Impact of raising minimum wage in USA

[italdesign]

Somewhere on the web, I came across this opinion:

A Bank Officer there recently told me that in 2 years there will not only be no more tellers, there will be no more local branches. They will have regional offices, modeled on a mall based "Apple Store", where there will be Officers to assist you with housing loans, or problems with an account, but no lowly tellers.

I went into a local Chase branch the other day during the mid day lunch hour rush, and the previous 8 teller windows were mostly permanently walled off. Only 2 possible teller windows, and just one teller working. In front of where the old teller windows used to be were 2 new giant freestanding machines. Looking like ATMs on steroids, they were able to do extensive transactions that used to require a human teller. I wanted to withdraw $400 in $100 bills, not the $20s that an ATM would give me, and they had someone there to walk us thru using the new machines instead of waiting in the long teller line. In less than 30 seconds I had my $100 bills and was out the door.

With more and more cities passing $15/hour laws, and heavy health care costs being mandated by Obamacare, along with new Federal regulations gutting bank fees, we are going to see more and more automation. The next step is companies like McDonalds are already putting in machines that can make your burger faster and better than a human. Soon Starbucks will put in machines that can make your Latte better than any barista.

Economics 101: the more you regulate and tax something, the less you get of it. With labor fees and costs going thru the roof, jobs for non-skilled workers are going to be phased out as fast as possible.

Interesting interesting... I have been thinking about this kind of stuff a lot. Marco Rubio famously said "if you raise the minimum wage, you make people more expensive than a machine." And yet, if you don't, you keep people in poverty which leads to crime. So what is the right approach?

When I visited Australia and New Zealand, the basic services seemed better (bus driver, taxi, fast food), while the higher end services seemed worse (restaurant) than US. I attributed the former to higher minimum wage and the latter to lack of tipping. Everyone was more equal, a staple of "socialism". Things were more consistent.

Compare this to the US where you get great service at a sit down restaurant or salon, but horrid treatment on public transportation and call centers. The gap is as wide as the path to hell. And when someone proposes to raise the minimum wage, aka pay the poor ppl better so they rise out of poverty and treat others' better, the reaction is to replace them with machines. Why don't we see Aussies and Scandinavians doing that despite having higher wage for a long time?

Is this all because the gap in America enables the rich to be super rich and they don't want to give part of their wealth to the poor?

 

[Matt]

I went into a local Chase branch the other day during the mid day lunch hour rush, and the previous 8 teller windows were mostly permanently walled off. Only 2 possible teller windows

With more and more cities passing $15/hour laws, and heavy health care costs being mandated by Obamacare

I'm pretty sure that Chase in Manhattan has similarly replaced tellers with ATMs, does not have a $15/hr law, and offered health insurance for its full time employees for years.

Automation will always get cheaper, and if we happen to live in a world where I can do my banking without a human, but humans get access to healthcare, that works for me

 

[GettingReady]

I've read that some mininum wage workers are voluntarily working less hours since they can make the same amount of money. There's no motivation for them to work 40 hrs.

I use to be amazed, when I finally started splurging on an occasional ice coffee, at the number of min. wage workers who had I-phones and acrylic nails. It was unbelievable. Figured I must be doing something wrong.

 

[italdesign]

I use to be amazed, when I finally started splurging on an occasional ice coffee, at the number of min. wage workers who had I-phones and acrylic nails. It was unbelievable. Figured I must be doing something wrong.

Doesn't mean the quality of the other aspects of their life is comparable though.

 

[GettingReady]

True but it's interesting the things they chose to spend their money and how outwardly they gave the appearance of a higher standard of living.

 

[italdesign]

well, we may also give the impression that we are millionaire since we sit in $10k flights and stay in $700 hotels like it's nothing

Maybe they know a trick we don't. (I can think of a few semi-jokes but I'll resist)

 

[GettingReady]

well, we may also give the impression that we are millionaire since we sit in $10k flights and stay in $700 hotels like it's nothing

Haha, maybe for you it's nothing. We have yet to sit in a 10k flight or stay in a $700 room. But as someone pointed out I'm "GettingReady." We're looking forward to our first ever luxury vacation. Good thing I have plenty of time to plan. I need it!

