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Minimum wage is a little more complicated in a welfare state. We outlaw people paying their workers too little money because otherwise the welfare system become

Minimum wage is a little more complicated in a welfare state. We outlaw people paying their workers too little money because otherwise the welfare system becomes a free grant towards what should be their payroll expenses. (It even this way under our current minimum wage system because minimum wages are far too low). If the costs of keeping low-wage workers alive weren't socialized (people paid too little simply died), you might have a point. But wages would also be much higher, or Wal-Mart would quickly run out of warm bodies to hire.

twoodfin 11y ago
Why "should" someone's cost of living be included in payroll expenses? Is Wal-Mart obligated to pay someone more when they have a child? Are they obligated to pay a teenager from a rich home less than a poor senior for the same job? This argument is trotted out a lot, and I've never heard a thorough argument for it. In contrast, the argument for wages to be set by the market (including, of course, whatever contribution the government makes through welfare) is straightforward.
- superuser2 11y ago
  Sure. Redistribution is a serious thing. We are taking people's money by force; we had better be putting it to good use. I take the classic liberal position that the creation of a safety net to smooth out the quality of life for those subject to economic cycles, and to ensure a decent quality of life for those more permanently unable to find work, is a just use of force. We have a moral duty to keep our fellow humans from starvation and homelessness, particularly those who cannot be expected to fend for themselves (i.e. children). It is reasonable to mandate participation in this system through taxation. Public sacrifice for public benefit. The desperate are entitled to a cut of our paychecks. Wal-Mart's owners are not. Compulsory subsidy through taxation of Wal-Mart's OPEX is not a just use of force, because the power of the state ought to be used for equitably distributed public benefit, not to the disproportionate benefit of a few wealthy people (i.e. Wal-Mart's owners). I claim that paying its workers a living wage is part of minimum wage employers' OPEX on the basis that, if we withdrew the welfare system, Wal-Mart could not retain workers at its current wages and would have to pay them a great deal more. The welfare system (combined with a too-low minimum wage) is effectively a subsidy of that OPEX. The correct minimum wage, under this line of thinking, is the one which disqualifies the worker from other redistribution systems. This taxpayer subsidy of business expenses is a significant perversion of the market by making labor more cheaply available than it would be otherwise. So it is not really correct to say that, absent minimum wage, prices are being set by the market. Unless we also let people who are paid too little starve.
  - twoodfin 11y ago
    I claim that paying its workers a living wage is part of minimum wage employers' OPEX on the basis that, if we withdrew the welfare system, Wal-Mart could not retain workers at its current wages and would have to pay them a great deal more. You're saying that welfare produces downward pressure on wages. But I believe it's the opposite: If someone paid you $1,000,000/year whether you were working or not, if you're rational you'd never take a job that paid less than the marginal value of your leisure time. The latter is substantially improved by having $1,000,000/year of unconditional income, of course! Welfare dollars (at least the unconditional sort, unlike, say, EITC, which is deliberately a wage subsidy) are in competition with employers for their potential employees' time and effort, not a subsidy.
    - superuser2 11y ago
      You're forgetting the price floor imposed by cost of living, which is already higher than minimum wage. For your claim to hold, it would have to be the case that workers could survive on less than minimum wage.
- guptaneil 11y ago
  Because when you let the market set rates for unskilled labor, those rates will inevitably decline to near 0. This will result in deflation, which then hurts the entire economy, even skilled labor.

twoodfin 11y ago

Why "should" someone's cost of living be included in payroll expenses? Is Wal-Mart obligated to pay someone more when they have a child? Are they obligated to pay a teenager from a rich home less than a poor senior for the same job? This argument is trotted out a lot, and I've never heard a thorough argument for it. In contrast, the argument for wages to be set by the market (including, of course, whatever contribution the government makes through welfare) is straightforward.

superuser2 11y ago
Sure. Redistribution is a serious thing. We are taking people's money by force; we had better be putting it to good use. I take the classic liberal position that the creation of a safety net to smooth out the quality of life for those subject to economic cycles, and to ensure a decent quality of life for those more permanently unable to find work, is a just use of force. We have a moral duty to keep our fellow humans from starvation and homelessness, particularly those who cannot be expected to fend for themselves (i.e. children). It is reasonable to mandate participation in this system through taxation. Public sacrifice for public benefit. The desperate are entitled to a cut of our paychecks. Wal-Mart's owners are not. Compulsory subsidy through taxation of Wal-Mart's OPEX is not a just use of force, because the power of the state ought to be used for equitably distributed public benefit, not to the disproportionate benefit of a few wealthy people (i.e. Wal-Mart's owners). I claim that paying its workers a living wage is part of minimum wage employers' OPEX on the basis that, if we withdrew the welfare system, Wal-Mart could not retain workers at its current wages and would have to pay them a great deal more. The welfare system (combined with a too-low minimum wage) is effectively a subsidy of that OPEX. The correct minimum wage, under this line of thinking, is the one which disqualifies the worker from other redistribution systems. This taxpayer subsidy of business expenses is a significant perversion of the market by making labor more cheaply available than it would be otherwise. So it is not really correct to say that, absent minimum wage, prices are being set by the market. Unless we also let people who are paid too little starve.
- twoodfin 11y ago
  I claim that paying its workers a living wage is part of minimum wage employers' OPEX on the basis that, if we withdrew the welfare system, Wal-Mart could not retain workers at its current wages and would have to pay them a great deal more. You're saying that welfare produces downward pressure on wages. But I believe it's the opposite: If someone paid you $1,000,000/year whether you were working or not, if you're rational you'd never take a job that paid less than the marginal value of your leisure time. The latter is substantially improved by having $1,000,000/year of unconditional income, of course! Welfare dollars (at least the unconditional sort, unlike, say, EITC, which is deliberately a wage subsidy) are in competition with employers for their potential employees' time and effort, not a subsidy.
  - superuser2 11y ago
    You're forgetting the price floor imposed by cost of living, which is already higher than minimum wage. For your claim to hold, it would have to be the case that workers could survive on less than minimum wage.
guptaneil 11y ago
Because when you let the market set rates for unskilled labor, those rates will inevitably decline to near 0. This will result in deflation, which then hurts the entire economy, even skilled labor.