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What harm do minimum wages do?

economist.com

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Re: What harm do minimum wages do?

#441

Post by aidenn0 »

rbanffy wrote: post #432
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. That's true for a single employee, but you don't need to make a profit out of every single employee. If you do, your CEO will be extremely underpaid in relation to the rest of the market.

I am willing to work as the CEO of Walmart for say $750k per year. The fact that I don't work there means that either:

1. Voting Walmart shareholders think that the having Doug McMillon for $24M/year is a better deal than having me for $750k/year

2. Voting Walmart shareholders are unaware that reasonably intelligent people with no executive experience are willing to work for a lot less than McMillon.

3. There are other forces at play; e.g. CEOs as Veblen goods or good-old-fashioned corruption. Maybe the board members are also C level employees (at different companies) and they are colluding to keep the C level compensation high.

#2 seems rather unlikely so pick one of #1 and #3.

#1 Certainly does not contradict my use of intentionally, since they believe that McMillon

Re: What harm do minimum wages do?

#442

Post by lsiebert »

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…

Wait, your contention is that paying poor people more doesn't effect poverty rates, and you are asking other people for citations, not citing something of your own?

You might find this CBO report useful. https://www.cbo.gov/publication/55410

Re: What harm do minimum wages do?

#443

Post by asdff »

seiferteric wrote: post #83
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.…

If a company can hire someone worth $50/hr for only $5/hr and therefore make huge profits/margins, couldn't another company easily come along and undercut them? I don't think a scenario like that could exist very long.

They sure could and do if labor is limited. If the supply of labor exceeds the demand, you wouldn't need to undercut; you and your competitor would advertise $5/hr and you would both get a worker. In our current world, we don't see chipotle trying to out compete mcdonalds on wages, so clearly for many classes of worker there is an oversupply of labor.

Sometimes even in the real world things do flip, and there is a demand for low skilled labor that isn't being met. I overheard a few restaurant owners talking about the pandemic and their business while I was in line outside the grocery store a month or two ago. They bemoaned how no one wanted to come back to work at the restaurant since they were making more on unemployment. Neither brought up the idea of paying more if they failed to find labor at that price point in the market. Instead, they quipped back and forth about how lazy their staff are behaving after these owners themselves laid them off not too long ago and put them on unemployment in the first place. This anecdote is American capitalism in a nutshell, imo, just pure cognitive dissonance between the realities of the working class and the perceptions from the capital class.

Re: What harm do minimum wages do?

#444

Post by lukevdp »

chc wrote: post #340
lukevdp wrote: post #293

Earlier quoted context omitted.

Someone is not worth $50/hr if someone else is willing to do the same job with equal capability for $5/hr.

The parent was comparing the value a worker brings to the company against the worker's compensation. To illustrate how the worth of a transaction can be different from the cost: If I offer to give you a $50 bill in exchange for a $5 bill, is that bill not worth $50 just because I lost on the deal?

Yes but it is wrong to do so because wages are not set only by the worth a worker is to a company. That is only one side of the equation (demand). The labour market also have a supply side component which is the ability for the company to find labour.

Re: What harm do minimum wages do?

#445

Post by frogpelt »

gamblor956 wrote: post #319
lukevdp wrote: post #293

Earlier quoted context omitted.

Someone is not worth $50/hr if someone else is willing to do the same job with equal capability for $5/hr.

There is a difference between someone being worth $50/hour and another person willing to do whatever for just $5/hour. For example, rich kids can take unpaid internships because they don't have to worry about food or rent for the duration of internships. Poor kids can't usually afford to take jobs that don't pay.

I'm guessing poor kids usually don't have jobs at all.

Only about 40% of poor people 18-64 even have jobs.

Re: What harm do minimum wages do?

#446

Post by kube-system »

ccffpphh wrote: post #375
kube-system wrote: post #97

Earlier quoted context omitted.

Naturally? Maybe not, but many societies have decided to form governments in which their citizens are ascribed those entitlements.

How many of those governments are just, however? Can you reasonably claim that all citizens consent to the policies of their government? If everyone agreed to murder you, would that make it ok? What about if everyone agreed to rob you of all of your property, your livelihood? What about only half of that? Quarter? A tenth? What's the right number? Non-consent to any degree is not morally right. In the same way, it wo…

In the interest of expediency, most groups of people have decided that democracies can make decisions as a proxy for consent, and people continually work to improve that process. Larger groups of people have all found it necessary to delegate daily governance tasks to a subset of people, because the time and effort needed to govern scales with the size of the group.

