The virtues of a $10/hour minimum wage

[brickbacon]

@Bone

From the get go, Reich equivocates on people being paid what they are worth, and what people are worth.

I cannot imagine most people reading this came away with this perspective. Clearly he is using the term colloquially as a stand in for stating that is what their labor is worth.

@Bone

In addition, he gets the core of the saying wrong. It’s not that people are paid what they are worth, they are paid what the value of their work product is worth.

Again, I believe this is your conflation. He is clearly debunking the latter.

@Bone

Reich goes on to compare historical GM workers to current Walmart workers, and concludes that the reason both relatively low skilled folks are paid so much different in real terms is because of the decline of unions. Reich doesn’t talk about the disparity in alternatives for those workers at their respective times. No, it must simply be unions.

Do you deny unions have an effect on wages? If you do, they you should obviously concede the point that people are not always paid what the value of their work product is worth, nor what an employer independently thinks it’s worth. If you don’t, then why do you think people join unions, and why do you think conservatives are so against them?

@Bone

I think Reich has a definitional problem. And it’s with the word “worth”. The fact that Reich doesn’t define how he’s using this term undercuts his entire premise. If I define “worth” as what a person is paid in a voluntary transaction, then Reich is wrong.

No, he’s not. For example, a static wage in dollars is worth less every year. Are you saying that the value of one’s labor absent a raise declines despite increased experience on the job? Is every athlete paid an amount commensurate with the actual value of their labor? Why do celebrities, athletes, and high profile white collar workers hire agents to get better salaries if outcome in either case must axiomatically settle at the value of the work product of the individual? Why do almost all restaurants hire most new employees at the same wage? Do they just all coincidentally have the same value for their labor?

Here’s another real world example. I usually have to pay babysitters $15+/hour. Recently, when our normal sitter wasn’t available, someone recommended their sitter to me. She charged $12/hour. I was, and am, perfectly willing to pay more than her rate because her labor is actually worth that to me, but I only paid what she asked for. Why in the above scenario did the babysitter not get paid what her employer thought she was worth given my willingness, her comparable qualifications, and similar amount of “labor” being done?

All those scenarios above point out clear problems with the idea that your labor is worth what you are paid. Unless you just want to accept the above as a tautology, there are thousands of examples of situations where it doesn’t hold. Even something as simple as an athlete being paid while on IR. How can their labor be worth much when they are not actually producing anything? So if your side wants to continually argue this really stupid point, perhaps you can address the above. You don’t need to pick apart of short article by Reich to recognize how dumb this claim is.

[tomndebb]

@Bone

If I define “worth” as what a person is paid in a voluntary transaction, then Reich is wrong.

Of course, if you define worth in that way while conveniently ignoring real world constraints on what it means to be voluntary, then your criticism of Reich is less than valuable.

[Bone]

@tomndebb

Of course, if you define worth in that way while conveniently ignoring real world constraints on what it means to be voluntary, then your criticism of Reich is less than valuable.

So after 5 posts criticizing D’Anconia for lack of substantive comment, you are offering a rejoinder that says I’m ignoring real world constraints. Are you suggesting that the Wal Mart employee is not employed voluntarily? How would you like to define “worth”? Or “voluntary” for that matter?

@brickbacon

I cannot imagine most people reading this came away with this perspective. Clearly he is using the term colloquially as a stand in for stating that is what their labor is worth.

Reich is a pretty smart guy, I would think he would be more precise in his phrasing. In any case, my reading was how I interpreted it right off the bat and matches what was actually written. Your reading requires an assumption of things not written. But fine, I can think of that as an editing oversight.

Do you deny unions have an effect on wages? If you do, they you should obviously concede the point that people are not always paid what the value of their work product is worth, nor what an employer independently thinks it’s worth. If you don’t, then why do you think people join unions, and why do you think conservatives are so against them?

Of course unions have an effect on wages. But what a person’s labor is worth is not static. It is variable based on a number of factors, one of them being the cost of an alternative. If a union is able to restrict supply of available workers, through organizing they can increase the minimum amount their members would be willing to accept.

Here’s another real world example. I usually have to pay babysitters $15+/hour. Recently, when our normal sitter wasn’t available, someone recommended their sitter to me. She charged $12/hour. I was, and am, perfectly willing to pay more than her rate because her labor is actually worth that to me, but I only paid what she asked for. Why in the above scenario did the babysitter not get paid what her employer thought she was worth given my willingness, her comparable qualifications, and similar amount of “labor” being done?

