The Myths and Realities of a Higher Minimum Wage

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Dec. 6 (Bloomberg) -- Columbia University professor Dorian Warren and Sara Senatore, senior analyst at Sanford C. Bernstein, debate the potential benefits and negative impacts of a hike in the minimum wage on Bloomberg Television’s “Market Makers.”

Time warner cable means its price.

Will charter or comcast or both by the premium package?

Fries with that?

Minimum wages on the menu for fast food workers.

But will this mean fewer jobs at restaurants?

Back to the future brand.

These companies got their start in the postwar american boom.

Does their staying power result in sales in 21st century america?

Live from bloomberg headquarters in new york, this is "market makers," with erik schatzker and stephanie ruhle.

Welcome to "market makers." happy friday.

We have a lot to talk about.

As we wrap up this week.

We had so many days apart that we lost our group.

We need to get our synchronization back.

We will start with the news feed.

This is the top is the stories around the world.

Eddie lambert is spinning off lands' end.

He has been selling off sears shares.

Lands' end has been called the jewel in their crown.

It does not make much money.

They made $1.6 billion last year.

Another struggling retailer, j.c. penney says the sec has asked for information about its finances.

It had stark sales in september and is attempting to turn around shareholders.

It diluted shares by 30 eight percent.

And it is the latest escalation and holiday shopping.

Kohls department stores will keep their stores open for 100 hours straight from december 20 until christmas eve.

They operate almost 1200 stores nationwide.

I hope you are not there.

Hopefully you will be wrapped up by then.

We have a report on jobs.

According to the jobs report out a few minutes ago, unemployment dropped to a five-year low.

It dropped to 3/10 of one percent to seven percent.

Michael mckee has been going through the report.

You are always the man with the real deal.

When number were you expecting?

I had to 20, so i was pretty close.

What were you thinking?

We are all within the realm of reality here.

I have to start off -- you asked what number i was looking at.

I was wrong.

I said at 8:00 that i did not think the report would not -- matter all that much.

We knew it would go down.

It went down by so much with such a big increase in the labor force participation rate -- you have to take it seriously.

If you look at three digits, take the number out to three digits, it did not just go down.

It went down to 7.02%. that would take almost nothing for us to get into the sixes in the december report.

So, we could start the year with unemployment below seven percent.

In june, ben bernanke said we expected to be finished with tapering.

It definitely brings forward the idea of a fed taper.

I am for it -- i do not think there is time for it in december.

If this number signals that we are closer to a taper, one would think that the market would not hike up.

It is always difficult to determine what is going on.

Maybe what you have is the ideal situation.

That officials have said they are looking for this.

The market believes that the economy is ready to take over for them.

Instead of propping up earnings with the stimulus, you get more people spending more money.

It is a smooth handoff.

Too early to say, but that may be what is behind the thinking today.

It is hard to tell what is going on in the bond market.

Maybe some shortselling.

You are not seeing a big pop in interest rates.

You may see it the same way that your pricing the economy.

Does it surprise you that volumes are low?

Usually we see a big push.

Could it be that it is december and people are wrapped up for the year?

That is certainly possible.

You do not want to take a chance.

We are up for the year.

Nothing has been more volatile than the unemployment report.

Maybe people did not make huge bets this time.

They are all looking to get out of town on friday.

I am not looking to get out of town.

We have two hours of great tv to do.

Michael mckee, hank you for joining us.

We want to turn our attention to the labor department.

They say 3.6 million workers were paid at or below the minimum wage of seven dollars -- $7.25 last year.

President obama is calling for a hike to about $10 per hour.

That is what he calls a broad growth agenda.

There are airport workers and fast food workers and to nurse assistants and retail salespeople who work their tails off.

They are still living at or are above poverty.

That is why it is well past the time to raise a minimum wage that in real terms right now is lower -- fast food workers in 100 cities across the country made a strike yesterday.

They earn about nine dollars per hour.

They want the minimum increased to $15 per hour.

