8 ms·

Right, many minimum wage opponents focus on the scenario where someone is worth e.g. $14/hr to a business, and rightly point out that this person won't be hired

Right, many minimum wage opponents focus on the scenario where someone is worth e.g. $14/hr to a business, and rightly point out that this person won't be hired with a $15/hr min wage. BUT without a minimum wage, someone worth $50/hr can be paid $5/hr if anyone can do the job. It strikes me that this situation is far more common than the first scenario, and minimum wage opponents tend to ignore it in their arguments. Minimum wage sets a floor for the market. That could theoretically increase unemployment in some industries with razor thin margins, but it's far from a given.

prostoalex 6y ago
> someone worth $50/hr can be paid $5/hr if anyone can do the job What business sectors enjoy consistent 90% gross margins?
- danenania 6y ago
  That's not the right question to ask, since many other costs besides labor figure into gross margins.
  - prostoalex 6y ago
    What formula then is used in calculating “someone worth $50/hr“? Does it omit or include those costs?
    - danenania 6y ago
      It's not always easy to quantify. Consider people like janitors or security guards. They may be absolutely critical to the business running even though they don't produce revenue directly. Even if minimum wage was set to $100/hr for these jobs, it would still be worth it for many companies to hire them, since producing any revenue could be contingent on having people in those positions. At the same time, they are very competitive labor markets, so without a floor, the pay could go very low despite being essential to the business. When someone is directly contributing to revenue, like a factory worker or salesperson, it's a bit simpler since you can look at their output, but you still need more information than gross margin to know the maximum a company could profitably pay an employee, since a company might design their operations very differently depending on the price of labor.
      - leetcrew 6y ago
        $100/hr is considerably more than I make as a software engineer. if my employer was required to pay a janitor $100/hr, they would fire them and have all the junior engineers spend the last hour of their day cleaning. having someone clean the building is essential for any business with a physical presence, but it's only worth hiring a person specifically to clean if they can be paid less than your core employees or if they can do it much more efficiently. this is why restaurants typically do not employ janitors.
      - bumby 6y ago
        Another example that has come to mind lately is how do you quantify non-production skilled or intellectual labor? The value of maintenance, safety, quality are often only only apparent after being cut
      - refurb 6y ago
        They may be absolutely critical to the business running even though they don't produce revenue directly. They don't produce revenue, but one must assume they provide some value and in this case avoiding the loss of revenue due to theft, fires, etc.
- olva22 6y ago
  Apple's appstore? :)
- nemothekid 6y ago
  I know you were trying to make a broader point, but Facebook has been flirting with 90% gross margins for more than 5 years.
  - AnthonyMouse 6y ago
    But then you have to ask, how can they do that? And the answer is, of course, the network effect of their social network. The value derives predominantly from that and not what the employees are doing -- if they did the same work for someone else who doesn't control a popular social network, it wouldn't create the same returns.
    - jandrese 6y ago
      In economics this is called a barrier to entry. Industries with lower barriers of entry are more competitive (see: restaurants) and have lower margins. Industries high high barriers to entry tend to gravitate towards monopolies. For industries with the highest barriers to entry (like tap water) markets don't work and we have to use heavy handed regulation to avoid letting the industry completely screw over the populace (see: water barons). Of course it is pretty weird to think of a social network as a utility.
  - hajile 6y ago
    They've conned their users into doing 99.9% of their work for them for free in the form of collecting, collating, and entering many petabytes of personal data to be ready for sale. I'd have super-high margins if I could do this in ANY industry.
- reallydontask 6y ago
  Enterprise software vendors?
seiferteric 6y ago
If a company can hire someone worth $50/hr for only $5/hr and therefore make huge profits/margins, couldn't another company easily come along and undercut them? I don't think a scenario like that could exist very long.
- deleted 6y ago
  [deleted]
- jusssi 6y ago
  If the other company can also do the same, why would they piss into their own cereal by reducing their profit? And if the other company is a newcomer looking to gain market share by undercutting, they'll likely find themselves strongarmed or bought out of the market.
  - AnthonyMouse 6y ago
    > If the other company can also do the same, why would they piss into their own cereal by reducing their profit? Because that's how newcomers gain market share. > And if the other company is a newcomer looking to gain market share by undercutting, they'll likely find themselves strongarmed or bought out of the market. But then the high margins are still there, so the dynamic that attracts new entrants is still there. The markets that maintain high margins are the ones with barriers to entry. Which, of course, we try to avoid as a matter of policy, so any policy that relies on their existence is quite problematic.
  - deleted 6y ago
    [deleted]
- CJefferson 6y ago
  Between all the patents, it would be basically impossible to start a new mobile phone company from scratch which made its own chips, for example.
  - collyw 6y ago
    I went looking for a new phone recently, there were brands I hadn't seen before on the shelves. Why you would need your own chips is beyond me, when you can buy them for a pretty small price.
Aunche 6y ago
>That could theoretically increase unemployment in some industries with razor thin margins, but it's far from a given. It's not a given when you're talking about a small region like Seattle. However, increasing the minimum wage to the entire US would dramatically increase unemployment in the poorest areas. The minimum wage is why territories like American Samoa and Puerto Rico have the highest unemployment. Edit: changed Guam to American Samoa
