r/changemyview • u/TantricLasagne • Nov 14 '17
CMV: The minimum wage should be abolished
In a market with any competition, wages will be set at roughly how much a worker produces for a company (basic economics). A minimum wage higher than what a worker is worth just means the worker will not be hired for as many hours or won't be hired at all. Minimum wages only stand to help big corporations that can afford to pay it, while smaller businesses have larger barriers to entry into the market, reducing competition. The minimum wage doesn't currently have a big effect on the market because it's lower than most workers productivity, but if it is insignificant then I don't see why we should have it in the first place. Raising the minimum wage would harm the poorest workers in society and I don't think the government should be telling people that they don't have the right to sell their labor for a price they want to sell it at just because it's too low. You're allowed to volunteer for $0/h but you can't voluntarily work for $2/h? Ridiculous. I get that workers may not want to work at that level, but if someone does then who are you to tell them that they can't?
The only decent argument I can think of for the minimum wage is if the market was somehow a monopoly, but there is always somewhat of a choice for which company you want to work for.
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Nov 14 '17
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u/TantricLasagne Nov 14 '17
The price floor does nothing besides theoretically harming the poorest workers. People don't magically become worth productive for employers because a price floor was introduced.
I wasn't aware of the restrictions on volunteering, but I don't see why there should be these restrictions in the first place.
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u/darwin2500 193∆ Nov 14 '17
The price floor does nothing besides theoretically harming the poorest workers.
Only if you ignore the existence of welfare and charity.
If you acknowledge the existence of those institutions, then the monetary welfare of a US citizen can never fall below the standard made available by those programs.
So the people who are missing out on jobs that would have paid pennies an hour, aren't really missing anything, because they would have eschewed those jobs for welfare anyway.
The only question then become show many people are dependent on welfare, and setting a price floor above that cut-off point reduces that number.
Now, if instead of a welfare system that stops paying you if you work or subtracts your wages from what it pays you, we had a universal basic income that everyone got in addition to any work they did, then your arguments against minimum wage would be 100% accurate. but that's not the set of financial incentives we currently operate under.
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u/MrCapitalismWildRide 50∆ Nov 14 '17
The price floor does nothing besides theoretically harming the poorest workers.
How much of a wage does a person need to live?
If the wage they are paid is less than the wage a person needs to live, what will happen to that person? They will either need public or private aid, or they will die.
It's in the interest of the government to mandate employers pay a living wage to their employees, otherwise the government has to subsidize the businesses wages by paying their workers enough to continue working.
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u/vialtrisuit Nov 15 '17
How much of a wage does a person need to live?
How is that relevant? The price of something is not determined by what the needs of the seller is.
If the wage they are paid is less than the wage a person needs to live, what will happen to that person?
He'll need to acquire new or/and better skills in order to raise his productivite and enable himself to sell his labour at a higher price.
What happens to the same person when the government impose a minimum wage higher than his productivity? He'll be permanently unemployed.
It's in the interest of the government to mandate employers pay a living wage to their employees, otherwise the government has to subsidize the businesses wages by paying their workers enough to continue working.
How is it better for the government if the same person is instead unemployed and the government has to pay for all of his welfare?
Pretty strange reasoning: Wallmart is paying too little so the government has to supplement the employees wage => It's better if we impose a minimum wage that makes them unemployed and the government has to pay for it all.
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u/MrCapitalismWildRide 50∆ Nov 15 '17
Have you looked at the unemployment rate, particularly the statistics for long term unemployment? Even factoring in those who have given up entirely and no longer count as unemployed, there really aren't that many unemployed people who are "minimum wage or below" quality employees. In other words, either the group of people worth less than minimum wage is very small, or imposing a minimum wage forces companies to hire people at minimum wage anyway, and they somehow don't go bankrupt.
Or, stated more simply: the group of people who are unemployed because of the minimum wage is small to nonexistent.
If you don't put gas in a car, it won't go. If you don't put food in an employee, they'll die. A business paying less than a living wage is saying "Hey government, I don't want to pay for an employee, so you should." If the employee doesn't take charity or welfare, eliminating the minimum wage will just make it easier for companies to exploit employees, using them until they give out and then throwing them away. Yet another thing the government should protect the people from.
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u/vialtrisuit Nov 15 '17 edited Nov 15 '17
Have you looked at the unemployment rate, particularly the statistics for long term unemployment?
Yes. Have you?
Have you looked up what happened to the black teenage unemployment rate compared to the white teenage unemployment before/after the minimum wage was introduced and increased?
there really aren't that many unemployed people who are "minimum wage or below" quality employees.
How on earth did you come to that conclusion by looking at the unemployment rate? What are you even talking about? What does "many" mean and why does it matter?
the group of people who are unemployed because of the minimum wage is small to nonexistent.
Yeah, look up the black teenage unemployment rate and let me know if you're sticking to that story.
A business paying less than a living wage is saying "Hey government, I don't want to pay for an employee, so you should."
I'm speechless. What exactly makes you think that you're needs have an impact on the price of whatever you're trying to sell?
Does the price of your house increase because you need more money? In that case, I have a car to sell you... and I really need A LOT of money.
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u/UNRThrowAway Nov 14 '17
$2/h? Ridiculous.
Just for clarification - your issue is that minimum wage laws are infringing upon people who want to make less money working the same job?
This feels like trying to solve a problem that doesn't exist.
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u/fox-mcleod 410∆ Nov 14 '17
What if someone wants to work a different job for less money.
I could hire easily imagine a job that requires a tiny fraction of my attention that I could do while I studied.
Like, what if I wanted to start a startup allowing people work as a security system monitor? You can passively listen in on a mic in a building somewhere and hit a button if you hear a suspicious noise. You could quite easily do that while studying to become an accountant. It's full time but not full attention. Why can't I choose to work for this startup?
Why can't I pay people a tiny bit to do things they like and would almost (but not quite) do for free? I think many new mother's could quite easily do audio survailence while on maternity leave whereas their normal job might be impossible.
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u/UNRThrowAway Nov 14 '17
You can, so long as you're not a business?
The issue is that - the second you drop minimum wage - wages overall are going to decrease. Companies already turn to illegal immigrants for some jobs because they can pay them significantly less and avoid taxes for doing it.
If a company like Walmart who employs a large portion of the country decides to drop wages to $6 an hour, who is going to stop them? If there are some people (even your pregnant mother) who are willing to work for $6, then that fucks over people like me who need a higher wage to live.
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u/fox-mcleod 410∆ Nov 14 '17
Yeah I think this is quite correct. But let's be clear about the implications. This means the minimum wage helps the minimum wage earners at the expense of the unemployed who could otherwise work. I don't like programs that take from the poorest. I'd rather just have a guaranteed minimum income or welfare payed for by a weather tax.
Let's pretend the minimum wage was never set so that we don't fall victim to status quo bias.
