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What harm do minimum wages do?

economist.com

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Re: What harm do minimum wages do?

#471

Post by CraigJPerry »

The more research i do in economics the less impressed i am with the discipline.

Economics is defined as a social science. That point never really struck home with me until recently. I think the fancy models, the cutting edge statistics and clever use of logic blinded me to the fact that the entire discipline is built on top of stories.

There’s no gravity, there’s no absolute zero, there’s no kilogram. There’s no fundamental tangible truths underlying the concepts of free markets.

It’s stories we tell each other as a way to explain a system we don’t and possibly can’t understand.

I’ve never been so disappointed to realise all the arguments of economic theory are built on a foundation of sand. Shifting sand at that.

Re: What harm do minimum wages do?

#472

Post by roenxi »

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…

Hasn't the experience, considering Asia, been that the greatest benefit of free markets is for low-paid workers?

I buy a lot of notionally 'American' products (iPhone, computer gear, electronics) that are all manufactured in Asia for cost reasons. A bunch of places have become extremely wealthy in the last century, basically creating a middle class out of poverty, through a strategy of cheap-wages-lots-of-manufacturing. Coincidentally, the greatest reductions in poverty are all in Asia. And one shudders to think what the Chinese could be achieving if their government was a bit more competent and left people alone to prosper.

Is there evidence that the poor in America are prospering under high minimum wages? The stats I've seen suggested it is basically status-quo for the last 50 years. Minimum wage is a small part of the puzzle, granted, but it isn't necessary to generate absurd improvements in the general welfare.

Re: What harm do minimum wages do?

#473

Post by dann0 »

dnautics wrote: post #312
LudwigNagasena wrote: post #302

Earlier quoted context omitted.

> prices represent an equivalence class of values What do you mean by that?

there is this pervasive assumption in economic theory that if two things have the same price they have the same value in some global sense. To make an obvious example: If you are allergic to peanuts, then the value of a peanut to you is quite extremely different to the value of that same peanut to someone else. This is unaffected by the price of the peanut.

This is a faulty argument.

Value to an individual is very different to value to a market.

Value in this sense is the aggregate of the individual values to all of the buyers and all of the sellers.

Price and value only match when supply and demand are at equilibrium.

Re: What harm do minimum wages do?

#474

Post by dragonwriter »

asdff wrote: post #468
dragonwriter wrote: post #454

Earlier quoted context omitted.

> If you're working in an unskilled job, living paycheck to paycheck, how are you going to improve that situation? One of the most common ways people move on to higher-paying jobs in the workforce is by skills (not necessarily in “skilled labor” sense, but even just basic work habits) earned and/or demonstrated through work in lower-paying (even unpaid, though less that since the crackdown on unpaid internships) jobs…

It's a lot easier said than done. There are a finite amount of management positions.

Not all positions which aren't poorly paid are supervisory/management positions.

Of course, restricting employability at the bottom end proportionately reduces the number of supervisory/management positions needed.

Re: What harm do minimum wages do?

#475

Post by leetcrew »

nobody9999 wrote: post #408
leetcrew wrote: post #248

Earlier quoted context omitted.

I think you're overselling your point a bit. $15/hr would be very rough in NYC or SF, but it's actually a pretty decent wage for a single person most places in the US. for comparison, I make quite a bit more than $15/hr, but $2100/month is pretty close to what it costs me to live a nice life in one of the most desirable neighborhoods in my city. I spend closer to $2500 in a typical month, but $200 of that is because…

>for comparison, I make quite a bit more than $15/hr, but $2100/month is pretty close to what it costs me to live a nice life in one of the most desirable neighborhoods in my city. What's your monthly healthcare premium? What's that, your employer provides that for you? Mine is almost $750/month. That's just for me. What's more, as I pointed out, many folks earning minimum wage don't get 40 hours/week. As such, their…

> What's your monthly healthcare premium? What's that, your employer provides that for you? Mine is almost $750/month. That's just for me.

yes, my employer pays the premiums for my HDHP. the coverage is comparable to something at the boundary of a typical silver/gold ACA plan. these cost $450-480/month for an individual, but someone making $30k would likely qualify for a federal credit of $100+/month (not to mention that their tax burden would be significantly lower than your quick estimate).

