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Minimum wage would be $26 an hour if it had grown in line with productivity

182 points by apress 5y ago

credit_guy 5y ago
No it would not. The average productivity of a US worker might have increased by a certain amount, but not the productivity of the minimum wage earners. If their productivity had gone up that much, there would be no need for a minimum wage law, the employers would simply be glad to pay them based on their productivity.
- JumpCrisscross 5y ago
  > If their productivity had gone up that much, there would be no need for a minimum wage law, the employers would simply be glad to pay them based on their productivity Agree with your first objection. Believe this requires more data to be sustained. Minimum-wage workers have a poor bargaining position.
- standardUser 5y ago
  "employers would simply be glad to pay them based on their productivity." I honestly mean no offense, but that sentiment indicates a spectacular misunderstanding of capitalism.
  - vrotaru 5y ago
    Why do you think the capitalist pay programmers so much?
    - omgwtfbyobbq 5y ago
      Because they don't have an alternative. If the supply of programmers was as large as the supply of minimum wage workers pay would drop significantly.
      - credit_guy 5y ago
        That is exactly what capitalism is about. Prices being driven by supply and demand. Companies certainly try to pay the minimum they can get away with, just like workers look for jobs that pay them the maximum they can find. Companies are not generous (although some claim they are), and workers aren't either. But the competition drives the prices and, in the case of jobs, the salaries. If you are productive, you'll be in demand, and you'll be paid handsomely. If you are productive but live in communist Soviet Union, you'll get very close to whatever else gets in a similar job.
        omgwtfbyobbq 5y ago
        I think you're thinking of a Market Economy. https://en.wikipedia.org/wiki/Market_economy https://en.wikipedia.org/wiki/Market_economy Capitalism is about the private ownership of the means of production and profits. But yeah, competition for labor (and other things) via differences in wages are attributes of a market economy. Capitalism can be a healthy part of this, but sometimes it isn't. Crony capitalism for instance can provide companies the opportunity to collude so they can artificially suppress wages, which distorts the market economy for labor. https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...
    - ido 5y ago
      Nobody is "glad" to pay programmers that much - they pay as little as they can get away with, which for programmers happens to be a higher floor.
    - decebalus1 5y ago
      Because they 'currently' have no choice. Give it a few more decades..
  - credit_guy 5y ago
    Not when we are talking about $15 vs $26 per hour. If you think there are workers out there whose productivity is $26/hour, but who can't find work at more than $15/hour, then you can truly disrupt the market and hire all these workers for $20/hour and become rich. PS: it looks like the federal minimum wage is still $7.25 [1], not $15. You can become richer. [1] https://www.dol.gov/general/topic/wages/minimumwage https://www.dol.gov/general/topic/wages/minimumwage
    - pydry 5y ago
      >If you think there are workers out there whose productivity is $26/hour, but who can't find work at more than $15/hour, then you can truly disrupt the market and hire all these workers for $20/hour and become rich. How? If their productivity is $26 / hour but their market rate is $15 / hour, by paying them $20 / hour you'll just post lower profits than companies that pay them market rate.
      - VRay 5y ago
        The workers will leave all the other companies and work for you, so those other companies will be dead in the water and/or stuck raising their own workers' pay to compete At least, that's how it was supposed to work in theory.. Now that we see people out there going for improved wages/jobs in line with good capitalist doctrine, the business owners are all screaming in rage about a "labor shortage"
        pydry 5y ago
        I'm pretty sure Walmart would prefer to post higher profits than to drive the local hairdressers out of business and have more job applicants than they know what to do with.
        bena 5y ago
        Yeah, but there's a soft form of collusion going on. If we live on an inescapable island of 1000 people, and I have 200 jobs, and you have 200 jobs, and Bob has 200 jobs, then the fact that you and Bob pay twice as much doesn't matter. You guys only need 400 workers, total. Those 600 other workers will be left to compete for the 200 jobs I have. I still get to name my price. And once you see that I can undercut labor costs due to this, it makes no sense for either you or Bob to continue paying twice as much as I do. And let's not pretend that if you don't have the very best workers, you can't compete. First of all, you can't identify the best. You hope to get lucky, but in reality, you're going to be paying not the best, but those adequate enough to perform the job reasonably well. COVID assistance has changed the game. Because before, the choice was to have a job or starve homeless. You'd take almost anything in desperation. Remove desperation and people stop acting desperate.
  - JoeAltmaier 5y ago
    It indicates the major flaw of capitalism: It has no moral compass whatsoever. Its a vicious meat grinder. I think the comment is quite insightful, in the employers might think one thing while the realities of capitalism dictate another.
    - dnautics 5y ago
      s/capitalism/the universe/g Anyways, your statement is not true. Capitalism absolutely has a moral compass, it had the moral compass of the consumptive patterns of society; if that compass points the wrong way then either we must take a hard look at ourselves, or, think about what policies are twisting consumptive patterns to go the wrong way.... Probably a bit of both.
      - BuckRogers 5y ago
        The consumers don't drive much. They just exist in the environment they were born into. The idea we vote with our money doesn't hold much water when the system is rigged with regulations set by the largest corporations to their own benefit. Keeping out competition. And that's just never going to stop either, so the economic system needs examined, not hoping for some sort of libertarian awakening. To make this worthwhile to continue at all, this conversation first needs to clearly define capitalism. Capitalism is not the free market. Markets existed long before capitalism. Capitalism is exclusively paying people less than the value they produce, to create a profit for the employer. To rectify that economic system's moral compass, you create incentives to moving towards worker-owned enterprise. Instead of the employer/owner running your gas station, the employees that actually work it have 1 share each. To own a share you have to actively work there. That model resolves most issues with capitalism. Worker's unions also resolve it, but in a less ideal way as the tension between employer-employee still exists. Which is just a slightly kinder model as master-slave, or lord-serf. Not sure about the universe comparison. The universe is chaotic entropy as far as we know, but assigning human misery- that we actively create, to the universe is a bit much.
        dnautics 5y ago
- ranma4703 5y ago
  Do you think that companies pay based on productivity, or based on the minimum amount they need to pay in order to attract workers? If the former, do you believe that if a remote worker moves from NYC to Idaho, and their employer cuts their pay by 25%, it is because their productivity has dropped by 25%? Or because their employer knows they can get away with paying them less in an area with lower cost of living / less high paying jobs?
  - BobbyJo 5y ago
    > Do you think that companies pay based on productivity, or based on the minimum amount they need to pay in order to attract workers? It's both. Productivity has a very direct effect on the minimum amount they need to attract workers. If a low skilled worker can produce 100$ an hour of value, and you're paying them 10$ and hour, someone else will very quickly be willing to pay them 11$, or 12$, etc. Suddenly, you have to pay several times what you did before in order to keep your employees or attract new ones. > If the former, do you believe that if a remote worker moves from NYC to Idaho, and their employer cuts their pay by 25%, it is because their productivity has dropped by 25%? Or because their employer knows they can get away with paying them less in an area with lower cost of living / less high paying jobs? Same as the other answer. In NYC there are more companies competing for your employee, so you have to pay more to keep them. Competition in the middle of nowhere is restricted more so than in the middle of NYC.
    - pydry 5y ago
      >It's both. Productivity has a very direct effect on the minimum amount they need to attract workers. Productivity only puts a ceiling on the amount they'd be prepared to pay for a worker. It doesn't affect the minimum amount required to attract them. That's determined by competition (i.e. who else is out there) and leverage (how much they need the job). This is why business leaders lobby hard to reduce public sector wages/pensions (so private sector doesn't have to pay as much to compete for workers) and public benefits (like universal health care), which reduces worker leverage => reducing wages => increasing profits irrespective of worker productivity.
