Bachmann right about minimum wage

@magically_delicious Said

I thought it was a pretty readily accepted economic idea that lowering minimum wage would result in more unskilled workers being hired, and more importantly, less people being laid off. I believe this concept can be described as an elasticity of demand function, where as the wage increases, demand for unskilled workers decreases. I say unskilled because generally the minimum wage workers are under-educated, or right out of college or high school. I learned this in microeconomics class, and unemployment is explained this way (right next to the unemployment elasticity graph) in a text book I own by Paul Krugman, who publishes articles in the New York Times and won a Nobel Prize in Economics, so I'm really just regurgitating his ideas.

All that aside, I don't need a graph to know this makes sense. You have to look at different business models to see it in action, but I'll use a personal example first. I used to manage a feed store that had 23 employees, and most people were paid a few dollars above minimum wage, and worked 42 hours a week. We were always understaffed in the yard, but it took awhile to train new yard workers where all the different grains were located and the business was barely breaking even. Many times people were left waiting in the store for help because I would have to leave the counter to help the guys retrieve grain, so obviously output could be improved by more workers. By lowering our wages 2 dollars each (which also lowers his taxes), the owner would have been able to justify hiring the extra yard guy, and I'm sure he would have since we needed him but couldn't afford him. The yard guy would have made up for his wages by increasing the output of the business, and decreasing the number of unhappy customers who went elsewhere.

The same principle could apply to a Strawberry farmer, maybe he has 40 guys out there working for minimum wage but could increase his output by hiring another 10 workers. Lowering 40 workers wages by 2 dollars each would more than allow for the extra 10 workers to be hired on, and increase the productivity of the strawberry farmer.

As you pointed out, this would not work for business who is already at their peak of productivity, because they do not need additional workers. However, I have seen many, many restaurants who are understaffed and would most likely hire on more workers if it would increase their productivity while offsetting the cost for employing them. Obviously businesses who are already close to letting people go would keep their employees if they could pay them less instead of firing them, especially if productivity would suffer by firing them.

@El_Tino Said

Minimum wages are already lower than standard for restaurant servers and small farm workers.

As for your retail example, if they could get qualified people at minimum wage, then why were they paying above minimum wage? That makes no sense.

And Paul Krugman does not advocate lowering the minimum wage:
" In reality, reducing wages would at best do nothing for employment; more likely it would actually be contractionary."
https://krugman.blogs.nytimes.com/2009/12/16/would-cutting-the-minimum-wage-raise-employment/

@magically_delicious Said

I thought it was a pretty readily accepted economic idea that lowering minimum wage would result in more unskilled workers being hired, and more importantly, less people being laid off. I believe this concept can be described as an elasticity of demand function, where as the wage increases, demand for unskilled workers decreases. I say unskilled because generally the minimum wage workers are under-educated, or right out of college or high school. I learned this in microeconomics class, and unemployment is explained this way (right next to the unemployment elasticity graph) in a text book I own by Paul Krugman, who publishes articles in the New York Times and won a Nobel Prize in Economics, so I'm really just regurgitating his ideas.

All that aside, I don't need a graph to know this makes sense. You have to look at different business models to see it in action, but I'll use a personal example first. I used to manage a feed store that had 23 employees, and most people were paid a few dollars above minimum wage, and worked 42 hours a week. We were always understaffed in the yard, but it took awhile to train new yard workers where all the different grains were located and the business was barely breaking even. Many times people were left waiting in the store for help because I would have to leave the counter to help the guys retrieve grain, so obviously output could be improved by more workers. By lowering our wages 2 dollars each (which also lowers his taxes), the owner would have been able to justify hiring the extra yard guy, and I'm sure he would have since we needed him but couldn't afford him. The yard guy would have made up for his wages by increasing the output of the business, and decreasing the number of unhappy customers who went elsewhere.

The same principle could apply to a Strawberry farmer, maybe he has 40 guys out there working for minimum wage but could increase his output by hiring another 10 workers. Lowering 40 workers wages by 2 dollars each would more than allow for the extra 10 workers to be hired on, and increase the productivity of the strawberry farmer.

As you pointed out, this would not work for business who is already at their peak of productivity, because they do not need additional workers. However, I have seen many, many restaurants who are understaffed and would most likely hire on more workers if it would increase their productivity while offsetting the cost for employing them. Obviously businesses who are already close to letting people go would keep their employees if they could pay them less instead of firing them, especially if productivity would suffer by firing them.

@magically_delicious Said

I don't think large corporations would change much of anything. Again, all this depends upon productivity. I highly doubt any company would lessen the wages of its employees unless they had to. I don't believe lowering the minimum wage would result in this wave of employers suddenly decreasing their current employee's salaries, with the exception of agricultural businesses, seasonal employers, and employers who are in a bad financial state. I believe productivity is the bottom line. If you go and lower everyone's wages at McDonald's, a bunch of people are going to quit, become less productive, strike, or steal things. The business would not be padding their wallets, but instead face huge losses due to reduced revenue. If you keep the wages the same for current workers, productivity could increase, and new employees would be hired at the lower wages, which would save money and increase output. If a business will have increased productivity by having more workers, they will hire more workers if they can afford to do so.

I know CEO's are not stupid, there would be major union strikes and huge employee turnover if a company massively dropped all of their employee's wages. The idea is the unskilled worker with no work experience, very little work experience, non-native English speakers, etc., would be able to find a job instead of solely relying on welfare and savings. Increased capital causes increased spending, and it certainly seems like a better idea than sitting back and watching unemployment get worse.