39 ms·

What harm do minimum wages do?

• sparker72678 6y ago
  I know research is hard, and these issues are fraught with complexities and challenges in acquiring data, but it still boggles my mind just how many macro economic theories don't have strong empirical data to support them.
  • rtkwe 6y ago
    It's because it's trying to create simple formulas for a complex system with people involved at all levels.
  • coldtea 6y ago
    What if the strong empirical data were against the interests of the rich and powerful? They couldn't afford to base policy on those then!
    • deleted 6y ago
      [deleted]
  • gridlockd 6y ago
    How much empirical data do you need to convince yourself that jumping out of a window with an umbrella is unsafe? Everybody can understand that employing people at a loss is unsustainable and that the goal of employers is to make a profit. I think there's plenty of empirical data for that, the rest just follows logically. Of course there's bound to be a narrow range where you can move some profits into wages and you have neither rising prices nor unemployment, but that number is going to be different for every location, every sector and every business. I wouldn't trust politicians to come up with a magic number here.
    • CoolGuySteve 6y ago
      > How much empirical data do you need to convince yourself that jumping out of a window with an umbrella is unsafe? A non-zero amount, at least: https://www.youtube.com/watch?v=FBN3xfGrx_U https://www.youtube.com/watch?v=FBN3xfGrx_U
      • gridlockd 6y ago
        Maybe he was just holding it wrong.
  • fragsworth 6y ago
    It is basically impossible to produce real empirical evidence in economics. You can look at data/correlations, and try to reason about cause and effect. But real empirical evidence requires you use the scientific method to test hypotheses (ideally done in a double-blind way), which is impossible for economists to do even if we had a national desire to do it, because the test itself would impact reality for its participants too much. It's similar to the "observer effect" in physics, but on a massive scale. At best, I think you can create mathematical simulations built on certain assumptions about reality. Those simulations depend on how well the assumptions model reality, and very easy to miss an important detail.
    • ipnon 6y ago
      AI researchers are important for this reason. Super intelligence, even if limited to simulations, can find results outside of the mainstream that are more optimal than the economic convention.[1] [1] https://blog.einstein.ai/the-ai-economist/ https://blog.einstein.ai/the-ai-economist/
• gjulianm 6y ago
  > Textbooks state that, in the absence of a minimum wage, a worker is paid his “marginal product of labour”, which means the value of what he produces. > Just as a monopolist can set prices higher than would be the case in a competitive market, a monopsonist can set prices artificially lower. A lot of economic arguments forget these ideas. The labor market is not a free market: companies have more power in negotiation, they have more information and, most important of all, they can deal with a job opening not being covered most of the time. Workers can't usually live too much without finding a job. That's why minimum wage laws and workers rights are important. Companies will always push for lower wages wherever they can, without a care for the actual wealth created by the worker. The only way to counter that push is by giving more power to the worker, and in low-skilled fields with lots of available workers, you need to do that through regulations and subsidies.
  • throwawaysea 6y ago
    You're redefining what a 'free market' means. If one side has a greater need or desire, that is still within the bounds of what a free market is. The market creates incentives and disincentives to fulfill different market demands, by creating an incentive to supply what's in demand (by paying more) and a disincentive to supply what we don't need more of (by paying less).
    • gjulianm 6y ago
      Not a greater need or desire, but a fundamental need. It's an important distinction. In a perfect market, if the only offers to buy a product are too low, you will stop production and close the company because you can't make a profit. In the labor market, if the salaries are too low, people will still take the jobs because low income is better than zero income.
  • bcrosby95 6y ago
    Also, do textbooks actually say that? Because it seems trivially false: if a worker is actually paid that, then there's no money left for investors.
• coldtea 6y ago
  They harm the bottom line of people using the Economist to suggest public policy...
• pchristensen 6y ago
  (can't read the article, but I've read and thought a lot about it) I'm on the fence about the net cost/benefit of localized minimum wages. I think that a federal minimum wage (or at least, a high one), and to some extent, state minimum wages, are a bad idea. The Fight for $15 movement came from expensive cities, and it might be the right policy for those places. But it would severely distort and crush lower-cost cities and states. The right policy for San Francisco isn't necessarily right for Birmingham. It's one thing to have uniform national laws for human rights. But the nominal value of $15 means something very different in different parts of the country. It seems to me that the right policy to increased pay for low wage jobs would be to set the minimum wage so a full time job at that rate puts you at some multiple of the metropolitan/micropolitan area poverty line. Wages would automatically increase with costs in a predictable way, and local economic conditions determine the rate. State or federal minimum wages could set a floor but acknowledge that regional differences matter in economics.
  • eloff 6y ago
    I think you're very right that this is policy best done locally, because cost of living varies wildly even in the same state.
    • ghayes 6y ago
      My only fear is that wouldn't businesses constantly relocate to new areas with lower minimum wages? If the area you're located in goes from $5 to $8 (possibly due to your factory), why not relocate three counties over to an area that's still at $5? A national standard mitigates this issue.
      • pchristensen 6y ago
        Moving 3 counties means basically every employee has to be relocate or be replaced. If a business is willing and able to make that choice, they are a) not attached to their current location, and b) probably willing to consider farther moves for further cost reductions.
