Hank Scorpio wrote:
denisdman wrote:
There's no free lunch with raising the minimum wage. One of the following things has to happen, and in reality, a little bit of each would happen:
1) The workers being paid a higher wage are automated away by technology because rising labor costs make capital equipment more cost competitive to use. Impact: Less jobs. Low wage workers with jobs win, but many low wage jobs disappear.
2) Companies try to maintain margins and thus raise the prices on all goods and services. Impact- Inflation is borne by all of society and real purchasing power goes down. The pain is shared broadly across the economy.
3) Companies eat the extra cost and do not lower employment or raise prices. Impact: This is the one that would hit the upper classes the most because it would lower earnings on companies that they own or run including all publicly traded companies.
In scenario 3, the low wages workers win as a greater share of our economy is flowing to them. Since corporate profits are at a record high relative to all income, this is the preferred situation. It is a good way to redistribute income. Unfortunately, none of us can control how companies collectively would respond to the forced payment of higher wages. In the end, employees must be providing value add that exceeds their costs. Otherwise, over time those jobs will disappear.
The wage discussion aside, as a country we need to provide the education and skill development that will make our high schoolers valuable to employers. One of our biggest failures as a society is that too many kids get to 18 years old and have no tangible skills to offer an employer. And as they age, it doesn't get any better.
3 is the only option that truly helps and how do you make that happen without severe government influence.
It's a great question. The best way is what I allude to in my last paragraph- education. That solves a large piece of the puzzle because then workers have desirable skills that employers must bargain for. I am sure many on this board have employment opportunities at their competitors' shops, and those places would offer a higher salary or wage to attract you.
Now low wage jobs like McDonalds really are meant for teenagers and college aged kids. Unfortunately, we have too many people trying to raise families on those jobs.
There is nothing the government can do that wouldn't make the problem worse. Companies have been exceptionally good at doing more with less.