Then let's raise it to $1000 an hour. We'll all be rich.
To respond to the above comment, yes, it does lead to higher unemployment for those with lower skills, particularly in an environment when unemployment is already high.
Who would you hire for $12 an hour? A teenager with no experience or someone who was laid off but has 5-10 years of experience? We already see (at least in the United States) that teen unemployment is the highest of all age groups at 23%, when average unemployment amongst all age groups is 7.9%. [1]
For comparison, Germany has no statutory minimum wage (except for a few specific employment groups). Not exactly a bastion of poverty and destitution. [2]
This is an extreme example which lacks any depth of insight. It would be like me arguing; why don't governments print loads more money and we will all be rich as my reason they should not print anymore than we have today.
To stay on the money analogy; we want governments to print THE RIGHT amount of money. If they print too little the economy will suffer just as much as if they print too much. This is the same as a minimum wage. If it is too low it damages things like consumption and quality of life. Too much and it is damaging competitiveness etc.
I would suggest the best answer to this whole debate is in empirical data. Look at countries that have similar economies low AND high minimum wages and see what works best on the majority of case.
Also personal views weight this argument. My lean on this is argument is that a country should be run to give the largest amount of people the best quality of life possible. If you have no problem with a large poor/rich gap you could easily argue to keep minimum wage down.
Also Germany doesn't have a minimum wage but has legally enforced collective bargaining. Companies don't just pay what they think people are worth. Your example is not really givings the full story by pointing out there is no statutory minimum wage. Their government has employed a different system to ensure wage levels meet workers needs and is nothing like giving companies carte blanche to pay poverty wages.
I don't think it's nonsense. The things that are wrong with a $1000 minimum wage are the same things that are wrong with a $10 minimum wage. They're just happening to different people.
Setting a $1000 minimum wage would destroy essentially all jobs. There's nothing I or most people could do that's worth that much. Nothing at all. With my job gone, my income is zero and the products and services I contributed to society don't exist. Such a law would make me permanently poor, and would make society incrementally poorer.
This is what I think happens to people whose natural output is below the minimum wage. Because their skills and education justify $6/hr but not $9, they aren't allowed to make that $6. They and society are $6/hr poorer for it.
I believe firmly that people should be allowed to work if they want to, on whatever terms they find agreeable and can get. If you want to help them beyond that, I'm sure they'll think that's swell. But it shouldn't come in the form of destroying their job.
1000/hr will make all jobs unfeasible - on the basis that a job is a way to earn money by offering greater value in labour than in wage.
But what if we lived in a society where solar powered robots did everything and one guy earnt all the money for just pressing the power switch at 8am each day?
How would we share out the bounties of wealth these robots made? Giving everyone a job at below cost might be one way. Not the best but it is a way.
So I suggest that the coming world will have vast wealth, and fewer jobs - and we need to find new ways to make society fair for all. Because an unfair society is a Bad Thing.
I don't understand this view. Every time I see people spending hours of their time watching harlem shake videos or any other silly nonsense on the web, I am heartened that there are infinite jobs in entertaining each other and providing "non essential" services. OK sure, robots will take over construction and heavy lifting, leaving only a "super class" of surgeons and whatnot still able to get any of the jobs we recognize today. But I think we are far away from robots taking away other very human jobs. I pay for a twitch.tv subscription so I can see StarCraft games in 720p+. I literally pay other people to play video games. This is not some strange oddity, this is the future.
Remember: once upon a time it was a full time job for just about everyone in a society to get food, take care of children, and just generally do the bare minimum to survive. I'm sure they look at the world we live in today as "post-scarcity" the same way we imagine a world of tomorrow where robots do all of our duties. When agriculture introduced surplus into our society, it didn't cause a collapse. It instead allowed art and science to be born. Just as those early humans would have scoffed at Michelangelo getting a paycheck for putting colors on walls, so to does this possible future seem frivolous to us. But it is no more frivolous than all the current people employed in our current economy convincing each other to buy things we don't need.
If or when machines do everything we consider essential now, I assure you we will find new things to do with our time, some will be better than others at these new things, and thus we will pay each other to do them.
There is a difference between being paid to do a job and a job that increases the total wealth in the world.
There are two ways to look at this - the pg style do something people want (such as play Starcraft well) and a more physicist viewpoint of decreasing amount of energy needed to achieve a given outcome. (Yeah that definition needs some work but it is intuitively measurable)
Anyway, if robots do all the stuff that is physicist-style
Like farming or manufacture and humans then sit around doing arts and crafts, that's great for humans - as long as there is some means of distributing the wealth (energy transformed into goods?) - and preferably a fair means of doing so
We could just hand out food, or give everyone a "job" - but correcting the compensation when the job is not actually productive is hard. We are going to go into a world where economics will have to catch up.
A job is essentially an overloaded concept - it does two things, distributes wealth and is an actual means of wealth creation. Split the two and we are in uncharted waters, but splitting the two we are.
I don't understand why you think any rules change just because the jobs being done change. This revolution of automation has largely already taken place, and I would argue that the automation isn't even the important part. What difference does it make if all food is generated by robots vs today's reality of most food being generated by a tiny percentage of the humans with the huge help of technology? I certainly don't generate my own food, and I don't do anything very essential by the "physicist viewpoint", and yet I am still able to acquire food. Most people in this country don't farm and are still able to get food despite doing "non physicist" jobs. I didn't need a job handed to me or invented to keep me busy. My job is completely non-essential and would have made absolutely no sense 1000 years ago. It however exists because of technology and surplus.
The guy playing StarCraft makes money. He then uses said money to buy food from guy who owns the crops, just like today. Its no different than how soccer players play for people for money. What is the complexity here? Why do you think we will need to figure out means of "distribution"?
So you are saying that the "wealth" of the changes in farming is produced by say 5% of the population, and they are the only ones who are really needed. The rest of us get to play a game where we guess the total wealth of the world (ie the food) and assign money to it. Then we split that money somehow (playing starcraft) and give some of it back to the farmers.
I suppose I am now taking econ 101.
