Why are most minimum wage proposals in the US $15?

[Wrenching_Spanners]

@Ruken

Since it’s a Great Debate, you first; make your argument one way or another and I’ll tell you why I think you’re right or wrong instead of just peppering you with questions.

I do not believe that market forces do an adequate job of setting the baseline wage of typical unskilled workers. I believe that wage slavery exists in many parts of the world. I wasn’t able to quickly find a cite on global wage slavery, but a comparable cite is the US Department of Labor paper “List of Goods Produced by Child Labor or Forced Labor”. https://www.dol.gov/sites/dolgov/files/ILAB/ListofGoods.pdf (PDF) Wage slavery conditions that I’m aware of include construction work in the UAE, diamond mining in Angola, coffee plantations in the Ivory Coast, and clothing production in Bangladesh. I don’t believe that the US or the UK are naturally immune from wage slavery. At least in the UK, wage slavery conditions for illegal migrants at car washes and nail bars are an issue. The prosperity of the US and the UK ensure that the very abject conditions listed above won’t occur in those two countries. Putting it in simple economic terms, our demand curve is to the right. However, that’s not an indication that the supply/demand price point for unskilled labour in the US or UK would be above the poverty level. Using the minimum wage as a guideline, 493,000 UK workers were paid below the minimum wage in 2018. Record number of UK workers paid below minimum wage – report | Minimum wage | The Guardian In the US, the figure is 1.3 million, albeit with qualifiers due to tipping. https://www.bls.gov/opub/reports/minimum-wage/2018/pdf/home.pdf (PDF) The poverty line may or may not be below the current minimum wage in the US or the UK. But if there are currently markets for below minimum-wage workers, even if it’s illegal, then if there’s no minimum wage the supply/demand price point for unskilled labour will be below the poverty line.

[Wrenching_Spanners]

In my previous post, the line “Putting it in simple economic terms, our demand curve is to the right.” is misstated. The supply curve of people in the US and UK willing to work for very low wages is to the right of the supply curve in impoverished countries. The demand for those very low wage jobs is lower and I conflated the two. My apologies for any confusion caused.

[Wrenching_Spanners]

@Shodan

That depends, of course, on what you mean by “adequate”.

My somewhat ambiguous definition of adequate in that post is that the socioeconomic benefits of a situation exceed the socioeconomic costs. My viewpoint is that conditions of abject poverty represent a huge socioeconomic cost to society. Mild poverty represents a mild socioeconomic cost. Moving people out of poverty eliminates socioeconomic costs to society. I think this should be measured in absolute terms and not relative terms. Relative poverty doesn’t personally disturb me. I’m not concerned about the ratio of the lowest paid workers to CEO’s, although I do believe that minimum wage rises should be based on both inflation and increases in the GDP. Given the ambiguity of the above definition, a more straightforward definition of an adequate baseline wage is the poverty line. A single adult working full time in normal employment circumstances should, at the minimum, be earning slightly above the poverty line as defined by the government for a single adult. Minimum wage should be set to ensure that happens.

@Shodan

“Is that worth it?” is a moral question, not a market one.
<snip>
Market forces are efficient, in that they bring about the average greatest good for the average greatest number. It can be decided that efficiency is less desirable than greater good for some, which is why MW is a form of cost-shifting. Sometimes that can happen, but it is a mistake to believe that cost-shifting is the same as free money, for anyone.

Agreed.

[Shodan]

@Wrenching_Spanners

My somewhat ambiguous definition of adequate in that post is that the socioeconomic benefits of a situation exceed the socioeconomic costs. My viewpoint is that conditions of abject poverty represent a huge socioeconomic cost to society. Mild poverty represents a mild socioeconomic cost. Moving people out of poverty eliminates socioeconomic costs to society.

Well - it depends on how you move them out of poverty.

Simply increasing the MW, and thereby moving them out of poverty, does not eliminate costs - it just shifts them from taxpayers (assuming it replaces welfare payments and SSDI and the EITC and so forth) to employers. If you move them out of poverty by investments in human capital, then you can reduce the costs - if everyone graduated from high school and/or college/trade school, then that would reduce the costs of poverty, and hopefully the increase in tax revenue from better-paying-because-more-in-demand jobs would make up the difference.

Of course, you can’t do that with everyone. Not everyone can be productive enough to raise the demand for their labor. But that is equally an argument against the MW - not everyone can be productive enough to earn MW. So, they just won’t get hired. And thus you don’t reduce their cost to society.

Regards,
Shodan

[puddleglum]

@Wrenching_Spanners

My somewhat ambiguous definition of adequate in that post is that the socioeconomic benefits of a situation exceed the socioeconomic costs. My viewpoint is that conditions of abject poverty represent a huge socioeconomic cost to society. Mild poverty represents a mild socioeconomic cost. Moving people out of poverty eliminates socioeconomic costs to society. I think this should be measured in absolute terms and not relative terms. Relative poverty doesn’t personally disturb me. I’m not concerned about the ratio of the lowest paid workers to CEO’s, although I do believe that minimum wage rises should be based on both inflation and increases in the GDP. Given the ambiguity of the above definition, a more straightforward definition of an adequate baseline wage is the poverty line. A single adult working full time in normal employment circumstances should, at the minimum, be earning slightly above the poverty line as defined by the government for a single adult. Minimum wage should be set to ensure that happens.

In your model when the minimum wage goes up, businesses pay their employees more and do nothing else.
In another model when the minimum wage goes up, businesses pay their employees more and then respond in other ways. For example, they higher fewer employees and give their current employees fewer hours.

Which model is correct is an empirical question and it has been studied. When Seattle changed the minimum wage to 15$/hr they also commissioneda study to look at its effects. What it found was that it increased pay for workers, but led to fewer hours which meant that most workers ended up making the same total pay. However, it also led to fewer jobs for low skilled workers. Thus some people were helped a little, and some people were hurt alot. As you point out abject poverty is worse than mild poverty, thus the minimum wage is a bad idea.