6 ms·

The goal of a minimum wage is difficult to pin down, because laws are written by large groups of people with potentially differing motivations. That being said

The goal of a minimum wage is difficult to pin down, because laws are written by large groups of people with potentially differing motivations. That being said, I hope it isn't about a safety net. What a minimum wage really does is outlaw jobs that provide less value than the minimum wage (eg, if I have cleaning work that requires 1hr of labour and generates value of $10, it theoretically will not happen under a minimum wage regime of $11/hr). With this frame, there does seem to be much debate about the interaction between the market price for labour and the value-add of different work. People want to make decisions here and I suspect they don't consider have all the facts. Politics as usual :].

tjr225 8y ago
> I hope it isn't about a safety net. Why, exactly- assuming that the reason you hope minimum wages are enacted can be both for your reasons and to provide a safety net?
- another-one-off 8y ago
  Well, I don't believe that corporations should be required to create a social safety net. I think the government should do it directly.
  - tejtm 8y ago
    they would need a non negative tax on noncorporal entities to afford that too
  - CJefferson 8y ago
    I would say society produces a social safety bet, corporations aren't completely separate. They would like to be, but they are heavily supported, between society educating their workers, providing them basic health care, the emergency services, allowing their owners limited liability, the odd massive bail out, etc. Etc.
sonnyblarney 8y ago
"The goal of a minimum wage is difficult to pin down" In the most general sense it's straightforward. Your salary is a function of your economic power vis-a-vis your employer - and nothing else. That power is usually derived as a function of the necessity (i.e. value creation) and scarcity of your skills, and possibly some other non-market forces. Skilled workers have some modicum of leverage and can get a decent salary. Or have powerful guilds (like doctors). 'Capital class' will use their status as major asset holders, and non-market things like class, relationships, political patronage, lobbying, direct control of political systems etc. to manage their careers. But unskilled workers have a problem. Basically, if there was no minimum wage (or other social intervention), workers would be paid the absolute minimum necessary to survive, and economies to support those very low levels would develop (i.e. 'Dollar Store' would be the '25 cent store) and there'd be favela like living conditions just as they already exist in advanced economies like Hong Kong and almost advanced economies like Brazil. (Obviously, if there is 'welfare' than the amount of welfare comp. would set the floor on this, i.e. 'work for the government and do nothing' would be the 'lowest alternative' to paid work.) But especially without welfare, or non-market interventions in general ... that floor would be very, very low. Just take a trip outside of the 'rich world', it's easy to find workers working for 'a bowl of rice a day' whilst owners make considerably more, and by that I mean, there are definitely surpluses in the system to allow for higher salaries, but pure market power doesn't provide any impetus at all for employers to provide it. So - 'minimum wage' is a non-market intervention, much like a 'union without membership' to establish a kind of meta collective bargaining. Non market interventions are basically essential and they exist in one way or another in all advanced nations (either social services, welfare, min. wage. etc..). Should note that some argue that social intervention is correlated but not causal to wealth creation, but I disagree with this ... but that's for another discussion.
- AnthonyMouse 8y ago
  I think what you're saying is that there are jobs that are worth e.g. $25/hour but they only pay e.g. $5/hour because there are many people willing to do them for that price. But that only happens when there is fairly high unemployment. Otherwise there will be an employer with a job worth $25/hour who can't find an employee for $5/hour and will offer $6/hour because $19 in net yields is better than none. Then the original employer will have to offer $7 because they don't want to lose their productive capacity either, and so on until the wage rises enough that employers stop raising their wages even if it means they can't hire someone. For unskilled workers that doesn't really happen, because as a segment they typically have a high unemployment rate. But in that case you have a problem: Some of the employers paying $5 have employees who are worth $25, but some of them are actually only worth $5. Raise the minimum wage and the first group gets a raise while the second group loses their jobs. It's basically a tax on hiring low wage employees where the tax revenue goes to subsidize the employee's wages. Which like any tax may cause the work to fall below profitability and cease to exist. But is especially distorting because the burden falls exclusively on employers who hire low earning workers, which is a very narrow base that makes the "rate" quite high -- if they have to pay $12 instead of $4 it's effectively a 200% tax on the original wage. The better solution is a UBI, which is very similar on the "give lower income people some extra money" side but gets funded from broad based taxes so the effective rate doesn't get out of control like that.
jamescostian 8y ago
I know a lot of people who make minimum wage (e.g. fast food jobs). When minimum wages rise (like when they got to 7.25 in the US), they don't get fired, they get a raise. Just because minimum wages go up, doesn't mean humans are getting replaced. Instead, people often adjust their price limits (e.g. if cleaning was thought to generate $10, and then you don't clean for a while, you'll feel it warrants $11) and workers get better pay. The workers who do get fired due to financial constraints can now get a job elsewhere for more money. I agree that there is a breaking point and that point does vary by company, but that breaking point (for the vast majority of things) happens to be far greater than zero
- zeusk 8y ago
  > The workers who do get fired due to financial constraints can now get a job elsewhere for more money. or they drop away from employment entirely. https://fred.stlouisfed.org/series/EMRATIO https://fred.stlouisfed.org/series/EMRATIO
  - jamescostian 8y ago
    This is an excellent chart. Now match it up with the times when minimum wages increased - I used the following URL to figure out when those were: https://bebusinessed.com/history/history-of-minimum-wage/ https://bebusinessed.com/history/history-of-minimum-wage/ The big drop goes from June 2008 to October 2009 - which is indeed when we had not one but two increases to federal minimum wage. However, look at all the other times when we had minimum wages increase - even when employment decreased, there was a pretty quick recovery. I'd argue that 2008 and 2009 minimum wage increases also happened during a recession, and that they were only part of the contribution to the large drop. Am I missing something?
- perl4ever 8y ago
  "I know a lot of people who make minimum wage (e.g. fast food jobs). When minimum wages rise (like when they got to 7.25 in the US), they don't get fired, they get a raise." This reminds me of someone who once argued that schools cannot reduce their costs when the number of students that need educating declines, because e.g. you can't stop renting a building just because there are 10% fewer occupants. Is there a flaw in this sort of logic?
js8 8y ago
"The goal of a minimum wage is difficult to pin down" No, it isn't. The point of minimum wage is to outlaw jobs that cannot reasonably* feed people doing them. (*Subject to societal norms.) Existence of such "jobs" is immoral, and is not very different from slavery. If the society cannot pay enough for some work, it simply shouldn't be a job (and should not be called such). Despite what some economics schools try to make it, people are not apples. Apple doesn't care what is its market price. But a human almost always does. Survival of apple and human depends on their respective market price, but we as a society, I hope, value human survival more.
- sah2ed 8y ago
  > The point of minimum wage is to outlaw jobs that cannot reasonably feed people doing them. (Subject to societal norms.) OK, how does a society put a dollar figure on what a reasonable minimum wage should be, subject to societal norms, as you put it? Keep in mind that what an unskilled worker 'll end up with at the end of any given week will be: - agreed hourly rate x hours worked If the unskilled worker ends up with pneumonia for that week, s/he essentially gets nothing since no hours were worked, so a minimum wage doesn't really insure against inability to work due to circumstances beyond one's control. That's a separate issue on its own.
ukoki 8y ago
> eg, if I have cleaning work that requires 1hr of labour and generates value of $10, it theoretically will not happen under a minimum wage regime of $11/hr True, but I think the far more common scenario is this: I have cleaning work that generates value of $25/hr. Since the labor is unskilled and there is ample supply I can pay my workers the minimum wage and still find plenty of applicants. If there was no minimum wage I could pay them $5/hr and would still have plenty of applicants who would be even more impoverished.

