[civilframe]

I don't believe that raising the minimum wage will trigger businesses to cut jobs significantly. They will probably pass the higher cost onto the consumer. Ultimately, it's a method of wealth redistribution, which is sorely needed in our economy.

[rhino369]

Passing costs on the client isn't something you can just do. Many products and services have elastic demand. Fast food, for example, has been has found it very hard to raise away from their dollar menu pricing.

Businesses don't have to cut jobs either. They just have to move them.

Edit2: Costumers can also shift to lower cost alternatives. Online retailers have less overhead and lower labor costs. If you make Walmart more expensive than Amazon, Walmart will shutter stores laying massive numbers of people off.

Edit: Some economists have argued that past raises in min wage have not made noticeable impacts in employment. But this is way outsides of a normal rise in minimum wage. Going to 9 or 10 makes a lot sense. 15 dollars will put people in most of the country out of work.

[dragonwriter]

> Costumers can also shift to lower cost alternatives. Online retailers have less overhead and lower labor costs. If you make Walmart more expensive than Amazon, Walmart will shutter stores laying massive numbers of people off.

Yes, that's a good reason why we shouldn't subsidize capital intensive businesses over labor intensive business by taxing capital income less than "normal" income and then adopting additional taxes on labor income on top of normal income taxes, but should instead treat all income alike for tax purposes without regard to source (and also, therefore, for benefit-eligibility purposes for past-income-qualified benefits for which dedicated taxes on income are taken to fund benefits.)

> But this is way outsides of a normal rise in minimum wage.

Not really. The article claims that $12 in 2020 would bring it above its 1968 peak level in inflation adjusted terms (the 1968 peak level, $1.60, is about $10.97 now, so $12 now would be a little bit ahead of it, with 2% annual inflation from now to 2020, $12 would be almost exactly the 1968 peak level.) So, a $15/hr. federal minimum wage in 2020 would be a higher-than-historical minimum wage, but not by a large margin.

And a little-over-doubling from 2009 to 2020 wouldn't be an unprecedented jump over an 11 year period, either (from 1945 to 1956 it got a 2.5 multiple from $0.40 to $1.00 -- and over 12 years, from 1938 to 1950 -- it tripled from $0.25 to $0.75.)

[crdoconnor]

>15 dollars will put people in most of the country out of work.

Like it did in Australia?

[rhino369]

But you also have to compare PPP, cost of living, and unemployment rates.

Australia's PPP adjusted minimum wage is 10.50 USD.

It's very possible that Australia's min doesn't hurt employment and it would in the USA.

It's also plausible that Australia's recent increase in employment (while US is hitting post 2008 lows) is partially caused by too high of a minimum wage.

[crdoconnor]

>It's very possible that Australia's min doesn't hurt employment and it would in the USA.

Much as the National Restaurant Association, Cato and American Enterprise Institute would love for us to believe this, it just isn't true.

It would hurt profits, though, and a lot of those restaurants paying minimum wage would go out of business (and be replaced by other restaurants).

[toomuchtodo]

>15 dollars will put people in most of the country out of work.

So be it. Can't find a job that offers a living wage? We provide a social safety net and increase taxes on the wealthy to pay for it.

Make more than a million dollars a year? 95% marginal tax rate. Tax rates are the lowest they've been in the history of the US, and all we've seen is a disgusting level of income equality.

[rhino369]

>Make more than a million dollars a year? 95% marginal tax rate.

That is just a bad plan. You are essentially outlawing income over a million.

If you didn't apply it to capital gains, you are just fucking over lawyers, bankers, consultants, and CEOs. It would actually lower tax revenue. Because all that money that is getting taxed over a million a year would disappear. And the truly mega rich would actually be better off. No more having to pay high priced lawyers, bankers, and CEOs.

If you tried to place that restriction on capital gains, everyone ounce of capital in the this country would flee.

[toomuchtodo]

I intend to tax capital gains just as high as well, unless its in a retirement account.

> If you tried to place that restriction on capital gains, everyone ounce of capital in the this country would flee.

Feel free to take your capital out of the country. It'll be taxed with an expatriation tax. Attempting to evade the tax will allow the IRS to confiscate assets anywhere in the world the US has a tax treaty with (ie everywhere).

[rhino369]

You realize what would happen right? The rich would divest from all their investments permanently. They'd sell all their assets foreigners[1] who aren't subject to the tax. There is no point risking losing your investment if taxes will take any gain. It fucks the expected value of investment.

