Social Conservatives Understand Economics Poorly
I keep seeing this meme from social conservatives, and it is so wrong-headed it makes
me grind my teeth.
First, and probably the least negative impact, is that government has no constitutional authority to set the prices of goods, services, labor etc. I mean, this is definitely an insidiously large psychological impact, failing to understand the basic concept that government is limited to enumerated powers (not rights) that it exercises on behalf of the people through the temporary, and most significantly, the limited delegation of authority to government officials. But the bigger problem is basic economic ignorance.
Things just don't work that way. It is no more subject to legislation than the 3rd law of thermodynamics.
Economics is not a set of rules we enacted to “create capitalism”. It is the study of how decisions are made, taking into account the basic and immutable characteristic of all living organisms; that we seek benefit and try to avoid pain.
Suggestion: LET'S LEAVE THE POLITICS OF ENVY AND RESENTMENT OUT OF IT.
This is not a good argument for Republicans, Libertarians, or Constitutionalists of any stripe. The real problem here isn't that the slackers and motivated employees get temporarily leveled. Leave the judgmental cultural preferences behind. The traditions of our people are not the laws of nature.
The real problem with raising mandatory minimum wage (especially a drastic raise) is that lots of people, low skilled, or in marginal jobs, will not get a raise to $15/hour. They will get fired, because the work they do doesn't provide enough value to the customer, to pay $15/hour prices for stuff they can substitute cheaper goods for.
Say a burger franchise, where the franchise owner makes maybe $60 to $100k per year, and is wholly invested in it… he has put his life savings into real estate, franchise fees, and startup costs, operated it himself for a few years, and now makes an upper middle-class income and doesn't have to be there every day. He pays his employees several dollars an hour, they make exactly minimum wage only when first starting and start incrementing within a short period of time, but they do cap out pretty low…
Only the 16-20 hours per day operational cycle, selling almost around the clock, generates that upper middle-class income for the boss. Any particular employee may be making the boss from a few cents to a couple bucks an hour over the cost of the employee's wages benefits, taxes, etc. None of them are making the boss double what they cost.
Some may actually cost more than they add for certain times of day when business is slow but customer expectations require being open; mid-afternoon and other in-between meals times are when side work gets done, but often enough capacity for a restaurant is mostly or entirely idle during these times, and this is reflected in fancier restaurants closing for these periods of time. Those higher cost restaurants have higher demand during specific meal times, and higher margins due to the superior customer experience. Servers in this business may work only the lunch crowd or the dinner crowd, and due to higher volume of higher margin service offerings (fancy meals, alcohol sales with higher margins than commodity burgers and fries), concentrated in shorter time frames and with more generous tips from customers, can make enough money to tolerate or even prefer a shorter shift.
Likewise, kitchen staff has a higher level of skill resulting in higher wages. Lower cost (fast food) restaurants typically try to continue earning during these low volume times because their labor and other costs are lower, but their margins are also much lower. It’s also difficult for them if they don’t meet social expectations of being available during all times, or local laws or social customs prohibit having employees clock out during slow periods. It’s a difficulty for employees if their schedule is unpredictably variable and in many cases employees will focus on a job that pays steady minimum wage over one that pays slightly higher but is unpredictable on hours; this is a basic risk calculation and risk = cost.
However, with all the above said, with dozens of employees working together for front of the house, back of the house, and drive through, all earning some increment above minimum wage, and providing the extra value of a few cents to a couple dollars an hour to the enterprise, it averages out to a decent living for the boss and an economically viable *entry level* job for each employee.
Now double the cost of labor, and even if you raise the price of a burger, customers are only going to pay so much more per unit. And they will buy fewer units, because the marginal benefit of going out to eat cheap fast food just got turned upside down and it is now cheaper by far to eat at home. The question of “eat out or eat in” just got a huge price bump attached to one of those options.
So the least valuable/productive employees (in the employer's best “guestimate”) get canned, the owner goes and works in the kitchen (and works 16 hours days, 7 days a week… there is no limit on mandatory overtime when you're the owner, no minimum wage for owners either, all you get is whatever is left over after expenses are deducted from income.) So, he fires one or two of the shift managers because he now can't afford so many, and they need basic producers (that they can't afford enough of) far more than managers wringing out percentages of efficiency. The owner now makes less than minimum wage for all his risk, and delayed gratification, having saved his money instead of spending it, and putting in the extra effort to develop the business. If you scoff at “less than minimum wage” consider that 40 hours/week and 52 weeks/year is 2080 hours. If a person works 12 hours/day 6 days/week (not uncommon for entrepreneur start-ups) that is 3744 hours in a year, which would divide a $60k salary into $16.02 per hour.
