The Instigator
JaredPeta
Pro (for)
Losing
0 Points
The Contender
JohnMaynardKeynes
Con (against)
Winning
57 Points

Raising the federal minimum wage would not be economically beneficial

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Post Voting Period
The voting period for this debate has ended.
after 11 votes the winner is...
JohnMaynardKeynes
Voting Style: Open Point System: 7 Point
Started: 7/22/2014 Category: Economics
Updated: 2 years ago Status: Post Voting Period
Viewed: 1,388 times Debate No: 59401
Debate Rounds (3)
Comments (0)
Votes (11)

 

JaredPeta

Pro

Resolved: Raising the federal minimum wage would not be economically beneficial

Shared burden of proof.
JohnMaynardKeynes

Con

I accept.

Best wishes to Pro. I look forward to a fun debate.
Debate Round No. 1
JaredPeta

Pro

JaredPeta forfeited this round.
JohnMaynardKeynes

Con

This is unfortunate. I was hoping for a debate on this subject. At this point, I will give my opponent a chance to respond and will provide my own case in the next round.
Debate Round No. 2
JaredPeta

Pro

JaredPeta forfeited this round.
JohnMaynardKeynes

Con

Forfeit

Unfortunately Pro has forfeited every round of this debate. This merits a loss of conduct points, but I will leave that at the discretion of the voters. At this point, I will offer my own case which will go unrefuted.

Resolved: Raising the Federal Minimum Wage would be economically beneficial

The definitions, to my knowledge, are self-explanatory, so I don't feel a need to clarify any at this point. I'll jump right into my argument.

Note: I had several images, but kept receiving error messages when I tried to submit. So I'm going to instead link to the images.

I. Adjusting for Sticky Wages

As we all know, economic gains are not broadly shared; over the past thirty years, the bulk of economic gains have gone to the very affluent. In spite of the fact that productivity has doubled, median wages have flatlined for many and fallen for some. Who has been the most hurt by this? Minimum wage workers; the minimum has not been and is not indexed to inflation, meaning that nominal wages do not rise with inflation. Even though the nominal minimum wage has increased over time, real wages nevertheless decline, meaning falling purchasing power.

Let's examine this in several graphs.

The first graph comes from a piece Robert Reich wrote in the NYT (1).


http://www.debate.org...

Initially, this looks like a rather confusing graphic, so allow me to briefly elucidate it for you. From 1947 to 1979, productivity increased by 119%. As a result, hourly compensation increased by 100% and hour wages increased by 72%. This looked, overall, pretty fair: generally speaking, pay rose proportionally with productivity. This hasn't been the case recently, however. From 1979 to 2009, productivity increased by 80%, whilst average hourly compensation only increased by 8% and average hourly wages only increased by 8%.

How have wages practically been flat, though, if productivity has increased? As the opponents of a minimum wage increase often argue, people are "paid what they are worth." That, of course, is an utter crock. I'm going to provide a few more graphics proving this point soon, but there's more to see.

Observe next the change in income distrubtion to households by income groups. This comes from the Stanford Center on Poverty and Inequality (2). Note the same occurence: rising shares of income for those at the very top, and flat or falling shares of income for those struggling to make it.

http://www.debate.org...


We should view this in context, though. What has happened to incomes of the top 1 percent over this time period? Let's review this following graph (3).

http://www.debate.org...

To make a long story short, the top 1 percent has done exceedingly well, with income gains surpassing productivity gains. To provide more context, consider this: in 1980, CEO's earned 42 times what the average worker made, but in 2012, they earned 380 times (4). Opponents of a minimum wage increase will argue that workers are merely paid "what they are worth," which is rooted in their productivity. However, if the minimum wage kept pace with productivity, it will be about $21.72 (5). If it even kept pace with inflation, it would be $10.52 (5).

We can observe this disparity with an analysis put together by Pew of nominal versus real values of the minimum wage (6). Notice that the real value of the minimum wage peaked in 1968, and hasn't been higher since.

http://www.debate.org...


II. Productivity

So we now know, judging from empirical data, that the notion that people are paid in accordance with their equilibrium wage or their marginal product of labor if a canard: it simply hasn't happened, which is largely because the entire concept is entirely theoretical and arbitrary. That is, if I'm an employer, I can artificially increase your productivity by making sure that you have access to the best machinery. I could also artificially lower your productivity (this is obviously hypothetical) by breaking your leg. Does this mean I should alter your pay? Of course not, nor would I. This isn't to say that productivity and compensation are entirely incompatible, as there is some merit to the argument that pay, generally speaking, does or should increase with productivity. It simply hasn't happened as recent, and thus having a minimum wage acts a counterweight against lack of bargaining leverage in the workplace.

The point of this contention, though, is that raising the minimum wage can actually increase worker's productivity. Wayne Cascio from the Harvard Business Review explains:

"In return for its generous wages and benefits, Costco gets one of the most loyal and productive workforces in all of retailing, and, probably not coincidentally, the lowest shrinkage (employee theft) figures in the industry...Costco’s stable, productive workforce more than offsets its higher costs.These figures challenge the common assumption that labor rates equal labor costs. Costco’s approach shows that when it comes to wages and benefits, a cost-leadership strategy need not be a race to the bottom." (7)

We also have a statement from over 1,000 business owners expressing their support for increasing the federal minimum wage:

"[H]igher wages benefit business by increasing consumer purchasing power, reducing costly employee turnover, raising productivity, and improving product quality, customer satisfaction and company reputation" (8).