Because you’re leaving out the other side of the equation. A babysitter may be worth $15 to you, but the value of the labor exchanged is different between different babysitters in your example. For the latter, their labor was worth $12/hour to them, so they accepted the transaction you offered. That you would pay more means that the value of that labor was worth more, to you.

All those scenarios above point out clear problems with the idea that your labor is worth what you are paid. Unless you just want to accept the above as a tautology, there are thousands of examples of situations where it doesn’t hold. Even something as simple as an athlete being paid while on IR. How can their labor be worth much when they are not actually producing anything? So if your side wants to continually argue this really stupid point, perhaps you can address the above. You don’t need to pick apart of short article by Reich to recognize how dumb this claim is.

I do think there can be scenario where this principle doesn’t hold. Your examples above however aren’t any of them. An athlete being paid on IR is a function of a contractual obligation that was necessary for the particular athlete/employer to agree to work under a given contract. Think of it like high priced PTO. The value of being paid while on IR is embedded within the contract.

---

And back to the Reich article:

@Reich

People who park their savings in these banks accept a lower interest rate on deposits or loans than they require from America’s smaller banks. That’s because smaller banks are riskier places to park money. Unlike the big banks, the smaller ones won’t be bailed out if they get into trouble.

This is what Reich calls a subsidy. Because larger institutions offer lower rates of interest, Reich concludes this is because the potential for bailout is priced in and therefore larger institutions are receiving a subsidy.

It’s not that the larger institutions may have greater overhead in maintaining a larger network of services, or have wider product offerings, or that smaller institutions may need to offer higher interest rates to entice folks to utilize smaller banks with less services. No, it must be because larger banks are getting a bailout subsidy.

Like I said, Reich is a smart guy but this is not a good analysis by him.

[Ograbme]

As an employer, why on Mammon’s green earth would I pay someone exactly as much as the value they added to the company?

[brickbacon]

@Bone

Reich is a pretty smart guy, I would think he would be more precise in his phrasing.

It’s not an academic paper. There is no need to be more precise as almost everyone would not read it the way you assume he meant it.

@Bone

Of course unions have an effect on wages. But what a person’s labor is worth is not static. It is variable based on a number of factors, one of them being the cost of an alternative.

Then we don’t need to address this any further. You clearly agree wages are not directly tied to the value of one’s labor. The fact, as I mentioned a while ago, that worth is not static whereas wages are typically sticky means they are not always in alignment.

@Bone

Because you’re leaving out the other side of the equation. A babysitter may be worth $15 to you, but the value of the labor exchanged is different between different babysitters in your example. For the latter, their labor was worth $12/hour to them, so they accepted the transaction you offered. That you would pay more means that the value of that labor was worth more, to you.

You misunderstood. The basis of my example was this comment:

An employee’s labor is only worth what someone else is willing to pay for it, no more, and no less.

I was willing to pay more. That is my point. She undervalued her labor relative to the market. That’s why her wages don’t reflect her worth in the eyes of most employers. To bring it back to the OP, some argue that raising the MW would put tons of people out of work because their labor is ONLY worth what they are being paid; otherwise, they would make more. That is clearly not the case in many real word examples, and once you accept that, you start to see why part of the reason MW increases in real life didn’t seem to destroy jobs as many predicted they will is because the labor of these employees is actually worth more than what they are being paid.

@Bone

An athlete being paid on IR is a function of a contractual obligation

Exactly. Contracts can act as a disconnect between the worth or value of one’s labor, and one’s wages. That was the point.

[D_Anconia]

@tomndebb

He is more likely centrist or slightly Left of center, but he is not “hard Left.”

Only on this board would Reich be considered a “centrist”.

[Broomstick]

@Bone

Because you’re leaving out the other side of the equation. A babysitter may be worth $15 to you, but the value of the labor exchanged is different between different babysitters in your example. For the latter, their labor was worth $12/hour to them, so they accepted the transaction you offered. That you would pay more means that the value of that labor was worth more, to you.

On the other hand, if the babysitter values her labor at $15/hour but can find no one willing to pay more than $12/hour it’s questionable how “voluntary” that transaction has become. And why wouldn’t she seek means to increase her compensation, from direct negotiation with the purchasers of her services to banding together with other babysitters to form a union to argue for higher wages for them all?

