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Comment by lend000 | Hacker News Reader

The problem I have with the minimum wage is that it transfers wealth from the very poorest to the mid-working class/lower middle class.

Who am I to tell a homeless person that she is legally forbidden to engage in a voluntary, hourly employment contract for less than $15/hr? I would effectively be guaranteeing that she stays unemployed/homeless. Regardless of practical effects (which are ambiguous at best), it's wrong on moral grounds.

On the other hand, the minimum wage definitely benefits middle class teenagers on their first jobs (if they can get a job), and has questionable benefit for millennial humanities college grads who have yet to start a career. For them, the higher wage comes with fewer hours, according to this study.

In the long run though, the more we raise the minimum wage, the sooner the local price inflation catches up. Getting a casual meal in Seattle is NOT cheap right now.

EDIT: I'll throw in that I think a very basic income with no minimum wage/unemployment/other welfare is much smarter fiscally and economically, and is the only way to largely eliminate extreme poverty. And it's sad that HN readers flagged this article because it challenges a conventional liberal talking point.

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> On the other hand, the minimum wage definitely benefits middle class teenagers on their first jobs (if they can get a job), and has questionable benefit for millennial humanities college grads who have yet to start a career.

This is the problem. Everyone working 40 hours per week deserves a living wage, whether they're fresh out of high school or 8 years into a humanities degree. There's this weird sense out there that working in food service isn't a "real job," or as you say they haven't started their "career." This is how you end up with people working 60 or 80 hour work weeks, or two or three jobs, to provide for themselves and their family. Every 40 hour job is a "real job" and deserves a living wage. Otherwise you're just making people depend on our social safety net, and no one wants that.

> Otherwise you're just making people depend on our social safety net, and no one wants that.

I suppose the homeless and chronically unemployed people you've condemned do not usually use public assistance? I disagree with this, and regardless, it doesn't sound like a good solution for them.

There are a lot of cheap places out there (see: Midwest, South), but unfortunately, millennials do not want to live there. I would rather let economics sort it out instead of creating a vicious local inflation cycle that prices out local minorities and increases the homeless population via minimum wage.

You moved goalposts from >Every 40 hour job is a "real job" and deserves a living wage.

to >I would rather let economics sort it out instead of creating a vicious local inflation cycle that prices out local minorities and increases the homeless population via minimum wage.

Whether they deserve or it or not doesn't change whether the market will support it. Some people making 10 dollars an hour might get a raise to 13, but some might just get fired. So law decides that someone whose labor is only worth 10 dollars to the market is better off banned from working.

I'm willing to entertain other ideas. If the living wage is X and the minimum wage is Y < X, then someone has to make up the difference. Two methods to make up the gap that make sense to me are taxation and redistribution, or raising the minimum wage. How do you suggest to make up the gap?

> How do you suggest to make up the gap?

How about first reducing the gap by reducing taxation of labor income, including employer-side payroll taxes (which both reduces the nominal wage necessary for livable income and makes it less expensive for employees to hire workers at any given nominal wage.)

I admit I've never been on the employer side of the payroll equation, but I'd be shocked if that was enough to make up the gap, especially when you consider the reduction in social services that would be required to balance it. Kansas is going down the "no tax" route and is on the verge of falling apart.

I am an employer. Sharpen your pencil and work it out from the other side. You’d probably be a generous boss. See what you can do.

There lies enlightenment.

> reducing taxation of labor income, including employer-side payroll taxes

How do you replace the funding those taxes provide, especially FICA which funds Social Security and Medicare?

I edited my original comment: universal basic income + no minimum wage or other forms of welfare (most of which offer negative incentives, such as TANF, unemployment benefits, mandatory social security, etc.). UBI should get you a very base level of livability (not enough to live in an expensive metropolis like SF/NYC), but not enough that most people won't want to work to improve their standard of living.

Minimum wage and other forms of welfare just don't make sense compared to a simple, clean, basic income.

>Everyone working 40 hours per week deserves a living wage (...)

You can earn a living wage for 40 hours a week doing anything in the US. You just can't afford a new iPhone. All the minimum wage does is makes it impossible to employ low-skill workers. So while before the minimum wage you could make a living, now you either can't make a living or you're effectively in the lower middle class.

Ask your dad or granddad what they had to go through to get you to a position where you think 15$ an hour is merely a "living wage".

> You just can't afford a new iPhone.

Or a home. Or a car. Or healthcare. The idea that minimum-wage life in America is in any way up to developed-world standards is horribly, laughably, tragically wrong.

