> 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…
Universal Basic Income would also help with this problem.
What harm do minimum wages do?
631–640 of 776 posts
Re: What harm do minimum wages do?
#632> 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…
Is this true? Do you agree that reducing the minimum wage would open up more jobs that couldn't previously exist, and increasing it would close existing jobs?
For example, if I want to start a lemonade stand that serves my entire neighborhood, I'm gonna need help. If I have to pay the help $50/hr at minimum, then I will probably not open the lemonade stand. I think in this case it is obvious that too high of a minimum wage can result in a suboptimal outcome. The next best solution is to enter an informal agreement with my worker, which is an even worse outcome because now no one is protected.
Re: What harm do minimum wages do?
#633Earlier quoted context omitted.
If you cannot pay your workers a decent amount, perhaps you should not have your small business. Working for a small business shouldn't mean sacrificing your ability to buy food. Offer something better than the large places.
The people taking those low-wage jobs clearly prefer the existence of those businesses over nothing. Maybe you can help them by getting them food at lower prices. Just a thought.
Re: What harm do minimum wages do?
#634Earlier quoted context omitted.
the dismal science is too generous
“The dismal science” is an established name for economics. Similar to the sweet science or the gay science.
A better translation from the original German is probably "Joyful Science", though.
Not sure if that's where the parent was going, but I learned something new today.
Re: What harm do minimum wages do?
#635Earlier quoted context omitted.
That still doesn't make it illegal. It only makes it non-viable from a unit-economics point of view. Now if you want to talk about how larger companies have better unit-economics, and small companies can suffer with high minimum wage, then we can certainly have that conversation.
This entire discussion is about laws regarding minimum wage, the act of literally making it illegal to hire for less than a certain wage. I’m not sure I see the confusion
Wages are a cost to a company. There are other costs to a company. Companies also return a profit to the owners. If a company's costs are too high, they my not return a profit; they may not be able to pay their creditors.
My dad ran his own very small business. I am familiar with a business not making a profit for a period of time. I am familiar with workers who are not profitable to employ.
It is a reduction to absurdity to state that minimum wage "makes it illegal to work unless you can produce $X value per hour."
There are interesting, non-absurd discussions about the effects of minimum wage, but this is not one of them.
Re: What harm do minimum wages do?
#636Earlier quoted context omitted.
Indeed we should - demand the repeal of Taft–Hartley Act and other laws which have nerfed collective bargaining power far from any "natural" point. Jurisdictional strikes, wildcat strikes, solidarity or political strikes, secondary boycotts, secondary and mass picketing, closed shops, and monetary donations by unions to federal political campaigns are all part of the freedom to negotiate the terms of our employment,…
On the other hand, employers are also barred from colluding to keep wages artificially low, which arguably would be considered a “negotiation strategy” if one follows your interpretation. I agree though that employers have naturally more negotiation power in the vast majority of cases.
In other words, that collusion was profitable for those companies and for upper management like Eric Schmidt who participated but face no real ostracism for their illegal actions.
That law has no real teeth.
Compare that to, say, UC filing charges against UAW Local 2865 following wildcat strikes at UCSC claiming that UAW Local 2865 didn't do enough to prevent the strike UAW Local 2865 didn't authorize in the first place.
Re: What harm do minimum wages do?
#637> 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 marginal value of what he produces. Which means that if there is a minimum wage in effect, the employer might be forced to pay the worker more than the marginal value of what he produces. Which in practice means that employer starts looking for ways to eliminate that job, since it costs more than it is worth. If employers do not do that in the presence of minimum wage laws, it simply means the laws are having zero effect because the minimum wage is below the free market equilibrium wage for that job anyway.
> The labor market is not a free market
It is if there are no laws fixing prices, i.e., no minimum wage laws.
None of the things you list prevent a market from being a free market. A free market is not a market where everyone has equal negotiating power, equal information, or equal ability to deal with some good or service not being available. A free market is a market in which all transactions are voluntary--i.e., a transaction happens only if both parties believe that that transaction, at that price, will make them better off. Any third party dictating the terms of transactions--of which minimum wage laws are just one of many examples--makes the market a non-free market. The fact that the third party believes that it is "improving" something doesn't change the economic fact that it is forcing the market to not be free, and therefore making the market less efficient.
> Companies will always push for lower wages wherever they can, without a care for the actual wealth created by the worker
In a free market, they can't, because their competitors will be willing to pay more for workers that are worth more in terms of productivity. Tech companies are good examples: they are willing to pay a high premium for workers that can create a lot of value by writing good code and more generally doing good, reliable software engineering. Companies that try to pay less for such workers simply don't get them.
> The only way to counter that push is by giving more power to the worker
No, that doesn't counter anything, because "the worker" is not one person and does not have one interest. The best way to help workers is to raise their productivity, so that the work they do is worth more and can command higher wages. But really, even that misstates it, because it treats the workers as though they weren't capable of raising their own productivity if given the opportunity, and need "help" in doing so. Which is the big problem with all the grand schemes to "help the worker": it's people with no skin in the game themselves trying to dictate to everyone else how they should play.
Re: What harm do minimum wages do?
#638Earlier quoted context omitted.
“The dismal science” is an established name for economics. Similar to the sweet science or the gay science.
I know boxing is the "Sweet Science", and a quick search seems to indicate that "Gay Science"[1] comes from Nietzsche, and seems to refer to... poetry or song? A better translation from the original German is probably "Joyful Science", though. Not sure if that's where the parent was going, but I learned something new today. [1] https://en.wikipedia.org/wiki/The_Gay_Science
Wasn't Nietzsche nihilist, though? Seems like it would be hard to be joyful if your science leads to nihilism.
Re: What harm do minimum wages do?
#639The direct effect of the minimum wage is to make certain low-productivity jobs illegal . Consider that for a moment: a person with limited skills and/or needs is simply prohibited from doing low-productivity work regardless of desire. The counter-argument is that many workers do not have a choice; they will always accept wages vs nothing, but have no power or ability to negotiate. With a minimum wage we've made the d…
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…
It's not like companies want to pay for shipping of products from halfway across the world, but because of minimum wage it makes it more profitable to do so. Which results in jobs leaving to other countries.
Without minimum, those workers wages would have simply gone down over time, allowing them some time to find other opportunities. Instead of just one day the plants up and decides to move to Asia and you're out of a job.
Re: What harm do minimum wages do?
#640(can't read the article, but I've read and thought a lot about it) I'm on the fence about the net cost/benefit of localized minimum wages. I think that a federal minimum wage (or at least, a high one), and to some extent, state minimum wages, are a bad idea. The Fight for $15 movement came from expensive cities, and it might be the right policy for those places. But it would severely distort and crush lower-cost citi…
>The Fight for $15 movement came from expensive cities, and it might be the right policy for those places. But it would severely distort and crush lower-cost cities and states. The right policy for San Francisco isn't necessarily right for Birmingham. Your point is a valid one. At the same time, if you look at how these numbers actually play out in reality, $15/hour (assuming 40 hours/week -- certainly not a given an…
I live with roommates because it's cheaper and I probably pay less than half of the average rent in my city. If the average rent in one of the least expensive cities is $600/month, there's still going to be a range of rent prices in that city. I'd expect the median citizen of that city to go for the places with about the average rent and the lowest earning citizens to go for cheaper places, or to live with family or roommates.
If you assume that the cheapest unit you can find is roughly half the rent of the median unit, then living in the median city on $15/hour seems reasonable again.