how is it that "trickle down" economy is supposed to work, but raising minimum wage doesnt?

Question

trickle down puts more money into the hands of big companies, they in turn are supposed to invest wisely and hire more workers as a result...its a theory(proven to fail, but lets continue anyways)....minimum wage puts money into the hands of consumers, and they in turn spend it on products or services which also feeds the economy.......so why do some support one and not the other?

Answer 1

increases to the minimum wage also is a cost to employers, which decrease profits and potentially lead to unemployment. trickle down is relieving not just large companies but large tax payers of tax burden allowing for reinvestment R&D and stimulating growth

Answer 2

You have an excellent question. Since I'm a business major, let me tell you what I've learned in my economics class.

You're right that Trickle Down Economics does not trickle down. Because that is contingent upon a company being willing to spend money instead of hoarding it. At least in theory.

But also, you have to realize that a company usually has to pay about 40% of its profits on taxes. Also, healthcare premiums are rising at a rate far faster than inflation, and the baby boomers are retiring.

Couple that with jobs going overseas and if you are a middle supplier of parts for another company here in the U.S., well that may mean that your overseas competition got the order instead of your company.

Now in regards to minimum wage, there are conflicting theories. First of all, I agree that minimum wage is unacceptable. Even if you have a 40 hour a week job (which most minimum wage positions are not), minimum wage is lower than poverty level for a family of one. Now try to raise a family on that amount? Forget it. So in theory you want a person to earn more than minimum wage.

But you also have to factor in that a company may not have millions of dollars in revenues and not every company has a multimillionaire CEO in charge. Many of the owners do not make the big bucks. So if you do what is going to happen in Michigan, each employee will get their wages raised.

Let's say you have 300 employees who all make minimum wage at a factory that makes pizza pans and everyone works full time. Each person gets a 50 cent an hour raise. Doesn't seem like a lot does it from the employee perspective? But take a look at it from the company perspective, 50 cents per hour at 2,080 hours per year. That's a 1,040 a year increase in salary. Add that up for 300 employees. That means the company now has to pay out 312,000 in additional salaries.

Where is the company going to get that money from? It will have to either reduce costs someplace else or increase their prices. Most likely they will increase their prices of the pizza pans to make up for the additional expense. Now if the company raises it's prices too much, they will sell less pizza pans. If their sales decline so does the amount of parts sold. That means they don't need as many workers to make the pizza pans.

So, raising minimum wages may help in the short run, but it also can affect whether jobs are kept here or shipped overseas. Because the cost to make the pizza pans includes the cost of the labor. So if they can get the labor cheaper overseas, they may decide it's cheaper in the long run to send the jobs overseas where they can pay a lot less in labor.

Trust me, I don't want to see anyone lose their jobs here, but the sad fact is that until overseas wages are comparable with the U.S. wages we will see a steady decline of jobs going overseas.

Answer 3

It only puts money into the hands of a relatively few consumers. Most people make more than minimum wage and most of those are not expected to be the sole earner in a household. The few that are will still not be able to spend more in any real way.

What does happen though is that people who were making a few dollars over minimum are effectively making less money, since costs go up and it's only a few dollars a week anyway.

Govt. intervention doesn't work.

Answer 4

Because the first , is a Republican idea and the second is a Democrats idea . Reagan tried trickle down economy and though they'll never admit it , it didn't work . But the Corporations thought it was such a good idea the first time , that they wanted Bush to try it again . And it still doesn't work .
Raising the minimal wages has been prove by a lot of economist
that it does work . Closed minded people will never change the way they think . Yes you are right

Answer 5

I just support the way that allows someone to get a job and support themselves without welfare. Raising the minimum wage would allow workers to actually earn a wage that allows them to put a roof over their head, food in their bellies, pay the electric bills, and clothe themselves. Right now, the cost of living has increased greatly, but yet the minimum wage remains the same as it was years ago. People whine about those on welfare. Fine - raise the minimum wage, and those moms can afford day care so they can go do that job.

I shake my head when I write that check for $150.00 per week for my daughter's daycare. Someone on minimum wage couldn't afford to pay someone to watch their kid while they are at work. How are they supposed to work?

Just some thoughts. . . I hope someone thinks about it.

Answer 6

I don't think the trickle down economy has been proven to not work, but i see your point, as you stated in my question. But the thing is what happens to the people who don't get wage increases because of the minimum wage hike? Inflation rises though

Answer 7

Raising the minimum wage will cause prices to go up.
Do not forget when Clinton had like a trillion dollar surplus and stated "We could give the money to you (middle class people), but you would just spend it anyway"
Would someone please tell me the logic in this statement.

Answer 8

You want to stimulate the economy, give money to the middle class and we will spend it, that is for sure.

Answer 9

I think it trickled into the Radical Conservatives pockets