Econ 101: UC Berkeley forced to lay off 500 due to minimum wage hike

[crazyqx83_rivals88013]

My whole opposition to the minimum wage skyrocketing to $15 an hour is that you'll go from having about 1% of the US population over 24 making minimum wage to about 50% of the population. (median individual income listed for people over 25 is $32,140 or about $15.45 for a 40 hour work week).

If you don't think that would royally **** the economy, then I don't know what to tell you. You obviously don't understand supply chains and automation cost thresholds.

And full disclosure: on a personal level, I think it's ******* insulting for a registered architect to make only 40% more than some snot nosed kid flipping burgers or spending 90% of their shift chatting with co-workers at some all retail store. I like it closer to the 250% more it is right now. Call me greedy.

 

[starchief]

I'll start this put by saying that I have great amounts of faith in people. I truly believe that people will work hard to improve their situation if they are poor, and if being poor sucks! History is filled with stories of folks that worked hard to escape being poor and made something of themselves.

The problem is that government, on all levels, continues to try to find ways to make being poor not quite so sucky. If minimum wage is increased to "a living wage", then where's the incentive for unskilled, under-educated people to work to improve their own life?

Let the market dictate wages for entry level, unskilled labor. Once people figure out how bad those jobs suck they will move up and move on.

You make it sound like everybody who wants to succeed and prosper can. And that there's a great job waiting out there for anyone who applies himself. Sorry, but a large percentage of people who truly want to succeed never stumble across the opportunity. They have shipped the good jobs overseas. Computers and robots (and old age) are eventually coming after your job as well. Yeah, I know you are not worried because you are indispensable, but most people someday sadly learn that they are not.

 

[gamecockcat]

Dee,
I agree with plenty of what you said but don't agree that lowering the minimum wage automatically equates to workers automatically accepting a lower wage. At some point (and in many areas, that point is already above $7.25), the worker says, 'It's not worth it" and refuses to take a job. For instance, I wouldn't walk a beat as a policeman for $20/hour - no way, no how. Or work in a coal mine. So, for me and particular jobs, the minimum wage is far higher than $20/hour. For a teenager to work at McDonalds, most of the ones that worked with my daughter didn't only get $7.25, they got (I think) $7.50. Of course, McD's also has about 350% turnover among their part-timers, which may be, in part, because workers don't want to do the job for the wage McD's is willing to pay.

I mean, when Gov Brown signed the law, he said it probably didn't make economic sense but it was the 'fair' thing to do. That's the kind of logic that is so incomprehensible to people like me. Much the same way as Pres Obama stated he would like to raise the capital gains tax rate EVEN if it resulted in less taxes being collected because it's the right thing to do. People who think like that, I cannot relate to.

Minimum wage jobs are not supposed to be careers that can support a family. Raising the minimum wage too high puts many of these folks at risk of having no job as the incentive to automate becomes greater with higher labor costs. At $20/hour, there wouldn't be a single fast food joint with a live person working the front. All automated kiosks (or the cost of a burger and fries would skyrocket). At $2/hour, there theoretically could be many, many more people working the front. However, a miniscule percentage of potential workers would work for only $2/hour. Let the market decide where the optimum and acceptable equilibrium point is. Not some bureaucrat in Washington who probably has never had to work a minimum wage job.

And I do agree that the layoffs at Berkeley probably had very little to do with raising the minimum wage although another article I read stated that many of the jobs lost would be minimum wage jobs. Just very ironic the timing of the whole thing.

 

[KingOfBBN]

According to a quick google search 1.5 million workers make minimum wage and 1.8 make below minimum wage. Combined, that's 4.3% of the population.

So considering the fact that about 1% of the population are people making minimum wage ages 24 and up isn't even important, if more people make under minimum than those that make minimum wage. WTF is the point of raising it if more people are going to make less than min wage than those that make it?

My numbers were from I believe 2012 or 2014. But yeah, point taken.

