Minimum Wage: What's the Other Argument?

[metalhead]

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...

...and as far as I know no one depends on restaurant food for survival, except sometimes people who work there...

You've totally missed the point. I've gone to the trouble of pointing out that in places where labor makes up a relatively small percentage of businesses' bottom lines - such as in cities like Seattle where most of the cost is in real estate and taxes - the effect is going to be negligible. The problem is, the example of Seattle is not in any way applicable across the country, because in other places, a much larger share of operating costs come from labor. Also, a national minimum wage affects the cost at every step in the supply chain - manufacture, warehousing, transport, etc., costs which are not affected when the $15 minimum wage is isolated mostly to the retail part of the equation.

I feel like you're making excuses that "no credible economic theory" holds that a $15/hr wage is bad, but then you make a fundamental error in logic by holding up the Seattle example as if it means something.

 

[Lexicus]

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.

I actually did explain some of them a few pages ago, but it's simple: the 19th century theory forgets that the wages paid to workers make up a large proportion of national income.
Workers, and particularly low-wage workers, have a higher propensity to spend than most other people, so when their incomes rise they spend more, which overall generates more economic activity. Greater consumption leads to greater investment and more employment.
Then from an earlier post:

Problem with the classical theory is it views the economy as static, confuses the analysis of a single firm or individual with an analysis of the economy as a whole, and its assumptions viz. rational behavior and availability of relevant information are known even by its proponents to be false.

You want data that suggests it doesn't work? Look at the real value of the minimum wage in the US over time, and then look at employment and prices in the US over time.

If you find any of the correlations claimed by the fearmongers, here:

Can't find any graph that superimposes the real minimum wage onto the inflation rate, but there's similarly no correlation.

Minimum wage increases would cause inflation at full employment, but in a situation with tremendous underutilization of economic capacity? Where productivity and wages are further apart than they've been since the 1920s?

I feel like you're making excuses that "no credible economic theory" holds that a $15/hr wage is bad, but then you make a fundamental error in logic by holding up the Seattle example as if it means something.

It's the best evidence available for what happens with a $15 minimum wage.
Yeah, I'd say no credible economic theory would hold something as simplistic as "$15 minimum wage is bad."
Scaremongering tactics like the ones you're using now have been deployed for more than a century to get people to oppose wage increases. But can you come up with a single example of a large wage increase affecting similar proportion of people, that actually had negative effects?

 

[El_Machinae]

I'm also really worried about productivity. It's getting harder, because there're fewer ways to invest in productivity as the low hanging fruits are scooped.

 

[Vectors]

A raised minimum wage can also increase demand as the people have more discretionary income.

 

[metalhead]

Scaremongering tactics like the ones you're using now have been deployed for more than a century to get people to oppose wage increases. But can you come up with a single example of a large wage increase affecting similar proportion of people, that actually had negative effects?

I support minimum wage increases. Putting forth poor evidence because "it's the best we have" isn't making a case, it's trying to rebut an argument with something totally irrelevant to the discussion. Pointing out that there is risk is not "fearmongering," it's recognizing that there are risks in setting a minimum wage that is too high.

There has never been a minimum wage increase even of the magnitude of going from $7.25 to $10, let alone to $15. $15 represents a minimum wage higher than anywhere in the world. Your chart doesn't seem to include a doubling of the minimum wage anywhere on it as far as I can tell, so once again - your data is irrelevant. I can't come up with an example because a raise of this magnitude doesn't exist; why you seem to think that the absence of data supports the conclusion that you can raise the minimum wage at will without any negative consequences to either the price of goods or employment is breathtaking, it really is.

It's not really a difficult concept to understand that what happens when you have a small wage increase does not simply scale up proportionally when you have a large wage increase. And in fact, even in cases where increases are relatively small, there is evidence that prices go up at establishments that employ minimum wage workers.

 

[Commodore]

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.

That makes absolutely no sense. The only reason to tax corporations for automating is to bully them into keeping actual people employed.

 

[onejayhawk]

If you find any of the correlations claimed by the fearmongers, here:

That is suggestive of a correlation, particularly with the 16-24. Other factors are clearly at play, eg the early 1980s recession.

One could also use that chart to argue that the minimum wage is close to historic norms. No tinkering needed.