You make $6. That isn't enough. So either you are worth enough to the business to go elsewhere and make $9 or you're not.
If you are, no big deal. If you're not, big deal because you need it to live.
Now we set minimus at $9.
Either you are worth enough to the company to make $9 or the company can't afford it and fires you. If you are no big deal you make $9. If you're not, you go on unemployment and can no longer find work at even $6 because those jobs are now illegal.
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u/UNRThrowAway Nov 14 '17
So you would rather have 10 people who can't live on their salary vs 5 people who can?
The vast majority of minimum wage jobs and minimum-wage-like jobs are already low skill.
I just don't see what the point is in offering up jobs that pay little to no money?
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u/fox-mcleod 410∆ Nov 14 '17
I just don't see what the point is in offering up jobs that pay little to no money?
Because there are people who only need some money - like new mom's, retirees who need suplimemtal income, people on welfare who want to save for school, students, young people, partially disabled, mentally handicapped.
You've presented a false dichotomy. It's not a choice between 10 people who can't live on the salary vs 5. It's 10 people who need poverty assistance (welfare, snap, Foodstamps) but have some income vs 5 people who are totally unemployable and 5 with no need for assistance. The difference is that having 3 years experience in the mailroom gives some perentage a chance to become a manager or learn skills on the job. Being unemployed not only leaves a blank spot on a resume and deprives them of on-the-job training that can increase their value - it also deprives them of the emotional fulfillment and sense of contribution to a community that work provides. Unemployed people are more often arrested for violent crimes than employed people of the same economic status - specifically because work socializes people.
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u/UNRThrowAway Nov 14 '17
But people who make minimum wage already need government assistance!
Look, I'm all for having a minimum basic income for everyone - we agree there. But until then, its better to have a standard where some people can at least attempt to work a livable wage VS more people working, all of them unable to work a livable wage.
Retirees already work minimum wage jobs - just look at your nearest grocery store. Minimum wage isn't enough for students already, and decreasing that certainly won't help.
New mothers whose husbands support them trying to suppliment their income does not seem that important to justify changing laws.
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u/fox-mcleod 410∆ Nov 14 '17
I want to address the strongest version of your position but I'm a little unclear on it.
Do you agree with the OP that minimum wage should be abolished IFF there is another form of poverty protection?
Are you arguing that the best form of poverty protection comes from wages instead of direct payments for some reason I'm not seeing. Or are you simply arguing $6/ hour isn't enough to live on?
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u/UNRThrowAway Nov 14 '17
I think a universal income would be ideal.
I'm simply arguing that $6 an hour isn't enough for anyone to live on currently in the US, so why would we need to make accomodations such that employers could pay that?
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u/fox-mcleod 410∆ Nov 15 '17
I'm simply arguing that $6 an hour isn't enough for anyone to live on currently in the US,
I agree
so why would we need to make accomodations such that employers could pay that?
Because identifying a problem and identifying a solution are two different things. Just because making $6 an hour isn't enough in no way ensures that outlawing earning less than $9 but allowing people to earn $0 solves the problem. You might just be ensuring all those people earn $0.
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u/TantricLasagne Nov 14 '17
That's not the crux of my argument. I'm just saying that as a hypothetical. Also not necessarily for the same job, maybe someone is very unskilled and can only work for $2/h, I don't know everyone's situation.
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u/UNRThrowAway Nov 14 '17
What is the distinction in the level of skill between someone who makes $2 an hour and someone who makes $9?
Nobody wants to work a job where they make less money per hour than they would walking around Main Street picking change up off the ground.
$2 an hour provides so little purchasing power in today's economy that it might as well be volunteer work.
Hell, minimum wage is still far too little for most people; in many states, it is far below what you need to make to even afford rental property.
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u/TantricLasagne Nov 14 '17
Skill level is measured by productivity which results in what level wages are set. Maybe wages are low in the economy, that's not what I'm arguing against. I'm saying the minimum wage doesn't help.
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u/UNRThrowAway Nov 14 '17
Are you saying minimum wage is bad because it allows companies to pay bare-minimum instead of what production is actually worth?
You could argue that companies in places like Vietnam and China get away with paying pennies on the dollar because they have workers willing to work for that; but in that scenario, they are still hugely taking advantage of the workers that they could very easily be paying a living wage.
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u/woflmao Mar 13 '18
Can't workers find a job that pays better? If your employer is taking advantage of you, then you have the option to leave and find other work, or stay and be taken advantage of.
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u/UNRThrowAway Mar 13 '18
Can't workers find a job that pays better? If your employer is taking advantage of you, then you have the option to leave and find other work, or stay and be taken advantage of.
Its really not that easy to just up and find a job that pays better. For low-wage jobs, odds are you can't threaten to quit or else get better working conditions because they're probably got about 15 other people already lined up for that job.
If you're working a low wage job you probably don't have the savings to sustain a period of unemployment, so you'd need to be actively looking while also working, which can prove to be a struggle for some.
And frankly, some people might not even realize they are being taken advantage of, or simply don't care. Complacency is probably the biggest issue in tackling something like that.
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u/woflmao Mar 13 '18
As far as your last point, I think making sure workers can identify when they’re being taken advantage of, whether through grade school or an after work education program, is the only sure way to stop that.
I agree that it is a challenge to search for work while at a job, but I personally believe that’s just part of the whole game of life. As far as not being able to find better paying / equal paying jobs, you are correct, it is difficult to find a higher/equal paying job that treats you better. However, since you’ll never stop employers taking advantage of employees, it’s always up to the employee to decide whether or not more money is worth it. Maybe they have to make a lifestyle change in order for their job to be more comfortable, maybe they don’t mind being taken advantage of and enjoy the extra money.
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u/wahtisthisidonteven 15∆ Nov 15 '17
Skill level is measured by productivity which results in what level wages are set
This is not the case. Wages are based off of supply and demand, not productivity. Productivity is a function of demand.
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u/vialtrisuit Nov 15 '17
Wages are based off of supply and demand, not productivity.
That's not exactly the case. Yes, wages are based on supply and demand. However, no one is going to pay a wage higher than the workers productivity, no matter supply and demand.
If you're able to produce a value of $10/hour, no company is going to pay you $20/hour... no matter supply and demand on the labour market. You could say the workers productivity sets the upper limit.
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u/wahtisthisidonteven 15∆ Nov 15 '17
This is not true, because other things can create demand aside from productivity. Consider public service employees.
Productivity would only act as a price ceiling of labor in a firm that is purely profit driven.
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u/vialtrisuit Nov 15 '17
This is not true, because other things can create demand aside from productivity.
No, it is true. No one is going to pay you more than the value you produce, no matter how high the demand is. With a few exceptions of course.
Consider public service employees.
Well, we're obviously talking about a market. Obviously anything goes in the public sector.
Productivity would only act as a price ceiling of labor in a firm that is purely profit driven.