- BitwiseFool 5y ago
  >"the employers would simply be glad to pay them based on their productivity." Maybe for smaller companies, but any business with an HR department, investors, or board of directors is going to pocket the gains rather than distribute it out via raises. And, in my experience, they even resist raising COLA rates despite the company consistently growing year over year and inflation beginning to rise. I also assert that people wouldn't need to switch around jobs during their careers in order to get substantial pay raises if pay rose with productivity.
- all2well 5y ago
  This is just begging the question. How do you know wage changes equal changes in productivity?
- tw04 5y ago
  >the employers would simply be glad to pay them based on their productivity Based on...? What employer do you know of that just willingly offers employees raises for no reason other than "you're producing more for the company so here's some free cash"? The only role I'm aware of at most companies that directly ties your output to your income is sales, and even that can be sketchy depending on where you work and how transparent they are with the financials. Most publicly traded company's goals are to pay you as little as possible to retain you.
  - joshgrib 5y ago
    Yeah this seems like a dream world, if you're a publicly traded company you have a legal obligation to pay people as little as you can, and with most companies in general the founder/owner feels like they're entitled to as much as they can take for "taking the risk"
- jokethrowaway 5y ago
  That's one way of seeing it and it could definitely be a factor. An increase in the workforce numbers could be another factor
- runako 5y ago
  This represents a fairly common misunderstanding of "productivity" as used by economists, as in this story. In economics, labor productivity is simply the output per unit of labor. A common metric is revenue per hour worked. How does this fit into the discussion here? If a company earns 10% more in inflation-adjusted currency this year than last year, but headcount has increased < 10%, by definition the staff was more productive this year than last. It's fairly easy for anyone to apply this calculation to the economy as a whole, or to a given subset. Find total revenue in period X and total revenue in a later period Y and the corresponding # of employees, and you can determine whether and how much productivity increased. Objection: "but the minimum wage earners are not more productive, everyone else is driving the productivity gains." You can run the calculation on any low-wage industry you want, you will likely see roughly similar results.
  - jkhdigital 5y ago
    Yeah… for economists “productivity” is simply an aggregate quantity, kind of like “velocity of money”. It is doubtful one can say anything intelligent about “real” productivity of individual workers based on this number alone.
- acchow 5y ago
  When your life (and health coverage!) depends on your job and you don't have the energy or time to shop around for alternative jobs, you have little negotiating power. Your employer will not simply raise your wages just because productivity has increased without you finding some negotiating power to demand it. This is why labor unions are so helpful for the working class.
- NovemberWhiskey 5y ago
  I think this is probably right? If you consider positions like janitors, bussers in restaurants, hotel housekeepers (etc) and ask the question "what has happened since 1968 which would've caused productivity for these jobs to increase by 150%?", what would the answer be?
- spywaregorilla 5y ago
  I don't agree that companies even try to pay based on productivity, but the first point is correct. Minimum wage workers have generally not gotten anymore productive. The impact of, say, Microsoft Office has been enormous on the median white collar worker's productivity. Such gains have been much smaller on low skill manual labor tasks. Most minimum wage jobs in america are attendants, cooks, aides, etc. Not the classic factory worker failing to reap the profits of improved capital machinery.
xupybd 5y ago
How much of this increase in productivity is the result of off shoring low wage jobs?
- dangus 5y ago
  Why would overseas workers be counted in a measure of US worker productivity?
  - Rebelgecko 5y ago
    If you're measuring average productivity per worker (I don't know if this is the case), removing the least productive workers would increase average productivity
  - xupybd 5y ago
    If a US company has higher revenue then they appear more productive. It could be that they have reached that productivity by using off shore workers. So the number of people indirectly involved in the US economy has increased.
    - dangus 5y ago
      But the article isn't talking about company revenue, it's talking about worker productivity - income generated in an hour of work.
      - xupybd 5y ago
        How do you calculate income generated in an hour of work without looking at revenue?
        dangus 5y ago
        What I'm trying to say is that labor productivity does not have anything to do wages. We can talk about productivity in terms of output divided by input wages, too, but that's not what this article is talking about from what I can tell. It is strictly talking about workers in the US and it's talking about how much output they can generate from each hour of labor performed, regardless of what they are being paid. (I will say, the article's own loose terminology does make it a little ambiguous, but to me the context of the article points squarely at labor productivity: output per hours worked, not hours per wage earned) Let's take an example: Chinese worker works 40 hours at $5/hour US worker works 40 hours at $25/hour Weekly total sales of product from each plant is 1,000 units at $10 per unit, so revenue is $10,000 So, now we divide revenue by hours worked for labor productivity. In this example, whether the employee is Chinese or US their labor productivity is still $10,000/40 = 250 Obviously, this hypothetical company might choose to mainly use Chinese labor for this particular product, but that doesn't change the fact that each employee is equally productive in this example. If this hypothetical company chose to increase offshoring, their revenue would not increase because the output is worth the same either way, but their profit would increase if all other costs remain the same.
randyrand 5y ago
When productivity increases, you have 2 choices: 1. increase your wages. pay your suppliers more. 2. decrease your prices. It doesn't really matter which you do. Do we want higher wages or lower prices? You can't do both. Does it even matter? The net effect is the same. Who cares that we've universally chosen #2? Note: I'm assuming there's modest competition. Monopolies have a 3rd option: more profit.
- miduil 5y ago
  > [...] their pay has flatlined, or even declined when factoring in inflation [...] Neither #1 NOR #2 are happening, what is instead happening is #3 > [...] increased inequality with most gains going to people at the top [...]
  - randyrand 5y ago
    Even if that is true, productivity is not the cause there. Productivity increases our wages because it naturally decreases prices. It's already account for. Edit: to those that don't believe it, what do you think would happen if suddenly 3x more of every product popped into existence?
- alice-i-cecile 5y ago
  The critique is that much of the investor class has chosen: 3. Pay yourself more.
- pydry 5y ago
  Profits are also a thing. Business generally prefers to do neither 1 nor 2.
- ashtonkem 5y ago
  You forgot one option. 3. Take less profit.
- peer2pay 5y ago
  Or you could do either of: 3. massive bonuses for execs and wage increases for white-collar workers 4. stock buybacks and dividends to directly distribute profits to shareholders Let’s not pretend that both of these don’t happen at the cost of regular employees.
commandlinefan 5y ago
Hm - that's about 3.5x what it is now. Does that mean everybody else should be making 3.5x what they're making now, or does this just apply to the lowest earners?
- R0b0t1 5y ago
  This $25/$26 figure was what was being quoted >5 years ago. It's more now. The comparison comes from (iirc) purchasing power parity based on the minimum wage when it was first established.
- unclebucknasty 5y ago
  >Does that mean everybody else should be making 3.5x No, it doesn't necessarily mean that. Productivity gains have not been distributed proportionally; which is what this metric is underscoring for our lowest wage workers. EDIT: If I'm misreading this, I welcome the enlightenment.
- pessimizer 5y ago
  It very obviously applies to the workers that saw the least share of productivity gains. What case would you make for raising the salaries of those paid more than their equivalent jobs were paid (adjusted for productivity growth) when the minimum wage began?
jrsj 5y ago
This might be the case but many jobs I feel like would no longer be worth paying anyone to do at that rate. That would suggest to me that the productivity of minimum/low wage workers has not increased at the same rate as productivity generally. Which would make sense given most of that increase is attributable to technology which isn’t distributed evenly through different sectors of the economy etc.
- lostapathy 5y ago
