Income inequality

[Rawedge Rim]

Just because it's easier for some people doesn't mean that those who have to struggle harder can't succeed. They just have to try harder, and make bigger sacrifices.

But just because people try harder and make bigger sacrifices doesn't mean they will succeed either.

--A

Only assurance in life is that no-one is getting out of it alive. Other than that, nearly everything is possible, if not probable.

I agree, if I'm an Eothiopian refuge during a famine in Africa, the odds against me are huge, but not impossible. Whereas in many industrialized countries, you have millions on the government dole sitting around in front of the television, with beer in hand saying, "Gee, wish I could do better this", a year of so after they dropped out of school.

Yeah, they can still succeed, but Lord, have they picked the hard road to walk if they do.

[Avatar]

I'd say offhand that probability is a more important factor than possibility in this case. And the greater the odds, the lower the probability.

--A

[Rawedge Rim]

I'd say offhand that probability is a more important factor than possibility in this case. And the greater the odds, the lower the probability.

--A

No doubt, but those who live where opportunity abounds (US, England, Austrailia, Germany, Japan, etc.) don't have much room to whine about how they just can't improve thier lot in life.

[Avatar]

I certainly agree that they have both better possibilities, and a higher probability of achieving them.

--A

[SoulBiter]

So the Obama administration is out there touting a rising of the minimum wage to $10.10 an hour.

Two ideologies are being floated out there:

1. Raising the min wage to that level will cost jobs. Many small business's cannot afford to pay those kinds of wages. People will make more but less people will be working.

2. Raising the min wage will help the economy. More money in peoples pockets means more people spending means more manufacturing, service, etc etc, means more need for workers thus more jobs for everyone and at a higher wage.

Frankly I can get on board either side of this. I understand the free market should decide what people make, yet working in corporate America I also understand that corporations work hard to pay the least amount for everything, especially labor. Its not so they can be more competitive, its so they can put more distance between the red and the black lines on the P&L sheet.

[Cail]

Increase minimum wage and:

- Anyone making more than minimum wage also gets a pay increase.

- Unions who tie their pay rates to the local prevailing wage increase their wages.

- As a result, fewer people are hired and....

- The cost of goods and serviced increases.

I've already posted the statistics of who it is working minimum wage jobs, and it isn't heads of households with kids.

[SoulBiter]

Increase minimum wage and:

- Anyone making more than minimum wage also gets a pay increase.

Anecdotally I haven't seen this happen. I have worked for two very large corporations and perhaps its because neither was a 'small business'. The one I work for now pays a bit more than the min wage. The last few times min wages increased, we did not raise pay across the board accordingly. When I say across the board I mean, hourly workers or salary workers. Didn't happen. Everyone else in the industry did not see that happen or we would have had a flight of people out. Heck people will leave for .25 per hour. Again didn't happen.

- Unions who tie their pay rates to the local prevailing wage increase their wages.

no idea. I don't work in a area where you see many unions.

- As a result, fewer people are hired and....

- The cost of goods and serviced increases.

Again just my experience from where I work. We don't tie our cost of goods to anything but what the market is asking and the cost to manufacture/distribute and sell. Our cost to make and distribute goods has only continued to go down.
Example, For our Largest distribution facility. Seven years ago our CPU (cost per unit) for our facility was almost 40 cents. Its has gone down each year and is closer to 32 cents per unit now. We send out millions of units per year. So year over year that accounts for literally millions of dollars per year less in 'saved' cost to distribute goods out of our facility. The added cost 3 dollars per hour per person is almost insubstantial compared to just that fact alone.

Agreed that its not my money nor my decision, nor my risk, but its pretty obvious that the company is making money even in a down economy, we are doing more with less, and the company has continued to put that on our P&L and just separate the red and the black lines more and more.

Added to that, just this year the business has become less generous while making much more. Anyone hired prior to this year has a pension. One of the few left. Anyone hired after this will NOT get a pension. They instead will give you 2% more match in 401K if hired after that. I've already done the math on it and someone making 50K per year, even with 12% compound interest will have less than half of what they would have gotten with a pension.

These are the kinds of things that show me that things have changed a lot in the last 40 years. The bottom line has become more important than anything else.

I am not disgruntled and this doesn't affect me at all. I have a great job. My wife and I together make a crap load of money. We both have a pension, we both of good 401K's. But future hires will get less than we will. Even in a time when the company can afford to me more generous, it is getting less generous.

I've already posted the statistics of who it is working minimum wage jobs, and it isn't heads of households with kids.

I agree that this is feel good legislation. Those making min wages are less than 2% of all workers in the economy and thus little to no impact to poverty and spending.

[Vraith]

I agree that this is feel good legislation. Those making min wages are less than 2% of all workers in the economy and thus little to no impact to poverty and spending.

A number of the stats posted upthread don't make as much difference as it might seem [for instance, union membership is very low, and only a portion of them are tied to minimum wage...but numbers could be argued I suppose].