      • 6y ago
• sthnblllII 6y ago
  The only politically feasible alternative is increased welfare spending, which means a low minimum wage is just a way to have taxpayers cover employers’ labor costs. https://www.realclearpolitics.com/video/2014/02/13/ron_unz_how_raising_the_minimum_wage_will_reduce_welfare_spending.html https://www.realclearpolitics.com/video/2014/02/13/ron_unz_h...
  • crooked-v 6y ago
    See, for example, how Wal-Mart has the single largest collection of workers who get food stamps in the US.
    • pchristensen 6y ago
      Not defending Wal-Mart's labor practices, but there are probably very, very many companies where they have the single largest collection of workers who $INSERT_CONDITION_HERE.
      • Ekaros 6y ago
        I would actually say that it is the opposite... As there is few very large employers. Wal-mart being largest one of them. Companies employing lot of people also has largest collection of workers with $INSERT_CONDITION_HERE. Not that the whole sector couldn't do better. Wal-Mart just having that statistic because they employ the most.
        • pchristensen 6y ago
          Sorry, that's what I meant to say. Wal-Mart is the largest private employer by a factor of 3. They're probably first in many categories (of absolute numbers, not percentages) based on the size of their workforce.
      • kennywinker 6y ago
        This is a puzzling comment. Yes, you can probably find a unique characteristic among various groups... but this specific value of $INSERT_CONDITION_HERE is relevant to the discussion, and probably a negative force in our society. Seems like you're trying to dismiss it for some reason?
• hpoe 6y ago
  One thing I found was interesting > The effects of a wage floor can also be felt outside low-pay sectors. A preliminary study in 2019 of the impact of Germany’s minimum wage found it led to more reallocation of workers from smaller, lower-paying firms to larger, higher-paying ones. Is it possible that although the change in overall employment was muted smaller shops were closed up and their work simply transferred to larger ones better able to expend the capital?
• alex_young 6y ago
  Why don't we index the minimum wage to inflation? The 1968 minimum, in todays dollars, is over a third higher than our federal minimum wage today. [0] [0] https://en.wikipedia.org/wiki/Minimum_wage_in_the_United_States#Historical_trend https://en.wikipedia.org/wiki/Minimum_wage_in_the_United_Sta...
  • jldugger 6y ago
    You probably know this but the opponents of raising the minimum wage fear that it will lead to inflation. The old adage "labor is 2/3rds the cost of everything."
    • alex_young 6y ago
      Sure, and there is some logic there, but isn’t the somewhat random real wage a problem? Whatever we select, it seems healthy to index it right?
    • fulafel 6y ago
      Many countries effectively do this and it doesn't make inflation get out of habd.
      • jldugger 6y ago
        States can and sometimes do set higher rates than the national minimum. And frankly, a national minimum wage doesn't make sense -- why should wages in low CoL areas like rural Alabama be the same as high CoL areas like NYC/SF? Even state lines may be too coarse grained for minimum wage policies, Since there are many metro areas that cross state lines. On the other hand, economists have been able to treat these places as natural experiments with mixed success: when one state raises the minimum wage but the other does not, you can measure a variety of things, including regional inflation. But it's still difficult to disentangle causation and substitution effects, since the minimum wage directly affects only a small portion of society. The evidence on that front has been... shedding more heat than light. I'm not sure anyone's proved conclusively that inflation does or does not happen, or that unemployment does or does not happen. Probably the most interesting study I've heard of is one looking at restaurants as a sort of model species for minimum wage jobs, the same way that biologists study fruit flys because they have short lifecycles. The supposed evidence there is that the type of restaurants change in response to wage increases: more self-bussing, less staff hired per dollar turnover. The people left get paid more, but fewer people employed overall. That said this was from a podcast discussion and I haven't reviewed the peer reviewed article personally.
• csours 6y ago
  OT: Is there an economic theory that explains or talks about job creation?
• pwfisher 6y ago
  Non-paywalled: http://archive.is/zF4ei http://archive.is/zF4ei Great read. The real labor market is more complex than a simple model of supply and demand. It's like the old physics joke, "I have a solution, but it only works for a spherical chicken in a vacuum."
  • Shinchy 6y ago
    Thanks :)
• AnotherGoodName 6y ago
  Look i get that USA has a lot of billionaires and the GDP per capita looks great for the USA but I want US citizens to please take a look at median wealth per adult and see how far you have to scroll down to find the USA: https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe... This is a great way to rule out outliers. My home country Australia has 3X the median wealth per adult of the USA. This is similar to the median wealth difference between the USA and China for reference. It shows to be honest having lived in both countries. Specifically it shows in the conditions that minimum wage earners in the USA face, eg. having to live off food stamps as is common for wallmart workers for example is just horrendous. eg. https://www.kiro7.com/news/local/report-amazon-walmart-workers-on-list-of-top-food-stamp-users/830854650/ https://www.kiro7.com/news/local/report-amazon-walmart-worke... Australians usually call out companies that make things in sweatshops where pay is below the poverty line. Specifically clothing in Asia. But i believe we should start doing this for US companies as well. Sure the US minimum wage is higher than say Bangladesh but since the cost of living in the US is higher too so it doesn't change the fact that things manufactured at minimum wage in the US are coming from companies that pay wages below the poverty line.
  • grandmczeb 6y ago
    Wealth is very hard to accurately measure and is impacted a lot by demographics (e.g. age distribution). Consumption is a better measure of how people actually live. https://en.wikipedia.org/wiki/List_of_countries_by_household_final_consumption_expenditure_per_capita https://en.wikipedia.org/wiki/List_of_countries_by_household...