> Can you reasonably claim that all citizens consent to the policies of their government?

People will disagree with each other whether they have a government or not. Those who live ungoverned tend to experience more coercion, violence, and violations of their rights than those who are governed.

Re: What harm do minimum wages do?

#447

Post by gjulianm »

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…

> That's not what a free market means.

It looks like in this thread people have different definitions of free market. For me, the fundamental property is that supply and demand respond elastically to price changes, and a quick test (necessary, not sufficient) is the following: if the price asked by buyers is too low, does supply stop? For example (and simplifying), if people wanted to pay just $1 for consoles, the supply of consoles would drop because it's not profitable, so it could be a free market. Now, for jobs, if companies wanted to pay just $1 an hour, would people stop working? Given that their alternative is starving, they probably wouldn't. So the job market can't be a free market.

> And I don't know how you can say companies have more power in negotiation. They post their rates, and people apply or they don't. There are millions of alternative jobs. If I sell my car, I post the price and if I don't like the offer, I don't take it. Are you claiming that this is not an aspect of the free market?

A car and a job are very, very different things. You can live without a car, you can't live without a job. If the available offer of cars is too bad, you won't get a car (well, maybe you need to because you need a means of transport). If the available offer of jobs is too bad, you will still get a job because you need income to live.

> A friend of mine is a shift supervisor at a food supplier...

I don't know how this is related to the debate at hand. Do you know the situations and motivations of those people?

> There are wages that people will just not work for. Even if minimum wage laws were lifted, people aren't going to go work at MacDonald's for $1/hr.

IIRC, current minimum wage puts people below the poverty line. Why do people go to work on that? Maybe because they have no alternative?

> And you also see this will undocumented labour (i.e. where minimum wage regulations are ignored)

Which is a separate problem. Any regulation of any kind will push incentives towards undocumented labor. That's not an argument against regulation, it's an argument for better oversight.

> Sure they can. What are you talking about? Tens of millions of people, for all kinds of reasons, either choose not to work, or choose to work part-time.

Working part-time is working. And if you've found the formula to live without income, please share it.

Re: What harm do minimum wages do?

#448

Post by dragonwriter »

avianlyric wrote: post #61
missedthecue wrote: post #15

Earlier quoted context omitted.

A free market does not mean that both sides want something with equal desire. I need food to survive much more than Krogers needs my business to survive. This does not mean that grocery sales are not a free market. A free market means that the supply and demand of goods rely on price signals rather than a centralized planner. Labour is absolutely a free market. As wages in one particular area increase, people respond…

Free markets are also free of monopolies, and generally expect the actors how have good “information” about the market. This simply isn’t true for the labour market, ignoring the monopoly aspect for the moment, workers don’t have good market information. Worker pay is usually heavily obfuscated by employers so it’s almost impossible for an individual worker to accurately gauge how much they can demand. Addition worke…

> Free markets are also free of monopolies

Usually, that's covered by the adjective “perfectly competitive” rather than “free” modifying “markets”, but it is an aspect of textbook idealized markets.

Re: What harm do minimum wages do?

#449

Post by jayd16 »

bgorman wrote: post #243
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…

Your chain of causality is actually completely wrong. At 15 dollars an hour only a few companies can hire unskilled workers. At 1 dollar an hour many people can pay workers that amount, so there is more competition out there for wages. The idea that there is a monopolistic employer in the US labor market is laughable. Even for monopolistic industries like telecom there are multiple options. Minimum wage jobs should n…

A livable minimum wage is the only way someone can move on. If you're working in an unskilled job, living paycheck to paycheck, how are you going to improve that situation?

Re: What harm do minimum wages do?

#450

Post by dragonwriter »

javert wrote: post #94
avianlyric wrote: post #61

Earlier quoted context omitted.

Free markets are also free of monopolies, and generally expect the actors how have good “information” about the market. This simply isn’t true for the labour market, ignoring the monopoly aspect for the moment, workers don’t have good market information. Worker pay is usually heavily obfuscated by employers so it’s almost impossible for an individual worker to accurately gauge how much they can demand. Addition worke…

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.

> The free market is very good at solving information asymmetries of the kind you are talking about.

No, it's not.

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