Minimum wage. Should it be $15?

[oldtimer]

Here ya go people.  I did read this.  Funny how he doesn't think he makes too much.

 

http://www.msn.com/en-us/news/politics/trump-doubles-down-on-claim-that-us-wages-are-too-high/ar-CCfQ4Z?li=AAa0dzB

[Fjd]

 

 

in a Wall Street Journal column from May 2015 that Warren Buffett, CEO of Berkshire Hathaway (one of the richest men in the world), provided these two sets of data in that column that I found interesting:

 

1. “In 1982, the first year the Forbes 400 was compiled, those listed had a combined net worth of $93 billion.  Today, the 400 possess $2.3 trillion, up 2400% in slightly more than 3 decades, a period in which the median household income rose only about 180%.”

  

 

 

 

 

I wanted to put the statistic above into more of a table form.

 

 

 

Forbes 400 net worth:

1982:      $       93,000,000,000.00

2014:      $ 2,300,000,000,000.00

 

Median income (half above / half below)

1982:      $ 28,070.00

2014:      $ 53,657.00

 

 

 

 

 

 

 

I thought this analysis of the numbers above may be more informative if broken down by one median income earner and the average net worth for one Forbes 400 net worth individual.

 

In 1982 it would take 8,283 years for one median income earner of $28,070 per year to accumulate the average for one Forbes 400 net worth individual of $232,500,000.

 

Consider this, that by 2014, even with that 180% increase in the median income, it would take 107,162 years for one median income earner of $53,657 per year to accumulate the average for one Forbes 400 net worth individual of $5,750,000,000.

 

With this type of widening gap, the "Rule of 72" will not be of much help when earning the median wage.

[oldtimer]

Seriously metro.  Because the whole economy depends upon minimum wage jobs, an increase works its way through every level of the economy?

[Paducah Home Theater]

I thought you went to college and studied your *** off.  What exactly did you learn?   Clearly not the wage-price spiral and the conditions which make it valid.

Really dude? What's that all about?

 

Every level is the key here.  Every level is the assumption.  What is the actual fact?  Minimum wage represents an increase at every level input?  Who cares about Starbucks anyway?  Check out the coffee cables thread.  We brew our own.  Every level?  When you can walk on the paper without leaving a trace, then you will have learned.  I don't recall any published numbers regarding the profit of Starbucks.  Please demonstrate.  So expensive coffee becomes more expensive.  This suddenly becomes every level?  OK, for rhetorical purposes I will say it again.  Every level?

Real world examples from my own business:

1. Loggers make less than $15 an hour on average. Lumber just went up if you raise the minimum wage to $15 an hour.

2. Once the trees are cut, the sawmill people can make less than $15 an hour. Some make more but some don't. Lumber just went up again.

3. Gas station employees typically make less than $15 an hour, gas will go up to pay them more. Ship that lumber from Oregon to Missouri and guess what's going to happen? Right. Lumber just went up again.

4. Even though they could since it's based on piece-part, most people building trailers probably don't make $15 an hour. But, if we want better wages, these guys need a raise too, right? So the cost of building a trailer even after you have the materials just went up.

5. A dealer buys the trailer then pays a girl to work in the office. I seriously doubt these folks make $15 an hour on average. So not only does he raise prices to pass on the increased price that the manufacturer gave him, but he raises it a little more to pay the secretary.

Same with chicken farms.

1. I doubt factory farm workers are making $15 an hour. Chicken just went up.

2. Sell those chickens to Tyson. Seriously doubt the guys doing the butchering are making $15 an hour. Chicken just went up again.

3. Sell those chickens to a grocery store. The store clerk definitely isn't making $15 an hour. So the store passes on the prices from Tyson as well as a little more to pay for the clerk.

Yes, every level. Lots more people are touching consumer products than just the retail clerk. They're not all straight up minimum wage but if you more than double it there will be lots of people that will be affected.

 

Seriously metro.  Because the whole economy depends upon minimum wage jobs, an increase works its way through every level of the economy?

My original statement at least meant that every level of the supply chain is increased, not every level of the economy. But, realistically, it probably is. When inflation occurs, the top dogs don't just absorb it, they just make it worse if they can get away with it.

Edited November 12, 2015 by MetropolisLakeOutfitters

[oldtimer]

Tyson already owns the chickens, or at least told their suppliers what they will pay.  Tyson does not give a rats how it affects the supplier.  Furthermore I have already agreed with you that the mechanism is the key and nothing needs to be rigid across the spectrum.  As for where the college quote comes from, it came from you originally in this thread.  Still yet to see any actual Starbucks numbers.  Or any evidence that minimum wage jobs are so fundamental to the economy that any change in wages creates a radical change for everything else.  Do you agree with Trump that the problem is that americans make too much already?  If so what are you willing to sacrifice to make us "competitive?"  Or is it of course not directed at your earnings but at those who make less than you?  Keep being rigid about it.  Keep thinking inside the box.  Keep thinking how you have been told to think.

