6 ms·

I don't understand the libertarian argument for allowing low wages. Let's say company X is paying low wages, which allows it to sell goods for cheap. If company

I don't understand the libertarian argument for allowing low wages. Let's say company X is paying low wages, which allows it to sell goods for cheap. If company Y tries to enter the market and pay higher wages, they won't get any market share, because their goods will be more expensive. So wages will stay low forever. Am I missing something?

mnx 9y ago
Yes. Labour supply is not limitless. So in theory you could treat labour just as any other market good. Therefore, if there's an oversupply of labour, it will be cheap. If the supply is short, it will be expensive. There's many important caveats, and I don't claim to represent the Libertarian view fully, but that's the most important thing you are missing.
- deleted 9y ago
  [deleted]
moxious 9y ago
In theory, labor forces higher wages, they are not given by the business. What you're missing is that the power dynamic isn't one way with the company determining everything. Labor has to agree to accept low wages or the whole arrangement falls apart and either the company pays more or stops doing business.
- deleted 9y ago
  [deleted]
antome 9y ago
The are two arguments I see: the first is that if the minimum wage is higher, the cost of living increases, leading to the same problem as before. Of course this assumes the two are perfectly correlated, which is a flawed assumption. The second is that if local humans are too expensive, people will use local robots or outsourced humans instead. While technically true, this is inevitable. Lowering wages might slow down the incoming problem, but it will always eventually exist regardless of local wages.
IanDrake 9y ago
Yeah, you're missing the greater economy that surrounds your microcosm. Skill is not in abundance. People pay for skill and people with skill can demand pay. People without skill have little value to offer. Is it better to price their skill at its true value and have them work or to price it at an artificial value and have them not work? On the consumer end, lowest price doesn't declare a winner. Look at Whole Foods or Ben and Jerry's. These are companies that hire essentially unskilled workers who speak English well and look and act like my peers and they get paid more than minimum wage. However, if I walk into a Walmart I'm usually surprised that the people working there still have a job. They're typically weird or rude and/or speak poor English (this includes supposedly EFL people).
jstanley 9y ago
If company Y is producing the same quality of goods as company X but trying to charge more money, they deserve to be out-competed by company X. Do you agree? Equally, if employee Y is producing the same quality of work as employee X but trying to charge more money, does employee Y not deserve to be out-competed by employee X? Employment is a two-sided market too. Nobody would advocate for a minimum price for a packet of crisps just to save the poor crisp companies from earning too little per packet. It is obvious that if crisps were too expensive, people would stop buying them. The same applies for workers. Minimum wage is just saying "if you can't produce at least $X of value per hour, you're not allowed to work at all". That's not fair.
- pg314 9y ago
  Except that in one case you're talking about companies and in the other about people. I have no problems with companies dying, but I have moral reservations about people dying. The free market has no such qualms, it will happily set wages at a level where people can't survive.
  - eru 9y ago
    A minimum wage forbids companies from hiring workers.. What you are arguing for is a welfare state. As an example, modern Germany had a long tradition of welfare state combined with no minimum wage.
    - Fnoord 9y ago
      > As an example, modern Germany had a long tradition of welfare state combined with no minimum wage Welfare state as in? Having social benefits and minimum wage is not mutually exclusive. Furthermore according to Wikipedia [1] the minimum wage in Germany is 8.84 EUR. You might say, "that's Wikipedia, that's no reliable source!" No sweat, go click the link first. For this specific information (minimum wage in Germany) they provide links to an English AND German source. [1] https://en.wikipedia.org/wiki/List_of_minimum_wages_by_country https://en.wikipedia.org/wiki/List_of_minimum_wages_by_count...
danblick 9y ago
Doesn't your argument basically assume the first company will always be able to hire workers? If wages are so bad, workers would seek other options, like developing a skill or taking a job in a different industry. http://blog.skepticallibertarian.com/2013/02/25/remedial-economics-and-the-minimum-wage-for-presidents/ http://blog.skepticallibertarian.com/2013/02/25/remedial-eco...
- frgtpsswrdlame 9y ago
  ...Does this guy actually know any economics? He's pretty much just googling and copy-pasting without any real understanding. Here's a better article The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to modest increases in the minimum wage. http://cepr.net/documents/publications/min-wage-2013-02.pdf http://cepr.net/documents/publications/min-wage-2013-02.pdf
  - danblick 9y ago
    "But, probably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers." If this is the case, you'd think employers would have an incentive to raise wages on their own without requiring a law.
    - aianus 9y ago
      Some do, like Costco paying cashiers well over minimum wage to improve service and turnover.
- adultSwim 9y ago
  1.5 million American families, including 3m children, live on less than $2/person/day. Half the world lives on less than $2/day (in our buying power). This isn't by choice.

