Supersize My Wage
nytimes.com
nytimes.com
Short term: Employees get paid more and the number of employees stays close to the same. The businesses must operate as they did before
Medium Term: The quality of employee goes up. The people who are willing to trade their time for more $ is a different demographic as you climb the $/hour slope.
Long Term: Businesses find a way to remove high costs out of their operating costs and will automate the jobs were possible. This will improve productivity of each paid employee but the total employee count will go down (all other things held constant). The productivity and manual labor has been shifted from person to machine.
Many eons ago --before surface mount was commonplace-- I was employing engineering students to stuff circuit boards for a low volume product (a few thousand units per year).
Part of the job entailed bending component leads based on how they had to be mounted to the board. I didn't have the money or the volume for fancy automated tools. We used prototyping-level hand tools to bend the components. After wave soldering we'd clip the leads by hand and test.
Back then minimum wage was $6 or $7. I was paying the kids $10.
I bought an old Bridgeport CNC milling machine for $1,800. I devoted a week to making better lead-forming tools and a mass lead cutting machine using a cheap router motor.
Within a week the same worker could do nearly ten times more work. I eventually let go of half the crew.
Costs are everything in business. If government unilaterally and unnaturally forces an increase in costs businesses will naturally respond with cost-saving measures and technology. This can also include taking the work to lower labor cost markets...forever.
That's how it works in the real world. At one point an artificially high minimum wage will result in less jobs, not more.
Artificially high? If you're making a profit but your employees need public assistance, you're literaly profiting at the expense of the taxpayers. You are in effect benefiting from an artificially low prevailing wage. If you can't afford to pay them a living wage, society would be better off if resources were allocated elsewhere.
Since hiring a person can only increase that person's income, and decrease the amount of welfare they can claim, this is wrong. If there were a better allocation of that person's labor (e.g. a higher paying job) that person would surely take it.
Would society be better of banning this machine, because it couldn't produce a "living wage"? Because this is what you are proposing.
I have no clue what you do. I'll pick something for you. Let's say you are a Personal Chef.
Let's say I am someone who needs a Personal Chef.
I put up an ad on Craigs List.
You show up and seem to be qualified.
I offer you $3 per hour.
You are probably going to tell me to go fuck myself.
I then offer you $8 per hour.
Same response.
$10 per hour?
$15 per hour?
$25 per hour?
$50 per hour?
You want $75. I say, I won't go more than $50 until I know that you can cook. That will take 90 days. After that I agree to raise your hourly rate by $5 per quarter until we get to $75 per hour.
Ah, we have a deal.
You see, I can't force you to work for me for any wage other than what you are willing to accept for the job at hand. We have to agree on a number that works for both of us.
Not one business, manager or business owner is forcing any person to come to their establishment every day and work for any wage whatsoever. At least not in the US. People seek out these jobs, apply for them and then go to work every day.
Not a living wage? Don't take the job! Don't blame it on the business. Don't take the job! Go find a job where your skill set will result in higher wages! How can this possibly be the business's fault in any imaginable reality? Do. Not. Take. The. Job.
Ah, no choice because you have no marketable skills? Who's fault is that? How can that possibly be any business's fault?
Your "artificially low prevailing wage" is imaginative utter nonsense. The only thing that is artificial is forcing a wage floor on all businesses regardless of market realities.
It is precisely this kind of government meddling that PUSHES jobs out of the country.
In your reality people flipping burgers in Los Angeles would make $25 per hour (barely a "living wage" in Los Angeles by some measures) and Big Mac would cost $35, fries another $10. Guess what? In that reality you are going to have robots running McDonald's because NOBODY is going to pay those prices. All those people who would be flipping burgers at a market rate are going to be out of work and possibly on some kind of a government social program. In other words: The very concept is nothing but insane. You don't create jobs by destroying the ability of businesses to hire people. You create jobs by letting the market function without interference from those who don't have a clue as to how the real world works.
I know you are going to claim that McDonalds can still make money while paying more. Really? Based on what? Do you own a fast food franchise? I know at least two people who do within walking distance from my house. Profits are thin. Very thin. Only restaurants that benefit from incredible locations have a little breathing room. Nobody is swimming in money.
I've bootstrapped and launched a number of businesses. I've created lots of jobs, from receptionists and warehouse workers to highly paid software and hardware engineers. Before that I've held jobs all the way from $4.00 per hour to $250K per year. I've been on both sides of the equation.
