Carpe Diem

Socrates and the minimum wage

In 2007, when Congress was in the process of passing the “Fair Minimum Wage Act of 2007,” Larry Reed of the Mackinac Center for Public Policy argued that what members of Congress (and now President Obama) needed is not another lecture on the minimum wage from an economist, but rather an old-fashioned Socratic inquisition. If Socrates was alive today, here’s how Larry Reed imagines such a dialogue might go (updated for the $9.00 per hour minimum wage proposal).

Congressman: Look, a minimum wage of $9.00 per hour isn’t much.

Socrates: I’d like to know how you arrived at that figure. Was it some sophisticated equation, divine revelation or toss of the dice? Why didn’t you choose $20.00, which is not only a nice round number but also a lot more generous?

Congressman: Well, $20 would be too high, for sure. Too much of a jump at once.

Socrates: It sounds like you think the cost of labor might indeed affect the demand for it. Good! That’s progress. You’re not as oblivious about market forces as I thought. What I want to know is why you apparently don’t think higher labor costs matter when you raise the minimum wage from $7.25 to $9.00. Do you think everyone, regardless of skill level or experience, is automatically worth what Congress decrees?

Congressman: Now hold on a minute. I’m for the worker here.

Socrates: Then why on earth would you favor a law that says if a worker can’t find a job that pays at least $9.00 per hour, he’s not allowed to work?

Congressman: I’m not saying he can’t work! I’m saying he can’t be paid less than $9.00!

Socrates: I thought we were making progress, but perhaps not. Can you tell me, if your scheme becomes law, what happens to a worker who is worth only $7.00 because of his low skills, lack of education, scant experience or a low demand for the work itself? Will employers happily employ him anyway and take a $2.00 loss for every hour he’s on the job?

Congressman: Businesses need workers and $2.00 isn’t much, so common sense and decency would suggest that of course they would.

Socrates: So employers who employ people are too greedy to pay $9.00 unless they’re ordered to, but then when Congress acts, they suddenly become generous enough to hire people at a loss. Who was your logic instructor?

Congressman: Can we hurry this up? I’ve got other plans for other people I have to think about.

Socrates: I give up. You congressmen are incorrigible. You’re the only people on whom my teaching method has no discernible impact.

74 thoughts on “Socrates and the minimum wage

  1. You congressmen are incorrigible. You’re the only people on whom my teaching method has no discernible impact.

    Oh, if only they were the only people.

  2. Austrian economist: It’s very simple. Raising the price of labor will reduce the quantity demanded for labor.

    Neoclassical economist: What about giving workers the flexibility of cash instead of fixed benefits, cutting pay for overpaid workers, raising prices only 2% for a 10% increase in the minimum wage, and all firms will have to pay at least the minimum wage to level the playing field, reduce our historically high profit margins a little, workers may stop pretending to work when we stop pretending to pay them, more productive workers will take jobs (my teen looks at any job below $10 an hour as a joke, although there are desperate people), and we can reduce the costly turnover rate substantially.

    Austrian economist: Don’t bother me with details.

    • socrates:

      so, an employer is greedy for not paying $9 for something he values at $7 but a worker is not for requiring $9 for somehting valued at $7?

      perhaps you could explain to me how your definition of “greed” works.

      by taking away the freedom of a worker to price his own labor, we make his life better?

      it seems awfully paternalistic. shall we also limit the price at which gas stations can sell gasoline or restaurants sell hamburgers? why is selling labor somehow different than selling anyhting else?

      • employers also have the option of not hiring employees but hiring independent contractors, non-employees to do the work and that type of “employee” not only is not covered by minimum wage but also does not require the employer to pay FICA taxes,

        you merely contract with the worker to provide services in exchange for compensation.

        so why wouldn’t … instead of not hiring employees, companies just hire contractors so they don’t have to pay minimum wage nor pay FICA taxes?

        • so why wouldn’t … instead of not hiring employees, companies just hire contractors so they don’t have to pay minimum wage nor pay FICA taxes?

          There isn’t necessarily any savings in hiring contractors over employees, in fact in most cases it costs more per time period of employment such as day or hour.

          Hiring employees is an expensive undertaking, and they must be retained for a comparatively long period of time to recover the initial costs of hiring them in addition to any training costs. The advantage of hiring contractors is in the temporary and easily scalable nature of their availability, as well as their already having the skills the employer needs without any additional training.

          You can contract a worker for a day, a week, a month, or until they are no longer needed without incurring any employee costs. In addition, the term of employment is understood by both employee and employer from the beginning, and no one is harmed and no one need feel guilty when the worker is no longer needed and is let go.

          Think of it like renting a car for the day when you have an occasional need for a second car, but don’t want to buy and own a second one.

          • the benefit of a contractor is no minimum wage and no FICA taxes. that would seem to argue that they are less expensive than wage workers even if there are other “cons”.

            I just don’t think an employer like McDs is going to not hire the help it needs to maintain it’s benchmarks for quality and service and I don’t think they’ll forgo hiring if their business increases profits with them.

            if you go to the drive-in window of McD’s and someone does not come on the intercom within a few seconds or if your order gets screwed up or you change is wrong or your food cold, – you’re going to go to another store – and there is no way that McD or anyone else can skimp on manpower and still provide the minimum expected service.

            McD MUST adequately staff and maintain it’s level of service or they lose far more than paying increased wages and passing that cost on to customers.

            Customers will pay 25 cents more for a hot burger delivered quickly… but they’re not going to pay 25 cents for a cold burger delivered slowly.

            you can’t maintain expected service levels by trying to save on employee costs with less staff.

            this would be like arguing that if the price of electricity or toilet paper went up that McD would buy less of it.. even if it damaged their service levels. They’re just not going to damage their business to save money – they’ll pass on the increased costs first.

            If all fast food places are subject to the same increase in minimum wage – the competitive dynamics remain the same.

        • the benefit of a contractor is no minimum wage and no FICA taxes. that would seem to argue that they are less expensive than wage workers even if there are other “cons”.

