The Minimum Wage Destroys Jobs

Originally Posted by Bradylama

If the prevailing minimum is 5 dollars, and then you suddenly increase that by a dollar, you're looking at 1/5th of the current employees on minimum wage losing their jobs.

Have you ever ever heard of labor demand elasticity? Have you ever considered that it's not 1, so maybe your calculations are too simplistic? If you're going to argue with math, then you have absolutely no credibility if you can't even grasp one of the most basic parts of the equation, and did no research to find out whether your "intuitive" economics makes any real sense. Research in the last decade and a half has confirmed that elasticity in fast-food businesses (most highly effected by any wage hikes) is virtually zero. (Take this recent report, by an institute that held onto the notion of high elasticity longer than most - check their report archives.) The numbers don't add up, so we fall back on emotional arguments or outright falsehoods, like Brady's.

In other words, Brady, your argument here is as much an anachronism as your other fanciful notions. I suppose that you'd dismiss economic research by anyone who doesn't put their faith in a gold standard, though, bless your heart.

RR's analogy was closer than you thought anyway; minimum wage hikes' intended purpose is to narrow the disparity between upper management and the lowest workers, but until directors' salaries are based on corporate profitability (regardless of whether I think that's a good idea), such a roundabout trick as minimum wage is only going to do a half-assed job of it.

Originally Posted by a lurker

I think the libertarian argument that minimum wage will destroy your livelihood and lead to rampant inflation is just ridiculous, but I'm not educated enough in economics to say that a minimum wage hike every single year will have minimal adverse effects

Originally Posted by the earlier link

Washington has the highest minimum wage in the country and was the first state to annually adjust its state minimum wage for cost-of-living increases. The Washington-based Economic Opportunity Institute has found that Washington has out-performed the rest of the country in jobs since the end of the recession in November 2001, and that industries most-heavily affected by the minimum wage have not seen adverse employment impacts (Smith 2003; Watkins 2004; Chapman 2004).

Smith, Jason. 2003. “Working Well in Washington: An Evaluation of the 1998 Minimum Wage Initiative.” Policy Brief. Economic Opportunity Institute. http://eoionline.com/MinimumWage/Brief2003.htm
Waltman, Jerold, Allan McBride, and Nicole Camhout. 1998 “Minimum Wage Increases and the Business Failure Rate.” Journal or Economic Issues. Vol. XXXII, No.1, (March). p.221.
Chapman, Jeff. 2004. “Employment and the Minimum Wage: Evidence from Recent State Labor Market Trends.” Briefing Paper. Washington, D.C.: Economic Policy Institute.

How ya doing, buddy?

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There's some wage amount that will get people to stop working a second job in order to get by. I don't know what it is, and I doubt you do either, but do you see the reason why knowing that point could be important?

Also, do you know what zero sum actually means? Taking all the wealth in a country and giving it to one person creates a zero net change in wealth for a country, but I don't think anyone out there would argue the two situations are equivalent from any standpoint other than raw numbers.

That's exactly what I'm saying it means. In your example everybody save one person is a loser of wealth. In the real example of a minimum wage hike, the real losers are in a minority, yet are also the ones who are most purported to be the benefactors. This doesn't seem insane to you? The inability of any central authority to measure such items is why Keynesianism is bullshit.

Knowing the drop off point for when a person stops taking a second job is impossible, because it can only be applied on a case-by-case basis. How much is one man going to be content with compared to another? How much does he need compared to another? These are impossible terms to measure, and expecting somebody working 6 hours a day at one job to stop working the other 6 hours because they're making an extra few bucks is absurd. It won't apply all over the board, and the people who it may apply to aren't going to be significant enough to provide any net benefit. In any case when you increase the minimum wage both federally and at the state level, you create more economic losers, and more chronically unemployed who are incapable of climbing out of their rut without being able to underbid the wages of their competing employees.

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Don't smaller businesses tend to make one of their main selling points their exceptional customer service? You know, it's worth going to your local hardware store over Walmart because even though it's a little more expensive you're going to get expert assistance while you're shopping.

And in order to maintain that expert assistance they'd have to eat expert costs. Which increases with the minimum wage hike. It's an unnecessary burden that shouldn't be placed on small businesses.

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Have you ever ever heard of labor demand elasticity? Have you ever considered that it's not 1, so maybe your calculations are too simplistic? If you're going to argue with math, then you have absolutely no credibility if you can't even grasp one of the most basic parts of the equation, and did no research to find out whether your "intuitive" economics makes any real sense. Research in the last decade and a half has confirmed that elasticity in fast-food businesses (most highly effected by any wage hikes) is virtually zero. (Take this recent report, by an institute that held onto the notion of high elasticity longer than most - check their report archives.) The numbers don't add up, so we fall back on emotional arguments or outright falsehoods, like Brady's.