The owner gradually comes to ask himself why would he make less than minimum wage to support a bunch of ungrateful employees, when he could better than minimum wage managing (due to experience) some higher margin business with even less regard for employees? So, he closes the business and the customers (the public) lose choices and access to services and the employes lose their jobs.
THAT'S THE PROBLEM WITH $15 (OR WHATEVER) MINIMUM WAGE.
Not that somebody’s social status is harmed by other people catching up to them.
Not quite:
https://econreview.berkeley.edu/minimum-wage-and-unemployment-is-it-time-to-break-up-with-neoclassical-economics/
https://www.americanprogress.org/article/higher-minimum-wages-support-job-growth-economy-recovers-covid-19/
Neoliberal economics (whos positions you report) isn’t well equipped to address this because its all about aggregate growth, not individual success. It can’t – as a theory – account for contrary data.Report
There are a number of studies with some conflict as to exactly how bad the effect is. No credible studies I’m aware of suggest it actually helps the economy.
As a person who has run a small business, made payroll, and paid bills based on low margin customer service & retail interactions, I can tell you that it absolutely means fewer jobs. It’s not theoretical. Here in Washington state the massive jumps in minimum wage over the last decade have also visibly resulted in lower quality customer experience in retail. Hygeine in public areas of retail and especially restrooms has plummetted. Fewer people are doing more work much more sloppily in a harried manner.
It’s the little things that don’t get done, and build up over time, because the low margin activities and epxenses not directly related to profit get skipped first.Report
In science, when we have conflicting studies, we don’t double down on a hypothesis that is not backed up by statistics. You preferred hypothesis has some support and some detractors. Best to leave it ambiguous absent more data.
As to your personal experiences – those would have made your essay a lot more impactful, especially if you had used some numbers to illustrate what you see as the dollars and sense of the issue. Even now, I can’t tell if the customer experience is degrading because of fewer workers – who are less willing to do the work for more pay (which is always a counter intuitive statement to me). I’d also push back on the low margin activity statements – if a retailer isn’t presenting a clean and inviting experience, shoppers leave, which impacts profits.Report
In social science, every study’s results are directly or indirectly the product of its assumptions. Economics is one of the harder social sciences, but it’s very dependent on the model.
That said, while economists don’t agree on much, and they argue about whether minimum wage hikes result in layoffs, there’s near-agreement that they inhibit hirings. Both of your links suggest that they hit the most vulnurable.Report
“They will get fired, because the work they do doesn’t provide enough value to the customer, to pay $15/hour prices for stuff they can substitute cheaper goods for.”
Since when is this a problem?
Like, when a machine or software is invented that can do the same work for less money and results in workers getting fired, we are given stern lectures on Luddism and Econ 101.
The fact is, everyone is competing with technology. For every single possible labor, there is somewhere a machine or software or technology that will do the same thing.
For some jobs, that technology is still too expensive to make the replacement feasible. But that calculation changes daily.
In one sense, the market fundamentalists are correct: Labor is a commodity like anything else like electricity, fuel, insurance or products. Whether a higher price of the commodity results in minimal, modest, or major disruptions depends on how high the price is shifted, how rapidly and how easily the end price can be raised and other factors as well.
Those answers aren’t static and can’t be given as absolutes.Report
Not absolute or static. But consider, equipment and software purchases for labor replacement are CapEx, while labor is OpEx. They get expensed differently- depreciation, etc. There may be interest involved on a capital expenditure which makes it more expensive.
Bottom line if the expense made good financial sense at minimum wage status quo ante, they would have made the switch already. By driving this decision, I mean it provides the final X percentage of impetus to do it, which is a market distortion. Without it, the action would not happen. Raising minimum wage drives decisions like this that then become a sunk cost, and people emotionally commit to sunk costs. So they’re also unlikely to go back to labor after trying to use labor saving devices even if the implementation fails.