 

[CatFromDaHood]

The only problem here is that the layoffs and budget cuts are NOT actually due to a higher minimum wage. This is just some fluff piece that is trying to link the two together. There is a linked article that states the reason for the layoffs is because they have had huge deficits for the last three years. $12 million, then $109 million and finally $150 million.

We have no idea how an increase in minimum wage effected them. My guess is that they probably had very few employees who were making minimum wage in the first place. What we do know is that it was a terribly written article that was specifically designed to pander to conservatives.

well agendas will be agendas....

 

[WildcatfaninOhio]

You make it sound like everybody who wants to succeed and prosper can. And that there's a great job waiting out there for anyone who applies himself. Sorry, but a large percentage of people who truly want to succeed never stumble across the opportunity. They have shipped the good jobs overseas. Computers and robots (and old age) are eventually coming after your job as well. Yeah, I know you are not worried because you are indispensable, but most people someday sadly learn that they are not.

Stumble across the opportunity? Did you really just type that? People that succeed don't stumble across an opportunity. I never suggested that people should sit back and wait to stumble across an opportunity. I suggest that when being poor sucks, and minimum wage sucks, people will get up off their asses and go chase down an opportunity. If it means moving, then they move. If it means going back to school, they go back. If it means applying for a new job, then they do it. But for government to step in and force employers to pay a living wage for unskilled work, it strips away the need for people to better their situation. It actually makes lives worse. They are paid just enough to be comfortable, but they still are stuck in a ****** job instead of doing something better.

 

[Deeeefense]

- So the cost of labor goes down, but goods would remain the same price? Seems like an odd strategy. Your hypothetical is also not supported by anything but your back-of-napkin scribbling, so there is that. This is classic "third way" BS. Just cut right down the middle and it will always be the right answer, regardless. No serious thought or empirical evidence needed, just use the word "extremes" to make your position seem reasonable.

Double Tay pointed out the economic disasters of setting a min wage too high. He used a hypothetical number of $50/hr to illustrate - obviously that's hyperbole but it's useful to see his point. Likewise I use the other extreme of $1/hr to illustrate the economic disaster of setting a min wage too low. Again it's nothing more than a hypothetical. I said nothing about cutting anything down the middle, I pointed out that somewhere between the extremes there is an optimal number for the economy. That's a reasonable economic argument to make, though obviously I don't expect you to agree with it. I'm sure there is a lot of empirical data and research that supports the simple idea that when labor costs are too high productivity and economic growth suffer and likewise when wages are too low there demand for goods and services impedes growth. However I have no interest in spending my time googling for lengthy PDFs that no one is likely to read anyway.

It's just a discussion board. Folks have opinions if you disagree that's fine, no hard feelings.

 

[We-Todd-Did]

Using inflation as the only reference, minimum wage in the late 60's translates to about $11 and change per hour. If you use percentage of GDP as the only reference, that late 60's minimum wage translates to about $21.50 per hour.

I also want to point out that Costco averages about $17 an hour plus benefits and Aldi's pays over $20 an hour in most retail positions. These are both retailers that offer jobs that many say a $15 minimum wage ramped in over years will destroy.

I want an armchair economist explanation of these without using the words personal responsibility, teaching, or bootstraps.

 

[thabigbluenation]

[roll] wow!

 

[Lexie's Dad]

Average salary of a UC-Berkeley prof is $149,100. Yep, those minimum wage guys are wrecking the school budget.

Yes, because it takes the same skills to have a Ph.D in economics or physics as it takes to mop the kitchen. Not to mention all the research grants that the facilities crew generate for the university, then on top of that the classes that they teach.

 

[Lexie's Dad]

Maybe you aren't familiar with the word "inflation". What it means is the value of a dollar changes over time. In reality a $1 in 1938 is now worth $16.42. Or stated differently a dollar today would buy 6 cents worth of goods in 1938

You can thank FDR and Keynesian based fiscal policy for that.