Ah yes, the EPI report. A document signed on by "scientists" who valued the social impacts of the findings more than the actual real economic ones.

Yes, in the short term the elasticity of labor demand means that small increases in the minimum wage won't be significant. However, what we're looking at is a wage increase that creates no statistically significant level of unemployment. This doesn't account for the affects on the chronically unemployed economic underclass, or how minimum wage hikes actually affect long-term solutions to a loss of real income and buying power among existing workers.

Lurker's statement that the libertarian argument claims that a minimum wage hike will create inflation is false. The argument made by libertarians is that inflation creates a loss of real wages, and the solution to stopping the deterioration of buying power among the poor is to end inflation. Otherwise attempting to peg the increase of minimum wages would constantly involve accounting practices and costs reaching into the billions, which damages the economy on the net, and may even be practically impossible.

As for the Washington example:

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In November of 1998 Washingtonians voted overwhelmingly in favor of increasing Washington’s minimum wage from $4.90 per hour to $6.50 per hour over a two-year period. The law also requires annual cost-of-living adjustments (COLAs) every year thereafter. In January 2003, Washington’s minimum wage is scheduled to increase by 1.6% to $7.01 per hour.

In effect for four years and through times of economic growth and decline, the minimum wage law has had a significant impact on the income of the state's lowest-paid workers and has had no significant impact on job or business growth. Research on Washington’s 1998 minimum wage initiative shows these results:

Considering the recession, it's hard to tell whether the effects of the minimum wage are really that insignificant, or whether the damages were outpaced by the boom following 2001.

In all cases, accounts for the "growth" which occurs in job markets doesn't account for the possibility of a marginal return, i.e. that without the minimum wage these markets would have experienced greater growth and provided even more jobs on the net.

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In addition, employment in the predominately low-paying restaurant industry increased by 3.6% between 1997 and 2001.

How much more expansion would've been possible in the absence of a minimum wage hike?

There's also something else which the hikes of minimum wage don't account for: automation. When setting a price floor on labor, one encourages firms to seek the increased automation of jobs previously worked by low-skilled labor. While in the short term unemployment may not indicate a noticeable increase, in the long term the increasing automation of an industry means that the employment opportunities for unskilled labor will go down.

Also, how do any of these studies reflect any real increase of buying power amongst minimum earners following a mandated hike in the face of monetary and commodity inflation?

I am a dolphin, do you want me on your body?

Originally Posted by Bradylama

And who's going to work a dollar an hour for, anything? You could make better money mowing lawns. The reason we even get payed higher than minimum wage is because entrepreneurs and other rival corporations compete for labor, and the wage earnings of a position as a result naturally gravitate to the actual worth of the labor.

If there are more low-wage workers than there are low-wage jobs, theoretically (since Libertarians ideas mostly are just theory), employers could pay whatever they wanted.

You argue that people should be paid for their productivity, but that wouldn't happen: people would be paid on a market value. Higher skill workers are paid that now, but, with no minimum wage, there's nothing to keep the baseline from spiraling to a point where workers are getting paid well below their worth to a company and we're talking at your levels of destitution.

I was speaking idiomatically.

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If there are more low-wage workers than there are low-wage jobs, theoretically (since Libertarians ideas mostly are just theory), employers could pay whatever they wanted.

Theoretically in a baseline status quo. However, entrants into the market and entrepreneurs keep employers competing for labor in order to avoid a potential staff flight.

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You argue that people should be paid for their productivity, but that wouldn't happen: people would be paid on a market value. Higher skill workers are paid that now, but, with no minimum wage, there's nothing to keep the baseline from spiraling to a point where workers are getting paid well below their worth to a company and we're talking at your levels of destitution.

People are already payed in accordance to their real rate of productivity. The reason we have minimum wage jobs is because they're just barely productive enough to justify the pay. Once you increase the minimum to a certain point, you lose demand for an entire industry. It's why farmers imported illegals to pick strawberries, and contractors imported them to rebuild New Orleans. Cheap, menial labor costs too much to justify a minimum wage.

There's no guarantee whatsoever that companies would attempt a "race to the bottom" in the absence of a minimum wage. If that were the case then why doesn't everybody make a minimum wage?

What kind of toxic man-thing is happening now?