  Right, this is where this sort of blanket extrapolation breaks down. Has the average productivity grown that much? Sure, I can believe that. Has the productivity at the lower margin grown that much? I seriously doubt that. The value created by stocking shelves at wal-mart just doesn't really change over time. There's a lot of labor on the lower end that is a solved problem with all the productivity wrung out of it decades ago.
  - onlyrealcuzzo 5y ago
    It absolutely does! If Wal-Mart can pay more money for something, they would be /willing/ to pay it. The same stocking of shelves, they are able to capture more value from. Unskilled laborers are just not able to capture that value from Wal-Mart because there is an abundance of unskilled labor and the average person (the laborer) has to derive income from work. They can't just say, "Puh, this isn't worth it any more!" In addition, there's been a ton of improvements in productivity for warehouse workers. They are absolutely doing more work in the same amount of time. The same is true at most big businesses. That being said - at $26 an hour, there would be A LOT more pressure to eliminate more jobs.
    - celtain 5y ago
      >there is an abundance of unskilled labor and the average person (the laborer) has to derive income from work. They can't just say, "Puh, this isn't worth it any more!" This was true throughout the 2010s, but under full employment even a low-wage/"unskilled" worker can realistically go get a different job if they don't like the one they have. There's probably an Amazon warehouse nearby that would hire them at a higher wage, or a restaurant if they're willing to do a different kind of work.
BuckRogers 5y ago
Going off of productivity has a lot of gotchas, I'd go for tracking purchasing power for non-imported goods like housing for the zip code that the job is located in. There might be some interesting side effects to that. Pushing businesses into poor areas, which should have a positive effect on society as a whole to get money coming into those areas without handouts or mandates. It'd be a fun experiment to run. I see zero arguments against pegging the minimum wage to $12 an hour in 2021, maybe a tad more to offset years of what amounts to theft from worker's pockets. People on one hand will badmouth those on welfare, and then turn around and not want to reward those that go to work either. Those two together never sat well with me. Seems like people are just envious, bitter creatures all around.
- agitator 5y ago
  Yeah that's interesting. I think incentivizing distribution of jobs might solve a lot of issue... but who knows there are always side effects and loop holes. I agree, might be worth an experiment.
agitator 5y ago
I'm struggling to understand how productivity has anything to do with salary. Productivity increases are inevitable for everything as automation keeps improving. Salaries go up with demand for skills. If its more difficult to hire for a critical role (a skilled job or competitive), or the role generates a lot of value for a company, salaries go up. Simple economics. Low skill jobs and physical labor jobs actually require less and less skills as automation improves. In this situation wages would go down. But I do think it's a good idea to have a wage floor to account for the inflation and increases in cost of living. A social limit to what we all collectively feel is a minimum amount of money one of us should make to survive in the society we are building. I think universal healthcare and a UBI would solve a lot of this. Especially as its only going to get worse for people at the bottom.
- MisterBastahrd 5y ago
  In the 1930s, a store clerk in a large city could afford to support a family in a home they would eventually own on their single income. Today, a couple with that same job would likely be in public housing and would be scraping by.
  - bitexploder 5y ago
    What is the comparative quality of life like or those two examples?
    - code_duck 5y ago
      Owning any single family home (presumably with a yard) seems clearly more attractive than living in a public housing apartment complex.
      - cperciva 5y ago
        I'd rather have an apartment with Internet access than a house without.
        5y ago
matz1 5y ago
Because for minimum wage job its the technology that increased the productivity, not the worker itself.
silisili 5y ago
It's getting there. The biggest employer in my hometown, a huge shipping conglomerate, was paying $8.50 until a few years back. Today, they're starting at $21. That's a huge jump.
worker767424 5y ago
Productivity is a price ceiling for labor. It only raises wages by allowing marginal producers come online and compete in the labor market. It could also reduce the total demand for labor, so there's no reason to assume wages and productivity would stay linked. The correlation only makes sense in a first-order way: I produces twice as many widgets; "you should pay me twice as much." But that widget machine wasn't free, and it doesn't mean you'll sell twice as many.
lmilcin 5y ago
I agree that minimum wages are too low but the argument that wages should track productivity is false from economical point of view, in my opinion. The argument would be true if how people contribute to economy did not change. But over time disparity in contribution to economy changed. Hundred years ago people had very similar jobs, mostly physical, manual, where each would contribute rather similarly. Nowadays companies can produce virtual goods, sell "IP", and many other mechanisms to produce a lot with relatively little that just are not possible with traditional production lines. Now, I think the correct reason to justify better minimum wage is basic human decency and also the role of the state as servants to entire population. I think a person doing honest, important work for 8 hours a day 5 days a week should enjoy a compensation that should be enough for a basic living plus some little extra. Basic living means a decent place to live, medical care, ability to buy healthy, non-extravagant food, etc. It doesn't matter if that job is cleaning streets or being cashier at Walmart. We need streets to be cleaned and we need to buy stuff. These people doing basic jobs are unable to defend themselves and that's where the state should come in and make sure that people who do basic jobs are able to afford basic living.
- drran 5y ago
  What stopping you from paying much more to these poor workers?
  - tyree731 5y ago
    There are people who do pay more to these sorts of workers, but that doesn't fix the broader, societal problem.
  - lmilcin 5y ago
    What is stopping companies is competition. If you own a supermarket and want to pay a decent wage, bad news for you. Over long time you are likely to loose against your competitor who doesn't share your sentiment. You may start with 100 companies of which 2 don't have any scruples and over time you will find out that these companies will take over the market along with other ones that will use this experience as learning on how to make successful business. In the end the companies that are more aggressive win because that is just the nature of competition. Governments are there exactly to protect individual people from aggressive predation.
jhoechtl 5y ago
Keeping that in line would mean to socialize wins - it wont happen and doesn't make sense either. Sorry.
xbpx 5y ago
Yes, weaken labour regulations, allow workarounds like the gig economy, break up unions, enforce no increase in minimum, tolerate regulatory capture, permit highly wealthy individuals and organizations to have substantial say over politics through lobbying, campaign donations and think-tank policy marketplaces and guess what? The elite will pocket basically all of the productivity gains, the more elite the more in your pocket. Those with no leverage are left with a dwindling share of the pie. Trickle up economics
newfriend 5y ago
Wages are based on supply and demand. Minimum wage is an artificial propping up of wages. If there are too many workers, then employers don't need to compete to hire them, and wages are depressed. Meanwhile we import over a million new legal immigrants each year (along with unknown numbers of illegal aliens), the vast majority of whom are low-skilled workers. The people decrying low-skilled wages are the same ones supporting policies that actively reduce those wages through increased competition.
karaterobot 5y ago
> Yet rising productivity is no guarantee of a healthy economy. Equally important is how the fruits of productivity are divided. It sure seems like you can. Isn't the article about how productivity has gone up without a commensurate increase in wages for the last 50 years? Where's the basis for a skeptical employer to buy this seeming counter-factual? I support a much higher minimum wage, but this article wouldn't have convinced me of anything I didn't believe already.
stickfigure 5y ago
Why should the minimum wage track average productivity?
HandstandMick 5y ago
Minimum wages and tax reductions should all be indexed. Plenty of things are indexed to go up annually based, so why not the few things that really matter be it indexed down for taxes and up for minimum wages.
- frockington1 5y ago
  The interesting part of the equation is how allocation shifts with political parties. In the last few cycles its been best to load up on assets when Republicans have more control and then switch to more debt when Democrats get in power. Net effect is the same but the flipping makes it seem like change is happening
oh_sigh 5y ago