> What's more, as I pointed out, many folks earning minimum wage don't get 40 hours/week. As such, their income is less than the numbers I stated.

"many" being about 6% of workers making the minimum wage, according to BLS in 2017.[0]

> in the end, it comes down to how we choose to deal with this situation. Do we require employers to provide a (theoretical, remember many don't get 40 hours a week) living wage, or do we as a society pay to subsidize those employers who don't pay enough to allow people to support themselves?

> But the issue goes beyond just the dollars and cents. The hoops that many government programs force those who need help to jump through is often demeaning and tends to dehumanize people. What's more, those programs have overhead too. The costs of administering these programs need to be considered part of the subsidy to employers.

as a taxpayer, I'm not happy about paying for it, but I tend to think this is society's problem more than any particular business's. inevitably, there will be people who do not produce enough value to sustain themselves. in my ideal world, we would do away with minimum wage entirely, give people UBI sufficient to at least subsist (perhaps coupled with a public option for affordable heathcare), and let businesses employ anyone who wants to work for a market wage.

[0]https://www.bls.gov/opub/reports/minimum-wage/2017/home.htm

Re: What harm do minimum wages do?

#476

Post by mattmanser »

ccffpphh wrote: post #385
mattmanser wrote: post #374

Earlier quoted context omitted.

Risk is a strong word, often there's little risk involved, it's often more about who you know, which entitlements your birth gave you and what parachute mummy and daddy can give you (especially if you're white, male and privately educated). There's no inherent entitlement or human right to give your children your money, or to not be simply turfed off what ever land you are using when society decided there's a better…

There is risk in any action taken due to the fundamental lack of information regarding events occurring in the future. I agree with you that much of it is luck, this at the same time does not mean because one is born lucky that they now need to suffer to bring someone else to their level. I disagree that it is meaningless, I believe that since no one person is entitled to anything from anyone else (to think otherwise…

I stopped reading when you started directly contradicting the fact based article with an armchair philosopher supposition.

Your view is merely dogmatic and ignorant, the opposite of what I come to HN for.

Re: What harm do minimum wages do?

#477

Post by dann0 »

dnautics wrote: post #223
fsckboy wrote: post #95

Earlier quoted context omitted.

> 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.

> no player can thru individual choices affect prices in the market That might be Econ 101 with fully continuous utility curves, and realized price equilbria, but anyone who has traded on a market knows that as soon as most bids are fulfilled it causes a dislocation of the price, so in reality the opposite is true: all individual choices affect prices in the market. There is an old concept that rolls through bernanke…

It’s knowledge of settlement that causes the “dislocation” of price. Actual settlement has minimal affect.

Price, at equilibrium, is a true representation of value. But other market forces ensure that equilibrium is seldom met. Tax, tariffs, subsidies on the product and its components skew price away from value.

Also, this kind of analysis only works at market level. Individual actors all have different values. It has to be viewed in aggregate. Think anecdote vs data.

Re: What harm do minimum wages do?

#478

Post by macspoofing »

gjulianm wrote: post #447
macspoofing wrote: post #330

Earlier quoted context omitted.

Where are you getting all this stuff from? It's like you're only reading communist blogs where they engage in creating fictitious straw-men of every aspect of a market-based economy. This is not how the world works. >The labor market is not a free market: companies have more power in negotiation That's not what a free market means. And I don't know how you can say companies have more power in negotiation. They post t…

> That's not what a free market means. It looks like in this thread people have different definitions of free market. For me, the fundamental property is that supply and demand respond elastically to price changes, and a quick test (necessary, not sufficient) is the following: if the price asked by buyers is too low, does supply stop? For example (and simplifying), if people wanted to pay just $1 for consoles, the su…

>It looks like in this thread people have different definitions of free market.

No. Words have meaning. You made up a definition for 'free market'.

>For me ...

