View topic - Is the Safety Net Too Wide? • Redscape

: danivon; Ambassador; Posts: 16006; Joined: 15 Apr 2004, 6:29 am

22 Aug 2013, 2:18 pm

GMTom wrote:when costs go up, demand goes down ...pretty simple stuff?
as demand goes down, employees are let go ...again, pretty simple isn't it?

Doesn't matter that everyone's costs will go up, inflation is not something we want to embrace is it? Or the salaries for ALL go up and your minimum wage becomes absolutely meaningless.

However...

If wages go up, especially at the lower level, then demand goes up generally. Henry Ford understood why.

: GMTom; Administrator; Posts: 11284; Joined: 14 Feb 2000, 8:40 am

22 Aug 2013, 3:06 pm

and when Henry Ford understood this we had virtually no middle class, the vast majority were poor, we still had plenty of people willing to work less desirable jobs for low pay. He was able to pay well just as Google is able to pay well, not every job pays poorly now are they?
comparing apples to pineapples here

and to Ricky's comment

If you actually had evidence of this happening whenever the minimum wage HAS been raised ...you might have something.
But in the past, raising the minimum wage has never had a desultory effect on the economy.

raising minimum wage a few cents, a dollar, yes, this would be somewhat minor but you are not talking about simply raising minimum wage you are talking about doubling it or more, that is not the same thing and to take a few cent raise and comparing the two is now comparing apples to tuna fish.

: rickyp; Statesman; Posts: 11324; Joined: 15 Aug 2000, 8:59 am

23 Aug 2013, 11:16 am

Then how does Australia have a minimum wage equivalent to $14.50 American and a Big Mac only costs 6-cents more than the average U.S. menu price? AND Australia hasn't had an economic downturn in over two decades, and their workers have national health care.

Paying people more at the bottom is like pouring money into the economy at-large. We discovered during the Clinton years that when the lowest paid employees do well, it buoys the entire economy, because they spend it right away.

: Ray Jay; Ambassador; Posts: 4991; Joined: 08 Jun 2000, 10:26 am

23 Aug 2013, 11:31 am

rickyp wrote:
Then how does Australia have a minimum wage equivalent to $14.50 American and a Big Mac only costs 6-cents more than the average U.S. menu price? AND Australia hasn't had an economic downturn in over two decades, and their workers have national health care.

Paying people more at the bottom is like pouring money into the economy at-large. We discovered during the Clinton years that when the lowest paid employees do well, it buoys the entire economy, because they spend it right away.

Rickyp:

Tom, if the teen age employee is doing the same job as the adult employee, and doing it equally as well - is it fair to compensate him less for his labour?

Do you want to divulge the full complexity of the Australian minimum wage, or are you going to wait for other people to do that for you?

: rickyp; Statesman; Posts: 11324; Joined: 15 Aug 2000, 8:59 am

23 Aug 2013, 12:11 pm

http://www.fairwork.gov.au/factsheets/F ... -wages.pdf

here you go ray.

: danivon; Ambassador; Posts: 16006; Joined: 15 Apr 2004, 6:29 am

23 Aug 2013, 12:24 pm

GMTom wrote:and when Henry Ford understood this we had virtually no middle class, the vast majority were poor, we still had plenty of people willing to work less desirable jobs for low pay. He was able to pay well just as Google is able to pay well, not every job pays poorly now are they?
comparing apples to pineapples here

I guess it depends what you mean by 'middle class', and how big you think it was back in 1913. But I seriously challenge the 'virtually no middle class' claim. The USA had quite a substantial middle class by the turn of the Century, as did Industrial Western Europe. In fact, it was only a few decades later that there were concerns that the middle class was shrinking.

The term was quite new, but you should bear in mind that while cities were rapidly growing and drawing in an expanding working class, small town America across the whole country was expanding and that was a major source of the middle class American culture.

The point to the Ford comment though, is that even 'cheap' fast food joints want customers.

Overall - which you should consider, not just one company at a time - if people on low incomes get paid more, they are likely to spend most or all of the increase. That causes demand to go up, which would offset the price increases that wage rises would also create.

Also, we should be wary of over-emphasising the impact of a wage rise on retail prices. For example (as we were talking about increasing wages at fast food chains), I found this on the cost of a burger.

The food itself is 22% of the cost. Fixed costs, utilities, supplies, fees and licences and profit between them account for a further 40%.

The proportion attributed to labour comes to 27%, including the salaried management workforce as well as the lower paid. 17% are on hourly wages

If all hourly wages went up by 50% on average and the company retained profits as 5%, the cost of a burger would go from $7.99 to...

$8.70 - an increase of 8.9%.

Which is a bit of a jump, but there would be a fair number of people whose incomes had gone up by 50%, most of which will go straight into the economy

A sudden rise like that would not be the best way to do it, but the impact would not actually be so disastrous. A bit of inflation may not suit everyone (nowhere near 9%, because there are plenty of sectors that don't have the minimum or sub-minimum wage component that fast food joints do), but spread over time, and if it also led to more real money in the economy, it would not be as painful as you think.

: Ray Jay; Ambassador; Posts: 4991; Joined: 08 Jun 2000, 10:26 am

23 Aug 2013, 1:03 pm

rickyp wrote:http://www.fairwork.gov.au/factsheets/FWO-fact-sheet-minimum-wages.pdf

here you go ray.

they also have lower rates for teens. In light of the discussion, I think that is relevant.

