In places with strong unions, there is often a de facto, negotiated minimum at least on a sector by sector basis instead.
E.g. Norway has a roughly 50% unionisation rate, and no minimum wage in most situations, but most sectors are covered by negotiated agreements between the unions and employer organisations.
(Btw, the American healthcare system is about as far away from a free market as it gets. Don’t think that example supports your point.)
If your question is why is minimum wage a good policy, you could start here for a summary of the arguments and evidence: https://en.wikipedia.org/wiki/Minimum_wage
I don't think a full look at the history of minimum wages will be kind to their supporters. Minimum wages were created by labor unions for the sole purpose of excluding other workers who are more productive or less expensive than their members[0].
Going back further, labor unions were created during the railroad boom by racist white workers to exclude Chinese laborers who were 2x more productive for the same price. Instead of responding to competition by getting better, American railroad workers formed labor unions and lobbied politicians for relief, culminating in the Chinese Exclusion Act [1] that forcibly expelled 400,000 Chinese immigrants and led to some horrific violence and racism towards Asian people in this country.
In all cases, the role of government should not be to mandate wages or prices or anything else that markets are better suited to establish, or there will necessarily be higher unemployment. Governments can help by establishing some health and safety standards and policing abuses, but when it comes to accomplishing the social goals that minimum wages intend to, that's better done through tax policy and income redistribution (e.g., guaranteed minimum income, earned income tax credit, welfare benefits).
[0] https://en.wikipedia.org/wiki/Workingmen%27s_Party_of_Califo... [1] https://en.wikipedia.org/wiki/Chinese_Exclusion_Act
It sounds like, were you to acknowledge that thresholds exist somewhere for most things you think the threshold for minimum wage is 0 and that UBI and guaranteed services is a better mechanism.
Which is respectable, at least in that you recognize a government role in ensuring humane living conditions for its citizens. Most people who argue against a minimum wage seem to think any government action of any kind to protect or provide for citizens is "theft by taxation".
I’m not opposed to taxes. When designed properly, they’re transparent and avoid excluding economic activity like min wages do.
But you seem to be missing my point on housing code: do you support a nonzero housing code? Some is good, too much is bad. Same for minimum wage, many models and analyses show that some minimum wage improves productivity and counterintuitively increases employment in monopsonistic industries up to the point when they (partially) undo the damage the monopsony caused, at which point obviously a further increase in minimum wage causes damage as you say. My point is that your "real question" (which was an argumentative point in disguise) works rhetorically against nearly every intervention, some of which you certainly support (I tried to pick an obviously good intervention and came up with building code), and thus is a weak argument. If you truly support no market interventions I at least respect the internal consistency of your worldview but think you must underestimate how much food poisoning, fire death, servitude, etc it would cause.
As shown by comments elsewhere, picking a minimum wage is often based on some imagined everyman/woman’s standard of living that may preclude others from earning a livelihood at all due to jobs never created or capital replacing labor because government decided by fiat that no work that generates less than $X/hr in output shall occur. Human skills and living arrangements are infinitely variable, and governments fail when they attempt to preclude people with lower skills from finding work.
In practice, very few workers earn the minimum wage, but union contracts are often tied to it, so unions like to advance laws that increase the minimum wage, which leads to the outcomes described in the parent post.
As economic policy, they’re also bad because inflating the price floor of labor fairly quickly feeds through to higher costs for housing, food, and services.
Safety standards (ie rules of the road) and competent enforcement are good roles for government, and while they do tend to increase operating costs and function as regulatory barriers to entry, setting prices is best left to markets.
Monopsonies are easily solved by workers moving out of the (labor) market controlled by the buyer to better job prospects. Claiming ancestral ties to a place, etc, as reasons for remaining are then the choice of the worker. If enough people leave, the employer will be forced to increase wages to attract workers.
This is very different from most other goods, because no one really cares if you break your chair, the chair's parents didn't spend 18 years of their life on it, etc.. If you break a chair, you bear the full costs of replacing it.
Also, the full cost of replacing a human is vastly higher than the maintenance wage.
> Also, the full cost of replacing a human is vastly higher than the maintenance wage.
The trick for this to work is that the UBI has to really cover a lot of basic needs.
Overall, this works better for lower skilled workers than it does for higher skilled and higher paid workers. But it could also make sense for people staying home to raise their children, a job which is not compensated today.
How would such a program even work? If we say the Maintenance Wage is $15, is the government just paying the difference between that and the market rate? If so, it seems the ideal salaries to offer are $0 (let the government subsidize it) and $16+ (but you could just get two $0 workers, so I'd expect pay scales to really start at more like $30?)
This seems like it rapidly descends into Bureaucracy or Communism
It also has consequences like increasing the attractiveness of substituting capital (i.e., automation) for labor or simply leaving some work undone (e.g., many smaller restaurants in CA are going out of business due to multiple government policies, including very high minimum wages).
No, that doesn't hold because humans need these "maintenance costs" regardless of whether they're working or not. Therefore it's fallacious to claim that such "maintenance costs" stem from the job itself. It's a sunk cost arising from the person existing in the first place.
Same idea as police, fire, basic education. We want a properly educated, health, safe workforce. That's the basis of a healthy, productive, strong society.
Because you intentionally picked large unreasonable number and now want to argue it implies much smaller number is reasonable.
If maximum speed of 50km/h is reasonable in cities, why not making it 5km/h?
https://en.wikipedia.org/wiki/Locomotive_Acts#Locomotives_Ac...
On speed limits, when it comes to road deaths, you get people saying "one death is too many" and so on when one of their loved ones die, even when speed limits are set to 20 mph.
These people are wrong. Asking why a 1 mph limit is bad can help reveal that we do put a cost measured in lives on convenience, and we do face the risk of death when driving a car, and everyone has a number they think is reasonable.
