6 ms·

The USA went 149 years, from 1789 to 1938, with no federal minimum wage – so yes, America has gone longer without any hike than just than the 10 years since 200

by gojomo 7y ago

The USA went 149 years, from 1789 to 1938, with no federal minimum wage – so yes, America has gone longer without any hike than just than the 10 years since 2009. Many economic experts, ignored by this article, consider no minimum wage to be the optimal level.

ozzyman700 7y ago
optimal level to achieve what goal?
- whatshisface 7y ago
  The best balance between unemployment and low pay, so that the most is paid to workers overall.
  - SubiculumCode 7y ago
    Do you mean that you'd get low unemployment, but most workers get paid starvation wages, but t a few most valuable workers get much larger salaries? Poverty was absolutely horrible before minimum wage for most workers. I can't help but think that such policies you are proposing are historical revisionism at its worst.
    - whatshisface 7y ago
      The sum of all the money earned by all workers without a minimum wage is higher than with one. With a minimum wage you have one fry cook in your neighborhood making $100/hr and everyone else unemployed, without one you have 100 people making $2/hr each. More total money is given out in the second case, although I guess you can decide you'd prefer having the rich few if that's what you want (economics doesn't judge which outcome is better, it just tells you which outcome you will get). Edit: numbers made up to illustrate the claim, not to provide evidence. This claim is a widely accepted principle that you can find in any introductory econ textbook.
      - Goronmon 7y ago
        Decrease that $100/hr to $10/hr and increase the 100 people making $2/hr to 1 million people making $2 an hour, that way you go from $10/hr in earning potential to $2million/hr. Just by getting rid of the minimum wage! I can see why the minimum wage is such a bad idea, you are totally correct.
        whatshisface 7y ago
        Your example, although meant to show that the point was silly, can still serve to illustrate it. Imagine that for the vast majority of people, widgets are worth $3 each, but for one person they are worth $10 each (because he really likes them). Further, suppose that a widget takes an hour to make. With a minimum wage, one person can make $10/hour serving the one person who want widgets that badly, but without one it becomes profitable to open up an entire new market sector of mass-produced widgets for the common man. You can change the numbers and the details, but the general principles of microeconomics will prefer the free market every time.
        derekp7 7y ago
        To carry that example further, you have many people that are willing to pay $3 per widget. But there are barriers to opening a widget factory, such that there is only one widget factory in town. And the owner of that factory only wants to pay worker 50 cents per hour, selling the widgets produced for $3.00. Now total money paid to workers is much lower than if minimum wage is set to $3.00 So the moral of the story is minimum wage should be raised to the point where total employment is still at an acceptable level.
- rchaud 7y ago
  Presumably where output is maximized on the production possibility curve [0], i.e. a purely theoretical petri dish where every individual, corporation and government's actions can be neatly quantified in a 2-dimensional chart. [0]: https://www.tutor2u.net/economics/reference/production-possibility-frontier https://www.tutor2u.net/economics/reference/production-possi...
  - clairity 7y ago
    and where information is symmetrical, so that each rational actor always makes the perfectly optimal economic choice. give the rugged individual all the relevant information (wages/benefits, available jobs, hidden risks, corporate strategy, market dynamics, etc.), and then maybe we can talk about labor market deregulation.
- elil17 7y ago
  People who want no minimum wage are usually people who think the goal is to increase the GDP as much as possible or to lower unemployment as much as possible. No minimum wage would definitely increase GDP, I don’t think there’s a lot of debate on that, but there really isn’t solid evidence or theory to know what effect it would have on unemployment. (1) The other goal, the one most focused on by people who support increasing the minimum wage, is ensuring that minimum wage earners are making enough that they have a decent quality of life and don’t also need government benefits. (1): It depends on the slopes of the demand and supply curves for labor and measuring those is really hard. People who want to raise the minimum wage usually claim that the demand curve for labor is relatively flat. People who want to get rid of the minimum wage usually claim that the demand curve is steeper.
  - bencoder 7y ago
    The data is too noisy with boom & busts and inflation to really say, but it certainly doesn't /look/ like it makes a difference to employment rates: https://imgur.com/a/KtC7BD0 https://imgur.com/a/KtC7BD0
  - slavik81 7y ago
