Traditional economic theory suggests that raising minimum wage does create a price floor on labor costs, putting an economic strain on businesses and ultimately hurting the poorest people by costing low-skill workers jobs.
Although, more recent research suggests that increasing the minimum wage has little to no effect on the economy and may boost the economy by reducing incentives to lay workers off and shifting income towards people who consume more of what they earn.
I think you are exactly right, MW workers are commodities. But that’s mainly due to the existence of the MW. Without it, the commoditization stops. Each worker once again becomes an individual, competing with a bunch of other individuals. You see them, it appears, as inherently commodities. I don’t. I assume that each has a different combination of skills and talents to offer. I want what they get paid to be aligned as closely with that as possible. The MW says, in essence, "Oh, no college, no special skills, go stand in that line with the other few million slubs. It makes people think about how they can separate themselves from the other millions.
I know that if I were one of those workers, I would much prefer to strike my own deal. I’d offer to work for a pittance for a short time to prove myself. Hell, I’ve done this in real life after graduating college and stuck being a gopher for a carpenter and mason. I went on an interview for a job I was under qualified for. The guy liked me I guess, and asked how much I’d want to get paid. I told him I’d work for a month for free. He said that was the right answer. He called me in a week and said I had the job for three months, but that I would get paid. $15,000/year. And with the 80 and 100 hour weeks I put in, I would have been better off at McDonalds. In the short term. A year and a half later I was making $30,000.
The point is, one of the things that got him to take my desire seriously was to put my money where my mouth was and offer to work for $0. And when I got that raise, it started off that I was going to get the usual percentage, whatever it was. But I told my boss that I don’t want a raise. I want a reevaluation that takes into account my contribution to the company today. He went to talk to the powers that be and doubled my salary. Now I was pretty good at what I did, but I think the more important ingredient was the way I refused to be put into a box with tons of other people. That made me work harder and it paid off. I think everyone can duplicate that to some degree.
I’m not sure you’re getting the concept of commodity here. For the purposes of a job, a commodity workers are those whose skills meet the minimum required, but otherwise are indistinguishable. One guy might shoot great hoops, the other might play a wicked guitar, but for the purposes of a fast food place they are the same.
The MW doesn’t make anyone stand in that line. But for those who naturally are going to stand in that line, it makes their life a bit better.
Removing it does not cause any more distinguishing between people. If corn has price supports, and you remove them, you don’t all of a sudden examine the cheaper corn with a magnifying glass to get the very best.
For MW workers lowering pay means you can make a profit on less skilled ones, so you are less likely to do the screening you do now.
And there is a fallacy. Like I said, you are not a commodity worker. You might have had a commodity job, but you soon got out of it. Do you really think that every high school dropout working in a McDonalds as a career would be able to rise up higher, let alone graduating from college?
These days there are lots of non-commodity workers stuck in commodity jobs. Once things recover they’ll be out of them, which is one reason why people in this thread said they had to lie about their abilities to get jobs. Much better to get they guy who will stay forever than the guy who will split the first second the economy improves. Also commodity managers probably don’t like it when non-commodity workers like us rock the boat.
Lots of people think they are not commodities. Only some of them are right. The ones that are right get the big raises because good managers can tell.
Working for nothing - or working at grad student wages - is an example of delayed gratification - which sometimes pays off and sometimes does not (I’m looking at you English PhDs. )
The point remains - if everyone were smart and innovative and go-getters we’d have a more robust economy and people would pay more because the smart person they hire is worth it, and, if screwed, could go to the competition. Do you think everyone is like this? Do you think everyone has an IQ of more than 100? What do we do with the people not up to our high standards? Those are the people the MW is for, not for people like you and me.
Presumably this works in the same way that the Laffer Curve works, in that there is an ideal level where the minimum wage is high enough for MW workers to live and spend enough to keep the economy ticking along, but low enough that it doesn’t adversely affect companies to the extent that it inhibits further hiring or incentivizes job cuts. In fact I suspect the current MW is well on the low side of that curve, in that companies have already cut jobs down to the minimum sustainable level to maximize profits during the economic downturn. If so, you’d have to hike the MW pretty substantially to reach the other side of the curve.
Naturally, every time a MW increase is proposed the usual chorus of Republicans and business interests bewail the impending loss of tens of thousands of low-wage jobs as companies are forced to lay off people in order to pay the higher wages. And every time, the vast unemployment spike among MW employees fails to materialize. Funny, that.
Voyager, I must say that your posts have been extremely informative, well written and a delight to read. I really hope you’re an economics or Poli Sci professor in real life.
This, to me, is the fascinating bit. The classic old supply and demand charts in Economics 101 don’t work; the classical model – wages go up > employment goes down – fails to occur in reality. Something’s missing from the model.
Since what you’ve described has happened every time – from the origin of the MW and in every increase – you’d think the opponents would learn that their model is in error and work to revise it.
IMO they don’t want to be right; they want to be rich. So they’re not going to pay people any more than they have to. Which also implies that the idea that abolishing the MW would be better for workers is false.
Thank you, but I’m just a dumb computer scientist. Everything I know I learned from my daughter who does have an Econ degree from Chicago, and who does research in behavioral economics. We taught a class in behavioral econ as applied to engineering, and hearing her do the econ part for 3 years finally sunk in.
But if you think this stuff through and look at the evidence it all seems pretty obvious.
The really sad part is that so many of them would be happy being rich in a poor country. The wiser among them want to be rich in a rich country, and therefore favor policies that help build up a strong middle class.
One could hardly call Henry Ford a progressive, but that was the big insight he had: if you pay your workers enough so that they can afford to buy the products you make – you have a stronger overall market, and happier, healthier, more satisfied workers too!
But what they are competing on is who is the most desperate. The worker who hasn’t eaten for a week and so will be willing to do the job for 50 cents an hour will out compete the on who ate three days ago and figures its not worth it to work for less than 75 cents.
Of course what is better still is to have everyone else pay their unskilled workers enough to by the products you make while you pay your workers peanuts, that way you get the best of both worlds. Since your workforce is a tiny sliver of the economy there is no point in just raising the pay of your workers in hopes that it trickles up unless everyone else is willing to do the same. Hence the need for someone (i.e. the government) to step in and make sure everyone follows the script.
S’truth… In an ideal world, such an employer wouldn’t have any workers; they’d all just quit and go find better jobs. In an ideal world, we wouldn’t need anti-pollution laws, either, as no manager would ever want to dirty the water his own children have to drink.
Funny how that doesn’t work in real life. The “invisible hand” is sometimes intangible also.
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