Minimum wage -- an education in how not to debate

What is your individual opinion on the Minimum wage law. Do you believe it is a benifit for the economy, or do you believe that the minimum wage has the adverse effects? Explain your reasoning.

 

I believe people deserve a living wage and minimum wage is a way to enforce that even though an inordinate amount of the time minimum wage is not a living wage for anyone. Without minimum wage businesses would pay the least amount possible because that is just how capitalism works. Less overhead = more profit. Minimum wage does have negative effects in our global economy though because now that the economic climate of the world is globalized businesses push work out to underdeveloped countries to maximize profits. That gives rise to unemployment issues.

And your signature - I hate Keynesian economics because of an economy class I took.

 

Hello, Emperor! You may advocate more Keynesian policies than you may think; there are many flavors of Keynesian economics.

Individuals have not taken these jobs because somebody put a gun to their head and said "produce, or else." Individual actors take these jobs because they see an advantage. If they did not subjectively feel the job would benefit them, they would not take the job. People would not take wages if they were too low, and a business will not provide wages that are too high. In an unhampered market, wages will fall to their equilibrium.

If you create a minimum wage you create unemployment, you're taking away marginal workers who would have worked for less. They create compulsory unemployment, businesses will chose not to hire more people if they must pay them more than what they would have to pay in an unhampered market. They will hire less than what they would have and all the individuals who would have taken what they saw as an opportunity cannot now, because the Business cannot afford to hire them for what they were willing to work at.

Because business cannot operate in country A with a minimum wage law, they go and produce in country B, which has no minimum wage, giving them huge employment benefits because they're willing to work work at those wages (like the marginal workers in country A would have). So you're saying that a minimum wage law does create unemployment and takes away production capacity?

 

It should be minimum of $10 an hour!

 

Why should it be $10 an hour?

 

I mean in a perfect closed market it would work this way, but as I said globalization of the economy creates an interesting set of problems, unless all of the world has the same standard of living the market will never be able to work itself out to an equilibrium that will allow the maintenance of current standards of living. Correct me if I am wrong but you are saying that marginal workers will be willing to work for less than what it is possible to live on. There is a huge difference in say how much I could live on in Taiwan and what I could live on in the US. (Taiwan is an example, no one get all hoity toity and say I am stereotyping.)

If we went from our current economic situation and abolished minimum wage laws now and started paying manual labor and repetitive labor employees the same wages that the factories in Taiwan payed we would have a lot of hungry, homeless, dying people because with out current situation it would take much too long for the market to adjust down.

Unless my understanding of a market is completely wrong. Which it could be, I only have fairly basic knowledge of macroeconomics.

 

its not enough to live on...

I work a minimum wage manual labor job and not only is it tedious but theres no way in hell i will be able to afford to pay for college!

Honestly its rediculous how little we get paid for the word that we do.

 

Glad to see your reply Emperor!
If I understand correctly are you trying to state that unless every Society has the same standard of living, they can't achieve equilibrium? If this is the case I want you to keep in mind that every Society will have different standards of living, every individual will have different standards of living. If there is no intervention in the market, prices will always fall towards equilibrium - values are subjective, so the equilibrium will change.

To an individual actor it is seen on his scale of values as a gain. He voluntarily exchanges his labor for instead of 7.50 an hour, the equilibrium wage of 7 dollars an hour. If it were not a gain to him, he would not take what he considers an opportunity. Instead though, the Government enforces a minimum wage law, and producers must cut back on hiring labor and now person 'x' won't get hired at all! Sure person Y will be making .50 more an hour and so will person Z. What about persons V, W, and X? They won't even have the chance to receive the 7.00/h, and now the Entrepreneur is out of possibly increasing his production to increase standards of living and 3 people are out of work.

People in Taiwan generally have a lower standard of living, they've been in massive poverty due to their own Government intervention issues. They take their low paid jobs because it was ranked higher on their scale of value than to just sit at home and not even be able to purchase bread for himself.


Our wages would not go that low. If the law were to be perished, companies would lower the wages to equilibrium, increase their Capital/Employee base, etc. and maximize their production capacity. Let's say they try to set it below the equilibrium of wages, fewer people would want to work for the business, they wouldn't be able to produce to their best capacity, they won't receive as much profit and as you stated before, Producers want to maximize their profits as much as possible. Let's say they lower the wages of workers to 6.50 - well 7 is the equilibrium, so not as many people are going to work for them, and they will soon realize this and to increase their profits they will increase their offered wages to 7.00/h.

