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What harm do minimum wages do?

economist.com

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Re: What harm do minimum wages do?

#621

Post by CarbyAu »

javert wrote: post #382
Sohcahtoa82 wrote: post #220

Earlier quoted context omitted.

I've always considered this a very naive idea of how a free market works. It ignores how irrational and short-sighted humans can be, not to mention that many consumers are price sensitive. A free market will not solve climate change as long as coal and fossil fuels are inexpensive. A free market prioritizes one thing: Profit. That is all. A free market only solves problems when it is profitable to do so. Yeah, charit…

I think you're reading more into what I said, than what I actually said. But I also think part of what I said was dumb, so I partially agree with you.

You just restored a little bit of my faith in humanity. Thank you.

Re: What harm do minimum wages do?

#622

Post by Spooky23 »

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…

In a free market you would be bidding up worker salaries to hire and retain the most efficient workers. Demand would often increase the price of labor and perhaps the output.

In almost every sector of the modern American economy, the rules benefit capital over competition. In my area in New York, there were dozens of small bakeries pumping out good bread... today we pay more for shitty frozen stuff baked at the supermarket. ISPs were plentiful, now they are a monopolist service that costs 10x more than they did in 1999. We broke up standard oil decades ago... That monopoly is mostly reassembled today and we have weaker competitive forces around prices of fuel commodities than we did in the 90s.

Re: What harm do minimum wages do?

#623

Post by CarbyAu »

giantrobot wrote: post #386
sushshshsh wrote: post #160

Earlier quoted context omitted.

We are already seeing Flippy the burger flipping robot taking over jobs originally meant for humans. The technology for Flippy is only getting cheaper and better, the quality of human labor is already at its most optimal point and is only getting more expensive due to laws passed. Now, you could make Flippy the robot illegal, and maybe x number of businesses would eat the cost of the more expensive workers. But somet…

Fast food has always been about efficiency, consistency, and streamlining. If Flippy has existed in 1961 when Roy Kroc bought out McDonald's it would have been a fixture in every location. Making fast food isn't a job "meant for humans", it's a job humans perform for the legal minimum of pay. The moment fast food chains can replace humans with Flippy without a PR backlash they will do so without hesitation.

Even with a PR backlash, providing the sums work out correctly. I have no doubt it'll happen, just a matter of when.

I like the idea of humans not having to do trivial work.

But I am concerned as to whether as a society we'll transition to "more leisure without reduction of living standards" or "higher competition to make ends meet, with the 'failures' being cast aside".

So far it is the latter.

Re: What harm do minimum wages do?

#624

Post by nearbuy »

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.

It's not an American perspective; it's an economic perspective. The parent comment isn't talking about people's psychological wellbeing, but "how people actually live" (in terms of do they live in poverty or like rich people).

Wealth doesn't capture that. For example, you might have someone living in extreme poverty in Guatemala who has no electricity or running water, a small home with a mud floor, and eats mostly rice and beans and similar. If this person has no debt, they might have a very small but positive net worth. Meanwhile, you can have someone from America with negative net wealth living a middle class life. The Guatemalan might be spending the equivalent of $600 per year, while the American might be spending 50x that. Looking at spending better captures who is living in poverty.

Wealth can also fail to capture how the wealthy live. Warren Buffett is notoriously frugal. Looking at wealth, you'd find he's about 180,000x wealthier than the mean American adult. Yet he has one house which he bought for $31,500 in 1958, and apparently eats breakfast at McDonald's each morning for no more than $3.17. The vast majority of his wealth will be going to charity. Looking at his spending gives you a more accurate picture of how he lives than looking at his wealth.

Re: What harm do minimum wages do?

#625

Post by bumby »

FabHK wrote: post #594
tclancy wrote: post #565

Earlier quoted context omitted.

Is that how CAPM works?

No, the Capital Asset Pricing Model has nothing to do with this discussion. It takes the payoff distribution of capital assets as exogenously given (and known), then makes assumptions about investors' utility functions to find the price they're willing to pay for these assets, then employs an equilibrium argument and some neat maths to arrive at a linear relationship between the expected excess return of an asset and…

Any suggestions on where one can learn more, particularly with the mathematics involved?

Re: What harm do minimum wages do?

#626

Post by zerof1l »

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 wage employee will be paid is some baseline plus or minus how much the bargaining power employee has.

The baseline wage is determined by how much a person with such characteristics is being paid in the industry for similar work in a given country, state, city. Usually, such characteristics should be limited to things like education and prior experience. In practice, they can include immigration status, nationality, current physical location, and other things that can be perceived as unfair.

By how much employees' income will diverge from this baseline is determined by the bargaining power and bargaining skills. This includes anything that can convince the employer to pay more. For example, if you currently have a job you may be less desperate to get a new job, meaning you can refuse a bad job offer more easily. If your status in the country is uncertain and you can't work legally in the country, regardless of how educated or skilled you are, you don't have as much bargaining power and you can be paid four to five times less than a citizen.

What I'm getting at is that in reality, employee's income is not determined by the product of labor he produces. It is determined by what similar others are being paid for similar work and bargaining. Usually, the lower bound is minimum wage and the upper bound is the company's income.

Re: What harm do minimum wages do?

#627

Post by konjin »

zerof1l wrote: post #626
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 wage employee will be paid is some baseline plus or minus how much the bargaining power employee has. The baseline wage is determined by how much a person with such characteristics is being paid in the industry for similar work in a given country, state, city. Usually, such characteristics should be limited to things like education and prior experience. In practice, they can include immigration status, nationalit…

>The wage employee will be paid is some baseline plus or minus how much the bargaining power employee has.

Given that corporations have been happy to work people to death, that baseline is zero.

Re: What harm do minimum wages do?

#628

Post by shirakawasuna »

FabHK wrote: post #605
shirakawasuna wrote: post #505

Earlier quoted context omitted.

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.

The free market sociopathy is still there, of course. Nazi Germany no longer exists so they can no longer rationalize doing business with it.

They're doing the same things they've always done, just with modern issues. They'll be just as disgusting in hindsight for most people. A critical reading of them now will make it so that one doesn't have to wait.

PS, you heard it there first: buy slave-made sugar.

Re: What harm do minimum wages do?

#629

Post by momokoko »

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…

We should also remember that the dual mandate of the federal reserve in the US targets an unemployment rate of 4%. This means that low skill workers will never have negotiating power. Not due to laws of economics but by US government policy.

I’m not here to argue about whether that is the right choice. Or debate about what the target inflation rate should be etc. But if the US government is going to intentionally maintain a minimum scarcity level of employment options for low skilled workers, it is only reasonable that the US government enact policies that protect these low skilled workers on the other side.

Re: What harm do minimum wages do?

#630

Post by nearbuy »

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?

Every year struggling farms go out of business[1]. If expenses are a bit higher, a bit more farms will go under.

[1] https://www.forbes.com/sites/niallmccarthy/2020/02/10/us-far...

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