If minimum wage workers aren't responsible for the growth in productivity, why should they be paid as if they were? Would productivity actually be increased, if business owners not only had to invest in, say, machinery to improve productivity, but also needed to pay employees more now that they were using machines that improved their productivity? For example, I build fences for a living. Usually I pay a guy $100/day to dig post holes, and he can dig 20 post holes in a 6 hour day. I decide to scale up, so I buy a post hole digging machine for $20,000. This machine is pretty much point and shoot, and now lets the same guy dig 200 post holes in 6 hours. Not only has he dug 10x more post holes, but he also feels better at the end of the day because he was using a machine and not his own muscles to do the job. How much should that guy get paid now? Is it $1000, since he is 10x as productive? Is it $100, because he is working the same amount of hours as before? Is it $80, because his job is actually easier now because I put in $20k of my own money to make it so?
- ihumanable 5y ago
  This is the heart of capitalism right, you bought the capital, the post hole digging machine, and so you get to (this next word is being used with its technical definition, make full use of and derive benefit from (a resource), not the emotionally charged one) exploit the value generated by labor using the capital. In your scenario you didn't say how much you charge the customer, but I'll assume that it's more than you pay the laborer so that you can turn a profit. You are paying the laborer $5 per post hole. Let's say you have a healthy profit margin so you charge the customer $10 per post hole. The laborer makes you $200 each day of which you pay the laborer $100 and pocket the other $100 as profit. Now you have a post hole digging machine, they guy can dig 200 post holes and that generates $2000 dollars in value for you of which you pay out $100 to the laborer and pocket the other $1900. Now you used to make $100 profits, so let's subtract that out and say you make an additional $1800 per day from that laborer. If the capital costs $20,000 you will pay for the capital in $20,000 / $1800 = 11.11 days, we can round up and say 2 weeks. So in 2 weeks you will have paid for the capital expenditure with the increase in productivity, and then there will be upkeep and maintenance on the post hole machine, but every day after the first 12 days you go from labor making 50% of the value they generated digging holes to labor making 5% of the value they generate digging holes. Now we tell ourselves, this is the system working, you took the risk in buying the post hole digging machine. The laborer could save up his earnings for 200 days (assuming he had no other expenses, which is not realistic) and also have $20k to buy a post hole digging machine and then could just go capture the full value of his labor himself, or could pay someone $100 to operate it and make $1900 a day. If you are the guy digging the holes though, 6 months after the machine is paid off you are still only capturing 5% of the value you generate, does that seem like a good deal anymore. At what point does your taking 95% of the value someone else generate become predatory. We make ourselves feel better by saying, it's a free market, if he doesn't like it he can go get a different job. But at the end of the day, someone making $1900 has a lot more economic power and the options that come with it than someone making $100. After a year of hard work that laborer has $36,500 and the capitalist has $693,500. It's not surprising that as the economy has done this day after day, year after year, we are faced with massive income inequality, and it was really only a matter of time before the guy actually digging all the post holes your selling might ask how this arrangement is fair.
eloff 5y ago
The productivity of minimum wage labor did not increase by that amount. It's largely unchanged. Computers did not do much to revolutionize productivity on your average minimum wage job. This is a major reason why wage growth is unequal across job types.
- pessimizer 5y ago
  > The productivity of minimum wage labor did not increase by that amount. Maybe include a link?
  - eloff 5y ago
    I don't have one. Google it if you care enough. It should be pretty intuitively true if you think about which jobs benefited the most from technology and which benefited the least.
frankbreetz 5y ago
By this same metric the median household wage would be 140k The chart says production per worker has doubled. Average household income 1970:10k[0] Inflation adjusted: 70k[1] [1]https://www.census.gov/library/publications/1971/demo/p60-78.html https://www.census.gov/library/publications/1971/demo/p60-78... [0]https://www.usinflationcalculator.com/ https://www.usinflationcalculator.com/
exabrial 5y ago
Minimum wages were designed to protect workers live's from being wholesale sacrificed in factories. The theory of a government mandated "livable wage" is a concept from 3rd wave Socialism. It is truly the worst possible way to guarantee quality of life as it gives employers an excuse to be "legal" while being horribly out of line ethically.
BurningFrog 5y ago
Whenever a minimum wage argument uses 1968, you know you don't need to take it too seriously. That was an outlier year with the highest historical value. First Google graph: https://www.today.com/money/good-graph-friday-minimum-wage-worth-less-1968-6C9678220 https://www.today.com/money/good-graph-friday-minimum-wage-w...
- frankbreetz 5y ago
  1968 appears to be when the correlation between minimum wage growth and productivity growth stopped. You could use any year between the late 40s and early 70s (it's hard to be precise with the chart in the article) and you would get a similar result.
  - timbit42 5y ago
    This is when gold was decoupled from the dollar and money printing began.
Rebelgecko 5y ago
1. I don't think there's a good argument for tying minimum wage to median productivity gains across the entire economy. Is an accountant today 5x more productive than an accountant in the 1960s? Perhaps. But is a dishwasher or a frycook 5x more productive? Probably not. I also think the biggest problem impacting lower income folks is housing costs and IMO minimum wage is not the best tool for fixing that issue. 2. 1968 as a start year is super mega cherrypicked. A lot of people say "if minimum wage had kept with with CPI inflation since 1968, it'd be $12/hour now!" They usually neglect to mention that if minimum wage had kept up with CPI inflation since 1948, it'd only be $4/hour. The only reason to use 1948 vs 1968 is to massage the data to match your preexisting hypothesis.
Factorium 5y ago
Wages started to diverge from productivity at about the same time as the USA opened up to non-Western immigrants in 1965: https://en.wikipedia.org/wiki/Immigration_and_Nationality_Act_of_1965 https://en.wikipedia.org/wiki/Immigration_and_Nationality_Ac... "The act greatly increased the total number of immigrants as well as the share of immigrants from Asia and Africa." Immigrants from poor countries are easier to exploit, and will accept lower wages/standard of living, because their 'new life in the new world' is still superior to their homeland.
philwelch 5y ago
Has the productivity of minimum-wage workers grown in line with overall productivity?
JimTheMan 5y ago
Wages in the broader workforce haven't risen with increased productivity (in the developed world). Any additional profits aren't exactly getting shared with workers. The article kind of a raises a moot point, if regular wages aren't tied to productivity what should minimum wages be tied to? I believe that minimum wage should probably be set to some social factor, above some level of worker exploitation and a wage that a person could actually live on.
specialist 5y ago
Imagine if executive compensation had also been pegged to productivity. https://wtfhappenedin1971.com https://wtfhappenedin1971.com Stagnant wages and record profits. Coincidence?
_nicelaris_ 5y ago
Minimum wage wouldn't exist if it had grown in line with productivity because nothing about minimum wage laws has anything to do with productivity or fair wages. Curious though, why exactly do you think wages need to raise? Why wouldn't they be fine remaining exactly where they were when minimum wage was first conceived in order to keep minorities and "imbeciles" (the words of the architects of it, not mine)? Could it, perhaps have something to do with state involvement in fiscal policy and fiat currency?
jkhdigital 5y ago
This comment thread has really dashed my hopes of ever having a well-informed economic discussion on HN. Seems like a large majority of commenters are stuck in the 19th century, and have no idea that we moved on from the labor theory of value. Perhaps modern economics education is to blame…?
chrismcb 5y ago
The real question is, why did wages in general ) not just minimum wage) start to diverge from productivity in the early 70s?
black_13 5y ago
All the arguments about “no training” are wrong when a citizen shows up they had 12 years of training. They can presumably read write do basic arithmetic and reasonably socialized and understand a social hierarchy. The public school system did this an having a 28 dollar minimum wage would mean you would have the taxes from those from everyone making at least 28 dollars an hour. But saying they have “no training” is a lie and does a disservice to all the teachers and parents that got this person ready to work.

