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In economic theory, this is what’s known as an efficiency wage. If you pay more, there’s more competition for your openings and you attract a better class of e

In economic theory, this is what’s known as an efficiency wage. If you pay more, there’s more competition for your openings and you attract a better class of employee. As other comments have pointed out, simply raising the minimum wage doesn’t accomplish the same thing. Instead, all those people who were marginal at $7-8/hour simply don’t get hired, and employers use automation or forego the opportunities that additional labor offers.

curyous 7y ago
If your business is only viable when paying people below what they need to live, then your business shouldn't exist. The fact that you can do that now is simply people in power exploiting the weak. Effectively what is happening is that those without power are subsidising the business by supplying them labour below cost. Generally in economics, making a business only viable through subsidies is a bad thing. It is much more efficient to give that labour to better businesses.
- vonmoltke 7y ago
  > Effectively what is happening is that those without power are subsidising the business by supplying them labour below cost. How do you define "cost"?
  - rocqua 7y ago
    The 'cost' of labour is the income required for such labor to maintain itself. I.e. living costs + healthcare costs + groceries & other expenses + a little saving. This is the base cost of a person, and thus the base cost of labour.
    - xamuel 7y ago
      You're just pushing the bubble around under the wallpaper: who defines "living costs" etc? A person can technically stay alive in extremely spartan conditions.
- dantheman 7y ago
  To provide a slight counter example: 1. Employee A produces 20 widgets an hour 2. Employee B produces 100 widgets an hour There is a wage where employee A costs more than the value they create. By mandating a wage that is higher than their productivity they are simply not hired, they do not get a chance to gain experience/knowledge, they loose the chance to be as productive as Employee B. The result is they are now on welfare/unemployed/etc. They lose the chance to get on the employment ladder. In general people improve so we you shouldn't be making the low wages for long. But what do we do about people who don't improve - either we push them out of the workforce or we subsidize their lifestyle to meet a minimum threshold.
  - SketchySeaBeast 7y ago
    > The result is they are now on welfare/unemployed/etc. They lose the chance to get on the employment ladder. > In general people improve so we you shouldn't be making the low wages for long. But what do we do about people who don't improve - either we push them out of the workforce or we subsidize their lifestyle to meet a minimum threshold. That's only assuming that the ladder is just that, and not a single rung. Time spent in most minimum wage jobs are hard to sell as giving you a leg up when moving into the higher professional strata.
- Frondo 7y ago
  The first sentence is the "how do we want society to work" and it is the right one. Businesses are a thing we've invented to shuffle resources around; there's currently enough resources for everyone in the world to be fat and happy (the world produces 3,500 calories per capita per day), it's just so very unequally distributed that 1 in 10 working Americans faces food insecurity, and 1 in 8 Americans overall lives in poverty. Anyone working a full-time job should be able to live comfortably, and if you can't work full-time, society should take care of you anyway.
mcguire 7y ago
For your second paragraph, that is a bit more complicated than simple economic theory might say. For one thing, someone has to cook the fries, sweep the back room, and help customers. Unless you invent insanely cheap and powerful automation or raise the wage to a point that it's uneconomic to open a new store (and please take the employers who say "if you raise the minimum wage, I'm going to take my marbles and go home" with a grain of salt), it's hard to actually get rid of minimum wage jobs. For another, remember that you will be injecting money into a sector of the economy that tends to spend it immediately. Minimum wage workers are likely to buy more fries and day care, causing more demand for other low-wage jobs.
- zaroth 7y ago
  But that’s exactly what happens. A marginally profitable store becomes an unprofitable store and shuts down. Fewer stores serving the same customers more efficiently are able to afford paying the remaining employees the new prevailing wage. There’s a lot of slack in how many customers per hour a team can serve in a fast food restaurant. Look at In N Out burger at lunch time versus the average Wendy’s. You can pay an experienced team 2x to serve 5x as many meals. But you’ll need 1/5th as many restaurants.

curyous 7y ago

If your business is only viable when paying people below what they need to live, then your business shouldn't exist. The fact that you can do that now is simply people in power exploiting the weak. Effectively what is happening is that those without power are subsidising the business by supplying them labour below cost. Generally in economics, making a business only viable through subsidies is a bad thing. It is much more efficient to give that labour to better businesses.

vonmoltke 7y ago
> Effectively what is happening is that those without power are subsidising the business by supplying them labour below cost. How do you define "cost"?
- rocqua 7y ago
  The 'cost' of labour is the income required for such labor to maintain itself. I.e. living costs + healthcare costs + groceries & other expenses + a little saving. This is the base cost of a person, and thus the base cost of labour.
  - xamuel 7y ago
    You're just pushing the bubble around under the wallpaper: who defines "living costs" etc? A person can technically stay alive in extremely spartan conditions.
dantheman 7y ago
To provide a slight counter example: 1. Employee A produces 20 widgets an hour 2. Employee B produces 100 widgets an hour There is a wage where employee A costs more than the value they create. By mandating a wage that is higher than their productivity they are simply not hired, they do not get a chance to gain experience/knowledge, they loose the chance to be as productive as Employee B. The result is they are now on welfare/unemployed/etc. They lose the chance to get on the employment ladder. In general people improve so we you shouldn't be making the low wages for long. But what do we do about people who don't improve - either we push them out of the workforce or we subsidize their lifestyle to meet a minimum threshold.
- SketchySeaBeast 7y ago
  > The result is they are now on welfare/unemployed/etc. They lose the chance to get on the employment ladder. > In general people improve so we you shouldn't be making the low wages for long. But what do we do about people who don't improve - either we push them out of the workforce or we subsidize their lifestyle to meet a minimum threshold. That's only assuming that the ladder is just that, and not a single rung. Time spent in most minimum wage jobs are hard to sell as giving you a leg up when moving into the higher professional strata.
Frondo 7y ago
The first sentence is the "how do we want society to work" and it is the right one. Businesses are a thing we've invented to shuffle resources around; there's currently enough resources for everyone in the world to be fat and happy (the world produces 3,500 calories per capita per day), it's just so very unequally distributed that 1 in 10 working Americans faces food insecurity, and 1 in 8 Americans overall lives in poverty. Anyone working a full-time job should be able to live comfortably, and if you can't work full-time, society should take care of you anyway.

mcguire 7y ago

For your second paragraph, that is a bit more complicated than simple economic theory might say. For one thing, someone has to cook the fries, sweep the back room, and help customers. Unless you invent insanely cheap and powerful automation or raise the wage to a point that it's uneconomic to open a new store (and please take the employers who say "if you raise the minimum wage, I'm going to take my marbles and go home" with a grain of salt), it's hard to actually get rid of minimum wage jobs. For another, remember that you will be injecting money into a sector of the economy that tends to spend it immediately. Minimum wage workers are likely to buy more fries and day care, causing more demand for other low-wage jobs.

zaroth 7y ago
But that’s exactly what happens. A marginally profitable store becomes an unprofitable store and shuts down. Fewer stores serving the same customers more efficiently are able to afford paying the remaining employees the new prevailing wage. There’s a lot of slack in how many customers per hour a team can serve in a fast food restaurant. Look at In N Out burger at lunch time versus the average Wendy’s. You can pay an experienced team 2x to serve 5x as many meals. But you’ll need 1/5th as many restaurants.