Not saying that minimum wage is the answer. Personally, I support abolishing it in favor of a Universal basic Income. But suggesting that the problem it is trying to address isn't even real is... just not correct.

Yes, it does afford you healthcare the way US works right now, if it doesn't, that's a failing of Obamacare. Also, you want to be able to afford a car and a home by working at McDonald's? What are you talking about? And your solution is to not even have people work, just be given money. That's borderline insane. What cozy life do you have to be living to think that you're entitled to these things.

You support, and vote for, universal healthcare and advanced and subsidized public transportation systems, right?

Then ask your dad or grandad to adjust for inflation, cost of living, decreased value of both highschool and college degrees, etc.

I'm talking standard of living, not how much they earned. If you think you have it worse or as bad, you don't know anything.

What would you need to be able to afford for it to count as a living wage? I would say enough to cover food, clothing, housing, and healthcare for you and a dependent.

One of my issues with setting a national minimum wage is those last two are very different if you are living in Seattle vs rural Arkansas. How would you set minimum wage in such that it gives the same standard of living to people in both of those places?

As an aside, I think our social safety net should be changed so that any income will increase your standard of living. There are too many situation were going from 0$ to something will decrease your standard of living.

> As an aside, I think our social safety net should be changed so that any income will increase your standard of living. There are too many situation were going from 0$ to something will decrease your standard of living

That's a major argument for UBI.

There are ways to solve the problem without UBI. Such as making sure the sum of help reduces slower than income increase.

With the current system the aid is earmarked for certain items. This prevents one of the issues with UBI where someone gets a check, eats steak for a week, then cannot make rent the next week.

I know the earmarks don't work perfectly currently or prevent all bad choices but I think that UBI would allow for more bad choices.

"Deserve" is pretty subjective and vague, borderline meaningless. One could argue that they only deserve the value they create.

The problem is that automation increases inequality (I think). Between individual workers (software engineers vs factory workers) - and between capital and labour.

The solution is income redistribution. To me, the negative income tax with no minimum wage makes most sense. Minimum wage is a weird, hard-to-analyze hack.

> "Deserve" is pretty subjective and vague, borderline meaningless.

I don't think so. If we agree human labor has value, then the question is what that value is. About a century ago, we collectively agreed that 40 hours of work per week is a decent balance between work and home life. It seems reasonable to conclude that someone working those 40 hours has performed enough work to earn enough to have all of their needs paid for, including housing, transportation, food, and leisure time costs. In short, someone working 40 hours per week deserves a living wage.

When a person is desperate, 'voluntary' starts to lose all meaning.

If you are dead broke and half starved and I offered you a take it or leave it offer to work carrying rocks for $2 an hour so you can get a sandwich and you agree, is that really voluntary?

I do agree with you about teenagers and other people that don't need the money in order to live. For dependents and people that agree not to get public assistance (e.g. retirees), I don't think there should be any minimum wage at all.

Yes, that is voluntary. It stops being voluntary when you make it a long term contract.

A long-term contract isn't necessary; only a continued razor thin margin of financial error that can devolve, more or less immediately, into desperation again.

/Tens of Millions/ of Americans live their lives there.

You have to remember that the guy's other option in this example is not working at all, and getting no money. He demonstrably prefers the working situation, by doing it. It's of no risk to him and he can back out at any time.

Edit: I also think your expectations of relative difficulty in finding new work and doing it might be the result of minimum wage and other legally imposed on boarding costs. There would, for example, be a much more fluid market of sign spinning jobs with no minimum wage or employment regulations which for some reason want to designate people "employees" with "rights."

Yes, but the 'why' of his preference is important here. Preferring something to avoid pain or death doesn't lead to net positive transactions, in general.

If I ask you whether you want your leg or your left hand cut off (and I have the power to make either happen) you can have a preference and still lose.

> Preferring something to avoid pain or death doesn't lead to net positive transactions, in general.

Actually, it does. Because avoiding pain or death, in a preferable way, is by definition a net positive.

> If I ask you whether you want your leg or your left hand cut off (and I have the power to make either happen) you can have a preference and still lose.

That's not the shape of the example here. The employer isn't the only job in town, and the employer didn't impose a situation of joblessness on the guy. There are other employers he could do menial low-trust work for.

The answer of imposing a minimum wage, by the way, means you get your leg and hand cut off.

Yes, it's much better to prevent any employment opportunity for that person.

Situation A: I can choose between no employment (bad), and exploitative employment (slightly less bad).