    My concern around the minimum wage is around employment. A high minimum wage guarantees that you will either be paid well or paid nothing. If the point of the policy is that everyone should receive a living wage, then half the guarantee is missing. Whether a job guarantee would be good idea, I don't know. But a good policy needs to be comprehensive. It shouldn't let people slip through the cracks.
FussyZeus 7y ago
> The USA went 149 years, from 1789 to 1938, with no federal minimum wage – so yes, America has gone longer without any hike than just than the 10 years since 2009. You're (likely deliberately) omitting a ton of context as well as presenting a bad faith argument in general. Of course there were no minimum wage increases prior to the minimum wage. I also suspect there was no highway funding increases prior to the New Deal, does that in turn mean we shouldn't fund infrastructure now? > Many economic experts, ignored by this article, consider no minimum wage to be the optimal level. I'm sure they do, economic experts are the only ones who still think trickle-down economics is a good idea. Our economy is exploding, and our current problems are far more social, so maybe we should be listening to the sociologists and put the economy on the back burner for right now?
- devinl 7y ago
  Do economic experts still think trickle down/supply side economics are a good idea? It seemed to be a controversial issue among economists in the 70s and 80s. From what I could find, the modern consensus among economists is that tax cuts for the wealthy isn't effective at increasing GDP. (see https://en.m.wikipedia.org/wiki/Supply-side_economics https://en.m.wikipedia.org/wiki/Supply-side_economics http://www.igmchicago.org/surveys/tax-reform-2 http://www.igmchicago.org/surveys/tax-reform-2 http://www.igmchicago.org/surveys/tax-reforms http://www.igmchicago.org/surveys/tax-reforms )
  - tialaramex 7y ago
    The kind of experts gojomo is thinking of are still resolutely convinced that they're correct, and no facts will change their mind about that. Like the people the tobacco lobby used to wheel out to tell you that they were confident smoking was actually not dangerous, or the same handful presented as offering an "alternative" explanation for global climate change, they are fiercely resistant to the obvious conclusion from the available facts, and I don't really need to care whether that's because they're they're actually paid not to look at the obvious or they're not smart enough to see it. Not trickle down, but Laffer (the guy the Laffer curve is named after) worked for Donald Trump in his 2016 campaign, and currently blames Barack Obama for the Great Recession. Laffer's curve is 100% real, it's also 100% irrelevant to real world economics. It's as though after explaining about relativity and why it's impossible to accelerate an object with mass to the speed of light, a physicist turned around and told you that therefore they are confident that it's impossible to move at more than a walking pace and so Olympic sprinters don't exist. And then an entire political party pretended to believe them because it would make very wealthy people even richer. The analogy breaks down there actually I guess. Also the part where loads of people die in miserable poverty, that's not really in the physicist analogy either.
JaimeThompson 7y ago
Do said economic experts take into account the societal costs of that position? The economically "correct" position isn't always the absolute best thing for society when the people have access to both the voting booth and weapons to effect changes. I think that sometimes some people forget that actual people with families are impacted by their decisions.
- Reedx 7y ago
  But there's another thing people are forgetting about: entry level positions. Consider a case like grocery store baggers. A position which has been devastated because it's become too expensive to justify, even though it's something everyone would still like to have. Stuff like that are great first jobs for teenagers and functions as a low-risk way for them to get introduced to the work force. Learn about money, working with customers, getting to work on time, etc. Useful skills down the line and gives them some spending money in the meantime.
- zaroth 7y ago
  I think you misunderstand the position of experts who believe a minimum wage is not “optimal”. It’s never been easier to discover and apply for new jobs. That is to say, the transaction costs of changing jobs has never been lower. In a competitive market with low transaction costs of changing jobs, an employee will achieve their highest wage on the open market based on their skill set. Based on this theory a minimum wage sets a minimum skill level or value proposition a worker must present in order to be entitled to employment. Anyone who performs below that level is denied a job by the Federal minimum value proposition law. The higher the minimum value proposition of a worker, the higher functioning / more productive individual workers must be, and the fewer people need to be employed. So the theory is that a minimum value regulation directly hurts the people who are capable