50 dollar minimum wage

With the federal minimum wage unchanged for over a decade — and the value of that amount eroding while income inequality increases as the years go by — Allegretto says Biden’s plan is “long overdue.” TODAY spoke to economists about the most common rebuttals to a minimum wage hike — and why they might be misguided.

“There are a lot of other expenses when you run a business that have nothing to do with how many minimum wage workers you employ,” he said over Zoom. “For the typical restaurant, labor costs are only 20%-25% — minimum wage labor costs are even less than that. So when the minimum wage goes up, yes, you may need to raise prices a little bit, but you're going to raise them much less than the actual minimum wage increase.”

In other words, the degree to which Biden’s plan would help low-wage workers is exponentially greater than the degree to which it would damage consumers’ wallets.

Plus, Zipperer explained, the real problem is that inflation has already been happening. Over the past few years, businesses have had to respond to hikes in the cost of food, electricity and rent, to name a few. Wages, on the other hand, have remained stagnant, and it’s time that they’re brought up to speed.

Think of it this way: You’re running a McDonald’s selling 1,000 hamburgers a day. You make, say, 75 cents on each Big Mac costing $3.99. Will you raise its price by a nickel to $4.04 in order to make up for an increase in the minimum wage? That would be silly, because $4.04 is not an attractive number, and you’d lose too many sales as a consequence. Rather, you’d be satisfied with a lower profit margin on a Big Mac of 70 cents. But you notice that the Big Mac Meal is selling for $5.69; that gives you the opportunity to raise its price to the next attractive number of $5.75 in order to make up for the increased cost of labor. Will the demand for Big Mac Meals decline? It is doubtful that customers will even notice that tiny increase in price. Hence, Krueger concludes, “The net effect is basically no change in overall employment.” Profits might decline slightly, but not on every item. There are offsetting benefits as well: “decently paid workers tend to do a better job.”

So profits would not be in great jeopardy. Anyhow, the one thing this economy is good at is generating profits with most of it, of course, going to the top 1 percent. Corporate (after-tax) profits are currently ringing the cash register at $1.8 trillion. This equals about all wages and salaries earned by those employed in the manufacturing sector and in all government employment (state, local, federal) combined.

CEO compensation these days is roughly $7,000 an hour (that is, assuming a 40-hour workweek). In fact, CEO-to-average worker pay has increased by a factor of 15 from the 1960s ratio of 20 to 1 to the present whopping 300 to 1. But in some companies it is astronomical. At Chipotle the ratio is 1,522 to 1. Yes, you read it right. That is not a typo. In some firms, the CEO makes nearly 2,000 times as much as the average worker. At Walmart the ratio is 1,133. Do these CEOs deserve their millions? Not by a long shot. Take the CEO of Coca Cola company. He still pockets $25 million. His rival, the CEO of Pepsico writes a check to himself for $22 million. Yet, I have not heard any of the Republican presidential hopefuls suggest that these millions are hurting our exports. A pittance to the coolies hurts the economy, but the millions to their bosses are quite all right.