- dragonwriter 6y ago
  > The minimum wage is why territories like Guam and Puerto Rico have the highest unemployment. But...they don't, even though Guam, unlike several states, has a higher minimum wage than the Federal level. https://en.m.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_unemployment_rate#Unemployment_rate_by_jurisdiction https://en.m.wikipedia.org/wiki/List_of_U.S._states_and_terr...
  - chrischen 6y ago
    Guam’s minimum wage is on the low side, about $1 higher than the federal minimum.
    - dragonwriter 6y ago
      > Guam’s minimum wage is on the low side, about $1 higher than the federal minimum. There are, if I counted right, 19 states and all other federal districts except DC and the Virgin Island at (well, below for American Samoa) the federal $7.25 level (American Samoa's level is also a federal level, but it's federally set lower than the rest of the US), and a few more states at the same level as Guam; so it's pretty close to the middle, not really much on the low side.
  - Aunche 6y ago
    I must have been thinking about another territory rather than Guam. It looks like unemployment was counted before the pandemic for the US territories and after the pandemic for states.
- 6y ago
lukevdp 6y ago
Someone is not worth $50/hr if someone else is willing to do the same job with equal capability for $5/hr.
- gamblor956 6y ago
  There is a difference between someone being worth $50/hour and another person willing to do whatever for just $5/hour. For example, rich kids can take unpaid internships because they don't have to worry about food or rent for the duration of internships. Poor kids can't usually afford to take jobs that don't pay.
  - frogpelt 6y ago
    I'm guessing poor kids usually don't have jobs at all. Only about 40% of poor people 18-64 even have jobs.
    - burfog 6y ago
      The minimum wage workers around here are of two types: 1. teenage children of the upper middle class or higher 2. poor adults with a history of bad decisions It's kind of a weird mix. Where are the children of the poor? You'd think they might want money much more than the children of better-off families do. Surgeons, business owners, passenger jet pilots, software developers, and corporate executives all send their teenagers off to work minimum wage jobs. The point seems to be to learn about answering to a boss and/or to learn why success in school is important.
      - gorgoiler 6y ago
        Where are the children of the poor? The ice cream parlor in Sausalito is run by (and frequented by) the children (and parents) of one class? The Denny’s in Excelsior by that of another?
      - magicnubs 6y ago
        I'm not sure where you live, but my experience has been the complete opposite. When I was a poor working kid nearly every other poor kid I knew in high school started working at 16. Some of my friends from wealthy families did as well, but not nearly as many and usually only during the summer and not during the school year. Most did not have their first job (not including internships) until after college.
macspoofing 6y ago
The only arguments for minimum wage that I've ever seen, are those that claim that under certain conditions minimum wage may not be noticeably detrimental. What you never see is the minimum wage actually make a lick of difference to any metric that matters (like unemployment rate, or poverty rates, or income rates, or whatever else). Never. And I'm serious about this. Have you ever seen a region that adopted minimum wage, then come back a year later and show, for example, that poverty rates have fallen as result? Curious. So you have a policy that cannot demonstrate it actually makes anything better, sometimes can be demonstrated to not measurably negatively affect anything, and frequently actually hurts. Policies like minimum wage, or rent control, are not really about facts. They are driven purely by emotion and ideology.
- jackvalentine 6y ago
  This article links to a lot of studies about the health benefits of a minimum wage: https://www.nytimes.com/interactive/2019/02/21/magazine/minimum-wage-saving-lives.html https://www.nytimes.com/interactive/2019/02/21/magazine/mini...
- heylook 6y ago
  > Never. And I'm serious about this. You know that we have search engines, right? https://www.healthaffairs.org/do/10.1377/hpb20180622.107025/full/ https://www.healthaffairs.org/do/10.1377/hpb20180622.107025/... https://papers.ssrn.com/sol3/papers.cfm?abstract_id=267875 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=267875 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3381978 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3381978 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3520915 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3520915
  - macspoofing 6y ago
    Let me summarize what you did here: 1) You had a conclusion in your mind that minimum wage is beneficial. 2) You googled with terms that match your conclusion. 3) You cherry-picked the studies that match your conclusion. 4) The studies all point to either mixed outcomes or minor effects - with no attempt to even establish a causal effects (some of those are downright silly. Like tying minimum wage policy to rising wages in a country that is going through 7-9% GDP growth) Do you honestly think that this is a way to argue? That you just shut-gun random links you cherry-picked? How about this, survey after survey of economists (and you can google those since apparently googling is all you need) show either a majority or plurality of economists oppose rising minimum wages and deep skepticism of its benefits. What are they missing? Or do you want to cherry-pick economists that support your conclusion like a climate change denier pointing to that small number of climate scientist that show some skepticism of climate change?
refurb 6y ago
someone worth $50/hr can be paid $5/hr if anyone can do the job How do you define "worth" here?
- CarbyAu 6y ago
  Different people are saying different things but your question is most important. I suspect - but obviously can't speak on behalf of - the GP is using a definition of:worth $50/hr for the business bottom line.