Well how about we use the general understanding free market? It just makes it easier when you don't redefine common terms. But OK ...

>Now, for jobs, if companies wanted to pay just $1 an hour, would people stop working?

Yes. They would indeed not bother working.

But try it. I can guarantee you that even poor migrant workers would laugh at you if you offered them that kind of wage.

>Given that their alternative is starving, they probably wouldn't

That is not an alternative. I'm not even sure if there was a single case of starvation in the last few decades that was a result of lack of income or lack of a job. On the other hand, plenty of starvation in Soviet Russia ... with full employment!

>You can live without a car, you can't live without a job.

This is just pure gaslighiting. Unemployed people do not die. What are you talking about?

>Which is a separate problem.

No. It's not. It is an unregulated market where minimum wage laws are ignored, and yet, you don't see a race to the bottom. The wage settles at some equilibrium. And yes, skilled labour even in that type of environment will be much much higher than minimum wage. It kills your argument because clearly minimum wage laws are not the thing that prevent a race to the bottom, but rather, you know ... market forces.

Do you also realize there are countries with modern economies that either do not have minimum wage laws, or have one that is much lower.

>And if you've found the formula to live without income, please share it.

That's not what you said. You wrote: "Workers can't usually live too much without finding a job."

But even with this, let me throw it back at you. There are tens of millions of people without income or a job - how do they survive?

Re: What harm do minimum wages do?

#479

Post by dnautics »

brazzy wrote: post #368
dnautics wrote: post #312

Earlier quoted context omitted.

there is this pervasive assumption in economic theory that if two things have the same price they have the same value in some global sense. To make an obvious example: If you are allergic to peanuts, then the value of a peanut to you is quite extremely different to the value of that same peanut to someone else. This is unaffected by the price of the peanut.

> there is this pervasive assumption in economic theory that if two things have the same price they have the same value in some global sense. Um... quite exactly the opposite? Very nearly the most basic assumption of all economic theory is that wealth is created through trade (which includes trading labor for a salary) because each party values the thing they are receiving more than the thing they are giving away.

> because each party values the thing they are receiving more than the thing they are giving away.

We're not disagreeing. I think I could have been imprecise. It seems a lot of arguments made by economists who should know better quietly use models which which effectively ignore the "most basic assumption" or average it out, which is a nonsensical operation.

Re: What harm do minimum wages do?

#480

Post by tastyfreeze »

gjulianm wrote: post #426
tastyfreeze wrote: post #315

Earlier quoted context omitted.

In this discussion a country's population is irrelevant. For a small country with a GDP per capita higher than the United States only 55 years after independence I would say they are doing pretty damn good. https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)... There is no requirement that everybody succeed at the same level. The measure of a country's success is improvement of society over time. Has the gen…

> In this discussion a country's population is irrelevant. It's not. You'll see that a lot of the top companies in Singapore are operating at global level while headquartered in Singapore. It's a little bit like looking only at the economy of the main US cities. > There is no requirement that everybody succeed at the same level. The measure of a country's success is improvement of society over time. Inequality is a p…

There is always inequality in all aspects of life. We all do not perform on the same level. Looking at a specific point in time and comparing inequality is a poor measure of society. The only measure that matters is improvement over time.

Upon independence, "Singapore faced a small domestic market, and high levels of unemployment and poverty. 70 percent of Singapore's households lived in badly overcrowded conditions, and a third of its people squatted in slums on the city fringes. Unemployment averaged 14 percent, GDP per capita was US$516, and half of the population was illiterate." [https://en.wikipedia.org/wiki/Economy_of_Singapore#Independe...]

Compared to today, Singapore has about 1000 homeless, 3.16 persons per household, a literacy rate of 97.3%, GDP per capita of $602 billion, an unemployment rate of 4.11% and a median household income of $9,293. The income distribution isn't bad either. From what I could find the cost of living (minus rent) for an individual is $575 a month.

https://blog.seedly.sg/average-singaporean-household-income-...

The better society is the one where everyone has an opportunity to improve their lot in life by satisfying a need of others.

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