          I will not even try explain to you what’s wrong with that statement. Ask someone at your location to explain employee costs to you.

          “<i.I just don’t think an employer like McDs is going to not hire the help it needs to maintain it’s benchmarks for quality and service and I don’t think they’ll forgo hiring if their business increases profits with them.”

          McDs will not forgo hiring e the people they need. Try to imagine for a moment that some workers produce more than in the course of a their work day than others. If McDs or anyone else must pay $9/hr, they will only hire and retain people who will consistently produce more than $9/hr. They won’t hire or retain workers who only produce $7/hr. They will have fewer workers who can do the required amount of work rather than more workers doing less for lower pay.

          if you go to the drive-in window of McD’s and someone does not come on the intercom within a few seconds or if your order gets screwed up or you change is wrong or your food cold, – you’re going to go to another store -

          Every store is pretty much the same, Larry, I expect shitty treatment when I go to McDs, which is why I don’t go there.

          – and there is no way that McD or anyone else can skimp on manpower and still provide the minimum expected service.

          As above, they won’t skimp, but will hire only workers worth the higher pay.

        • employers have the option of hiring independent contractors who do not have to be paid minimum wage nor does the employer have to pay FICA taxes.

          what is that not an option for employers who do not want to pay minimum wage employees?

          • LarryG,

            It’s not so simple to hire independent contractors instead of employees. You are usually an employee if the person you work for sets your hours of work or tells you what you have to do and when to do it and/or supplies you with materials to do your job. An employee who thinks an employer is improperly classifying him or her as an independent contractor can submit a form and the IRS will rule on it (employees win more than 50% of these cases with big fines for the employer for the improper classification). I currently work on both a W2 and 1099-misc basis along with my 1099R retirement.

            http://www.irs.gov/pub/irs-pdf/fss8.pdf

          • @Walt –

            It IS the employers choice though and to some extent it boils down to how much direct control the employer wants over the employee.

            An independent contractor has a more equal footing over the specifications for the work – and to a certain extent more protections from abuse.

            basically the difference is how much control the employer has over your work rather than your work product.

            the employer saves money not only on minimum wage but FICA taxes … and if the employer really knows their business – they can be a fierce competitor by using independent contractors vice wage employees.

            But my basic point is that employers do have ways to get around the minimum wage laws – and still hire the help they need. It’s not a situation where the only option they have is to hire minimum wage employees or not.

          • Walt, employees are not the only ones to bring actions against employers. Even if the contractor prefers to be a 1099 contractor, the government can and does step into that relationship and screws everything up.

          • @chuckM

            oh contraire! what I SAID was that employers HAVE THAT OPTION – and they do – but there are rules and “behavior control” is one of them -

            and it’s not like that it’s not an option not used. It is used and increasingly so for employers who have optimized their businesses in terms of functions.

            For instance, a McD might contract with a clean-up crew to keep the grounds clean rather than pay trained employees to do that.

            and almost surely places like McD use independent contractors to do landscape work or remodel/repair, etc.

            by doing that – and it is obviously possible in a wide variety of work no days – especially with automation – employers can avoid paying minimum wage

            but I also pointed out a number of existing exemptions for students and for restaurant wait staff as well as others.

            It’s NOT, as portrayed here in AEI an black/white, all or nothing proposition that clearly harms the economy.

            that’s their position but it’s not the reality. The fact that they often use cherry-picked deceptive data and tactics on these issues further undermines their position of being “trusted” on the issue. They have an obviously biased agenda – and it’s time for some to call them on it and tamp down the echo chamber nature of their “scholarly articles”.

          • Larry G: ‘and almost surely places like McD use independent contractors to do landscape work or remodel/repair, etc.

            by doing that – and it is obviously possible in a wide variety of work no days – especially with automation – employers can avoid paying minimum wage ”

            Employees cannot be arbitrarily classified as independent contractors. Every state has guidelines for the classification of independent contractors.

            Here’s a link to the Texas Workforce Commision’s guidelines for determining whether a worker may be classified as an independent contractor:

            http://www.twc.state.tx.us/news/efte/appx_e_twc_ic_test.html

      • Here’s what you don’t understand, Morganovich:

        It is not you and I and our employees who have specific knowledge and understand who is overpaid and who is not, how costly turnover is to us, what our profit margins should be, and what wage level constitutes “pretend pay”. Peak learned in his Colorado economics program that it is he who understands this better than you and I. He has a model and everything.

        You and I, being “financial types” who “can’t explain anything to our hypothetical children”, understand that all of our models are wrong. We just don’t know about what and to what extent. We don’t have the luxury of confirmation bias because the market isn’t that kind to us when we are wrong.

        Peak, on the other hand, suffers no consequences for being wrong. In fact, being wrong emboldens him. He just keeps vomiting up crap he reads without processing any of it. Or, worse, he might have processed it and agrees with this nonsense. It is the arrogance of the chattering class.

          • peak-

            “Methinks, when a general equilibrium model for a large economy is created, your job will be obsolete.:”

            this may be the most foolish thing you have ever said.

            if you really believe that that you have no idea what a general equilibrium model is and how it would work at the micro economics level and you have no idea what many of us do for a living.

            thanks for clearing that up.

            i had been imagining that you could be persuaded by logical argument. clearly, you believe in magic and this is not so. this will save a great deal of time int he future.

          • morganovich: “this may be the most foolish thing you have ever said.”

            That would be a pretty high bar.

      • perhaps you could explain to me how your definition of “greed” works.

        Greed isn’t wanting other people’s money, it’s only wanting to keep your own.

        • re: ” Greed isn’t wanting other people’s money,”

          really? how does that work with folks like Bernie Sanders or ticket scalpers or counterfeiters…?

          • I’m sorry, Larry, I forgot you might be reading these comments and would need a fuller explanation.

            It’s an ironic reference to the view of some that it’s all right to want to take money from those who have earned it, but not all right for those who have earned it to want to keep what they’ve earned.

            Those rich, greedy bastards! How dare they complain about higher taxes!