The ignorance of people who present views such as yours never fails to get my blood pressure up. You, sir, have no fucking clue what you are talking about. Go start a business in your garage with your own money and grow it to twenty or thirty people. Then we can talk. Until then, please don't think that what you are constructing in your mind is even remotely similar to what happens in the real world.
Yes, a little rough. So be it. I'm kind of tired of being politically correct with the clueless.
Fast-food outlets can afford to spend more on salary (in that, they will still be profitable and it doesn't affect their viability as a business) but have no inclination to, and therefore must be forced by law. As an additional bonus, they can't outsource their work to another, cheaper state. Great - the minimum wage law works exactly as intended, in this particular case.
It's less obvious that this applies to other industries. Will average households employ a domestic cleaner at minimum wage? Small, near-viable businesses where salary is the largest expense: what happens to them when the minimum wage increases? What happens to people who are thinking about starting businesses with that as a risk?
They have done some of it for almost a decade http://www.nytimes.com/2006/04/11/technology/11fast.html?pag...
They can also use more automation - "outsourcing" to machines.
There are far more subtleties that the article didn't cover as you partially point out. There is a good article on cafehayek about it. (eg the nature of work done can change). http://cafehayek.com/2013/12/again-more-on-the-minimum-wage....
McDonald's could double wages and it's operating profit would still be $5.5Billion. What's wrong with $5.5billion in profit?
http://www.businessinsider.com/mcdonalds-could-double-wages-...
In the case of McDonald's: absolutely nothing, it's a business, it exists to generate a profit. That is its purpose, to optimize returns. Others may choose a different path, non-profit for example, or low-profit (eg Costco). There is nothing inherently wrong with either path. If McDonald's makes the wrong choice, then they open themselves up to a very large market of competition to hammer them.
The problem the labor of McDonald's has is simple: their customers will not care whether a person or a robot makes the burgers, so long as they taste the same and are inexpensive. This problem will never go away, and the robotics revolution will ensure the obvious outcome.
Low costs are critical to this piece.
Nurses and teachers in Germany and France are happy if they make $30,000 per year. I think $30,000 burger flippers, fry cooks, and order takers, that come with all the complications of human labor, will be mostly easy to replace at a fraction of that cost. The fast food workers have completely lost perspective on what their labor is worth.
A very popular convenience store chain on the east coast, called Sheetz, has been running the order taking of their very successful food business (where they make all of their money), strictly with touch screen order kiosks for nearly 20 years. McDonald's could eliminate, what, four or five order taking employees with a simple change. No way they keep order takers at $30k per year. That's just one simple example of course.
Headline billion-dollar profits sound impressive, but are meaningless until you see how much capital has been employed. It's all very well to say they should halve their profit, but if that then meant that the returns for the company fell below what is expected from the sector, there will be other flow-on effects, such as a falling company value, difficulty in raising further capital if required, and other problems.
I would turn the question around - what's wrong with a $11b profit? The duty of the McDonalds management is to increase returns for the shareholders, not to run a make-work business.
Nothing, by itself, but in the case of McDonalds, Walmart and others who make massive use of minimum wage workers that profit is heavily subsidized by all of us as taxpayers since by holding on to that money and not sharing it with the employees we (taxpayers) now need to help fill the gap created between the cost of living and what those corporations are paying the majority of their workers.
Change the laws and you can take their profit down to zero.
Horray!
It is more ethical for McDonalds to make a higher profit, and pay lower wages, if they can.
This is because they have an agreement (and I don't care about the precise legal nature of this agreement) with the shareholders to maximize the profit of the company.
The employees on the other hand, they never made any promises to. Employees have a relationship with the company as long as they are willing to take the wages/conditions on offer.
You might think that it is ethical for McDonalds to redistribute money from their shareholders to their workers (and their workers are surely poorer on average). But this is solely the role of the government, and private charity. I can't prove this properly in a single post, but it is closely related to the First and Second Welfare Theorems.
I know, that's why I left it as an open question.
> They have an agreement with the shareholders to maximize the profit of the company.
It's fascinating we let that agreement trump the implicit agreement they have with all humans on earth.
> You might think that it is ethical for McDonalds to redistribute money from their shareholders to their workers (and their workers are surely poorer on average). But this is solely the role of the government, and private charity
This is how the system currently functions, but I strongly believe the system needs to (and must) change. For a business to purely be concerned with profit can only lead to destruction for all of us. They'll bleed workers dry, kill the planet and be happy doing it.
