$15/hr minimum wage. example of negative consequences...

Well.... It'll be interesting to see how these really high minimum wages pan out.

There's two possibilities, that I see.

One is definitely the lack of hiring, and more cutting corners and overworking the existing employees as much as possible... This has been happening for a long time, now.

The other one I'm more curious about... Will this speed up the arrival of the massive spike in inflation that everyone says is coming. Inflation, as the government measures it has been very controlled, so far... But doubling minimum wage... I gotta believe that will trigger some pretty massive ripples.
 
ilwrath said:
The other one I'm more curious about... Will this speed up the arrival of the massive spike in inflation that everyone says is coming. Inflation, as the government measures it has been very controlled, so far... But doubling minimum wage... I gotta believe that will trigger some pretty massive ripples.
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Would you mind saying who is "everyone" in this context? Some parts of Europe, such as as Spain, are already suffering from deflation and prices in the US have been tracking Japan in the 1990s, which had become the poster-child for deflation for an entire decade. If you search for recent articles mentioning "United States" and "deflation", you will find quite a number of articles from a variety of different sources.
 
JoBBo said:
Would you mind saying who is "everyone" in this context? Some parts of Europe, such as as Spain, are already suffering from deflation and prices in the US have been tracking Japan in the 1990s, which had become the poster-child for deflation for an entire decade. If you search for recent articles mentioning "United States" and "deflation", you will find quite a number of articles from a variety of different sources.
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Pretty much any fairly conservative (and I mean traditionally fiscally conservative, not politically right wing) financial analyst has had extended worries about US inflation for the past several years. A lot has been floated by printing tons of money and releasing it through the banks. This, in turn devalues the US dollar, and conventional wisdom says we'd have to have inflation, eventually.

A few reuters articles from just the past few days, alone....

http://www.reuters.com/article/2014/05/21/us-economy-poll-usa-idUSBREA4K0FY20140521

http://www.reuters.com/article/2014/05/23/usa-agriculture-inflation-idUSL1N0O90PY20140523

Personally, I've hedged my bets quite a bit. I don't have much debt, and I don't have much invested, so whichever way it goes, it won't hurt too bad. The problem is, whichever way it goes, I won't profit, either, though. The price of being a peasant. :/
 
ilwrath said:
But doubling minimum wage... I gotta believe that will trigger some pretty massive ripples.
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It might but most of the inflation (and it's huge but unmeasured) that we have seen is in real estate and financial instruments. When the cost of stocks go up all the stock holders cheer but it's still price inflation but we don't measure it. The stocks and real estate have gone up so much because the kind of people that play those games are the kind of people who have 90% of the money.
 
Wayne said:
The area called SeaTac rolled out a $15/hr minimum wage and now they're starting to feel the amazingly bad consequences (like any rational person knew would happen)... It's good to see evidence of it though...
Wayne
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The article is remarkable for how content free it is.
 
ilwrath said:
Pretty much any fairly conservative (and I mean traditionally fiscally conservative, not politically right wing) financial analyst has had extended worries about US inflation for the past several years.
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Printing money IS inflation but if you only give it to the rich then it doesn't cause the prices to go up on the stuff peasants need to buy. If you give the money to the peasants then all the prices go up and the rich people end up not being so rich relatively speaking.
 
FluffyMcDeath said:
Printing money IS inflation but if you only give it to the rich then it doesn't cause the prices to go up on the stuff peasants need to buy. If you give the money to the peasants then all the prices go up and the rich people end up not being so rich relatively speaking.
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Not so much, I don't think... The rich are too rich to be hurt by doubling or tripling the price of stuff. They spend the lowest percent of their worth on stuff of any group.

But that kind of inflation could kill the last of the middle class, because they have to spend a much larger percent of their worth on stuff, just to survive.

And then there will be the sub-class of people who can't find any job at all, because they have literally nothing to offer that could be worth that minimum wage. :/

This is a tipping point where it could get really ugly. This is where that inflation might just get real. It's been in the system and hanging around for a while.... And you're very right that it has been rather absorbed in the markets and whatnot. But will this spill it into the "real" economy?
 
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ilwrath said:
Not so much, I don't think... The rich are too rich to be hurt by doubling or tripling the price of stuff. They spend the lowest percent of their worth on stuff of any group.
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That's true, but they don't FEEL that way. But it could be worse than that. What if the prices DON'T go up but people pay off their debt faster? That would be a total killer because a lot of rich people see a lot of their income coming from other people working to pay off impossible debts.
But that kind of inflation could kill the last of the middle class, because they have to spend a much larger percent of their worth on stuff, just to survive.
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There's a middle class? It's got to be less than a hundred people these days. It's funny how many people still think of themselves as middle class even though they aren't. Most people are working class.
And then there will be the sub-class of people who can't find any job at all, because they have literally nothing to offer that could be worth that minimum wage. :/
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That will happen more and more anyway since all the jobs stupid people can do are done by machine and soon all the jobs that half smart people can do will be done by machines. We have an economic system that can generate vast wealth by machine but the wealth goes to the people who own the machines and the more wealth they have the more machines they can own. How then do you feed the people? Either you let the people starve, you force the wealthy to help feed them or you change the laws about what individuals can own. Pick your evil.
This is a tipping point where it could get really ugly. This is where that inflation might just get real. It's been in the system and hanging around for a while.... And you're very right that it has been rather absorbed in the markets and whatnot. But will this spill it into the "real" economy?
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If there was a real economy ...
The minimum wage these guys are getting is roughly equivalent to the minimum wage in the 70s (though the CPI calculation was adjusted under Clinton to make inflation seem less than the previous measure said it was - which would make it more like $11). It's not really that much. A lot of these jobs will be students and recent graduates so the money will be going to pay for student debt and beer ... and rent. OK, so the price of beer and rent may go up but if the money is being sucked back out of the economy paying down debt it won't have much effect except on those people who make their income from debt.
The main determinant of whether businesses hire is not how many people they can get for a buck but how many people they need. If you need 1 person for your business you won't just hire two for kicks no matter what the price of labour is. You will hire people if you don't have the manpower to capitalise on your business opportunities.
 
