Does Minimum Wage Increase Help Or Hurt The Appraisal Business?

[Overimprovement]

The board is great because we interact with those with different viewpoints. In that vien, it's pretty silly to say the ambitious will cease getting educated or skilled, since doing so always means more money no matter what the minimum is. The fact is that lower wage service/retail jobs now make up I read aprox 40% of the US jobs, these are not stepping stone positions anymore they are sometimes the only jobs around. Yes, the price of goods/services goes up, but not all of them, and the people making a higher wage now also spend that money, creating other jobs in communities since their higher spending means other businesses flourish.

It hopefully will affect the pay scale of appraisers comparatively, though the AMC intrusion into fees is a n appraisal field/bundled fee specific, still , at least appraisers have a higher bar for the low end to compare or fall back on.

So am I correct in thinking you are of the opinion that all or most jobs will have their wage rates increase simply because the floor rate increases?

 

[J Grant]

So am I correct in thinking you are of the opinion that all or most jobs will have their wage rates increase simply because the floor rate increases?

I don't know. Employers like to keep pay down so for some jobs they will resist and upper level professional jobs are in their own sphere. If some pay goes up the business owner will "adapt" as everyone tells us to do ..

One assumes making more $ earning at lower segment will see those people spending in local communities which gives local businesses a boost.

It's weird to earnings as "wealth re distribution"..

Local workers earning more means more local businesses benefit, including appraisers if more people can afford to buy homes. Some low/min wage workers can transition to owners instead of renters, we get a few more appraisal orders every year.

 

[Gobears81]

If a small business can't survive paying their employees $15/hour (the increase is made over a period of time and not all at once)....

Does that mean it wasn't a viable business and was destined to fail???

Hmm...kind of a weird question.

What is the value of a business? To maximize the value of said business.

My dad appraised a car dealership recently and the guy was stressing about the minimum wage increase as his (commissioned) employees would have to get a higher base pay in slow periods when they aren't selling as many cars. If you look at the cost-benefit analysis, the owner has optimized the number of employees to maximize the income to the business. At a higher minimum wage, he would lower the number of salespeople on the floor, resulting in a decline in car sales, and consequently, business income.
Most aren't questioning whether McDonalds has a viable business model (that I know of). But if minimum wage increases to $15, you might see a shift to automated ordering kiosks and even increased automation in food preparation, due to the availability of technological alternatives and their respective costs.
In the example of my company, the college kids aren't staying for extended periods, and they have to be trained for a portion of that time. Have their been some past college kid employees worthy of $15/ hour? Yes - maybe more, and we would've kept them as long as they wanted to stay but they've moved on to bigger and better things than a part-time helper. We're glad for them too. But, there's also been multiple past employees that didn't bring any value and weren't worthy of minimum wage. If the value that the workers bring isn't $15/ hour or more on average, the business model would indicate that said position would need to go unfilled.
I am aware that Amazon is hiring its workers based on $15/ hour. But, Amazon is also a potential future anti-trust target and is regarded as the symbol of online businesses killing the mom-and-pops. If they were to hire as many minimum wage workers as they could, the opinion of their corporate brand would be further despised, so their business model supports increasing employee pay to maximize their corporate image.

 

[J Grant]

Hmm...kind of a weird question.

What is the value of a business? To maximize the value of said business.