Raising capital for switching to labor saving devices may also preclude other necessary but lower priority business expenditures, or the business may not have the ability to raise capital for that expenditure, and may fail. Failed businesses are an acceptable but not a desired end state in an open market. It reduces consumer choice and overall market resilience. Some businesses are not amenable to labor saving devices and raising labor costs just makes them fold. This is particularly true in th ecase of part time side businesses struggling to make the leap to full time self employment. Self employment is a public good for many reasons aside from price fo consumer goods, not least of which is the spirit of citizenship in a nation that self governs with rule by the people and of the people, but it doesn’t end there. Self employment provides resilience in an economy heavily influenced by massive international market trends and provides a competitive counterpoint to consolidation of industry, it is a big driver of innovation.Report
None of this refutes my point.
There are plenty of empirical examples where a rise in minimum wage didn’t result in higher unemployment.
There are plenty of business sectors where a sectorwide rise in labor prices can easily be transferred to consumers in the form of higher prices.
As I said, this isn’t static and has a lot of variations which can make a rise in minimum wage a good or bad idea.Report
The resistance to raising prices to cover increased labor costs – in the middle of an alleged inflationary period – remains mind bogglingReport
This is where it becomes ideological.
Profit is just the sum of all expenses and revenues.
Insofar as the bottom line is concerned, it doesn’t matter if the line for “Payroll” or “Material” goes up or down.
All prices are subject to non-market shocks. Like a cold snap makes a restaurants vegetable prices to suddenly jump or an international incident causes a spike in fuel prices.
Sometimes consumers will accept higher prices, sometimes, some prices are elastic, some aren’t.Report
Yup. In the case of the OP, we’re asked to consider a fast food burgers-and-fries restaurant.
I wrote below that experience suggests that prices didn’t rise when wages did, based largely on what I’ve seen from such businesses here in the Portland Metro area where minimum wages are all already at, or exceeding, the $15.00/hr level we’re discussing here. Minimum wage in the Portland Metro is $14.75/hr, and most employers need to go above that to attract any workers at all, even at burgers-and-fries kinds of places. My own lived experience going to places like these is that one person’s lunch still costs around $10-$12, which is what it cost before the pandemic and the following upward market pressure on wages.
But that was insufficiently accurate. It’d be more accurate to say, the way an economist would, that prices are less elastic than wages. There will be a point at which a proprietor is going to say “I can’t take a profit margin this low anymore,” and will bite the bullet and raise prices. And their competitors will all probably breathe a sigh of relief and follow suit fairly quickly, and I wouldn’t even say that was collusion so much as the market at work.
But my question below remains, and is poignant in response to this exchange. Market conditions are in constant flux. Any business has a wide variety of inputs, whose prices change, and by “change” I mean “almost always rise.” It’s pretty rare when your insurance rates go down. Landlords are not known for reducing the rent. Utilities don’t tend to decrease their rates. And the cost of labor doesn’t become lower over time.
And I still don’t know why I should behold a business whose owner failed to budget, plan, or price for these kinds of changes in input costs and feel more pity for it than I do for the workers at that and many other businesses who earn the minimum wage. Built into their earning minimum wage is that their employers would pay them less than the minimum if they could. Minimum wage nationally and in not quite half of states is $7.25 an hour, which for full-time work of 2,000 hours a week works out to just a smidge less than the Federal poverty level. ($14,500 < $14,580.) So I'm sorry if I seem callous, but if an employer cannot afford to operate on terms other than paying his workers literal poverty wages, and raising the minimum wage will force that owner to lay people off, then inevitable increases in prices of all of the other inputs needed to make that business operable are going to do increase too, whether the government changes its policies or not. What we're talking about here is a business that is already teetering on the brink of failure. Which is sad for those involved, but which is also part of how capitalism works. Adapt to changing conditions and survive; fail to adapt and get overtaken. That's no less true an observation than observing that death is part of how biology works.Report
“I still don’t know why I should behold a business whose owner failed to budget, plan, or price for these kinds of changes in input costs…”
You know, you’ve got something there. It’s not society’s responsibility to subsidize anyone’s failure to plan for the future, to save up for a rainy day, to recognize that costs always increase; to be prepared for situations that, while not their fault, are still their responsibility to deal with. And that’s why national health-coverage plans are a moral error, right?Report
Upon further thought, I think there’s more insight here than meets the eye. Other business inputs are sometimes significantly price-regulated (insurance) and sometimes not (rent or mortgages) but there’s no input that’s not at least nudged a little bit by the government. Rent, for instance, is purportedly determined by the market, but property taxes are a) based on a public officer’s assessment of the market value of the property which is almost certainly inaccurate and then b) baked into the amount of money demanded by the landowner, if not passed through directly as in a triple-net lease.
