Could Raising Minimum Wage Mean Even Fewer Millennial Drivers?

"Blake Noble" (no-bull)
02/18/2014 at 15:54 • Filed to: Feature-Length

Generation Y — otherwise known as "those damn Millennials" to anyone old enough to have been awake during the Gerald Ford administration — has been a source of constant grief for automakers and middle-aged balding industry pundits for a couple of years now. "Cellular phones," they constantly quip out of ignorance, "are more important to today's youth than personal transportation."

Some idiot even proclaimed once, " !!!error: Indecipherable SUB-paragraph formatting!!! ." Yeah, !!!error: Indecipherable SUB-paragraph formatting!!! . I bet you also bought that oceanfront condo in Phoenix, right?

I myself am part of the younger end of this demographic (and if you call me a Millennial, I will clean your dirty mouth up with Gojo and a wire brush) that currently comprises a little over a fourth of the United States population at an estimated 80 million strong. You can see why analysts are chugging Kool-Aid spiked with melodrama, and automakers are champing at the bit to tap into a sliver of the money we represent.

Except we don't have any cash. We're !!!error: Indecipherable SUB-paragraph formatting!!! . Most of us still struggle to find work. And if a proposed increase to the federal minimum wage laws manages to pass the legislative litmus test known as Congress, you're likely to going to see even fewer of us working a nine-to-five shift, buying new cars.

Say what? As my college economics professor would say, "Don't shoot me. I'm just the messenger."

Here's Why You Shouldn't Have Shown Up to Economics Class Hung Over

As of today, the federal minimum wage in the United States is set at $7.25 an hour and has been since the summer of 2009, as a result of the Fair Minimum Wage Act passed by Congress in 2007. Some state and local jurisdictions have passed legislation since then that happily exceeds that figure, with !!!error: Indecipherable SUB-paragraph formatting!!! (which makes sense considering the higher costs of living there).

The federal end of the equation could be set to change soon, though. There's been recent talk coming out of Washington to !!!error: Indecipherable SUB-paragraph formatting!!! , and that discussion has really gained a significant foothold not only with some members of Congress, but the American voter as well.

It certainly does sound good when you read it online or hear it on your local evening news. From the look of it, if you're secure in a job, career or profession, you'll be taking home a few dollars extra between pay checks, and that hopefully might even open up a little bit of spare financial breathing room. Folks slaving at an entry-level job will finally see a decent raise and make decent pay. It also seems like younger people entering the workforce will be earning a better wage out of the gate. So what's the problem then?

In reality, raising minimum wage never exactly works out as advertised. While some folks who have a steady job do see some benefit, there's a cost to that gain — !!!error: Indecipherable SUB-paragraph formatting!!! , and !!!error: Indecipherable SUB-paragraph formatting!!! . That last bit is long-hand for "Generation Y."

Why? It's because a significant majority of us are young, lack basic job skills, or both. That itself is a result of the economic downturn of the late '00s and the increases in minimum wage that happened around the same time; many of us entered into the workforce then — whether it was to find a part-time job to earn some extra spending money during school or college, or if it was to work full-time because we didn't feel the need to go college in the first place — only to find recently displaced Gen Xers and Baby Boomers were taking up lower position jobs because they had greater job experience and skills on top of their bachelor's degree. Employers were happy to pay them minimum wage versus a 17 to 20 year-old kid who never worked a day in his life.

That was supply and demand at work, and it's the same basic economic law that's going to make life a living hell for us when wages are hiked yet again. Think about it.

When minimum wage goes up, employers obviously do not want to pay unskilled workers that higher amount of pay. Their demand for unskilled or underskilled labor goes down, and they replace those positions with cheaper automated machines or eliminate them all together. After all, if you were an employer, why would you want to pay someone ten bucks an hour to do a simple job like pump gas or bag groceries? We've seen countless entry level jobs eliminated because of that very reason, and it's those jobs — pump jockey, bag boy, and so on — that gives unskilled labor the basic skills they need to move up in the workforce.