of providing the least value. Is it the best thing for society for the least productive workers to be legally unemployable? Of course this glosses over all the inefficiencies and particularly the power imbalances that exist most dramatically at the jobs with the least skilled workers. Companies are profitable because they can pay their employees dramatically less than the value that they produce for the company. Usually that value is a result of the infrastructure and intellectual property of the company multiplying the productivity of the worker to create the added value. But sometimes it’s simply on the backs of the workers being underpaid for the value they are personally creating. Personally I think the minimum wage is low enough at this point where the overhead for just having the employee dominates the total cost of payroll. If there’s a cost saving to be had, it’s in lowering that overhead, not lowering payroll. This typically is achieved through reducing employment regulations in general, of which minimum wage/value is just one of hundreds or perhaps thousands.
guelo 7y ago
Your argument from authority doesn't hold. Many other economic experts consider a wage floor to be good policy. It is not a settled area of economics.
- ben509 7y ago
  The trustworthy experts are the self-interested ones. The sugar producers, for instance, have a price floor for the goods they supply. But they have experts who know the danger of price floors, so they made sure their deal requires that the government purchase unsold sugar. And, of course, even that doesn't prevent sugar consumers from using alternatives, hence the number of products that replace sugar with high-fructose corn syrup.
- gojomo 7y ago
  I agree it's unsettled! My complaint is that the article treats the matter otherwise: only referring to "experts" who think a rising wage floor is overdue, and only quoting those with pro-price-control beliefs (like representatives of the large-labor-union-funded EPI). That's in keeping with the article's myopic, misleading, pandering headline that ignores over a century of pre-1938 precedent.
rchaud 7y ago
Can you link to some of this research? I'd like to see the experimental conditions where a no minimum wage system exists harmoniously with a rising gas prices, tuition costs, housing and food costs.
- mortehu 7y ago
  Although it's not an experimental condition, the Nordic countries have no minimum wage.
  - rchaud 7y ago
    They can do that because unions are part of the labour market structure, and can do collective bargaining directly with the employers, instead of leaving the government to impose a one-size fits all minimum wage [0]. https://www.fastcompany.com/3052798/can-fast-food-work-ever-be-a-decent-job-these-swedish-mcdonalds-workers-say-yes https://www.fastcompany.com/3052798/can-fast-food-work-ever-... That to me is the right way to approach this (advocate for workers' interests, but leave the government out of it), but if that was ever considered in the US, a good chunk of the HN readership would go apoplectic and beg for the state to intervene.
- gojomo 7y ago
  See sibling reply at: https://news.ycombinator.com/item?id=20227574 https://news.ycombinator.com/item?id=20227574
zzzeek 7y ago
"many" people disagree
nerdponx 7y ago
Many economic experts, ignored by this article, consider no minimum wage to be the optimal level. Citation needed. It's only optimal (and in a limited sense at that) in the presence of a host of unrealistic assumptions.
- gojomo 7y ago
  A good overview of the case against minimum wages based on economic research & reasoning is this Cato Institute summary paper, "The Negative Effects of Minimum Wage Laws": https://object.cato.org/pubs/pas/PA701.pdf https://object.cato.org/pubs/pas/PA701.pdf (This understanding was popular enough in 1987 that even the NYTimes endorsed it in an unsigned, editorial-board opinion piece – that meaning "this is the consensus opinion of the paper's editors": https://www.nytimes.com/1987/01/14/opinion/the-right-minimum-wage-0.00.html https://www.nytimes.com/1987/01/14/opinion/the-right-minimum... )
  - nerdponx 7y ago
    Fair enough, although the Cato report glosses over or ignores a lot of interesting subtleties in its cited sources (e.g. the FRB Atlanta report [15]). For arguments that minimum wages reduce employment, I'd sooner trust the various NBER working papers on the subject: https://www.nber.org/papers/w12663 https://www.nber.org/papers/w12663 https://www.nber.org/papers/w23532 https://www.nber.org/papers/w23532 https://www.nber.org/papers/w20724 https://www.nber.org/papers/w20724 Does any of that research suggest that a zero minimum wage is optimal in some sense? No. But I will grant you that raising the minimum wage might not do what we hope it would do.
olliej 7y ago
Many economics experts also recognize slavery as being ideal (after all that’s the only reason the southern states went to war with America)
inscionent 7y ago
So.... about slavery? This is just a bad argument that dismisses the historical context and structure of the US labor market and continues to ignore the on going inequality of labor.

