What would be the actual effects of abolishing the minimum wage?

Great Debates
21

It’s better to do both IMO.

Even if robots stacking shelves in a typical wal-mart (and not the backroom or warehouse) was feasible right now:
1. What about the other duties I listed for a typical shop assistant?
2. What about the other jobs I listed?
3. What difference does this make to this issue anyway? It’s very unlikely the marginal difference between MW and whatever wal-mart wants to pay is the critical difference between whether this technology gets implemented or used.

But in this case it’s the corporation with the need.

I’ve worked for plenty of companies (I’m a contractor), and I’ve never seen a case where a business doesn’t really need an employee, but hey, if they offer their services for a pittance, then said business might create a job for them.

The need, and the job, is there, it’s just the matter of how good a deal they can get from the market. Squeezing a few extra dollars out of their lowest-paid employees generally doesn’t matter a great deal to them but they’re a profit-making venture and will do it if they can.
Meanwhile those few dollars mean a lot to wider society. It makes sense for us to say: You can only go so low.

And I’ll repeat it for emphasis: MW doesn’t force companies to hire. If they grudgingly pay that means the employee is worth much more than MW to them.

OTOH if you think MW will cause unemployment to increase, then we can discuss that: I disagree, but no-one here has put that point to me so I haven’t had need to go into it yet.

22

To answer the OP, the effect would be almost nothing. This is one of those non-problems (like bathrooms) that really don’t need solved.

From the Bureau of Labor Statistics website. Less than 4% of workers earn minimum wage.

Partial quote here:
Among those paid by the hour, 1.3 million earned exactly the prevailing federal minimum wage of $7.25 per hour. About 1.7 million had wages below the federal minimum. Together, these 3.0 million workers with wages at or below the federal minimum made up 3.9 percent of all hourly paid workers.

I don’t know why we spend so much time arguing this subject in the US. Anyone who’s remotely competent is soon above MW. I didn’t like working for minimum wage either, back in 1974. Each of my (now adult) kids started at minimum wage, and each got raises within a few months on the job. Neither has seen MW since.

It’s a solution in search of a problem.

23

“May not have been possible.” Are you making the claim or not? If yes, show your work.

24

You have not shown this. Two workers can do the same job, one receiving state aid and one not (because state aid in the U.S. is dependent on multiple factors). The employer doesn’t know the difference. Increase the aid by $1; now how much of that $1 does the employer receive?

25

MW does nothing productive. Need based aid and or basic income is what works.

26

Wal Mart has offered those workers a better employment situation than anyone else in the world has. Why are they routinely bashed for doing this?

Minimum wage advocates like to bite the hand that feeds the poor. Butt out.

27

So the social service worker said that if you had a business that only made you $15K a year and you needed an additional $5K worth of support from the government to make ends meet than you should close the business and make $0K a year? I can see why the person went into social work instead of business education.
If Walmart closed would its employees be better off or worse?

28

What would happen is that wages would vary more by area. In most cities nothing would happen since the market clearing wage is higher than the current minimum wage. In poor areas the market clearing wage would be lower than the old minimum wages and more people would get hired at the new wage. Those making minimum wage in those areas would be slightly hurt by the new wage since their wages would not go up as much. The people who are newly hired would then learn job skills on their new jobs and would move up the job ladder to higher paying jobs. This would reduce unemployment, poverty, and crime in the affected areas. Since the number of people who are priced out of the current job market is relatively small, the number of people moving out of poverty would be relatively small, maybe 10,000 a year.

29

How would unemployment benefits work if there is no minimum wage? Would people lose unemployment benefits if they found a $2/hr job?

30

This is disingenuous. Suppose I start working at McDonald’s for the minimum wage. McDonald’s will review my performance, usually after three months or so, again after six months, and again after a year (or some such progression). At some point, I’ll be handed a raise. That raise will be something relatively insignificant, like $0.15 an hour. But at that point, I’m no longer earning the “Minimum Wage”.

Yet, EVERY line employee at McDonald’s is earning a wage that is based off the initial wage McDonald’s pays, which is minimum wage. So an increase in the minimum wage will perforce result in an increase in wages for all McDonald’s line workers. If you include everyone who’s wages would automatically have to increase because of an increase in the minimum wage, you get a hell of a lot more than 3% of the workforce. :wink:

31

That’s not really a problem with economics. Everything IS an economic issue.

It is economically true that 1 is better than 0. The faulty assumption though is that markets automatically produce efficient outcomes, i.e. That a worker at Walmart earning $7/hr. Is actually worth $7/hr. It might be that that worker is performing work worth $15/hr and the difference is being subsidized by taxpayers who giving social aid to that worker, or it might be that that worker is doing work worth $3/hr. And Walmart is generously providing a social service and giving back to the community by easing the burden on the taxpayer.

Trying to tease out the truth is tough part.

32

Not everybody that starts working at McDonald’s makes minimum wage. And surprisingly, not everyone that works in fast food makes wages that are based on minimum wage. There are workers who negotiate a higher wage based on experience and such.