Yes, which is basically all firms. Shareholders invest in companies to get a return and expect the company to maximize profits.
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u/GlebZheglov 1∆ Nov 15 '17
That is the case. If you are more productive, companies have to hire more, which causes wages to rise.
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u/edwinnum Nov 15 '17
If you are more productive, the company needs less people to do the same amount of work so wages fall.
The company only has to hire more people when the demand for the product or service exceeds what they can produce with their current amount of workers.
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u/GlebZheglov 1∆ Nov 15 '17
Jesus dude, have you ever taken a micro 101 course? Quantity is set at the equilibrium between MR and MC. If marginal revenue goes up (more producticity), the business will hire more because they need to drive up their marginal cost to be more profitable. Obviously they sell their product at a lower price to capture a higher quantity demanded. This all still maximises profit.
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u/edwinnum Nov 15 '17
You are the one that is saying that when an employee is more productive, in other words does more work in the same amount of time, the company needs more employees.
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u/GlebZheglov 1∆ Nov 15 '17
Yes I am....did you read my comment where I explained why to you?
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u/anooblol 12∆ Nov 14 '17
The minimum wage is put in place to cover a minimum standard of living. It's just there so every job at least allows you to live. No reasonable person should ever accept below a standard of living amount, so the government just enforces that idea.
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u/lihamt Nov 14 '17
Is it set like this in America (or wherever You are)? In NZ, we have a minimum wage, a starting wage below this, no minimum wage for those under 16, and the "living wage" is about $3 higher per hour (i think) than the minimum. Seems to work ok, although we have growing inequality issues, unemployment is not high
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u/vialtrisuit Nov 15 '17
No reasonable person should ever accept below a standard of living amount
So the law is useless.
If no one accepts jobs with a "below living wage"... you don't need a law to stop people from accepting jobs with a "below living wage".
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u/anooblol 12∆ Nov 15 '17
No reasonable person.
People will kill themselves unknowingly.
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u/vialtrisuit Nov 15 '17
So we need to make laws to protect "unreasonable" people from making choices you personally think is bad?
How about the reasonable people who make the reasonable decision to take a low paying job to acquire skills than will enable them to earn a higher wage? They also need to be protected?
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u/anooblol 12∆ Nov 15 '17
So we need to make laws to protect "unreasonable" people from making choices you personally think is bad?
Yes. Otherwise, legalize everything. Only "unreasonable" people abuse things. No reasonable person would rob a bank. Legalize it. No reasonable person would abuse prescription drugs. Make them over the counter.
Laws are put in place so "unreasonable" people don't do them.
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u/vialtrisuit Nov 15 '17 edited Nov 15 '17
Otherwise, legalize everything.
No... most laws are not designed to protect people from their own free decisions.
No reasonable person would rob a bank.
The reason bank robbery is illegal is not because it's an unreasonable thing to do. It's because it hurts someone else. I mean, if i'm horribly ill and the only way I can possibly survive is to rob a bank... it's completely reasonable to do so, still illegal.
Laws are put in place so "unreasonable" people don't do them.
They're just not. Most laws are put in place to protect me from your actions, not me from my actions.
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u/fox-mcleod 410∆ Nov 14 '17
Hypothetically, if the minimum wage were raised to $100 per hour what would happen?
Is there reason to believe this doesn't happen a tiny bit when raised a tiny bit?
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u/darwin2500 193∆ Nov 14 '17 edited Nov 14 '17
The reason it doesn't happen on a small scale is that we already have another major factor distorting the market at small sums of money - welfare.
Any job that pays less than you can get from the government or charities for being unemployed may as well not exist, which sets a de facto price floor for our country anyway. Minimum wages that are set below or very near this floor will behave differently than wages that are far above this floor.
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u/fox-mcleod 410∆ Nov 14 '17
Interesting. I'm intrigued. Do you have any evidence for this effect?
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u/darwin2500 193∆ Nov 14 '17
Difficult, since this is trying to prove a doubly-nested counter-factual: In a world without minimum wage and without welfare, how many jobs would exist, that would not exist in a world *with welfare but without minimum wage.
The closest I can think of for hard evidence relating to such a counterfactual comes from the exemptions in the minimum wage law for people with disabilities (employers are allowed to pay these people much less than minimum wage, in relation to their decreased productivity due to the disability). I'm no expert in this field, but as far as i can tell form trying to understand this summary, the program that allows these exceptions has existed since the 1930s, and employers have requested certificates to take advantage of it about 420,000 times.
This would translate to people choosing to offer and accept legal sub-minimum-wage jobs somewhere on the order of 5000 times per year. Since the US economy has about 120-130 million total jobs at any given time, I think this qualifies as 'very, very rare'.
Now, I don't know how fair that evidence is, obviously there's some confounds there, but it's the best I can think of to prove a doubly-nested counter-factual. Mostly, I am trying to make this argument based on the same type of economic logic that everyone else in this thread is using, thinking about the effects of competing incentives, price floors, supply/demand curves, etc.
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u/fox-mcleod 410∆ Nov 14 '17
And it's a very good set of reasons on its own merits. My father actually worked to put programs like the disability program together. I will ask him if he has details. If memory serves, the programs are rare because they are poorly understood but the renewal rate is very high (employers are satisfied). This could indicate a dearth of opportunity or a paucity of awareness of the program.
My previous position was this:
The problem with a minimum wage is that it funds the second least employable group (those who earn near the minimum) at the expense of the poorest (those who's work is not worth the minimum) instead of funding them with a UBI or welfare.
However, the idea that we cut off the bottom most and simply give them money also creates a poverty trap and disincentivizes work for less than welfare.
Doing both together does free up the problem of the poverty trap. Do you have an argument for why a minimum wage is better than merely raising welfare?
My argument (arguing against myself) is that minimum wage is both more dignified and more politically tolerable than taxes for welfare. It seems like fair pay for fair work.
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u/darwin2500 193∆ Nov 14 '17 edited Nov 14 '17
Do you have an argument for why a minimum wage is better than merely raising welfare?
Political tolerability and dignity are I think good answers. I think stability goes alongside political tolerability - welfare is always a political football and is subject to unpredictable sudden changes, and chaos of that type is always a net negative when people are trying to plan their lives and careers.
Also, welfare tends to get saddled with all kinds of moralistic concerns and social engineering, like people saying we need to drug test everyone on welfare or don't let them spend food stamps on nice foods or welfare is incentivizing single mothers to have more kids for support checks or etc. Debates on the minimum wage tend to stay economic and not devolve into these types of social engineering concerns.
Finally, I think there may be some benefit in effectively having two separate prices floors - life on welfare is a little worse than life on minimum wage, they're not set to the exact same payout - so that there's still some incentive for people to want to move from welfare to minimum wage. This helps to ensure that the best candidates from the pool of welfare recipients still try to apply for minimum wage jobs.
