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What harm do minimum wages do?

economist.com

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Re: What harm do minimum wages do?

#351

Post by drak0n1c »

moth-fuzz wrote: post #336

I’m going to flip this one around and ask: why are businesses entitled to low-cost labor? In other markets, markets of objects, if you don’t have the funds to purchase something you don’t get to have the thing, and if you attempt to coerce the thing into your ownership, we call that robbery, and prosecute it accordingly. So why doesn’t that apply to human labor? Labor is a product, it exists in a market, and there is…

There is no distinction - all markets are ruled by consent. Both parties have to agree to a voluntary transaction, and that applies to employees and products.

Re: What harm do minimum wages do?

#352

Post by jandrese »

trentnix wrote: post #309
jandrese wrote: post #296

Earlier quoted context omitted.

So why not provide a legal path to immigration instead of abolishing the minimum wage then?

Illegal immigration and immigration in general is its own rabbit hole. You shouldn't assume from my post whether I'm for or against illegal immigration (or any type of immigration) because it doesn't really matter one way or the other to the points I'm trying to make. Economically speaking, granting legal status to unskilled illegals results in a combination of undesirable side effects: - it increases the price of th…

This is where you lose me. The jobs still need to be done. Some companies might just fold up and die, but most would be just as happy passing on the higher costs to customers, and said good or service still needs to be produced so the companies that survive will take over for the ones that folded.

Economists have this weird idea that all fast food would close because the people working there clearly aren't worth $15/hour because they're doing jobs that currently pay only $10/hour.

The crazy part is that higher minimum wages tend to increase the market, not decrease it. Turns out that poor people are bottlenecked on money. If you reduce the bottleneck they can spend more, which increases demand for labor (to fill the supply) which increases the labor rate. You can see this effect all throughout history, the more wealth gap an economy has the slower its economic growth rate is. The super rich can't spend the money fast enough or broadly enough to increase the economic base, the economies grow stagnant.

Re: What harm do minimum wages do?

#353

Post by ccffpphh »

JoeAltmaier wrote: post #91
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.

...and because workers show up to make it run, and because everybody pays taxes for the roads and electricity, and on and on. We could have a dog-eat-dog society like Mad Max or something. Or we could set simple rules and live a decent life. Its kind of what Democracy is about.

You don't need taxes for roads or electricity. In the same way we don't need taxes for grocery shopping, or education.

Workers indeed show up and make things run, but only because they voluntarily chose to agree to a contract where that is their duty. If they don't like the terms of their contract, they can not take it, renegotiate their current one, find a new one, or take on risk and start your own income. You can't "accidentally" fall into a job.

Re: What harm do minimum wages do?

#354

Post by throwaway894345 »

WalterBright wrote: post #292
throwaway894345 wrote: post #217

Earlier quoted context omitted.

Fair enough; we're using 'leverage' differently. I didn't realize it had a formal economic definition. Never the less, my point stands: that employers can afford to wait for a given worker's labor prices to come down to the market price for their labor is affirmative evidence that the labor market is free whereas the OP considers this evidence that the labor market is unfree.

> employers can afford to wait for a given worker's labor prices to come down to the market price for their labor That seriously underestimates the cost of a business being idle. Ample evidence for that is the devastation wreaked on businesses from the recent lockdowns.

To the OP's credit, I think there's a difference between "a company can continue without filling a specific role for a very long time, while a worker must find a job quickly" and "a company can continue without any employees for a very long time" which seems to be more consistent with your lockdown example.

The OP's position is IMO wrong in that (rational) employers aren't incentivized to wait for the absolute lowest-price worker because of opportunity cost. Consider the example of a successful restaurant looking to fill the role of 'marketer'. The company is already profitable and could continue indefinitely without filling the role. However, the company is looking to fill this role precisely because it believes that it stands to profit a lot, and every day that the role goes unfilled they're losing out on that profit. So here the worker has some leverage. Further, the restaurant isn't the only game in town, the worker can have offers from multiple employers and parlay them against each other for still better offers. The wage ultimately depends on the size of the opportunity (the company won't pay the marketer 100% of the opportunity or it won't be worth hiring them) and the supply of marketers. Ultimately, the restaurant wants to hire the least-expensive marketer (ignoring variance in worker quality for sake of argument) without waiting too long (losing out on the opportunity). This is what a free market looks like--the OP is arguing that because an employer can theoretically avoid bankruptcy indefinitely without filling the position that the market is not free, but I think they misunderstand what "free market" means.

