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Comment by drewr | Hacker News Reader

One thing Congress could do immediately is cut the minimum wage. It is now at $7.25 per hour. This is a price control on labor. You can't make a worker's $5.00/hour skills magically worth $7.25.

They could also make it cheaper for small businesses to hire people. That $7.25/hour labor really costs $14.50.

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Minimum wage is there for a reason - to protect workers from exploitation. We will always have people who lack education and work ethic, then you have immigrants who are not necessarily familiar with a language - all these people are relatively easy to exploit, and they are still human and deserve access to certain basic things (food, shelter, transportation, heat, etc.).

While the educated and ambitious are not worried about the minimum wage, it helps a great many people survive.

Furthermore, very cheap labour (as well as subsidized labour) reduces the incentive to innovate and automate, which I am sure this forum is keen on.

It would be great if all minimum wage did was 'prevent exploitation.' But the simple fact is: minimum wage cuts jobs.

That's not a "simple fact."

Minimum wage also transfers money to low-wage workers, who tend to spend every cent they're given, which acts as an economic boost for the area, and creates job.

All the research I've seen shows that there are two conflicting effects, and even well-educated experts, who have spent long periods of time studying it, have a very hard time determining if the effect is net positive, negative, or neutral.

It only transfers money to low wage workers if they still have a job.

Fortunately, minimum wage cuts very few jobs; market rate is usually significantly higher than $7.25 an hour. However, when you pass a minimum wage higher than market rate, you do have significant effects. Take American Samoa, for example, which recently lost several thousand tuna canning jobs to the recent minimum wage hike:

http://www.washingtonexaminer.com/opinion/columns/Ask-Americ...

Yes, there are edge cases. Yes, if you jack it to levels that are substantially higher than market rates there are negative effects.

None of that demonstrates that reasonable minimum wage laws, in the aggregate, cost jobs.

Exactly. When a minimum wage is higher than market rate, it costs jobs.

When it is below market rate, it has no effect on jobs (or wages); it is essentially a law saying "keep doing what you are already doing".

So tell me, what is the purpose of minimum wage laws?

The key word in my post was substantially.

If you jack it up to a level insubstantially higher than market rate, then the number of jobs lost will probably also be insubstantial (and statistically insignificant in most studies). I agree with this statement.

So basically, an insubstantial increase in minimum wage hides the harm in statistical noise. On the other hand, the (also insubstantially small) benefits will be completely visible.

Sounds like a political win to me: an invisible cost but a visible (albeit small) benefit.

No. Once again you are misrepresenting the alternate hypothesis.

Simply put, the economic effects of modest increases in the minimum wage floor are sufficiently complex that it is difficult to conclusively prove that there is a negative aggregate effect on unemployment.

Further, a useful analysis of the matter would also consider effects on labor force participation, distribution of wages, the poverty rate, entitlement expenses, the cost of living, incentives to attain education, incentives to work, consumer expenditures, prices, etc, in addition to unemployment.

Minimum wage laws cannot be usefully discussed by saying "increasing the minimum wage increase unemployment, it's that simple." Because it's not that simple. And even if that one variable did change that simply, it still would not be a useful policy analysis.

That said, I no longer get paid for presenting or analyzing policy, and your personal opinions have no effect on me, so I'm going to go spend my time doing something more useful and profitable.

You can't sit through an econ 101 course in college where the effects of minimum wage aren't thoroughly discussed as being negative.

It's just a fantasy to suggest that it isn't harmful to marginalized workers like minorities.

Econ 101 gives a very easily understood prediction of huge, obvious disemployment effects which do not occur in reality. Something much more subtle, hard to measure, and not yet understood is happening instead.

Your Econ 101 class must've been far more definitive than my Econ 600 classes.

Econ 100 -- Keeping all other variables the same, if the cost of wages goes up, demand for workers goes down.

Econ 600 -- When wages go up, the other variables do not remain the same, so a useful comparison must analyze the second-order effects to determine the change in aggregate demand for workers.

I think the right approach is a negative income tax, not a minimum wage. Let employers pay no more than they find appropriate, then have taxes (which include taxes on that employer) make up the rest, bringing a household's income up to appropriate levels. (This sort of subsidy would have to be on a basis more frequent than "once a year," of course.)