Would you take a bet on a coin flip, if when you lost you paid a dollar, but when you won you'd get a nickle.

Banks would implode. The credit market would stop. Any business survive on a line of credit would just fail immediately.

Best case scenario, you'd just replace American rich for foreign rich.

[1] if you tried to tax foreign capital gains on American assets, you'd just destroy the entire economy. There would be huge lack of capital.

Your plan is insanity.

Edit: And some country would be creative and end tax treaties with the US just to get a couple trillion of capital flowing through their economy.

[JonFish85]

"Make more than a million dollars a year? 95% marginal tax rate."

Great. Then what? Everyone currently making over $1m a year will cut their salary to $1m. Then you gotta start taxing the upper middle class -- what rate do you want to tax people making over $500k? $250k? $100k? Those are the ones that will pay for this program.

As much as you want to tax "the wealthy", there really aren't enough wealthy people to pay for everything, and it comes down to how much you want to tax the moderately successful person who is trying to pay for their 2 kids' college expenses while saving to have a retirement.

[toomuchtodo]

> Great. Then what? Everyone currently making over $1m a year will cut their salary to $1m.

Do wealthy individuals in other countries with a heavier tax burden (Europe, Scandinavia to be specific) do this? Would be nice to see evidence of this behavior before outright dismissing raising taxes.

[caseysoftware]

Yes. Google "millionaires leaving X" and see what the autosuggestions are for X and choose one. While some are US states - NY, Maryland, etc - most are countries.

Here's the top couple using France: http://www.forbes.com/sites/chrisconover/2012/07/23/flight-o...

http://www.theguardian.com/world/2014/dec/31/france-drops-75...

[toomuchtodo]

https://en.wikipedia.org/wiki/Expatriation_tax

[JonFish85]

If the tax rate is 95%, a company would have to pay someone a $21 million dollar salary to pay that person $2m. I suspect that no company would do such a thing, as it's just throwing money away.

[bryanlarsen]

5% of a very large number is still a large number. Very few people are going to say "don't give me that extra $20 million because the government will take $19 million." $1 million is still a lot of money.

And of course, there are lots of deductions. You could give that $20 million to a charity and the government would get none of it. You wouldn't get any either, but you could certainly get a lot of indirect value out of giving away $20M.

[crdoconnor]

>As much as you want to tax "the wealthy", there really aren't enough wealthy people to pay for everything,

The point isn't to make them pay for everything. The point of taxing them is to mute the inflationary effect of letting them keep their money.

The primary noticeable effect of taxing the wealthy on the rest of us would be to make property more affordable once again.

[yummyfajitas]

This is completely backwards. The wealthy primarily invest their money; it is mainly spent on non-consumer goods (servers, backhoes, research, etc). If we redistribute to people with a higher propensity to spend, then we are shifting wealth from investment to consumption. This will raise demand for consumer goods, hence raising prices, and causing inflation.

Note that an increase in the speculative value of real estate is NOT inflation - inflation incorporates the cost of housing (rent or owner-equivalent rent), not the speculative value of land. Similarly, it's not inflation if FB or MS goes up.

By the way, if you believe that money going into the hands of the wealthy is the best way to cause inflation, it therefore follows that the best economic stimulus is tax cuts for the wealthy. Do you favor such cuts during times of recession?

[toomuchtodo]

> By the way, if you believe that money going into the hands of the wealthy is the best way to cause inflation, it therefore follows that the best economic stimulus is tax cuts for the wealthy. Do you favor such cuts during times of recession?

In a recession, you want to stoke demand. Inflation isn't a worry, deflation is. You therefore give tax cuts to the people who are going to spend (ie not the wealthy).

"Overall, tax cuts for the bottom 90% tend to result in more output, employment, consumption, and investment growth than equivalently sized tax cuts for the top 10% over a business cycle frequency."

http://www.forbes.com/sites/taxanalysts/2015/04/24/tax-cuts-...

[crdoconnor]

>This is completely backwards. The wealthy primarily invest their money; it is mainly spent on non-consumer goods

Have you not noticed that these goods have experienced a considerable degree of price inflation over the last decade? Did houses get cheaper?

>Note that an increase in the speculative value of real estate is NOT inflation

Bullshit. If I'm spending more on rent or mortgage (which I will if property prices increase), I've experienced inflation just as much as if I'm spending more on milk, eggs and bread.

>By the way, if you believe that money going into the hands of the wealthy is the best way to cause inflation, it therefore follows that the best economic stimulus is tax cuts for the wealthy.

