Archive for the ‘Minimum Wage – Living Wage’ Category

McDonald’s replacing $1 menu with a buck-and –a-half menu … ouch!

September 9, 2014

Relax, we’re just speculating … it’ll only happen if the fast-food workers get the $15 per hour that they were clamoring for last week

Economists at the Heritage Foundation have observed that fast-food joints operate on very slim profit margins (about 3% on average) so they’d have no choice but to bump up prices. to stay even.

 

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The Heritage economists estimate that a $15 minimum wage for hamburger flippers would force restaurants to raise average menu prices about 40% in order to hold the current level of profitability.

Here’s the essence of their analysis …

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Who really benefits from increases in the minimum wage ?

July 9, 2014

An article in the WSJ this week is causing a bit of a stir.

Titled “Who Really Gets the Minimum Wage”, the report concluded that Minimum wages are ineffective at helping poor families because such a small share of the benefits flow to them.

Specifically, “Obama’s $10.10 target would steer only 18% of the benefits to poor families; 29% would go to families with incomes three times the poverty level.”

Hmmm.

How does that happen?

 

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The essence of the dynamic: counter-intuitively, low-wage workers and low-income (i.e. “poor”) families are not the same folks.

According to the article, data from the U.S. Census Bureau show that there is only a weak relationship between being a low-wage worker and being poor.

Three reasons for that:.

  1. Many low-wage workers are in higher-income families—workers who are not the primary breadwinners and often contribute a small share of their family’s income.
  2. Some workers in poor families earn higher wages but don’t work enough hours (and have hours cut when the minimum wage goes up)
  3. About half of poor families have no workers, in which case a higher minimum wage does no good. This is simple descriptive evidence and is not disputed by economists.

Bottom line: Not much help to the well-intended anti-poverty movement.

There’s another “non-poor” group that benefits when the minimum wage is raised..

Glance at the picture above and see if you can guess who that is.

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What happens when the minimum wage is raised?

February 19, 2014

President Obama is pushing to raise the minimum wage to $10.10 per hour.

Interesting play

$10.10 … not $10.

Why?

To make folks think that he thought about it … that $10.10 is some kind of magical optimum.

Putting that silliness aside, the rationale is well-intended: get low-earners closer to a “living wage”

The major argument against the move is econ 101 … and empirical evidence.

The below chart – from AEI’s Mark Perry —  cuts to the chase.

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The chart plots the level of the Federal minimum wage against the number of percentage points that the teenage unemployment rate is over the all-inclusive unemployment rate.

Implicitly, the analysis assumes that the bulk of minimum wage jobs go to teens … and, measuring the differential (instead of the gross rate) normalizes to the overall state of the economy.

The conclusion is stark: when you raise the minimum wage you lose jobs.

Period.

But, some folks argue that economic life is better for the minimum wagers who retain their jobs.

Not so fast …

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Chart: What happens when the minimum wage is raised?

February 20, 2013

President Obama is pushing to raise the minimum wage to $9 per hour.

The rationale is well-intended: get low-earners closer to a “living wage”

The major argument against the move is econ 101 … and empirical evidence.

The below chart – from AEI’s Mark Perry —  cuts to the chase.

image

The chart plots the level of the Federal minimum wage against the number of percentage points that the teenage unemployment rate is over the all-inclusive unemployment rate.

Implicitly, the analysis assumes that the bulk of minimum wage jobs go to teens … and, measuring the differential (instead of the gross rate) normalizes to the overall state of the economy.

The conclusion is stark: when you raise the minimum wage you lose jobs.

Period.

But, some folks argue that economic life is better for the minimum wagers who retain their jobs.

Not so fast …

(more…)