Seattle and the $15/hr Minimum Wage

[Crazed Rabbit]

Currently, Washington state has the highest minimum wage in the union with $9.32/hr this year (~$19,000/year for 40 hrs/wk). By law, it increases a bit every year.

There's been a push in the liberal city of Seattle to increase the minimum wage to $15/hr. I can understand that it seems very nice. Cities are expensive to live in, and Seattle is one of the most expensive. People don't want to just scrape by.

The push for this includes the Mayor (though he's not dead set on $15, just an increase) and a newly elected socialist city councilwoman;
http://seattletimes.com/html/localne...twage1xml.html

(And yes, a real 'Workers should seize the factories!' socialist, not just a left leaning democratic party member; http://www.kirotv.com/news/news/seat...ical-id/nbxbC/ )

The councilwoman is really pushing for the $15/hr wage and has a site; http://www.15now.org/

The problem (as it always is with socialist ideas) is actual economic realities; http://seattletimes.com/html/dannywe...neat23xml.html

It would be hard to find more of a liberal do-gooder in the local business community than John Platt.

His restaurant, St. Clouds, in my own Madrona neighborhood, doubles as a sort of local relief agency. Drop by there and Platt is likely to be cooking 500 meals for the homeless. Or volunteering to be chef for public-school auctions. Or running dine-out fundraisers for everyone from environmental activists to immigrant high-schoolers trying to get to college.
...
It works like this. About one-third of Platt’s costs are labor. Those costs will rise up to 60 percent if the wage is lifted from $9.32 to $15 per hour. His cost of goods also will rise, though not as sharply. The bottom line is St. Clouds’ total costs could easily go up 25 to 30 percent.

If he passes that on to his customers, then St. Clouds’ burger with green chili aioli, which sells for $13, could cost $17. The top of the menu, pan-roasted duck, could go from $32 to more than $40.

“It isn’t fear-mongering; it’s just math,” says Burke Shethar, who runs the Madrona Ale House across the street from St. Clouds. “We could be the city of the $18 hamburger.”

But economists say these new costs are so steep they can’t be passed completely along to customers, who would balk at paying them. Small businesses would be forced to eat some portion, and try to recover the rest by a combination of reducing staff hours or benefits as well as raising prices. Bigger companies, as were affected by the SeaTac wage measure, have more flexibility to absorb such “cost shocks.”

It's like the supporters think they'll make $15/hr up from $9.32 but everything else will just stay the same. A complete ignorance of the total integration of economics.

And non-profit groups will be hurting too; http://seattletimes.com/html/localne...neat26xml.html

Bill Hobson says the $15-an-hour wage movement is the most electrifying change in thinking he’s witnessed on an issue in more than 30 years of advocacy for the poor.

“I’m something of a 1960s radical,” Hobson says, “and I don’t think I’ve ever seen such a rapid societal shift as the $15 wage.”

There’s only one hitch, and it’s a doozy: He can’t pay it.

Hobson, as director of the Downtown Emergency Service Center, is Seattle’s largest employer of social workers and counselors to the homeless. He’s got 520 full-time workers running a network of apartments, shelters and crisis clinics for the city’s sickest and most vulnerable — thousands of mentally ill or drug-addicted folks who, on any given day, would be out lying on sidewalks or under bridges without the help of Hobson’s crew.

Of that crew, though, 171 make less than $15 an hour. His 30 janitors start at $11.75. The hundred-plus counselors who staff the agency’s buildings start at $12.75 — a “travesty,” Hobson says, considering many have college degrees in social work.

But paying $15 will cost him $1.25 million he doesn’t have.

“In principle, I’m all for the higher wages,” Hobson said. “But I can’t pay it. Without some major infusion of cash from the city, I would have no choice but to cut services.”

I don't think the minimum wage should be a "living wage" that is something people plan on earning for a long time.

CR

[Husar]

Indeed, a better idea would be to limit corporate profits to say, 10% of their revenue. Then companies will have nothing better to do with 90% of their revenue than pay their employees and acquire materials/services of decent quality.