But somehow the cost of labor raises ideological hackles. (All around, let’s be fair.) When proposals to increase wages arise, we are inevitably confronted with the image of a close-to-the-bone mom-and-pop burgers-and-fries independent small business, and told that THIS increase in input costs will perversely enslave the proprietor to his workers, who will now be making less per hour than the teenagers he hired to flip the burgers, else he will simply close shop and all those jobs will vanish, crushed out of existence by the heavy, ill-advised hand of a stupidly oppressive government.
When it’s insurance costs, we sort of shrug. I’ve had lots of clients (contractors, mostly) do and say a lot of things that exhibit irrational fear of rising insurance costs. They don’t get it when others look at them strangely. These same class of people don’t much worry about the cost of their labor — they accept that if you want a carpenter or an electrician who knows what they’re doing, you have to pay them a certain amount and they don’t mind doing that at all. Perhaps that’s because on a T&M contract it’s easy to see how tonpay your worker and make a profit, but baking insurance premiums into that equation is hard so they skip that step? I don’t pretend to know, that last sentence is speculation.
But there’s something about labor costs and it isn’t that labor costs are a large input that can easily affect the bottom line compared with other inputs like electricity or professional services. I think it may be that We Are All Marxists Now, at least insofar as we have all come to accept Marx’s postulate that wages paid to workers by capitalists are the principal mechanism by which wealth is distributed to society, and ideology informs our varied visions of what that result ought to look like.Report
The answer to your puzzle is simple – low hourly wage workers are STILL judged as morally deficient by too many people. They do not DESERVE more then they get because they will not or have not taken action to move up the economic ladder to more “important” professions. Its classist and racist and misogynistic to its core. Its also the American Way ™Report
This notion of desert is surely part of what Chip meant by “ideology.”Report
A million years ago, I worked for minimum wage for the restaurant. $3/hr (plus a split from the tip jar).
I had been there a year and busted my butt and gave them ~40 hours a week despite also going to college and I talked to the manager about getting a raise. She came back a few days later and told me that *YES*. I was going to get bumped to $4/hour!
And then, like, two months after that, the minimum wage got raised to $4.75/hr.
I remember resenting that.
Even though I got another raise on top of the raise I already got.Report
so you resented two raises in what 3 months? Fascinating.Report
I only resented the second.
I was proud of the first.Report
why did you resent the second one?Report
I earned the first one.
The second one was given me by someone else entirely and it was completely unearned.Report
This is where I disagree – as a member of the labor force, you both deserved and earned that second raise just as much as the first. Labor ALWAYS deserves just compensation for its productivity.Report
There were days when I took home more money from the tip jar than I got in my paycheck. (For the day, anyway. There were many days when I left with more than $25 bucks in my pocket. AND THOSE WERE CLINTON DOLLARS.)
Switching to a computer job where I made a whopping $8/hour was a letdown.Report
“as a member of the labor force, you both deserved and earned that second raise just as much as the first. ”
oh, right
so instead of being resentful that he could have just done the absolute minimum possible and still gotten the minimum-wage increase, meaning that busting his ass was completely pointless
he should be resentful that all along the bosses were STEALING the money that he DESERVEDReport
If he wants to be resentful then yes, being underpaid consistently for his labor would be a thing to be resentful of. But claiming he got a raise he didn’t believe he deserved when ALL labor got a raise (and likely deserved it) – begs credulity . . . .Report
Just for your internal calibration, this was a dumb comment. You didn’t understand Jaybird’s comment, and what you’re clumsily trying to snark at him about was actually the main point of his comment.Report
KenB, you missed Philip’s point, which was to draw out that what Jaybird resented was other folks’ good fortune, even when he shared in it. Draw from that what conclusions you like. And leave the Hall Monitor gig to Pinky.Report
Good to know what level you’re on.
