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Minimum wage would be $26 an hour if it had grown in line with productivity

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Re: Minimum wage would be $26 an hour if it had grown in line with productivity

#51

Post by teawrecks »

randyrand wrote: post #14

When productivity increases, you have 2 choices: 1. increase your wages. pay your suppliers more. 2. decrease your prices. It doesn't really matter which you do. Do we want higher wages or lower prices? You can't do both. Does it even matter? The net effect is the same. Who cares that we've universally chosen #2? Note: I'm assuming there's modest competition. Monopolies have a 3rd option: more profit.

> You can't do both.

You can definitely do a bit of both. The sum just can't net you less than if you had done neither. Which is why many corporations just opt for neither.

Re: Minimum wage would be $26 an hour if it had grown in line with productivity

#52

Post by MisterBastahrd »

agitator wrote: post #44

I'm struggling to understand how productivity has anything to do with salary. Productivity increases are inevitable for everything as automation keeps improving. Salaries go up with demand for skills. If its more difficult to hire for a critical role (a skilled job or competitive), or the role generates a lot of value for a company, salaries go up. Simple economics. Low skill jobs and physical labor jobs actually req…

In the 1930s, a store clerk in a large city could afford to support a family in a home they would eventually own on their single income.

Today, a couple with that same job would likely be in public housing and would be scraping by.

Re: Minimum wage would be $26 an hour if it had grown in line with productivity

#54

Post by dangus »

ajsnigrutin wrote: post #38
dangus wrote: post #30

Earlier quoted context omitted.

The reason why #2 doesn't have the same effect as #1 is scale . Wealthy people are not affected by prices in the same way as average people. I hypothesize that being able to buy more with the same income rather than being given a higher income helps the wealthy more. Let's take a practical example: A banana now costs 50 cents. It would have to cost $2 if we paid for higher labor costs, for that $20+ minimum wage. But…

...or they'd just raise the price of a banana to $4, to keep relative profits the same, people would earn more than previously, but everything would be more expensive. Say what you want, we do buy and own a lot more stuff than we did in history. The only unfair thing here is, why does amazon pay (relatively, percentually) less tax than local banana stand.

> ...or they'd just raise the price of a banana to $4, to keep relative profits the same

I'd say for many products they can't actually do that because there's only so much demand. Also, because middle and higher earners wouldn't be getting the same kind of raises that the minimum wage folks would get if the minimum wage were raised.

If you're above minimum wage, you're essentially being paid at a market equilibrium rate: an intersection of supply and demand. But if you're at minimum wage, you're at "the company would pay you less if they were legally allowed to" territory.

My point is that "everything would be more expensive" would actually be a net benefit to the lowest earners.

Labor is very nearly never 100% of the purchase price of a product or service.

So, if you increase your labor cost by 100%, that doesn't mean the product's price increased by 100%, because labor is only one component of a product's price.

It's the same math that makes living in HCOL areas worth the expense (e.g.: increase your expenses by 50% and your wage by 50%. As long as you are paying less than 100% of your wage into your expenses that's a net gain).

McDonald's in Denmark is a great example. Their employees make well over $20 an hour and have 6 weeks vacation. Big Macs in Denmark don't cost double the price, but the workers are paid just about double depending on which region in the US you compare to.

Re: Minimum wage would be $26 an hour if it had grown in line with productivity

#55

Post by bitexploder »

MisterBastahrd wrote: post #52
agitator wrote: post #44

I'm struggling to understand how productivity has anything to do with salary. Productivity increases are inevitable for everything as automation keeps improving. Salaries go up with demand for skills. If its more difficult to hire for a critical role (a skilled job or competitive), or the role generates a lot of value for a company, salaries go up. Simple economics. Low skill jobs and physical labor jobs actually req…

In the 1930s, a store clerk in a large city could afford to support a family in a home they would eventually own on their single income. Today, a couple with that same job would likely be in public housing and would be scraping by.

What is the comparative quality of life like or those two examples?

Re: Minimum wage would be $26 an hour if it had grown in line with productivity

#56

Post by worker767424 »

Productivity is a price ceiling for labor. It only raises wages by allowing marginal producers come online and compete in the labor market. It could also reduce the total demand for labor, so there's no reason to assume wages and productivity would stay linked. The correlation only makes sense in a first-order way: I produces twice as many widgets; "you should pay me twice as much." But that widget machine wasn't free, and it doesn't mean you'll sell twice as many.

Re: Minimum wage would be $26 an hour if it had grown in line with productivity

#57

Post by randyrand »

eugeniub wrote: post #28
randyrand wrote: post #14

When productivity increases, you have 2 choices: 1. increase your wages. pay your suppliers more. 2. decrease your prices. It doesn't really matter which you do. Do we want higher wages or lower prices? You can't do both. Does it even matter? The net effect is the same. Who cares that we've universally chosen #2? Note: I'm assuming there's modest competition. Monopolies have a 3rd option: more profit.

