Minimum Wage: What's the Other Argument?

What you are describing has been operative more or less since the beginning of the industrial revolution, and even earlier. Marx recognized it all the way back in the 19th century.
But, I think you're completely off-base if you represent the minimum wage level as having a major effect on the processes that cause this to happen, considering how few workers are actually affected by the minimum wage.

Careful now, over 40% of American workers make less than $15/hr. And the economic argument doesn't even touch the reduction in purchasing power that people making $15-$20/hour will face in places where prices go up, but their wages do not.

And that doesn't even touch the virtual certainty that minorities will be the ones disproportionately feeling the pain of job losses from a large wage increase.
 
What you are describing has been operative more or less since the beginning of the industrial revolution, and even earlier. Marx recognized it all the way back in the 19th century.
But, I think you're completely off-base if you represent the minimum wage level as having a major effect on the processes that cause this to happen, considering how few workers are actually affected by the minimum wage.



It's nonsense when it's used to object to raising the minimum wage to $15 over the next four years.
Where is the actual evidence that minimum wage increases really cause these effects? In theory, sure, you could raise the minimum wage to $100 or more, but is that even remotely on the table? No.

http://www.npr.org/2016/04/01/472716129/one-year-on-seattle-explores-impact-of-15-minimum-wage-law

Four years to phase in a US Federal wage of 15 is way too quick for businesses to adapt, there is also massive variation between states so I think 10 in fact is a better short term goal. 100 would kill the economy as very few people generate that amount of productivity.

I think the bigger thing is to introduce a Basic Income, say 10000 per year or 830 a month which is low enough it'd encourage people to work, but high enough to provide a very basic standard of living. I would also recommend a guaranteed income of half of that for kids which would represent a substantial boost versus child credit and food stamps for parents.
 
Why do you want to sentence people to working menial jobs which could be automated away?

It's like trying to encourage employment of human alarm clocks or switchboard operators.

Because the mindset that people need to work in order not to be thought of as unproductive leeches is not going away; if anything, it's become worse. The result is that people who lose their jobs and cannot find other employment through no fault of their own are thrown into the underclass and given barely enough to survive. Furthermore, not being employed has severe negative effects on mental health. If there were a serious chance of a change of mindset, I'd rather just dial the average workweek way back and have everyone reap the benefits of the extra leisure time. But this isn't what's happening: instead, people who have jobs work full weeks, and people whose jobs have been eliminated get discarded.

If you read things written by social reformers and futurists of the turn of the 20th century, they agree that the increase in productivity caused by automation should cause the average work week to fall to something like 20 hours or less by the year 2000, thus freeing up people's time for leisure, hobbies, further education, etc. But there's no sign of this, and it doesn't appear that our economic system favors decreasing the hours of people who are employed in order to employ more people. Instead, people who do have jobs work 40+ hours/week, and people who work less or not at all are usually working less because their employer cut their hours and their pay, or laid them off altogether.

So we're in a situation where we basically need people to dig holes and fill them back in again, or else they'll be discarded as unproductive leeches. Well, better would be to employ them at some of the things we actually do need, like infrastructure repair and upgrading, but there will come a point where it's not possible to productively employ all of the workforce (minus a few percent unemployed at "full employment"). This will cause a long-term increase in long-term unemployment. We're already seeing this today, although it's hard to tell where the technological effects begin and the normal economic ones end.

What you are describing has been operative more or less since the beginning of the industrial revolution, and even earlier. Marx recognized it all the way back in the 19th century.
But, I think you're completely off-base if you represent the minimum wage level as having a major effect on the processes that cause this to happen, considering how few workers are actually affected by the minimum wage.
In minimum wage discussions, you have to consider not just the workers who are working at exactly the current minimum wage but all of the workers who are currently making wages between the old minimum wage and the new one that is being proposed. According to metalhead's source, that's something like 40% of the workforce between $7.25/hr and $15/hr.

It's nonsense when it's used to object to raising the minimum wage to $15 over the next four years.
Where is the actual evidence that minimum wage increases really cause these effects? In theory, sure, you could raise the minimum wage to $100 or more, but is that even remotely on the table? No.

http://www.npr.org/2016/04/01/472716129/one-year-on-seattle-explores-impact-of-15-minimum-wage-law
There haven't really been any good examples where the minimum wage was raised to anything like that level, even over four years, while an adjacent jurisdiction didn't raise it. That's the main reason I'm excited that some cities are running the experiment.

Even for the usual kind of minimum wage hike (from something extremely low to something very low), economists are approximately evenly divided on whether they increase unemployment or not. My best understanding of the evidence is that the normal type of minimum wage increase doesn't have any real effect on employment, but a large one (say, hiking it to the current 40th percentile wage) nearly certainly would. Section II of this blog post contains a decent summary of the disagreements among economists.