    • Austrian economist: Don’t bother me with details nonsense.

      “cut pay for overpaid workers”

      I AM cutting pay for overpaid workers by not hiring people worth only $7/hr, the $9/hr you would force me to pay them for a $2/hr loss to the company.

      As a good steward of the capital the company’s owners have entrusted me with, why do you believe I would knowingly overpay for ANYTHING, let alone something as expensive as labor? get a grip. Who, among my employees, is overpaid, and how would you know what they’re worth to me?

      “raising prices only 2% for a 10% increase in the minimum wage, ”

      I work for the stockholders. You want me to charge THEM for this unwarranted raise in pay for entry level unskilled and inexperienced workers, as well as risking losing market share to competitors by raising my prices? It’s not going to happen.

      ” level the playing field”

      “That’s a purely political term that means “tilt the playing field in my favor”. It has no economic meaning Didn’t you say you were an economist, Mr. Neoclass? I’m beginning to wonder. The only level playing field is one on which 2 parties meet and enter into a voluntary and mutually beneficial agreement without any outside interference or coercion.

      “reduce our historically high profit margins a little”

      I’ll ask the stockholders what they think. I’m pretty sure they won’t mind. LMAO

      ” workers may stop pretending to work when we stop pretending to pay them”

      Ha Ha Ha. Cute Soviet era joke. But aren’t you trying to justify that upward sloping demand curve for labor? You may be straying off topic.

      ” more productive workers will take jobs”

      I have news for you. More productive workers already HAVE jobs, and they pay more than your minimum wage.

      “(my teen looks at any job below $10 an hour as a joke
      although there are desperate people)”

      Then I can only assume you won’t mind supporting them until they figure out the real world for themselves. Some never do.

      “and we can reduce the costly turnover rate substantially.”

      What costly turnover rate? When our entry level workers gain experience and learn some skills we promote them into better paying jobs with more responsibility and more opportunity. Or current plant manager started in the warehouse unloading trucks.

      We prefer promoting people who already understand our business and who we know to be valuable employees to hiring unknown higher skilled and higher paid people from outside. Most of our employees have been with us 6 years or more.

      If by “turnover” you mean those people who move frequently from one entry level job to another, apparently without ever learning any skills, we consider ourselves fortunate to be rid of them, so we AND they can quit wasting time in an unsatisfactory relationship.

      All that – and you have written nothing to explain that upward sloping demand curve for labor you keep showing us, but have only offered really stupid suggestions on how we might try to absorb or hide the additional cost of an increase in minimum wage.

      You neoclassicals either really have your heads up your asses, or you have been swindled by the institutions of higher learning where you took your instruction, and I can only recommend you go back and demand your money back.

      signed: Mr Austrian Economist

      • ron-

        you make an excellent point.

        cutting pay for overpaid workers by hiring new workers for more than they are worth seems like a pretty preposterous strategy. it’s literally self refuting.

        also:

        do not evaluate the neocalssical school of economics based on peak’s comments. he does not understand their theory and consistently misrepresents it as some sort of miasma of top down fascist command and control fetish with a belief in magic thrown in.

        neoclassicism is predominantly about individuals maximizing utility and or profit. it’s just a different mathematical approach to the idea of folks like adam smith, ricardo, and fisher.

        it does NOT claim that demand curves slope up nor that government should set prices.

        this is some weird mutation into peakoclassical economics.

        peak is more of a keynsian than a neoclassicist, he just does not realize it.

        he believes in forced stimulus and repeated government intervention for “our own good”.

        an actual neoclassicist would not advocate banning drugs or fixing prices. they believe in free markets reaching equilibrium, not intervention in markets to force outcomes.

        i have no idea who taught him the economic ideas he seems to hold, but it was certainly not a neoclassicist in any conventional sense.

        • do not evaluate the neocalssical school of economics based on peak’s comments. he does not understand their theory and consistently misrepresents it as some sort of miasma of top down fascist command and control fetish with a belief in magic thrown in.

          You’re right, of course, that was sloppy of me and I DO know better. the neoclassical school can hardly be defined by the misinformed rantings of one extreme outlier.

    • Perhaps you could be more specific. That link you provided commingles overtime with minimum wage, without drawing a distinction between the two insofar as exemptions are concerned. It’s not clear (from the link) for which people the government bureaucrats would be willing to concede that a mandated minimum wage reduces hiring.

      • re: overtime and minimum wage.

        1. – there are exemptions to minimum wage – they can be found by simple searches.

        2. – employers have an array of options to get around the minimum wage issue even beyond exemptions to include hiring contractors – which are not subject to minimum wage nor does the employer have to pay FICA.

        It would seem that it would be much cheaper for McDonalds and others to hire independent contractors instead of wage employees… no?

        • Larry dear, if employers can easily get around the minimum wage, then WTF is the point of a minimum wage?

          (For the record, you understand eff-all about how independent contractors work. None of the McDonalds employees would qualify as independent contractors, according the the definitions set by your beloved slave masters in the Potomac Swamp.)

          • re: independent contractors

            got a cite Methinks or are you just flapping your gums again as usual?

            does the name calling start with your next post?

            exemptions to minimum wage:

            ” Full time and vocational students
            Many exemptions apply to student workers, both from high school and college. Certain employers, including retail or service stores, agriculture, or colleges and universities, are permitted to pay full time students as little as 85% of the minimum wage as long as they are registered students (the business must get a certificate allowing them to do so from the Department of Labor under the “Full-Time Student Program”). Furthermore, the “Student-Learner Program” allows any student age 16 or older and enrolled in a vocational school to be hired for as little as 75% of the regular minimum wage (employers must also have a certificate from the DOL). These exceptions are designed to allow businesses to hire inexperienced workers at a reduced rate, and are meant to be an “educational program” for the student workers.”

            http://www.minimum-wage.org/minimum-wage-exemptions.asp

          • Oh, Loopy Larry, you wouldn’t understand the litmus tests for contract work even if I gave them to you. I’m not going to waste my time. Go look it up on the internet.