On the supply side of things, when minimum wage goes up, you always have more people looking for work and an increase in the supply of unskilled labor goes in hand with that. Supply outstrips demand, and that's how you get a surplus. And when there's a surplus in labor and those labor costs are high, employers can certainly afford to be picky about who they hire.

Ever !!!error: Indecipherable SUB-paragraph formatting!!! more than in the past? There's your answer in a nutshell, and that's also why if your an early twenty-something with a degree in anthropology, your college education doesn't mean shit when it comes to landing a job hocking Mexican Pizzas at Taco Bell if you haven't held down a job before. If you don't have basic job skills, you're not high up on the totem pole against some 45 to 50 year-old with a business degree and 25 to 30 years of work experience.

Now, I'm not an economist, so I can understand if you want a more professional opinion because you think my explanation might have been lacking somewhere. Thankfully, !!!error: Indecipherable SUB-paragraph formatting!!! that quoted a few studies written by different economists on the subject of minimum wage and the impact it makes. Let's take a look at one of the quotes highlighted.

From a !!!error: Indecipherable SUB-paragraph formatting!!! , released in December 2013:

A minimum wage has two opposing effects on employment: it reduces demand for new workers by raising the marginal cost of an employee, while inducing additional search effort from unemployed workers…The results for job creation show that, in equilibrium, any supply-side effects on search (and the potential increase in the quality of employer-employee matches) do not overcome the negative demand-side effects of higher labor costs…More importantly, we find that on net the minimum wage meaningfully affects employment via a reduction in the rate of long run job growth.

It's really just more of what I just said, except with economic jargon.

So, what does that ultimately mean for the relationship between Gen Y and the auto industry? To be blunt, if minimum wage does increase, automakers are going to have to forget about selling a good number of us a brand-new car.

That Means Boomers Won't Shut Their Damn Mouth About How "Kids Hate Cars"

If you've been following the automotive industry for any length of time, you'll know it has recently made a significant rebound in America since the financial meltdown of the last decade. For the first time since 2007, !!!error: Indecipherable SUB-paragraph formatting!!! . But, on the other hand, that !!!error: Indecipherable SUB-paragraph formatting!!! .

That's where the whole "kids hate cars" rhetoric stems from (and, no, used cars are never part of the equation). Older generations — especially Baby Boomers — who are enjoying the recent economic recovery the most, are buying new cars by the truckload and wondering why Junior or Grandson isn't financing that $25,000 in change along with them, willfully ignorant to the fact we're still just as broke as ever and can't land a decent job. Unfortunately, some of those Boomers !!!error: Indecipherable SUB-paragraph formatting!!! .

!!! UNKNOWN CONTENT TYPE !!!

If minimum wage goes up to $10.10 an hour, it won't yield further gains for the automotive industry, nor will it silence the moronic onslaught of drivel and junk data being posted to !!!error: Indecipherable SUB-paragraph formatting!!! . More importantly, it won't benefit myself or anyone else unfortunate enough to be branded as a "Millennial" (for the record, I regret using that word in the title). Stick whatever partisan label you want to my ass when I say this, I don't care — I hope the GOP does good on continuing to not do anything and the idea dies on the Senate floor.

(Main image credit: !!!error: Indecipherable SUB-paragraph formatting!!! )

Like this article (... probably not)? Keep up with the madness by following Ignitionist here on Kinja or on Twitter !!!error: Indecipherable SUB-paragraph formatting!!! . You can send all hate mail, tips, and kudos to theignitionist@gmail.com. Be classy, stay sassy, and thank you so much for reading.

DISCUSSION (40)

EL_ULY > Blake Noble
02/18/2014 at 16:03

Kinja'd!!!

They will be missing out if they keep being huevones

Arch Duke Maxyenko, Shit Talk Extraordinaire > Blake Noble
02/18/2014 at 16:10

Have you ever had to work for minimum wage?

IT FUCKING SUCKS.

Go tell the people who are working 40+ hours a week on minimum wage and still rely on food stamps to feed their families, that raising the minimum wage is bad.