FluffyMcDeath said:
That's true, but they don't FEEL that way. But it could be worse than that. What if the prices DON'T go up but people pay off their debt faster? That would be a total killer because a lot of rich people see a lot of their income coming from other people working to pay off impossible debts.
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Well... If prices don't go up, people will still be able to afford to eat. Though, since so much of food is tied to minimum wage level jobs... I can't see how those prices won't go up, regardless of what people try to spend that money on.

There's a middle class? It's got to be less than a hundred people these days. It's funny how many people still think of themselves as middle class even though they aren't. Most people are working class.
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True...
That will happen more and more anyway since all the jobs stupid people can do are done by machine and soon all the jobs that half smart people can do will be done by machines. We have an economic system that can generate vast wealth by machine but the wealth goes to the people who own the machines and the more wealth they have the more machines they can own. How then do you feed the people? Either you let the people starve, you force the wealthy to help feed them or you change the laws about what individuals can own. Pick your evil.
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Yup... I can't agree more, here. And I'd have to guess that a massive minimum wage hike will unfortunately accelerate us toward this end.

If there was a real economy ...
The minimum wage these guys are getting is roughly equivalent to the minimum wage in the 70s (though the CPI calculation was adjusted under Clinton to make inflation seem less than the previous measure said it was - which would make it more like $11). It's not really that much.
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Honestly, I agree here. And, ideally, it would be nice if people could make that without crashing the system.

A lot of these jobs will be students and recent graduates so the money will be going to pay for student debt and beer ... and rent.
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I don't think so. I think the students and recent grads are going to be completely screwed. There won't be any jobs for them. The minimum wage will climb to parity with what the people who have 10 years experience are currently making. So there's your new minimum wage crowd. That's gonna sting.

The main determinant of whether businesses hire is not how many people they can get for a buck but how many people they need. If you need 1 person for your business you won't just hire two for kicks no matter what the price of labour is. You will hire people if you don't have the manpower to capitalise on your business opportunities.
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I'd refine that statement a bit. The determination of whether a business grows or not is based on the need for enough productivity to capitalize on business opportunities... There are multiple ways to gain productivity. Adding employees is one way. And, traditionally, that has been good for workers. But if you make that way costly enough, other ways become more attractive. Overworking current employees is a very popular way to gain productivity, right now. Adding more automation is another. Outsourcing, too. All of these options have the effect of concentrating wealth toward the very upper few, at the expense of the main part of the population.
 
ilwrath said:
I don't think so. I think the students and recent grads are going to be completely screwed.
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True. But I was referring to the guys that already graduated since 2008 and have ended up in the minimum wage jobs already. They've all got debt. They're going to be paying that down and taking money out of the economy so it won't be inflationary unless... well, unless they are the kinds of people who decide that more income means they can support higher debt loads. Hmmmm. OK. We're doomed.
Overworking current employees is a very popular way to gain productivity, right now. Adding more automation is another. Outsourcing, too. All of these options have the effect of concentrating wealth toward the very upper few, at the expense of the main part of the population.
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Overworking is definitely happening, however, a lot of the low wage industries are service oriented. You can't outsource barista and if you get rid of the restaurant staff you have nothing but a big vending machine (and that sort of thing HAS been tried but customers don't seem to like doing that much self serve).
 
FluffyMcDeath said:
True. But I was referring to the guys that already graduated since 2008 and have ended up in the minimum wage jobs already. They've all got debt. They're going to be paying that down and taking money out of the economy so it won't be inflationary unless... well, unless they are the kinds of people who decide that more income means they can support higher debt loads. Hmmmm. OK. We're doomed.
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So, yeah, people with 6 yrs experience... ;)

Overworking is definitely happening, however, a lot of the low wage industries are service oriented. You can't outsource barista and if you get rid of the restaurant staff you have nothing but a big vending machine (and that sort of thing HAS been tried but customers don't seem to like doing that much self serve).
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Well, you can't pay baristas $15/hr and not raise the price of the drinks even more. Who will be left to afford them? The baristas, themselves can't pay those prices. And now that'll put the prices out of range for the people with 6 or 10 years experience, too. Now, the .0001% crowd won't care, but they don't need that many baristas.... rut-roh.
 
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FluffyMcDeath said:
The main determinant of whether businesses hire is not how many people they can get for a buck but how many people they need. If you need 1 person for your business you won't just hire two for kicks no matter what the price of labour is. You will hire people if you don't have the manpower to capitalise on your business opportunities.
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Bingo!

Scaremongering over higher minimum wages is mostly just that.
 
Interestingly, when I posted the story about SeaTac on Facebook, I got a reply from none other than Bill McEwen who now works in SeaTac and personally verified the observations regarding raising the minimum wage there to $15.00
 
ilwrath said:
Well, you can't pay baristas $15/hr and not raise the price of the drinks even more.
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Now a barista has to make four coffees in an hour instead of three to pay for themselves.
Seattle pioneered really expensive coffee
 
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