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# Minimum Wage

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>If the minimum wage were indexed to the cost of housing (annual or biannual updates
>maybe), that raise in housing would trigger a corresponding increase in minimum
>wage.

Yes. And the increase in minimum wage would then trigger another increase in housing prices as the minimum wage earners hit the new limit. Such mechanisms can lead to hyperinflation.

> I said a working couple (two minimum wage earners) might be able to afford a small
>apartment near their work. Right now, the only people who can live on minimum wage
>are those who live with parents or a whole bunch of family friends.

Two minimum wage earners would have no problems living in a small apartment in Eloy, Arizona. (And a fair number of skydivers do something like that.) That, of course, doesn't work in downtown San Francisco or in the nicer areas of Tucson. Which is one of the problems of trying to use a federal (or even state) minimum wage to address perceived inequalities in housing supply.

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And the increase in minimum wage would then trigger another increase in housing prices as the minimum wage earners hit the new limit. Such mechanisms can lead to hyperinflation.

I suspect the effect would be asymptotic, and a fairly stable equilibrium would occur.
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>I suspect the effect would be asymptotic, and a fairly stable equilibrium would occur.

It might - but the asymptote might not be on the axis you want it to be on.

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>I suspect the effect would be asymptotic, and a fairly stable equilibrium would occur.

It might - but the asymptote might not be on the axis you want it to be on.

I think it would be, but without a more specific plan and sufficient data to estimate parameters, I can't be sure. I'm far too lazy to attempt to derive the result from scratch.

Edit to add: Actually, it would be easy enough to show that the asymptote (if it exists) would be horizontal.
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Agreed - because the absolute minimum wage earners are effectively priced out of the real estate market. By raising the minimum wage more people will cross the line and be able to afford housing. That will be a minor effect until vacancy declines to near zero at which point housing prices will rise dramatically due to undersupply - thus pricing those same people out of the market.

Or new development would take place, which would mean jobs and revenue for the municipality.

Regardless, your scenario gets a little extreme. Ontario has a minimum wage just north of \$10 an hour. We have vacancy in rental units, nor has there been an incredible increase in rental rates.

Should be noted that we have quite a condo boom going on.

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>Or new development would take place, which would mean jobs and revenue for the
>municipality.

Which would mean more demand for housing - which would mean further increases in the price of housing.

Many economic "quick fixes" don't work because you can't change just one thing and expect to have only that part of the economy change. We've learned this with respect to tariffs, minimum wage, taxes, deficit spending, tax credits etc. All of those things were intended to solve one problem but had effects far beyond that one issue.

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Which would mean more demand for housing - which would mean further increases in the price of housing.

And more supply, so no increase in price of housing. You are also assuming no unemployment.

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>And more supply, so no increase in price of housing.

Supply greatly lags demand in real estate (due to construction times) and in city centers real estate is inelastic. There is often no more supply to be had. Such confounding factors are another problem with the "quick and simple" economic fix.

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From a very low base. This extra income, unlike tax cuts for the rich, will also be spent to give an immediate boost to the economy.

Not such a low base if you have 500 people working for you. Now we are talking over a million dollars, and that is not even taking overtime into account.

The current minimum wage is set low. Hence why people have had to go into so much debt just to stay afloat. A million dollars in wages going into the economy sounds good to me.

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What the hell are minimum wagers doing with credit cards??!! The minimum wagers created their issues, not the level that minimum wage is set.

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What the hell are minimum wagers doing with credit cards??!! The minimum wagers created their issues, not the level that minimum wage is set.

The value of the minimum wage has been going steadily downwards for decades. If work won't pay the bills - then debt is the only answer. Until the system crashes.

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Almost 80pc of British business leaders feel that senior executives are paid too much, according to Grant Thornton. On an international level, 66pc reflected this sentiment, the survey of 2,800 businesses in 40 countries found.

The survey also showed that two-thirds (67pc) of business leaders want shareholders to have a greater say on pay packages for senior executives.

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From a very low base. This extra income, unlike tax cuts for the rich, will also be spent to give an immediate boost to the economy.

Not such a low base if you have 500 people working for you. Now we are talking over a million dollars, and that is not even taking overtime into account.

The current minimum wage is set low. Hence why people have had to go into so much debt just to stay afloat. A million dollars in wages going into the economy sounds good to me.

We are losing sight that "Minimum Wage" is not meant as a sole source for life's needs wage. It is an entry level pay scale, for high schooler's, as a supplemental source income for retirees, or one of several jobs.

The mind set of this one minimum wage job is how I will pay for all is wrong. The mind set of work to improve yourself and MOVE UP in the pay scale and better support yourself with one job, is correct.

Matt
An Instructors first concern is student safety.
So, start being safe, first!!!

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> If work won't pay the bills - then debt is the only answer.

This attitude is why we are in so much trouble here.

If work won't pay the bills - suspend your cable service. Sell your car and buy a bike. Get a cheaper apartment. Get a roommate. Move back in with your parents. Stock up on Ramen noodles and powdered orange juice. Stop eating out. Get a better job. Get a second job. Go to a community college so you _can_ get a better job.

