On Lowering or Eliminating the Minimum Wage

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Christopher Carr

Christopher Carr does stuff and writes about stuff.

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148 Responses

  1. Avatar Don Zeko says:

    On the one hand, anything to get unemployed people working can’t be that bad. On the other, perhaps this is the exception. If our biggest economic problem right now is weak demand and deflationary pressure, as I think it is, then lowering wages to make the labor market clear is going to be a Sysephean task. Beyond that, I would require that any reduction be temporary, and in the current political climate I don’t see how I could possibly be confident of that.Report

  2. Avatar Trumwill says:

    A waste of political energy.Report

  3. Avatar Dan Miller says:

    I’m not an expert, but the experts that I trust–Paul Krugman, Jared Bernstein, Dean Baker–tend to see the minimum wage as having minimal negative employment effects. So IMHO, this would be harming the purchasing power of the poor (and if you’re earning minimum wage, you’re poor), without much of any compensating increase in employment. No deal.Report

  4. Avatar James K says:

    I’d prefer to introduce a Minimum Income programme first, but sure eliminate the sucker.Report

  5. Avatar Kolohe says:

    I would seriously consider eliminating it for 16-20 year olds. (+/- a year or two on either side)Report

  6. I guess I would need to understand the proposed logic behind the move. I’m not a fan of the idea at first read.Report

  7. Avatar Kim says:

    Having worked for less than minimum wage, I’d say no.
    Knowing people who have worked without the benefit of overtime on an hourly job, I’d say no (Amusement Park Workers work 12 hour shifts at nearly minimum wage around here. And people draw knives on them. “let my sister cut in line”)Report

  8. Avatar Jason Kuznicki says:

    I’m against lowering the minimum wage. We should abolish it.Report

  9. Avatar Alan Scott says:

    If I had a solid reason to believe that lowering/abolishing the minimum wage would increase employment, then I’d support it. But we’re in a demand crisis, not a capital crisis–The jobs won’t appear just because it becomes cheaper to fill them.Report

  10. Avatar NoPublic says:

    Sure. Company towns worked very well the last time we had them.Report

  11. Avatar Plinko says:

    Neither.

    I’d rather we lower real wages, where needed, via inflation.Report

  12. Avatar Will H. says:

    I think that the minimum wage is needed, and that are enough exclusions for it.
    Automatic increases need to be done away with though.Report

  13. Avatar b-psycho says:

    If the idea behind it were truly as advertised, it’d have been indexed to inflation. You can’t build a wage floor on quicksand.

    That said, I understand the argument about it cutting off from the job market some marginal labor. But I think questioning that theoretical aspect is less important than questioning why enough people are at that level (thus making minimum wage) or below (that is, unemployed because employers don’t think they’re worth $7.25 an hour) who we generally agree aren’t in a position where that’s manageable (high school kids bagging groceries for minimum wage is different from people with a family or some other real responsibilities doing it) for it to be a concern in the first place.Report

  14. Avatar Michael Drew says:

    Wages paid by firms should be allowed to be float downward at times of loose labor markets but during those times the federal government should provide wage support to restore workers’ total hourly cash compensation back to a the established minimum. This is an obvious economic stabilization and stimulus measure that shouldn’t be remotely controversial in principle, though determining the starting and stopping (or phase-out) triggers would be an involved and controversial process, but one that government is and should be perfectly capable of producing a workable solution to.

    Beyond that, during demand shortfalls the wage restoration amount should actually bring take-home above what it had been prior to the labor market downturn, to provide additional spending power to consumers and buttress aggregate demand.Report

    • That sounds pretty good in theory. It’d be nice if this sort of thing was automatically built in to our economic and tax policies, if we could enjoy the advantages of a labor market that is allowed to clear while still providing people at least a living wage.Report

    • Avatar Jesse Ewiak in reply to Michael Drew says:

      Yeah, and if I’m company x, I’m lobbying my Senator’s and Rep’s with massive gobs of cash to make the subsidization permanent so I can pay my employees below minimum wage forever and have the government pick up the rest of the tab.Report

