Yes. This is true. I will concede that. This is why I am in favor of no minimum wage if there is a decent social safety net in place. I understand how exploitative capitalism is left unchecked.
Fair enough.
A humble request to have a discussion here that accepts that this country has a minimum wage which should be increased, and that focuses on the advantages and disadvantages of a locally indexed living wage concept in contrast to a Federal standard amount.
Accepted that some do not agree with that premise. Duly noted.
What is your goal ?
If your goal is to create more unemployment and less entry level jobs then go fot it, raise the minimum wage.
If your goal is to increase employment and increase entry level jobs then get rid of the minimum wage.
It is common sense. Raise the price of anything be it labor, shoes, candy or lemonade the less you will sell. Lower the price you will sell more of it. Common sense.
So much for that request …
Ah well.
Again granted that there is a debate that can be had (with each side bringing their common sense and expert opinions and data to bear) on whether a there should be a minimum wage raise of any sort. We’ve had those and they are well and good. I acknowledge the arguments. The op is however a more narrow focus: given a circumstance in which it is to be raised, what is the better means of doing so?
So the question is what is the best way to do something counter-productive? Okay, then a federally mandated increase is the better choice. It will cost jobs and raise opportunity costs for entry level workers, but at least there would be less bureaucracy. Hopefully it would only be raised enough to have little effect - many states already have a minimum wage higher than the federal level.
If we are going to do something stupid, at least let’s do it efficiently.
Next question - when we ban abortion, should we sentence women to prison, or abortionists? And please stick to the question - no arguing that banning abortion is a bad idea.
Regards,
Shodan
I feel like this is an argument of the excluded middle. The options aren’t just having a minimum wage or wage slavery. I think it’s possible to reduce or eliminate the minimum wage, but also have other precautions in place. However, since that’s not the point of this thread, I don’t want to get into that too much.
In honoring the request, if we’re taking it as a given that a minimum wage of some sort must exist, while I agree that a locally indexed living wage makes more sense than a nationally mandated one, I’m unsure exactly how that would work.
As it stands, part of my issue with the nationally mandated one is that if it is enough to live off of in some parts of the country, it sure as hell isn’t enough in many places. I live in the DC Metro area, and even knowing the people I know who are hourly and make more than minimum wage ($10-12/hr), they still struggle just to rent a room and make any kind of savings or put a dent in debt or get training/education.
But how would locally indexed living wage work? I’d have concerns about how it might create some unusual patterns. Certainly it would create a higher minimum wage around here compared to, say, rural West Virginia, but might that not also exacerbate some of the work and transportation issues as a result? Consider that, for instance, the cost of living grows fairly dramatically the closer one gets to the city. If I have a minimum wage job and that’s determined by the local index, wouldn’t it encourage me just to live in a lower cost of living area and work in a higher indexed area? So now, instead of me working at, say, the McDonald’s I can walk to and make $10, I’m going to travel closer to the city to make $12 or whatever, and people who live farther out will travel to the one across the street from me to make that $10 instead of the $8 they’d make where they live.
As I see that, the consequences would end up being that we’d create a high amount of competition for minimum wage jobs in higher indexed areas and reduce competition for minimum wage jobs in lower indexed areas. And that would have the adverse affect of encouraging more minimum wage jobs in these higher indexed areas and creating work shortages in the lower indexed areas.
Worse, by making the minimum wage employees commute closer to the city, it would have a negative affect on all of the non-minimum wage workers because we’ve just created additional commuters. So now roads and public transportation is more crowded.
When given absolute freedom, companies will squeeze the low end of their workforce on wages, HARD, because it is the only way to compete. As much as companies need labor to do business, laborers need to eat a lot more urgently. Low end, low skilled laborers are in a highly disadvantaged position for negotiation, unless the unemployment rate is historically low.
Therefore a certain amount of ‘collective bargaining’ is needed to ensure that wages remain reasonable even at the low end. We call this the minimum wage, and it levels the playing field so that all businesses are competing equally.
However, there is nothing about low end labor that requires this minimum wage to be a ‘living wage’ if you define that as a wage sufficient to care for a family. I feel the minimum wage should account for the fact that many earners are supplementing their income, not trying to make a go of it entirely on one minimum wage job. Other social programs like welfare, foodstamps, etc. can bridge the gap for those who are trying to raise a family on one wage, while not overpaying those who are supplementing a regular income.
The problem with having different Federal minimum wages is the border effect. I don’t want the feds deciding that one place will have an advantageous wage compared to it’s neighbor. If the neighboring town wants a higher min. wage, they should decide that for themselves, not have thrust upon them by a wage formula.
I don’t get your question. We already have both. We have a mandated federal MW and many states and localities have one that is higher. Are you suggesting that there be a federally mandated maximum MW? Otherwise, what is the difference between your two proposals?
