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What harm do minimum wages do?

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Re: What harm do minimum wages do?

#481

Post by ouid »

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…

most of these problems can be solved by just giving everyone the right to say no to labor with a guaranteed poverty income. It's not enough money to live on comfortably, but it gives the labor negotiator a chance to walk away from a monopsonist.

Re: What harm do minimum wages do?

#482

Post by dann0 »

whatshisface wrote: post #362
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.

If I'm allergic to peanuts and the price of peanuts is $100/pound, the value of a pound of peanuts to me is still $100... because I can sell them and buy something I'm not allergic to.

True. Value to an economist is an aggregate of all the individual’s values. Your individual value is likely to have not influence on the market value (unless you’re buying a lot at a different price).

Re: What harm do minimum wages do?

#483

Post by dnautics »

whatshisface wrote: post #362
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.

If I'm allergic to peanuts and the price of peanuts is $100/pound, the value of a pound of peanuts to me is still $100... because I can sell them and buy something I'm not allergic to.

not really. If you are planning an arbitrage operation, then their resell price (and thus value to you) must be at least MORE than $100, otherwise you wouldn't buying them and going through the hassle and opportunity loss of the arbitrage.

If you don't bother buying them, then the total value to you is probably less than the value of $100 for you.

It's possible that the value just happens to be equal to the value of $100. That's a vanishingly unlikely coincidence.

Re: What harm do minimum wages do?

#484

Post by dredmorbius »

littlestymaar wrote: post #418
dredmorbius wrote: post #356

Earlier quoted context omitted.

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…

> Keep in mind that "free market" and "perfect competition", whilst commonly used interchangably, are in fact distinct terms. But the author used a “textbook” result that is only true in case of perfect competition, so he must be talking about perfect competition right?

I did consider rooting my comment higher up the thread. But the points I was addressing were most appropriate here. Point remains that "free market" is a loaded and political term.

Re: What harm do minimum wages do?

#485

Post by ertian »

mdoms wrote: post #164
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...

Yikes. Measuring wellbeing by consumption is a VERY American perspective.

But median wealth per adult is okay?

Re: What harm do minimum wages do?

#486

Post by curryst »

chc wrote: post #340
lukevdp wrote: post #293

Earlier quoted context omitted.

Someone is not worth $50/hr if someone else is willing to do the same job with equal capability for $5/hr.

The parent was comparing the value a worker brings to the company against the worker's compensation. To illustrate how the worth of a transaction can be different from the cost: If I offer to give you a $50 bill in exchange for a $5 bill, is that bill not worth $50 just because I lost on the deal?

Both the value of the worker and this situation both ignore the supply side. A $5 bill is worth $50, assuming there is a supply of people willing to pay $50. Likewise, a worker is only "worth" $50/hour if there is a supply of people willing to pay them $50/hour. If they're working for $5/hour, there's a good chance the supply of people willing to pay them $50/hour is slim to none. I would argue at that point that they are actually worth $5/hour, and $50/hour is a fiction like saying my shares of Hertz are worth $10,000 a piece.

Re: What harm do minimum wages do?

#487

Post by dredmorbius »

WalterBright wrote: post #465
dredmorbius wrote: post #321

Earlier quoted context omitted.

The lockdowns are (incidentally, effectively) a case of collective action. It's not a case of one worker withdrawing from the market, but all workers. Individually, with any positive level of unemployment, any one worker's nonparticipation is mooted by a ready waiting pool of available workers. Eventually the hold-out gets hungry. Or starves. Blacklists operate similarly: businesses can afford the exclusion, the (uno…

If that were true, every job I've had would be at minimum wage. But I tended to be well-paid, despite being at the bottom of the organizational pyramids. As for blacklists, there are solutions. Blacklisted people can join together and start their own enterprises. One of the nice things about a free market is you can't stop people from doing that.

> every job I've had would be at minimum wage.

The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others: first, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the constancy or inconstancy of employment in them; fourthly, the small or great trust which must be reposed in those who exercise them; and, fifthly, the probability or improbability of success in them.

Ibid., Book 1, Chapter 10

https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_I/...

> One of the nice things about a free market is you can't stop people from doing that.

The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it.

Ibid., Book1, Chaper 8. Immediately follows my first cite.

Re: What harm do minimum wages do?

#488

Post by dpedu »

aidenn0 wrote: post #401
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…

>> 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. This sentence is just wrong. First of all a rational actor will not intentionally pay a worker the value of their production; you get no profit. Textbooks actually say that a worker will be paid no more than the marginal product of labor, and if labor is in short sup…

>> 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.

> This sentence is just wrong. First of all a rational actor will not intentionally pay a worker the value of their production; you get no profit.

It's correct. You're assuming whatever the worker produces is sold at cost.

Re: What harm do minimum wages do?

#489

Post by mcguire »

AmpsterMan wrote: post #261
mcguire wrote: post #241

Earlier quoted context omitted.

Economists take the spherical cow as, if not the current state of cow-dom, the perfected nature of cows and what cows would be if they got to make the rules.

I'm not really sure I understand what you are trying to say here. The almost purely "logical" and "ideological" statements of 19th and early-to-mid 20th century economics have been supplanted with with more empirical methods.

You know the supply and demand curves, from Econ 101? How they meet at one point to determine the price of the thing? The demand curve can actually have any shape, so you can have any number of points where the two curves meet, and the supply curve has the problem that a firm making extra things both will and must not change the overall number of things made.

See Debunking Economics by Steve Keen.

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