But what you don't see is the line of people outside the door, whose labour is worth less than $7.25 per hour, but who can't find (legal) work because of the minimum wage laws.
One among many possible positive effects of higher minimum wages is to shift the threshold at which it becomes profitable to upgrade low-tech processes to computerized ones, which can modernize sectors of the economy, and create some highly paid jobs [1]. Another positive effect is to redistribute more money to people in the remaining low-end jobs. But economies are complex and full of feedback loops, so those aren't really well established either.
[1] As an AI researcher, of course, this benefits me: humans undercutting us is one of our top problems with deploying research in the real world.
All this talk about minimum wage, haven't seen mention of living wage.
So it's actually only 3.1% of jobs that pay (Federal) minimum wage.
Sure the skillset might be considered less valuable, but is their actual life (and quality of it?).
[1] http://www.retailmeansjobs.com/data/CA/0 - even if the numbers are off by 300% it's still millions
Hah. Most of the EMTs not related to a fire department, that take you to hospital when you call 911 are on, well... minimum wage.
How's that for unsettling?
I think the data supports it pretty well, too. Minimum wage is reasonably well correlated with unemployment among lower-educated workers.
http://www.learnliberty.org/sites/default/files/Davies_0.pdf
One of these studies might be a better starting point: http://en.wikipedia.org/wiki/Minimum_wage#Empirical_studies
This machine.
And really, does economics ever get much better than that? I think it rarely gets even that good.
When you have a correlation, the logical possibilities are that A causes B, B causes A, C causes both, or the correlation isn't real -- just random noise. I think the last option is pretty unlikely, and I'm having a very hard time imagining how unemployment among lower skilled workers would cause minimum wage increases, or what in the world would cause both. Particularly persuasive to me is that the strength of the relationship changes with education level -- exactly what I'd expect.
No, I suppose I don't know for sure. It's always possible something else causes both, and sure, the dots are all over the map even if there is a relationship; it is a complex system. But to be honest, I really do find that data pretty persuasive.
I didn't see anything in the Wikipedia entry that changed my mind much, either. Mostly it was unrelated to what I posted: studies specifically on teenagers (which showed more or less what I'd expect, that minimum wage increases decreased employment), and a comment that in a complex system, lots of factors affect unemployment. (Sure, of course).
I don't know, it says "Economists now disagree", but it doesn't say much about what changed their minds. I don't feel bound to change mine just because they did, though it's certainly something to take seriously.
Minimum wages are usually set at rates well below market. I.e., it's a law that says "keep doing what you are doing" for the vast majority of workers.
In the rare cases when the minimum wage law changes behavior, unemployment is the typical result (see American Samoa's recent troubles, for example).
Well, while we're exchanging anecdotes, we've got an $18/hr minimum wage here in Denmark, and unemployment is quite low. The main effect is that wages are more compressed than in the US. It does help that there's an aggressive upskilling program, so people automated out of a job get free education to move up to sectors with more demand.
One way of thinking of it is that a higher minimum wage, coupled with technological advancement and a strong education system, just accelerates the automation curve. Today's $10/hr labor will be tomorrow's automatable-for-$2/hr labor anyway. So people in those jobs are going to have to switch to something else in the near future. Why not automate 'em a few years earlier, and get a jump on both deploying new tech and moving people into something better? Then you can export the resulting tech, too.
Why not automate 'em a few years earlier, and get a jump on both deploying new tech and moving people into something better?
Because it would be more efficient to invest in automating other processes?
Suppose you have two processes - one process (call it A) costs a human $12/hour, another (B) costs a human $6/hour. You only have enough money to invest in automating one. It's obviously more efficient to automate A.
If the minimum wage is raised to $12/hour, then the market signal to automate A preferably to B is lost.
The market signal is intentionally changed from "automate A preferably to B" to "it will make financial sense to automate both A and B, do it".
There are unemployed people today who would like to have a job. Isn't that sufficient empirical evidence?
> No, because lowering the minimum wage, empirically, does not produce new jobs.
But it does. As the minimum wage goes to zero, I could personally create a larger and larger number of jobs.
