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Thursday, March 6, 2014

"Minimum wage increase,It's a bust..." 'James "Kimo" Rosen'

James “Kimo” Rosen is a retired
 professional photographer 
living in Kapa'a
 with his best friend Obama Da Dog,
 Rosen also blogs as a hobby.

Minimum wage increase,It's a bust

Hawaii  State bill 2609 offering a minimum wage increase sounds great,  in reality is it really that great?

With minimum wage increase  the price of everything will inflate. Many business are saying they will need to layoff employees including  the National Restaurant Association along with the U.S. Chambers of Commerce.

 Imagine how much higher the prices will be even at  food trucks? I can't imagine them getting much higher than  the $12.00 a la carte burger.

 It's a bust, sometimes the things we were taught in grade school such as prices will increase if you have more expenses.  A higher minimum wage will only increase the cost of everything, so what's the point?

I see both sides, but do know there are always people who need to make less to balance the system.
Local activists  in Kapa'a town demonstrate 
in favor of house  bill #2609 for a  minimum wage
pictured left to right, KipuKai Kualii, 
Kip Goodwin, Joe Carrillo and Ray Cantina

Hana Hou, (Encore) Shared from Facebook...


Douglas Dunn said...

your point is based on flawed economic misunderstandings. Every objective academic study by real economists not funded by the fast-food industry has shown the opposite, and for solid economic reasons.

Consumer PRICE is not based on the cost of goods. That is a myth promoted by those who want to scare consumers into supporting lower wages to workers. PRICE is set at the intersection of SUPPLY and DEMAND. At best, cost of goods is one indirect component of SUPPLY.

They can't just "pass the costs along" — they can't sell for more than is allowed by DEMAND — "what the market will bear."

PRICE is NEVER based on cost. People produce stuff they can't sell all the time, and end up selling it at a loss (think about how real estate goes "under water" or what a "short sale" means). New Balance athletic shoes are better quality, MADE IN AMERICA with American wages at higher costs, but sell for a LOWER PRICE than Nike, which is a poorer quality and cheaper (slave labor) production costs, but has more consumer demand because they have better marketing PR. From 1955 to 1975, McDonalds repeatedly complied with numerous significant increases in the minimum wage (which brought it to almost $20/hr in inflation-adjusted equivalent today), yet the price of a basic McDonald’s hamburger, in that entire 20-year period, stayed completely constant at a flat 19¢ — no price increase at all.

And, yes, even IF you passed along the costs, which doesn't happen, because compensation to low wage workers is only a fraction of operating costs, the actual price increase if the entire cost were passed along to consumers, which has never occurred in the past, the actual increase would be extremely small.

By the way, how come conservatives who are so concerned about raising wages for the poorest workers are never concerned about the effect on consumer price of waging CEO compensation?

As long as goods are still profitable, even if the margin is diminished, the supply will continue and the price still cannot exceed what the market will bear.

Example: Minimum wage in New York City is $7.25 / hr. Minimum wage in San Francisco is $10.55 / hr — $3.30 per hour higher. Yet a Big Mac in San Francisco does not cost more than in New York City. It is still about the interplay between SUPPLY and DEMAND.

Rick Comstock said...

Oregon 2013 - 2014 …. state raised minimum wage above to $9.50 per hour, underemployment went down, Oregons' economy increased 21%….. We all shall climb this ladder together, 68% are for this increase. Making yourself feel good while handing a boat anchor to swimmer is just crazy.

Rick Comstock said...

Douglas …. very well explained, full of facts and examples that even a fifth grader could understand if they only allow themselves to. Thanks Doug

Douglas Dunn said...

Excellent points, Rick — Kimo’s blog was about the effect on consumer pricing, not employment, but you do bring up the other big CONservative myth about minimum wage, that it will cause jobs to be lost.

Douglas Dunn said...

Excellent points, Rick — Kimo’s blog was about the effect on consumer pricing, not employment, but you do bring up the other big CONservative myth about minimum wage, that it will cause jobs to be lost.