I would however suggest that the automation revolution has not finished - the mechanisation revolution may be slowing but software is barely started.
Exactly. Here's the trouble: we are already more productive than necessary. 90% of humans can adequately supply 100% of the population with everything necessary. What if we lower that 90% to 10%?
The problem is that capitalism, which aligns your job/business with your income, breaks down at that point. If there is no job for you to do, then under this system you'll starve. Will we let 90% of the population starve just to preserve capitalism? That's not exactly sustainable.
The reality is that capitalism is not perfect, but it's the best we've come up with so far as a species. Once we hit the point where it stops working we'll have to re-imagine a whole lot of concepts.
On a reread I do not think that the next wave or whatever will cause a collapse - if there are no jobs to be had then we shall not all be livin in the dirt - we will find ways to share the wealth some other way than wage packets.
There are many ways of sharing the wealth - for example I benefit from road building schemes even if I do not recieve direct payments.
Michalangelo as compared to a Neanderthal is an interesting idea - but reverse it - although michaleangelo presumably thought he had to work hard, if he had lived a life of same utility as a Neanderthal he could have done so on an hours work a week. It's just that he liked clothes and houses and wine. So I agree that in the robot future the effort needed to live like you or I will be small - but it won't pay for that holiday to Mars
>> 1000/hr will make all jobs unfeasible - on the basis that a job is a way to earn money by offering greater value in labour than in wage.
>> But what if we lived in a society where solar powered robots did everything and one guy earnt all the money for just pressing the power switch at 8am each day?
This is highly unrealistic.
1) We are a very long way from having robots able to do most human jobs.
2) There will always be scarce resources. Even if you could 3D print houses for pennies, land, access to desirable events and people, etc will be scarce, coveted, and distributed to the highest bidder.
Let's talk about policies that work well in our actual, current world.
You're ignoring the fact that if you made $1000/hr, you could afford (and thus would be charged) higher prices for everything else, and so would everyone. Thus you would be producing $1000/hr, it's just that a thousand then would mean less than it does now. That's inflation. So long as people spend and the economy grows faster than that, we're better off than we were.
Inflation doesn't work that way. You can't legislate it into existence, and you can't legislate it away. If you could, it would be an easy problem to solve.
Inflation occurs when you add to the money supply more than you add to the economy. The California gold rush caused inflation. Countries with hyperinflation have governments that are printing money at incredible rates.
That's completely orthogonal to minimum wage. If you say I must have a $1000/hr job, it's in current dollars. Even if my employer wanted to pay me more, he can't -- he doesn't have the money to! Even if everyone wanted to switch over to doing that, they couldn't; there isn't enough money in the system! If everyone woke up tomorrow and agreed that a dollar was worth 1000x less, they'd all be 1000x poorer and nobody could afford anything.
No, the minimum wage doesn't change the value of a dollar. It just changes who's allowed to earn one.
It's not the money supply. It's the money flow, which you can model as a product of money supply and money circulation speed. A $1000USD minimum wage will increase circulation speed and from there induce inflation.
Don't read too much into my comment. Your argumentation was based on the the fact that inflation only occurs when you add monetary mass. I just pointed that that's a naive view. Contrary to your statement, you can legislate inflation into existence by creating conditions for increased money flow.
I did not say anything about the benefits of increasing minimum wage. In general it is known that the absence of minimum wage creates unsustainable imbalances of income society-wide. However, I don't know the US economy well enough for an informed opinion. Your current imbalance of income is huge, but that's only one data point.
It's hyperinflation if you're increasing to $1000/hr, which is why no one is seriously suggesting that. Otherwise it's a little bit of inflation, and one that would be overshadowed by the resulting growth.
"I don't think it's nonsense. The things that are wrong with a $1000 minimum wage are the same things that are wrong with a $10 minimum wage. They're just happening to different people"
You don't seem to consider elasticity. Basically, the main argument of the proponents of a higher minimum wage is that the hiring capacity is elastic enough that a raise in minimal wage's benefits far outweigh the resulting loss of jobs.
Saying that raising the minimal wage to 10$ show the same problems than raising it to 1000$ is wrong in that it considers that, at best, the elasticity of the hiring capacity equals 1. However, we can expect it to be false if we consider that the minimal wage has, in effect, went down in the recent years and that it did not result in a hiring frenzy.
That's my point. Obviously, increasing the minimum wage to $1000 is ridiculous. But so is the idea that raising the minimum wage by $1 has no consequence, as some claim. The higher cost you impose on employers for low skill jobs, the more likely it will be that employers will attempt to hire fewer of those workers or reject unskilled candidates. It's simple logic.
For instance, the hamburger-making machine will replace teenagers who need a job at McDonald's. [1] Why wouldn't an employer just purchase a machine that will reduce costs, create a consistent product, and not call in sick if it can do so at an equivalent or lower cost than an unskilled teen who would be required to earn $10 or $12 an hour?
Why do you think a hamburger making machine is a bad thing? Automation in the long term is good for the economy, if it wasn't for automation those same teenagers would be manually plowing fields instead of flipping burgers.
If anything raising the minimum wage a bit should spur a lot of automation industries, and those same teenagers would be more likely to get an entry level job there, instead of at a menial job.
It's not a bad thing for us. It's a bad for the people that minimum wage is supposedly trying to help. Increase minimum wage, decrease low skilled jobs, and increase mechanization.
It is a bad thing for us (software developers) too: yes, we would get a contract to automate these low-skilled guys jobs, but then who's going to pay for these low-skilled guys' unemployment?
Besides, our automated solutions would still deliver higher-than-before prices, because if automation was cheaper, then low-skilled jobs would have been automated away without government's legal help.
I guess the point is that, as the min wage grows, certain considerations that were not viable before become viable now, and as a consequence people who otherwise may have been considered for a job would no more, or would lose the job, or the job itself would disappear.
Its actually pretty reasonable to posit that raising the minimum wage will have no effect on employment. Take a look at S&P 500 profits over the last few years. Then look at real household income. If you want to get crazy, look at productivity measures. Profits are going up while income is falling in real terms. It stands to reason that there's a buck to spare there.