My dad appraised a car dealership recently and the guy was stressing about the minimum wage increase as his (commissioned) employees would have to get a higher base pay in slow periods when they aren't selling as many cars. If you look at the cost-benefit analysis, the owner has optimized the number of employees to maximize the income to the business. At a higher minimum wage, he would lower the number of salespeople on the floor, resulting in a decline in car sales, and consequently, business income.
Most aren't questioning whether McDonalds has a viable business model (that I know of). But if minimum wage increases to $15, you might see a shift to automated ordering kiosks and even increased automation in food preparation, due to the availability of technological alternatives and their respective costs.
In the example of my company, the college kids aren't staying for extended periods, and they have to be trained for a portion of that time. Have their been some past college kid employees worthy of $15/ hour? Yes - maybe more, and we would've kept them as long as they wanted to stay but they've moved on to bigger and better things than a part-time helper. We're glad for them too. But, there's also been multiple past employees that didn't bring any value and weren't worthy of minimum wage. If the value that the workers bring isn't $15/ hour or more on average, the business model would indicate that said position would need to go unfilled.
I am aware that Amazon is hiring its workers based on $15/ hour. But, Amazon is also a potential future anti-trust target and is regarded as the symbol of online businesses killing the mom-and-pops. If they were to hire as many minimum wage workers as they could, the opinion of their corporate brand would be further despised, so their business model supports increasing employee pay to maximize their corporate image.

Two sides to everything...the car dealer owner was stressing..on what level, a survival of business level, or thinking he might make 450k a year vs 500k a year ?

If other workers in the dealer's area see higher wages, will those workers buy or lease cars from him, thus offsetting his wage variance?

If he has to, then he would cut back on employees , though he might instead offer an additional revenue source, creative financing or expand repair services. It can mean different things for different businesses.

As far as replace with auto kiosks etc, that will happen in certain stores/eateries no matter the min wage, since automation is cheaper than a person per hour. If we are to survive though economically businesses will at some point need yo consider the more they replace people with automation, the fewer potential customers (people who earn ) will be able to buy the business's goods and services.

 

[Gobears81]

Interesting thoughts (not being sarcastic).

If other workers in the dealer's area see higher wages, will those workers buy or lease cars from him, thus offsetting his wage variance?
Possibly. But, take my town where there's been a high number of restaurant closures over the past year or two. Unemployment is already higher than average and the restaurant operators do not see price elasticity that they might in a stronger market, so a greater number would close. An increase to $15/ hour would create a winners and losers element of the lower class, in which either you can get a job or you can't, and unemployment would undoubtedly be higher than it is now.

If he has to, then he would cut back on employees , though he might instead offer an additional revenue source, creative financing or expand repair services. It can mean different things for different businesses.
Businesses are constantly searching for a form of innovation, in both bad and good times. I would never say that because a business has not yet innovated, it cannot, but if it has not innovated yet, what element of increased labor costs would support new innovation? Maybe a small shift in demographics would support a minor change in the business model, but operators in each industry constantly have their ear to the ground - the self-storage guys subscribe to self-storage magazines that discuss industry trends, same with c-stores, restaurants, etc - so unless there is some mismanagement or an incompetent business owner, innovation is usually more gradual and ongoing.

As far as replace with auto kiosks etc, that will happen in certain stores/eateries no matter the min wage, since automation is cheaper than a person per hour. If we are to survive though economically businesses will at some point need yo consider the more they replace people with automation, the fewer potential customers (people who earn ) will be able to buy the business's goods and services.
Agreed. But...by and large, these changes have not yet been made yet. Sure, grocery stores have the self-service checkouts, but the majority of the fast food restaurants (all?) still involve a human cashier. There are large initial investments - especially on robotics that would increase automation on food preparation. At $10/ hour, the cost-benefit analysis does not support this shift, but at $15/ hour, I can almost guarantee it will.

Minimum wages could stand to be boosted - maybe to $10 or even $12/ hour, or maybe indexing it to higher cost-of-living locations. I am not suggesting that going to $15/ hour would be a negative move across the board, as like you say, there would be greater purchasing power on behalf of those that do experience an increase in wages. But, going to $15/ hour is extreme and significant, and the negatives will most likely outweigh the positives.

 

[J Grant]

I happen to agree on that, imo an increase nationally to $12 rather than $15 makes more sense and of course locally they can go higher if they wish.

There are two sides to the argument and a myriad of possible outcomes .

But keeping a large segment of workers earning so little they can not put money back into the local economy means a continually depressed economy.

