[RD] What is the Point of a Minimum Wage?

It doesn't work. First off, an incredible number of people are not living wholly alone. They're in some type of communal living arrangement. For example, teenagers who were able to stay at home until they were done high school.
Shades of Jason Kenney. :rolleyes:

If the UCP defeats the NDP in the next Alberta election, Kenney has vowed to decrease the minimum wage for teenage workers. He doesn't think they have the same need for $15/hour that an adult worker would (and he's made it clear that he considers $15/hour to be too much anyway).

It whooshes over his head that there are teenagers who are working to help support their families (if one parent is sick and unable to work, if they're in a single-parent household, and there are instances where the teen is the only one with a job if the parent(s) is/are unemployed). Kenney is oblivious to the fact that college educations are not free in Alberta, so a lot of high school kids are saving up for it. Or they have a vehicle that requires all the same things that an adult's vehicle would require (and there are situations in which a vehicle would be necessary if the student has a job that doesn't mesh with local public transit).

A business isn't a 'failure' if they're able to tap this labour pool and then provide services. The teenagers require a subsidy in order to live their life, but the two alternatives are that the family is paying the subsidy or the business isn't. If the minimum wage prices them out of the market, then they're just not employed.
You do realize that not all teenagers live with their families, right?
 
You do realize that not all teenagers live with their families, right?

I do. That's why I literally qualified things in the previous sentences.

A minimum wage doesn't help the teenager who's supporting the family, because the teenager living at home can outcompete him to get the job. Unless you're hoping that the rich kid is too lazy to get the minimum wage job.

The minimum wage is the wrong tool for the job. It has nothing to do with Jason Kenney. A high minimum wage, if put to a 'living wage' destroys every single lower-productivity job. That's a huge loss of potential employment and output.

It's a very regressive intervention. It hurts one poor person in order to help another poor person. A single mother cannot afford a babysitting service in order to take advantage of a spare shift, because the babysitting service (while hiring teenager in their spare time) is not allowed to charge the single mother less than what she's making by pulling extra shift hours. It wouldn't matter if the babysitting service could offer a cheap service, it's not allowed to exist.

It's the wrong tool for the job. If you want young people to have enough money if they need it, then use a progressive taxation to help them. You don't give teenagers an advantage by forcing their employer to pay an adult wage, you use a wage-match program paid for out of progressive taxation. You don't help handicapped people by forcing employers to pay them the same as an able-bodied person, you wage-match out of progressive taxation.

The employer won't hire a low-skill worker if the cost (to the employer) is too high. It's just fundamental. It's the wrong tool for the job.
 
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If you want young people to have enough money if they need it, then use a progressive taxation to help them.

I would be interested in your proposed progressive tax policy that would counteract excessive rents.

In the bigger picture, I'm not sure I understand your arguments. You keep mentioning that a living wage would destroy the market and thus it shouldn't be instated, but what is the point of a wage if not for the worker to then be capable of living? Is this a really roundabout way of saying you think the current market system is bollocks?
 
The minimum wage is the wrong tool for the job. It has nothing to do with Jason Kenney. A high minimum wage, if put to a 'living wage' destroys every single lower-productivity job. That's a huge loss of potential employment and output.


This isn't true because minimum wage employees make less income than they produce in outcome.
 
Almost by definition, yes. But the output that is less productive than the minimum wage is just not done. The productivity worth $14/hr becomes zero. It doesn't magically become $15 because the MW is $15.

If you force an employer to pay all apple-pickers at least 10 apples per day, you'll find that none of his workers picks fewer than 10. But not because of magic. The 9-per-day pickers get zero, and they don't get counted as an employee. The 9-per-day picking just doesn't happen, that job is destroyed. It's gone.


I would be interested in your proposed progressive tax policy that would counteract excessive rents.

In the bigger picture, I'm not sure I understand your arguments. You keep mentioning that a living wage would destroy the market and thus it shouldn't be instated, but what is the point of a wage if not for the worker to then be capable of living? Is this a really roundabout way of saying you think the current market system is bollocks?

