Mythology Of The Australian Minimum Wage

[AmazonTania]

This comparison is going to be fun, because unlike American Samoa, Australia actually releases their own statistics regularly. The favourite example of minimum wage proponents: Australia. After all, it currently has the world's highest minimum wage and one of the strongest economies in the world. But is all of this attributed to the minimum wage? Let's find out.

Unlike before, I do plan on comparing Australia to a few OECD nations, mostly the United States. I do plan on using graphs provided to me by the Federal Reserve Economic Database, which collects and archives economic data from all over the world. I also plan on retrieving Australian data from the Reserve Bank of Australia (RBA). Most of all, I plan on comparing the Australian and US minimum wage by looking at the following economic factors: Unemployment, Characteristics of Minimum Wage Employees, Standards of Living, Cost of Living,

Minimum Wage:

So, it doesn't take a genius to know that the minimum wage in Australia is $16.88 and the minimum wage in the United States is $7.25.


http://www.washingtonpost.com/blogs/wonkblog/files/2013/08/minimum_wages_around_world.png


Unemployment:

The greatest argument minimum wage proponents have for an even higher minimum wage are the minimal effects of unemployment. In fact, proponents argue that a higher minimum wage decreases unemployment overall. Comparing both the United States and Australia, you will find that Australia has an unemployment rate of 5.8 (Australian Bureau of Statistics, 2013 (http://www.abs.gov.au/ausstats/abs@.nsf/mf/6202.0)) while the United States has an unemployment rate of 7.3% (Bureau Labour of Statistics, 2013).



United States
Australia


7.3%
5.8%



Australia's unemployment rate is lower so clearly the market is able to handle it's minimum wage, correct? Well, you won't be able to tell very much by looking at the unemployment rate for one particular month alone. You'll have a greater idea of what you are looking at by reviewing the data in a trend. While it is true that the unemployment rates of both nations has experienced a slight uptight from September to October, contrary to what has been happening in Australia, the unemployment rate in the United States is on a downward trend (Trading Economics: Australia (http://www.tradingeconomics.com/australia/unemployment-rate)/United States (http://www.tradingeconomics.com/united-states/unemployment-rate), 2013)


http://img547.imageshack.us/img547/4606/3tpu.png


Obviously, the trend can't tell the entire story. Just because the unemployment rate is increasing doesn't that people are losing their jobs. Perhaps the Australian unemployment rate is increasing because more people are entering the labour force. Well, the unemployment rate also increases when people lose their jobs. (Unemployment Rate = Unemployed Persons / Total Labour Force * 100). According to the Australian Bureau of Statistics, there is a sharp upward trend in the amount of people losing their jobs. Contrast that to the United States, where the number of unemployed is declining (Trading Economies: Australia (http://www.tradingeconomics.com/australia/unemployed-persons)/United States (http://www.tradingeconomics.com/united-states/unemployed-persons)).



http://img713.imageshack.us/img713/3028/a6w0.png
But what about the Youth unemployment rate? It's a common point that the minimum wage effects those with the least experienced among us. Namely: The Youth. How does the youth unemployment in the United States compare with the youth unemployment in Australia? According to the Australian Bureau of Statistics, the youth unemployment in the region is 13%, while the youth unemployment rate in the United States is 15.6% (Bureau Labour of Statistics, 2013 (http://www.bls.gov/web/empsit/cpseea13.htm)).





United States
Australia


15.6%
13%




If you dig deeper for the information, you'll find that both the US and Australia has experienced a sharp upward movement in unemployment during 2008 with a slight leveling off in-between 2008 and 2010. However, since 2010, the United States youth unemployment rate has slightly improved, while the unemployment rate for youth in Australia has been on the upward trend (Trading Economies: Australia (http://www.tradingeconomics.com/australia/youth-unemployment-rate)/United States (http://www.tradingeconomics.com/united-states/youth-unemployment-rate))


http://img24.imageshack.us/img24/8340/viwd.png


Unemployment is one typical measurement of minimum wage effect in the overall economy. It's evident that the minimum wage does have adverse effects on unemployment. The evidence shows that the United States is currently experiencing a downward trend in unemployment, while Australia is currently experiencing an upward trend in unemployment.

Characteristics of the Minimum Wage



The most important aspect of researching about the minimum wage is who actually earns the minimum wage. We all know that the minimum wage is generally designed for inexperienced, low skilled workers, but who actually makes a living at this wage.