    • AnotherGoodName 6y ago
      I disagree simply because expenditures are completely different for more socialist countries. Eg. Total healthcare expenditure per capita is well below the USA in Australia. Less than half in fact. https://onthewards.org/the-inside-scoop-part-one-a-comparison-of-the-us-and-australian-healthcare-systems/ https://onthewards.org/the-inside-scoop-part-one-a-compariso... So that's $4500 a year more the average US citizen has in total expenditure that isn't some type of luxury good or indicator of a better life. It's just survival. I mean Australia beats the USA by any quality of life index out there. https://en.wikipedia.org/wiki/Where-to-be-born_Index https://en.wikipedia.org/wiki/Where-to-be-born_Index
• chanfest22 6y ago
  http://archive.is/zF4ei http://archive.is/zF4ei tl;dr — when labor markets are artificially depressed by employers with monopsony power (e.g. workers only have one employer to work for), a minimum wage can improve efficiency of the marketplace. Enjoyed the dispassionate take on the age old minimum wage question. It is difficult to figure out which people are in monopsony labor markets because it depends on so many things including geography and even within a zip code could vary based on a variety of factors such as internet access, public transportation access, etc. Makes sense that in some cases, when there is only one employer, they are artificially driving the price of labor down because people have no choice. Have policymakers considered other solutions to this monopsony problem? For example guaranteed government jobs that pay a certain $ amount adjusted for the geography to incentivize private sector to match or beat that price?
• neonate 6y ago
  https://archive.is/R8WCe https://archive.is/R8WCe
• GoodJokes 6y ago
  The labor theory of value would be a more useful read than more economist garbage.
• calkuta 6y ago
  What I find important to remember about minimum wage is that it constitutes a restriction on the freedom of workers to negotiate for their labor. The existence of a meaningful minimum wage implies that there are people in the society who desire to negotiate for lower compensation (because they are more motivated to get the job for whatever reason), but they are disallowed from doing so. It might be our opinion that it is undignified or exploitative to work for a certain wage, but we should not have the right to bar others from doing so if they wish. As individuals, we should demand the freedom to negotiate the terms of our employment without government influence, including wages, benefits, and even working conditions. Using the government to coerce employers into giving greater compensation is appealing in the short term, but ultimately it disenfranchises others by blocking them out of jobs and results in long term economic stagnation. Mandatory minimum wage significantly above the "natural" level dictated by prevailing economic conditions unquestionably causes harm, mostly to workers who, if they choose to continue to work for less money, are now doing so illegally. Mostly they just don't get work. This is why politicians tend to let minimum wages lapse behind the market rate - economies work better without this restriction. And when a significant minimum wage hike is imposed, like $15/hour in some places today, the economic harm to workers quickly becomes apparent.
  • eesmith 6y ago
    Indeed we should - demand the repeal of Taft–Hartley Act and other laws which have nerfed collective bargaining power far from any "natural" point. Jurisdictional strikes, wildcat strikes, solidarity or political strikes, secondary boycotts, secondary and mass picketing, closed shops, and monetary donations by unions to federal political campaigns are all part of the freedom to negotiate the terms of our employment, which we are currently disallowed from doing.
    • flyingfences 6y ago
      I can't tell if you're saying that sarcastically, but I do agree unironically.
      • eesmith 6y ago
• _ah 6y ago
  The direct effect of the minimum wage is to make certain low-productivity jobs illegal. Consider that for a moment: a person with limited skills and/or needs is simply prohibited from doing low-productivity work regardless of desire. The counter-argument is that many workers do not have a choice; they will always accept wages vs nothing, but have no power or ability to negotiate. With a minimum wage we've made the decision as a society that, in order to prevent worker exploitation, we will also eliminate certain classes of work. Some of this work does vanish entirely, while some of it reappears in the shadow economy through untracked cash payments or self-employment. As with all policy decisions there's a messy balance here and we're arguing mostly over where the line falls. I do wish there was a cleaner way to protect against monopsony (higher minimum wages) while also providing good opportunities for low-skill workers (those who are very young, very old, have physical or mental impairments, etc).
  • klmadfejno 6y ago
    I don't think that's a reasonable point of view. Most minimum wage jobs are not productivity jobs, but jobs that need to get done by someone but require no special skills. That is, you can't easily define the value of the sanitation worker who keeps a restaurant clean enough to pass health standards. You just observe that there's enough people willing to do it that you can offer a low wage. What jobs are being made illegal?
    • nickff 6y ago
      Many of the people employed at very low wages have attributes which mean that they are not worth hiring at higher costs. Factors such as lack of job history, attendance issues/unreliability, language issues, etc. mean that the employer will opt for a more 'attractive' candidate if there is a price floor. As an example, if you are looking for a bottle of wine to accompany your Tuesday night dinner, you might opt for a low-cost, low-quality option, as it is adequate for your needs; but if there is a price floor, you will opt for a different, higher quality option. Price floors mean that deals below the set price are illegal.
      • 6y ago
• seiferteric 6y ago
  I know that in economics it is difficult to do proper studies hence the "dismal science", but my understanding is that most economists agree that minimum wages don't work right? So why is it still pushed? Shouldn't we "listen to the experts"? Besides there are other tools like the EITC.
