Oh, and aurelian, I do hope you’ll keep us up to date regarding your mullings. I rather enjoy conversation based on an attempt at mutual understanding with those who have a different outlook than I do.
Of course. I’ve already said as much.
But of course, there are plenty of market mechanisms that address this. Magazines like Consumer Reports, independent testing labs like Underwriter’s Labs, enthusiast magazines for products, consumer reviews at sites like Amazon and epinion.com, word of mouth, trial and error. But there’s a much more powerful force which seldom gets talked about when we discuss market regulation - brand value. When companies sell products that people like, it enhances the value of their brand. Sell garbage, and the brand goes down in value. In this way, brand names become an information conduit, and the value of a company’s hard-won brand name acts as a powerful economic incentive for them to not sell junk. There are plenty of cases of brands losing millions or billions of dollars in value because of a single poor product.
I work in engineering development for a very big company, and I can tell you that we walk, talk, and breathe quality. Everything this company does is focused on customer value and quality. The government doesn’t tell us to do this - we do it because we know there is a 1:1 correlation between sales, profit, and quality. If we release a crappy product, heads roll. We literally spend millions of dollars just studying quality theory and training our engineers on it. We don’t think about how to sell the cheapest quality stuff for the most we can - we think about the Voice of the Customer. We establish ‘personas’, which are modelled customers, and design our produccts to make them happiest.
I think we need regulation to prevent market failures. I have no problem with disclosure laws. Hidden defects and tapeworms can be handled through tort law. And I’ll agree that in some cases regulation is needed. Just not nearly as much of it as we already have.
The question wasn’t nonsensical because I was using it to merely point out that there ARE wage-setting mechanisms in the free market that operate without government regulation.
Do minimum wage laws only affect those who make minimum wage? Not necessarily. If you raise the minimum wage, you increase the price of products that use the labor. If you raise the price of a work force so much that you price a company out of the market, you hurt every worker of the company, its consumers, and shareholders.
Minimum wage laws distort the market in a couple of ways. One, by setting wages above the natural level, they act like other price controls, causing shortages of jobs or the elimination of products that can no longer be made because they are not cost-effective. They also help off-load jobs to countries that do not have minimum wages set that high. But aside from those static effects, the change in a minimum wage imparts costs by changing the allocation of resources. Consider a situation where two identical widgets are made by two companies - one on an assembly line, and one by hand. Let’s say that they ultimately cost the same. Now you raise the price of labor. Suddenly the economic balance changes, causing the flow of goods and services to change. Assembly line economics change. Companies that make equipment see the demand for hand-operated vs automated change, requiring them to reconfigure their own assembly lines. Raw material flows change. Etc. There are alwsys hidden costs and unintended consequences to regulatory change, which is why it should only be done as a last resort.
I will admit that changes to the minimum wage laws, at least small changes, appear to have a small effect on the economy. But if you make that minimum wage increase big enough (say, to $8 or $9 like I’ve heard some demand), and you’ll see big changes. I would predict a move of even more industries offshore, for one thing. Another thing you’ll see is that people who work in jobs that current pay $8-$9 hour, but who work in worse conditions than minimum wage jobs, will suddenly demand more money or go to work in other jobs. All of this re-adjustment costs money and losses of efficiency until a new equilibrium is established.
It’s not at all like saying that. It’s more like saying, "If we demand that all construction companies give their workers $500 Kevlar helmets, who is affected other than the construction workers? Answer: A whole lot of people, from the ones making the helmets to the companies that made the old helmets to the people renting the suddenly more expensive buildings. Nothing happens in a vacuum in an economy.
The beauty of competition, as has been pointed out several times here, is that people is free to seek other means of satisfying their wants and needs if their current situation is failing them. Political power is also a means of satisfying wants and needs. Should the hunt fail in these plains I would go to greener pastures. It is not some bizarre human failing that people have sought solutions with political power but the very fact that their solutions could not, in principle, in fact, or at least at that time, be addressed satisfactorily by other means. Why unions? Why social security? Why a central banking system or a separation of powers? These things did not come about because people are stupid, but because they are trying to address problems. And problems cannot be defined away by merely suggesting that if the market didn’t meet people’s needs then they are being too lazy or greedy or Eris knows what reasons are brought up.
