Rejecting industry dogma, Costco backs calls to lift minimum wage | Hacker News Reader

Rejecting industry dogma, Costco backs calls to lift minimum wage

latimes.com

188 pointsSparksZilla462 comments

I like Costco, I think we should raise the minimum wage, and I am a reliable Democratic voter, which is one of the reasons I know that Costco is a key corporate supporter of the Democratic party, and that the minimum wage is a Democratic party identity issue.

Agree also with the other comment here that the minimum wage is a structural advantage for Costco against Walmart.

I'm surprised we haven't heard more arguments for raising the minimum wage over the last few years. The main argument against it is that it leads to inflation, but inflation has been the least of our worries recently.

One of the biggest arguments against it is that raises unemployment by making more people unemployable. Some people do not generate $10 + overhead cost per hour.

Raising the minimum wage hurts the young the most since they need low skill, low value jobs to learn and gain experience. By removing that rung of the ladder we hurt them greatly throughout their life.

That sure has happened in Australia.

These assessments of minimum wage that end at 'it raises unemployment' are intellectually stunted; it belies a simplistic understanding of economics and either an oversight or refusal to see that rising minimum wage makes for more spenders, which in turn drives demand. The higher-wage:higher-unemployment argument is a go-to in the wheelhouse of supply-side economists.

Why not set minimum wage to $35/hr and we make everyone middle class?

for the same reason offering loans and grants didn't make college affordable, prices adjust to the money available and the costs to create.

Are you ready to say all the people you have met or know are worth thirty five bucks and hour in a job? Would you pay them the same to work for you?

;)

Then let's raise it to $1000 an hour. We'll all be rich.

To respond to the above comment, yes, it does lead to higher unemployment for those with lower skills, particularly in an environment when unemployment is already high.

Who would you hire for $12 an hour? A teenager with no experience or someone who was laid off but has 5-10 years of experience? We already see (at least in the United States) that teen unemployment is the highest of all age groups at 23%, when average unemployment amongst all age groups is 7.9%. [1]

For comparison, Germany has no statutory minimum wage (except for a few specific employment groups). Not exactly a bastion of poverty and destitution. [2]

[1]: http://www.bls.gov/news.release/empsit.a.htm [2]: http://www.economist.com/node/21536648

Then let's raise it to $1000 an hour. We'll all be rich

Ridiculous arguments are ridiculous. The rest of your point is more than strong enough to stand on its own without that kind of nonsense.

That's my point. Obviously, increasing the minimum wage to $1000 is ridiculous. But so is the idea that raising the minimum wage by $1 has no consequence, as some claim. The higher cost you impose on employers for low skill jobs, the more likely it will be that employers will attempt to hire fewer of those workers or reject unskilled candidates. It's simple logic.

For instance, the hamburger-making machine will replace teenagers who need a job at McDonald's. [1] Why wouldn't an employer just purchase a machine that will reduce costs, create a consistent product, and not call in sick if it can do so at an equivalent or lower cost than an unskilled teen who would be required to earn $10 or $12 an hour?

[1]: http://www.gizmag.com/hamburger-machine/25159/

EDIT: 5.2% of US workers earn at or below the minimum wage, 50% of those are under 25: http://www.bls.gov/cps/minwage2011.htm

Why do you think a hamburger making machine is a bad thing? Automation in the long term is good for the economy, if it wasn't for automation those same teenagers would be manually plowing fields instead of flipping burgers.

If anything raising the minimum wage a bit should spur a lot of automation industries, and those same teenagers would be more likely to get an entry level job there, instead of at a menial job.

I guess the point is that, as the min wage grows, certain considerations that were not viable before become viable now, and as a consequence people who otherwise may have been considered for a job would no more, or would lose the job, or the job itself would disappear.

...yet when industry eliminates redundancies and increases automation, resulting in lost jobs, it's viewed as efficiency.

It does have other consequences, certainly.

Automation in the long term is a good thing. However forcing automation by legal system is suboptimal for economy. Even in the long term.

It's not a bad thing for us. It's a bad for the people that minimum wage is supposedly trying to help. Increase minimum wage, decrease low skilled jobs, and increase mechanization.

It is a bad thing for us (software developers) too: yes, we would get a contract to automate these low-skilled guys jobs, but then who's going to pay for these low-skilled guys' unemployment?

Besides, our automated solutions would still deliver higher-than-before prices, because if automation was cheaper, then low-skilled jobs would have been automated away without government's legal help.

>Why do you think a hamburger making machine is a bad thing?

It's a bad thing if you pay the bills by making hamburgers.

It's simple fallacious logic

FTFY. I don't normally do this, but since you are relying on classic straw man for your argument, I thought I might as well make it obvious that your whole argument is suspect logically.

Getting rid of low-skill, unproductive jobs that are nothing but drudgery to the sorry people stuck doing them is a Good Thing.

That's extraordinarily elitist and insensitive to some people desperate to work, isn't it?

Not really, no. I know loads of people with low-wage jobs. None of them like doing those shitty jobs so much that they'll turn down a wage rise, or a funded unemployment, or a higher-paying job, to "protect" their particular employer. Nobody wants to work more for less, and when you talk about a system that keeps productivity down (ie: a race to the bottom between labor wages and the price of automation), you are ultimately talking about everyone working more for less.

> None of them like doing those shitty jobs so much that they'll turn down a wage rise, or a funded unemployment, or a higher-paying job, to "protect" their particular employer.

No, but I'm sure they like them better than not doing anything, since they have the choice to not do anything right now. If the minimum wage is raised above what they are capable of producing in value, they will no longer have the choice at all.

It wouldn't be a choice between a cardboard box and tedium if we'd give the human race a fucking chance to do its thing.

So you say $0 per hour is better than $7 per hour? Somehow hard to believe.

What are some examples of high-drudgery unproductive jobs?

Submitting link spam onto blog posts. Washing cars. Wiping reflective metal surfaces in elevators. Doing inventory. Growing and mowing lawns. Frying chips. Bathroom attendant at a nightclub.

Really? So no one would pay to have their car washed, keep their elevators clean, have a count of their inventory, have a nice lawn, or eat fried chips? (I'm stumped on the bathroom attendants, but I assume someone likes their mouthwash, towel, and mint services)

If someone would pay to have those things done, then that means they value it. They have value. The crappy thing is that the minimum wage prevents people from matching the value in those tasks with someone willing to tolerate that drudgery for the reward. Government knows best, as usual.

Its actually pretty reasonable to posit that raising the minimum wage will have no effect on employment. Take a look at S&P 500 profits over the last few years. Then look at real household income. If you want to get crazy, look at productivity measures. Profits are going up while income is falling in real terms. It stands to reason that there's a buck to spare there.

Oddly enough it may not be true - the share of GDP captured is roughly 40% for corporations - and has dropped for wages. That is whilst the share of GDP for companies has remained roughly same for past few decades, wages share has dropped.

This means that the share of wealth going to wage earners and working stiffs is dropping - but is not being captured by company profits.

Where is it going? To self employed dividend earners - basically there are more one person bands now, freelancers etc. Some will be tax efficient schemes for bankers, but most are, well, us on HN.

I cannot find the link - will see in the morning.

I was talking about the last 5 years, as opposed to the last 30. Although household income has been declining in real terms for the last 30.

I'd be interested to see your link. I was under the impression that most growth has been captured by larger corporations rather than free-lancers, and if they refer to 'self-employed dividend earners' that could easily be people collecting dividends and capital gains on stock. But that's all speculation -- hit me up with the link if you get a chance.

It's actually been remarkably similar over the past 50 years.

http://en.wikipedia.org/wiki/Wage_share

This is terrible reasoning. A million different variables go into real household income, productivity, and corporate profits.

Just because corporations are making profits does not necessarily mean a significant number of people making minimum wage won't be fired when the minimum wage is raised. It's not like you have managers sitting around saying, "Well, we're making money... so we can afford to pay a worker $9/hour even though their output is only worth $8/hour." If it does not make economic sense to retain a worker, a company will fire that worker.

I don't think it's nonsense. The things that are wrong with a $1000 minimum wage are the same things that are wrong with a $10 minimum wage. They're just happening to different people.

Setting a $1000 minimum wage would destroy essentially all jobs. There's nothing I or most people could do that's worth that much. Nothing at all. With my job gone, my income is zero and the products and services I contributed to society don't exist. Such a law would make me permanently poor, and would make society incrementally poorer.

This is what I think happens to people whose natural output is below the minimum wage. Because their skills and education justify $6/hr but not $9, they aren't allowed to make that $6. They and society are $6/hr poorer for it.

I believe firmly that people should be allowed to work if they want to, on whatever terms they find agreeable and can get. If you want to help them beyond that, I'm sure they'll think that's swell. But it shouldn't come in the form of destroying their job.

You're ignoring the fact that if you made $1000/hr, you could afford (and thus would be charged) higher prices for everything else, and so would everyone. Thus you would be producing $1000/hr, it's just that a thousand then would mean less than it does now. That's inflation. So long as people spend and the economy grows faster than that, we're better off than we were.

Hyperinflation would destroy everyone's savings and destroy the ability of anyone to invest. This is a ridiculous line of reasoning anyways.

It's hyperinflation if you're increasing to $1000/hr, which is why no one is seriously suggesting that. Otherwise it's a little bit of inflation, and one that would be overshadowed by the resulting growth.

Inflation doesn't work that way. You can't legislate it into existence, and you can't legislate it away. If you could, it would be an easy problem to solve.

Inflation occurs when you add to the money supply more than you add to the economy. The California gold rush caused inflation. Countries with hyperinflation have governments that are printing money at incredible rates.

That's completely orthogonal to minimum wage. If you say I must have a $1000/hr job, it's in current dollars. Even if my employer wanted to pay me more, he can't -- he doesn't have the money to! Even if everyone wanted to switch over to doing that, they couldn't; there isn't enough money in the system! If everyone woke up tomorrow and agreed that a dollar was worth 1000x less, they'd all be 1000x poorer and nobody could afford anything.

No, the minimum wage doesn't change the value of a dollar. It just changes who's allowed to earn one.

It's not the money supply. It's the money flow, which you can model as a product of money supply and money circulation speed. A $1000USD minimum wage will increase circulation speed and from there induce inflation.

Let me get this straight.

You think a minimum wage increase will increase the velocity of money, which will cause inflation, which is a good thing.

That's the argument? Is that argument . . . original?

Don't read too much into my comment. Your argumentation was based on the the fact that inflation only occurs when you add monetary mass. I just pointed that that's a naive view. Contrary to your statement, you can legislate inflation into existence by creating conditions for increased money flow.

I did not say anything about the benefits of increasing minimum wage. In general it is known that the absence of minimum wage creates unsustainable imbalances of income society-wide. However, I don't know the US economy well enough for an informed opinion. Your current imbalance of income is huge, but that's only one data point.

No, it's not original. It's called the "multiplier effect" and it's a pretty standard economic principle. See Forbes:

http://www.forbes.com/sites/timworstall/2013/02/25/overestim...

I agree with this.

1000/hr will make all jobs unfeasible - on the basis that a job is a way to earn money by offering greater value in labour than in wage.

But what if we lived in a society where solar powered robots did everything and one guy earnt all the money for just pressing the power switch at 8am each day?

How would we share out the bounties of wealth these robots made? Giving everyone a job at below cost might be one way. Not the best but it is a way.

So I suggest that the coming world will have vast wealth, and fewer jobs - and we need to find new ways to make society fair for all. Because an unfair society is a Bad Thing.

Edit: tried to be cleaerer

I don't understand this view. Every time I see people spending hours of their time watching harlem shake videos or any other silly nonsense on the web, I am heartened that there are infinite jobs in entertaining each other and providing "non essential" services. OK sure, robots will take over construction and heavy lifting, leaving only a "super class" of surgeons and whatnot still able to get any of the jobs we recognize today. But I think we are far away from robots taking away other very human jobs. I pay for a twitch.tv subscription so I can see StarCraft games in 720p+. I literally pay other people to play video games. This is not some strange oddity, this is the future.

Remember: once upon a time it was a full time job for just about everyone in a society to get food, take care of children, and just generally do the bare minimum to survive. I'm sure they look at the world we live in today as "post-scarcity" the same way we imagine a world of tomorrow where robots do all of our duties. When agriculture introduced surplus into our society, it didn't cause a collapse. It instead allowed art and science to be born. Just as those early humans would have scoffed at Michelangelo getting a paycheck for putting colors on walls, so to does this possible future seem frivolous to us. But it is no more frivolous than all the current people employed in our current economy convincing each other to buy things we don't need.

If or when machines do everything we consider essential now, I assure you we will find new things to do with our time, some will be better than others at these new things, and thus we will pay each other to do them.

There is a difference between being paid to do a job and a job that increases the total wealth in the world.

There are two ways to look at this - the pg style do something people want (such as play Starcraft well) and a more physicist viewpoint of decreasing amount of energy needed to achieve a given outcome. (Yeah that definition needs some work but it is intuitively measurable)

Anyway, if robots do all the stuff that is physicist-style Like farming or manufacture and humans then sit around doing arts and crafts, that's great for humans - as long as there is some means of distributing the wealth (energy transformed into goods?) - and preferably a fair means of doing so

We could just hand out food, or give everyone a "job" - but correcting the compensation when the job is not actually productive is hard. We are going to go into a world where economics will have to catch up.

A job is essentially an overloaded concept - it does two things, distributes wealth and is an actual means of wealth creation. Split the two and we are in uncharted waters, but splitting the two we are.

I don't understand why you think any rules change just because the jobs being done change. This revolution of automation has largely already taken place, and I would argue that the automation isn't even the important part. What difference does it make if all food is generated by robots vs today's reality of most food being generated by a tiny percentage of the humans with the huge help of technology? I certainly don't generate my own food, and I don't do anything very essential by the "physicist viewpoint", and yet I am still able to acquire food. Most people in this country don't farm and are still able to get food despite doing "non physicist" jobs. I didn't need a job handed to me or invented to keep me busy. My job is completely non-essential and would have made absolutely no sense 1000 years ago. It however exists because of technology and surplus.

The guy playing StarCraft makes money. He then uses said money to buy food from guy who owns the crops, just like today. Its no different than how soccer players play for people for money. What is the complexity here? Why do you think we will need to figure out means of "distribution"?

Good point....hmmmm.....

So you are saying that the "wealth" of the changes in farming is produced by say 5% of the population, and they are the only ones who are really needed. The rest of us get to play a game where we guess the total wealth of the world (ie the food) and assign money to it. Then we split that money somehow (playing starcraft) and give some of it back to the farmers.

I suppose I am now taking econ 101.

I would however suggest that the automation revolution has not finished - the mechanisation revolution may be slowing but software is barely started.

Exactly. Here's the trouble: we are already more productive than necessary. 90% of humans can adequately supply 100% of the population with everything necessary. What if we lower that 90% to 10%?

The problem is that capitalism, which aligns your job/business with your income, breaks down at that point. If there is no job for you to do, then under this system you'll starve. Will we let 90% of the population starve just to preserve capitalism? That's not exactly sustainable.

The reality is that capitalism is not perfect, but it's the best we've come up with so far as a species. Once we hit the point where it stops working we'll have to re-imagine a whole lot of concepts.

On a reread I do not think that the next wave or whatever will cause a collapse - if there are no jobs to be had then we shall not all be livin in the dirt - we will find ways to share the wealth some other way than wage packets.

There are many ways of sharing the wealth - for example I benefit from road building schemes even if I do not recieve direct payments.

  Michalangelo as compared to a Neanderthal is an interesting idea - but reverse it - although michaleangelo presumably thought he had to work hard, if he had lived a life of same utility as a Neanderthal he could have done so on an hours work a week.  It's just that he liked clothes and houses and wine.  So I agree that in the robot future the effort needed to live like you or I will be small - but it won't pay for that holiday to Mars

>> 1000/hr will make all jobs unfeasible - on the basis that a job is a way to earn money by offering greater value in labour than in wage. >> But what if we lived in a society where solar powered robots did everything and one guy earnt all the money for just pressing the power switch at 8am each day?

This is highly unrealistic.

1) We are a very long way from having robots able to do most human jobs. 2) There will always be scarce resources. Even if you could 3D print houses for pennies, land, access to desirable events and people, etc will be scarce, coveted, and distributed to the highest bidder.

Let's talk about policies that work well in our actual, current world.

"I don't think it's nonsense. The things that are wrong with a $1000 minimum wage are the same things that are wrong with a $10 minimum wage. They're just happening to different people"

You don't seem to consider elasticity. Basically, the main argument of the proponents of a higher minimum wage is that the hiring capacity is elastic enough that a raise in minimal wage's benefits far outweigh the resulting loss of jobs.

Saying that raising the minimal wage to 10$ show the same problems than raising it to 1000$ is wrong in that it considers that, at best, the elasticity of the hiring capacity equals 1. However, we can expect it to be false if we consider that the minimal wage has, in effect, went down in the recent years and that it did not result in a hiring frenzy.

If raising the minimum wage to $12 is good for the economy, and raising it to $1000 is bad, then there's an inflection point where it switches from good to bad.

Therefore, the theory that raising the minimum wage is good for the economy is incomplete at best.

No, it's not. This is just straw man reasoning that doesn't belong on HN. Obviously, it's not a smooth linear curve, so a raise to $10/hour is not just a weaker form of a raise to $1000 hour. One is healthy and the other wrecks the economy. There is not an inflection point, only a straw man here.

What's the strawman part of it? Raising the minimum wage is a strawman? Who decides which one wrecks the economy?

Absolutely. Totally incomplete. My point is not that "higher is better". My point is that some adjustments to some adjustable parameters may be beneficial in some contexts.

Generalize further than that at your own risk.

Do you have an example of when $X/hour person would benefit from setting mandatory minimum wage to $(X+1)/hour?

Yes. If the job actually produces more than $(X+1)/hour worth of productivity to the employer.

The employer, unable to continue their advantageous position of paying $X/hour (it being illegal), but finding the job still worth retaining (it generating more than $(X+1)/hour) retains the employee.

The employee's salary goes from $X/hour to $(X+1)/hour.

Or did I totally misunderstand your question?

That example is too narrow/shaky. It requires employer to have some sort of monopoly on employing that worker (otherwise why would the worker keep working for that employer for $X/hour in the first place?).

I was asking about example when employee's gain (from increasing minimum wage) would be more reliable and would not depend on chance so much.

Gambler has a chance to win, but gambling is not a good way to get wealthier.

I disagree that this example is too narrow/shaky. I believe it actually encompasses a vast majority of people who are currently earning the minimum wage. Note that I'm willing to change my beliefs if my reasoning has led me astray :)

The key assumption you've made that I disagree with is this: "why would the worker keep working for that employer for $X/hour in the first place?". It seems to me that this assumption boils down to an underlying assumption that the labor market is an efficient market.