United States:

According to the Bureau Labour of Statistics, there were a total of 75,276 thousand workers earning wages in 2012. Among those 75,276 million people, a total of 3,550 thousand workers earned either "At or Below the minimum wage." 3,550 thousand workers or 4.7% of all hourly paid workers. Basically, out of everyone who earns a wage, only 4.7% earns wages either at or below the minimum wage (BLS Characteristics of the Minimum Wage, 2012 (http://www.bls.gov/cps/minwage2012tbls.htm#1)).

Among the 3,550 thousand workers, you'll find that more than half (50.6%) of all workers who earn the minimum wage are the ages between 16 to 24. This accounts for 1,797 thousand people among wage earners. The 49.4% of people (1,753 thousand) are ages 25 and older. So, running the numbers, we find that 4.7% of all wage earners make a living either at or below the minimum wage. 50.6% of that 4.7% are between the ages of 16 and 24, while the rest are 25 and older.

Australia:

According to the OECD, there were 8,986 thousand workers earning wages in 2010. Among these 8,986, about 1,180,818 people earned the Federal Minimum Wage in Australia. 1,180,818 or 13.5% of all hourly paid workers in Australia (Estimated number of adults in receipt of the minimum wage, SIH, HILDA and EEH, 2010 (http://www.oecd.org/els/emp/Bray%20Minimum%20Wage%20-%20%20working%20paper%20version.pdf)).

And breaking down the number of people who earn the federal minimum wage, an estimated 85,000 people who work Full-Time earn the minimum wage between the ages of 21 - 24. 85,000 or 27.9% of all wage earners. Part-time consist of an estimated 93,000 (16.8%). Apparently the older you grow, the more likely you are to keep the wages you've earned. An estimated 97,000 Part-time workers between the ages of 25 - 35 earn the minimum wage (22.3% of all minimum wage workers), while an estimated 77,000 Full-Time workers within the same age group earn the minimum wage (4.8%). Ages 35 - 44 has the lowest minimum wage demographic, as the number of Full-Time workers earning this rate is 44,000 (2.8% of all minimum wage workers), while part-time workers consist of an estimated 98,000 within the same age group (17.5%). You'd probably have to do nothing short of retire to escape the minimum wage in Australia, as about 33,000 estimated workers are earning the minimum wage as part-time employees over the age of 65 (nearly 30% of all part-time employees earn the minimum wage over the age of 65%).

Now I can compare these statistics by age, industry, jobs and gender, and I'm sure some of you would love that, but I want to keep this simple. The older you are, the more likely you are to make more money. This is true in both cultures. But it is evident that you are less likely to earn the minimum wage the older you become.




United States
Australia


Total Paid Hourly
75,276
1,180


21 - 24
8.7%
15.2%


25 - 34
4.2%
15.3%


35 - 44
2.7%
11.9%


45 - 54
2.4%
13.3%


55 - 64
1.8%
6.5%


65 +
2.9%
3.3%



The divergence is at the retirement age, but the trends are pretty clear. In America, the more experienced you are and the more skills you acquire, the more money you will earn.

[AmazonTania]

Standards of Living:

How does the standards of living compare? The universal metric of living standards among economist has always been GDP per Capita (International Monetary Fund, 2013 (http://www.imf.org/external/pubs/ft/weo/2013/02/weodata/weorept.aspx?sy=2012&ey=2012&ssd=1&sort=country&ds=.&br=1&pr1.x=16&pr1.y=7&c=512%2C668%2C914%2C672%2C612%2C946%2C614%2C137%2C 311%2C962%2C213%2C674%2C911%2C676%2C193%2C548%2C12 2%2C556%2C912%2C678%2C313%2C181%2C419%2C867%2C513% 2C682%2C316%2C684%2C913%2C273%2C124%2C868%2C339%2C 921%2C638%2C948%2C514%2C943%2C218%2C686%2C963%2C68 8%2C616%2C518%2C223%2C728%2C516%2C558%2C918%2C138% 2C748%2C196%2C618%2C278%2C522%2C692%2C622%2C694%2C 156%2C142%2C624%2C449%2C626%2C564%2C628%2C565%2C22 8%2C283%2C924%2C853%2C233%2C288%2C632%2C293%2C636% 2C566%2C634%2C964%2C238%2C182%2C662%2C453%2C960%2C 968%2C423%2C922%2C935%2C714%2C128%2C862%2C611%2C13 5%2C321%2C716%2C243%2C456%2C248%2C722%2C469%2C942% 2C253%2C718%2C642%2C724%2C643%2C576%2C939%2C936%2C 644%2C961%2C819%2C813%2C172%2C199%2C132%2C733%2C64 6%2C184%2C648%2C524%2C915%2C361%2C134%2C362%2C652% 2C364%2C174%2C732%2C328%2C366%2C258%2C734%2C656%2C 144%2C654%2C146%2C336%2C463%2C263%2C528%2C268%2C92 3%2C532%2C738%2C944%2C578%2C176%2C537%2C534%2C742% 2C536%2C866%2C429%2C369%2C433%2C744%2C178%2C186%2C 436%2C925%2C136%2C869%2C343%2C746%2C158%2C926%2C43 9%2C466%2C916%2C112%2C664%2C111%2C826%2C298%2C542% 2C927%2C967%2C846%2C443%2C299%2C917%2C582%2C544%2C 474%2C941%2C754%2C446%2C698%2C666&s=PPPPC&grp=0&a=)):



