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What harm do minimum wages do?

economist.com

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Re: What harm do minimum wages do?

#541

Post by mr_toad »

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…

How does a minimum wage help with asymmetrical negotiating power and information for the majority of the workforce?

If this was the justification for the minimum wage (it almost never is), it’s a pretty ham-fisted solution.

Re: What harm do minimum wages do?

#542

Post by edgyquant »

svachalek wrote: post #522
madeofpalk wrote: post #512

Earlier quoted context omitted.

I’m not all that educated on negative tax rate - what’s to prevent companies from just setting wages to obscenely low, knowing the government will just pick up the bill and pay out the difference?

This is more or less what happens with tipping so I would assume it also happens here.

A lot of states regulate tips so the employer has to compensate an employee whose tips equal less than the minimum wage for the hours worked.

Re: What harm do minimum wages do?

#543

Post by incadenza »

csours wrote: post #387
qeternity wrote: post #378

Earlier quoted context omitted.

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.

This entire discussion is about laws regarding minimum wage, the act of literally making it illegal to hire for less than a certain wage. I’m not sure I see the confusion

Re: What harm do minimum wages do?

#544

Post by arp242 »

missedthecue wrote: post #15
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 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…

I would personally rephrase the previous comment as one of choice: for a free market to function you must have a reasonable choice to say "yes" or "no"; if you're strongly incentivised (or even forced) towards saying "yes", then that's not a very free market.

And that what's skewed here: as a (low-income) labourer, I often don't have all that much choice but to say "yes" since my bargaining power and alternatives are extremely limited. Often times people can't really "compare options".

Re: What harm do minimum wages do?

#545

Post by ianai »

burfog wrote: post #525
ianai wrote: post #51

Earlier quoted context omitted.

Yes. In one of my grad Econ classes an entire lecture was devoted to deriving individual pay based on marginal input and aggregate utility functions. The prof ended the derivation with a laugh then discussed all the obvious places wage does not equal marginal societal benefit. Ie school teachers vs entertainers. The takeaway is that Econ theory only explains what it’s capable of explaining. The real market clearly ha…

The rich entertainers are worth more because they provide value to very many people. It adds up. Each teacher only provides value to about 30 people. Total pay for all teachers is far in excess of total pay for all entertainers. Measured that way, we clearly do value the teachers more. It's just that an individual teacher is not very productive. Some entertainers are not productive. Being a clown at small birthday pa…

You’ve got to think of all the people a teacher teaches to over their career and the strength of the interaction. Yes entertainers can make a song that winds up with astronomical airtime. But teachers inform how people think throughout their entire lives.

Re: What harm do minimum wages do?

#546

Post by dredmorbius »

WalterBright wrote: post #491
dredmorbius wrote: post #487

Earlier quoted context omitted.

> every job I've had would be at minimum wage. The five following are the principal circumstances which, so far as I have been able to observe, make up for a small pecuniary gain in some employments, and counterbalance a great one in others: first, the agreeableness or disagreeableness of the employments themselves; secondly, the easiness and cheapness, or the difficulty and expense of learning them; thirdly, the con…

> the law Notice how they used the law to prevent the free market from operating. They had to use the law because the free market did work around it.

Wealth, as Mr. Hobbes says, is power.

Ibid., Book 1, Chapter 5.

Re: What harm do minimum wages do?

#547

Post by mr_toad »

aidenn0 wrote: post #401
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…

>> 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…

> you get no profit.

Marginal value of production is almost always lower than average value, because of diminishing returns. Profits are made on the average value.

A Marxist take in this is that labour should be paid on the average value of production, and labour should get all the profits.

Re: What harm do minimum wages do?

#548

Post by Discombulator »

eesmith wrote: post #122
calkuta wrote: post #79

What I find important to remember about minimum wage is that it constitutes a restriction on the freedom of workers to negotiate for their labor. The existence of a meaningful minimum wage implies that there are people in the society who desire to negotiate for lower compensation (because they are more motivated to get the job for whatever reason), but they are disallowed from doing so. It might be our opinion that i…

Indeed we should - demand the repeal of Taft–Hartley Act and other laws which have nerfed collective bargaining power far from any "natural" point. Jurisdictional strikes, wildcat strikes, solidarity or political strikes, secondary boycotts, secondary and mass picketing, closed shops, and monetary donations by unions to federal political campaigns are all part of the freedom to negotiate the terms of our employment,…

On the other hand, employers are also barred from colluding to keep wages artificially low, which arguably would be considered a “negotiation strategy” if one follows your interpretation.

I agree though that employers have naturally more negotiation power in the vast majority of cases.

Re: What harm do minimum wages do?

#550

Post by dmalvarado »

efxhoy wrote: post #459
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…

>> 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. In the econ 101 textbook simplified free market that the author is refering to firms do not make any economic profit. If…

As an econ major, I've come to the conclusion that the dismal science is equal parts making models and explaining why they don't work.
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