In another comment elsewhere in this thread sergiosgc makes a statement that I think is relevant here: "You wrongly assume the job market is a perfect market. It's not; there are barriers to entry, barriers to exit and lots of asymmetric negotiation positions."

My argument (and I Am Not An Economist) is that the COST of labor and the VALUE of labor (from the employer's perspective) are not necessarily equal.

A quick hyperbolic example of a labor-rich job market that demonstrates this difference: * Your labor market has 1,000,000 people * You are offering the only job in the labor market. For every hour the lone employee works the job will generate $500 of additional revenue for your company. * There is no minimum wage, and your goal is to minimize your costs while maximizing your revenue.

What is the price you pay your employees under these conditions? It's not $500/hour. It's probably only room and board. If we introduce a minimum-wage of $5/hour, what is the price you pay now? If we raise the minimum-wage to $10/hour, what is the price you pay now? If we raise the minimum-wage to $100/hour? $1,000/hour?

I admit that this was an extraordinarily hyperbolic example, but I think the current U.S. job market is a less-extreme example of this.

1) Based on anecdotal evidence (that I'm too lazy to look up current estimates of the number of people not participating in the U.S. workforce), the current job market around the country currently favors employers. Many people are fervently searching for jobs which drives down the PRICE of labor. This doesn't change the VALUE of any particular job for the employer.

2) The median U.S. income is down over the last several years (http://en.wikipedia.org/wiki/Household_income_in_the_United_...), while U.S. corporate profits are hitting record highs (https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease...). This is a pretty strong indicator that the PRICE of labor and the VALUE of labor are disconnected.

Finally, I refer you to Wikipedia where there is a rather good summary of current economic thinking on the impact of minimum wage laws on unemployment (http://en.wikipedia.org/wiki/Minimum_wage). As far as I can tell from a brief summary, currently thinking by economists is relatively mixed.

Why would an employer ever start a business if he had to pay every dollar of "profit" to the employees?

Besides, who is to say what that productivity to the employer is?

If I start a grocery business and hire you to work the cash register - it's pretty easy for you to see $5k/day come through the drawer and think, "I'm responsible for $5k/day."

In reality, though, your contribution is minor compared to the costs of rent, paying for business licenses, paying taxes, stocking inventory, paying for inventory, paying for advertising, and managing the other employees of the business.

Your "productivity" is actually what you negotiate for your salary. My productivity as the business owner is what's left after all my costs including your salary.

So f*ck anyone that can't negotiate well?

Okay, so in your world the government should be responsible for all negotiations? Some people and some businesses (run by people) can't negotiate well - so this logically follows from your caustic and emotional comment.

The government should set the price of my airline ticket, the price of milk at the grocery store, my salary, the salaries of professional basketball players, the prices that business use between each other, etc.?

Let me just truly get a full view of your philosophy and what kind of zero Liberty world you would have us all live in.

Protecting the weakest in society != zero Liberty.

The world ain't black and white and I didn't say the government should be responsible for all negotiations.

At the lower end, the people who are stuck on minimum wage, the people who cannot improve themselves, these people need some protection. Yes, there are humans who are not good at looking out for their own long term interests or even their short term interests, lots of them. Looking out for them, protecting them from getting into (for instance) unfair contracts is one very useful government function. One could consider very low wages to be an unfair contract, pretty much by definition.

Protecting the weakest in society != zero Liberty.

So what's the cutoff for the "weakest in society"? Do you have a percentage of the population that we're obligated to care for? Should these people too helpless/clueless to ask for a competitive wage be allowed to drive cars? Should they be allowed to vote when they can't really perform the most basic of tasks in society?

I didn't say the government should be responsible for all negotiations

So where is the cutoff and how do we prevent it from creeping up? Food stamp use continues to rise because apparently larger and larger segments of the population cannot earn enough money for food. When does the continued increase of helplessness level off?

the people who cannot improve themselves

Cannot or will not? What incentive is there for people to get an education, to work hard, to improve their lot in life, to learn better ways to live, to learn how to negotiate for their worth at a job, etc. if the government tries to take over care of so many aspects.

By seeking to protect people, government creates a dependency and victimhood mentality in society.

Look, I'm for helping the helpless in our society. What I'm not for are absolute statements like your next one that are guaranteed to lead to an increase in helplessness.

One could consider very low wages to be an unfair contract, pretty much by definition.

If the wage earner is free to go elsewhere to negotiate the fee for his time then it is not unfair by definition.

Bullshit, basically. So much ideological bullshit. Sorry.

> Why would an employer ever start a business if he had to pay every dollar of "profit" to the employees?

No one, ever. Maybe, on a technicality, the founders of 501(c)(3)s. I didn't use the word profit.

> Besides, who is to say what that productivity to the employer is?

The employer is to say the productivity of the employee. They won't do this explicitly, and it's very rarely a value that could be directly calculable.

This could be a case where I'm not using the best possible term. When I say the "productivity to an employer" of an employee, I'm actually talking about the value to the employer (http://en.wikipedia.org/wiki/Value_(economics)).

One way to answer the question of what the productivity of an employee is would be to ask this question:

"Were there only one laborer remaining unemployed, and they were free to name their salary, what is the maximum price that I would be willing to pay someone to perform this work?"

>If I start a grocery business and hire you to work the cash register - it's pretty easy for you to see $5k/day come through the drawer and think, "I'm responsible for $5k/day."

See above. All of this is from the employer's perspective. It doesn't matter what the employee thinks their "worth" is; what matters is what value the employer gains from the relationship.

> Your "productivity" is actually what you negotiate for your salary. My productivity as the business owner is what's left after all my costs including your salary.

This actually hits at my key point. Your "productivity" is actually your VALUE. What you negotiate for your salary is your PRICE (http://en.wikipedia.org/wiki/Price). I argue that these two are not necessarily coupled. Further, I suspect in the current U.S. economy at the low-income end of the job market these _are not_ coupled.

EDIT: Changed the final sentence from "I argue...that I suspect" to simply "I suspect...".

The inflection point is the productivity-per-hour of workers. Whenever wages get higher than productivity-per-hour, they cause unemployment.

However, whenever productivity-per-hour is much higher than wages (as it has been, on the median, and increasingly so, since the 1970s), we can afford to raise wages without trouble.

So the question is: what's the productivity of minimum-wage jobs? Also: if their productivity really is that low, shouldn't anyone unable to obtain a living wage when already in full-time work just be taken out of that job and subsidized by the state wholesale? I mean, doing otherwise has given us massive effective subsidies to Wal-Mart and other low-wage, low-productivity employers who are essentially fleecing the public of its hard-won antipoverty dollars.

Or it could turn out Wal-Mart employees actually do produce $10/hour of value, and the company was just being exploitative all along...

Unless Walmart is in control of all jobs in the market or unless Walmart and other employers are illegally colluding by sticking to a low wage agreement - the value of productivity per hour is what workers at Walmart are negotiating.

If Walmart isn't paying people what they feel they are worth then they're free to go elsewhere to redefine what their labor is worth.

just be taken out of that job and subsidized by the state wholesale

That completely eliminates the ability of some to find part time work to supplement their income. Maybe a mom without any real skills in the job market would like to work a few extra hours at an entry level job to bring home some spending money for herself and her family. Maybe a teenager would like to get some experience and earn some gas money while in high school.

By eliminating jobs through manipulating the minimum wage so thoughtlessly, you would destroy vital segments of the job market that serve a purpose.

That is ludicrously utopian thinking. Reality does not conform to theory, there is always some gap between productivity and wages. Oh hell, it's been a growing gap, for the past 40 years.

By eliminating jobs through manipulating the minimum wage so thoughtlessly, you would destroy vital segments of the job market that serve a purpose.

No, I ensure that jobs go to people who actually need them. Besides, teenagers earning spending money can shovel snow off the books, or any number of other small jobs that they already do without recourse to an official employment contract.

Of course there's a gap between productivity and wages. It's called profit. If a company doesn't make some profit off an employee's endeavors, why would they hire him/her?

And if this gap, as you call it, is too high for the American workforce in general, for millions and millions of people, it would mean there is tremendous money to be made by companies willing to pay higher and so capture a portion of this surplus.

The real reason that Americans are so exploited economically is because they lack the ability to reason about economics and are easily fooled by fallacious claims that benefit the most powerful at their own expense. The minimum wage is just a minor example among countless schemes designed to make the poor, working, middle, and even upper middle classes feel they are being aided by government policies while they are actually being copiously robbed in broad daylight.

There is no negotiation.

This is Walmart, not silicon valley.

You don't like what we're paying? Starve, see if we care, we'll find someone who will work for half what we offered you and let us throw paint on him to boot.

These jobs aren't taken by people whose needs are taken care of and are just looking for a little 'pocket money' or some gas so they can take the old car around and see their buddies on weekends.

"Starve, see if we care"

Even if they like what Walmart is paying, their workers are still on food stamps.

And there is the issue!

The rest of us, through taxes, are already subsidising the big corps and their minimum wage employees. We do this because people shouldn't have to starve in the modern world, but where people are employed we shouldn't need to.

By forcing a raise in the minimum wage we stop the employer from taking from our collective pocket to support their broken business model.

But what's the root issue? Worker X is not able to produce value of more than $X an hour. Do we mandate he/she is paid more anyway, or do we try to train and educate a workforce that can produce more value?

Why must it be that the worker isn't producing the value?

Worker X may be producing value of $10X or $20X per hour, but corporation Y is pocketing the difference, and can do so because there is an oversupply of workers.

You are not fully understanding where the $10X or $20X value comes from. It doesn't come from the low skilled workers. It comes from the huge amount of automation, computerization, business process, and infrastructure all around that unskilled person.

If I work twenty years and invest all my spare money to build a fabulous machine that produces intricate and expensive electronics but the one thing I don't do is create a way to turn it on and off automatically. I hire a person to just sit there and push the button. This person needs almost no skills whatsoever.

Is this person really vital to producing my $100X per hour? In a way, yes. But then again, since this person's skills are non-existent - this person can be replaced by anyone else who can push a button.

I invested in the invention and the creation of the machine. I took the risk to build the machine. I spent the twenty years of my life dedicated to it. I created the environment where any half sentient being could push the button to get the thing going. Everything I did created the $100X per hour.

The person pushing the button doesn't deserve $100X per hour. The person pushing the button deserves the wages for someone with the skills to push a button.

Deserve? Oh my, have I crossed some randian moral-boundary here? My word... leeches and moochers everywhere!

If you're not going to pay a living wage, what makes you think you DESERVE to have a worker there pushing the button?

That person deserves what the market pays for people with that particularly low skill set. It's not totally up to me. Maybe I live in an area where wages are really high. In that case, I'm going to have to pay the going rate for someone with low skills.

"living wages" are crap. They completely ignore the fact that some workers are young or spousal dependents looking for that part-time job to earn a little money.

On top of that there is no such thing as a "living wage" that can be defined. If I'm living alone, young, healthy, and not real picky about my lifestyle -- a living wage can be $1000 per month. If I'm married with 5 kids and in need of constant medical care, a living wage is 6X higher.

Yet you're implying that I as an employer with my available job for someone to push a friggin' button has to worry about all that or at very least accept someone's opinion on the lowest common denominator living wage?

At that point, I say screw the high school kid or part-time mom looking to earn a little extra money pushing the button. I automate the whole damned thing and eliminate the job. That, my friend, is called the "unintended consequence" of your heavy handed approach of controlling every little perceived injustice.

"That person deserves what the market pays for people with that particularly low skill set"

So I'm right, you do consider this a moral issue, you think that the free market is the be-all and end-all of morality and that people only 'deserve' what you deign to hand to them.

"Yet you're implying that I as an employer with my available job for someone to push a friggin' button has to worry about all that or at very least accept someone's opinion on the lowest common denominator living wage?"

You're the one that came up with the dumb button example.

Sounds like you don't really need someone to press the button anyway. If it was vital to your operations you'd be prepared to pay decently as it's not you've made a saving. Good for you.

"At that point, I say screw the high school kid or part-time mom looking to earn a little extra money pushing the button. I automate the whole damned thing and eliminate the job. That, my friend, is called the "unintended consequence" of your heavy handed approach of controlling every little perceived injustice."

If that is the price paid to get hundreds of other people off the government teat and stop subsidising the labour needs of you and your company, awesome. That high school kid misses out but his dad, who does more than press a button and generates more than ten times his pay packet for the company he labours for, gets to put food on the table.

This is not an unintended consequence at all.

A free market does not operate as a moral system. If you want to inject morals, price-fixing and wage-fixing are especially miserable ways to do it. The free market responds, often in ways you don't anticipate, and your social experiment goes weirdly sideways.

"A free market does not operate as a moral system."

I didn't bring morals into this, you'll notice the no-minimum-wage guy is the one that started bringing 'deserves' into this. I was talking about getting people off government support by making employers pay enough for workers to live on.

"If you want to inject morals, price-fixing and wage-fixing are especially miserable ways to do it."

Seems to work OK in a bunch of places.

"The free market responds, often in ways you don't anticipate, and your social experiment goes weirdly sideways."

The free market is a myth.

Seems to work OK in a bunch of places.

Most economists disagree vehemently with you.

[Citation Needed]

Also, what do economists know? Where were they in the buildup to the '08 crash? Nowhere to be seen, that's where.

I guess economists are to blame because you weren't paying attention and you can't even be bothered to use Google to educate yourself.

http://nicedeb.wordpress.com/2008/09/21/the-white-house-warn...

http://www.youtube.com/watch?v=cMnSp4qEXNM

Economists were warning of the housing bubble from the beginning of the decade. Republicans were warning of the problems with fannie/freddie from as early as 2002.

This is the closest to the right margin I've ever seen a discussion go.

"Oversupply" is the key word there.

How much do I value having clean water? A lot. I'd pay $100 a gallon if I had to do so to survive.

But I'm happily paying a tiny fraction of that and "pocketing the difference". That's because my demand is easily met by the supply.

Am I wronging the water company? Of course not. If they want to make more, they have to offer me something I can't get from someone else for cheaper.

Not to mention the fact that "pocketing the difference" in both cases actually means "spending the difference on something else."

EDIT:

I'm not allowed to reply to the next reply to me, but there is a difference between treating humans as a commodity and treating their labor as a commodity.

I have a right not to be enslaved. I do not have a right to be paid for my labor AT ALL, much less to be paid a certain amount. I have to compete to sell my labor to the highest bidder, just as though I were selling widgets.

Absolutely, oversupply is the word.

However society is built by and for human beings, not machines or economic ideals. Where water is a commodity, treating humans as one must have limits, surely?

"I'm not allowed to reply to the next reply to me"

You can usually hit 'link' and it'll let you reply in there, not sure if that's always the case.

"I do not have a right to be paid for my labor AT ALL, much less to be paid a certain amount. I have to compete to sell my labor to the highest bidder, just as though I were selling widgets."

You talk about these things as if they were written in stone somewhere. When you start to look at this in terms of absolute rights you lose sight of the point to some extent - what outcome do we want here? How can this best be achieved? What are the downsides?

The people who are stuck on minimum wage are the least able to compete. They have no skills and likely some difficulty acquiring them, they probably lack the ability to negotiate, they don't have the choice of not taking work because the alternative is starvation. The logical conclusion for them, were a truly free and unregulated market for labour ever to appear, would be contracting their lives away for a roof and some food, working insane hours in hazardous conditions for little to nothing.

Make no mistake here, a proportion of the population cannot better themselves.

Over the last hundred or so years we've added a huge framework of workers rights to our society to stop this very situation. A minimum wage is part of this, and raising it may well help large numbers of people.

I don't get it. Do the same arguments apply to, say, subsidized college tuition?

I'm not sure I see how that applies to subsidised tuition, could you elaborate?

Whenever a college charges more money than a student can pay, that student has to seek financial aid, which is subsidized by the taxpayer.

Do colleges have a "broken business model", too?

You could say that yes. But you could also say it's in our collective interest to help students achieve a higher level of education, and therefore we could/should choose to support this broken model.

You could make the claim that it's in our collective interest to keep WalMart profitable, but it would be something of a harder sell. IMHO.

What about food aid? Are the evil food conglomerates "taking money out of our pockets" by charging prices that some people can't afford and thus requiring a government subsidy?

Your theory that by democratically choosing to subsidize something, the government is creating an obligation on the part of private business to make the subsidy unnecessary is bizarre.

"Are the evil food conglomerates "taking money out of our pockets" by charging prices that some people can't afford and thus requiring a government subsidy?"

Who said anything about evil? I merely think that the labour market does not resemble anything like a free market (nor can it or should it), and at the moment employers are profiting handsomely while depending on the public purse.

"Your theory that by democratically choosing to subsidize something, the government is creating an obligation on the part of private business to make the subsidy unnecessary is bizarre."

I'm not sure that's my theory at all. My 'theory' is that income top-ups via food stamps, tax credits, whatever, where someone is employed, form an unofficial subsidy to employers, and one that I think we should be trying to find ways to eliminate. If one of the ways we choose to do that is by pushing more responsibility onto the employer, then I'm not sure I see a problem.

income top-ups via food stamps, tax credits, whatever, where someone is employed, form an unofficial subsidy to employers

Spell that out for me. When I hire Bob at $8/hour, what difference does it make to me whether the government is giving him a tax credit for being poor, or owning a home, or buying an electric car?

How am I being "subsidized"?

Bob can't feed himself or his kids on that, so I have to reach into my pocket (taxes) to help him out. If I didn't do that, Bob and his kids would either slowly starve to death or move somewhere else. Either way, no more employee for you.

There is your subsidy.

Why is it my responsibility to make up the difference, and not the McDonald's across the street that didn't hire him at all? Or the landlord who is charging Bob $400/month instead of $300/month?

What you're saying is perhaps rhetorically appealing, but it doesn't make sense.

Why is it my responsibility to make up the difference

Because I'm sick of doing it for you, when I have nothing to do with your business.

You could at least attempt to explain why all the other people who receive the benefits of your generosity towards Bob aren't equally responsible. If Bob starves to death, his landlord loses a tenant. His grocer loses a customer, etc. What makes his employer special?

The others are more subject to market pressures. Take a look all over this thread for some really well-cited explanations of exactly why employment is not like these other things.

Or you could just tell me.

Or you could use your eyes and read.

Walmart has no say in the decision of who is getting food stamps. So if you, as a voter, decide that somebody has to get food stamps - Walmart can not be responsible for that decision. In any case, thinking that without Walmart salary the people that now getting food stamps wouldn't get them is clearly fallacious. Walmart is a largest private employer in the country, and employs a lot of low-skills people. The people of the US decided that earnings that Walmart can provide to these low-skills workers are not enough for them and the people want to give these workers more money. How it's Walmart's fault? They'd get public assistance with or without Walmart - with Walmart they just needs less of it, but it's not up to Walmart to replace the welfare system the people of the US instituted.

