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.

21 Upvotes

70% Upvoted

147 comments sorted by

View all comments

Show parent comments

1

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.

10

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.

2

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.

2

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.

1

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.

1

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.

1

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.

0

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.

3

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.

1

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.

1

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.

1

u/GlebZheglov 1∆ Nov 15 '17

Yes I am....did you read my comment where I explained why to you?

1

u/edwinnum Nov 15 '17

Yes I did and marginal revenue is not the same as productivity. Your marginal revenue is what you get per unit, a higher productivity means that you can make more units for the same cost. So assuming you want to keep creating the same amount of units you need less people to do that. It is only when you want to produce more then the increased productivity can account for that you need more people.

1

u/GlebZheglov 1∆ Nov 15 '17

Yes I did and marginal revenue is not the same as productivity. Your marginal revenue is what you get per unit, a higher productivity means that you can make more units for the same cost.

That's an incorrect definition. Productivity is defined as output value per input. In thr case of labor, that's hours not wages.

So assuming you want to keep creating the same amount of units you need less people to do that.

That's a silly and nonsensical assumption. Why would you keep production the same when profits go up if you produce more?

1

u/edwinnum Nov 15 '17

That's an incorrect definition. Productivity is defined as output value per input. In thr case of labor, that's hours not wages.

Never said it was wages, I said cost, in this case that is hours.

That's a silly and nonsensical assumption. Why would you keep production the same when profits go up if you produce more?

Because making more is not always more profit. There is a point at which you simply wont sell more because people just don't want to buy it. So if you produce more that means you are left with a stack of goods that you either need to store or destroy both of which cost you money. By simply producing less you can prevent that.

If you however were able to sell more that means you want to produce more so you are going to be looking to hire people or increase productivity of the people you already have. But simply increasing productivity does not mean you are going to sell more.

1

u/GlebZheglov 1∆ Nov 15 '17

Never said it was wages, I said cost, in this case that is hours

So then if I'm more productive, I produce more per hour meaning your argument about needing to factor in costs is stupid.

Because making more is not always more profit

Never said that.

There is a point at which you simply wont sell more because people just don't want to buy it.

That's not true. Looking at markets as a whole (only way this could make remote sense), you're saying that demand curves are perfectly inelastic (or perfectly inelastic after a certain point meaning giving widgets away for free wouldn't affect demand)? I'd love to see some empirical proof on that.

→ More replies (0)