Agree also with the other comment here that the minimum wage is a structural advantage for Costco against Walmart.
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.
I've not heard of this before. Is this common in federal or municipal contracts?
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?
This is probably true, but wouldn't ending corporate welfare be a better strategy to achieve that end?
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.
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.
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.
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
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.
Ridiculous arguments are ridiculous. The rest of your point is more than strong enough to stand on its own without that kind of nonsense.
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.
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
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 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.
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"?
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.
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.
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 MarsThis 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.
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 $1000/hr job, it's in current dollars. Even if my employer wanted to pay me more, he can't -- he doesn't have the money to! Even if everyone wanted to switch over to doing that, they couldn't; there isn't enough money in the system! If everyone woke up tomorrow and agreed that a dollar was worth 1000x less, they'd all be 1000x poorer and nobody could afford anything.
No, the minimum wage doesn't change the value of a dollar. It just changes who's allowed to earn one.
You think a minimum wage increase will increase the velocity of money, which will cause inflation, which is a good thing.
That's the argument? Is that argument . . . original?
http://www.forbes.com/sites/timworstall/2013/02/25/overestim...
I did not say anything about the benefits of increasing minimum wage. In general it is known that the absence of minimum wage creates unsustainable imbalances of income society-wide. However, I don't know the US economy well enough for an informed opinion. Your current imbalance of income is huge, but that's only one data point.
You don't seem to consider elasticity. Basically, the main argument of the proponents of a higher minimum wage is that the hiring capacity is elastic enough that a raise in minimal wage's benefits far outweigh the resulting loss of jobs.
Saying that raising the minimal wage to 10$ 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.
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
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.
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.
It's a bad thing if you pay the bills by making hamburgers.
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.
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'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.
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.
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.
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.
Therefore, the theory that raising the minimum wage is good for the economy is incomplete at best.
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
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)
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.
Generalize further than that at your own risk.
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?
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.
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 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.
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.
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.
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.
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.
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...
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.
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.
Even if they like what Walmart is paying, their workers are still on food stamps.
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.
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.
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.
If you're not going to pay a living wage, what makes you think you DESERVE to have a worker there pushing the button?
"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.
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.
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.
Most economists disagree vehemently with you.
Also, what do economists know? Where were they in the buildup to the '08 crash? Nowhere to be seen, that's where.
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.
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.
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.
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?
Do colleges have a "broken business model", too?
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.
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.
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.
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"?
There is your subsidy.
What you're saying is perhaps rhetorically appealing, but it doesn't make sense.
Because I'm sick of doing it for you, when I have nothing to do with your business.
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.
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.
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.
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...
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.
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.
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.
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?
http://en.wikipedia.org/wiki/List_of_minimum_wages_in_Canada
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.
(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.)
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.
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.
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.
"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%
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.
As a counterexample: Singapore doesn't really have much labour protection nor minimum wage laws to speak of.
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.
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.
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.
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.
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.
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?
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.
Like most things, increasing the minimum wage is subject to the law of diminishing returns.
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?
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.
Where the flying fuck have you been for the last 30 years?
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.
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).
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.
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.
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.
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
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.
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.
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?
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.
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.
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.
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.
And when they reinvest that money what do you expect happens to it?
* 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.
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)
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 Sweden will take your approach, but I would be amazed if the US will :-). But some solution will be needed.
or
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.
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.
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.
Whether that is right or wrong depends on the observer. But it is true.
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.
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
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.
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.
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.
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.
Whether that is a bad thing or not I don't know.
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).
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?
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.
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?
Which means that some portion of Wal-Mart's revenues is mathematically equal to the money the government spends topping-up their workers' incomes.
In general, you are right, but at the margin you are wrong.
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."
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-...
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?
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
7.25? 10? 15? Reasonable people can disagree.
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.
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
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.
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.
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.
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.
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."
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.
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.
People pretend that their feelings about minimum wage are facts, far too often, and that kind of self-ignorant argumentation hurts everyone.
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.
http://www.risep-fiu.org/wp-content/uploads/2012/02/FL-Minim...
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
2) Using legal system (mandatory minimum wage law) to fight their competitors - is a sleazy tactic.
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.
It means you want unemployment to raise as well? Because that's a very typical effect of minimum wage increase.