What harm do minimum wages do? • Hacker News Board

Re: What harm do minimum wages do?

#31

Post by oivey » Wed, Aug 19, 2020, 6:31 PM UTC

bcrosby95 wrote: post #9

gjulianm wrote: post #4

> Textbooks state that, in the absence of a minimum wage, a worker is paid his “marginal product of labour”, which means the value of what he produces. > Just as a monopolist can set prices higher than would be the case in a competitive market, a monopsonist can set prices artificially lower. A lot of economic arguments forget these ideas. The labor market is not a free market: companies have more power in negotiatio…

Also, do textbooks actually say that? Because it seems trivially false: if a worker is actually paid that, then there's no money left for investors.

It’s also obviously untrue given the fact that wages in the US have stagnated while productivity has continued to grow. That’s despite a floor on wages.

Re: What harm do minimum wages do?

#32

Post by deegles » Wed, Aug 19, 2020, 6:31 PM UTC

missedthecue wrote: post #15

gjulianm wrote: post #4

> Textbooks state that, in the absence of a minimum wage, a worker is paid his “marginal product of labour”, which means the value of what he produces. > Just as a monopolist can set prices higher than would be the case in a competitive market, a monopsonist can set prices artificially lower. A lot of economic arguments forget these ideas. The labor market is not a free market: companies have more power in negotiatio…

A free market does not mean that both sides want something with equal desire. I need food to survive much more than Krogers needs my business to survive. This does not mean that grocery sales are not a free market. A free market means that the supply and demand of goods rely on price signals rather than a centralized planner. Labour is absolutely a free market. As wages in one particular area increase, people respond…

> people respond to that price signal by learning the relevant skills and working in that field and getting greater salaries

Many people stay in jobs they don't like or that don't pay enough because they need the healthcare or don't have the resources (including time) to learn new skills and move to a higher paying job. So the fact that people can't freely respond to price signals means that it is not a free market.

Re: What harm do minimum wages do?

#33

Post by chanfest22 » Wed, Aug 19, 2020, 6:32 PM UTC

http://archive.is/zF4ei

tl;dr — when labor markets are artificially depressed by employers with monopsony power (e.g. workers only have one employer to work for), a minimum wage can improve efficiency of the marketplace.

Enjoyed the dispassionate take on the age old minimum wage question. It is difficult to figure out which people are in monopsony labor markets because it depends on so many things including geography and even within a zip code could vary based on a variety of factors such as internet access, public transportation access, etc. Makes sense that in some cases, when there is only one employer, they are artificially driving the price of labor down because people have no choice.

Have policymakers considered other solutions to this monopsony problem? For example guaranteed government jobs that pay a certain $ amount adjusted for the geography to incentivize private sector to match or beat that price?

Re: What harm do minimum wages do?

#34

Post by missedthecue » Wed, Aug 19, 2020, 6:34 PM UTC

deegles wrote: post #32

missedthecue wrote: post #15

Earlier quoted context omitted.

A free market does not mean that both sides want something with equal desire. I need food to survive much more than Krogers needs my business to survive. This does not mean that grocery sales are not a free market. A free market means that the supply and demand of goods rely on price signals rather than a centralized planner. Labour is absolutely a free market. As wages in one particular area increase, people respond…

> people respond to that price signal by learning the relevant skills and working in that field and getting greater salaries Many people stay in jobs they don't like or that don't pay enough because they need the healthcare or don't have the resources (including time) to learn new skills and move to a higher paying job. So the fact that people can't freely respond to price signals means that it is not a free market.

Again, a free market doesn't mean that everyone can easily buy or sell any good or service. Plenty of things prohibit this, including geographical challenges, language barriers, import tariffs, and other natural and contrived barriers to trade.

A free market means that the distribution and production of goods and services do not rely on centralized planning, but on price signals.

Re: What harm do minimum wages do?

