Why Do We Have A Minimum Wage?

David Tatarowicz February 18, 2013 at 08:53 pm

From Bloomberg Business Week
"It hasn’t drawn much attention, but Facebook’s first annual earnings report contains an accounting gem: a multibillion-dollar tax deduction for the cost of executive stock options and share awards. Even though Facebook (FB) reported $1.1 billion in pre-tax profits from U.S. operations in 2012, it will probably pay zero federal and state taxes—and even receive a federal tax refund of about $429 million—according to a Feb. 14 statement from Citizens for Tax Justice."

David Tatarowicz February 18, 2013 at 08:54 pm

"You won’t find any $429 million tax refund in Facebook’s financial statements. Indeed, the company says it had a $559 million federal tax liability in 2012. But that liability isn’t an actual payment. In a footnote, the company also said that it had a $1.03 billion “excess tax benefit” last year related to “stock option exercises and other equity awards.” That benefit is what flips the federal tax liability into a refund. (A small portion is applied against state taxes.)
Facebook says that it anticipates reducing its tax liability in the future by an additional $2.17 billion by using further net operating loss carry-forwards that it has banked."

Greg February 18, 2013 at 08:55 pm

"@Greg You are absolutely right --- Obama should be home working on the budget day and night, and not out golfing with some admitted adulterer --- we all know that"
a) Nope b) Nope (I don't think that Obama's budget policy is one bit moral) c) morninmist can post any crap he/she wants and people like David won't say a word.

David Tatarowicz February 18, 2013 at 08:55 pm

Facebook spokeswoman Ashley Zandy declined to discuss the tax break but pointed to the transcript of Facebook executives’ conference call with analysts. On the call, Chief Financial Officer David Ebersman cited the accumulated tax benefits and noted that the company ended the fiscal year with nearly $10 billion in cash and investments, “giving us great flexibility and risk protection.”

David Tatarowicz February 18, 2013 at 08:58 pm

Are these tax breaks for Google (and many others) the kind of deductions that the Republicans are fighting to keep?

Greg February 18, 2013 at 09:07 pm

No, this is where the Republicans want to get revenue instead of milking the middle class.

skinnyDUDE February 18, 2013 at 09:19 pm

The Minimum wage pretty much eliminates a high school drop out from employment in this country. Clearly, this effects minorities in a dramatic way. If you take Racine as a example the minority drop out rate is very high . If the country was smart it would allow the employee to opt out of the Minimum wage. It might allow them to get a foot in the door and learn the skills needed to build a future with business willing to hire them. Under the current law you we see this uneducated class of people unable to get a job and that usually leads to a life of dependence or crime . Good bye American Dream . We all know this is true.
People need skills and some small business cant afford to pay like the government has mandated. The solution is to let people basically be free agent with their own services and let them work for what they agree too. That way the business gets a worker and the worker gains the skills and dignity of a entry level job which clearly will benefit him/her future more than Govt dependence or life of crime. The goal should not be to totally eliminate Job opportunity for the least successful people with no skills. But the minimum wage clearly does this to the people farthest away from gaining the American dream.

Brian Dey February 18, 2013 at 09:32 pm

David and Lyle: My point is this. Government intervention to manipulate the parameters of business operations is doing a huge disservice to our economy. Artificially tipping the scales in either direction generally hurts more than it helps. you know that thing called unintended consequences.
I don't believe for a moment that the majority of businesses are out to stick it to their employees, just like I don't believe the majority of employees are out to stick it to their employers. But the mentality on both sides makes it harder and harder for me to empathize with policies made by a government that seems that the employer is an evil person out to stick it to everyone else for a profit. That is why the progressive tax system will always be the most unfair form of taxation. Picking winners and losers is not what the government is supposed to be there for. It has corrupted the system. Let's just say that if every single employer out there decided that all they were going to pay was minimum wage and not a penny more, then where would the middle class be. If that was all that was out there, then you would have to work for that wage. Sounds alot like what happened in the USSR. It collapsed their economy. Dare I say that businesses face bigger risks every day. If I need to meet a payroll and it means me not getting paid, that is what I have to do. The employee doesn't take that risk.