J

 

[Flying Pig]

One might also point out that there isn't really a trend in the minimum wage there, that growths and declines are too short-lived to really see their effect, and that it's all operative within narrow boundaries - barring one peak in 1970, the minimum wage is always within $1 of $8.

 

[Lexicus]

I support minimum wage increases. Putting forth poor evidence because "it's the best we have" isn't making a case, it's trying to rebut an argument with something totally irrelevant to the discussion. Pointing out that there is risk is not "fearmongering," it's recognizing that there are risks in setting a minimum wage that is too high.

There has never been a minimum wage increase even of the magnitude of going from $7.25 to $10, let alone to $15. $15 represents a minimum wage higher than anywhere in the world. Your chart doesn't seem to include a doubling of the minimum wage anywhere on it as far as I can tell, so once again - your data is irrelevant. I can't come up with an example because a raise of this magnitude doesn't exist; why you seem to think that the absence of data supports the conclusion that you can raise the minimum wage at will without any negative consequences to either the price of goods or employment is breathtaking, it really is.

It's not really a difficult concept to understand that what happens when you have a small wage increase does not simply scale up proportionally when you have a large wage increase. And in fact, even in cases where increases are relatively small, there is evidence that prices go up at establishments that employ minimum wage workers.

Never said you could raise the minimum wage at will - that's a strawman. $15 is the high end of what I think would make sense.

But you're talking about transferring a non-trivial amount of money to low-income people...and all you want to do is talk about how it will affect payrolls without talking about how it would affect other things.

One might also point out that there isn't really a trend in the minimum wage there, that growths and declines are too short-lived to really see their effect, and that it's all operative within narrow boundaries - barring one peak in 1970, the minimum wage is always within $1 of $8.

What does a trend in the minimum wage have to do with anything? There is no trend in the minimum wage, and a slight upward trend in unemployment...
Like I said, anyone who thinks the minimum wage is going to be a major driver of unemployment is kidding themselves. The real cause of unemployment is that the government won't run a large enough deficit. On that note, I'd prefer a Job Guarantee to a minimum wage, but that doesn't seem to be on the table so...

 

[Flying Pig]

Surely that's not enough to judge the impact of the minimum wage, though? I mean, seeing unemployment go up slightly without a change in the minimum wage doesn't say anything about how high it would be with a vastly different minimum wage, or how it would respond to significant changes. All that it says is that the two aren't locked one-to-one - and that isn't a particular surprise.

 

[metalhead]

Never said you could raise the minimum wage at will - that's a strawman. $15 is the high end of what I think would make sense.

But you're talking about transferring a non-trivial amount of money to low-income people...and all you want to do is talk about how it will affect payrolls without talking about how it would affect other things.

Then let's talk about them, without resorting to calling risk identification "fearmongering." The whole point of the thread was to discuss the potential downsides of the minimum wage being too high, was it not?

There are far better ways to transfer money to low income people, as we've discussed many times. Too high of a minimum wage poses risks to people that some might lose their jobs. It poses risks to low-skill workers that they might be priced out of the employment market altogether.

Small minimum wage increases can actually help create jobs, due to the transfer of wealth and increase in demand, but that is not absolute. The best approach is to raise it to $9 or $10, give it a few years, and then see if you can increment it higher. That way, you mitigate the risk. Meanwhile, states and cities that feel they can handle it economically are free to raise it higher if they want. I recognize there are political realities at play that make a long-term approach like that difficult to pull off in reality, but going whole hog to doubling it without trying to assess or mitigate the risk because blind faith says a $15 minimum wage would work everywhere is bad policy.

 

[Vectors]

A job guarantee just kicks the can down the road, what if in 30 years there simply aren't enough jobs to go around?

 

[Lexicus]

Surely that's not enough to judge the impact of the minimum wage, though? I mean, seeing unemployment go up slightly without a change in the minimum wage doesn't say anything about how high it would be with a vastly different minimum wage, or how it would respond to significant changes. All that it says is that the two aren't locked one-to-one - and that isn't a particular surprise.

*shrug* That would be my point. There is no reason to conclude such dire consequences as warned of by people I suspect don't work jobs that pay low hourly rates. I think the overall history makes it clear the minimum wage has been a boon to people working in those jobs.