If no one hiring is will to pay more than $12/hour but no one selling is willing to accept less than $15/hour then something has to give. If it turns out that the result is babysitters being paid $14/hour then I guess their labor was worth more than $12/hour after all!

And that’s the problem with blind acceptance that the current state of affairs has reached some sort of perfection. It hasn’t. Value of labor and materials goes up and down. It always has and it always will. People who treat current salaries as some sort of ineffably correct thing are ignoring that.

[D_Anconia]

@Broomstick

On the other hand, if the babysitter values her labor at $15/hour but can find no one willing to pay more than $12/hour it’s questionable how “voluntary” that transaction has become.

Of course it’s voluntary. Nobody is forcing her to take a specific job, or to babysit in general.

[Shodan]

@D_Anconia

Of course it’s voluntary. Nobody is forcing her to take a specific job, or to babysit in general.

“Voluntary” in this context refers only to the babysitter. It would be “voluntary” if she could compel employers to pay her more than they want.

It’s a disconnect about the meaning of “voluntary”. If a monopoly exists, or I can create one, that doesn’t affect whether a transaction is “voluntary” or not, unless I am on one side (or the other), for certain points of view.

Regards,
Shodan

[Bone]

@brickbacon

Then we don’t need to address this any further. You clearly agree wages are not directly tied to the value of one’s labor. The fact, as I mentioned a while ago, that worth is not static whereas wages are typically sticky means they are not always in alignment.

I don’t think it’s sufficient to say that wages are not directly tied to the value of one’s labor. They are tied to the value, but they are also tied to many other factors. Ultimately worth is relative. If wages are sticky, there may be non-wage items that are entering the calculus. Those are also involved in the determination of worth.

You misunderstood. The basis of my example was this comment:

If you are willing to give Reich latitude in how he phrased his writing, surely you’d give the same to D’Anconia.

I was willing to pay more. That is my point. She undervalued her labor relative to the market. That’s why her wages don’t reflect her worth in the eyes of most employers. To bring it back to the OP, some argue that raising the MW would put tons of people out of work because their labor is ONLY worth what they are being paid; otherwise, they would make more. That is clearly not the case in many real word examples, and once you accept that, you start to see why part of the reason MW increases in real life didn’t seem to destroy jobs as many predicted they will is because the labor of these employees is actually worth more than what they are being paid.

I agree there are employers that are paying less than they would otherwise be willing to pay because there are people who would accept less. There are also people who would be willing to work for less, but cannot find employment because there is a floor of minimum wage. Agree? There is also an inflationary pressure that exists when minimum wage is increased.

Exactly. Contracts can act as a disconnect between the worth or value of one’s labor, and one’s wages. That was the point.

You cut off the remainder of the sentence. There is no disconnect - the potential of injury is factored into the cost of the contract. That some may be injured and some may not be doesn’t change this fact.

@Broomstick

On the other hand, if the babysitter values her labor at $15/hour but can find no one willing to pay more than $12/hour it’s questionable how “voluntary” that transaction has become. And why wouldn’t she seek means to increase her compensation, from direct negotiation with the purchasers of her services to banding together with other babysitters to form a union to argue for higher wages for them all?

It’s not questionable at all. What is your question? Are you suggesting that the babysitter is being forced to work in some fashion? I value my labor at $1B/year. No one is willing to pay me that amount - therefore I’m being forced into riding a desk for less. Damn it!

If no one hiring is will to pay more than $12/hour but no one selling is willing to accept less than $15/hour then something has to give. If it turns out that the result is babysitters being paid $14/hour then I guess their labor was worth more than $12/hour after all!

And that’s the problem with blind acceptance that the current state of affairs has reached some sort of perfection. It hasn’t. Value of labor and materials goes up and down. It always has and it always will. People who treat current salaries as some sort of ineffably correct thing are ignoring that.

You’re agreeing with your opposition. Prices will adjust to reflect the relative worth of a particular good or service in the way you describe.

[brickbacon]

@Bone

I don’t think it’s sufficient to say that wages are not directly tied to the value of one’s labor. They are tied to the value, but they are also tied to many other factors. Ultimately worth is relative. If wages are sticky, there may be non-wage items that are entering the calculus. Those are also involved in the determination of worth.

If you agree with the above, then you disagree with the notion that is being discussed: that people are paid exactly what their labor is worth.

@Bone

If you are willing to give Reich latitude in how he phrased his writing, surely you’d give the same to D’Anconia.