I want to bring in columbia university professor -- who focuses on labor inequality issues.

I want to start with you.

Restaurant workers are calling for $15 per hour.

Don't they run the risk that mcdonald's or wendy's will cut the workforce?

That is the myth.

We have plenty of studies recently that show there are negligible employment effects when you raise the minimum wage.

When you think about it, take the current employees -- $7.25 per hour.

A big mac is three dollars.

They could actually buy more big macs with the money.

It would benefit mcdonald's as a company.

They would not be working full- time.

All americans should work hard.

You're still living in poverty at the minimum wage.

It is some economics.

They are the consumers as well as the employees.

They would consume more and create more demand for the very product that they sell.

I think that makes a lot of sense.

It certainly will hurt my margins.

We probably would see an increase in demand.

There is no question that labor for restaurants is about one third of the cost.

If you're going to increase wages, you will see some impact on margins.

There will be some offsetting piece of it.

The balance between those remains to be seen.

What about the other components?

Productivity and pricing.

If you are thinking about top line, you certainly have quantity that people buy.

You have the pricing.

What we have seen historically is that it is more about commodities, as opposed to wages.

When we have seen and put prices go up, there is a balance.

The consumer absorbs some of that.

Consumers -- companies absorbs some of that.

What we're talking about is where that trade-off is.

Is it hard to lower margins?

That is the argument.

Costco makes a lot of money and they say that they -- that people are not as inclined to leave.

The training cost goes down.

Retention costs go down.

What we're talking about its efficiency wage.

They pay more than the market so that they keep people.

If everyone's wage goes up, we will have less of that argument.

You still have the turnover that does happen at low wages.

That being said, i think we are also talking about the customer base.

For some of them, they are by and march the same as the worker base.

That is the opportunity, potentially.

There is a recent study that says that low-wage industries -- the companies that pay a higher minimum wage experience lower turnover.

They get some cost savings.

And, if the price is passed to the customer, those ferry workers will actually buy more goods act into the business.

It is good business as well is good for the workers.

You do not think -- you cover these restaurants.

If mcdonald's tomorrow started paying their employees $15 per hour -- would you have a buy on them?

Let's look at this from the standpoint of what we see when commodity prices rise.

Everybody has the same cost increase.

What you are really talking about is relative performance between them.

Again, it does not help the top line.

When you see some inflation, that is good for the restaurant.

They can have some of that past -- price passed through.

It remains to be seen what the next benefit or cost will be.

The margins would go down.

One thing i would mention about wendy's and mcdonald's is that they are franchised.

It is their franchisee to bear most of these cost.

The companies themselves might not have as much of an impact.

It is good for top and that is good for restaurants.

Is there a danger in confusing the impact?

People obsess over the impact on employment.

From a restaurant point of view, it is not really so much about the restaurant company.

They do not care really about the impact that has a national employment.

They just care whether they make money or not.

They can pass those costs onto consumers.

They can past the cost onto mcdonald's consumers?

They spent their lives with the dollar menu.

They cannot suddenly offer and $11 big mac.

People go because of the value meal.

The people that go there are the people that work there.

They are the minimum wage workers of the world.

If they got a raise, they could purchase more burgers.

It would benefit the workers and also the companies.

There is in the lit -- another layer and that is the taxpayers.

A study shows that fast food workers actually rely on public benefits.

If it did not come out of taxpayer dollars, they would not have a problem with that.

Because we subsidize the cost of low wages, it actually hurts all of us.

Does that mean that we are effectively subsidizing the bottom line of the fast food companies as well?

When i think about the different companies, they have different customer bases.

If you have a very low income customer base, you probably would say mcdonald's -- trader joe's can pay their employees more.

Chipotle, starbucks -- they pay higher wages because their customers can pay more.

It depends which company we are talking about.

There is some insulation versus franchised and company operated.

I think that when we think about the dynamics, you have to think about it as company specific.

Like i said, i think in the end you probably stay -- the company does not absorb it all.