 

[George Hatch]

We've been over this before. Poor people are not poor because the minimum wage is $8/hr or whatever prevails in your local. Poor people are poor because the labor market values their labor so much lower than it values the higher skilled workers. Simply raising the expression of that value doesn't actually raise the value itself. UNLESS those are the only workers who get the raise, in which case you actually are penalizing everyone else in order to benefit the winners you have singled out for the raise.

You enjoy the lifestyle you enjoy precisely because - based on the law of substitution - the market values your work as an appraiser at an average of 5x higher (or whatever your number really is) than it values the kid at the McDonald's counter who just started yesterday. Doubling that kid's pay rate doesn't make him a more valuable worker, it just undermines your economic leverage by reducing the multiplier for your work from 5x unskilled to 4x unskilled or whatever results from that increase in the minimum wage. If the employer is paying more for labor what that really means is that the consumer is paying more for that labor. Your fantasies that it will only be the fat cats who pay for the increased costs of labor is just that - a fantasy. It won't happen because it basically can't happen.

So when the cost of the Big Mac increases from $4 to $5 because of the increase in labor costs all through their supply chain and into the store itself that undermines your economic leverage. Instead of that Big Mac costing you .11 hours of your labor it costs you .14 hours of your labor - unless you get the same raise those workers got, in which case they're still getting paid 5x less than you are. And are still impoverished as a result.

The only sure-fire winners in all this is the gov't because they get more dollars (which have less value due to the additional inflation these minimum wages add) in tax revenues to pay off debts that were incurred in the past with the higher valued dollars.

We see the complaint here all the time - our fees haven't kept up with the costs of inflation. We're doing the same amount of work but the purchasing power of our fees are in decline. We used to be able to buy 13 Big Macs for an hour's work but now we can only buy 9.

We deal in such large numbers in our day job that it's easy to forget these are not Monopoly dollars - they're real dollars of the type we use to pay for our food, clothing, shelter and the occasional Grand Slam Breakfast at Denny's or Hardees.

 

[J Grant]

George, I respect your opinion but it's one perspective. regarding the "market" valuing labor, there is no such thing as a free market, every nation even poor ones have a min wage or collective bargaining floor , as an economic reality. Check the list the USA is low down compared to a number of other developed nations, and we have the depressed ravaged cities and rural towns to show for it.

If I pay more locally for some goods or services due to min wage rise, I assume a percent of those workers will move from renters to homeowners and if I get a few more appraisals a year that makes up for the variance. And one day it might mean higher appraisal fees as well

Consider this, we the people now subsidize low wages via food stamps, section 8, other programs, which subsidize wealthy people and business owner,s not just workers. By allowing a business owner to under pay people with a below living min wage, the business owner is able to do that because a number of low wage earners qualify for food stamps or section 8 . While it helps low wage earners survive, it relieves their employers of paying a living wage which means the employer might make a lot more $. So who are we subsidizing through this, a wealthy or well to do employer or their underpaid employee? Which is why the min wage needs to be a higher aka able to pay for basics, because when it fails to do it becomes in part a tax payer subsisted wage )

 

[ucbruin]

"But, take my town where there's been a high number of restaurant closures over the past year or two."

This past week I saw a headline regarding that there have been a number of restaurant closings in MA (maybe Boston)....
I didn't read the article....

I assume this has to do more with shifting dinning habits/healthy eating/demographics/etc. because employment is high and $15.00 minimum wage has yet to take place...

 

[George Hatch]

You're wrong about minimum wage workers moving and becoming homeowners. Dead wrong.

Here in Calif we have had minimum wage increases and our minimum is $12/hr as a result of a series of increases over several years. As far as I can tell, 100% of that increase went straight into apartment rent increases and other increases in the cost of living. The minimum wage workers today don't have any more discretionary income than they had 5 years ago. All enabling more renters to pay higher rents does is lead to higher rents. Whether people make their housing choices as being the residual after all their other expenses are met or vice versa makes no difference.