Critic's Corner
The good folks at Athens Politics take aim at Banner-Herald executive editor Jason Winder's latest column concerning a living wage. Now Winders, my former boss, is a good guy and his column does have some truth to it, but I agree with Publius on this one.
Winders was right in stating that small businesses would be ones who would be hurt the most by a mandated living wage. Of course, this is pretty much basic economics so I don't know how much credit should be given for that assumption. But he never really discusses the issue and instead dismisses it casually as something silly that only do-gooder-types care about. Had it been a more intelligent discussion about the pros and cons of a living wage, Winders would have explored the popular notion of a dollar-for-dollar tax credit for small businesses which voluntarily offer a living wage. And there are plenty of other ideas of how best to promote a living wage, and - it should be noted - stronger arguments against implementing a living wage.
While we're on the Sunday editorial page, let me also have a bit of fun with Jim Thompson's column about form letters. Again, it must be noted that I am a personal, and for the most part, professional fan of JT. He's a good guy whom I've got a ton of respect for.
But, is it just me, or does anyone else see some sort of peculiar hypocrisy in bashing folks who submit the same letter over and over again ... yet has pretty much done the same thing himself? About the very thing he's criticizing?
Though such repeat performances are nothing new. The Banner-Herald hearts D.J. Shockley on Saturday and on Sunday.
There's an old phrase I like ... something about glass houses and stones, I think.
Winders was right in stating that small businesses would be ones who would be hurt the most by a mandated living wage. Of course, this is pretty much basic economics so I don't know how much credit should be given for that assumption. But he never really discusses the issue and instead dismisses it casually as something silly that only do-gooder-types care about. Had it been a more intelligent discussion about the pros and cons of a living wage, Winders would have explored the popular notion of a dollar-for-dollar tax credit for small businesses which voluntarily offer a living wage. And there are plenty of other ideas of how best to promote a living wage, and - it should be noted - stronger arguments against implementing a living wage.
While we're on the Sunday editorial page, let me also have a bit of fun with Jim Thompson's column about form letters. Again, it must be noted that I am a personal, and for the most part, professional fan of JT. He's a good guy whom I've got a ton of respect for.
But, is it just me, or does anyone else see some sort of peculiar hypocrisy in bashing folks who submit the same letter over and over again ... yet has pretty much done the same thing himself? About the very thing he's criticizing?
Though such repeat performances are nothing new. The Banner-Herald hearts D.J. Shockley on Saturday and on Sunday.
There's an old phrase I like ... something about glass houses and stones, I think.
posted by Jmac at 9:02 AM
12 Comments:
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Actually, it is often small businesses who lead the charge for hikes in minimum wage. These businesses already, on average, pay more to their employees than do the "giant corporations", and so they like the idea of forcing the big guy's overhead a little higher to improve their own competitive advantage (or to lessen their disadvantage).
Some businesses (big or small) may be hurt by mandatory minimum wage hikes (to "living" levels or otherwise), but as a general rule they will simply make the necessary adjustments to their personnel to aborb the higher labor costs. (Some businesses may not be able to do this, and will simply "go under", which would certainly constitute being "harmed")
The people hurt most directly (and predictably) by minimum wage hikes are, sadly, marginal workers themselves. Those workers whose labor is least valuable to employers end up losing their jobs. Been said before, but it bears repeating: "minimum wage hike" = higher unemployment
I was rushed earlier, and had to condense, then prematurely abandon, my post. But I guess the gist is still there.
Here is linkage, though, for my perspective on this:
http://www.mises.org/fullstory.aspx?Id=1603 (Really, any article under a search of "minimum wage" at the Mises site will do)
Good points. I don't see eye-to-eye with you about all minimum wage hikes (particularly for larger corporations), but you're right about small businesses. They typically do pay higher per hour than the larger corporations ... partially because of the close interaction between owner and employee.
I don't understand your disagreement about "larger corporations." Are you saying you support imposing a higher minimum wage just on those corporations? (Feel free to ignore/delete/link to eastern european pornography if you think this comment is too off-topic)
Feel free to ignore/delete/link to eastern european pornography if you think this comment is too off-topic
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No, not at all. While I'm not entirely sold on the idea of a mandated living wage, what I do mean is that larger corporations have, for the most part, more flexibility in spreading out the increased costs (i.e., a price hike on cereal from $2.50 to $2.70). I also think, with regard to larger corporations, much of costs should come from the profits made.