Whole heartedly agree but I still pick an option C you didn’t list to best address it. First let’s compare options A and B. Unlike you cite by the start of this year 29 states had minimum wages above the federal minimum according to wiki. A lot of that is recent, but for most of the country we’re closer to option B broken down by state groupings already. I worry about edge conditions in option B. It sounds good, but depending on how you break down the grouping it can be more difficult in practice.
States can have wildly different zones economically. Even counties can. As you get to even smaller groupings like zip code you probably get more homogenous but you create a lot more artificial edges.I grew up in what would be clearly identified edge territory. I was maybe 2 miles east of a country line. I was less than 2 miles from another county which was in another state. I was less than 10 miles from yet another county in that other state. Except for my county all had a big difference between the cost of living in what was the fringe of the suburbs and rural areas. One had a lot of higher priced developments pushing averages ways up and rural areas. A lot of the retail traffic for all four counties was a strip along a major thoroughfare which include one of the metro areas major malls. The strip ran right across one of the county lines. Competing businesses that employed minimum wage workers were on both sides of that border. I’m leery of a process that can arbitrarily affect winners and losers near those edges even when they are competing for the same customers.
Aside from edge conditions I’d also be leery of small COL areas suffering from positive inflation feedback simply because of the automatic adjustment. Higher wages has to play out in both of the labor market and the goods that labor provides. It’s not wildly out there to expect some positive pressure on cost of living as a result of higher wages. Wages go up… so prices go up… so wages go up some more… repeat. I’d want to see really good economic analysis to make sure we weren’t unknowingly planting a wage increase bomb in some communities.
Which brings me to C. Adjusting wages as a means to reduce poverty among the working poor presupposes that there’s a strong correlation between those getting paid that and those households actually subsisting off of minimum wage. That correlation isn’t that strong. About half of minimum wage earners are in households with total income over $40k per year. Two wage earners making current federal minimum wage so lhe top of that range is pretty much where subsisting on minimum wage line can be drawn. Just shy of a third are in households >$60k. Median income if about $52 ( the 538 article just round to the closest number on their breakdown when they say 60k) so about a third of minimum wage earners are in the top half of households by income. Adjusting wages is a blunt tool. It affects a lot that aren’t necessarily living off minimum or near minimum wage. Since some price impacts are to be expected do I want to increase prices for everyone so that the kid from an upper middle class household in their first job earns enough to pay for prom quicker? Not so much.
If all you have is a blunt tool like a sledge hammer you make do. We have a tool that directly targets the working poor though. It’s called the EITC (Earned Income Tax Credit) and the associated CTC (Child Tax Credit). It targets the support to those that are genuinely poor. It phases gradually above that so there’s no sharp cliffs discouraging work. It’s been pretty awesome for getting families with children out of poverty. It doesn’t do currently do much for those without children. It takes federal tax revenue to fund. Still, for economic side effects I like the idea of taking relatively small tax increases on the wealthiest to price control in labor market. Even Republicans tend to like it. It’s even been safe to include in some presidential candidates positions like Bush and kasich IIRC. The catch being that it’s hard to get my party to actually tax someone to increase it or even fix the hole for the childless. The other catch is a fair amount of the far left tends to use slogans like “It’s all about wages” to target the tool (raised minimum wage) instead of actually targeting their help on those trying to subsist on low wage.
EITC does also only provide a big annual check instead of a regular income stream. Which is why I am closer to a little more minimum wage increase with EITC tweaking based on where we set that number. So mark me down for option D. I’m a moderate… don’t want to have a position that’s all one or the other or I might break out in hives. 
Can you explain the mechanism by which the US would go back to a 19th century system and allow companies to pay in script with company towns dictating pricing? There have been a few systemic changes between then and now, and I don’t see how taking away minimum wage would necessitate we go back to that.
One thing that is always missing in these discussions is that just because there isn’t a minimum wage doesn’t mean companies would be able to just set their wages at a $1/hour. The work force aren’t slave laborers, and even people at the very bottom have choices (assuming they are US citizens)…if the price point for the job is too low then they will take their labor elsewhere or simply go on welfare and other assistance. Companies won’t be able to fill those jobs and will be forced to increase their price point to get the workers they need…otherwise, their competitors will do so and get all the best workers.
As for what the OP is asking, I think it’s 6 to 1 half dozen to the other. We already have local regions that attempt to set a living wage in high cost areas and minimum wage has been increased. I say jack up either. The long term effect will be to kill many of the jobs at the low end, since companies are already investing heavily in automation. Want to see the future? Go to a Chili’s restaurant and order your food from a kiosk at the table, get appetizers, desert and pay for the meal all with only minimal wait staff needed. Or go to a Walmart and notice that up to half of the check out area is now devoted to self serve, with 10 or more check out stations being watched by a single person, where once you would have needed 1 (or even 2 if they had assistance to help bagging) for each one. Or fill up your car at a gas station where you have one guy able to service all the folks getting gas AND run the convenience store. That’s where we are going with this, because those are the types of jobs that fall under minimum wage.