Situation B: With the benevolent intention of a minimum wage legislated into existence, I can "choose" no employment (same bad as before).

You don't make someone worse off by increasing the number of options.

You don't make people better off by arguing for the goodness of an intention.

Measure results of your policies. Keep in mind foundational economic principles. Do good.

Ninja edit for pedants: adding additional options to a baseline set of options. "Live peacefully -> (join my army | die)" is a greater number of choices, but I don't have the option of sticking with "live peacefully". I hope this helps clarify my sentence above.

This all assumes that time is worthless.

The actual equation is [80 hours usable time] vs. [40 hours useable time + some small amount of money].

If I can use that 40 hours to find a better job or train for the future, I would be better off.

I didn't say that the person should take the exploitative job.

The term you're looking for is opportunity cost. And yes, the opportunity cost of A is !B. Similarly the opportunity cost for B is !A. We could come up with all sorts of stuff that happens in the time that would otherwise be devoted to the exploitative job, but that wouldn't clarify the point being made here.

We are in adversarial agreement.

Exploitative employment can be defined as one being paid much less than one's time is worth. So the 'slightly less bad' assessment of the exploitative employment is incorrect because having all of the time at full value is better than selling some for lesser value.

You do realize that you're adding a third scenario?

You are saying that I can choose (no employment | exploitative employment | non-exploitative employment), whereas my post you originally responded to had (no employment | exploitative employment).

I agree with you. Expanding the set of choices is a good thing.

Even assuming that working a low-paying job is worse than not working at all, it doesn't mean that low-paying jobs should be illegal. Adding more options doesn't generally make things worse. Maybe for some people having a low-paying job is better than not having a job at all.

Is this the only place in town that needs rocks toted?

Higher minimum wage means the robotics revolution happens faster.

As an employer seeking to exploit the working poor in order to improve profits and justify my seven digit salary, I wholeheartedly agree with your assessment.

> When a person is desperate, 'voluntary' starts to lose all meaning

An honest assessment of the tradeoff is that we eliminated cheap labour OP's homeless person might have done to remove pricing pressure from the restaurant worker. That is, the homeless person might have done Task A at $2/hour and the restaurant worker Task B at $6/hour. By setting the minimum wage at $7/hour, the restaurant worker gets a bump and the rock-carrying job is eliminated.

Without the minimum wage, someone hiring for Task B could threaten the restaurant worker with unemployment under the bogeyman of the homeless person taking their job at $5/hour. The bogeyman is not real. The homeless person, we assume here, could not be trained to do Task B. But expecting the restaurant worker to know that, and negotiate competently on it, is not a responsibility we ask workers to bear, and with good reason.

TL; DR people doing Task B vote while people who could do Task A don't, or at least not in an organized, politically-coherent fashion.

Do you assume that the person will be in the $2 job forever?

Social Security is a transfer from current workers to retirees. Does that meet your definition of public assistance?

The crux of the issue is at the end of the day, the true "market value" of most 0 or near 0 skill jobs is close to 0$. This is especially true in the case of your hypothetical homeless person for whom any employment represents a significant percentage marginal increase in income (hard not to beat 0). Given the power asymmetry between "people offering low skill jobs" and "people forced into taking low skill jobs" minimum wage is morally superior than forced feudalism.

Now, the US (and most governments) miss out on the other side of the in that, we want to force people out of low skill effectively worthless jobs, and into higher skill positions that drive the economy. That means reeducation programs, community involvement, and a social safety net which all costs tax money.

"The crux of the issue is at the end of the day, the true "market value" of most 0 or near 0 skill jobs is close to 0$. This is especially true in the case of your hypothetical homeless person for whom any employment represents a significant percentage marginal increase in income (hard not to beat 0)."

I don't think that's true at all ... as a Californian, I am surrounded by zero skill tasks related to agriculture that pay well more than zero.

I pay workers in my vineyards and orchards for zero-skill tasks like weeding, mowing, digging, etc. over minimum wage. Granted, this is in a coastal area (Marin County) but even in the central valley the value of zero-skill labor is much more than zero.

In fact, I will bet that anywhere in California a worker that can show up on time and work hard for a full shift will consistently be paid over minimum wage for this zero-skill labor (absent employer trickery).

The real problem, in my opinion, is that there is a great social migration taking place towards high-priced cities with low housing stock and lots of wealth driving up prices of all goods and services in these areas.

So it's not that zero-skill work has zero value, but rather: zero skill work cannot meet basic living standards in an expensive city - and these days, all of the cities are (relatively) expensive.

