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

[Arwon]

Because people shouldn't get fired for no reason. Getting fired sucks. Radical position, I know.

 

[Arwon]

I would also point you to OECD minimum wage levels (Australia around 23 USD in PPP adjusted terms, one of the highest couple), labour force participation rates (Australia in the top third, around Canada) and unemployment levels as a starting point if you want to argue about "destroying jobs" or whatever, if there's an effect there it's seemingly swamped by lots of people getting paid fairly decently.

(Of course, ours probably isn't high enough to be an actual living wage, even the Reserve Bank is worried about lack of real wages growth over the last five or so years, and the opposition are planning to bring back an actual living wage should they win government this year, but anyway)

 

[MagisterCultuum]

A podcast that came up in my playlist this morning happened to include an interview with the man behind a major study into the results of Seattle's minimum wage increase.
http://www.econtalk.org/jacob-vigdor-on-the-seattle-minimum-wage/

Among their conclusions were that increasing the minimum wage did not cause a significant number of people to loose their jobs. Those who already had jobs were very unlikely to loose them due to the increase, but when looking to expand companies were less likely to take on new employees at the lowest rungs and more likely to invest in innovations like having customers order food through apps instead of talking to waiters or asking customers to bus their own tables.

The minimum wage increase did however result in low paid part time workers being given significantly fewer work hours, enough that they often took home less total pay despite the higher hourly wage rate.

 

[Arwon]

Yeah Vancouver is at Sydney levels behind only Hong Kong, measured as median house prices as a multiple of median incomes. Melbourne and some Californian cities the next couple on that list.

I assume Vancouver has the same trouble with anti density NIMBY types we do?

Most of the countries looked at in this Demographia publication are Anglophone but I'd be surprised if much of continental Europe were in this range. Maybe Tokyo though? Singapore is 4.6.

 

[El_Machinae]

I listened to that podcast as well, and it's actually a very good podcast. The host is an Austrian economist, but he is pretty good at flagging his biases.

Later on in that podcast, they start flirting with my major concern, automation induced unemployment. Minimum wage isn't the right tool there, though they don't actually get to the discussion of the right tool for the problem

 

[Synobun]

Yes. Rezoning public transit corridors is a nightmare, let alone non-PT corridor neighbourhoods. There are several SkyTrain stations (above ground subway, basically) which are still zoned for single family homes. Our density is alright but it could be a lot better than it is. We also have fairly unrestricted foreign ownership. Something as simple as an "empty homes" tax receives significant push-back. Some of our politicians are openly and outright bought by the Chinese government.

Anyways, Vancouver and the associated report is window dressing for the point of the thread. If someone wants to start a thread about the Vancouver housing market, they're certainly free to.

 

[Arwon]

Hoo boy, in this country that "Chinese owners" thing is a massive racist dog whistle to the baby boomer property owning class, who are looking to blame something other than their own NIMBYism and favourable tax treatment for the affordability crisis.

 

[Synobun]

Hoo boy, in this country that "Chinese owners" thing is a massive racist dog whistle to the baby boomer property owning class, who are looking to blame something other than their own NIMBYism and favourable tax treatment for the affordability crisis.

It is here as well. It's difficult to talk about because there are many who just see "foreigner" and pick a boogeyman. They let their prejudice control their opinion, and facts are essentially secondary. Addressing actual foreign influence is almost impossible with that in mind because both racists and hyper-anti-racists get into a tiff over the opportunity of an outrage.

But it's an actual thing. Vancouver is a hot spot for Chinese wealth, as well as casino laundering. Sometimes those are connected. This place is an idyllic locale to plant a ton of cash and make some serious dough.

 

[El_Machinae]

if there's an effect there it's seemingly swamped by lots of people getting paid fairly decently.

I don't doubt there's a benefit, as I've said, it's a tool that has its place. It can be misused, and the damage is borne at the bottom.