prostoalex 6y ago

> someone worth $50/hr can be paid $5/hr if anyone can do the job What business sectors enjoy consistent 90% gross margins?

danenania 6y ago
That's not the right question to ask, since many other costs besides labor figure into gross margins.
- prostoalex 6y ago
  What formula then is used in calculating “someone worth $50/hr“? Does it omit or include those costs?
  - danenania 6y ago
    It's not always easy to quantify. Consider people like janitors or security guards. They may be absolutely critical to the business running even though they don't produce revenue directly. Even if minimum wage was set to $100/hr for these jobs, it would still be worth it for many companies to hire them, since producing any revenue could be contingent on having people in those positions. At the same time, they are very competitive labor markets, so without a floor, the pay could go very low despite being essential to the business. When someone is directly contributing to revenue, like a factory worker or salesperson, it's a bit simpler since you can look at their output, but you still need more information than gross margin to know the maximum a company could profitably pay an employee, since a company might design their operations very differently depending on the price of labor.
    - leetcrew 6y ago
      $100/hr is considerably more than I make as a software engineer. if my employer was required to pay a janitor $100/hr, they would fire them and have all the junior engineers spend the last hour of their day cleaning. having someone clean the building is essential for any business with a physical presence, but it's only worth hiring a person specifically to clean if they can be paid less than your core employees or if they can do it much more efficiently. this is why restaurants typically do not employ janitors.
    - bumby 6y ago
      Another example that has come to mind lately is how do you quantify non-production skilled or intellectual labor? The value of maintenance, safety, quality are often only only apparent after being cut
    - refurb 6y ago
      They may be absolutely critical to the business running even though they don't produce revenue directly. They don't produce revenue, but one must assume they provide some value and in this case avoiding the loss of revenue due to theft, fires, etc.
olva22 6y ago
Apple's appstore? :)
nemothekid 6y ago
I know you were trying to make a broader point, but Facebook has been flirting with 90% gross margins for more than 5 years.
- AnthonyMouse 6y ago
  But then you have to ask, how can they do that? And the answer is, of course, the network effect of their social network. The value derives predominantly from that and not what the employees are doing -- if they did the same work for someone else who doesn't control a popular social network, it wouldn't create the same returns.
  - jandrese 6y ago
    In economics this is called a barrier to entry. Industries with lower barriers of entry are more competitive (see: restaurants) and have lower margins. Industries high high barriers to entry tend to gravitate towards monopolies. For industries with the highest barriers to entry (like tap water) markets don't work and we have to use heavy handed regulation to avoid letting the industry completely screw over the populace (see: water barons). Of course it is pretty weird to think of a social network as a utility.
- hajile 6y ago
  They've conned their users into doing 99.9% of their work for them for free in the form of collecting, collating, and entering many petabytes of personal data to be ready for sale. I'd have super-high margins if I could do this in ANY industry.
reallydontask 6y ago
Enterprise software vendors?