We are talking about Seattle, after all ...

You aren't telling the homeless person that they are legally forbidden from working in cheap labor. You are telling businesses that they are not solvent if they rely on ultra cheap labor.

both?

Perhaps minimum wage proponents need to frame it like that to justify it, but in reality, it goes both ways. You ARE legally forbidding a homeless person from working at a price of their choosing, just as much as you are forbidding a business from purchasing labor below a certain price.

This line of thinking leads to allowing people to sell themselves into slavery. Do we need to solve homelessness? Absolutely. We do not do this by propping up businesses and properties that rely on below livable wages.

I can buy some level of slippery slope at play here. But, by and large, this frames it in a way that allows sub-livable wages.

So, you can think my "side" is framing this in a way to justify it. This does little more than convince me your "side" is just trying to justify keeping ill earned wealth.

> This line of thinking leads to allowing people to sell themselves into slavery.

I think there is a fundamental difference between selling labor and selling legal rights. You might say that someone so financially desperate has de-facto given some rights to their employer, but coercion is always illegal (whether or not this kind of person is likely to seek legal help is another story).

> So, you can think my "side" is framing this in a way to justify it. This does little more than convince me your "side" is just trying to justify keeping ill earned wealth.

Sounds like you dislike exploitative businesses more than you care about the homeless. That isn't necessarily right or wrong, but I think it explains your inclination on the issue.

    I think there is a fundamental difference between
    selling labor and selling legal rights. You might
    say that someone so financially desperate has de-facto
    given some rights to their employer, but coercion is 
    always illegal (whether or not this kind of person is
    likely to seek legal help is another story).

I question that difference. Selling labor is merely selling the legal rights to the product of your labor. Building a dependence into the system by allowing below living wages is something I just don't see ending well.

I'm not convinced I'm correct on this. But at face value, I don't see how it works.

    Sounds like you dislike exploitative businesses more than
    you care about the homeless. That isn't necessarily right
    or wrong, but I think it explains your inclination on the
    issue.

I view them as distinct things. And while I certainly encourage ways to get homeless people feeling productive, I don't think getting them below living wage jobs is doing them a favor. Reliable shelter where they are able to get food and necessities while possibly building skills is something I'm incredibly for. And I hate the NIMBY syndrome that is pervading a lot of the city.

Unfortunately, I don't think there is an easy answer. :(

What's wrong with allowing people to sell themselves into what you call slavery?

Assuming it's a bad decision (makes their lives worse off), the problem is that they make a bad decision. In that case, it might make sense to create a regulation that forbids people making bad decisions.

If it's a good decision, there's no point forbidding it.

Good for who though? If you're the employer then people selling themselves to you for below living wage (slavery) is absolutely fantastic, if you're the person selling yourself then it's not so great! It's a matter of perspective.

If nobody is allowed to offer him work below a particular rate and nobody is willing to pay him at or above that rate, then he's effectively forbidden from working.

Or, if no company is willing to pay a living wage to accomplish a task, does it need to be done?

Perhaps not, or more likely it doesn't need to be done in the jurisdiction of the forced minimum.

For fully localized jobs that cannot move (ex: waiter) that means they probably won't exist at all and the business will close down.

Or will the prices just increase to account for the higher wage? Isn't that easier?

Companies will pay at most the value that a worker creates. It makes no sense to pay minimum wage, if the worker creates less value than that.

And what is the value created by labor? Let's split the discussion into service jobs and non-service jobs, as we all know most of these minimum wage positions are service jobs. So, what is the value of one hour of service labor? Whatever someone will pay for it. Which is set by a market of service providers all decreasing their prices to the lowest they can tolerate. Because if you can undercut a competitor, the free market says you will win the business. Which, for the people who make minimum wage, is how little a wage they will accept. Ok, what sets the floor for what people will tolerate to be paid? When looking at the minimum wage sector of the population, what is their bargaining power? What is the bargaining power of the employers? Is it a free market? What other options do the workers have? Is it a voluntary transaction if the alternative is starvation and homelessness?

No, you're telling the customers that their food is subsidized by ultra cheap labor. Of course, higher prices will decrease the number of goods sold, which the free marketers regard as a deadly sin. Rather, when costs are fully internalized, the free market works better! Externalizing costs onto labor by perpetuating a below-living wage is a market distortion held up by government! They should hate it!

And to the free marketers who point out that companies could voluntarily pay a living wage, you're not wrong! But it exposes the fault in the free market religion. The market, on a whole, will gladly enslave and abuse a small minority for the benefit of the majority.