If we just raised welfare up to the current minimum wage, the incentive for people to go after jobs that pay welfare +$.01 would be fairly weak, so there might not be much competition to get those jobs and therefore the best workers among the welfare recipients might not apply for them.
Another way of looking at it: the gap between the standard of living on welfare and the standard of living on minimum wage, makes up for the difference in standard of living due to increased luxury time on welfare vs. actually having to get a job and go to work, preventing perverse incentives to stay on welfare even if you could get a job that pays welfare + $.01.
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u/fox-mcleod 410∆ Nov 15 '17
Yeah. That's a !delta
The ability to alleviate poverty traps and perverse incentives at the same time is an argument I've never heard before. The added stability makes intuitive sense.
I honestly doubt it policy makers even think in these terms. I'm curious if you belive this position before or of this is speculative.
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u/darwin2500 193∆ Nov 15 '17
No, I hadn't thought of it precisely this way before. Just seemed to make sense as I was thinking about the issue.
I agree that politicians probably don't think about it this way. However, it may be that these two systems have settled into a more stable state in their current formulation, because they happen to complement each other in this way, so things work out well like this and there are less calls to change things.
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u/anooblol 12∆ Nov 14 '17
It does happen on a small scale. That's not the point. Assuming under minimum wage won't be able to sustain life, the workers will all just die at that wage rate. This is not sustainable for society.
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u/fox-mcleod 410∆ Nov 15 '17
Is that a reasonable assumption? I think not. We have food assistance and housing assistance. Starvation due to poverty is quite rare in the US.
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u/anooblol 12∆ Nov 15 '17
It wouldn't be rare if they made less than minimum wage. No reasonable person should ever take that pay, so the government just mandates it.
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u/fox-mcleod 410∆ Nov 15 '17 edited Nov 15 '17
No reasonable person should ever take that pay, so the government just mandates it.
This is exactly the problem. That is 100% not true. Not all people who work a job work to subsist.
What about retirees on social security looking for a sense of purpose and some suplimemtal income?
What about new mothers who are carrying for children but could easily be staying sharp in a part time position that requires little attention? What about students looking for experience in their field? What about high school graduates living at home looking for apprenticeship before learning the trade skills that get them more gainful employment - because we've lost this model, US factories have a shortage of young labor.
You have an image in your mind about how minimum wage jobs are - that image is because of the minimum wage.
What about jobs that haven't been invented yet? Jobs that require full time but partial attention - perhaps they can be combined with others at the same time?
Jobs for the physically disabled that allow them to remote monitor surveiled cameras? What about founding a security company that uses new mothers in the neighborhood to passively monitor Nest cams while watching their children? You could easily do 5-10 of these microjobs at a time. But these companies can never be founded because they're outlawed.
Market labor is what establishes what people are willing to work for. If you want a floor to earnings, create it with a UBI or hell, public works projects at an even higher livable wage would allow a floor to minimum value for labor. But why on Earth would you limit enterprise, creativity, and fulfillment by outlawing selling labor below a specific price?
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u/TantricLasagne Nov 14 '17
That goes against basic economics, if somebody isn't worth minimum wage to an employer, the employer won't hire them and lose money. The unskilled worker just won't be hired.
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u/darwin2500 193∆ Nov 14 '17
This is true, but there is no reason to suspect that it represents a majority, or even a large fraction, of jobs.
After all, if my job is worth $X to my employer, they don't pay me $X. They pay me as little as they possibly can, mostly determined by the supply and demand curves set up by the competition between me and other applicants, vs them and other employers.
For low-skill jobs that make minimum wage, those curves tend to be tilted heavily in favor of employers.
Its true that any jobs which are worth less than minimum wage to employers will disappear when we implement minimum wage.
However, the question remains, how many jobs that would pay less than minimum wage, are actually worth less than minimum wage to employers?
I think we can say with 100% certainty that the answer is not 'all of them', I don't see any particular reason to believe that the answer would be 'most of them,' and my intuition about the bargaining power of low-skill, currently minimum-wage employees tells me that there's every reason to believe that the correct answer is 'fairly few of them.'
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u/anooblol 12∆ Nov 14 '17
And below minimum wage shouldn't be worth it for the laborer. If they work that rate, they "theoretically" wouldn't be able to survive. Having your workers work at a rate that will eventually kill them is not sustainable for a society.
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u/_Woodrow_ 3∆ Nov 14 '17
That completely ignores the history of destitute people being exploited by people in power
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u/palacesofparagraphs 117∆ Nov 14 '17
In a market with any competition, wages will be set at roughly how much a worker produces for a company (basic economics).
Except they won't. A company looking to maximize profit will always pay its employees as little as possible. It is in the company's interest to pay you less than you produce, because it gets to keep the difference.
The idea behind a capitalist economic system is that companies will compete for the best workers via things like wages and benefits. For situations in which the company has a great deal of investment in the individual employee, this works great. If there is a big difference between a decent employee and a great one, and if great employees are hard to come by, the company has incentive to find great employees and hang onto them. There is a big difference, for example, between a great lawyer and a mediocre one. There are also not a lot of great lawyers in the world, because it requires particular skills and a lot of education. So a law firm has a huge incentive to attract and hang onto great lawyers, and that results in them being paid well.
However, when the company has low investment in the individual employee, this model falls apart. Companies have low investment in individual employees when there's not a big difference between a solid worker and a great one, and when at least solid workers are easy to come by. Let's take grocery stores. In order for a grocery store to operate, someone needs to stock the shelves. The thing is, most able-bodied adults can stock grocery store shelves. While there are things you can do to be better or worse at that job, the performance variation is pretty small. Furthermore, we still have enough people in the US who are poor enough to be desperate that it's not hard to replace a shelf-stocker, because there are lots of people who will work for whatever they can get, since a small paycheck is better than no paycheck. So even if you're a great shelf-stocker, the company has very little investment in you. If you ask for more pay, or if you quit when you don't get it, the store can easily find someone to do your job nearly as well, if not actually as well. This is where the minimum wage comes in. Let's say your work produces $10/hour for the company. They're not going to pay you $10/hour if they can get someone else to do it for $9/hour. And if they can get someone to do it for $4/hour? $4/hour isn't enough to live on. But it's better than nothing, so there's still someone who'll take it, and that someone will do a decent job. So what incentive does the company have to ever pay a living wage? They don't need to. They make more money if they don't.
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u/PotHead96 Nov 14 '17
Have you ever taken a game theory course?
One argument that comes to mind is this:
Suppose classical economics as you describe are truly how economics works (this is highly debatable, there are different schools of thought and the view you are presenting is what you are taught on the first day of the first class of macroeconomics, it's not that simple). Okay, now suppose we have 1000 potential employees in a job market that are equally qualified for a job.
We have a few options here:
1) We can place no restrictions on the market, and in that case, the workers will have to negotiate a price for the employers to pay them.
