama has perpetuated, and those jobs are taken by folks who would much rather be working full time in a job they are trained for. You don't need to pay a skilled wage for an unskilled job, you need to create more skilled jobs for those people.
A job that requires no skill should not pay the same as a job that does require education and skill.
Doug:
I didn't say pay the same; I said pay enough to live on. This is called a "living wage."
David:
Those are entry level jobs where people can gain experience and certain skills. And, as we have seen with unemployment benefits (that pay a similar "wage"), as long as people make enough money to live on, they will continue to live that way until the money runs out. Only then, will they seek employment. People making a higher minimum wage will neither strive for a better job, seek education, nor learn more skills. You'd be paying people to remain uneducated.
http://economix.blogs.nytimes.com/2010/03/17/do-jobless-benefits-discourage-people-from-finding-jobs/?_r=0
Doug:
We aren't talking about unemployment benefits... we are talking about employed people not being able to survive on their pay. Increasing the minimum wage makes an even larger difference between being unemployed and having a job.
David:
Ah, but the second key problem with raising the minimum wage is that you hurt the very group of people you say you are trying to help. Raising the minimum wage eliminates low-skilled jobs. When you use the data at hand, your argument is thus: It is better pay some people more, even though it will cause others to lose their job completely, and leave those unemployed with fewer options.
http://www.nber.org/papers/w5224
Doug:
If you are going to cite 40-page academic papers, then I'm going to make you read them! This paper is a comparison of two studies that are over 20 years old. The studies were during a time when the minimum wage was changed in New Jersey from $4.25 to $5.05. The studies attempt to compare business hiring in NJ and Pennsylvania immediately afterwards. One study found a huge hiring increase because of minimum wage; the other found a slight decrease. The studies included fast-food chains like Roy Rogers, Burger King, and Kentucky Fried Chicken. These studies assume that a change in minimum wage will have an immediate effect on hiring practices.
But perhaps a better measure is the long term effect: do these businesses go out of business? Or do they change their pricing in order to accommodate increased costs? Does fast-food get so expensive that we can't afford it?
I am happy (or sad, if you consider health issues) that Roy Rogers, Burger King, and Kentucky Fried Chicken are all doing fine, and people can still afford their food. In fact, you might find that business has increased, because there are now more people that can afford their food.
David:
A Big Mac was just under a dollar in 1980. Now, it's just under five dollars.
There are many studies that have been done for the last 90 years, since the first minimum wage was mandated. Overall, they have shown elimination of individual jobs, and higher prices. Again, there are other variables to consider, but the data supports this conclusion. McDonalds is eliminating front-line jobs, and replacing them with robotic kiosks as we speak. Why? Because they have become cheaper than an employee.
In this study by Mark Wilson, all of these effects are noted, but a key finding is that raising the minimum wage had little to no effect on reducing poverty, which I think is the key argument Socialists and Democrats are making for its enactment.
http://object.cato.org/sites/cato.org/files/pubs/pdf/PA701.pdf
Doug:
Egads... another 20 page academic paper! I forbid you from citing these and not reading them! Ironic that the author uses the phrase "there is no free lunch" because minimum wages were enacted in 1938 because too many people were in the free lunch lines of the depression. So, the argument is, that since 1938, minimum wages have harmed the economy? How could it be much better than it is for CEOs!?
Today, the wage differences (the "pay gap") between workers and CEOs has never been larger. It used to be 20 times larger; now it is approaching 400 times larger! Ironically, at the same exact time the study above increased minimum wage, CEOs pay began to skyrocket.
So, if this is a zero sum game, then an easy solution is to pay the workers more of what the top executives are getting. There is enough money being made, it is just going to a few at the top. With this great of an imbalance, you're going to see revolt. A minimum wage can help narrow this gap, and create better living for all citizens.
David:
Counting the pages in a report is not quite the same as reading it. Perhaps you can just read the summary, so your brain doesn't get too tired with details and facts. Sometimes, an issue is complicated enough to require a lengthy study to examine what is really going on.
Doug:
Ah, yes, I'm a college professor, remember? But you can't just point to a 40-page study and say, "See? I told you so." What part of that report supports your claim?
David:
Yes, and I'm a physician, which means we both should know how to read and interpret a study.
So you should know it isn't a "zero-sum game". There isn't a pot of magic money somewhere, and if a dollar goes to Joe, then that's a dollar that was taken from Suzy. Creating animosity for those who are making a top-dollar wage, doesn't create more jobs or better jobs. Paying a bigger salary for an unskilled job doesn't either. It does the opposite. Nice pivot from the real argument to class-envy. You may have a career in politics ahead of you!
Doug:
It is a zero-sum game, unless you charge more money. A company makes X dollars. How do you split those X dollars up? You could do it fairly, and everyone could live happily ever after. Or you could have most of the money go to the top and purposefully make the low-wage earners not make enough to live on. There is nothing classy about that.
David:
Supply and demand still works in economics. To get the most successful CEO to improve your company or corporation may require outbidding another company. If the company does well, in the long run it helps all of the workers and our society as well, as new jobs are created in manufacturing, transportation, packaging, etc. Making sure your company has the best expertise at the top is only a bad idea if you believe bigger government is the key to success. Government rarely has the best minds at the top.
The big-government approach of mandating companies to raise their minimum wage doesn't help raise people out of poverty, it eliminates jobs for the very people that need them most, and will likely raise prices on goods overall (there is no free lunch…).
Doug:
That's what we call a fairy tale. In reality, the higher the minimum wage, the vastly more CEOs make. That is what we call a nightmare.
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