In being asked to accept the hegemony of the free market, we are being asked, simultaneously, to accept a system driven by wants and needs yet also to restrict the satisfaction of our wants and needs only to that which the market can in fact provide (rather than what it can in principle provide). We are asked to accept as obvious on its face that “lazy” people will apparently, in their laziness, stop at nothing to interfere with the market to achieve their own laziness–an amazing definitional and factual paradox which I cannot reconcile with intellectual rigor (though I don’t mean to suggest intellectual dishonesty here). I strongly doubt that anyone suggesting it is easier to affect law than to make an honest buck for someone who doesn’t already have political power or big bucks has tried to organize a political movement without them, but I would not mind being shown otherwise, of course.
There’s the small notion that if the market took care of people well enough in the first place that such mechanisms would have not been adpoted. And I also think it is fair to say that the hidden-costs of low-wage jobs are addressed by welfare systems. In effect we are subsidising businesses who fail to pay their workers acceptable wages. If most businesses were doing right by their employees, then it is hard to see how such political powers could come about in absence of any need, though I must admit that I have not dedicated any expanse of time to probing the question.
But realisitically, where is the money coming from to “subsidize” these workers under a MW system? Do you think companies are foregoing profit in order to pay their workers more? No, the cost is passed along to consumers. The MW is a tax, you just can’t determine how big the tax is and how much it costs society.
We’ve been over this dozens of times. Your position essentially boils down to the idea that if I offer someone a job, I sudenly become responisble for supporting them. I don’t think that makes semse. If society as a whole wants to offer support, then do so explicitly. There is no need to distort the market in order to do it.
Come now. People vote for things for all sorts of reasons. Are you really saying that you canno fathom how an electorate could vote for a “stiff the rich” proposal even if it was not a very good idea economically speaking?
I don’t believe that was what I said, no. I simply said I couldn’t imagine people who were satisfied with the market looking to other mechanisms to satisfy wants and needs they don’t have because the market satisfied them well enough. I can imagine people who were not satisfied, of course. That’s easy.
Who ever said the market satisfies everyone’s wants and needs? I want a Lear Jet. The market ain’t providing one.
Some people, when faced with a gap between what they want and what they have, vote to use force. That’s what government is. Legalized force. This says nothing about whether or not the market is the best way to allocate goods and services.
No one, I should think. But it is hard for me to stay particularly motivated about the free market when the same people that, how did you put it?, exercize force will be present in it. Reminds me of some other economic model that required people to be otherwise than they were. The name escapes me.
Sam, judging by how you re-worded my analogy to include $500 helmets, in addition to the rest of your arguments, you seem to be assuming that “minimum wage” means “too high of a minimum wage”. Your whole argument seems predicated on that. Why don’t we instead assume that it means “reasonable minimum wage”?
What, exactly are you talking about? The extent to which people exercise force for thier wants is the extent to which a market is not free. I would have thought that would be obvious. Who are these free market participants who exercise force?
Quite, but it is a very small step from here to understand how people with unsatisfied needs might blame the market incorrectly. No? That is they could blame the market for unsatisfied needs when the blame belongs elsewhere.
“Reasonable” is a value judgement. “Too High” in an economic sense means higher than the ‘true’ value as set by supply and demand.
A better analogy than your helmets would be rent controls. They seek to achieve the same thing - social justice - by artificially manipulating the prices of things. The result has been a classic case of the law of unintended consequences. Rent-controlled apartments became run-down, because they didn’t generate the revenue other apartments did. At the same time, as rents increased elsewhere the people in rent-controlled apartments became unable to move because prices skyrocketed around them. Distortions of the marketplace abounded and wound up hurting the people that were supposed to be helped.
Part of the problem with discussing the potential effects of raising minimum wages is that a change in prices by fiat creates consequences that can’t be predicted. Perhaps a higher minimum wage will act as a disincentive for people to go to college, leading to a glut of teachers. Or perhaps jobs that pay higher than minimum wage for worse conditions will suddenly find a shortage of workers willing to work there. Or there may be effects we can only guess at.
Make the wage high enough, and you WILL kill jobs. Make the minimum wage $9, and every worker in the country that only adds $8/hr of value to his company will lose his job. The last round of minimum wage hikes seem to not have caused widespread job losses, but that may be more a factor of the small size of the increase and the fact that most wages were already higher. Extrapolating from that to say that jobs won’t be lost if the minimum wage is increased substantially
would be foolish.
