Earlier quoted context omitted.
>>. It's a place where jobs are hard to come by, so maybe Amazon offers something the desperate, the poor, and the struggling something they can't get elsewhere. If you make it illegal to provide bad jobs, those jobs will not be substituted one-for-one for good jobs. That's not how an economy works. You're only hurting low-skilled workers by mandating higher minimum work standards. Responding to below: Yes, every so-…
> If you make it illegal to provide bad jobs, those jobs will not be substituted one-for-one for good jobs. That's not how an economy works. I think this betrays a fundamental misunderstanding of how markets work. If you are a smart business, you don't charge what's "fair", you don't start by saying "I'm going to pay $X to my workers, so let's see how many I can hire with that money." Those are bad ways to run a busi…
They will hire fewer workers.. there will be fewer profitable business ventures when the cost of one of the inputs to production increases.
In some case, it's true that higher wages will reduce profits, instead of reducing the number of jobs available, but that is not a good thing.
High profit margins encourage greater investment.
Take N95 masks for instance. If there is a shortage, any one producing them will raise prices and earn a huge profit.
Now let's say a progressive politician is elected and decides that those profits should be reallocated to the workers producing the N95 masks, so imposes an industry-specific minimum wage for N95 mask creators. Now profit margins decline for producing N95 mask makers, and N95 mask maker employees earn more.
What's lost is the massive influx of investment capital that high profit margins would otherwise have elicited, that would have raised N95 mask supply, which would have made the masks more affordable and plentiful.
Price controls don't work to increase net welfare. They reduce social welfare for reasons Economics explains in depth. Prices are a collectively generated signal produced from a complex network of interlocking exchanges that are based on a vast array of localized calculations. They are the product of a super collective intelligence that tells us where economic resources should be allocated.
>>It's not just wrong because reality is more complicated and in practice the simplistic models don't always bare out
Basic supply and demand theory tells us that the minimum wage, to the extent that it has an effect, harms wage growth. In the absence of the ability to conduct controlled experiments to prove definitively its effect one way or another, we should opt to trust basic economy theory.
There are a bunch of outlier situations in which artificial price bounds might theoretically not create economic deadweight losses, but it's nowhere as simple as "the economy doesn't conform to a simplistic model therefore a price floor is good".
It's entirely possible for price controls to still create losses while the market is not perfectly competitive.