As long as there are plenty of people earning just minimum wage we need minimum wage.
You can't argue that if we removed or lowered the minimum wage that employers would not take advantage of that and would reduce the pay of those that currently earn minimum wage given that evidence.
Surely there will be some workers who are paid marginally more because of minimum wage laws, but not much more. Because of the large quantity of low paid workers, the gains from automation are significant. One wheat combine does the work of thousands of laborers.
Firms do not "take advantage" any more than workers do. Surely some workers would be paid somewhat less without minimum wage, but surely more people would be employed, gaining skills and experience, etc.
Who really knows what the impact of this would be on various industries over time. The modern world has done away with low skilled manufacturing jobs (which might have been the first rung on a ladder to more skilled jobs) and replaced hundreds of thousands of workers with a far smaller number of robots.
Most advocates of minimum wage prefer to look at the world as a single slice of time in which it's obvious that someone is benefitting from the policy. Over a longer period of time, the benefit is far more difficult to detect and the case for minimum wage evaporates.
Imagine a world in which people could be hired for $2 per hour (where that's all their skills were worth). The state could simply subsidize their paid work. Then it's not a welfare system but a subsidized job training program. Far preferable both for outcomes and for the self identity of those working in the program.
Why? Wasn't the wage you made supposed to be based on the value you added? Or has that argument gone out the window?
I really don't see any reason why there ought to be a normal distribution of wages. Also, the wages are not distributed that way at all, it's a power law distribution, relatively large numbers of people make little money and relatively few people an enormous amount.
> but you can't infer that far more people are earning $6/hour at a $6/hour minimum wage than would be earning that wage if no minimum wage existed.
Sure you can. That's unassailable logic. Every person earning minimum wage is a datapoint that you can use as evidence. How many people do you suppose are earning minimum wage right now?
> Such large scale market inefficiencies would not last for long.
In countries without minimum wage they last up to today, in countries with they lasted up to the moment that minimum wage was introduced.
> Surely some workers would be paid somewhat less without minimum wage, but surely more people would be employed, gaining skills and experience, etc.
Right. You mean "would be locked in to wages below subsistence level without much chance of improvement". Gaining skills and experience doing what? Flipping burgers? Checking out at the register?
> Who really knows what the impact of this would be on various industries over time.
Shareholder value would increase :)
> The modern world has done away with low skilled manufacturing jobs (which might have been the first run on a ladder to more skilled jobs) and replaced hundreds of thousands of workers with a far smaller number of robots.
You must live in a different world than the one where I live. Where I live we've outsourced those manufacturing jobs to places where there is no minimum wage and there is a disregard to job safety and public health. And in more than just a few cases where there is no age limit for full time work either.
> Imagine a world in which people could be hired for $2 per hour (where that's all their skills were worth).
Imagine a world in which people could be hired for $7 per hour (where that's all their skills were worth).
We already live in that world.
So firms do take advantage.
> Firms do not "take advantage" any more than workers do.
Right. Workers have yet to take advantage of their employers in a single instance, whereas employers have historically abused their workers routinely and still do so today in many places, and would do so in many more given the chance.
The worst thing a worker can do is to strike. And that is - in most places - a government protected right. Coincidentially, most of the places where you can't legally strike also don't have a minimum wage.
Really, I can see a lot of advantages to Capitalism but there are limits to what it can achieve and if it was a perfect system then we wouldn't need minimum wage, and we wouldn't need unions either. In the real world, unfortunately, we need both.
Capitalism is like democracy, it's not perfect but it seems to be the best we've got. Hopefully in the longer term it will turn out that we can and will do better.
Then, on top of all that there is one more factor. The minimum wage sets the base level for all other wages. There would be a tremendous knock-on effect from removing the minimum wage. When minimum wage was introduced everybody benefited (well, except for the highest segment, maybe).
Technically, to demonstrate that, you'd need to demonstrate that the minimum wage level is an outlier in the overall wage distribution. That should be very easy to see if we had a histogram of how many people earn a given wage, but my Google-fu is failing me on that point.