Lets say a restraunt owner didn't have to pay minimum wage to a cleaner, vs one who had to pay minimum wage. The one who has to pay more might decide that they don't need cleaning as much, and so forego the job offer, while the one who didn't have to pay minimum could offer a really low amount, and someone might take them up on that job.
Minimum wage laws, at some level, prohibit useful employment. But every day the pool of people whose labor is effectively worthless--zero marginal product people, as Tyler Cowen calls them--is growing larger. Very few people, left or right, seem to want to confront this fact. Mostly because it's unpalatable: when horses' labor became uneconomic, we just turned them to glue. What do we do with people?
When horses' labor became uneconomic, we just turned them to glue. What do we do with people?
Force companies to pay a living wage.
?
It's called supply and demand. If there's no demand for cheap laborers, the answer is not to make them more expensive to hire, or to force companies to pay them a minimum. That just exacerbates the problem - now they can't even work for wages they might be able to be worth. It's very difficult to get better at a job unless you're either working at it or have the resources to do it in your free time. Someone who can't get a minimum wage job probably doesn't have the resources to learn the skills to move up.
I can personally attest that it's not just teenagers trying to find minimum wage jobs. I am a teenager, and I while I was looking for a summer job (I'm now employed as a software consultant) I was regularly (i.e., every single time) competing with people in their 20s or even, in some cases, older than that, who were simply unable to find work elsewhere.
This way, they can either look for a real job to earn cash, instead of living on "vouchers/food tickets", or have to take classes to reskill/up-skill. They won't be battling for their next meal, but they also can't have leasure time.
I'm only suggesting that a minimum wage is necessary, because there is a cost of living in a modern society. Money pays for shelter. Money pays for healthcare. Money pays for education and food. And unless you're in a socialist system, that money comes from wages. So a standard should be met. Especially in cases where a corporation would otherwise consider someone's labor to be essentially worthless.
And yes, perhaps if that standard itself were fair (assuming it's currently unfair), then in some places and in some jobs it might be less than whatever the current minimum wage is, where the minimum wage exists. Elsewhere it might be higher. I don't know, and I'll readily admit I might be bringing a checkers set to a chess match when discussing economics on this forum but I honestly believe it should be something.
If the standard of living is low enough that, taking the same wages as an outsourced worker, someone doing that job could still survive, you might have an argument against the minimum wage standard there.
Otherwise, if only option to retain local employment is to pay what those outsourced workers are making, or less, in a market where more than that means living hand to mouth, then it's a distinction without a difference to me.
That's a good argument for a guaranteed minimum income. It's a bad argument for a minimum wage laws, because at least sometimes they result in people earning zero instead of low wages.
And unless you're in a socialist system, that money comes from wages.
We're already in a partly socialist system. Minimum wage laws are a convoluted and inefficient form of welfare; it's better to just directly give money to poor people, and then avoid doing anything that interferes with their ability to increase their income.
Why not? You seem to think that there is only one big company setting wages for everyone. If company X needs good workers and is only willing to pay $5 per hour, but company Y is willing to pay $12 per hour, company X is not going to get the good workers. If they want better workers they will have to raise their wages.
> without any regard to the standard of living for the employees making those wages.
The clients who pay me do so without any regard to my standard of living. They pay me with regard to the value I provide. If you are suggesting that low skill employees need to be paid based on something other than the value they provide then you are suggesting that they be given charity rather than wages.
10 years ago a college degree in business or communications was enough to land a salaried-job. Now, to obtain a well-paying job straight out of college either a STEM degree or graduate work is usually required. It is extreme to suggest that citizens either acquire a high-level of education (which many simply cannot complete) or perform work for $2 an hour.
why is that a wrong ideal to move towards to? I agree that current education is poor, but thats an implementation problem. The idea that every citizen should be highly educated is a good one, and that in the future, in order to provide value (which is rewarded in the form of money), you can't just labour.
But all organizations have a choice: I can either pay a worker $X or replace labor with capital for $Y, within the budgetary constraint $Z. If $Y < $X, they'll do that, or be outcompeted by organizations which do choose to do that. (If $Y and $X are both >$Z, well, that's when the organization closes up shop.)
That's a real choice, and it's not easily legislated into oblivion.
I understand that, and I don't mean to demonize business by any means. A minimum wage might well stifle competition somewhat, but I think the lack of one would do more harm than good. Given the choice between harm to business and harm to people, I'll choose to harm business.