            And your exemptions to the minimum wage are a.) too costly to police, b.) not an exemption as they are all simply a different minimum wage and c.) if they were real exemptions (they are not), then WTF is the point of minimum wage?

          • Larry dear, if employers can easily get around the minimum wage, then WTF is the point of a minimum wage?

            Oh wow. I’m just not fast enough today. That was my exact question and you beat me to it.

          • “easily” ? who said that?

            turns out, students are cheaper than adults when it comes to minimum wage according to this:

            ” Full time and vocational students
            Many exemptions apply to student workers, both from high school and college. Certain employers, including retail or service stores, agriculture, or colleges and universities, are permitted to pay full time students as little as 85% of the minimum wage as long as they are registered students (the business must get a certificate allowing them to do so from the Department of Labor under the “Full-Time Student Program”). Furthermore, the “Student-Learner Program” allows any student age 16 or older and enrolled in a vocational school to be hired for as little as 75% of the regular minimum wage (employers must also have a certificate from the DOL). These exceptions are designed to allow businesses to hire inexperienced workers at a reduced rate, and are meant to be an “educational program” for the student workers.”

            so instead of getting rid of them.. wouldn’t they be hiring even MORE of them instead of more expensive adult non-students?

            so how does that work?

            http://www.minimum-wage.org/minimum-wage-exemptions.asp

          • re: independent contractors

            got a cite Methinks or are you just flapping your gums again as usual?

            Ahh. Larry:

            At 3:08 PM today you responded to a morganovich comment by informing him – and anyone else who cared – that an employer had the option of hiring a 1099 instead of a W2, thus saving not only the high cost of the minimum wage, but the employer portion of FICA as well. While that last part isn’t strictly true, I don’t want to go there at this time.

            Instead I only want to remind you that this was YOUR subject, so I would expect you already had the necessary citations on the subject at your fingertips, and wouldn’t have to ask Methinks to get them for you.

            You also informed us:

            you merely contract with the worker to provide services in exchange for compensation.

            While this works well for temporary girlfriends, employers of other types of contract labor may find there is government “red tape” involved.

          • re: ” While that last part isn’t strictly true, I don’t want to go there at this time.”

            as someone familiar with how 1099misc are tax processed, I can assure you it’s not the employer than has to pay the FICA unless you are classified as a statutory employee and I’ve not seen too many of them in processing 1099misc.

            re: red tape for contractors… not if you follow the rules and 1099misc are fairly common income statements for many folks these days.

          • so instead of getting rid of them.. wouldn’t they be hiring even MORE of them instead of more expensive adult non-students?

            so how does that work?

            You are missing an important point. While employers are interested in minimizing labor costs, they are interested in getting value for what they pay, just like anyone else does. It’s not enough to just get a warm body at a low price.

            The unskilled students who can be hired cheaply may not be worth ANY price to an employer, whereas an adult with previous work experience, some skills and good work habits may be worth the minimum wage or even more. That’s why they don’t fire all the adults and hire all students instead at a lower cost.

        • Larry: “employers have an array of options to get around the minimum wage issue even beyond exemptions to include hiring contractors – which are not subject to minimum wage nor does the employer have to pay FICA.”

          No, they do not. The link I provided to the texas Workforce Commission clearly shows that it is difficult for an employer such as McDonald’s to classify workers as independent contractors. If you had read that document objectively, you would realize that.

          • re: workforce “rules” ….

            what I’m rebutting is the idea that with the minimum wage – it’s either hire or don’t hire and I’m pointing out there are a variety of other options to include independent contractors to exemptions for students and wait staff.

            the “theory” espoused here is that there is an absolute one-to-one relationship between the minimum wage and unemployment and that’s simply not the case.

          • John Dewey: “ If you had read that document objectively, you would realize that.

            Heh! Talk about a high bar!

          • well we/I HAD read the doc but Dewey did the typical thing here in AEI.. he took what I said and turned it into something I did not say.

            what I said – from the get go – was that employers have more options than just hire or fire based ONLY on what the minimum wage is.

            and Dewey was pointing out, in essence, that it’s not that easy.

            I never said it was. I said there WERE options and there are – to include exemptions for some kinds of work, students, and independent contractors – and there are and there are businesses that do use the exemptions and hire independent contractors.. that’s a simple fact.

            Restaurant wait help can work for 2.15 an hour. One might ask – how they actually got that waiver and if they got it – why couldn’t other businesses?

            Colleges and Universities are allowed to pay less than minimum wage.

            You may also find that much of the trades like plumbers, electricians are independent businesses and often work as independent contractors INCLUDING new employers, INCLUDING teens learning a new trade.

            the whole minimum wage thing is yet another libertarian rant… and the fact that many countries do either the minimum wage or have trade unions pretty much proves that this issue is much wider than just US teenagers.

            it’s yet another trumped up article of faith by those who are pure theory folks… who basically disavow/reject the wider real word on these things.

            The most effective “study” to “prove” their case would be one that looks at countries around the world and is not originated by any group whose basic agenda is opposition to the minimum wage to start with.

            AEI specializes in publishing “studies” that just happen to confirm their own ideological concepts… no surprise there but they do need a few folks to keep them honest.

          • You may also find that much of the trades like plumbers, electricians are independent businesses and often work as independent contractors INCLUDING new employers, INCLUDING teens learning a new trade.

            Larry…

            Hmm. How do I even start?

            Yes. Plumbers and electricians are often independent contractors. You call a plumber and you say “Please install a new sink for me.” They already know how to install sinks so you only tell them what to do, not how to do it. That person isn’t your employee.

            A plumber who is a “new employer” already knows how to do plumbing. They aren’t just learning.

            A teenager learning a trade is probably not a contractor, but an employee of a contractor. Would you call a teen just learning a trade and say “please install a new sink for me”? The contractor you call may have a teen working for him who is just learning a trade, but that teen isn’t the one in charge and responsible for installing your new sink.

            You are way off the rails here.

          • re: tradesmen and their help.