Asking why $100/hr is too high can at least help us decide on a quantitative way to decide on a number rather than just guessing.
"Reasonable" is a completely subjective standard and not a good way to run a complex economy with an infinite combination of job seekers and providers.
Who gets to decide what is reasonable has big real world implications for millions of people. Get it wrong, and as we see in California here, people lose their jobs and businesses close all because some politician or bureaucrat (or misinformed voter) thinks they know better than workers and employers what the correct price for labor should be.
Because min wage policies have a cost and a benefit. The benefit only happens at relatively low numbers (enough for basic necessities). After that point you dont get more benefits but the costs still increase.
Is a three-bedroom house in [pick nicest neighborhood in any metro area] a necessity?
How about a one-bedroom apartment in the same neighborhood?
An in-law unit (e.g., "granny flat") on a farm just outside town?
A room in a six-bedroom co-op house where meals are collectively prepared and shared?
Same could be asked about food, clothes, etc. I can buy used clothes for $5 or new ones for $100.
"Basic necessities" is woolly term that in practice is full of paternalistic value judgements. Every individual has a variety of resources to draw upon that would make them willing/unwilling to work a job at a given wage.
A government-mandated minimum wage means some people who could find employment will not because their output do not exceed the wages the government has declared must be paid. In practice, it also means many people starting out in life or who are less skilled never get the chance to be hired and learn new skills that increase their pay.
Minimum wages remove the lowest rungs on the job ladder that often teach skills required to be successful higher up.
If this community ceases to exist, is it a societal negative? And further, will a high minimum wage speed up or slow down the decline of this community?
The obvious alternative is to tax the rich to feed the poorest. We can start with capital gains.
Prevent a desperate race to the bottom? Ensure something approaching a minimum wage? Nobody cares, so long as they're getting a UBI check from the government.
Not really? Other countries do industry-wide union agreements that apply to the whole sector, seems to work well enough for them.
When facts conflict with beliefs we hold dear and perhaps define our identities, our brains are very skilled at finding ways to keep believing what we want to believe.
Especially when the facts define your in-group. Changing such beliefs, makes you one of the people you and your friends hate. The mind will convince itself of pretty much anything to avoid such social suicide.
Labor isn't just another good, it is actual human beings whose wages greatly affect their quality of life.
Your rant about in-groups is odd.
There's a curious authoritarian tinge to these "free market" argument. "Free markets are powerful, therefore if I support free markets I am a powerful insider."
It usually takes an encounter with a major economic reverse - like being bankrupted by healthcare - for proponents to realise that the free market doesn't care about them either, no matter what they believe.
I am open to being convinced by either you or OP but your argument is failing to do so.
Of course, I can't prove that from scratch in a HN comment. What I can do is point out that in the science studying this, it is an uncontroversial fact.
I didn't substantiate that, which made it less convincing, but here is an Economics textbook saying the same thing: https://pressbooks.oer.hawaii.edu/principlesofmicroeconomics...
I know, you can think of an externality. Trust me, Economists can also think of externalities, far more than you or me. In general, they just add interesting nuance to the supply/demand model. They don't completely invalidate it.
But I can't easily demonstrate that, so I suspect I have not changed your mind.
Often because they're not even aware of the concept. The more sophisticated claim that it doesn't apply to the labor market.
The minimum wage discussions are dominated by this view.
The supply/demand analysis is simple: If a worker has skills worth $12/hour on the labor market, and the minimum wage is $15, that worker will be unemployed, making 0$/hour. They'll also not learn new skills, since they can't get a job.
Try bringing that up in a minimum wage discussion, and you'll be called many nasty names. Often equalling market wage to human worth, which means you think the poor are lesser humans. A few sophisticates will bring up vague externalities arguments, as if they negate the whole supply/demand concept.
From my perspective minimum wage laws is one of the main factors keeping people in poverty, but that concept is impossible to even explain to most people.
My main thought about externalities is that they their effect is usually minor, and can be ignored. Many of them are also positive. For the bigger ones, it's a case by case analysis.
Is the externality you're thinking of something around the government paying money to the working poor?
To demonstrate that this is a strawman, I will parrot back what that basic wikipedia article provides as a critique of your point: often in the real world that $12/hr number you provide is depressed by a one-sided monopsony (few large employers vs many small employees, a fact known as market concentration that has grown stronger over decades) and minimum wage can provide effectively a mega union against it to put it simply. When a market is dominated by a single entity what is something "worth"? You may say whatever the market will bear but in noncompetitive markets that is absolutely not the most efficient allocation of resources for the broader system. If insulin were a complete monopoly would it be worth $1M/vial because a billionaire would happily pay that much to save their life? I use the extreme to demonstrate the concept of market failure to you. By pointing out monopolistic forces am I saying "supply and demand don't apply"? Maybe in a way, but putting it that way is reductive and unproductive for our collaborative search for the truth in this discussion.
Or, for a totally separate but less abstract argument, say someone has no skills except for an ability to dig a ditch at $5/hr - it is low value because you could pay someone $50/hr to rent and operate a trencher and be 100x more productive at less total cost and a better overall outcome to society (I think these numbers are probably roughly reflective of reality), but this low skill person is unable to run that trencher. Is it better for society to "learn new skills" as you say by digging ditches for years? They probably would get a bit stronger but obviously never get close to the trencher's productivity or bang per buck. This is an exaggerated toy model but it demonstrates the point that many sub-minimum wage gigs teach negligible skills compared to formal education. I point this out just to object to your example - many people turn to education if possible when they fail to find employment, so to say sub-minimum wage employment will teach them skills whereas unemployment will be worthless just doesn't map on to most people's experience in the real world and to be frank sounds out of touch.