But this one is larger than indicated.
Yea, only that amount at or below minimum.
But at least 40 million make less than $10 per hour.
3million people getting a raise might not have much effect...but 40 million is something else.

And for every study that says raising the minimum lowers employment, there is another that shows it doesn't.
Find a good chart showing unemployment rate since the 50's, and one showing the minimum wage rates since then.
You'll see there is no correlation.
[[I expect there would be if the minimum were raised extremely...but right now it isn't even keeping up with inflation]]

Now, I actually have an idea about the effect [or lack] that I've never seen anyone tie into their data. Someone MUST have, but I haven't found it:
Tax deductible wages and other expenses for the employer.
For example: the difference between paying my full-time employee 7 per hour and 10 per hour is right around 6k per year. But that doesn't all come directly out of my pocket/profits. It's a 6k more per year I can deduct on my taxes.
I'm gonna have to look deeper into that...but right off the bat there is a significant positive difference between the increased purchasing power on the demand side [employee increased wages] and supply side cost to business.

[Cail]

And for every study that says raising the minimum lowers employment, there is another that shows it doesn't.

Horseshit.

Post links.

[Orlion]

Obama is an idiot. He probably think that by increasing minimum wage, people will be able to afford that insurance he wants everyone to buy into. What he will do is cause the price of everything to go up, the dollar to depreciate in value quicker, and people still won't be able to afford insurance.

[Cail]

Obama is an idiot. He probably think that by increasing minimum wage, people will be able to afford that insurance he wants everyone to buy into. What he will do is cause the price of everything to go up, the dollar to depreciate in value quicker, and people still won't be able to afford insurance.

Exactly. An imposition has been made upon the poor and downtrodden, now the government needs to give them the money to insure they can pay the government back.

[Avatar]

On short notice...






--A

[SoulBiter]

Those graphs don't show a causation or even a correlation between raising the min wage and unemployment rates. There were times when the unemployment rate was up even when there was no change to wages, and there were times when they were both up. Nothing shows a direct tie out between the two. That being said, that also does not support the opposite idea that if you raise the min wage, there is more money going around and unemployment would go down. I don't see anything that supports that either. So again this change really will do nothing for the overall economy, good or bad....but it looks good on paper.

I do think that business in general should pay their employees more and get more money flowing. But this is the real world, where when there is more money flowing, people are more likely to pay more for goods because they have more and thus the cost of goods goes up and we are back to where we are today. Take a look at any area where there is lots of money and you will find that the cost of living is incredibly high so as to take in as much of that money as possible. Why do they charge more? Because people will pay more..... Its a vicious circle.

[Zarathustra]

Its not so they can be more competitive, its so they can put more distance between the red and the black lines on the P&L sheet.

You don't think that greater distance makes them more competitive? A wider profit margin creates stability to protect against downturns in the market. It also creates opportunity to upgrade equipment or expand. More money can be put into advertising. And it can drive up the stock value.

As far as the graphs go, there sure looks like a direct correlation to me, especially in the first. Don't just pick individual points for comparison. Look at the general "slope." Draw a line through the peaks and valleys that captures the average value, and you'll see the match between unemployment and min wage increase.

I like how Krauthammer said it: a raise in minimum wage is merely wealth redistribution from some poor people to other poor people.

[SoulBiter]

Its not so they can be more competitive, its so they can put more distance between the red and the black lines on the P&L sheet.

You don't think that greater distance makes them more competitive? A wider profit margin creates stability to protect against downturns in the market. It also creates opportunity to upgrade equipment or expand. More money can be put into advertising. And it can drive up the stock value.

The divide between that red and black line has only continued to widen. We expand or contract based on people buying our product not based on that divide. Sure it puts us in a position to expand...but typically we dont expand by true expansion, we just buy others out, close their facilites and incorporate their business into ours.

You can call it what you want. I have worked for major corporations for the last 40 years. I have been part of small companies that are bought and then bought and then bought again until they are part of a HUGE business. I have seen the P&L and reactions over more than one recession and downturn. The one over-riding thing I have seen in the last 40 years is that as the business gets MORE profitable, they become less generous in what they offer the employees. As the balance sheets look better, they look for even more ways to to get more with less and to offer to the lowest denominator. Forty years ago, there was more loyalty toward long term associates. Today they are looked at as a target to get rid of because they are grandfathered in with the better benfits packages. I have seen this more in the last 5 to 7 years as there has been purges of those long term associates.

I believe in capitalism and I believe that if you want to keep your job, especially the higher paid ones, it will always be 'What have you done for me lately" as it should be . But....Im not blind to seeing the offerings of wages and benefits continue to degrade over time while on the 'whole' corporate profits (the distance between the red and black) have only gotten wider and wider.