This is terrible reasoning. A million different variables go into real household income, productivity, and corporate profits.
Just because corporations are making profits does not necessarily mean a significant number of people making minimum wage won't be fired when the minimum wage is raised. It's not like you have managers sitting around saying, "Well, we're making money... so we can afford to pay a worker $9/hour even though their output is only worth $8/hour." If it does not make economic sense to retain a worker, a company will fire that worker.
Oddly enough it may not be true - the share of GDP captured is roughly 40% for corporations - and has dropped for wages. That is whilst the share of GDP for companies has remained roughly same for past few decades, wages share has dropped.
This means that the share of wealth going to wage earners and working stiffs is dropping - but is not being captured by company profits.
Where is it going? To self employed dividend earners - basically there are more one person bands now, freelancers etc. Some will be tax efficient schemes for bankers, but most are, well, us on HN.
I was talking about the last 5 years, as opposed to the last 30. Although household income has been declining in real terms for the last 30.
I'd be interested to see your link. I was under the impression that most growth has been captured by larger corporations rather than free-lancers, and if they refer to 'self-employed dividend earners' that could easily be people collecting dividends and capital gains on stock. But that's all speculation -- hit me up with the link if you get a chance.
FTFY. I don't normally do this, but since you are relying on classic straw man for your argument, I thought I might as well make it obvious that your whole argument is suspect logically.
Not really, no. I know loads of people with low-wage jobs. None of them like doing those shitty jobs so much that they'll turn down a wage rise, or a funded unemployment, or a higher-paying job, to "protect" their particular employer. Nobody wants to work more for less, and when you talk about a system that keeps productivity down (ie: a race to the bottom between labor wages and the price of automation), you are ultimately talking about everyone working more for less.
> None of them like doing those shitty jobs so much that they'll turn down a wage rise, or a funded unemployment, or a higher-paying job, to "protect" their particular employer.
No, but I'm sure they like them better than not doing anything, since they have the choice to not do anything right now. If the minimum wage is raised above what they are capable of producing in value, they will no longer have the choice at all.
Submitting link spam onto blog posts.
Washing cars.
Wiping reflective metal surfaces in elevators.
Doing inventory.
Growing and mowing lawns.
Frying chips.
Bathroom attendant at a nightclub.
Really? So no one would pay to have their car washed, keep their elevators clean, have a count of their inventory, have a nice lawn, or eat fried chips? (I'm stumped on the bathroom attendants, but I assume someone likes their mouthwash, towel, and mint services)
If someone would pay to have those things done, then that means they value it. They have value. The crappy thing is that the minimum wage prevents people from matching the value in those tasks with someone willing to tolerate that drudgery for the reward. Government knows best, as usual.
If raising the minimum wage to $12 is good for the economy, and raising it to $1000 is bad, then there's an inflection point where it switches from good to bad.
Therefore, the theory that raising the minimum wage is good for the economy is incomplete at best.
Great! Now, if only the justifications for the minimum wage referred to those effects!
That is, what are the "known, obvious" downsides to raising the minimum wage, so that we can know when the costs start to exceed its benefits, and/or I can tell that that $1000 min wage might be stupid but not, say, a $12 one?
This is what bothers me about the debate: people confuse a strawman with a reductio ad absurdum. Sure, no one advocates a $1000/hour minimum wage, but the claims used to support a $12 would also apply to $1000. So if you find them insufficient in the latter case, so should you in the former.
For example, if you believe $12/hour min wage would "get more money in heavy-MPC[1] folks' pockets" in some helpful way, then you should also believe a $1000/hour min wage would "get more money in heavy-MPC-folks' pockets".
[1] MPC = marginal propensity to consume i.e. fraction of any new money you spend on consumption goods rather than saving
> but the claims used to support a $12 would also apply to $1000
I disagree with this statement. It may be true that _some_ of the claims used to support a $12 wage would apply to a $1,000 wage. Surely you won't take the position that this is true of _all_ possible claims.
The following claims I post are examples of counter-claims. I haven't thought these positions through entirely, but they refute the reductio ad absurdum argument that $1,000/hour is as reasonable as $12/hour:
* I make a claim that most minimum wage jobs produce more than $9/hour of productivity to their employer. Assuming this is the case, we can raise the minimum wage to $9/hour without severely impacting the number of jobs currently available. This claim becomes less true the higher the minimum wage goes, and I certainly wouldn't support it at $1,000/hour.
* I make a claim that the job-losses caused by raising the minimum wage to $9/hour are offset by the job-gains caused by people scaling back from 2 jobs to 1 job). This is certainly not possible at $1,000/hour.
I think your reductio ad absurdum in this case is indeed absurd, unless you are using it to invalidate _specific_ claims (i.e. refuting the increase MPC claim)
Right, some claims don't generalize as I've indicated, but most that we actually see, do. I should have perhaps used those examples the first time around.
The most typical one is, "Raising the minimum wage, because it is the law, will mean that employees who previously made $x will make the new wage $y [rather than just be laid off or new jobs not created in anticipation of having to pay $y in the future]." It's clear that this claim -- existing in the economic models in the minds of the typical proponent, is too strong, and thus false. It is thus very appropriate to point out it's too strong by picking an arbitrarily high value for $y and showing that the economy "just doesn't work like that" -- that no law can make someone worth hiring at $y, so the typical need-based ("living wage") argument is wholly irrelevant, much to the frustration of those of us trying to have a serious exchange on the issue.
The implicit model that you gave -- in which the typical min wage worker is underpaid relative to the (appropriately discounted) marginal revenue they produce would indeed imply that raising it will not (typically) mean job loss (or forgone job creation i.e. "outsourcing" work to a new hire).
It's also an extremely unrealistic model. If it were true, that would mean any firm can steal the profits of other firms by bidding up worker income. That they don't, would imply that competition for low-skill labor is weaker than for other labor, when all evidence indicates this is the opposite of the truth.
So yes, the arguments raised by responses to this reductio reveal the weakness of the case for raising the minimum wage. I'd call that a fruitful point, not a strawman.