Originally Posted by Bradylama

That's exactly what I'm saying it means. In your example everybody save one person is a loser of wealth. In the real example of a minimum wage hike, the real losers are in a minority, yet are also the ones who are most purported to be the benefactors. This doesn't seem insane to you? The inability of any central authority to measure such items is why Keynesianism is bullshit.

So, in other words, all that matters is the total amount of wealth in the economy and everyone that disagrees can go suck a cock (obviously what they'd be doing to get by)?

Also, welcome to the soft sciences, the inability to measure anything worthwhile is what makes them very speculative and difficult to determine. But just because we can't get an exact number for something doesn't mean we shouldn't at least go for a best shot.

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Knowing the drop off point for when a person stops taking a second job is impossible, because it can only be applied on a case-by-case basis. How much is one man going to be content with compared to another? How much does he need compared to another? These are impossible terms to measure, and expecting somebody working 6 hours a day at one job to stop working the other 6 hours because they're making an extra few bucks is absurd. It won't apply all over the board, and the people who it may apply to aren't going to be significant enough to provide any net benefit.

I thought you said we couldn't measure this sort of thing, yet you're magically making assumptions about how exactly the distribution will fall.

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In any case when you increase the minimum wage both federally and at the state level, you create more economic losers, and more chronically unemployed who are incapable of climbing out of their rut without being able to underbid the wages of their competing employees.

Well, we create more economic losers, but we're also creating even more economic winners. You know, all the minimum wage people that are keeping their jobs.

Also, I'm actually curious, how many people do you know that have been unable to find employment from places that hire at minimum wage? The only people I knew in high school that couldn't find work were those that valued their time at considerably more than minimum wage, so they felt it was better to not even spend their time working in the first place. Much like how if I were to have difficulty during a job search, I'd consider my time being worth more than minimum wage, so instead of working 40 hour weeks at Walmart I'd feel I'd be better off working very little and putting my time towards finding a better line of employment.

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And in order to maintain that expert assistance they'd have to eat expert costs. Which increases with the minimum wage hike. It's an unnecessary burden that shouldn't be placed on small businesses.

Nothing is forcing the small company to pay their employees more since we're assuming they're already paying more than minimum wage prior to the hike, so why should we make the assumption that they will increase their wages to keep a notch above the rest?

FELIPE NO

Originally Posted by Bradylama

Theoretically in a baseline status quo. However, entrants into the market and entrepreneurs keep employers competing for labor in order to avoid a potential staff flight.

Is McDonald's or Wal-Mart concerned about turnover?

Originally Posted by Bradylama

People are already payed in accordance to their real rate of productivity. The reason we have minimum wage jobs is because they're just barely productive enough to justify the pay. Once you increase the minimum to a certain point, you lose demand for an entire industry. It's why farmers imported illegals to pick strawberries, and contractors imported them to rebuild New Orleans. Cheap, menial labor costs too much to justify a minimum wage.

There's no guarantee whatsoever that companies would attempt a "race to the bottom" in the absence of a minimum wage. If that were the case then why doesn't everybody make a minimum wage?

Why are you so forgiving of the farmer? Who says that he wants to pay someone what they are worth? The farmer imports illegals because it makes him the most money, not because it is the most fair price to pay for someone to pick strawberries.

Everyone doesn't make a minimum wage because there is high demand for high-skilled workers. If there were too many lawyers or chemists for how many lawyer or chemist jobs are available, they wouldn't get paid as much. They don't get paid as much when that situation arises, which is proof that if more low-skill jobs are available and no wage safeguard, wages would drop drastically.

That's hardly saving anyone from destitution.

What, you don't want my bikini-clad body?

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Is McDonald's or Wal-Mart concerned about turnover?

No, which is also why they're not particularly concerned about a minimum wage hike. They are concerned insofar as it affects their competition. Besides, McDonalds and Wal-Mart have undergone massive automation in the past decades, and have severely decreased their overhead as a result. Wal-Mart by an large was paying its minimum earners above the minimum wage before the hike in the first place. Indeed, right around the projected increase.

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Why are you so forgiving of the farmer? Who says that he wants to pay someone what they are worth? The farmer imports illegals because it makes him the most money, not because it is the most fair price to pay for someone to pick strawberries.

Yes, Mikey, 2 dollars an hour is the most fair price to pick strawberries, as it's cheaper on labor costs than automation in the long-term. Do you really think that farmers can afford to pay 40 people 7.25 an hour to pick strawberries for a month?

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Everyone doesn't make a minimum wage because there is high demand for high-skilled workers. If there were too many lawyers or chemists for how many lawyer or chemist jobs are available, they wouldn't get paid as much. They don't get paid as much when that situation arises, which is proof that if more low-skill jobs are available and no wage safeguard, wages would drop drastically.

