What do you think of this argument against raising the minimum wage?

[All Along The Watchtower]

The argument goes like this:

A business employs some people at $10 an hour (which is the minimum wage in this scenario) and other workers at $12 an hour. These are the two lowest pay levels at said business.

Now, the minimum wage gets raised from $10/hour to $12/hour; what happens to the employees who were paid $12/hour before the minimum wage is increased? Their wages won't be increased (or so the argument goes) any time soon, and wage increases for them will actually be delayed, yet they have seniority and experience over the minimum wage employees.

Is this a valid argument?

[Okay, maybe Mike Johnson is a competent parliamentarian.]

That strikes me as being not so much an argument as vague concern trolling that implies that we should feel nonspecifically affronted by the prospect that it contemplates without actually explaining what it's attempting to prove.

[All Along The Watchtower]

That strikes me as being not so much an argument as vague concern trolling that implies that we should feel nonspecifically affronted by the possibility that it contemplates without actually explaining what it's attempting to demonstrate.

So in other words...

Whatever?

[AggregateDemand]

Yes, it's valid. It's an accurate reflection of the problem as well.

When the skilled labor force feels the unskilled labor force crowding out their wages, they tend to leave. In a bid to protect skilled labor, the company jettisons unskilled min wage workers.

The market doesn't follow this step by step process because people are paid to avoid the instability of regulation. They fire the unskilled laborers before the laws take effect. Jobs are lost upfront and countless potential jobs are eliminated. Young inexperienced workers have very little prospect of work because companies cannot justify the risk.

If we need higher wages, we need full employment. Nothing raises wages like labor shortage. See: late-90s

[Gustaf]

First of all, it's unclear why this is even a problem. But secondly one would expect this to be very temporary to the extent that it is.

[Antonio the Sixth]

First of all, it's unclear why this is even a problem. But secondly one would expect this to be very temporary to the extent that it is.

^^^^

Especially since a minimum wage increase would boost demand, thus help businesses' profits in the long run, giving them all the leverage they need to raise other wages (if they want to).

[Small Business Owner of Any Repute]

The argument goes like this:

A business employs some people at $10 an hour (which is the minimum wage in this scenario) and other workers at $12 an hour. These are the two lowest pay levels at said business.

Now, the minimum wage gets raised from $10/hour to $12/hour; what happens to the employees who were paid $12/hour before the minimum wage is increased? Their wages won't be increased (or so the argument goes) any time soon, and wage increases for them will actually be delayed, yet they have seniority and experience over the minimum wage employees.

Is this a valid argument?

No, it's not.

That person receiving $12/hour will, when the minimum wage gets boosted, immediately become underpaid. This means the employer will face increased pressured to maintain the company's labor structure. The employer can continue to pay the minimum, but as the market adjusts, the employee will be sorely tempted to leave their current job in favor of one that, once again, pays higher than the minimum.

http://money.cnn.com/2014/01/14/smallbusiness/minimum-wage-hike/

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Approximately 2 million Americans saw their wages increase as a direct result of minimum wage increases in 2014. Another 2.6 million saw their wages increase indirectly, because their wages were close to the minimum and now need to be increased to maintain a wage structure.

[DC Al Fine]

The argument goes like this:

A business employs some people at $10 an hour (which is the minimum wage in this scenario) and other workers at $12 an hour. These are the two lowest pay levels at said business.

Now, the minimum wage gets raised from $10/hour to $12/hour; what happens to the employees who were paid $12/hour before the minimum wage is increased? Their wages won't be increased (or so the argument goes) any time soon, and wage increases for them will actually be delayed, yet they have seniority and experience over the minimum wage employees.

Is this a valid argument?

No, it's not.

That person receiving $12/hour will, when the minimum wage gets boosted, immediately become underpaid. This means the employer will face increased pressured to maintain the company's labor structure. The employer can continue to pay the minimum, but as the market adjusts, the employee will be sorely tempted to leave their current job in favor of one that, once again, pays higher than the minimum.

I think that depends on the local labour market. A call centre worker might be low skill, but still have something minimum wage earners don't have (well spoken, willing to put up with abuse etc.)

As long as there are alternative, higher paying positions available for those modestly skilled workers, I agree, but I'm not so sure that is the case in economically depressed areas.

