Minimum wage: how much is too much?

[Josh]

Most businesses do have margins to increase wages. The sticking point is how much and how long will that be satisfactory.
The problem is that it is never enough. It wouldn’t matter if the minimum wage was $20, people would be asking the exact same question, “Surely the company could pay more”.

What exactly do you expect employees at the bottom to do when they are experiencing price inflation of 10-50% for things like housing costs and groceries?

I don’t know. I suppose the same as the owner. Get squeezed, and hope for more income before getting squeezed to death.

Most people at the bottom end already live paycheck to paycheck, can barely make ends meet, and often are going into debt. I really don't know what the rest of the country expects from them.

If we don't have working people and labour, we don't have a country at all anymore.

[RZehr]

There is always the question of how much minimum wage is too much. Almost never the question of how much maximum wage is too much.

The premise is different. The question of how much minimum is to much, is because at some point it has the risk of bankrupting a company if they don’t have the margin, nor the ability to raise prices. Which a lot of small companies can’t do. This is true for both the bottom of the pay scale and the top of the pay scale. A company cannot pay unlimited amounts. The question of minimum and maximum cannot be separated.

There is plenty there is plenty of question about how much is too much. Both at the bottom and top of the scale. Both from a balance sheet perspective and from a national political perspective. Elizabeth Warren said last week that Bezos needs targeted, and needs to pay more in taxes.

Employees can't afford to go into unlimited amounts of debt, either. By this same argument, employers could cut wages whenever they felt like if they "don't have the margin".

My experience around most businesses of medium to larger size is that there is plenty of money to pay six and seven figure bonuses at the top, but a slight increase of a dollar an hour in pay for the people at the bottom is a huge deal.

I think there are companies that look at labor strictly as a line item expense, and simply as a “human resource” just another component of their process. These companies probably would cut wages whenever they thought they could get by with it. But many companies are a bit wiser and a bit more measured.

Business is, among other things, slow to take on overhead. Often it is more comfortable to give a one time bonus of $100,000 than it is to spend that money on raise wages across the board. The reason is because once a base wage is raised, it ain’t going back down. When bad times come, no one likes to, or can, cut wages at the low end of the pay scale. Instead there will be lay offs, usually. A bonus, whether to one person or a lot of people, is not as embedded into the overhead.

[Sliceitup]

I’m curious what type of sustainable business models don’t have the margins for pay increases, or the ability to raise prices? I’m sure it exists, but how and why?

In an environment of rapid inflation, a lot of business models are suddenly unsustainable. Wal-Mart and Amazon are "sustainable", but not smaller, independent retailers. They don't have access to billions of dollars at near-zero interest, nor do they have the ability to lobby congress and local government to get favourable treatment.

I have a small business and the business isn’t sustainable if I don’t have wages calculated into the price. Because if I’m not paying myself, I can’t grow because I won’t have the margins to be able to pay others when my business grows.

Did you budget for wages going up 50% a year? Do you have the ability to raise your prices 50%+ plus a year including raising them enough to cover the higher cost of goods sold?

Is this a competition thing? Where a business can’t afford to pay workers adequately because others will undercut their prices? Is it poor business management? I can understand that there are times, especially in the beginning when the cash flow isn’t there, but to have a business operate continually like this raises all kinds of questions in my mind.

We are talking about the unique situation that has arisen in the last 15 months with wage and price inflation.

To give you an example, I haven't had a raise in the last 2 years. The price we pay at the grocery store is up about 50% for the exact same goods. Of course, we've adjusted by buying different things, buying less things, and cutting out certain luxuries like eating out a lot less if at all. The cost to eat out is up even higher, one example that springs to mind is Freddy's, where prices are over double what they were in 2019.

Likewise, the cost to acquire a car or truck is up 40%. I simply do not have the ability to give anyone working for us a 40% raise. Do you think that I somehow should? I cannot raise prices to our customers 40%, or somehow magically get 40% more business and try to make everyone work 40% harder.

My question was not specifically about the last two years, because I’ve heard these reasons (businesses don’t have the profit margin, or ability to raise prices) for years.

Are you saying groceries as a whole are up 50%? Cause I don’t pay detailed attention to prices, but I’m pretty sure I would have noticed that.

[Ken]

What exactly do you expect employees at the bottom to do when they are experiencing price inflation of 10-50% for things like housing costs and groceries?

I don’t know. I suppose the same as the owner. Get squeezed, and hope for more income before getting squeezed to death.

Most people at the bottom end already live paycheck to paycheck, can barely make ends meet, and often are going into debt. I really don't know what the rest of the country expects from them.

If we don't have working people and labour, we don't have a country at all anymore.

What is YOUR answer or solution? Higher minimum wages? Better social safety net? More wealth redistribution? Trickle-up economics?

[Josh]

My question was not specifically about the last two years, because I’ve heard these reasons (businesses don’t have the profit margin, or ability to raise prices) for years.