33

Right now, the minimum wage is a floor for wages; no matter how uneducated, unskilled, inexperienced or incompetent a worker may be, if they’re working, they’re being paid at least minimum wage. And I’d suspect that there are gradations of skill, education and experience within minimum wage jobs- i.e. they’re not all actually equal in terms of what it takes to do the jobs well.

So you’d have some minimum wage jobs that would remain paying 7.25/hr. You’d have others that would pay significantly less, because there would presumably be people willing to work for say… 5.00/hr doing something requiring less education, experience or skill than a job that pays $7.25/hr.

I think downward pressure on wages might be limited to the lower skill/experience/education jobs that typically already pay minimum, or that are upward in the career path for former minimum wage earners. I don’t see qualified and skilled trades and jobs being unduly affected by an abolishment of the minimum wage; their wages are more set based on the going market rate for that particular combination of skills and experience, not on their distance from minimum wage.

34

If everything is an economic issue, explain why people smoke. People pay large amounts of money to consume a product they acknowledge provides minimal benefits and causes them significant harm.

Why do people not wear seatbelts?
Why do people go to church?
Why do people prefer one brand of beer over another?
Why do people have a favorite sports team?
Why do people choose one particular individual to marry?
Why do people have pets?

There are plenty of areas in human lives where people do things which make no economic sense. In many cases, they’ll even admit what they’re doing doesn’t make economic sense.

In the real world, people are often motivated by factors that have nothing to do with economics. Economists either admit this or try to fudge the equations by adding in “x factors” to balance the numbers.

35

I’m not terribly familiar with our unemployment insurance, having never collected it. If we’re going to have it, it seems reasonable to continue support if the unemployed person finds a job that pays less.

I don’t think it works that way now.

36

The real effect would to be speeding the development of robotic assembly of fast food.

Carl’s Jr (poster child) would resent even more having to pay anybody anything.

In case you haven’t heard:
That voice at McDonald’s drive-thru (“Can I take your order?”) is a call center worker. Even that job is outsourced as much as possible (can’t risk a Hindi* accent showing up).

Mc’D’s is behind the “Two-Tier Minimum Wage” - a trainees is not worth $7.25/hr - we want to pay them $5 until they are “worth” 7.25.

I loved the WalMart “Help make the Season Cheerful” drive - the beneficiaries were the WalMart employees.
Real charming place.

    • Hindi is the dominant language of India. There is also Tamil and a few other regional languages. Pakistan speaks Urdu.
37

The pleasure from smoking outweighs the financial, health and health costs.

Lots of reasons, all can be expressed economically. For example, they don’t wear them on school buses because lots of school buses don’t have them because the cost to install them carries less benefit than other safety measures which could be implemented (as per Cecil article.)

Different reasons. I went as a kid, because my mother would take me to breakfast at IHOP afterward. That’s a purely economical transaction. I go today, because that’s part of the admission price into heaven, and because if I am seen at Church than I am seen as the kind of person who goes to a Church. This adds to my stature in the community, and provides me economic and social benefits.

Again different reasons. I drank K&B brand beer because it was super cheap back in College. Pure economics. People choose their beer based on many factors but these can all be expressed economically.

. Again, there is no one answer, but I can give you answers and express them in terms of economics. I like Penn State, because they are the most local big college, so it’s convenient, plus I get benefit by having a shared interest with other local people which increases my stature.

. Dating is one long economic shopping and negotiation where each person attempts to spend the coin of their desirability to gain the most desirable mate. Do you think Brad Pitt ended up with Angelina Jolie because he is her soulmate? Why do so many rockstars end up with supermodels? This is such a blatant ecomical exchange of value than I am surprised you don’t see it.
Why do people have pets?

. What people admit is besides the point. The fact is that everything that we do represents an exchange of value. That’s economics.

Respectfully, I don’t think you have a firm grasp of what ecomics is. It is the study of value exchanges.

If you are watching a movie, and you need to go to the bathroom, and you carefully time your sprint to the John so as to avoid missing a good part, and to miss as little of the movie as possible, you are engaging in a series of ecomic transactions.

38

That’s going to happen regardless. The genie’s out of the automation bottle.

That’s fucked up.

39

I feel I have a pretty good grasp of economics. Enough to spot a lot of those x-factors I spoke of.

Smoking gives you “pleasure”? Okay, let’s work on that. You said you can express answers. So how is pleasure measured? What are the units it’s expressed in? How much pleasure is contained in a cigarette? Do different brands of cigarettes contain different amounts of pleasure? Do different people obtain different amounts of pleasure from the same type of cigarettes? What’s the exchange rate of pleasure into more commonly recognized units of value? What percentage increase in the price of cigarettes would cause a given smoker to decide the pleasure is no longer sufficient value?

A physicist or a chemist or a biologist can analyze smoking and give you hard numbers about their scientific analyses. Can economists do that?

I personally believe economic utility is the equivalent of phlogiston or luminiferous aether or biological humors.

40

I drink the beer I do for flavor. I want to see you torture flavor, ethics, and personal choice into an economic decision. I’ll start by granting my choice of hard liquors are an economic compromise.