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Those two things are disconnected. Wages are dictated by supply and demand, not efficiency. An oversimplified example [with lots of nuances I'm sure people wil

Those two things are disconnected. Wages are dictated by supply and demand, not efficiency. An oversimplified example [with lots of nuances I'm sure people will comment on instead of the original point]: The supply of heart surgeons is small, therefore they can command a larger wage and have their choice of jobs. The supply of burger-flippers is much larger and employers can usually find someone willing to do the labor for cheaper than another person. The point being, the best way to increase your wage is to switch jobs to something where the supply of applicants is smaller and the demand is strong.

pydry 6y ago
Supply and demand isn't purely about total numbers. it's also about the power to walk away. This is why employer lobbies are very keen on reducing public benefits (means you are more reliant on having a job) and reducing public sector wages (reduces competition in the labor market).
shadowgovt 6y ago
Essentially. Which is why unionization is such an important process---it binds the supply-demand curve so that employers are forced to allocate the resources more equitably. Supply suddenly dries up if nobody's willing to work for you because you won't pay a living wage (let alone a decent wage).
- commandlinefan 6y ago
  Well, any way you slice it - through unionization or through legislation - a $24/hour minimum wage is just going to mean massive unemployment, not 3x more money in everybody's paycheck.
  - shadowgovt 6y ago
    I think it depends. If the CEO can make more money selling 200 million whatever than 100 million whatever, they're still going to hire enough to make 200 million, even if they're taking home less than they would in the hypothetical world where they were making 200 million whatever and their bottom-tier employees were on government subsidized housing. But in the longer term, I think you raise a great point---it's a huge incentive for the CEO to figure out how to automate making 200 million whatever so that they can pay $0. Which is good for the economy in general (automation means more free human time), but societies have to adapt to a lack of labor-intensive jobs to go around. They already need to be adapting to that, because we're already in the middle of the automation revolution.
  - tomtheelder 6y ago
    I don't think this is cut and dry whatsosever, and in fact I strongly disagree. This is a hotly debated subject. What you suggest aligns with what classical economics predicts, but real world evidence doesn't necessarily back that up. Personally I don't think it would cause any significant unemployment as long as you don't do it all at once. Based on my own research, the evidence doesn't support minimum wage hikes increasing unemployment, except possibly in the very short term. The logic is basically that because the marginal propensity to consume is so high for low income workers any increase in the minimum wage creates large spikes in demand. No one wants to fire their workforce in the face of increasing demand. Prices go up some then stabilize. Companies bring in more absolute $s, and employ a similar (or even possibly a larger) workforce. It ends up being a redistribution without meaningful negative consequences. The obvious question becomes "why not keep raising it even more then?" and then answer is basically that at some point the MPC drops too low and you stop getting the positive effects, at which point you'd presumably start driving unemployment. That's obviously an oversimplification, but so is the simple logic that large changes in minimum wage spike unemployment.
- exabrial 6y ago
  Except that's a temporary solution. Eventually the industry moves it to an area where people are willing to do it cheaper; hence why nearly all manufacturing is now done in poorer countries. Not saying this is correct, just commenting on reality.
  - shadowgovt 6y ago
    It's much harder to move making hamburgers to a foreign country. Those are going to be some terrible hamburgers by the time they're shipped back from Bangladesh to Kansas, and the wait time is going to really change the drive-thru experience. ;)
    - dredmorbius 6y ago
      True, though the substitution then is more likely automation or self-service, to the limit of non-automatable work.
jariel 6y ago
Doctors are a government-subsidized cartel! (In most places) They fix the number of Doctors, and, the government usually provides substantial support for education and training. So not a very good example! But it's moot - on the 'low end' of wages, basically 40% of the population, people have 0 bargaining power - it's always been like that. The 'free market' minimum wage would be ~2$ an hour. People would be living in favelas without electricity (or it would be stolen), no healthcare, no car, borderline subsistence living. An entire economy would pop up around that - instead of the 'Dollar store' you'd have the '25 cent' store. Which is why every advanced nation has minimum wage laws. The question is though - how much of the 'productivity gains' are from better labour in any ways? Say for example a company hums along, and in an era of globalization is able to sell 5x more product, yielding really great surpluses. So the investors and execs start to get rich, the staffers get paid the same relatively speaking to inflation, their boat is possibly not lifted but stays the same. They are doing the same work, with the same skills etc.. That's more likely what is happening - labour used to be a commodity, but it's even more of a commodity now. There are no easy solutions but minimum wage should possibly be hire, the jobs that can't be done at that price should go to Mexico to help that economy develop so they can be purchasers of American exports. Something like that.