I'm focusing on the here and now.

Are you saying groceries as a whole are up 50%? Cause I don’t pay detailed attention to prices, but I’m pretty sure I would have noticed that.

Depends on the goods you buy, perhaps you buy things that aren't going up in price. I'm shocked at how steep some things have gone up in price. In Canada it's even worse; my 50% figure is an average of US and Canada (admittedly a bit specious, but I don't really care much about national boundaries.)

[steve-in-kville]

As people have to earn more wages just to make ends meet, they will be pushed into higher tax brackets. (Officially, inflation is low, so these tax brackets aren’t budging.) That means they keep less of their pay, even if their employer keeps giving raises. And they won’t be eligible for as much government help.

The company I work for starting paying double-time for working weekends. I volunteered to help one Saturday for a few hours. Came in at 4am and left at 8am. I basically payed $26 to do that. Not gonna do that again anytime soon.

[Sliceitup]

As people have to earn more wages just to make ends meet, they will be pushed into higher tax brackets. (Officially, inflation is low, so these tax brackets aren’t budging.) That means they keep less of their pay, even if their employer keeps giving raises. And they won’t be eligible for as much government help.

The company I work for starting paying double-time for working weekends. I volunteered to help one Saturday for a few hours. Came in at 4am and left at 8am. I basically payed $26 to do that. Not gonna do that again anytime soon.

Aren’t most income taxes marginal? As in, if the tax on income above 60k is 15% and under 60k it’s 10%, you don’t pay 15% on a 65k income. You pay 10% on the income up to 60k and 15% on the additional 5k.

I thought that would prevent you losing money to taxes if you work more hours. Unless there’s other payroll taxes that aren’t marginal that cause that. I believe FICA taxes aren’t progressive and therefore wouldn’t increase if you make more money. Actually I think they decrease at a certain point.

[Josh]

As people have to earn more wages just to make ends meet, they will be pushed into higher tax brackets. (Officially, inflation is low, so these tax brackets aren’t budging.) That means they keep less of their pay, even if their employer keeps giving raises. And they won’t be eligible for as much government help.

The company I work for starting paying double-time for working weekends. I volunteered to help one Saturday for a few hours. Came in at 4am and left at 8am. I basically payed $26 to do that. Not gonna do that again anytime soon.

Aren’t most income taxes marginal? As in, if the tax on income above 60k is 15% and under 60k it’s 10%, you don’t pay 15% on a 65k income. You pay 10% on the income up to 60k and 15% on the additional 5k.

I thought that would prevent you losing money to taxes if you work more hours. Unless there’s other payroll taxes that aren’t marginal that cause that. I believe FICA taxes aren’t progressive and therefore wouldn’t increase if you make more money. Actually I think they decrease at a certain point.

If I make $10,000 and my rent is $5,000 a year, I have about $4,000 left over after paying 10% taxes.

Let’s say inflation goes up 10X, like it did in Brazil in about 1 year in the 1990s.

If inflation spikes that to $100,000 and my rent is now $50,000 a year, I don’t have $40,000 left over because my taxes are 25%. I have $25,000 left over instead, which buys me what $2,500 used to.

So, it’s like getting a $1,500 pay cut today.

In addition, you don’t qualify for all the welfare programs like child tax credit etc as income gets higher.

[appleman2006]

I will say this/ If you are going to have a minimum wage it should at the very least not raise faster than inflation.
A few years ago I did a quick check and based on their earliest figures I could find of minimum wage laws in 1963 if rates would have only increased at the average rate of inflation they would be under 9 dollars today. I believe ours are at #14.25 right now. Maybe $14.50, People are totally shocked when presented with that fact because that is now what they are being told.

[temporal1]

Canada:

I will say this/ IF you are going to have a minimum wage it should at the very least not raise faster than inflation.

A few years ago I did a quick check and based on their earliest figures I could find of minimum wage laws in 1963 if rates would have only increased at the average rate of inflation they would be under 9 dollars today.

I believe ours are at #14.25 right now. Maybe $14.50,
People are totally shocked when presented with that fact because that is now [not?] what they are being told.

Minimum wage was not intended to equate to minimum “living” income, or career/professional level income.
The purpose was for entry level jobs, teens, housewives, i.e., generally temporary or additional income.

This began before families were decimated, jobs sent overseas, technology eliminated jobs, the cost of living surged.

Near seattle, a grocer has signs posted, “Hiring, $20/hr.”

i would work for $5/hr., and be grateful for the job.
i have Soc Sec, and Medicare, that means i have health ins.: with supplemental ins., with copays and deductibles, etc. $$$.
(i.e., Medicare is not “free.”) i think is often misunderstood. my last job, childcare, was $10/hr., no benefits.

some costs are skyrocketing. i expect more+more increases as the market adjusts to itself. i.e., higher min wage, and TRILLIONS of taxpayer dollars tossed “everywhere.”