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However, governments these days provide a safety net to guard against poverty (because, based on Gilded Age history, the alternative is worse). Employees who ar

However, governments these days provide a safety net to guard against poverty (because, based on Gilded Age history, the alternative is worse). Employees who are paid substandard wages often simultaneously qualify for the government safety net as well. Probably in part for this reason and others, it was Franklin Roosevelts's opinion that businesses that cannot survive unless they paid substandard wages, should not be allowed to exist. (https://takingnote.blogs.nytimes.com/2014/03/07/f-d-r-makes-the-case-for-the-minimum-wage/ https://takingnote.blogs.nytimes.com/2014/03/07/f-d-r-makes-...).

mindcrime 8y ago
Probably in part for this reason and others, it was Franklin Roosevelts's opinion that businesses that cannot survive unless they paid substandard wages But the question isn't necessarily "survival of the business". It's whether or not the business can afford to bring more people into the fold, based on an arbitrary fixed-point in terms of how much they can pay. Maybe I'm running a company that's humming along, profitable but only marginally so, paying 100 workers some rates ranging from exactly minimum wage, up to $WHATEVER. Now I'd like to hire 5 more workers to do some fairly low value manual labor, but if I hire them at minimum wage, it pushes the company into the red. Where does that leave us? I can: 1. Hire the workers at less than "minimum wage". This creates the most jobs, but has the downside of paying people less than what some people feel that they "should* earn. 2. Hire fewer workers, but at minimum wage. That's fine for the 2.5 workers I do hire, but how does it benefit the 2.5 that I don't hire? 3. Do nothing. This benefits none of the 5 workers I might have hired. 4. Buy a machine that does the kind of work those workers would have done, don't hire anybody new, and then lay off 10 workers once the machine is up and running. 5. Reduce costs somewhere else in the business, to allow for hiring the 5 workers at minimum wage. This might or might not be viable, depending on lots of other details. 6. Hire the 5 workers at minimum wage, and raise prices, passing the increased cost on to my customers. This might work, but again, there are a lot of variables in play here. And this negatively impacts my customers. Obviously there's a lot of nuance to all this, but my point is that it's a bit Pollyanna'ish to think that jacking up the minimum wage results in a better outcome for everybody.
- soundwave106 8y ago
  From a business point of view I'm sure they would prefer no minimum wage at all. But there are obviously more factors to consider besides business. Obviously there is such a thing as too high of a minimum wage, that will severely dampen employment for lots of businesses. Jacking up the minimum wage in itself to an arbitrary value that is too high is pretty poor policy. But in the current state, too often, those on full time minimum wage jobs are still below poverty level, and thus qualify for many government benefits. In effect, my tax money contributes to your low-wage employee. From a personal perspective, I don't really like your option 1. I'd actually ideally want that person who is only worth sub-minimum wage to linger in the safety net for a while and learn skills that will make them more valuable than below-minimum wage level. Such would be a far better value for my tax dollars than subsidizing low-skill employment. Some economists feel that up to a certain point, minimum wage actually increases employment (in non-competitive labor markets, eg monopsonies) and increases aggregate demand enough to compensate for the cost effect (because low-income workers have a higher marginal propensity to consume, which would offset the cost effect). Of course, minimum wage is not the only anti-poverty tool out there and some economists feel it is too blunt. And the "correct" minimum wage probably varies hugely by location. As you say -- there are a lot of nuances. I'm just saying, there is more to this than just the employer perspective.

mindcrime 8y ago

Probably in part for this reason and others, it was Franklin Roosevelts's opinion that businesses that cannot survive unless they paid substandard wages But the question isn't necessarily "survival of the business". It's whether or not the business can afford to bring more people into the fold, based on an arbitrary fixed-point in terms of how much they can pay. Maybe I'm running a company that's humming along, profitable but only marginally so, paying 100 workers some rates ranging from exactly minimum wage, up to $WHATEVER. Now I'd like to hire 5 more workers to do some fairly low value manual labor, but if I hire them at minimum wage, it pushes the company into the red. Where does that leave us? I can: 1. Hire the workers at less than "minimum wage". This creates the most jobs, but has the downside of paying people less than what some people feel that they "should* earn. 2. Hire fewer workers, but at minimum wage. That's fine for the 2.5 workers I do hire, but how does it benefit the 2.5 that I don't hire? 3. Do nothing. This benefits none of the 5 workers I might have hired. 4. Buy a machine that does the kind of work those workers would have done, don't hire anybody new, and then lay off 10 workers once the machine is up and running. 5. Reduce costs somewhere else in the business, to allow for hiring the 5 workers at minimum wage. This might or might not be viable, depending on lots of other details. 6. Hire the 5 workers at minimum wage, and raise prices, passing the increased cost on to my customers. This might work, but again, there are a lot of variables in play here. And this negatively impacts my customers. Obviously there's a lot of nuance to all this, but my point is that it's a bit Pollyanna'ish to think that jacking up the minimum wage results in a better outcome for everybody.

soundwave106 8y ago
From a business point of view I'm sure they would prefer no minimum wage at all. But there are obviously more factors to consider besides business. Obviously there is such a thing as too high of a minimum wage, that will severely dampen employment for lots of businesses. Jacking up the minimum wage in itself to an arbitrary value that is too high is pretty poor policy. But in the current state, too often, those on full time minimum wage jobs are still below poverty level, and thus qualify for many government benefits. In effect, my tax money contributes to your low-wage employee. From a personal perspective, I don't really like your option 1. I'd actually ideally want that person who is only worth sub-minimum wage to linger in the safety net for a while and learn skills that will make them more valuable than below-minimum wage level. Such would be a far better value for my tax dollars than subsidizing low-skill employment. Some economists feel that up to a certain point, minimum wage actually increases employment (in non-competitive labor markets, eg monopsonies) and increases aggregate demand enough to compensate for the cost effect (because low-income workers have a higher marginal propensity to consume, which would offset the cost effect). Of course, minimum wage is not the only anti-poverty tool out there and some economists feel it is too blunt. And the "correct" minimum wage probably varies hugely by location. As you say -- there are a lot of nuances. I'm just saying, there is more to this than just the employer perspective.