I think you’re ignoring my point and we’re talking in circles. Are you arguing that anything less than the current minimum wage and the human machines start to break down? People would be dropping like flies, and then there would be a shortage of workers?
I’ll play along. Let’s say we see this effect. What happens to the cost of minimum wage level workers when the supply of needed workers starts to dry up? What does economics teach us? You’ll have to pay more for workers. So, I reject that the minimum wage is what is preventing the poor from keeling over, but even if it were, the market would correct itself in your dystopia.
By the way, all this living wage stuff always seems to ignore how many minimum wage workers are teenagers or second or third earners in a household, and the fact that it eliminates jobs (ask the CBO). We always seem to be asked to speculate about a single earner, heading a large family, in a costly area. It’s an impossible model! Sure…
It’s one of those mindless, feel-good actions that people love to vote in because it’s painless for them. It’s probably not too detrimental, the possible bad effects so obscured, that we just live with it and congratulate ourselves on our benevolence…
But, minimum wage laws also interfere in situations where people are willing/able/eager to work for less. Over the years I’ve had people asking for a job to help pad their resume or college application. They would be happy just hanging out and observing, doing some work but being paid little or nothing. They would not be worth minimum wage so I turn them away.
Ok, you’ve convinced me. I support a law that guarantees you a minimum wage as a small business owner. Just tell me who it is that owes you the money, and we will solve this issue for you.
This seems to be the common argument against my position so I will address it. Just because I employ someone, they do not take the position of a machine or a slave.
They are independent of me and what their private needs are don’t bear any relation to the value they bring to my business. This works both ways as well. If the employee brings a lot of value to my business and I pay him $100k per year, he will have a lifestyle well above basic survival. What he does with his money after work hours is none of my concern.
The belief that I must provide him a “living” wage or any other price floor is a paternalistic attitude that workers are wards of the state and cannot compete in a free market system. By accepting my offer of employment, they lay themselves at my feet and demand that I provide a certain level of living comfort. As the dissent above says, where is the other half of this equation? Where is the requirement that the worker provide me the equivalent value in his services?
If a worker can only provide me with a market value of $6/hr in his services, but the law says that I have to pay him $10, society is making me bear the $4/hr loss, even if it meets putting me over the edge to where I go out of business. Or I simply don’t hire the guy so society is now responsible for $10/hr in taking care of him instead of merely $4/hr by working for me. Also, where is my guarantee of a minimum wage?
I just don’t see how I jumped into the role of caretaker simply because I negotiated an employment contract with someone.
But prices simply aren’t that elastic. If they were, we could just as easily raise the minimum to $30 per hour, raises all prices tremendously, ???, and profit. But we don’t because we know it doesn’t work that way. Because if it did, then there would be no benefit to minimum wage workers. They would get a bump in pay but simply see the things they buy go up in price as well. No net benefit.
As minimum wage supporters are quick to point out, it does not cause inflation. What happens is that many small business owners take a very real hit and possibly go under. Or the money comes out of the owner’s pocket whether he can afford to pay it or not. Even if he himself is not making minimum wage.
There’s a lot of truth in this post, hidden behind incorrect terms. To rank the different wages:
subsistence wage: the minimum amount a person needs to not die. I recall reading it was around $4 a day for a family of 4, though with public and private charity it’s closer to 0.
equilibrium wage: the price wages would stabilize at if there was no government intervention. Some evidence suggests it would be around $5 an hour. There would be no race to the bottom because that’s not how economics works; at some point, other activities like doing chores or begging for money or farming your own food become more valuable than earning a wage.
Minimum wage: the wage set by governments. Currently $8.25/hour nationally, and higher in some states.
Living wage: A wage generally higher than the minimum wage, though there isn’t any functional difference between it and a high minimum wage. Defined as the minimum wage necessary to have a certain standard of living, not to live at all. Currently people are calling wages from $10-15 an hour a living wage.
As we can see, a living wage is clearly not the minimum amount of money a person needs to live–in fact, it provides for people to purchase substantial amounts of luxury goods. Paying a subsistence wage is something that is clearly necessary, but it’s also so far below equilibrium wage it’s not really necessary. There’s no need for society to step in because no one earns below subsistence wages–someone with literally no skills or ability to do work at all could sell blood and still make enough to get by.
So this clearly doesn’t include rent or utilities or paying bail when you get arrested for pitching your tent in the public park, right? I could probably, if I had access to someone else’s kitchen with water, electric and gas, feed my family of four on $4 a day. But we couldn’t poop - no money for toilet paper.
Irrespective of my comment above to you earlier, I would agree with you here 100% but the world is not so black and white. In a perfect world, you should contract with these workers and pay them exactly what they are worth to you. If they charged too much, you would switch to some alternative like robots. This will make an efficient economy and you will be able to compete with everybody else who offers similar products on a level playing floor.
The issue arises is that you are employing citizens with rights, needs, and desires that have to be fulfilled for them to live and not revolt. This fact is coupled with the nature of low skilled labor; it is a commodity. You can hire any Joe Shmoe off the the street to push that button or sweep the floor; it does not take any training or special skills beyond the ability to show up on time and not be drunk. Because there is no differentiation between these low skilled labor units, their value is set by the lowest valued unit in the market. After all, why would you pay Joe Schmoe #1 $5/hour when Joe Scmoe #2 is willing to work for $4/hour? So you get a race to the lowest equilibrium; this is how commodity markets work. Farmers (or low skill workers) that cannot supply soybeans (or labor) at the market price pull out of the market and prices stabilize due to shrinking supply.
