What harm do minimum wages do? • Hacker News Board

Re: What harm do minimum wages do?

#381

Post by throwaway894345 » Wed, Aug 19, 2020, 9:25 PM UTC

AmpsterMan wrote: post #189

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…

Free Market used colloquially is very broad and usually means free from government intervention. Free market in the microeconomic context is a market in which no one entity can significantly move the prices of a product but deciding how much to supply, therefore they don't have price setting power. A second condition is relative ease of entering and exiting a market for competitors. Coase's theorem is a good place to…

Yes, the example we're discussing is very contrived and over simplified. Notably, I'm implicitly assuming "perfect information" for both parties for simplicity (spherical cows and all that). There's lots I'm glossing over because this is an HN post, and I was responding to the specific claim that an employer's ability to avoid bankruptcy without filling a position gives them the ability to fix labor prices such that the labor market is not free.

Re: What harm do minimum wages do?

#382

Post by javert » Wed, Aug 19, 2020, 9:28 PM UTC

Sohcahtoa82 wrote: post #220

javert wrote: post #94

Earlier quoted context omitted.

The free market is very good at solving information asymmetries of the kind you are talking about. If it isn't being solved, it's probably because of regulation (regulatory capture). Or maybe it isn't a real problem. I'm going to guess in this case it's more the latter than the former.

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.

Re: What harm do minimum wages do?

#383

Post by jackvalentine » Wed, Aug 19, 2020, 9:28 PM UTC

macspoofing wrote: post #364

danenania wrote: post #10

Earlier quoted context omitted.

Right, many minimum wage opponents focus on the scenario where someone is worth e.g. $14/hr to a business, and rightly point out that this person won't be hired with a $15/hr min wage. BUT without a minimum wage, someone worth $50/hr can be paid $5/hr if anyone can do the job. It strikes me that this situation is far more common than the first scenario, and minimum wage opponents tend to ignore it in their arguments.…

The only arguments for minimum wage that I've ever seen, are those that claim that under certain conditions minimum wage may not be noticeably detrimental. What you never see is the minimum wage actually make a lick of difference to any metric that matters (like unemployment rate, or poverty rates, or income rates, or whatever else). Never. And I'm serious about this. Have you ever seen a region that adopted minimum…

This article links to a lot of studies about the health benefits of a minimum wage: https://www.nytimes.com/interactive/2019/02/21/magazine/mini...

Re: What harm do minimum wages do?

#384

Post by AmpsterMan » Wed, Aug 19, 2020, 9:28 PM UTC

throwaway894345 wrote: post #367

AmpsterMan wrote: post #238

Earlier quoted context omitted.

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.

It's a straw man in that no one in this thread is arguing that a free market is eminently desirable or otherwise making ideological arguments (contrary to the implication in your post). There's the chance that you weren't talking about "arguments made in this thread" and were simply digressing to "arguments made by other people elsewhere in the world" which is differently bad (off topic). To be clear, I wasn't remark…

Yeah, I was talking to the immediate commenter, not the parent. I can understand where you're coming from with my off-topic comment; it was not intended to imply anything about anyone on the thread as such, nor was it a response to the op. It was just a lament of a frustrated person when it comes to their field of study.

Re: What harm do minimum wages do?

#385

Post by ccffpphh » Wed, Aug 19, 2020, 9:29 PM UTC

mattmanser wrote: post #374

ccffpphh wrote: post #47

Earlier quoted context omitted.

The issue is that nobody is entitled to anything. You aren't de facto entitled to receiving money for any services you may or may not provide, regardless of whether you're skilled or not, just because you exist. A company exists because one or more people risked wealth in order to create a net positive system - their existence is not as riskless as one would believe.

Risk is a strong word, often there's little risk involved, it's often more about who you know, which entitlements your birth gave you and what parachute mummy and daddy can give you (especially if you're white, male and privately educated). There's no inherent entitlement or human right to give your children your money, or to not be simply turfed off what ever land you are using when society decided there's a better…

There is risk in any action taken due to the fundamental lack of information regarding events occurring in the future. I agree with you that much of it is luck, this at the same time does not mean because one is born lucky that they now need to suffer to bring someone else to their level. I disagree that it is meaningless, I believe that since no one person is entitled to anything from anyone else (to think otherwise would be to support slavery), the only morally correct form of interaction is through consensual voluntary action.

I do not think we need checks and balances. Minimum wage actually harms those who are most disadvantaged - if I am hiring two people and I must pay them the same amount, there's no reason I would take the socially less valuable person. At the very least, eliminating the floor would allow the disadvantaged to compete and make racists pay for their prejudice, i.e. "Do I really want to pay $10.00 for a white straight privileged [whatever insert here] or $5.00 for a black trans [etc]".

