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Minimum wage. Should it be $15?

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It's humorous to me that so much attention is fixed on 1969 as a measurement stick. A much more meaningful consideration should be the 'rate of new wealth creation'. The higher the RATE, the higher should be the minimum wage. After all, what we are talking about is cutting up a pie that we all bake. Whatever end of the machinery you work on, the more the machine makes, the more you should share in the result.

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What happens when the rate of new wealth creation goes down? Do newly hired young people take a pay cut from the previous years new hires? And then what if it goes up the next year? Do newly hired young people make more than the previous years new hires?

 

 

 

 

Fifty years ago the typical chief executive made ~ $20 for every dollar a worker made.  Today, that gap is greater than $300 for every dollar a worker makes.  From this perspective, it doesn't look like there is much sharing in the new wealth creation going on.  In addition, there is typically a very expensive "golden parachute" for the chief executive that fails.

Edited by Fjd
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Distribution of wealth is out of control!!!!

 

Is it Germany where the top executives of a company can only make a certain percentage more than the lowest paid worker? We need to do something like that.

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Fifty years ago the typical chief executive made ~ $20 for every dollar a worker made. Today, that gap is greater than $300 for every dollar a worker makes.

 

Is this a bad thing or a good thing?  Aren't salaries determined by the market?    Why wouldn't any employee from the peon to the ceo try to make as much as possible?

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Fifty years ago the typical chief executive made ~ $20 for every dollar a worker made. Today, that gap is greater than $300 for every dollar a worker makes.

 

Is this a bad thing or a good thing?  Aren't salaries determined by the market?    Why wouldn't any employee from the peon to the ceo try to make as much as possible?

 

 

 

 

In a pure economic model shown in a vacuum as a class room exercise, probably; however, in the real world full of disparate situations and impacts, not so much.

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From a few years ago--- about your incorrect 1969 reference:

In 1969, the minimum wage for most private sector workers was $1.60 an hour.(7) That is equivalent to $10.24 in today's money, adjusted for inflation using the CPI. The actual federal minimum wage today is only $7.25 an hour - and has been since 2009.

The president's preferred minimum wage of $10.10 an hour would come close to restoring the minimum wage that prevailed in 1969, adjusted for inflation. But 1969 was a long time ago. More than 60 percent of Americans alive today were born after 1969. (8)

If the minimum wage had grown in lock-step with growth in national income per person since 1969, it would have reached $16.88 an hour in 2013. (9)

Assuming that GDP per capita continues to grow at a modest 2.5 percent per year in 2014 and 2015, the equivalent figure for 2015 would be a minimum wage of $17.73 an hour.

That's quite a bit higher than President Obama's proposed increase to $10.10 in 2015.

The $17.73 an hour figure is not some kind of socialist dream number pulled from thin air. It is the minimum wage we would have today if we had indexed the minimum wage to overall economic growth all those years ago.

A $17.73 an hour minimum wage would be a living wage for the 2010s. In fact, it is almost exactly equal to the $15 living wage demanded by the 2012-2013 fast food industry protests, once you add in 10 paid sick days, 10 paid vacation days, and 10 paid holidays.

I will take your word for it that the numbers are correct. I'm not that smart. I would like to know what 10 holidays should be paid, why 10 sick days (not feeling like going to work doesn't count) and 10 vacation days? I started working at age 12 ($1.02/hour) and missed one day back in 1982 when I had an emergency appendectomy. I was at my brother's wedding so I had Friday-Sunday off. I took an extra day and went back on Tuesday.

$17.73 is fine, the problem is the companies would cut the # of employees and expect more from the people staffed. They get tired of working harder than they feel they should and call in sick. And the cycle continues

People today (I hate to generalize) feel they are entitled to whatever they want, not what they work for. I don't have a lot, but I've never had my hat in my hand either. Maybe I should try it

 

Survey done and posted on my FB page, hopefully you get some action from it

 

Mark

Edited by ZEUS121996

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Fifty years ago the typical chief executive made ~ $20 for every dollar a worker made. Today, that gap is greater than $300 for every dollar a worker makes.

 

Is this a bad thing or a good thing?  Aren't salaries determined by the market?    Why wouldn't any employee from the peon to the ceo try to make as much as possible?

 

 

I think it should.   Minimum wage jobs should simply be gateway labor.  You do it, you don't like it and you strive to move on or do your job so great that you are able to move up in the company.  You give a dog a bone every day and that dog WILL NOT hunt. 

 

At the other end of things, I think is friggin pathetic that fat cats for non profit orgs such as various Cancer societies are paid in excess of million dollar a year salaries. All along you have those same minimum wage workers giving donations that they cant afford to help fight the so called "fight for a cure"  because they have lost a loved one or are simply giving people.  