seiferteric 6y ago

If a company can hire someone worth $50/hr for only $5/hr and therefore make huge profits/margins, couldn't another company easily come along and undercut them? I don't think a scenario like that could exist very long.

deleted 6y ago
[deleted]
jusssi 6y ago
If the other company can also do the same, why would they piss into their own cereal by reducing their profit? And if the other company is a newcomer looking to gain market share by undercutting, they'll likely find themselves strongarmed or bought out of the market.
- AnthonyMouse 6y ago
  > If the other company can also do the same, why would they piss into their own cereal by reducing their profit? Because that's how newcomers gain market share. > And if the other company is a newcomer looking to gain market share by undercutting, they'll likely find themselves strongarmed or bought out of the market. But then the high margins are still there, so the dynamic that attracts new entrants is still there. The markets that maintain high margins are the ones with barriers to entry. Which, of course, we try to avoid as a matter of policy, so any policy that relies on their existence is quite problematic.
- deleted 6y ago
  [deleted]
CJefferson 6y ago
Between all the patents, it would be basically impossible to start a new mobile phone company from scratch which made its own chips, for example.
- collyw 6y ago
  I went looking for a new phone recently, there were brands I hadn't seen before on the shelves. Why you would need your own chips is beyond me, when you can buy them for a pretty small price.

Aunche 6y ago

>That could theoretically increase unemployment in some industries with razor thin margins, but it's far from a given. It's not a given when you're talking about a small region like Seattle. However, increasing the minimum wage to the entire US would dramatically increase unemployment in the poorest areas. The minimum wage is why territories like American Samoa and Puerto Rico have the highest unemployment. Edit: changed Guam to American Samoa

dragonwriter 6y ago
> The minimum wage is why territories like Guam and Puerto Rico have the highest unemployment. But...they don't, even though Guam, unlike several states, has a higher minimum wage than the Federal level. https://en.m.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_unemployment_rate#Unemployment_rate_by_jurisdiction https://en.m.wikipedia.org/wiki/List_of_U.S._states_and_terr...
- chrischen 6y ago
  Guam’s minimum wage is on the low side, about $1 higher than the federal minimum.
  - dragonwriter 6y ago
    > Guam’s minimum wage is on the low side, about $1 higher than the federal minimum. There are, if I counted right, 19 states and all other federal districts except DC and the Virgin Island at (well, below for American Samoa) the federal $7.25 level (American Samoa's level is also a federal level, but it's federally set lower than the rest of the US), and a few more states at the same level as Guam; so it's pretty close to the middle, not really much on the low side.
- Aunche 6y ago
  I must have been thinking about another territory rather than Guam. It looks like unemployment was counted before the pandemic for the US territories and after the pandemic for states.
6y ago

lukevdp 6y ago

Someone is not worth $50/hr if someone else is willing to do the same job with equal capability for $5/hr.