United States GDP per Capita
Australia GPP per Capita


$51,703
$41,954



Nearly $10,000 higher than Australia, but GDP per Capita is not a measure of personal income, but we can compare personal income by comparing complete disposable income (Total Personal Average Income - International Comparison, 2012 (http://www.worldsalaries.org/total-personal-income.shtml))



Personal Income
United States
Australia


Gross
23,484
17,924


Disposable
19,776
14,185



More statistics and information from the OECD, the average household net-adjusted disposable income is $38,000 a year, which is higher than the OECD average of $23,047. Also compare that to Australia with a net-adjusted disposable income of $28,884. While the Gini Coeffienct of the World Bank shows that the United States has much greater income inequality than Australia (World Bank, 2012 (http://data.worldbank.org/indicator/SI.POV.GINI/)), the differences between the rich and poor are rather moot. In the United States the Top 20% of the population earns more than 8 times than the bottom 20%, while the Top 20% in Australia earns more than 6 times of the bottom 20% (OECD Better Life Index, 2012 (http://www.oecdbetterlifeindex.org)).

Cost of Living:

A common argument of minimum wage proponents is that the Minimum Wage should match the cost of living. It's often argued that the minimum wage doesn't quite match the cost of living. Can the same be said in Australia? The simple answer to that is no.

For starters, there have been many reports that have outlined that Australia is the most expensive place to live in the industrialised world. More expensive than the United States, more expensive than the United Kingdom, even more expensive than Hong Kong (That's quite an accomplishment), depending upon what you are measuring. According to the Economist, Australia is the most expensive place to purchase a home (which makes sense considering it's currently experiencing a housing bubble) (The Economist, 2013 (http://www.economist.com/blogs/dailychart/2011/11/global-house-prices)). It's ranked fourth in the most expensive place to purchase food according to the Groceries Index and the Restaurant Price Index (Numbeo, 2013 (http://www.numbeo.com/cost-of-living/rankings_by_country.jsp)). Just in case you are wondering, this is not considered a good thing. Even when using the CPI, the annualised growth rate in the amount of food is off the charts (FRED, 2013 (http://research.stlouisfed.org/fred2/graph/?g=oAa))


http://research.stlouisfed.org/fredgraph.png?g=oAa

Australia (Bold) has had a 50% increase in the price of Food since 2000, while the United States has only experienced a 44% increase in it's food, according to the CPI. But this goes to show that you cannot take the minimum wage at face value without putting the minimum wage into perspective. This is done by measuring the minimum wage Purchasing Power Parity (PPP). According to the OECD, the real minimum wage of Australia is $9.80, which is $7 whole dollars lower than the Federal Minimum Wage in Australia (OECD, 2013 (http://stats.oecd.org)). In simple terms, the Aussie Dollar is $7 dollars overvalued.

Summary:

A couple of things you can learn from reading this in relation to the minimum wage effect on the economy:

1. The Australian Unemployment Rate is trending upward, while the US unemployment rate is trending down.
2. Unemployed Persons are growing in Australian, while unemployed persons in the US are shrinking.
3. Youth Unemployment is also trending upward in Australia.
4. 5% of all hourly wage workers earn the minimum wage in the United States. Contrast this to 13.7% in Australia.
5. More experienced workers earn the minimum wage in Australia than the United States.
6. GDP per Capita as well as Disposable Income per Capita is higher in the US, despite having lower minimum wages.
7. Net-Adjusted Household Disposable Income is $15,000 + higher than the OECD average and 10,000 higher than in Australia.
8. The Cost of Living is higher in Australia... Period.

