When horses' labor became uneconomic, we just turned them to glue. What do we do with people?
Force companies to pay a living wage.
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...
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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.