The minimum wage is a very blunt tool. It has its place. There are cases where it's the right tool, but you have to be careful. It's an intervention for labour's bargaining power. But, it's regressive. It's also a price-floor, with all the damage thereby done. But, to be clear, it doesn't "destroy" the market. It just damages it. I could set up a system of taxation where everyone had to shave their heads before they left the house. It wouldn't destroy the economy, it would just damage it through lost potential.

The point of a market is to clear prices. Every single act of work is of value. Some are more valuable than others. What you want is for people to be doing stuff. Really, think of my example of the apples. That's the way the economy is in many ways ... apples just sitting there that will rot if we don't grab them. We want people to go pick the apples. But if someone is grabbing fewer apples then they need, the answer is not to forbid them from grabbing apples, it's to find a way to get them to pick the apples they can an give them the extra that they need.

Keep in mind, it's not all about 'profits'. For the same reason that inflation boosts employment and productivity, an improper minimum wage (if set too high) can destroy it. There are things that exist at the margin. If an employer has a job that's 'worth' $14/hr, and the MW is $15, then that job won't get done. Doesn't matter if there's someone out there that can afford $14. Doesn't matter that there's someone out there that needs $14, the job won't get done. The service that could have been provided is denied the society, and so that person (who needed $14) either suffers or puts a $14 strain on the safety net.

As for progressive taxation, well a tax on idle income is probably my favourite. Instead of destroying the businesses that are scraping by (but still providing both employment AND a social benefit), you can get a simple benefit through a negative income tax or a wage-match for people with disadvantage. Or a guaranteed employment program.

Tax the extra apples coming off the field. And then either give people apples or (at least) give apples to everyone that shows up to pick.
 
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That sounds like a convoluted version of "let the free market decide", which everyone already knows is a failure of a model.

It's not at all. With a too-high minimum wage, the market has the easiest time 'deciding'. The individual employer will individually decide, using first principle analysis, whether someone is not worth hiring. And every single lower-productivity idea that they have will be discarded, because it's forbidden. You don't want to destroy productivity. You want to tax profits.
 
Can't say I'm tearing up at the idea of an employer not being legally allowed to underpay an employee.

I know. But you're imagining all employers as 'rich'. You're imagining that all productivity must be net profitable enough to generate a living wage. It's the wrong tool. There are entry level positions. There are spare-time positions. There is so much opportunity at the margin that will be destroyed if it's not harnessed.

It's destroying the $14/hr productivity position and taxing the $16/hr position regressively compared to the $80/hr position.

There are enough apples for everyone, hugely so. But only if they get harvested. When you say "we don't want people picking nine apples a day", they rot. They're gone. The person who could have picked nine either starves or has to get ten somewhere else.
 
I'm not imagining them as rich. I'm imagining them as not being allowed to exploit people. If your market system doesn't allow for jobs to provide a living wage, there is something wrong with that market system. The solution isn't to just go, "You know what, guys? It's okay to pay pennies. There'll always be someone desperate enough to work themselves to the bone for it."
 
Thanks @El Machinae - your post #22 really clarified some of your thinking for me.

The one thing that seems to be lacking so far, though, is that your simplified explanations seem to be taking place decoupled from other realities. For example, when the minimum wage recently went up from $10.50 to $13.50 (for small employers) I saw the price of my customary breakfast rise from $7.00 to $7.75. The employer was able to adjust pricing to translate the 9-apple employee into a 10-apple employee.

Adding in another request for explanation:
"The point of a market is to clear prices"
This may be a fundamental truism, but I don't understand the word Clear, nor what Prices refer to.
 
Aren't all these people gathering our food getting less than the minimum wage? Not the farmers of course, but the guest workers.

Have you seen how they live and why American citizens are not lining up for these jobs ?
Even the good wages in slaughter houses are all filled out by new immigrants, illegals and guest workers its tough, dangerous and phyically demanding.