#35

Post by olva22 » Wed, Aug 19, 2020, 6:34 PM UTC

prostoalex wrote: post #17

danenania wrote: post #10

Earlier quoted context omitted.

Right, many minimum wage opponents focus on the scenario where someone is worth e.g. $14/hr to a business, and rightly point out that this person won't be hired with a $15/hr min wage. BUT without a minimum wage, someone worth $50/hr can be paid $5/hr if anyone can do the job. It strikes me that this situation is far more common than the first scenario, and minimum wage opponents tend to ignore it in their arguments.…

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

Apple's appstore? :)

Re: What harm do minimum wages do?

#36

Post by prostoalex » Wed, Aug 19, 2020, 6:34 PM UTC

danenania wrote: post #21

prostoalex wrote: post #17

Earlier quoted context omitted.

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

That's not the right question to ask, since many other costs besides labor figure into gross margins.

What formula then is used in calculating “someone worth $50/hr“?

Does it omit or include those costs?

Re: What harm do minimum wages do?

#37

Post by geogra4 » Wed, Aug 19, 2020, 6:35 PM UTC

bcrosby95 wrote: post #9

gjulianm wrote: post #4

> Textbooks state that, in the absence of a minimum wage, a worker is paid his “marginal product of labour”, which means the value of what he produces. > Just as a monopolist can set prices higher than would be the case in a competitive market, a monopsonist can set prices artificially lower. A lot of economic arguments forget these ideas. The labor market is not a free market: companies have more power in negotiatio…

Also, do textbooks actually say that? Because it seems trivially false: if a worker is actually paid that, then there's no money left for investors.

Maybe some textbooks? But like - when a software engineer is billed out by a contracting company at 250/hr and only is paid 50/hr it's pretty obvious that the wealth created is not what the worker is paid. It's been a long time since I took microeconomics in college but even the most charitable analysis of that is basically that the worker gives up the other 200/hr for stability and benefits.

Re: What harm do minimum wages do?

#38

Post by gridlockd » Wed, Aug 19, 2020, 6:36 PM UTC

sparker72678 wrote: post #2

I know research is hard, and these issues are fraught with complexities and challenges in acquiring data, but it still boggles my mind just how many macro economic theories don't have strong empirical data to support them.

How much empirical data do you need to convince yourself that jumping out of a window with an umbrella is unsafe?

Everybody can understand that employing people at a loss is unsustainable and that the goal of employers is to make a profit. I think there's plenty of empirical data for that, the rest just follows logically.

Of course there's bound to be a narrow range where you can move some profits into wages and you have neither rising prices nor unemployment, but that number is going to be different for every location, every sector and every business. I wouldn't trust politicians to come up with a magic number here.

Re: What harm do minimum wages do?

#39

Post by colinmhayes » Wed, Aug 19, 2020, 6:37 PM UTC

oivey wrote: post #31

bcrosby95 wrote: post #9

Earlier quoted context omitted.

Also, do textbooks actually say that? Because it seems trivially false: if a worker is actually paid that, then there's no money left for investors.

It’s also obviously untrue given the fact that wages in the US have stagnated while productivity has continued to grow. That’s despite a floor on wages.

No it's not obviously untrue. Productivity growth has been driven by capital, not labor.

Re: What harm do minimum wages do?

#40

Post by throwawaysea » Wed, Aug 19, 2020, 6:37 PM UTC

gjulianm wrote: post #4

> Textbooks state that, in the absence of a minimum wage, a worker is paid his “marginal product of labour”, which means the value of what he produces. > Just as a monopolist can set prices higher than would be the case in a competitive market, a monopsonist can set prices artificially lower. A lot of economic arguments forget these ideas. The labor market is not a free market: companies have more power in negotiatio…

You're redefining what a 'free market' means. If one side has a greater need or desire, that is still within the bounds of what a free market is. The market creates incentives and disincentives to fulfill different market demands, by creating an incentive to supply what's in demand (by paying more) and a disincentive to supply what we don't need more of (by paying less).