a living wage

Great Debates
141

I don’t think anyone is saying they should be punished for having kids. What they are saying is that corporations are not devices for redistributing wealth or managing social issues. Corporations are entities that engage in commerce. They try to control costs and raise revenue by being efficient and offering products that people will buy for a high enough price that the company make a profit so that it can continue doing what it does best. This arrangement is the engine of our economy, and a lot of social good comes out of it.

Attempts to turn corporations into welfare agencies by subverting business needs and replacing them with purely social needs will not work. It just can’t be done, and it shouldn’t be. You cause distortions in the marketplace, you wind up with wage ceilings which prevent unskilled people from finding jobs, you distort the information-carrying ability of the price system, etc. You wind up with a less efficient economy, and less overall wealth.

If you want poor people to have more money, use the government. Tax all businesses equally, and use that revenue to supplement the incomes of the poor. At least doing it that way forces you to deal with the fact that these things have economic consequences. There are no free lunches in the world. ‘Minimum Wage’ laws are a social program masquerading as good corporate regulation. They are insidious because the costs of those minimum wages get absorbed diffusely and are hard to see, while the benefits are tangible. But the costs are there, and they are expensive. More expensive than the benefits that accrue. They are simply a bad idea.

142

There is a huge amount of ground between laseis faire capitalism and redistributing wealth, where the best route probably lies. Having some degree of gov’t oversight does not equate with “turning corporations into welfare agencies”.
Does the fact that we’ve gotten rid of child labor and the company store in the US make corporations welfare agencies?
When the people who actually produce the product are laid off with no excuses, have their retirement funds raided, all the while the fat cats who produce nothing of value are given “golden parachutes” it is plainly obvious that “supply and demand” doesn’t work.

143

Sam, to hear you speak one would think that the minimum wage was a new idea. Where is your evidence that minimum wages are harming the economy more than helping it?

As to “living wage” I do see that as a different issue and a more complicated one. It does make sense to try to distinguish between full-time adult workers struggling to get by, and part-time teenage workers who are supported by their families. It’s possible that one way to create a “living wage” is to approach the problems of the working poor from a different angle: payroll tax reductions for people working at that level, subsidized daycare for working families, more training opportunities so they can get out of low wage work. I support all of those things; but let’s acknowledge the fact that the minimum wage has been around for decades.

Here is a report from the Economy Policy Institute from 2000, when the economy was still doing pretty well.

Here are just a few of the arguments made:

*" No evidence exists that teenagers or less-than-high-school-educated adults lost work as a result of the 1996-97 minimum wage increases.

? Historically, analyses of the minimum wage’s impact on young workers have never shown the predicted large job-loss effects.

? The small negative employment effects found in past analyses diminish over time and are no longer statistically significant.

? Minimum wage increases are well targeted in the sense that 63% of the gains from a dollar increase in the minimum wage would be expected to accrue to working households in the bottom 40% of the income distribution."*

In addition:

“The history of the minimum wage in real terms and relative to other values: Figure 1 shows the inflation-adjusted minimum wage from 1955 to 1999, in 1999 dollars. Since the minimum wage is not indexed (e.g., to inflation or to some measure of wage growth), when Congress fails to increase its value, it declines in real terms. Thus, each uptick in the figure’s graph represents a mandated increase, while the downward trends represent periods when the real value was eroded by inflation. The minimum wage peaked in 1968, when it stood at $7.07 in 1999 dollars.[3] The figure also shows the 30% decline in the minimum wage over the 1980s, when Congress failed to adjust the wage floor for nine years. Even with the recent increases in the 1990s, the inflation-
adjusted minimum was 21% lower in 1999 than in 1979.”

144

Well don’t think of it as “nice” then. Think of it as accounting for the cost of production. Do you pay less than cost for electricity? The same goes for laborers. In order to work they have to eat. For many jobs they require the healthiness and cleanliness that comes from paying rent. At least some degree of healthcare is needed for most people througout their lives too. Sure, the people have developed a monopoly of sorts, but so what. I think it’s at least as worthy a monopoly as a utility.

Great, are you suggesting we should have sweatshop labor here in the good old us of a? Whoo boy, I can’t wait. What a wonderful idea. What the hell, why not child labor too? Since their parents can’t support them on sweatshop wages, they’d better start working too. Of course we’d also have to stop mandating school, since many kids wouldn’t have time for that anymore. Then we can have a perfect capitalist system full of a class of people with no mental capacities beyond the machines that they are chained to.

