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What harm do minimum wages do?

economist.com

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Re: What harm do minimum wages do?

#601

Post by aidenn0 »

typ wrote: post #492
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…

> First of all a rational actor will not intentionally pay a worker the value of their production; you get no profit. The sum of the production of workers is not equal to the production of a business. Otherwise, if a business increases revenues significantly by simply replacing its CEO, does it mean that the CEO contributes to the increased revenue all alone?

The CEO probably was able to increase per-worket productivity.

With the possible exception of lights-out facilities, the sum of the production of workers is equal to the production of a business, and even with lights out facilities, you would attribute the production of the facilities to those who build and maintain them.

Re: What harm do minimum wages do?

#602

Post by lopmotr »

chii wrote: post #580
mr_toad wrote: post #547

Earlier quoted context omitted.

> you get no profit. Marginal value of production is almost always lower than average value, because of diminishing returns. Profits are made on the average value. A Marxist take in this is that labour should be paid on the average value of production, and labour should get all the profits.

> labour should get all the profits. and the question becomes "who supplies the capital to enable the labour, if labour gets all the profits".

The other question is what does labor get when there are temporarily low or negative profits?

I used to work at a company which gave 10% of its profits to the workers each month as a bonus. But I was only there during some money-losing months so I got zero bonus. Imagine if that had been my entire pay!

Re: What harm do minimum wages do?

#603

Post by shirakawasuna »

edgyquant wrote: post #540
shirakawasuna wrote: post #509

Earlier quoted context omitted.

No? If value isn't defined as the price at which the product is selling (could easily be above cost), what is it in basic econ? 1. Worker(s) make a thing. 2. Worker(s) sell a thing. 3. All the above worker(s) (if there's more than one) receive a portion of the proceeds. If it reflects their actual contribution to that thing at its selling price, it's their marginal product of labor, putting aside things like reinvest…

What defines value is a matter of debate in econ but labor theory is only believed by Marxists these days.

This isn't even labor theory of value...

Re: What harm do minimum wages do?

#604

Post by aidenn0 »

chii wrote: post #580
mr_toad wrote: post #547

Earlier quoted context omitted.

> you get no profit. Marginal value of production is almost always lower than average value, because of diminishing returns. Profits are made on the average value. A Marxist take in this is that labour should be paid on the average value of production, and labour should get all the profits.

> labour should get all the profits. and the question becomes "who supplies the capital to enable the labour, if labour gets all the profits".

That requires either labor itself to own the capital (e.g. a co-op), or the state to have a monopoly on capital (e.g. communism)

Re: What harm do minimum wages do?

#605

Post by FabHK »

shirakawasuna wrote: post #505
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…

If workers were paid the value of what they produce, there would be no profit, no payoff for investors / owners. Classic Economist, laundering in free market sociopathy through bad economics. If you're ever interested in taking a more removed perspective view of that particular magazine, take a look at their old articles. 1850s-60s (e.g., slavery). Late 1800s and early 1900s (labor rights). Nazi-related stuff.

> free market sociopathy

> Nazi-related stuff

I think today's Economist does not correspond to your caricature.

FWIW, they've endorsed the Democrat candidate in 5 of the last 7 US presidential elections, and I'm confident that soon it'll be 6 out of 8.

Re: What harm do minimum wages do?

#606

Post by aidenn0 »

lopmotr wrote: post #602
chii wrote: post #580

Earlier quoted context omitted.

> labour should get all the profits. and the question becomes "who supplies the capital to enable the labour, if labour gets all the profits".

The other question is what does labor get when there are temporarily low or negative profits? I used to work at a company which gave 10% of its profits to the workers each month as a bonus. But I was only there during some money-losing months so I got zero bonus. Imagine if that had been my entire pay!

If they gave 100% of their profits to the workers as the only pay, then long term workers could presumably self-insure.

Re: What harm do minimum wages do?

#607

Post by FabHK »

wdn wrote: post #294
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…

The labor market is a free market. If you don't agree the employer offer is fair, you don't have to accept. When you find a better offer, you go to the better offer. As for minimum wage, it is hurting the unskilled workers, like high school students, college students who are looking for experience. If you are stuck in a minimum wage job, then this is what the market is paying for your skill set. If you think you wort…

You can't really respond to an article that says "Here's the conventional wisdom, and here's all the evidence and advanced work that shows why the conventional wisdom is wrong" with "Here's the conventional wisdom."

Re: What harm do minimum wages do?

#608

Post by tprice7 »

mr_toad wrote: post #547
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…

> you get no profit. Marginal value of production is almost always lower than average value, because of diminishing returns. Profits are made on the average value. A Marxist take in this is that labour should be paid on the average value of production, and labour should get all the profits.

If we wanted to go into more detail, we could consider production as a function of the cost of labour and the rental cost of capital, rather than restricting our attention to labour and assuming capital is fixed. In this case, the law of diminishing returns typically disappears, since in theory we can rent more capital and scale all operations proportionally. Therefore, due to the link between profit and the law of diminishing returns that you've explained, there should be no profit if all capital is rented. The reason profit still exists in this model is that capital is often owned rather than rented. So in this sense profit derives ultimately from the ownership of capital. That is not Marxist theory, that is mainstream economics (e.g. Mankiw & Scarth).

Re: What harm do minimum wages do?

#609

Post by bravo22 »

Retric wrote: post #506
bravo22 wrote: post #502

Earlier quoted context omitted.

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…

Having a negative income tax is reasonable without removing minimum wage as they deal with different things. Removing the minimum wage is effectively a subsidy for companies and industry’s that would then pay below the old minimum wage. Considering how often people in the US make below minimum wage even when it’s illegal, it seems like a bad idea. Instead even higher minimum wages can be used to drive automation.

Minimum wage creates distortions. For example industries that are labour heavy are impacted disproportionately to others that are more automated.

Re: What harm do minimum wages do?

#610

Post by gruez »

arp242 wrote: post #566
Discombulator wrote: post #539

Earlier quoted context omitted.

All disciplines studying complex systems like societies down to something like the human body, simply do not have the luxury of absolute truths like in mathematics or even the ability to run experiments like in physics (often for ethical reasons, e.g., in medicine or economics). But does that mean that it is not worth doing? For these fundamental reasons economics is “hard”, but I argue that it is still worth doing b…

I feel the biggest problem with economics is that it's very infused with ideology, which makes it even harder to say what's true or not. There's a lot of what I would call "arm-chair economics" – entire government policies are based on nothing more than conjectures, guesses, and ideological preferences of so-called "economists". Okay, maybe guesses and conjecture is the best we have to go on, but at least be honest a…

>I feel the biggest problem with economics is that it's very infused with ideology, which makes it even harder to say what's true or not. There's a lot of what I would call "arm-chair economics" – entire government policies are based on nothing more than conjectures, guesses, and ideological preferences of so-called "economists".

Is it any better in fields other than math and the natural sciences? For medicine and nutrition we're constantly backtracking on our previous discoveries. First it was fat that's bad, then it was sugar.

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