Edited November 12, 2015 by oldtimer

[Paducah Home Theater]

As for where the college quote comes from, it came from you originally in this thread.

Oh I remember, I was envisioning a corporate officer at McDonalds vs. the guy at the register working for the same company. Somehow you latched on and applied it to me and have repeated it multiple times like you're trying to make fun of me or some crap. I kinda take offense at that. I have no beef with you otherwise.

 

Still yet to see any actual Starbucks numbers.

Post 497. Of course there's way too many variables to say anything of the sort for sure but that's how much this stuff can add up.

Edited November 12, 2015 by MetropolisLakeOutfitters

[Travis In Austin]

I thought you went to college and studied your *** off. What exactly did you learn? Clearly not the wage-price spiral and the conditions which make it valid.

Really dude? What's that all about?

Every level is the key here. Every level is the assumption. What is the actual fact? Minimum wage represents an increase at every level input? Who cares about Starbucks anyway? Check out the coffee cables thread. We brew our own. Every level? When you can walk on the paper without leaving a trace, then you will have learned. I don't recall any published numbers regarding the profit of Starbucks. Please demonstrate. So expensive coffee becomes more expensive. This suddenly becomes every level? OK, for rhetorical purposes I will say it again. Every level?

Real world examples from my own business:

1. Loggers make less than $15 an hour on average. Lumber just went up if you raise the minimum wage to $15 an hour.

2. Once the trees are cut, the sawmill people can make less than $15 an hour. Some make more but some don't. Lumber just went up again.

3. Gas station employees typically make less than $15 an hour, gas will go up to pay them more. Ship that lumber from Oregon to Missouri and guess what's going to happen? Right. Lumber just went up again.

4. Even though they could since it's based on piece-part, most people building trailers probably don't make $15 an hour. But, if we want better wages, these guys need a raise too, right? So the cost of building a trailer even after you have the materials just went up.

5. A dealer buys the trailer then pays a girl to work in the office. I seriously doubt these folks make $15 an hour on average. So not only does he raise prices to pass on the increased price that the manufacturer gave him, but he raises it a little more to pay the secretary.

Same with chicken farms.

1. I doubt factory farm workers are making $15 an hour. Chicken just went up.

2. Sell those chickens to Tyson. Seriously doubt the guys doing the butchering are making $15 an hour. Chicken just went up again.

3. Sell those chickens to a grocery store. The store clerk definitely isn't making $15 an hour. So the store passes on the prices from Tyson as well as a little more to pay for the clerk.

Yes, every level. Lots more people are touching consumer products than just the retail clerk. They're not all straight up minimum wage but if you more than double it there will be lots of people that will be affected.

Seriously metro. Because the whole economy depends upon minimum wage jobs, an increase works its way through every level of the economy?

My original statement at least meant that every level of the supply chain is increased, not every level of the economy. But, realistically, it probably is. When inflation occurs, the top dogs don't just absorb it, they just make it worse if they can get away with it.

Your assumptions are off base.

http://work.chron.com/much-money-loggers-make-6803.html

Not to argue your point for you, but what you need to find is a reputable source that says prior increases in the minimum wage resulted in inflation.

Giving examples that don't match reality only cause the argument you are trying to advance to move in reverse.

Reputable source based on historical data.

[Woofers and Tweeters]

The cost of labor though, which can make up anywhere from 30 percent to 60 percent or more of total operating costs ...

 

 

We're not going to preserve jobs in the US by driving the cost of manufacturing here higher. Why was there so much Off-Shoring: LABOR cost. Now we have Next-Shoring. 

 

Part of the problem is the consumer demanding products to be cheaper, regardless of quality. Suppliers gave the consumers what they asked for, but the jobs went somewhere else.

Want your investments to do better (who doesn't)? cut cost and offshore. Now the company you invest in is stronger, but we're out of a job.

 

Why do people keep saying that labor cost doesn't have an affect on goods? Look at what's already happened, look at how many jobs have been lost. 

[Paducah Home Theater]

Not to argue your point for you, but what you need to find is a reputable source that says prior increases in the minimum wage resulted in inflation.

My concern is how fast we're talking about doing it. You more than double it overnight, which I'm not sure has ever happened before, and you're going to send certain industries into shock. The link I posted earlier has several single companies with ridiculous numbers of people on minimum wage. We're talking about doubling that instantly. I don't see how you can do such things that fast then say it would have zero effect on inflation.