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In a pure economic model shown in a vacuum as a class room exercise, probably; however, in the real world full of disparate situations and impacts, not so much.

 

So you're saying salaries are NOT determined by the market?

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Fifty years ago the typical chief executive made ~ $20 for every dollar a worker made. Today, that gap is greater than $300 for every dollar a worker makes.

 

Is this a bad thing or a good thing?  Aren't salaries determined by the market?    Why wouldn't any employee from the peon to the ceo try to make as much as possible?

 

 

I think it should.   Minimum wage jobs should simply be gateway labor.  You do it, you don't like it and you strive to move on or do your job so great that you are able to move up in the company.  You give a dog a bone every day and that dog WILL NOT hunt. 

 

At the other end of things, I think is friggin pathetic that fat cats for non profit orgs such as various Cancer societies are paid in excess of million dollar a year salaries. All along you have those same minimum wage workers giving donations that they cant afford to help fight the so called "fight for a cure"  because they have lost a loved one or are simply giving people.  

 

 

 

 

Nice examples of what sometimes happens in this real world full of disparate situations and impacts.

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In a pure economic model shown in a vacuum as a class room exercise, probably; however, in the real world full of disparate situations and impacts, not so much.

 

So you're saying salaries are NOT determined by the market?

 

 

 

 

I don't really want to derail mustang guys thread (at least until he gets the survey participants); however, it is not that simple.  Max has described a couple of results, here is an example where an accounting rule can have an everlasting impact on wages, benefits, what is ultimately received, among other issues. 

 

An Accounting Parable for Our Time

 

February 23, 2012

By Tom Selling 

 

As told to me by a faculty member at Ohio State, who heard it in a presentation by Eugene Flegm, former general auditor for General Motors:

 

Some years after the end of World War II, GM was negotiating a new contract with the United Auto Workers. The labor union proposed that GM should pay an additional amount per hour to its unionized employees, which the UAW would take and invest in a pension fund. Pension payments to retirees would eventually become the full responsibility of the UAW.

 

The CEO of GM consulted with his economist, who advised that the proposal was a good deal for GM: the expected cost of funding the pensions would remain the same, but the risk of funding unanticipated losses would be borne entirely by the union.

 

The CEO next consulted with his accountant, who informed him that current profits would suffer if the union's offer were accepted: the additional wages called for would be reflected in expense immediately. On the other hand, if GM were to keep the responsibility (and risk) of paying the pensions, recognition of the associated expense under extant GAAP would be delayed for decades – until retirees were actually paid.

 

The CEO chose to disregard the economist's advice and to decline the UAW's offer.

 

Postscript: Following similar decisions of subsequent CEOs and questionable funding decisions, GM's underfunded liability for retirement benefits grew to $50 billion as of December 31, 2008. In December 2008, under President Bush, GM received $13 billion of TARP funding, and another $39 billion under the Obama administration.

 

The 'Moral of the Story'

 

This tale of GM wealth destruction is just one of many that can be told that begins with a bad accounting rule. It's a relatively dated story, but if the first twelve years of this millennium are any indication, the problem of perverse accounting incentives has been getting much worse – despite the putative best efforts of standard setters to enhance financial reporting "quality."

 

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I don't see the problem with a CEO making millions a year while entry level labor with no skills make a wage that isn't livable. The skills required to be a CEO are possessed by far fewer people than those possessed by burger flippers. That makes them extremely valuable assets.

The minimum wage was never meant to be livable. Perhaps I could make a case that it was meant to be unbearable - so that those making it would strive for more experience/education so that they could make more.

If a CEO is making an incredible amount of money it is because companies who pay these sums have done the math to determine the position brings more value than it consumes and, they have to compete in the marketplace to draw in the talent.

You aren't making enough? Do you want to be that CEO and make all that money? What is stopping you, other than yourself? If you aren't making enough because you don't have the talent/skills/drive to improve your station in life, welcome to how things work. I think it is completely unfair to demand something you are not qualified to receive and cry to the government when it doesn't materialize.

There is another facet to all this: not everyone can be on top.

Edited by Bella
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People today (I hate to generalize) feel they are entitled to whatever they want, not what they work for.

I sell utility trailers, the way those things are made are weird. All the welders have to be paid by "piece part". It's like a mini-contract. There is literally a list that says ok if you frame a trailer you get $75. Wire one up, $20. Dozens of individual tasks. If they were simply paid by the hour, nothing would get done. Even with this we've had people quit within 10 minutes before, also had people quite while admitting they could make more just sitting at home drawing welfare. The unfortunate thing is that I've done the math, and if they busted ***, they could make $50 an hour, for as much work as they wanted. Some have even gotten mad at me for making way more by selling them with no physical labor involved, which is odd and insulting to me, since my efforts literally give them a $50 an hour job.