Doge_Supreme drives a BRZ > Blake Noble
02/18/2014 at 16:11

As a so called millenial I'm all for less millenial drivers on the road. Most millenials cant seem to put down their phones for more than 1.5 seconds, and are incapable of paying attention to the road. Plus them not driving means they all stay in dense urban areas that are easy to avoid and stay off the better country driving roads.

Chris Clarke > Arch Duke Maxyenko, Shit Talk Extraordinaire
02/18/2014 at 16:16

It'll suck worse when they get let go cause their company had to downsize since it can't make payroll.

Jagvar > Blake Noble
02/18/2014 at 16:17

Most millenials struggle to pay the repair bills on their secondhand German luxury cars.

Party-vi > Blake Noble
02/18/2014 at 16:33

1) The survey done by The Wall Street Journal included only 48 economists , and not all of them answered questions. Considering there are more than 700 economist jobs available on Indeed.com I'd say this survey is useless.

2) The Gallup Poll survey only included 1,040 adults older than 18 . Given the poll met requirements for these type of polls that is still only 0.0000032896% of the US population. This is like Subaru saying the Baja is just as good as the Corolla based on their sales figures.

3) The excerpts from both studies you mentioned contradict each-other; the A&M Study states the minimum wage has two opposing effects on employment while Schmitt's study states the minimum wage has little or no effect on employment.

^All that being said, this was a great read. I didn't know about Ignitionist until today but I can't wait to see more of your articles.

04sneaky - Boxers. Blowers. Bikes. And bitches. > Blake Noble
02/18/2014 at 16:37

Also didn't see a point made in there about how raising the national minimum wage also effectively allows the cost of living to be raised as well.

I 100% agree with everything you said, and even if we ignore all the facts that you pointed out, and assume that Millennials do make more money from the raise...

It still just means that the cost of living and value of the dollar become even more skewed than they already are. I make quite a bit for being only 22, and definitely a lot more than most people do my age, and I can barely afford to buy a new car at the moment. Even last year I was making quite a bit more than minimum wage and could still barely afford a car payment along with the costs of a house (renting), utilities, etc.

So I have to concur, raising minimum wage will do nothing but further fuel the issues we already face. In my educated opinion, there has to be a scale, and just bring the ends of those scales closer together does nothing for modern society and the way our economy works.

jariten1781 > Blake Noble
02/18/2014 at 16:51

Additionally, raising the minimum wage tends to disproportionately affect goods and services purchased by low income earners.

A big problem is that people equate minimum wage with a living wage. It's not. Minimum wage is supposed to be an entry level wage that covers the training and initial performance of a job. Companies need to be able to pay less during this period because a person is not performing as a full equivalent worker during that time. By establishing it as a living wage via a minimum wage increase the company has to invest more at the entry level tier for less return which stifles growth, which stifles higher level openings, which leaves people stuck in the minimum wage bracket for far too long, which calls for people to call for a minimum wage increase again.

A tiered minimum wage is a better system, but it's got problems of its own.

FelixScout > Blake Noble
02/18/2014 at 17:32

In regards to this:

Actually many of those jobs were eliminated during times of wage stagnation not increase. In the 10 year period of flat minimum wages from 1998-2008 we see the expansion of automated check out, the elimination of dedicated baggers (now multipurpose workers), and many other jobs replaced through automation or consolidation. Prior to this decade period we see the number of construction workers decline due to mechanization, the number of stitchers decline due to the same, and so many other examples. See the car industry where everything was done by hand we now see fleets of robots and a handful of operators take over what a number of human welders did. Certainly there is still a place for a person in car construction, even in hand constructed assembly, but if it can be automated it almost certainly will be. Frankly no or low skills workers are always replaced since it means reductions in labor costs (see the reduction of longshoremen in the conversion to containerization) and this frequently operates independently of minimum wage rates because cost reductions are cost reductions.

This is why there is slowly growing movement looking to replace minimum wages and most forms of support with Alternative Minimum Income (AMI) where we will run out of jobs due to rapid automation. Yes automation brings about new jobs as economies shift from production to service/knowledge but there is a limit, at this time, to the number of new jobs when populations are effectively stable and not ever increasing, which is what current economic model require for growth.