      • Avatar Christopher Carr in reply to Jesse Ewiak says:

        Would you make the same argument if we were talking about creating a single-payer health insurance system? (i.e. companies would lobby Congress to create a single-payer system so they wouldn’t have to pay their employees’s insurance premiums?)Report

      • Avatar Michael Drew in reply to Jesse Ewiak says:

        Jesse – a fair concern to an extent, except that I fear you’ve been so conditioned by loose labor markets that you’re not remembering what it’s like to live at full employment. Companies actually have to BID to get US to come work for THEM! Really! Covering the spread between the natural wage and minimum wage isn’t much of a problem.

        Now, if you have a low-wage vision for American workers over the long term, like Gov. Perry does, then yeah, you’re always closer to having to deal with that margin than you’d like to be. but even if you’re at a relatively low-wage equilibium, in a high-demand/full-employment situation, employers are still having to bid up what used to be minimum wage work up to $9-10-11/hr. Even if we raised MW up to $8.50 as we should, the subsidies are still not an issue. And that’s just to get people who will show up regularly to show up regularly at your business rather than somebody else’s. You want quality? Ya gotta pay a premium.Report

      • Avatar Michael Drew in reply to Christopher Carr says:

        That’s honestly the most-fleshed out presentation of a GMI proposal I’ve seen yet at this site. So I’m not really sure. I think the differences between that and my proposal are pretty clear.

        I take your point about the potential underlying progressivism in Jason’s underlying social safety net proposal, though. I have to say that for having that view, he spends far more time opposing the social safety net that we do have explicitly than just advancing that proposal, which if he focused more on it, I think if he wanted to he could gain much more support for his overall program from progressives than he currently enjoys. My hunch is that this is not something he desires.Report

        • Avatar Jason Kuznicki in reply to Michael Drew says:

          Or perhaps when I’ve mentioned it in the past, it’s been curtly dismissed by progressives. See here, for the one I remember best.Report

        • Avatar Jason Kuznicki in reply to Michael Drew says:

          You also seem to have forgotten about this comment, which was in response to one… Michael Drew.Report

          • Avatar Michael Drew in reply to Jason Kuznicki says:

            You mean the one where I and another progressivish person say, Sign us up!, Erik Kain says, Please write this GMI thing up into a full post, Jason., and libertarian supergenius Simon K says, Hmm, it’s expensive but it could work (in NZ if not the States)?Report

        • Avatar Michael Drew in reply to Michael Drew says:

          Posts, Jason? White papers? An advocacy campaign? A simple statement that is is more important to you to institute a guaranteed minimum income than to do away with the current incarnation of the welfare state?

          I don’t know. Maybe you’ve done these things. I’m just speaking to what I’m aware of.

          Merely having this be an argument you use when pressed in comment wars so as to provide a theoretical backstop against charges that you are indifferent to the human effects of your more sustained advocacy (which I don’t think you are – I think you are sincere in supporting a GMI) doesn’t amount to its being a programmatically essential part of your advocacy at large. If you made it the focus of your advocacy, you would be tainted by so much liberal-progressive blog love that you’d barely be able to show your face at your office any more, is my suspicion.

          Prove me wrong. …Please!Report

          • Avatar Jaybird in reply to Michael Drew says:

            If you made it the focus of your advocacy, you would be tainted by so much liberal-progressive blog love that you’d barely be able to show your face at your office any more, is my suspicion.

            I’d give it an equal shot that he’d be asked whether the Kochs just bought stock in cigarette companies and/or fast food and that’s the real reason he wants brown people to have more money at their disposal… when a truly moral person would push for education and health care.