Inheritance tax is violence against those who pass on their wealth. If you have indeed earned so much that you would like to ensure your lineage, what right does anyone else have to stop you? Why is it wrong for you pass on wealth to your children? Whose business is it? What if instead, you simply lived a thousand years and kept your wealth?

If you want to donate money because you are very rich and have a lot of money to spare and truly believe this, then by all means, you can even pay more in taxes nowadays and never file a return. Nobody will stop you.

Re: What harm do minimum wages do?

#386

Post by giantrobot » Wed, Aug 19, 2020, 9:30 PM UTC

sushshshsh wrote: post #160

david38 wrote: post #116

Earlier quoted context omitted.

Minimum wage, applied universally, absolutely validates worth of a worker. If the minimum wage is set too high to plant grapes for example, grapes will not be grown. $15/h too high to flip burgers? Ok, I guess we don’t need fast food. Oh wait. Except it somehow doesn’t put the corps out of business.

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.

Re: What harm do minimum wages do?

#387

Post by csours » Wed, Aug 19, 2020, 9:32 PM UTC

qeternity wrote: post #378

csours wrote: post #342

Earlier quoted context omitted.

Ehhh? What are you talking about? It's not illegal to do things that don't make money. That's called a cost center. I don't make money for my company, I reduce the risk of losing money, and provide tools for people who do make money.

I didn’t say making money, I said providing value. You’re creating some value for your company that exceeds what they pay you, otherwise you wouldn’t have a job. Let’s say I’m a widget maker. I can make 10 widgets per hour for my company, and they in then earn $1 profit per widget. This company is not going to pay me $15/hr if I’m only able to generate $10/hr in value for the business. But if minimum wage is $15 then…

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.

Re: What harm do minimum wages do?

#388

Post by collyw » Wed, Aug 19, 2020, 9:33 PM UTC

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…

Thomas Sowell makes quite a convincing argument that minimum wages stop people getting onto the bottom rung if the employment ladder. He convinced me to an extent, in that it can be useful for young people starting out and small companies that couldn't otherwise afford staff. But I do think it need to be balanced with some checks to stop it being exploited by companies who can afford it.

Re: What harm do minimum wages do?

#389

Post by dragonwriter » Wed, Aug 19, 2020, 9:33 PM UTC

mcguire wrote: post #241

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.

Economists take the spherical cow as, if not the current state of cow-dom, the perfected nature of cows and what cows would be if they got to make the rules.

> Economists take the spherical cow as, if not the current state of cow-dom, the perfected nature of cows and what cows would be if they got to make the rules.

Well, sure in a way, but that includes the parts that lay people ignore like the perfect information element and perfect value optimizing decisionmaking of the rational actor model, and the absence of externalities. But most economists recognize that people aren't omniscient, don't always optimally apply the information they so have, and that you can't avoid econonicndecisions having impacts on people other than those voluntarily participating in them.

Far fewer economists (basically, just the Chicago/Austrian schools, the latter of which does so as pretty overtly an article of faith) think that if you can't magically handwave those elements of the model into reality, the rest of 101-level simplified regulation-free markets still remains desirable as an ideal.

Re: What harm do minimum wages do?

#390

Post by B4CKlash » Wed, Aug 19, 2020, 9:34 PM UTC

macspoofing wrote: post #330

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…

Where are you getting all this stuff from? It's like you're only reading communist blogs where they engage in creating fictitious straw-men of every aspect of a market-based economy. This is not how the world works. >The labor market is not a free market: companies have more power in negotiation That's not what a free market means. And I don't know how you can say companies have more power in negotiation. They post t…

Ironic that you complain about the parent maintaining a particular set of ideology while maintaining a similar set of irrational beliefs...

Just looking at your first point. Companies wield an extreme asymmetric information advantage about 'your' specific hiring cohort. They know who has applied to the job, the size, relative experience, and in many cases they know the expected salary range of those individuals. They know the explicit and implicit cost of their benefits on an actuarial scale - costs potential-employee will never know. They have a firm understanding of their actual needs and a higher degree of flexibility. Like other comments have concluded - it's easier for an organization to fold tasks into other jobs. Employees, especially when you consider health insurance (and that of a family) is tied into these decisions.

In today’s model potential employees are required to negotiate with themselves (as a result of being unaware of the qualifications, expected incoming, etc. of the pool). We wonder why salaries remain stagnant...

If you look at CEO pay as a counterexample it becomes obvious. It's not about adding or demonstrating value, it's about extracting value and an understanding of your ability to extract value. CEO compensation is a published number in public companies. "High CEO pay reflects economic rents—concessions CEOs can draw from the economy not by virtue of their contribution to economic output but by virtue of their position." https://www.epi.org/publication/ceo-compensation-2018/