I suppose for some types of jobs it may be. If a coffee shop closes, and it's competitor opens another branch to soak up the extra demand, the additional coffee shop will probably use approximately the same number of employees as the old one fired. But can the same be said of, say, factories? What if the second factory, while filling the same demand as the first, was more successful because it used more effective automation?
Perhaps the answer (at least in the US) would be to reduce the cost of reeducation to facilitate transition, and socialize healthcare? Lower wages might not be so bad where healthcare and education don't represent potential lifetime burdens for people. But then the tax burden for that would fall disproportionately on the poor wouldn't it? And also, there might just not be jobs at all to replace the ones lost.
I don't know.
The trend of people squandering their education and ending up in low paying jobs anyway disturbs me, but I think that could be solved by offering only majors that are in demand for free. Free STEM and medical sciences would be my initial suggestion, but I would want to see any decision like that backed up with some solid data (perhaps the data would reveal my concern is unfounded).
Who was harmed? The business or the people?
The $5 per hour may not seem like much, but to the teenager it is $5 per hour, plus a chance to learn to manage their own money, a chance to learn people skills, a chance to learn work ethic, a chance to have a good reference from you for later jobs, etc.
But back to your question about what happens when employers lower their wages to $2 per hour, they would probably lose all of their employees and have to raise wages if they want workers. Believe it or not, wages do correspond in some way to the amount of benefit an employee brings to a company.
Lets say you want to hire someone to clean your house. How much would you have to pay in order to attract someone with enough skill to do the job? You couldn't just say you'll pay $0.50 per hour and magically get people to clean your house at that rate. There might be some people you'd attract for $5 per hour. As the price goes up, so does the pool of people you could pull from. However, above a certain price, it isn't worth it for you to pay someone else to do it. You might do it yourself or just live with it being dirty.
If having your house cleaned is worth only $5 per hour to you and someone is willing to do house cleaning for $5 per hour should you be allowed to hire them? They probably aren't going to be willing to work for $5 per hour if they can make $10 per hour somewhere else. Does it make sense for the government to say, "You can't hire this person unless the value they provide is greater than $7.25 per hour"? I don't feel that benefits you or the person who you want to pay. I don't feel it benefits society as a whole because I think we benefit by having money flowing through more hands not fewer. Minimum wage says that transactions below a certain hourly rate are not allowed, so it prevents money from flowing through some of the hands that might get it otherwise.
The least worst situation, in my opinion, is the minimum wage, and the only cost is that it has an overhead on society (in the form of benefit pay outs for jobs that got destroyed by the minimum wage).
It might kill the economy or grow a black market, but it is easily legislated into oblivion. The thing is: legislation can decrease $X and/or increase $Y. Put a $1000 a barrel tax on oil, and proportionally on other sources of energy, and abolish income taxes and you will find that people are willing to pay close to $Z for manual labour.
Yes, that is exaggeration, but any increase of the cost of capital relative to that of manual labour will have some effect. It will either put companies out of business or it will create manual labour jobs.
Problem is that this requires international cooperation or unilateral restrictions on trade (import bans or high import tariffs)
So what is a living wage for a teenager living at home? What is a living wage for a college student going to school full time but still supported by their parents? What is a living wage for a retired grandparent that wants to 'stay young'? How about for a spouse who just wants to be out of the house because the other member of the marriage brings home sufficient disposable income?
The notion that there is a single administratively selectable price point that is the 'minimum' wage for any and all job situations is a fallacy.
I admit to not knowing the full details of how it works in Germany--not many good sources on the Internet immediately apparent, so I'd be plenty eager to hear if I'm misunderstanding how it works.
Who determines what a "living wage" is? Does it include having cable? Internet? A car?
But beyond that, why do you want to put up any barriers to what jobs companies can hire workers for? Lets say you own a company that employees 20 people and it sits on one acre of land. You need to get someone to mow the grass. You can hire company to come in for $80 per week to mow for you. They have big expensive lawnmowers and can do it very quickly. Or you can hire Joe to mow it using an older push mower you have. Joe isn't super fast and it will take him 10 hours. So you decide the value is $8 per hour in order to be on par with the company that will do it.