Another problem with raising the minimum wage is that it can make the economy more brittle. For example, let’s say that the de-facto minimum wage is $7, but the government minimum is $6. If we raise the minimum wage to $7.10, you probably wouldn’t see much effect on the job market. But what if the economy goes into recession and worker productivity drops? With a lower or nonexistant minimum wage, employers have the flexibility of rolling back wages to retain the jobs. But if the loss of productivity drops the worker’s value below the minimum wage, the employer loses the ability to adjust wages to match reality, and jobs are lost en-masse. More people go on public aid, a whole bunch of productivity is lost, and the recession gets worse.
Minimum wages are a lousy way to fix a social problem. For one thing, it’s a blunt instrument. Raise the minimum wage and you don’t just benefit the single mother who needs the money, but you benefit the kid who’s working part time and for whom there’s no real reason to increase wages. It distorts the market. It eliminates entire classes of jobs, such as roadside litter cleanup, that are not worth the money. It creates unemployment.
Or correctly. No?
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Watchdog/testing groups voluntarily run by private parties are very much a part of a free market. If you mean to exclude such groups run by the government, especially with enforcement powers, I agree with your definition.
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But a proper government would impose severe restrictions on honesty and the honoring of contracts thru the police and the courts. It is a common misconception that a free market has no controls other than public opinion; it does not mean a vendor can offer goods or services that are fraudulent, not actually provided or delivered as promised. There must be a mechanism to enforce contracts or you have anarchy, not capitalism.
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Yes, but the USA has come close; in previous centuries, not this one.
Of course it is. But that doesn’t change the fact that you keep using “too high” as the only example you give. Just because it’s subject to debate doesn’t mean there is no such thing as a reasonable minimum wage. Would anyone disagree that one cent an hour wouldn’t be too high for a minimum wage? I doubt it. There does exist a range in which a minimum wage would be reasonable; what’s left is determining what that range is. I hear a lot of people arguing, “If the minimum wage were $9…”, or “If the minimum wage were $10…” But it’s not.
I disagree. If there were no minimum wage, there would be employers who would pay an unfairly low wage. All we have to do is look at other countries, or even our own past to see that this happens. The market does not automatically correct substandard wages, because the pool of blue-collar workers is larger than the number of blue-collar jobs. There is nothing to force employers to pay more, because they can simply get someone else for less. Say, for example, the “true value” that the market sets is $1/hour. IMO, that’s an unacceptable wage in a civilized society. One could not provide oneself the basic necessities needed to survive for that amount of money.
Better how? I don’t think you understood what I was trying to say with regard to the helmets. I was simply refuting your suggestion that if minimum wage keeps people from making less, that everyone would make minimum wage. Again, that doesn’t make sense, because it ignores the fact that not everyone has the same occupation. That’s what I was trying to get across. I don’t know what rent-controls have to do with that.
We have a minimum wage, and it just doesn’t seem to be having the detrimental effect you think it does.
Sure, if it’s high enough. But that’s not an argument against a reasonable minimum wage.
The MW is $5.15 an hour. I honestly don’t see how having teenagers working for less than that is going to substantially improve the world. I really don’t see why we ought to have any burning desire for teenagers to make four, three, or two dollars an hour. If you can’t run a business and pay your help a paltry $5.15, then IMO your business model is ill-conceived.
I don’t understand that. The roads are owned by the government. It’s not even within the purview of private enterprise to clean the roads. If it were, I’m sure there would be no problem handling it. Privately owned spaces like shopping malls, theaters, etc. don’t seem to have any problem keeping clean without hiring workers at sustandard wages. I just don’t see the problem.
But if your answer to unemployment is to create an entire class of workers making substandard wages, how is that a solution? Sure, we’d have less unemployment if we created jobs that pay $2 an hour, but then you just have a bunch of employed people who can’t afford to buy food. How is that any better?
I guess it would depend on your definition of ‘unfairly low wage’. Unfair to who? How? After all, no one FORCES someone to work for a given wage. People have to weigh for themselves if working for what the employer is worth it for them…and make their own decisions. Is working 8 or 10 hours a day for $.50/hour worth it? If so, then for that person the wage is fair. If not, then that person will take their labor and go elsewhere. If enough people basically say that the wage is too low, that the pay is not worth the work involved, then the employer will be FORCED to increase what they are offering…or they will have no employees. Its really as simple as that.