Clearly, when you compare the fundamentals, the minimum wage isn't everything. Australia has one of the strongest economies in the world and a very business friendly environment (compared to the United States anyway), with relatively Free Trade. There are many things which makes the economy great, but the minimum wage isn't one of them.

If you have questions, comments or concerns, feel free to address them. There are many other nations I'd like to address while I'm still doing this series on minimum wage comparisons.

[del]

it's hard to take someone seriously who has a lie for a sig file.

carry on

[AmazonTania]

If I wanted to be taken seriously, I wouldn't be here.

Carry on.

[del]

If I wanted to be taken seriously, I wouldn't be here.

it's good to have a goal

[AmazonTania]

it's good to have a goal

Most of which I have accomplished. I'm here for fun (mostly). If you go around taking other random people you've never met seriously, then reevaluate yourself.

[del]

Most of which I have accomplished. I'm here for fun (mostly). If you go around taking other random people you've never met seriously, then reevaluate yourself.

if i went around taking advice from random plagiarists on the interweb, i'd certainly consider a reevaluation.

[AmazonTania]

if i went around taking advice from random plagiarists on the interweb, i'd certainly consider a reevaluation.

You can't afford my advice, but wishful thinking for me if you could...

I see that your friends with Jillian. I was wondering why you don't understand what plagiarism is... Having this many morons who personally know one another all in the same forum. Hm, small world indeed...

[Chris]

Well done.


"The greatest argument minimum wage proponents have for an even higher minimum wage are the minimal effects of unemployment. In fact, proponents argue that a higher minimum wage decreases unemployment overall. "

That great argument for min wage is actually a straw man. Raising min wage doesn't directly reduce employment, iow, doesn't result in aome being laid off. The effect is more indirect in that raising the min wage makes entry into low skill work force more difficult.

This doesn't change the argument. The negative effect has been demonstrated.

It will be interesting to see if any serious counterarguments are raised.

[AmazonTania]

Wanted to post this as well, but it was too hard for the post. So instead I just gather the information from the OECD website.

But it's a good counter claim to use.


http://img59.imageshack.us/img59/281/6mq0.png

[del]

You can't afford my advice, but wishful thinking for me if you could...

I see that your friends with Jillian. I was wondering why you don't understand what plagiarism is... Having this many morons who personally know one another all in the same forum. Hm, small world indeed...

i can afford what your advice is worth; i just don't want it.

i'll bet you wonder about a lot of things that others take for granted.

[Codename Section]

Did you bother to read the rules about good faith posting? It's where you don't show up in threads for the sole purpose of being annoying. She put together a lot of work. If you don't agree with it, fine. Point out why. Insulting her is just being a dick and useless, imo.

Carry on.

[AmazonTania]

Trolls have to find some way to validate their useless existence.

[Terminal Lance]

Thank you for putting it together. I'm going to print it out.

[AmazonTania]

i can afford what your advice is worth; i just don't want it.

i'll bet you wonder about a lot of things that others take for granted.

Nope. Not really...

[Terminal Lance]

I am not against people making money. I like making money. I hate the fact that I make shit until I get that DD214. Just wages and food/housing are attached at the hip. If you raise wages you raise food prices. What's the point of the increase?

Why don't we consider trying to make our money less inflated?

[Codename Section]

I am not against people making money. I like making money. I hate the fact that I make shit until I get that DD214. Just wages and food/housing are attached at the hip. If you raise wages you raise food prices. What's the point of the increase?

Why don't we consider trying to make our money less inflated?

You'll make money in a few weeks. Brainy dog's got something worked out for you.

[AmazonTania]

I am not against people making money. I like making money. I hate the fact that I make shit until I get that DD214. Just wages and food/housing are attached at the hip. If you raise wages you raise food prices. What's the point of the increase?

Why don't we consider trying to make our money less inflated?

People should understand that raising the minimum wage IS inflation. It's called Cost-Push Inflation. Australia has had many adaptations in their minimum wage laws. One in 2007, 2008, 2010, 2011, 2012 and 2013, and each and every year, the cost of living has increased. This around the same time the Reserve Bank of Australia has adopted a policy of tight money (tighter than the rest of the world, anyway). Currently, there is no monetary inflation in Australia, but there is plenty of Cost-Push Inflation. It's why the Aussie minimum wage is worth 9.80 PPP, despite the fact that the minimum is $16.88.