 

[Lexie's Dad]

and for that reason I think the min wage law should have provisions for exceptions for youths of a certain age still living at home and/or working part time, since they are basically working for their spending money. That's been proposed by some in congress.

Well, then I think that there should be a provision that states that everyone else has to be in some sort of program that is increasing their job skills so that they aren't relying on an artificial price floor to give them something that they can't earn in a free market.

 

[qwesley]

It just needs to be tied to GDP or some other economic indicator so it can stop being used by the DNC in election years to get their prime voter bloc ginned up.

 

[Bill@ModernThirst]

Where do you stand then if you work 35 hours per week

Full time.

Although, for the purpose of calculating ACA requirements, 30 hours a week is a full time employee. Technically, could be less, as anyone who works 30 hours per week OR 130 hours per month is considered full time for that calculation.

 

[warrior-cat]

If you look at the percentages of minimum wage workers, they're an absurdly small portion of the work force. According to the U.S. Labor Department, 55 percent of minimum wage workers are 16-24-years-old and 68 percent of minimum wage workers are part-time employees.

These numbers tell a huge part of the story. Minimum wage jobs are mostly kids who are learning responsibility and going to school and the other portion is people working multiple jobs.

Also, there are people who want part time jobs because they want more time to do the things they want to do. I know a few people like this. They are content with the life they have.

 

[warrior-cat]

that's not what I said it all, I simply pointed out that extremes in the min wage $1 or $50 would be economically catastrophic and therefore would never occur in the country as we know it today. The point being wages should be somewhere between the extremes for optimal economic performance. I guess that's just over your head though.

It would however also be extreme to pay $15.00 an hour almost over night imo and, given the governments inability to manage money, I am not confident in their ability to regulate it.

 

[warrior-cat]

Maybe we need to find ways to lower the cost of executive pay.

I am for that and pro athletes pay as well.

 

[Lexie's Dad]

I am for that and pro athletes pay as well.

Why?

The money is there. Owners are free to spend it as they desire. (Be it Jerry Jones or the UPS Board of Directors).

Lower ticket prices!

• Just a small revenue source.
• If games are sold out, prices are not too high.
• If a team is winning and there are unsold tickets - yeah, lower prices.

 

[Rex Kwon Do]

Minimum wage hike is, quite simply, about trying to get increased tax/FICA revenue and unions getting to renegotiate based on scale to the minimum.

Of course the powers that be always think everything is static, they don't ever think of a single unintended consequence i.e. lost jobs and increased prices to the end use customer and general public.

 

[Levibooty]

I am for that and pro athletes pay as well.

I agree. I have a problem digesting coaches being the highest paid government employees for so many states and pro team owners getting government welfare in the form of billion dollar stadiums built for their corporations to work in.

 

[mdlUK.1]

I am for that and pro athletes pay as well.

Agree. I wonder why that is never brought up? And movie stars or musicians.

 

[Lexie's Dad]

I agree. I have a problem digesting coaches being the highest paid government employees for so many states and pro team owners getting government welfare in the form of billion dollar stadiums built for their corporations to work in.

Agree on the corporate welfare issue. The jobs and revenues created by having a team are not sufficient to offset the taxpayer costs. Cities should refuse to build - the potential cost being they lose a team and the restaurant, hotel, and stadium (including concessions, and memorabilia all throughout the city) revenue associated with the team.
If the coach is being paid in accordance with his ability to generate revenue, leave him/her alone - they have many revenue streams and their pay comes from many different sources.

 

[Bill Derington]

Minimum wage hike is, quite simply, about trying to get increased tax/FICA revenue and unions getting to renegotiate based on scale to the minimum.

Of course the powers that be always think everything is static, they don't ever think of a single unintended consequence i.e. lost jobs and increased prices to the end use customer and general public.

I agree with the last part of your post.

Minimum wage used to be entry level jobs, teenagers and college students dominated the workforce. What's happened is that as manufacturing jobs have disappeared those workers have moved to the service sector.

