I’ve got this weird, not really thought through idea that we should be okay with a perpetually rising minimum wage. I don’t know what argument there is that it should stay put.
Let it rise, keeping just ahead of the economy, perhaps doing some work in driving inflation or whatever, and when it gets to like $1000/hr, just divide everything by a thousand.
Why not?
Not but seriously, why not?
What illegal activity?
My understanding of business and economics.
Because the minimum wage has been unchanged for many years, from a time (the last increase) when the increased minimum wage did not reduce employment, but there has been inflation over these years. So in spending power, the minimum wage has been steadily decreasing.
The minimum wage is significantly lower, in functional dollars, then at a time in the past in which we know it did not lower employment.
Businesses talking to each other about wages is not illegal.
Yes European countries are “writhing in utter pain” from a combination of high minimum wages and other restrictive labor laws.
“The unemployment rate in Spain has fallen below 25% for the first time in two years, thanks to the beginning of a revival in the economy. An extra 402,000 people started work in the second quarter of the year, boosted by the seasonal upturn in tourism.
That helped to push the official jobless rate down to 24.5%, from 25.9% in the first three months of the year.”
The minimum wage should be removed from yearly political wrangling and simply set as a percentage of median wage–(the analogy which comes to mind is how Social Security increases are set each year).
I agree spending power based on minimum wage has decreased over time, but this doesn’t speak to where we are at now with regard to the actual market rate. Even though purchase power may have declined, this doesn’t necessarily mean we are below the market rate for wages.
Conceptually if we are below the market rate, then increasing minimum wage will have minimal impact on unemployment and inflation. Conversely if we are above the market rate then increasing minimum wage will have a greater impact on unemployment and inflation. You have suggested we are below the market rate. I’m asking you to support that.
Yes, that’s right. But that’s not what you said. You said:
‘collude with each other to squash wages’ - the fact pattern matters, but that would generally be illegal.
I expect this does happen (recent incidents with tech companies in silicon valley have been widely reported), but when you are suggesting that the current compensation rate for low skilled workers is below what the market will actually bear due in part to wage collusion, you’ll have to present evidence of something widespread.
How does that work? Are there teenagers saying “Sure, I’d love to stock shelves at the QuikMart for $7 an hour, but $15? Dude, that’s waaaayyyy too much money.”
I think the idea is that there are employers saying, “I’d like to give you some work, but I don’t have anything I can afford to pay you $15 an hour for.”
It’s pretty simple – by looking at labor statistics from the time of the last min wage increase, and noting the minimal impact on unemployment and inflation, we can conclude that we were below the market rate for wages then, even with that increase. And since the real value of the minimum wage is significantly lower now, it’s reasonable to conclude that we’re still below the market rate for wages. I suppose there’s some tiny possibility that, somehow, the market rate for wages has drastically decreased since the time of the last min wage increase, but that seems pretty highly unlikely.
Those seem like the same thing. How is that ‘generally illegal’?
I just offered it as a possible explanation for the reason wages for low-skill jobs are “below the market value for wages”, since (based on the paragraph above) it’s reasonable to conclude that they are. It’s not a vital part of my argument at all.
As workers, systems, and processes become more efficient, the market rate for certain functions or skills may decline. Simply saying we were below the rate in the past and some factors are unchanged doesn’t necessarily follow that we would still be below currently. And even still, if you are saying we were below the market rate in the past, there must be some factors depressing wages below the natural market rate. What would those be?
Additionally, in the current state, you are suggesting we are below the market rate. While I grant we do not operate in a perfectly functioning market, what conditions do you think exist that distort the market such that we can have a continuing environment where wages are below the market rate?
Businesses talking to each other about wages is fine. Colluding together to suppress wages is not. Wage fixing would be violative of anti trust laws. In other words, saying “we pay entry level staff $X/hour” is fine. Saying, “Let’s agree not to hire any entry level staff above $X/hour” would not be fine.
While this particular example may not be a vital part of your argument, you would need to actually make an argument that is persuasive why we are currently below the market rate for low skilled labor.
I think a good one would be the supply of labor that is paid illegally, such as unreported wages to people who aren’t eligible to work in the country. I don’t know how big an impact that has, but it definitely has a depressing impact on wages.
It’s more like, if the marginal value a particular person can add to the business is $8/hour, then if they cost (in total) less than that, it’s worth hiring them. If not, then no. If min wage was $7/hour (inclusive of all total costs), then they’d be hired. If that rate is raised to $10/hour, not hired.
With the last several min wage hikes, we had similar evidence to show that we were below the market rate in the past. I think it’s very likely we still are, so I support small, incremental hikes. If we have data that suggests we’ve reached that level, then we would stop the hikes.
We probably can’t know for sure until we actually raise the minimum wage. That’s why I support small, incremental hikes.
Possibly collusion, possibly illegal labor (as you suggest), possibly many other factors. But considering that we know, factually, that it was below the market rate in the past, we know these factors existed. It’s very likely many of them still do, considering that there has been no significant labor legislation in the meantime.