Their logic is that, when you raise the price of something (the whole supply/demand dynamic they were willing to overlook completely in the consumer pricing thing), you will have less of it, ergo, raise the price of labor and you will have less of it. That would work if labor were a single-variable element of the economy, but labor is not a “commodity” like equipment, inventory or facilities.
Labor is PEOPLE.

The CONservative MYTH that minimum wages reduce employment has been proven false by replicated university studies (and I have the specific references for anyone who wants them) that were NOT funded by the fast-food industry.

Yes, labor is an economic commodity, and raising the price should theoretically reduce the supply, BUT only in a simplistic, myopic, one-dimensional CONsevative world lacking nuance.

In the reality, what real-world studies have proven, is that LABOR is PEOPLE (duh!) — and the WORKERS who make up the "commodity" element of labor play MULTIPLE roles in the economy; they are multi-dimensional, and it is more complex than simplistic CONs understand. WORKERS are also CONSUMERS, and when they have more money in their pockets, they increase DEMAND, which requires more supply of goods and services, and to satisfy that DEMAND, and produce that SUPPLY, more workers need to be hired, and EMPLOYMENT IS INCREASED. Business owners do not hire teenagers out of the goodness of their hearts because they just love young people or because they have extra money burning a hole in their pockets. They hire exactly the fewest number of workers they need to meet consumer demand. So when consumer demand goes up, so does hiring, even if the profit margin for the employer is narrower. As long as there is one, it will go up.

But NO ONE WILL BE HIRED if no one can afford to buy what no one is making thus resulting in no demand.

And the CONs only point to the economic cost of low wage workers, never to CEO compensation nor do they explain why CEOs or shareholders should pay LOWER tax rates on their higher incomes.

KimoRosen said...

It's a wash, with a minimum wage increase, everything goes up, either way is fine..

KimoRosen said...

P.S. Doug and Rick, I welcome your views if you ever wish to guest-blog on dakinetalk, the invitation is always open!

Douglas Dunn said...

Kimo, read my comment again. It is NOT a wash.
Raising the minimum wage does NOT increase prices AT ALL and, contrary to losing jobs, it increases employment and production because of the increased consumer demand from those who can afford to buy more.

If you like, you are welcome to take my two comments, the first on inflation (consumer prices) and the second on employment, and combine them into a Dakinetalk piece.

Douglas Dunn said...

Or if you want, Kimo, I can just combine them and insert the transition for you and send it to you in an e-mail.

KimoRosen said...

Doug, Sure, you'll be a breath of fresh air and get your view out there to over 200 daily readers. How can raising minimum wage, not increase prices, if the grocery store has to pay more expenses in wages, who pays for that? Us! People like food are an expense, when expenses go up, simple theory, prices go up, period, exclamation point.!

Douglas Dunn said...

I sent it to the same e-mail address I have used for you in the past...

KimoRosen said...

Mahalo Doug, will set it up to run sometime next week, no blog on Saturday, Judith has Sunday and my column is Monday so next week for sure! Aloha, kimo

Douglas Dunn said...

Kimo, you continue to miss the point about SUPPLY and DEMAND, NOT COST of goods.

They can't just raise the price above what people will pay. As long as it is profitable, they will just have to live on a smaller margin. It is the inverse of what we have seen in the last 30 years since Reaganomic peddled the myth of “trickle down.”

In the 1960's, the wage gap between owner/investor/CEOs and front line employees was at its lowest in our nation's history, the minimum wage was at its HIGHEST (adjusted for inflation) and we had the greatest era of broad-based middle class prosperity.

What happened was that, under the lie of TRICKLE DOWN, they promised that if we don't increase the minimum wage and let it fall in real dollars, rich people will let their wealth "trickle down" to workers and we'll all get richer.

NO, we all got richer when wages were high and inflation was low! Why does REDISTRIBUTING middle class wealth result in lower prices? IT DOESN'T. NIKE has lower labor costs (slaves in Asia) than New Balance, which produces a better shoe made in America by union workers, but cost less.