That's hardly saving anyone from destitution.

Actually the indicators regarding an abundance of high skilled labor isn't lower earnings, but restricted employment opportunities. Cheap education has flooded the labor market for high-skilled workers, which makes it harder for graduates to receive entry-level positions.

Besides, Norway, Sweden, Finland, Denmark, Switzerland, Germany, Austria, Italy, and Cyprus, all have no minimum-wage laws. Most of them do, however, have some form of wage control.

The minimum wage is a myth paraded around by politicians as the new form of bread and circuses for the 1% on minimum wage which never addresses the real cause of loss in buying power.

Here's a summary of 50 Years of Research into the negative affects of minimum wage as of 1995:

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The minimum wage reduces employment. (albeit in the real-world cases marginally - Brady)

The minimum wage reduces employment more among teenagers than adults.

The minimum wage reduces employment most among black teenage males.

The minimum wage helped South African whites at the expense of blacks.

The minimum wage hurts blacks generally.

The minimum wage hurts low wage workers particularly during cyclical downturns.

The minimum wage increases job turnover.

The minimum wage reduces average earnings of young workers.

The minimum wage drives workers into uncovered jobs, thus lowering wages in those sectors.

The minimum wage reduces employment in low-wage industries, such as retailing. (note that the Kruegman study documented the negligible effects in fast-food -Brady)

The minimum wage causes employers to cut back on training.

The minimum wage has long-term effects on skills and lifetime earnings.

The minimum wage leads employers to cut back on fringe benefits.

The minimum wage encourages employers to install labor-saving devices.

The minimum wage hurts low-wage regions, such as the South and rural areas.

The minimum wage increases the number of people on welfare.

The minimum wage does little to reduce poverty.

The minimum wage helps upper income families.

The minimum wage helps unions. (many unions have pay scales which are tied to multiples of the minimum wage -Brady)

The minimum wage lowers the capital stock.

The minimum wage increases inflationary pressure.

The minimum wage increases teenage crime rates. (black teens can't get work and join gangs? No kidding -Brady)

The minimum wage encourages employers to hire illegal aliens.

Few workers are permanently stuck at the minimum wage.

The minimum wage has had a massive impact on unemployment in Puerto Rico.

The minimum wage has reduced employment in foreign countries.

The costs of a minimum wage go beyond employment.

Jam it back in, in the dark.

Originally Posted by Bradylama

Yes, Mikey, 2 dollars an hour is the most fair price to pick strawberries, as it's cheaper on labor costs than automation in the long-term. Do you really think that farmers can afford to pay 40 people 7.25 an hour to pick strawberries for a month?

But companies are free to automate now and a person making $2/hour might as well not work at all. So what do you care?

(Yes, I am ignoring that $2 is a lot in Mexico for an illegal immigrant. I don't believe in basing policy on law-breakers, though.)

There's nowhere I can't reach.

Who said we were basing policy on law-breakers? Why not expand the quotas for unskilled labor and eliminate a minimum wage for imported workers?

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But companies are free to automate now and a person making $2/hour might as well not work at all. So what do you care?

Because what happens between a farmer and an immigrant worker is their business. If an immigrant, legal or otherwise is willing to underbid the minimum wage he should be able to. Denying them the ability encourages both them and their employers to break the law, and denies Mexicans a much-needed income. Yes, the Mexican government needs to get its shit together, but there's no good reason why we should be impeding trade, even in a labor market.

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So we should allow people to break the law to encourage them to not break it.

Oh.

Oh wait I see, this is another one of your arguments where what you want isn't dependent on changing 1 thing, but 4,000.

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I hate to cut in (I'm a liar), but

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Because what happens between a farmer and an immigrant worker is their business.

If a person does work for pay, that work is by law the business of the government. I'm really sorry if you don't agree with that, but it's not your call.

I was speaking idiomatically.

Not in this thread, no. Any "trade agreement" is a horrible international beurocracy which inevitably redistributes wealth so that the most powerful and wealthiest nations acquire an economic club to use against the disadvantaged parties in the agreement. Plus there's that whole global government thing which I'm having none of.

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If a person does work for pay, that work is by law the business of the government. I'm really sorry if you don't agree with that, but it's not your call.

As a voter, it is my call to make (partially). I don't get what your point is.

What kind of toxic man-thing is happening now?

Originally Posted by Bradylama

As a voter, it is my call to make (partially). I don't get what your point is.