  • fulafel 6y ago
    There doesn't appear to be consensus like that - but not because lack of trying: https://www.anderson.ucla.edu/faculty-and-research/anderson-review/minimum-wage-primer-leamer https://www.anderson.ucla.edu/faculty-and-research/anderson-...
    • seiferteric 6y ago
      Sorry but that seems to be an opinion article by a non economist? Or am I mistaken?
      • fulafel 6y ago
        I thought it was a pretty even handed piece covering the debate in the field. Here are personally penned unedited opinions from econ nobelists etc if you prefer :) https://www.nytimes.com/2015/07/17/opinion/paul-krugman-liberals-and-wages.html https://www.nytimes.com/2015/07/17/opinion/paul-krugman-libe... https://www.epi.org/publication/raise-minimum-wage/ https://www.epi.org/publication/raise-minimum-wage/
        • seiferteric 6y ago
          Thanks, those are a bit better, though still single opinions. I guess I am looking more for a survey of economists opinions. What was interesting about Krugman's piece was that he said minimum wage used to not work, but now it might due to changes in the economy, which is surprising if true. To me, neither one was a resounding affirmation of minimum wage, both said that $15 did not seem to hurt, and might help slightly.
    • 6y ago
• snake_plissken 6y ago
  I've thought about a similar question: what happens if there is no minimum wage? If people are already struggling when being paid the minimum wage, what happens if business are able to lower it even more? Yeah I get the dynamics of supply demand are supposed to work here, but it just feels like at some point it's not worth people's time to work for such a low wage and they just give up and go on the dole. I also wonder if in some perverse way, a minimum wage does some harm to workers. Basically the thinking goes like this: companies that are looking to hire labor at these pay levels don't really need to compete for the labor because they know all of their competitors are going to be also paying the minimum wage. The resulting effect is stagnant wages that never go above the minimum wage because everyone knows they only ever need to pay that. Anyway, I support concepts like the minimum wage which are well intentioned, it's probably just time we reevaluate how to help low income workers achieve more financial security. PS: didn't read the article, just wanted to get my thoughts out there real quick while on lunch break.
• baron816 6y ago
  If society decides that people should have a minimum income/minimum quality of life, then the burden of providing that minimum should fall on society as a whole. I don’t think it’s right (or efficient) to place that burden on a certain set of firms or industries that are providing jobs for low skilled workers. We would be much better off with a negative income tax plus universal health care.
  • rjbwork 6y ago
    We definitely would, but generally those who argue against a minimum wage also argue against that. Friedman withstanding in the case of the negative income tax.
    • imtringued 6y ago
      I argue against minimum wages because people who like minimum wages don't like job guarantees. It's just hypocrisy. Why does everyone talk about the stupid minimum wage? It's just a number invented by government. It does nothing. A job guarantee works fine without minimum wages. Minimum wages don't work without a job guarantee so the minimum wage always loses.
• Naac 6y ago
  >> This school of thought argues that some labour markets are characterised by a market structure known as monopsony. Under a monopolistic regime one dominant supplier sells to many buyers, whereas under a monopsonic regime, one dominant buyer purchases from many sellers. Just as a monopolist can set prices higher than would be the case in a competitive market, a monopsonist can set prices artificially lower. I had a really hard time understanding this paragraph. Did anyone else?
• aussir 6y ago
  If you raise the price of cigarettes through taxes, less people buy cigs. Same for gambling, driving, flying, etc. If you raise the price of labor through minimum wage, you fix poverty. Opposed to literally everything else plus evidence.
  • simsla 6y ago
    This fallacy is addressed in the article, I suggest you read it. The key point is that wages are being kept artificially low by monopsonies. And the evidence supports this. (Current hyperlocal minimum wage laws make for good A/B-ish tests.)
  • imtringued 6y ago
    Minimum wage doesn't guarantee you get any wage at all. It's a toothless tiger and can't fix poverty. Offer a job guarantee and then we'll talk.
• supernova87a 6y ago
  A most frustrating thing about many kinds of protectionist economic policies is that frequently the people who would benefit from the opposite policy aren't allowed to vote to count the value of it. The people who would get hired if you didn't put this policy in place are the ones who don't get to vote against it. The people who would be able to afford to live in a city that has rent control, don't get to vote against it. It's not until you have some external shock that shows you how much this little island of protectionist policy has cost you that you realize what it did. And in the meantime you've favored and built up a system that is that much less resilient to whatever new problems you face.
• MisterBastahrd 6y ago
  The people who argue hardest against minimum wages are those who would never expect to be paid a minimum wage for their services. Our "essential workers" are usually some of our lowest paid workers. If a UBI is ever implemented, I would suggest that these people get those funds first
• sys_64738 6y ago
  They don't do any harm anywhere other than in an ECON 101 class. The invisible hand and equilibrium ECON 101 doesn't account for unlivable wages. That's why there's a minimum wage.