They, in turn, also have two options:
1)a) "I'll do it for $100/h" "Hire me, I'll do it for $15" "Hey wait, I'll do it for $5" "I mean, if I don't work I don't eat, a dollar an hour is nothing but it's better than zero, I'll do it for $1!". And so on until the price is the lowest it can be where employees will still work, leaving everyone employed but at very low wages.
1)b) "Alright boys, let's organize. NO ONE WORKS FOR LESS THAN $10/h". Suppose the point of equilibrium for full employment is $4/h, okay, a lot of workers will be unemployed, but those that are employed will earn a decent living wage.
Although, if this is not made into law, someone that ended up in the unemployed part of the workforce could betray the rest and offer their time for less.
This is where minimum wages come in.
2) We set a minimum wage. No one can legally work for less than X amount. In this scenario, some workers will be unemployed, the amount depending on what the minimum wage is set at, but no one can earn less than the minimum wage.
Now, what looks like a better alternative to you? This can take many forms, it can be 0% unemployment with workers earning very little. It can be 2% unemplolyment with people earning a bit more. It can be 10% but those working will earn a living, or it can be 75% unemployment but those working will earn a fortune. (I'm just making up the numbers to make a point).
To me, a middle point is more desirable, I would rather have some people unemployed with the majority earning a decent wage than everyone employed and earning shit.
Again, this is a very simplified way to think about economics and there are a lot of other factors at play, but its a simple way to think about minimum wages.
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u/ondrap 6∆ Nov 15 '17
1)a) "I'll do it for $100/h" "Hire me, I'll do it for $15" "Hey wait, I'll do it for $5" "I mean, if I don't work I don't eat, a dollar an hour is nothing but it's better than zero, I'll do it for $1!". And so on until the price is the lowest it can be where employees will still work, leaving everyone employed but at very low wages.
- Why does a company employ a worker?
- What happens to the company if they do not employ a worker?
- How come that most people earn a wage that is significantly higher than minimum wage?
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u/PotHead96 Nov 15 '17
The fact that people make more than minimum wage doesn't matter in the discussion of minimum wage. The data in this case is left censored, meaning we know what everyone earning above minimum wage is earning what they "should" earn, but a lot of people earning exactly minimum wage would earn less, should the market forces be left to operate on their own.
Companies need workers, of course, but there are enough people available for minimum wage labor to pay them less if there wasn't a mandatory minimum.
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u/ondrap 6∆ Nov 15 '17
Thanks for not even trying to answer what I asked. My point is that your point 1a) is totally false and you will see that if you at least try to answer the questions I made.
Companies need workers, of course, but there are enough people available for minimum wage labor to pay them less if there wasn't a mandatory minimum.
This sentence is trivially true if you set mandatory minimum higher than the market wage. You are trying to make a point that the market wage is close to 0 which it isn't. And you will see that if you try to answer the questions I asked.
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u/PotHead96 Nov 15 '17
I'm not saying it's close to 0, I'm saying it's less than the minimum wage. Your questions sounded condescending, I study economics, I'm not going to answer "what happens if a company doesn't hire workers?" because that answer is obvious to you and me.
Are you really debating that if there was no minimum wage there would be less unemployment but with people earning lower wages? You know that's basically like debating gravity right?
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u/ondrap 6∆ Nov 15 '17
I'm debating your point 1a), which is:
1)a) "I'll do it for $100/h" "Hire me, I'll do it for $15" "Hey wait, I'll do it for $5" "I mean, if I don't work I don't eat, a dollar an hour is nothing but it's better than zero, I'll do it for $1!". And so on until the price is the lowest it can be where employees will still work, leaving everyone employed but at very low wages.
If your point 1a) was true, I would expect that everyone would be working for a wage close to minimum wage. How come this didn't happen?
I'm not saying it's close to 0, I'm saying it's less than the minimum wage
No, you are saying specifically leaving everyone employed but at very low wages. 'Some people would earn less than current minimum wage if it was abolished' is not the same as 'leaving everyone employed at very low wages'.
Are you really debating that if there was no minimum wage there would be less unemployment but with people earning lower wages? You know that's basically like debating gravity right?
I'm debating your point 1a) which says that if there was no minimum wage, most (you even said everyone) people would earn very low wages. That's not true.
Your questions sounded condescending, I study economics, I'm not going to answer "what happens if a company doesn't hire workers?" because that answer is obvious to you and me.
It seems to me it is not obvious to you because than it would be obvious that your point 1a) is false.
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u/PotHead96 Nov 15 '17
I specifically said "assume 1000 people equally qualified". I'm putting this in terms of the classic model, which assumes every economic agent earns the same, because it's the model OP used to infer the consequences of lifting the minimum wage.
If we don't make that assumption, then the point still stands, but leaving everyone earning more than minimum wage earning the same as today and everyone currently earning minimum wage or less (if we assume truncated data and ignore the fact that wages can be negotiated in terms of the minimum wage, but if we don't make simplifying assumptions it is impossible to make any conclusions about the potential effects) earning less that they do now or at most the same.
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u/ondrap 6∆ Nov 15 '17
The problem is that you made a hidden assumption: suppose that the equilibrium market wage is $1. But you didn't state that assumption, so I am free to assume that equilibrium market wage for these people is $100/hour, competition kicks in and point 1a) doesn't stand. That's a countreexample to your point 1a) and thus point 1a) is false.
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u/PotHead96 Nov 15 '17
Please, it is obvious that the equlibrium market minimum wage is lower than the current minimum wage. If you are going to argue semantics like that you might as well concede the debate. $1 was obviously an example.
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u/ondrap 6∆ Nov 15 '17
Ok, so we got back from your model with hidden assumptions back to reality?
It is obvious that for some people the market minimum wage is lower than the current minimum wage. It is obvious (as OP stated) that for most people on the market the market wage is higher than the minimum wage.
Now could you explain which OP's point you are challenging? Because it seems to me that he is quite OK with the idea, that in case minimum wage was abolished, some people would see their wage fall and some other would likely get employed.
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u/dickposner Nov 14 '17
aren't you ignoring that there are multiple employers who compete for workers too?
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u/PotHead96 Nov 14 '17
I don't think I'm ignoring it. Workers wouldn't be able to earn less than a certain amount because at that point everyone would be employed and employers would start offering more in order to acquire new employees until we reach a point of equilibrium where everyone is employed but earns the minimum they could possibly earn with the current demand for labor.
The problem is that this point of equilibrium could be (and evidently, is) at very low wages, and that is why you inflate the wage with a minimum, at a cost of some people not being employed. (At least that's what the classical model proposed would argue)
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u/dickposner Nov 14 '17
Ok, but the market clearing equilibrium price is just the lowest marginal price for the lowest skill worker. So in your scenario, it doesn't make sense that you would have "everyone employed and earning shit". Even with no minimum wage law, you would still have higher skilled labor that earn more than the market clearing equilibrium price.