And besides the Arigicultural industry are subsidies and protected by First world governments, as a strategic interest for self reliance.
 
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Yes, some businesses are able to pass along the costs to the customers. That's literally a question of elasticity for any specific position. There was no transformation in that example, tough. The employees were already picking more than ten apples. The value was there, that's why a price-increase was tolerated. What happened is that instead of the employer paying more on a regressive basis, the customer did. The consumer surplus dropped, the producer surplus rose.

When this happens, it can be of net local benefit (even if it causes price inflation). There is no doubt that the minimum wage has its place. But it's a very blunt tool. In your case, local prices increased. This means that those items then became more expensive. You need a case-by-case analysis to figure out if the price increase ended up hurting 'the poor' more than 'the rich'. And yeah, if you're lucky with a minimum wage, you can get a local multiplier effect to offset the unemployment of low-productivity positions.

Sometimes there's just too much money being harvested from an economy by people who'll spend it elsewhere. It's a blunt tool. It's a mechanism to assist labour's negotiation power. It's a price floor. It can generate a multiplier effect locally. It can drive down productivity.

My major point is that it's the wrong tool for the job. For example.

There'll always be someone desperate enough to work themselves to the bone for it.
You want the desperate person working. The last thing you want to do is tell someone that they may not hire this person. It's only in certain circumstances where raising the minimum wage will help this desperate person. There has to be a position that's worth at least the minimum wage available. Any position worth less than the minimum wage counts as zero. The productivity from that position is zero. Doesn't matter if I can casually think of a $14/hr task, if the MW is means they're unemployed then that desperate person gets nothing.

It's the wrong tool for the job. If the person is desperate, that person needs money. He doesn't need a society that has less (net) productivity than it could. Prices are higher than they need to be. Scarcity is higher than it needs to be.

Some jobs have less productivity than the minimum wage. I know this to be true, because my workplace has a side-project that generates $3 per unit. It's literally an unlimited opportunity. Fun if you want to sweat and zone-out. When I hustle, I can do 6 per hour. Most of the smaller staff max out at about 4 per hour. If we were profit-maximizing, we'd not let the smaller staff work on the task. This means those units aren't produced. Now, to pad employee's hours, we let people put in a few hours doing it if things are slow. But that specific task requires a subsidy. With a minimum wage, it means that the employer is the only one who can pay that subsidy. Wrong tool for the job.

Part of any social welfare discussion is figuring out if the rich are capturing too much of the productivity (they are). The other discussion is what to do with people having trouble earning a living. Nine times out of ten, I'd prefer that person produce $28k to earn $30k than produce zero and collect $15k in welfare. The minimum wage prevents the person from producing $28k. If you want him to have $28k more, just give him $2k more from a progressive tax. Don't force him to earn zero by insisting the employer pay people at least $30k.

You want progressive tax to deal with both issues. You want to avoid using regressive systems.
 
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In a previous career, I worked with enough adults to know that the other boogeyman conservatives throw out is false - that minimum wage is really only for kids working their way through school.

Recently saw a funny meme that said "the minimum wage is for high-schoolers, which is why all establishments that pay minimum wage are closed from 7am to 3pm monday thru friday"

The reality is that in any system that tolerates unemployment the minimum wage is zero. The government should act as the employer of last resort, and the wage it paid for that program would actually end up being the minimum wage. $15/hr is not enough.
 
Adding in another request for explanation:
"The point of a market is to clear prices"
This may be a fundamental truism, but I don't understand the word Clear, nor what Prices refer to.

"Prices" are easily thought of in the colloquial sense. To clear a price is to ask "hey, I've got a thingamabob, what's it worth?". Buyer meets seller. Trade happens. If we've good institutions, the economic surplus from the trade leads to net benefit and growth.

The point of our society is for year-over-year benefit to accrue according to the messy standards we apply. We know we want people working. We know we want people making useful stuff. We know we want quality of life to grow. We know we want opportunity to grow.

The reality is that in any system that tolerates unemployment the minimum wage is zero. The government should act as the employer of last resort, and the wage it paid for that program would actually end up being the minimum wage. $15/hr is not enough.