We can use all types of regressive effects to create a net benefit. Road tolls can improve efficiency, making students loan interest payments tax deductible can improve efficiency. But you have to carefully set the dial, because the damage is borne at the bottom.

In your charts, Alberta and Australia aren't good examples, because they trade natural resources in exchange for stuff value-added at much less than a living wage. Ostensibly, you can crank that to eleven, even, if you want to really sell your future. Two data points to create a correlation isn't the best idea, anyway.

Because people shouldn't get fired for no reason. Getting fired sucks. Radical position, I know.

It's not for no reason. It would be because the adult employee couldn't outperform a teenage employee in a way that was of discernible benefit. This isn't solely 'the fault' of the employer or even the employee. There are just always opportunities available that are not worth a living wage. You don't want to lose discovery of these innovations.

 

[Lexicus]

You are both insisting that the idea can deliver value, and insisting that there is no way to decide if it's true or not.

How do you define value?

You still need a metric. When my doctor suggests a specific medication, there are a constellation of indicators that we watch, and we judge success based on the sum of the metrics.

That's an unfair comparison, the way you judge success in that case is the result of decades of practical experience. They weren't thought up ahead of time by some random dude on the internet. Off the top of my head you'd want to look at unemployment and inflation. If unemployment weren't significantly reduced that would indicate a problem. Runaway inflation would also potentially indicate a problem.

I just don't see the usefulness of the idea compared to a universal basic income.

So explain how you would measure whether a universal basic income is "delivering value".

What is the difference between your idea and the current military industrial complex?

It seems to me self-evident that there is a difference between killing people and blowing stuff up on the one hand, and filling in potholes and planting trees on the other. The J.G. also ideally would have a decentralized administration, rather than a centralized hierarchy.

Really, you're perceptive to draw comparisons to the military. It takes people in, teaches them skills, it doesn't do as good a job as we'd like of taking care of its people but it certainly does better than the "private marketplace." And despite all that wasteful spending everyone knows about, inflation never seems to rise too much.

 

[Arwon]

It's not for no reason. It would be because the adult employee couldn't outperform a teenage employee in a way that was of discernible benefit. This isn't solely 'the fault' of the employer or even the employee. There are just always opportunities available that are not worth a living wage. You don't want to lose discovery of these innovations.

Then you should have to front up in an unfair dismissal tribunal and explain that as a valid reason for firing someone, or of course pay out a couple months' wages worth of redundancy, given the dismissal was nothing to do with the worker's performance.

I'd note also that termination based on age is actually illegal, as it should be as part of a decent junior wage system. Firing someone when they turn 21 to avoid paying an adult wage is actually explicitly illegal under the Discrimination Act according to the Human Rights Commission. Although really, junior wages should only apply to under 18s, the current situation leaves a lot of university students in a pretty bad way when trying to self-support.

 

[Rashiminos]

As much as I inherently disagree with El_Mac's endpoint (in my opinion UBI initiatives will essentially result in vice subsidies), it does explain both how one would rationally support that idea and argues another side of the minimum wage issue. Thank you.

 

[cardgame]

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.

Would that that were true, but, as currently implemented, the opposite is occurring. My state only pays out welfare if you are employed, making it nothing less than a subsidy to exploitative employers.

 

[Hrothbern]

A podcast that came up in my playlist this morning happened to include an interview with the man behind a major study into the results of Seattle's minimum wage increase.
http://www.econtalk.org/jacob-vigdor-on-the-seattle-minimum-wage/

Among their conclusions were that increasing the minimum wage did not cause a significant number of people to loose their jobs. Those who already had jobs were very unlikely to loose them due to the increase, but when looking to expand companies were less likely to take on new employees at the lowest rungs and more likely to invest in innovations like having customers order food through apps instead of talking to waiters or asking customers to bus their own tables.

