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CEO raises his company's minimum wage to $70,000...

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  • #16
    Originally posted by Mountain Man View Post
    So that is it nobody wants to play?
    We hunt the hunters


    • #17
      Originally posted by wolfhnd View Post
      This should be fun.

      I want to start with what I see as a fundamental philosophical flaw then move on to the economics.

      The assumption that a civilization can be built on greed as the primary motivation for social cooperation is as flawed in capitalism as the communist belief that altruism can be the foundation of a society. At a fundamental biologically level altruism and greed (self interest) cannot really be separated. What is evident however is that all social animals have a degree of altruism that make social cohesion possible. Civilizations are fundamentally based on the voluntary surrender of individual freedoms in exchange for security. Altruism however is balanced by "fairness" and the concept of fairness is also seen throughout social animals. A break down in either fairness or altruism will cause social instability.

      The difference between what the CEO has done and a universal minimum wage is the lack of fair distribution. A universal minimum wage not only is fair it also places all businesses on a level playing field. Competition is them able to favor other factors besides wages into the success or failure of individual enterprises.

      The principle behind minimum wages is the assurance that everyone that works has sufficient purchasing power to meet minimum living standards. The sides effect of everyone having a minimum living standard are numerous. They include a healthy population, increases in consumer production, better housing, and the responsibility that comes with inclusion in the economy. Where there is little reward for working if a minimum living standard can't be achieved by wages alternative life styles are encouraged. Those life styles reflect high crime rates, health issues related to poverty, voluntary unemployment and irresponsible behavior.

      The idea that high minimum wages will stimulate automation is not just a side issue but resolves one of the crises we face with the exploitation of cheap foreign labor. The U.S. has been able to withstand trade imbalances with the shift to manufacturing in China an elsewhere by controlling international finance. The control of international finance market has and may continue to erode making future trade imbalances more difficult to absorb. Automation is likely to completely alter this dynamic in the future but it is being slowed by a number of factors.

      The primary factor is lack of motivation for innovation low wages keep inefficient labor arrangements profitable. Automation is also being forestalled by the exchange of derivatives for cheap foreign labor. While higher domestic minimum wages are unlikely to influence automation directly while cheap foreign labor is available they are also unlikely to effect the tech sector directly. They will tend to jumpstart automation of the service industry and increase the infrastructure need for automated production.

      High minimum wages should not be seen as social engineering. All the normal competitive forces and market freedoms remain in place. They are simply sound economic policy that stimulate the economy without direct government interference. The alternative social engineering policies such as welfare and stimulus packages and taxes have all proven to come with significant unintentional cost.
      I see a couple of problems with this: first, an increase in minimum wage doesn't necessarily translate to an increase for those making more than minimum wage. If we go up to $15 per hour, those that make $16 per hour will continue to make that much, they'll just now be $1 more than minimum wage. Meanwhile, the cost of just about everything will go up...that's a certainty in my opinion. Companies will not absorb the extra cost, they'll pass it on to their customers. The new 'living wage' will not go as far as it once did so it won't end up being a 'living wage' in the long run.
      Next, I don't believe that paying a higher minimum wage will increase productivity or job satisfaction--in fact it may cause an opposite effect for a lot of people. Imagine you've been working for 10 years, you started out at whatever minimum wage was 10 years ago and now you've climbed up to better jobs and are just now reaching $14 per hour. How are you going to feel getting $1 an hour increase while the new person they hired yesterday will now get the same pay as you? Happy with the $1 per hour? I doubt it. You have experience and skills that had you earning almost twice minimum wage and now you'll be right back at the beginning pay rate.
      Also, it doesn't help the US job situation to raise minimum wage for (especially) manufacturing jobs because other countries won't need to do that. Now instead of trying to compete paying US workers $8.00 compared to the $2-3 they might make in Mexico, companies will look at $15 vs. $2-3 and the factories will start closing. Automation will replace the worker in many service industries but those workers will then be on welfare, and since a 'living wage' is $15 per hour welfare will need to be raised to compensate for the higher cost of living.
      I believe the increase in minimum wage is simply an attempt to win votes by throwing the promise of more money around. It will increase the number of people on welfare and unemployment.
      You may think that if you just don't go to the drive-thru you won't be affected by this increase: if so you are wrong. It's just like the increase in gas prices a couple of years ago: it went up to $3-4 a gallon, so prices went up at the grocery store (for example) so stores could profit a lot from the tiny per-unit increase in transportation costs. Once gas prices went down, grocery store prices stayed up. When gas goes up again, grocery store prices will increase again, guaranteed. It wasn't just you paying more at the pump it's you paying more across the board, just as you will when the cost of doing business for most companies goes up due to a minimum wage hike.


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