[King]

It only works on the assumption that the difference between a 10 and 12 wage is some sort of degree or years of experience or managerial  position.  Reality is that 12/hr is also an unskilled labor wage, perhaps just enough to be cut off from food stamps in some states. 

The "advantage" lost by such an employee is merely academic.  They're neighbors.

[MurrayBannerman]

The argument goes like this:

A business employs some people at $10 an hour (which is the minimum wage in this scenario) and other workers at $12 an hour. These are the two lowest pay levels at said business.

Now, the minimum wage gets raised from $10/hour to $12/hour; what happens to the employees who were paid $12/hour before the minimum wage is increased? Their wages won't be increased (or so the argument goes) any time soon, and wage increases for them will actually be delayed, yet they have seniority and experience over the minimum wage employees.

Is this a valid argument?

No, it's not.

That person receiving $12/hour will, when the minimum wage gets boosted, immediately become underpaid. This means the employer will face increased pressured to maintain the company's labor structure. The employer can continue to pay the minimum, but as the market adjusts, the employee will be sorely tempted to leave their current job in favor of one that, once again, pays higher than the minimum.

Or, in a more likely scenario, they will be laid off and their position, in the long run, will be phased out by a cost saving measure.

[Small Business Owner of Any Repute]

The argument goes like this:

A business employs some people at $10 an hour (which is the minimum wage in this scenario) and other workers at $12 an hour. These are the two lowest pay levels at said business.

Now, the minimum wage gets raised from $10/hour to $12/hour; what happens to the employees who were paid $12/hour before the minimum wage is increased? Their wages won't be increased (or so the argument goes) any time soon, and wage increases for them will actually be delayed, yet they have seniority and experience over the minimum wage employees.

Is this a valid argument?

No, it's not.

That person receiving $12/hour will, when the minimum wage gets boosted, immediately become underpaid. This means the employer will face increased pressured to maintain the company's labor structure. The employer can continue to pay the minimum, but as the market adjusts, the employee will be sorely tempted to leave their current job in favor of one that, once again, pays higher than the minimum.

Or, in a more likely scenario, they will be laid off and their position, in the long run, will be phased out by a cost saving measure.

People will be phased out by cost-saving measures regardless of what happens with the minimum wage. For the most part, though, minimum wage workers are service employees who can't be outsourced or replaced by machines. No one wants to order from McDonaldsbot 3000, and you can't outsource the Burger King drive through to India.

If your local Walmart thinks it can get by with only 50 employees, then it's only going to hire 50 employees. Cost seems to have no bearing, so long as the cost is "as low as possible."

[MurrayBannerman]

The argument goes like this:

A business employs some people at $10 an hour (which is the minimum wage in this scenario) and other workers at $12 an hour. These are the two lowest pay levels at said business.

Now, the minimum wage gets raised from $10/hour to $12/hour; what happens to the employees who were paid $12/hour before the minimum wage is increased? Their wages won't be increased (or so the argument goes) any time soon, and wage increases for them will actually be delayed, yet they have seniority and experience over the minimum wage employees.

Is this a valid argument?

No, it's not.

That person receiving $12/hour will, when the minimum wage gets boosted, immediately become underpaid. This means the employer will face increased pressured to maintain the company's labor structure. The employer can continue to pay the minimum, but as the market adjusts, the employee will be sorely tempted to leave their current job in favor of one that, once again, pays higher than the minimum.

Or, in a more likely scenario, they will be laid off and their position, in the long run, will be phased out by a cost saving measure.

People will be phased out by cost-saving measures regardless of what happens with the minimum wage. For the most part, though, minimum wage workers are service employees who can't be outsourced or replaced by machines. No one wants to order from McDonaldsbot 3000, and you can't outsource the Burger King drive through to India.

If your local Walmart thinks it can get by with only 50 employees, then it's only going to hire 50 employees. Cost seems to have no bearing, so long as the cost is "as low as possible."

I'll just put this right here.

http://www.neowin.net/news/mcdonalds-orders-7000-touchscreen-kiosks-to-replace-cashiers

[Small Business Owner of Any Repute]

McDonalds made that move in Europe, a very different place with very different customs and very different ways of doing things. It's notable that McDonalds has not made the switch in the U.S. aside from limited tests, and based on my knowledge of its order-by-iPad experiment, it's far from a QSR slam dunk.