I wouldn't want the government to come in and make laws that make it better for you to hire the big company than Joe. I wouldn't want them to make it harder for you to justify taking a chance on hiring Joe and giving him a shot at a job just because someone doesn't think that $8 per hour is a living wage.
If Joe works for you for a year and has good track record, who knows. Maybe he will prove dependable enough that you can find other things for him to do. Maybe some of those things will be worth paying him more. Or maybe he can get a higher paying job working for the big lawn-mowing company based on his track record with you.
Do you now fire joe and hire the mowing company? or do you instead choose to pay hin $4 an hour? Ovbiously joe can't increase his speed of mowing beyond a certain limit - he is human after all.
The real underlying question is - if the value that joe provides can be instead provided via a cheaper source, then the business _should_ use that cheaper source, joe's life shouldnt and won't come into consideration. This method of thinking seems incompatible with the concepts of compassion and empathy, but it seems this is the way the real world works...
Regarding just hiring the person managing the labor to do the work: Don't forget that one person can manage multiple people.
The guy yelling at the toilet scrubber doesn't have his job because he is particularly skilled at yelling at toilet scrubbers.
But consider, if a HS dropout could learn how to wrench on a car for $2/hour, maybe they could get a full auto tech position (at a living wage) later on, without the crushing debt of trade school.
That may not make them a manager, but there are jobs that pay higher than minimum wage that require the ability to clean as a skill. Often those jobs come with new skills to be learned. And yes, someone who has some degree of management potential could definitely start out cleaning toilets for minimum wage and work their way up to managing the cleaning staff somewhere.
To make a long story short, today I'm a Senior Software Developer at a large company. I'm happy enough without any aspirations to management at this time :-)
I agree with you that you don't learn a lot of great marketable skills by scrubbing things clean. But such a job, by itself, can't stop you from learning if you're determined.
Actually, that's exactly what will happen. You'll do the job. Then you'll learn how to do it well. Then your job will be to teach others to do it well. Then you'll become an assistant manager, making sure people have the training and equipment to do it well, and handling problems that others don't have the experience for. Then you'll become a manager because you know how to handle people and make that part of the business succeed. Then you'll become a higher level manager because you know how to make a team of workers successful.
That's not a far-fetched scenario. That's exactly what happens in many organizations. It's not the only way into leadership, but it is a well-trodden path.
When your parents are struggling to make ends meet like this, what do you do as a kid? You start working night shifts in high school instead of studying for the SATs.
If you took people in this trap who were willing, and subsidized them for two years to go to community college, I feel like you'd have a huge increase in productivity, especially across generations. And it wouldn't even be that expensive, especially if you factored in increased tax revenue. Or heck, as a lesser goal, make it a goal to enable people making under $X/hour to get their GED.
Maybe this is way too idealistic.
I was lucky. Relatively rich parents, we could move into a good school district, I got to go to a good university, not really worry about money, and now I work in the software industry which is booming. But a huge part of that I owe to circumstance - I could study in school, never hungry, never worried about paying rent.
But there are also plenty of counterexamples of people who didn't have rich parents, didn't live in good school districts, and did it on their own. I know a person just like that, and she paid for school on her own working fast food shifts at night and full time in the summer, and now has a great job in biotech. $anecdote++;
> you can't see first hand that education really gets you anything.
I don't see that education really does get you anything except a stifled sense of creativity, decreased curiosity, and crushing debt. See: the current college-grad crisis.
"Education" in a modern, western sense is a red herring. Being a lifelong learner, being always curious, and having the desire to do something useful with your life -- if you have these qualities you'll do just fine.
Yes, but those people are playing on "hard" mode, so to speak. More power to them, but it's unreasonable to imply that all people in poor socioeconomic circumstances will be able to do the same.
EDIT (reply to below): Like I said, they're playing on "hard" mode. You cannot expect all or even most people playing on "hard" mode to achieve the same things that people playing on "easy" mode can achieve (people like me living in an affluent suburb, whose parents are upper-middle class, who went to fantastic local schools filled with other upper-middle class students, whose parents can afford to pay for college and any educational expense, etc.)
Why?
