PeakTrader.com

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PeakTrader:

If the national minimum wage kept-up with inflation and low-wage productivity, since its peak in 1968, it would be around $13 an hour today. I stated before:

It’s highly unlikely a $10 minimum wage keeping up with inflation would result in millions of lost jobs. Many other variables would adjust to prevent those job losses. Whether the net effect, on the economy, is positive or negative is uncertain. However, the evidence suggests a market failure in low wage income. So, it’s likely, an increase in the minimum wage, up to some level, will have a positive effect on the economy.

There are many other factors that have a much more powerful effect on employment. It’s possible, low-wage workers have been underpaid for decades.

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A friend started a firm about 15 years ago and has several hundred employees now.

He pays the highest possible wages for his workers, who all earn $30,000 to $60,000 a year, and buys equipment to make the work easier for them. He pays himself $150,000 a year. He could pay himself much more, if he wanted to, but limits his pay.

His philosophy has always been to pay his workers as much as possible and make their jobs easier. Attracting and retaining better workers was likely a major factor why he was able to take market share from his competitors.

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Worker wages: Wendy’s vs. Wal-Mart vs. Costco
August 6, 2013

“Hundreds of dissatisfied workers at major American companies like Wal-Mart (WMT), McDonald’s (MCD) and Wendy’s (WEN) have joined protests nationwide in the past year demanding higher wages and better benefits.

One company that hasn’t had to deal with such strikes is Costco (COST).

The no-frills warehouse chain pays its hourly workers an average of just over $20 an hour, compared to just under $13 at competitor Wal-Mart.

Sales at Costco have grown an average of 13% annually since 2009, while profits have risen 15%. Its stock price has more than doubled since 2009.

During the same period, discount retailer Wal-Mart’s sales grew an average of 4.5% each year, profits rose 7%, and its stock price increased 70%.

Costco seems to be investing some of those profits back into its employees.

Cesar Martinez, a 37-year-old fork lift operator, has worked at a Costco in North Carolina for 19 years. He makes $22.82 an hour, gets health benefits and a pension plan. He manages to save, and doesn’t worry about hospital bills for his daughter, who suffers from asthma.

“That’s the reason why I’ve been here for so long,” he said. “The company gives you a decent wage and treats you with respect and takes care of you. That’s why we all give 100%.”

Research shows that it pays to pay employees well, because satisfied workers are more productive and motivated, according to MIT Sloan School of Management professor Zeynep Ton, who focuses on operations management.

“How many times have you gone to a store, and the shelves are empty or the checkout line is too long, or employees are rude?,” she said. “At Costco, you see a huge line that disappears in minutes.”

The productivity translates into sales, she said.

According to Ton’s research, sales per employee at Costco were almost double those at Sam’s Club, its direct warehouse competitor owned by Wal-Mart.

The median pay for fast food workers nationwide is $9.05 an hour, or about $18,800 a year.

While the fast food and retail industry is making record profits, its workers are forced to rely on public assistance just to afford the basics.”

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Ricardo:

Peak,

That is one of the best things written concerning free trade in labor I think I have read in a while. This is proof that the market sets the wage. Your friend’s business obviously has skilled workers who can demand a higher wage because he too these workers from his competitors with higher wages and still took market share.

If he were in competition with Walmart he would be out of business almost before he starts paying all his employees $30-60K per year. Walmart shoppers will not pay the prices to support those kinds of wages.

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PeakTrader:

The market wage is too low. That’s why it’s a market failure, resulting in productivity and output that are too low.

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Patrick R. Sullivan:

‘He pays the highest possible wages for his workers, who all earn $30,000 to $60,000 a year, and buys equipment to make the work easier for them. ‘

In other words, he substitutes capital for low skill labor and only employs higher skill labor. Pretty much textbook economics.

All of which ignores the plight of low skill workers and those who work in non-capital intensive industry. Or for employers who simply don’t have the resources to provide their workforce with capital, to enhance productivity. I.e. the people who will be hurt by a minimum wage that is above the market clearing wage for low/un-skilled labor.

Why do you hate the poor?

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PeakTrader:

Why do you want workers to work harder than they have to for less wages?

Why do you want less demand, to generate fewer jobs, which hurts the “poor?”

Why do you want to prevent production of capital equipment, to create jobs, including for “poor” workers?

Why do you hate the poor?

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And, why do you assume poor people are too dumb to handle capital equipment?

Moreover, why do you want to keep firms that can’t even afford capital equipment?

And, prevent better firms from expanding?

Furthermore, why do you want to slow or stop freeing-up limited resources to expand the economy?

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Not Posted:

http://idiosyncraticwhisk.blogspot.com/2014/01/a-couple-more-minimum-wage-regressions.html

Time series

There's no causal explanation in your model. It's an attempt to forecast.

So, how do you explain the decline in the real minimum wage over the past few decades, along with capturing no gains in productivity, and the decline in the teen EPR, over those decades?

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PeakTrader:

Rules and regulations both promoting and preventing growth can result in expensive no growth.

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U.S. monetary policy has been much more effective than Japan and the E.U..

Japan began QE very late, in response to demographic shifts, while the ECB hasn’t implemented QE, perhaps, because of the “PIIGS.”

The Fed acted quickly and decisively, although it was somewhat behind the curve easing the money supply, initially, in 2007 and 2008.

The Bernanke Fed deserves a lot of credit (pun intended). Unfortunately, fiscal policy and economic policies out of Washington have been less effective and counterproductive.

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