tjr225 8y ago

> I hope it isn't about a safety net. Why, exactly- assuming that the reason you hope minimum wages are enacted can be both for your reasons and to provide a safety net?

another-one-off 8y ago
Well, I don't believe that corporations should be required to create a social safety net. I think the government should do it directly.
- tejtm 8y ago
  they would need a non negative tax on noncorporal entities to afford that too
- CJefferson 8y ago
  I would say society produces a social safety bet, corporations aren't completely separate. They would like to be, but they are heavily supported, between society educating their workers, providing them basic health care, the emergency services, allowing their owners limited liability, the odd massive bail out, etc. Etc.

sonnyblarney 8y ago

"The goal of a minimum wage is difficult to pin down" In the most general sense it's straightforward. Your salary is a function of your economic power vis-a-vis your employer - and nothing else. That power is usually derived as a function of the necessity (i.e. value creation) and scarcity of your skills, and possibly some other non-market forces. Skilled workers have some modicum of leverage and can get a decent salary. Or have powerful guilds (like doctors). 'Capital class' will use their status as major asset holders, and non-market things like class, relationships, political patronage, lobbying, direct control of political systems etc. to manage their careers. But unskilled workers have a problem. Basically, if there was no minimum wage (or other social intervention), workers would be paid the absolute minimum necessary to survive, and economies to support those very low levels would develop (i.e. 'Dollar Store' would be the '25 cent store) and there'd be favela like living conditions just as they already exist in advanced economies like Hong Kong and almost advanced economies like Brazil. (Obviously, if there is 'welfare' than the amount of welfare comp. would set the floor on this, i.e. 'work for the government and do nothing' would be the 'lowest alternative' to paid work.) But especially without welfare, or non-market interventions in general ... that floor would be very, very low. Just take a trip outside of the 'rich world', it's easy to find workers working for 'a bowl of rice a day' whilst owners make considerably more, and by that I mean, there are definitely surpluses in the system to allow for higher salaries, but pure market power doesn't provide any impetus at all for employers to provide it. So - 'minimum wage' is a non-market intervention, much like a 'union without membership' to establish a kind of meta collective bargaining. Non market interventions are basically essential and they exist in one way or another in all advanced nations (either social services, welfare, min. wage. etc..). Should note that some argue that social intervention is correlated but not causal to wealth creation, but I disagree with this ... but that's for another discussion.