First, while it's not entirely a zero-sum game, there's a considerable competitiveness aspect - there aren't enough college slots or scholarships to accommodate everyone getting a good degree from a strong school, and if there were, there wouldn't be enough jobs to hire them into. So at various points, people are going to not make the cut. Do we simply say "well, if you're not in the top X% of the nation you'll have to make do on $10/hour?"
Secondly, because we can't simply wave our wands and make everyone 15-30 IQ points smarter. Getting every poor child to be as motivated and intelligent as that anecdote is at least as large a problem as income inequality generally. It's like saying "I've got a cure for cancer, but it requires time travel" - you've just reduced a Very Hard problem to a different Very Hard problem, which is a solid achievement but doesn't actually solve anything.
EDIT: And Thirdly, why should the answer be that poor people have to work their asses off to catch up just because they made the wrong choice of parents? It's like a race where some contestants have to carry dumbbells - it's great that they can actually succeed, but it's still miles and miles from fair.
False dilemma. The choices are not "either get a good degree from a strong school, or make $10/hour forever".
> we can't simply wave our wands and make everyone 15-30 IQ points smarter
I'm not sure what your point is here.
> why should the answer be that poor people have to work their asses off to catch up just because they made the wrong choice of parents
I wasn't arguing that they should, just that they could.
You're right that it's not yet that stark. Nonetheless, while we need a system which encourages, motivates, and rewards the people who succeed, we also need a system which doesn't abandon the people who don't make the cut. We can't just simply say "well, everyone had a shot" and leave it at that. There are millions of Americans who are working poor, and tens of millions more who are still struggling to get by in the land of plenty.
>I'm not sure what your point is here.
My point is that just because there are ways out for people who are unusually intelligent and unusually diligent doesn't solve the societal inequity, because not everyone can take advantage of those outs unless they suddenly get a lot smarter en masse. Again, even if we perfect meritocracy and all the incentives, we can't ignore the people who don't have IQs over 115 or whatever[1]
[1] - or if IQ is an inadequate measurement, whatever measurement you have for merit.
Suppose that we were to play a game - you are given two people, A and B, and the following information about their parents: income level and education level (name of degree/diploma(s) and schools). Do you think that you could come up with a strategy for guessing which person - A or B - will make more money at age 30, that would do better than just flipping a coin?
Formal education does offer you huge benefits. I walked out of school into a job paying many times minimum wage - I got the job because I did well on the interviews, but I got the interviews because I have a degree. Is this fair? Probably not, but it is the reality of the situation. And I do feel like I learned a ton in school. Of course, there are problems with the education system, but that's another discussion.
Is the lesson that parents' education causes this, or that parents who value education/learning produce that type of child? Not to be a "correlation != causation" parrot, but it's worth considering.
Maybe being raised in an environment where participating in "the system" (school, college, salaried job) is the norm produces children who are more likely to participate in the system themselves?
> but I got the interviews because I have a degree
I wouldn't argue against this point on another site, but it should go without saying that here in hacker land this isn't really a thing.
The world is full of examples like this, but here's the thing that is always glossed over: hard work alone isn't sufficient for success. The kid who grows up on the wrong side of the tracks not only needs to do all the right things, they also need to never do the wrong thing, which typically requires both diligence and luck.
The rich kid who gets caught with drugs? It's a youthful indiscretion, he gets off with a talking to. The poor kid gets a criminal record, which makes it many times harder to succeed.
The rich kid who get pregnant? Her parents pay for an abortion. The poor kid drops out of school to raise the child.
The rich kid who slacks off an flunks a couple classes in high school? Parents pay for some fancy prep school to polish the kids academic record. The poor kid is essentially locked out of top-tier colleges.
The rich kid who doesn't land the Goldman Sachs internship after junior year? Goes to work at his mother's friend's consulting firm and still has something "good" on his resume when he's applying for the first job out of college. The poor kid works at the supermarket.
It's not that being poor means that you can't succeed if you work hard. It's that it means that the deck is stacked against you every step of the way, and that just working hard isn't actually enough even if you do everything right that's in your power to do. You also need to be lucky. If you are sufficiently well-connected and wealthy, however, lots of "minor" things get overlooked and you can be quite successful even if you don't work especially hard and aren't especially lucky.
If they do have enough reliability to show up on time and enough motivation to go to the community college, there are parts of the country where they can work a minimum wage job and still pay for tuition and a place to stay.