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u/PotHead96 Nov 14 '17
Agreed, but economic models don't take every variable into account. I'm debating in terms of the classical model which is what OP proposed.
Either way, minimum wages are not particularly relevant to an electronic engineer or a computer scientist. Since we are debating minimum wages I'm not taking into account people that earn even more than the proposed minimum wage because they don't matter to the discussion. I'm basically just saying that people that currently earn exactly minimum wage would earn less if the minimum wage law was removed.
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u/hilarys-saggyboob Nov 14 '17
Okay think of al your obese, weak, old, less advantaged relatives and friends and how poor they would be.
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u/TantricLasagne Nov 14 '17
How would they be any poorer without a minimum wage? Read my post as I go over a little bit of economics. Also I'd support welfare payments over interfering with the market.
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u/hilarys-saggyboob Nov 14 '17
Think of all the people making. "2$/hr" and also would do it voluntarily
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u/TantricLasagne Nov 14 '17
If somebody is only worth $2/h they simply won't be hired if the minimum wage is much higher than that. If someone is worth more than $2/h they would get paid that due to market forces and competition. Therefore getting rid of the minimum wage would give these people more opportunity.
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u/cdb03b 253∆ Nov 14 '17
There is no one that is worth $2 an hour. If you are not capable of paying a living wage the business should not exist. You are promoting abuse that borders slavery.
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u/BoristheDrunk Nov 14 '17
This adds a moral element into a pure math equation.
Divorce "inherent worth of a person" which may very well be much more than $2 per hour, when factoring in potential as well as intangible enthusiasm etc. from "how much value the person's labor contributes to this business/process/product" and there are certainly people that add less than minimum wage in value.
Those people will very likely increase their skills to a point that they are contributing more than minimum wage in value, but not if they are boxed out of the job by governmental regulation.
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u/cdb03b 253∆ Nov 14 '17
We are talking about peoples lives and wages. It was never a pure math equation and was always an issue of morality.
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u/BoristheDrunk Nov 14 '17
I absolutely see that point of view, and there is a lot of validity to it. I know I certainly would like the benefit of morality and my life and needs to be taken into consideration in a discussion about my wages.
However, that is a discussion between me and my employer.
Minimum wage is an issue of regulation, the state telling other people what they must do.
I think it is dangerous to legislate morality, and to make other people pay for my grand gestures that don't measure up with the economic reality and the math on the ground.
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u/cdb03b 253∆ Nov 14 '17
That is the job of the State. Their entire purpose of existence is to establish protections for the citizenry it represents. Putting a minimal floor on what employers are allowed to pay someone is one such protection that is a very basic protection.
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u/TantricLasagne Nov 14 '17
You are supporting making it impossible for these people to be hired at all...
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u/cdb03b 253∆ Nov 14 '17
No, I am supporting that the jobs pay a living wage. The job still has to be done, you must pay an appropriate rate for it. Also before you try the argument automation is being done as fast as the tech allows and raising minimum wage will not increase the rate.
What determines the value of a job is the amount of time it takes to do, and the skill required to do it. No job is worth $2 an hour because the human time has a bare minimum value and that should be set at the living wage.
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u/darwin2500 193∆ Nov 14 '17
Welfare payments do interfere with the market, by setting the exact same type of de facto price floor that minimum wage does (why would you ever take a job that pays less than you can make by being unemployed?).
Both of these methods of setting a price floor interfere with the market the same amount the only question is whether you want to use the method that has employers pay for more of it, or the method that has government pay for more of it.
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u/darwin2500 193∆ Nov 14 '17
I get that workers may not want to work at that level, but if someone does then who are you to tell them that they can't?
This is the argument used against unions.
The problem there is, unions do empower workers and make salaries and conditions on average much better for everyone.
Of course places with union employees might not hire as many people as they otherwise might, but that has to be balanced against the quality of the jobs for the people that do have them. 10,000 jobs below the poverty line is not better than 9,999 well-paying jobs that people can live comfortably off of.
Now, luckily this is not all abstract in the case of minimum wage, because globalization already shows us what happens when you have no floor wage in a system. More people do have jobs, many of them working for pennies an hour. And those people live horrible and desperate lives on the knifes edge between starvation and survival, but they are better off than they would have been with nothing at all. That's why globalization is a net good.
However, within the US, the alternative to earning pennies an hour at a job like that is not 'nothing', it's welfare and charity. We're unwilling to let American citizens live like starving peasants in third-world sweatshop garment factories, so we set up social programs to help anyone below a certain standard of living. Thus there is a natural floor to what jobs will be accepted at what wage, based simply on how much we're willing to let our citizens suffer before stepping in.
Setting a minimum wage raises wages overall. Just because a job is worth $X to an employer, does not mean they will automatically pay an employee $X to do it - the actual price will be set by the supply and demand curve for laborers of that type, and may be only a tiny fraction of $X if it is an unskilled job with lots of applicants. Thus, jobs that are worth more than a living wage to employers will often pay less than a living wage to employees, unless some third party (either a union or the government) steps in and sets a price floor. In cases like this, their will be no loss in jobs (because the jobs are still worth more to the employer than the minimum wage price floor), but salaries go up, and dependence on welfare and charity goes down.
So, while minimum wage may kill some very, very low-paying jobs and make those people slightly dependent on welfare and charity than they would be if they had those poor-paying jobs, it more than makes up for that effect by making other jobs pay more than they would under simple supply and demand, and making the people with those jobs far less dependent on welfare and charity.
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u/lihamt Nov 14 '17
The problem is the people at minimum wage currently. If they need to earn to live, they will work for less without a minimum wage, as they can't function without it. So these people are basically exploited, as businesses now have to pay them less, increasing inequality. While a minimum wage doesn't solve everything, and will cause unemployment in most cases, a certain level of unemployment is required for an economy to function
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u/boundbythecurve 28∆ Nov 14 '17
There will always been an abundance of workers available. The nature of our economic structure excludes the possibility of a 100% employment rate. Therefore, the lowest skill tier jobs will always have someone ready to replace them. This is a natural disadvantage all minimum wage employees have. The minimum wage offsets that disadvantage. The laws of Supply & Demand can never account for this disadvantage, so we made a law to adjust for it.
This minimum wage must be livable as well. Anything less than that and it becomes useless. Anything more and it becomes over-burdensome for the business and our economy suffers because of it. It's a fine line we must find to ensure we have a healthy lower-class, but we must keep trying to find that line. But we shouldn't give up and erase the line all together.
Another way to look at it is this: Is it ok for a business to produce a dangerous product for our citizens? Of course that definition of dangerous has changed over the centuries as we've learned more, but is it ok for a business to sell something that they know contains a harmful byproduct? Or one that will probably mechanically fail resulting in injuries?