• trentnix 6y ago
  Minimum wage, despite all manner of contortion by those that seek to justify its existence, is a political concept. The minimum wage is, always, zero. Minimum wage is also what drives the market for illegal immigrant labor. As Milton Friedman pointed out decades ago, immigration is most beneficial to employers precisely when it's illegal. Those workers don't enjoy the protections, wagers, and respect their legal counterparts enjoy. If illegal immigrants are made legal, then the benefit of employing an illegal plummets. These wages also avoid other form of government oversight, such as taxation. Lack of immigration enforcement and lack of penalties for those that hire illegals provides an unfair advantage to those employers who, brazenly, break the law. They get cheaper labor, avoid taxes, and gain an unfair market advantage over those employers who follow the law. There's nothing "free" about a market whose government selectively enforces its laws. Consenting adults should be able to work for whatever wage they like.
  • jandrese 6y ago
    I'm not sure how your first three paragraphs support the fourth. Illegal immigration drives down wages so we shouldn't have a minimum wage?
    • trentnix 6y ago
      Illegal immigration is a side effect of minimum wage. And minimum wage puts unskilled Americans (or Americans whose skills aren't valuable because of a changing market) at an unfair disadvantage in their attempts to obtain employment and acquire new skills. Sorry if that wasn't clear in my post.
      • jandrese 6y ago
        So why not provide a legal path to immigration instead of abolishing the minimum wage then?
        • trentnix 6y ago
          Illegal immigration and immigration in general is its own rabbit hole. You shouldn't assume from my post whether I'm for or against illegal immigration (or any type of immigration) because it doesn't really matter one way or the other to the points I'm trying to make. Economically speaking, granting legal status to unskilled illegals results in a combination of undesirable side effects: - it increases the price of the goods they produced reducing the buying power of the minimum wage, - it prices many of those illegals out of the market because they are unable to produce value for the wage they are paid (but now they are eligible for government benefits), - and it encourages new types of "black market" employment. Try all you like, but you won't outsmart the market.
• DINKDINK 6y ago
  "The first thing that happens, for example, when a law is passed that no one shall be paid less than $106 for a forty-hour week is that no one who is not worth $106 a week to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation. The only exception to this occurs when a group of workers is receiving a wage actually below its market worth. This is likely to happen only in rare and special circumstances or localities where competitive forces do not operate freely or adequately; but nearly all these special cases could be remedied just as effectively, more flexibly and with far less potential harm, by unionization. It may be thought that if the law forces the payment of a higher wage in a given industry, that industry can then charge higher prices for its product, so that the burden of paying the higher wage is merely shifted to consumers. Such shifts, however, are not easily made, nor are the consequences of artificial wage-raising so easily escaped. A higher price for the product may not be possible: it may merely drive consumers to the equivalent imported products or to some substitute. Or, if consumers continue to buy the product of the industry in which wages have been raised, the higher price will cause them to buy less of it. While some workers in the industry may be benefited from the higher wage, therefore, others will be thrown out of employment altogether. On the other hand, if the price of the product is not raised, marginal producers in the industry will be driven out of business; so that reduced production and consequent unemployment will merely be brought about in another way. When such consequences are pointed out, there are those who reply: “Very well; if it is true that the X industry cannot exist except by paying starvation wages, then it will be just as well if the minimum wage puts it out of existence altogether.” But this brave pronouncement overlooks the realities. It overlooks, first of all, that consumers will suffer the loss of that product. It forgets, in the second place, that it is merely condemning the people who worked in that industry to unemployment. And it ignores, finally, that bad as were the wages paid in the X industry, they were the best among all the alternatives that seemed open to the workers in that industry; otherwise the workers would have gone into another. If, therefore, the X industry is driven out of existence by a minimum wage law, then the workers previously employed in that industry will be forced to turn to alternative courses that seemed less attractive to them in the first place. Their competition for jobs will drive down the pay offered even in these alternative occupations. There is no escape from the conclusion that the minimum wage will increase unemployment." [...] "As to the prices, wages and profits that should determine the distribution of that product, the best prices are not the highest prices, but the prices that encourage the largest volume of production and the largest volume of sales. The best wage rates for labor are not the highest wage rates, but the wage rates that permit full production, full employment and the largest sustained payrolls. The best profits, from the standpoint not only of industry but of labor, are not the lowest profits, but the profits that encourage most people to become employers or to provide more employment than before." Henry Hazlitt “Economics in One Lesson.” To those who are downvoting: There are no illegal people, there is no illegal two-party consensual trade.
• dayjobpork 6y ago
  The richest person in Australia seriously floated an idea to import foreign workers and pay them $2 a day to work in her mines I've always looked at minimum wage as an employer saying "I'd pay you less if I legally could". In workplace negotiations all of the power is held by the employer, unless you have some form of collective bargaining, and having a Government mandated minimum prevents companies from totally exploiting low paid workers.
  • qeternity 6y ago
    These policies are always double edged swords. The other way to frame minimum wage is that it makes it illegal to work unless you can produce $X value per hour.
    • csours 6y ago
      Ehhh? What are you talking about? It's not illegal to do things that don't make money. That's called a cost center. I don't make money for my company, I reduce the risk of losing money, and provide tools for people who do make money.
      • qeternity 6y ago
        I didn’t say making money, I said providing value. You’re creating some value for your company that exceeds what they pay you, otherwise you wouldn’t have a job. Let’s say I’m a widget maker. I can make 10 widgets per hour for my company, and they in then earn $1 profit per widget. This company is not going to pay me $15/hr if I’m only able to generate $10/hr in value for the business. But if minimum wage is $15 then it makes it illegal for me to work for them.