            Ron – do you have a clue boy?

            do you have tradesman come to your place?

            do you notice if they have “helpers” ?

            what makes you think that someone who is an independent contractor is going to go through the trouble of getting an EIN and start paying W2 wages and withholding FICA and Fed/State tax?

            How many w2s have you seen that were generated by independent contractors to pay their help?

            do you think they might pay their help and instead generate a 1099misc?

            what do you think Ron?

    • Think about it, Larry, allowing students – or anyone – to work for less than min wage is an acknowledgement that the minimum wage is harmful to those people.

      • ” Think about it, Larry, allowing students – or anyone – to work for less than min wage is an acknowledgement that the minimum wage is harmful to those people”

        well no… not necessarily.. did you see this:

        ” These exceptions are designed to allow businesses to hire inexperienced workers at a reduced rate, and are meant to be an “educational program” for the student workers.”

        • These exceptions are designed to allow businesses to hire inexperienced workers at a reduced rate, and are meant to be an “educational program” for the student workers.

          Duh, exactly!! That’s just what I said. Employers won’t hire people who need an “educational program” at the minimum wage, but WILL hire them if they were allowed to work for less than the minimum wage. That’s the whole argument about the minimum wage – that it prices low or no skilled workers – those that need an “education program” – out of the market.

          The DOL is admitting as much.

          • re: ” Duh, exactly!! That’s just what I said. Employers won’t hire people who need an “educational program” at the minimum wage, but WILL hire them if they were allowed to work for less than the minimum wage. That’s the whole argument about the minimum wage – that it prices low or no skilled workers – those that need an “education program” – out of the market.

            The DOL is admitting as much.”

            Ron.. how much “training” does a McD worker need guy?

            they get a couple hours worth and they earn sub-minimum wage for weeks, months.

            that’s a good deal for McD, no?

            I suspect that McD’s problem is that once the young get “trained”, if they can find a server job for tips, they’ll leave to make much more than min wage…

            i just don’ think the narrative about the economic simplicity of an increased minimum wage is that simple and straight-forward. there are a lot of other factors in play also.

            Any young person that is willing to work for tips (and can speak and make change) can usually find a job no matter what is going on with the minimum wage issue.

            Those who are unemployed would likely not be desirable employees even at 2.15 an hour.

            bad servers aren’t bad servers for long….

          • Ron.. how much “training” does a McD worker need guy?

            they get a couple hours worth and they earn sub-minimum wage for weeks, months.

            You just won’t give that up, will you?

            Larry – one more time. While McDs employees need little training, there are good workers and bad workers even at McDs. After that one hour of training there are 7 more to go during which a worker can earn the meager wage they paid, or cause more damage than they are worth. Adult workers who have prior work experience are likely to produce more for their employer, and therefore worth paying a higher wage, than a teen who has just finally learned to tie his shoes. It’s not that hard, Larry. For that reason – for the last time – it is NOT necessarily better to fire all the adult workers and hire young workers with no likely value.

            Believe it or not, people are generally paid pretty close to what they’re worth

    • Had you researched this statute carefully, Larry, you would have discovered that an employer such as McDonald’s faces very tight restrictions on the use of student employees at wages below the minimum wage. In Texas, the total sub-minimum wage hours can be nor more than 10 percent of the total hours worked at such an establishment. Furthermore, Texas regulation “519.5 Conditions governing issuance of full-time student certificates” specifies that:

      “The employment of more than six full-time students by an employer will not create a substantial probability of reducing the full-time employment opportunities for persons other than those employed under such certificates.”

      In other words, retail employers cannot reduce the use of employees covered by the minimum wage by hiring students at sub-minimum wages.

      • re: Texas rules… I thought you boys were arguing that Obama was the problem..

        geeze… Rick Perry’s Texas screws over businesses that need employment flexibility – the hell you say.

        And Rich Perry has the temerity to go to Calif to try to convince businesses to move to rule-laden Texas?

        gazoooooooks!

        • No, Larry. Those restrictions exist in just about every state of the union.

          YOU are the one who referred to the Texas Workforce Commission’s exemptions in your comment above (LarryG | February 16, 2013 at 3:11 pm) It is dishonest on your part to proivide a link that you believe supports your position, and then try to disavow the rules at that link when you discover such rules do not support you.

          • I did pick it at random to point out that the issue is much more than just Obama the “socialist” engaging in failed progress policies.

            The states play a big role and have for some time – INCLUDING states that promote themselves as “right-to-work” friendly – like Texas.

            don’t tell me that independent contractors do not exist.

            they do. Many businesses use them and many more are starting to use them by structuring their businesses in such a way that only the core function is staffed with wage workers.

            I’m not sure why you say what I have done here is “dishonest”.

            I’ve tried to be straightforward and my main point is that the idea that minimum wage has only two options – hire or fire – is just not the true story.

            Wait staff can work for 2.15 an hour…

            I used to work at a place that was half staffed with employees and half staffed with independent contractors.

            don’t tell me it cannot be done. It DOES require the business to restructure but the law does not deny the business from pursuing that option either.

            of more interest to me – is where the rules come from for independent contractors… what’s the rationale for the specific rules?

            does it come from the Fair Labor Act created in the 1930s?

          • LarryG, does this answer your question?

            Employee versus Independent Contractor

            IRS Revenue Ruling 87-41 contains factors, commonly referred to as the twenty common law factors, that assess whether or not a business has the right to direct and control the actions of the worker. Although this revenue ruling is still valid today, the IRS has grouped the more relevant ones into three main categories of evidence that show whether a worker is an employee or an independent contractor:
            •One: behavioral control

            •Two: financial control, and

            •The third is the relationship of the parties

          • @Dewey- yup, I did read that. are you saying that this proves there are no options or what?

            I did not say that there are 100% ways to avoid the minimum wage. I said there were a wide array of options and there are.

            It may require a business to restructure how it uses labor but it certainly is an option – and in a competitive word – it’s one more angle that smarter entrepreneurs can explore instead of saying that if the minimum wage goes up they are screwed.