That is, a CEO and the investors bringing home $1.5 million versus $2.5 million. It's still a lot of money for their own use - be it investments or personal spending. Plus the additional money in the pockets of those affected by a living wage would inevitably go back into the economy and back into the very corporations that had to pay the additional dollars.
It's sort of the exact same principle as a tax cut. You're giving people more money to stimulate the economy, right? The same thing applies, at least the way I see it, to business.
But, as I noted earlier, you're right about small businesses ... as is Winders, more or less. A small business which has a smaller customer base and small revenues would have a difficult time adjusting to a mandated living wage.
Wait, I'm saying just the opposite.
Small businesses in general already pay higher wages than do "big corporations." (theories abound as to why this is the case; lots of sensible possibilities) They are often the ones most on board for a hike in minimum wages, because it will hurt the corporations but won't affect the small business owners at all (since they already pay higher wages anyway).
When people say that minimum wage "hurts small business," that isn't (generally) right. This is not a good argument against the minimum wage. But there is a good argument against a coerced minimum wage. It's not that it hurts "small business", it's that it hurts marginally-employable people (The very people we're trying to help?).
If Sally's labor is not worth more to her employer than 5.15 an hour, and the gov't comes in and tells the employer that he/she/it has to start paying all employees 7/hr, what is the employer going to do? Hint: they're not going to just lose money for every hour that Sally works. Sally will get a pink slip, and will probably blame Wal-Mart for it, even though it was the minimum wage hike that caused her to lose her job.
Now, most of these marginally-employed people work for "big corp" type places, as said above. So we might feel that the big corp. should just "cut its profits" and pay Sally the extra money. Even if Wal-Mart gets less out of Sally than it pays her, hey they still make a gazillion in profits so we're not shedding any tears.
The problems with this, I think, are legion:
1) Corporations don't become money-makers in the "big stuff" by deliberately losing money in the "small stuff". The reasoning about just agreeing to pay Sally more money than she actually produces for the company can also apply to everything else Wal-Mart (or whoever) does. Why not pay the banana farmers more money than Wal-Mart can sell them for? Wouldn't that be nice to do for the banana farmer? But then, why not also pay extra to the providers of their electronics, jewelry, clothes, etc.
2. Incentives, yadda yadda yadda (I get sick of making this cliched argument, but there it is). CEO's have a lot of wealth becasue they (in general) are worth it in terms of what they produce for the economy. There are very few people out there who are capable of being the successful CEO of a fortune 500 company, which is why they are compensated handsomely for their efforts.
Similarly, stock-holders invest into Wal-Mart because they expect it to make money (because they trust its leadership, its position in the market, etc.) When it makes money, that money has to be divided back out to the shareholders, without whom much of Wal-Mart's success wouldn't have been possible.
3. You yourself suggest that the big corporations can just "hike" the price of cereal up a bit to off-set the costs of higher wages. But increased price (almost always) means decreased demand, and it means less wealth for whoever does buy the product (since they had to pay more to get it at the higher price). The economic factors to consider are not just Wal-Mart CEO and Wal-Mart employee. We also have to consider all the consumers who shop at Wal-Mart. The fact that the Wal-Mart employees might have more money to spend (even at Wal-Mart) won't off-set the overall effect of the entire rest of the consumer population having less real wealth as a result of the increase in prices.
Right, and now 2 people have a better working situation (a full-time job over $x/hr, whereas before they only had a part-time job at $x-n/hr) while 3 people have a worse working situation (a part-time job at $x-n/hr just went bye-bye).
5 people all have jobs which they have agreed to work for a wage that their employer has agreed to pay them. But we want the government to come in and declare these professional relationships illegal, the end result being that 3 of these people now don't have their job at all. But we're trying to help the poor employees, I thought?
One problem with the living wage is that no one has any idea what it actually entails in dollar amount. How much money is a living wage?
Matt, I had read somewhere that for Athens, a living wage would be between $10 and $11 an hour. Lots of it has to do with the cost of living in a particular town or city. The living wage for Athens would be different than the living wage in Atlanta.