182 points by apress 5y ago

No it would not. The average productivity of a US worker might have increased by a certain amount, but not the productivity of the minimum wage earners. If their productivity had gone up that much, there would be no need for a minimum wage law, the employers would simply be glad to pay them based on their productivity.

JumpCrisscross 5y ago
> If their productivity had gone up that much, there would be no need for a minimum wage law, the employers would simply be glad to pay them based on their productivity Agree with your first objection. Believe this requires more data to be sustained. Minimum-wage workers have a poor bargaining position.
standardUser 5y ago
"employers would simply be glad to pay them based on their productivity." I honestly mean no offense, but that sentiment indicates a spectacular misunderstanding of capitalism.
- vrotaru 5y ago
  Why do you think the capitalist pay programmers so much?
  - omgwtfbyobbq 5y ago
    Because they don't have an alternative. If the supply of programmers was as large as the supply of minimum wage workers pay would drop significantly.
    - credit_guy 5y ago
      That is exactly what capitalism is about. Prices being driven by supply and demand. Companies certainly try to pay the minimum they can get away with, just like workers look for jobs that pay them the maximum they can find. Companies are not generous (although some claim they are), and workers aren't either. But the competition drives the prices and, in the case of jobs, the salaries. If you are productive, you'll be in demand, and you'll be paid handsomely. If you are productive but live in communist Soviet Union, you'll get very close to whatever else gets in a similar job.
      - omgwtfbyobbq 5y ago
        I think you're thinking of a Market Economy. https://en.wikipedia.org/wiki/Market_economy https://en.wikipedia.org/wiki/Market_economy Capitalism is about the private ownership of the means of production and profits. But yeah, competition for labor (and other things) via differences in wages are attributes of a market economy. Capitalism can be a healthy part of this, but sometimes it isn't. Crony capitalism for instance can provide companies the opportunity to collude so they can artificially suppress wages, which distorts the market economy for labor. https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...
  - ido 5y ago
    Nobody is "glad" to pay programmers that much - they pay as little as they can get away with, which for programmers happens to be a higher floor.
  - decebalus1 5y ago
    Because they 'currently' have no choice. Give it a few more decades..
- credit_guy 5y ago
  Not when we are talking about $15 vs $26 per hour. If you think there are workers out there whose productivity is $26/hour, but who can't find work at more than $15/hour, then you can truly disrupt the market and hire all these workers for $20/hour and become rich. PS: it looks like the federal minimum wage is still $7.25 [1], not $15. You can become richer. [1] https://www.dol.gov/general/topic/wages/minimumwage https://www.dol.gov/general/topic/wages/minimumwage
  - pydry 5y ago
    >If you think there are workers out there whose productivity is $26/hour, but who can't find work at more than $15/hour, then you can truly disrupt the market and hire all these workers for $20/hour and become rich. How? If their productivity is $26 / hour but their market rate is $15 / hour, by paying them $20 / hour you'll just post lower profits than companies that pay them market rate.
    - VRay 5y ago
      The workers will leave all the other companies and work for you, so those other companies will be dead in the water and/or stuck raising their own workers' pay to compete At least, that's how it was supposed to work in theory.. Now that we see people out there going for improved wages/jobs in line with good capitalist doctrine, the business owners are all screaming in rage about a "labor shortage"
      - pydry 5y ago
        I'm pretty sure Walmart would prefer to post higher profits than to drive the local hairdressers out of business and have more job applicants than they know what to do with.
      - bena 5y ago
        Yeah, but there's a soft form of collusion going on. If we live on an inescapable island of 1000 people, and I have 200 jobs, and you have 200 jobs, and Bob has 200 jobs, then the fact that you and Bob pay twice as much doesn't matter. You guys only need 400 workers, total. Those 600 other workers will be left to compete for the 200 jobs I have. I still get to name my price. And once you see that I can undercut labor costs due to this, it makes no sense for either you or Bob to continue paying twice as much as I do. And let's not pretend that if you don't have the very best workers, you can't compete. First of all, you can't identify the best. You hope to get lucky, but in reality, you're going to be paying not the best, but those adequate enough to perform the job reasonably well. COVID assistance has changed the game. Because before, the choice was to have a job or starve homeless. You'd take almost anything in desperation. Remove desperation and people stop acting desperate.
- JoeAltmaier 5y ago
  It indicates the major flaw of capitalism: It has no moral compass whatsoever. Its a vicious meat grinder. I think the comment is quite insightful, in the employers might think one thing while the realities of capitalism dictate another.
  - dnautics 5y ago
    s/capitalism/the universe/g Anyways, your statement is not true. Capitalism absolutely has a moral compass, it had the moral compass of the consumptive patterns of society; if that compass points the wrong way then either we must take a hard look at ourselves, or, think about what policies are twisting consumptive patterns to go the wrong way.... Probably a bit of both.
    - BuckRogers 5y ago
      The consumers don't drive much. They just exist in the environment they were born into. The idea we vote with our money doesn't hold much water when the system is rigged with regulations set by the largest corporations to their own benefit. Keeping out competition. And that's just never going to stop either, so the economic system needs examined, not hoping for some sort of libertarian awakening. To make this worthwhile to continue at all, this conversation first needs to clearly define capitalism. Capitalism is not the free market. Markets existed long before capitalism. Capitalism is exclusively paying people less than the value they produce, to create a profit for the employer. To rectify that economic system's moral compass, you create incentives to moving towards worker-owned enterprise. Instead of the employer/owner running your gas station, the employees that actually work it have 1 share each. To own a share you have to actively work there. That model resolves most issues with capitalism. Worker's unions also resolve it, but in a less ideal way as the tension between employer-employee still exists. Which is just a slightly kinder model as master-slave, or lord-serf. Not sure about the universe comparison. The universe is chaotic entropy as far as we know, but assigning human misery- that we actively create, to the universe is a bit much.
      - dnautics 5y ago
ranma4703 5y ago
Do you think that companies pay based on productivity, or based on the minimum amount they need to pay in order to attract workers? If the former, do you believe that if a remote worker moves from NYC to Idaho, and their employer cuts their pay by 25%, it is because their productivity has dropped by 25%? Or because their employer knows they can get away with paying them less in an area with lower cost of living / less high paying jobs?
- BobbyJo 5y ago
  > Do you think that companies pay based on productivity, or based on the minimum amount they need to pay in order to attract workers? It's both. Productivity has a very direct effect on the minimum amount they need to attract workers. If a low skilled worker can produce 100$ an hour of value, and you're paying them 10$ and hour, someone else will very quickly be willing to pay them 11$, or 12$, etc. Suddenly, you have to pay several times what you did before in order to keep your employees or attract new ones. > If the former, do you believe that if a remote worker moves from NYC to Idaho, and their employer cuts their pay by 25%, it is because their productivity has dropped by 25%? Or because their employer knows they can get away with paying them less in an area with lower cost of living / less high paying jobs? Same as the other answer. In NYC there are more companies competing for your employee, so you have to pay more to keep them. Competition in the middle of nowhere is restricted more so than in the middle of NYC.
  - pydry 5y ago
    >It's both. Productivity has a very direct effect on the minimum amount they need to attract workers. Productivity only puts a ceiling on the amount they'd be prepared to pay for a worker. It doesn't affect the minimum amount required to attract them. That's determined by competition (i.e. who else is out there) and leverage (how much they need the job). This is why business leaders lobby hard to reduce public sector wages/pensions (so private sector doesn't have to pay as much to compete for workers) and public benefits (like universal health care), which reduces worker leverage => reducing wages => increasing profits irrespective of worker productivity.
BitwiseFool 5y ago
>"the employers would simply be glad to pay them based on their productivity." Maybe for smaller companies, but any business with an HR department, investors, or board of directors is going to pocket the gains rather than distribute it out via raises. And, in my experience, they even resist raising COLA rates despite the company consistently growing year over year and inflation beginning to rise. I also assert that people wouldn't need to switch around jobs during their careers in order to get substantial pay raises if pay rose with productivity.
all2well 5y ago
This is just begging the question. How do you know wage changes equal changes in productivity?
tw04 5y ago
>the employers would simply be glad to pay them based on their productivity Based on...? What employer do you know of that just willingly offers employees raises for no reason other than "you're producing more for the company so here's some free cash"? The only role I'm aware of at most companies that directly ties your output to your income is sales, and even that can be sketchy depending on where you work and how transparent they are with the financials. Most publicly traded company's goals are to pay you as little as possible to retain you.
- joshgrib 5y ago
  Yeah this seems like a dream world, if you're a publicly traded company you have a legal obligation to pay people as little as you can, and with most companies in general the founder/owner feels like they're entitled to as much as they can take for "taking the risk"
jokethrowaway 5y ago
That's one way of seeing it and it could definitely be a factor. An increase in the workforce numbers could be another factor
runako 5y ago
This represents a fairly common misunderstanding of "productivity" as used by economists, as in this story. In economics, labor productivity is simply the output per unit of labor. A common metric is revenue per hour worked. How does this fit into the discussion here? If a company earns 10% more in inflation-adjusted currency this year than last year, but headcount has increased < 10%, by definition the staff was more productive this year than last. It's fairly easy for anyone to apply this calculation to the economy as a whole, or to a given subset. Find total revenue in period X and total revenue in a later period Y and the corresponding # of employees, and you can determine whether and how much productivity increased. Objection: "but the minimum wage earners are not more productive, everyone else is driving the productivity gains." You can run the calculation on any low-wage industry you want, you will likely see roughly similar results.
- jkhdigital 5y ago
  Yeah… for economists “productivity” is simply an aggregate quantity, kind of like “velocity of money”. It is doubtful one can say anything intelligent about “real” productivity of individual workers based on this number alone.
acchow 5y ago
When your life (and health coverage!) depends on your job and you don't have the energy or time to shop around for alternative jobs, you have little negotiating power. Your employer will not simply raise your wages just because productivity has increased without you finding some negotiating power to demand it. This is why labor unions are so helpful for the working class.
NovemberWhiskey 5y ago
I think this is probably right? If you consider positions like janitors, bussers in restaurants, hotel housekeepers (etc) and ask the question "what has happened since 1968 which would've caused productivity for these jobs to increase by 150%?", what would the answer be?
spywaregorilla 5y ago
I don't agree that companies even try to pay based on productivity, but the first point is correct. Minimum wage workers have generally not gotten anymore productive. The impact of, say, Microsoft Office has been enormous on the median white collar worker's productivity. Such gains have been much smaller on low skill manual labor tasks. Most minimum wage jobs in america are attendants, cooks, aides, etc. Not the classic factory worker failing to reap the profits of improved capital machinery.