Now, if you want to get right down to it I don't think the minimum wage is the best method of transferring income downward...but it's a method and I favor fighting for $15 because that's the best way to get $12.

Small minimum wage increases can actually help create jobs, due to the transfer of wealth and increase in demand, but that is not absolute. The best approach is to raise it to $9 or $10, give it a few years, and then see if you can increment it higher.

That is precisely what is being proposed. IIRC in CA the $15 min wage kicks in over a period of years and the governor has the authority to stop it if the effects are too bad.

A job guarantee just kicks the can down the road, what if in 30 years there simply aren't enough jobs to go around?

What does it mean to 'not have enough jobs to go around'? I don't recognize the validity of that concept...there's not a finite number of jobs sitting around...

 

[metalhead]

I'm glad that California is doing the experiment. I'm only opposed to going to $15 at the federal level, without having any idea of the effects. States can find out on their own how well it works. It's easier to reverse at the state level, and far less disruptive. And if they get there and the negative impact is minimal, then we can look at it federally.

 

[Vectors]

Technology will reduce the amount of jobs to go around to achieve "full employment", see how Instagram replaced Kodak and has far less employees.

By not enough jobs I mean the amount of work will decrease to the point where there is not enough work to have extremely high labour participation rates, 40 hour work weeks and unemployment at 5%. We could reduce the work week in duration to say 35 hours and that's a decent idea, but it only goes so far as 10% of jobs are in relatively easy to automate fields such as cashiers which already are starting to be replaced by machines, in restaurants you might see more switching to an electronic device to take orders and check you out without waitstaff involvement so that businesses can employ less waitstaff per table.

 

[Lexicus]

What I want to know is what you mean by 'amount of work'. Like, you seem to think there's only a finite, definite amount of work that needs to get done. That's what I'm confused about.

I think that what you're saying is more or less correct as it applies to the production of physical things, which encompasses mining, agriculture, manufacturing, all that stuff.
But the service sector is of a fundamentally different character, there's no real limit to the things we can decide we want to pay people to do for each other.

 

[metalhead]

As long as people continue to discover new ways to add value/reduce risk to existing businesses and individuals, the service sector will continue to grow. It's possible the automated economy isn't nearly as hands-off as we envision from our necessarily myopic current point-of-view.

 

[El_Machinae]

That makes absolutely no sense. The only reason to tax corporations for automating is to bully them into keeping actual people employed.

If one only sees taxes as 'bullying', the conversation gets more difficult. But remember that we're talking about unemployment up there, so either we're taxing corporations to provide welfare or we're taxing to encourage employment. It's the horns of dilemma, and perfect is going to be the enemy of the good.

 

[MagisterCultuum]

The market may be able to create a limitless number of jobs to serve the needs of individuals, but the government would never be able to predict what those jobs would be well enough to provide an employment guarantee.

It would work far better to provide a Basic Income, so ordinary people could have a stronger vote as to what free market services they find valuable.

Of course it is better yet if we don't tax productive labor, industry, or trade, but shift to taxing negative externalities and government granted privileges.

 

[Vectors]

What I want to know is what you mean by 'amount of work'. Like, you seem to think there's only a finite, definite amount of work that needs to get done. That's what I'm confused about.

I think that what you're saying is more or less correct as it applies to the production of physical things, which encompasses mining, agriculture, manufacturing, all that stuff.
But the service sector is of a fundamentally different character, there's no real limit to the things we can decide we want to pay people to do for each other.

Why is the service sector fundamentally different? The number of cashiers can be substantially reduced by robots. Airbnb is reducing hotel demand. What do you think Amazon is doing to brick and mortar stores? Do you think Amazon would decide against automating the warehouses with robots doing as much of it as they can? Robots don't need to sleep, they need recharging, but if they have swappable battery packs that is a much smaller time, they don't need breaks or sleep so a robot could work probably 23 hours a day on average.

As long as people continue to discover new ways to add value/reduce risk to existing businesses and individuals, the service sector will continue to grow. It's possible the automated economy isn't nearly as hands-off as we envision from our necessarily myopic current point-of-view.

The service sector has poor wages which at the bottom end have to be subsidised, it also produces a lot of terrible jobs which are highly repetitive.