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What harm do minimum wages do?

economist.com

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Re: What harm do minimum wages do?

#101

Post by throwawaysea »

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…

> This will be the case as long as we have monetary policy based on the idea that "100% employment is the apocalypse"

Can you share where you are deriving this from? I don't think monetary policy is based on this idea. I think it is based more on managing inflation and economic growth, with employment impacts being a side-effect.

> It seems like it is accepted as fact that 100% employment would lead to hyperinflation

I also don't think it is that 100% employment would lead to hyperinflation. It's more that full employment might imply inflation has taken place, meaning that a basket of goods/services might cost more (in terms of number of Dollars). But maybe I don't understand the argument here?

Re: What harm do minimum wages do?

#102

Post by snake_plissken »

I've thought about a similar question: what happens if there is no minimum wage? If people are already struggling when being paid the minimum wage, what happens if business are able to lower it even more? Yeah I get the dynamics of supply demand are supposed to work here, but it just feels like at some point it's not worth people's time to work for such a low wage and they just give up and go on the dole.

I also wonder if in some perverse way, a minimum wage does some harm to workers. Basically the thinking goes like this: companies that are looking to hire labor at these pay levels don't really need to compete for the labor because they know all of their competitors are going to be also paying the minimum wage. The resulting effect is stagnant wages that never go above the minimum wage because everyone knows they only ever need to pay that.

Anyway, I support concepts like the minimum wage which are well intentioned, it's probably just time we reevaluate how to help low income workers achieve more financial security.

PS: didn't read the article, just wanted to get my thoughts out there real quick while on lunch break.

Re: What harm do minimum wages do?

#103

Post by throwaway894345 »

tfehring wrote: post #84
ccffpphh wrote: post #47

Earlier quoted context omitted.

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?

The parent said "no one is entitled to anything". I take that to mean "neither capital nor labor is entitled to a return". It's probably also useful to scope this conversation to a certain context: "in a free market, no one is entitled to anything". This is a sort of hypothetical scenario since there are no perfectly free markets, and a completely unregulated market is very likely not a desirable thing (evolutionary forces aren't stable and stability is a prerequisite for sustained prosperity, security, etc); however, it's still a useful concept to guide discussion.

Re: What harm do minimum wages do?

#104

Post by grandmczeb »

AnotherGoodName wrote: post #64
grandmczeb wrote: post #52

Earlier quoted context omitted.

Wealth is very hard to accurately measure and is impacted a lot by demographics (e.g. age distribution). Consumption is a better measure of how people actually live. https://en.wikipedia.org/wiki/List_of_countries_by_household...

I disagree simply because expenditures are completely different for more socialist countries. Eg. Total healthcare expenditure per capita is well below the USA in Australia. Less than half in fact. https://onthewards.org/the-inside-scoop-part-one-a-compariso... So that's $4500 a year more the average US citizen has in total expenditure that isn't some type of luxury good or indicator of a better life. It's just survi…

If you add American's median household healthcare expenditure (~$8,200) to Australia's consumption, America's consumption is still 20% higher.

> I mean Australia beats the USA by any quality of life index out there.

I don't think it's worth it to get into an argument about which country is "better", except to say a lot of indexes are designed to advocate for the creator's goals rather than as a useful comparison. E.g. your linked ranking uses "the share of women holding seats in national Houses of Assembly". Is that really a useful comparison point for quality of life?

Re: What harm do minimum wages do?

#105

Post by sumtechguy »

strbean wrote: post #77
Analemma_ wrote: post #26

Earlier quoted context omitted.

I don't enough to say whether 100% employment is good or not, but I do know that this: > It seems like it is accepted as fact that 100% employment would lead to hyperinflation is a strawman. The argument is that 100% employment will cause an undesirably high inflation, but serious economists almost never talk about hyperinflation. (It tends to be a boogeyman used by deficit hawks and the like, since it almost never h…

It isn't a straw man. The theory states that inflation will continuously increase at an accelerating rate as long as employment is above the "natural level". For any definition of hyper-inflation, proponents of NAIRU believe that we will meet that definition at some point if employment stays too high. > Only with continuously accelerating inflation could rates of unemployment below the natural rate be maintained. [0]…

For it to be basically unlimited inflation would mean there is an unlimited amount of cash and capital and capital in the system. That seems on the surface improbable. It strikes more as one of the formulas has gone off the chart and someone is making assumptions.

Re: What harm do minimum wages do?

#106

Post by baron816 »

If society decides that people should have a minimum income/minimum quality of life, then the burden of providing that minimum should fall on society as a whole. I don’t think it’s right (or efficient) to place that burden on a certain set of firms or industries that are providing jobs for low skilled workers. We would be much better off with a negative income tax plus universal health care.

Re: What harm do minimum wages do?

#107

Post by danenania »

prostoalex wrote: post #36
danenania wrote: post #21

Earlier quoted context omitted.

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?

It's not always easy to quantify. Consider people like janitors or security guards. They may be absolutely critical to the business running even though they don't produce revenue directly. Even if minimum wage was set to $100/hr for these jobs, it would still be worth it for many companies to hire them, since producing any revenue could be contingent on having people in those positions. At the same time, they are very competitive labor markets, so without a floor, the pay could go very low despite being essential to the business.

When someone is directly contributing to revenue, like a factory worker or salesperson, it's a bit simpler since you can look at their output, but you still need more information than gross margin to know the maximum a company could profitably pay an employee, since a company might design their operations very differently depending on the price of labor.

Re: What harm do minimum wages do?

#108

Post by AnimalMuppet »

Fargren wrote: post #72
colinmhayes wrote: post #39

Earlier quoted context omitted.

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

If I dig one hole a day with my hands and ten holes a day with a shovel, I still dug the nine extra holes even if I don't own the shovel.

I believe that colinmhayes' point is that you dug the extra nine holes because there was a shovel, not because you got better at digging holes with your hands. The productivity gain was because a shovel was being used. It didn't matter who owned the shovel, it mattered that you were digging with one.

But that's not completely true, because a person who only knows how to dig with their hands still only digs one hole a day, even if there's a shovel just lying there. Knowing how to use the tools does in fact make you a more productive worker.

It seems to me, then, that part of the gain from the productivity from better tools should go to the worker who knows how to use the tools. And part should go to the person who bought the tools.

Re: What harm do minimum wages do?

#109

Post by nemo44x »

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.

Over the last 50 years, the combined middle and upper-middle class of the USA has been the part that has grown the most. The lower middle and poverty classes have shrunk. The upper class has grown a small amount. 62% of the country today is middle or upper-middle class today as opposed to 50 years ago when 51% were. [1]

However, the middle class has shrunk quite a bit as the upper middle class has seen tremendous growth while lower middle and poverty classes have seen a good deal of shrinkage.

37% today are lower-middle or poverty class compared with 50 years ago where 48% were. In particular, the poor have shrunk from 24% to 20% today.

So the middle and upper-middle have grown over the last 50 years with the upper-middle in particular growing and lower-middle and poverty has shrunk. However, middle class people may feel left behind as they see more people becoming upper-middle.

[1] https://www.urban.org/sites/default/files/publication/81581/...

Re: What harm do minimum wages do?

#110

Post by fulafel »

seiferteric wrote: post #100

I know that in economics it is difficult to do proper studies hence the "dismal science", but my understanding is that most economists agree that minimum wages don't work right? So why is it still pushed? Shouldn't we "listen to the experts"? Besides there are other tools like the EITC.

There doesn't appear to be consensus like that - but not because lack of trying: https://www.anderson.ucla.edu/faculty-and-research/anderson-...
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