The inflection point is the productivity-per-hour of workers. Whenever wages get higher than productivity-per-hour, they cause unemployment.
However, whenever productivity-per-hour is much higher than wages (as it has been, on the median, and increasingly so, since the 1970s), we can afford to raise wages without trouble.
So the question is: what's the productivity of minimum-wage jobs? Also: if their productivity really is that low, shouldn't anyone unable to obtain a living wage when already in full-time work just be taken out of that job and subsidized by the state wholesale? I mean, doing otherwise has given us massive effective subsidies to Wal-Mart and other low-wage, low-productivity employers who are essentially fleecing the public of its hard-won antipoverty dollars.
Or it could turn out Wal-Mart employees actually do produce $10/hour of value, and the company was just being exploitative all along...
Unless Walmart is in control of all jobs in the market or unless Walmart and other employers are illegally colluding by sticking to a low wage agreement - the value of productivity per hour is what workers at Walmart are negotiating.
If Walmart isn't paying people what they feel they are worth then they're free to go elsewhere to redefine what their labor is worth.
just be taken out of that job and subsidized by the state wholesale
That completely eliminates the ability of some to find part time work to supplement their income. Maybe a mom without any real skills in the job market would like to work a few extra hours at an entry level job to bring home some spending money for herself and her family. Maybe a teenager would like to get some experience and earn some gas money while in high school.
By eliminating jobs through manipulating the minimum wage so thoughtlessly, you would destroy vital segments of the job market that serve a purpose.
Unless Walmart is in control of all jobs in the market or unless Walmart and other employers are illegally colluding by sticking to a low wage agreement - the value of productivity per hour is what workers at Walmart are negotiating.
That is ludicrously utopian thinking. Reality does not conform to theory, there is always some gap between productivity and wages. Oh hell, it's been a growing gap, for the past 40 years.
By eliminating jobs through manipulating the minimum wage so thoughtlessly, you would destroy vital segments of the job market that serve a purpose.
No, I ensure that jobs go to people who actually need them. Besides, teenagers earning spending money can shovel snow off the books, or any number of other small jobs that they already do without recourse to an official employment contract.
Of course there's a gap between productivity and wages. It's called profit. If a company doesn't make some profit off an employee's endeavors, why would they hire him/her?
And if this gap, as you call it, is too high for the American workforce in general, for millions and millions of people, it would mean there is tremendous money to be made by companies willing to pay higher and so capture a portion of this surplus.
The real reason that Americans are so exploited economically is because they lack the ability to reason about economics and are easily fooled by fallacious claims that benefit the most powerful at their own expense. The minimum wage is just a minor example among countless schemes designed to make the poor, working, middle, and even upper middle classes feel they are being aided by government policies while they are actually being copiously robbed in broad daylight.
You don't like what we're paying? Starve, see if we care, we'll find someone who will work for half what we offered you and let us throw paint on him to boot.
These jobs aren't taken by people whose needs are taken care of and are just looking for a little 'pocket money' or some gas so they can take the old car around and see their buddies on weekends.
The rest of us, through taxes, are already subsidising the big corps and their minimum wage employees. We do this because people shouldn't have to starve in the modern world, but where people are employed we shouldn't need to.
By forcing a raise in the minimum wage we stop the employer from taking from our collective pocket to support their broken business model.
But what's the root issue? Worker X is not able to produce value of more than $X an hour. Do we mandate he/she is paid more anyway, or do we try to train and educate a workforce that can produce more value?
Why must it be that the worker isn't producing the value?
Worker X may be producing value of $10X or $20X per hour, but corporation Y is pocketing the difference, and can do so because there is an oversupply of workers.
You are not fully understanding where the $10X or $20X value comes from. It doesn't come from the low skilled workers. It comes from the huge amount of automation, computerization, business process, and infrastructure all around that unskilled person.
If I work twenty years and invest all my spare money to build a fabulous machine that produces intricate and expensive electronics but the one thing I don't do is create a way to turn it on and off automatically. I hire a person to just sit there and push the button. This person needs almost no skills whatsoever.
Is this person really vital to producing my $100X per hour? In a way, yes. But then again, since this person's skills are non-existent - this person can be replaced by anyone else who can push a button.
I invested in the invention and the creation of the machine. I took the risk to build the machine. I spent the twenty years of my life dedicated to it. I created the environment where any half sentient being could push the button to get the thing going. Everything I did created the $100X per hour.
The person pushing the button doesn't deserve $100X per hour. The person pushing the button deserves the wages for someone with the skills to push a button.
That person deserves what the market pays for people with that particularly low skill set. It's not totally up to me. Maybe I live in an area where wages are really high. In that case, I'm going to have to pay the going rate for someone with low skills.
"living wages" are crap. They completely ignore the fact that some workers are young or spousal dependents looking for that part-time job to earn a little money.
On top of that there is no such thing as a "living wage" that can be defined. If I'm living alone, young, healthy, and not real picky about my lifestyle -- a living wage can be $1000 per month. If I'm married with 5 kids and in need of constant medical care, a living wage is 6X higher.
Yet you're implying that I as an employer with my available job for someone to push a friggin' button has to worry about all that or at very least accept someone's opinion on the lowest common denominator living wage?
At that point, I say screw the high school kid or part-time mom looking to earn a little extra money pushing the button. I automate the whole damned thing and eliminate the job. That, my friend, is called the "unintended consequence" of your heavy handed approach of controlling every little perceived injustice.
"That person deserves what the market pays for people with that particularly low skill set"
So I'm right, you do consider this a moral issue, you think that the free market is the be-all and end-all of morality and that people only 'deserve' what you deign to hand to them.
"Yet you're implying that I as an employer with my available job for someone to push a friggin' button has to worry about all that or at very least accept someone's opinion on the lowest common denominator living wage?"
You're the one that came up with the dumb button example.
Sounds like you don't really need someone to press the button anyway. If it was vital to your operations you'd be prepared to pay decently as it's not you've made a saving. Good for you.