You have this myth that they have to pass on the costs. They can't do that.
If you buy a house, and the market goes bust, and you want to sell it, you can't just sell it for more to make a profit. You might have to sell at a loss. You can't set price based on your costs, you have to set price at the MARKET rate, unless you think the whole foundation of economics (supply and demand) is baloney.

Sorry, Kimo, but you have bought into the CONservative myth used to CONvince working people to REDISTRIBUTE their incomes to those who already have the most.

KimoRosen said...

Doug, I have not even been following democratic vs. republican on this issue. For me this this is just common sense . I do not follow all democratic policies, for the most part I do prefer the Democrats. I am an independent thinker. I do not join any side, I am thinking for myself, and yeas prices will go up. My opinion, your opinion is fine, but I do not agree, I do not miss the point, just a difference of opinion. Your blog will run next week and am sure many will agree with you. I respect your opinion, just don't agree, not that I don't understand. I have been in business before, if I have to pay my helpers more, expenses go up, simple capitalism.

Steven Eayrs said...

I can attest that when I give my employees higher wages, I have always had to raise the rate we charge. Really no other option when the profit margin is 5% of the gross. Also it seems to me the min wage rate was never designed to be what a person could independently live on, but was for entry level jobs, where young people learned how to work. Those who take the time to learn a trade, and give 100% on the job, then receive raises... Its called a good incentive, and its counter to the sense of entitlement so many people have .........Thats how it works in many small businesses.................... Of course greed takes over in some places and some will pay as little a they can, and likely wish slavery was still legal.... There will always be those places, but those who apply themselves, learn and work hard, hopefully will eventually find employers that appreciate who they are, and pay accordingly.

KimoRosen said...

Totally agree Steve!

Douglas Dunn said...

No Kimo and Steven — I have also been both an employee and an employer and, regardless of how it “feels” and the way you sincerely remember your anecdotal experience, I understand how it works when hiring employees and setting prices.

When I hire someone, I don’t look at costs. If I need to get the work done and there is more than I can do myself, I hire someone. Their pay is set based on what is usual for that position and their unique experience and qualifications in relation to others being considered, i.e., what the market will bear.

If I get a sudden windfall, I may choose to share it with my employees as a bonus — some employers do that, many do not.

I can’t just raise my prices if I hire a well-paid worker. In fact, often I am hiring someone I pay more because they can perform even better than what I’m paying them, i.e., improve efficiency and, overall, lower costs.

If business gets slow, but still profitable and I still have the business volume, I do not reduce employees pay rate or lay people off (again, as long as I’m still in the black and have the volume to justify the work). I may have to lower prices to keep up with the competition.

And when minimum wages go up and workers have more money in their pocket, they generate greater consumer demand, more business volume, and the employers may have more business (so they can’t lay people off) and a smaller per-unit revenue factor, but more volume of a thinner margin and, in the long run, a more prosperous economy for both employer and employee.

It has always worked that way; regardless of the way it seems, all major historical economic data and studies verify that, in the real economy, that is how it works.

You can't simply ignore the most basic, fundamental laws of economics.

KimoRosen said...

Doug, I get it, we don't agree...

Rick Comstock said...

Again Doug I follow every word you say. What you write is not ones opinion, nor is it Rep. vs. Dem. its simple economics tried and proven not an ideology. As for giving a wage rate increase, many employers use wages as an incentive. The old owners that feels a need to maintain a bottom line solely because he must base my business model on wages i.e.; my profits are based on a percentage of the workers hourly rate. Nor does that owner compensate good employees for increased production, which has been increasing for 50 years at least. The two exist together. If you dig trenches at 10' per hour with 3 men, your bottom line should increase when you make the investment to purchase a back hoe. increasing your trench to 30' per hour. If the men work hard together and increase it to 40' per hour you prosper in many ways with taxes and deprecations. Otherwise don't be in business, it looks like slavery.

Steven Eayrs said...