Depends on whose economy you are stimulating. If you just want to stimulate the price of property and stock prices, sure, tax cuts for the wealthy all round. If you want to stimulate employment for the middle classes, not so much.

If you want to stimulate general economic growth, tax cuts for the rich are awful because there is a very minimal multiplier effect. The money goes into real estate and the stock market and largely stays there.

The best way to do that is to offer a job guarantee like FDR did in the 30s or increasing the minimum wage. The spending multiplier on both of those is about 3-5.

>Do you favor such cuts during times of recession?

Clearly not.

[JonFish85]

"The point of taxing them is to mute the inflationary effect of letting them keep their money."

What? How is it inflationary to let "the wealthy" keep their money vs. artificially raising the wages of the minimum wage workers?

"The primary noticeable effect of taxing the wealthy on the rest of us would be to make property more affordable once again."

Also--what? Being that we're on Hacker News, the majority of people here are probably making $100k+ a year and are solidly in the top 10% of wage-earners in the country. We're the ones driving up housing prices on a macro scale across the country, not the few people that have hundreds of millions to spend.

[crdoconnor]

>What? How is it inflationary to let "the wealthy" keep their money

Because they spend it.

>We're the ones driving up housing prices on a macro scale across the country, not the few people that have hundreds of millions to spend.

Both are. The few people with hundreds of millions of dollars will buy large properties in central locations in multiple cities, shrinking the available housing stock for the rest of us.

[bko]

A job is not just a job to most people. It's their livelihood and purpose in life. It's very cruel to deny someone their an opportunity to be independent of the state

[littletimmy]

That is American/Japanese nonsense. You don't have to be defined by your work.

[toomuchtodo]

Therapy can be provided through universal healthcare if you'd like.

What work would you like to make up for people when technology has replaced everyone's work? Salespeople? Digging ditches and filling them back in?

[bko]

I don't know what work people will be doing when technology replaces everyone's work.

It's also true that were I around in 1880 I would not know what roughly half of the US population who were then farmers would be doing after automation.

For those new-age luddites who are generally afraid of technology destroying jobs, why stop at tomorrow's technologies? Why not outlaw washing machines? Surely elimination of washing machines would bring back a lot of jobs. Or let's outlaw productivity tools like spreadsheets. If people were forced to do everything by hand, surely this would create a lot of jobs.

Would you propose we eliminate any of today's technology? Why is it always that today's technologies are OK but not tomorrow's? Those will surely be our downfall.

Ironically, increasing the cost of human capital through a minimum wage will surely hasten the replacement of human capital by machines.

[TheGrimDerp1]

Or maybe just a fair flat tax on all new goods and all services at ~8%. Everybody always pays the same percentage: tourists, bajillionaires, hobos, you name it.

[toomuchtodo]

Flat taxes are regressive. They're simple, but they don't work.

You consider it "fair" because everyone pays the same. Not everyone should pay the same tax. Some people should pay more, some less.

[seanflyon]

Define "regressive" because when I google it I get "(of a tax) taking a proportionally greater amount from those on lower incomes". Are you talking about the wealthy having greater ability to find tax loopholes or do define "regressive" as everyone paying the same proportion of their income?

[jon-wood]

8% is going to hurt at different levels depending how much you have to spare - compare the pain caused by losing $8 of the $100 you have for the week to the $800 of $8000 for the week. One of those people is going to have to make real sacrifices, and it won't be the guy with $7200 left over.

[velik_m]

Going from 1000 USD to 900 USD hurts a lot more than going from 1 million to 900k.

[Kequc]

As a general rule prices in a capitalist society are already as high as they can be. Any higher and they would be undercut. When a company becomes large and therefore able to produce goods for less money, the price doesn't fall, profit margins increase.

These large businesses are the ones paying employees the federal minimum wage. Only thing that happens is their profit margin shrinks a tiny amount. As long as the profit margin is in the black the business will continue to operate.

It puts more money into the pockets of consumers, who are the drivers of the economy.

[JonFish85]

"As a general rule prices in a capitalist society are already as high as they can be."

What you're discounting is that once the minimum wage is raised, the market can bear higher prices, and will move accordingly.

[ealexhudson]

It's not a huge number of people on minimum wage that would be affected by an uplift: in the UK in 2014, there were around 1.5M minimum wage jobs, 50% of which in hospitality, cleaning and retail (so, many not full time). The average wage shift would be virtually imperceptible and the extra spending power of those on the minimum wage does not translate to measurably higher prices (in the UK the minimum wage has rarely followed average earnings, and it's difficult-almost-impossible to measure the spending of minimum wage earners separately).