Yes, indeed we have seen decreased prices in housing, healthcare, education, etc in the last 40 years.

You bring up a good point, but the reasons for that are not directly related to productivity. 2 big ones:

1. money supply. Average wage and population have both increased. How can that be possible if the total amount of money in the economy is fixed? Well it's not. Increases in money supply are slightly more than productivity growth rate in order to prevent deflation, and they err on the side inflation. There's literally more money in the economy than ever before.

2. monopolies. Healthcare & education & housing are not competitive markets. You can't invent more land. Healthcare is a basketcase. And schools are in effect a luxury good where exclusivity is the main product.

You combine #1 and #2 and you get what you expect.

The solution to this is not to increase minimum wage with productivity. That doesn't make sense.

IMO minimum wage should be pegged at some standard of living in a 50th percentile cost of living suburb.

Re: Minimum wage would be $26 an hour if it had grown in line with productivity

#58

Post by megaman821 »

peer2pay wrote: post #26
randyrand wrote: post #14

When productivity increases, you have 2 choices: 1. increase your wages. pay your suppliers more. 2. decrease your prices. It doesn't really matter which you do. Do we want higher wages or lower prices? You can't do both. Does it even matter? The net effect is the same. Who cares that we've universally chosen #2? Note: I'm assuming there's modest competition. Monopolies have a 3rd option: more profit.

Or you could do either of: 3. massive bonuses for execs and wage increases for white-collar workers 4. stock buybacks and dividends to directly distribute profits to shareholders Let’s not pretend that both of these don’t happen at the cost of regular employees.

Even if this were true, it provides little in the way of an explanation. Why do 10s of thousands of companies across hundreds of industries pay their regular employees a small fraction of their worth? What is stopping someone else from coming along and paying them a larger fraction of their worth?

Re: Minimum wage would be $26 an hour if it had grown in line with productivity

#59

Post by lmilcin »

I agree that minimum wages are too low but the argument that wages should track productivity is false from economical point of view, in my opinion.

The argument would be true if how people contribute to economy did not change.

But over time disparity in contribution to economy changed. Hundred years ago people had very similar jobs, mostly physical, manual, where each would contribute rather similarly.

Nowadays companies can produce virtual goods, sell "IP", and many other mechanisms to produce a lot with relatively little that just are not possible with traditional production lines.

Now, I think the correct reason to justify better minimum wage is basic human decency and also the role of the state as servants to entire population.

I think a person doing honest, important work for 8 hours a day 5 days a week should enjoy a compensation that should be enough for a basic living plus some little extra. Basic living means a decent place to live, medical care, ability to buy healthy, non-extravagant food, etc.

It doesn't matter if that job is cleaning streets or being cashier at Walmart. We need streets to be cleaned and we need to buy stuff.

These people doing basic jobs are unable to defend themselves and that's where the state should come in and make sure that people who do basic jobs are able to afford basic living.

Re: Minimum wage would be $26 an hour if it had grown in line with productivity

#60

Post by BuckRogers »

dnautics wrote: post #31
JoeAltmaier wrote: post #11

Earlier quoted context omitted.

It indicates the major flaw of capitalism: It has no moral compass whatsoever. Its a vicious meat grinder. I think the comment is quite insightful, in the employers might think one thing while the realities of capitalism dictate another.

s/capitalism/the universe/g Anyways, your statement is not true. Capitalism absolutely has a moral compass, it had the moral compass of the consumptive patterns of society; if that compass points the wrong way then either we must take a hard look at ourselves, or, think about what policies are twisting consumptive patterns to go the wrong way.... Probably a bit of both.

The consumers don't drive much. They just exist in the environment they were born into. The idea we vote with our money doesn't hold much water when the system is rigged with regulations set by the largest corporations to their own benefit. Keeping out competition. And that's just never going to stop either, so the economic system needs examined, not hoping for some sort of libertarian awakening.

To make this worthwhile to continue at all, this conversation first needs to clearly define capitalism. Capitalism is not the free market. Markets existed long before capitalism. Capitalism is exclusively paying people less than the value they produce, to create a profit for the employer.

To rectify that economic system's moral compass, you create incentives to moving towards worker-owned enterprise. Instead of the employer/owner running your gas station, the employees that actually work it have 1 share each. To own a share you have to actively work there. That model resolves most issues with capitalism. Worker's unions also resolve it, but in a less ideal way as the tension between employer-employee still exists. Which is just a slightly kinder model as master-slave, or lord-serf.

Not sure about the universe comparison. The universe is chaotic entropy as far as we know, but assigning human misery- that we actively create, to the universe is a bit much.

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