# What would be the actual effects of abolishing the minimum wage? **URL:** \ **Category:** Great Debates\ **Created:** [December 8, 2016, 9:25pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234 "2016-12-08T21:25:19Z")\ **Posts on this page:** 17\ **Page:** 7
**Author:** ![bump](https://avatars.discourse-cdn.com/v4/letter/b/7c8e57/32.png) [@bump](https://boards.straightdope.com/u/bump)\ **Post date:** [December 13, 2016, 10:01pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/121 "2016-12-13T22:01:36Z")
> [@Trinopus](#): > > Then **k9bfriender** was not wrong in estimating his employees being worth about twice what he’s paying them. I think what he was trying to say was that the value of his employees’ work is about twice what he pays them, which is something entirely different than being willing or able to pay them twice as much. That aside, even if he thinks they’re worth twice what he’s paying them, it’s pretty clearly established that he isn’t paying them that much, so he only values them at their current rate. And \*\*octopus \*\*is right; the actual trading is what sets the value. In this example, it may be that **k9bfriender** is willing to pay 2x what he does, but has no market forces compelling him to ante up the extra pay, as employees of that level of education, experience and competence are paid that same rate by all the other businesses competing for their labor. TL;DR: if **k9bfriender** did indeed value his employees 2x what he pays them, he’d already be paying them 2x what he does today. Since he doesn’t, he clearly values them exactly what they’re paid. Whether or not he derives 2x the value versus what they’re paid is something else entirely. ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [December 13, 2016, 11:13pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/122 "2016-12-13T23:13:26Z")
> [@bump](#): > > . . . That aside, even if he thinks they’re worth twice what he’s paying them, it’s pretty clearly established that he isn’t paying them that much, so he only values them at their current rate. . . . Yes, but **octopus** blundered by bringing in estimates of value/worth, and, as noted, **k9bfriender** clearly estimates the value of the employees at twice what he’s currently paying. octopus tried to use one definition to support a completely different definition. (Also, I don’t wholly agree with your, or his, definition of value, preferring the “willing to pay” definition, over “is now paying.” Again, that would mean that Yellowstone Park has “no value.”) ---
**Author:** ![Mijin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mijin/32/9369_2.png) [@Mijin](https://boards.straightdope.com/u/Mijin)\ **Post date:** [December 14, 2016, 4:02am UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/123 "2016-12-14T04:02:38Z")
> [@octopus](#): > > Nope. Willingness to pay is meaningless. Pricing is established by the act of trading. Not some unrealized hypothetical. So if someone offers to give me their brand new Ferrari for $1, that’s its worth to me? A rational actor will seek to get the most “bang for their buck”: happy to purchase items at way less than they would be willing to pay if the floor price was higher. IMO and most other people, for example, food and clothing are both cheap in the modern economy; I would pay much, much more for these things if I had to (and the only limit on my purchases is that there’s only so much food I need to eat, and so much clothing that I can store in my house). And transactions involving labor are no different. If I’m hiring a Widget Adjustor, I might genuinely think to myself “Our business model desperately needs a Widget Adjustor, and I’d pay up to $200,000 per year if I had to. But I know in this town many WAs have been made redundant recently, so I’m confident we can find one for $30,000”. In this scenario, why would we say the worth is only $30k? ---
**Author:** ![octopus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/octopus/32/3716_2.png) [@octopus](https://boards.straightdope.com/u/octopus)\ **Post date:** [December 14, 2016, 4:07am UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/124 "2016-12-14T04:07:20Z")
> [@Mijin](#): > > Ok, but what I was wondering was whether anyone was using this as their argument against MW. It seems not really. > > But anyway, there’s plenty of data to show that no, in fact, increasing MW doesn’t increase unemployment. > For example, there’s the finding that states that raised the MW had faster job creation ([cite](http://cepr.net/blogs/cepr-blog/2014-job-creation-in-states-that-raised-the-minimum-wage)). > And then there’s all the research cited [here](http://www.businessforafairminimumwage.org/news/00135/research-shows-minimum-wage-increases-do-not-cause-job-loss), which yes is an advocacy page but still it’s a pretty comprehensive set of research. Yeah that establishes no cause and effect. It could very well and probably is a reflection of a hot job market where the average wage is already high and that the costs to job creation caused by raising the minimum wage can’t be disentangled from other factors. Try raising the minimum wage in a labor market where the average wage is already low and see those factories move to China. ---
