Posted on 08/05/2011 4:53:03 PM PDT by Kellis91789
Conventional thinking would say the minimum wage interferes with free markets for labor and should therefor be opposed by any right thinking capitalist conservative.
However ... it occurs to me that a really LARGE increase in the minimum wage (say to $25/hr) could actually be used to screw the public employee unions and creditors of the Debt. It would have the following effects that are worth pondering:
1) It would cause prices to skyrocket and then stabilize at a new higher level, as more money chased the same amount of goods and services. Overall, prices would go up such that people retain the same buying power as before. That's what supply & demand dictates, anyway.
2) The free-market portion of the labor market, ie. wages for non-union workers and non-government employees, would adjust almost automatically as those workers screamed about the cost of living going up. Union contracts and government worker wages could not go up automatically but would have to be renegotiated before those workers could get an increase. Unless those contracts include automatic cost-of-living adjustments based on CPI, which could very well be the case.
3) Companies selling goods and services at higher prices while paying more for wages and raw materials will maintain the same percentage profit margin, therefor stock prices and dividends should stabilize at levels that reflect the same buying power as before. People living off investment income would be getting twice as many dollars and spending it on stuff that costs twice as much. Investments would go up in value in direct relation to this effective devaluation of the currency -- with the exception of bonds, including the T-Bills that make up our Debt. We'd be paying our creditors back with dollars worth half what they used to be worth.
4) Social Security benefits ARE tied to COLA increases, so recipients buying power would not suffer.
5) Mortgage payments would become a smaller portion of the larger paychecks. Home values would rise in dollar terms because more dollars would be available.
6) Cash would come off the sidelines with the announcement of the impending minimum wage increase. Money invested in stocks or commodities or gold will be "safe" from devaluation, but cash will lose value.
Thoughts ?
union contracts generally include a clause that says they make either a certain % more than minimum wage or a certain amount more than minimum wage...I’m afraid they wont get screwed that way...
The minimum wage is worth about half of what it was a few years because of QE1 and QE2.
Similar to what happened to the prices when the (women) the second wage earner entered the workforce in mass in the sixties...
Many thought more wage earners would mean a higher standard of living. What really happened was that the merchants and landlords were smarter than the average Joe, and when families had more income, they just raised the prices on everything. IMHO, much of the Carter inflation was due to this.
The women got screwed in the deal... They got to work, but they did not really get any benefit from it, and it came at a cost to their kids. So they screwed themselves.
The single parent (or the single wage earner family) was hurt the worse.
worse = most
They’d get screwed if it was “amount more than minimum wage”.
If a contract said “Wage shall be $12/hr more than the Federal minimum wage”, they go from making $19.25 to $37 — a percentage increase of only 92% while the minimum wage worker got an increase of 245%. Prices could triple and the minimum wage worker would be OK while the union worker loses buying power.
If the contract says “Wage shall be 300% of the Federal minimum wage”, then the union worker doesn’t get screwed.
If the contract says “Wage shall increase by the greater of 3.2% per year or the CPI”, then they don’t get screwed but just tread water.
And all those workers who would lose their jobs because they don’t create $25 per hour of value?
You are so wrong it is beyond belief.
Union wages are tied to the minimum wage. Usually the union wage is a multiple of the minimum wage.
So tge union wagw would go up instantly. BTW inflation is bad, while it’s happening we don’t need to do stupid things.
” ... when families had more income, they just raised the prices on everything ...”
This is kind of my point. Everything that isn’t a previous contractual agreement — like wages under a collective bargaining agreement or a mortgage or car loan — will experience inflation to soak up the additional money available.
Mortgage payments are locked in — you bought your house “cheap” compared to what is is worth in inflated dollars. Same for a car — last year’s model cost you $20K but the new model costs $40K — you are still paying for a $20K loan but with a paycheck that is twice as big. You don’t get hit until you want a new car at today’s higher price.
Devaluation screws creditors who have their money tied up in your purchase and will get devalued dollars returned to them in interest and principal.
“And all those workers who would lose their jobs because they don’t create $25 per hour of value?”
That’s the funny thing about money. It merely represents the value of production. McDonalds charges $3 for an item that includes 25 cents of labor at $7.25/hr. At $25/hr, McDonalds must charge $3.60 for that item. And they CAN charge that higher price because the workers are making $25 instead of $7.25.
This is no different than inflation that happens slowly over time. When minimum wage was $2.65/hr McDonalds charged 89 cents for a Big Mac.
Realistically, buying power doesn’t change. Wages go up and basic economics dictates prices will go up to match.
“Union wages are tied to the minimum wage. Usually the union wage is a multiple of the minimum wage.”
I did say that was a possibility, and I’d like to know. Do you have a reference for that ? If that is true, it would be a wash for unions and only creditors would be screwed by a devaluation.
Better luck next time.
Why do you think democrats love to raise the minimum wage so much? It has nothing to do with low paying jobs, but the media is too stupid or lazy to report the facts.
I found this about the “Public Employees Federation” union and it doesn’t mention any relationship to the minimum wage:
“But in July 2004, PEF agreed to a new four-year contract which included salary increases of $800 in the first year; 2.5 percent, 2.75 percent, and 3 percent salary increases in the last three years;”
This is the kind of union contract I had in mind. A sudden devaluation would screw them until they renegotiated their contract.
When are people going to learn ... ?
No, no, no! There are lots of products and services that people won’t buy if the minimum wage is tripled. THAT is basic economics.
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