Edited by MetropolisLakeOutfitters

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It's humorous to me that so much attention is fixed on 1969 as a measurement stick. A much more meaningful consideration should be the 'rate of new wealth creation'. The higher the RATE, the higher should be the minimum wage. After all, what we are talking about is cutting up a pie that we all bake. Whatever end of the machinery you work on, the more the machine makes, the more you should share in the result.

Sent from my SM-T330NU using Tapatalk

What happens when the rate of new wealth creation goes down? Do newly hired young people take a pay cut from the previous years new hires? And then what if it goes up the next year? Do newly hired young people make more than the previous years new hires?

 

 

There's a lot of relativity in the economy already. Such as the price of gasoline. I'm not suggesting adjustments every year, however, when the change is significant, some adjustment would seem appropriate for new hires. 

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I don't see the problem with a CEO making millions a year while entry level labor with no skills make a wage that isn't livable. The skills required to be a CEO are possessed by far fewer people than those possessed by burger flippers. That makes them extremely valuable assets.

The minimum wage was never meant to be livable. Perhaps I could make a case that it was meant to be unbearable - so that those making it would strive for more experience/education so that they could make more.

If a CEO is making an incredible amount of money it is because companies who pay these sums have done the math to determine the position brings more value than it consumes and, they have to compete in the marketplace to draw in the talent.

 

 

 

 

The pay ratio surveys that I'm referring to show the ratio between the CEO and the median pay (half above and half below the amount), not the entry level worker making minimum wage.  In the case of the example in my previous post, it looks like the CEO could have been viewed as looking more at his bonus based on current earnings over the long-term wealth generation of the company.

 

Please keep in mind that this is substantially more complex; however, I believe that a simple way to show how the share in the wealth creation referenced above could be demonstrated this way.  Fifty years ago the "wealth pie" was $21 and split in a manner of CEO $20 and median workers $1.  Today the $301 of the "wealth pie" is now split CEO $300 and median workers still $1. 

Edited by Fjd
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It's humorous to me that so much attention is fixed on 1969 as a measurement stick. A much more meaningful consideration should be the 'rate of new wealth creation'. The higher the RATE, the higher should be the minimum wage. After all, what we are talking about is cutting up a pie that we all bake. Whatever end of the machinery you work on, the more the machine makes, the more you should share in the result.

Sent from my SM-T330NU using Tapatalk

What happens when the rate of new wealth creation goes down? Do newly hired young people take a pay cut from the previous years new hires? And then what if it goes up the next year? Do newly hired young people make more than the previous years new hires?

 

 

 

 

Fifty years ago the typical chief executive made ~ $20 for every dollar a worker made.  Today, that gap is greater than $300 for every dollar a worker makes.  From this perspective, it doesn't look like there is much sharing in the new wealth creation going on.  In addition, there is typically a very expensive "golden parachute" for the chief executive that fails.

 

 

Correct. The "sharing" which is just a euphemism, is wickedly out of balance today. Suppose a 100 units of brand new wealth is created this year: then about 90 of those units are going into the same 5,000 hands who already have most of the previously created wealth. That simply means that the rules (again a euphemism) for distribution, have been wildly skewed in one direction. It's not good for anyone. The health of the economy depends on consumer spending. More spending is good. Ergo, more wages are good. 

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Many of these big time CEO's are paid in company option too where they have to sit on them a good while before they can liquidate any. It also gives the company a chance to see just how well he has dug the company out of its hole

 

 

 

 

It's humorous to me that so much attention is fixed on 1969 as a measurement stick. A much more meaningful consideration should be the 'rate of new wealth creation'. The higher the RATE, the higher should be the minimum wage. After all, what we are talking about is cutting up a pie that we all bake. Whatever end of the machinery you work on, the more the machine makes, the more you should share in the result.

Sent from my SM-T330NU using Tapatalk


What happens when the rate of new wealth creation goes down? Do newly hired young people take a pay cut from the previous years new hires? And then what if it goes up the next year? Do newly hired young people make more than the previous years new hires?

 

 

 

 

Fifty years ago the typical chief executive made ~ $20 for every dollar a worker made.  Today, that gap is greater than $300 for every dollar a worker makes.  From this perspective, it doesn't look like there is much sharing in the new wealth creation going on.  In addition, there is typically a very expensive "golden parachute" for the chief executive that fails.

 

 

Correct. The "sharing" which is just a euphemism, is wickedly out of balance today. Suppose a 100 units of brand new wealth is created this year: then about 90 of those units are going into the same 5,000 hands who already have most of the previously created wealth. That simply means that the rules (again a euphemism) for distribution, have been wildly skewed in one direction. It's not good for anyone. The health of the economy depends on consumer spending. More spending is good. Ergo, more wages are good. 