I did grant that latitude when I asked for clarification and debated this point. S/he doubled down on the nonsense.

@Bone

I agree there are employers that are paying less than they would otherwise be willing to pay because there are people who would accept less. There are also people who would be willing to work for less, but cannot find employment because there is a floor of minimum wage. Agree?

No. I don’t think there are people in great numbers who cannot find work because the minimum wage is currently too high. There are some obviously. This issue comes up a lot with disabled people who want to work. But as a general proposition, I don’t think this factors in much. It probably would at $15/hour in many areas of the country, but I don’t think it really does in today’s climate.

@Bone

You cut off the remainder of the sentence. There is no disconnect - the potential of injury is factored into the cost of the contract. That some may be injured and some may not be doesn’t change this fact.

Of course it does. That is the issue. Yes, injury risk is insured against in your typical sports contract, but that doesn’t change the fact that the athlete is being paid for labor that was not provided. That is the point. If you accept that people are paid what they are worth at every given point without exception, then someone who is injured and not providing any real labor is an obvious contradiction.

[Bone]

@brickbacon

Of course it does. That is the issue. Yes, injury risk is insured against in your typical sports contract, but that doesn’t change the fact that the athlete is being paid for labor that was not provided. That is the point. If you accept that people are paid what they are worth at every given point without exception, then someone who is injured and not providing any real labor is an obvious contradiction.

The contract is at a point in time. Both the employer and the athlete agree to a rate and factor in the potential for injury. The athlete is being paid based on the terms that were agreed to - X dollars for Y service. Y service is provided - but sometimes Y service is minimal due to injury. Y service is still being provided. You are construing injury to be outside of Y service, when Y service is contemplated by the contract terms.

No. I don’t think there are people in great numbers who cannot find work because the minimum wage is currently too high. There are some obviously. This issue comes up a lot with disabled people who want to work. But as a general proposition, I don’t think this factors in much. It probably would at $15/hour in many areas of the country, but I don’t think it really does in today’s climate.

I’m not sure. Do you have any data to support this? In my area minimum wage is already either at or above $10/hour.

[brickbacon]

@Bone

The contract is at a point in time.

As are most wage talks. Again, the point is that contracts present a point of disconnect between wages and the value of labor. Injury is just one example. Plenty of times, people outperform (eg. Mike Trout) or under-perform (eg. Alex Rodriguez) their contracts. This is why neither example is currently being paid what their labor is worth by any reasonable measure.

@Bone

I’m not sure. Do you have any data to support this?

Mostly just the data that raising the MW doesn’t seem to destroy jobs. I’ve cited this in this thread numerous times, including providing recent data from other countries.

Do you have any evidence that any great number of people are currently willing to work for less than MW, who would likely find jobs absent a MW?

[Bone]

@brickbacon

As are most wage talks.

Not really - most employee/employer relationships are dictated by contract, but are at will.

Do you have any evidence that any great number of people are currently willing to work for less than MW, who would likely find jobs absent a MW?

The “this” I was referring to was the idea that there aren’t people who can’t find work because min wage is too high, in any significant frequency.

I don’t - I think it’s an unknown.

[DrCube]

@Ograbme

As an employer, why on Mammon’s green earth would I pay someone exactly as much as the value they added to the company?

And why would a worker accept a job that pays exactly as much as their free time is worth to themselves?

The fact is, both sides of a transaction come out ahead, or they wouldn’t proceed with the transaction.

Your employer gets more value out of your labor than they pay you, and you get more value out of your paycheck than you’d get sitting on your couch playing Xbox.

We’re not talking about subjective human value here, like how much your mom will miss you if you die. We’re talking about the financial value of your labor. There is no other quantitative measurement of what a particular good or service is worth other than the price that both sides of the transaction have voluntarily agreed to.

[davida03801]

Here ya go. The start of the elimination of minimum wage burger flippers.

The burger flipping machine.

[brickbacon]

@davida03801

Here ya go. The start of the elimination of minimum wage burger flippers.

The burger flipping machine.

That process started a LONG time ago.

[septimus]

I’ve already given my opinion, but the thread gets bumped so I’ll bump my opinions.
First, regarding the burger-flipping machine, let’s ask everyone:
If a machine can flip burgers better and cheaper than a human, as a society do we “want” the humans to continue to do the flipping?
I’m not sure how the various “sides” would answer this question. The same group worried that higher wages would lead to mechanical flipping would probably oppose (useless) “make-work” employment.