 

When getting paid minimum wage your employer is basicly saying
' if i could pay you less i would'

i earn double that of minimum and thats still stupidly low.

 

If you feel you cannot possibly save to pay for your college and find it lower on your scale of value to take a loan out or borrow the money from someone, you always have the option to quit your place of work. You've stayed at your job because you saw it as a psychic gain, perhaps it was a better option to take this immediate job (time preference) instead of waiting to find a better suitable job for you to pay for college. Perhaps it was a better option than just sitting at home wishing you had a job, perhaps it's a better option than to look hard for different work.

Hello, stojac, thank you for contributing to the conversation!

I'd like to begin by saying the employer is basically saying, "if I could pay you what the free-market set in place, I would pay you that and increase my employee base and Capital investment."

Eventually, the employer will successfully purchase new Capital, increase their employee base, and increase Production. I'd also like to say that increased production leads to increased wages.

The higher prices in other aspects of the economy are due to more intervention issues but that is another discussion entirely and I may create a new thread very soon relating to this subject (some of it being talked about perviously on this thread, just not so much in detail.)

 

Here is where economics on paper meets the real world. You can say these things on paper all you want, but the truth is for first time employees, with no college degree, and little to no experience there is very little work. You say to look for a different job like jobs are plentiful - the truth is that real life isn't as easy as a mathematical model. There are many things that you can't model through a graph, formula, or equation. You've looked at his statement one sidedly and didn't consider all of the elements.

 

Im not quite sure what your asking us to express here, are you saying this debate is about:

1.) Whether minimum wage is too low

2.) Or should minimum wage exist

If 1.) I do think minimum wage is a tad too low, very hard to live on its not feasible, i think it should increase by 20%.

If 2.) We need a minimum wage law or else we go back to slave labour, employers choosing how much they wanna pay their workers and if the workers can't find ANY work they'll take it just to survive and could be working for pennies.

 

For first time employees there would be more work offered, producers are no longer under the strain of government imposed minimum wage laws. I am not graphing, nor using mathematics to illustrate my reasoning. Austrian economics is based upon the study of human action, why humans act different ways using their means to achieve various ends. I have certainly looked at this from many angles.

Should minimum wage exist, I argue it should not and we should allow the free-market to determine wages.

Slave labor? Are you forced to work for that wage? Wages are prices, and are determined the same way. A business man wants to increase his production and maximize his profits, a worker wants to maximize his income. If a Producer offers only 1 dollar an hour, where the equilibrium is 7 dollars (the amount in which producers will maximize their supply of labor and employment is maximized because people are willing to work for these wages) Nobody is going to be willing to work 1 dollar an hour, so the Producer won't have any workers to maximize his profits. So he is forced to increase wages to their equilibrium so he can maximize production and profits.

 

He is talking about real life though, not a scenario. There is a bit of a difference there.

My question is what incentive would abolishing the law bring if there are still places that will accept less? The median/equilibrium here may be $7, but there are still places that will work for only pennies on the dollar. What brings it back here? There is still no reason to bring it back here if you can hire workers that will work for 500% less else where.

 

omfg madhacker, you don't even know how long it's been... what with you, sam, jrsmithfan, and tyro all coming back to post at sythe-- it's like a TC oldfag party!!! *dredges up screenshots of tight pink tanktop*


On topic: minimum wage is a curse. At my work, I've been working diligently and far above my paygrade for 4 hours straight, and every time we get a meager raise, minimum wage catches up (and often overtakes me) literally no less than a month later. Here's how my wages and minimum wage have gone:

Started work, $8.55 minimum wage, worked for half a year and hit annual raises. I didn't get a raise because I hadn't been there for a full year
Worked a whole 'nother year, annual raise to $8.77
1 month later, minimum wage shoots up to $8.75
Another year, no annual raise in my department due to money shortage
Minimum wage overtakes me at $8.82
Another year, annual raise to $8.93
A month or two later, minimum wage shoots up to $9.01
This april, annual raise that my new boss fucks up, so I only got a raise to $9.05
Minimum wage is expected to raise to $9.10 here in a few weeks.