You wrongly assume the job market is a perfect market. It's not; there are barriers to entry, barriers to exit and lots of asymmetric negotiation positions.

Nobody said it's a perfect market. It's not a market dominated by monopolies either. The heavy handed solutions provided by minimum wages and other government measures doesn't help matters. They mask some problems while creating many others due to economic dislocation.

In the end, masterminds planning all our lives and trying to create utopia on earth have never done better than following simpler rules of law and letting people deal with each other in a free market capitalistic system.

Sorry, the GP reasoning assumes a perfect market, when stating that people are free to choose another employer if the current one is not paying enough. What wasn't stated in my comment is that the market is not perfect because of monopolistic behaviour. You kick off your argument with two misinterpretations of my comment and the GP's.

The market is illiquid, for example, because of exit/entry costs associated with relocation, such as selling your home at underwater values. This is one example of the factors I mentioned. Others abound.

The utopia/mastermind argument falls flat when you consider whether the US model is ahead of social-democrat states such as Denmark or Sweden. A cursory look at stats such as infant mortality rates or % of population below the poverty line strongly suggests the "mastermind" model is better.

* The utopia/mastermind argument falls flat when you consider whether the US model is ahead of social-democrat states such as Denmark or Sweden*

If we're doing a comparison, we need to compare across other utopian states. You need to throw in Greece, Italy, Portugal, the Soviet Union, North Korea, etc. You don't just get to cherry pick a couple of the few reasonable successes on your side of the ledger.

Furthermore, you have to realize that there's a memetic/genetic difference in Denmark vs the US. We can no more adopt the rules and policies of Denmark here than the US can impose its style of democracy on Afghanistan.

Finally, I would argue that countries like Denmark receive an amazing amount of benefit from other countries like the United States which provide most of the defense and technological advances that give them a cozy safe environment in which they get to spend most of their money on social programs.

I'll take the bait on the three states you mention that are indeed stable democracies following a social-democrat strategy: Greece, Italy and Portugal. I'll drop the Soviet Union and North Korea, which are straw men in your argument, for plainly obvious reasons.

Let's back our conversation with numbers, shall we? Infant mortality rates and percent of population below the poverty line.

Infant mortality rates (deaths by 1000 live births)[1,4]: United States 6.81, Greece 4.65, Italy 3.51, Portugal 4.45, EU 4.49

% of population below poverty line [2,3]: United States 15.1%, Greece 20%, Portugal 18%, Italy 18,2%

So, I think we can close the discussion on infant mortality rates. It'd be a stretch proving that the US is better than Greece with those numbers.

As for the poverty threshold, I could argue that the numbers are within the same order of magnitude, but I don't really have to. Some statistics gimmicks are occurring here: The US poverty line is defined at an annual income of around $11k, for a median national income of around $50k. The EU defines the poverty line at percentile 40% of national income. Easily any of the European countries has one order of magnitude less poor people than the US.

You brought up indicators on innovation and defence spending. As for defence, it's an endless discussion, where I guarantee you, many people in the world would wave away US military intervention outside of its own borders in a heartbeat. Innovation is a more interesting topic, since it's often touted as a bastion of the US. Here, the sheer scale of the US is misleading. Try to compare with aggregates of the same dimension, like the EU: http://ec.europa.eu/enterprise/policies/innovation/files/ius... You'll find that the US/Japan do lead, but nowhere can they be defined as the world providers of R&D, from where other countries benefit.

[1] http://en.wikipedia.org/wiki/List_of_countries_by_infant_mor... [2] http://en.wikipedia.org/wiki/List_of_countries_by_percentage... [3] http://www.inequalitywatch.eu/spip.php?article99 [4] http://www.indexmundi.com/european_union/infant_mortality_ra...

Birth rate is a bad number to look at because it's not taking in purely economic effects, it's racial and historical effects.

http://www.cdc.gov/nchs/data/databriefs/db09.htm#arethere

http://www.census.gov/compendia/statab/2012/tables/12s0080.p...

Had America not been founded on slavery and a history of inequality afterwards our numbers would be much closer to the EU stats.

Raising the minimum wage a little will help. If you're poor(ish), you basically spend every dollar you earn to survive. Canada has min wages around $10, and you can still buy a bigmac for the about the same as the US. Their sky has not fallen.

http://en.wikipedia.org/wiki/List_of_minimum_wages_in_Canada

It's likely that variation in productivity accompanied the rise in productivity.

You're not much more (in real terms) productive than a bored teenager in 2013 than you were in 1993, but the most productive people in 2013 may be an order of magnitude more productive than the most productive people in 1993.

Oh, I contest that. It depends heavily on how you employ the bored teenager. Employ him at flipping burgers and he's obviously "unproductive" as ever was in 1993. Employ him at data-entry and he's the human component in an immensely valuable computation. What he still lacks in the latter case is bargaining power: the ability to walk out of his job and bring the vast computation to a quick halt.

(Which is why unionization of a lot of low-level white-collar workers would really help, and would probably save us a lot of stupid talk on the subject of "My oh my, whatever should the government do!" Strong organized labor is how you keep government out of the labor market, at least if you don't want the working class to starve.)

Strong organized labor is a de facto part of the Democratic party. The Democratic party really has become synonymous with the Federal Government itself, as their purposes of building power at the expense of individual sovereignty appear to be fairly close in alignment.

What will get us somewhere is allowing people to realize that each of us is responsible for his or her own advancement in life. Sitting on the couch watching sports and reality TV every afternoon and evening has consequences. Majoring in bullshit ethnic and cultural studies in college has consequences.

Measures like the minimum wage, welfare, the Community Reinvestment Act, and food stamps mask the relationship between real world actions and their economic consequences. This misalignment causes markets to warp more and more over time. To compensate, new mastermind policies are created to mask those effects. Eventually the economic dislocation becomes so bad that the system fails. This is what happened to Greece. This is what's happening in the US wrt the Debt.

>> Or it could turn out Wal-Mart employees actually do produce $10/hour of value, and the company was just being exploitative all along...

Your assumption is that it's immoral for an employer to make a high margin on labor. My assumption is that it's foolish for an employer not to make a high margin.

My employer had better be getting tens of thousands more out of my efforts than what they pay me, or they shouldn't have hired me. That margin will be in flux month to month while my salary is constant, so there had better be some wiggle room or I'll be fired.

It's not immoral to sell a Star Wars action figure for 10x what you bought it for, is it? Why is labor different?

Great! Now, if only the justifications for the minimum wage referred to those effects!

That is, what are the "known, obvious" downsides to raising the minimum wage, so that we can know when the costs start to exceed its benefits, and/or I can tell that that $1000 min wage might be stupid but not, say, a $12 one?

This is what bothers me about the debate: people confuse a strawman with a reductio ad absurdum. Sure, no one advocates a $1000/hour minimum wage, but the claims used to support a $12 would also apply to $1000. So if you find them insufficient in the latter case, so should you in the former.

For example, if you believe $12/hour min wage would "get more money in heavy-MPC[1] folks' pockets" in some helpful way, then you should also believe a $1000/hour min wage would "get more money in heavy-MPC-folks' pockets".

[1] MPC = marginal propensity to consume i.e. fraction of any new money you spend on consumption goods rather than saving

> but the claims used to support a $12 would also apply to $1000

I disagree with this statement. It may be true that _some_ of the claims used to support a $12 wage would apply to a $1,000 wage. Surely you won't take the position that this is true of _all_ possible claims.

The following claims I post are examples of counter-claims. I haven't thought these positions through entirely, but they refute the reductio ad absurdum argument that $1,000/hour is as reasonable as $12/hour:

* I make a claim that most minimum wage jobs produce more than $9/hour of productivity to their employer. Assuming this is the case, we can raise the minimum wage to $9/hour without severely impacting the number of jobs currently available. This claim becomes less true the higher the minimum wage goes, and I certainly wouldn't support it at $1,000/hour.

* I make a claim that the job-losses caused by raising the minimum wage to $9/hour are offset by the job-gains caused by people scaling back from 2 jobs to 1 job). This is certainly not possible at $1,000/hour.

I think your reductio ad absurdum in this case is indeed absurd, unless you are using it to invalidate _specific_ claims (i.e. refuting the increase MPC claim)

Right, some claims don't generalize as I've indicated, but most that we actually see, do. I should have perhaps used those examples the first time around.

The most typical one is, "Raising the minimum wage, because it is the law, will mean that employees who previously made $x will make the new wage $y [rather than just be laid off or new jobs not created in anticipation of having to pay $y in the future]." It's clear that this claim -- existing in the economic models in the minds of the typical proponent, is too strong, and thus false. It is thus very appropriate to point out it's too strong by picking an arbitrarily high value for $y and showing that the economy "just doesn't work like that" -- that no law can make someone worth hiring at $y, so the typical need-based ("living wage") argument is wholly irrelevant, much to the frustration of those of us trying to have a serious exchange on the issue.

The implicit model that you gave -- in which the typical min wage worker is underpaid relative to the (appropriately discounted) marginal revenue they produce would indeed imply that raising it will not (typically) mean job loss (or forgone job creation i.e. "outsourcing" work to a new hire).

It's also an extremely unrealistic model. If it were true, that would mean any firm can steal the profits of other firms by bidding up worker income. That they don't, would imply that competition for low-skill labor is weaker than for other labor, when all evidence indicates this is the opposite of the truth.

So yes, the arguments raised by responses to this reductio reveal the weakness of the case for raising the minimum wage. I'd call that a fruitful point, not a strawman.

Reductio ad absurdum is a perfectly valid form of argument. http://en.wikipedia.org/wiki/Reductio_ad_absurdum

>"Ridiculous arguments are ridiculous."

So where is the line where it is no longer ridiculous, then? $999? $500? $10?

Labour is an input cost of production; when the input prices rise, so do output prices to compensate.

I'd vote for no minimum wage but with a minimum income subsidized by the government.

Germany also has strong labor unions and statutory codetermination. America decided to basically kill off organized labor and use government instead.

> Who would you hire for $12 an hour?

Any business that is econmically viable can afford $12 an hour. McDonalds, car washes, Denny's, etc. If you can't afford $12 an hour then there is something wrong with your business.

So, in your opinion, people who cannot produce at least $12 an hour of value should not be allowed to produce anything? That seems to be the logical consequence of shutting down all businesses that need to pay less than that...

I would guess the point is that those companies are probably very few. If your business can't extract $12 an hour from an employee then perhaps it should fail.

The harm done by these job losses is less than the boost to the economy by putting more money in low income consumers pockets.

I'm struggling to think of an example of labour that wouldn't produce $12 per hour in value and can't be reasonably cheaply automated.

If you are going to shut down some businesses, where would more money (to low income workers) come from?

Would depend on the effect of the rising costs (of labour) of the firms. Do they make less profit or increase the prices of their goods?

Hopefully the extra money comes from an area that has a higher rate of tax than the tax rate of low income earners thus putting more money back into the "market economy". This should be likely in a country with progressive taxation.

You're talking about disturbing a system with billions of variables by changing a few thousand of them. Almost any such change will have unintended consequences of the same order as the intended effect. For politicians, this is beneficial, since they can be surprised by the consequences, ignore their causes, and advocate new changes to "fix" them. For someone who actually intends to improve things, such as yourself, the fact that poking the economy with a stick is likely to backfire should be cause for concern. :)

Yep, economics is basically equivalent to executing random scripts concurrently as root and when they crash you get to argue about what the stack trace was.

They can work independently and set their own pricing.

Yes. In this modern world, it is better to give unemployment checks to pay people to study or clean the streets than to do something no one would give a tenner for.

This is a logical fallacy, reductio ad absurdum, or a slippery slope argument. If you want to argue your point at least do so without being intellectually dishonest.

Germany is also practically communist when compared with the USA. It has a public healthcare system, invented the modern welfare state and up until recently used its conscription laws to get young adults to staff its nursing homes and ambulances (amongst other things) for about €3/hour.

The flip side to Germany's model is manifold, but one big difference is that the social security system will pay benefits to those who are full-time employed but don't have enough money to live.

Before you say that's a stupid policy, consider that this is the minority of recipients of social benefits, and that often enough it's easier to get into better paying jobs from a low paying job than from being unemployed for a decade.

Yet, Germany also has very strong labor protection laws. If you have no minimum wage and no labor protection laws, it leads to sweatshop situations. You see some of the same thing in a lot of IT-oriented positions not located in IT epicenters: 24/7 availability, entry level wages, and ultimate responsibility for when the shit hits the fan -- even if you've been warning your boss that it'll hit the fan for the past eight months.

That's more of a consequence of low wage levels in general.

As a counterexample: Singapore doesn't really have much labour protection nor minimum wage laws to speak of.

This is an extreme example which lacks any depth of insight. It would be like me arguing; why don't governments print loads more money and we will all be rich as my reason they should not print anymore than we have today.

To stay on the money analogy; we want governments to print THE RIGHT amount of money. If they print too little the economy will suffer just as much as if they print too much. This is the same as a minimum wage. If it is too low it damages things like consumption and quality of life. Too much and it is damaging competitiveness etc.

I would suggest the best answer to this whole debate is in empirical data. Look at countries that have similar economies low AND high minimum wages and see what works best on the majority of case.

Also personal views weight this argument. My lean on this is argument is that a country should be run to give the largest amount of people the best quality of life possible. If you have no problem with a large poor/rich gap you could easily argue to keep minimum wage down.

Also Germany doesn't have a minimum wage but has legally enforced collective bargaining. Companies don't just pay what they think people are worth. Your example is not really givings the full story by pointing out there is no statutory minimum wage. Their government has employed a different system to ensure wage levels meet workers needs and is nothing like giving companies carte blanche to pay poverty wages.

Please... People don't hire teens when the economy is weak because they are less reliable than adults. In the late 90's, fast food places were desperate for anyone -- they would hire folks willing to work as little as 4 hours a week!

The sob story about the impact of minimum wage on companies is bogus. I was an asst manager in high school for a bakery/cafe... 20 employees, about 23000 hours of work each year... A minimum wage increase amounts to $25-30k a year, not a big deal.

Wal-Mart is another great example... You have like 300 employees at a store, probably 3 million man-hours a year. So a minimum wage increase amounts to $3-4M a year -- peanuts for a company where average revenue per employee is $200k.

Did you just confuse revenue with earnings?

You're talking about $3M of additional cost with $60M in revenue.

What does that mean in reality? You either take a margin hit, or enhance the margins by raising prices and changing product mix.

Also consider that minimum wage folks proportionally spend alot of money where they work. If Wal-Mart adds $3M in payroll, they're getting alot of it back as sales.

I had a saying years ago that went like this...

"You can tell the condition of the economy by the quality of fast food employees."

> People don't hire teens when the economy is weak because they are less reliable than adults.

Incorrect: People don't hire teens when the economy is weak because they can hire a MBA, BS, etc for the same price because they desperately need a job.

http://www.bbc.co.uk/news/business-21180371

Spain unemployment rate hit a record: youth rate at 55%

For comparison, Germany has no statutory minimum wage

However they do have various social systems in place where basically the government will make up the difference between what you earn and what you need to live for people working very low wage jobs.

> For comparison, Germany has no statutory minimum wage

This is true, but you cannot use that as an argument, because the German system cannot be compared to the U.S. system.

There are two reasons for having no minimum wage in Germany.

First:

It us up to the individual unions to negotiate a minimum wage. And unions still have a lot of power in Germany. So many jobs actually do have a minimum wage.

Second:

If someone in Germany has a job that does not produce a living wage, the person automatically qualifies for social security money paid by the state.

Besides that, a minimum wage on a state-wide level will be implemented in the next years. I am sure of that. There are more and more non union regulated industries that have started to pay very low wages.

> Then let's raise it to $1000 an hour.

Like most things, increasing the minimum wage is subject to the law of diminishing returns.

Raising operating system register sizes does not work. If you think it does, then let's extend the minimum register length beyond the limits of virtual memory. We'll all be able to store unlimited data.

What would you store in a 64-bit variable anyway? A boolean which only needs one bit of storage? We already see aggregate memory usage on Windows 7 systems (at least in the United States) above 2GB with no programs loaded. [1]

For comparison, the classic Atari only requires eight bits (except for certain operations) as the minimum size for memory addresses. Not exactly a bastion of weak and sluggish games. [2]

Did you notice what I did?

Look at heavily unionized industries like hollywood and the writers guild for guidance. They effectively have a "minimum wage" where if you're part of the guild, you must be paid a MINIMUM of $64k for an original screenplay.

http://www.wga.org/uploadedFiles/writers_resources/contracts...

Guess how easy it is to get a job writing screenplays as a member of the guild? It's actually incredibly difficult and the vast majority of prospective writers are effectively unemployed, working jobs at coffee shops instead.

Putting a price floor on labor creates unemployment, period. The writers guild is just one microcosm of this effect.

Hollywood screenwriting is an atypical labor market for all sorts of reasons. The fact that they are heavily unionized is only one small factor.

Screenwriting may be atypical, but arithmetics that produces this problem is very typical. If you set a minimal price for certain item, that makes anybody holding the same item with lesser value effectively unable to sell it. If you set a minmal price for a car at $20k, you wouldn't be able to sell a used car once its value fell below $20k. Selling one's services abides by the same laws - price floor means excluding items with value less than the floor.

Are you somehow under the impression that Hollywood buys fewer screenplays than it would if producers could pay less? That there are some movies not getting made because of this?

If by "Hollywood" you mean whole movie/TV/entertainment industry, then yes, I think price of the scripts influences decisions. Blockbuster aren't the only movies made.

rising minimum wage makes for more spenders

I don't see that at all. Raising the minimum wage results in people at the bottom losing their jobs, hence fewer spenders. I can't imagine why on earth you'd think there would be more.

Nor do you explain why you think the idea that it raises unemployment is 'intellectually stunted'. I find the argument that we would expect the minimum wage to increase unemployment, and the data indicating that it historically has done just that, to be persuasive.

(A good presentation of the argument; I honestly find this video persuasive) http://www.learnliberty.org/videos/does-minimum-wage-hurt-wo...

(Historical data) http://www.learnliberty.org/sites/default/files/Davies_0.pdf

What do you think I'm missing?

The people who are actually necessary (worth the additional cost) can buy more things, and businesses in turn have more money.

I'll accept the first proposition: the people who were earning below the minimum wage before, who keep their jobs, have more money to spend. (Limitation: I accept the argument that says if they are producing significantly more than they are paid, they will eventually be paid more anyway, so the gain is both temporary and small.)

But balance against that against the fact that those who are laid off, whose businesses close down, or who are never hired in the first place, have much less money to spend.