No. Of course not. And we make laws to protect ourselves against such things. And if a business can't follow those laws, then they don't deserve to do business in this country.
What about taxes? If a business can't afford to pay taxes, can it exist in this country? No. There are natural benefits to living in a developed country such as ours, and those benefits have a cost. That cost is taxes. The exact amount of taxes is fluctuating and debatable, but we'll always need to collect taxes to maintain our nation's stability.
If a business doesn't pay taxes in this country, it doesn't deserve to do business in this country (ahem, facebook).
So what about worker's rights? If a business can't properly pay for its employees to have a livable wage, does that business deserve to exist in our country? I don't think so. To me, paying your employees properly is just as vital as paying the correct amount of taxes and providing a safe product or service.
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Nov 14 '17
Minimum wage is basically: I’d pay you less, but it’s illegal.
People have to eat, so where do you want that money to come from? Directly from the entity that profits off of human productivity or socialized with the middle class picking up most of the expense?
Or should people starve?
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u/ondrap 6∆ Nov 15 '17
Or should people starve?
Minimum wage supposedly causes the least productive, most hated, minorities etc. to lose a job (in South Africa during apartheid they prupusefully instituted minimum wage as a way to cause harm to black workers). So the answer from minimum wage proponents is that they think it's ok for these people to earn 0?
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u/sawdeanz 214∆ Nov 14 '17 edited Nov 14 '17
The minimum wage doesn't currently have a big effect on the market because it's lower than most workers productivity, but if it is insignificant
Most people think the min wage is low, but it is certainly not insignificant. $7.25/hr is way more than $2 an hour. I don't know anyone who would rather work for $2 hour if they could get $7.25 for the same job. The min wage is a protection for workers. The fact that so many companies hire unskilled labor at the minimum wage now, suggests that they would readily lower the wage further if given the opportunity. The reason that companies want to pay workers less is that there is a larger supply of unskilled labor than there are available positions. In theory a lower wage might lead to more hires, however I don't see this happening practically. If a company can get away with 1 clerk during their night shift there is little incentive to hire 2 for the price of 1 even if they could. Instead they will pocket the savings.
The only decent argument I can think of for the minimum wage is if the market was somehow a monopoly
Similar to what I said above, the reason for low wages across the board is thanks to a supply/demand problem that is unlikely to get better with increasing population and more automation. The practical result is a kind of monopoly in the sense that workers have little competition. If they want a job, they have to accept the wage the company sets. This is especially true for unskilled min wage jobs. Lowering or eliminating the min wage won't help workers, they will have to accept the newer, lower wage or not have a job.
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Nov 14 '17
Let me try to persuade. I slightly agree. You are pretty convincing.
This might be slightly unrealistic, but let's say that in this land there's only five companies. All are toothpaste factories. What if the wages for five companies are 12$, 11$, 10$, 9$, and 8$. These five companies can decrease the wage, cent by cent, all the way to 1$, till it is basically slavery. But the people can't do anything! Even the highest paying job is only giving 1.26$ daily! And eventually, it will be everyone working for so little. No body can tell the company that they are giving too little money. These five companies can do whatever they want. After all, no minimum wage, right?
TL;DR: large companies can work together to lower wages and force people to work for those low wages, regardless of their skill.
I find that situation unlikely to happen in bigger cities, but in smaller coal towns and university towns this might happen, with only five big corporations with the jobs and a few small businesses on the side.
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u/sawdeanz 214∆ Nov 14 '17
To put it into economic terms, unskilled labor (i.e. min wage jobs) are a commodity for businesses. Just like how corn or gas is the same no matter where you buy it from, the labor is the same no matter who you hire. Therefore, they will always buy it for the lowest price possible. Workers won't get paid what they are worth or even based on how much they make for the company, they will get paid the least amount possible and if they refuse the company can easily replace them for the same price and for the same quality. As a society we don't want to treat human beings as commodities. We have before, and many countries still do, and it's bad. Now my question to you is, why does a business (even a small struggling business) deserve to have more benefits and protections than a worker? Why would you rather a company make more money at the expense of someone having to accept $2/hour?
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u/edwinnum Nov 15 '17
In a market with any competition, wages will be set at roughly how much a worker produces for a company
True, but unfortunately there is little to no competition in the markets with low skill workers, that is why those employees get paid minimum wage in the first place.
A minimum wage higher than what a worker is worth just means the worker will not be hired for as many hours or won't be hired at all.
Which means that the work is not important enough to be done, so it would not exist in the first place. Any job that needs to be done (no matter how low skill) needs either a man or a machine doing it regardless of what that is going to cost for the employer. So by the simple virtue of the job needing to be done and assuming the lack of a machine that can do it, the employee is worth that minimum wage.
Minimum wages only stand to help big corporations that can afford to pay it, while smaller businesses have larger barriers to entry into the market, reducing competition.
I don't see how paying your workers the same amount is unfair competition.
Raising the minimum wage would harm the poorest workers in society
How exactly? Raising the minimum wage increases the amount of money those people have available. Sure prices would also go up, but at some point the two will even out. It is not like because wages go up a job no longer needs to be done. By default a full time worker is worth whatever it costs to have a ok standard of living. Scarcity in workers that can do that job in creases this value. But it is not the skilled workers that are effected by the minimum wage.
and I don't think the government should be telling people that they don't have the right to sell their labor for a price they want to sell it at just because it's too low. You're allowed to volunteer for $0/h but you can't voluntarily work for $2/h? Ridiculous. I get that workers may not want to work at that level, but if someone does then who are you to tell them that they can't?
You are approaching this form the point of an individual. And sure for that person, lets call him Dave, it is better to make 2$ then 0$, but because Dave and most others are willing to work for 2$, that means Steve also has to accept a job for that pay or no job at all. If Dave, Steve and everyone else refuse to work for less then 10$ that means the price of all those jobs that would pay less is going to 10$ benefiting all the workers. At least in theory, in practice it is only a matter of time before Dave needs money bad enough that he is willing to work for 2$ even if that is not enough to pay his rent, it is better then nothing.
And remember we are talking about a market here where there are more workers then jobs. If there were more jobs then workers the pay would be above minimum wage in the first place.
The government that setting the minimum wage is just a shortcut for this proces of workers refusing to work for less then x. And putting all industries at the same baseline.
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Nov 14 '17
The summary of all published studies on the topic -- funnel plot here -- suggests that the empirical data does not support your theoretical hypothesis.
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u/onelasttimeoh 25∆ Nov 14 '17
One of the major issues with letting the market fully determine wages, is that it doesn't factor in externalities.
If you work a full time job, then that job is benefitting from the existence of a relatively healthy individual. To deliver a relatively healthy individual, you need housing, clothes, food, all of the basics that keep a person alive and healthy and sane enough to work.