: danivon; Ambassador; Posts: 16006; Joined: 15 Apr 2004, 6:29 am

23 Aug 2013, 2:22 pm

Ray Jay wrote:
rickyp wrote:http://www.fairwork.gov.au/factsheets/FWO-fact-sheet-minimum-wages.pdf

here you go ray.

they also have lower rates for teens. In light of the discussion, I think that is relevant.

Yes, they do. Let's see what they are.

Based on an exchange rate of 1USD=1.11AUD, in US terms the current rates (coming into force on 1 July 2013 are:

Under 16 $5.43
16 $6.97
17 $8.52
18 $10.07
19 $12.17
20 $14.41

And the also have a sliding rate for apprentices:

Year of apprenticeship
1 $9.45
2 $11.16
3 $13.74
4 $16.32

(Hmm, seems that they also have higher minimum wage rates for certain jobs, the yr4 apprentice rate is 95% of the 'level 3 adult rate' - $19.07AUD, $17.18US)

Every Apprentice, and every Australian teen aged 17 or over still has a higher minimum wage than the US federal minimum. 16 year olds are only 30c short.

: Ray Jay; Ambassador; Posts: 4991; Joined: 08 Jun 2000, 10:26 am

23 Aug 2013, 2:29 pm

yes, it's a very interesting system. I'm guessing that it at least partially answers Ricky's question that he asked when he brought it up.

Then how does Australia have a minimum wage equivalent to $14.50 American and a Big Mac only costs 6-cents more than the average U.S. menu price?

: danivon; Ambassador; Posts: 16006; Joined: 15 Apr 2004, 6:29 am

23 Aug 2013, 2:40 pm

Ray Jay wrote:yes, it's a very interesting system. I'm guessing that it at least partially answers Ricky's question that he asked when he brought it up.

Then how does Australia have a minimum wage equivalent to $14.50 American and a Big Mac only costs 6-cents more than the average U.S. menu price?

Only partially. The other part is that wages are not that significant in the cost of a burger (as per my earlier post) - a 10% hike in hourly wages would increase the cost of an $8 dollar burger by about the same amount. A Big Mac is cheaper, about $4-5.

: danivon; Ambassador; Posts: 16006; Joined: 15 Apr 2004, 6:29 am

23 Aug 2013, 2:57 pm

Oh, and New Zealand also has higher MW than the USA - $10.74US standard, $8.59 in training or "starting out" - and their Big Macs are cheaper than in the USA.

The "starting out" rate applies to 16-19 year olds, but only for the first six months or while in a minimum level of accredited training, then they get the standard rate. And it seems they are phasing it out this year.

http://www.dol.govt.nz/er/pay/minimumwage/

: bbauska; Administrator; Posts: 7463; Joined: 26 Jun 2000, 1:13 pm

23 Aug 2013, 3:05 pm

danivon wrote:Oh, and New Zealand also has higher MW than the USA - $10.74US standard, $8.59 in training or "starting out" - and their Big Macs are cheaper than in the USA.

The "starting out" rate applies to 16-19 year olds, but only for the first six months or while in a minimum level of accredited training, then they get the standard rate. And it seems they are phasing it out this year.

http://www.dol.govt.nz/er/pay/minimumwage/

Why is that? Perhaps government regs? Perhaps nation should have the same costs for all items as Costa Rica

: freeman3; Adjutant; Posts: 3741; Joined: 17 May 2013, 3:32 pm

23 Aug 2013, 3:07 pm

Median wage in the U.S is $776 a week (annually that would be $40,000)http://www.bls.gov/news.release/pdf/wkyeng.pdf
Minimum wage is $7.25 an hour (2000 hoursx7.25 is 14,500)
A comparison of minimum wage to median for different countries
http://m.washingtonpost.com/blogs/wonkb ... -is-16-88/ (the author appears to somewhat neutral, though perhaps a little biased against raising the minimum wage)
Here is a review of the various studies done with regard to the effect of employment as a result of raising the minimum wage. http://m.washingtonpost.com/blogs/wonkb ... ible-idea/
I think having a standard where the minimum wage is half of the median wage would be a good idea.

: danivon; Ambassador; Posts: 16006; Joined: 15 Apr 2004, 6:29 am

23 Aug 2013, 3:15 pm

bbauska wrote:Why is that? Perhaps government regs?

If you can find evidence that New Zealand controls the prices of Big Macs, then please present it.

Perhaps nation should have the same costs for all items as Costa Rica

If you want the same wages and conditions, sure. But why aspire so low? Is that the American Dream now?

: bbauska; Administrator; Posts: 7463; Joined: 26 Jun 2000, 1:13 pm

23 Aug 2013, 6:22 pm

danivon wrote:
bbauska wrote:Why is that? Perhaps government regs?
If you can find evidence that New Zealand controls the prices of Big Macs, then please present it.

Perhaps nation should have the same costs for all items as Costa Rica
If you want the same wages and conditions, sure. But why aspire so low? Is that the American Dream now?

I don't have any evidence. I was asking the question.

I get frustrated with the US having to always have higher benefits and standard of living, but have lower prices on medical and food.

Make up your minds.

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Is the Safety Net Too Wide?