It would probably be a combination of price increases and lower margins.

Thank you very much for joining us.

You specialize in labor and equality issues.

A professor at columbia university.

And our analyst on restaurants.

When we come back, we will speak on the legacy of nelson mandela.

He changed more than a country, he changed culture.

? today, we remember the life and the legacy of nelson mandela.

He became a symbol of revolution and triumph over racial segregation.

With us to talk about the contributions and achievements of his greatest -- south africa's greatest son is the director of the africa division of the human rights watch.

Good to be here.

When we think about the contributions that he made to the world, is there concern that we could see this reversed in some way.

He is such a symbol.

What happens to that symbol now that he is no longer here?

I would like to say that this is a tremendous loss.

For the whole world.

He was obviously such a great leader.

Millions across the world will mourn his loss.

It is also a time to be reminded of the great legacy he has left us.

It is such a high standard and challenged that he has set for the next generation.

Indeed, for leaders in general.

What could happen to his political party?

Many people vote with that party simply because he is a member.

Could they be in risk that they will lose support now that he is not there?

It is difficult to say.

It is true that south africa today is not the south africa that he said he hoped it would become.

It has made significant strides, but it remains to face some serious challenges.

Both in protection of political and social, as well as rights.

South africa continues to face challenges in respecting and protecting rights for its citizens.

Given how much he achieved, why is that the case?

It is a difficult question.

I think that the next generation of leaders will have -- have failed to live up to the standards that he said.

They really have to continue to be inspired and live up to the challenge.

What is the biggest obstacle?

Is a corruption?

South africa faces a very competent challenge.

Corruption is one of them.

It is also political commitment to deal with the problems domestic and internationally.

In terms of promoting human rights, it goes beyond the borders.

The next generation of leaders have a huge task to live up to that biggest, highest standard.

He is really -- the struggle for freedom and equality.

When you think about political will and commitment, there is no greater symbol the nelson mandela.

Without him, what does that mean?

Who could be the next force?

I am sure and i believe that we will continue to have great leaders.

Nelson mandela has very difficult shoes to fill.

South africa continues to produce leaders who could live up to those standards.

It is a good example of democracy.

It continues to face a serious challenge and is expected to rise to those challenges.

Just how much progress can a country like south africa make when whites on average make six times more than blacks in the country?

They have better access to education, medical care, housing.

The list goes on.

That is the very depressing reality.

Inequality, poverty, lack of access for all south africans.

That is still there.

That is why it is a deeply disturbing conflict that they face.

The new generation of leaders will address this.

Is the government doing anything about this in your mind?

The government has made efforts, but they have not lived up to the expectations.

Lots of talk and no action?

There is a lot of talk, but not sufficient political will or commitment to address the challenges head on.

What is the missing link?

What needs to happen?

There requires political will and commitment and action.

Talk about what is practical.

If there's one thing that the government could do, where should they focus their effort?

When you think of political will.

There is not someone greater than nelson mandela.

It makes one feel listless that that symbol is not here.

There has to be an action plan.

It is true.

He is not there, but his legacy will continue to live.

It should continue to inspire and challenge a new generation of leaders.

Some countries have corruption and to deal with attacks.

We're dealing with the treatment of my country.

There's police brutality.

There are challenges we see on a day-to-day basis.

We would like to see leaders taking some concrete actions on those problems.

These are problems for you to take some action to change it.

It always seems impossible until it gets done.

Things can get significantly better.

Thank you so much for joining us.

Daniel is the director of the african division of human rights watch.

When we come back, at&t gives in to pressure from a small arrival.

You can now get mobilephone service without a contract.

We will explain.

We continue after the break.

? we are approaching 26 after the hour.

Time for a quick check on the markets.

The s&p 500 is having its best day in almost a month.

Is the taper of good thing?

Apparently so.

It looks like we might get that sooner than we thought.

We will be back in two minutes.

?

This text has been automatically generated. It may not be 100% accurate.

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