**Author:** ![octopus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/octopus/32/3716_2.png) [@octopus](https://boards.straightdope.com/u/octopus)\ **Post date:** [December 14, 2016, 4:13am UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/125 "2016-12-14T04:13:51Z")
> [@Buck\_Godot](#): > > After cost of materials upkeep, taxes markting etc. a widget nets a profit of $2.00 > > Worker A produces 20 widgets and hour, but is very shy and doesn’t know the widget market and so meekly accepts $8.00 an hour. The Boss gladly rakes in a net profit of $32.00 > > Worker B produces 10 widgets an hour but hires a negotiator who convinces the boss to pay him $16.00 an hour. The boss still seeing a net profit of $4.00 accepts. > > Obviously worker B is twice as valuable to the employer as worker A as indicated by the fact that he is paid twice as much. Yes indeed. Marketing has value. Being weak does not. In time the worker who has the sense to hire a negotiator and the strength to negotiate demonstrates higher value traits. If I buy a thousand apples I may get a better price than one! If I negotiate with knowledge for a car I may save $4,500 compared to a rube off the street. When we do business for meaningful things we pay lawyers to review the contracts and add favorable contingencies. For the same property we get more value then those who don’t. Value is actualized when the exchange comes. Value has nothing to do with profit or loss. If my employer is dumb and can’t sell what I produce for my salary it doesn’t mean I’m not worth my salary if some one else is willing to pay it. Worker a may have more unrealized value. But it does not exist until the exchange is made. ---
**Author:** ![octopus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/octopus/32/3716_2.png) [@octopus](https://boards.straightdope.com/u/octopus)\ **Post date:** [December 14, 2016, 4:15am UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/126 "2016-12-14T04:15:05Z")
> [@k9bfriender](#): > > Oh, I didn’t know that we were talking about a raise of MW to $30. > > I would say such a thing would be foolish, and I would chastise anyone who suggested it. I am sure that someone suggested it in this thread for you to bring it up, otherwise you are just being entirely disingenuous and trying to sidetrack the debate with irrelevant non-sequiturs. > > Now, can we talk about what happens if MW gets raised to $10-$12 an hour? > > In Buck’s scenario, the boss loses out on 4 an hour from his better worker, but still makes a pretty good profit. Of course you would. Because then the effect of minimum wage would be disentangled from other variables. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [December 14, 2016, 12:52pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/127 "2016-12-14T12:52:17Z")
> [@k9bfriender](#): > > Now, can we talk about what happens if MW gets raised to $10-$12 an hour? We have been doing that all along - read the thread. The CBO estimates that raising the MW to $10.10 an hour would cost about a half million jobs. Raising it to $12 would likely cost more. Do you understand that changes to labor cost affects businesses? Regards, Shodan ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [December 14, 2016, 7:25pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/128 "2016-12-14T19:25:18Z")
But the minimum wage has been increased several times – and instituted in the first place – without the predicted loss of jobs. Every single time it has been increased, people have thought there would be job losses…and that hasn’t happened. Their model of the economy does not reflect reality. [Here’s a link](http://www.businessforafairminimumwage.org/news/00135/research-shows-minimum-wage-increases-do-not-cause-job-loss), although I confess it’s just the first result in Google, and I haven’t studied it carefully. If it doesn’t actually say what I want, dummy on me. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [December 14, 2016, 7:41pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/129 "2016-12-14T19:41:33Z")
Perhaps you could read post #114 instead of simply posting the first thing you find, without reading it closely enough to tell what it says. Regards, Shodan ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [December 14, 2016, 8:03pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/130 "2016-12-14T20:03:18Z")