So there's more in play that what your econ prof was saying.

AthomSfere > Arch Duke Maxyenko, Shit Talk Extraordinaire
02/18/2014 at 17:45

I have, but raising minimum wage in the long run has no effect.

Where does the money to pay minimum wage come from? The stuff the company makes, and with labor being on average ~70% of a companies costs, the cost of goods goes up too. Like McDonald's? Welcome to the $2 menu instead of the $1 menu. Or the $10 value meal. Inflation and equilibrium means that minimum wage increase is worth nothing. Meanwhile everyone making above the minimum wage is taking a pay cut.Think its nice making $11 for a job now? Not when the same job takes an almost 30% cut in buying power.

TheGodDamnPope > Arch Duke Maxyenko, Shit Talk Extraordinaire
02/18/2014 at 22:44

Maybe don't have kids you can't financially support?

The minimum wage cannot change the actual value of someone's labor. It only removes the bottom rungs from the income ladder. Employees who cannot generate value in excess of what their labor costs the employer will simply be let go or not hired at all.

TheGodDamnPope > Blake Noble
02/18/2014 at 22:49

Maybe we wouldn't need a minimum wage if our public education system could give graduates some skills that are actually useful on the job market after twelve fucking years .

Blake Noble > Arch Duke Maxyenko, Shit Talk Extraordinaire
02/18/2014 at 23:15

I've worked for minimum wage before (and when it wasn't $7.25 at that). At Wal-Mart. You don't have to tell me how bad it sucks. I could only imagine how much worse it would be raising two kids on that paltry amount of money a year.

But, you know, that's why we have the Earned Income Tax Credit (EITC) and it's proven much more effective at providing aid for low-income families than simply hiking minimum wage, if that's who you're looking out for. Maybe we should focus on making it an even better tool for raising low-income households above the poverty line instead ... ? Just a thought.

Blake Noble > Party-vi
02/19/2014 at 00:13

1.) Most polls are conducted like that, with small sample groups. I could try to explain why most polls and surveys are conducted like that, but it makes my head hurt. Something to do with error of margin and larger groups not yielding better results or something like that.

2.) ... You know, Gallup explains it on their own website .

3.) Excerpt one illustrates how minimum wage laws relate to supply and demand and excerpt two ... I'll be honest, excerpt two is sort of a mixed bag and I really wish I didn't go with it now. On one hand, it does seem to contradict my position and the excerpt above it, but on the other hand it does tend to illustrate a few of the negative outcomes of raising minimum wage. What can I say? Editing can be a bitch sometimes.

Anyway, excellent counterargument and constructive criticism! Thanks for the feedback.

More importantly, though, thanks for reading and I'm glad you enjoyed it. I'm aiming to have at least one new article or post up on Oppositelock every Monday, Wednesday, Friday, and either Saturday or Sunday if not everyday so you'll be seeing more. ;-)

Blake Noble > Blake Noble
02/19/2014 at 01:10

For future reading, I've decided to remove the second excerpt from the article.

The second excerpt originally included is below.

From another study by John Schmitt, a senior economist at the Center for Economic and Policy Research , released in February 2013:

The minimum wage has little or no discernible effect on the employment prospects of low-wage workers. The most likely reason for this outcome is that the cost shock of the minimum wage is small relative to most firms' overall costs and only modest relative to the wages paid to low-wage workers…Employers can reduce hours, non-wage benefits, or training. Employers can also shift the composition toward higher skilled workers, cut pay to more highly paid workers, take action to increase worker productivity (from reorganizing production to increasing training), increase prices to consumers, or simply accept a smaller profit margin.

I understand this may or may not be the wisest decision to make after initially publishing a post. However, after re-rereading this article again, I feel that excerpt should've been better examined for its potential ambiguity before allowing it to make its way to you. Sorry for the hiccup, and the next piece of content will be up to better snuff.

Thanks for understanding.

samssun > Blake Noble
02/19/2014 at 06:31

You have to put it even simpler for those who think the economy is static and this is free money: make something more expensive (lowest value labor), and people will buy less of it.