You can vote the law to change. Until that happens, any monetary transaction is lawfully the business of the government, and Farmer Joe is going to have to pay his workers minimum wage. Sorry.

How ya doing, buddy?

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You can vote the law to change. Until that happens, any monetary transaction is lawfully the business of the government, and Farmer Joe is going to have to pay his workers minimum wage. Sorry.

So since when have I made a legal argument?

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I don't really see a widespread movement by Libertarians that give a fuck about the inequities of rich vs poor folk.

That's because the inequities are by and large deserved. CEOs get payed exhorbitant salaries because they bring shareholders exorbitant profits. Shareholders are the ones which negotiate CEO salaries, not a Board of Directors. Even in the case that they don't make profits for the company, they're still entitled to an income, as otherwise they wouldn't take the job.

Do you really think that libertarians should unite as one against fraud? Stealing from pensions is fraud, and something that libertarians have despised from day-one. Denouncing fraud is such a non-issue, and one that should be enforced by the government, that there's no point in making a big stink about it. What we do make a big deal out of, is when fraud is committed with government protection and subsidizing, e.g. Enron.

What, you don't want my bikini-clad body?

Originally Posted by Bradylama

Yes, Mikey, 2 dollars an hour is the most fair price to pick strawberries, as it's cheaper on labor costs than automation in the long-term. Do you really think that farmers can afford to pay 40 people 7.25 an hour to pick strawberries for a month?

I dunno, the strawberry farmers in my area always hired middle/high school kids to work the fields and the kids like to do it because they could earn at least minimum wage doing it.

Of course, the other question is why would the farmer not be able to pay 40 people $7.25 an hour. Is it because all the other farmers in the area are able to get their labor for much cheaper?

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Originally Posted by Bradylama

So since when have I made a legal argument?

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Because what happens between a farmer and an immigrant worker is their business.

From a legal standpoint, that is factually false. That's all I'm saying.

There's nowhere I can't reach.

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Yes, Mikey, 2 dollars an hour is the most fair price to pick strawberries, as it's cheaper on labor costs than automation in the long-term. Do you really think that farmers can afford to pay 40 people 7.25 an hour to pick strawberries for a month?

Very similar arguments were used to argue for slavery. Somehow our economy survived it.

This thing is sticky, and I don't like it. I don't appreciate it.

Originally Posted by a lurker

From a legal standpoint, that is factually false. That's all I'm saying.

And all I'm saying is nigga I don't give a fuck.

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Very similar arguments were used to argue for slavery. Somehow our economy survived it.

Slaves weren't payed, stupid.

I am a dolphin, do you want me on your body?

First: The word is paid, stupid.

Second: They talked about how they'd never be able to compete or do anything if they had to spend that much more on paying laborers. They survived.

I was speaking idiomatically.

It's because they were wrong in the face of free market theories. The problem with slavery wasn't that they couldn't afford to pay them real money it was that it created a massive labor force that would passively resist to the point where they would be as little productive as possible and get away with it.

If you can import workers who are willing to work for 2 dollars an hour compared to hiring a bunch of kids to work 7 dollars an hour, you've got the edge on the competition. That's how unskilled labor markets work. The unskilled worker willing to work for the smallest wage is the most attractive, and since the exchange is voluntary the problems of passive resistance do not rear up as they do with slavery.

What kind of toxic man-thing is happening now?

Originally Posted by Bradylama

And all I'm saying is nigga I don't give a fuck.

That's too bad.

FELIPE NO

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If you can import workers who are willing to work for 2 dollars an hour compared to hiring a bunch of kids to work 7 dollars an hour, you've got the edge on the competition. That's how unskilled labor markets work. The unskilled worker willing to work for the smallest wage is the most attractive, and since the exchange is voluntary the problems of passive resistance do not rear up as they do with slavery.

So in other words farmers that try to stay legal in their hiring prices are coerced into practices they'd rather not do because of their criminal neighbors or are forced to go out of business?

What, you don't want my bikini-clad body?

Either that or they crunch to automate. Illegal immigration is as inevitable as the drug trade so long as there's a demand for labor which is willing to work below the minimum. Either the solution is to legitimize immigrant workers, or it's to get rid of the minimum wage.

Jam it back in, in the dark.

Hey and Brady wins either way.

Yay Libertarianism.

hate coming in political palace anymore

There's nowhere I can't reach.

That's not really fair, Mikey. Yeah, according to him, his ideals will win in either situation, but neither one will come to pass. He's doing the economic version of vore fetishism - it's easy to call yourself kinky when you make up a fetish you can never act out on.

This thing is sticky, and I don't like it. I don't appreciate it.