Just for your internal calibration, your “hall monitor” schtick is also dumb — you’re happy enough to criticize other people’s commenting styles and attempt to enforce your own preferences. Time to retire it and move on to something less tired.Report
“Is.”
“OUGHT!”
“Is.”
“OUGHT!!!”
“Is.”
“OUGHT!!!!!!!”Report
This is obscure even for you.Report
Mostly. I’m just floored that someone earning a wage would be resentful of two raises in a 2-3 month period. Ever. It’s counterintuitive to how humans generally are.Report
No, it’s basically exactly how primates are. ::Monkey throwing cucumber gif::Report
The fact that you’re saying that I was resentful of two raises despite us just talking about how I was only resentful of the second (seriously, we hammered this out in this very thread) indicates to me that you’re not understanding what I said.Report
What I plainly said was you were resentful of receiving two raises in a short period of time. Which you are/were. Had you never received the second you would not have been resentful – so you said. Had you not received the second in such a short period you may or may not have been resentful.
But when the second one came along so quickly – for everyone – you were resentful. There’s nothing incorrect in my statement.Report
Here, let me recreate the interaction from above:
(It goes on from there, but that’s where we discussed my attitude toward the two different raises.)
And you turned that into, and I’m copying and pasting this: “I’m just floored that someone earning a wage would be resentful of two raises.”
You can’t restate it. This tells me that you’re not grasping what is there.Report
I get that you are resentful of the second one because you think it’s unearned. But you also presented a temporal component – it came so fast after the first. And you ARE resentful that you got two raises (one you felt you earned, one you didn’t) in a short time period. You only believe you should have had one of those.
Which again – I am floored that a person earning a labor based wage would be resentful of receiving two raises in a short time period. Because as a wage receiving laborer you were deserving of both.Report
If the only way that you can comprehend what I said is to reframe it in a way that I have said twice that I disagree with, I am confident that the problem is that you aren’t understanding what I said.
I’m okay with that.Report
SO try different words and see if it changes my perspective.
Because you keep coming across as – frankly – butt hurt that you had to throw down for a raise with your employer and then three months later you and everyone else got a raise that no one had to throw down for. Which you resented receiving. Which is where my incredulity comes in because raises are raises are raises no matter the source. Again, I don’t know anyone else – nor have read any extensive documentation – that says large swaths of people react that way to being paid more.Report
I can see “if I’d waited to ask for the merit wage until after the legal minimum took effect, I’d be making even more!” as a lost-opportunity sort of resentment, and then transferring that resentment from oneself to an externality (here, the government). That’s pretty ordinary human behavior. Irrational, but contrary to humans as units within the world models of economists, we real-world humans are not always rational actors.Report
I’m pretty sure that if I had waited 4 months to ask for a raise, it’d have been shot down.
Why, I just got a huge raise! Certainly for a kid working through college!Report
I received a positional good that was a recognition of my value.
This positional good was then removed and replaced with an absolute good that was greater than the now subsumed positional good.
I’d also ask to not read TOO much into the resentment. It didn’t result in a decline in the quality of my work.Report
Yes you did.
Not really – you received an absolute good that was added to your positional good as additional recognition of your value by dint of being in a certain category – namely wage labor. Had you never received the positional good, you would still, by dint of being a wage laborer have received the entire value of the positional and absolute goods as recognition of your worth.Report
While I appreciate your telling me what my internal state ought to have been, I hope that you can appreciate that I am telling you what it actually was.Report
Yes you were.
And it baffles me.
Because in the end you received two recognitions of your worth in the form of additional compensation.Report
No, I received one.
And I have said as much multiple times.Report
so you do not believe a general increase in the minimum age is a recognition of your worth as a wage laborer because you didn’t advocate for it? Would you rather your employer had said “Jaybird didn’t ask us for this so even though he’s a wage earner and this increase is a recognition of wage earners we won’t give it to him?”
See this is what baffles me – you appear to be saying you didn’t earn or deserve that second raise.Report
He didn’t EARN the second one. It was given by action of law based upon what other’s thought he should be paid, not his actually employer. This really isn’t so hard to understand?Report
I think the disconnect is that Philip has an a priori belief that all workers outside of management deserve more money. He’s not really thinking of cases where, e.g., people can look around and see total slack-offs getting the same rewards as the hard workers.Report
Yes I generally do believe wage grade workers are generally woefully underpaid in respect to their economic contributions. And frankly to begrudge you second raise in a few months because there might be a slacker getting the same is the sort of perverse thinking that keeps poor whites and poor blacks from getting Medicaid expansion in Mississippi because they don’t “deserve” it. Its moralistic class based discrimination.Report
I understand the differing processes by which each raise was granted. I have all along.
