What harm do minimum wages do? • Hacker News Board

Re: What harm do minimum wages do?

#81

Post by adrr » Wed, Aug 19, 2020, 7:03 PM UTC

pchristensen wrote: post #6

(can't read the article, but I've read and thought a lot about it) I'm on the fence about the net cost/benefit of localized minimum wages. I think that a federal minimum wage (or at least, a high one), and to some extent, state minimum wages, are a bad idea. The Fight for $15 movement came from expensive cities, and it might be the right policy for those places. But it would severely distort and crush lower-cost citi…

I am fine with localized min wage laws if the federal government based distribution of spending on a per tax revenue by each state. High min wage, means more federal tax revenue. State should get most of that money back in federal spending.

Re: What harm do minimum wages do?

#82

Post by claudiawerner » Wed, Aug 19, 2020, 7:03 PM UTC

cmrdporcupine wrote: post #67

abvdasker wrote: post #59

Earlier quoted context omitted.

The Marxist perspective is that the employer is incentivized to pay as little as possible to extract the maximum amount of value from the person's labor, realizing the difference as profit (even though crucially that value was created by the worker). An example of this would be software engineers at companies like Apple and Google, whose labor has been shown to produce several times the value of their compensation. U…

I think it's more correct to say that the Marxist (well, labour theory of value) perspective is not that the employer is incentivized as such, but they _have_ to. That the capitalist market _requires_ it or it doesn't work, business won't survive. It's intrinsic to the profit / wage-labour model, even if you switch to something like cooperatives or state ownership. The theory is that surplus value (which can become p…

>But this kind of misses the bigger picture of what Marx was getting at rather by getting lost in the weeds about price definitions and really is a critique of Ricardo more than Marx.

This is very true, and cannot be overstated. Often, the criticisms of one theory are actually much better direceted at a predecessor theory. Students in a history of economics course, or a regular economics course, may learn of the "labour theory of value", but they may learn either Smith's, Ricardo's, or Marx's, and assume that the theories are the same, or that the same criticisms apply to all of them.

There are good and serious criticisms of the "labour theory of value" from those unsympathetic (and even those sympathetic) to its apparent normative conclusions. It's a shame that many people seem to confuse one thinker for another, especially when each boasted of their improvements (Marx, for example, writes "I was the first to point out and examine this [...]" when writing on the "LTV" and discussed the law of the tendency for the rate of profit to fall again in his original understanding, despite being extremely well read on - and critical of - his predecessors).

Re: What harm do minimum wages do?

#83

Post by seiferteric » Wed, Aug 19, 2020, 7:04 PM UTC

danenania wrote: post #10

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…

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.…

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

Re: What harm do minimum wages do?

#84

Post by tfehring » Wed, Aug 19, 2020, 7:04 PM UTC

ccffpphh wrote: post #47

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…

The issue is that nobody is entitled to anything. You aren't de facto entitled to receiving money for any services you may or may not provide, regardless of whether you're skilled or not, just because you exist. A company exists because one or more people risked wealth in order to create a net positive system - their existence is not as riskless as one would believe.

So capital is entitled to a return but labor isn't? Why the distinction?

Re: What harm do minimum wages do?

#85

Post by throwaway894345 » Wed, Aug 19, 2020, 7:04 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…

> A lot of economic arguments forget these ideas. The labor market is not a free market: companies have more power in negotiation, they have more information and, most important of all, they can deal with a job opening not being covered most of the time. Workers can't usually live too much without finding a job.

I'm generally in favor of stronger job protections and so on, but I'm not aware of any definition of "free market" which supposes that all players have equal leverage. As I understand it, an economy with powerful corporations and relatively weak workers could still satisfy the definition for 'free market'; in other words, power dynamics are orthogonal to market freedom.

Re: What harm do minimum wages do?

#86

Post by credit_guy » Wed, Aug 19, 2020, 7:04 PM UTC

clairity wrote: post #63

pchristensen wrote: post #6

(can't read the article, but I've read and thought a lot about it) I'm on the fence about the net cost/benefit of localized minimum wages. I think that a federal minimum wage (or at least, a high one), and to some extent, state minimum wages, are a bad idea. The Fight for $15 movement came from expensive cities, and it might be the right policy for those places. But it would severely distort and crush lower-cost citi…

i'm generally in favor of state-level control of such things, but i'd be remiss not to point out that that's a great way to further entrench inequality across america. i mean, if $15/hour is a little more than subsistence level in rural north dakota or the hills of west virginia, so be it. maybe it means they can buy a laptop for the kids, but it won't be mansions and teslas everywhere. current labor markets are prof…

> maybe it means they can buy a laptop for the kids

Or maybe it means they can't buy a laptop if they don't have a job at all.

Re: What harm do minimum wages do?