Like I said – whatever conditions did it before. I don’t need to know which ones, because we know, factually, that it was the case for the last few minimum wage hikes.
I trust that big companies with big lawyers can find some legalese to use that might bypass such laws.
No I don’t. There’s no way to prove it until we actually raise the minimum wage – that’s how we showed such conditions existed in the past.
Exactly. When you have neither a survivable minimum wage nor public health care nor a reasonable social safety net, it’s pretty good evidence that a particular mentality arising from a particular income demographic is running the economy.
Another good point. To which I can only add that it appears to be a persistent right-wing delusion that companies operate in a vacuum with absolutely zero responsibility to their employees, to the environment, or to the society to which they owe their existence. This appears to be the assumed starting baseline, and anything companies are mandated to do such as ensuring that workers aren’t killed on the job, ensuring buildings don’t fall down, or not being permitted to poison the environment and killing us all, is considered to be an unfair and “anti-business” burden imposed by an evil and meddling government. Some of us don’t share that delusion.
The minimum wage is in the same category. One can argue about what the amount should be or whether there should be a range based on circumstances, but to any argument that some amount is “too high” there is certainly a counterargument that there are certainly amounts that are “too low” because no one could possibly live on them. So a minimum wage becomes not just a social good, but a social necessity.
I recently heard about a report that assessed what it would take today for an urban US family of four to live a “comfortable” but certainly not extravagant lifestyle (going from memory – sorry, no cite) – one car, one ordinary family vacation per year, a mortgage, clothes and entertainment for the kids, etc. IIRC, the number was something like $140,000. Even $15 an hour brings in a paltry $31,200 assuming you’re paid every week of the year and work 40 hour weeks. And some people are paid way less, entirely in the interest of their bosses and shareholders maximizing their own take. An apt example here is the difference between what Walmart workers are paid (and how they’re treated) and what Costco workers are paid. The problem is not generally a shortage of corporate cash as much as it is an attitude of exploitation dressed up as sanctimonious rationalism.
Many probably do. But some dont. The most recent example I can think of had to do with many silicon valley tech companies. I believe the class action suit was recently settled - it involved over 100K workers. In the past the DOJ has brought suit for similar activity.
The whole argument about raising minimum wage is that we are currently below the market wage, right? But you say there’s no way to be sure until we raise the minimum wage. I think the burden would be to show that we are below the current market rate, and how. Minimum wage as a catch all solution to unknown market interference seems to be a blunt object at best.
This seems analogous to tying health insurance to employers. If the goal is to be able to either subsidize or supply low skill workers enough to survive, why does that need to be done through an employer? A negative income tax would accomplish the same thing more efficiently and not distort the market. There would be no need to determine if we were below or above a market rate.
So, is the minimum wage someday going to be raised later on again, to $25/hour?
And then decades later on again, to $50/hour?
And then decades later on again, to $100/hour?
And then decades later on again, to $250/hour?
Depends on inflation, and the time period. It’s very possible that in many decades, $100 will be equivalent to $10 today.
It’s not a catch all – I just think it would be helpful. I don’t know if there’s a way to show without a doubt we’re below the current market rate – I think the best way to estimate this is by looking at past data, and comparing it to the present. Based on that, I think it’s reasonable to assume that we’re below.
A negative income tax could also distort the market (depending on how it’s written) – employers might not have as much of an incentive to pay higher wages if higher wages don’t provide much financial benefit to the workers.
This should be done through the employer because it’s beneficial to all to reduce the need for social services.
So it bothers you that the minimum wage might be tied to inflation? Know what bothers me? How many billions the Koch brothers, Mitt Romney and all their oligarchic friends will be worth at each of those times.
100 years ago, Henry Ford paid $5 a day, DOUBLING the going rate. We went from $2.50/day (average wages) to $56/day, 22x. In another 100 years, if we have the same increases, minimum wages will go from $7/hr to $150/hr.
Of course, we’re not paying 5 cents for coffee and 15 cents for a sandwich, and in 100 years they won’t be paying $1 for coffee and $5 for a sandwich.
A point that occurs to me: Automation ought to be driving minimum wage up. A lot of jobs that would once have been done for minimum wage are not any more, not because they pay more now, but because they’re now done by machines instead of by humans at any price. And these jobs are, by and large, the jobs that require the least skill. So the least-skilled-human-job now requires more skill than the least-skilled-human-job of the past. Is it not reasonable, then, that the wage paid for that job should be higher?
That’s not at all how to think about the market rate of wages. While the skill of the person is a factor, just because a person has more or less skills doesn’t necessarily control the wages. The very best horse and buggy driver is not going to make very much, whereas a run of the mill software developer will likely earn a decent living.
Supply and demand for labor will be much more controlling than particular skill at a certain activity, though they are related. As more work in automated through efficiency, the supply of labor will increase. All other things being equal wages would decrease.