[Crazed Rabbit]

Indeed, a better idea would be to limit corporate profits to say, 10% of their revenue. Then companies will have nothing better to do with 90% of their revenue than pay their employees and acquire materials/services of decent quality.

That's an even worse idea. You want to penalize successful companies? You want people to worry about making to much of a profit? Gah.

CR

[Fragony]

There's a hidden benefit to it, more money means more to spend. Services can get more expensive, but groceries not all that much.

[HopAlongBunny]

Indeed, a better idea would be to limit corporate profits to say, 10% of their revenue.

Leaving a mere 90% to bump up the CEO's pay package :p

[Brandy Blue]

What I know about economics could be written on the back of a postage stamp, but still ...

What I don't get is why the minimum wage has to be the same for all kinds of businesses. Maybe charities should have a slightly lower rate (not too much lower, or no one will want to work for them), small businesses a medium rate, and larger businesses have to pay either a higher rate or spend a minimum amount of their profits on paying people (I mean the rank and file, employees, not just an excuse to pay the CEO's more), whichever is higher. Or maybe for every $1 they pay management in bonuses and hidden bonuses (stock options etc) they have to pay X amount of dollars in bonuses split up among the employees. Something like that. A single across the board minimum is either going to be too low or too unrealistic.

[Seamus Fermanagh]

Larger how? # of employees? Total revenues? Net revenues? Profit amount? Profit margin?

I like the idea that a "one size fits all" answer isn't the best route -- classic problem solving point that one.

[HoreTore]

I don't think the minimum wage should be a "living wage" that is something people plan on earning for a long time.

CR

I agree.

Workers should be kept in a situation where they are not able to feed themselves. They should be kept in a state where they are not able to start families or live comfortably; this will ensure that they will stay loyal and work hard. Allow them to build up a capital reserve or start a family, and they may use that to leave or demand even more benefits.

[Rhyfelwyr]

What a silly and irrelevant sob story that was about Mr. Platt's restaurant. If he wants to run a charity maybe he should look into getting people in to help on a volunteer basis. If he wants to run a business, he needs to pay his employees what is deemed to be a satisfactory wage.

I don't think the minimum wage should be a "living wage" that is something people plan on earning for a long time.

Just about everybody I have worked alongside with on minimum wage has expected to be on it for life, and indeed they most likely will be.

[Beskar]

15 USD would actually be more than British minimum wage, surprisingly.

But I still don't understand why you would pay $17 for a burger or even $13. A large meal at Mc Donalds is only $8 and they pay everyone here minimum wage which is around $11.

[Sarmatian]

Even though I'm a hated pinko, I don't believe that minimum wages should be raised arbitrarily if it's gonna affect the economy negatively. I'm talking about normal minimum wages, not American, based on my short work experience there.

What the state should do, is focus much more effort and money to allow people to work for something more than minimum wage, first and foremost giving them a good and free education.

[HoreTore]

Even though I'm a hated pinko, I don't believe that minimum wages should be raised arbitrarily if it's gonna affect the economy negatively. I'm talking about normal minimum wages, not American, based on my short work experience there.

What the state should do, is focus much more effort and money to allow people to work for something more than minimum wage, first and foremost giving them a good and free education.

No matter how educated a people becomes, we will still need someone to flip our burgers and wash our toilets.

[Fragony]

Nobody would ever accuse me of being a pinko. Now they will probably. But it's good for the ordinary middle-class enterprises if the lowest of incomes have more money to spend. It's benificial and works it's way up.

[HoreTore]

Nobody would ever accuse me of being a pinko. Now they will probably. But it's good for the ordinary middle-class enterprises if the lowest of incomes have more money to spend. It's benificial and works it's way up.

The Dark Side is strong, Fragony... Join us.