Touchscreen ordering is not quicker than ordering in person, and it's not necessarily that more accurate — most fast food mistakes seem to happen in the kitchen, not at the kiosk. Most of the things can't take cash, only credit. Americans also like, I think, the feeling of superiority they feel when dealing someone in a customer service station. When else are we "always right?"

In any case, no one ever seems to be using them at the fast food establishments I've seen them at. Unless the line is 15 deep at the regular registers, there's no perceived benefit to most consumers.

[MurrayBannerman]

McDonalds made that move in Europe, a very different place with very different customs and very different ways of doing things. It's notable that McDonalds has not made the switch in the U.S. aside from limited tests, and based on my knowledge of its order-by-iPad experiment, it's far from a QSR slam dunk.

Touchscreen ordering is not quicker than ordering in person, and it's not necessarily that more accurate — most fast food mistakes seem to happen in the kitchen, not at the kiosk. Most of the things can't take cash, only credit. Americans also like, I think, the feeling of superiority they feel when dealing someone in a customer service station. When else are we "always right?"

In any case, no one ever seems to be using them at the fast food establishments I've seen them at. Unless the line is 15 deep at the regular registers, there's no perceived benefit to most consumers.

It's a slow process, but pricing labor out of the market will quickly accelerate it and add the additional functions needed to make it viable as a main order taking option.

[Randy Bobandy]

The argument goes like this:

A business employs some people at $10 an hour (which is the minimum wage in this scenario) and other workers at $12 an hour. These are the two lowest pay levels at said business.

Now, the minimum wage gets raised from $10/hour to $12/hour; what happens to the employees who were paid $12/hour before the minimum wage is increased? Their wages won't be increased (or so the argument goes) any time soon, and wage increases for them will actually be delayed, yet they have seniority and experience over the minimum wage employees.

Is this a valid argument?

No.

[Small Business Owner of Any Repute]

It's a slow process, but pricing labor out of the market will quickly accelerate it and add the additional functions needed to make it viable as a main order taking option.

Again, touchscreen ordering's lack of adoption is not a function of its price. It is really inexpensive today for a QSR to set up a remote ordering station option (especially if its just a $500 iPad).

Kiosk-based ordering is, by its nature, a supplement to human cashiers. It's not a replacement.

[MurrayBannerman]

It's a slow process, but pricing labor out of the market will quickly accelerate it and add the additional functions needed to make it viable as a main order taking option.

Again, touchscreen ordering's lack of adoption is not a function of its price. It is really inexpensive today for a QSR to set up a remote ordering station option (especially if its just a $500 iPad).

Kiosk-based ordering is, by its nature, a supplement to human cashiers. It's not a replacement.

And again, if labor prices itself out of the market, kiosk-based ordering and other non-employee based ordering will be developed to replace labor. It's an opportunity cost issue and currently, the perceived loss in revenue from both the lack of interest in using the system and the underdeveloped technology do not justify a full change.

It's happened in many other places. To think that Americans are somehow immune to this change is defying rationality.

[fartboy]

It's a great argument. My argument has always been that higher wages lead to higher prices in order to compensate lost revenue. Now we're back to where we started and our dollar has lost even more value. It's too bad class envy works so well on minorities in political campaigns because otherwise our country would be in great shape.

[Small Business Owner of Any Repute]

Can someone give me a valid argument on why minimum wage should be justified? I'll completely disregard the fact that it's unconstitutional.

I don't agree with President Obama on everything, and in general, I think he's been very unhelpful when it comes to the problem of income inequality. One thing I do agree with him on is this: Anyone who is willing to work a 40 hour day in the United States should not live in poverty.

Increasing the minimum wage increases the incentive to work. It makes welfare and public housing less attractive. It reduces the public need for food stamps. It increases government revenues in terms of income taxes and sales tax (via increased lower class spending), cutting the deficit. People would be more interested in climbing the ladder if the ladder didn't look like complete and total $h1t.

Historically, when businesses do not have regulations as to how they can treat their employees, they treat them very badly. Look at the abuses in the coal mining industry, such as company stores, that were tantamount to slave labor. I'd prefer it not be legal for McDonalds to pay an employee $2 per hour in the form of McD gift cards to literally live in the janitor's closet.

If you let businesses pay people less than the minimum wage, some will. And that means lower average wages for Americans. Why the would anything that promotes lower wages for workers be good for the health of the country, especially those stuck in jobs that pay close to the minimum?