AnthonyMouse 8y ago
I think what you're saying is that there are jobs that are worth e.g. $25/hour but they only pay e.g. $5/hour because there are many people willing to do them for that price. But that only happens when there is fairly high unemployment. Otherwise there will be an employer with a job worth $25/hour who can't find an employee for $5/hour and will offer $6/hour because $19 in net yields is better than none. Then the original employer will have to offer $7 because they don't want to lose their productive capacity either, and so on until the wage rises enough that employers stop raising their wages even if it means they can't hire someone. For unskilled workers that doesn't really happen, because as a segment they typically have a high unemployment rate. But in that case you have a problem: Some of the employers paying $5 have employees who are worth $25, but some of them are actually only worth $5. Raise the minimum wage and the first group gets a raise while the second group loses their jobs. It's basically a tax on hiring low wage employees where the tax revenue goes to subsidize the employee's wages. Which like any tax may cause the work to fall below profitability and cease to exist. But is especially distorting because the burden falls exclusively on employers who hire low earning workers, which is a very narrow base that makes the "rate" quite high -- if they have to pay $12 instead of $4 it's effectively a 200% tax on the original wage. The better solution is a UBI, which is very similar on the "give lower income people some extra money" side but gets funded from broad based taxes so the effective rate doesn't get out of control like that.

jamescostian 8y ago

I know a lot of people who make minimum wage (e.g. fast food jobs). When minimum wages rise (like when they got to 7.25 in the US), they don't get fired, they get a raise. Just because minimum wages go up, doesn't mean humans are getting replaced. Instead, people often adjust their price limits (e.g. if cleaning was thought to generate $10, and then you don't clean for a while, you'll feel it warrants $11) and workers get better pay. The workers who do get fired due to financial constraints can now get a job elsewhere for more money. I agree that there is a breaking point and that point does vary by company, but that breaking point (for the vast majority of things) happens to be far greater than zero

zeusk 8y ago
> The workers who do get fired due to financial constraints can now get a job elsewhere for more money. or they drop away from employment entirely. https://fred.stlouisfed.org/series/EMRATIO https://fred.stlouisfed.org/series/EMRATIO
- jamescostian 8y ago
  This is an excellent chart. Now match it up with the times when minimum wages increased - I used the following URL to figure out when those were: https://bebusinessed.com/history/history-of-minimum-wage/ https://bebusinessed.com/history/history-of-minimum-wage/ The big drop goes from June 2008 to October 2009 - which is indeed when we had not one but two increases to federal minimum wage. However, look at all the other times when we had minimum wages increase - even when employment decreased, there was a pretty quick recovery. I'd argue that 2008 and 2009 minimum wage increases also happened during a recession, and that they were only part of the contribution to the large drop. Am I missing something?
perl4ever 8y ago
"I know a lot of people who make minimum wage (e.g. fast food jobs). When minimum wages rise (like when they got to 7.25 in the US), they don't get fired, they get a raise." This reminds me of someone who once argued that schools cannot reduce their costs when the number of students that need educating declines, because e.g. you can't stop renting a building just because there are 10% fewer occupants. Is there a flaw in this sort of logic?

js8 8y ago

"The goal of a minimum wage is difficult to pin down" No, it isn't. The point of minimum wage is to outlaw jobs that cannot reasonably* feed people doing them. (*Subject to societal norms.) Existence of such "jobs" is immoral, and is not very different from slavery. If the society cannot pay enough for some work, it simply shouldn't be a job (and should not be called such). Despite what some economics schools try to make it, people are not apples. Apple doesn't care what is its market price. But a human almost always does. Survival of apple and human depends on their respective market price, but we as a society, I hope, value human survival more.

sah2ed 8y ago
> The point of minimum wage is to outlaw jobs that cannot reasonably feed people doing them. (Subject to societal norms.) OK, how does a society put a dollar figure on what a reasonable minimum wage should be, subject to societal norms, as you put it? Keep in mind that what an unskilled worker 'll end up with at the end of any given week will be: - agreed hourly rate x hours worked If the unskilled worker ends up with pneumonia for that week, s/he essentially gets nothing since no hours were worked, so a minimum wage doesn't really insure against inability to work due to circumstances beyond one's control. That's a separate issue on its own.

ukoki 8y ago

> eg, if I have cleaning work that requires 1hr of labour and generates value of $10, it theoretically will not happen under a minimum wage regime of $11/hr True, but I think the far more common scenario is this: I have cleaning work that generates value of $25/hr. Since the labor is unskilled and there is ample supply I can pay my workers the minimum wage and still find plenty of applicants. If there was no minimum wage I could pay them $5/hr and would still have plenty of applicants who would be even more impoverished.