Is the first force is bigger than the second, and hence businesses would see more demand? You'd have to prove that to me. I don't have evidence or a strong opinion either way, but I consider it unlikely.

>Limitation: I accept the argument that says if they are producing significantly more than they are paid, they will eventually be paid more anyway, so the gain is both temporary and small.

Where the flying fuck have you been for the last 30 years?

My experience with minimum wage jobs is that employers like employees who would struggle to calculate their actual value.

Henry Ford?

Hint: anyone preaching an economics based on moral dogma (ie: Learn "Liberty") is heavily biasing their economics lessons.

Criticize the argument, not the name of the website.

The problem with the argument is that their basic claim, at bottom of all of it, is, "Governments cannot make economic policy because it's immoral for them to do so. Any economic outcome produced by a government action is incorrect; any economic outcome produced by a 'free market' (and no, I can't point to a completely free market, it's a spectrum) is right. Thus, all positive aspects of actually-existing economies are thanks to the free market, and all negative aspects I can blame on the government."

It's a completely typical example of utopian-totalitarian argumentation. We always apparently need one less marginal unit of government action, no matter how much we actually have at the moment, at least until real life looks like a Neal Stephenson novel.

For a last point, if we really want to evaluate laissez-faire versus social democracy without resorting to moralization, we can. We simply have to agree on what desirable versus undesirable outcomes look like ahead of time, and then look at the various natural experiments (or even near-controlled experiments, as when Canada or Australia do one thing and the USA does another). We can argue about the quality of the experiments, but in the end, results will out.

You still aren't criticizing the argument. You're criticizing the motivations of the people who wrote it. Even if you're correct, even if the people who wrote it are against government action in every form (and they aren't, by the way!), the fact remains that I find their criticism of this particular government intervention persuasive.

I find the argument persuasive. I'm absolutely not kidding about that. If you demonstrate the argument is invalid, you will change my mind. But since it's the argument, not the authors I find persuasive, it doesn't particularly matter why they believe it. I happen to think they're honest, but who knows? Maybe they're crazy or demon-possessed. I don't know. All I know is, what they said makes sense to me.

--------

The argument, in a nutshell, is that minimum wage increases unemployment because some people are less productive than that. Some people are only making $8/hr worth of stuff, so requiring that they paid $9/hr is tantamount to making it illegal for them to work. Hence, unemployment.

The data shows that there is a correlation between the minimum wage level and unemployment among lower-educated workers. That doesn't prove that the theory is correct, but it supports it pretty well.

Those are the things you have to criticize if you want to change my mind (or persuade the folks reading along).

You still aren't criticizing the argument. You're criticizing the motivations of the people who wrote it.

Yes, I am. The flaw in the argument is a basic type-error: Type MORAL does not match type FACTUAL. You cannot use a moral claim (government is evil, taxation is theft, minimum wage is interference in free contract) to justify a factual claim (minimum wage increases unemployment).

The data shows that there is a correlation between the minimum wage level and unemployment among lower-educated workers. That doesn't prove that the theory is correct, but it supports it pretty well.

First of all, which data? Second, most major studies have found that minimum wage has little to no relation to total unemployment, particularly not once we factor out cyclical trends. Unemployment is mainly governed by the cyclical and structural trends of the economy as a whole.

Now, at the margin, does the minimum wage disemploy some people? Probably, same as the 40-hour work-week does. However, I've got two counterarguments here:

A) Any wage below a living wage (enough for the worker to support themselves on the wage alone, not necessarily anyone else) is either slowly murdering the employee (who cares, we're not moralizing, right?) or taking an implicit subsidy in the form of government top-ups to that employee's income (what actually happens). This leads right into:

B) The wage-level that a given business can support at a given level of worker skills is determined by many different variables about capital investment. For example, today's roboticized factories have a very hard time employing low-skilled and mid-skilled labor, while yesteryear's assembly lines had an easy time of it. At the very bottom, you need some capital-intensivity to support anything about subsistence farming, but there's loads of what are basically "user interface issues" determining how much capital-intensivity you can support for how little user skill. This is something us technologists can Work On.

This leads to related point:

C) Implicit subsidies for the kind of capital-unintensive, unproductive, sub-poverty-wage work being done in sectors like retail distort the market, both by suppressing the natural organization of labor (collective bargaining was the original response to sub-poverty wages when there was no minimum wage) and by padding the profit margins of businesses that use labor to substitute for capital investment (ie: in a market without income top-offs, I believe Amazon would more quickly eat Wal-Mart's lunch, precisely because it has automated away more of the retail process).

D) Many companies pay more than $9 or $10 per-hour for low-skilled labor while their competitors pay less, so what's stopping everyone from doing so?

So the total conclusion is that while the minimum wage should theoretically have some disemploying effect, and some studies have found a weak relationship when zooming in on the lowest-skill workers, these effects appear to largely "wash out" of the economy as a whole due to other factors that affect things more strongly: overall demand, overall demand for labor, labor organization, ordinary business cycles and capital-intensivity at set skill levels.

Uh. They're not making a moral argument. They are motivated by morals to make a factual argument. So you do have to deal with the argument.

Which I did. You saw what I said: the theoretical - and, in practice, relatively small - disemploying effects of a minimum wage wash out against all the other variables affecting employment.

You did, but only after making an incorrect assertion that you didn't have to, and that their argument was completely invalid.

The flaw in the argument is a basic type-error: Type MORAL does not match type FACTUAL.

I . . . think you must be thinking of someone else. I didn't make a moral argument. (Well, okay, I've made lots of moral arguments, but I haven't made a moral argument with you, in this thread. Yet. At the very least, the argument we're supposedly discussing isn't a moral one.)

First of all, which data?

The data we're supposedly talking about. My second link, like five posts ago. The one you criticized for having the word "Liberty" in the URL. ;)

Now, at the margin, does the minimum wage disemploy some people? Probably

Oh, so we actually agree. That's actually what I think, too: minimum-wage increases measurably increase unemployment among low-skilled people, but in the economy as a whole, the effect is lost in the underflow. I suspect it's still there, but . . . you're right, lots of variables.

Sorry for simplifying. I didn't mean to be misleading.

The reason I care about that particular unemployment effect is that minimum wage is supposed to help the people at the bottom. But if it causes unemployment for them, then I don't think it's really helping them. In fact, it's probably hurting some of them a lot. The fact that it doesn't affect the rest of the economy that much either way . . . I don't really care about that.

So, if we agree about that, you think we should have a minimum wage anyway because . . .

A) Any wage below a living wage is either slowly murdering the employee or taking an implicit subsidy

I disagree. Not every job is permanent, and not every job-seeker is independent. Some people don't need a living wage: teenagers, retirees, spouses, students. Some jobs aren't for income, but for reputation, experience, or skill-building. Some jobs are side jobs: supplemental income.

Low-paying jobs shouldn't be permanent, and they generally aren't. People move on (or get raises/promotions) as soon as they can do better.

And anyway, how is destroying the job a reasonable response? The person who took it clearly thinks it's his best option.

B) The wage-level that a given business can support at a given level of worker skills is determined by many different variables

Sure. I definitely agree with that. I don't see why you think it's a reason the minimum wage is a good idea, though.

Implicit subsidies for [low-skilled manual labor] distort the market, both by suppressing the natural organization of labor and by padding the profit margins of businesses that use labor to substitute for capital investment

I . . . can't really make sense if that sentence. I'm serious, I've been trying for like five minutes.

At a best guess, I think you're trying to say that eliminating low-skilled manual labor would force those sectors to replace the work with automation, which would make the world a better place for everyone. Maybe? I have no idea what you're saying about subsidies and unions, or how that ties in.

Regardless, that doesn't sound like a good idea to me. The minimum wage destroys jobs indiscriminately, and some things are easier to automate than others. Some businesses would adjust. Others would disappear.

And anyway, I think if your goal is to automate things, there are better ways. If you want the government to invest in infrastructure, for example, you won't get much argument from me. Or maybe start a business yourself and do it better? Surely there's a better way than hurting the poorest people in society.

I seem unable to reply to others in this thread but I would like to take a view on the two comments that frame this : basically let's raise the minimum wage to $35 or to $1000 / hour.

Now we should reasonably assume that there will not suddenly be an increase in jobs that can afford to pay 35 (or 1000!) - so those jobs will remain steady roughly. And those jobs below will either vanish or will find they can employ peoe at those rates.

So there will be an increase in unemployment.

But that's not the point - we are seeing a massive structural shift in jobs - technology is displacing at the White collar middle skill level. There are going to be less jobs no matter what.

The share of GDP captured by wages is the important measure here - not the individual wage rate but using employment as a means of distributing wealth how do we spread the wealth around.

If half the jobs vanish then we may simply find a social balance in women staying at home and men earning double.

(nb I am not advocating this back-to-the-50s as a social good, just that minimum wage increases do not have to mean the share of the wealth diopps - we just need to find ways to share it out that we as society think are equitable)

Technology has been replacing workers since the tractor was introduced around 1900. But unemployment hasn't kept going up because we keep finding new ways to employ people.

But if by some miracle we do finally automate everything minimum wages won't help at all - we're talking about a situation where there's no reason to employ someone in the first place. In that case just tax production and provide everyone a guaranteed minimum income. No need to worry about work disincentives, they weren't working anyways!

Maybe. I don't have a good answer for how to equitably distribute the 40% or so of GDP that is currently captured by wage packets.

Maybe Sweden will take your approach, but I would be amazed if the US will :-). But some solution will be needed.

>But if by some miracle we do finally automate everything

If we quit finding new ways new ways to employ people...

You don't have to automate everything, just increase unemployment to a significant enough percentage and social instability (rioting, political unrest) will be the primary concern.

Your argument assumes that all the increased that all the extra spending from people at the minimum wage goes to good produced by minimum wage workers, which I hope you would agree isn't true.

In theory you could find that the minimum wage could raise employment with tenuous assumptions[1], but there's no need to sit back and theorize in your arm chair when you can go out and collect actual data. And most studies show that the rises in the minimum wage do increase unemployment, though there have been a few studies that showed the opposite. But still, the consensus among economists about minimum wage is about as strong as it is among climatologists about global warming.

But that isn't the same as saying that a minimum wage is bad for poor people. If many people see their wages rise for every person who loses their job then maybe that's something we want. And the evidence does say that wage gains to the people making the new minimum exceed the wage loses of the people thrown out of work.

But since ~90% of the money for those wage gains ends up coming from higher prices, we'd be much better off just raising taxes and handing the money to people earning less than we think they should. That way the costs would fall progressively rather than repressively, and we wouldn't see any increase in unemployment at all.

EDIT: And while it's true that Australia has a very high minimum wage and low unemployment, most industries that would be minimum wage in the US have special exceptions from the minimum wage in Australia. The number of people earning 7$ an hour in Australia isn't that different per capita than in the US.

[1] That minimum wage industries are monopsomies and have similar cost structures.

Its easy to raise the minimum wage in the middle of an artificial economic boom. The destructive consequences don't show up until there is a drop in demand for labor. I doubt studies are designed to look beyond a few months after the increase for effects.

If wages aren't drop when there is a dramatic increase in supply, there's no incentive to create businesses that can hire and train those people. Everyone that worked in the housing industry are now lacking marketable skills. They need retraining.

It would be far better for the least valuable workers if we found some way to assist them that doesn't interfere with their ability to get a job.

And we'd be doing that if there won't so many that don't understand how markets work.

How much we pay in taxes is secondary to the high human costs of government interfering in critical markets like the labor market. The costs of this particular failure are focused entirely on the poorest among us.

And most people are blind to how they are doing it to them.

Individual employers are hiring to make a profit, not to make some collectivist understanding of the economy work out.

Obviously, any dollars an employer does not give to his employees, he gets to spend or his customers get to spend. Those dollars don't disappear into the ether.

There is no increase in overall spending from paying more for a service than it can command in the market place. And no increase in demand.

Except that for a lot of businesses, it's actually that any dollars an employer does not give to his employees, it keeps as profit. Then maybe it pays that out as dividends, but those mainly go to rich people who are likely to reinvest them rather than immediately spending them, because that small increase in dividend receipts doesn't make a huge difference on their overall financial situation.

Whereas extra dollars going to a minimum wage earner will almost entirely be spent, because people that poor tend to spend nearly all of their income.

It's the same reason why tax cuts to the poor are more stimulative than those to the rich.

I would argue that dividends feed everyone's retirement and investment accounts, but:

* As you pointed out, those are class-biased towards the upper middle class and those richer.

* Worse: companies nowadays seem to be paying out pathetically low levels of actual dividends compared to their monumental earnings. It's an unsustainable economic model where earnings are supposed to create a higher stock price rather than a dividend payout, even for absurdly profitable companies like Apple.

>...but those mainly go to rich people who are likely to reinvest them rather than immediately spending them, because that small increase in dividend receipts doesn't make a huge difference on their overall financial situation.

And when they reinvest that money what do you expect happens to it?

The underlying assumption in your argument is that when someone who is not on minimum wage earns an income, whether through profit, dividend or earnings, gets reinvested rather than 'spent'.

OK, I'll go along with that - most people invest their excess earnings above a certain level.

But that's where your understanding breaks down. Those 'investments' are not money stuffed in a mattress. Mostly it is kept in financial instruments or directly in businesses or properties. Each one of those investments is making people better off, whether by employing minimum wage workers, building houses for people, or delivering services - whatever - but it's not stuck under a mattress. Even if it is put in a bank account as cash, the bank then takes that money and re-lends it out to seomeone else to finance a house, a business, a car - whatever.

I'll agree that tax cuts to the poor are an excellent stimulus - as long as they are replaced with commensurate reduction in public spending. It is far better to cut the tax rate for a low income earner and let that earner decide what to do with the extra cash, than to take it as taxes and have a beuracrat decide what to do with that persons cash.

Of course, cutting taxes for every income level is the best plan overall, as long as you cut government spending at the same time. And for most governments, that means cutting welfare spending. If you let low income earners keep more of their cash, then you spend less on welfare.

Unproven Claim A is true for the same reason that Unproven Claim B is true.

It does have an effect in Australia I think. Many places would rather hire a group of casuals under 18 to cover 1 full time person. They can pay young people youth wages which are well under the minimum wage.

Whether that is a bad thing or not I don't know.

Looking at Spain's 55% youth unemployment, it's probably a good thing. Giving the young jobs is good, you don't learn how to work in a vacuum. Once they are older and have training they'll be able to find better jobs with the experience under their belt.

'belies' means 'does not give the impression of'. If it 'belies a simplistic understanding' then it gives the impression of a not-simplistic understanding.

Raising the minimum wage increases the disposable income for the employed. You are making the assumption that an increase in minimum wage does not decrease the employment rate.

Your particular country may be benefiting from a commodities export boom, free-money level interest rates, or any number of other internal or external factors, which allow employers to get by fine with raising the minimum wage. Perhaps they had huge margins already, the customers can eat the increase in cost, CEOs are enjoying a stock market boom and don't dare to let their companies growth stall, whatever.

In an economic contraction things aren't so rosy.

We have a unique situation now where minimum-wage level employees are increasingly competing with machines. Increasing both the minimum wage and labor costs just expedites the progression of this trend.

To take a line from Bartlett: that's why we need more retraining programs.

You shouldn't be writing this if you have a poor understanding of economics yourself.

Raising minimum wages doesn't raise productivity. It redistribute wealth from the rich (investors) to the poor (employees). It does create more spenders in the employees level and less spenders in the investors level.

Actually considering the Deadweight loss (http://en.wikipedia.org/wiki/Deadweight_loss), we'll end up with more unemployment and less GDP

That's why if you go to a restaurant in Australia you have to serve yourself - certainly nobody will be coming to your table to help you unless you're paying at least $50 per head.

Whether that is right or wrong depends on the observer. But it is true.

Uh, what? Australian citizen who gets back home every few years here... again, huh?

Go into any mid-priced restaurant in Australia where a meal costs about $15-25. See if you get greeted into the restaurant, seated and served at the table, including having your drink refilled, any problems attended to and your bill brought to you.

You will not. You will go to a counter, read a menu, order the food and return to your table. At some point you will either be paged, have your number called, or possibly have your food brought to the table.

This is because waiting staff are unaffordable below a certain price point on the food.

It costs $25-$35 / diner to pay a server $12/hr?

Generally, yes.

Restaurants are a burst capacity problem. In a typical restaurant from 11ish to 1sh you have a burst of traffic then from 1ish to 5ish you have low to no traffic. Once the dinner crowd comes in you'll have another burst of traffic that can vary greatly per weekday (monday nights, low traffic - friday nights, high traffic). You run in to the problem were many employees (waiters) want a full time job but you can only afford a few of them.

In many food service types they've (as the parent stated) got rid of the waiters all together (increased unemployment) and only kept the staff that would need to be there regardless of traffic amount.

* cough* * bullshit* * cough*

Eating out in a lot of Oz can be pricey, but that's just nonsense.

Besides which, culturally, many folks from other countries find the US habit of having waiters hovering around constantly to be intensely annoying

The last 5 meals I have eaten out in Australia have not had table service. The last meal I ate in Australia that had full table service cost me $120/head. While I'm sure you can find restaurants with lower price points that still do table service, in general, you don't get it. It's not bullshit at all. Perhaps there are areas of the country which have high concentrations of people who can earn less than the adult minimum wage (ie, students) where table service is more common.

I make no judgement at all whether full table service is a good or bad thing, I simply note that because of the cost structure, a restaurant in Australia has less staff than a similar restaurant in a different country.

In most other countries I visit, most restaurants have table service, even cheap cafes and coffee shops. This is demonstrably not the case in Australia.

"I simply note that because of the cost structure, a restaurant in Australia has less staff than a similar restaurant in a different country."

And I think you're wrong.

"In most other countries I visit, most restaurants have table service, even cheap cafes and coffee shops. This is demonstrably not the case in Australia."

Seriously, I don't know where you went, but I lived over there for the last two and a half years and travelled the entire country (no I'm not making that up, the entire country), and never came across this. Every small town cafe and restaurant had table service. All the backstreet city places had table service.

"This is demonstrably not the case in Australia."

I'm sorry, I just don't believe this without some serious research. You're wrong.

I live in Australia. Last Friday night I went out for a meal. Again I had to pay at the counter and collect the meal myself.

If you go to Nandos that'll happen, because its their model.

Do you live in Canberra? Maybe there aren't many staff in Canberra because nobody lives there. Never encountered this in two and half years though, it's nonsense.

This doesn't match my experience in Melbourne in the slightest.

>> rising minimum wage makes for more spenders

Really?

John lives near me and is unemployed. My neighbors and I all hate cutting our grass. We'd pay $5 an hour to have someone else do it, and John would prefer $5 an hour to $0.