        • csours 6y ago
          That still doesn't make it illegal. It only makes it non-viable from a unit-economics point of view. Now if you want to talk about how larger companies have better unit-economics, and small companies can suffer with high minimum wage, then we can certainly have that conversation.
• lokar 6y ago
  The anti-min-wage / free market argument ignores a key fact: as a society we have decided we won't let people starve to death. So, if someone can't make ends meet, we will (via taxes) support them, at least to some extent. This support factors into the wage negotiation, allowing the employer to force a lower wage (absent a state imposed min). Absent state sate welfare style support many low wage (min and sub-min) jobs would simply not work, people could not feed themselves, and they would not accept the jobs.
  • nickff 6y ago
    So they would starve, jobless, because the work wouldn't pay a subsistence wage? This seems unlikely, as many people work at jobs where they don't earn enough to support their lifestyle. I think the below-subsistence wage earner would be more likely to (though not certainly) move somewhere that their skills were more needed.
    • smileysteve 6y ago
      > I think the below-subsistence wage earner would be more likely to (though not certainly) move somewhere that their skills were more needed. This introduces us to indentured servitude's abuses.
  • qeternity 6y ago
    This gets to the heart of the problem of minimum wage. Walmart is often cast as a villain because many of their workers receive government benefits. Nobody stops to ask the very real question of: what if the average Walmart worker doesn’t add $X in value per hour. What if the value of the “Walmart Greeter” is less than that of minimum wage? Is it better for Walmart to fire this person because they’re not worth minimum wage (presumably it’s the highest paying job they could find, suggesting they’re not worth “minimum wage”) or is it better to have lower minimum wage with state benefit offsets? At least in the latter scenario Walmart helps shoulder the burden. Tl;dr - Often corporations are accused of abusing state benefits by not paying workers more as opposed to shouldering some of the burden that states would otherwise be left with due to unemployed masses of unskilled labor.
• greggyb 6y ago
  Is the goal for people to receive a certain amount of money? There are many approaches to this. Is the goal for companies to pay some people (specifically, those employed) a certain amount of money? There are fewer approaches to this. Is the goal to shift the distribution of revenue in a company? There are fewer approaches to this. A minimum wage is a poor one.
• StreamBright 6y ago
  There are valuable insights and measured numbers on minimal wage laws. https://www.aei.org/economics/thomas-sowell-on-the-cruelty-of-minimum-wage-laws/ https://www.aei.org/economics/thomas-sowell-on-the-cruelty-o...
• moth-fuzz 6y ago
  I’m going to flip this one around and ask: why are businesses entitled to low-cost labor? In other markets, markets of objects, if you don’t have the funds to purchase something you don’t get to have the thing, and if you attempt to coerce the thing into your ownership, we call that robbery, and prosecute it accordingly. So why doesn’t that apply to human labor? Labor is a product, it exists in a market, and there is a baseline amount of money a person needs to survive - the ‘price’ of a human doing work (compare this to covering the cost of materials, production, etc for some nonhuman item). If companies cannot meet that price, why are either laborers or governments expected to shoulder it so that businesses can get their hands on the human product regardless? Why is human labor constantly sold at a loss?
  • drak0n1c 6y ago
    There is no distinction - all markets are ruled by consent. Both parties have to agree to a voluntary transaction, and that applies to employees and products.
    • grumple 6y ago
      Well, that’s only true if we ignore that companies used (or currently use) slave labor.
  • xondono 6y ago
    They aren’t, the problem is that the “baseline amount of money a person needs to survive“ is extremely low compared to modern standards, and generally way lower than what minimum wage dictates. The result depends on how many people can do the job and how productive the job is. If the job is reasonably productive but anyone can do it, the result is a bidding war between sellers fighting for a job (race to the bottom).
• Trias11 6y ago
  In a poor areas government-enforced minimal wage will cause mass layoffs, black market economy and more misery.
• jsanford9292 6y ago
  What a useless article. No real conclusion and no new information. Raising the minimum wage CAN have negative effects. This is obvious. If you raise the minimum wage to $10,000 per hour, what happens? Hamburgers cost $1,000 each and nobody buys them. Restaurants become insolvent and they close. Bad outcome. I believe no minimum wage CAN also have negative effects but those effects are less clear to me. Maybe workers get taken advantage of by companies? But is a minimum wage the best way to fix this? Would love to hear other thoughts on what specifically a minimum wage fixes compared to having no minimum wage.
  • machiaweliczny 6y ago
    Minimum wage gives more efficiency to spending power. These people are subsided anyway but if they are given foodstamps it's inefficient (I don't know how it work in US but here people won't eat most of it, even if poor, unless starving). So if your goal as economy is to select for producing nice products at affordable rate then adding purchase decision to low income workers is best way to let them get out of powerty. Maybe they don't need shitty food produced by rich folk with connections to gov but computer for their childeren or some tool to start business?
• afinlayson 6y ago
  Without a minimum wage, some jobs would pay effectively zero. You see that with waiters, who get paid below minimum wage, and are expected to make tips, the issue is if there's no customers because of a pandemic, they are now making no income.
• CraigJPerry 6y ago
  The more research i do in economics the less impressed i am with the discipline. Economics is defined as a social science. That point never really struck home with me until recently. I think the fancy models, the cutting edge statistics and clever use of logic blinded me to the fact that the entire discipline is built on top of stories. There’s no gravity, there’s no absolute zero, there’s no kilogram. There’s no fundamental tangible truths underlying the concepts of free markets. It’s stories we tell each other as a way to explain a system we don’t and possibly can’t understand. I’ve never been so disappointed to realise all the arguments of economic theory are built on a foundation of sand. Shifting sand at that.