mnx 9y ago

Yes. Labour supply is not limitless. So in theory you could treat labour just as any other market good. Therefore, if there's an oversupply of labour, it will be cheap. If the supply is short, it will be expensive. There's many important caveats, and I don't claim to represent the Libertarian view fully, but that's the most important thing you are missing.

deleted 9y ago
[deleted]

moxious 9y ago

In theory, labor forces higher wages, they are not given by the business. What you're missing is that the power dynamic isn't one way with the company determining everything. Labor has to agree to accept low wages or the whole arrangement falls apart and either the company pays more or stops doing business.

deleted 9y ago
[deleted]

antome 9y ago

The are two arguments I see: the first is that if the minimum wage is higher, the cost of living increases, leading to the same problem as before. Of course this assumes the two are perfectly correlated, which is a flawed assumption. The second is that if local humans are too expensive, people will use local robots or outsourced humans instead. While technically true, this is inevitable. Lowering wages might slow down the incoming problem, but it will always eventually exist regardless of local wages.

IanDrake 9y ago

Yeah, you're missing the greater economy that surrounds your microcosm. Skill is not in abundance. People pay for skill and people with skill can demand pay. People without skill have little value to offer. Is it better to price their skill at its true value and have them work or to price it at an artificial value and have them not work? On the consumer end, lowest price doesn't declare a winner. Look at Whole Foods or Ben and Jerry's. These are companies that hire essentially unskilled workers who speak English well and look and act like my peers and they get paid more than minimum wage. However, if I walk into a Walmart I'm usually surprised that the people working there still have a job. They're typically weird or rude and/or speak poor English (this includes supposedly EFL people).

jstanley 9y ago

If company Y is producing the same quality of goods as company X but trying to charge more money, they deserve to be out-competed by company X. Do you agree? Equally, if employee Y is producing the same quality of work as employee X but trying to charge more money, does employee Y not deserve to be out-competed by employee X? Employment is a two-sided market too. Nobody would advocate for a minimum price for a packet of crisps just to save the poor crisp companies from earning too little per packet. It is obvious that if crisps were too expensive, people would stop buying them. The same applies for workers. Minimum wage is just saying "if you can't produce at least $X of value per hour, you're not allowed to work at all". That's not fair.

pg314 9y ago
Except that in one case you're talking about companies and in the other about people. I have no problems with companies dying, but I have moral reservations about people dying. The free market has no such qualms, it will happily set wages at a level where people can't survive.
- eru 9y ago
  A minimum wage forbids companies from hiring workers.. What you are arguing for is a welfare state. As an example, modern Germany had a long tradition of welfare state combined with no minimum wage.
  - Fnoord 9y ago
    > As an example, modern Germany had a long tradition of welfare state combined with no minimum wage Welfare state as in? Having social benefits and minimum wage is not mutually exclusive. Furthermore according to Wikipedia [1] the minimum wage in Germany is 8.84 EUR. You might say, "that's Wikipedia, that's no reliable source!" No sweat, go click the link first. For this specific information (minimum wage in Germany) they provide links to an English AND German source. [1] https://en.wikipedia.org/wiki/List_of_minimum_wages_by_country https://en.wikipedia.org/wiki/List_of_minimum_wages_by_count...

danblick 9y ago

Doesn't your argument basically assume the first company will always be able to hire workers? If wages are so bad, workers would seek other options, like developing a skill or taking a job in a different industry. http://blog.skepticallibertarian.com/2013/02/25/remedial-economics-and-the-minimum-wage-for-presidents/ http://blog.skepticallibertarian.com/2013/02/25/remedial-eco...

frgtpsswrdlame 9y ago
...Does this guy actually know any economics? He's pretty much just googling and copy-pasting without any real understanding. Here's a better article The employment effect of the minimum wage is one of the most studied topics in all of economics. This report examines the most recent wave of this research – roughly since 2000 – to determine the best current estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to modest increases in the minimum wage. http://cepr.net/documents/publications/min-wage-2013-02.pdf http://cepr.net/documents/publications/min-wage-2013-02.pdf
- danblick 9y ago
  "But, probably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers." If this is the case, you'd think employers would have an incentive to raise wages on their own without requiring a law.
  - aianus 9y ago
    Some do, like Costco paying cashiers well over minimum wage to improve service and turnover.
adultSwim 9y ago
1.5 million American families, including 3m children, live on less than $2/person/day. Half the world lives on less than $2/day (in our buying power). This isn't by choice.