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What harm do minimum wages do?

economist.com

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Re: What harm do minimum wages do?

#611

Post by FabHK »

nickff wrote: post #176
klmadfejno wrote: post #130

Earlier quoted context omitted.

I don't think that's a reasonable point of view. Most minimum wage jobs are not productivity jobs, but jobs that need to get done by someone but require no special skills. That is, you can't easily define the value of the sanitation worker who keeps a restaurant clean enough to pass health standards. You just observe that there's enough people willing to do it that you can offer a low wage. What jobs are being made i…

Many of the people employed at very low wages have attributes which mean that they are not worth hiring at higher costs. Factors such as lack of job history, attendance issues/unreliability, language issues, etc. mean that the employer will opt for a more 'attractive' candidate if there is a price floor. As an example, if you are looking for a bottle of wine to accompany your Tuesday night dinner, you might opt for a…

> Many of the people employed at very low wages have attributes which mean that they are not worth hiring at higher costs.

The whole article was about how that doesn't seem to be the case, empirically. When the minimum wage rises, the effect on employment is minimal, and people on minimum wage get paid more (they're not fired).

Re: What harm do minimum wages do?

#612

Post by bravo22 »

madeofpalk wrote: post #512
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…

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?

The government doesn't foot the bill. People and businesses do. We pay taxes. Government has no money.

The transfer payment is taken from the entire economy through a tax. A slice off the top.

If a business has higher profits it would also pay larger portion of that transfer to low income persons.

A key feature is indexing the maximum amount i.e. what a person with 0 income would receive to typical cost of living at state or country level. This way it auto adjusts. Then it is in the interest of everyone paying taxes to figure out ways to reduce costs of living.

Re: What harm do minimum wages do?

#613

Post by bravo22 »

cosmojg wrote: post #579
madeofpalk wrote: post #512

Earlier quoted context omitted.

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?

Couldn't that be continuously offset by increasing/decreasing taxes at the top? I imagine a self-regulating system might be difficult, but not impossible.

You would actually have a flat tax across the system ideally. Eliminates unproductive capital deployment to reduce tax burden.

You take X% off the top of the economy and distribute it to everyone who needs it on a sliding scale basically below a certain income level Y.

Re: What harm do minimum wages do?

#614

Post by crunchybackbone »

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…

the rational actor would pay the value of production if the actor worked in a worker co-op. then 'profit' doesn't make any sense. if the value of the group's production increases, so does the actor's wages.

addiction to profit is a hell of a habit to kick, but it's not impossible.

Re: What harm do minimum wages do?

#615

Post by dnautics »

dann0 wrote: post #473
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.

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.

What aggregate do you use? Mean? Median? Mode? Second moment? Wealth-weighted average? Buying-likelihood weighted average?

How do you avoid Simpson's paradoxes?

Re: What harm do minimum wages do?

#616

Post by nearbuy »

kennywinker wrote: post #221
cynicalkane wrote: post #184

Earlier quoted context omitted.

Consumption is the income and wealth that you end up using. Measuring wellbeing by consumption is the standard economic perspective, since it describes how much of society's goods and services one ends up using. More simply, if you save then spend, wealth-based measures will rate you as better off than a person with higher income who just spends. That doesn't make sense.

This is confusing. If you save, you have more wealth. If you have more wealth, you are more resilient to hardships (economic, health, etc.) - a population of people with large savings accounts and low debt seems obviously better than a population that makes a ton of money but lives close to the wire or carries large debts

I think you're double counting the advantage for wealth if you consider resilience an advantage, but don't consider not spending money to be a disadvantage.

Keeping money reserved for hardships is a lot like having spent the money, since you can no longer use that money to increase your standard of living. If you put away $50,000 in case of job loss or health problems, you've bought resilience at the opportunity cost of $50,000 worth of something else. If you change your mind later and spend it, you just traded in your resilience for other goods and services. You have the benefit of resilience or the benefit of whatever else you might buy with that money, but not both at the same time.

When you look at consumption numbers for a country, they already include what people have spent to deal with hardships. Wealth, however, doesn't tell you how much in poverty someone had to live in order to save that wealth.

Insurance is a formal way of spending money on resilience. Insurance, though, has the advantage of pooling risk among a large number of people. You don't actually have to save up millions to be insured for millions in healthcare bills. Someone with excellent insurance but little savings can have both more resilience and a higher standard of living than someone who lives in poverty to save every penny, but doesn't spend on insurance.

Re: What harm do minimum wages do?

#617

Post by CarbyAu »

curryst wrote: post #486
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?

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 the…

I think there is a miscommunication in "worth" between some of the posts here.

Definition 1. - your version "a worker is only "worth" $50/hour if there is a supply of people willing to pay them $50/hour."

Definition 2. "a worker is "worth" $50/hour if they add $50/hour value for the business." (who then goes on to pay the worker as little as possible, maybe only $5/hr)

Not sure which definition is "correct".

Re: What harm do minimum wages do?

#618

Post by chii »

aidenn0 wrote: post #604
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".

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)

if labour owns the capital, then that "somebody providing the capital" still exists. Coops demonstrates that profit still need to exist, which is contradictory to the idea that labour should get all the profits.

The only way "labour gets all the profits" is under the umbrella of communism - and even then, the state still extracts profit anyway (just under a different name - that of central allocation).

Re: What harm do minimum wages do?

#619

Post by chii »

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!

> what does labor get when there are temporarily low or negative profits?

good question - the current system ensures that labour gets paid, regardless of profits being negative or not (until the company collapses). This is enshrined into law - you cannot leave wages unpaid, and it sits above creditors in seniority.

Re: What harm do minimum wages do?

#620

Post by CarbyAu »

refurb wrote: post #517
danenania wrote: post #10

Earlier quoted context omitted.

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?

Different people are saying different things but your question is most important.

I suspect - but obviously can't speak on behalf of - the GP is using a definition of:worth $50/hr for the business bottom line.

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