A better thing in my mind would be for those other countries to demand a decent wage for their own workers so that moving overseas wouldn’t be quite as tempting.

145

Property rights do not cause human suffering. Human suffering is the default state. No one is born immortal. You begin the process of dying the moment you are born. All we can do is slow down the rate that we approach death.

Accepting such living conditions and thinking that you are entitled to better simply because you are human are totally different things. I do not believe that humans are born with the right to take the property of others simply because they “need” it more.

And in truth, when you are poor you have no choice but to accept such living conditions. Unless you plan on stealing from others (either directly or through government programs) there is no choice but to adapt and work at raising your income.

146

FWIW, I dug some numbers off a Census site regarding 2000 incomes by household. It turns out that a 23% tax on household income across the board would permit the government to pay out $13,500 per year to each and every household in the United States. This would enrich two-thirds of Americans, at the detriment of the other one-third; the cutoff income (where the $13,500 award is less than the tax increase) is at a household income of about $60,000. $13,500 is roughly equivalent to the current poverty level for a hypothetical household of 2.5 people (roughly the current average in the US).

My household would stand to lose about $16,000 a year under such a system; however, I would still support it.

147

Procacious, care to define which benefits you are reffering to? I want to know exactly whom you are calling theives.

148

The Economic Policy Institute has a POV; they favor the Living Wage. See

In particular, the co-author of the cited study, Jared Bernstein has written a paper called, The Living Wage Movement: Pointing the Way Toward the High Road.

Since the cited paper comes from advocates, it behooves us to carefully read what they say. Here are the cited conclusions, interpreted:

<<No evidence exists that teenagers or less-than-high-school-educated adults lost work as a result of the 1996-97 minimum wage increases.>>

That is this particular study produced no such evidence. However, there have been many other studies of the impact of minimum wage on jobs.

<< Historically, analyses of the minimum wage’s impact on young workers have never shown the predicted large job-loss effects.>>

That is, other studies have predicted that minimum wage increases would cause job loss to young workers. Such job losses have indeed occurred, but the job losses were less than the studies predicted.

<<The small negative employment effects found in past analyses diminish over time and are no longer statistically significant.>>

According to this one study.

<<Minimum wage increases are well targeted in the sense that 63% of the gains from a dollar increase in the minimum wage would be expected to accrue to working households in the bottom 40% of the income distribution.>>

Duh! This is obvious. What’s not so obvious is that most of the economic cost of the minimum wage rise will be jobs eliminated and jobs not created, which will harm an even poorer group of people.

BTW I have a vague memory of this particular study having been technically criticized by some economists, but I cannot find a cite.

However, many economists have come to quite opposite conclusions. E.g.
http://www-hoover.stanford.edu/publications/selections/962/cogan_macurdy.html
http://www-hoover.stanford.edu/publications/selections/962/cogan_macurdy.html

Note that the Bernstein-Schmitt results contradict the law of supply and demand – the most basic law of economics. Therefore, we ought not rely on just a single study. However, if you go into google, you’ll find that Bernstein-Schmitt is cited over and over. Why? Because there’s a big group of people commited to the minimum wage, so they trumpet the one study that supports their POV, We at the Straight Dope should do a more careful job of weighing the available research.

149

If you’re going to claim that the “law” of supply and demand is inviolate I have two words for you: Beany Babies.

150

The “law” of supply and demand is really just a dressed-up empirical observation. It only holds fast in a pure market with no externalities, no price floors or price ceilings, no transactional costs. There is no such market. The fact that Bernstein and Schmitt have reached conclusions that are contrary to those expected by the all-holy law of supply and demand is not proof that their methodology or conclusions are wrong. It is quite obvious that the labor market is rife with externalities, transactional costs, price floors, and other distorting factors that make it about as far from a pure market as you can get. It is not reasonable to assume that the law of supply and demand will hold tight in that market, and not unreasonable to discover that it fails to hold at all.

151

And Dutch tulip mania:

http://www.ricedelman.com/planning/investing/tulipbulbs.asp

And of course another word would be: * dotcom. *

152

The problem here is that the law of supply and demand is some kind of god to you, an omnipotent deity whose will is not to be questioned. You are so in awe of this god that you cannot see or understand anything else about economics and politics, and you invoke the name of your god constantly as though the mere mention of him magically disposes of any facts and arguments presented to you. When others try to explain to you that economics is much, much, * much * more complicated than the law of supply and demand, you stop your ears, close your eyes and begin chanting your manta.