 

  Yeah, but the majority, but not all of these minimal paid workers are giving these additional wages to individual sectors such as BUDWIESER, MARLBORO and the neighborhood drug dealer.   Its sure not going to the mom and pop shops getting clothes cleaned, shoe repair, furniture and certainly not the grocers's as they already get the food stamps. Yeah, we can concentrate on the good minimal paid workers, but for the math to actually friggin work, we have to be brutally honest and it seems this is something our current establishment cant do to ensure they will have many, many followers from all colors and all nationalities.

Edited by Max2

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It's humorous to me that so much attention is fixed on 1969 as a measurement stick. A much more meaningful consideration should be the 'rate of new wealth creation'. The higher the RATE, the higher should be the minimum wage. After all, what we are talking about is cutting up a pie that we all bake. Whatever end of the machinery you work on, the more the machine makes, the more you should share in the result.

Sent from my SM-T330NU using Tapatalk

 

I picked 1969 as an example of wages that are not competitive in the world.  Wages were high in 1969 because it was the end of a strong "made in america" time.  If we try to duplicate that time we cannot be competitive. 

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Ours is not a micro environment anymore. As a nation we are competing more and more on the world stage. We import a large percentage of our labor resources and that doesn't look like it is going to subside in the short future. More people competing for fewer, or even more jobs, pushes the compensation packages down. And again, not everyone can be King - we must have serfs. So only a select few are lucky enough to make it to the top where, because of the increase in world-wide markets becoming available, top end compensation packages are reflective of that.

If you are looking for a villain in these so-called wage disparity issues, look to your government. They are the ones that opened the doors. If you are looking to them to fix it. Well, then you deserve what you get.

Conversely, it was destined to be this way. The world would be leaving the U.S. behind if we didn't open our markets as they were doing.

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I don't see the problem with a CEO making millions a year while entry level labor with no skills make a wage that isn't livable. The skills required to be a CEO are possessed by far fewer people than those possessed by burger flippers. That makes them extremely valuable assets.

If a CEO is making an incredible amount of money it is because companies who pay these sums have done the math to determine the position brings more value than it consumes and, they have to compete in the marketplace to draw in the talent.

 

 

 

Many of these big time CEO's are paid in company option too where they have to sit on them a good while before they can liquidate any. It also gives the company a chance to see just how well he has dug the company out of its hole 

 

 

 

I believe that since the 1980s studies show that CEO compensation in the United States has outpaced corporate profits, economic growth and the average compensation of all workers.

 

Between 1980 and 2004, Mutual Fund founder John Bogle estimates total CEO compensation grew 8.5 percent/year compared to corporate profit growth of 2.9 percent/year and per capita income growth of 3.1 percent.

 

A 2006 article in Bloomberg News, titled "Letter From Washington: As U.S. rich-poor gap grows, so does public outcry" actually indicated that "by 2006 CEOs made 400 times more than average workers—a gap 20 times bigger than it was in 1965."  Of course, as a general rule, the larger the corporation the larger the CEO compensation package. 

 

http://webuser.bus.umich.edu/jpwalsh/PDFs/Bogle%20-%202008%20-%20Reflections%20on%20CEO%20compensation%20--%20AMP%20paper.pdf

 

http://www.forbes.com/2002/03/22/0322enronpay.html

 

 

Given these types of statistics, how much of the rise in CEO compensation is really related to the competition for scare CEO talent that will be a benefit to the stockholders' long-term value and how much is the result of manipulation of the system by the conflict of interest that arises in a 'self-dealing' situation where the CEO is in a position to greatly take advantage of the position in transactions and acting in his or her self-interest rather than in the best interests of the shareholders?

Edited by Fjd
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Ours is not a micro environment anymore. As a nation we are competing more and more on the world stage. We import a large percentage of our labor resources and that doesn't look like it is going to subside in the short future. More people competing for fewer, or even more jobs, pushes the compensation packages down. And again, not everyone can be King - we must have serfs. So only a select few are lucky enough to make it to the top where, because of the increase in world-wide markets becoming available, top end compensation packages are reflective of that.

If you are looking for a villain in these so-called wage disparity issues, look to your government. They are the ones that opened the doors. If you are looking to them to fix it. Well, then you deserve what you get.

Conversely, it was destined to be this way. The world would be leaving the U.S. behind if we didn't open our markets as they were doing.

Essentially, we are victims of our own success. Our economy far outperforms most others and our wage structure, while some here think it was too low, was/is comparatively very high. Now we're opening up all the economies and importing these lower-waged workers and our existing workforce is crying foul.

It's like opening the locks on a lake that once contained two bodies of water at different levels. Ours, being the higher level economy, is being drained into the lower level economies and it will continue that way until both lakes (economies) are at equal levels. The key to profiting from it is to understand it and then figure out how to take advantage of it. Those that can't or don't want to see it will be the ones who will continue to complain 'it isn't fair.'

Edited by Bella
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