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"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-v

"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.
- wallace_f 8y ago
  >jobs that are worth e.g. $25/hour but they only pay e.g. $5 [...] only happens when there is fairly high unemployment. That's not true though. Surplus value is produced all the time[1]. However, I agree with you about your conclusion on UBI 1-www.khanacademy.org/economics-finance-domain/microeconomics/consumer-producer-surplus
  - AnthonyMouse 8y ago
    > That's not true though. Surplus value is produced all the time What I mean is that the surplus isn't that large unless there is high unemployment. At low unemployment the marginal employer might pay a $24 wage producing $25 worth of value, not a $5 wage producing $25. In which case a) a low minimum wage does nothing because everybody already makes more, and b) you can't raise it to e.g. $30 or you're back to causing unemployment. At high unemployment the employer producing $25 worth of value and the employer producing $5.25 worth of value can both pay $5. A higher minimum wage extracts more from the first but prices the second out of the market and causes their employees to lose their jobs. Which is quite silly when there are known alternatives that don't do that.
    - wallace_f 8y ago
      >the surplus isn't that large unless there is high unemployment. At low unemployment the marginal employer might pay a $24 wage producing $25 worth of value That's still not true. You're confusing market price with value, and the more difficult to define term, worth. What's the water you drink valued at? What's its price? There's a huge difference. When you buy an expensive toy and spend more money on it than your water, it's not because it has more value than you living beyond 3 days, but it's because you are spending until your marginal value-add reaches equilibrium with marginal price. Same thing goes with jobs, which is just a business buying labor.
      - AnthonyMouse 8y ago
        > What's the water you drink valued at? What's its price? There's a huge difference. Because water is not particularly scarce. If it was scarce (more demand than supply), the equivalent of low unemployment, then its price would approach its value, i.e. be much higher.
vmlinuz 8y ago
Just to point out, for the record, that Hong Kong has had a minimum wage in operation for 7 years, and while of course there are people living in crappy conditions at the bottom end of society, "favela like living conditions" is a pretty loaded term...
- sonnyblarney 8y ago
  I think that 'favelas' are better than the conditions those at the bottom of the HK spectrum are living in [1] though I can only speak from journalism, only having viewed some of this from afar myself. At least favelas have some space, some basic amenities however hacky, some community, sunshine - and mobility at least during the day there are vast spaces for people to access including some of the world's best beaches. [1] https://www.theguardian.com/cities/gallery/2017/jun/07/boxed-life-inside-hong-kong-coffin-cubicles-cage-homes-in-pictures https://www.theguardian.com/cities/gallery/2017/jun/07/boxed...
njarboe 8y ago
I think why people support a minimum wage is complicated and varied. Great Britain did not pass a minimum wage until 1998. I don't it was full of favela like living conditions throughout the 20th century.
- sonnyblarney 8y ago
  "Great Britain did not pass a minimum wage until 1998. I don't it was full of favela like living conditions throughout the 20th century." They had other non-market social interventions long before that. And in early 20th century, many were living in favela like conditions.

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.

wallace_f 8y ago
>jobs that are worth e.g. $25/hour but they only pay e.g. $5 [...] only happens when there is fairly high unemployment. That's not true though. Surplus value is produced all the time[1]. However, I agree with you about your conclusion on UBI 1-www.khanacademy.org/economics-finance-domain/microeconomics/consumer-producer-surplus
- AnthonyMouse 8y ago
  > That's not true though. Surplus value is produced all the time What I mean is that the surplus isn't that large unless there is high unemployment. At low unemployment the marginal employer might pay a $24 wage producing $25 worth of value, not a $5 wage producing $25. In which case a) a low minimum wage does nothing because everybody already makes more, and b) you can't raise it to e.g. $30 or you're back to causing unemployment. At high unemployment the employer producing $25 worth of value and the employer producing $5.25 worth of value can both pay $5. A higher minimum wage extracts more from the first but prices the second out of the market and causes their employees to lose their jobs. Which is quite silly when there are known alternatives that don't do that.
  - wallace_f 8y ago
    >the surplus isn't that large unless there is high unemployment. At low unemployment the marginal employer might pay a $24 wage producing $25 worth of value That's still not true. You're confusing market price with value, and the more difficult to define term, worth. What's the water you drink valued at? What's its price? There's a huge difference. When you buy an expensive toy and spend more money on it than your water, it's not because it has more value than you living beyond 3 days, but it's because you are spending until your marginal value-add reaches equilibrium with marginal price. Same thing goes with jobs, which is just a business buying labor.
    - AnthonyMouse 8y ago
      > What's the water you drink valued at? What's its price? There's a huge difference. Because water is not particularly scarce. If it was scarce (more demand than supply), the equivalent of low unemployment, then its price would approach its value, i.e. be much higher.

vmlinuz 8y ago

Just to point out, for the record, that Hong Kong has had a minimum wage in operation for 7 years, and while of course there are people living in crappy conditions at the bottom end of society, "favela like living conditions" is a pretty loaded term...

sonnyblarney 8y ago
I think that 'favelas' are better than the conditions those at the bottom of the HK spectrum are living in [1] though I can only speak from journalism, only having viewed some of this from afar myself. At least favelas have some space, some basic amenities however hacky, some community, sunshine - and mobility at least during the day there are vast spaces for people to access including some of the world's best beaches. [1] https://www.theguardian.com/cities/gallery/2017/jun/07/boxed-life-inside-hong-kong-coffin-cubicles-cage-homes-in-pictures https://www.theguardian.com/cities/gallery/2017/jun/07/boxed...

njarboe 8y ago

I think why people support a minimum wage is complicated and varied. Great Britain did not pass a minimum wage until 1998. I don't it was full of favela like living conditions throughout the 20th century.

sonnyblarney 8y ago
"Great Britain did not pass a minimum wage until 1998. I don't it was full of favela like living conditions throughout the 20th century." They had other non-market social interventions long before that. And in early 20th century, many were living in favela like conditions.