            Just a guess.Report

            • Avatar Michael Drew in reply to Jaybird says:

              That would be love compared to how they feel about him now. 😉

              Srsly, just because they’d welcome the idea doesn’t mean it would suddenly become their entire program. They’d, sure give us that, and give us health care subsidies, or even just gubmint health care. And Jason and they could haggle, or not haggle, whatever. It’s all good. I’m just saying that they’d like it. A lot. I’m not saying that’s why Jason would make it the centerpiece of his program, just to get progressive love. Indeed, I’m saying I think it’s a a minor reason he doesn’t. The reason he’d do it is because he really, really cares about getting a GMI. Period. Also maybe because thinks that maybe leading with that could also get people to at least listen more openly to his arguments on other parts of the welfare state. But it would mostly be because he really, really cares about instituting a guaranteed minimum income, or at least about getting it on the agenda in a real way. Whatever happens to the rest of the welfare state.Report

              • Avatar Jason Kuznicki in reply to Michael Drew says:

                I would support a GMI on the condition that it replaced the other major cash and noncash benefit programs — health care provisions, EBT, Social Security, and the like. It should also replace the minimum wage, of course.

                I would not support a GMI as a supplement to those programs.

                The strategic reasons why I’m relatively quiet in this area are (1) there doesn’t seem to be much interest in it and (2) I think it a lot more likely that the political process would yield a GMI plus the existing welfare state.Report

              • Avatar Christopher Carr in reply to Jason Kuznicki says:

                A GMI plus the existing welfare state sounds like a nightmare. Also, didn’t Milton Friedman favor a GMI at at least one stage? He’s like the libertarian Ronald Reagan: just the mention of his name in conjunction with a policy is enough to get the brass on it.Report

              • A GMI plus the existing welfare state sounds like a nightmare.

                And inevitable, to some degree. If not the current welfare state, something added all the same. At the end of the day, we’re simply not going to say “You spent your money irresponsibly. So no food or rent or health care for you.”Report

              • Avatar Christopher Carr in reply to Will Truman says:

                I think the business that is providing services might say that, but the private charity that now has a much more manageable workload probably won’t.Report

              • Avatar Michael Drew in reply to Jason Kuznicki says:

                Do you seriously think that if you made your advocacy stress GMI as the leading point of your program, that you’d be in danger of bringing about a GMI? Clearly, I know that you don’t support one while the rest of the welfare state stays in place. But you have to know that you can’t just have what you want. You have to bargain. How about getting rid of most of the welfare state programs in exchange for GMI, with the understanding that you’re not done advocating that the rest be removed at some point? In any case I do truly believe that you’d get a lot farther toward your overall desired endstate, presuming you really do want it to feature a GMI, if you led with the GMI. Because as it is, you don;t have to convince conservatives to want to get rid of welfare; and you’re not getting welfare state defenders to want to deal with you. And given the reality of your ideal endstate, if that includes a GMI, you absolutely could be getting much further with the keepers of the welfare-state-that-is if you were leading with what you have to offer them, which is something you favor on the merits, not even something you have to concede against your preferences, rather than leading with arguments about why they are backward, intransigent or ignorant (which is how they hear what you do lead with).

                I would also ask you to seriously reflect on which is more likely: that if you were to emphasize your support for a GMI while continuing to make clear you support it only as a replacement for existing welfare, that we’d end up with a GMI underneath our current welfare apparatus, or that if you cintinue to engage in your argumentation against the existing programs on philosophical, moral, and prgmatic grounds as you currently do while softwalking your support for GMI, that the intellectual support you lend to the anti-welfare cause will, given political trends that are now decades old, and given demographic realities, end up contributing to a quicker deterioration of the flawed social safety net that we do have, while no prospect whatsoever of a new universal system of cash entitlements for every person in the country ever comes anywhere close to alighting on the national agenda.