 

[Maverick17]

Look up the story of the Gravity Payments guy on the web. He's a fellow Idahoan, and got a ton of press when he moved the minimum salary to $70k for his workers. Many might have seen that video, it went viral pretty quick.

Well they (someone, not sure who, Inc. maybe?) recently had an update. Seems that some customers left early over fear of raised prices and other concerns. But for the most part he's had a big upswing in business. Unfortunately that's mostly from the PR I would guess, and if you're not first to market with an idea like this, who knows if you would make it work very well. Also it's telling he's had to reduce his salary, which was already not super high in the CEO world, to make it work.

OTOH, some of my small business owning friends are adamantly against it. They make modest incomes (based on assumptions and conjecture only, I haven't seen their books), and say they cannot survive for long at that wage. But if the "trickle-down" approach is more than theory, might it work to have workers in the small to medium towns with more cash?

 

[Abbazappaplant]

All things being on the table, the current system doesn't work. So why not try $15 an hour? Wal-mart, McDonald's and a couple other big'uns keep their wages artificially low by letting their workers know they can get government assistance. In essence, the taxpayer is raising the minimum wage so a few giant corporations can have larger profits. Kind of silly, don't you think? Why should a person ready, willing and able to work be told to go and get food stamps or medicaid so that Wal-mart can make more money? Obviously some small businesses will be hurt by $15 an hour, but it isn't as though they aren't already. How is that you ask?

The bottom doesn't have the same spending power that they used to. People are going to spend money, it's just the nature of the beast and if a worker making $8 an hour is now making $15, their need for gov't assistance will be minimized and they can go out and buy new pillows or a cookware set or a nicer used car. A $15 minimum wage won't make the cost of manufacturing much more expensive, so price increases would be negligible. On to stagnation...

The wages for the majority of American workers have been stagnant for nearly a decade, possibly more. What does that mean... it means someone who works in catering in NYC would make $20 an hour in 2003. The wages for that same position are still the same as they were in 2003. This decreases that persons spending power as inflation has made that $20 an hour now $15.40 in 2015. So what does the $15 minimum have to do with stagnation? It allows those workers "value" to be increased over the perceived minimum of $15 an hour and, adjusted for inflation, bring their wages up to just over $25 an hour in perceived value, possibly more. The perception of distance of one worker to another is what sets the pay rate a lot of times.

Raising the minimum wage raises the "value" of everyone in the bottom 80% of the economy. While I can't say zero small business will be hurt by this, most will see upticks in sales just through added spending power. If one's only concern is the top corporations, then yes, it's bad for them.

 

[AnxiousRetirement]

I'm somewhat conflicted when it comes to the government mandating things, but I don't really grasp the wisdom of paying the minimum wage. Basically, you get what you pay for...

It seems to me that it would make more sense to pay someone materially more relative to their peers. They'd be more invested in their job and would probably do it better than the minimum wage guy; you'd spend less on constant training new folks from turnover; you'd have less headaches from "minimum-wage attitude"; etc.

For the first almost twenty years of my career when I was a manager, I tried to have less people who made more in my department than other managers who were always trying to scrimp in pay to add more people. And we always seemed to accomplish more.

 

[nomadwfs]

The real minimum wage is $0. This is often forgotten in the discussions of a "fair" or "living" wage.

What matters more than a legally-mandated minimum dollar amount per hour of work is the worker. The worker must generate more value for the business than what it is costing the employer to pay him. Any employer that pays $15/hr to employees that generate less than $15/hr for the business will be out of business soon.

A rise in minimum wage leads to greater unemployment. The irony of this is that the intent of raising the minimum wage is to help the poor, and it in fact does the opposite - it pushes workers out of the workforce and puts less money, not more, in their collective pockets. Value is not something that can be legislated by Congress. Value is something that people create through a combination of labor, capital, and ideas.

The labor that people do must create things of value. If, unfortunately, the things they do are not valuable enough to warrant their pay (minimum wage or otherwise), a business will find another way, or perish.

If the US wanted to truly tackle the root problem (improving the lives of the poor) we're attacking it at the wrong end. True income mobility comes from people creating more and more value from the same amount of time they work. This would require restructuring both education (to fix the next generation) and offering generous job retraining programs (to help those without skills now).