Re: What harm do minimum wages do?

#355

Post by ccffpphh »

coliveira wrote: post #90
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.

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.

I agree!

Re: What harm do minimum wages do?

#356

Post by dredmorbius »

fsckboy wrote: post #95
throwaway894345 wrote: post #85

Earlier quoted context omitted.

> 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…

> I'm not aware of any definition of "free market" which supposes that all players have equal leverage. bog standard microeconomics 101 uses as an assumption that no player can thru individual choices affect prices in the market, i.e. all players do have equal leverage, zero. "free market" has more than one usage, but economics's conclusions are valid only if the assumptions are met.

Keep in mind that "free market" and "perfect competition", whilst commonly used interchangably, are in fact distinct terms. Few standard economic texts even mention "free market" whilst "perfect competition" is a standard microeconomic term (along with monopoly/monopsony and oligopoly/oligopsony), referring almost entirely to marginal value analysis, price/quantity behaviours, allocations of producer/consumer surplus, and deadweight losses.

"Free market" is a political term regarding the level of government regulation.

Neither "free market" nor "competitive market" adequately describe all (or even significant) levels of power differentials between economic (and social) actors.

Re: What harm do minimum wages do?

#357

Post by chc »

Stupulous wrote: post #280
entropicdrifter wrote: post #174

Earlier quoted context omitted.

Or you could make an automation tax and use it to fund UBI

You could only use it to help fund UBI, unless UBI is significantly less than minimum wage. If the price of buying the robot and running it plus automation tax exceeds what you would spend on employing people at minimum wage, businesses would just keep employing people.

That sounds like a win-win scenario. In cases where robots can do things so efficiently that no human could compete when the minimum wage is a living wage, robots will can do the jobs and anyone who could only have done that job will be OK. In cases where it's cheaper to pay people a living wage than to have robots do it, people can work for a living wage.

Re: What harm do minimum wages do?

#358

Post by mdoms »

abstractbarista wrote: post #273
mdoms wrote: post #157

Earlier quoted context omitted.

> The direct effect of the minimum wage is to make certain low-productivity jobs illegal. Consider that for a moment: a person with limited skills and/or needs is simply prohibited from doing low-productivity work regardless of desire. Has this ever been shown to be the case? Use real data or case studies.

Back-breaking farm work is done largely by humans who are present in the country illegally.

So the fields would be left fallow if governments enforced their laws properly?

Re: What harm do minimum wages do?

#359

Post by oarabbus_ »

throwaway894345 wrote: post #85
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…

>As I understand it, an economy with powerful corporations and relatively weak workers could still satisfy the definition for 'free market';

Sure, this can be true.

> in other words, power dynamics are orthogonal to market freedom.

No, they are certainly not orthogonal. One needs to only perform a simple thought experiment and increase the corporations' power to the point which constitutes a monopoly, to see immediately that they are not orthogonal. Do the same thing with increasing the power of unions and workers and you will again quickly leave free market territory.

It's a bit astounding to make the (false) claim power dynamics are orthogonal to market freedom.

Re: What harm do minimum wages do?

#360

Post by qeternity »

AnotherGoodName wrote: post #127
grandmczeb wrote: post #104

Earlier quoted context omitted.

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…

>If you add American's median household healthcare expenditure (~$8,200) to Australia's consumption, America's consumption is still 20% higher. Yes but the point is that's one example. I'm not going to got through the full list but i can't think of one USA government provided service that's better quality or requires less private intervention compared to social democracies like Australia and it shows up in so many in…

Very odd to hear from someone who lived in both. I’ve lived in both as well.

> More private toll roads in the USA.

And more public. More roads period. The interstate highway system is one of the modern wonders of the world.

> Public housing is more common per capita in Australia.

I’m not sure if this is true, but I’d argue it’s not a good thing.

> Australias national broadband network (i still can't get fibre here in the USA but i had it in regional Australia), etc. Again i'm not going to keep going except to say that i've lived in both nations and it's really obvious.

This is an extremely strange one. Internet in Australia is so bad it’s painful. The national network is a joke.

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