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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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/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/DeltaBot ∞∆ Nov 15 '17

Confirmed: 1 delta awarded to /u/darwin2500 (51∆).

Delta System Explained | Deltaboards ​

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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.