My guess about the Seattle case is that Seattle will be able to get away with raising its minimum wage to $15 without major ill effect, as could some other high-priced cities with strong economies on the West and East coasts. However, it would almost certainly be bad policy in most of the country. Even within states, a gradual hike to $15 in Washington would have vastly different effects in Spokane than it would in Seattle, or in California Fresno vs San Francisco, or in Massachusetts Fall River vs Cambridge, etc.
 
Because the mindset that people need to work in order not to be thought of as unproductive leeches is not going away; if anything, it's become worse. The result is that people who lose their jobs and cannot find other employment through no fault of their own are thrown into the underclass and given barely enough to survive. Furthermore, not being employed has severe negative effects on mental health. If there were a serious chance of a change of mindset, I'd rather just dial the average workweek way back and have everyone reap the benefits of the extra leisure time. But this isn't what's happening: instead, people who have jobs work full weeks, and people whose jobs have been eliminated get discarded.

So automate as many people away as quickly as possible until it's no longer feasible to treat the structurally unemployed as discarded.
 
So automate as many people away as quickly as possible until it's no longer feasible to treat the structurally unemployed as discarded.

I don't know if you realize how rough this transition will be. I'm not totally certain that humans even can be satisfied without an ostensibly productive role in the economic activity of their society. Also keep in mind that large amounts of unemployed, disproportionately young, and economically useless people are a major cause of social unrest, for obvious reasons.

We probably want to make the transition as smooth as possible. My own statement about decreasing the incentives to automate is one idea, although better would be to strengthen the safety net and decrease the workday and work week to be considered full-time. There just aren't any signs of this, though, so we probably will end up doing what you're advocating, in a particularly disruptive way.
 
I don't know if you realize how rough this transition will be. I'm not totally certain that humans even can be satisfied without an ostensibly productive role in the economic activity of their society. Also keep in mind that large amounts of unemployed, disproportionately young, and economically useless people are a major cause of social unrest, for obvious reasons.

We probably want to make the transition as smooth as possible. My own statement about decreasing the incentives to automate is one idea, although better would be to strengthen the safety net and decrease the workday and work week to be considered full-time. There just aren't any signs of this, though, so we probably will end up doing what you're advocating, in a particularly disruptive way.

Yes, by "no longer feasible", I mean that I expect major social unrest to force change.
 
Unemployed young people might behave differently if society doesn't make them outcasts and prevent them from having economic security just because they don't have a job.

Also, I like the idea of charging employers payroll taxes on things like ordering kiosks. It's actually kind of ridiculous not to tax them on things which are performing actual job functions.
 
Unemployed young people might behave differently if society doesn't make them outcasts and prevent them from having economic security just because they don't have a job.

Also, I like the idea of charging employers payroll taxes on things like ordering kiosks. It's actually kind of ridiculous not to tax them on things which are performing actual job functions.

Why wouldn't we ostracize young people as lazy parasites for not having a job even when there are no jobs?
 
In general, I prefer progressive vs regressive taxes. It's why I don't like minimum wage (in principle) and the idea of payroll taxing robots is ... I dunno, weird. Why do payroll taxes on robots when you can do income taxes?
 
If you tax automated labor, then taxes will track productivity much better than simply taxing income.

A VAT would also accomplish this.
 
It is actually kind of ridiculous to have payroll taxes at all, especially if you want to reduce unemployment.

A VAT is also a very high deadweight loss kind of tax.


We should not fight automation or other innovations that decrease required labor time or increase the total wealth available in the economy.

It makes much more sense to redistribute that extra wealth through a citizen's dividend.
 
Also, I like the idea of charging employers payroll taxes on things like ordering kiosks. It's actually kind of ridiculous not to tax them on things which are performing actual job functions.

It would be very hard to define "things which are performing actual job functions" without meaning pretty much anything a company buys. The obvious 1st step i vending machines. Are they not just "ordering kiosks" for a limited set of produces? Then you can get more esoteric, that computer running excel is taking the job of 50 accountant with ledgers. That printing machine is taking the jobs of a million monks with quills.
 
metalhead said:
Careful now, over 40% of American workers make less than $15/hr. And the economic argument doesn't even touch the reduction in purchasing power that people making $15-$20/hour will face in places where prices go up, but their wages do not.

Yes, I'm sure people making $15-$20/hr will be absolutely beggared by a $15 min wage :rolleyes:

And that doesn't even touch the virtual certainty that minorities will be the ones disproportionately feeling the pain of job losses from a large wage increase.

Job losses which you assume will take place but aren't indicated by any sound economic theory. This is scaremongering without any factual basis.

Bootstoots said:
In minimum wage discussions, you have to consider not just the workers who are working at exactly the current minimum wage but all of the workers who are currently making wages between the old minimum wage and the new one that is being proposed. According to metalhead's source, that's something like 40% of the workforce between $7.25/hr and $15/hr.

True.