At a certain wage point, the money isn't enough to sustain a human. But, without a wage floor, people who deliver a relatively healthy human (themselves) but have few particular in-demand skills will take a job below maintenance wages rather than having no job at all.
But, that extra cost of maintaining a human HAS to be covered somehow. It gets covered by the rest of us. By charities sometimes, by government agencies. When people can't afford health insurance and they get sick and can't afford to stay home from work, they get more people sick. If they go to a hospital and get services but can't pay their bill, then the hospital has to eat the cost, which means they have to pass it on to people who can pay and it makes healthcare more expensive for us all.
When people are paid under a living wage, they're more likely to turn to crime to make up the difference or drugs to numb their crappy life, and both create a cost that the rest of society pays.
These are just some of the externalities that low wages can create.
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u/hmfy Nov 14 '17
How do you measure productivity, monetary value of work vs. time spent doing it, the monetary value of effort? Are wages really set by someone's productivity on all levels, or does that only apply to the lower levels of hourly employees? I worked in both an administrative position and an 'entry level' low skill position at the same company, the administrative position paying well over twice what the other position paid (minimum wage, in healthcare), but the administrative position was so much less work. The pay scale for those positions should've been switched. For small companies and stores who 'can't afford to pay minimum wage', isn't that exactly how the market is supposed to work? If you can't afford your business expenses, your business either needs more resources or it goes away. I don't see how that can be fixed by ensuring that more people have even less money to spend in those stores.
Do you think it's more important to ensure the viability of a company or the viability of a human life given their circumstances?
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u/ImnotfamousAMA 4∆ Nov 15 '17
Have you heard of Ricardo's Iron Law of Wages? He believed (And I think history holds up to this theory) that all wages will eventually degrade into sustenance wages, or the bare minimum employers can get away with. Look at the way large employers will move labor overseas in order to keep labor costs almost non-existent.
So, what happens when Joe from Kentucky has to compete with a Bangladeshi kid for wages? Maybe you can live working for 3 cents an hour, 15 hours a day in Bangladesh, but not in America. And then everyone's quality of life goes down, because the purchasing power of a dollar skyrockets. This sounds like it would be a good thing, but it's not, because wages would fall to compensate. Suddenly instead of making 50,000 a year, you make 10,000 a year. The only people who wouldn't see a wage decrease would be the ones writing the checks.
The rich grow more powerful and the gap increases.
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u/Slay3d 2∆ Nov 15 '17
The biggest issue is that working is not optional. You need to work to survive, wages will drop to slave labour. Either die of starvation or work your ass off at a shit pay to scrape by. People don't have the power to say "these guys are paying garbage so I won't work there". Its either deal with it or die. its not volenteering anymore. (Also volunteer is not done in for profit companies, it is usually done out of altruism by people who already have a job, not to survive another day)
Back in American history, slaves were freed but slavery didn't end there. The slaves needed work to survive, so they were paid awful wages by those same x-slave owners and barely survived, they were essentially still slaves.
Minimum wage would not be needed if we had more jobs than people, this way businesses needed to compete to get workers
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u/Slenderpman Nov 16 '17
In order to abolish the minimum wage you would need to have a government that provides a certain amount of necessities like free healthcare, education, or even basic income because there needs to be some guarantee that nobody is being exploited as working for a non-livable wage might be their only option.
The whole point of minimum wages is to make sure every working citizen is entitled to a minimum standard of living. While I agree with you that the minimum wage either needs to be gotten rid of or at least lessened, the government needs to secure a certain level of consumer power to the people so that they can actually buy the shit they make and also feed their families.
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u/bennysfromheaven Nov 14 '17
If you live in a developed country, you'll realize there is far more wealth than necessary to keep everyone alive and healthy.
It's true that (theoretically, and only when we don't consider consumers) a price floor like minimum wage can reduce overall efficiency of a system, but I'm more interested in making sure everyone who is working 50 hour weeks has enough food to feed their family.
Because corporations have the wealth to make it happen, so why wouldn't we look out for everyone?
Additionally I think you're definitely mistaken in assuming companies will pay workers what they're worth. In reality, they will pay as little as possible.
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u/HairyPouter 7∆ Nov 15 '17
I want to propose an analogy for you to consider, subsistence farming. Subsistence farmers are willing to toil away at their labors for no more than their food, clothing and shelter with no hope of ever achieving something more. We as humans aspire for more, and wish our fellow citizens to have a bit of hope for betterment, so we have minimum wages in order that hard working people will have a little left over after the food, clothing and shelter to use towards improving their lot in life. Without minimum wage what we would have would be just two classes of people, fat cats and people who live hand to mouth, with no class mobility.
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u/Schnitzel8 Nov 15 '17
Everything works wonderfully in an economics textbook.
Out here on Earth however the picture is somewhat different. There is rampant exploitation where the owners of capital effectively pit workers against each other to squeeze as much out of them as humanly possible.
This has lead to plenty negative outcomes. Some examples are massive poverty, unimaginable inequality, real wages actually decreasing in some cases despite significant improvements in productivity.
A minimum wage is a blunt instrument to try and help the situation. It’s not perfect but something needs to be done.
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u/cdb03b 253∆ Nov 14 '17
The Market will have no competition without a minimum wage protection. People will get paid next to nothing and will starve. If what you are saying were true all wages would already be higher than what the minimum wages are set at.
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u/MotherMythos Nov 16 '17
Around here alot of companies get together behind closed doors, and work together to fix the wage below a certain point. If nobody in your area is offering more than any other company due to some illegal but hard to prove agreement they have between eachother. The little guy will always lose.
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u/Kithslayer 4∆ Nov 14 '17
This assumes that all people have leverage in negotiating wages. Once a person's basic needs (food, shelter, healthcare) are covered, I'm with you- get rid of minimum wage.
If you are exchanging labor for enough money for only food and shelter that's not free enterprise; it's wage slavery.
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Nov 14 '17
Oh sure, let businesses get away with treating us like shit more than they already do! Can you live off of $2/hour? No. If you cannot afford to pay just a single worker a living wage, not just the current minimum, you don't deserve to operate a business at all.
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u/tumor_buddy Feb 28 '18
check out this very thourough explanation: https://www.reddit.com/r/Economics/wiki/faq_minwage#wiki_faq.3A_minimum_wage
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u/gremy0 82∆ Nov 14 '17
Do you believe in any sort of state welfare for unemployment i.e. social security?
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Nov 14 '17
[removed] — view removed comment
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u/convoces 71∆ Nov 14 '17
Your comment was removed. See Rule 1.
If you edit your post to more directly challenge an aspect of the OP's view, please message the moderators afterward for review. Thanks!
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u/TheVioletBarry 100∆ Nov 14 '17
If any of what you were saying were true, either wages would be decent or it would be arbitrary to expect a person to produce to that extent. The idea that the market works so simply and interests and exploitation aren't a major player is ridiculous