> [@Shodan](#): > > We have been doing that all along - read the thread. The CBO estimates that raising the MW to $10.10 an hour would cost about a half million jobs. Raising it to $12 would likely cost more. > > Do you understand that changes to labor cost affects businesses? > > Regards, > Shodan I have been reading the thread. You were the one that brought up a $30 an hour MW out of the blue. I reminded you that that was not the sort of thing that is being discussed. The CBO estimates have ranges to them. The half million is only an estimate. It could be from slight job loss to as much as a million. And there is the fact that many of these jobs are not lost, as in the employee is let go by the employer, but many of these jobs are no longer worked because the employee doesn’t have to work 2 jobs anymore. I know this has been explained a few times, it seems like maybe even in threads that you were in. I do understand very well that changes to labor costs affect businesses. My labor is affected every time I give out a raise. As I am in a service industry, my labor is well over 50%, so any changes to my employee’s pay rate make a big difference to my bottom line. Now, what you don’t understand, is that most businesses are not dominated by their labor costs. Most places I’ve worked with run labor at less than 25%, often less than 20%. If your labor cost is 25%, and your labor cost goes up by 25%, how much does that increase your costs? (Hint, it is not 25%) ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [December 14, 2016, 9:32pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/131 "2016-12-14T21:32:29Z")
> [@k9bfriender](#): > > And there is the fact that many of these jobs are not lost, as in the employee is let go by the employer, but many of these jobs are no longer worked because the employee doesn’t have to work 2 jobs anymore. I know this has been explained a few times, it seems like maybe even in threads that you were in. No, it actually hasn’t, but now is your chance. Let’s see credible cites for this “fact”. How many MW workers are working two jobs now, and how many jobs are lost when they no longer need to? > [@](#): > > Now, what you don’t understand, is that most businesses are not dominated by their labor costs. Do you understand that a business does not have to be dominated by its labor costs to be affected by them, and by changes in them? Or perhaps you could discuss the effect of a raise in MW in industries like child care, where labor costs can be as high as 81% of total expenditures ([cite](http://www.ctvoices.org/sites/default/files/ece03childcenterbudget07.pdf)). Median hourly wage for child care workers is [$9.77](http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&uact=8&ved=0ahUKEwinko33z_TQAhXDSCYKHd9qCnsQFggtMAQ&url=http%3A%2F%2Fwww.bls.gov%2Fooh%2Fpersonal-care-and-service%2Fchildcare-workers.htm&usg=AFQjCNG2HDTJFZxrW9xHzp2mX-z2gCUAhA&sig2=y709yL9GQPds1Tx3n4pHug&bvm=bv.141536425,d.eWE). So you raise MW to $10 or $12 an hour. Families already complain that the cost of child care consumes most of what they earn (average cost of child care is about 40% of income). How does raising labor costs benefit mothers who use child care? Regards, Shodan ---
**Author:** ![k9bfriender](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/k9bfriender/32/3283_2.png) [@k9bfriender](https://boards.straightdope.com/u/k9bfriender)\ **Post date:** [December 14, 2016, 10:03pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/132 "2016-12-14T22:03:07Z")
> [@Shodan](#): > > No, it actually hasn’t, but now is your chance. Let’s see credible cites for this “fact”. How many MW workers are working two jobs now, and how many jobs are lost when they no longer need to? Do you understand that a business does not have to be dominated by its labor costs to be affected by them, and by changes in them? Once again, you try to change the goalposts. I am not talking about people making the federal minimum wage, I am talking about people who make less than the new proposed minimum wage. That is a much larger number than you keep talking about. About 7 Million low wage earners had [2 jobs in 2012](https://toughnickel.com/finding-job/Working-2-or-More-Jobs). I could dig and try to find more up to date cite, but I don’t really have time right now. I am sure a little google-fu could find more up to date numbers. So, there was a cite that quite a number of people have 2 jobs because one is not enough. Do I need to cite that most people would rather not work two jobs if they didn’t have to? > [@](#): > > Or perhaps you could discuss the effect of a raise in MW in industries like child care, where labor costs can be as high as 81% of total expenditures ([cite](http://www.ctvoices.org/sites/default/files/ece03childcenterbudget07.pdf)). Median hourly wage for child care workers is [$9.77](http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&uact=8&ved=0ahUKEwinko33z_TQAhXDSCYKHd9qCnsQFggtMAQ&url=http%3A%2F%2Fwww.bls.gov%2Fooh%2Fpersonal-care-and-service%2Fchildcare-workers.htm&usg=AFQjCNG2HDTJFZxrW9xHzp2mX-z2gCUAhA&sig2=y709yL9GQPds1Tx3n4pHug&bvm=bv.141536425,d.eWE). So you raise MW to $10 or $12 an hour. Families already complain that the cost of child care consumes most of what they earn (average cost of child care is about 40% of income). How does raising labor costs benefit mothers who use child care? > > Regards, > Shodan To begin with, I have always thought that childcare pay was pretty low in the first place. I mean, do you really want your child to be taken care of by someone who is not able to make ends meet? I am for childcare subsidies that wold lower the cost of childcare for working families. They would also earn more to be able to afford the higher costs. ---