Before the late eighteenth century, we were told that slavery was the natural order of things and could never be abolished. In the nineteenth century we were told that the natural order of things dictated that children should work ten hours a day six days a week in mines and factories, and that foremen were entitled to beat them if they were “lazy.” Today we are being told that we shouldn’t expect old age pensions or living wages for our labor, and you in particular tell us that the great god Free Market tells us that some people should live in alleys and eat lard. It is all lies and madness.

153

december, if you’re going to post follow-ups on citations provided by those with whom you disagree, please read them more carefully, and represent them accurately. EPI’s study directly refers to two previous studies: Card (1992) and Card and Krueger (1995).

If you want to take a dogmatic position the minimum wage has been “bad” for the economy, so be it.

If you want to insist on that point despite admitting that you know of no evidence on which to predicate it, so be it.

If you want to insist that your position–based on your personal Econ 101-type knowledge of supply and demand–is superior to the oft-cited research of professional economists because they have a “point of view” (and you presumably do not!), so be it.

But while you’re busy thus digging your own grave–oops, I mean making your own case–please don’t report factual inaccuracies about the evidence at hand.

: puts on best Miss Emily Latona face :

Thank you :slight_smile:

154

That’s Emily Letella, Mandelstam. :wink:

I do find it interesting that espousing a point of view on an issue automatically leads to unfair bias, and thus suspect research… or is that only in the cases where the conclusions differ from one’s own opinion?

155

My point was not that the Law of Supply and Demand is automatically true and holy. My point is that it would be quite unexpected if it were invalid. As the skeptics say, Extraordinary claims require extraordinary proof. However, we have seen only limited proof in this case.

156

That’s where we part, december. I don’t venerate the “law” of supply and demand the way you do. It is not that surprising to me that the law of supply and demand might not hold in certain markets, and I am not going to demand extraordinary proof of findings that are inconsistent with it.

157

I think those who mock the Law of Supply and Demand as a false deity, or something, misunderstand what it says. It is not a “law” in the sense of Newton’s laws of motion. You don’t plug numbers into it and get numbers out of it. It simply describes trends. It says such things as, “If people want a good more, they will pay more for it”, and “When a good that is in demand becomes scarce, the price for that good will go up”. When you take these observations into account, you can predict what will occur when certain things affect the market. And, from what I’ve been able to tell, the law is pretty much inviolable, in the sense that what it says will happen pretty much always happens. The only sticking point is that the LoSaD depends on a huge number of factors, frequently things that we can’t know for certain. Maybe the LoSaD states that if the cost of oil goes up, all things being equal, people will buy less oil. So the cost of oil goes up… but suddenly, it’s discovered that rubbing oil on your body will give you eternal life. Oil purchases go through the roof. Does this mean the LoSaD was wrong? No, it means that the people applying it didn’t have all the information at the time they made their prediction. “The Law of Supply and Demand” is basically just a fancy economist’s way of saying “Common Sense”. Just because it’s rarely (if not never) wrong doesn’t mean the people using it are infalliable or omnisicent.

Someone mentioned the Beanie Babies are evidence against the LoSaD. Please explain? From what I saw, there was a market craze - people had to have Beanie Babies, for whatever strange reason. People were hoarding the ones that they perceived to have value. They were thus hard to find - restriction on supply - and cost more. Now no one give a damn about the silly things, and this after a metric buttload of them have been sold. The supply is huge. And the cost of buying one is miniscule. (Here I’m referring to their costs on eBay - perhaps supply and demand in its purest form. Anybody want to see economic principles at work, hang around eBay for twenty minutes.)

This concludes our seminar on “The Almighty Law of Supply and Demand - Our Blessed Savior”. :wink:

Jeff

158

El Jeffe, the “scarcity” of Beany Babies was manufactured. The only percieved value they held was their supposed scarcity- but they were never rare. The words “collectors edition” are used on DVDs in much the same way to artificially produce scarcity of mass produced products.

159

So what? Demand is demand, however it is generated. Supply is supply, regardless of whether it is limited by natural or artificial factors.

160

Adding to what El Jeffe just wrote, the Dutch tulip mania also followed the law of supply and demand. In fact, it followed the law of supply and demand to the point of ignoring the law of paying for something what it’s actually worth.

Looked at another way, investors saw the price of tulips rapidly rising and greedily wanted to take advantage. They failed to realize that the price rise would be temporary, because the price had gone far above intrinsic value. However, in no way did these foolish investments violate the law of supply and demand. When the supply was limited and the demand was great, the price went up. When the demand went down, the price went down.