However, it's illegal for us to hire him at that wage. So we cut our own grass and he has no job. There's one less spender.

There's also a bunch of hours we could have spent doing something more productive. For instance, I could have worked on my open source project instead of cutting my grass. But I'm producing $5 of economic value that hour instead of $50.

So why is "you can't sell labor for less than $X" any more reasonable as a law than "you can't sell oranges for less than $X a pound" would be? Both lead to waste.

Contract labor for the win.

Sell the mowing job as a unit. I will pay you $X to mow lawn, you have one day to complete the task. You separate the speed in which the labor works from the value of the job. In most cases this leads the worker to complete as fast as possible for their own benefit, but does not harm you if the worker decides to take their time.

That seems to be the effective argument against having a minimum wage at all. Once you establish a social contract that says that human effort should be valued at no less than a particular amount, we just accept that some level of underemployment as a result of that.

Of course. The argument is about where you set the minimum. Everyone agrees that a $100/hr minimum wage wouldn't work because the vast majority of jobs wouldn't support that. So the question is how high can you go before the underunemployment effects outweigh the "human effort should be valued" bit.

7.25? 10? 15? Reasonable people can disagree.

It's more than just the underemployment vs. "human effort should be valued" balance, though.

There's a meaningful stimulus and multiplier effect to be found when people who pretty much have to spend every single dollar they get to stay afloat get a few more dollars to spend.

I'm at a point where if I got a small increase in marginal revenue, it wouldn't really change my spending. I remember a time, however, when a .25/hour increase made a meaningful impact on what I could purchase.

AFAIK there is no empirical research to support that claim.

A quick Google search found a handful of links to empirical research supporting that idea.

Specifically: The authors examine 23 years of household spending data and find that for every dollar increase for a minimum wage worker results in $2,800 in new consumer spending by his or her household over the following year

http://raisetheminimumwage.org/pages/stimulus

That's a local effect though (your quote). The money that goes in that workers pocket has to come from somewhere else. Also raising the minimum wage possibly causes some (slight) additional unemployment.

So what's the overall stimulus effect on the economy? Unclear. It appears as if the second study on the page you linked to might try to address it, though it looks to me like more of an advocacy paper than an impartial study. That's just from a quick glance though. I will try to read further.

My overall impression of the minimum wage debate is that it has a very high ratio emotion :: impact. Whatever overall effects it has on the economy appear to be quite small (almost within the noise), and yet it always generates a lot of intense argument. There's lots of signaling going on here I think.

That article is not talking about the multiplier effect. It is talking about consumers consumption smoothing...buying automobiles after the minimum wage goes up because there has been a permanent increase in their income. From the article: "Our estimates are silent about the aggregate effects of a minimum wage hike."

I've read a lot of the econ literature in this area, and have never seen a defense of the minimum wage on the basis of multiplier effects. Too few people are working at the minimum wage. And, the minimum wage is too blunt of a instrument to try to counteract business cycles.

Consumption spending is what we want to get out of a recession, but long-term you want to encourage investment spending.

I don't think that is true. A dollar spent on creating a business is a dollar of demand too.

The only advantage consumption has is that its easier for a politician to point to.

And there is no proof that consumption gets us out of a recession faster. It is an unproven assertion. Where is the double blind study?

And, yes, if government is going to use force on citizens to implement a theory, some proof is required. Especially if that theory selectively avoids effects that don't fit the goal of expanding government.

I don't think the dollar of spending is contrasted with the dollar of business investment. It's contrasted with the dollar stuffed into someone's mattress.

Dollars stuffed under the mattress don't compete with other dollars, raising their value and enabling them to buy more of the available goods and services.

Dollars aren't resources. The resources exist and can be invested in different ways regardless of how many dollars there are.

When there is a bubble collapse, like the collapse of housing bubble, demand for the thing that is being overproduced collapses. That has to happen in order for the economy to get back to producing things people value and are willing to buy with their own money.

That collapse is a catastrophe for investors and workers invested in the bubble, but the other industries now can get all their raw inputs for less and can now grow.

Keynesians look at the collapsed industries as if they are the only source of growth for the economy. But those unviable industries have actually been diverting resources away from viable ones. The collapse of the artificial bubble is a much needed correction.

Dollars stuffed under the mattress don't compete with other dollars, raising their value and enabling them to buy more of the available goods and services.

They do when they come out of the mattress. Hoarding money means playing a zero-sum game: "This won't circulate, so the currency won't inflate, but whenever I want, I can selectively release such huge injections of cash as to buy whatever I want at whatever price it's going for."

Of course dollars matter when they come out of the mattress. But the issue was what happens in the short term if they are kept there and not spent.

The amount of resources in the world available for either consumption or investment (future consumption) don't change when a bubble is collapsing. Resources are just more likely to be used to grow sound businesses. And that creates more resources and good jobs in the future.

Consumers curtail their consumption because they are no longer fooled into thinking that their wages and asset rices will be rising fast. They stop loading up on debt. They aren't bidding up prices and the factors of production are cheaper as a result, helping expand businesses that do make sense.

If I was making $6/hour and now all potential employers are prohibited to pay me that much - in the long term I'm more likely to lose that income than "get a few more dollars to spend".

A conservative economist says to not worry over a raise to $9 an hour: http://mungowitzend.blogspot.com/2013/02/please-to-calm-down...

I do worry that we are eating away at low-pay jobs, which are often necessary steps for mid-pay jobs for the middle class. This is a tiny little step away from that, but probably not too much worth worrying about, given all the other things we have (like huge marginal rates on the poor as they rise out of eligibility for welfare programs).

I struggle to imagine why a business that cannot employ someone at 10 dollars and hour, is suddenly a Facebook style gangbusters when they pay 7 dollars an hour.

If your business model is so thin that 3 dollars cripples you, really you need to re-think.

(As an example, do we really think that the Comet/Currys/Circuit City sitting in a big car park miles out of town is running a sustainable business model for buying the latest gadgets? )

And on the demand side, do we think it is likely that the law firm that has five floors in the office block will decide that since all the cleaning companies costs have gone up, they will just leave the bins overflowing and ask the clients to wipe the toilets before use?

You aren't thinking at the margin.

In general, you are right, but at the margin you are wrong.

I think the margin is the wrong way to view this - yes, there are companies where losing a dollar will make it uneconomic - but I will be amazed if that company is otherwise a strong, scalable and robust business model, instead of a crippled business limping along till something kills it off.

Hiring decisions are made at the margin though. Even strong companies stop hiring when the additional cost of an additional worker is less than the additional value to the business.

>> If your business model is so thin that 3 dollars cripples you, really you need to re-think

well... that really depends on economy of scale I would say.

Wal Mart has 2.2 million employees[1]. Lets assume 1 million of them are min-wage workers (assuming bottom rung has a high turnover, I think this might be conservative) Suddenly that $3/hr becomes $3 milllion/hr. Lets say the average worker works 30hrs/week, and suddenly this "$3" change from a $7 to $10 min-wage is costing Wal Mart 90 mil a week, over 4.5 billion a year! And eating 20% of your profit.

[1] http://en.wikipedia.org/wiki/Walmart

Only 20% ?!

That is surely a great argument for raising the minimum wage. I am sure Walmart will kick up a fuss, but there are plenty of other things coming down the road that will hurt it's profits more.

Maybe they will get robots to stack the shelves from behind and save a billion. Either way the problem is still mot what should the actual wage level be, but how do we spread the wealth if pay packets no longer go to everyone?

Tsk tsk. The problem with Wal-Mart is that their wages are so low some of their stores hand out Food Stamps and Medicaid applications when they hire you. They literally do not expect that you can make a good living working at Wal-Mart.

Which means that some portion of Wal-Mart's revenues is mathematically equal to the money the government spends topping-up their workers' incomes.

So food stamps and medicaid enable jobs like that to exist.

They enable their children to not be malnourished.

Yup. Its a general rule that government spending supports the lower/middle class (the majority, and therefore most of the economy). The origin of the U.S. middle class was WWII spending. Without gov spending, you get ever-greater inequality as the economy is reduced to a corporate fiefdom run for the benefit of the wealthy minority.

I think if you looked at a graph of U.S. welfare spending vs. the Gini coefficient over the last 40 years you'd see exactly the opposite of the correlation you suggest.

My point exactly. A minimum wage that is not a living wage is a subsidy to employers who troll at those depths

What happens is they get paid below minimum wage, and under the table, so they aren't paying taxes on their wages. I don't know if that is good or bad for the economy...

But how is there this weird curve that 40 years ago, there was an equivalent sustainable rate of essentially $24/hr or something- but now that businesses can't sustain it?

It seems that companies and the economy keep growing, but for some reason we haven't kept up with the purchasing parity of lower end workers

Energy costs? Overseas competition? Cost of regulations?

These sort of thought experiments come from the same place where they say we should tax the unemployed for oxygen inhaled & subsidize oxygen for the employer. i find uchicago-style social-engineering-disguised-as-economics alternately fascinating & repulsive, depending on which end of the table I am sitting at.

What?

The idea being that if joblessness has a social cost, we make the jobless pay that cost by taxing their breathing. Whereas if work, any work, is of social benefit, than we subsidize breathing by employers on a per-job basis.

The thought experiment is: does working at a job have an intrinsic social value, or unemployment an intrinsic social cost, aside from the wages or lack thereof?

That's certainly a quasi-religious position of the Boston school; unfortunately, it doesn't appear to jibe too well with reality: http://www.cepr.net/documents/publications/min-wage-2013-02.... for example.

I disagree. Any job that was likely to teach you anything or become a valuable experience for getting later jobs probably already pays more than minimum wage, and is probably more selective about hiring than minimum-wage employers, too.

You can disagree, doesn't mean you're correct. Right out of high school I worked at a gas station for a few months (needed to pay the bills) before I gained employment at an internet service. People skills, situation control, theft management are just a number of things I picked up there.

It increases unemployment of low-skilled black men mainly. Other low-skill demographics don't have as much of a problem finding employment when the minimum wage increases. This awkward fact is why lowering the minimum wage is progressive.

Unemployment doesn't have to be worse than low-wage employment, in a progressive socialized economy.

Unemployment is so mentally and physically unhealthy that I do not see how it could ever become better than working a job that creates candidacy for better jobs. An unemployed person isn't a student or a full-time volunteer (unless that person is networking; such people usually are well above minimum wage.)

This is a common argument, and it makes sense in theory. (I don't mean "in theory" snidely, I mean it in the real sense -- it's a defensible theory.) But here's the thing: there are states across the country that have higher minimum wage than the national minimum, and cities that have higher minimum wage than their states. This has been true for more than a decade in most of these places -- so there's been enough time for us to gauge the effects by now, right? If the theory was correct, most of those localities should have measurably higher unemployment rates in low wage jobs than surrounding localities, and most of those rates should not be able to be linked to other factors beyond the legislated minimum wage.

As it turns out, there's no substantive evidence this has happened. California does not, it seems, have a statistically lower number of minimum wage jobs per capita available than other states. That's true even in San Francisco, which has the highest minimum wage in the country.

In fact, there have been studies done on this. A lot of them. Generally they show either no effect on employment caused by raising the minimum wage, or at worst case a small negative effect. There's a fair amount about what economists think at this NYT article, including links to a few of those studies:

http://economix.blogs.nytimes.com/2013/03/04/what-economists...

While the polled economists are rather evenly split on whether they think raising the wage is likely to be overall negative or positive, there was stronger agreement that "benefits of raising the minimum wage and indexing it to inflation outweighed the costs."

What about mobility. If a person loses their job, in the U.S. it is easy to move.

With the number of people that have left California to other states with lower costs of living, or going to counties with lower costs these things are not easily gathered.

http://www.newgeography.com/content/001925-if-california-is-...

This thinking that people should be happy to work at a token wage than not at all worries me a bit. It might be okay for some teenagers who live at home with their parents and have their basic needs covered, but what about people who won't cover their cost of living with such a small amount?

Where I live the minimum wage is $15.96 an hour and it is not really even possible to live on that and have any quality of life.

Ultimately in the absence of government subsidy people are paid what their labor is worth. If your labor is only worth $8/hr and the minimum wage is $15.96/hr, you won't get paid $15.96/hr. Whatever you would have done at $8/hr will be automated.

You usually get paid less than what your labor is worth. That's how a business builds up its savings account, or pays off its debts.

Nonsense. If that's the going rate for your labor, that's what it's worth. The fact that your employer can use your labor as part of a system that returns more value than the sum of its parts isn't relevant.

By that same logic, if government raises the rate, negotiating on your behalf, your labor is worth more.

As other have noted we'd all be rich if that were true. No, your labor is still only worth what someone else is willing to pay.

Your wages may go up temporarily because it takes time for employers to adjust. In the long run if you can't offer your employer more value than what he's paying you simply won't have a job.

That argument hasn't been supported by actual studies in the UK.

> One of the biggest arguments against it is that raises unemployment by making more people unemployable.

This is a classic a priori economic argument, and the data do not support it. Here are some studies on the effects of minimum wage increases.

"The Florida Minimum Wage After One Year" Summary: none of the dire predictions of job losses came true, the Florida economy continued to lead the country in job growth, and the unemployment rate continued to decline steadily, while economic growth accelerated.

http://www.risep-fiu.org/reports/Florida_Minimum_Wage_Report...

"The Economics of the Minimum Wage" Summary: minimum wage increases have little or no impact on employment rates.

http://www.progressive-economics.ca/2007/01/27/the-economics...

"Step up, not out: The case for raising the federal minimum wage for workers in every state" Summary: critics argue that, faced with rising labor costs, employers are forced to lay off workers. This claim has been carefully studied by labor economists who have found little evidence that minimum wage increases lead to significant job losses. In fact, the research unequivocally shows that the benefits to low-wage workers and their families far outweigh the costs.

http://www.epi.org/content.cfm/issuebriefs_ib149

"Myth and Measurement: The New Economics of the Minimum Wage" Summary: recent increases in the minimum wage had no adverse effect on employment.

http://www.amazon.ca/Myth-Measurement-Economics-Minimum-Wage...

"States with Minimum Wages above the Federal Level have had Faster Small Business and Retail Job Growth", Fiscal Policy Institute, 2004.

http://www.fiscalpolicy.org/FPISmallBusinessMinWage.pdf

"National Minimum Wage: Low Pay Commission Report 2005." Summary: The National Minimum Wage was introduced on 1 April 1999, with an adult rate of £3.60. Its introduction benefited about one million low-paid workers and had no measurable adverse effects on employment or inflation.

http://www.lowpay.gov.uk/lowpay/report/pdf/DTi-Min_Wage.pdf

I recommend Alan Manning's "Monopsony in Motion", which subjects the standard economic assumptions about perfect competition to some rigorous empirical testing.

http://press.princeton.edu/titles/7522.html

The market for labour is an imperfect market that does not behave in a simplistic manner:

* Markets for labour are relatively inflexible - it's difficult and time-consuming to look for a different job, so it's hard for employees to 'vote with their feet' by seeking employment elsewhere - especially those employees making the least money and having to work the longest hours to make ends meet.

* Because there are relatively few employers compared to a great many employees, employers have market power - they can force wages below a pure market rate because employees have limited options for alternate employment and limited opportunities to seek out those options.

* Higher wages mean lower turnover and hence lower hiring and training costs for employers, which offset the allocative distortion of paying higher than a market rate.

* At the same time, higher wages motivate employees to work harder, which raises productivity and can also help to offset the higher cost of labour.

* When already-wealthy people make more money, they tend to invest it, but when poor people make more money, they tend to spend it. As a result, a policy that increases income to the poor has a bigger impact on GDP than a policy that increases income to the rich.

* When low-income workers make more money, they depend less on government subsidies, which alleviates pressure on public expenditure.

You deserve a pat on the back for digging up research instead of simply spewing opinions like most other HN comments. Bravo. This is the gateway to reasoned argument. (Although, I notice, I am the only one replying to you.)

People pretend that their feelings about minimum wage are facts, far too often, and that kind of self-ignorant argumentation hurts everyone.

Thank you. In the interest of disclosure, I already had those references on hand, having done the research for a previous debate on a minimum wage (not on HN).

Meh, I looked through some of the links. The first one didn't resolve and no one said ANYTHING. That tells me no one looked through these links, they just upvoted the "spaghetti on the wall pile of links post".

The second link was more of an opinion piece from a progressive pro-minimum wage site.

The third one was from EPI, which has on its front page how the Sequestration cuts are dire financial problems for the country. Jeez, did someone take Jay Carney's podium notes and reprint them as actual pieces of credible journalism?

I gave up after that. A spam of useless links does not scholarship make.

Good catch on the first link - it seems to have moved since I first looked it up. Here's the current URL:

http://www.risep-fiu.org/wp-content/uploads/2012/02/FL-Minim...

In today's US economy, those jobs are not taken by the young anymore. They are being taken by people who have been laid-off/downsized, already have skills of some sort and don't need the experience of the low value jobs.

The main argument for me is that it leads to higher unemployment for teenagers and its affects on small businesses trying to get part time workers.

What does part time have to do with hourly wage?

part time jobs are the most likely to pay the minimum wage

The main argument against it is that many people loose their jobs when the minimum is raised for those who can't provide that much value to their employers. Any interference with the free market never results in a good thing. Note that the most innovative part of the economy, computers/software, is also the least regulated.

Because of interference with the free market we have safer air to breath, water to drink, food to eat, and medicines to take. The free market only cares about something when it will affect profit margins positevly and lets be honest most people don't care about how why it's really important to not pollute the ocean. Without government interference we would still have child labor. Correlation doesn't equal causation, my friend. Most would agree the reason software is so successful is because of the ultra low barrier to market entrance because all you need to build software is a $300 computer and cheap Internet connection. I don't have the burden of having to run a physical store and pay all the expenses that go along with that. I can compete with billion dollar companies and win.

Interesting theory - can you explain why, then, that the most regulated economies ever, such as the former Soviet Union or former East Germany, were the most polluted? Interference in the free market causes chaos, such as our current economy and the direction things are going now, unfortunately.

Your easy start up example is interesting too, as if there were more regulation, you would have to work through layers and layers of red tape and fees and lawyers to start a company etc which simply reinforces my point. If you were to add 50K+ to the costs of starting a software company due to regulation and fees, the innovation landscape would change dramatically as would the companies we have today.

Gosh, I wonder if being ruled by a mass murderer dictator might have been a factor?

There's no such thing as a free market. Just like there's no Santa Claus. Also, some very innovative parts of the computer/software economy not only lack regulation, the FOSS sector, lack wages and salaries that are directly related to the production of said software.

It doesn't hurt that the software industry boomed under the Internet, which might be the most horribly regulated and managed infrastructure in history, but it is densely controlled by politics, else governments wouldn't have privatized their coax lines and wireless spectrum wouldn't be controlled by a few major players.