If your labor is worth less than $10 an hour, either because you're a teen with no experience or adult with no skills, initiative, or ability to show up on time, then after the wage hike an employer can either choose to pay you more than you're worth, or not employ you (and either buy a machine or tell the $25/hr guy he has to do more).

Party-vi > Blake Noble
02/19/2014 at 09:20

I wasn't really going for a counterargument here (hell I didn't add anything constructive anyway), just pointing out again that most polls and surveys (while representative) are made up of a relatively small group.

Also wow that's quite a busy posting schedule. Make sure you don't get burned out trying to post so much! Keep up the good work.

focus3 > Blake Noble
02/20/2014 at 18:22

" wondered why youth unemployment is higher now ?"

Not really.

Kinja'd!!!

MTY85 > Arch Duke Maxyenko, Shit Talk Extraordinaire
02/20/2014 at 20:16

Raising the minimum wage is bad. It causes the cost of living to go up, so people are STILL on food stamps. Raising minimum wage only raises the poverty level.

Howie > Blake Noble
02/20/2014 at 20:52

Just wait it out gen Y guys, the boomers have one foot in the grave and then it will be economic party time! somebody has got to fill all those empty boomer jobs and there sure as hell ain't enough gen X'ers to do it.

Howie > AthomSfere
02/20/2014 at 21:03

Pffftt... I doubt McDonalds labor costs is anywhere near 70%. Walmart by way of example could effectively raise its average wage from a pathetic 9 bucks an hour to 15 bucks an hour with the penalty incurred per customer only coming to 27 bucks a year or about 56 cents a week if one shops at Walmart on a weekly basis.

Australia's minimum wage is about twice what it is currently in the US and McDonalds menu items are up to 17% more per item compared to the US so that dollar menu item only costs 17 pennies more yet they have a minimum wage that is nearly 16 dollars an hour.

Super Nintendo Chalmers > Arch Duke Maxyenko, Shit Talk Extraordinaire
02/20/2014 at 21:35

Who decides to support a family with an entry level job?

Super Nintendo Chalmers > Blake Noble
02/20/2014 at 21:36

Basic Supply and Demand for your BOZOS who could fit all of your Economic knowledge in the boot of a ferrari w/ room the spare.

Price of Labor goes UP, Demand for Labor goes down. Raising minimum wages discriminate against anyone who is worth or is willing to work for less than that wage.

Common fucking sense.

Arch Duke Maxyenko, Shit Talk Extraordinaire > Super Nintendo Chalmers
02/20/2014 at 21:38

Those who had a decent job and lost it because of the Bush administration recession.

Super Nintendo Chalmers > Arch Duke Maxyenko, Shit Talk Extraordinaire
02/20/2014 at 21:50

"Bush Administration Recession"

Coming from someone who realizes the difference between Republicans and Democrats is about as consequential as Cat and Dog shit, I can tell you unequivocally that the loofah in my shower knows as much about economics as you do.

Blake Noble > Super Nintendo Chalmers
02/20/2014 at 21:55

I would hate to use the dismiss function, but I'll do it if you don't dial it back on the vitriol. I don't care if you want to criticize what I've written, I don't care if you want share your views on politics. But do so constructively.

Arch Duke Maxyenko, Shit Talk Extraordinaire > Super Nintendo Chalmers
02/20/2014 at 21:55

Your loofah got an A in micro economics?
Fucking impressive.

Super Nintendo Chalmers > Blake Noble
02/20/2014 at 22:05

do you mean politely?

Super Nintendo Chalmers > Arch Duke Maxyenko, Shit Talk Extraordinaire
02/20/2014 at 22:06

It's a Macro subject but who cares at this point. It's Bush's fault. Let's pretend Federal Reserve policy has nothing to do w/ it.

Arch Duke Maxyenko, Shit Talk Extraordinaire > Super Nintendo Chalmers
02/20/2014 at 22:13

Who submits a budget proposal to Congress?
Oh, yeah, that's right, the president.