[AggregateDemand]

I don't agree with President Obama on everything, and in general, I think he's been very unhelpful when it comes to the problem of income inequality. One thing I do agree with him on is this: Anyone who is willing to work a 40 hour day in the United States should not live in poverty.

That's a very nice thing to say, and I'm sure it gives you a buzz to say it, but it doesn't reflect life on this planet.

We have markets so we don't have to deal with futile, unrealistic mandates from moral busy-bodies. The market says that unskilled labor in the United States is not valuable relative to the productivity of salaried workers. Government mandate will not change the underlying economics.

So we are confronted with a choice. Use the government to close the gap between ethical wages and market wages or we can complain about corporations and capitalism, while making futile attempts to command the economy. Democrats have only complained and commanded, with a brief respite to establish a vote-buying scheme (welfare), and that's why the lower classes suffer unnecessarily.

[Starbucks Union Thug HokeyPuck]

No.  Being paid a living wage takes priority and that's that.  Whatever kinks in the individual businesses that have to be worked out after the fact will be worked out. 

[TDAS04]

Nope.

[muon2]

In the OP I would expect that the $12/hour workers are minimum wage workers who have been around long enough to get a raise above minimum. It's unlikely that the first raise is a 20% raise, so let me suggest an alternate scenario.

A company has a large number of entry-level jobs that pay a minimum wage of $8/hour. Employees who perform well but don't seek a promotion can expect a raise of $0.50/hour with each year of service up to a maximum of $12/hour. At that point wages are capped unless they promote to a position that has a starting wage of $13/hour.

The government now mandates a $2/hour increase in the minimum wage up to $10/hour. The company could move everyone under $10/hour up to the new minimum wage, but as has been pointed out, that creates an inequity for employees who have worked for the company for a number of years, so the company adds $2/hour to everyone working the entry-level job. But now this causes the most senior entry-level workers to earn more than the position to which they might promote. To maintain equity, the higher level positions need a raise as well, and so on up the corporate ladder.

In the end this creates pressure to give everyone a windfall raise, that in this case would average about 20%. That's probably unsustainable for most companies, but if it were 3% or something at roughly the level of inflation, it could be sustained without internal problems for the company. I think the argument would not be one against raising the minimum wage, but it would be one against a large single jump as opposed to a series of small steps or an indexed increase.

BTW, this type of situation happens when a company has a unionized labor force and non-union management. The union contract gets negotiated only every few years and it can have a large jump in the first year, like the jump in minimum wage in the above example. I am aware of police departments where a promotion from sergeant to deputy chief in the first year of a contract meant a pay cut because of this effect.

[dead0man]

The argument goes like this:

A business employs some people at $10 an hour (which is the minimum wage in this scenario) and other workers at $12 an hour. These are the two lowest pay levels at said business.

Now, the minimum wage gets raised from $10/hour to $12/hour; what happens to the employees who were paid $12/hour before the minimum wage is increased? Their wages won't be increased (or so the argument goes) any time soon, and wage increases for them will actually be delayed, yet they have seniority and experience over the minimum wage employees.

Is this a valid argument?

That's not what happens.  What happens is the guys that were making $12 an hour are now going to be making $13 and either:
A.a small percentage of all "low end" employees get let go and the ones left have to work a little harder (just a little as the person(s) let go will be the worst) or
B.they increse the price they sell widgets at

Neither is as bad as the no minimum wage increase people will say.

[pbrower2a]

People are minimum-wage because, typically:

1. They are not long-term employees. That explains part-time high-school and college students who have little desire to keep the jobs that they then have after completing their education. They are not going to sacrifice their education for the chance to go from $8 an hour to $9 an hour unless the educational effort begins to fail.

2. They do little real work on the job. Such is so with retail clerks who wait for customers who come to the business to buy impulse items. Pay and effort are connected. Salespeople are either the worst-paid people around (retail) or among the best -- and among the best are those who must seek customers.

3. They are difficult if not impossible to train for work more skilled than what they then have. They are undereducated and living up to limited potential.

4. They have few choices of employment. They may be illegal aliens who dare not leave the job. They may be holdouts in a depressed are.

5. They have a pay structure that implies a nominal minimum wage (such as a draw against commissions) but rely upon commissions or tips. For such people the minimum wage is a joke as payment.