xupybd 5y ago

How much of this increase in productivity is the result of off shoring low wage jobs?

dangus 5y ago
Why would overseas workers be counted in a measure of US worker productivity?
- Rebelgecko 5y ago
  If you're measuring average productivity per worker (I don't know if this is the case), removing the least productive workers would increase average productivity
- xupybd 5y ago
  If a US company has higher revenue then they appear more productive. It could be that they have reached that productivity by using off shore workers. So the number of people indirectly involved in the US economy has increased.
  - dangus 5y ago
    But the article isn't talking about company revenue, it's talking about worker productivity - income generated in an hour of work.
    - xupybd 5y ago
      How do you calculate income generated in an hour of work without looking at revenue?
      - dangus 5y ago
        What I'm trying to say is that labor productivity does not have anything to do wages. We can talk about productivity in terms of output divided by input wages, too, but that's not what this article is talking about from what I can tell. It is strictly talking about workers in the US and it's talking about how much output they can generate from each hour of labor performed, regardless of what they are being paid. (I will say, the article's own loose terminology does make it a little ambiguous, but to me the context of the article points squarely at labor productivity: output per hours worked, not hours per wage earned) Let's take an example: Chinese worker works 40 hours at $5/hour US worker works 40 hours at $25/hour Weekly total sales of product from each plant is 1,000 units at $10 per unit, so revenue is $10,000 So, now we divide revenue by hours worked for labor productivity. In this example, whether the employee is Chinese or US their labor productivity is still $10,000/40 = 250 Obviously, this hypothetical company might choose to mainly use Chinese labor for this particular product, but that doesn't change the fact that each employee is equally productive in this example. If this hypothetical company chose to increase offshoring, their revenue would not increase because the output is worth the same either way, but their profit would increase if all other costs remain the same.

randyrand 5y ago

When productivity increases, you have 2 choices: 1. increase your wages. pay your suppliers more. 2. decrease your prices. It doesn't really matter which you do. Do we want higher wages or lower prices? You can't do both. Does it even matter? The net effect is the same. Who cares that we've universally chosen #2? Note: I'm assuming there's modest competition. Monopolies have a 3rd option: more profit.

miduil 5y ago
> [...] their pay has flatlined, or even declined when factoring in inflation [...] Neither #1 NOR #2 are happening, what is instead happening is #3 > [...] increased inequality with most gains going to people at the top [...]
- randyrand 5y ago
  Even if that is true, productivity is not the cause there. Productivity increases our wages because it naturally decreases prices. It's already account for. Edit: to those that don't believe it, what do you think would happen if suddenly 3x more of every product popped into existence?
alice-i-cecile 5y ago
The critique is that much of the investor class has chosen: 3. Pay yourself more.
pydry 5y ago
Profits are also a thing. Business generally prefers to do neither 1 nor 2.
ashtonkem 5y ago
You forgot one option. 3. Take less profit.
peer2pay 5y ago
Or you could do either of: 3. massive bonuses for execs and wage increases for white-collar workers 4. stock buybacks and dividends to directly distribute profits to shareholders Let’s not pretend that both of these don’t happen at the cost of regular employees.

commandlinefan 5y ago

Hm - that's about 3.5x what it is now. Does that mean everybody else should be making 3.5x what they're making now, or does this just apply to the lowest earners?

R0b0t1 5y ago
This $25/$26 figure was what was being quoted >5 years ago. It's more now. The comparison comes from (iirc) purchasing power parity based on the minimum wage when it was first established.
unclebucknasty 5y ago
>Does that mean everybody else should be making 3.5x No, it doesn't necessarily mean that. Productivity gains have not been distributed proportionally; which is what this metric is underscoring for our lowest wage workers. EDIT: If I'm misreading this, I welcome the enlightenment.
pessimizer 5y ago
It very obviously applies to the workers that saw the least share of productivity gains. What case would you make for raising the salaries of those paid more than their equivalent jobs were paid (adjusted for productivity growth) when the minimum wage began?

jrsj 5y ago

This might be the case but many jobs I feel like would no longer be worth paying anyone to do at that rate. That would suggest to me that the productivity of minimum/low wage workers has not increased at the same rate as productivity generally. Which would make sense given most of that increase is attributable to technology which isn’t distributed evenly through different sectors of the economy etc.

