Comment by MCRed | Hacker News Reader

Comment by MCRed | Hacker News Reader

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When you raise the minimum wage, you don't change any of the other aspects of the business affected by it. So, say you have 15 employees making $10 an hour to keep your company afloat. (Just to keep things simple ,this is about the logic of it.) Now the minimum wage goes up to $15. What are you going to do? You would be losing money with a %50 increase in your costs. Most likely what you will do is lay off 5 employees (The weakest 5) and keep the remaining 10-- but now they have to do the work of 15. Remember the alternative is closing the business and they all lose their jobs. Plus if some don't like the workload there are many people who just got laid off (you laid off 5) who would happily take their jobs.

When you set a minimum wage- or engage in any kind of price fixing- you distort the market and historically that has always hurt the poorest people the most.

Looked at another way, minimum wage is the wage below which you will be unemployed rather than allowed to work.

A minimum wage is a penalty that keeps workers unemployed if they don't have sufficient marketable skills to overcome it.

Imagine if the minimum wage was $100 an hour. How many of us would be unemployed?

People seem to imagine that there's just a lot of money out there and the only reason that anyone might not have enough is that people are being greedy. This is zero sum theory, and it is not true in economics. It's nice to imagine that you're "foreign the rich people to give up the money they are hoarding"... but you're hitting businesses that are on the margins. What's the average margin for a business? IT's not the %50 that intel enjoys-- a grocery store maybe makes %3.

What do you think a business that is clearing %3 net is going to do when you increase labor costs by %50? (in this example.)

Edit: You can disagree with my position, or even find an error in my argument, but I'm tired of spending time explaining things and giving examples like this only to be downvoted for ideological reasons... constantly. Is a circle jerk what you really want HN to be? I don't think any rational person can say that my comment wasn't a quality explanation for the position.

I hear this "What if the minimum wage was raised to some ridiculous amount" argument from conservative people all the time. (I think they parrot it from conservative AM radio talk show hosts)

That is a loaded question. The minimum wage does not have to be increased to some ridiculous amount, but it does have to be high enough to keep the people off of government benefits.

Additionally, if raising the minimum wage by a modest amount causes a business model to crash and burn, then that's a flaw which needs to be corrected. Maybe that business model wasn't so robust after all?

If a business depends on an exploitative minimum wage to be profitable, that business needs a new business model. If that means more automation and robotics, so be it. It is not good public policy to pay exploitative wages that force employees to go on government assistance at the expense of the taxpayers.

I don't disagree with your argument.

On the other hand... Currently, employers that pay a less than living wage are subsidized in effect - the government (tax payers) makes up the difference in the form of food stamps, healthcare, etc. Is it right that businesses should get subsidized labor?

It's actually the other way around. These employers are basically subsidizing the social services. If the best job Jimmy can get pays minimum wage, then logically, if Jimmy couldn't even get that job, he wouldn't earn a living wage; he'd earn nothing. If Jimmy had the opportunity to earn a living wage, after all, he would go get the job that pays that living wage and quit Wal-Mart. But, since Wal-Mart is the best job Jimmy can get, the net effect of Jimmy earning minimum wage at Wal-Mart is that he costs the state less money in social services than he would with no job at all. Wal-Mart, therefore, is the one subsidizing the state and not the other way around.

I respectfully disagree with this line of thinking. The goal of a society is to eliminate as many people from needing government benefits as possible, and to ensure that only those who are truly unemployable receive government benefits. Employers must pay a wage which ensures that basic needs are met.

That's palpably not true. We all get roads, police, fire, regulated utilities. Absolutely nobody is trying to wean us from those.

It takes a change in thinking to accept the basic income. I'm afraid a generation will have to grow old and die before it gains traction, because of the ingrained thinking that 'full employment' is a good or useful societal goal.

You mean the generation that remembers what the USSR was like? I'm not being flippant, I'm being serious. The entire leftist political agenda, including Basic Income is basic marxism and the arguments for it are the same ones we had in over a century ago.