Why am I crying about minimum wage then if it boosts me up to 9.10 before another annual raise comes? Because I deserve to be earning more than 100% of our labor pool, I have the most seniority over all of the non-director employees. And here's the real kicker: when minimum wage plummets so will my wage. I won't stay up at $9.10, I'll be lumped in with the rest of the lumps who make minimum wage when it plummets back down. I can guaranteed this was their plan. It's just a good thing I probably won't be around to watch it happen.

 

Corporations still produce and sell in the United States, yes they export their business to other countries for cheaper wages. If you let wages return to equilibrium, wouldn't that give more incentive to stay in the US? Sure, there are some that will move their business elsewhere regardless, but with the minimum wage you're only decreasing that incentive to produce here.

It's good to hear from you man!!! Anymore TC rooms still going on? Hahaha, I left when the old crew started to die out.

 

I'd just like to point out that in New Jersey it is illegal to pump your own gas. In New York, I haven't seen a full service pump in years. Let's compare:

New York Cost per Gallon (Average): $3.860
New Jersey Cost per Gallon (Average): $3.580

Now let's remove taxes:

New York cost per Gallon - .696 tax = $3.164
New Jersey Cost per Gallon -.329 tax = $3.251

So this means that the cost of paying someone to pump gas (I'm just assuming that they can acquire the gas at the same average rate as New York as they are close by one another), on average, costs the stations 8.7 cents per gallon.

New Jersey minimum wage is $7.25 per hour. I'll round up to $9.00 per hour to cover the hidden costs of hiring an employee such as the employers social security contribution. With more simple math you find that you need to sell about 104 gallons of gas per hour per full time gas attendant to not lose any money. This could be done by just having a few people buy gas in that hour.

Therefore the cost of having people pump gas is not all that great. The reason that they do not have these people, unless forced to by law, is because businesses do not care about anything except their profit margins. If New Jersey decided to allow people to jump their own gas, I highly doubt the cost of gas would go down. They would keep it higher as people are used to that particular price.

You mentioned that not allowing people to form contracts of their own free will is immoral. In a perfect world, I would agree with you. However, this is not a perfect world and the majority of people are immoral and quite stupid. In addition to this, corporations have more resources available and could write contracts in such a way so that they could easily take advantage of people who do not have the intelligence, knowledge or money to deem whether or not a contract is fair or misleading. This is where the government steps in to be a force for the people that has more influence and power than any corporation. This is a solution to try to make the world as moral as it can be being that we live in a very imperfect world. When you have to choose between two immoral options, choosing the one that will be the least immoral is your best bet.

 

I don't believe the minimum wage is tomorrow because it is more of a trade law or speeding ticket then it is a forced behavior like no murdering, no robbery ect. Trade laws also are a staple of the first world which prevents things like all the companies that provide a specific service grouping together and artificially inflating the price of a specific service. The minimum wage law essentially means that you cannot sell your work for less than any specific value. Productivity is irrelevant when talking about the minimum wage law because the minimum wage law deals with supply and demand. a gas pumper and a receiver both make minimum wage yet require different amounts of productivity, both make approximately the same wage because they are low skill high supply jobs. This law protects those with low skill who want to apply for the high supply jobs because otherwise there wage would be run into the ground due to the high supply, which wouldn't allow them to make a living.

Also volunteer work and internship can be supported while supporting the minimum wage law. Volunteer work is considered a donation to an organization, while internship is considered an exchange of productivity for experience or learning in a specific career environment.

While everybody thinks, well I should say everybody who is smart thinks, that more education should turn into a better salary at work it is still a necessity to protect the lower class from becoming even lower by having their low skill jobs sold for less than the cost of living. The minimum wage does this at the cost of cutting off students from taking lower positions for a little to no pain unless the work is done illegally. Having illegal workers also only results in a fine not the arrest of the owner.

Lastly most of these low productivity positions still exist in many places regardless of the minimum wage for example all across canada there are more pumps with employees that will fill your gas then there are pumps without them. With some stations even requiring only employees to fill. Another example is greeters in big box stores this position is literally the lowest of the low productivity requires absolutely no skills and could probably be sold for 50 cents an hour yet it still exists with a minimum wage law.