                I understand your caution because of the truly hideaous nightmare that the prospect of a guaranteed cash income in addition to need-specific social supports (food, health, education, employment) being in place at the same time represents to you, Jason. However, if what you want is change to the existing system rather than a system in place you view as flawed that will provide a target at which to aim your professional endeavors, I would respectfully suggest that you are failing to take a reasonable risk that could, if your example were replicated by other in your movement, result in a pretty large reward: namely: potentially significant policy movement in the direction you desire, or at least considerable cross-ideological coalition support for such movement. That is, if such things would amount to rewards for you.Report

              • Avatar Jason Kuznicki in reply to Michael Drew says:

                I would also ask you to seriously reflect on which is more likely: that if you were to emphasize your support for a GMI while continuing to make clear you support it only as a replacement for existing welfare, that we’d end up with a GMI underneath our current welfare apparatus, or that if you cintinue to engage in your argumentation against the existing programs on philosophical, moral, and prgmatic grounds as you currently do while softwalking your support for GMI, that the intellectual support you lend to the anti-welfare cause will, given political trends that are now decades old, and given demographic realities, end up contributing to a quicker deterioration of the flawed social safety net that we do have,

                Milton Friedman’s experience with GMI advocacy shows that the first scenario not only can happen — it did happen. Ask for a GMI, and if you’re taken seriously, it becomes just another program tacked onto the welfare state.Report

              • Avatar Christopher Carr in reply to Michael Drew says:

                “How about getting rid of most of the welfare state programs in exchange for GMI.” – This would necessarily have to come from the Democratic Party, right? I’d say HCR as originally envisioned was structurally similar, and look what happened there. A program that originally was designed to ease the lifestyles of our most indigent (+1) was met with opposition from peoples in favor of choices and markets (+1), and the result was gentle fellatio to the insurance companies (-3).Report

              • Avatar Jeff in reply to Michael Drew says:

                As one of self-same progressives, I would love the idea of a Guaranteed Minimum Income, and several of us progressives have commented on it on a progressive blog. I’m not sure it would TOTALLY replace the “welfare state” — you’d still have to have General Relief for when the freezer stops working, for instance — but it would make a serious dent.

                Progressives don’t love government for government (the way that a lot of libertarians seem to hate government simply for being government), we just find it the best way to ensure the “social safety net” that empathy (there’s that word again) obligates us to have.Report

  15. I’m certainly no economist, and I do buy the notion that the minimum wage might prevent employers from hiring, both because of the actual cost of paying the wage and because of the cost of proving to the government that they are paying the wage.

    Still, there’s some disconnect–something that makes me uncomfortable–when someone who probably makes a high five-figure or even a six-figure salary stridently says “I wouldn’t reduce it; I’d abolish it.” I realize that I am indulging in an ad hominem: the argument isn’t invalid simply because the one who advocates it isn’t as directly affected by minimum wage policy as someone who works at or near that wage.

    But there’s an element of tone that’s involved in making such an argument. When times are desperate (and yes, I know that compared to, say, even the flush times of c. 1955 we’re better off now), sometimes it helps to acknowledge that “hey, people are suffering. In the short term, my solution might hurt some people and that’s truly regrettable, but in the long run it will help and that’s why we should abolish the minimum wage.” None of this changes the argument, but not to include it invites so much acrimony that one’s main point gets lost.Report

  16. Avatar Jaybird says:

    Money is not wealth. If you increase the amount of money without increasing the wealth, all you do is raise prices.

    (Incidentally, this is why QE is so awful.)

    We want more wealth until the wealth floods the market to the point where everybody has some.Report

    • Avatar Michael Drew in reply to Jaybird says:

      QE happened but prices didn’t rise. That’s because, while prices in $s is affected by #of $s, prices are where demand meets supply. And demand is shit right now. Meanwhile, we are squandering our ability to create wealth because money is sitting on the sidelines, because demand is shit. If getting money moving can be accomplished by injecting more of it right now, if it gets us creating wealth, then later, if need be, we can adjust the money level to ward off price increases we don’t want. It’s called monetary policy. We should do some.Report

      • Avatar Jaybird in reply to Michael Drew says:

        QE happened but prices didn’t rise.

        I have nothing to say to this.Report

        • Avatar Michael Drew in reply to Jaybird says:

          Well, it’s not all I wrote.Report

          • Avatar Jaybird in reply to Michael Drew says:

            I’m sure that your patient explanation of monetary policy would be great comfort to the people out there who see gas and food prices rising.