[davis_m]

It isn't just the people on minimum wage that would get a raise. Anyone making between the current minimum wage and the new minimum wage would receive a pay bump.

I don't have the numbers, but I would guess that there are more people within a dollar or so of the current minimum wage than there are actually at the minimum wage. The trend in the US is for people to at least get nominal raises that would technically raise them above minimum wage, but well below the proposed new minimum wage.

[civilframe]

This assumes that the economy is perfect, which is far from the truth. Prices are not already as high as they can be. Such a thing is meaningless in economics.

[BurningFrog]

Then why not raise it to $100/h, so everyone can live a comfortable life?

[littletimmy]

Reasonable person: 8 glasses of water keep you healthy.

You: WHY DON'T YOU DRINK 100 LITERS A DAY IF YOU LIKE IT SO MUCH!!

[BurningFrog]

Well, yeah, I'm interested in what mechanism people think will make going to $100/h or $30/h fail, and what makes it not apply for $15/h.

[unprepare]

I'll take a crack at this.

Because 100$ per hour is not what labor is currently worth.

The whole idea behind making the minimum wage a livable wage is to stop allowing corporations to keep wages artificially low by having workers augment their wages with government provided subsidies.

So what people are saying is, when you account for the subsidies people currently being paid minimum wage are taking advantage of, the real cost of that labor is much closer to 15$ per hour than the current 7.50$ per hour.

Shifting the minimum wage to 15$ an hour will shift many people with minimum wage jobs off of government subsidy programs, actualizing the real cost of labor on corporations and lowering the burden of our current government programs.

so this is much more than just picking a number and saying 'wages should be at least this high", its more "youre are paying X, we are subsidizing that by Y, we think you should pay all of X+Y"

[phaus]

Its a form of wealth distribution that's going to have the largest negative impact on the lower and middle class. I agree we need to do something to solve the problem of poverty in this country, but this doesn't seem like it would redistribute wealth from the middle class to the poor, not the rich to the poor.

[johnjac]

The problem with this type of wealth redistribution is that the poor are often consumers of the same products and services served by min wage jobs. This is one of many reasons I support unconditional basic income. It allows labor to be accurately priced in the market, without raising cost to the poor.

[thomasfoster96]

I'd agree, but raising the minimum wage is a relatively good alternative to doing nothin given unconditional basic income is merely a political dream in most jurisdictions. The US has such a low minimum wage given the wealth within the economy it's hard to see a rise having much of an impact.

[w1ntermute]

An EITC would more effectively incentivize the poor to work than unconditional basic income.

[ashark]

1) An EITC fails to realize the efficiencies of consolidating or eliminating other forms of aid that basic income could.

2) The incentive to work under basic income is having more than barely enough money to scrape by. Wages will go up until this is a sufficient incentive. My money's on wages not having to rise much at all, if any, to achieve this. I wouldn't even be surprised if average compensation dropped a bit under basic income.

3) An EITC doesn't support entrepreneurship and small businesses the way basic income could.

[dragonwriter]

> An EITC would more effectively incentivize the poor to work than unconditional basic income.

Maybe, but:

(1) This is an assertion provided without evidence, and (2) The purpose of the basic income isn't to incentivize poor people to work, anyway, and (3) Poor people, even before considering EITC or Basic Income, have more than sufficient incentive to work, what they generally lack is opportunity to work with their current skill set, and opportunity to gain the skills needed to work where it is in demand without trading off present necessities.

[thomasfoster96]

I should've clarified: by impact I mean negative impact on business costs and employment rates.

[dllthomas]

Assuming it doesn't taper, yes.

[fweespeech]

> The problem with this type of wealth redistribution is that the poor are often consumers of the same products and services served by min wage jobs. This is one of many reasons I support unconditional basic income. It allows labor to be accurately priced in the market, without raising cost to the poor.

Yes but labor is less than half of the cost for everything. One of the most labor intensive is food [growing -> market -> consumer] and its still not even 50%.

https://www.fmi.org/docs/facts-figures/marketingcosts.pdf?sf... http://www.ers.usda.gov/media/307995/aer780d_1_.pdf

Its 38.5%. The impacts is similar on other areas where the minimum wage laborer is also the minimum wage consumer.

