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What harm do minimum wages do?

economist.com

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Re: What harm do minimum wages do?

#231

Post by avmich »

throwaway894345 wrote: post #217
fsckboy wrote: post #95

Earlier quoted context omitted.

> I'm not aware of any definition of "free market" which supposes that all players have equal leverage. bog standard microeconomics 101 uses as an assumption that no player can thru individual choices affect prices in the market, i.e. all players do have equal leverage, zero. "free market" has more than one usage, but economics's conclusions are valid only if the assumptions are met.

Fair enough; we're using 'leverage' differently. I didn't realize it had a formal economic definition. Never the less, my point stands: that employers can afford to wait for a given worker's labor prices to come down to the market price for their labor is affirmative evidence that the labor market is free whereas the OP considers this evidence that the labor market is unfree.

Unpacking this:

> employers can afford to wait for a given worker's labor prices to come down

So employers can wait.

> is affirmative evidence that the labor market is free

For employers.

> whereas the OP considers this evidence that the labor market is unfree

For employees - they can't wait (that much), see above.

Re: What harm do minimum wages do?

#232

Post by ipnon »

fragsworth wrote: post #155
sparker72678 wrote: post #2

I know research is hard, and these issues are fraught with complexities and challenges in acquiring data, but it still boggles my mind just how many macro economic theories don't have strong empirical data to support them.

It is basically impossible to produce real empirical evidence in economics. You can look at data/correlations, and try to reason about cause and effect. But real empirical evidence requires you use the scientific method to test hypotheses (ideally done in a double-blind way), which is impossible for economists to do even if we had a national desire to do it, because the test itself would impact reality for its partic…

AI researchers are important for this reason. Super intelligence, even if limited to simulations, can find results outside of the mainstream that are more optimal than the economic convention.[1]

[1] https://blog.einstein.ai/the-ai-economist/

Re: What harm do minimum wages do?

#233

Post by mrkstu »

bitdotdash wrote: post #49
prostoalex wrote: post #28

Earlier quoted context omitted.

> That's why minimum wage laws and workers rights are important. How do you translate that into numbers? If $15/hr is better than $14/hr, wouldn’t $150/hr be 10x better, and if so, what’s wrong with a comfortable $1,500/hr? I think that’s where economists start to differ.

Slippery slope / Straw-man fallacy. One is to do with tying the minimum wage to a livable wage. The other is just large numbers for the sake of trying to win an argument. No one is arguing for $150/hr. The argument is simply that you aught not to be able to run a business and extract a profit if the cost to do so is employing people at such a low wage that they require governmental handouts just to pay rent and eat f…

That is still better for society than not having the economic activity.

What exactly is the benefit of wholly depriving the putative worker of a job vs. making up the difference with something like food stamps and Medicaid?

Re: What harm do minimum wages do?

#234

Post by AnthonyMouse »

AlexandrB wrote: post #213
AnthonyMouse wrote: post #205

Earlier quoted context omitted.

> companies have more power in negotiation, they have more information You're just asserting this without any argument or evidence. > and, most important of all, they can deal with a job opening not being covered most of the time. Workers can't usually live too much without finding a job. Workers don't specifically need a job at that company. Even if they need a job, they can go work somewhere else. And if that isn't…

> You're just asserting this without any argument or evidence. This is ridiculous. If I assert that the sky is blue, I don't think I need to provide a list of sources. Under what possible circumstances does the average individual have more negotiating power or more information than a multinational organization with teams of lawyers, an HR department, and access to labour market research? Edit: To add, when we talk ab…

> Under what possible circumstances does the average individual have more negotiating power or more information than a multinational organization with teams of lawyers, an HR department, and access to labour market research?

You're assuming a level of competence for corporate HR departments that isn't in evidence. What do you think they have that you can't get from Glassdoor or similar? Not much, if anything.

> Please explain how a ditch-digger can have negotiating leverage over the average road construction company?

By taking a job at some other ditch-digging company, or Walmart, or Uber, or anywhere else, until one company offers a better wage than the other.

For commodity positions it's not even really a negotiation for either party -- everybody on both sides knows what ditch diggers get paid, the employers offer that much and the employees accept that much because anybody who offered less or demanded more wouldn't find any takers.

Which is also why there can't be any meaningful information asymmetry -- when everybody knows the prevailing wage for that category of work, there is nothing else you really need to know in terms of wage negotiations.

Re: What harm do minimum wages do?

