Sunday, November 2, 2014

A $20 an hour minimum wage would NOT (!) cost a lot of people their jobs

My response to "A $20 an hour minimum wage really would cost a lot of people their jobs"
by Matthew Yglesias, in Vox, October 28, 2014  

If average Walmart nonsupervisory pay were raised to $100 an hour, the price of $10 items rise to $15. Walmart labor costs are 7%. Nonsupervisory workers average $12 an hour. $12 X 8 = almost $100. One of the $12s is included already.  7x7% = 49%.

Double current Walmart nonsupervisory pay to $24 hourly, throw on 25% for benefits to make it $30 and prices rise about 10%.

Somebody challenged me that raising Walmart prices 10% (at $30 -- only 3.5% at $15 min wage) would charge low income consumers $26 billion more a year ($260 billion sales).  I pointed out they could take it out of the $560 billion raise they would get from a $15 minimum wage. 

A $15 minimum wage would shift about 3.5% of income from the 55 percent of the workforce who garner 90% of income to the 45% who scratch only 10%.  $8,000 average raise X 70 million (45% of 140 million + 5% at minimum now) = $560 billion out of $16,000 billion GDP.  BTW, 45% of workforce not going to be sent home over a 3 1/2 percent shift in income share.

100,000 out of (my estimate) 200,000 gang age, Chicago males are in street gangs – I say because they wont work for a minimum wage several dollars below LBJ’s 1968 minimum wage ($10.95) after per capita income about doubles.  A $15 an hour minimum wage might actually put American born workers back to work at America’s McDonald’s.

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”Denmark has no minimum-wage law. But Mr. Elofsson’s $20 an hour is the lowest the fast-food industry can pay under an agreement between Denmark’s 3F union, the nation’s largest, and the Danish employers group Horesta, which includes Burger King, McDonald’s, Starbucks and other restaurant and hotel companies.”

What Denmark does have – along with most of continental Europe and French Canada and Argentina and Indonesia -- is a labor market setup called centralized bargaining where every employee doing similar work (e.g., retail clerk) negotiates one common labor contract with all employers doing similar business (e.g., Safeway, Best Buy, Walmart).

$20 an hour + benefits: it’s the (centralized bargaining) free market!  
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Last breath: our difference with Denmark is not education:
Progressive economist Ha-Joon Chang says that our much increased education doesn't add much productivity to the economy.  It is just what we have to do to keep up with what others are doing.  He uses highly efficient and productive Switzerland as an example: going from 15% college to 40% over two decades.
(2011 book, 23 Things They Don't Tell You about Capitalism)

Berkeley political scientist Martín Sánchez Jankowski spent nine years on the streets of five NYC and LA poverty neighborhoods and discovered, among other things, that ghetto schools don't work because students (and teachers!) don't see anything remunerative enough in the labor market when they finish school to make it worth the extra effort.
(2008 book, Cracks in the Pavement: Social Change and Resilience in Poor Neighborhoods)

Some truly free labor market education may be gained reading: Were You Born on the Wrong Continent?: How the European Model Can Help You Get a Life by Thomas Geoghegan.

1 comment:

Denis Drew said...

I am glad the minimum wage discussion has moved up to a seriously amount of money.

Liberal and conservative economists too often argue how much difference a dollar or two dollar min wage raise would make to poverty or employment. A dollar minimum wage raise would shift about one-quarter of one percent (because a lot fewer recipients) of income share -- which national effect should disappear in the noise of other factors: unmeasurable.

Seems to me that many of the employment studies focused (like everyone else!) on fast food which because it has the highest labor costs at 33% (Walmart's at 7%) which could in effect amplify results that might otherwise be below audibility. Seem to remember most showing no effect one way or the other anyway.

(E.I.T.C., at $55 billion, shifts one-third of one percent of income -- not leaving overall poverty measurably effected either.)