Doug, I wasn't commenting on how it felt. I was telling you what is presently like in my business. Your example does not apply as much to a service related business like mine, as some retail position somewhere. Its construction related, a number of years experience as an apprentice, some schooling, all before you can expect to make a better wage. An investment of time on my part, and the employees part too, before its expected they will make a lot better money. The income side is reliant on an hourly charge to the customer, which is directly related to the labor costs, workers comp, insurance and all the overhead in trucks, equipment... I didn't say I raise the rates when I hire another person, because I count on that the additional good help, to increasing the revenue enough to pay them, but have given raises a number of times thru the years, because I like to keep good help around. I pay well, and when I increase the hour wages, I also have to consider an increase of the rate we charge to the customer... Its directly related. In fact after raises this last year, its a fact that our rates went up to make up the difference, and will likely have to go up a little more because its too tight of a budget.. And at this point I make just slightly more than my highest paid guys.... I am not alone. There are many businesses like mine. If all my work was done for a fixed price, like bids, etc.., then of course your example fits better.....Its just your example only works for certain types of industry.

Rick Comstock said...

The example is for everything, cutting grass to selling t-shirt….I would say you do not talk minimum wage when you write. But still if you want to talk labor and use apprenticeships and burdens, I could go that direction with you also…. 44 years with SMWIA….narrow down cause and effect about minimum wage maybe I will hear something to help people climb a ladder.

Steven Eayrs said...

Your right, I am not just talking minimum wage, but have hired some 16 year olds, and feel that the current min wage is fine for them, until they learn something, or just learn how to work in general. Many don't, and higher pay is sometimes the only incentive to work harder you can offer, until something kicks in, and they realize what life is about....And I don't even know who SMWIA is... but spent the last 35 plus years in construction related work, at all levels. The last 25 as an employer.

Steven Eayrs said...

Rick... ok.....sheet metal workers union.... I'm in plumbing and heating but non-union. The guys have had the option a time or two, but higher take home pay working non-union......

Rick Comstock said...

Not likely….But that again is your opinion for a different time. So what about minimum wage…..I would say base pay and your environment governs your thoughts more than improving the economics and the working poor. Buy the way you can call yourself a plumber but the term pipe fitter is the correct term when you try to do heating, But then again I only design the total systems and use pipe fitters to install the hydronics for my HVAC designs. Have one of your workers call me in ten years to tell me how good he had it and what he is doing currently doing then. Lets keep the debate at minimum wage. We can only disagree on the union / non-union thing.

Steven Eayrs said...

Your right.... never met a union man who didn't think they were better and treated better than non.... And I am both a plumber and pipe fitter.. Lisc'd for both. Admin lisc for both, and over 50% is boilers. both residential and commercial, plumbing and heating.. Was a split shop for a couple years because a friend who was union, that needed work, when the union jobs could not keep him busy. Worked fine until the union started bugging us about it, and they pressured us to go all union.....so we dropped them.... The guys did not want to take a pay cut. I sub the HVAC out on the commercial stuff. In our area most who are plumbers are also pipe fitters... And the guys are quite happy, and have no desire to line the pockets of some union guy.... and half of them have been w/ me over 10 years.....They all have options for a 401 w/ matching funds, and insurance, but I don't take a cut out for myself, like the union would. And don't appreciate being called a liar. Evidently things run a lot different in some places than you have experienced. ...... But your right this link is about min. wage... where I doubt we will agree on much either... so good day to you sir.

Rick Comstock said...

As you say and turn it personal as I have never stated to you a derogatory comment about non-unions. That in itself shows shows lack of empathy for all working people. Your comment tells me more about yourself. Never called you a liar and I don't need to discuss what puffs my chest like you do. When I read your comments about minimum wages I knew then your post contained nothing of value about wages. Few suggestions…if your scrapping to make 5% profit you would do better keeping your money safer in a bank money market fund. Next time your ignorant comment crys' about union makes to much money remember you told me non-union have a higher take home pay….Remember to thank a union member for the time they fought for everyones working rights. When posting don't be self serving and compare your small world to economics of the country. As I stated before we disagree but the Kimo post is about minimum wage and you showed you had know ideas for me to disagree with much less knowledge of economics.