Also, software patents can easily be considered intense regulation, especially in the superfluous and artificial nature they make the mathematics behind algorithms scarce because you have to tip toe around getting sued.

The main argument against the minimum wage is that it may increase unemployment for unskilled workers. However, recent empirical work suggests that the minimum wage is currently low enough in the U.S. that raising it has quite a small effect on unemployment. Therefore, some economists feel the redistribution effects are worth a small cost in efficiency. Here is a survey of prominent economists on the effects of raising the minimum wage to $9:

http://www.igmchicago.org/igm-economic-experts-panel/poll-re...

Many economists would argue that increasing the EITC would be a better way to help the poor.

But the libertarians don't see it like that. If we give poor people $9, they'll want $25, $100, and then $1000/hour. There is no point in arguing a rise to $9/hour, so use straw man to make the argument against stronger!

I like min wage increases vs EITC. A min wage increase pushes up the value of human labor, giving more incentive to innovate and automate, which is where we should be heading anyways. It's actually a hard love approach.

Remember there's always that cozy alternative to innovate and automate: not starting that business after all.

Fortunately we aren't like that. But we still need the pressure valve on at the low end to force us all up the value chain.

It's like raising water rates to make you use water more efficiently, do you stop using it? No, you are smarter about how you use it. Human labor is the same thing. I've seen what happens when the bottom is too low...it's not much better than slavery or serfdom.

The problem with EITC (and Medicaid) is that it subsidizes employers like Walmart.

It's not only inflation. The argument is making more low-skilled youngsters unemployable and thus preventing them from stepping on the lowest step of the skills ladder which eventually would take them to higher wages. It also precludes people that are unable to generate enough value to justify minimum wage from earning any income instead of completely relying on state assistance. Inflation can be counteracting this - since if dollar costs less, eventually the value of it would fall low enough so that value generated by an unskilled worker is worth the dollars state prescribes to pay him - but that'd take time, and getting on the dole is easier than getting off.

Unemployed people can do plenty of things to develop skills, and are often required to do so by welfare programs. What are the main skills acquired by working at Walmart after the first week?

Assuming Walmart is the only minimum wage employer is your first mistake.

I don't know, never worked at Walmart (and shopped there maybe twice) but I can guess - people skills? Management skills if one becomes, say, shift supervisor? Plain old "showing up to work on time" skills (for a person who never ever held a steady job that might be a new skill too)? Having a resume that actually shows you can do all of the above so hiring you is lower risk?

Developing skills because some law requires you to check the V in the papers and developing skills because you're actually earning your living doing that is a very different thing.

No it doesn't lead to inflation (maybe inflation in products that the $10/hour employees mostly use) but the general rate of inflation should be the same.

Raising the minimum wage redistribute the wealth from the rich to the poor. The disadvantage is that it creates a Deadweight loss (http://en.wikipedia.org/wiki/Deadweight_loss) resulting in unemployment and lost economic value.

In a perfect, competitive and free market there should be no minimum wages. However, as a liberal capitalist, I think we should keep some standard.

Deadweight loss only occurs if government is incapable of putting people to productive work. government, while imperfect, has some capacity for organizing productive labor.

Agree also with the other comment here that the minimum wage is a structural advantage for Costco against Walmart.

Walmart socialize their labor costs by pushing their employees on to government aid, eg food and healthcare.

US Government mandated minimize wage forces corporate welfare basket cases like Walmart to start carrying more of their own water.

People arguing against minimize wage carefully omit that corporate profits are at all time high while wages have stagnated for decades. Coincidence?

> US Government mandated minimize wage forces corporate welfare basket cases like Walmart to start carrying more of their own water.

This is probably true, but wouldn't ending corporate welfare be a better strategy to achieve that end?

Does Walmart get direct welfare?

So people starve?

We, collectively, support the employees that allow walmart and their ilk to operate. Mandating a minimum wage at a higher level takes the burden away from the rest of us.

The alternative is not just to pull the rug out from under folks feet and let them sink. This would not result in better negotiation skills, or people choosing jobs that pay a living wage, or any other utopian ideas. It would result in further abject poverty.

>the minimum wage is a structural advantage for Costco against Walmart.

It's a structural advantage for Costco, period. They sell necessities in bulk. When people can afford to buy in bulk, they will. So the more people who can afford to hop in the car and pack it to the gunnels with canned goods and 48 packs of toilet paper, the better Costco does.

1) When Costco raises their entry-level wages - it's probably a good thing.

2) Using legal system (mandatory minimum wage law) to fight their competitors - is a sleazy tactic.

Nearly all professions and businesses do #2.

Agreed but that is a Bad Thing™.

This is backtracking a bit, but what are the goals of raising the minimum wage?

The implied goal seems to be to help the poor, but as others have pointed out, other policies (EITC, guaranteed minimum income, negative income tax) are better suited to that goal. So, do proponents of the idea have a different (or additional) goal in mind? Do proponents believe that these other policies are not more effective solutions?

I would like to hear others' opinions on the answer to this question, especially if you support the raise.

Those other solutions involve the taxpayer footing the bill, why should we be subsidising employers?

Conversely, why should employers be the ones responsible for providing a safety net to a nation's citizens?

It's not really a safety net at that point, it's more along the lines of the true cost of the employee. I suppose it all depends on how you look at it :)

Those alternatives are indeed all taxpayer funded, but not all act as a subsidy to employers. There was a paper contrasting EITC and guaranteed minimum income, and one of the notable differences is that EITC is a slight subsidy to employers, while GMI is actually the opposite. GMI creates (some) disincentive to work, requiring employers to pay more to attract the same employees.

Raising the minimum wage does not "just" impact low-income workers, at the margins.

It actually affects the entire economy because many contracts are tied to __multiples of__ the minimum wage.

So it's not just about marginal workers either (a) getting a raise, or (b) losing (or not getting) a job. It's far more about union workers and other collective bargaining agreements with pay and benefits tied to minimum wage. Those are the people the legislation is designed to benefit. If anything, low-income workers are a distraction.

And that's why it's a core Democrat issue, not because it helps the poor or the young. Government already has programs that effect the poor and young far more than any minor adjustment in the minimum wage, but those programs do nothing for those under collective bargaining agreements, which is the actual purpose of increasing the minimum wage.

It actually affects the entire economy because many contracts are tied to __multiples of__ the minimum wage.

I've not heard of this before. Is this common in federal or municipal contracts?

> I think we should raise the minimum wage

It means you want unemployment to raise as well? Because that's a very typical effect of minimum wage increase.

I think overall better move would be to reduce the number of hours people work. Reduce weekly hours from 40 to 30, and make overtime really pricey. That will increase employment. It will reduce profits of companies substantially though.

This doesn't surprise me at all. Since they already pay their workers a lot more than minimum wage, the increase would mainly be a hit to their primary competitor that relies on low wages: Walmart/Sam's Club.

Well, but it does hurt their employment advantage in areas where they actively compete for labor. I wouldn't take such a cynical view on why they support raising the minimum wage.

Having people who make more money also means in areas where it really matters, people will buy more at Costco too :-). (in theory)

> it does hurt their employment advantage

Ar there areas whith a shortage of unskilled workers?

It wouldn't hit Walmart at all, they don't pay minimum wage.

Nationally the average full time Walmart associate earns $12.57 / hour. That has increased by roughly 30% in seven years.

You are citing the full-time age for Walmart who is famous for not having people as full-time so they don't have to pay benefits?

How many of Walmart's employees are full time?

I live in a relatively poor part of the country, and starting part-time associates here make about $9.50 / hour. 30% above minimum wage already.

A minimum wage increase will not hit Walmart.

Minimum wage hike is a winner for Walmart. Walmart employees are among the most productive in retail, Walmart has low labor cost/unit of sales.

Their customers are low earners, so if their wages increase, that helps Walmart.

Mostly, it helps Walmart because that small store in the little shopping district half an hour or an hour from the nearest Walmart will have a harder time staying in business.

Indexing the minimum wage to inflation is a particularly bad idea, if there is ever a big supply shock and stagflation, you'll get a big increase in the minimum wage at the wrong time, when people and companies are struggling to avoid layoffs.

> Indexing the minimum wage to inflation is a particularly bad idea, if there is ever a big supply shock and stagflation, you'll get a big increase in the minimum wage at the wrong time, when people and companies are struggling to avoid layoffs.

I assume you agree that in the long run the minimum wage should rise with something like inflation.

Put it in the hands of the Federal Reserve. Then can ensure it does not go up at the wrong times, and does go up the right amount over the long run.

During a supply shock, the fed should allow inflation to increase because prices are rising for a real reason. But equilibrium wages should remain steady because workers aren't becoming more productive. Basically this is just a way of saying everyone needs to take a hit to consumption, something which is readily facilitated by inflation. If minimum wages rise but equilibrium low-skilled wages don't rise or even fall, it will lead to layoffs and turn the supply shock into a high-unemployment recession. If the Fed tries to react by reducing inflation, equilibrium wages will fall further making the situation worse, and giving rise to a lot of inefficiencies where some people are shielded from the supply shock and others face the full brunt.

I think it would be nice if wages rose faster than inflation.

I just don't think the government can mandate it. There's nothing that special about labor markets that prices shouldn't be set by supply and demand. If the government e.g. the Fed isn't smart enough to constantly set the price, how are they smart enough to set a rule that would be permanently right?

If government mandates a higher than market-clearing wage, people are going to be out of work who otherwise would be happy to work at the lower wage. There's no economic law that says wages for any or every job will always rise as fast as inflation, if productivity isn't growing, and supply of labor for that job is rising faster than demand.

I kind of think the minimum wage should be more like a labor protection, ie set it 10-20% below the bottom 10% of the wage distribution. Basically for those cases where a local employer is a price-setter, as opposed to a price-taker, or a worker really doesn't have much choice of employer for some reason, or is a really bad negotiator, the employer can't totally abuse it. Just like they can't make you use a chainsaw without protective eyewear.

Even that puts some people out of work. Economic conditions and prices can vary really widely, it's a big country. Kids, people with disabilities, at low wages they might want to work and it might be good for them to get experience and be tied to the labor force, and they might not have the productivity to justify minimum wage as messengers, delivery persons etc. But the law should also allow exceptions, eg people with tips, interns, subsidies for legit programs for the disabled.

I'm not saying the market is perfect, I just don't see the sort of widespread abuse or great benefit of government price-fixing here. Mostly populism and bad economics. If it's OK to fix minimum prices for labor, why not for anything else?

Sticky prices and wages are a big part of recessions, layoffs etc. Quantity adjusts instead of price. So you get layoffs, GDP drops. Doing things that make prices and wages more sticky makes things worse.

One group that benefits from a high minimum wage is cash workers/illegals. Once you push people out of legit employment into the casual sector/black market, they don't get any protections.

> I think it would be nice if wages rose faster than inflation.

It is nice, and there is a history of this happening.

> There's nothing that special about labor markets that prices shouldn't be set by supply and demand.

0. There is a significant imbalance of market power between the buyers and sellers of labour.

1. At the low end the price for labour has important welfare implications.

2. It is hard to create transparency about high end jobs.

> If the government e.g. the Fed isn't smart enough to constantly set the price, how are they smart enough to set a rule that would be permanently right?

The Fed is already setting a price, the price of money (Interest Rates), in a way deliberately designed to manage a balance between unemployment and inflation. They are smart enough to do a respectable job of this, and have managed inflation well.

> I kind of think the minimum wage should be more like a labor protection, ie set it 10-20% below the bottom 10% of the wage distribution. Basically for those cases where a local employer is a price-setter, as opposed to a price-taker, or a worker really doesn't have much choice of employer for some reason, or is a really bad negotiator, the employer can't totally abuse it. Just like they can't make you use a chainsaw without protective eyewear.

I agree, this goal of minimum wage policy is the welfare of low paid workers.

> If it's OK to fix minimum prices for labor, why not for anything else?

I am in favour of a minimum price for alcoholic beverages. Perhaps by a tax based on $2 per standard drink.

Whenever I hear people talking about the minimum wage I want to know why they don't talk about the earned income tax credit instead.

EITC: Money is given to the poor people that need it most. The money that goes to them comes out of progressive taxation. Very little dis-employment effect.

Minimum wage: Money mostly comes from higher prices, which fall disproportionately on poor people. Fairly substantial dis-employment effect.

The only reason to favor the later is that politicians can rely on the public not noticing that they're paying for it.

Tax credits rely on someone who is struggling to stay afloat to fill in yet another set of forms, correctly and then wait for the government to process it.

They were and still are a disaster in the UK - something like 20% of eligible people have never claimed and now billions have been overpaid - yes, clerical error and overly complex systems means the UK government is trying to claw back over payments from some of the poorest in UK, who have already spent it anyway. It's ridiculous.

No - keep it simple stupid, almost everyone can work out what they have to spend by looking in their pay packet. Working out what complex tax credit - no way

I've never understood why the lower income tax allowances and limits were raised instead, so the lower paid people just paid no or less tax.

I don't think anything about the minimum wage is as settled as you make it out to be.

There's a big reason this won't fly in the US. The GOP won't support it because it's a gift to moochers.

I agree with you, it's a better way to do it and to raise the standard of living in this country. It might even have a big effect on reducing crime.

Huh? The EITC only pays you if you work, it was enacted under Nixon, and Reagan, Bush the Elder and Bush the Younger all signed expansions of it.

At least this Republican thinks it's a way better anti-poverty choice than raising the minimum wage, for many of the reasons already argued here.

As to any difficulty the eligible have in claiming it: How hard would it be to add another checkbox to the W-4 asking about other sources of income? If your total income including the job you're filling out witholding for is estimated to be less than X, it's your employer's responsibility to claim the EITC for you and add it to your paycheck. Perhaps grease the skids on this a bit by giving the employer some tax benefit for doing so.

EDIT: It was enacted in 1975, so Ford, not Nixon, but you get the idea.

I was being slightly tongue-in-cheek with the "moochers" comment. There are a lot of working poor in the 47%, and those are the ones that I was talking about. The GOP views the poor as responsible for their plight and not victims of circumstance. Obviously, the truth is somewhere in between.

Two reasons, from two different political ideologies.

Right: because it's giving money to moochers. Period. Makers and takers, man. (This is what the Republican Party actually ran their campaign on this past November.)

Left: because it's an effective subsidy for sub-living-wage employers.

Nice political talking points, but the EITC has been expanded consistently by both parties. See the growth of EITC benefits:

http://www.taxpolicycenter.org/briefing-book/key-elements/fa...

"Both parties"? The Democratic Party is not the Left. They're the center to center-right corporatists. There is no Left in the United States at the governmental level.

I was just offering that while the EITC can be rejected by both politcal dogmas, both parties have embraced the concept. e.g.

Left: EITC provides relief for the poor.

Right: EITC is workfare, not welfare.

Since both parties have expanded the program over the last 30 years, my version aligns with the facts better.

http://atr.org/eitc-changes-bad-deal-a7071

Just FYI EITC was reduced this year.

Makers and takers?

Sounds oddly close to the "strivers vs scroungers" debate the Conservative and UKIP parties in the UK are trying to drum up.

Honestly, do the Tories even bother pretending they're not copying the Americans anymore?

Government handouts of taxpayer money only creates dependency. If you wish to give money to the poor, then give YOUR money to the poor. Do not vote to have government give your neighbor's money to the poor. Your neighbor's money does not belong to you. When you vote for politicians who favor government handouts of taxpayer money, then you are acting as a thief who lacks the courage to perform the act of robbery himself. Socialism is therefore simply a cowardly form of theft.

The minimum wage, however, while not theft, is a destroyer of jobs. The minimum wage increases unemployment. Raising it, further increases unemployment. Additionally, you are telling people under what terms they may enter into voluntary business arrangements with each other, which is none of your concern. You have no natural right to direct the affairs of others.

The most utterly evil profit maximizing business would always prefer that the government mandated minimum wage is somewhere near what they pay their lowest paid employees.

Sad state of journalism that a group of businesses lobbying for their self interest is swallowed so frequently as selfless action for the public good.

The most utterly evil profit maximizing business would always prefer that the government mandated minimum wage is somewhere near what they pay their lowest paid employees.

How so? Costco in this case has always benefited from a happier, more loyal, consistent workforce because they have a job that many other service workers actually strive for. I fail to understand how reducing the advantage of their position helps maximize their profit.

Because their profit margins remained unaffected by the change but their competitors already razor thin margins get significantly reduced.

I think you missed his/her point. Costco gets to have more motivated and more loyal employees because their pay is significantly higher than minimum wage. If minimum wage goes up, they lose some/all of the benefit unless they further increase wages.

This is the same company that was for the higher taxes for the rich and then made sure to get a huge loan to pay bonuses ahead of schedule so the Costco execs and board members could avoid the tax hike. Hypocrites.

Over a 10-year horizon, that scheme only counters 10% of their goodness.

Hypocrites

I don't beleive that makes them hypocrites. I can simultaneous believe in higher taxes, while optimizing my own situation based upon the current tax code. The notion that the only people who can argue for higher taxes have to maximize their own exposure is not robust.

Obviously lifting the minimum wage would increase pressure on their competition. Maybe they can not operate as efficiently as Costco and having to pay their workers more would send them on a tailspin to bankruptcy (for example). It really doesn't make sense for a business to call for higher minimum wages (other than for PR and hurting the competition). If they believe in paying more, they can do so without a law.

My thinking also, as long as the minimum wage doesn't cross $11.50 it has no effect on Costco and would just be raising other competitors costs who do pay minimum wage to some employees.

It's more likely to have a positive effect on Costco rather than none at all: if all minimum-wage workers have more money in their pocket, they're more likely to buy a CostCo membership, or spend more if they have one already.

That's highly doubtful as Costco is primarily used by middle income earners, in one of the paradoxical effects of wealth where having a bit more allows one to save more. Walmart would be far more likely to benefit, but we know that Walmart isn't exactly for it.

People are really stretching to try to make Costco out to be bad guys in this.

I didn't mean to imply that there was anything sinister with Costco's advocacy; it simply seems like an instance where the interests of Costco and minimum wage workers (possibly) align.

In my mind, that's the benefit of a minimum wage program: you might have to pay more for labor, but so does everybody else, theoretically resulting in more customers with cash to spend. As a company which already pays above minimum wage, they happen to get the benefit without the cost.

I don't think they are really the bad guys. Just that it is a lot easier to advocate a jump in the minimum wage when it doesn't effect your payments. They would be the good guys for having these better wages in the first place.

You have an odd definition of "utterly evil". By my measure, the most "utterly evil profit maximizing business" would prefer to externalize the costs of employment as much as possible by not paying for healthcare and paying employees as little as possible. Surprisingly, it seems that Walmart does something along such lines[1]. There are other business strategies that might approach utterly evil, like child labor in third world countries, or sweatshops, or paying no attention to physically/medically dangerous working places/conditions, but somehow I don't really find supporting a higher minimum wage to be one of them - especially when that business has continually ignored calls from Wall Street to increase its profitability at the expense of its employees.