It's also the system that makes the most theoretical sense given the First and Second Welfare Theorems, which state (or more accurately strongly imply) that any desired outcome can be achieved by the free market, and government redistribution.
"killing the planet" is an externality that can be addressed by environmental legislation (e.g. a carbon tax).
One has to wonder what the end-game will be,
There is nothing that I have said that would rule out a highly progressive tax system, and a generous welfare system. In fact that is exactly what I would recommend.
I don't think the US is particularly free economically. It is true that most developed countries have higher minimum wages and, for example, more powerful unions, but this is not, in my opinion, why they have less inequality. They have less inequality because they have more progressive tax systems, and more generous welfare systems.
Also the US has more cultural diversity, and many people (e.g. living in poor rural areas) could earn more money if they were willing to choose a very different lifestyle.
This is a perverse use of the word 'ethical'. It attempts to remove corporations from any responsibility towards their employees.
If it is, as you say, ethical for a corporation to follow their shareholders wishes and maximize profits and the cost to wages,
then I consider it extremely unethical for shareholders to insist upon this, knowing that the result is exploitation of employees.
Let me ask you a question: where does the moral responsibility to pay higher than market wages come from? When I started my work, I had no doubts that my employer would rather pay less than more. However in my case there was competition for my skills that drove up the price of my labor. In the case of people earning minimum wage, there is not enough competition to drive the price above minimum wage. But in both cases the market is setting the price, and I don't see how the term exploitation applies to either.
The fact that some people don't have the ability to earn more than minimum wage is a property of those people, not their employees. And the appropriate response is to transfer money to them via the tax/benefit system.
People are obligated to take employment even if that's at a far lower wage than the value of what they are offering.
I am satisfied to describe this type of employment as exploitation.
If a corporation makes an increased profit only by using the fact that its employees are in a very poor negotiating position and cannot refuse employer demands, I would be satisfied to call that unethical. Normally, people would call sweatshops unethical - on the same basis. I believe that corporations and already-wealthy shareholders both shoulder moral responsibility for that.
Current economic conditions have converged to a point where [minimum wage] employees have almost zero negotiating position.
I agree with you that this needs to be better addressed by politicians - partly, but not only, in the tax/benefit system - but I don't observe that it is being addressed.
Things to be wary about - this is limited experiment with two fast food joints.
1. This might be a fluke, with only two fast food places compared data sample is very small - at best it is case study. Apparently this is incorrect, see comment below.
2. Their monitoring period was only 11 months. Who knows what will happen in 5 years?
All that said, I applaud their effort. Too many things are taken for granted in Economics because they "make" sense. Real world is so complex that things are often counter intuitive.
The two found fast-food joints along the New Jersey-Pennsylvania border
And I'm convinced fast-foods can afford to pay employees more.
That is, if I am opening a new Wendy's in this area you're postulating, and the deal is that I can have generous profits despite a substantial increase in my employee's wages, why don't I offer $1 more than the other fast food joints in the area and steal all of their best employees?
I see a few possible explanations:
1. Fast food employees do not substantially differ in quality. The best fast food employee in the world is not really better than the median, in terms of their ability to drive additional business to a location.
2. The owners of the fast food restaurants in the area have formed a cartel, and are (flagrantly illegally) engaged in anti-competitive practices.
3. There is simply no competition among fast food restaurants -- the field is so sparse that when I open a new restaurant, there are no competitors to steal from.
4. The labor market is incredibly overpopulated such that every fast food restaurant can fill its ranks with employees who are first-tier, without raising their wages.
What's your theory?
1. Speed. Employees are going to be better or worse at turning orders quickly, and I can't see how good preparation from the corporate overlords can entirely compensate for this.
2. Graft/Wastage/Slackery. If your employees steal from you, that's going to affect your bottom line real fast. If they're dropping burgers on the floor all the time, that's a big deal. If they are chatting with each other instead of serving your customers, that's a big deal.
3. Customer Service. It has traditionally been the case that a bright smile, eye contact, and polite language has seen some reward among food service workers, and again it doesn't seem possible that McDonald's has figured out how to make all employees great at this.
I would be provisionally ready to believe that the combination of corporate work to provide a simplified work experience plus a slack labor market has created a situation where there's a glut of potential fast food workers who are somewhere between the 60th and 99th percentile in worker quality, and the difference between 60th and 99th percentile is small enough that it doesn't warrant paying a higher wage.