Bootstoots said:
There haven't really been any good examples where the minimum wage was raised to anything like that level, even over four years, while an adjacent jurisdiction didn't raise it. That's the main reason I'm excited that some cities are running the experiment.

Even for the usual kind of minimum wage hike (from something extremely low to something very low), economists are approximately evenly divided on whether they increase unemployment or not. My best understanding of the evidence is that the normal type of minimum wage increase doesn't have any real effect on employment, but a large one (say, hiking it to the current 40th percentile wage) nearly certainly would. Section II of this blog post contains a decent summary of the disagreements among economists.

I'm much more concerned with empirical evidence, than in what economists who subscribe to 19th (in some cases even 18th) century theory believe.

As has been pointed out before Truman nearly doubled the minimum wage and this did not bring about any ill effects.
And I know, when he doubled it it only affected 10% of workers. But so what? By the 'higher wages raises unemployment' logic so many people making wages above the minimum (in fact, more than double the minimum) should have been causing unemployment all by itself.

Bootstoots said:
I'm not totally certain that humans even can be satisfied without an ostensibly productive role in the economic activity of their society.

You should read history. Lots of aristocrats were perfectly content in this role. The modern aristocracy is perfectly content in it now.

EDIT: Payroll taxes should be abolished. Not a big fan of income taxes either, really. What I'd like above all else is flexibility in the tax regime, to reflect the changing economic circumstances. The economy is dynamic and the tax regime should be dynamic as well.
 
The most straightforward way to do it would be to scale up payroll tax rates as worker productivity increases, rather than directly tax a given machine. Keep it simple, keep bureaucracy away from deciding what should be taxed, and by how much. Charge it as a tax surcharge.
 
Yes, I'm sure people making $15-$20/hr will be absolutely beggared by a $15 min wage :rolleyes:

I don't know why you continue to act like people won't be negatively affected. You really don't think people will care if the price of food goes up by 20%? You don't have to be sent into the poor house to lose out in the deal.

Job losses which you assume will take place but aren't indicated by any sound economic theory. This is scaremongering without any factual basis.

I'm not quite sure when supply and demand ceased to be sound economic theory. Perhaps I was absent the day they sent that memo?

Claiming that a large increase in wages won't decrease demand for labor makes about as much sense as claiming that cutting taxes will increase tax revenue. It's not scaremongering, it's basic economics. I don't really understand why people can't be adults and acknowledge that policies they support actually have risks and potential downsides.
 
The most straightforward way to do it would be to scale up payroll tax rates as worker productivity increases, rather than directly tax a given machine. Keep it simple, keep bureaucracy away from deciding what should be taxed, and by how much. Charge it as a tax surcharge.

At what level? If it is at a national or industry level, then you hurt companies that retain staff when others are automating. If you do it at a company level you hurt existing companies that want to move with the times compared with new start-ups that can exploit technological improvements without laying off existing staff.
 
Well, I'm not sure it's a good idea, but I do know that economists have fretted about what continued increasing productivity means for both workers and government bottom lines. Neither taxes nor wages have come close to keeping up with it.
 
metalhead said:
I don't know why you continue to act like people won't be negatively affected. You really don't think people will care if the price of food goes up by 20%? You don't have to be sent into the poor house to lose out in the deal.

The idea that food prices will increase by 20% is completely unfounded nonsense.
http://www.fastcoexist.com/3059118/after-a-year-seattles-new-minimum-wage-hasnt-raised-retail-prices
Again, if you want effects look here. The only exception is restaurants...
One exception to the trend was restaurants, which raised prices 7%-9% because they rely so heavily on labor. Even there, however, owners sometimes found other ways to cut expenses as they paid workers more, such as closing during slow hours or asking customers to wait a little longer because fewer people are waiting tables.
...and as far as I know no one depends on restaurant food for survival, except sometimes people who work there...

And BTW - I believe that minimum wage increases negatively effect capitalists and bosses, but I want them negatively affected. If I had my way the capitalists and bosses would be done away with completely because we don't need them to run the economy.

metalhead said:
I'm not quite sure when supply and demand ceased to be sound economic theory. Perhaps I was absent the day they sent that memo?

The problem is not the supply and demand, it is the lack of dynamism and the isolation of the one thing from the rest of the things that, in reality, are affected by the one thing and affect it back.

metalhead said:
Claiming that a large increase in wages won't decrease demand for labor makes about as much sense as claiming that cutting taxes will increase tax revenue.

More discredited 19th century theory...

metalhead said:
Well, I'm not sure it's a good idea, but I do know that economists have fretted about what continued increasing productivity means for both workers and government bottom lines. Neither taxes nor wages have come close to keeping up with it.

I read something recently that suggested productivity increases might be slowing down, even stopping.
 
Could you explain the problems with the theory 19th-century theory? You've said that it's wrong several times, but never actually said what is wrong with it, or given any data which suggests that it doesn't work.
 
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