Unions like minimum wage too much for that to happen. They've historically used minimum wages to try to drive up wage rates for their members.

This is sad and true. The only way out for governments historically has been to inflate the currency to cut labor costs. It's like people need a government for them to have someone to lie to them.

I would be strongly in favor of eliminating the minimum wage, if we had an appropriately socialized system of food, water, clothing, and job training distribution. But that's never going to happen.

I have a nearly unlimited amount of viewpoints on political matters, but more and more I think it's almost irrelevant. Politics seems like this kind of fun thing where we can have infinitely many new and continuing arguments, but this arguing is never going to accomplish anything. I'm not a senator, and even senators quickly become jaded and cynical at how little actual power their high status provides.

There are a lot of states without minimum wages. They are cheaper to live in and, believe it or not, workers make more than pennies per hour.

The second point you bring up is worth discussing too. Between payroll taxes, health insurance, and social security hiring people is ather expensive.

Isn't there a Federal minimum wage? Don't the states have to respect it? California's is higher, but I thought everybody had to respect Federal minimum wage, at least in the US.

Weirdly enough, the Federal minimum wage applies to states that track the Federal minimum. Some states have no minimum wage and some have minimum wages different from the Federal minimum. I think it's a strange system, but there you go.

http://en.wikipedia.org/wiki/Minimum_wage_in_the_United_Stat...

And all of those states are in the the bottom half (I'd say third, but south carolina is a bit above that for standard of living) of states ranked by standard of living, education, and infant mortality. In fact, for infant mortality these 5 states hold the top 4 spots.

Nobody's labor is worth as little as $5/hour. That's not a living wage anywhere in the US, and as a result it borders on slave labor to hire people for that little. The high price for small businesses is, however, a more realistic problem.

By what process do you come to the conclusion that no labor is worth as little as $5/hour?

By virtue of the fact that it's not possible to make enough to provide food and shelter on that amount (an untested hypothesis on my own part, admittedly). If someone is not trying to make a living then there well may be labor that is worth that little, but I'm not sure how you would make a meaningful distinction to avoid exploitation without a ton of other, more onerous regulations.

sure you can, here's how $5/day on food $10/day rent $5/day utilities + entertainment $2.50/day transportation

$22.50/day or $8,218.13 per year in expenses. At $5/hr, you are making $10k a year for a full time job w/ 2 weeks vacation.

$300/mo for rent and $2.50/day for transportation? Sign me up.

FYI a single ride on the bus/light rail in the Bay Area (VTA) costs $3.75.

That's your issue. You want to live in the bay area. Many cities have monthly passes for under $60.

Austin bus system is $2 for a day pass (unlimited riding for 24 hours), $8 for a for a 7 day pass and $28 for a 31 day pass. $300/month is a bit low for rent, but for $500 you can have a nice 1 bedroom, $350-$400 you can get a reasonable studio in a decent part of town.

Oh, it's possible to provide food and shelter on that amount (depending on what area you're living in, and dependent on you only needing to support yourself), but it's very hard to do so in such a way that one moves themselves forward in life, and it's practically impossible to do so in a way that isn't ridiculously depressing.

Sources: I lived on < $10,000/yr for quite a while.

It should be noted that I am not advocating reducing (or increasing) minimum wage. I think that the issue that people try to address via minimum wage is a clusterfuck of an issue that won't really be solved without a pretty large paradigm shift in how people acquire, or are provided with, their food and shelter.

I think you're confusing the ideas of what work is worth and how much money people ought to get. As most people use the word "worth," it means the amount of wealth something embodies (one good measure of which is the market price).

The distinction becomes particularly clear when you consider societies of one-- e.g. a castaway. If he wasn't industrious enough, a castaway could clearly work in a way that wouldn't guarantee sufficient food and shelter. Ergo it is possible for work to generate less wealth (= be worth less) than would guarantee food and shelter.

I think what you mean to say is that if people can't generate enough wealth to cover certain minimum requirements, the rest of us should make up the difference. And I don't think anyone would argue with that general principle.

By what process do you come to the conclusion that not everyone deserves a chance at food and shelter?

Actually, you're both wrong.