lostapathy 5y ago
Right, this is where this sort of blanket extrapolation breaks down. Has the average productivity grown that much? Sure, I can believe that. Has the productivity at the lower margin grown that much? I seriously doubt that. The value created by stocking shelves at wal-mart just doesn't really change over time. There's a lot of labor on the lower end that is a solved problem with all the productivity wrung out of it decades ago.
- onlyrealcuzzo 5y ago
  It absolutely does! If Wal-Mart can pay more money for something, they would be /willing/ to pay it. The same stocking of shelves, they are able to capture more value from. Unskilled laborers are just not able to capture that value from Wal-Mart because there is an abundance of unskilled labor and the average person (the laborer) has to derive income from work. They can't just say, "Puh, this isn't worth it any more!" In addition, there's been a ton of improvements in productivity for warehouse workers. They are absolutely doing more work in the same amount of time. The same is true at most big businesses. That being said - at $26 an hour, there would be A LOT more pressure to eliminate more jobs.
  - celtain 5y ago
    >there is an abundance of unskilled labor and the average person (the laborer) has to derive income from work. They can't just say, "Puh, this isn't worth it any more!" This was true throughout the 2010s, but under full employment even a low-wage/"unskilled" worker can realistically go get a different job if they don't like the one they have. There's probably an Amazon warehouse nearby that would hire them at a higher wage, or a restaurant if they're willing to do a different kind of work.

BuckRogers 5y ago

Going off of productivity has a lot of gotchas, I'd go for tracking purchasing power for non-imported goods like housing for the zip code that the job is located in. There might be some interesting side effects to that. Pushing businesses into poor areas, which should have a positive effect on society as a whole to get money coming into those areas without handouts or mandates. It'd be a fun experiment to run. I see zero arguments against pegging the minimum wage to $12 an hour in 2021, maybe a tad more to offset years of what amounts to theft from worker's pockets. People on one hand will badmouth those on welfare, and then turn around and not want to reward those that go to work either. Those two together never sat well with me. Seems like people are just envious, bitter creatures all around.

agitator 5y ago
Yeah that's interesting. I think incentivizing distribution of jobs might solve a lot of issue... but who knows there are always side effects and loop holes. I agree, might be worth an experiment.

agitator 5y ago

I'm struggling to understand how productivity has anything to do with salary. Productivity increases are inevitable for everything as automation keeps improving. Salaries go up with demand for skills. If its more difficult to hire for a critical role (a skilled job or competitive), or the role generates a lot of value for a company, salaries go up. Simple economics. Low skill jobs and physical labor jobs actually require less and less skills as automation improves. In this situation wages would go down. But I do think it's a good idea to have a wage floor to account for the inflation and increases in cost of living. A social limit to what we all collectively feel is a minimum amount of money one of us should make to survive in the society we are building. I think universal healthcare and a UBI would solve a lot of this. Especially as its only going to get worse for people at the bottom.

MisterBastahrd 5y ago
In the 1930s, a store clerk in a large city could afford to support a family in a home they would eventually own on their single income. Today, a couple with that same job would likely be in public housing and would be scraping by.
- bitexploder 5y ago
  What is the comparative quality of life like or those two examples?
  - code_duck 5y ago
    Owning any single family home (presumably with a yard) seems clearly more attractive than living in a public housing apartment complex.
    - cperciva 5y ago
      I'd rather have an apartment with Internet access than a house without.
      - 5y ago

matz1 5y ago

Because for minimum wage job its the technology that increased the productivity, not the worker itself.

silisili 5y ago

It's getting there. The biggest employer in my hometown, a huge shipping conglomerate, was paying $8.50 until a few years back. Today, they're starting at $21. That's a huge jump.

worker767424 5y ago

Productivity is a price ceiling for labor. It only raises wages by allowing marginal producers come online and compete in the labor market. It could also reduce the total demand for labor, so there's no reason to assume wages and productivity would stay linked. The correlation only makes sense in a first-order way: I produces twice as many widgets; "you should pay me twice as much." But that widget machine wasn't free, and it doesn't mean you'll sell twice as many.

lmilcin 5y ago

I agree that minimum wages are too low but the argument that wages should track productivity is false from economical point of view, in my opinion. The argument would be true if how people contribute to economy did not change. But over time disparity in contribution to economy changed. Hundred years ago people had very similar jobs, mostly physical, manual, where each would contribute rather similarly. Nowadays companies can produce virtual goods, sell "IP", and many other mechanisms to produce a lot with relatively little that just are not possible with traditional production lines. Now, I think the correct reason to justify better minimum wage is basic human decency and also the role of the state as servants to entire population. I think a person doing honest, important work for 8 hours a day 5 days a week should enjoy a compensation that should be enough for a basic living plus some little extra. Basic living means a decent place to live, medical care, ability to buy healthy, non-extravagant food, etc. It doesn't matter if that job is cleaning streets or being cashier at Walmart. We need streets to be cleaned and we need to buy stuff. These people doing basic jobs are unable to defend themselves and that's where the state should come in and make sure that people who do basic jobs are able to afford basic living.

drran 5y ago
What stopping you from paying much more to these poor workers?
- tyree731 5y ago
  There are people who do pay more to these sorts of workers, but that doesn't fix the broader, societal problem.
- lmilcin 5y ago
  What is stopping companies is competition. If you own a supermarket and want to pay a decent wage, bad news for you. Over long time you are likely to loose against your competitor who doesn't share your sentiment. You may start with 100 companies of which 2 don't have any scruples and over time you will find out that these companies will take over the market along with other ones that will use this experience as learning on how to make successful business. In the end the companies that are more aggressive win because that is just the nature of competition. Governments are there exactly to protect individual people from aggressive predation.

jhoechtl 5y ago

Keeping that in line would mean to socialize wins - it wont happen and doesn't make sense either. Sorry.

xbpx 5y ago

Yes, weaken labour regulations, allow workarounds like the gig economy, break up unions, enforce no increase in minimum, tolerate regulatory capture, permit highly wealthy individuals and organizations to have substantial say over politics through lobbying, campaign donations and think-tank policy marketplaces and guess what? The elite will pocket basically all of the productivity gains, the more elite the more in your pocket. Those with no leverage are left with a dwindling share of the pie. Trickle up economics

newfriend 5y ago

Wages are based on supply and demand. Minimum wage is an artificial propping up of wages. If there are too many workers, then employers don't need to compete to hire them, and wages are depressed. Meanwhile we import over a million new legal immigrants each year (along with unknown numbers of illegal aliens), the vast majority of whom are low-skilled workers. The people decrying low-skilled wages are the same ones supporting policies that actively reduce those wages through increased competition.

karaterobot 5y ago

> Yet rising productivity is no guarantee of a healthy economy. Equally important is how the fruits of productivity are divided. It sure seems like you can. Isn't the article about how productivity has gone up without a commensurate increase in wages for the last 50 years? Where's the basis for a skeptical employer to buy this seeming counter-factual? I support a much higher minimum wage, but this article wouldn't have convinced me of anything I didn't believe already.

stickfigure 5y ago

Why should the minimum wage track average productivity?