Hmmmn, it's just the nature of work that the minimum wage is zero. Some tasks are worth zero. I could pay someone to come to my place right now and measure the average weight of the dust bunnies under my fridge, but the fair price for that task is zero. With a mandated minimum wage, it just means that the $14/hr position actually pays zero.

I'm really wobbling on the guaranteed job program, if only because it is very easy for a government to pay people to perform a net-loss task. And this would price out other tasks that are less inefficient (though still not net valuable). For example, the government job of weighing-dust-bunnies would easily be able to outcompete the job of spinning-dust-bunnies-into-yarn. Both are negative productivity jobs, but one is worse than the other. Also, the jobs guarantee is actively consuming the person's time, which is then lost in opportunity cost.

Even directly compared to the UBI. The UBI creates purchasing power the same way the jobs guarantee does, but it allows me to allocate my labour time much more flexibly. I'm available to spin yarn out of dust-bunnies. I'm not wasting the time and resources merely weighing them.

What's the balancing metric of the guaranteed employment? What's the indicator that you use to determine if there's net sustainability? How do you determine the net loss or net benefit of the program, to determine if the wage is too high or too low?
 
A minimum wage doesn't help the teenager who's supporting the family, because the teenager living at home can outcompete him to get the job. Unless you're hoping that the rich kid is too lazy to get the minimum wage job.
Why do you assume either of them are rich? And why would the non-supporting teen get the job, if the other one is more qualified? And if a minimum wage job doesn't help, do not sit there and tell me that a less-than-minimum wage job would.

You're seeing this through an economics textbook. I look at it from the point of view of someone who has never been rich and was once half a day from being homeless because of a shortage of affordable apartments in Red Deer that also take cats at an affordable pet damage fee. The place I ended up in was a dump in one of the more dangerous parts of town (murder happened a block away, the upstairs neighbors had regular visits from the cops due to domestic violence, other neighbors told me that the person who used to live in my suite was a hooker and her pimp (who decided to smash holes in the walls and the building owner wasn't in any hurry to fix them until I pointed out that insects could be living there and would escape if they didn't fix the holes), and I was accosted at a bus stop by a woman who was high and potentially violent. I lived there just over a year until the opportunity came to get out of that neighborhood that the cops swore they'd cleaned up (there was a Grim Reapers chapterhouse there, as well as a number of known drug houses) but didn't do anywhere near enough.

The minimum wage is the wrong tool for the job
. It has nothing to do with Jason Kenney. A high minimum wage, if put to a 'living wage' destroys every single lower-productivity job. That's a huge loss of potential employment and output.
I take it you don't read the CBC.ca news site. If he ends up as Premier, he says he will do away with the minimum wage for teens (lower it) because he seems to think that teens never spend money on necessities, only luxuries. I shudder to think about what he would do regarding other vulnerable populations here; whenever some UCP (or Wildrose) canvasser would phone me and I'd ask the party's position on AISH, not one of them had ever heard of it.

It's a very regressive intervention. It hurts one poor person in order to help another poor person. A single mother cannot afford a babysitting service in order to take advantage of a spare shift, because the babysitting service (while hiring teenager in their spare time) is not allowed to charge the single mother less than what she's making by pulling extra shift hours. It wouldn't matter if the babysitting service could offer a cheap service, it's not allowed to exist.
So nobody offers babysitting services anymore unless they work for a child care centre?

It's the wrong tool for the job. If you want young people to have enough money if they need it, then use a progressive taxation to help them. You don't give teenagers an advantage by forcing their employer to pay an adult wage, you use a wage-match program paid for out of progressive taxation. You don't help handicapped people by forcing employers to pay them the same as an able-bodied person, you wage-match out of progressive taxation.
In other words, you treat teens and disabled people (not "handicapped" if you please; I'm not fond of that word) like TFWs and get the non-disabled/non-teens mad at them, like it's their fault if employers suddenly make it difficult for other workers to pick up enough shifts or have decent hours (as was done in some cases where the employers were able to hire TFWs because of subsidized wages).