These people are trying to make a living at fast food restaurants. It's hard to do that on 7.50 an hour.

To solve the problem we've got to get at the root cause.

 

[starchief]

Yes, because it takes the same skills to have a Ph.D in economics or physics as it takes to mop the kitchen. Not to mention all the research grants that the facilities crew generate for the university, then on top of that the classes that they teach.

I was not criticizing profs making $150K. I'm just saying you cannot simply leave the high salaried employees out of the bottom line equation and blame the lowest paid employees for the crunch.

 

[Perrin75]

Getting back to what started this post, the increased cost of wages is not the reason for layoffs at Berkeley. They are suffering from the same thing are Universities are. Enrollment has dropped substantially because of a population lull, and state subsidies have decreased as well. If neither of these things happen, then I doubt there is really much impact at all because Universities do not employ large number of folks working in that salary range.

So far no one has presented any compelling evidence to show that an increase in the minimum wage has had any impact (be it positive or negative) on employers. So, anyone have anything compelling to support their side of the argument? Otherwise, I suppose we can assume it hasn't really had much impact on either side.

 

[LadyCat92]

And full disclosure: on a personal level, I think it's ****ing insulting for a registered architect to make only 40% more than some snot nosed kid flipping burgers or spending 90% of their shift chatting with co-workers at some all retail store. I like it closer to the 250% more it is right now. Call me greedy.

This is where I take issue as well. I've flipped burgers. It's not hard work. It's boring work, but it's not hard. I have no issue giving a nurse's aide or a garbage man more because that is some terrible and tough work, but not a kid flipping burgers. These are not lifetime jobs. This is why they only pay minimum wage. They teach you to show up to work, be on time, dress properly, follow some orders, and then move on to something better. Moving wages to $15/hr isn't going to result in a ripple of increase of wages for everyone else. People who were doing ok are now going to find themselves making the same as the burger flipper while the cost of goods goes up, thus decreasing their overall net.

That said, as someone else pointed out, the issue with Cal-Berkley has as much to do with the decrease in enrollment as anything. The job market has picked up and studies have shown that when the job market picks up, the number of people going to college goes down. In addition, I think people are just saying college isn't affordable and are finally refusing to pay the price.

 

[warrior-cat]

Agree. I wonder why that is never brought up? And movie stars or musicians.

That is where I was going with it. How do you pick and choose who deserves to get paid the big bucks and who should not. Slippery slope in a capitalist society.

 

[Big_Blue79]

So far no one has presented any compelling evidence to show that an increase in the minimum wage has had any impact (be it positive or negative) on employers. So, anyone have anything compelling to support their side of the argument? Otherwise, I suppose we can assume it hasn't really had much impact on either side.

I recently worked on a case about the minimum wage with lots of studies about the effect of rising minimum wages on labor markets. There's... mixed results depending on the studies used. A lot of recent scholarship shows that increases in the minimum wage has little or no effect on number of jobs. Some scholars (including some in the UC system) say these studies ignore or minimize key variables. But (and this was unfortunate for my client's position) the trend is towards higher wages = good or neutral, with some of the offset in costs being 1) less employee turnover/training (largest part), 2) slight (< 7%) price increases, and 3) increased sales due to more people earning more (applies to things like low end retail and fast food primarily).

The other interesting variable in all this is public assistance programs. There's an argument that government subsidies for the working poor encourage lower wages by making those low wages acceptable both optically and practically. So the government distorts the market rate down through subsidies, and up through minimum wages. In that scenario, our tax dollars effectively subsidize employers to pay lower wages than they otherwise would, so raising the minimum wage is a form of correction. The articles I read on it were pretty compelling, but there were not a lot of counter studies so I got (mostly) a one-sided argument. The anti minimum wage scholarship leaned towards using tax credits rather than minimum wages to help the working poor. Not sure how I feel about that as it, again, shifts the burden to the general tax paying public.