by gojomo 7y ago

ozzyman700 7y ago

optimal level to achieve what goal?

whatshisface 7y ago
The best balance between unemployment and low pay, so that the most is paid to workers overall.
- SubiculumCode 7y ago
  Do you mean that you'd get low unemployment, but most workers get paid starvation wages, but t a few most valuable workers get much larger salaries? Poverty was absolutely horrible before minimum wage for most workers. I can't help but think that such policies you are proposing are historical revisionism at its worst.
  - whatshisface 7y ago
    The sum of all the money earned by all workers without a minimum wage is higher than with one. With a minimum wage you have one fry cook in your neighborhood making $100/hr and everyone else unemployed, without one you have 100 people making $2/hr each. More total money is given out in the second case, although I guess you can decide you'd prefer having the rich few if that's what you want (economics doesn't judge which outcome is better, it just tells you which outcome you will get). Edit: numbers made up to illustrate the claim, not to provide evidence. This claim is a widely accepted principle that you can find in any introductory econ textbook.
    - Goronmon 7y ago
      Decrease that $100/hr to $10/hr and increase the 100 people making $2/hr to 1 million people making $2 an hour, that way you go from $10/hr in earning potential to $2million/hr. Just by getting rid of the minimum wage! I can see why the minimum wage is such a bad idea, you are totally correct.
      - whatshisface 7y ago
        Your example, although meant to show that the point was silly, can still serve to illustrate it. Imagine that for the vast majority of people, widgets are worth $3 each, but for one person they are worth $10 each (because he really likes them). Further, suppose that a widget takes an hour to make. With a minimum wage, one person can make $10/hour serving the one person who want widgets that badly, but without one it becomes profitable to open up an entire new market sector of mass-produced widgets for the common man. You can change the numbers and the details, but the general principles of microeconomics will prefer the free market every time.
        derekp7 7y ago
        To carry that example further, you have many people that are willing to pay $3 per widget. But there are barriers to opening a widget factory, such that there is only one widget factory in town. And the owner of that factory only wants to pay worker 50 cents per hour, selling the widgets produced for $3.00. Now total money paid to workers is much lower than if minimum wage is set to $3.00 So the moral of the story is minimum wage should be raised to the point where total employment is still at an acceptable level.
rchaud 7y ago
Presumably where output is maximized on the production possibility curve [0], i.e. a purely theoretical petri dish where every individual, corporation and government's actions can be neatly quantified in a 2-dimensional chart. [0]: https://www.tutor2u.net/economics/reference/production-possibility-frontier https://www.tutor2u.net/economics/reference/production-possi...
- clairity 7y ago
  and where information is symmetrical, so that each rational actor always makes the perfectly optimal economic choice. give the rugged individual all the relevant information (wages/benefits, available jobs, hidden risks, corporate strategy, market dynamics, etc.), and then maybe we can talk about labor market deregulation.
elil17 7y ago
People who want no minimum wage are usually people who think the goal is to increase the GDP as much as possible or to lower unemployment as much as possible. No minimum wage would definitely increase GDP, I don’t think there’s a lot of debate on that, but there really isn’t solid evidence or theory to know what effect it would have on unemployment. (1) The other goal, the one most focused on by people who support increasing the minimum wage, is ensuring that minimum wage earners are making enough that they have a decent quality of life and don’t also need government benefits. (1): It depends on the slopes of the demand and supply curves for labor and measuring those is really hard. People who want to raise the minimum wage usually claim that the demand curve for labor is relatively flat. People who want to get rid of the minimum wage usually claim that the demand curve is steeper.
- bencoder 7y ago
  The data is too noisy with boom & busts and inflation to really say, but it certainly doesn't /look/ like it makes a difference to employment rates: https://imgur.com/a/KtC7BD0 https://imgur.com/a/KtC7BD0
- slavik81 7y ago
  My concern around the minimum wage is around employment. A high minimum wage guarantees that you will either be paid well or paid nothing. If the point of the policy is that everyone should receive a living wage, then half the guarantee is missing. Whether a job guarantee would be good idea, I don't know. But a good policy needs to be comprehensive. It shouldn't let people slip through the cracks.

