Sounds like a great argument to increase the federal minimum wage so everyone is forced to pay their employees more.
As other comments have pointed out, simply raising the minimum wage doesn’t accomplish the same thing. Instead, all those people who were marginal at $7-8/hour simply don’t get hired, and employers use automation or forego the opportunities that additional labor offers.
Effectively what is happening is that those without power are subsidising the business by supplying them labour below cost. Generally in economics, making a business only viable through subsidies is a bad thing. It is much more efficient to give that labour to better businesses.
How do you define "cost"?
I.e. living costs + healthcare costs + groceries & other expenses + a little saving.
This is the base cost of a person, and thus the base cost of labour.
There is a wage where employee A costs more than the value they create. By mandating a wage that is higher than their productivity they are simply not hired, they do not get a chance to gain experience/knowledge, they loose the chance to be as productive as Employee B.
The result is they are now on welfare/unemployed/etc. They lose the chance to get on the employment ladder.
In general people improve so we you shouldn't be making the low wages for long. But what do we do about people who don't improve - either we push them out of the workforce or we subsidize their lifestyle to meet a minimum threshold.
That's only assuming that the ladder is just that, and not a single rung. Time spent in most minimum wage jobs are hard to sell as giving you a leg up when moving into the higher professional strata.
Businesses are a thing we've invented to shuffle resources around; there's currently enough resources for everyone in the world to be fat and happy (the world produces 3,500 calories per capita per day), it's just so very unequally distributed that 1 in 10 working Americans faces food insecurity, and 1 in 8 Americans overall lives in poverty.
Anyone working a full-time job should be able to live comfortably, and if you can't work full-time, society should take care of you anyway.
For one thing, someone has to cook the fries, sweep the back room, and help customers. Unless you invent insanely cheap and powerful automation or raise the wage to a point that it's uneconomic to open a new store (and please take the employers who say "if you raise the minimum wage, I'm going to take my marbles and go home" with a grain of salt), it's hard to actually get rid of minimum wage jobs.
For another, remember that you will be injecting money into a sector of the economy that tends to spend it immediately. Minimum wage workers are likely to buy more fries and day care, causing more demand for other low-wage jobs.
There’s a lot of slack in how many customers per hour a team can serve in a fast food restaurant. Look at In N Out burger at lunch time versus the average Wendy’s.
You can pay an experienced team 2x to serve 5x as many meals. But you’ll need 1/5th as many restaurants.
In such situations, it becomes an irreversible effect, as the cost to transition was mainly up front.
So the real question is: at what point does minimum wage draw automation as a response?
And that of course depends on the economics of automation at any given point in time — if a human isn’t drawing enough value (compared to the cheaper alternative), then the only rational thing is to replace the job entirely.
But minimum wage is also independent of automation (or any other alternative) costs, which is why its a bit of a hamfisted solution — it ignores the possibility that human labor simply isn’t worth that much. So you get this awkward line where everyone above the line is better off, and everyone below the line is homeless — the line being how much value you can produce.
Using India again as an example, that line doesn’t really exist — you have a fluid scale of wealth, where the bottom-most aren’t jobless (we can always produce enough work, if the price is right; you don’t want a daily maid?), but they barely make anything, and they live a lifestyle that we as a first-world country would deem unacceptable, but they find acceptable (especially compared to the alternative — no job/money at all).
Notably the poor indian probably lives better than the poor american, because the economy of the poor is significantly more developed. Partly because there are so many poor people in india, and partly because their income is allowed to be so much more fluid.
So there’s also the additional question of whether minimum wage “starves out” the poor economy, compounding how bad life can be at the bottommost rungs of our society
India is also a place where if you were to have 10 children and 6 of them survived, that’s good odds. In America, if you have 10 children and 1 dies, that’s a tragedy.
Source: I lived there for a few months.
India, and every other third world country, has their (many) problems, but nonetheless, the economy of those living on a dime is far superior to whatever exists in the US.
Minimum wage, as all regulation does, strangles such poor economies (there must be an official term for this; anyone know it?) by virtue of creating a hard line where things simply cease to exist, be it half-functional cars, drugs, housing, wage, etc. Anyone above the line is better off (all options are now guaranteed to be at least decent), and anyone below simply has no options.