gamblor956 6y ago
There is a difference between someone being worth $50/hour and another person willing to do whatever for just $5/hour. For example, rich kids can take unpaid internships because they don't have to worry about food or rent for the duration of internships. Poor kids can't usually afford to take jobs that don't pay.
- frogpelt 6y ago
  I'm guessing poor kids usually don't have jobs at all. Only about 40% of poor people 18-64 even have jobs.
  - burfog 6y ago
    The minimum wage workers around here are of two types: 1. teenage children of the upper middle class or higher 2. poor adults with a history of bad decisions It's kind of a weird mix. Where are the children of the poor? You'd think they might want money much more than the children of better-off families do. Surgeons, business owners, passenger jet pilots, software developers, and corporate executives all send their teenagers off to work minimum wage jobs. The point seems to be to learn about answering to a boss and/or to learn why success in school is important.
    - gorgoiler 6y ago
      Where are the children of the poor? The ice cream parlor in Sausalito is run by (and frequented by) the children (and parents) of one class? The Denny’s in Excelsior by that of another?
    - magicnubs 6y ago
      I'm not sure where you live, but my experience has been the complete opposite. When I was a poor working kid nearly every other poor kid I knew in high school started working at 16. Some of my friends from wealthy families did as well, but not nearly as many and usually only during the summer and not during the school year. Most did not have their first job (not including internships) until after college.

macspoofing 6y ago

The only arguments for minimum wage that I've ever seen, are those that claim that under certain conditions minimum wage may not be noticeably detrimental. What you never see is the minimum wage actually make a lick of difference to any metric that matters (like unemployment rate, or poverty rates, or income rates, or whatever else). Never. And I'm serious about this. Have you ever seen a region that adopted minimum wage, then come back a year later and show, for example, that poverty rates have fallen as result? Curious. So you have a policy that cannot demonstrate it actually makes anything better, sometimes can be demonstrated to not measurably negatively affect anything, and frequently actually hurts. Policies like minimum wage, or rent control, are not really about facts. They are driven purely by emotion and ideology.

jackvalentine 6y ago
This article links to a lot of studies about the health benefits of a minimum wage: https://www.nytimes.com/interactive/2019/02/21/magazine/minimum-wage-saving-lives.html https://www.nytimes.com/interactive/2019/02/21/magazine/mini...
heylook 6y ago
> Never. And I'm serious about this. You know that we have search engines, right? https://www.healthaffairs.org/do/10.1377/hpb20180622.107025/full/ https://www.healthaffairs.org/do/10.1377/hpb20180622.107025/... https://papers.ssrn.com/sol3/papers.cfm?abstract_id=267875 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=267875 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3381978 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3381978 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3520915 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3520915
- macspoofing 6y ago
  Let me summarize what you did here: 1) You had a conclusion in your mind that minimum wage is beneficial. 2) You googled with terms that match your conclusion. 3) You cherry-picked the studies that match your conclusion. 4) The studies all point to either mixed outcomes or minor effects - with no attempt to even establish a causal effects (some of those are downright silly. Like tying minimum wage policy to rising wages in a country that is going through 7-9% GDP growth) Do you honestly think that this is a way to argue? That you just shut-gun random links you cherry-picked? How about this, survey after survey of economists (and you can google those since apparently googling is all you need) show either a majority or plurality of economists oppose rising minimum wages and deep skepticism of its benefits. What are they missing? Or do you want to cherry-pick economists that support your conclusion like a climate change denier pointing to that small number of climate scientist that show some skepticism of climate change?

refurb 6y ago

someone worth $50/hr can be paid $5/hr if anyone can do the job How do you define "worth" here?

CarbyAu 6y ago
Different people are saying different things but your question is most important. I suspect - but obviously can't speak on behalf of - the GP is using a definition of:worth $50/hr for the business bottom line.