HandstandMick 5y ago

Minimum wages and tax reductions should all be indexed. Plenty of things are indexed to go up annually based, so why not the few things that really matter be it indexed down for taxes and up for minimum wages.

frockington1 5y ago
The interesting part of the equation is how allocation shifts with political parties. In the last few cycles its been best to load up on assets when Republicans have more control and then switch to more debt when Democrats get in power. Net effect is the same but the flipping makes it seem like change is happening

oh_sigh 5y ago

If minimum wage workers aren't responsible for the growth in productivity, why should they be paid as if they were? Would productivity actually be increased, if business owners not only had to invest in, say, machinery to improve productivity, but also needed to pay employees more now that they were using machines that improved their productivity? For example, I build fences for a living. Usually I pay a guy $100/day to dig post holes, and he can dig 20 post holes in a 6 hour day. I decide to scale up, so I buy a post hole digging machine for $20,000. This machine is pretty much point and shoot, and now lets the same guy dig 200 post holes in 6 hours. Not only has he dug 10x more post holes, but he also feels better at the end of the day because he was using a machine and not his own muscles to do the job. How much should that guy get paid now? Is it $1000, since he is 10x as productive? Is it $100, because he is working the same amount of hours as before? Is it $80, because his job is actually easier now because I put in $20k of my own money to make it so?

ihumanable 5y ago
This is the heart of capitalism right, you bought the capital, the post hole digging machine, and so you get to (this next word is being used with its technical definition, make full use of and derive benefit from (a resource), not the emotionally charged one) exploit the value generated by labor using the capital. In your scenario you didn't say how much you charge the customer, but I'll assume that it's more than you pay the laborer so that you can turn a profit. You are paying the laborer $5 per post hole. Let's say you have a healthy profit margin so you charge the customer $10 per post hole. The laborer makes you $200 each day of which you pay the laborer $100 and pocket the other $100 as profit. Now you have a post hole digging machine, they guy can dig 200 post holes and that generates $2000 dollars in value for you of which you pay out $100 to the laborer and pocket the other $1900. Now you used to make $100 profits, so let's subtract that out and say you make an additional $1800 per day from that laborer. If the capital costs $20,000 you will pay for the capital in $20,000 / $1800 = 11.11 days, we can round up and say 2 weeks. So in 2 weeks you will have paid for the capital expenditure with the increase in productivity, and then there will be upkeep and maintenance on the post hole machine, but every day after the first 12 days you go from labor making 50% of the value they generated digging holes to labor making 5% of the value they generate digging holes. Now we tell ourselves, this is the system working, you took the risk in buying the post hole digging machine. The laborer could save up his earnings for 200 days (assuming he had no other expenses, which is not realistic) and also have $20k to buy a post hole digging machine and then could just go capture the full value of his labor himself, or could pay someone $100 to operate it and make $1900 a day. If you are the guy digging the holes though, 6 months after the machine is paid off you are still only capturing 5% of the value you generate, does that seem like a good deal anymore. At what point does your taking 95% of the value someone else generate become predatory. We make ourselves feel better by saying, it's a free market, if he doesn't like it he can go get a different job. But at the end of the day, someone making $1900 has a lot more economic power and the options that come with it than someone making $100. After a year of hard work that laborer has $36,500 and the capitalist has $693,500. It's not surprising that as the economy has done this day after day, year after year, we are faced with massive income inequality, and it was really only a matter of time before the guy actually digging all the post holes your selling might ask how this arrangement is fair.

eloff 5y ago

The productivity of minimum wage labor did not increase by that amount. It's largely unchanged. Computers did not do much to revolutionize productivity on your average minimum wage job. This is a major reason why wage growth is unequal across job types.

pessimizer 5y ago
> The productivity of minimum wage labor did not increase by that amount. Maybe include a link?
- eloff 5y ago
  I don't have one. Google it if you care enough. It should be pretty intuitively true if you think about which jobs benefited the most from technology and which benefited the least.

frankbreetz 5y ago

By this same metric the median household wage would be 140k The chart says production per worker has doubled. Average household income 1970:10k[0] Inflation adjusted: 70k[1] [1]https://www.census.gov/library/publications/1971/demo/p60-78.html https://www.census.gov/library/publications/1971/demo/p60-78... [0]https://www.usinflationcalculator.com/ https://www.usinflationcalculator.com/

exabrial 5y ago

Minimum wages were designed to protect workers live's from being wholesale sacrificed in factories. The theory of a government mandated "livable wage" is a concept from 3rd wave Socialism. It is truly the worst possible way to guarantee quality of life as it gives employers an excuse to be "legal" while being horribly out of line ethically.

BurningFrog 5y ago

Whenever a minimum wage argument uses 1968, you know you don't need to take it too seriously. That was an outlier year with the highest historical value. First Google graph: https://www.today.com/money/good-graph-friday-minimum-wage-worth-less-1968-6C9678220 https://www.today.com/money/good-graph-friday-minimum-wage-w...

frankbreetz 5y ago
1968 appears to be when the correlation between minimum wage growth and productivity growth stopped. You could use any year between the late 40s and early 70s (it's hard to be precise with the chart in the article) and you would get a similar result.
- timbit42 5y ago
  This is when gold was decoupled from the dollar and money printing began.

Rebelgecko 5y ago

1. I don't think there's a good argument for tying minimum wage to median productivity gains across the entire economy. Is an accountant today 5x more productive than an accountant in the 1960s? Perhaps. But is a dishwasher or a frycook 5x more productive? Probably not. I also think the biggest problem impacting lower income folks is housing costs and IMO minimum wage is not the best tool for fixing that issue. 2. 1968 as a start year is super mega cherrypicked. A lot of people say "if minimum wage had kept with with CPI inflation since 1968, it'd be $12/hour now!" They usually neglect to mention that if minimum wage had kept up with CPI inflation since 1948, it'd only be $4/hour. The only reason to use 1948 vs 1968 is to massage the data to match your preexisting hypothesis.

Factorium 5y ago

Wages started to diverge from productivity at about the same time as the USA opened up to non-Western immigrants in 1965: https://en.wikipedia.org/wiki/Immigration_and_Nationality_Act_of_1965 https://en.wikipedia.org/wiki/Immigration_and_Nationality_Ac... "The act greatly increased the total number of immigrants as well as the share of immigrants from Asia and Africa." Immigrants from poor countries are easier to exploit, and will accept lower wages/standard of living, because their 'new life in the new world' is still superior to their homeland.

philwelch 5y ago

Has the productivity of minimum-wage workers grown in line with overall productivity?

JimTheMan 5y ago

Wages in the broader workforce haven't risen with increased productivity (in the developed world). Any additional profits aren't exactly getting shared with workers. The article kind of a raises a moot point, if regular wages aren't tied to productivity what should minimum wages be tied to? I believe that minimum wage should probably be set to some social factor, above some level of worker exploitation and a wage that a person could actually live on.

specialist 5y ago

Imagine if executive compensation had also been pegged to productivity. https://wtfhappenedin1971.com https://wtfhappenedin1971.com Stagnant wages and record profits. Coincidence?

_nicelaris_ 5y ago

Minimum wage wouldn't exist if it had grown in line with productivity because nothing about minimum wage laws has anything to do with productivity or fair wages. Curious though, why exactly do you think wages need to raise? Why wouldn't they be fine remaining exactly where they were when minimum wage was first conceived in order to keep minorities and "imbeciles" (the words of the architects of it, not mine)? Could it, perhaps have something to do with state involvement in fiscal policy and fiat currency?

jkhdigital 5y ago

This comment thread has really dashed my hopes of ever having a well-informed economic discussion on HN. Seems like a large majority of commenters are stuck in the 19th century, and have no idea that we moved on from the labor theory of value. Perhaps modern economics education is to blame…?

chrismcb 5y ago

The real question is, why did wages in general ) not just minimum wage) start to diverge from productivity in the early 70s?

black_13 5y ago

All the arguments about “no training” are wrong when a citizen shows up they had 12 years of training. They can presumably read write do basic arithmetic and reasonably socialized and understand a social hierarchy. The public school system did this an having a 28 dollar minimum wage would mean you would have the taxes from those from everyone making at least 28 dollars an hour. But saying they have “no training” is a lie and does a disservice to all the teachers and parents that got this person ready to work.