"At that point, I say screw the high school kid or part-time mom looking to earn a little extra money pushing the button. I automate the whole damned thing and eliminate the job. That, my friend, is called the "unintended consequence" of your heavy handed approach of controlling every little perceived injustice."
If that is the price paid to get hundreds of other people off the government teat and stop subsidising the labour needs of you and your company, awesome. That high school kid misses out but his dad, who does more than press a button and generates more than ten times his pay packet for the company he labours for, gets to put food on the table.
A free market does not operate as a moral system. If you want to inject morals, price-fixing and wage-fixing are especially miserable ways to do it. The free market responds, often in ways you don't anticipate, and your social experiment goes weirdly sideways.
"A free market does not operate as a moral system."
I didn't bring morals into this, you'll notice the no-minimum-wage guy is the one that started bringing 'deserves' into this. I was talking about getting people off government support by making employers pay enough for workers to live on.
"If you want to inject morals, price-fixing and wage-fixing are especially miserable ways to do it."
Seems to work OK in a bunch of places.
"The free market responds, often in ways you don't anticipate, and your social experiment goes weirdly sideways."
Economists were warning of the housing bubble from the beginning of the decade.
Republicans were warning of the problems with fannie/freddie from as early as 2002.
How much do I value having clean water? A lot. I'd pay $100 a gallon if I had to do so to survive.
But I'm happily paying a tiny fraction of that and "pocketing the difference". That's because my demand is easily met by the supply.
Am I wronging the water company? Of course not. If they want to make more, they have to offer me something I can't get from someone else for cheaper.
Not to mention the fact that "pocketing the difference" in both cases actually means "spending the difference on something else."
EDIT:
I'm not allowed to reply to the next reply to me, but there is a difference between treating humans as a commodity and treating their labor as a commodity.
I have a right not to be enslaved. I do not have a right to be paid for my labor AT ALL, much less to be paid a certain amount. I have to compete to sell my labor to the highest bidder, just as though I were selling widgets.
"I'm not allowed to reply to the next reply to me"
You can usually hit 'link' and it'll let you reply in there, not sure if that's always the case.
"I do not have a right to be paid for my labor AT ALL, much less to be paid a certain amount. I have to compete to sell my labor to the highest bidder, just as though I were selling widgets."
You talk about these things as if they were written in stone somewhere. When you start to look at this in terms of absolute rights you lose sight of the point to some extent - what outcome do we want here? How can this best be achieved? What are the downsides?
The people who are stuck on minimum wage are the least able to compete. They have no skills and likely some difficulty acquiring them, they probably lack the ability to negotiate, they don't have the choice of not taking work because the alternative is starvation. The logical conclusion for them, were a truly free and unregulated market for labour ever to appear, would be contracting their lives away for a roof and some food, working insane hours in hazardous conditions for little to nothing.
Make no mistake here, a proportion of the population cannot better themselves.
Over the last hundred or so years we've added a huge framework of workers rights to our society to stop this very situation. A minimum wage is part of this, and raising it may well help large numbers of people.
However society is built by and for human beings, not machines or economic ideals. Where water is a commodity, treating humans as one must have limits, surely?
You could say that yes. But you could also say it's in our collective interest to help students achieve a higher level of education, and therefore we could/should choose to support this broken model.
You could make the claim that it's in our collective interest to keep WalMart profitable, but it would be something of a harder sell. IMHO.
What about food aid? Are the evil food conglomerates "taking money out of our pockets" by charging prices that some people can't afford and thus requiring a government subsidy?
Your theory that by democratically choosing to subsidize something, the government is creating an obligation on the part of private business to make the subsidy unnecessary is bizarre.
"Are the evil food conglomerates "taking money out of our pockets" by charging prices that some people can't afford and thus requiring a government subsidy?"
Who said anything about evil? I merely think that the labour market does not resemble anything like a free market (nor can it or should it), and at the moment employers are profiting handsomely while depending on the public purse.
"Your theory that by democratically choosing to subsidize something, the government is creating an obligation on the part of private business to make the subsidy unnecessary is bizarre."
I'm not sure that's my theory at all. My 'theory' is that income top-ups via food stamps, tax credits, whatever, where someone is employed, form an unofficial subsidy to employers, and one that I think we should be trying to find ways to eliminate. If one of the ways we choose to do that is by pushing more responsibility onto the employer, then I'm not sure I see a problem.
income top-ups via food stamps, tax credits, whatever, where someone is employed, form an unofficial subsidy to employers
Spell that out for me. When I hire Bob at $8/hour, what difference does it make to me whether the government is giving him a tax credit for being poor, or owning a home, or buying an electric car?
Bob can't feed himself or his kids on that, so I have to reach into my pocket (taxes) to help him out.
If I didn't do that, Bob and his kids would either slowly starve to death or move somewhere else. Either way, no more employee for you.
Why is it my responsibility to make up the difference, and not the McDonald's across the street that didn't hire him at all? Or the landlord who is charging Bob $400/month instead of $300/month?
What you're saying is perhaps rhetorically appealing, but it doesn't make sense.
You could at least attempt to explain why all the other people who receive the benefits of your generosity towards Bob aren't equally responsible. If Bob starves to death, his landlord loses a tenant. His grocer loses a customer, etc. What makes his employer special?
The others are more subject to market pressures. Take a look all over this thread for some really well-cited explanations of exactly why employment is not like these other things.
Walmart has no say in the decision of who is getting food stamps. So if you, as a voter, decide that somebody has to get food stamps - Walmart can not be responsible for that decision. In any case, thinking that without Walmart salary the people that now getting food stamps wouldn't get them is clearly fallacious. Walmart is a largest private employer in the country, and employs a lot of low-skills people. The people of the US decided that earnings that Walmart can provide to these low-skills workers are not enough for them and the people want to give these workers more money. How it's Walmart's fault? They'd get public assistance with or without Walmart - with Walmart they just needs less of it, but it's not up to Walmart to replace the welfare system the people of the US instituted.
You wrongly assume the job market is a perfect market. It's not; there are barriers to entry, barriers to exit and lots of asymmetric negotiation positions.