pydry 6y ago

Supply and demand isn't purely about total numbers. it's also about the power to walk away. This is why employer lobbies are very keen on reducing public benefits (means you are more reliant on having a job) and reducing public sector wages (reduces competition in the labor market).

shadowgovt 6y ago

Essentially. Which is why unionization is such an important process---it binds the supply-demand curve so that employers are forced to allocate the resources more equitably. Supply suddenly dries up if nobody's willing to work for you because you won't pay a living wage (let alone a decent wage).

commandlinefan 6y ago
Well, any way you slice it - through unionization or through legislation - a $24/hour minimum wage is just going to mean massive unemployment, not 3x more money in everybody's paycheck.
- shadowgovt 6y ago
  I think it depends. If the CEO can make more money selling 200 million whatever than 100 million whatever, they're still going to hire enough to make 200 million, even if they're taking home less than they would in the hypothetical world where they were making 200 million whatever and their bottom-tier employees were on government subsidized housing. But in the longer term, I think you raise a great point---it's a huge incentive for the CEO to figure out how to automate making 200 million whatever so that they can pay $0. Which is good for the economy in general (automation means more free human time), but societies have to adapt to a lack of labor-intensive jobs to go around. They already need to be adapting to that, because we're already in the middle of the automation revolution.
- tomtheelder 6y ago
  I don't think this is cut and dry whatsosever, and in fact I strongly disagree. This is a hotly debated subject. What you suggest aligns with what classical economics predicts, but real world evidence doesn't necessarily back that up. Personally I don't think it would cause any significant unemployment as long as you don't do it all at once. Based on my own research, the evidence doesn't support minimum wage hikes increasing unemployment, except possibly in the very short term. The logic is basically that because the marginal propensity to consume is so high for low income workers any increase in the minimum wage creates large spikes in demand. No one wants to fire their workforce in the face of increasing demand. Prices go up some then stabilize. Companies bring in more absolute $s, and employ a similar (or even possibly a larger) workforce. It ends up being a redistribution without meaningful negative consequences. The obvious question becomes "why not keep raising it even more then?" and then answer is basically that at some point the MPC drops too low and you stop getting the positive effects, at which point you'd presumably start driving unemployment. That's obviously an oversimplification, but so is the simple logic that large changes in minimum wage spike unemployment.
exabrial 6y ago
Except that's a temporary solution. Eventually the industry moves it to an area where people are willing to do it cheaper; hence why nearly all manufacturing is now done in poorer countries. Not saying this is correct, just commenting on reality.
- shadowgovt 6y ago
  It's much harder to move making hamburgers to a foreign country. Those are going to be some terrible hamburgers by the time they're shipped back from Bangladesh to Kansas, and the wait time is going to really change the drive-thru experience. ;)
  - dredmorbius 6y ago
    True, though the substitution then is more likely automation or self-service, to the limit of non-automatable work.

jariel 6y ago

Doctors are a government-subsidized cartel! (In most places) They fix the number of Doctors, and, the government usually provides substantial support for education and training. So not a very good example! But it's moot - on the 'low end' of wages, basically 40% of the population, people have 0 bargaining power - it's always been like that. The 'free market' minimum wage would be ~2$ an hour. People would be living in favelas without electricity (or it would be stolen), no healthcare, no car, borderline subsistence living. An entire economy would pop up around that - instead of the 'Dollar store' you'd have the '25 cent' store. Which is why every advanced nation has minimum wage laws. The question is though - how much of the 'productivity gains' are from better labour in any ways? Say for example a company hums along, and in an era of globalization is able to sell 5x more product, yielding really great surpluses. So the investors and execs start to get rich, the staffers get paid the same relatively speaking to inflation, their boat is possibly not lifted but stays the same. They are doing the same work, with the same skills etc.. That's more likely what is happening - labour used to be a commodity, but it's even more of a commodity now. There are no easy solutions but minimum wage should possibly be hire, the jobs that can't be done at that price should go to Mexico to help that economy develop so they can be purchasers of American exports. Something like that.