  • Discombulator 6y ago
    All disciplines studying complex systems like societies down to something like the human body, simply do not have the luxury of absolute truths like in mathematics or even the ability to run experiments like in physics (often for ethical reasons, e.g., in medicine or economics). But does that mean that it is not worth doing? For these fundamental reasons economics is “hard”, but I argue that it is still worth doing because economic policies have a big impact on people’s lives, and partial understanding is better than nothing.
    • arp242 6y ago
      I feel the biggest problem with economics is that it's very infused with ideology, which makes it even harder to say what's true or not. There's a lot of what I would call "arm-chair economics" – entire government policies are based on nothing more than conjectures, guesses, and ideological preferences of so-called "economists". Okay, maybe guesses and conjecture is the best we have to go on, but at least be honest about what it is. This is the case for some other social sciences as well, but I have the impression it's (much) worse for economics. The effects are certainly a lot more impactful.
      • gruez 6y ago
        >I feel the biggest problem with economics is that it's very infused with ideology, which makes it even harder to say what's true or not. There's a lot of what I would call "arm-chair economics" – entire government policies are based on nothing more than conjectures, guesses, and ideological preferences of so-called "economists". Is it any better in fields other than math and the natural sciences? For medicine and nutrition we're constantly backtracking on our previous discoveries. First it was fat that's bad, then it was sugar.
• sirmoveon 6y ago
  We don't need more slave rights; we need more systemic equity.
• Wump 6y ago
  Chris Rock had a great sketch about minimum wage: 'I used to work at McDonald's making minimum wage. You know what that means when someone pays you minimum wage? You know what your boss was trying to say? It's like, "Hey if I could pay you less, I would, but it's against the law."' https://www.youtube.com/watch?v=F_Fr1djc67U https://www.youtube.com/watch?v=F_Fr1djc67U
• whiddershins 6y ago
  I’ve always been all for the minimum wage. Seems like it should be a helpful and/or necessary leveler. Lately though, sometimes ... I’ll get a disorienting flip around in perspective and I will think just what gives you the right to step between me and another consenting adult when we attempt to make a transaction! And it feels almost gross that the government would paternalistically step in and tell us what agreement we are allowed to make. I’m not sure what I think in the end. Somehow both things feel true simultaneously.
  • galvin 6y ago
    The notion of the government being some abstract external entity is really strange to me. Some consenting adults don't have the power to negotiate fair transactions so we, as a society, can use our collective bargaining power to define what a fair transactions is.
• pcvarmint 6y ago
  A lot. They make it illegal for you to hire someone at a rate below the minimum wage, even if they agree to it. They force unemployment of those with skills below the average minimum-wage employee's. They pick an arbitrary minimum wage mandated by government fiat, instead of determined in the marketplace. Such an arbitrary wage suffers from the economic calculation problem, where rational allocation of goods is impossible without free markets and prices to communicate supply and demand. Changes in the minimum wage affect other things, like the price of food in restaurants, in way which is nonlinear from the actual supply and demand of those goods and services. It's as though there is pressure for prices to move upwards or downwards in response to market conditions, but the minimum wage, or other prices directly affected by the minimum wage, are not allowed to respond to those market conditions, and so a shortage or oversupply occurs. https://fee.org/articles/topics/minimum%20wage https://fee.org/articles/topics/minimum%20wage
• huntermeyer 6y ago
  Non-paywall link: https://web.archive.org/web/20200819180537/https://www.economist.com/schools-brief/2020/08/15/what-harm-do-minimum-wages-do https://web.archive.org/web/20200819180537/https://www.econo...
• spo81rty 6y ago
  At my last startup 15 years ago we paid our support staff $12 and had no problem hiring people. But the people we could hire for $12 sucked at the job. They just didn't have the skills or talent. So we started paying $16+ and hired much higher quality people. Companies always want to pay as little as possible, but they also have to be able to attract the right level of talent.
• spo81rty 6y ago
  Nobody has to work for minimum wage. Nobody is forced to take the job. Companies will only pay it if people are willing to work for it. It's basically supply and demand.
• jefurii 6y ago
  What harm does a living wage do? What kind of fucked up bullshit question is that? Folks gotta eat and pay the rent and all that.
• mjevans 6y ago
  Another side to this question is: What is the value of a dollar? that is, what does a minimum wage job actually empower a worker to obtain? The argument for harm should be re-framed in terms of minimum wages devaluing the buying power of a dollar, of raises to those wages as a tax upon the middle-class (who's wages presumably do not increase accordingly), but crucially not the rent taking (wealthy) class. Rather than focusing just on dollars and an hourly wage, efforts must be made to correct the market for life essentials so that everyone is able to invest in themselves and the future. Taxes should be structured to prevent the wealthy from abusing the poor. There are other market distortions as well, such as artificially limited housing and many other forms of ladders being kicked out from behind of those who already have their place in life, and don't care for those whom are still seeking a place of their own to belong.