These statements are consistent with empirical work conducted by U.C. Berkeley economists which revealed that an increase in the minimum wage up to $13 per hour has "no measurable effect on employment" (9). It also demonstrated how businesses react to the increase in labor costs. Lynn Thompson of the Seattle Times explains:

"Businesses absorbed the costs through lower turnover, small price increases at restaurants, which have a high concentration of low-wage workers, and higher worker productivity, the researchers found." (9)

III. Outsourcing?

Another canard we often hear about the minimum wage is that it will lead to "outsourcing." Not only is this claim unsound logically, as it insinuates that labor costs are the be-all-end-all and the sole determinant of employment opportunities. If that were the case, why wouldn't businesses relocate to -- I know libertarians are going to cry "strawman!" but I promise you, if you look at the data, this is a relevant example -- Somalia? You could pay workers whatever you'd like if there aren't any regulations. Why don't businesses do this?

There are a few reasons. First, minimum wage jobs are most often in the restaurant or service sector such as retail -- about 60%, in fact, as Paul Krugman notes (10). Obviously service sector jobs cannot be readily exported, so on this front, the claim falls flat. Literally relocating businesses to X country with lower labor costs would cost businesses even more money than increasing the minimum wage, and would exacerbate the next problem I'm about to point out.

The second problem with the outsourcing canard is that one businesses's employees are another's businesses -- or, even that same business's -- customers. Low-wage workers have a higher marginal propensity to consumer than more affluent people, meaning they consume with about 100% of their income. Therefore, any increase in the minimum wage will merely result in those dollars going back into the economy. As people spend more money, the AD curve shifts to the left. Businesses would want to supply more, and now can because their profits have increased, meaning we would see a shift along the AS curve as well as an increase in the demand for labor. This is the reason that AD, not AS, is the key to the economy -- and I am not only saying that because John Maynard Keynes happens to be the economist after which I have modelled my username. Businesses are sitting on literally trillions of dollars in cash right now that they aren't investing. It's intellectually dishonst to insinuate that merely reducing their taxes, deregulating them further, abolishing the minimum wage, etc. would provide an economic boost. They aren't going to increase their supply, and thus hire more workers, if there isn't any demand for their products their selling. That, my conservative friends, is called a glut. Rising inventory costs are literally toxic to businesses, and should be avoided when they can. This acts as a check by ensuring that businesses have an active, vibrant customer base.

IIII. Jobs

I've already essentially proven this case, but with the few remaining characters I have, I'll address this as well.

There have been several meta-studies conducted on this subject, and the conclusion far and wide has been that raising the minimum wage has "no discernable effect" on employment (11). Let's go to John Scmitt from the CEPR:

"[T]wo recent meta-studies analyzing the research conducted since the early 1990s concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers. The most likely reason for this outcome is that the cost shock of the minimum wage is small relative to most firms' overall costs and only modest relative to the wages paid to low-wage workers." (11)

Even the CBO study that conservatives often cite -- falsely, might I add -- grants that a hike in the minimum wage provides an economic stimulus:

"The increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion, by CBO’s estimate."

Conclusion
There isn't much else to say. Vote Con.

Sources
(1) http://tinyurl.com...

(2) http://tinyurl.com...
(3) http://tinyurl.com...
(4) http://tinyurl.com...
(5) http://tinyurl.com...
(6) http://tinyurl.com...
(7) http://tinyurl.com...
(8) http://tinyurl.com...
(9) http://tinyurl.com...
(10) http://tinyurl.com...
(11) http://tinyurl.com...
Debate Round No. 3
No comments have been posted on this debate.
11 votes have been placed for this debate. Showing 1 through 10 records.
Vote Placed by jackh4mm3r 2 years ago
jackh4mm3r
JaredPetaJohnMaynardKeynesTied
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Total points awarded:07 
Reasons for voting decision: Pro made no case, Con went above the call of duty to not merely post and avoid forfeit but also made arguments to try and educate. All points to Con.
Vote Placed by kinsky 2 years ago
kinsky
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Reasons for voting decision: ff
Vote Placed by 9spaceking 2 years ago
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Reasons for voting decision: ff
Vote Placed by lannan13 2 years ago
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Reasons for voting decision: FF
Vote Placed by Zarroette 2 years ago
Zarroette
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Reasons for voting decision: ff
Vote Placed by KhalifV 2 years ago
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Reasons for voting decision: FF
Vote Placed by Mojique 2 years ago
Mojique
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Reasons for voting decision: All points inherently go to con as the pro didn't have a case and therefore had no arguments, spelling and grammar, conducts or sources.
Vote Placed by Ragnar 2 years ago
Ragnar
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Reasons for voting decision: Conduct for FF. Argument tied due to lack of arguments (waiting for the final round to post anything, gets it ignored)
Vote Placed by FuzzyCatPotato 2 years ago
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Reasons for voting decision: ff
Vote Placed by Daltonian 2 years ago
Daltonian
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Reasons for voting decision: Forfeiture and a good case made by con none the less. Good job to con. Vote on my EU plagiarism debate on the forum? :p