#235

Post by mcguire »

baddox wrote: post #172
brokensegue wrote: post #114

Earlier quoted context omitted.

ec101 often assumes perfect competition. google defines that as. >the situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers. so everyone has equal leverage (zero).

Perfect competition is definitely taught as a concept, mostly as a benchmark to measure real-world markets against, but I don’t think it’s literally an assumption of everything you learn in Econ 101.

Most of the theoretical results of basic economics (i.e. Econ 101) are built on really sketchy assumptions, including perfect competition. I recommend Steve Keen, Debunking Economics, for one amusing reference.

Re: What harm do minimum wages do?

#236

Post by dylz »

kenhwang wrote: post #123
clairity wrote: post #63

Earlier quoted context omitted.

i'm generally in favor of state-level control of such things, but i'd be remiss not to point out that that's a great way to further entrench inequality across america. i mean, if $15/hour is a little more than subsistence level in rural north dakota or the hills of west virginia, so be it. maybe it means they can buy a laptop for the kids, but it won't be mansions and teslas everywhere. current labor markets are prof…

It's one thing to be unfair when the government is footing the bill, like basic income or tax brackets. It's a good incentive to balance out rising cost of living. It's another when it's small businesses footing the bill. There's a very painful lag time between being required to pay employees more and when employees have more spending power. Typically all that happens is local business don't have the finances to cove…

I don't have an opinion on this in either direction, but i'm curious: how do you define a small business, and do inefficient/wasteful small businesses get selectively 'bailed out' compared to national ones? Why should small businesses not have to foot the bill while large ones do? Just because they are small, they don't have to be competitive or efficient - do not-profitable hobby businesses get propped up for no reason other than they are small?

Many chains and non-small businesses have also been known to split off (for example, an incorporation per chain location, franchise location, or per physical building) - then that one national fast food chain or REIT building is now a "small business" with only a few employees?

Re: What harm do minimum wages do?

#237

Post by trentnix »

wtallis wrote: post #153
throwaway894345 wrote: post #85

Earlier quoted context omitted.

> A lot of economic arguments forget these ideas. The labor market is not a free market: companies have more power in negotiation, they have more information and, most important of all, they can deal with a job opening not being covered most of the time. Workers can't usually live too much without finding a job. I'm generally in favor of stronger job protections and so on, but I'm not aware of any definition of "free…

If you're having a rational conversation with reasonable people, sure. But there are plenty of people who will insist that anything making a market less free is harmful, a bad idea and bad public policy. If you try to reconcile that, you may infer that they seem to be working with an unusually constrained definition of "free market", but that's usually not the most straightforward explanation.

I've not found my position is rational, other positions are not to be all that convincing.

Re: What harm do minimum wages do?

#238

Post by AmpsterMan »

throwaway894345 wrote: post #212
AmpsterMan wrote: post #197

Earlier quoted context omitted.

That's kinda the point. We define what a spherical cow is to be able to compare the real world against it. The problem for economists is that lay persons take that spherical cow to be truth and base whole ideological systems on those spherical cow.

This is a straw man argument. The issue at hand isn't "whether a free market is eminently desirable", but whether or not the relative ability for employers (or any buyer) to wait for a better price on a good or service renders a market unfree. My position is that a market in which one party (the employer in this specific case) can wait for another party (the worker) to come down to market price is entirely congruent…

Not really sure where there's a straw man here. I've addressed your concern on whether power dynamics are orthogonal or not. I've described the academic definition of what a perfectly competitive market is and referred to Coase's Theorem which essentially concludes such markets rarely exist in reality.

You say they are orthogonal, and I provided evidence that they are not.

Re: What harm do minimum wages do?

#239

Post by opportune »

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…

That entire excerpt is bollocks. I seem to recall a pretty influential treatise explaining how wages tend towards the exchange-value of the labor to produce a good, not the use value or even marginal exchange value of the good itself.

Re: What harm do minimum wages do?

#240

Post by nxmL »

throwaway894345 wrote: post #85
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…

> A lot of economic arguments forget these ideas. The labor market is not a free market: companies have more power in negotiation, they have more information and, most important of all, they can deal with a job opening not being covered most of the time. Workers can't usually live too much without finding a job. I'm generally in favor of stronger job protections and so on, but I'm not aware of any definition of "free…

Power dynamics are not at all orthogonal to market freedom.

Academics hold all the power in the "free" market and have their snouts in the trough. In a truly free market Milton Friedman would be on minimum wage at best (or find a rich sponsor).

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