So the question becomes what sets the level where low skilled laborers will pull out of the market and thus what will be the equilibrium low skill wage? My argument is this is currently a very strong but non-linear function of the social safety net. If there was no low income, government subsidized, housing the price of labor would rise because your low paying job would not really help in putting a roof over a workers head. Your pay would not give them what they need to survive and they would either negotiate a higher wage or continue searching in desperation for something that allowed them to meet these needs. So your low wage workers are subsidized by my tax dollars.
I believe in a perfect world this is the way it should be done. The poor should be taken care of by society funded by progressive taxes. The alternative, you paying a living wage, would result in you raising your prices to stay in business and this would in effect be a (most likely) regressive tax affecting your customers. So if I can get you to agree to a strong social safety net supported by a progressive tax system, then I will support you call to lower or even eliminate the minimum wage and let the market set the price of your labor.
Exactly. Fire people not carrying their weight, and then maybe you eventually get lucky, and find someone who is so good, that you give this person a raise above minimum, because they are actually helping the business, and you don’t want to lose them.
FWIW, there is a system in the US for paying people who really can’t meet productivity because of a disability, less than minimum. It’s called “work adjustment.” People spend time doing tasks that are typical of what they would do in certain work environments, after training (all under the auspices of Vocational Rehabilitation). The end result is a percentage of productivity, and it is legal to pay that person whatever percentage of the minimum wage equals their productivity. That is, if your productivity is 85% of a “typical” worker, you can be paid 85% of the minimum wage. Then, you can receive Supplemental Security Income from Social Security, or Social Security Disability, to make up the rest of what you need.
There are also other incentive programs for hiring disabled people. Sometimes VR will pay all of a person’s wages during training, and half or their wages during their probationary period, to minimize the risk to employers if the person doesn’t work out, and VR provides a job coach. In my experience, there are certain types of jobs and employers practically running a legal scam by taking advantage of these programs. I’ve known disabled people hired under work adjustment who eventually get their production up to normal, and sometimes get merit raises.
Just pointing this out, because there are ways to get employees with less of a “hit” if they don’t work out. This is just one. I could name a few others, but I don’t want a TL;DR post.
Is there any concern that making these minumum wage jobs more competive pay wise will give the employers more to choose from leaving some of the formerly hard to employ out in the cold?
Again, this is the minimum amount necessary to survive, not to live a comfortable or even shitty life. I don’t think anyone should live on $4 a day, nor would I want to, but I’m saying that it’s possible. Most of the things you listed are not essential for life: bail, electricity, gas, toilet paper. I’m just saying that any job will pay enough to live on.
I’m not entirely sure what you mean by “more competive pay wise” but it is economics 101 that a price floor will create a surplus of supply, e.g. workers. On the other hand plenty of empirical studies have shown that this effect is actually fairly negligible.
Right now, employers have plenty of employees to choose from because demand for minimum wage jobs outstrips supply. Lowering the minimum wage would increase the supply of jobs and reduce unemployment, but again, studies show that this is fairly marginal.
OK, but is housing included in that $4? I just don’t see how that number was derived. And how do you cook food with no electricity or gas? (Or firewood, I suppose, which is also not free.)
The drive to the bottom pretty much affects only those jobs that require the least training. The large pool of unskilled or wrong-skilled workers that can be replaced by pretty much anyone off the street provide a nearly limitless supply that drives down demand in a way that skilled labor does not.
Let’s say I am a small business owner that did NOT USE MY HOME as collateral on my business loan.
My business fails. Since that business was my source of income, I cannot pay my mortgage. I can declare bankruptcy, of course, but how does that save my home from foreclosure?
Actually, yeah, it does. If you didn’t hate individual freedom and liberty with every ounce of your being, you’d know that an absolute and unconditional guarantee of an equal share of social wealth is an absolute precondition to a free society, because only then can one be truly free to pursue zir own goals and desires without being compelled by material necessity to subordinate zirself to another–be it the boss, the customer, the shareholder, or the state.
Since each individual is entitled to an equal share of social wealth, that means that possession of wealth in excess of the social mean is an act of theft from those who have less, and taking it back is an act of restitution.
First of all, I’ve tried looking for a source for that figure but I can’t find anything. So it might be wrong.
On the other hand, I do think it’s possible. From poking around online, it looks like someone could purchase a couple of acres of timberland for a couple hundred dollars an acre and live there in a tent or lean-to. They’d have to pay a premium for a water source, but they could chop wood to heat themselves, boil water and cook food. They’d also have to find someone willing to give them a mortgage on property worth a couple thousand dollars, and they’d be basically in the middle of nowhere, but it seems possible.
City living seems more expensive. The cheapest I can imagine is to live on a dilapidated houseboat, though I’m not sure how to cook food.
But this is all very academic and tangential. The point I’m making is that any job will pay enough that someone won’t have to live like this.