I guess there must have been a reasonable availability of workers behind this, because all the pressure was based on 'or you'll be fired'. Or they just relied on us taking them seriously - the city was at about 4% official unemployment (Brisbane, 2006), so it can't have been that bad a glut.
I quit, personally, when my schedule got screwed around at the last minute. They seemed kind of shocked.
Also, as your question can be answered as the combined effect of a series of dimensions, for this one there are basically non-price competition, oligopolies, and low price sensitivity of customers as likely culpits.
This is exactly the point of the dollar menu/value menu/whatever promo is going on at the time. They do exactly this. Also, fast food economics are basically "Get the customer in the door. Take their order. Do all you can to sell them sodas and fries. Break even everywhere else."
What's your theory for why it was a problem? Obviously, in the immediate sense, a higher wage is better for the employee and worse for the employer, so are you assuming (perhaps as an axiom) that favoring the employee over the employer is a solution to a problem?
More so, I think that my interlocutor regarded it as a problem, and he suggested that it was "common sense" that of course wages would always be at the minimum wage. His "common sense" idea doesn't take into account the major mechanism of price and wage levels that is supposed to exist in a market economy, and I was wondering why it was so conspicuously absent from his comment.
I think that's fairly reasonable, although at what point do you say "profits are too high" or "wages are too low"? If the market can fail (which it obviously can), then what mechanism can we use to determine what is "optimal"? I do not think that monopoly regulation of the economy (i.e. government regulation and fiscal policy) should be expected to do better than the market.
This is what happens in every other industry. For example, at my company, we constantly lose customer service reps to a nearby company that pays $1 more. We could increase our wage and reduce turnover, but have decided it's cheaper to just replace. Not that I necessarily agree, but it's not my call.
Guess what I saw passing by a KFC the other day?
An automated ordering kiosk. Just use a touch screen to place your order, swipe your card and your food will come out with your number.
It is just wishful thinking to think that raising minimum wages makes people better off. At best, it just creates inflation for the very products that those workers buy. At worst, it cuts the rungs off the bottom of the job ladder and increases the incentive to permanently replace low-wage employees with automation.
Most people start work on the lowest wage there is. I certainly did. Making it harder to employ people at low cost removes the ability to start working your way up the ladder.
You can argue the morality of the minimum wage - whether it should exist or not, what the level should be, but you can't argue the marketplace effects.
The reason I ask is because no one wants to use those self-serve kiosks. They've had them everywhere as a means to "free" an employee up but what ends up happening is an employee has to come by and help the customer because 1) the interface sucks and 2) people dont want to read screens then tap then read more screens, they'd rather just tell a cashier what they want and have the cashier press the buttons.
But if you mean the robots also serve and cook the food... where do you live again?
I could totally see automated ordering happening. Look at big box stores and self-checkouts. At my local home depot, walmart, and mejier, and smaller stores like county market, there are often only two cashiers for the whole store (I only go at night, i guess). One oversees a bank of 4-8 self-service check-outs, and the other handles one full service checkout.
Self-service grocery store checkout is way more complicated than fast-food ordering. There are coupons, produce codes, scales, large qty of items, and the actual act of scanning and bagging. By intentionally under-staffing the full service lanes, people naturally adapt to self-service. This is the standard now.
Imagine how efficient fast food could be. One touch for predefined meal, accept the defaults or maybe one more touch for size change, tap your NFC credit card or device, done.
Once upon a time banks experimented with new robot tellers that nobody used, because it was easier to just ask the nice cashier for your money. These robots were even free to use.
There was once a time when airport check-in had a couple of weird self-service terminals off to the side...that nobody used. Now with Delta you can't check in with a real person.
Rental car companies have got one of those weird check-in robots....
It doesn't matter what the customer wants in the end. If the customer will put up with it and the company can save money, then it will happen.
But most likely it is inevitable that fast food will go this route. (Probably not until McDonalds decides to deploy it all across the US), but your statement that at least one "front-end" person is out of a job is not true at all. No one behind the counter is trained only to be a cashier. Pretty much the first thing you do when you work these kinds of jobs is learn how to handle the register because that's the most important thing at a restaurant (getting money from a customer).
So how many people is this kiosk actually replacing? Who is to say that having these self-serve kiosks won't just free them up to do something else like cooking food? If freeing them up allows them to serve more customers to make more money then why would the store fire them? There are a lot of things to consider but it seems short sighted to just assume that nixing this task will somehow eliminate an entire spot in the employee roster.