The pay increase still flows ~60% to the people on minimum wage and is the most effective method that is politically feasible. [e.g. Backed by a large portion of a major political party]

Ideally, raising the standard deduction to the poverty level for 1 person as well would be ideal to spread things out more. Of course, you'd need to raise the marginal tax rates [e.g. Money after $11,700/year would be taxed at a higher rate] to do that since it'll cost hundreds of billions otherwise :p [e.g. $6,300 -> $11,700]

http://familiesusa.org/product/federal-poverty-guidelines

[afarrell]

You would also want to have the IRS automatically fill out the tax returns of people making less than 3x the poverty line. Otherwise the poor and frazzled would not take advantage of this.

[jefurii]

> this type of wealth redistribution

As opposed to the kind where the bosses pay absurdly low wages and distribute the profits to themselves?

Update: grammar, typo

[icebraining]

No, clearly as opposed to UBI. Did you read the whole post?

[Turing_Machine]

It isn't super-rich people who shop at Walmart, eat at McDonalds, or patronize most other low-wage businesses, so I don't think your "wealth distribution" theory is correct.

[civilframe]

Check page seven of http://www.bls.gov/opub/reports/cps/characteristics-of-minim... for some insightful statistics.

[bko]

Businesses would generally charge the price that would result in the most profit (revenue - expenses). Businesses can't just raise prices and get more revenue. If they could, they would do that already.

Minimum wage has to do with marginal cost of producing an extra product. Marginal cost generally increases after a while. So producing that last additional unit usually costs more than the one before. When you increase cost in the form of the price of human capital, the marginal cost of producing a unit will increase and the intersection with the marginal revenue (price of the unit) will drop to a lower quantity supplied and higher price.

So yes, prices will go up but the business will also sell less units. Since less units are sold, there will be less capital that will need to be utilized.

Prices aren't arbitrarily set and increase in price will result in less units being sold and less employment. This isn't as controversial as journalists make it out to be.

Pre-political Paul Krugman does a great job explaining it:

> So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment. This theoretical prediction has, however, been hard to confirm with actual data. Indeed, much-cited studies by two well-regarded labor economists, David Card and Alan Krueger, find that where there have been more or less controlled experiments, for example when New Jersey raised minimum wages but Pennsylvania did not, the effects of the increase on employment have been negligible or even positive. Exactly what to make of this result is a source of great dispute. Card and Krueger offered some complex theoretical rationales, but most of their colleagues are unconvinced; the centrist view is probably that minimum wages “do,” in fact, reduce employment, but that the effects are small and swamped by other forces.

> What is remarkable, however, is how this rather iffy result has been seized upon by some liberals as a rationale for making large minimum wage increases a core component of the liberal agenda–for arguing that living wages “can play an important role in reversing the 25-year decline in wages experienced by most working people in America” (as this book’s back cover has it). Clearly these advocates very much want to believe that the price of labor–unlike that of gasoline, or Manhattan apartments–can be set based on considerations of justice, not supply and demand, without unpleasant side effects.[0]

[0] http://www.forbes.com/sites/timworstall/2015/03/02/paul-krug...

[civilframe]

> Businesses can't just raise prices and get more revenue. Right, businesses gauge how much consumers are willing to pay. If minimum wages go up and businesses raise prices while citing said minimum wage increases, consumers will likely be willing to pay the higher prices. Consumers generally won't tolerate price increases that are not justified. Those increases that are justified are more readily accepted. This is why I think businesses can and will pass higher minimum wage costs down to the consumer, successfully.

[seanflyon]

> Marginal cost generally increases after a while

That is possible, but I would generally expect the opposite with economies of scale.

[bko]

In modern economics the assumption is that marginal cost decreases for a while due to economies of scale, but then increases. It's a bit confusing, but consider this, at first you will devote the best resources to their best appropriate task. If you buy a factory, you'll buy the most cost effective factory and you'll hire the most cost effective people. As you expand, you'll have to maybe get another factory that may not be as well suited (if it were, you would have gone with it in the first place) and hire the second best person, and so on. This is called diseconomies of scale. Similarly, running organizations above a certain size creates plenty of inefficiencies that also contribute to increased marginal cost.

Both economies of scale and diseconomies of scale play a role. Think about it in the extremes. Would a company be able to produce 2x, 10x, 100x the product they currently produce now at the same per unit cost, or less? If not, then there must be some point at which the marginal cost is upward sloping.

I believe this is the reason that large companies don't necessarily lead innovation. For instance, a company like Facebook could have easily created a Snapchat, but it could not. It wasn't even successful imitating the product after several attempts (popularity, not functionality).

More: http://www.investopedia.com/exam-guide/cfa-level-1/microecon...