Nobody said it's a perfect market. It's not a market dominated by monopolies either. The heavy handed solutions provided by minimum wages and other government measures doesn't help matters. They mask some problems while creating many others due to economic dislocation.
In the end, masterminds planning all our lives and trying to create utopia on earth have never done better than following simpler rules of law and letting people deal with each other in a free market capitalistic system.
Sorry, the GP reasoning assumes a perfect market, when stating that people are free to choose another employer if the current one is not paying enough. What wasn't stated in my comment is that the market is not perfect because of monopolistic behaviour. You kick off your argument with two misinterpretations of my comment and the GP's.
The market is illiquid, for example, because of exit/entry costs associated with relocation, such as selling your home at underwater values. This is one example of the factors I mentioned. Others abound.
The utopia/mastermind argument falls flat when you consider whether the US model is ahead of social-democrat states such as Denmark or Sweden. A cursory look at stats such as infant mortality rates or % of population below the poverty line strongly suggests the "mastermind" model is better.
* The utopia/mastermind argument falls flat when you consider whether the US model is ahead of social-democrat states such as Denmark or Sweden*
If we're doing a comparison, we need to compare across other utopian states. You need to throw in Greece, Italy, Portugal, the Soviet Union, North Korea, etc. You don't just get to cherry pick a couple of the few reasonable successes on your side of the ledger.
Furthermore, you have to realize that there's a memetic/genetic difference in Denmark vs the US. We can no more adopt the rules and policies of Denmark here than the US can impose its style of democracy on Afghanistan.
Finally, I would argue that countries like Denmark receive an amazing amount of benefit from other countries like the United States which provide most of the defense and technological advances that give them a cozy safe environment in which they get to spend most of their money on social programs.
I'll take the bait on the three states you mention that are indeed stable democracies following a social-democrat strategy: Greece, Italy and Portugal. I'll drop the Soviet Union and North Korea, which are straw men in your argument, for plainly obvious reasons.
Let's back our conversation with numbers, shall we? Infant mortality rates and percent of population below the poverty line.
Infant mortality rates (deaths by 1000 live births)[1,4]: United States 6.81, Greece 4.65, Italy 3.51, Portugal 4.45, EU 4.49
% of population below poverty line [2,3]: United States 15.1%, Greece 20%, Portugal 18%, Italy 18,2%
So, I think we can close the discussion on infant mortality rates. It'd be a stretch proving that the US is better than Greece with those numbers.
As for the poverty threshold, I could argue that the numbers are within the same order of magnitude, but I don't really have to. Some statistics gimmicks are occurring here: The US poverty line is defined at an annual income of around $11k, for a median national income of around $50k. The EU defines the poverty line at percentile 40% of national income. Easily any of the European countries has one order of magnitude less poor people than the US.
You brought up indicators on innovation and defence spending. As for defence, it's an endless discussion, where I guarantee you, many people in the world would wave away US military intervention outside of its own borders in a heartbeat. Innovation is a more interesting topic, since it's often touted as a bastion of the US. Here, the sheer scale of the US is misleading. Try to compare with aggregates of the same dimension, like the EU: http://ec.europa.eu/enterprise/policies/innovation/files/ius... You'll find that the US/Japan do lead, but nowhere can they be defined as the world providers of R&D, from where other countries benefit.
>> Or it could turn out Wal-Mart employees actually do produce $10/hour of value, and the company was just being exploitative all along...
Your assumption is that it's immoral for an employer to make a high margin on labor. My assumption is that it's foolish for an employer not to make a high margin.
My employer had better be getting tens of thousands more out of my efforts than what they pay me, or they shouldn't have hired me. That margin will be in flux month to month while my salary is constant, so there had better be some wiggle room or I'll be fired.
It's not immoral to sell a Star Wars action figure for 10x what you bought it for, is it? Why is labor different?
Raising the minimum wage a little will help. If you're poor(ish), you basically spend every dollar you earn to survive. Canada has min wages around $10, and you can still buy a bigmac for the about the same as the US. Their sky has not fallen.
It's likely that variation in productivity accompanied the rise in productivity.
You're not much more (in real terms) productive than a bored teenager in 2013 than you were in 1993, but the most productive people in 2013 may be an order of magnitude more productive than the most productive people in 1993.
Oh, I contest that. It depends heavily on how you employ the bored teenager. Employ him at flipping burgers and he's obviously "unproductive" as ever was in 1993. Employ him at data-entry and he's the human component in an immensely valuable computation. What he still lacks in the latter case is bargaining power: the ability to walk out of his job and bring the vast computation to a quick halt.
(Which is why unionization of a lot of low-level white-collar workers would really help, and would probably save us a lot of stupid talk on the subject of "My oh my, whatever should the government do!" Strong organized labor is how you keep government out of the labor market, at least if you don't want the working class to starve.)
Strong organized labor is a de facto part of the Democratic party. The Democratic party really has become synonymous with the Federal Government itself, as their purposes of building power at the expense of individual sovereignty appear to be fairly close in alignment.
What will get us somewhere is allowing people to realize that each of us is responsible for his or her own advancement in life. Sitting on the couch watching sports and reality TV every afternoon and evening has consequences. Majoring in bullshit ethnic and cultural studies in college has consequences.
Measures like the minimum wage, welfare, the Community Reinvestment Act, and food stamps mask the relationship between real world actions and their economic consequences. This misalignment causes markets to warp more and more over time. To compensate, new mastermind policies are created to mask those effects. Eventually the economic dislocation becomes so bad that the system fails. This is what happened to Greece. This is what's happening in the US wrt the Debt.
No, it's not. This is just straw man reasoning that doesn't belong on HN. Obviously, it's not a smooth linear curve, so a raise to $10/hour is not just a weaker form of a raise to $1000 hour. One is healthy and the other wrecks the economy. There is not an inflection point, only a straw man here.
Absolutely. Totally incomplete. My point is not that "higher is better". My point is that some adjustments to some adjustable parameters may be beneficial in some contexts.
Yes. If the job actually produces more than $(X+1)/hour worth of productivity to the employer.
