Asymmetrical Information

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Slightly off-topic, but related.

In my town I see bumper stickers that say, "A Living Wage Is A Moral Virtue." Never mind that the living wage is calculated for a decent lifestyle (cable TV, going out to eat a couple of times a month, owning a car, etc.). What strikes me about that bumper sticker is that it implies that anyone working at less than a living wage is immoral: although the bumper sticker is supposed to meand it is immoral for an employer to pay less than a living wage, it also says that it is immoral for a worker to work at less than a living wage.

There was one other option that you should consider in the case of that New Jersey minimum wage study.

There is the possibility that there were more positions available than people willing to work them. Employers had set the pay level for certain jobs to the "minimum wage" because that is all they felt the job was worth. With the increase in minimum wage, the job's pay was more in-line with what some workers were willing to work for.

A small jump in minimum wage rates would therefore cause a small increase in employment in some areas and a small decrease in others. I'd doubt that any increasing trend would carry along that far with rising minimum wages though.

As much as economists like to idealize the small-business owner, they sometimes aren't the brightest bulbs in the cinema marquee. The idea of the "minimum wage job" can affect the judgements and decisions of both employees and employers.

The minimum wage ultimately amounts to an income transfer from the poor to the lower middle class. I'd love to see the issue discussed as such. But no serious politician (well, serious about getting elected) is going to frame the issue that way.

There is the possibility that there were more positions available than people willing to work them. Employers had set the pay level for certain jobs to the "minimum wage" because that is all they felt the job was worth. With the increase in minimum wage, the job's pay was more in-line with what some workers were willing to work for.

I can't speak for New Jersey, but at the moment, here in Phoenix our unemployment rate is 3.7%.

That is FULL employment.

If you are a 15 year old school-kid, you can walk into any store/mall anywhere in Phoenix, and you will see a help wanted sign in the window. In fact, you can apply for a job in the morning and (more often than not) be working later on that afternoon or evening. The only time this doesn't happen (that being immediate employment), is if you are applying at a very large company that has very strict employment/hiring policies and they take control away from the store manager and give it to some corporate entity that operates above and in command of the store.

The majority of these jobs start at minimum wage. That is what the pay is. And since kids here get hefty allowance from parents (or they would rather sit on their @sses and play with their XBox than work for chump change) the jobs go unfilled, year round. Stores are then left with the unsavoury choices of raising the starting wage to attract these spoiled kids away from their XBoxes (not a good choice), gambling an investigation from INS and hiring an illegal Mexican who would be willing to do the work (also not a good choice), or, just not filling the job. So many of these jobs remain unfilled (and those who are willing to work are OVER worked) because kids can't be bothered to work for minimum wage, no matter what the wage is.

Incidently, Taco Bell is Scottsdale is hiring 15 year old kids at $10.50 an hour. That is starting wage. Inn-n-Out Burger (multiple locations in Phoenix) starts at $9.75 an hour, but many of the kids (who have some job experience) come in at $11.50 an hour.

And these places are hiring.

Why work for minimum, if you can get double that elsewhere?

xmas: "As much as economists like to idealize the small-business owner, they sometimes aren't the brightest bulbs in the cinema marquee."

What an insulting statement! How many small business owners do you know personally? I've been a small business owner for 15 years. I'd wager that both my intelligence and my business training are at least equal to yours. Many fellow business owners are retired corporate professionals and executives.

My guess is that most small business owners wouldn't waste their time trying to impress anyone having an attitude implied by your statement above. So you'll probably never realize just how wrong you are.

"As much as economists like to idealize the small-business owner, they sometimes aren't the brightest bulbs in the cinema marquee."

What an insulting statement! How many small business owners do you know personally? I've been a small business owner for 15 years. I'd wager that both my intelligence and my business training are at least equal to yours.

Well, he needs to know at least two business owners for his statement to be true, because his criticism was pretty muted. He just said that some small business owners aren't too bright.

Judging by your rush to be offended, your intelligence and acumen ought not to be immune from questioning.

And I'm pretty sure (for example) that all the dry cleaners within five minutes of my house are owned or operated by people of questionable intelligence, because almost every day I see someone trying to pick up or drop of his shirts at 7:20, only to find that every cleaner in the neighborhood keeps the exact same hours. If anyone stayed open until 8 PM, he would make a killing. He'd get at least $30/week in business from me alone, and I bet that there are at least 20 people just like me on my block.

As it stands now, I drop my clothes off in midtown, instead of on the UWS. I wish the UWS cleaners realized that by differentiating themselves on hours of service they could earn a lot of incremental business.