There are two things an employer can do when considering an employee who they would prefer to pay less than minimum wage: either pay minumum wage, or don't have that employee. There's some cutoff as to which choice the employer makes. You can guess one way, as you do, and most minimum wage earners would be substantially harmed by the removal of the minimum wage. You can guess the other way, as grandalf does, and most current minimum wage earners would be either entirely or near entirely unaffected. Without numbers, either one is still a guess.
specifically:
http://en.wikipedia.org/wiki/File:Income-curve-$10k.png
http://pubdb3.census.gov/macro/032005/hhinc/new06_000.htm
Keep in mind that in increase or decrease of the minimum wage will affect all wages higher than minimum wage, with a more pronounced effect on the lower end of the scale.
Minimum wage is 2% of the workforce for full-time employees, a much larger percentage when looking at part-time employees. Minimum wage is also usually found to be associated with either the young, the old or the uneducated, in other words, those that have a bad negotiation position.
Unfortunately, this happens to be what the census bureau tabulates, which makes it hard to find the data we're actually looking for.
Your view also defines workers and firms as adversaries with no shared interest in improving worker productivity (ability to add value). Aside from pure manual labor (for which workers might be whipped to increase productivity and for which virtually no intellect or interest is required) all firms would benefit from improving the human capital value of their labor force.
Strikes are a legacy of the days when work was simply straining one's muscles against the earth or repetitively doing stitching, stamping, etc.
Unions, too, are a legacy of the days when you could be replaced by any willing person ready to step in and earn your wage. Today, Unions are granted additional power (beyond the market power they would have just via collective bargaining) and they essentially impose a tax on certain firms. I'm not anti-union... they serve an important purpose, they just shouldn't have any extra power beyond collective bargaining. New hires shouldn't be forced to join, etc.
In my view, minimum wage laws have a few negative effects:
- they drive low wage work into the black market where there are no protections against abuses.
- they limit employment opportunities for those whose ability to add value is lower than minimum wage... such people become wards of the state, terminally unemployed.
- They make subsidized training arrangements infeasible for low end workers.
- They draw a sharp distinction between employed an unemployed. It would be far more accurate to determine that a person needs $3/hour of support from the state b/c they can only reliably pull in $4 per hour. In today's world, that person is unemployed or is constantly fired after it becomes obvious that he/she is not fit for minimum wage work.
This has been shown to be false throughout history, at least as many times as supply-side economics.
The what?
Imagine a world in which people could be hired for $2 per hour (where that's all their skills were worth).
This reminds me of Metropolis. Is a world where a large portion of people work full time, producing just $2/h, really preferable? That's got class society written all over it.
Because not all employers extract the same value from the same workforce, those more efficient will be able to afford the raise. But, by definition, the employers of some of that population will not be able to afford that raise (otherwise the market value would have been greater). This means some people will become unintentionally unemployed.
Exceptions to minimum wage are a thing that's been tried in some places but on the whole it didn't work out well, I believe there are still some experiments running in Europe where long term unemployed can work for less than minimum wage in some jobs (but with a time limit) while keeping their welfare.
I would also add it is completely illegitimate to prohibit a voluntary agreement based on some supposed "greater good".
Your assertion that no minimum wage means "shitty wages for everybody" is unfounded. Wages are determined by productivity, and it's no possible to raise real wages (taking into account other goods prices) with a law. Only an increase in produced wealth can raise wages.
Edit to add: If you imply that the "unintentionally unemployed" ones are a unlucky few, that's not the case. As you would probably know, official unemployment levels are around 20% in some EU countries, while real levels are probably way above that. That means a whole lot of people is not allowed to produce nothing because of minimum wage laws. The wealth prevented from being created is huge.
Subsistence work with no possibility of improvement does not provide society with a net benefit, but only creates a class of permanent poverty marred by undernutrition and an inability escape the tactical issues of living paycheck to paycheck, and it's an especially important issue in a country such as the US where health benefits are few and time off is minimal.
If minimum wage is taken away, market force WILL drive down the wages, but there will be no social benefit, as it will only result in denying opportunities to a very large sector of society.
Society takes a loss. The less wealth is produced, the poorer the society is. It's as easy as that.
What denies opportunities is denying someone the possibility of working because he's not productive enough.