What is your goal? To help poor people? I can get behind that. But I’m not sure boosting the minimum wage, either with an even floor or based on cost-of-living, is the best way to accomplish this goal. Most people making the minimum wage are not living in poverty. And only about half of minimum wage earners work 40 hours per week or more. So you’re not reaching most poor people, and setting your floor based on a 40-hour workweek won’t boost most people’s income to your target.
I’m just guessing at the motivation in the OP. You may have other reasons for having a price floor.
Adjusting for cost-of-living is tricky, because it can vary extensively over a narrow geographic range. And where we live is, to some extent, a choice. Living in Manhattan is very expensive, but most people who work there don’t live there. When I was living in southeastern PA, I knew people who commuted to Manhattan. Of course, lower-wage households often have limited commuting ability. And commuting costs can turn a low wage into a negative wage. Tricky doesn’t mean wrong, though.
It can be, if you can get enough work. That often requires two or more jobs, and “just-in-time” work scheduling makes that difficult.
Is a rule that prohibits being paid in scrip considered wage control?
I disagree with this part of your post because I think you’re being idealistic. We’ve already seen that if companies don’t offer enough to get even low-wage workers, they’ll bring in illegals or anyone else willing to work “under the table”. And then they spin it by claiming that “Americans are too lazy”. Case in point farm labor. Yes, working in the fields is hard, back breaking work. But that doesn’t mean Americans are too lazy. It means maybe they should offer a wage commensurate with the labor effort.
If you abolish minimum wage laws in favor of “negotiate for yourself” then how can you prohibit being paid in scrip? You wage can be $0/hr + $scrip/hr. You can’t deny a company the right to give people scrip in addition to a legal wage if they want.
That’s a rather arbitrary limitation. A law could simply be, pay whatever you can negotiate, but under no circumstances is scrip permitted to be used as a form of payment. *Voila!
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Right, so, they are getting around it by bringing in illegals who would be willing to work for that price point. That might (and does) work for farm/migrant labor in some cases, but not all companies would have that option. Also, if the government were to crack down they would be forced to change…either invest in more automation for those farm tasks that could be automated or offer a higher wage.
If people are willing to ‘work under the table’ then that means that the price point IS in line with getting workers for those tasks because there are people willing to exchange their labor for that level of pay. My own point was that companies can’t just arbitrarily set some ridiculously low wage point and expect to get US workers to do those jobs. If you set the bar too low, then no one will accept the jobs. Set it up a bit higher and you will get basically illegals. Set it a bit higher and you’ll get mainly kids who don’t have a lot of skills to exchange their labor for the wage. It’s going to vary with the job and the companies expectations. You aren’t going to want an illegal who can’t speak good English to work in a company that requires those skills, for instance.
And, of course, that still leaves the other option of government assistance. Frankly, depending on what the OP is actually trying to accomplish with all of this, that would probably be a smarter way to go. If you are trying to help poor people, especially poor families, then do away with a minimum wage and offer direct assistance for anyone working who is making below some standard you want to help. That would eliminate the scatter gun effect of upping wages for kids in their first job working over the summer or the like and direct the aid where it’s most needed.
Doesn’t matter though. We won’t get rid of minimum wage at this point…and what minimum wage is ALREADY doing is moving companies to more and more automation. Pushing it up more will just accelerate that and shed jobs at the low end (and probably have a ripple effect at jobs higher up as automation becomes more pervasive).
Of course you can do that, but it’s clearly a wage control. ‘Whatever you can negotiate’… ‘except this, and that and this other thing here’.
You can kid yourself that it’s not wage control, but it is.
That’s why I asked directly in post 33 if that type of rule would be considered a wage control. If that fits your (or Lobohan’s) definition of wage control then sure that seems reasonable. It doesn’t require a minimum wage to avoid being paid in scrip though, and that’s what I was trying to tease out because it seemed like Lobohan was saying that the only way to avoid scrip payments was minimum wage. That’s just not true.
I was assuming that wage controls included that.
Note that upthread I posted WalMart in Mexico doing something very similar, paying partially in WalMart vouchers.
If there is no minimum wage, I assume some company could do similar things for the desperate, $2 an hour + full medical, $2 an hour + free childcare, $2 an hour + a $100 Wal-Mart gift card, $2 an hour and free stay at the company apartments, and so on.
I don’t doubt that all sorts of benefits could be used to lock people in. And someone who is desperate for the benefit can have his or her realistic options limited.