I disagree that he didn’t EARN the second one. He was – at the time – a wage laborer. A determination was made that wage laborers deserved higher pay then they were receiving. Jaybird benefitted from that determination. The necessity and the positive impact to his financial well being is no less just because he didn’t have to convince his employer of his worth. He still deserved the raise, just as every wage laborer who was granted it deserved the raise.
And I remain baffled that anyone would object to or be resentful a raise simply based on the procedure by which it was granted.Report
Maybe a personal example will help.
Way back when, my boss, after my performance review, informed me that I would be getting a “merit” increase of X %. That pay increase was 100% work performance related.
He also informed me, that because the companies pay policies were to move every employee to the mid point of the pay range for the particular job they were doing, I would be receiving an ADDITIONAL pay increase of Y%. So whether I was average, exceptional, or above average employee, I as assured the Y% amount. Performance had nothing to do with it.
So I can understand how Jaybird feels when he EARNED the first pay increase. The second pay increase was “gifted to him” by fiat of law. You disagree with this, but it’s a rationale position. It’s not like he refused the non merit pay increase..Report
That may be the mechanism, but he ALSO earned it by dint of being a wage laborer. Both can be true.
And yes, it is rational to note the differences in mechanism by which the raise is received. I’ve noted those differences several times. to say that one RESENTS the mechanism regardless of the outcome? No, I don’t see that as rational at all.Report
“That may be the mechanism, but he ALSO earned it by dint of being a wage laborer. Both can be true.”
This is where you and I (and I presume Jaybird) disagree.Report
“I disagree that he didn’t EARN the second one.”
the issue we’re having with you is that not everyone considers “you exist” to mean that you’re automatically worthy of getting as many resources as you would like.Report
Eh, minimum wage is a 19th century solution to a 21st century problem.
Both the solution and the critiques of it are dumb; but go ahead and fight over it.Report
Is the OP congruent with the lived experience of job seekers and labor-seeking employers? I see “help wanted” signs all over town. Market forces seem to be pushing wages up. And both employers and employees are becoming more picky about one another, as evidenced by jncreasing turnover rates. The net advantage seems to still rest with those offering labor. Now, bear in mind that this state of affairs will necessatily change over time.
But at least for now, the best argument a conservative could make against raising minimum wages is “The government doesn’t need to do thus, the market is doing it all on its own.” After all, in a free capitalist system, there is no inherent value to labor or to any other market input of any sort. The OP, like the meme it criticizes, comes close to making the mistake of assuming inherent values to different kinds of labor, particularly that labor which previously was paid less than $15 an hour. The OP says such workers’ jobs are at risk be abuse they do not add sufficient value to justify the higher wage, and consumers will reject the new, increased prices that necessarily result from increasing the price of this input (to wit, unskilled labor).
Recent economic experience suggests that both components of this proposition are not true. First, employer demand for labor does not seem to diminish as a direct result of statutory minimum wage increases. Employers need X amount of labor, at whatever price, to do anything at all. Employers already had substantial pressure to get the tasks done with as little labor as possible, and to pay those laborers as little as they could. But recent experience makes clear that whether it’s the government or market forces pushing wages upwards, employers must, will, and do compete with compensation to attract at least the threshold-of-functionality level of labor, and figure out profit margins and prices to customers from there.
Recent experience also assures us that prices to customers do not necessarily rise in response to increased labor costs. Contrary to baleful predictions of $16.00 Big Macs, unionized fast food restaurants remain competitive with un-unionized counterparts the prices attached to their products, despite an increase in labor costs resulting from collective bargaining. If more money is going to labor, and presumably sales volume has not increased, where have receipts gone? Less to profits, of course.
This is the real question: is it still profitable to operate a business with increased labor costs? That’s where the inquiry belongs. The OP gets to this point in its own way, although it’s a lot more gloomy about this than I because it assumes that the business is already operating so close to the bone that the ownership is already earning “less than minimum wage” in profits, and thus any increase in any input cost would force layoffs, although for some reason (analytical convenience?) there seems to be an operational assumption that the only variable is cost of labor.