[Germanicus]

Fuzzy trace is your problem. Or something.

Australia is a continent that is rich in resources and unlike USA we actually exploit them. We have a small population.

Talking about min wage is silly unless you take into consideration exchange rates.

But yeah, Australia has a high min wage, low unemployment and a strong economy.

Our workers have more spending power since the GFC. The GFC was actually good for us because we live near China.

[Mr Happy]

Interesting take on the minimum wage. The standard of living and GDP etc are interesting. I remember talking to an economist about this - quite some time ago, so things might have changed, but he said the reason that the US GDP per capita was more due to the multi-millionaires bringing the average up, than it being a true reflection of what the real deal is for Joe Average in the US. IOW, you take Bill Gates, Mark Zuckerberg, Warren Buffet, The Waltons etc out of the US economy and see the the average GPD drop markedly.

I would rather be poor in Australia than the US....

[patrickt]

it's good to have a goal

Have you considered one. Responding to the thread clearly isn't a goal for you. Perhaps developing a sense of humor?

I found the OP, both parts, interesting. Statistics can mean a host of things and sometimes all of them are less than honest.

I wonder if the declining percentage working at minimum wage in the U.S. is due to workers moving up in the wage scale or workers learning they can do better than minimum wage without working?

I tend to think I fit the traditional model in that I started working--with no significant job skills--and moved from job to job improving my lot. But, that was before alternatives to working such as SSI.

[kilgram]

You can't afford my advice, but wishful thinking for me if you could...

I see that your friends with Jillian. I was wondering why you don't understand what plagiarism is... Having this many morons who personally know one another all in the same forum. Hm, small world indeed...
This article is yours?

[Chris]

Interesting take on the minimum wage. The standard of living and GDP etc are interesting. I remember talking to an economist about this - quite some time ago, so things might have changed, but he said the reason that the US GDP per capita was more due to the multi-millionaires bringing the average up, than it being a true reflection of what the real deal is for Joe Average in the US. IOW, you take Bill Gates, Mark Zuckerberg, Warren Buffet, The Waltons etc out of the US economy and see the the average GPD drop markedly.

I would rather be poor in Australia than the US....


I find it difficult to imagine there are no rich Australians, but perhaps you could gather some data to demonstrate this factor in the equation. I doubt amazon as an economist would reject the notion there are many factors affecting this, more than those analyzed.

[oceanloverOH]

AmazonTania, violation of posting rule #7: You must provide a link when quoting an article and follow fair use guidelines. We noted that several hyperlinks are embedded in the piece, internal hyperlinks that the author included. But you should also include the link(s) to the website(s) of where you got the info. .

[Mr Happy]

Where does AT's talking start and the plagerism, er, linked stuff, start?? Anybody?

[Mr Happy]

I find it difficult to imagine there are no rich Australians, but perhaps you could gather some data to demonstrate this factor in the equation. I doubt amazon as an economist would reject the notion there are many factors affecting this, more than those analyzed.

There are rich Australians, just not on the scale of the US...You're economy is measured in the 10s of trillions. Ours is hundreds of billions at most..

You have 422 billionaires. We have 18. I think Bill Gates alone is worth about the top four of ours combined..

http://en.wikipedia.org/wiki/List_of_countries_by_the_number_of_US_dollar_billi onaires

[Chris]

Where does AT's talking start and the plagerism, er, linked stuff, start?? Anybody?

It's all hers.

[Chris]

There are rich Australians, just not on the scale of the US...You're economy is measured in the 10s of trillions. Ours is hundreds of billions at most..

You have 422 billionaires. We have 18. I think Bill Gates alone is worth about the top four of ours combined..

http://en.wikipedia.org/wiki/List_of_countries_by_the_number_of_US_dollar_billi onaires

Smaller population as well, by amazon's statistics.

[BB-35]

Where does AT's talking start and the plagerism, er, linked stuff, start?? Anybody?

When did she claim the material as her own?

[bladimz]

I'm no economist, and i don't pretend to understand all of the factors that are used to determine the relative economic strength of one country to another, but...
Australia's economy remains the envy of the developed world

Despite the predictable claims to the contrary, the performance of the Australian economy over the last 20 years has been rock solid, and continues to be outstanding in the face of ongoing global volatility. These are facts readily accepted by the IMF, the OECD and most credible private sector economists, but ignored by those with vested interests and parts of the press.