The employer, unable to continue their advantageous position of paying $X/hour (it being illegal), but finding the job still worth retaining (it generating more than $(X+1)/hour) retains the employee.
The employee's salary goes from $X/hour to $(X+1)/hour.
Why would an employer ever start a business if he had to pay every dollar of "profit" to the employees?
Besides, who is to say what that productivity to the employer is?
If I start a grocery business and hire you to work the cash register - it's pretty easy for you to see $5k/day come through the drawer and think, "I'm responsible for $5k/day."
In reality, though, your contribution is minor compared to the costs of rent, paying for business licenses, paying taxes, stocking inventory, paying for inventory, paying for advertising, and managing the other employees of the business.
Your "productivity" is actually what you negotiate for your salary. My productivity as the business owner is what's left after all my costs including your salary.
> Why would an employer ever start a business if he had to pay every dollar of "profit" to the employees?
No one, ever. Maybe, on a technicality, the founders of 501(c)(3)s. I didn't use the word profit.
> Besides, who is to say what that productivity to the employer is?
The employer is to say the productivity of the employee. They won't do this explicitly, and it's very rarely a value that could be directly calculable.
This could be a case where I'm not using the best possible term. When I say the "productivity to an employer" of an employee, I'm actually talking about the value to the employer (http://en.wikipedia.org/wiki/Value_(economics)).
One way to answer the question of what the productivity of an employee is would be to ask this question:
"Were there only one laborer remaining unemployed, and they were free to name their salary, what is the maximum price that I would be willing to pay someone to perform this work?"
>If I start a grocery business and hire you to work the cash register - it's pretty easy for you to see $5k/day come through the drawer and think, "I'm responsible for $5k/day."
See above. All of this is from the employer's perspective. It doesn't matter what the employee thinks their "worth" is; what matters is what value the employer gains from the relationship.
> Your "productivity" is actually what you negotiate for your salary. My productivity as the business owner is what's left after all my costs including your salary.
This actually hits at my key point. Your "productivity" is actually your VALUE. What you negotiate for your salary is your PRICE (http://en.wikipedia.org/wiki/Price). I argue that these two are not necessarily coupled. Further, I suspect in the current U.S. economy at the low-income end of the job market these _are not_ coupled.
EDIT: Changed the final sentence from "I argue...that I suspect" to simply "I suspect...".
Okay, so in your world the government should be responsible for all negotiations? Some people and some businesses (run by people) can't negotiate well - so this logically follows from your caustic and emotional comment.
The government should set the price of my airline ticket, the price of milk at the grocery store, my salary, the salaries of professional basketball players, the prices that business use between each other, etc.?
Let me just truly get a full view of your philosophy and what kind of zero Liberty world you would have us all live in.
Protecting the weakest in society != zero Liberty.
The world ain't black and white and I didn't say the government should be responsible for all negotiations.
At the lower end, the people who are stuck on minimum wage, the people who cannot improve themselves, these people need some protection. Yes, there are humans who are not good at looking out for their own long term interests or even their short term interests, lots of them. Looking out for them, protecting them from getting into (for instance) unfair contracts is one very useful government function. One could consider very low wages to be an unfair contract, pretty much by definition.
Protecting the weakest in society != zero Liberty.
So what's the cutoff for the "weakest in society"? Do you have a percentage of the population that we're obligated to care for? Should these people too helpless/clueless to ask for a competitive wage be allowed to drive cars? Should they be allowed to vote when they can't really perform the most basic of tasks in society?
I didn't say the government should be responsible for all negotiations
So where is the cutoff and how do we prevent it from creeping up? Food stamp use continues to rise because apparently larger and larger segments of the population cannot earn enough money for food. When does the continued increase of helplessness level off?
the people who cannot improve themselves
Cannot or will not? What incentive is there for people to get an education, to work hard, to improve their lot in life, to learn better ways to live, to learn how to negotiate for their worth at a job, etc. if the government tries to take over care of so many aspects.
By seeking to protect people, government creates a dependency and victimhood mentality in society.
Look, I'm for helping the helpless in our society. What I'm not for are absolute statements like your next one that are guaranteed to lead to an increase in helplessness.
One could consider very low wages to be an unfair contract, pretty much by definition.
If the wage earner is free to go elsewhere to negotiate the fee for his time then it is not unfair by definition.
That example is too narrow/shaky. It requires employer to have some sort of monopoly on employing that worker (otherwise why would the worker keep working for that employer for $X/hour in the first place?).
I was asking about example when employee's gain (from increasing minimum wage) would be more reliable and would not depend on chance so much.
Gambler has a chance to win, but gambling is not a good way to get wealthier.
I disagree that this example is too narrow/shaky. I believe it actually encompasses a vast majority of people who are currently earning the minimum wage. Note that I'm willing to change my beliefs if my reasoning has led me astray :)
The key assumption you've made that I disagree with is this: "why would the worker keep working for that employer for $X/hour in the first place?". It seems to me that this assumption boils down to an underlying assumption that the labor market is an efficient market.
In another comment elsewhere in this thread sergiosgc makes a statement that I think is relevant here: "You wrongly assume the job market is a perfect market. It's not; there are barriers to entry, barriers to exit and lots of asymmetric negotiation positions."
My argument (and I Am Not An Economist) is that the COST of labor and the VALUE of labor (from the employer's perspective) are not necessarily equal.
A quick hyperbolic example of a labor-rich job market that demonstrates this difference:
* Your labor market has 1,000,000 people
* You are offering the only job in the labor market. For every hour the lone employee works the job will generate $500 of additional revenue for your company.
* There is no minimum wage, and your goal is to minimize your costs while maximizing your revenue.
What is the price you pay your employees under these conditions? It's not $500/hour. It's probably only room and board.
If we introduce a minimum-wage of $5/hour, what is the price you pay now?
If we raise the minimum-wage to $10/hour, what is the price you pay now?
If we raise the minimum-wage to $100/hour?
$1,000/hour?
I admit that this was an extraordinarily hyperbolic example, but I think the current U.S. job market is a less-extreme example of this.