But if the status quo ante is that margins are already so thin they can’t withstand an increase in labor costs, they also can’t withstand an increase in COGS, or insurance, or rent, or any of the other inputs. And those are things that can, do, and currently are happening for reasons having nothing to do with statutory minimum wage increases.
Why ought we, as outside observers, think of such a business as anything other than a weak competitor, and why oughtn’t we think of the failure of such a business as the ordinary, natural result of the market at work, weeding out inefficiency and inadaptability? Doesn’t the vision of robust, unfettered capitalism tell us that this is, at the macro-level, a good thing producing, ultimately, a more robust and plentiful market?Report
TL/DR:
1. To the capitalist, nothing has an inherent or objective monetary value. There is only the always-fluctuating price upon which a willing buyer and willing seller can agree.
2. To the capitalist, certain things are inputs. Labor is but one of many of these.
3. The capitalist ultimately does not care from whence an increase in the price of an input originates. She cares about the quantum of that increase.
4. If the capitalist runs her business such that she cannot withstand an increase in the price of an input (such as labor but not necessarily that) wouldn’t we say that she has made a mistake and, thus unsympathetic, give a “that’s-the-free-market-at-work” shrug at the closure of her business?Report
“[T]he best argument a conservative could make against raising minimum wages is…”
…is made right there in the OP, and it’s “there are jobs where the cost of having them not-done exceeds the cost of hiring someone to do them, and raising the minimum wage moves jobs into that category”.
“Recent experience also assures us that prices to customers do not necessarily rise in response to increased labor costs.”
Actually they do.
“But if the status quo ante is that margins are already so thin they can’t withstand an increase in labor costs, they also can’t withstand an increase in COGS, or insurance, or rent, or any of the other inputs. ”
You’re right, when a landlord raises rent then any responsible adult should simply be able to perform the financial readjustment necessary to accommodate that instead of whining about increased costs, right?
“Doesn’t the vision of robust, unfettered capitalism tell us that this is, at the macro-level, a good thing producing, ultimately, a more robust and plentiful market?”
*Removed Portion by Moderator. We are not going to personally attack and name call each other. Stick to the subject at hand or move along. Report
And this is why I ignore you.Report
Hey, that’s my gig. Stay in your own lane.Report
“Doesn’t the vision of robust, unfettered capitalism tell us that this is, at the macro-level, a good thing producing, ultimately, a more robust and plentiful market?”
Ah-heh. “Robust unfettered capitalism” wouldn’t have minimum-wage enforced by law, you idiot.Report
I want everyone to sit and think about the assumptions in this paragraph. Business owners would come in and work. This requires:
a) a non-chain business
b) that currently pays under $15 an hour
c) owned singly, not by investors
d) that is not some sort of professional like a dentist or lawyer where the owner already works there (I know that seems silly to list, but at this point, that’s probably most of the remaining ones.)Report
The big deal, I think, is whether the cost of labor would be affected by a hike in the minimum wage. This doesn’t just mean businesses that pay the minimum wage right now, of course: many businesses enter the market for labor at “minimum wage plus a dollar” or “115% of minimum wage” or something like that so they can attract enough labor to stay fully staffed. There are almost certainly other categories of employers who are affected by changes in the minimum wage even if they don’t actually employ anyone at the minimum.Report
“This requires:
a) a non-chain business
b) that currently pays under $15 an hour
c) owned singly, not by investors
d) that is not some sort of professional”
Congratulations, you’ve invented small single-proprietor local businesses.
Maybe next you can explain why you think these guys should eat it and die because you’d rather ConHugeCo get all the money.Report
None of us think they should eat it and die. Most of us don’t want ConHugeCO to get more money.
But we do want business owner big and small to recognize that holding prices in the face of increasing costs isn’t a good idea. ConHugeCo likely won’t. We also believe that doing so to keep labor costs down is not the correct moral or economic approach.
So I’ll tell you what – when we see a flood of stories about how small businesses are being driven under by insurance increases or rent increases or any one of a dozen other things – and STILL not raising prices – we can talk. But if its just rising labor -raise your damn prices. Even Henry Ford (racist bigot that he was) knew enough to pay his workers to be able to buy his cars and still make rent and put food on the table.Report
“we do want business owner big and small to recognize that holding prices in the face of increasing costs isn’t a good idea.”