          • that’s the claim.. the evidence is questionable

            What, that Obama wants to raise the min wage, or that min wage causes more unemployment?

            Both are pretty much irrefutable. There has been so much discussion at this blog on min wage, and so many studies referenced that I won’t do it again. Min wage causes higher unemployment, period. I challenge you to refute that. Your own claims don’t count, Peak Trader’s idiotic claims don’t count, and his oft referenced and even more often refuted Card Kruger study don’t count.

            independent contractors work for less than minimum wage Ron – believe it.

            Not hourly workers, and not in entry level jobs at fast food restaurants.

            that contractor nimrod may well have apprentices with him…

            Jesus, Larry, those apprentices aren’t contractors. They are employees of the contractor.
            have you ever hired folks to do work at your house guy?

            Of course I have. They are contractors. I tell them what I want done, and they do it for an agreed price. I don’t tell them how to do their work, what tools to use, what material to use or haw many employees they should have working for them and I don’t pay them hourly.

            re: McD.. maybe, maybe not. lot cleanup, landscaping, last shift cleanup… substitute workers….

            You are now just pulling stuff from your ass.

            “Yes they COULD restructure their business to use contractors. They could also restructure their business to be online only, so that you could order your meal from the comfort of your home and it would arrive next day in the mail, but neither are workable options.”

            if you ever looked at 1099misc from people you might realize that.

            I’m familiar with 1099 in all it’s variants. YOU need to understand employee costs.

            my position was that there are options beside only minimum wage – that WAS my position and still is.

            Reasonable options, Larry, viable options that don’t create more compliance costs than any possible savings in cash wages.

            “I’ve tried to be straightforward…”

            No you haven’t. You’ve tried to bullshit your way through this issue like you do with every other issue.

            I’ve seen and worked with independent contractors and have seen 1099misc for people who run vending routes, clean buildings, even do security work – and yes.. quite a few work for less than minimum wages even though they are “trained”… and “know how to do the work”.

            You are either misinformed or a liar. You haven’t seen hourly employees paid less than min wage on 1099s.

            Your trying to say that McDs can hire contract employees for less than min wage, remember?

          • “that’s the claim.. the evidence is questionable”

            What, that Obama wants to raise the min wage, or that min wage causes more unemployment?

            not proved.

            “Both are pretty much irrefutable. There has been so much discussion at this blog on min wage, and so many studies referenced that I won’t do it again. Min wage causes higher unemployment, period. I challenge you to refute that. Your own claims don’t count, Peak Trader’s idiotic claims don’t count, and his oft referenced and even more often refuted Card Kruger study don’t count.”

            lots of discussion true but the evidence provided is not irrefutable especially on a world basis.

            it’s basically an article of faith for the true believers.

            employers have other options than just firing workers.

            “independent contractors work for less than minimum wage Ron – believe it.”

            Not hourly workers, and not in entry level jobs at fast food restaurants.

            what is an “hourly” worker and who said only fast food?

            I very much pointed out that states give waivers for students and restaurants where tips are allowed pay 2.15 an hour -then we have schools, churches, and others that get waivers… then we have independent contractors.

            all of these other paths are options for those who might lose a job due to minimum wage. The employers know this also and are not going to get rid of good people over minimum wage nor short staff themselves – they’ll raise the price of a burger before they do that.

            “that contractor nimrod may well have apprentices with him… ”

            Jesus, Larry, those apprentices aren’t contractors. They are employees of the contractor.
            “have you ever hired folks to do work at your house guy?”

            Ron – are you saying that these apprentices are W2 wage employees my friend? You’re saying a contractor who files a 1099misc himself is going to go through the trouble of paying FICA and Fed/State withholding for “helpers”?

            “Of course I have. They are contractors. I tell them what I want done, and they do it for an agreed price. I don’t tell them how to do their work, what tools to use, what material to use or haw many employees they should have working for them and I don’t pay them hourly.”

            and you think their helpers are w2 wage employees?

            “re: McD.. maybe, maybe not. lot cleanup, landscaping, last shift cleanup… substitute workers….”

            You are now just pulling stuff from your ass.

            really? do you know McD managers?

            “Yes they COULD restructure their business to use contractors. They could also restructure their business to be online only, so that you could order your meal from the comfort of your home and it would arrive next day in the mail, but neither are workable options.”

            “if you ever looked at 1099misc from people you might realize that.”

            I’m familiar with 1099 in all it’s variants. YOU need to understand employee costs.

            “my position was that there are options beside only minimum wage – that WAS my position and still is.”

            Reasonable options, Larry, viable options that don’t create more compliance costs than any possible savings in cash wages.

            such is the world of business – guy. no one said “easy” options – but it’s not true also that the ONLY option is to fire minimum wage employees… that’s just as wrong-headed.

            “I’ve tried to be straightforward…”

            No you haven’t. You’ve tried to bullshit your way through this issue like you do with every other issue.

            really?

            “I’ve seen and worked with independent contractors and have seen 1099misc for people who run vending routes, clean buildings, even do security work – and yes.. quite a few work for less than minimum wages even though they are “trained”… and “know how to do the work”.”

            You are either misinformed or a liar. You haven’t seen hourly employees paid less than min wage on 1099s.

            indeed I have fool.

            Your trying to say that McDs can hire contract employees for less than min wage, remember?

            nope.. that’s what you are twisting but it’s not what I said…

            when McD hires a last shift cleanup crew for a set price – do you think someone is going to sit down and figure hours and wages or just pay the contract price?

            seriously. Do you think there is some kind of enforcement and compliance going on with minimum wage and independent contractors? serious question?

            I don’t know the answer. do you?

            Further – do you know the BASIS for the fair labor rules to start with and why things like “behavior control” are at issue.. why is that? why doe sit make a difference if the employee is “directed”?

        • re: Texas rules… I thought you boys were arguing that Obama was the problem..

          Obama IS the problem. He wants to increase min wage which will cause even more unemployment.

          don’t tell me that independent contractors do not exist.