The facts are these. In global terms, there can be no clearer display of strength and resilience than the incredible 22 consecutive years of growth we have achieved. The incredible resilience of our economy has been confirmed yet again in the recently published 2013 June quarter National Accounts showing GDP growth of 2.6%, a little below trend for the 2012-2013 financial year.

It's probably fair to say that Australians have been less aware of our economic strength than the rest of the world, but this isn’t their fault. It lies in the refusal of a faction of those who lead and influence debate to deal with hard facts, and who instead are constantly looking to talk the joint down and erode confidence...

===============================================

...Australians have not been feckless in their experience of the terms of trade increases over the last 10 years; they have saved an enormous amount of income from the boom. In just the March quarter alone, net saving by Australian households was a massive $44bn of their disposable income. That's the highest quarterly household savings total in our history. It's four times as much as households saved in net terms a decade ago, when the terms of trade boom began. The combination we’ve seen of high savings and high investment reassures me that we are not wasting our good fortune – and to suggest so is incorrect. Australians are saving and investing like never before.

It's also not the first time I've seen the myth that Australia’s recession-beating performance came largely from riding China’s coattails. This couldn’t be further from the truth. In their authoritative post-crisis analysis, Australian treasury officials Steve Morling and Tony McDonald concluded that "a combination of factors explain the extraordinary resilience of the Australian economy" during the global financial crisis.
http://www.theguardian.com/commentisfree/2013/oct/04/australia-economy-laborI especially like the (implied) comparison of household savings from one country to the other.

[Chris]

I'm no economist, and i don't pretend to understand all of the factors that are used to determine the relative economic strength of one country to another, but...I especially like the (implied) comparison of household savings from one country to the other.



I think amazon's analysis was focused on the myth of high minimum wages and showed it had a negative effect on jobs, that despite Australia weathering recession.

I will not that your source simply dismisses criticisms of Australian growth as coming from vested interests while he brags about the job he did as Treasurer.

[bladimz]

To me the important thing is the bottom line: Australia has a stronger economy than the US. The idea that a higher minimum wage is a negative is questionable. Maybe the fact that they enjoy a higher minimum wage is the reason why australian household savings are substantially higher.

[Chris]

To me the important thing is the bottom line: Australia has a stronger economy than the US. The idea that a higher minimum wage is a negative is questionable. Maybe the fact that they enjoy a higher minimum wage is the reason why australian household savings are substantially higher.

How is it questionable?


" Maybe the fact that they enjoy a higher minimum wage is the reason why australian household savings are substantially higher."

That's what amazon debunked. So far no one has provided a counter argument. Other factors have been raised--sure, there are other factors. But none of those address minimum wage and it's effects.

[bladimz]

The counter argument:


A $10.10 minimum wage would give economy (and more low-wage workers) a bigger boost

Raising the minimum wage as a tool for economic growth

The immediate benefits of a minimum-wage increase are in the boosted earnings of the lowest-paid workers, but its positive effects would far exceed this extra income. Recent research reveals that, despite skeptics’ claims, raising the minimum wage does not cause job loss. In fact, throughout the nation, minimum-wage increases would create jobs. Like unemployment insurance benefits or tax breaks for low- and middle-income workers, raising the minimum wage puts more money in the pockets of working families when they need it most, thereby augmenting their spending power.

Increasing the federal minimum wage to $10.10 by July 1, 2015, would give an additional $51.5 billion over the phase-in period to affected workers, who would, in turn, spend those extra earnings.

This projected rise in consumer spending is critical to any recovery, especially when weak consumer demand is one of the most significant factors holding back new hiring. Though the stimulus from a minimum-wage increase is smaller than the boost created by, for example, unemployment insurance benefits, it is still substantial—and has the crucial advantage of not imposing significant costs on government.

Using standard fiscal multipliers to analyze the jobs impact of an increase in compensation of low-wage workers and decrease in corporate profits that result from a minimum-wage increase, we find that increasing the national minimum wage from $7.25 to $10.10 per hour by July 1, 2015, would result in a net increase in economic activity of approximately $32.6 billion over the phase-in period and would generate approximately 140,000 new jobs. Though the resulting employment impact is modest in the context of the millions of workers currently unemployed nationwide, creating tens of thousands of jobs would be a step in the right direction.
http://www.epi.org/blog/10-10-minimum-wage-give-economy-wage-workers/#sthash.rpqJ0bEX.dpuf

No charts in this excerpt, and my post isn't a mile long, but there are plenty of supporting charts in the article itself.