I disagree…the market DOES correct ‘substandard wages’, if the people who are applying for those jobs think they ARE ‘substandard wages’. See, if people refuse to work for the wage offered (i.e. if they really ARE ‘substandard’) then the company will either close its doors from lack of a work force or they will increase the wage/benifits offered. The market has corrected the problem. What you really mean though is that YOU think the wage (whatever arbitrary wage we are talking about thats ‘substandard’) is ‘substandard’ for someone else to work the job, and you are upset because there are people who might not see it that way. People make their own decisions as far as what they are willing to sell their labor for. If what they are making is too low for them to subsist, then they are free to try and sell their labor to a higher bidder. In addition, I’m not opposed to providing direct assistance to people who are honestly trying to work but are having a hard time. In fact, I would prefer such direct government assistance to those working and have no MW laws.
I also see minimum wage as something thats distasteful but inevitable. As long as people feel they must monkey with the market for the good of all (and I don’t see that ever letting up) we’ll have such things. My only hope is that they can be kept to a minimum so they don’t distort the market TOO badly. And this seems to be the case by and large. I’m reasonably content with how things are now by and large, and if the liberals can continue to be kept mostly at bay (well, and if we can get rid of Bush, an economic liberal disguised as a conservative republican IMO) from doing more harm I’ll be happy. 
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There are at least 2 rational justifications that have been offered in defense of teh MW: 1) A type of welfare and 2) an incetive to work. These have some merit, although I think **Sam **and I and others have offered very reasonable arguments why the same goals could be accomplished better (ie, more directly, more targetted towards those in real need, and more measurable in terms of the cost) thru direct subsidies from general funds.
But you cannot be serious in proposing that your own personal judgement about the viability of someone’s business model can be used a justification for the MW, can you? Again, no one here is advocating letting people starve in the streets. We’re just saying that there are other ways, probably BETTER ways, to accomplish the goal of fighting abject poverty. Can you offere some argument AGAINST the althernative proposals? I’m having a hard time understanding why there is this isistance that the WM is the only way to go. It seems that there is some need to “punish” employers who don’t live up to your own standards of pay.
Huh? As I pointed out in the MW thread, you don’t have an absolute right to have a solvent business. A business has expenses, and yes, it might cost the business more to obey the laws than it would to break the laws. That doesn’t mean the law is ipso facto bad. For example, there are laws that require fire exits. Yes, it costs more to put in a fire exit, but that doesn’t mean that law shouldn’t exist, and it doesn’t mean that the free market is going to automatically put in fire exits wherever they’re needed. You guys seem reluctant to accept that there are things that exist that are for the public good, and that it is not a foregone conclusion that they are automatically bad.
You have it backwards. I’M not saying viability of a business is a justification for MW; YOU are saying that viability of business is a reason NOT to have a minimum wage. I’m simply saying that’s not necessarily true.
Actually, the jist of what I’m getting is not that alternatives should be enacted, but that the market will somehow automatically take care of the problem.
You’re going to have to be more specific than that. Again, I responded to Sam’s statement: “Or how come the vast majority of workers in the United States make more than minimum wage? If minimum wages are what really protect workers from being paid pennies for their labor, why isn’t everyone making minimum wage?”
I don’t see an alternative proposal there, only a misunderstanding of the fact that not everyone is at the bottom rung of the salary ladder. I also don’t see as how I’ve said MW is the only way. If you have a better idea, I’m all ears.
I think by wording it that way, you’re just projecting your own emotions onto the issue. It’s not a punishment at all. Do you think business owners are entitled to an absolute right to solvency? If so, I think I’ll open a business. 
Damn. Let me correct that. I should have said “It might cost more for businesses to obey the laws than not to have the laws at all.”
Breaking the law actually has nothing to do with my point; I don’t know why I worded it that way.
Another thing I don’t understand is that there are two contradictory arguments seeming to be advanced here. ONE is that a minimum wage is not necessary because the market will automatically correct for substandard wages. And TWO is that a minimum wage damages the market. Well if it doesn’t DO anything, then how can it hurt?