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Comment by ozzyman700 | Hacker News Reader

optimal level to achieve what goal?

Presumably where output is maximized on the production possibility curve [0], i.e. a purely theoretical petri dish where every individual, corporation and government's actions can be neatly quantified in a 2-dimensional chart.

[0]: https://www.tutor2u.net/economics/reference/production-possi...

and where information is symmetrical, so that each rational actor always makes the perfectly optimal economic choice.

give the rugged individual all the relevant information (wages/benefits, available jobs, hidden risks, corporate strategy, market dynamics, etc.), and then maybe we can talk about labor market deregulation.

The best balance between unemployment and low pay, so that the most is paid to workers overall.

Do you mean that you'd get low unemployment, but most workers get paid starvation wages, but t a few most valuable workers get much larger salaries?

Poverty was absolutely horrible before minimum wage for most workers. I can't help but think that such policies you are proposing are historical revisionism at its worst.

The sum of all the money earned by all workers without a minimum wage is higher than with one. With a minimum wage you have one fry cook in your neighborhood making $100/hr and everyone else unemployed, without one you have 100 people making $2/hr each. More total money is given out in the second case, although I guess you can decide you'd prefer having the rich few if that's what you want (economics doesn't judge which outcome is better, it just tells you which outcome you will get).

Edit: numbers made up to illustrate the claim, not to provide evidence. This claim is a widely accepted principle that you can find in any introductory econ textbook.

Decrease that $100/hr to $10/hr and increase the 100 people making $2/hr to 1 million people making $2 an hour, that way you go from $10/hr in earning potential to $2million/hr. Just by getting rid of the minimum wage!

I can see why the minimum wage is such a bad idea, you are totally correct.

Your example, although meant to show that the point was silly, can still serve to illustrate it. Imagine that for the vast majority of people, widgets are worth $3 each, but for one person they are worth $10 each (because he really likes them). Further, suppose that a widget takes an hour to make. With a minimum wage, one person can make $10/hour serving the one person who want widgets that badly, but without one it becomes profitable to open up an entire new market sector of mass-produced widgets for the common man.

You can change the numbers and the details, but the general principles of microeconomics will prefer the free market every time.

To carry that example further, you have many people that are willing to pay $3 per widget. But there are barriers to opening a widget factory, such that there is only one widget factory in town. And the owner of that factory only wants to pay worker 50 cents per hour, selling the widgets produced for $3.00. Now total money paid to workers is much lower than if minimum wage is set to $3.00

So the moral of the story is minimum wage should be raised to the point where total employment is still at an acceptable level.

People who want no minimum wage are usually people who think the goal is to increase the GDP as much as possible or to lower unemployment as much as possible.

No minimum wage would definitely increase GDP, I don’t think there’s a lot of debate on that, but there really isn’t solid evidence or theory to know what effect it would have on unemployment. (1)

The other goal, the one most focused on by people who support increasing the minimum wage, is ensuring that minimum wage earners are making enough that they have a decent quality of life and don’t also need government benefits.

(1): It depends on the slopes of the demand and supply curves for labor and measuring those is really hard. People who want to raise the minimum wage usually claim that the demand curve for labor is relatively flat. People who want to get rid of the minimum wage usually claim that the demand curve is steeper.

The data is too noisy with boom & busts and inflation to really say, but it certainly doesn't /look/ like it makes a difference to employment rates:

https://imgur.com/a/KtC7BD0

My concern around the minimum wage is around employment. A high minimum wage guarantees that you will either be paid well or paid nothing. If the point of the policy is that everyone should receive a living wage, then half the guarantee is missing.

Whether a job guarantee would be good idea, I don't know. But a good policy needs to be comprehensive. It shouldn't let people slip through the cracks.

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