Bob Dobalina

I have often wondered the same thing myself. There are lots of things that I can't easily leave work to take care of;

dry cleaners
hair dressers
dentists
optometrists

which are usually only open around normal business hours. I usually work 8-7 or so, not crazy hours, and I can't really understand why more of the above folks aren't open later (say 4-midnight) who would be able to service people who work late.

They might have to pay higher wages to their workers, but it seems to me there would be a big market for such services.

Bob Dobalina,

After rereading xmas's post, I still cannot believe he was referring to one or two small business owners, but rather to a sizable portion of them. As a representative of small business owners, I remain insulted by his statement.

Owners of dry cleaners apparently have not responded to your particular desire for later service. That does not indicate they lack intelligence. It may be difficult to believe, but small business owners often make choices they know will limit revenues.

In the particular example you're citing, I doubt the dry cleaners industry as a whole is losing any money by closing at 7:00 PM. If one dry cleaners decided to stay open later, the rest would probably be forced to follow. In that case, total industry revenues would remain the same but total operating expenses would increase. Actually, the owners of all those dry cleaners may be demonstrating more intelligence than you realize by merely matching the hours of their competitors. My guess is that the better business owners use other means to differentiate their commodity-like service.

Bob Dobalina,

Researchers such as Thomas Stanley ("The Millionaire Next Door") discovered in the 90's that dry cleaning was one of the leading producers of millionaires in the U.S. Not sure that's still true. Corporate America has adopted business casual dress. But I'd guess that dry cleaners owners are still wealthy. I doubt they work any more than the 8-7 shift that lannychiu claims to be "not crazy hours".

Dry cleaners owners may not all be geniuses. But they certainly seem to have made a smart occupational decision.

Researchers such as Thomas Stanley ("The Millionaire Next Door") discovered in the 90's that dry cleaning was one of the leading producers of millionaires in the U.S. Not sure that's still true.

I heard the very same thing and it makes sense if you think about it. It is probably still true.

Even in today's "casual dress" business, men still (typically) wear buttoned down, collared shirts. And with dual income households now the norm (not the exception) couples do not have the time (or the energy) to not only do laundry, but to iron. I know I don't, and I do all the laundry.

So, they send the shirts and blouses out to be professionally laundered. People pay the $1.25-$1.50 a shirt (whatever it is) and that is all gravy to the dry cleaner. If they have enough large washing machines, they don't even need to send the shirts to another location. Just do them right there.

Working in a laundry, is a pretty mundane, braindead, task. Because it is so mundane and routine, the pay (for the counter help) is pretty low. I'm not going to say minimum wage, but you can hire 5 or 6 high school students to do some 100 loads of shirts (depending on how many industrial machines you have) and work the shirt press(es) to finish the job, in just a few hours. It just isn't that difficult (and the training takes all of 10 minutes.) And if there are, say, 15 shirts to a load, that is 1500 shirts and blouses (almost $2000) then came into your business, in a day. So, with wages being what they at a dry cleaners, there is room for a lot of profit for the owner. Millionaire? No problem. If you get enough traffic, you could probably put a million dollars cash in the bank in just 10 years.

Yes I could see that. Screw this sh*t. I'm giving up my career as a .NET programmer and I'm opening a dry cleaning business.

John,

I know plenty of small business owners. They are all humans, so sometimes they make stupid decisions. Also, since they are humans, they sometimes they make stupid decisions en masse, just like any other group of humans.

But then again, without small business owners, there would be no large business owners, would there? Persistence, perspiration and personality, along with one good idea, are much bigger keys to success than straight-forward intelligence or even business knowledge (i.e, Nike, Apple and Microsoft).

So please don't take it the wrong way when I try to sully the economists' image of the small business owner as the most rational of cogs in the economic machine, the purest example of economic thinking, or the Platonic ideal of business owner. Because, sometimes, the small business owner is that guy yelling at the busboys getting stoned out in back of the restaurant. He cannot understand why he always gets stoners applying for his minimum wage positions.

xmas: "please don't take it the wrong way when I try to sully the economists' image of the small business owner as the most rational of cogs in the economic machine"

Well, that's very different from your first statement - the one I considered insulting. But I totally disagree with you. My experience with small business owners revealed them to be far more rational than the hired hands that run big corporations. I've worked with enough from both groups the past 35 years to have formed strong opinions.

xmas: "He cannot understand why he always gets stoners applying for his minimum wage positions."

How can you know what the small business owner understands?

I doubt that restaurant owners "always get stoners" as bus boy applicants. My guess is that they are willing to put up with a percentage of hires who are drug abusers in order to keep labor costs low. So what if they have high turnover? It's not a skilled position that requires much training.

Who cares?! Let 'em have their minimum wage, it doubt it'll do anything.

Maybe we can even do it in a way that will inflate away welfare.

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