FussyZeus 7y ago

> The USA went 149 years, from 1789 to 1938, with no federal minimum wage – so yes, America has gone longer without any hike than just than the 10 years since 2009. You're (likely deliberately) omitting a ton of context as well as presenting a bad faith argument in general. Of course there were no minimum wage increases prior to the minimum wage. I also suspect there was no highway funding increases prior to the New Deal, does that in turn mean we shouldn't fund infrastructure now? > Many economic experts, ignored by this article, consider no minimum wage to be the optimal level. I'm sure they do, economic experts are the only ones who still think trickle-down economics is a good idea. Our economy is exploding, and our current problems are far more social, so maybe we should be listening to the sociologists and put the economy on the back burner for right now?

devinl 7y ago
Do economic experts still think trickle down/supply side economics are a good idea? It seemed to be a controversial issue among economists in the 70s and 80s. From what I could find, the modern consensus among economists is that tax cuts for the wealthy isn't effective at increasing GDP. (see https://en.m.wikipedia.org/wiki/Supply-side_economics https://en.m.wikipedia.org/wiki/Supply-side_economics http://www.igmchicago.org/surveys/tax-reform-2 http://www.igmchicago.org/surveys/tax-reform-2 http://www.igmchicago.org/surveys/tax-reforms http://www.igmchicago.org/surveys/tax-reforms )
- tialaramex 7y ago
  The kind of experts gojomo is thinking of are still resolutely convinced that they're correct, and no facts will change their mind about that. Like the people the tobacco lobby used to wheel out to tell you that they were confident smoking was actually not dangerous, or the same handful presented as offering an "alternative" explanation for global climate change, they are fiercely resistant to the obvious conclusion from the available facts, and I don't really need to care whether that's because they're they're actually paid not to look at the obvious or they're not smart enough to see it. Not trickle down, but Laffer (the guy the Laffer curve is named after) worked for Donald Trump in his 2016 campaign, and currently blames Barack Obama for the Great Recession. Laffer's curve is 100% real, it's also 100% irrelevant to real world economics. It's as though after explaining about relativity and why it's impossible to accelerate an object with mass to the speed of light, a physicist turned around and told you that therefore they are confident that it's impossible to move at more than a walking pace and so Olympic sprinters don't exist. And then an entire political party pretended to believe them because it would make very wealthy people even richer. The analogy breaks down there actually I guess. Also the part where loads of people die in miserable poverty, that's not really in the physicist analogy either.

JaimeThompson 7y ago

Do said economic experts take into account the societal costs of that position? The economically "correct" position isn't always the absolute best thing for society when the people have access to both the voting booth and weapons to effect changes. I think that sometimes some people forget that actual people with families are impacted by their decisions.

Reedx 7y ago
But there's another thing people are forgetting about: entry level positions. Consider a case like grocery store baggers. A position which has been devastated because it's become too expensive to justify, even though it's something everyone would still like to have. Stuff like that are great first jobs for teenagers and functions as a low-risk way for them to get introduced to the work force. Learn about money, working with customers, getting to work on time, etc. Useful skills down the line and gives them some spending money in the meantime.
zaroth 7y ago
I think you misunderstand the position of experts who believe a minimum wage is not “optimal”. It’s never been easier to discover and apply for new jobs. That is to say, the transaction costs of changing jobs has never been lower. In a competitive market with low transaction costs of changing jobs, an employee will achieve their highest wage on the open market based on their skill set. Based on this theory a minimum wage sets a minimum skill level or value proposition a worker must present in order to be entitled to employment. Anyone who performs below that level is denied a job by the Federal minimum value proposition law. The higher the minimum value proposition of a worker, the higher functioning / more productive individual workers must be, and the fewer people need to be employed. So the theory is that a minimum value regulation directly hurts the people who are capable of providing the least value. Is it the best thing for society for the least productive workers to be legally unemployable? Of course this glosses over all the inefficiencies and particularly the power imbalances that exist most dramatically at the jobs with the least skilled workers. Companies are profitable because they can pay their employees dramatically less than the value that they produce for the company. Usually that value is a result of the infrastructure and intellectual property of the company multiplying the productivity of the worker to create the added value. But sometimes it’s simply on the backs of the workers being underpaid for the value they are personally creating. Personally I think the minimum wage is low enough at this point where the overhead for just having the employee dominates the total cost of payroll. If there’s a cost saving to be had, it’s in lowering that overhead, not lowering payroll. This typically is achieved through reducing employment regulations in general, of which minimum wage/value is just one of hundreds or perhaps thousands.