They don’t.Report
They why all the whining and moaning about paying labor more?Report
(points to OP, which you apparently didn’t read)Report
i read it. I just don’t see why labor elicits the public whinning and begging for sympathy, especially in retail and food service where customer experience is the thing being bought. If prices have to adjust for increased rent, or fuel, or insurance, then why shouldn’t they for labor costs and be done?Report
Both the small business owner and the global megacompany are both capitalists looking to spend as little money on labor as possible, so I don’t really care which one survives. Plus, a megacompany is much easier to nationalize.
So, I don’t care which one succeeds, but in general, the megacompany usually is less likely to openly break labor law, not because they’re better people, but because they like consistency.
Now, personally, among the friends and people I know, the actual horror stories of bosses and terrible working conditions have not come so much from random Big Company X, but rather the petit bogouise small business owner who think he’s John Galt because he owns a barely surviving restaurant or whatever. Also, same thing w/ sexual harassment – HR sucks generally, but it really sucks when “HR” is the bosses wife or cousin.Report
“Plus, a megacompany is much easier to nationalize.”
welp
at least you’re honest!
“…among the friends and people I know, the actual horror stories of bosses and terrible working conditions have not come so much from random Big Company X, but rather the petit bogouise small business owner”
have you considered that maybe your friends and the people you know are not the sort of people with their act together sufficiently to get hired by Big Company X and thus would have few such stories to shareReport
…pretty sure I’ve ‘invented’ something more restrictive than that because those don’t have to have employees. And also don’t have to pay under $15 an hour, and also often professional businesses are structured as that. So really, everything that matches just (c) is a single proprietor.
But yes, you’ve correctly pointed out that ‘owned singly’ is in fact called ‘single proprietor’. Okay?
The fact was not that such places can’t exist, the fact was that business that fit every single one of those, (and more to the point people employed by such business), is actually a pretty small percentage of workers.
But hey, let’s go to the actual numbers.
https://www.pewresearch.org/social-trends/2015/10/22/three-in-ten-u-s-jobs-are-held-by-the-self-employed-and-the-workers-they-hire/
Only about 20% of people employed in the US are employed by ‘self employed’ people (that’s not counting the self-employed person), which, while not exactly the same as single proprietorship, is pretty close.
The median number of people in such a business is three, and the average is 8.6, which means that most of these small businesses actually employ only a few people, which makes his scenario of firing one of two (plus him) managers a somewhat odd proposition. No place with three employees, in fact probably no place with eight employees, has three managers. Most of these businesses, actually, are some sort of professional with a small staff.
.
I think the solution to the conglomerates owning everything would be to not allow them to do that, in a legal sense, not trying to construct laws so that local companies are allowed to pay very bad wages to to remain competitive, because they don’t get to exist at the expense of workers.
That said, there actually have been proposals in the law to make minimum wage different for the big corporations versus the smaller ones, and I am willing to bet you don’t approve of those either.Report
“The fact was not that such places can’t exist, the fact was that business that fit every single one of those, (and more to the point people employed by such business), is actually a pretty small percentage of workers.”
bro
you said that the owner of a business would never perform the labor of that business
that was a dumb thing to say, just admit it and move on
“there actually have been proposals in the law to make minimum wage different for the big corporations versus the smaller ones, and I am willing to bet you don’t approve of those either.”
you’re right, I think everyone should be the same before the law, I don’t think there should be extra nasty laws for People Who We Think Are Morally Suspect
ain’t I a stinkahReport
I will admit that it is at least somewhat interesting to live in a place out in the middle of the country where starting wages are already $15/hour for a burger flipper, $1.35 above the state’s minimum wage.
That said, Front Range Colorado is a coastal enclave 900 miles from the nearest ocean.Report
The best commentary I ever heard about the minimum wage came from Chris Rock.
“I used to work at McDonald’s making minimum wage. You know what that means when someone pays you minimum wage? You know what your boss was trying to say? “Hey if I could pay you less, I would, but it’s against the law.”Report
As if we needed further proof:
https://www.cnn.com/2023/04/28/politics/house-republicans-vote-climate-provisions/index.htmlReport