Anyways. I just realized how big of a tangent this is, since essentially your example of this was to underlie the fact that people working minimum wage should be appreciative because it can all be automated away, which I disagree with. The whole "ladder" and chopping off the bottom "rungs" is a bit bullshit though since it implies that all the burdens will land upon those same workers.
In fact most economists would rather answer the questions "why should we increase the minimum wage" or "should we increase the minimum wage".
Most economists would say that interfering with the market is bad in general. If we wanted to help people with low incomes, it would make more sense to decrease taxes for people on low incomes.
And low income benefits are not a separate discussion. It is more fair and efficient to redistribute money to people on low incomes through taxes and other benefits than through raising the minimum wage.
Do you have any evidence for the claim about efficiency regarding taxes vs minimum wage?
It's not my fault that people are using different meanings for the term and somehow my writing is expected to be consistent with all of them :)
>Do you have any evidence for the claim about efficiency regarding taxes vs minimum wage?
No, I think theory is enough for this point.
>As another poster pointed out, some people with low income pay a negative income tax.
The only way income tax can be negative, is if it includes low income benefits. In any case, no matter how one chooses to define things, isn't my argument clear at this point: Increasing benefits or decreasing taxes are more efficient than increasing the minimum wage.
I think the confusion is over the term "benefits". In the usage I've seen, benefits includes things not directly associated with the income tax code, like say, food stamps. If you increase your income, you may lose access to food stamps, but the food stamps don't come with your income tax returns and receiving them is part of a separate application process in most (all?) states.
So when you said income tax, I thought you were including those kinds of programs. But it sounds like you mean something closer to "benefits and deductions" directly in the tax code, like the earned income tax credit.
1) More skill based education, enabling them to upgrade out of their low paying, low skill jobs
2) Make it dramatically less expensive and easier to employ people, lower regulations (rather than adding thousands of new regulations per year), simplify compliance, simplify healthcare dramatically, and overall stop providing huge disincentives to hiring
The only tax that poor pay is sales tax. The bottom 40% pay a negative income tax rate. We could attempt to kick the sales tax back to them, but it wouldn't make even remotely as big a dent as improving the macro economic environment.
We should also become fiscally responsible and stop destroying the poor's standard of living through inflation. Inflation harms the poorest the most, by far.
And I don't mean the bogus CPI, which was substantially adjusted to mask inflation under Clinton's presidency. I'm talking about the massive inflation in: energy, housing & rent, food, education, health care. The cost of a new car has gone up by 50% in 20 years, while we're selling less of them (relative slack demand). The cost of milk & eggs has doubled in 15 years. The cost of a house has doubled in 15 years. Meanwhile, we have 14% real unemployment, with no justification for the massive increases in prices on the demand side (ie it's primarily driven by the Fed's massive devaluation of the dollar, with QE being used to avoid bankruptcy at the federal level; aka the poor are being papered to death in the process of masking our nation's fiscal irresponsibility).
What you are talking about is policies that (you claim) would benefit the economy in general and should be done regardless of how we deal with people who are currently on low incomes.
And inflation does not harm people's standard of living because real wages will rise or fall depending on the market. Inflation has some short term effects, but if nominal wages remained stagnant (which they haven't), that would be because the value of labor went down, not because of inflation.
I don't think that word means what you think it means. When prices go up, so does income. It has to because there are two sides to every economic transaction. Inflation often seems to coincide with declines in the real median wage because it's easier for your employer to not give you a raise instead than it is to reduce your salary. But over time it doesn't matter because even with no inflation if there's real wage decline you still have the same problem.
If we're talking about what inflation is, well, prices going up is not inflation to begin with. The expansion of the money supply is inflation. Prices going up is merely a potential symptom of inflation.
Inflation does in fact harm the poor dramatically more so than anybody else. They're the most susceptible to rising prices, their incomes rise the slowest, and they have no capital or assets to leverage to keep pace with inflation through hedges (such as stocks, gold, commodities in general, housing, etc).
Incomes do not inherently go up hand in hand with prices. In fact it's the exact opposite, the greater the inflation the less able incomes are to keep pace. America is dramatic proof of that over the last 40 years, as the cost of major goods such as housing, education and healthcare have vastly outstripped gains in income.
Your theory that wages inherently keep up with inflation assumes that there are no spin-off consequences to inflation, that's blatantly not correct. It generates a downward spiral, cascade effect; just ask Argentina how that works, their economy has been getting hammered by it the last few years. As you expand the money supply, devalue your currency and generate inflation, all sorts of costs from external sources begin to climb, such as the cost of imports (raw goods like plastic or steel, completed goods like toasters, commodities etc). This one effect alone guarantees domestic wages can never keep pace with inflation.