The employer won't hire a low-skill worker if the cost (to the employer) is too high. It's just fundamental. It's the wrong tool for the job.
So what is the "right tool for the job?"

I would be interested in your proposed progressive tax policy that would counteract excessive rents.

In the bigger picture, I'm not sure I understand your arguments. You keep mentioning that a living wage would destroy the market and thus it shouldn't be instated, but what is the point of a wage if not for the worker to then be capable of living? Is this a really roundabout way of saying you think the current market system is bollocks?
I'm reminded of an argument El Machinae and I had years ago, when he stated that the Alberta government is "benign."

Sure, it's benign if you're wealthy and don't need the social programs that were cut or the hospitals that were blown up or you don't have anyone among your family or friends with a gambling addiction (Klein broke his promise to remove VLTs from any businesses that wanted them gone) or you weren't a nurse who had to leave the city, the province, and sometimes the country to find a job (some of my nursing student clients were in that situation and I tore a strip off Stockwell Day, the last time he came doorknocking for my vote).

Fast-forward to now, and I have to wonder just what Rachel Notley's government did that benefited me. Sure, AISH just went up... by an inadequate amount (I guess she suddenly realized that disabled people vote, but for me it's too little, too late; she would have frittered away hundreds of millions on a two-week party (aka the 2026 Olympics if the people of Calgary hadn't wisely killed their city's bid), but done nothing for the people outside of Calgary and Edmonton. Even now, we apparently have to vote NDP if we want a proper cardiac unit in Red Deer. I had to go to Innisfail for my eye surgery because there's no room to do it in Red Deer.

And I told the person conducting a phone survey regarding emergency rooms if I'd recommend the one at Red Deer Regional Hospital. I told her it was a meaningless question, since it's the only one we have so there's nothing to compare it to. Considering that we're a city of 100,000+ and we also serve a lot of the surrounding towns, villages, and cities like Lacombe, we damn well need a second hospital.

But gotta fund those expensive international sporting events because they supposedly benefit "everybody." I won't be seeing so much as a penny of that "benefit" from the recent Canada Winter Games that just concluded here.

Almost by definition, yes. But the output that is less productive than the minimum wage is just not done. The productivity worth $14/hr becomes zero. It doesn't magically become $15 because the MW is $15.

If you force an employer to pay all apple-pickers at least 10 apples per day, you'll find that none of his workers picks fewer than 10. But not because of magic. The 9-per-day pickers get zero, and they don't get counted as an employee. The 9-per-day picking just doesn't happen, that job is destroyed. It's gone.
Have you accounted for under-the-table payments to workers who are willing to take less? The underground economy is a thing.
 
Hmmmn, it's just the nature of work that the minimum wage is zero. Some tasks are worth zero. I could pay someone to come to my place right now and measure the average weight of the dust bunnies under my fridge, but the fair price for that task is zero. With a mandated minimum wage, it just means that the $14/hr position actually pays zero.

I'm really wobbling on the guaranteed job program, if only because it is very easy for a government to pay people to perform a net-loss task. And this would price out other tasks that are less inefficient (though still not net valuable). For example, the government job of weighing-dust-bunnies would easily be able to outcompete the job of spinning-dust-bunnies-into-yarn. Both are negative productivity jobs, but one is worse than the other. Also, the jobs guarantee is actively consuming the person's time, which is then lost in opportunity cost.

The same argument applies to minimum wage as well. If someone picks 9 apples, but needs 10 apples to live, the net productivity is negative, no matter what the minimum wage is. If we allow someone to pay 5 apples, society somehow has to pay the missing 5 apples and the employer gets 4 apples as profit. If the government would employ this person to pick 9 apples and pay 10, the net cost to society is only one apple. So without a living minimum wage, people get rewarded for creating employment situations that are a drain on society. Forbidding such situations will at least stop this profit and may free up labor to perform more profitable tasks (maybe the person could pick 15 oranges instead). A minimum wage is a blunt tool, but it is much better than having no tool at all.
 
