Why Increasing Minimum Wage is Meaningless

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That's basic haggling, though.

Clearly they're going to plead poverty and try to guilt trip the authorities, in order to maintain their current profit level.

Equally clearly they're not going to say "ah well we can afford the wage increase" because then all their existing staff will say "WHAT?!?" and walk out.

It's the same as all these business leaders who threaten to take their companies abroad every time tax increases are mentioned. Lots of hot air, but it's rare for anyone to actually do it.

Plus in many cases their money is already abroad in tax havens, so actually the domestic policy changes have very little impact on them anyway. It's just posturing.

In Australia we call it enterprise bargaining

Don't get hung up on the specifics, I'm using arbitrary numbers to make a point about setting the wage floor too high.

Also, the restaurant business is incredibly unprofitable, you're doing great if you make a dime on every dollar of business you do, and it's brutal, grueling business.

So, you raise the wage, and everyone raises their prices to compensate, and so the now higher wage doesn't go any farther than it did before...

Why not use better tax policy to redistribute the wealth from the top down rather than use the blunt instrument of minimum wage? Raising the top marginal rates on high earners and implementing a reverse income tax or wage subsidy schemes, as I've suggested multiple times already in this thread, would provide the desired effect without punishing small business and devaluing the currency the way arbitrary minimum wages do, yet no one here has even engaged that suggestion.



I don't know what industry you're thinking of that has those kinds of margins, let alone one that pays minimum wage and thus is congruent to this debate. In the restaurant world, the equation is more like you try to keep food cost under 30%, labor at around 35%, and hope that your rent, utilities, operating costs, maintenance, etc don't eat up that remaining 35%, you're lucky if you make $.10 on every $1.00 (in my state, the sales tax is higher than that, so the state is often making more money off your business that you are). It's like that pretty much across the board in the small business world, no one is getting rich off of small shops, bars, restaurants, etc, it's more a labor of love than a pursuit of profit in most cases.

Wage-push inflation is very real. It's common to hear of businesses saying they're going to put their prices up every time a new minimum wage is announced.

In rural and urban areas in the UK, you can noticed a stark increase in prices due to the extra bump up of wages in cities.

In the 70s and early 80s it caused absolute chaos in the UK.

I think the pragmatic answer is that as a country, we’ve consistently chosen to minimize the direct financial responsibility of the state. As a nation we don’t want that level of dependence on government.

Under current schools of thought it would be inconsistent to tell the government to stay out of our business while also asking them to take responsibility for a minimum level of economic health for all citizens.

In a later post I think you go back to the universal basic income idea, and this thread does make me see a new argument for that. UNC would allow entrepreneurs to acquire cheaper labor and also make it possible for more people to take on entrepreneurial risk. But getting there takes a huge sea-change in how Americans view the role of government, and I don’t see how we can get there from where people are today.

Raising the minimum wage just causes businesses to raise their prices to compensate. Where I live it's at least $15 per hr now. So now a drive thru meal costs what the minimum wage was a couple of years ago. I've benefitted from it as my slightly higher than minimum wage has gone up accordingly. But I'm also finding a small amount of groceries costing an astronomical amount.

I think I answered that in my post on page 3: you don’t. That isn’t a viable business. But it isn’t the fault of the human capital, it’s the fault of the business model.

As I wrote, I know it’s a harsh thing to say, and it’s heart breaking. Entrepreneurship is the soul of America, and it would be lovely if every venture built on blood, swear, tears, dreams, ingenuity and sacrifice could succeed. But they can’t, and it isn’t the responsibility of low end wage earners to support a weak business model.

I’ve had to do paperwork for a lot of failing businesses. Entrepreneurs that I personally adore and wish could succeed, but after watching from a distance I usually know why they don’t. I hate having to say it, but the sooner they figure out their venture won’t cut it the better it will be for them. What’s inevitable is inevitable.

It usually isn’t the fault of the employees.

So many things go into making a successful business; a zillion intangibles and a ton of luck. Not even allowing lower wages can make something happen if it hasn’t found the magic formula. I’m sorry, it’s just the way it is.

It would be interesting to see how UBC could alter the formula, but that isn’t going to happen anytime soon.

I've always been able to get along just fine working a single low end job 40 hrs per week.

It depends on where you live.

You certainly can’t live on that in the vast majority of NYC.