Before even addressing this question, I’d want a top-down discussion, beginning with the goals of human society. As a thought experiment, comment on the following hypothetical:

*As robots improve, eventually almost all human workers are displaced. The robots are given the right to own property. Some creative fields, e.g. song-writing and performance, hold out for a while, but soon the best music videos are wholly the creations of robots. What do Dopers see as the proper economic structure of that hypothetical future society?*Pick one:
(A) Almost all wealth belongs to the grandchildren of the capitalists who owned the early robot factories. Other humans will scrounge on the periphery, perhaps hoping to become a sex toy for one of the rich. (A perverse sex toy, since the robots will perform high quality sexual services.)

(B) The robots, with superior financial skills etc., will have bought out the human capitalists and will own almost everything themselves.

(C) Humans all have some special status, with necessities and some luxuries free.

(D) Other.

Silly hypothetical? Maybe. But others are making reductio ad absurdem arguments, so let me take reductio ad absurdem to its own absurdem.

The other recent topic was Robert Reich’s claim that “Paid-what-you’re-worth” is a dangerous myth. I’d make a claim even stronger than Reich’s: that many prices are set in an almost arbitrary fashion not necessarily aligned with any “true worth.” Clean air and clean water are extremely valuable and yet are almost free. Much money is siphoned off in the form of “rents”, but it is a matter of luck rather than fundamental economic principle that no water rents are collected by landowners along the rivers.

And would those who think it clear that Alex Rodriguez is worth exactly $29 million and the Chief of Valeant Pharmaceutical did exactly $143 million worth of work for his wage also claim that a derivatives trader in 2008 did exactly $136 million “worth” of work? Did Pablo Escobar contribute $2 billion annually to human economic society?

@Xema

… today’s MW compares well with the average of the past 75 years.

Yes. However, per capita GDP has risen hugely even in inflation-adjusted terms. Minimum wage has fallen dramatically when measured as a percentage of average income. Cable TV, Internet, smartphones are examples of things that nobody had 75 years ago. Do you think the lower classes should be denied them?

But the most salient features of the thread are the breakdowns in reason.

@ziper1221

Are you kidding me?..
Now, finding data for this is almost pointless, because it is impossible to run an isolated test, and there are so many co-factors that you can manipulate the data to show whatever result you want.

Translation: Economists and statesmen are all liars, so just listen to me, ziper1221.

@D_Anconia

Bullshit yourself. The person who quoted Reich needs to back up his or her argument.

@D_Anconia

So Ann Coulter and Glenn Beck are “freakish”, but Reich’s “observations” are valid?

I don’t know whether to be amused by all this … or to despair at America’s universal suffrage. I think we’ll all agree that Reich is partisan, but to compare him with Ann Coulter and Glenn Beck is [has this thread been moved to BBQ Pit yet?] not quite perfectly rational. :eek:

[Sputnikkk]

Anyone who thinks lower minimum wage will help the US economy somehow, should look up the economics of Australia. Always at the top of happiest country in the world list. Its economy never crashes as hard as the US economy does. There is lower unemployment in Australia. But Australia’s minimum wage is really very high. When people get a higher minimum wage the spend that money and it goes back out into the economy. Its trickle up economics instead of trickle down and it makes the middle class healthier.

Also, Australia has a great health care system.

I think the unemployment and low wages in the US and shrinking middle class has more to do with where the money goes, to the wealthiest, than how high or low the minimum wage is.

[septimus]

@septimus

I think we’ll all agree that Reich is partisan, but to compare him with Ann Coulter and Glenn Beck is … not quite perfectly rational. :eek:

This sentence my be confusing to foreigners or some ignorant Americans, so let me describe the people D’Anconia compared:

Robert Reich has held several very prestigious professorships. He also held high government posts in one Republican and two Democratic U.S. Administrations. Time magazine named him one of the Ten Best Cabinet Members of the 20th century. The Wall Street Journal (not considered a left-wing echo chamber) in 2008 placed him sixth on its list of the “Most Influential Business Thinkers.” He is the author of numerous books (including bestsellers), produced an award-winning documentary, and is the Chairman of Common Cause.

Ann Coulter and Glenn Beck are shock jocks in the style of Howard Stern. To compare them to Robert Reich is like comparing Bozo the Clown to Thomas Jefferson — it tells us nothing about Reich, Coulter or Beck, but does tell us all we need to know about the person making the comparison.