By itself it doesn't have too much point. You have to realize the minimum wage was established at a time when there was also a maximum wage in this country when marginal tax rates were in the 80%s and 90%s. The point of having a minimum and maximum wage is to limit income inequality. Like primates we evolved in small tribes, and pack animals do not tolerate inequality. For the Howard Schultz's of the world who do not understand this, he should try to see if he can survive by himself somewhere in the wilderness in Alberta without other humans to assist him.

The problem is we got rid of the maximum wage when the Christian Right and Billionaire Industrialists formed a coalition, and those same billionaire industrialists (Koch Bros) decided to fund a takeover of the opposition party (labor) by introducing Third Way Politics, giving us a unified voice by both democrats and republicans in the 80s and 90s and 2000s of trickle down economics. 2020 will be simply the pendulum swinging back in earnest towards equalizing that inequality.
 
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That sounds like a convoluted version of "let the free market decide", which everyone already knows is a failure of a model.

The reality is the "free market" is basically an Orwellian term. Humans became agrarian well before the creation of nation-states. Humans went from hunter-gatherer tribes related to blood to agrarian villages of people related by blood, who lived basically in the equivalent of a modern commune. People bartered and lent each other things and extended credit to each other.

It's not until nation states were created (i.e. some of these agrarian societies becoming really successful and expanding into the territories of other agrarian societies) through violence does money and markets come into the picture, money is created by nation states so soldiers have some way to trade for goods and services in places they pass (or occupy), and money can be taxed which creates a system where commerce can be controlled by the government, and market places are created in the courtyards of fortified centers of government. So the libertarian fantasy worldview is basically historically illiterate, because money and markets don't exist without external state violence.
 
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I would be interested in your proposed progressive tax policy that would counteract excessive rents.

In the bigger picture, I'm not sure I understand your arguments. You keep mentioning that a living wage would destroy the market and thus it shouldn't be instated, but what is the point of a wage if not for the worker to then be capable of living? Is this a really roundabout way of saying you think the current market system is bollocks?
The problem is not that the rent is excessive, but poorly distributed.

The best solution is to levy high Land Value Taxes and use them to fund some mix of a Residents' Dividend plus certain public goods (like infrastructure that itself raises land values enough to pay for itself without needing to increase the rate of the tax).

Taxing improvements like apartment buildings discourages investments that produce more affordable housing (and all other sorts of goods), but taxing land up to 100% of its unimproved value actually stimulates the economy and encourages more efficient use of natural resources.

Humans may have have a natural right to the products of their labor, but that does not morally justify letting a certain subset of humanity exploit others by demanding payment from them in order to access scarce resources that they did not create (such as physical geometric space in densely populated areas like cities).

Land titles are not something that comes from a free market, but are a relic of feudal privileges. (The same can be said of the de jure monopolies commonly called intellectual property.)

Economic rent is something that cannot be eliminated, but rent seeking behavior can ruin economies when it allows a small subset to control wealth they did not produce and deprive productive members of society of the resources they need to thrive.


Imposing a price floor on labor is a terrible way to help the poor. Such policies were first created for explicitly racist reasons by men who believed that it was a good way to prevent minorities from competing with whites who expected a much higher standard of living than Blacks or Asians were accustomed to accepting. Many proponents were eugenicists who frankly stated that the point was to prevent undesirables from earning enough to live or reproduce. I don't expect many modern advocates share those sentiments, and we know now that horrible conditions often lead to higher fertility rates, but their reasoning about how it effects employment remains valid.

Minimum wage floors are a blunt instrument that cause significant deadweight losses and tend to do more harm than good.

Basic income guarantees are far preferable.

Some claim that welfare benefits to the working poor are subsides to exploitative employers, but that is wrong. Making poor workers less dependent on their paychecks empowers them to be picker about their jobs and demand even higher incomes when it comes to negotiating wages.
 
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