Xon, I'm still not sold on your arguments, but we've had this dance before. Primarily because we look at it through different prisms. You see, more or less, a doomsday scenario with minimum wage hikes decimating the economy and those it tries to help(though typically, increases in the minimum wage have not corresponded with periods of higher unemployment or dramatic increases in prices).
No one is disputing the fact that an increase in the minimum wage would, in some fashion, have an impact on prices or demand, but I just don't think it would be to the severity that you claim.
If Family X pays an extra $.20 for cereal, but is bringing home an additional $5 an hour, then it's not like they're going to be strapped or see an offset in costs. And, again, such marginal increases in prices can be more common for big corporations because they can spread that cost out to a variety of consumers.
So I don't necessarily think that demand will be hurt that much (gas prices have soared and demand is higher than ever, so as you noted, the two don't always go hand-in-hand).
Of course, I'm really not all gung-ho for a minimum wage hike. Such things will, as we've all agreed, have some effect on the economy, so they aren't to be taken lightly. I'm all for incentives and tax credits to help cushion the blow, and I'm perfectly OK with encouraging corporations to offer a living wage minus government mandate.
10-11 an hour for unskilled labor is pretty steep. Maybe athens is an expensive city, but in louisville ky, one person could live fairly easily, albeit unglamorously, for $10 an hour. Is that the idea?
Actually, why do people want a living wage? This is rather off topic, but it's frustrating to me to listen to liberals talk about this stuff, because there is no apparent clearly defined goal with any of it. When liberals are done legislating, what will it look like? What is the unifying purpose of the liberal agenda? If I knew that, I think it would help me wrap my mind around all of these concepts.
Actually, I would guess that significantly more people ride the bus, walk, ride a bike, etc. today than did, say, two years ago. Rising gas prices are clearly affecting demand (people are also giving greater thought to scooters/hybrid cars/etc.) (But gas is pretty essential to modern life, and so its demand curve in relation to price is probably a pretty gradual slope.)
The recent "scare" in Georgia (Athens, Atlanta, Augusta, anywhere else?) was largely due to people thinking that gas was about to run out. In other words, people were responding to what they thought was a short supply, not to higher prices. It's not like the higher prices brought the people to the gas station. On the contrary, the people's mistaken demand drove the prices up (and almost DID cause a genuine shortage to boot).
As to the results of minimum wage, I've never claimed that the increases in unemployment (or any other deleterious effects) have to be "dramatic." But they are real, and a lot of little stuff can become a big problem really quickly. Also, the claim is not that minimum wage always increases unemployment in absolute numbers, since the economy might be "growing" in other ways at the time of the hike. If the economy is "booming", then a lot more jobs are being added, and a modest minimum wage hike won't off-set the overall gains. But we can be sure that the minimum wage hike did take away some jobs somewhere, so that we now have less jobs than we would have had if the minimum wage had not been raised.
Furthermore, most families are not affected by a minimum wage hike, and thus are now paying .20 more for a box of cereal (and .20 more for several other things, most likely) without any added benefit at all. Those who were working at minimum wage might not mind the higher prices, but everyone else will. You cannot (we HAVE had this dance before, you are correct) just look at the people who get the direct benefit from some policy, and ignore the rest of the economy. The whole fascination people tend to have with economics is precisely in the way that (see "Freakanomics," for instance) one thing influences something else unexpectedly yet systematically.
An "over the top" example to make the principles clear: All bananas are mandated to a price of $100 a piece by the U.S. government. Let's also pretend that the gov't forces people to eat bananas. The entire economy will be full of people who are now quite poorer than they were, because of all the money they now have to spend on bananas. But the banana farmers will be loving it! They'll have gobs of extra money coming in. (Even if they had to buy their own bananas from the supermarkets at the super high prices, they wouldn't mind I'm sure). But the "Banana Price Floor Act of 2005" isn't a good policy just because it makes the banana farmers happy. There are other people to think about.
I know the response is "But the effects are not so dramatic. Everyone just pays a little more for their food, they probably don't hardly even notice." Maybe, but I'll bet someone notices (cereal wholesalers, perhaps). In any case, the government is almost never bold enough to impose massive changes all at once. It's always one incremental battle after another. Help the poor, don't be stingy, the sky's not falling. But over the decades we all get a little poorer. And then we need to pass a new law, so we can...help the poor all over again.
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