The unemployment problem in unskilled or low skilled labor is largely because government benefits make is economically better for low skilled people to NOT work. In my town there was a waitress who quit her job rather than take on the more hours they wanted her to work because it would have meant losing the money she was getting from the government.
I see a lot of people whose job hunting efforts are minimal or are for jobs they know they aren't qualified for because they want to stay on unemployment. When the unemployment runs out, the real job search will begin.
For a statistical look at this see the book: The Redistribution Recession: How Labor Market Distortions Contracted the Economy
About 15% of Americans are borderline mentally retarded. They are trainable, but most of the suitable jobs have been automated. Finding interesting work for them is a real problem and has gone badly. Currently the welfare apparatus is farming them for votes, but this is not a desirable or sustainable situation.
Also, the distribution is by definition normal, and I have hard time believing 15% of population is retarded. That would mean about 1 in every 6 person I met is retarded, a number too big to believe. Now 3 genius/3 dumb out of 100 is more like what my experience has been.
We'll have good, decently skilled, enthusiastic, hardworking "zero marginal product" people simply because software/robots will be able to do it cheaper than even a subsistence (calories+shelter) wage, and in most tasks employing a human for it would be a senseless luxury.
You can hire a bunch of people to carry you around in a carriage on their backs, or you can hire people to do arithmetics for you - but almost noone does. Soon (in my and your lifetime) the same will be for all the manual, exhausting jobs; for most of the driving, service, cleaning, delivery, and retail jobs; for most of the simple clerical jobs. Even if there is no progress in AI at all, we'll come to a state where, say, 10% of population can cover all major needs (agriculture, food production, service, clothing, construction, consumer goods manufacture, transportation, medical, legal, etc) of everyone. What we'll do with the other 90% (or 99%, or even 100% if AI happens) ? They will be nice, great, fellow humans, but practically speaking, the society can do with them and can do without them. That's a choice for the society - utopias or distopias are both possible.
Both distopia and utopia is possible, but the distopia is much more likely due to the capitalist system we have, and the rich/poor gap is only going to grow.
With trade, there's always relative competitive advantage. It's probably economically more sensible for you the software developer to hire someone to mow your lawn, since you make more money in an hour of writing software than it costs to get someone to mow your lawn. Even if you're better at mowing your lawn than the person you hire - you still make more money writing software (example: You make $100/hour writing software. It takes you 1 hour to mow your lawn, or you can hire someone for 2 hours to do it for you at $20/hour. Opportunity cost to mow the lawn: $200. Gain from hiring someone to mow the lawn: $160. So even though you can mow the lawn twice as fast as the person you hire can, it's still better to hire someone.)
So now it becomes a resourcing problem - you need people who can mow your lawn. Robots can do that, but I don't think that robots can do all jobs at least not in the near future. Which is why I think that a huge part of this is a resourcing problem - you have a mismatch between skills and demand, which again I think is solved through education. Consider software developers again - I bet that if suddenly there was no demand for software developers, any one of us could be successful in another career, since at the heart of it, we're logical thinkers. We need to get as many people to that level as possible.
Furthermore, it's very important to not make poverty generational. I think that I contribute to society through my employment (at least I pay a ton of taxes), but if I wasn't as lucky as I was, I might not be in the same position to do so. I'd still be as capable, at least in terms of potential, but I wouldn't have the opportunity.
The lawnmower example isn't what we're seeing already now - we have structural unemployment of young average people who could and would do simple jobs like mowing lawns, flipping burgers and cleaning sidewalks; but there already are millions more of them than such jobs. And with every year, millions these simple jobs are going away, and unlike all the previous tech-job-shifts, this time the new industries aren't creating new jobs for them. Software developers are hiring other people for lawns and babysitting, but they are currently replacing much more people in "obsolete" industries with high-tech low-headcount disruptive business models.
I do agree with your comments about what's important and how it should be - but it's not really relevant when estimating what will actually be; wishful thinking won't solve it, especially as it's clearly beneficial for the powerful to ignore this problem as long as possible.
I would love to see what the wealth distribution looks like after a year.