We've had a century of experimentation with it, from Fascism in germany ("to protect our farmers") to communism in Russia to socialism in the UK to all manner of variations in South America.

It hasn't worked.

Why is it leftists who are always going on as if they're the only ones who care about the poor, refuse to learn the lessons of history and economics?

History isn't a science, but economics is, and the reasons these things will fail are always pointed out-- as they were in this comment section-- and always ignored (as they were downvoted here on HN).

As a result more and more damage is done.

And when you see the damage the next generation of 20 year old leftists calls for socialism to fix the damage of socialism!

So yeah, when you're over 40 and you've been around the merry go round once you see what's going on.

OH, and by the way, one thing was constant- in all of these situations the people at the top profited. The politburo made out, and so that's why they support it.

It's how they exploit the poor.

We can paint it with the socialism brush, and write it off. Or we can recognize that today is a very different economic situation from, well, pretty much any time in history. We've got automation, and technology, and a burgeoning unemployed and unemployable population of non-technologists. We can try to prop up the quaint systems of the past (full employment, work or starve). Or we can change our system to one that is kinder, economical, and raises the standard of living for everybody.

As I said, I believe folks will have to grow old and die. Until then, we'll hear only FUD stories and scare tactics.

> The goal of a society is to eliminate as many people from needing government benefits as possible, and to ensure that only those who are truly unemployable receive government benefits.

Not only do I disagree that this is the goal of society, I don't see any reason to think that this should be the goal of society.

> Employers must pay a wage which ensures that basic needs are met.

It seems to me that this is a paternalistic and feudalistic approach that presumes that every member of society must be dependent on a particular employer.

And if you require employers to pay a living wage, then more and more people become unemployable.

Actually, the thing I like about basic income is that it gives you the freedom to eliminate minimum wage laws. People wouldn't have to work degrading jobs for subsistence pay, because they would already get subsistence pay, but if they earned even $3 an hour, that would be on top of basic income rather than in place of it.

I don't agree that Walmart is subsidizing the state but I could see an angle that is similar.

If the government stopped paying workers any benefits, would the cost of the worker's labor go up? If it didn't, that would indicate that employers were paying the market rate (speaking strictly from a economics perspective). I think running this experiment would confirm your argument that Jimmy would become unemployable as his market value would not increase, just his "cost".

I still think minimum wage should be increased but now I'm less sure if it a good idea/solution.

The elephant in the room is that jobs are going the way of the dodo bird. At some point there will be very few jobs left and the market value of labor will fall to near zero. At that point employers will have no customers either. Even if an individual employer can see that far ahead (like Henry Ford did) and raises his wages, he will be at a disadvantage to other employers who don't raise their wages. Forcing all employers to a higher minimum wage will get around that - but only for a while. Eventually those jobs will be automated and we'll be back to the no wages/no customers situation.

Tell me, there's been various minimum wage enacted in the U.S. since the 1930's. If a minimum wage is so bad for the economy, wow come during the last ~80 years, the U.S. has been the world's foremost leading economic engine?

How come the minimum wage has been raised many times throughout history, and somehow business keeps trucking along?

Nobody is suggesting raising the minimum wage to $100/hour, that's a false argument.

The market is full of distortions. Indeed the entire creation of the ideology of capitalism was about how best to regulate and harness the powerful market forces.

This happens a lot in over crowded markets too. In the Indian IT scenario, there are a lot of freshers every year in the market who will work for almost any starting salary(I was one such a guy at one point in time). So nobody in the chain would complain excessively about their salary, doing so would mean they are welcome to leave. The company would lose nothing as there is enough supply of workers ready to work at the price they want. The employee loses out on the longer run.

Re: edit

This is the irony of this. You are writing well thought out explanations, but since it's not leftist enough, you get downvoted at a community which spent non-trivial amount of time trying to raise "quality of discussion", and even more time talking about "quality of discussion".

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