Whether we really want this depends on the context and subjects (drugs, banks are high-return targets for regulation; cars and wage perhaps less so), but that regulation deletes a market, by-design, should always be a part of the consideration, though it rarely seems to be.
About 100 years ago, minimum wage used to be a socialist concept. Now, all parties in America support the minimum wage. The only debate is whether it should go up or stay the same. Your view on minimum wage and absolute deregulation is so radical that only the anarchist party is likely to share your views. I swear, some people just want to see the world burn.
The economics term you are searching for is probably a “deadweight loss”. In theory, when a $1/pack tax is introduced on cigarettes, there is a decrease in the volume of cigarettes packs sold. That volume reduction numeric value is the deadweight loss. In practice, cigarettes are an “inelastic” good and nicotine addicts keep buying packs to support their nicotine addiction even when the price goes up by a dollar. Thus, the deadweight loss on cigarettes is much lower than with usual goods.
Regulation does not delete a market. Just because we have printed nutrition facts and safety checks on almost all of our foods does not mean people have stopped selling food and people have stopped buying food. Just because drivers must stop at stop signs doesn’t mean people have stopped driving. Just because banks are required to only safeguard 10% or more of their account holder’s balance doesn’t mean banks are unprofitable and have ceased to exist. These all just mean the equilibrium has shifted in some amount in some direction and the market has established a new equilibrium.
As far as I can tell, you seem to have instead opted to respond to nothing I said, in the previous post...
>Your view on minimum wage and absolute deregulation is so radical that only the anarchist party is likely to share your views.
Is it really..? It seemed like an obvious thing to me: creating a glass floor traps people underneath it, but (ideally) makes life better for those above it. Glass ceilings are trivially accepted — and ceiling is just a floor to the guy above it. Is it so radical to apply it where the people above aren’t in the top 10%?
Also I’m not arguing absolute deregulation — I’m arguing that regulation inherently removes a subset of the market, and this should be accounted for. It might be worth it, it might not be. But its certainly not without consequence.
That, and that the extremely poor can live a better and more complete lifestyle in other countries than whats found in the US.
>The economics term you are searching for is probably a “deadweight loss”. In theory, when a $1/pack tax is introduced on cigarettes, there is a decrease in the volume of cigarettes packs sold
This doesn’t seem to be exactly what I’m getting at; I’m trying to refer to the idea that, when certain quality controls are globally enforced, the base cost goes up, and those who relied on lower costs can no longer be served. These barriers always existed — there’s a minimum cost to doing anything, really — but that hard-line bar has been raised. And that means the chunk of market that once existed inbetween the previous minimum and the new minimum... vanishes.
>Just because banks are required to only safeguard 10% or more of their account holder’s balance doesn’t mean banks are unprofitable and have ceased to exist.
I’m not suggesting it would remove the entire market of a given domain (I mean, regulation can, but usually doesn’t, and doesn’t strive to) but rather, it removes certain previously available options for banks which perhaps reached a sector that is now no longer served. That is, some people were not well off enough to afford such a safegaurd; the equilibrium shifts, along with the bare minimum required to enroll. Where previously “shithole” banks could serve that population, now a void exists (perhaps replaced by something worse, or better, or nothing at all).
But banks that cheat are probably globally good to regulate out of existence. Banks that safegaurd 10% vs 12% perhaps less obvious. But if 12% drives up the cost significantly, then some group of people are being pushed out.
Loan sharks don’t find borrowers because of a wealth of viable alternatives... they’re all thats left when you’ve exhausted all better options. The higher the minimum bar, the more likely someone ends up in such a state.
Until you realize that no level on minimum wage is adequate in SF, while $10/hr is livable in rural Arkansas.
It's not a silver bullet even with COL factored in. Higher staff costs? Replace them with automation. You can see the largest employers of minimum wage employees (eg. Mcdonalds) hedging against a rising minimum wage with kiosks to replace cashiers. At $15/hr for labor, those capital investments start looking like a mighty fine ROI.
Wages currently are responsible for about 4% of the cost of the burger. https://www.purdue.edu/newsroom/releases/2015/Q3/study-raisi...