Even after a few hundred transactions an interesting pattern emerged---a power law distribution of money, with the average amount of money per actor less than the starting amount of money (generally, about 66% of the starting amount). The results were similar regardless of the number of actors, the amount of starting money, and the amount per transaction (even a fixed amount exchanged per transaction would result in a similar result).
I think the result would the same for your hypothetical town.
If hard work is all it takes to succeed, then both should earn their first $1,000,000 at the same time, right?
It shocks me truly because we see the reality every single day. Two people, same job title, same responsibilities, same home life situation, and one far outperforms the other. The outperformer gets the bigger bonus, the bigger raise, and the promotion. Factored out 10 years, the outperformer ends up far "richer" than the other guy, and the other guy calls it inequality.
Yes, inequality happens. Yes, some people get a big head start. Yes, some people can tap family connections. But look around you, and I guarantee you'll observe my scenario 1,000,000 times before you observe your scenario once.
I'm not sure where you get that idea from. The purpose of my thought experiment is to show that outcome is inextricably tied to opportunity.
That guy who received $10,000,000, he's going to have a lot of opportunities. He gets to buy himself an education; he gets to invest in businesses that won't pay out for a few years, without having to worry about where his next meal will come from. He gets to treat minor ailments, before they fester into something more serious.
Too many people assume that the outcome is only dependent on effort alone. Too many people like to think that a person is destitute only because he is lazy, not because he didn't have any of the opportunities offered to those of us who grew up in a well-off environment.
In a perfect world, your financial outcome will be tied only to the amount of effort you put in. I'm trying to point out that the real world is hardly perfect.
One of the great ironies is that many people who think that what you're born with have no correlation with how your life will turn out are also the same people who think that an inheritance tax is a socialistic imposition that unjustly punishes rich parents from helping out their kids.
Consider that, as the wage at the bottom end decreases, the supply of labor may actually increase, because people with low income may be looking for a second (or third) job, trying to work more hours to make up for their low income. In other words, the standard textbook picture of how supply and demand work need not apply to labor.
When that happens, the market for labor may never clear despite falling wages. And then everybody loses - even capitalists would lose, because low wages means low income means low spending means low revenue for firms means low profits for capitalists.
I can't offer any deep analysis, but perhaps, with higher wages, employers are more careful with their hiring decisions and with their use of labour (or perhaps, they can simply attract better workers). Perhaps, also, the workers value their jobs more as the jobs are literally worth more.
Also, it's worth noting that now the first $18,200 of income (58% if you earn minimum wage for 52 weeks) is tax-free - that is, tax will be withheld on the basis of your estimated yearly income but then returned to you at mid-year when you file your tax return. The tax rate above the tax-free threshold is then 19% [2]. So if you earned absolute minimum wage for 52 weeks a year, you'd net a total of $28,999.57 - essentially, $29,000 after tax. This does not include any further tax breaks you may receive for being a low-income earner.
There's then various social safety nets if you are minimum wage and supporting a dependent (child, disabled family member, etc.) which stack on top of that and/or give tax breaks, but I'm not really familiar with them so can't elaborate much further there.
[1] http://www.fairwork.gov.au/pay/national-minimum-wage/pages/d... [2] http://www.ato.gov.au/individuals/content.aspx?doc=/content/...
Even hiring someone who was unskilled to do basic chores around my house would be freeing time up for me either to work at a higher rate (thus profit?) or gives me valuable relaxation time.
There are uncountably many human-requiring tasks that don't improve the world at all. For instance, "count all 'pretty' things and divide the number by two".
While silly this work still takes effort and you'd have a hard time finding someone to put out that effort without you paying them. You don't benefit in this scenario though because the work is silly. There is no value in having it done.
This is further complicated by subjective value. Even if we had identical homes in identical states we wouldn't identically value the same incremental improvement from having them cleaned. This is especially true across income levels.
If you set a minimum wage you ensure everyone working in that industry makes that wage in the same way that if you execute everyone over six-feet tall you ensure that nobody bumps their head. While you personally may even end up paying a bit more for a cleaner, poorer people who can't afford that would simply stop hiring cleaners. Their ex-cleaners make nothing but have conveniently been removed from the statistics so everything seems to be better. And now everyone's house is dirty.
http://blogs.law.harvard.edu/philg/2012/12/12/what-do-the-hi...