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Comment by dredmorbius | Hacker News Reader

I would rather enable new businesses

I allow for making specific provisions for this. I'm not arguing that you'd never want to subsidize labor, just that you 1) want to recognize that below-subsidence wages are a subsidy to business, and 2) that when you make exceptions, they're specific and for enterprises which provide net benefits.

A highly profitable company with high levels of negative externalities? Not so much.

The labor-export challenge is another issue which also should be addressed. I'd like to see, expecially, labor conditions (e.g., prison labor) and environmental impacts addressed through tariffs or other trade requirements, though international trade laws put (IMO harmful) limitations on this.

I don't think that minimum wage + basic income are mutually exclusive. I'm just highlighting what the actual dynamics of sub-minimum wages are.

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"The labor-export challenge is another issue which also should be addressed. I'd like to see, expecially, labor conditions (e.g., prison labor) and environmental impacts addressed through tariffs or other trade requirements, though international trade laws put (IMO harmful) limitations on this."

I mostly agree. I think that the WTO - for its faults - has been great at getting rid of barriers, and I think that barriers should not be erected without justification. However I think that, potentially, tremendous good could be done sitting down and drawing up a framework allowing for certain kinds of barriers when there is a disparity between worker protections, environmental regulations, &c (including enforcement thereof), and so reducing the race to the bottom. Of course, defining such a framework that doesn't allow too much wiggleroom is non-trivial and might be impossible...

"I don't think that minimum wage + basic income are mutually exclusive. I'm just highlighting what the actual dynamics of sub-minimum wages are."

I don't think they're actually mutually exclusive, per se, but I do think that with a sufficiently high BI the MW that reflects (shall we say) human cost of production of labor is $0. I'm not sure whether a sufficiently high BI is optimal, or whether the MW remains worthwhile to keep on the books if the market clears all labor far above the ideal MW anyway.

BI and MW address two different problems.

BI answers "should people be provided with the necessary essentials to survive".

MW answers "should businesses be compelled to pay a fair market rate for labor", again, unless a specific exemption is made.

Providing BI without allowing for MW still creates an environment in which at least some businesses can game the market to obtain below-cost labor. I see this as a market inefficiency which should be corrected.

The human cost of production of labor isn't zero, which is precisely the point.

If a specific business (or industry sector) wants an MW exception, that's yet a third question (essentially: is the product of this business and/or sector sufficiently valuable to warrant a net transfer of wealth from the rest of the economy to it). My knowledge of economics and markets is such that I don't believe that the free market will allocate resources efficiently in all cases, but where you're going to allow for such a subsidy, you'd best do it consciously, for specific reasons, and as transparently as possible.

Awarding the benefit to large, politically-connected, and highly profitable companies strikes me as a gross market mis-allocation.

If the market clears labor above its minimum sustaining rate, then the MW is a non-issue, but you'd best be sure that that's the case, and if it's a non-issue, then having the MW present changes nothing materially in the market.

But if people aren't forced to provide their labor by virtue of a sufficient BI, there is no longer that imbalance. Since individuals' needs are taken care of, the cost of labor as opposed to idleness is whatever dis-utility the potential worker finds in the task, and if the pay is below that we can expect them not to take the job. Again, if you run through the benefits you claim for MW, every one is provided by a sufficient BI even in the absence of MW.

Look at the short-run loss-minimization problem.

In the short run, a business (or an individual) will continue to operate (or work) so long as at least a portion of its fixed costs are covered (that is: you're meeting the marginal cost of operation / labor).

By putting the subsidy of BI underneath an individual, you're covering that much more of their fixed costs, and it may well be that the person is ahead by working at a below-full-cost wage. And if the BI covers enough of those fixed costs, this can be sustained indefinitely.

Again: this represents a net subsidy of the business which is receiving this labor. There's a reason I'm saying BI and MW are complimentary. They address different market failures.

But with a sufficient stipend, all of the fixed costs can be covered. At which point there is no short-run loss-minimization problem, because costs will only be above pay if marginal costs are above marginal pay, at which point the individual will stop working.

I'm ... not convinced this fully addresses the other aspects of business subsidy presented by lack of a sustinence-level minimum wage. I'd need to think about it in more detail.

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