This serves as a ligit counter-argument.

[Chris]

The counter argument:



No charts in this excerpt, and my post isn't a mile long, but there are plenty of supporting charts in the article itself.

This serves as a ligit counter-argument.



Very Keynesian, nice in theory, but doesn't look at unintended consequences counteracting any gains like how higher min wages makes it more difficult for younger and lower skilled people to enter the work force. It also fails to consider that the wealth thereby redistributed would have been invested elsewhere to create new companies and capital whereby jobs are created.

They make the same assumptions Keynes did about the multiplier effect:


Using standard fiscal multipliers to analyze the jobs impact of an increase in compensation of low-wage workers and decrease in corporate profits that result from a minimum-wage increase, we find that increasing the national minimum wage from $7.25 to $10.10 per hour by July 1, 2015, would result in a net increase in economic activity of approximately $32.6 billion over the phase-in period and would generate approximately 140,000 new jobs. - See more at: http://www.epi.org/blog/10-10-minimum-wage-give-economy-wage-workers/#sthash.rpqJ0bEX.veZ7ZCA2.dpuf

Where did Keynes come up with " standard fiscal multipliers"? He made it up. And if, as he did, and these authors do, you build into your model those multiplier assumptions, what do you expect to come out. In short, it's theoretical mumbo-jumbo to mask confirmation bias.

Think not? Where's their data demonstrating any multiplier effect? There is none, it's projections based on a model constructed to tell you what you want to hear.

[bladimz]

Where did Keynes come up with " standard fiscal multipliers"? He made it up. And if, as he did, and these authors do, you build into your model those multiplier assumptions, what do you expect to come out. In short, it's theoretical mumbo-jumbo to mask confirmation bias.

Think not? Where's their data demonstrating any multiplier effect? There is none, it's projections based on a model constructed to tell you what you want to hear.Well, according to some sources, you're incorrect: Keynes himself did not introduce the idea of the multiplier effect.


Fiscal multiplier

The existence of a multiplier effect was initially proposed by Keynes student Richard Kahn in 1930 and published in 1931.
(^ Snowdon, Brian; Vane, Howard R. (2005). Modern macroeconomics: its origins, development and current state. Edward Elgar. p. 61. ISBN 978-1-84542-208-0.)
http://en.wikipedia.org/wiki/Fiscal_multiplier#cite_note-1If you didn't get that one right, what am i to think about the rest of your post?

[Chris]

Well, according to some sources, you're incorrect: Keynes himself did not introduce the idea of the multiplier effect.

If you didn't get that one right, what am i to think about the rest of your post?

I could look it up but I believe Kahn was the first to model it, as I described above. It was a major point in all Keynes' arguments for government spending. The actual multiplier, made up out of whole cloth.

Nic has produced a study in which a multiplier effect was deduced, but not from actual data, only CBO projections.

Here's a discussion by two economists, one who has studied it: Ramey on Stimulus and Multipliers (http://www.econtalk.org/archives/2011/10/ramey_on_stimul.html).

[AmazonTania]

To me the important thing is the bottom line: Australia has a stronger economy than the US. The idea that a higher minimum wage is a negative is questionable.

What do you consider a 'stronger economy?' If you consider having a lower unemployment relative to the work force having a stronger economy, then that doesn't make sense. Australian unemployment is trending upward. If your definition of a stronger economy is stinger fundamentals, then that has little to do with the minimum wage.


Maybe the fact that they enjoy a higher minimum wage is the reason why australian household savings are substantially higher.

You don't save simply because you have more money to spend. You save to sacrifice present consumer for greater future consumption. In order for that to be possible, interest rates need to be higher. Interest rates in Australia was 4.25%. Now it's 2.5%. That's still higher than the interest rate in America, at 25 basis points.

Household savings rate in Australia is 10%. In America it's 4.9%.