To expand, you are of course absolutely correct. Higher wages is beneficial to the domestic economy. What higher wages will hurt, is export industries which are low-tech and labour-intensive. But that's not the kind of jobs you want in an economy anyway; we've got Indians, Chinese and Latinos for that.

[Fragony]

The Dark Side is strong, Fragony... Join us.

Ah in many things you already got me, I understand the need to alleviate the lower classes as much as possible. Where the money that is needed to do it is comming from is a different matter.

[HoreTore]

Ah in many things you already got me, I understand the need to alleviate the lower classes as much as possible. Where the money that is needed to do it is comming from is a different matter.

I'm not with the "use taxes to redistribute wealth"-crowd, frags, I'm firmly with the "increase wages"-crowd

[Sarmatian]

No matter how educated a people becomes, we will still need someone to flip our burgers and wash our toilets.

Isn't that what South Americans/eastern Europeans are for, depending on which side of the Atlantic you are?

Joking aside, minimum wage should offer a decent living but it is a bad idea to remove an incentive to improve. Why should I go to school for 16 years if I can get a good living with just 8 years in school? Driving people around in a taxi is certainly much less stressful than working in an office.

[Fragony]

I'm not with the "use taxes to redistribute wealth"-crowd, frags, I'm firmly with the "increase wages"-crowd

Yeah excellent, little secret, I am part viking. So I naturally know everything about everything about scandinavia. A LOT of Danes go to Germany to stock up, Swedes go to Denmark because it's even more expensive in Sweden. People don't want to go there for shopping, I blame Kadahar.

[HoreTore]

Isn't that what South Americans/eastern Europeans are for, depending on which side of the Atlantic you are?

Joking aside, minimum wage should offer a decent living but it is a bad idea to remove an incentive to improve. Why should I go to school for 16 years if I can get a good living with just 8 years in school? Driving people around in a taxi is certainly much less stressful than working in an office.

If that was true, Scandinavia would be a place with little to no education.

It's the exact opposite.

A low-paying* job doesn't create an incentive to improve. A high paying* job does.


*In absolute, not relative, numbers.

[Husar]

That's an even worse idea. You want to penalize successful companies? You want people to worry about making to much of a profit? Gah.

CR

I don't want to penalize anyone, same rules for all companies. Noone ever had to worry about making too much of a profit, it just means that it's not a profit and they have to invest it into something useful such as their employees or better quality production machines. This in turn increases their business success, increases their total revenue and thus also increases their absolute amount of profit. It's a win-win situation.

Leaving a mere 90% to bump up the CEO's pay package :p

Easy. The highest wage per hour including bonuses, shares etc. can only be 20 times as high as the lowest wage per hour.

[Crazed Rabbit]

Several points;

The minimum wage in the US was intended to prevent companies from paying rock bottom wages for low skilled jobs - as it functions now mostly - not as a livable wage for broad swaths of people in the economy. The reason it should remain that way is because politicians couldn't set such a wage well even if it was possible to set a one size fits all wage.

There's a hidden benefit to it, more money means more to spend. Services can get more expensive, but groceries not all that much.

In the US grocery stores operate on very thin margins and labor is a large cost;
https://www.fmi.org/docs/facts-figur...s.pdf?sfvrsn=2
Stores measure employees' speed at checkouts down to the second;
http://online.wsj.com/news/articles/...51745876821483

Those costs will rise and some employees will be fired, and all will likely lose some benefits.

I agree.

Workers should be kept in a situation where they are not able to feed themselves. They should be kept in a state where they are not able to start families or live comfortably; this will ensure that they will stay loyal and work hard. Allow them to build up a capital reserve or start a family, and they may use that to leave or demand even more benefits.

Thank you, HoreTore, for reading in between the lines and saying what I really believe better than I ever could.

Because of course it is only by raising the minimum wage that people get paid more - never by raises or other jobs or promotions.

Just about everybody I have worked alongside with on minimum wage has expected to be on it for life, and indeed they most likely will be.