Super Nintendo Chalmers > Arch Duke Maxyenko, Shit Talk Extraordinaire
02/20/2014 at 22:16

Yea, still has nothing to do w/ the price of rice but if you want to talk budgets, deficits, and unemployment, go compare the numbers w/ the last two Dictators in Chief and ask yourself if we're on the right track.

Again... Ignore the Federal Reserve and continue to fall in that ignorant trap of blaming the other party. It's about as constructive as believing professional wrestling is real.

Obruni > Blake Noble
02/20/2014 at 22:45

if the minimum wage kept up with productivity gains since the 1970s (instead of ALL of those gains going to the upper class) it would be nearly $23 an hour.

what the increase to $10.10 does is bring the minimum wage in line with inflation.

I'm actually not in favor of a minimum wage set at the national level though. $10.10 is still way too low in NYC, and is probably too high for Mississippi.

Obruni > Blake Noble
02/20/2014 at 22:59

as for raises reducing job growth: bullshit.

the US economy depends on consumer spending for 70% of GDP. Real wages have been falling for decades for 90% of Americans, and job growth has been anemic. In the 1970s & 1980s the slide in real wages was masked by women entering the workforce in droves. the stock market boom of the late 90's made Americans feel richer, when they really were not. In the 2000s, Americans kept up spending fueled by cheap credit, while savings rates headed negative.

The recovery is finally starting to generate jobs, but only after the personal savings rate plummeted (down nearly 40% year over year).

if Americans' pay doesn't go up, how can the economy grow? Workforce participation is slipping, most Americans aren't in the stock market anymore, and cheap credit was a massive failure.

PardonMyFlemish16 > Blake Noble
02/20/2014 at 23:01

Whittling down something as complex as employment to 1 data point (minimum wage) is laughable at best. But since you concluded by admitting to be a GOP troll I guess any explanation that fits the status quo is good enough.

Folks making minimum wage won't buy new cars because no bank is going to loan someone $20-30K when they are barely making $20K a year. But why get into that when you can spin car talk into an opportunity to jump on your political soapbox? Oppo/Jalop is a place I thought was a safe haven for this garbage... thanks for breaking the seal

AthomSfere > Howie
02/20/2014 at 23:20

Where did you get the 27 bucks figures? I doubt I spend more than $100 at walmart annually, that's a 27% increase!!!

But, labor is much more than just hourly labor. Managers, VPs, unemployment, insurance.

That said, walmart employs over a million people, $6 an hour more is serious money. At $20 an hour (All part time, no benefits basically) Walmart pays $120 million dollars more each week, 52 weeks a year: 6.24 BILLION more a year. You just wiped out 1/3 of their profit (15 billion)in the short run. In the long run though, Walmart is going to make it up, and Target, Ace Hardware and Granpa Pete's Emporium of second hand goods are going to follow. Wages go up, Target has to match to keep employees. So does the paper mill that makes the paper Walmart sells, Coleman for the tents and grills. They also must still sell a product and make a product, so their costs go up. They pass their increased costs to Walmart who raises their prices.

What we soon have is a real income of absolutely no gain. At 40 hours a week, the employee makes 12k more, but that 12k doesn't bring any additional buying power once the economy finds equilibrium.

Now, if one wants to make the argument that this Keynesian policy is good only in the short run to boost the economy, I would buy that. But the whole "social good" or social equality aspect of it is non sense, because it doesn't work. It is basic capitalism, and it doesn't increase real buying power in the long run.

Howie > AthomSfere
02/21/2014 at 00:57

They employee 2.2 million people actually and I'll see if I can dig up the link to the article talking about raising wages and the cost to Walmart and its shoppers.

If your only spending 100 bucks a year at Walmart your an outlier and your cost wouldn't equal 27 bucks since that number is on average shops over the course of a year.

In a community like mine where Walmart is the dominant retailer people are spending well in excess of 100 dollars a year.

Also Walmart doesn't have to pass the entire cost of the wage increase on to the consumer or absorb it entirely within the company. Increasing the average wage to 15 dollars an hour would go a long way toward reducing the company's turnover rate which hovers around 50% and costs the company about 1 billion dollars a year in new hires, by comparison and I work retail as well, my employer pays higher wages and our turn over is less than 10%. Their high turn over rate also negatively effects Walmart's productivity so actively retaining employees through better pay would yield further savings as fewer employees would be required to do the same job.