          Independent contractors don’t exist, Larry!

          Of course they exist , you moron, but they don’t exist at or below minimum wage for a variety of reasons, which John is patiently trying to explain to you, but you keep going off the rails.

          One of the basic tests for contractor/employee is behavior control. It’s all in the reference YOU cited. If an employer directs what an employee does, AND how to do it, the employee cannot be a contractor. A contractor already knows How to do what the employer wants done.

          If you call a contractor to do engineering work, he already knows HOW to do the work. You only need to show them WHAT you want done. If you contract for a programmer, he already knows HOW to code, so you only need to tell him what you want the software to do. McDs employees don’t fit that description. They need constant direct supervision, and therefore, Larry,
          don’t meet the description of a contractor. As John pointed out, using your own reference, there are other impediments to hiring independent contractors, that make it not feasible for McDs to consider contractors.

          Yes they COULD restructure their business to use contractors. They could also restructure their business to be online only, so that you could order your meal from the comfort of your home and it would arrive next day in the mail, but neither are workable options.

          they do. Many businesses use them [contractors] and many more are starting to use them by structuring their businesses in such a way that only the core function is staffed with wage workers.

          Your experience with contract workers may be with people supplied by workforce agencies and not with individual contractors. In that case they are most likely employees of the agency and are contracted for by your company as needed. Could that be the case?

          I’m not sure why you say what I have done here is “dishonest”.

          You are dishonest in citing a reference to support your position that doesn’t support your position, and then disagreeing when people point that out.

          I’ve tried to be straightforward…

          No you haven’t. You’ve tried to bullshit your way through this issue like you do with every other issue.

          “…and my main point is that the idea that minimum wage has only two options – hire or fire – is just not the true story.”

          Bullshit, Larry.

          • Obama IS the problem. He wants to increase min wage which will cause even more unemployment.

            that’s the claim.. the evidence is questionable

            “don’t tell me that independent contractors do not exist.”

            Independent contractors don’t exist, Larry!

            Of course they exist , you moron, but they don’t exist at or below minimum wage for a variety of reasons, which John is patiently trying to explain to you, but you keep going off the rails.

            independent contractors work for less than minimum wage Ron – believe it.

            “One of the basic tests for contractor/employee is behavior control. It’s all in the reference YOU cited. If an employer directs what an employee does, AND how to do it, the employee cannot be a contractor. A contractor already knows How to do what the employer wants done.”

            no shit Sherlock. that still does not mean they won’t work for less than minimum wage. And Ron, how much “training” do you think is needed to run a vending route or do landscaping? you’re so much a smart-ass you make yourself look dumb sometimes.

            “If you call a contractor to do engineering work, he already knows HOW to do the work. You only need to show them WHAT you want done. If you contract for a programmer, he already knows HOW to code, so you only need to tell him what you want the software to do. McDs employees don’t fit that description. They need constant direct supervision, and therefore, Larry,
            don’t meet the description of a contractor. As John pointed out, using your own reference, there are other impediments to hiring independent contractors, that make it not feasible for McDs to consider contractors.”

            that contractor nimrod may well have apprentices with him… have you ever hired folks to do work at your house guy? re: McD.. maybe, maybe not. lot cleanup, landscaping, last shift cleanup… substitute workers….

            “Yes they COULD restructure their business to use contractors. They could also restructure their business to be online only, so that you could order your meal from the comfort of your home and it would arrive next day in the mail, but neither are workable options.”

            the point is that it is an option and it is used and you are wrong about the wages.. if you ever looked at 1099misc from people you might realize that.

            “they do. Many businesses use them [contractors] and many more are starting to use them by structuring their businesses in such a way that only the core function is staffed with wage workers.”

            Your experience with contract workers may be with people supplied by workforce agencies and not with individual contractors. In that case they are most likely employees of the agency and are contracted for by your company as needed. Could that be the case?”

            I’ve seen both. worked with both.

            “I’m not sure why you say what I have done here is “dishonest”.”

            You are dishonest in citing a reference to support your position that doesn’t support your position, and then disagreeing when people point that out.

            my position was that there are options beside only minimum wage – that WAS my position and still is.

            “I’ve tried to be straightforward…”

            No you haven’t. You’ve tried to bullshit your way through this issue like you do with every other issue.

            “…and my main point is that the idea that minimum wage has only two options – hire or fire – is just not the true story.”

            Bullshit, Larry.

            the main point stands regardless of your angst.

            I’ve seen and worked with independent contractors and have seen 1099misc for people who run vending routes, clean buildings, even do security work – and yes.. quite a few work for less than minimum wages even though they are “trained”… and “know how to do the work”.

            Ron – you are the BS artist here.. and it’s repeat performance…

        • not proved.

          Your entire comment is an attempt to salvage an argument you lost a long time ago, but you continue to pull stuff from your ass as if there is some way to resurrect it.

          You are the most, illogical, and persistently stupid little prick I’ve ever encountered.

          Your dishonesty is truly offensive. Go fuck yourself.

  3. I forsee a big jump in “illegals” and others working “under-the-table” just to have any job at all and for employers to get the work done, with the consequence of even fewer tax dollars being collected.

    If labor costs too much relative to the work done, many employers are likely to choose to either break the law or go out of business. You can’t always raise prices to compensate, especially if your foreign competition’s labor cost is is already far below yours, I don’t care how much you automate or improve efficiencies.

    • students can be hired for lower minimum wage than non-student adults.

      One would think that a company like McDonalds could maintain level costs by firing the adults and hiring more students…

      no?

        • The other interesting thing is that food places that permit tips can pay as low as 2.15 an hour – as long as the employer makes enough in tips to add to the 2.15 to equal the minimum wage.

          so if you were a youngster and McDonalds thought you were too expensive – you could likely find a job as a server in a regular restaurant and I suspect this makes it harder for McDonalds type places to attract and keep help if the help can find a server job with tips.