I've also noticed that doing a full week in a low end job is usually enough to support someone. If someone needs to do 80 hours a week to support themselves then they should look at their spending habits.

A lot of my friends complain about how little money they have in their relatively low end jobs but have no issue with blowing a grand on a holiday or high end phone.

I think back in the past there was also less gadgets to spend money on making it appear that people had more money as they had "more" for the essentials. If you live in a time period where no mobile phones, game consoles, designer brands and expensive holidays existed then you'll be hard pressed to throw money down the drain. In the past you needed to really go out of your way to end up bankrupt.

In rural US, that required price raise can be problematic to small businesses. Some of them have to compete with large big box stores who can undercut them on price nearly every time. Raising the prices to compensate for the higher pay for workers also reduces the flow of customers into the business. If you are the customer, who would you buy from? Most pick the cheaper source (big box stores), leaving local businesses to dry up and blow away. I have seen this happen countless times growing up in Kansas when a Walmart made it into the area. Every time the minimum wage increases, more rural stores go under shortly after as collateral damage.

For the record I do not hate Walmart or Amazon. Businesses do what they can to survive and thrive. They just happen to be very good at doing what they do.

From my point of view, people have definitely become less thrifty over the past few years. For example, there are homeless people that use high end (I.e. costing above one thousand dollars) new smart phones in my area of the city. You would have not seen that even a few years ago. I still use a very cheap ($100) basic flip phone, as it is the least expensive option. If you know how to live cheaply, you can get by when you need to on minimum wage amounts. I learned that lesson during college.

Billionaires love it when working class people argue against raising minimum wages to avoid price increases on dollar menus. It helps keep all wages suppressed, starting with all wages that are very low - minimum wage jobs, not just at fast food places but everywhere that pays low, and then on up to higher paid jobs as businesses can argue that “you make double minimum wage!” (Or triple or 4x etc whatever) as justification that they’re paid well enough for what they do relative to the lowest paid workers.

Etc etc. All of this enables the largest corporations to continue underpaying everyone at every income level while reaping record profits for the company and its shareholders and paying CEO salaries of 351 times the average worker.

F all of that nonsense, IMO, pay people their Fair share for the work/knowledge/skills/efforts energy & time while still having a sustainable business. Pay people enough to cover their basic needs, healthcare, some wants, and to have enough to decide what to do with in terms of savings, investments, retirement, helping their kids out or whatever - enough to be happy and healthy.

There are already large businesses that operate more like this and they’re doing just fine, so there is no argument that it cannot be done. Costco is one of them, another is Dan Price’ payment processing company where he cut his CEO salary a handful of years ago to enable a $70k minimum wage for his employees.

But greedy CEO’s and other pigs at the trough aren’t going to voluntarily change their compensation structures because they suddenly just grew hearts and human emotions overnight. What I foresee happening are a combination of market forces (no one willing to work for peanuts = you’d better start paying cheeseburgers or steaks) as well as MASSIVE labour actions. General strikes, unionization drives - the collective actions that are long overdue in American labour. Amazon workers, order fulfillment, delivery services, gig workers like Uber etc, grocery stores, meat processing, manufacturing etc - everyone that’s been getting completely screwed for decades has had enough and the s**t is about to hit the fan.

Unions are reactionary. They don’t even need to exist if management is good and everyone’s treated fairly. But when management F’s up and gets too greedy for too long, people get angry, form unions and collective bargaining begins. It’s all just a matter of time in the USA. Employers can start paying more voluntarily, or by force of hard bargaining union negotiators.

No joke, it’s a grueling industry. Food is deceptive. Everyone knows food, but making a sustainable business from it is another matter. People usually underestimate the importance of the business side. And the industry itself is fickle, subject to whims of taste and fashion. My most successful client runs 3-4 different ventures at the same time, 2-3 making solid money and one that just doesn’t make it. Same entrepreneur, different results.

One thing that fascinated me was seeing my restaurant clients actually increase their margins in the pandemic. They were forced to pivot fast and hard, and it was impressive watching so many do it. They really focused on the business side because they knew they had to if they were going to have any chance. I’m curious to see how the experience may change the industry going forward. But no matter what, it will never be an industry for the faint hearted.

I get so nervous when someone takes that bumpy and grueling ride … more than with any other business.