Kathy February 18, 2013 at 10:02 pm

So it's the media reporting false facts? House Bill 4 in NC is a lie? Just one example of my oh so emotional buffoon response.
As to Quad? My figures might have been off. Yes, stock options fell. Joel did give himself a raise though. SOURCE: http://www.jsonline.com/business/quadgraphics-ceo-compensation-falls-to-423-million-c94sr81-146275325.html unlike some, I can admit to being wrong without resorting to personal attacks. @Ann and other haters: I'm disabled, care to take a jab there? I've been blessed to have a lot of drive and in my career done fabulous things that I am and others are quite proud of. I have owned my own business, been the exec director of sales and marketing, produced stage,events and radio shows. I've volunteered in my community and held several board seats. I've done all this in two different states. Shall I post my full resume? I am happy to say I am not mean spirited, I eschew small minds that opt to hate. Now go ahead and say it's free speech and you're right. Would you say these things to my face oh mighty keyboard warriors?

Kathy February 18, 2013 at 10:08 pm

PS: My soon to be ex has worked at quad for twenty years and in a management position. Knowing what I do about that place, I'd sooner opt to scrub toilets with my own toothbrush then toil away for Joel. If his father rose from the grave I'd reckon he'd give his son a thrashing for the way Joel runs that place. <---personal opinion.

Kathy February 18, 2013 at 10:30 pm

Could someone please point out when I stated I am pro min wage increase or pro Obama? I made one statement about possible effect of raising min wage, not a pro min wage statement. Sheeesh. I gotta go wash my hair and brush my tooth...carry on.

Kathy February 18, 2013 at 11:26 pm

@Brian Dey
The employee takes no risk? A good employee is part of the life blood of the business as they become vested to see the business thrive to keep the job. The customer is the other life blood. the customer purchases the product or service they employee worked to make. A business owner makes the choice to take the risk of having a business and has many pressures. The employee takes a risk of vesting time to help you succeed.

Independent Observer February 18, 2013 at 11:41 pm

Brian, Greg, Bottom Line and Steve are naive. I believe it was Adam Smith who said to the effect that the goal of a business is to get the most labor for the least possible cost.

CowDung February 19, 2013 at 12:13 am

Kathy:
How is 'vesting time' a risk on the part of the employee? Certainly you can't think that the 'risk' taken by an employee is anywhere near the level of risk taken by the employer.

CowDung February 19, 2013 at 12:17 am

Kathy:
It certainly sounded like you supported raising the minimum wage: "Any one ever thought that raising Min. wage puts more money in pockets which puts more money to shop? Just saying..."

CowDung February 19, 2013 at 12:25 am

Another statement that seems to favor a minimum wage increase:
"One possible reason a living wage needs closer consideration? Quad Graphics - largest printer now in USA." Even your flawed example of how easy it is for business to absorb a 25 cent/hour raise in minimum wage indicates support for raising minimum wage.

jbw February 19, 2013 at 12:51 am

Based on the number of times I've had to duck out of the way of roving gangs in Wauwatosa in the last few weeks, along with the recent crime reports, it seems like we are already there without a higher minimum wage.
If we raise it high enough, you'll be able to earn more by dropping out of high school than by going to college. If I'd known there'd be people working entry-level fast food jobs demanding $15/hour, I never would have bothered getting my degree. Working as a salaried employee in IT you can make less per hour for work that is a lot more demanding and stressful and requires a lot more skill. But if we are to form a communist state, I suppose we will have to flatten out wages at some point.

CowDung February 19, 2013 at 01:26 am

Kathy:
He may have given himself a raise of $43,000, but he was still $1.3 million below what he made the year before...

Steve ® February 19, 2013 at 01:33 am

But he is an evil CEO who whips his employees and eats minority babies for breakfast protein. Quad and the min wage, I fail to see any comparison. But it's fun to paint the business guy as evil, right?

Jay Sykes February 19, 2013 at 01:35 am

Lyle.... We know factually, through actual practice, that much of Hayek (Austrian Economics) and Supply Side is/can be effective. We learned the bounds/limits of effectiveness by actually changing the marginal tax rate;from Kennedy (90% marginal rate) through Bush II (28% marginal rate).
Lyle, you might need to let everyone know that you are motivated to bash Hayek and the Austrian School of Economics because of Hayek's view that "Social Justice has no meaning".