• temp_supply 6y ago
  Something the article hints at but should be looked at are concrete examples of minimum wage removing entire job sectors. For instance, almost all low skilled manufacturing and textile jobs have left the US for mainly Asian countries as a direct result of minimum wage. It's not like those companies want to pay shipping costs of getting products across the globe, but the minimum wage makes it more profitable to do so. Another example is automated grocery store scanners. Grocery stores lose a ton of money from people gaming the system of automated checkout machines. But even with those losess, it's still profitable for a grocery store to install a machine than hire a worker. Without a minimum wage, those jobs would still exist in the US and provide an opportunity for low skilled workers to enter the job market.
• gfxgirl 6y ago
  > By contrast, jobs in restaurants are hard to automate They are not so hard to eliminate. Some people claim the raise of self busing restaurants is in response to hiring people to do those jobs is too expensive. https://www.nytimes.com/2018/06/25/dining/san-francisco-restaurants-service.html https://www.nytimes.com/2018/06/25/dining/san-francisco-rest... The article above claims it's housing costs but the same trend is happening everywhere even places where housing costs are not SF. Of course it could just be a new trend of businesses and nothing to do with any other inputs whatsoever. These studies claimed a negative impact on new jobs meaning they claim the minimum wage hike made it harder for young people to find a job after the minimum wage went up. That could be because less people quit their now higher paying jobs. Whether that's a net plus or a net minus is probably debatable. https://evans.uw.edu/policy-impact/minimum-wage-study https://evans.uw.edu/policy-impact/minimum-wage-study https://evans.uw.edu/sites/default/files/webform/w25812_summary_final.pdf https://evans.uw.edu/sites/default/files/webform/w25812_summ...
• 11235813213455 6y ago
  I'm against it, because it promotes consumerism, which is the root of environmental problems, the most likely number 1 issue of the current and next decades People should have minimal essential/vital needs rather: home, water, electricity, (organic) food, healthcare. I spend less than 50€/month on food, because I forage it (even if I live in a city) (figs, oranges, medlars, persimmons, grapes, ..), and I buy some vegetables at a local producer and some rice at supermarket, and I'm pretty much full with this We need high-scale changes, less cars, less consumerism, less pollution, less useless activities, more (public) fruit trees and vegetables
• Wolfenstein98k 6y ago
  It cannot be that raising the price floor of a good does not cause consumers to buy less of it, or substitute where possible. Employers rent the labour of employees, and if their price floor is raised, it cannot have no effect on how much their labour is demanded - the equation has been tipped toward higher input costs. It may not have enough negative effect to cause any adjustments, but it must at the margins.
• alkonaut 6y ago
  > Textbooks state that, in the absence of a minimum wage, a worker is paid his “marginal product of labour”, which means the value of what he produces. This assumes the laborer is selling work as an individual and not negotiating e.g. as part of a union.
• dalbasal 6y ago
  There was a debate between the pro & con side of minimum wages a few years back. The debaters are all pretty intelligent, intellectually honest and deep people... all things considered. The debate was a spectacular failure, hinging on marginal interpretations of marginal datasets measuring marginal impacts. Most of the theoretical downsides end up below the noise threshold, in data. The pro side took this as a win, disproving the orthodox economic position. The con side demanded a counter theory. Obviously, a $1,000ph minimum wage would increase unemployment. That's hard to argue against. Why is a $14 minimum wage different? Where's your theory. It's not fair if you can debunk my theory, but don't have a theory for me to debunk. "Interesting. It works in practice, but does it work in theory?" to paraphrase a cliche from the late 40s. It's all a good reminder that economics is not a science. The gap between theory and practice can be vast, often is. Keynes (and most of his generation) was famously wrong about the future of working hours. Even so, the theories (income effect & substitution effect) used to make this failed prediction were not discarded. Even today, college economists teach the theories and Keyne's prediction. They find a way where the theories are still right, but "below the noise threshold." IE, other factors just happened to be more important in this case. I would also point out the the intellectual founders of modern, liberal free market theories (Hayek, Coase, Popper kinda) emphasized this. Economics is not a science. There is no universally true answer to the question "increases unemployment among young and low-skilled workers?" There are theoretically true answer, but this may or may not be operative in practice. It's also true that food availability increases reproduction rates. This doesn't mean that adding more burger joints will increase the human population of Manhattan. In Portugal, youth unemployment rates often tend to be high. If I were deciding for portugal, I'd be careful with my minimum wage policy. They are low in the UK. I wouldn't be concerned about gradual increases if I were deciding for the UK. There is another possible conclusion to the "economics is not a science" point which many economists concede. One most economists are uncomfortable with. Economists shouldn't be the only word. For example: ask low wage earners. They're the ones theoretically affected by minimum wages, for better or worse. If we want to know about the effects of some corporation policy on silicon valley, we would value the opinions of those companies. Same here. What do low wage earners think about minimum wages? https://www.npr.org/2013/04/09/176272083/should-we-abolish-the-minimum-wage https://www.npr.org/2013/04/09/176272083/should-we-abolish-t...
• known 6y ago
  What harm do Free Universal Health Care do
• quadrangle 6y ago
  > Firms do not know how much each worker contributes to their revenues. THIS. So obnoxious when free-market dogmatists make arguments based on that bullshit assumption.
• mbrodersen 6y ago
  Economics is ideology not science. The "textbooks" are whatever ideology is currently fashionable. Please also note that the "textbooks" will always support the current power elite unquestionably.