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What harm do minimum wages do?

economist.com

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Re: What harm do minimum wages do?

#511

Post by burfog »

frogpelt wrote: post #445
gamblor956 wrote: post #319

Earlier quoted context omitted.

There is a difference between someone being worth $50/hour and another person willing to do whatever for just $5/hour. For example, rich kids can take unpaid internships because they don't have to worry about food or rent for the duration of internships. Poor kids can't usually afford to take jobs that don't pay.

I'm guessing poor kids usually don't have jobs at all. Only about 40% of poor people 18-64 even have jobs.

The minimum wage workers around here are of two types:

1. teenage children of the upper middle class or higher

2. poor adults with a history of bad decisions

It's kind of a weird mix. Where are the children of the poor? You'd think they might want money much more than the children of better-off families do.

Surgeons, business owners, passenger jet pilots, software developers, and corporate executives all send their teenagers off to work minimum wage jobs. The point seems to be to learn about answering to a boss and/or to learn why success in school is important.

Re: What harm do minimum wages do?

#512

Post by madeofpalk »

bravo22 wrote: post #502
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…

Which is why instead of mispricing labour through minimum wage you can have a negative income tax which makes up the difference. The nice thing is that it will apply to everyone -- working or not, sick or not, on mat leave or not, can't work because of covid or not. You top-up people's income and that's paid for through taxes. You take the benefit of efficiency and productivity from the entire economy and return it t…

I’m not all that educated on negative tax rate - what’s to prevent companies from just setting wages to obscenely low, knowing the government will just pick up the bill and pay out the difference?

Re: What harm do minimum wages do?

#513

Post by javert »

dragonwriter wrote: post #450
javert wrote: post #94

Earlier quoted context omitted.

The free market is very good at solving information asymmetries of the kind you are talking about. If it isn't being solved, it's probably because of regulation (regulatory capture). Or maybe it isn't a real problem. I'm going to guess in this case it's more the latter than the former.

> The free market is very good at solving information asymmetries of the kind you are talking about. No, it's not.

This view was already expressed, except with some elaboration, hours before your comment. Why add to the noise with a post like this? Saying "no" is what the downvote button is for.

Re: What harm do minimum wages do?

#514

Post by crdrost »

efxhoy wrote: post #459
aidenn0 wrote: post #401

Earlier quoted context omitted.

>> 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. In the econ 101 textbook simplified free market that the author is refering to firms do not make any economic profit. If…

This this this, so much this.

The economic definition is for a “perfectly competitive market,” one with extremely low barriers to entry. And one of the arguments about these markets is that they are the least profitable markets because firms in a less-profitable market will want to jump the extremely low barriers to switch into that market; this dilutes per-firm profits in the competitive market and concentrates them in the less-competitive market.

Economists consider those least-profits an “opportunity cost” of spending your time in the first place, and if you include that as an explicit cost then the “profit” is indeed zero.

Re: What harm do minimum wages do?

#515

Post by Aunche »

gamblor956 wrote: post #323
Aunche wrote: post #258

Earlier quoted context omitted.

>That could theoretically increase unemployment in some industries with razor thin margins, but it's far from a given. It's not a given when you're talking about a small region like Seattle. However, increasing the minimum wage to the entire US would dramatically increase unemployment in the poorest areas. The minimum wage is why territories like American Samoa and Puerto Rico have the highest unemployment. Edit: cha…

Puerto Rico has structural issues related to endemic corruption that discourages business investment, and that is why companies generally avoid doing business there despite the very generous tax incentives for doing business in Puerto Rico. PR's minimum wage has very little to do with it, except for being a convenient scapegoat.

Corruption that discourages investments is one side of the high unemployment. The other side is tiny businesses that can't even afford to pay minimum wage. They're allowed to pay less than the federal minimum wage if they're sufficiently tiny, but that means that they can't expand.

Re: What harm do minimum wages do?

#516

Post by dx87 »

mdoms wrote: post #358
abstractbarista wrote: post #273

Earlier quoted context omitted.

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?

In some cases, yes. California farms are having problems finding people to work in fields since border control got tighter, and American's don't want to do the work, even for $15+ an hour. The farm owners said they're switching crops over to ones that are easier to harvest with machines. Similar things have happened in the South-East USA, where crops have been left to rot on the field because the government started cracking down on illegal immigrant labor, and no citizens want to fill the positions.

https://www.latimes.com/projects/la-fi-farms-immigration/

https://www.theguardian.com/world/2011/oct/14/alabama-immigr...

Re: What harm do minimum wages do?

#517

Post by refurb »

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.…

someone worth $50/hr can be paid $5/hr if anyone can do the job

How do you define "worth" here?

Re: What harm do minimum wages do?

#518

Post by danenania »

lukevdp wrote: post #444
chc wrote: post #340

Earlier quoted context omitted.

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?

Yes but it is wrong to do so because wages are not set only by the worth a worker is to a company. That is only one side of the equation (demand). The labour market also have a supply side component which is the ability for the company to find labour.

You seem to be refuting a claim that no one made. We aren't only talking about wages, but the amount of value the worker contributes to the company. The latter is typically significantly higher than the former. In a profitable company, this is true by definition (at least on average across all the company's employees).

Another way to look at it is: what is the maximum a company could conceivably pay for a particular role, even if that amount was way above the market rate? That number would presumably be a bit below the value that role is expected to contribute.

Re: What harm do minimum wages do?

#519

Post by refurb »

danenania wrote: post #107
prostoalex wrote: post #36

Earlier quoted context omitted.

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 ver…

They may be absolutely critical to the business running even though they don't produce revenue directly.

They don't produce revenue, but one must assume they provide some value and in this case avoiding the loss of revenue due to theft, fires, etc.

Re: What harm do minimum wages do?

#520

Post by john-shaffer »

socialdemocrat wrote: post #440
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.

A lot of the analysis and conclusions economists make are based on these kinds of assumptions. That is how they concluded in the past that minimum wage was a bad thing or many of them was against labour unions. Although Adam Smith grasped this better than many modern economists and was hence a strong supporter of Labour Unions. Of course Smith had not gotten his brain poisoned by excessive reliance on overly mathemat…

> Adam Smith... was hence a strong supporter of Labour Unions.

Do you have a source for this? I can't find anything but SEO junk.

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