Inflation also destroys savings, and the poor always have the smallest base of savings to begin with, and are least able to shift their savings into higher yielding investments.
There are numerous recent examples from around the world where inflation outstrips wage gains.
Brazil is an obvious recent example of it, the cost of goods in Brazil is outrageous, and was one of the reasons for their recent riots. The high inflation there, requiring incredible interest rates to fight, has far outstripped their wage gains. Venezuela and Argentina are two other recent examples of it. And there are extreme examples of it, in which the people of a country have been wiped out by inflated prices while their incomes did not keep up (Zimbabwe is an easy example of that).
No, seriously, increases in the price level is literally the definition of inflation.
> Incomes do not inherently go up hand in hand with prices.
If you hold purchases stable, incomes have to go up with prices because every price someone pays is also a price someone gets paid. And in fact, this actually understates the income effects of inflation because it results in an increase in demand because the value of holding money decreases.
I don't contend that there are no consequences of inflation, just that they are either only short term or that they happen anyway with more hysteresis in the absence of inflation.
> Inflation also destroys savings, and the poor always have the smallest base of savings to begin with, and are least able to shift their savings into higher yielding investments.
It does indeed reduce the value of savings. If you've got more savings than debt, inflation hurts you. That's not a position most of the poor are in. They're in the opposite position, statistically, where the losses to purchasing power from savings is outweighed by the gains from the reduction of debt.
My core point is not that the problems that you cite are not problems, but that inflation is not their cause. Argentina's problems have to do with instability. There are costs imposed by any movement in the value of money and they tend to have feedback effects. Too much inflation is a bad thing because it has large cost effects and causes more inflation. The same is true for large amounts of deflation.
The difference between prices and median income is the problem in your examples, but those problems would largely surface without the inflation because they are inequality problems. Inflation shortens the time scale on which the effects of income inequality is felt but it is not the source of the problem.
> If you hold purchases stable, incomes have to go up with prices because every price someone pays is also a price someone gets paid.
Assuming that is true, that doesn't mean that poor people's income grows. Maybe it just further consolidates income and wealth on the other end of the socioeconomic spectrum.
> They're in the opposite position, statistically, where the losses to purchasing power from savings is outweighed by the gains from the reduction of debt.
Poor people likely do not have meaningful savings so it's their very fixed incomes that is losing purchasing power, and their debts are often short term instruments that will compound the problem.
Speaking of inflation and savings and the poor, there is an episode of the late 1970's tv show "Good Times" where the family encounters a windfall, and one of the kids asks the dad what they should do with it, and the dad replied, and I'm paraphrasing, "We better spend it right away [perhaps on durable goods], becuase tomorrow it won't be worth anything." Having lived all of my life with relatively low inflation rates, as I child, I just assumed, as a comedy, it was just highlighting the foolish short-sighted decision making of the poor. Later in life I now appreciate what a powerfully poignant economic anecdote that scene represents.
Does anyone happen to know which one that was? Now that I'm thinking about it, I can't think of any modern TV shows that come close to depicting the lifestyles of poor people as "Good Times" did.
For example, what positive questions do the the first and second welfare theorems address?
The most fundamental values (how much do we value individual liberty? total wellbeing? the wellbeing of the least-well off?) are not necessarily for economists to define. But by describing the tradeoff between, for example, equality and efficiency, economists are able to practically answer normative questions, because almost everyone values equality and efficiency.
Wouldn't someone earning minimum wage define the poverty line?
The poverty threshold, on the other hand, is based on actual costs - apparently it is "three times the cost of a minimum food diet in 1963, updated annually for inflation using the Consumer Price Index, and adjusted for family size, composition, and age of householder." [http://www.irp.wisc.edu/faqs/faq2.htm]
Poverty is defined by the means you can afford, and if that meets some rough threshold of basic necessities (food, shelter, possibly transportation, etc). In a perfect world where policy is defined justly and the economy can support it without repercussions, the minimum wage would be defined by the poverty line, no the other way around. In the real world, there's no fundamental reason why the minimum salary in an economy would pass any particular bare-minimum lifestyle threshold.
I believe the magic number three was derived from one study decades ago, that found that food accounted for one-third of poor people's spending on average. There is no reason to think it has remained constant, or that it is stable to begin with, but that became the formula used in the US.