The minimum wage increase did however result in low paid part time workers being given significantly fewer work hours, enough that they often took home less total pay despite the higher hourly wage rate.

and more likely to invest in innovations like having customers order food through apps instead of talking to waiters or asking customers to bus their own tables.

Yeah... it helps push out the lazy, more reactive, investment behaviour

Innovation => higher productivity and higher value added per hour => enabling higher wages.
The reverse is also true (in many cases): unendless cheap labor pool available => no need for innovation & less investments => no resulting higher productivity => "we cannot pay higher wages"

The minimum wage increase did however result in low paid part time workers being given significantly fewer work hours, enough that they often took home less total pay despite the higher hourly wage rate

Which is easily (from the purely technical side) adressed with a bit of tax redistribution.

 

[civvver]

Regarding high housing costs, did you guys see those recent tweets attributing high housing costs to foreign oligarchs who need to wash their money and do so using REITs? I'm sure it happens to some degree but this guy seemed to think that was the main reason. I wonder how big a contributing factor it really is, if any at all.

 

[Valka D'Ur]

It's not for no reason. It would be because the adult employee couldn't outperform a teenage employee in a way that was of discernible benefit.

You're going to have to define "outperform." My mother was once a front desk clerk/bookkeeper for one of the smaller hotels in Red Deer and she was fired because she wasn't "bubbly enough." Her replacement was a woman half her age with much less experience.

My mother sued for discrimination on the basis of age, and won.

 

[civvver]

You're going to have to define "outperform." My mother was once a front desk clerk/bookkeeper for one of the smaller hotels in Red Deer and she was fired because she wasn't "bubbly enough." Her replacement was a woman half her age with much less experience.

My mother sued for discrimination on the basis of age, and won.

As soon as someone is over 50 it's really hard to fire them apparently, even as white collar, at will employees. You have to document a whole bunch of stuff so you have an iron clad case when you get sued. Just saying not bubbly enough isn't going to hold up. And the replacement probably makes less money so it looks like an incentive to fire her. That's why a lot of people don't get fired but laid off with leveraged buyouts and stuff.

 

[rah]

Yeah, we usually offer a generous severance. (which includes a no sue clause) for anyone over 50.
The other is to hire another older person that you know is incompetent and then document, fire and then hire the cheaper younger employee.

 

[El_Machinae]

You're going to have to define "outperform."

It doesn't really matter, because I am talking about the damages done by a price-floor. If the concern is employers milking employees, there are progressive mechanisms available. I am trying to point out the damages done by a regressive intervention. Just keep remembering, the wage of a person who cannot get a job has a wage of zero. And that's the wrong wage for someone to have if they want to work.

In the case I was discussing with Arwon, we were talking about a position that was created because teenagers could provide services more cheaply than an adult could. If you destroy the creation of these positions, the employment they generate is 'none' instead of 'too little for a person to live independently'. Not all positions destroyed by a minimum wage are having their excessive profits captured by the employer. Some are being passed onto the local customer. Others are creating exports that would not have otherwise existed. Doesn't matter.

I am not arguing against the idea that capital has too much power or that labour doesn't have sufficient bargaining power. I'm sold on those. I'm just saying that a regressive intervention is the wrong tool for the job. The employer who's making $80/hr margin on an employee 'loses' $1/hr (1.025%) when the MW goes up by $1. The employers who was making making $1/hr is now making zero (100% reduction). The company that wasn't making a real profit, but was functional is driven out of business. The company capable of passing on the costs to their customers is then affecting their poor customers more than their wealthy customers.

The matrix of conditions required for any specific MW increase to 'work' is pretty tight. Making 'the point' of the minimum wage something capable of living some type of lifestyle is the wrong matrix. Because it's hurting the more poor in order to help the (now less) poor.

 

[cardgame]

I feel like a lot of people aren't understanding that el_mac is coming from a standpoint of UBI already existing, in which case everything he's saying is 100% correct. If you take the "any wage is better than no wage" model and apply it today, it's pretty obviously not good.