While my personal experience with higher wages in essentially the same setting is anecdotal I see first hand every single day the beneficial effects of paying a person a living wage versus the race to the bottom and so does my company which considers our wage structure part of its competitive advantage.

xx45xx > Blake Noble
02/21/2014 at 07:21

i think we are ignoring the 1%'s drain on weath in this country. a CEO shouldnt make 400 times what the average worker makes. Another thing is that billionares do create jobs, and provide investments that are important, but any and all money that goes to a healthy middle class is invested and creates jobs just as good, in a more balanced and profitable way. We idolize our celebrities, our rock stars and our athletes. with a little work we are already at their level. but there is a whole hell of a lot more of us faceless, nameless beings who still command the single greatest force on earth. the american middle class.

AthomSfere > Howie
02/21/2014 at 08:03

I would be interested in any link you have. The figure I actually had was 1.4 million employees in 2010, I just wanted a conservative figure.

On your anecdotal evidence though: Your "living wage" whatever it may be is most likely an effective incentive because a) it is above minimum wage b) is more than competitive and c) gives you a higher real wage.

Real Wage - Just in case you are unfamiliar with the term is a measurement of buying power adjusted for inflation.

On turnover, you are dead right. The cost of hiring and training is an expensive ordeal. Sometimes as much as keeping an employee paid full time for three years. It is variable of course by industry and company.

But, I would wager what sets your company above Walmart has more to do with other aspects of the than with pay alone. Pay is surely a factor, but the number of people who will stick with a job for higher pay alone is very low. Benefits and perks go a lot further. Work / life balance, input in the company, paid time off and regular hours go further.

Most importantly though, is that you can't force every company to pay above minimum wage. And the higher the average american wage is, the less each dollar will actually buy. It's supply and demand, and its the natural equilibrium of a free economy.

Finally, I don't think it is right or that it is fair to pay some one so little that they can't live off the wage. But an increase in minimum wage fixes nothing. It bandaids the lowest tier of earners for a short time, but in a few years their buying power is exactly where it was before the minimum wage increase. I would much rather see a real change that would be self-sustaining and close the gap between minimum wage and the top 1% in true buying power.

Chris Zimmer > Blake Noble
02/23/2014 at 12:04

when the minimum wage went up to 7.25 the impact on the economy was MORE jobs were created. When people have even a wee bit more money they feel the need to spend it. Spending creates jobs as somebody has to make the stuff these people are buying...even if all they are buying is more hamburgers.

Economists can show us their perfect econometric models until they are blue in the face (and they'll do just that if you let 'em.) However econometric model do not and cannot take human behavior into account. We are not all perfectly rational decision making machines which is basically the very first assumption in ever econometric model released.

Joseph Shaul > Blake Noble
02/23/2014 at 15:46

If you'll excuse me going all european for a moment, let's look at minimum-wage jobs from a value-added model. A producer of value purchases inputs, adds value to them, and then sells them for more than it cost to make them but less than the value obtained by the purchaser.

In the case of Denny's, the cost to the consumer is only very slightly above the producer's cost (factoring overhead) and very slightly below the benefit obtained (Denny's is nasty.) If a Grand Slam jumps to $10, it will exceed the benefit obtained by almost all purchasers.

However, I argue that Denny's is the exception and not the rule, and for good cause: The cost of labor combined with a competitive market has produced an economy where of the value found between the purchaser's cost and the producer's cost, the business owner gets a small piece, the employee gets a smaller piece, and the purchaser gets a really dang big piece.
Competitive pricing and a huge labor surplus have pushed down the price of goods, but the majority of consumers will pay $2 instead of $1 for a McD's double hamburger or $15 for a delivery pizza. As for the loss of jobs, you are correct - but, given that we've created an economic system where you either offer crap pay or are pushed out of the market by someone else who does, perhaps some economic restructuring is in order.

However