1) Based on anecdotal evidence (that I'm too lazy to look up current estimates of the number of people not participating in the U.S. workforce), the current job market around the country currently favors employers. Many people are fervently searching for jobs which drives down the PRICE of labor. This doesn't change the VALUE of any particular job for the employer.
Finally, I refer you to Wikipedia where there is a rather good summary of current economic thinking on the impact of minimum wage laws on unemployment (http://en.wikipedia.org/wiki/Minimum_wage). As far as I can tell from a brief summary, currently thinking by economists is relatively mixed.
Please... People don't hire teens when the economy is weak because they are less reliable than adults. In the late 90's, fast food places were desperate for anyone -- they would hire folks willing to work as little as 4 hours a week!
The sob story about the impact of minimum wage on companies is bogus. I was an asst manager in high school for a bakery/cafe... 20 employees, about 23000 hours of work each year... A minimum wage increase amounts to $25-30k a year, not a big deal.
Wal-Mart is another great example... You have like 300 employees at a store, probably 3 million man-hours a year. So a minimum wage increase amounts to $3-4M a year -- peanuts for a company where average revenue per employee is $200k.
"You can tell the condition of the economy by the quality of fast food employees."
> People don't hire teens when the economy is weak because they are less reliable than adults.
Incorrect: People don't hire teens when the economy is weak because they can hire a MBA, BS, etc for the same price because they desperately need a job.
You're talking about $3M of additional cost with $60M in revenue.
What does that mean in reality? You either take a margin hit, or enhance the margins by raising prices and changing product mix.
Also consider that minimum wage folks proportionally spend alot of money where they work. If Wal-Mart adds $3M in payroll, they're getting alot of it back as sales.
Yet, Germany also has very strong labor protection laws. If you have no minimum wage and no labor protection laws, it leads to sweatshop situations. You see some of the same thing in a lot of IT-oriented positions not located in IT epicenters: 24/7 availability, entry level wages, and ultimate responsibility for when the shit hits the fan -- even if you've been warning your boss that it'll hit the fan for the past eight months.
For comparison, Germany has no statutory minimum wage
However they do have various social systems in place where basically the government will make up the difference between what you earn and what you need to live for people working very low wage jobs.
Germany is also practically communist when compared with the USA. It has a public healthcare system, invented the modern welfare state and up until recently used its conscription laws to get young adults to staff its nursing homes and ambulances (amongst other things) for about €3/hour.
Any business that is econmically viable can afford $12 an hour. McDonalds, car washes, Denny's, etc. If you can't afford $12 an hour then there is something wrong with your business.
So, in your opinion, people who cannot produce at least $12 an hour of value should not be allowed to produce anything? That seems to be the logical consequence of shutting down all businesses that need to pay less than that...
I would guess the point is that those companies are probably very few. If your business can't extract $12 an hour from an employee then perhaps it should fail.
The harm done by these job losses is less than the boost to the economy by putting more money in low income consumers pockets.
I'm struggling to think of an example of labour that wouldn't produce $12 per hour in value and can't be reasonably cheaply automated.
Would depend on the effect of the rising costs (of labour) of the firms.
Do they make less profit or increase the prices of their goods?
Hopefully the extra money comes from an area that has a higher rate of tax than the tax rate of low income earners thus putting more money back into the "market economy". This should be likely in a country with progressive taxation.
You're talking about disturbing a system with billions of variables by changing a few thousand of them. Almost any such change will have unintended consequences of the same order as the intended effect. For politicians, this is beneficial, since they can be surprised by the consequences, ignore their causes, and advocate new changes to "fix" them. For someone who actually intends to improve things, such as yourself, the fact that poking the economy with a stick is likely to backfire should be cause for concern. :)
Yep, economics is basically equivalent to executing random scripts concurrently as root and when they crash you get to argue about what the stack trace was.
Yes. In this modern world, it is better to give unemployment checks to pay people to study or clean the streets than to do something no one would give a tenner for.
> For comparison, Germany has no statutory minimum wage
This is true, but you cannot use that as an argument, because the German system cannot be compared to the U.S. system.
There are two reasons for having no minimum wage in Germany.
First:
It us up to the individual unions to negotiate a minimum wage. And unions still have a lot of power in Germany. So many jobs actually do have a minimum wage.
Second:
If someone in Germany has a job that does not produce a living wage, the person automatically qualifies for social security money paid by the state.
Besides that, a minimum wage on a state-wide level will be implemented in the next years. I am sure of that. There are more and more non union regulated industries that have started to pay very low wages.
Raising operating system register sizes does not work. If you think it does, then let's extend the minimum register length beyond the limits of virtual memory. We'll all be able to store unlimited data.
What would you store in a 64-bit variable anyway? A boolean which only needs one bit of storage? We already see aggregate memory usage on Windows 7 systems (at least in the United States) above 2GB with no programs loaded. [1]
For comparison, the classic Atari only requires eight bits (except for certain operations) as the minimum size for memory addresses. Not exactly a bastion of weak and sluggish games. [2]
The flip side to Germany's model is manifold, but one big difference is that the social security system will pay benefits to those who are full-time employed but don't have enough money to live.
Before you say that's a stupid policy, consider that this is the minority of recipients of social benefits, and that often enough it's easier to get into better paying jobs from a low paying job than from being unemployed for a decade.
This is a logical fallacy, reductio ad absurdum, or a slippery slope argument. If you want to argue your point at least do so without being intellectually dishonest.
To respond to the above comment, yes, it does lead to higher unemployment for those with lower skills, particularly in an environment when unemployment is already high.
Who would you hire for $12 an hour? A teenager with no experience or someone who was laid off but has 5-10 years of experience? We already see (at least in the United States) that teen unemployment is the highest of all age groups at 23%, when average unemployment amongst all age groups is 7.9%. [1]
For comparison, Germany has no statutory minimum wage (except for a few specific employment groups). Not exactly a bastion of poverty and destitution. [2]
[1]: http://www.bls.gov/news.release/empsit.a.htm [2]: http://www.economist.com/node/21536648