What harm do minimum wages do? • Hacker News Board

Re: What harm do minimum wages do?

#711

Post by IncRnd » Thu, Aug 20, 2020, 9:12 AM UTC

Spooky23 wrote: post #622

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…

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 super…

> 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.

That's not necessarily true. You assume that demand for workers exceeds supply. That is true for some vertical skilled labor. The often unspoken truth is that most jobs are commodity positions and people can be interchanged (from a labor standpoint). There is no upward trajectory of salaries for those positions.

Re: What harm do minimum wages do?

#712

Post by IncRnd » Thu, Aug 20, 2020, 9:13 AM UTC

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 selection of a CEO absolutely contributes to the benefit or detriment of revenue.

Re: What harm do minimum wages do?

#713

Post by gohbgl » Thu, Aug 20, 2020, 9:20 AM UTC

CraigJPerry wrote: post #471

The more research i do in economics the less impressed i am with the discipline. Economics is defined as a social science. That point never really struck home with me until recently. I think the fancy models, the cutting edge statistics and clever use of logic blinded me to the fact that the entire discipline is built on top of stories. There’s no gravity, there’s no absolute zero, there’s no kilogram. There’s no fun…

You should read into Austrian economics and in particular the studies of Ludwig von Mises because it builds on fundamental "tangible" truths. Search for the term praxeology

Re: What harm do minimum wages do?

#714

Post by IncRnd » Thu, Aug 20, 2020, 9:21 AM UTC

drran wrote: post #666

aidenn0 wrote: post #606

Earlier quoted context omitted.

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

It looks like excellent solution for startup: just pay 100% of startup profit to workers by giving them 100% of shares, so they will self-insure themselves and be OK when startup will fail.

That almost guarantees that fewer companies will be started, since your model removes incentive for people to benefit from starting companies.

Re: What harm do minimum wages do?

#715

Post by grumple » Thu, Aug 20, 2020, 9:32 AM UTC

drak0n1c wrote: post #351

moth-fuzz wrote: post #336

I’m going to flip this one around and ask: why are businesses entitled to low-cost labor? In other markets, markets of objects, if you don’t have the funds to purchase something you don’t get to have the thing, and if you attempt to coerce the thing into your ownership, we call that robbery, and prosecute it accordingly. So why doesn’t that apply to human labor? Labor is a product, it exists in a market, and there is…

There is no distinction - all markets are ruled by consent. Both parties have to agree to a voluntary transaction, and that applies to employees and products.

Well, that’s only true if we ignore that companies used (or currently use) slave labor.

Re: What harm do minimum wages do?

#716

Post by tprice7 » Thu, Aug 20, 2020, 9:33 AM UTC

efxhoy wrote: post #698

tprice7 wrote: post #681

Earlier quoted context omitted.

This is correct, but it doesn't address a fundamental misunderstanding of the parent comment. The prediction that wages = MPL alone does not predict a lack of profit, since the marginal product of labour is generally less than the average product of labour due to the law of diminishing returns. (I would agree though that "the value of what he produces" is an ambiguous phrase and seems closer to APL than MPL). It is t…

Yes, exactly right and well put. It's always difficult to jump into online discussions about economics because you need to give the entire econ 101 micro course in single comment just to make sure everyone is talking about the same thing.

Fair enough. I had a much more verbose comment earlier and it took me a second attempt to get it more concise while still conveying the essential point. The Blaise Pascal quote comes to mind, "I would have written a shorter letter, but I did not have the time."

Re: What harm do minimum wages do?

#717

Post by lukevdp » Thu, Aug 20, 2020, 9:44 AM UTC

CarbyAu wrote: post #617

curryst wrote: post #486

Earlier quoted context omitted.

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".

When you’re talking about wage prices, definition 1 is the relevant definition.

Definition 1 includes both supply and demand. You have a worker willing to work for $50/hr and someone willing to pay them $50/hr.

Definition 2 is only taking into account demand. You have a supplier who has set their price, but no buyers at that level.

Re: What harm do minimum wages do?

#718

Post by ohgodplsno » Thu, Aug 20, 2020, 9:45 AM UTC

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)

Communism implies a society that has gotten rid of the very concept of state. There is no leader.

Communism also implies getting rid of currency altogether.

You mean socialism.

Re: What harm do minimum wages do?

#719

Post by dalbasal » Thu, Aug 20, 2020, 10:00 AM UTC

There was a debate between the pro & con side of minimum wages a few years back. The debaters are all pretty intelligent, intellectually honest and deep people... all things considered.

The debate was a spectacular failure, hinging on marginal interpretations of marginal datasets measuring marginal impacts. Most of the theoretical downsides end up below the noise threshold, in data.

The pro side took this as a win, disproving the orthodox economic position. The con side demanded a counter theory. Obviously, a $1,000ph minimum wage would increase unemployment. That's hard to argue against. Why is a $14 minimum wage different? Where's your theory. It's not fair if you can debunk my theory, but don't have a theory for me to debunk.

"Interesting. It works in practice, but does it work in theory?" to paraphrase a cliche from the late 40s.

It's all a good reminder that economics is not a science. The gap between theory and practice can be vast, often is. Keynes (and most of his generation) was famously wrong about the future of working hours. Even so, the theories (income effect & substitution effect) used to make this failed prediction were not discarded. Even today, college economists teach the theories and Keyne's prediction. They find a way where the theories are still right, but "below the noise threshold." IE, other factors just happened to be more important in this case.

I would also point out the the intellectual founders of modern, liberal free market theories (Hayek, Coase, Popper kinda) emphasized this. Economics is not a science.

There is no universally true answer to the question "increases unemployment among young and low-skilled workers?" There are theoretically true answer, but this may or may not be operative in practice. It's also true that food availability increases reproduction rates. This doesn't mean that adding more burger joints will increase the human population of Manhattan.

In Portugal, youth unemployment rates often tend to be high. If I were deciding for portugal, I'd be careful with my minimum wage policy. They are low in the UK. I wouldn't be concerned about gradual increases if I were deciding for the UK.

There is another possible conclusion to the "economics is not a science" point which many economists concede. One most economists are uncomfortable with. Economists shouldn't be the only word.

For example: ask low wage earners. They're the ones theoretically affected by minimum wages, for better or worse. If we want to know about the effects of some corporation policy on silicon valley, we would value the opinions of those companies. Same here. What do low wage earners think about minimum wages?

https://www.npr.org/2013/04/09/176272083/should-we-abolish-t...

Re: What harm do minimum wages do?

#720

Post by kojus » Thu, Aug 20, 2020, 10:12 AM UTC

cogman10 wrote: post #455

Ekaros wrote: post #188

Earlier quoted context omitted.

That's not very good argument. As we are where we are now because our productivity has increased insanely since invention of agriculture... If burger flipping robot is more productive than human, we should replace all humans with such robots.

There's a lot of blind faith in "New jobs will appear as old ones are obsoleted". That's certainly has been true, but I don't think it's absolutely always going to be true. Further, what we've seen is that primarily low skill high wage jobs have been replaced with high skill jobs. This is evidenced by the fact that you simply can't make a good living off a high school degree. Based off this https://www.careerprofiles…

Why not simply reducing working hours for everyone? The risk of UBI is that rent-seekers might just engulf this guaranteed income by raising their prices, and then we will rapidly be back to square one.

Working 40 hours a week is not a natural law, peasants in the Middle Age worked less hours annually than us today. Reducing work hours would also have a positive environmental effect.

Otherwise, I wholly agree with your diagnosis of the situation.