[1] http://www.politifact.com/truth-o-meter/statements/2012/dec/...

That's an overly narrow view. I start with the assumption that Costco has already found the optimum wage to pay their employees. It's a rare business that does well by mistreating their employees. I'm trying to emphasize that this has nothing at all to do with any altruistic motives and is entirely consistent with profit maximization.

The term "utterly evil" in the context of discussing a mainstream retailer is pretty out of place IMHO.

That assumes a rather static view of the situation. For Costco to maintain the advantages they gain from the wage disparity (employee loyalty, motivation, etc) they would have to further increase their own wages if such legislation was passed.

Costco is free to pay their employees as high of wages as they'd like, no legislation required. This lobbying isn't out of their good will but a strategic play to hurt competitors that rely on lower wages. Such is politics.

That Costco isn't doing this purely out of goodwill needs to be mentioned further.

If Costco already starts all employees at $11.50, increasing the minimum wage to any point less than $11.50 doesn't initially impact their own bottom line, but just serves to increase their competitor's costs.

The other side is that if people see an increase in their pay, they'll have more money to spend (hopefully at Costco).

Not at Costco. The average wage of a person who shops at Costco is 74k. Sams Club perhaps; the customers they attract are at a lower income.

http://www.nytimes.com/2005/07/17/business/yourmoney/17costc...

Costco is more concentrated in higher wage, higher cost states on the West Coast. They'd love to extend California wage rates to Walmart's red state operations.

Isn't competition that takes advantages of factors beyond the free market still competition? In practice, shouldn't the free market extend beyond the "market" itself, and into the state as well? Because all real-world capitalist economies are really mixed economies where the state still has an effect on the market. So aren't rational economic actors making use of every weapon at their disposal by lobbying, pursuing tax loopholes, patent trolling, etc?

Yes, it's called rent seeking.

Why does that automatically preclude being motivated by good will? If their goal is to provide better wages to their employees then they would be best able to do so by increasing their competitive advantage by any means possible. Clearly there is a limit to the level of wage increase they are able to sustain when their competition is paying their employees rock bottom wages.

There's no reason why corporate interests and good will can't sometimes go hand in hand.

The more time goes on, the more I think maybe a minimum guaranteed income is the solution that makes the most sense. Maybe we should just accept that there isn't going to be enough work for everyone, and that that's going to become more true in the future, not less. And furthermore, maybe we should accept that that's a good thing, as long as we shape our economy accordingly.

>The more time goes on, the more I think maybe a minimum guaranteed income is the solution that makes the most sense.

Why? Someone has to pay for it.

Not coming down for or against, but one argument is that it causes less market distortion than a minimum wage. http://en.wikipedia.org/wiki/Negative_income_tax

>Why?

See the rest of my comment.

>Someone has to pay for it.

Of course, and those would be the people who choose to work in order to earn more than the guaranteed minimum. The result would be more available jobs with more relaxing hours, giving people more time to spend with their families, on side projects, or on creative pursuits that enrich our culture.

The idea that automation and technological advancement can cause people to go hungry is frankly crazy. Instead of celebrating the fact that humans don't have to waste their time on menial crap, we are forced by our economic system to wring our hands over the fact that that menial crap can no longer be used as an arbitrary metric for distributing resources.

>Of course, and those would be the people who choose to work in order to earn more than the guaranteed minimum. The result would be more available jobs with more relaxing hours, giving people more time to spend with their families, on side projects, or on creative pursuits that enrich our culture.

I don't follow this logic. The easier it is for people to skate through life without working or working effectively, the less incentive they have to contribute. The people that pay for this life will decrease and quality of life will decrease for everyone.

>The easier it is for people to skate through life without working or working effectively, the less incentive they have to contribute.

We do not currently have a problem with people not wanting to work. We currently have a problem with people being unable to find work.

>The people that pay for this life will decrease and quality of life will decrease for everyone.

That's why the system has to be dynamic. If you have a surplus of jobs, you reduce the GMI so that people have to work more. If you have a deficit of jobs, you increase the GMI accordingly.

Someone has to pay for the increased minimum wage too. I agree with parent that EITC has more bang for the buck if you're interested in helping the poor. I guess someone on the right would just want neither; fair enough I say.

WONKY ASIDE:

The incidence of the minimum wage is almost certainly equivalent to that of a regressive consumption tax. So assuming no disemployment effects, it basically transfers wealth from everyone who buys the products of low-wage labor (disproportionately from the poor) to people who work minimum wage jobs, some of whom are also poor. It also kills some low-wage workers' jobs.

By contrast, EITC is a transfer from people who pay income tax (disproportionately the rich) to people with low incomes. So unlike the minimum wage increase, it is unambiguously beneficial to the poor.

In my personal opinion, one of the big reasons the minimum wage is so popular (and it really is, even across party lines) is that the costs are hidden, so people can pretend it's being paid for by big bad corporations even though the costs are ultimately borne by disproportionately poor consumers.

Why do you assume that consumers will pay the cost of higher wages, and not owners (via lower profits)?

>and not owners (via lower profits)?

Because 'free market' competition would have already reduced that cost/profit via other market factors. Assume the market is colluding on price and it's not hard to see that consumers could pay the cost.

I'd be okay with some bare subsistence level income, but the reality is that politicians will buy votes by redefining "bare subsistence" over time.

Eventually these types of programs all get out of control. See medicare, social security, student loans, food stamps, etc.

>Eventually these types of programs all get out of control. See medicare, social security, student loans, food stamps, etc.

I don't know what you see as "out of control" about medicare, social security, or food stamps, but it doesn't really matter.

The more important question is why you think the minimum income should be limited to bare subsistence. Once the system is in place, you can use it to control job availability. Not enough jobs? Raise the minimum income and people will work fewer hours.

Out of control means $184,000 total government debt per CITIZEN. http://www.usdebtclock.org/

Regarding "subsistence", make NOT working attractive and you get more of it. It's simple human nature.

"Our debt is really high, therefore social programs must be out of control" is not a sound argument.

I guess if you didn't know or care that entitlements are the largest identifiable chunks of government spending you might feel that way.

The argument "our debt is really high, therefore there is too much spending" is also not a sound argument.

'x is not a sound argument' is not a sound rebuttal.

Do I really have to waste my time explaining that debt accumulates when revenue is less than spending, and so in order to say "the debt is too high, therefore spending is too high", you must first establish that the problem is not low revenue?

Yes, it helps the flow of the thread. At least that way I know what line of thinking you are using. Otherwise, why even post?

The low revenue is a problem too, but raising revenue enough is very hard - since just raising taxes suppresses economic activity and breeds evasion, and making economy produce more by government decree is a secret not yet unlocked.

Well, you could google and look at actual economic data to see that spending as a percentage of GDP is now over 24%, only outstripped by World War II era spending. http://www.usgovernmentspending.com/spending_chart_1900_2010...

So where does your condescension come from regarding others' knowledge of spending vs taxation?

Isn't the largest identifiable chunks of government spending defense?

Entitlements (not in the Constitution) are twice as large as defense (in the Constitution).

http://en.wikipedia.org/wiki/File:U.S._Federal_Spending_-_FY...

Actually, given how much these programs participate in the formation of the debt and given what the projections are for these costs in the future, it's pretty close. Of course, any debt by itself does not mean that, but this particular one is heavily related to spending (see how state revenues and outlays changed lately) and spending is heavily related to welfare. "Out of control" is a matter of opinion, spending and debt pattern are out there for all to see.

I would propose the description of unsustainable and incapable of delivery as better than out of control.

I think the argument was more like "our unfunded social programs' costs require out-of-control payments to be made in the future, therefore social programs are out of control."

Maybe it is our military programs that are unfunded. Like the ones passed as non-budgetary "emergency" appropriations.

The military budget is funded, except possibly military pensions.

Edit: What I mean is, the amount they are obligated to spend is set on a yearly bases (maybe tri-yearly in some cases), not on a 60-year horizon in which entire generations expect a future payment.

Forget about the use of "funded" vs not -- wouldn't you say the above is a pretty substantive difference? If we have to cut the fat, we have the option at any time of slashing military spending. In contrast, slashing other spending means stiffing pensioners who predicated their whole lives on it. We have an obligation to give them a realistic estimate of how much will be around when we hit a serious fiscal cliff -- in addition to cutting military spending.

Not enough jobs? Raise the minimum income and people will work fewer hours.

Where does this money come from, if GDP and thus gov't revenue is not increasing?

For this to work there really has to be significant rewards for working on the lower end. If people are guaranteed 40k but can make 50k toiling away at Walmart full time it will likely become hard to find people to fill the jobs.

Just take away $0.25 (of basic income) for every $1 earned working.

Or whatever numbers make sense. But it should be straightforward enough to keep incentives available.

Maybe. The difference between 40k and 50k sounds small in terms of raw percentage, but if you consider disposable income, it's more significant. What I think you'd much more likely see is an increase in part time work. In your scenario, likely nobody would be willing to work full time as a cashier at Walmart. But they would work part time if they wanted to save up for a new car, for example.

If the labor pool can support it, I think that's as it should be. The neat thing about the minimum guaranteed income is how well it scales as we automate jobs in the future. If we no longer need very many people working jobs at the skill level of Walmart cashiers, then raising the minimum income will account for that relatively painlessly.

But it's obviously not something you can just slap into place. You have to analyze the problem to figure out both how to set the minimum income initially, and how to adjust it over time.

That's why you grant a smaller basic income stipend (say, more like $15k/year -- equivalent to minimum wage at full time), but take away nothing for working. So if you grant $15k and Wal-Mart pays $15k (same wage levels as now), the worker has a total income of $30k.

Society's income, or capacity to work, isn't a fixed pie.

I'm not sure if that point is intended to support or reject GMI.

>And why Costco, a public company that has investors watching every penny and questioning every management decision?

I guess the author doesn't know that Costco is one of the few companies out there who famously give the middle finger to Wall Street analysts (who want them to reduce wages and benefits, and increase the price of goods sold)

Costco is still subject to economic reality. They make money by reducing overhead as much as possible and exercising monopsony power over brands (Walmart does this also for certain vendors).

I haven't looked enough into the issue to answer decisively, but I suspect they probably can't cut much more than they already have, unless their food is a cost center.

This is a dangerous statement; but I know that raising the minimum wage doesn't really hurt people making six figures; but, doesn't it hurt people making only a small multiplier of minimum wage? Like people making 1.25x minimum, and 1.5x minimum, because they'll now be making 1.05x and 1.15x minimum wage, reducing their own personal buying power once the prices settle again..?

I'm all for people earning more functional income. I've said before that I hate the corporate-level, money-hungry models of wages; but I had been taught that increasing the minimum wage, though it helps for a short while, ends up hurting in the end

This is the wrong approach - simply ask what level of wage is needed to prevent a worker having to claim state benefits. Anything else is subsidising the employer

I believe my point was that, as wages change, so does that number. Isn't that part of the whole "cost of living" differences from one place to the next? People make different amounts of money, therefore they can spend different amounts of money on things they need, and the supply/demand curve adjusts accordingly?

See: price of an apartment in Washington vs Texas

Long complaint short: It's broken. How do we fix it?

An apartment in Austin Texas is more expensive than one in Spokane Washington, your point?

not true and way too simplistic. If they can't get employed at all because the minimum wage is too high, the entire burden falls on those same state benefits.

That assumes that a business would be willing to rage quit. It either needs employees, or it doesn't. How many businesses do you think are carrying an excess of employees at the moment just because the wages are cheap? How many are supplying customers who woulld no longer decide they want the product/service because a small percentage of the total cost of delivery has increased my a relatively small amount, increasing prices very slightly? It is only those jobs that can be offshored at little or no (overall) cost that would be affected, barring ideology-over-sense zealots out to prove a point.

No, it assumes that in a flexible labor environment in the medium term, a business will adjust to the value of the worker. If the minimum wage goes up to $20 tomorrow, I may not let go of a lot of my temp employees today, but I will certainly do so in time. This isn't rocket science - this is economics 101. And I say this as someone who supports a gradual rise in the minimum wage (ie, a legislative solution that would link it to the CPI seems like the best way to take it out out of the hands of future legislators who want to play politics) - but the idea that there is no cost to increasing the minimum wage is silly.

Also, the "small percent of the total cost of delivery" is is a red herring; labor cost as a portion of total delivery cost varies greatly according to industry. To use a silly example, if the minimum wage was increased to $30 tomorrow, you don't think McDonald's starts firing employees?

>How many businesses do you think are carrying an excess of employees at the moment just because the wages are cheap?

More then you think. Increased insurance costs has done more to get rid of excess employees then minimum wage will.

>It is only those jobs that can be offshored

No, not only. Now that costs increase it makes more sense for the employer to take a harder look at replacing parts of the employment chain with software or automation. Where at one point employes kept people around for their flexibility it tips more in favor of machines (software or hardware) for there efficiency.

But it is clear. Not this muddy twilight zone of part working part benefits.

Anyway, this is not about the specific wage level, but that wages are the current means of transferring wealth generated from corporations and governments to the populace in an equitable fashion. There are other means of achieving the same end. Let's take the back-to-1950s approach - minimum wage too low? Fine, raise it to 30 bucks an hour and get all married women to stop working - their husbands can now bring home a sufficient wage, and the rise in unemployment is offset by the drop unpeople seeking work.

Why is full employment an achievable goal when it's main purpose is to spread the wealth. How donwe spread the wealth - answer that and unemployment stops being a problem.

The teenager at home trying to get some spending cash or save for college doesn't need to support a family. Every job doesn't need to support a family.

So, you will ring fence certain jobs as only for people without families? Perhaps like paper rounds? But if a job is available to a teenager it is available to the fifty year old who just got laid off and unless it's working in a strip bar, is likely to be a better worker all round.

Right and so the teenager is left with no options to get a job because adults are working extremely low skill jobs. The adult has little incentive to quickly move to a higher paying job because the minimum wage has flattened out the slope of lower end jobs meaning that the manager at the McDonalds isn't making that much more than the burger flipper... so why would the adult bother making the effort?

Meanwhile, the teen gets no experience at just getting up and doing something simple like flipping burgers so wastes his time watching TV or worse. When the teen gets to be an adult, he has zero work experience so what are the only jobs he is qualified for? Minimum wage entry jobs.

The minimum wage is a vicious lie that causes inflation hurting those at the bottom end of the economic ladder while destroying entry level positions for new workers and creating inefficiencies in the trade of money for value.

What valuable skills are developed over a year of flipping burgers, that aren't taught in the most basic highschool classrooms?

Earning money.

It saddens me that someone with access to a computer who reads HN like yourself either doesn't understand the value of some young adult's first job or is just being utterly obtuse.

Either way, what's the point of having a conversation when basic fundamentals of life aren't even agreed upon? It's like babbling away in our own separate languages.

Dealing with customers.

Working with others.

Earning a check (and the required things that go on with this).

Showing up on time or getting fired (can't get fired from school, only in trouble). Also on the same note, time management and working with others (hey boss, I need off friday, I talked to jon who would take my place without causing him any overtime).

I think you highly overrate what high school teaches students these days.

"So, you will ring fence certain jobs as only for people without families? Perhaps like paper rounds?"

No, what the heck did you read that gave you that idea about what I said? Employers decide everyday how much experience they need.

"But if a job is available to a teenager it is available to the fifty year old who just got laid off and unless it's working in a strip bar, is likely to be a better worker all round."

That is the problem with the upping of the minimum wage. Young workers get kicked out of entry jobs since the "lower wage / less experience" rate is pushed closer to "medium wage / experience" rate. So, employers aren't given a choice of setting the rate to something where part-time teenager is cost effective.

The heck was " every job does not need to support a family" - but my contention is that unemployment is now structural - so every job will be contended for by someone who does need to support a family, and will be presumably more experienced, better qualified etc, than the student.

In which case the student, or working mum, or immigrant family will usually lose out to the better qualified candidate.

I agree that minimum wages rises cost jobs.

But The jobs are going anyway - software is eating the jobs as well as the world.

There will not be enough jobs to go round. And as jobs are the current way to spread wealth creation, we need to Find ways other than jobs to distribute wealth.

How to do that I do not know - but we have to get out of a cycle of thinking full employment is the answer.

My suggestion is that raisng the minimum wage hard will sweep away the jobs at the margin, clear out the weaker companies and business models that depend on subsidised labour and force us to deal with the problems head on, a situation that usually leads to cleaner and more effective solutions.

But that is a political decision for each country - Sweden will take a different approach to the problem than Dubai or USA. But we all face the same problem.

Edit: refactoring

but my contention is that unemployment is now structural

Funny how now unemployment is structural, thus nothing politicians can do anything about. When the other party was running things during the last recovery, sustained unemployment around 8% would not have been called structural, it would have been called evidence of lousy economic policy.

First, unemployment is structural is bunk.

Second, your solution is to kill all the jobs and then think of some new solution? All those small businesses that are getting buy will be killed and then so will everything else. Software dies when no one is around who can pay for it.

> But The jobs are going anyway - software is eating the jobs as well as the world

This sounds very familiar, it reminds me of the arguments from the technocrats back during the industrial revolution who made the argument that that machines and factories, by making people more efficient would cost people their jobs and would lead to massive unemployment as human jobs would be replaced by machine jobs.

With hindsight its not hard to see that they were obviously wrong, the jobs that the machines and factories may have destroyed in the short term were more than made up by the jobs and economic growth that came with it in the long term.

What do you think makes your argument different then those of the technocrats?

>With hindsight its not hard to see that they were obviously wrong,

I won't say they we're wrong, yet. The industrial revolution is not over.

The fact is only 0.66% of overall workforce get minimum wage, but 22.8% of working teens get minimum wage or lower [1]. Most of the people on minimum wage would be either teens or people just entering the workforce. Of course, there are point exceptions, but numbers say fifty years old working at min wage is a very uncommon occurrence, both among fifty-year-olds and among minimum wage earners.

[1] http://www.aei-ideas.org/2013/02/the-real-tragedy-is-that-ma...

Wow. I had no idea that percentage was that low in the US.

Does that mean that this whole discussion is basically irrelevant? Or are there jobs with salaries above the mimimum wage, but indexed to it?

The labor market is governed by the law of supply and demand, just like any other. If you arbitrarily increase the price of something, in this case low-skilled labor, surpluses are the result.

If you want to help people, find a way that doesn't destroy the incentives to hire them and the incentives to become a more valuable employee.

This makes complete sense:

1) Costco already pays much more than the minimum wage, so they would not be affected directly from a cost perspective.