#87

Post by nobody9999 » Wed, Aug 19, 2020, 7:05 PM UTC

pchristensen wrote: post #6

(can't read the article, but I've read and thought a lot about it) I'm on the fence about the net cost/benefit of localized minimum wages. I think that a federal minimum wage (or at least, a high one), and to some extent, state minimum wages, are a bad idea. The Fight for $15 movement came from expensive cities, and it might be the right policy for those places. But it would severely distort and crush lower-cost citi…

>The Fight for $15 movement came from expensive cities, and it might be the right policy for those places. But it would severely distort and crush lower-cost cities and states. The right policy for San Francisco isn't necessarily right for Birmingham.

Your point is a valid one. At the same time, if you look at how these numbers actually play out in reality, $15/hour (assuming 40 hours/week -- certainly not a given and 50 weeks per year) works out to $30,000/annum. Figure in the 12%[0] Federal income tax plus the 6.25% FICA (Social Security/Medicare) withholding and that $30,000/annum nets (not including state and local income taxes, which vary) to ~$25,000/annum.

Assuming (a big assumption) no income tax at the state/local levels, that leaves ~25,000/annum at $15/hour, 40 hours/week.

This works out to ~$2100/month for a single earner. Given that rent, food cost, transportation requirements, etc. vary widely across various localities, it's difficult to determine how well folks can get by on that amount of money.

The median rent in the US[1] is ~$1000/month. That represents ~50% of net income (again, assuming zero state/local income tax. Which doesn't bode well for those making $15/hour, given that many don't get 40 hours/week.

Even in the places with the least expensive rent[2], that's still ~25% of income. That's often considered an appropriate level of housing cost relative to income.

What's more, given that the median income in the US is more than twice as high[3] as 40 hours/week at $15/hour, a $15 minimum wage wouldn't put any upward pressure on median income (how relevant such an eventuality might be is arguable, but is interesting to note).

So yes, a national $15/hour minimum wage isn't a panacea. Those living in the poorest/cheapest places could likely live pretty well on $15/hour (again, assuming 40 hours/week, 50 weeks/year -- which doesn't apply to many).

Contrariwise, those who live in places with costs around the median for the US would likely struggle with $15/hour, and those living in the most expensive places would likely not be able to live on just one full-time job.

So yes, $15/hour nationally is a bad idea. In fact, it should be significantly higher in places that are more expensive.

[0]https://en.wikipedia.org/wiki/Income_tax_in_the_United_State...

[1]https://www.deptofnumbers.com/rent/us/

[2]https://dailyhive.com/mapped/10-cheapest-cities-rent-usa

[3]https://www.census.gov/library/stories/2019/09/us-median-hou...

[Edit: Fix spacing typos]

Re: What harm do minimum wages do?

#88

Post by Supermancho » Wed, Aug 19, 2020, 7:05 PM UTC

dannyw wrote: post #16

strbean wrote: post #11

Earlier quoted context omitted.

> companies have more power in negotiation, they have more information and, most important of all, they can deal with a job opening not being covered most of the time This will be the case as long as we have monetary policy based on the idea that "100% employment is the apocalypse". It seems like it is accepted as fact that 100% employment would lead to hyperinflation, despite the fact that this has never occurred. I…

Monetary policy is to benefit the owners; not the workers. 100% employment will drive wage growth as demand exceeds supply. That’s not good for the stock market.

> 100% employment will drive wage growth as demand exceeds supply.

I hesitate to call this a fantasy thought experiment (like all the atoms in the right place for a brick wall to allow a baseball to pass through). Not to mention the illusion of employment statistics (how it's measured), in many countries.

This stable equilibrium is impractical. The world is not a singular country. Employment within a single country is not representative of labor supply/demand, in this context.

Re: What harm do minimum wages do?

#89

Post by fulafel » Wed, Aug 19, 2020, 7:05 PM UTC

strbean wrote: post #11

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…

> companies have more power in negotiation, they have more information and, most important of all, they can deal with a job opening not being covered most of the time This will be the case as long as we have monetary policy based on the idea that "100% employment is the apocalypse". It seems like it is accepted as fact that 100% employment would lead to hyperinflation, despite the fact that this has never occurred. I…

It seems this targets difficulty depends on the the threshold to get registered outside the labour force and that options incentives vs regitering as unemployed. For example, motivated stay at home parents would need strong incentives to become employed.

Re: What harm do minimum wages do?

#90

Post by coliveira » Wed, Aug 19, 2020, 7:06 PM UTC

ccffpphh wrote: post #47

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…

The issue is that nobody is entitled to anything. You aren't de facto entitled to receiving money for any services you may or may not provide, regardless of whether you're skilled or not, just because you exist. A company exists because one or more people risked wealth in order to create a net positive system - their existence is not as riskless as one would believe.

The argument goes both sides. No company is entitled to receive profits on the products it creates or the money it invests, just because it exists. There is no reason to believe or accept that companies and investors should have more protections from losses than workers.