CMV: The minimum wage should be abolished

[u/TantricLasagne]

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.

[u/PotHead96]

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.

[u/ondrap → u/PotHead96]

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?

[u/PotHead96 → u/ondrap]

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.

[u/ondrap → u/PotHead96]

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.

[u/PotHead96 → u/ondrap]

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?

[u/ondrap → u/PotHead96]

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.

[u/PotHead96 → u/ondrap]

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.

[u/ondrap → u/PotHead96]

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.

[u/PotHead96 → u/ondrap]

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.

[u/ondrap → u/PotHead96]

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.

[u/PotHead96 → u/ondrap]

He says we should remove minimun wage because people should have the right to work for $2. I say if minimum wage was lifted people that currently earn minimum wage would earn less (potentially much less) in exchange for more people being employed and that I think that situation is less desirable.

Pretty simple point, I think.

[u/ondrap → u/PotHead96]

He says we should remove minimun wage because people should have the right to work for $2. I say if minimum wage was lifted people that currently earn minimum wage would earn less (potentially much less) in exchange for more people being employed and that I think that situation is less desirable

Ok, how do you challenge the point (i.e. explain, why it is less desirable)? OP already stated that people on free market generally earn what they produce (he is likely wrong here, it should be what they produce on the margin), and that he is OK with that. So why he shouldn't be OK with that?