**Author:** ![NetTrekker](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/nettrekker/32/2909_2.png) [@NetTrekker](https://boards.straightdope.com/u/NetTrekker)\ **Post date:** [December 15, 2016, 2:52am UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/133 "2016-12-15T02:52:03Z")
> [@Clothahump](#): > > The labor market would determine the price. For example, assume minimum wage laws were abolished. Company X starts offering entry level jobs at $2 an hour. They can’t hire anyone. They start raising the rate until people start taking the jobs. That might be at 5 or 7 or whatever per hour. But the labor pool determines the wage, not the government. This. Instant full employment, in the sense that everyone that wants a job could have one at some wage level (and a new tidal wave of Latin Americans trying to get to the US). Of course, a lot of people would refuse to work for the low wages, but those with a work ethic would be able to start gaining work experience right away and start moving into higher paying jobs. Economic price controls have deleterious effects and an artificially higher minimum wage will result in job loss and an acceleration of automation leading to yet more unemployment. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [December 15, 2016, 1:12pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/134 "2016-12-15T13:12:57Z")
> [@k9bfriender](#): > > Once again, you try to change the goalposts. I am not talking about people making the federal minimum wage, I am talking about people who make less than the new proposed minimum wage. That is a much larger number than you keep talking about. About 7 Million low wage earners had [2 jobs in 2012](https://toughnickel.com/finding-job/Working-2-or-More-Jobs). I could dig and try to find more up to date cite, but I don’t really have time right now. I am sure a little google-fu could find more up to date numbers. No, I am not moving the goalposts - I am asking for a cite for what you claimed. What percentage of those who earn less than what you propose for a MW are working two jobs, and what percentage of those jobs will be lost if the MW is increased? Your cite says specifically > [@](#): > > Not everyone who has found it necessary to hold 2 or more jobs in this economy is in a low paying job. Andrew Sum, professor of economics and director of the Center for Labor Market Studies at Northeastern University says the better educated a person is, the more likely they are to be holding a second job. Do you have a cite for what you claimed? Regards, Shodan ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [December 15, 2016, 1:52pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/135 "2016-12-15T13:52:41Z")
And how many holding two jobs do so because the hours are low for both? We have nearly 30 million people working less than 35 hours per week. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [December 15, 2016, 2:06pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/136 "2016-12-15T14:06:48Z")
If six million of those want full time jobs, it doesn’t surprise me if another two million have pieced together part time jobs. Eta: I know guys, let’s ban part time jobs! It’s for the workers! ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [December 15, 2016, 5:55pm UTC](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234/137 "2016-12-15T17:55:49Z")
> [@Buck\_Godot](#): > > After cost of materials upkeep, taxes markting etc. a widget nets a profit of $2.00 > > Worker A produces 20 widgets and hour, but is very shy and doesn’t know the widget market and so meekly accepts $8.00 an hour. The Boss gladly rakes in a net profit of $32.00 > > Worker B produces 10 widgets an hour but hires a negotiator who convinces the boss to pay him $16.00 an hour. The boss still seeing a net profit of $4.00 accepts. > > Obviously worker B is twice as valuable to the employer as worker A as indicated by the fact that he is paid twice as much. You simply would not see such a disparity in the free market. There are other workers in the world besides A and B. The business owner would have to determine whether worker A or worker B is the outlier. Either he is getting an excellent deal by hiring Worker A (and should probably give him a raise so he doesn’t jump to the competition) or he should fire Worker B as he is getting ripped off. I think people understate how marketable even an unskilled worker is who will 1) show up on time, 2) sober, and 3) work hard. That is something and employer desires. It used to be expected, but more and more it is becoming a luxury to have in an employee. [Previous page](https://boards.straightdope.com/t/what-would-be-the-actual-effects-of-abolishing-the-minimum-wage/774234.md?page=6)