For the US, I don't think we should be setting the minimum wage so that the people working at Mcdonalds can afford to raise a family. Less than 5% of workers in the US are at or below the fed's minimum wage; http://www.bls.gov/opub/ted/2013/ted_20130325.htm

I don't think it's something most people in the US expect to be on forever.

I don't want to penalize anyone, same rules for all companies. Noone ever had to worry about making too much of a profit, it just means that it's not a profit and they have to invest it into something useful such as their employees or better quality production machines. This in turn increases their business success, increases their total revenue and thus also increases their absolute amount of profit. It's a win-win situation.

I believe, accounting wise, that extra money they choose to invest/increase wages with is originally profit. I mean, what do you think they do with the profit they make?

And even if they choose to save up their profits to have a large amount of cash on hand (like Apple), what makes that bad? It allows companies to invest easily if a new opportunity comes up.

CR

[Montmorency]

For the US, I don't think we should be setting the minimum wage so that the people working at Mcdonalds can afford to raise a family. Less than 5% of workers in the US are at or below the fed's minimum wage;

We've already been over how this is a worthless statistic last summer. It would be much more interesting and relevant to see how many work at or below 200% of the federal minumum.

[HoreTore]

Thank you, HoreTore, for reading in between the lines and saying what I really believe better than I ever could.

Actually, I assumed you to be familiar with Wealth of Nations.

Apparently you are not.

[Fragony]

Actually, I assumed you to be familiar with Wealth of Nations.

Apparently you are not.

I am, is there any ambiguity I am missing

[The Lurker Below]

Just about everybody I have worked alongside with on minimum wage has expected to be on it for life, and indeed they most likely will be.

What a depressing notion. I would prefer to be flat broke today and have hope that the future will be better than to be just alright today and know that things will never be better.

[Husar]

I believe, accounting wise, that extra money they choose to invest/increase wages with is originally profit. I mean, what do you think they do with the profit they make?

I believe they pay too much to shareholders and banks and other investors who make enormous profits by just "letting their money work". Meanwhile the investments the companies make in their employees or into actually producing working products are reduced in order to save costs and increase profits, which can then be paid to investors. If they are already working on a very tight margin such as the supermarkets you mention, then it is like it is and not much can be done.

And even if they choose to save up their profits to have a large amount of cash on hand (like Apple), what makes that bad? It allows companies to invest easily if a new opportunity comes up.

Money needs to flow, if people horde money it hurts the economy. And if rich people keep making investments that pay back tenfold while poor people get indebted and have to pay back more in the end then I call that trickle up.

[Rhyfelwyr]

What a depressing notion. I would prefer to be flat broke today and have hope that the future will be better than to be just alright today and know that things will never be better.

This is the reality of living out the dream.

[Kadagar_AV]

Peoples lives shouldn't be decent just because they happen to work hard!!

-'murica

[Papewaio]

So everyone in the restaurant is paid minimum wage or was the article being disingenuous?

$13 a burger. Third in labour. So it takes half an hour of total effort to take an order, make a burger and clean up?
So from $4.5 in cost it goes up to $7.50 in costs. Actual rise if the reports are correct and all are on minimum wage the burger would move from $13 to $16. So when they casually inflate the costs by 20-25% and probably overestimate work effort it would seem like a factually insufficient article.

How would you feel if you had to work 1.5hrs to afford a burger? Or how would you feel that it takes you an hour to make, serve and cleanup two burgers.

No wonder the guy has to donate food, half his staff would be starving.

[ICantSpellDawg]

I want nothing more than a minimum wage hike in all historic and liberal municipalities. If it works without shedding jobs, great. My hope though is that these municipalities with stagnate economically and constantly be out-competed by others. I want to see the Northeast accelerate their taxes and shrink their economic prowess. This, I believe will help that happen. Republicans should abstain From voting in these areas. If they defeat the measure, the Democrats will use it against them successfully: "remember when the dastardly GOP stopped us from entering paradise?". Let them do itSo that they have to own it and buy stock in less developed citied in the South and mid-west.