The idea that your only option when you're not making enough money is to take out a loan to be able to afford your cellphone, cable and credit card bills is nonsense.

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> If work won't pay the bills - then debt is the only answer.

This attitude is why we are in so much trouble here.

If work won't pay the bills - suspend your cable service. Sell your car and buy a bike. Get a cheaper apartment. Get a roommate. Move back in with your parents. Stock up on Ramen noodles and powdered orange juice. Stop eating out. Get a better job. Get a second job. Go to a community college so you _can_ get a better job.

The idea that your only option when you're not making enough money is to take out a loan to be able to afford your cellphone, cable and credit card bills is nonsense.

More people need to learn this, then apply it!
At all levels!

Matt
An Instructors first concern is student safety.
So, start being safe, first!!!

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> If work won't pay the bills - then debt is the only answer.

This attitude is why we are in so much trouble here.

If work won't pay the bills - suspend your cable service. Sell your car and buy a bike. Get a cheaper apartment. Get a roommate. Move back in with your parents. Stock up on Ramen noodles and powdered orange juice. Stop eating out. Get a better job. Get a second job. Go to a community college so you _can_ get a better job.

The idea that your only option when you're not making enough money is to take out a loan to be able to afford your cellphone, cable and credit card bills is nonsense.

They should eat cake - fine we get where you're coming from.

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>They should eat cake

Only if it's cheap! Living within your means is a skill some people never learn (unfortunately.)

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From a very low base. This extra income, unlike tax cuts for the rich, will also be spent to give an immediate boost to the economy.

Not such a low base if you have 500 people working for you. Now we are talking over a million dollars, and that is not even taking overtime into account.

The current minimum wage is set low. Hence why people have had to go into so much debt just to stay afloat. A million dollars in wages going into the economy sounds good to me.

We are losing sight that "Minimum Wage" is not meant as a sole source for life's needs wage. It is an entry level pay scale, for high schooler's, as a supplemental source income for retirees, or one of several jobs.

The mind set of this one minimum wage job is how I will pay for all is wrong. The mind set of work to improve yourself and MOVE UP in the pay scale and better support yourself with one job, is correct.

Matt

No recognition that the minimum wage is too low in value?

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>They should eat cake

Only if it's cheap! Living within your means is a skill some people never learn (unfortunately.)

Especially the rich (who always have to have more..and more)

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>Especially the rich (who always have to have more..and more)

Both the rich and the poor want more and more. The rich can afford it. Generally the poor can't. A good way to have more and more is to make more money. Going into debt is a poor way to be able to buy lots of stuff.

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Not for what it is intended for.

It is not a "Living" wage, it is a "minimum", and it is pretty decent when applied as intended.

If minimum wage is too low for those individuals, do like Bill pointed out, work harder, get the raise, get the education, make yourself worth more for, more pay.

Matt
An Instructors first concern is student safety.
So, start being safe, first!!!

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>Especially the rich (who always have to have more..and more)

Both the rich and the poor want more and more. The rich can afford it. Generally the poor can't. A good way to have more and more is to make more money. Going into debt is a poor way to be able to buy lots of stuff.

If work won't pay the bills then debt is the only other option. I assume you think it's ok to go into debt to pay for a professional qualification? Or a mortgage, or a new business?

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Not for what it is intended for.

It is not a "Living" wage, it is a "minimum", and it is pretty decent when applied as intended.

If minimum wage is too low for those individuals, do like Bill pointed out, work harder, get the raise, get the education, make yourself worth more for, more pay.

Matt

Still no recognition that the minimum wage is set too low.

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In 1980, the average US CEO was paid 42 times as much as the average worker when tax rates for the richest stood at 70%. Today, that ratio has widened to 380 times – exacerbated in part, no doubt, by the fact that CEOs are able to dramatically reduce their tax burdens by a reduction in top tax rates, as well as several new loopholes introduced in recent years.

In fact, some companies paid their CEOs more money than they paid in taxes. Take Aubrey McClendon, CEO of Oklahoma-based Chesapeake Energy, who was paid \$17.9m in 2011, while his company gave Uncle Sam just \$13m on sales of \$11.64bn.

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>If work won't pay the bills then debt is the only other option.

No, spending less is the other option. A minimum wage earner might not be able to afford the cool condo; he may have to share an apartment with someone else. He might not be able to afford cable. He might not even be able to afford (gasp!) an Iphone!

I spent two years of my life with almost no money to my name. During the summer I'd live on a diet of orange juice and peanuts; they were cheap at the local Cambridge grocery. For fun I'd talk to people and ride around on my bike.

I never thought about going into debt to be able to afford cable TV or a nicer place to live or fancy food. That is CERTAINLY not the only other option.

>I assume you think it's ok to go into debt to pay for a professional qualification?

If you have a plan to be able to pay it back - yes, that might be a wise decision.

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