Edited November 12, 2015 by MetropolisLakeOutfitters

[oldtimer]

Alright sorry for the offense.  It looked to me like you were speaking personally so that's my fault.  I would suggest a refresher in economics though.  Specifically in the mechanics and conditions of the wage-price spiral, and it's never a bad idea to revisit Friedman's theory of inflation.  And to set the record perfectly straight, I also applied the quote to myself.  Yes I did and yes I did.

[Travis In Austin]

Not to argue your point for you, but what you need to find is a reputable source that says prior increases in the minimum wage resulted in inflation.

My concern is how fast we're talking about doing it. You more than double it overnight, which I'm not sure has ever happened before, and you're going to send certain industries into shock.

Well again, this cycle is pretty much identical to how it has been raised everytime in the past. One side starts with a number, the other side says no, and they end up somewhere lower than what was initially sought.

If a raise in minimum wage results in higher prices there should be plenty of data on it.

[oldtimer]

The cost of labor though, which can make up anywhere from 30 percent to 60 percent or more of total operating costs ...

 

 

We're not going to preserve jobs in the US by driving the cost of manufacturing here higher. Why was there so much Off-Shoring: LABOR cost. Now we have Next-Shoring. 

 

Part of the problem is the consumer demanding products to be cheaper, regardless of quality. Suppliers gave the consumers what they asked for, but the jobs went somewhere else.

Want your investments to do better (who doesn't)? cut cost and offshore. Now the company you invest in is stronger, but we're out of a job.

 

Why do people keep saying that labor cost doesn't have an affect on goods? Look at what's already happened, look at how many jobs have been lost. 

How many goods made in china have you bought that looked like it was supposed to be, yet did not function at all?  I have time after time.  Making things is important, and making things that actually work is even more important.  When nothing you buy works how long will it take to spend more for something that does?  Do you agree with Trump that Americans make too much even still?  Is that what anyone wants in a leader?  How does that attitude square with making America great (supposedly again)?  Driving wages down further makes us great again?

[Jim Naseum]

Of you breakdown $3 cup of coffee you find materials, overhead, labor, and profit. Now look, it should be obvious to anyone with a calculator that you can raise labor lower profit and maintain $3 coffee!

If you really think that's what will happen even if it were possible, then I just need to bow out, that's a silly idea. Today's supply chain is often based on high volume low markup due to competition. You can't just raise costs significantly and expect businesses just to absorb it. Even if it were possible, the board and shareholders on a public company wouldn't be cool with that.

I also showed the numbers on this very thing in regards to StarBucks. The cost of raising their pay to $15 an hour on all their minimum workers is likely more than all the profits they make worldwide for the entire year. Yet you think that coffee businesses specifically will literally just absorb it and call it good. Makes no sense.

They absorb it when they have enough excess profit to absorb it. The last thing any business wants to do is raise prices.

Let's play coffee billionaire, and analyze that $3 coffee.

Pro Forma Cost Structure Model

Materials: $1.00

Overheard: $1.00

Labor: $0.25

Profit: $0.75

Now, let's say they are paying $10 an hour labor and the labor wants $15. That's a 50% increase. So, the labor goes to 37 cents, which leaves 63 cents profit, and the price stays at $3.

Why is that hard to believe or accept? The point is that labor and profit are in a tug of war. That's totally common in any business. We can't assume that profit is fixed or undisputable.

Sent from my SM-T330NU using Tapatalk

[oldtimer]

Close to a billion in the first quarter this year. For the mathematically challenged, a quarter is three months.

 

http://marketrealist.com/2015/01/starbucks-net-profits-surge/

 

There's a number.

[Woofers and Tweeters]

 

The cost of labor though, which can make up anywhere from 30 percent to 60 percent or more of total operating costs ...

 

 

We're not going to preserve jobs in the US by driving the cost of manufacturing here higher. Why was there so much Off-Shoring: LABOR cost. Now we have Next-Shoring. 

 

Part of the problem is the consumer demanding products to be cheaper, regardless of quality. Suppliers gave the consumers what they asked for, but the jobs went somewhere else.

Want your investments to do better (who doesn't)? cut cost and offshore. Now the company you invest in is stronger, but we're out of a job.

 

Why do people keep saying that labor cost doesn't have an affect on goods? Look at what's already happened, look at how many jobs have been lost. 

How many goods made in china have you bought that looked like it was supposed to be, yet did not function at all?  I have time after time.  Making things is important, and making things that actually work is even more important.  When nothing you buy works how long will it take to spend more for something that does?  Do you agree with Trump that Americans make too much even still?  Is that what anyone wants in a leader?  How does that attitude square with making America great (supposedly again)?  Driving wages down further makes us great again?