[bladimz]

What do you consider a 'stronger economy?' If you consider having a lower unemployment relative to the work force having a stronger economy, then that doesn't make sense. Australian unemployment is trending upward. If your definition of a stronger economy is stinger fundamentals, then that has little to do with the minimum wage.Their unemployment is trending upward. Should that be a surprise with the state of the global economy as it is? Get real. It's more important to understand that those who are employed are employed at a more reasonable rate, not struggling so much as to require assistance from their government. Assistance that comes from the tax dollars collected from their population. Not only does the US have a higher unemployment rate, it also suffers the massive underemployment number of americans, many of which are young college grads. (see http://www.centerforcollegeaffordability.org/uploads/From_Wall_Street_to_Wal-Mart.pdf). This single fact is what's killing our economy. It's just that simple. Charts and graphs are a convoluted attempt to bury the truth.


You don't save simply because you have more money to spend. You save to sacrifice present consumer for greater future consumption. In order for that to be possible, interest rates need to be higher. Interest rates in Australia was 4.25%. Now it's 2.5%. That's still higher than the interest rate in America, at 25 basis points.

Household savings rate in Australia is 10%. In America it's 4.9%.The point is, the employed in Australia at least have the option of saving or spending. Too many of the employed in our country have neither of the two.

[Mainecoons]

The bigger problem with the Australian economy is that it is too dependent on exports of minerals to China.

I wonder how the employed in Australia would be doing if their government allowed a bunch of unskilled legal and illegal immigrants to flood their labor markets? You do know, don't you Blad, that your Democrats are pushing for even more of this and playing the demagogues with efforts to rein in same to help the American worker?

It is no accident that the Australian worker enjoys high protection from uncontrolled immigration and that this is most assuredly a factor in his/her greater bargaining power in the labor marketplace.

You liberal hypocrites can start whining about the lousy pay in America when you own up to your responsibility for being a primary cause of it through excessive immigration and all the shit you pile on employers that makes it costly to employ people and cheap to outsource or employ robots. Until then, STFU.

[bladimz]

The bigger problem with the Australian economy is that it is too dependent on exports of minerals to China.

I wonder how the employed in Australia would be doing if their government allowed a bunch of unskilled legal and illegal immigrants to flood their labor markets? You do know, don't you Blad, that your Democrats are pushing for even more of this and playing the demagogues with efforts to rein in same to help the American worker?

It is no accident that the Australian worker enjoys high protection from uncontrolled immigration and that this is most assuredly a factor in his/her greater bargaining power in the labor marketplace.

You liberal hypocrites can start whining about the lousy pay in America when you own up to your responsibility for being a primary cause of it through excessive immigration and all the shit you pile on employers that makes it costly to employ people and cheap to outsource or employ robots. Until then, STFU.
Oh, Ok. So it's my fault. You opened my eyes, Maine...

Except we're talking about the positive impact that a higher minimum wage has on the economy of their people and of their country, right? You can prattle on about a million other factors that impact our economy(s), but for some reason, you don't want to discuss the worth of a higher minimum wage.

Oh, and by the way, the immigration numbers these days are a net zero. You should try to keep up.
http://goo.gl/Wvs6bF

[The Sage of Main Street]

Now the dumb jock bullies who run our corporations and can't make a profit without cheating the people who do the real work will move everything to Sierra Leone.

[AmazonTania]

Their unemployment is trending upward. Should that be a surprise with the state of the global economy as it is? Get real. It's more important to understand that those who are employed are employed at a more reasonable rate, not struggling so much as to require assistance from their government.

Why would that be important? Your income is determined based on your productivity, not by your employment status. Considering that the mean poverty rate (poverty rate before taxes, 50% below poverty line) of Australia is .273 and the United States is .284, it makes you wonder why there should be such a small gap between the two nations, especially if there is a $9 gap between the minimum wage?


Assistance that comes from the tax dollars collected from their population. Not only does the US have a higher unemployment rate, it also suffers the massive underemployment number of americans, many of which are young college grads. (see http://www.centerforcollegeaffordability.org/uploads/From_Wall_Street_to_Wal-Mart.pdf). This single fact is what's killing our economy. It's just that simple. Charts and graphs are a convoluted attempt to bury the truth.

Why are so many people underemployed?


The point is, the employed in Australia at least have the option of saving or spending. Too many of the employed in our country have neither of the two.

Savings = DPI (Disposable Income) = PI (Personal Income) - T (Taxes). Everyone has the option of saving and spending. There is no short fall of consumer spending, only savings. Maybe you should really explain why anyone in the country should save with an interest rate of 25 bps and an inflation target of 2% annualised. You're better off taking your money out of savings and putting it in the stock market. Everyone else in the nation seems to have caught on why there is no incentive to save. Why don't you?