As far as the graphs go, there sure looks like a direct correlation to me, especially in the first. Don't just pick individual points for comparison. Look at the general "slope." Draw a line through the peaks and valleys that captures the average value, and you'll see the match between unemployment and min wage increase.

Some Direct but nothing consistent. I don't see that every time there was a rise in min wage there is a rise in unemployment. It happens some, but there are a number of times when there is no difference and there a number of times when unemployment went down after a rise in min wages. When I have time I might take this out to Excel and see if I can stretch it more and put in some trend-lines and vertical lines that match 'when' things happen.

[Harbinger]

I just reread this thread. This is an AWESOME thread. Success is a choice!

[Vraith]

And for every study that says raising the minimum lowers employment, there is another that shows it doesn't.

Horseshit.

Post links.

Here's a place to start...in part cuz of what it says itself, and its look at various possible theories, in part cuz tracking down the pathways branching out through the references takes you many places.

HEE HEE...Edited to paste in the link, cuz I forgot to, even though I was saying here's a place to start...
www.cepr.net/documents/publications/min ... 013-02.pdf

Z...by all means look at the overall slope. I don't think it shows what you think? I see a wage line that is flat or slightly down while unemployment goes up. Especially when you get to the "modern" economy decades...

Which leads me...

Back to something more directly on the topic...maybe this is mentioned upthread somewhere...I haven't read it all, or if I have I've forgotten.

An extremely important point is that the data over many economies and long term show an interesting thing: It isn't inequality IN ITSELF that tends to cause problems [at least so far...we haven't had large quantities of solid reliable data for very long, all things considered]
It is the rate of inequality growth and and the source of that growth. [roughly, what are the folk with the real capital doing with it? how are they using it?]

[SoulBiter]

Thats awesome to hear!!! I agree that success is mostly about choices.

As I read this thread and thought about your post, one of the things that are involved is this. People are generous. Corporations are not. When I worked for small companies that were less stockholder driven and more 'Owner Operated', I note that pay and benefits were pretty good. As those got bought out by larger corporations who were more concerned with making more more more, the compensations trended downward.

Anectdotal for sure but thats been my experience! However I have done pretty well and expect a pretty nice retirement due to my own personal choices. Hopefully in the next 5 to 10 years I will retire and then maybe do voluteer work/nonprofit stuff or maybe do contract work for 3 months a year..... who knows.

[Zarathustra]

Vraith, if you draw a line from the first data point for real minimum wage in 1950 to the peaks in the last year or two of the ‘70s, the trendline is going up just as the general slope of unemployment for 16-25 group is going up. Though unemployment peaked a couple years after that, it then continued downward after 1983, following the downward slope of min wage all the way to about 2007, at which both begin to rise again. In the entire 60 year time span, the slopes are matched for all but 3-4 years.

I have seen the P&L and reactions over more than one recession and downturn. The one over-riding thing I have seen in the last 40 years is that as the business gets MORE profitable, they become less generous in what they offer the employees. As the balance sheets look better, they look for even more ways to to get more with less and to offer to the lowest denominator.

How do you know you’ve got the causation right? You could just as easily say, “As they look for even more ways to to get more with less, the balance sheets look better.” Maybe the balance sheets look better because they become less generous? (I’m sure there are other reasons, too.) You seem surprised by the fact that a company which streamlines its operation is going to have more profit. But isn’t this exactly what one would expect? People don’t usually run businesses to make smaller profits as they grow, or to increase their percentage of labor costs, or to become less efficient in general. Those would be reasons to worry about a business’s longterm prospects. Pensions, for instance, are one of the reasons that state and local governments are in trouble. Your company sounds like it has great management, that’s all.

Success is a choice!

That, and talent, drive, and interest. Not everyone can do what you've done, but they can do something else. There is a lot more opportunity out there than people imagine, even if you have to create it yourself.

[Hashi Lebwohl]

I will have to find the link for this again but minimum wage earners account for less than 5% of the workforce at this time; I found that number from the Bureau of Labor Statistics so I should be able to find it again. Raising the minimum wage won't have nearly as much effect as people think it will because so few people who work actually make that amount--only 1 in 20.

My wife is correct on this--she says that if places like McDonald's or WalMart have to pay more than the minimum wage then they will remove some jobs that were going to actual people and put in more self-order and self-checkout kiosks. It doesn't take a person to take your fast food order, especially when you can punch in your selections and swipe a card to pay; you don't pay a kiosk other than the monthly electric bill and the random service call if it fails. Also, why pay someone to scan your item then put it in a bag when you, the customer, can do this yourself? I used to shop at an Albertson's that had this system: you got a cart and a wireless scanner, scanned and bagged your own items as you shopped the store, then at the checkout counter you scanned the "finish and total" barcode, paid your total, and exited the store--no worker necessary. I am surprised that more stores haven't gone to this despite the increased risk of shrinkage (the retail industry euphemism for "shoplifting").