 

1) I do a lot of purchasing. Regularly, I ask the seller for to tell me the country of origin

2) The company I work for has closed several plants in the US. I don't like it, but there is nothing that I can do and my location might be next

3) A lot of what Trump says makes sense, a lot doesn't. If one takes it for what he might be saying (for the US labor force to regain jobs, then the labor costs needs to be reduced) might make sense. 

 

 

As I said before: the ones who wreck the economy to make a profit should be jailed. To do so, laws have to change. < that is the other end of the problem. We, as a nation, have to arrest both problems. We can't punish someone for earning more, nor can we reward ones for contributing less. 

[Jeff Matthews]

If a raise in minimum wage results in higher prices there should be plenty of data on it.

 

 

How much did you pay for a Snickers bar in 1978?

[Mallette]

Why do you think it wouldn't?

 

Begs the opposite question as you've offered no rationale for a rather speculative assumption.  Basic logic suggests that an increase in cost of "x" will yield an increase of the same percent, not across the board, but only in a single component.  If the pyramid of production is quite involved that increase may simply be absorbed in the system.  As mentioned above quite rationally, another possibility is that the 1 percent either absorb it  or pass it through.  Odds are they will absorb part of it in fear that the consumer will do what a consumer does when they don't want to pay more.  They just buy less.  So, in general, the entire system absorbs the increase proportionally.  The cost of electricity isn't going up due to an increase in the minimum wage as such wage earners have very little to do with its production. 

 

The question remains is whether it's cheaper to ensure a healthy and productive populace by direct means, or dealing with it indirectly and fooling ourselves. 

 

Dave

[Jeff Matthews]

The cost of electricity isn't going up due to an increase in the minimum wage as such wage earners have very little to do with its production. 

 

 But wages sure as heck go down when energy prices go down.   When prices go down low enough, unemployment even results.  Do you still disagree there is a correlation between wages and prices?

[Mallette]

But wages sure as heck go down when energy prices go down. When prices go down low enough, unemployment even results. Do you still disagree there is a correlation between wages and prices?

 

Duh.  What I said was that an increase in minimum wage has a minimum impact on the final price of anything.  If you recall, I was in the drilling business so I am more than a little aware that unemployment happens when prices go down.  However, I challenge anyone to suggest that the price of gasoline would shoot up if every convenience store in the nation suddenly paid 20.00 an hour to their clerks.  These people are a miniscule part of the cost of doing business.  The chain from the wellhead to the gas pump includes almost nobody making remotely that little.  Spread it out over cost increase in the corny dogs, beer, slushes, whatever they sell besides gas in the cost would be insignificant and hardly noticed.  In fact, I recall on a consulting job that back in the 80s the average tenure of a clerk at 7-11 was like six weeks and the company was out more to acquire and train them than they were paid in the entire term of employment.  Even at the time it occurred to me that maybe if they were paid a decent wage you might double that time and it would cost nothing given you'd at least get your investment back. 

 

I am certainly open to someone suggesting that the "good life" most of us Klipsch forumites live is somehow dependent on keeping  the minimum wage low and why that is the right approach.  I just don't see it.  Our biggest, most desirable, and durable items are not produced by minimum wage people.  By and large the output of the low salary people in this country is stuff we can live without entirely and probably should. 

 

Dave

[Bella]

Still at this I see.

 

Well here is my final comment on this thread. the U.S. does not operate in a vacuum with the rest of the world. Everybody seems to be ignoring U.S. wage structure as it applies beyond our borders. As I stated back in post #60 and virtually everyone ignored, now that markets have opened and continue to open around the globe we are competing with millions of people making less per hour than even our lowest paid workers. Some of them are coming here, competing for those lowest paid jobs. More are coming every month. These opening of markets where cheap labor is available and the influx of immigrants into the U.S. who will work for less, is poison to those looking for a higher minimum. 

 

Corporations are being forced more and more to become multi-national to survive. Those who do global business need to find the lowest cost workers to compete with companies offering products at ever-cheaper prices. The more these markets open up, the less likely the minimum wage can be sustained at the current push for $15 in this country. Frankly, it's an unrealistic pipe dream. Not to pour salt in the wound but obviously, those companies are adding assets across the globe: factories, operations centers, etc. That's more responsibility and more to manage so, you guessed it, CEO compensation packages will continue to increase. The wage gap between them and the minimum wage worker will continue to rise. 

 

See it as two lakes isolated from each other by a damn. One lake (the U.S.), has more resources than the other lake so if you were to remove the damn, the lake with the higher level drains into the other lake until the two are equal.  We are not going to rebuild the damn so the U.S. can expect more wage deflation until an equilibrium is obtained. It may take decades, if we have decades left. That is the reality that needs to be faced. 

Edited November 12, 2015 by Bella