          We eat with friends fairly frequently and I once or twice took note of the total tips just at our table and for one hour worth of serving us – while serving other tables – the server often gets $30-50 in tips. I would think that even mediocre servers could easily top minimum wage earnings unless the restaurant really sucked.

          In our area – we have a wide variety of casual dining places – Olive Garden, Logans, Chillis, Applebees, etc and they all stay busy and are well staffed with servers almost all of whom are college aged… or young moms.

          None of them would work at McDs if they could work as servers… trust me. McDs on the other hand OFTEN has middle-aged and older folks which indicates to me that folks who can get jobs as servers will only work at McDs as a last resort.

          One more thing. You can almost always tell at McD’s when the manager is not on premises or back in his/her office because the front counter service goes to hell in a handbasket…. I almost never get bad service where folks are working for tips.

          bottom line – the basic hourly wage is but one of several factors in hiring – in the real world – and when potential workers have other options – like working for tips – it’s an easy decision.

          Why the young have high unemployment stats?

          If you are functionally illiterate and/or do not have the minimal skills to county money and make change – then you’re not likely to get employment – even working at 2.15 an hour for tips.

          I suspect that’s a far bigger influence than minimum wages. Even McDs don’t want you if you can’t be trusted to handle money properly.

          • If you are functionally illiterate and/or do not have the minimal skills to county money and make change – then you’re not likely to get employment – even working at 2.15 an hour for tips.

            You may have noticed that with modern cash registers it’s not necessary to be able to count or make change.

            I suspect that’s a far bigger influence than minimum wages. Even McDs don’t want you if you can’t be trusted to handle money properly.

            “Trusted to handle money properly” means you will consistently put it in the cash register and not in your pocket.

            It should be obvious that people working for tips can make more than minimum wage, and it’s because they have skills, including people skills that enable them to please customers enough to convince them a tip is deserved. No such skills are required at McDs.

            However, there seems to be no shortage of unskilled people looking for jobs at McDs.

          • You may have noticed that with modern cash registers it’s not necessary to be able to count or make change.

            yup… but you still gotta be able to count out change and figure out how much tip you got, etc.

            “I suspect that’s a far bigger influence than minimum wages. Even McDs don’t want you if you can’t be trusted to handle money properly.”

            “Trusted to handle money properly” means you will consistently put it in the cash register and not in your pocket.

            and not come up short for counting out change wrong.
            it’s not all foolproof…

            It should be obvious that people working for tips can make more than minimum wage, and it’s because they have skills, including people skills that enable them to please customers enough to convince them a tip is deserved. No such skills are required at McDs.

            However, there seems to be no shortage of unskilled people looking for jobs at McDs.”

            if they’re looking for jobs at McD’s it might mean they couldn’t qualify as restaurant servers either…

            perhaps we agree on that..

  4. Whew! I was looking for something about Socrates, and ended up here!

    This seems to be yet another site where a group of 6-8 regulars go at each other over the same tired issues again and again.

    So why am I commenting? Because sometimes it helps to have an outsider stir up the pot a little.

    The main problem with any of these kinds of discussions is that the people on the different sides are talking past each other. Since no one bothers to make clear what their thesis is, then everyone is just arguing about what they imagine the other person really means. Compounding that is fact that if one person goes off on a tangent, then others follow him there, then the argument becomes one about why the tangential ideas apply or don’t apply to what each person believes are the core ideas.

    From my reading as someone with no prior issues with any of you, what I get is this:

    LarryG’s main point is that, when discussing minimum wage, there is not a clear-cut one-to-one correspondence between raising the min wage and employers hiring fewer workers. This is true. Employers try all the things that LarryG listed to avoid paying any more than they must for labor. Why shouldn’t they?

    At the same time, what should be argued against minimum wage is that all it does is inflate the price of $7/hr labor to $9/hr. If there were some cosmic currency that was always the same value no matter what, then it would be easier to see how this is true. Please allow me to make the attempt to explain:

    Let’s say that today, the minimum wage is $7/hr, and that all entry-level fast food workers get paid min wage and that if there were no min wage, entry-level restaurant workers would still earn $7/hr. In other words, the market price for entry-level fast food workers is $7/hr.

    Let’s also say that there is this totally free-market currency out there, that no government can change the value of. “Quatloos,” is as good a name as any, though admittedly unoriginal. Let’s also say that as of today, the exchange rate is at par, and one USD = one Quatloo (Q).

    If tomorrow the US government raises the minimum wage for entry-level fast food workers to $9/hr, have they really improved the earning power of that segment of the work force? For a very short time, yes, but over a few cycles of money through the economy, no.

    Before the raise of min wage, entry-level fast food workers were valued at $7/hr and Q7/hr. After, the price is set at $9/hr, but the “cosmic” value of such labor is still only Q7/hr. All that the government has done is lower the value of the dollar, not raise the value of the labor.

    How do we know this is true? We need only look at a model business to see:

    Today, a fast-food business is earning a certain amount per week and paying wages, materials and overhead. Tomorrow, after the min wage has been increased, the business now must pay more for wages. To maintain their profits, they must either raise prices or cut the other expenses. If they know that all of their competitors have been required to raise wages the same amount, the easiest thing to do is to raise prices. So the consumer is now paying $1.25 for something that used to cost them $1.00.

    The consumer will want to maintain their own level of personal economy. So if $1 burgers cost $1.25, the consumer will go to their own boss and demand higher wages. If their own boss agrees to raise wages, she will also be faced with the choice of cutting other costs or raising prices. Again, a competitive company has already done what it can to cut costs to the minimum in order to maximize profits, so the easiest thing to do is raise prices, passing on the increase in wages to the rest of the economy.

    Raising the minimum wage from $7/hr to $9/hr does not increase the purchasing power of the min-wage earner by $2/hr, all it does is decrease the value of $9 so that it buys what one used to be able to get for $7.

    Most people can see this easily if you suggest raising the min wage from $7/hr to $20/hr, but I guess they don’t believe it to be true when you bump the wage by only $2/hr.

    And if all the work-arounds that LarryG suggests are viable, then why have a minimum wage at all?

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