According to new numbers from the Labor Department, in 2008 only 1.1% of Americans who work 40 hours a week or more even earned the minimum wage. In other words, 98.9% of 40-hour-a-week workers earn more than the minimum. The data also show that teenagers are five times more likely to earn the minimum wage than adults.

http://online.wsj.com/article/SB1000142405297020344010457440...

So the people who are most affected by changes to the minimum wage are teenagers who aren't paying for food and shelter, but looking for disposable income.

Ergo, cutting the minimum wage won't be a boon for new jobs nor will it be cutting anyone's standard of living.

> So the people who are most affected by changes to the minimum wage are teenagers who aren't paying for food and shelter, but looking for disposable income.

> Ergo, cutting the minimum wage won't be a boon for new jobs nor will it be cutting anyone's standard of living.

Not so fast.

Many of those teenagers are learning to work, which makes their future labor more valuable. If they don't get such skills, they'll never be worth employing.

Also, some of those teens are contributing to their household's income.

Do you think that cost of labor has any connection to prices, which , in aggregate, creates the cost of living in any particular place?

In other words: higher minimum wage = higher prices = higher 'cost of living'

As a thought experiment, would you support making the minimum wage $1000/hr. If not, why not?

Honestly, the concept of a 'minimum wage' is one of the stupidest things I can imagine.

It all depends on the job and how labor intensive it is. For many jobs that are not labor intensive , reducing wages below won't make a huge difference , but for those who wok for this jobs , it will make a huge difference.

your mistake is in believing that all work is worth enough to live on -- but it isn't.

There is a lot of trivial work to be done that isn't worth rent+food+utilities+... There are things I'd pay someone $5/hr to do but not 50% more than that. It's a huge gap.

At one point in history, Luxembourg had the highest unemployment, largely due to the $10/hr minimum wage, which was the highest in the world at that time.

> your mistake is in believing that all work is worth enough to live on -- but it isn't.

I think it's more a moral belief that anyone who works ought to be able to support themselves by doing so.

Nobody is forced to work for any wage, thus the "slave" analogy doesn't apply. If not enough people are willing to do a job for $5/hr, then the employer will have to either pay a higher wage or reassess whether he needs the work done at all.

Your definition of "worth" must be more like my definition of "deserves".

My first job paid me $4 per hour, plus tips. That was 16 years ago and I was overpaid. However, that's what my labor was worth to my superiors, and they knew their business better than did the USG.

You make two assumptions with your comment. One is that everybody making minimum wage is supporting a family of four. I have sympathy for those people. Pricing them out of a job, however, is simply cruel. They need to increase the value of their skill with experience or education. And what better way to do that than to make less than they want for a period of time so that they can build up one or both of those.

Which brings me to your other assumption -- people who make a low wage will always make a low wage. I now make many times over that $4 per hour. That job enabled me to get another job which enabled me to get another job, etc. I wasn't doing what I do now, but every job had in common the attribute that I had to make myself worth what I was being paid, whether that's $4 per hour or $100. Every day I use experience gained at each of those jobs, even the most miserable ones.

There was a story on HN a while ago about a guy with an MBA who now works at Publix. He had been laid off and claimed that he wanted to teach his sons that work was dignified no matter the job. I believe he was being paid $8/hour or so. Publix has no choice but to pay him $8/hour because he likely can't do a much better job at bagging groceries than the 16 year-old next to him whose labor has been assigned that value by politicians who have never run a grocery store. If Publix wasn't forced to pay the teenager a higher wage than he's likely worth, Publix could either hire more teenagers and reduce everyone's workload and provide the customer a better experience, or they could pay the teen $4/hr and the father $12/hr.

That may enable the father to work there a little longer only to discover he is next in line for management because of his experience. His wife is thrilled that he's not traveling the world anymore eating out. And who better to run the store than someone who has been at the lowest level? Is the teen a slave at $4/hr? No, because he can walk next door to Kroger and see what they pay. Maybe it's $4.10. He decides to stay at Publix because he's already decorated his locker and made friends with the older guy who has great stories about traveling the world.

Businesses will determine quite well what their labor is worth and doesn't need USG to do it. Workers will determine quite well what corners they are willing to cut when times get hard. The latter may find that getting out of bed for a crappy, low-paying job enabled them to find a better opportunity.

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