This isn't the first such study, in fact there is a long history of them, with results so mixed that nothing can be concluded one way or the other on minimum wage (except perhaps for the conclusion that Economics 101 models don't match the real world). The following book contains a short review in an early chapter https://www.amazon.co.uk/Economics-Anti-Textbook-Critical-Th...

Still to my mind, a high level of Universal Basic Income combined with no minimum wage would be a more logical thing to do, and solves the above problems.

A lot of my girlfriend's friends work at or near minimum wage because they just need any job and the fact that there is a minimum wage seems to save them from complete poverty (and it's not like they are trying to start a family or anything yet). I think that there is a optimal minumum wage (15$ seems too high for me) but it's hard for me to argue against it completely having seen the good it has done for people and how impossible it would be to live below it. I guess I would feel differently if I had met a lot of people who had not been able to get jobs because of the minimum wage but at least for me I've yet to meet someone in that situation.

Since we're throwing out anecdotes, I've talked to a few local business owners who are looking at layoffs in the near future as a result of a series of upcoming jumps in minimum wage, because they simply can't afford to pay 50% more (over the next 5 years) and keep the same number of employees. I also met an automation engineer whose business is booming because companies are investing heavily into robotics and other technologies as cheaper alternatives to human beings.

Neither of our anecdotes is particularly useful in this discussion, but the economics and data (as in the article) tend to suggest that having a high minimum wage is unsustainable.

> I also met an automation engineer whose business is booming because companies are investing heavily into robotics and other technologies as cheaper alternatives to human beings.

Yes, my guess is increasing the minimum wage, along with the rising cost of healthcare benefits, will be very convenient excuses for automation.

Excuses? That's assuming that automation is something bad, that you need an excuse to do. Of course that companies try to maximize their profit. It's a good and necessary thing. Otherwise they'll lose market to competitors who automate.

This. What's unfortunate is that depending on what narrative you subscribe to around minimum wage, it can sound like an obviously good thing, or an obviously bad thing. It sounds great that you want to increase the wages of workers by increasing the minimum wage. It sounds awful when you want to exclude certain individuals from the job market by increasing minimum wages and making it against the law for low skilled workers to get jobs. The cold hard fact is that is that no matter your intention, you can't get one without the unintended consequences of the other. So yes you'll get an increase in wage for certain individuals, but you'll also exclude out of the market those who cannot yet produce at that rate. It's sad but true.

>Who am I to tell a homeless person that she is legally forbidden to engage in a voluntary, hourly employment contract for less than $15/hr?

Someone who hasn't unterstood minimun wage fully?

Minimum wage covers exactly this situation: You will have to pay at least that amount, even if the person you're employing happens to be homeless at the moment. If an employer is not willing to pay that, than that's not an issue with having a minimum wage...

If someone says 'my labor isn't worth 15$ and I know you won't hire me at that rate so I want to work for 10$' they are legally forbidden from this, right?

>If someone says 'my labor isn't worth 15$

But that's what I think is good about it!: It sets a baseline for what human labour is worth. Nobody has to say how much (or rather how little) his or her labour is worth. If an employer thinks someone should earn less than that - fully knowing that this wage will never enable this other person to get on in life - than she'd rather not employ anyone.

The trouble is for $15 per hour the business can probably hire someone more productive or less hassle than the homeless guy. Thus the homeless guy stays unemployed.

I was always a put off minimum wage laws by reading Thomas Sowell on how blacks had lower unemployment than whites in 1948 before minimum wage laws had much effect. After people hired non blacks and the unemployment rate shot up giving problems that continue to this day. ( eg http://www.twincities.com/2012/02/07/thomas-sowell-the-minim...)

Thank you for your example, that's interesting! I guess the story can also be interpreted the other way around:

Employers were only willing to hire black people because they were worked for lower wages, because they exactly knew that their labour was being considered less worth that that of white people? So introducing the minimum wage just made the racism obivous and I'm sure problems would also have arisen if the minimum wage had never been introduced and the black minority would have been forced to slave away on minimal incomes their whole life.

Sowell's argument was that different groups can have different productivity including say the average black at the time being less educated etc which he can get away with saying as he's black himself.

It absolutely is a problem with the minimum wage. Chances are a homeless person's marginal productivity is less than $15/hour. Why would an employer hire someone that's going to be a net loss on their bottom line?

Sadly this is not just a consequence for the homeless but it impacts all those who are low skilled, which is disproportionally the young and minorities.

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