guelo 7y ago

Your argument from authority doesn't hold. Many other economic experts consider a wage floor to be good policy. It is not a settled area of economics.

ben509 7y ago
The trustworthy experts are the self-interested ones. The sugar producers, for instance, have a price floor for the goods they supply. But they have experts who know the danger of price floors, so they made sure their deal requires that the government purchase unsold sugar. And, of course, even that doesn't prevent sugar consumers from using alternatives, hence the number of products that replace sugar with high-fructose corn syrup.
gojomo 7y ago
I agree it's unsettled! My complaint is that the article treats the matter otherwise: only referring to "experts" who think a rising wage floor is overdue, and only quoting those with pro-price-control beliefs (like representatives of the large-labor-union-funded EPI). That's in keeping with the article's myopic, misleading, pandering headline that ignores over a century of pre-1938 precedent.

rchaud 7y ago

Can you link to some of this research? I'd like to see the experimental conditions where a no minimum wage system exists harmoniously with a rising gas prices, tuition costs, housing and food costs.

mortehu 7y ago
Although it's not an experimental condition, the Nordic countries have no minimum wage.
- rchaud 7y ago
  They can do that because unions are part of the labour market structure, and can do collective bargaining directly with the employers, instead of leaving the government to impose a one-size fits all minimum wage [0]. https://www.fastcompany.com/3052798/can-fast-food-work-ever-be-a-decent-job-these-swedish-mcdonalds-workers-say-yes https://www.fastcompany.com/3052798/can-fast-food-work-ever-... That to me is the right way to approach this (advocate for workers' interests, but leave the government out of it), but if that was ever considered in the US, a good chunk of the HN readership would go apoplectic and beg for the state to intervene.
gojomo 7y ago
See sibling reply at: https://news.ycombinator.com/item?id=20227574 https://news.ycombinator.com/item?id=20227574

zzzeek 7y ago

"many" people disagree

nerdponx 7y ago

Many economic experts, ignored by this article, consider no minimum wage to be the optimal level. Citation needed. It's only optimal (and in a limited sense at that) in the presence of a host of unrealistic assumptions.

gojomo 7y ago
A good overview of the case against minimum wages based on economic research & reasoning is this Cato Institute summary paper, "The Negative Effects of Minimum Wage Laws": https://object.cato.org/pubs/pas/PA701.pdf https://object.cato.org/pubs/pas/PA701.pdf (This understanding was popular enough in 1987 that even the NYTimes endorsed it in an unsigned, editorial-board opinion piece – that meaning "this is the consensus opinion of the paper's editors": https://www.nytimes.com/1987/01/14/opinion/the-right-minimum-wage-0.00.html https://www.nytimes.com/1987/01/14/opinion/the-right-minimum... )
- nerdponx 7y ago
  Fair enough, although the Cato report glosses over or ignores a lot of interesting subtleties in its cited sources (e.g. the FRB Atlanta report [15]). For arguments that minimum wages reduce employment, I'd sooner trust the various NBER working papers on the subject: https://www.nber.org/papers/w12663 https://www.nber.org/papers/w12663 https://www.nber.org/papers/w23532 https://www.nber.org/papers/w23532 https://www.nber.org/papers/w20724 https://www.nber.org/papers/w20724 Does any of that research suggest that a zero minimum wage is optimal in some sense? No. But I will grant you that raising the minimum wage might not do what we hope it would do.

olliej 7y ago

Many economics experts also recognize slavery as being ideal (after all that’s the only reason the southern states went to war with America)

inscionent 7y ago

So.... about slavery? This is just a bad argument that dismisses the historical context and structure of the US labor market and continues to ignore the on going inequality of labor.