2) Competitors do not necessarily pay more than minimum wage, so this can only increase the costs of competitors.

3) Increasing minimum wage gives income to the lowest income people who will spend all of this money and are likely value shoppers of the kind attracted to big box stores like Costco.

There is nothing for Costco to lose here.

While I admire Costcos ethics all around, I can't say this is an entirely selfless gesture. Costco behaves rationally good with a long term view rather than irrationally bad with a short term view.

Not selfless at all, although the world is still a much better place for companies behaving this way.

They want a wage of $10.10 per hour? I bet a Costco employee starts around $10.20 per hour.

You're on the right track. From the article:

"Costco pays a starting wage of $11.50 an hour, gives most employees healthcare and other benefits, and has not switched to the model adopted by many big-box retailers of using temporary firms in warehouses to keep costs low."

A higher minimum wage costs Costco nothing and hurts their competitors.

I wouldn't say it costs them nothing. If competitors are forced to raise their wages near Costco's, Costco either needs to up the ante or lose some of the luster they've created in treating their employees so well compared to the average retailer.

I'm not saying they don't have good business reasons for this, they do, but it isn't all pure business upside for them.

Some of the costs from vendors may also increase as a result.

In theory, that is a shared cost amongst all their competitors.

13 $/hr + 0.5$ raise every 300 hours worked up to about 18$.

Blogspam. Original is here: http://www.latimes.com/business/money/la-fi-mo-costco-wages-...

Not blogspam. Circa is a pretty cool tool that tells a news story by pulling in all the sources talking about it, and then updates the story as new information comes in. Take a look at them; it's really useful.

Even if it's not technically blogspam, the best practice should still be to link to direct sources, no?

One link versus several? I like one link, personally.

So if you can aggregate more than one source, you're not blogspam anymore? :)

If you're adding quality on top of citing sources, then yeah, in my book they're not blogspam.

Never heard of Circa, but I don't think it's allowed anyways. From the guidelines (http://ycombinator.com/newsguidelines.html)

Please submit the original source. If a blog post reports on something they found on another site, submit the latter.

I see the point of this guideline, but will still argue that Circa provides more value to the readers here since it links out to multiple sources (also linked to SFgate: http://blog.sfgate.com/nov05election/2013/03/04/george-mille...), therefore giving readers a more holistic view of the story.

I'm pretty sure that increasing the cost of labor will drive the prices of labor dependent goods and services up, while also probably flattening growth or decreasing employment numbers when employers try to maximize the margins on the labor they already employ.

I'm pretty sure that giving lots of people more disposable income will increase demand. Which will in turn increase revenues and allow successful businesses to expand, increasing employment numbers, creating a positive feedback loop.

In reality however things are a little more complicated.

Part of the argument is that this isn't disposable income, that it's in fact needed as a baseline against poverty.

disposable and discretionary are not the same thing

http://en.wikipedia.org/wiki/Disposable_and_discretionary_in...

disposable = wage - taxes

Therefore disposable income pays for rent, food, gas... All of which would be needed to alleviate poverty, but I guess that depends on how we're defining poverty.

Define "poverty".

The lack of a meaningful definition shared by both law and society is the root of much of the consternation over the topic.

There are many, but one would be the lack of opportunity to improve ones situation by self-improvement. For example, you might be working two jobs to pay rent and other necessary expenses, so you have no time to learn new skills. Another would be that you cannot afford to send your kids to school (i mean K-12 public school) because you need them to work in the fields, so you can't create inter-generational opportunities.

People working at minimum wage can find themselves in such situations.

At this time, you can get ahead on MW, if you team up with other MW workers to live together and one person can get enough "family" support to get to the next level. However, our society, being very individualistic, doesn't really recognize this.

one would be the lack of opportunity to improve ones situation by self-improvement.

It's not a matter of opportunity, it's a matter of choice.

Time and again I've watched those with opportunity squander it, while others lacking opportunity fight to get it (and got it). I've had a 4AM bus driver take my evening C++ class, passing despite often dozing off therein, finding funding despite not having the steep tuition. I've known a chronically bedridden invalid who managed to run a profitable, um, pharmaceutical service from his gurney. I've worked multiple jobs and still learned new skills, even getting hired despite not having the core skill and learning it sink-or-swim. I've watched kids destroy windows while I was fixing their couch. I've seen eminently capable students with amazing affinity to programming fail a beginning C++ course for lack of effort, not understanding. Opportunity IS there; taking it or making it is up to the individual.

Instances of true "poor for lack of opportunity" are exceedingly rare. They have my sympathy and aid; I'm frustrated by the vast numbers who insist they are and in truth aren't.

You don't "give" more disposable income, you pay people for work. Pay for work is accounted for by receipts (prices paid for goods or services), causing prices to rise to cover the increased costs, or margins to fall if prices remain inflexible due to market price determination.

The artificial rise in wages will not help, as it will be met with a corresponding increase in prices to cover the costs of the wages.

Bosses don't "give" employees raises? Let's not argue semantics.

Using your line of reasoning it doesn't actually matter whether the rise in wages is "artificial" or not, your argument is simply "wage rises will not help" As a former recipient of wage rises I have anecdotal evidence that they do. :)

Economies are complex systems looking at one aspect of them in isolation and thinking you can apply a high school level understanding of supply and demand and come up with any substantive insight is frankly misguided.

Also, Henry Ford disagrees with you. http://en.wikipedia.org/wiki/Fordism

This is a shift of context: the first was in "us" (the non-boss political establishment not responsible for distributing receipts) "giving" raises. The second is "bosses" giving employees raises, now dropping the context of the reason for the wage increase; being compelled by force of law.

The line of reasoning is entirely dependent on the reason for an employer giving more wages. If he needs to give raises to retain talent, it is presumably because the skills he is purchasing can demand a premium, which can be reflected in the prices of the product or service being offered.

If most of the goods and services used by the people most "helped" by the commanded wage raise are themselves wage dependent, then their prices must increase or employment levels must decrease and efficiency of the remaining workers must increase to compensate.

As market prices for goods and services are not that linearly dependent on one factor, this result on employers will inversely affect employers with the least price flexibility; the ones with the least margin, the ones employing the low-income workers.

Increase demand for what? Chinese goods of course, purchased at Costco and Walmart and Target.

How does exporting higher profits to China help America exactly?

I suppose the theory is: pay American service workers more, so that they can buy more Chinese goods, so China can become wealthier and build more factories and employ more production jobs, while America gets poorer by continuing to expand its service sector (consumption jobs). Interesting theory.

You're right, that is an interesting theory.

It doesn't appear to be supported by anything in reality though. Personally my expenditures go to primarily to housing, utilities, travel and food. I'm not sure how any of those boost China's economy directly - Wells Fargo is probably quite heavily invested in China one way or another though.

This "average" consumer spending infographic would appear to back that up. http://www.billshrink.com/blog/1204/consumer-income-spending...

It doesn't break down along income lines which is unfortunate, that information would inform discussions around minimum wage much more. I did find the age break down interesting though.

Money is just paper. It's a convenient way to exchange labor for goods in an asynchronous way. Raising the minimum wage, simply means you have to produce more paper for the same amount of labor. It doesn't change anything except temporarily.

If raising the minimum wage made any difference, McDonalds would be 5-star restaurant by now.

Large, established retailers, in general, will favour a higher minimum wage if it's enforced on themselves and all their competitors. It's actually good for them, since they operate at a scale that can do more with less people. Unfortunately it reduces the market to a combination of large retailers, and small family run operations which can effectively get members of their family to work for less than the minimum wage, and very little in between.

That's a good thing. Efficient businesses with happy employees prosper. Inefficient sweatshops shut down.

just another story of a business getting involved in public policy in order to hurt competitors. costco can (and already does) pay workers more than minimum wage as is in line with their operating philosophy. government shouldn't be in the business of regulating wages, that's an agreement between an employer and employee.

Here is a plan - set the minimum wage at a level where one person working full time will not have to collect any state benefits in order to raise their family.

Any other level, is an indirect but tangible subsidy to companies who employ minimum wage staff

How big of a family are you talking about subsidizing?

1 child? 3? 5? Radical difference in cost.

So which target is the cost basis? If you say one child, who are you to say one? If you say seven, who are you to say seven? And it is thus the moral hazard presents itself: forcing tax payers to pay for other people's optional life choices (specifically ones so easily avoided as having children that you cannot afford).

It essentially gets into a scheme in which the claim has to be made that being able to afford to have children is a right (a right paid for by someone else that is more responsible and more productive).

Teenagers don't need to support a family. Without much in the way of valuable skills, they may still want a job for spending money and experience. Your proposed minimum wage would make this illegal.

College students don't need to support a family. They may want to take a low-paying internship to build experience in their chosen field. Your proposed minimum wage could make this illegal.

Mothers of school-age children who are supported by their husbands don't need to support a family. They may wish to do part-time, low-skilled work to build expertise in preparation for a future career after their children leave. Your proposed minimum wage would make this illegal.

Retirees with pensions don't need to support a family. They may wish to do work, possibly even very low-skilled work, as a way to combine a hobby with a sense of being useful. Or possibly as a launching-pad for more of a "fun" career than the "serious" career they've already finished. Your proposed minimum wage could make this illegal.

Low-skilled immigrants do sometimes need to support a family. When one member can't do it alone, sometimes mom, dad, and the oldest kid hold down four full-time jobs between them to make it work. The arrangement isn't permanent; it lasts until they can do better. But in the mean time, they can support themselves. Your proposed minimum wage law could make it impossible for them to support themselves this way, and force them to rely on charity. This in turn could make it impossible for them to immigrate at all.

Some people have very low expenses. A paid-off house, a renter, a garden in the backyard, and a low-paying job can be enough to make ends meet. Setting the minimum wage at a level such that someone with a mortgage and unproductive hobbies can raise a family would force this person, who could otherwise support themselves, to rely on charity.

I could go on. My point is that the world is a complicated place. Not every worker is a single-head-of-household-with-three-children sort of worker. Not every job is a permanent career. They can be educational, transitional, temporary. They can be held by all sorts of people for all sorts of reasons.

Provide assistance to the poor if you like, but don't make work illegal. Don't ever do that. There's a huge potential to hurt a lot of people, just because they're living lifestyles you aren't familiar with.

The "wages good enough to send your kids to college" proposal is really a thought experiment - let's imagine we are going to see an doubling of productivity in the economy as Software Eats The World. But no increase in the number of jobs.

There will be a dramatic decline in employment as all those journalists and factory operators and researchers get laid off.

So what do we do? Corporations are going gang busters, the share of a vastly increased wealth is not going to the majority of the people.

So let's whack up the minimum wage - make it 60k. (remember we just doubled GDP). All other wages have to rise as well to maintain parity. And so the share of GDP to wages gets rebalanced - but there are less jobs? That's ok we have gone back to the sngle worker family, and the world has nice picket fences again.

This is a poor solution to a good scenario - obviously the 50s solution is socially sub optimal, obviously the above scenario carries massive inflation risk.

But the essence is the same - the jobs are gone. How do we fix it? Minimum wage is one lever that if pulled hard in one direction will lift the veil on the oncoming storm.

We need all the warning we can get

let's imagine we are going to see an doubling of productivity in the economy as Software Eats The World. But no increase in the number of jobs.

I'm not comfortable with that assumption. All that software isn't going to write itself...

But leave that aside. What do people whose jobs have been made obsolete by technology do? What they've always done -- something else!

And a high minimum wage won't help them. People learning new skills need to be able to make low wages. That's how they get enough experience to get good enough at something new to eventually be able to make high wages.

Making an assumption that there will always be 'something else' that they can to to earn a living is just an assumption too. Attempting to find an optimal social solution before the unemployed riot and burn the factories is a good idea.

Thus ensuring all HS and College students that want to work part-time (or during the summer) can't because there are no jobs available that pay the requisite wage.

The earned income tax credit phases out a over 40k/yr for a married couple with one child. which is ~$20/hr working 255 days/yr. Other benefits and subsidies might phase out at higher amounts so the wage in question would be higher still.

A bit of statistics about minimum wage workers http://www.bls.gov/cps/minwage2011.htm

I support a minimum wage increase (trickle-down economics is moronic and makes much less sense than a bottom-up approach, but I digress), but let's not forget that a minimum wage increase helps Costco's bottom line, since their biggest competitor's business model is completely tied to low wages. Just saying let's not pretend this is as righteous of a move as it would be if it were coming from Wal-Mart (who stands to lose). :P

It makes sense for Costco, because they pay above minimum wage anyway, and any increase in the minimum wage will hurt their competitors more than them.

Costco employees start higher than minimum wage already, so this won't affect them. But it's in Costco's interest for their competitors to have higher labor costs. So, Costco supports minimum wage increases.

Labor unions do the same thing.

Costco is supporting the rise in minimum wage only because it helps them. They have lower labor cost then their competitors. I can hardly see any employees in Costco warehouses. This is the same type of hypocrisy as them supporting higher taxes for the rich and then getting a huge loan to pay ahead of schedule bonuses for the execs and board members to avoid new tax rates.

It probably hurt small independent shops much more than it would hurt Costco, due to economies of scale - if you have 100 workers and you had to raise wages 10%, you probably could do the same with 90 workers or cut a little service here and there without too much effect, but if you have just one worker and you don't have enough money for 10% raise, you're toast.

..and that is what it would be about. If Costco can hurt their competition by forcing up their labour force costs, plus at the same time give a good aura, and advertise their hiring policies to potential employees, it's a win-win-win.

This type of thing isn't done off the cuff, there would be very careful analysis behind it.

Most people would think this is against Wal-Mart or other large retailers, but where it would really bit is the very small corner-store operations, which not only collectively sell a lot of stuff, they prevent customers from going into bigger stores for small items like milk and bread.

Raising the minimum wage will increase unemployment. Additionally, having any minimum wage at all increases unemployment. On top of the unemployment problem, a minimum wage is an intrusion into the rights of the individual to voluntarily enter into business with others.

Proof?

I'd much preferred if they removed minimum wage and almost all of the welfare programs and replaced it with basic income guarantee (http://en.wikipedia.org/wiki/Basic_income_guarantee)

I can't imagine you'd find much public support for giving millionaires a weekly wage. What does this offer over the minimum wage? Is it that the universality makes it cheaper to administer or is the universality a principle rather than a pragmatic concession?

In the UK, there is a movement for a living wage which seems to be more about a higher, regionally-calibrated minimum wage.

Theres probably lots of well thought arguments for basic income guarantee but here's the things I could come up with:

- much cheaper than welfare because you don't need to hire people who decide if you deserve it

- less corruption than welfare because you can't bribe people who decide whether you deserve it.

- you don't have to hide that you are working in order not to loose the benefit, so possibly more money from taxes and healthier, more honest social climate. Also no need for minimum wage.

- no need for government sponsored pension or formalized retirement age

- you no longer have to care so much about unemployment. From political issue it becomes only yet another indicator of the state of economy. Hence the government can safely shed off large quantities of its employees.

- no need for minimum wage, wages can safely drop below any currently conceivable minimums.

- more worker mobility since you don't have your whole income at stake when you decide to look for new job.

- strong incentive for having kids since they add to family income, also parents have sense of security that they will be able to support a child and have time to raise it as well.

- more money in hands of more careful consumers. Poor people tend to spend money more wisely as they choose products more carefully with regards to ratio between price and quality. More purchasing power in hands of dedicated consumers, results in more efficient market.

>> - you no longer have to care so much about unemployment. From political issue it becomes only yet another indicator of the state of economy. Hence the government can safely shed off large quantities of its employees.

i.e. the slide to a welfare-dependent state where people don't feel the need to work for their luxuries and economic stagnation

>> - strong incentive for having kids since they add to family income, also parents have sense of security that they will be able to support a child and have time to raise it as well.

At 7bn, I'm not sure more kids is the answer.

> i.e. the slide to a welfare-dependent state where people don't feel the need to work for their luxuries and economic stagnation

That's the main counterpoint to the basic income guarantee. If people are no longer afraid that they starve or die of cold or heat on the street they won't work. Funny thing is that same people that voice this concern usually think that working is usual way how the people fulfill their higher needs (belonging, esteem, self-actualization).

> At 7bn, I'm not sure more kids is the answer.

There is a strong fear in many rich countries that their original populations that are currently growing old will eventually die out and be replaced by immigrants.

Personally I'm not against population growth. Having more educated kids in rich countries might be beneficial.

This is terrible. Costco can get away with a higher minimum wage because they sell at a higher end. All this is doing is forcing Walmart to stop competing at the lower end of the spectrum of goods. The only people harmed by that are the poor.

The minimum wage is as perfect a litmus test as we have for separating those who think they understand basic economics from those who actually do.

Higher labour costs just push business overseas. Is this not true?

For Costco, probably not - I won't drive as far as Mexico for some cheaper eggs :)

To China, where there is a rapidly increasing minimum wage. The Chinese understand income distribution will naturally fall extremely toward the powerful, and the powerless will make too little money to create a middle class. Raising the minimum wage distributes income to low income people who spend all their money and contribute to the consumer economy.

Are you really saying there is not a middle class in china?

Proportionally, the middle class in China is small, but growing.

I did not say that at all. There is a rapidly growing middle class in China.

Retailing doesn't follow the same logic as manufacturing since the jobs really aren't mobile. But things that can be automated will be automated.

Also, artificially high labor costs shut out younger and less employable people. If I have to pay $15 anyway, I never need to take the chance on someone who's run afoul of the law or high school dropouts. People who get a slow start in life are going to have that much more difficulty.

"especially at a time when finances are stable at best"

Sloppy reporting. Here's what the author should have written:

> Just four years after the worst shock to the economy since the Great Depression, U.S. corporate profits are stronger than ever.

> In the third quarter, corporate earnings were $1.75 trillion, up 18.6% from a year ago, according to last week'si gross domestic product report. That took after-tax profits to their greatest percentage of GDP in history.

> But the record profits come at the same time that workers' wages have fallen to their lowest-ever share of GDP.

http://money.cnn.com/2012/12/03/news/economy/record-corporat...

Whoever gets the mouthpiece gets to frame the debate.

The debate is wrong.

What's happening is this: Corporations have people on the hook, because the people are poor & desperate, meanwhile the corporations are more flush with cash than ever before. They know that everyone is running around, pretending we're in a terrible financial crisis… because we are, if you're an individual. The profit-taking is immense and ordinary people are suffering.

This is not a debate about "Well gee can Joe-Bob really produce $8 of value an hour?" because the profits say yes, Joe-Bob is definitely producing much more value than he costs. Even more so, given that this is a time when CEO compensation (a cost that reduces profit) has skyrocketed, compared to the average worker's wage.

Good for Costco. They have always behaved well towards workers, with regards to pay and benefits, even when things really were bad.

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