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"There is plenty of empirical evidence against this from countries that actually have introduced minimum wage laws." So you are saying that an employer would h

"There is plenty of empirical evidence against this from countries that actually have introduced minimum wage laws." So you are saying that an employer would hire someone that only produces $96 worth of value per week for $106 per week?

notahacker 15y ago
People that only produce $96 of value a week would probably have been unemployed anyway; because theres no shortage of labour at the bottom end of the market companies would have been able to hire better staff at $96 per hour before the minimum wage, who would be worth retaining at $106 per hour. The correlation between wages and employee productivity is pretty loose.
- jeffdavis 15y ago
  So you are arguing that there's nobody who produces a value of $1 - $105 per week? I would expect the correlation between wages and production to be much stronger at the low-income levels and for hourly positions. Regardless, it's what the employer thinks the employee is worth (or will be worth). If the employer doesn't expect at least $106+X dollars of productivity, they won't hire at $106. This is pretty basic microeconomics; supply and demand. Even if you're right that the first employee nets more than $106, that might not be true for the tenth one. The demand curve for employees is downward-sloping, right?
  - notahacker 15y ago
    I'd expect the correlation to be significantly less strong at the lower end of the market, particularly in a service-based economy like the US; worker productivity has a pretty minimal impact on number of burgers flipped per hour. They're minimum wage jobs because virtually anyone can do them, but unfortunately for people in low wage brackets there isn't an infinitude of unskilled employment opportunities to go around. It's pretty basic microeconomics that labour markets don't clear. Sure, intuitively you'd expect some very marginal employment opportunities to disappear, but the empirical evidence shows that companies prefer other options; raising prices, cutting profits or non-labour costs, increasing worker productivity where possible adjusting opening hours etc. so the effect on net unemployment is often minimal or non-existent.
dpatru 15y ago
> employer would hire someone that only produces $96 worth of value per week for $106 per week? The argument is a little more complex than that. No business will operate at an outright loss. But the minimum wage can cut into a business's profits. A hotel likely won't go bankrupt and shut down if it payed its workers a higher than market rate. And it still needs to pay for cleaners. But a higher-than-market cleaning rate will skew the market from the optimal. For example, a higher cleaning wage would make robot cleaners comparatively more attractive to a hotel. Investing in a robot might not make sense if wages were at market, but if they are raised too much, then it might be worth it to pay for an expensive robot that can replace a large portion of the cleaning staff. In general, the minimum wage encourages capital investment. If people are expensive, then you should try to replace them with machines.
- jeffdavis 15y ago
  "But the minimum wage can cut into a business's profits." Sure, part of the burden of minimum wage falls on the employer, and part on the potential employees that aren't hired. While what you say sounds plausible -- a hotel running a 20% profit every year might bear the entire burden of the higher wages and may still hire the same number of people. But there are many businesses (in the hotel industry or elsewhere) that will end up scaling back rather than pay higher wages. While minimum wage may encourage the building of machines, workers versus machines is a false dichotomy. Sure, those are alternatives, but there's another alternative as well: no machine and no worker, just a smaller business (or less service). To say that the same number of people will be hired at the higher wage is to say that the demand curve for employees is perfectly flat near the lower wages. I would have to see some evidence of that.

notahacker 15y ago

People that only produce $96 of value a week would probably have been unemployed anyway; because theres no shortage of labour at the bottom end of the market companies would have been able to hire better staff at $96 per hour before the minimum wage, who would be worth retaining at $106 per hour. The correlation between wages and employee productivity is pretty loose.

jeffdavis 15y ago
So you are arguing that there's nobody who produces a value of $1 - $105 per week? I would expect the correlation between wages and production to be much stronger at the low-income levels and for hourly positions. Regardless, it's what the employer thinks the employee is worth (or will be worth). If the employer doesn't expect at least $106+X dollars of productivity, they won't hire at $106. This is pretty basic microeconomics; supply and demand. Even if you're right that the first employee nets more than $106, that might not be true for the tenth one. The demand curve for employees is downward-sloping, right?
- notahacker 15y ago
  I'd expect the correlation to be significantly less strong at the lower end of the market, particularly in a service-based economy like the US; worker productivity has a pretty minimal impact on number of burgers flipped per hour. They're minimum wage jobs because virtually anyone can do them, but unfortunately for people in low wage brackets there isn't an infinitude of unskilled employment opportunities to go around. It's pretty basic microeconomics that labour markets don't clear. Sure, intuitively you'd expect some very marginal employment opportunities to disappear, but the empirical evidence shows that companies prefer other options; raising prices, cutting profits or non-labour costs, increasing worker productivity where possible adjusting opening hours etc. so the effect on net unemployment is often minimal or non-existent.

dpatru 15y ago

> employer would hire someone that only produces $96 worth of value per week for $106 per week? The argument is a little more complex than that. No business will operate at an outright loss. But the minimum wage can cut into a business's profits. A hotel likely won't go bankrupt and shut down if it payed its workers a higher than market rate. And it still needs to pay for cleaners. But a higher-than-market cleaning rate will skew the market from the optimal. For example, a higher cleaning wage would make robot cleaners comparatively more attractive to a hotel. Investing in a robot might not make sense if wages were at market, but if they are raised too much, then it might be worth it to pay for an expensive robot that can replace a large portion of the cleaning staff. In general, the minimum wage encourages capital investment. If people are expensive, then you should try to replace them with machines.

jeffdavis 15y ago
"But the minimum wage can cut into a business's profits." Sure, part of the burden of minimum wage falls on the employer, and part on the potential employees that aren't hired. While what you say sounds plausible -- a hotel running a 20% profit every year might bear the entire burden of the higher wages and may still hire the same number of people. But there are many businesses (in the hotel industry or elsewhere) that will end up scaling back rather than pay higher wages. While minimum wage may encourage the building of machines, workers versus machines is a false dichotomy. Sure, those are alternatives, but there's another alternative as well: no machine and no worker, just a smaller business (or less service). To say that the same number of people will be hired at the higher wage is to say that the demand curve for employees is perfectly flat near the lower wages. I would have to see some evidence of that.