Greg February 19, 2013 at 01:48 am

Adam Smith said a lot of stuff, but he really had no clue about capitalism. The goal of business is to make a profit, period! The one thing I am not, is naive.

Greg February 19, 2013 at 02:09 am

"there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits"
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1976 was awarded to Milton Friedman "for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy".

Greg February 19, 2013 at 02:21 am

Cow,
That is why the employees pay that unemployee insurance, it is so the employer does not suffer, at no fault of its own, when an employee leaves them hanging.

Bottom Line February 19, 2013 at 03:44 am

David ... being in business you realize that what you are suggesting is short information.
The tax code has to respect investment losses as well as taxing profit. When companies avail themselves the offset, it is a correction that invites companies to take risk. If we overlook the balance provided what will result? It seems we are in a situation where few are willing to risk investing ... if we follow your model do you think others will risk investment?

Bottom Line February 19, 2013 at 04:01 am

Lyle ... indulge my curiosity ... when did we apply the unfettered economic discipline offered by Milt. It has always been contaminated by government intervention.
Milt exposes simply what you cannot refute ... the market will always decide value, the government will always add cost to the equation ... and the consumer pays additionally as a result, or they decide the value is unworthy the expense. Yours is a fools folly, that you can add cost without detriment ... that you can mandate value in a global economy. Stuff and nonsense. You stated in a prior post that we cannot realize correction until the global economy meets our watermark ... we didn't have to add cost to ensure we would reduce our competitive advantage, and ensure our citizens would be left wanting. I think you should reconsider your position, but I lament you will not.

Greg February 19, 2013 at 05:30 am

There are massive indirect costs with hiring an employee into many types of businesses. If the job requires training the new employee may work for hundreds of hours before actually producing enough to cover his wages. During the training period the company will incur costs for the trainer(s) and possible scrap product. The costs of training a $9/hr employee could cost in the area of $60/hr. This training could take weeks or months. It may take years for the employer to recuperate these expenses, all the while the employee expects raises. Or at any point the employee may just walk out the door. Most beginning employees think the grass is greener over there. If you are lucky, you can snipe the trainee and save some training expense. So in many cases the minimum wage job includes a free education, but that does not show up on the W2.

Brian Dey February 19, 2013 at 01:43 pm

If you are paying an employee minimum wage now, with FICA and Workers Comp., you are paying $8.67 p/hr, or $18,033..60 for a full time employee in my industry.
If the minimum raise gets bumped up to $9.00 p/hr, with FICA and Workers Comp, you will pay $10.76 p/hr or $22,380.00 per full time employee. The total cost of minimum wage full time employee in my industry will be an additional $4,347.00. Somebody please tell me how this is good for the worker. To keep my costs unchanged, I would have to make them part time and cut 404 hours from them annually. OR How is that good for the consumer? I just got hit with a 20% increase in labor. I turn that over to my customers. But, but, but... They will be getting paid more so they can afford to buy more! REALLY? If the price of everything has to go up (in economic terms, they call this inflation), isn't the value of the consumers dollar going to be the same? OR The employee really isn't going to make more because hours will be cut or jobs will be eliminated, thus shrinking the consumer pool or remain stagnant with part time hours an now no benefits. I hope this little economics lesson gets through to the liberals because I have just outlined how most businesses will react to this huge expenditure you President wants to inflict on small business.

Urban Pioneer February 19, 2013 at 08:22 pm

Kathy doesn't that business owner now have $70.00 less money to shop and invest with every single week. Kind of kills your point. How about the Govt. gets the hell out and left the businesses owner pay the price per hour that suits his/her business, and the job being fulfilled.

Luke February 19, 2013 at 10:56 pm

Anyone??

Bottom Line February 25, 2013 at 03:02 pm

Informing citizens, and inviting critical thinking, when legislators suggest something as dynamic as raising the minimum wage improves the possibility that we can stop bad policy before we are invested.
Reversing bad policy, once we are invested, is usually too challenging. Better to nip it in the bud ...