            But hey! Housing is going down!Report

            • Avatar Michael Drew in reply to Jaybird says:

              Basket of goods and services, sir. Basket of goods and services.Report

              • Avatar Jaybird in reply to Michael Drew says:

                Remember when Heritage was talking about how well off the poor were?Report

              • Avatar Michael Drew in reply to Jaybird says:

                Rising gas and food prices hit the poor hardest, no doubt. But those can be caused by real facts in the economy, as well as (in theory) by money supply stuff. But if it were the latter in this case, prices in general would be going up as well as these consumer items. They’re not, particularly (i.e. inflation is positive but low). High gas and food prices don’t show that there is particularly high (or even much of any) money-supply caused inflation going on in our economy on their own; they’re more likely to reflect supply issues going for those particular products. Do you hold that the money supply is causing food and gas to go up while failing to cause broader inflation.

                (Btw, as I suggested before – monetary expansion does lay the groundwork for future inflation, there’s no doubt. Central banks have essentially their entire armory full of inflation-fighting weapons available to them when they become needed. Right now what they’re short on are expansionary tools.)

                (Also btw, if you’re not interested in having a straight discussion about this, just let me know and I’ll shut up. if that’s what you’ve been trying to let me know already, fair enough.)Report

              • Avatar Jaybird in reply to Michael Drew says:

                It seems to me as someone with half a bottle in him and who has been reading the news that both QE1 and QE2 has added 2.1 Trillion of dollars into circulation.

                Assuming 307 million American citizens, that’s 6840 per American citizen.

                Except, of course, this money was not given to each citizen but only to the wealthy ones… perhaps money trickled down.

                Assuming an average household wealth of… what?

                What average household wealth would you like me to assume for the country?

                If it’s not much above 68,000, that means that QE1 and QE2 ate 10% of their wealth away.

                If it’s below that, it ate away more.

                And that’s not taking Asia into account.Report

              • Avatar Christopher Carr in reply to Jaybird says:

                Dude. in vino veritas.Report

              • Avatar Mike Schilling in reply to Jaybird says:

                It seems to me as someone with half a bottle in him and who has been reading the news that both QE1 and QE2 has added 2.1 Trillion of dollars into circulation.

                Largely QE2, I’d guess, because the other one’s been dead for 400 years.Report

              • Avatar Michael Drew in reply to Jaybird says:

                Actually, there’s way less than 300m households, so that average is way low. But let me ask you this. If your household made 68k in 2006 and it made, say 70k in 2010, and you’re lucky and house values haven’t gone down much where you own, and you’ve had, say $10,000 or thereabouts in the bank the whole time, and inflation was 2%, then can you explain to me how it is that, on top of the loss in value of your 401k due to equities prices, you have still lost an additional 10% or more of your wealth because there is 10% more money in the system? Prices haven’t gone up that much; you still have the same amount of cash; other than loss of investent value, where has your wealth gone? And don’t tell me your investment wealth was lost due to QE’s: the Dow was near 6,000 before any of that happened. Where did the wealth go? More to the point: you have to show me how it is even gone. It’s not. You’re literally imagining something that doesn’t exist.Report

              • Avatar Michael Drew in reply to Jaybird says:

                Check my math out here, but here’s what I came up with based on this chart: http://www.fintrend.com/inflation/Inflation_Rate/CurrentInflation.asp.

                Average annual inflation (using monthly reported annual rate) between January 2005 and September 2008 inclusive was 3.43%

                Average annual inflation (using similar data) between October 2008 and August 2011 inclusive was 2.17%.

                If the phenomenon we want to talk about is quantitative easing causing inflation to rise between when the first round started in late 2008, and mid-2011, then there isn’t a phenomenon for us to talk about.

                But it is true that I am not taking Asia into account.Report

              • Avatar Michael Drew in reply to Jaybird says:

                I will admit, I didn’t realize that inflation had crept up to about %3.5 percent over the last four months, specifically: 3.16% -A, 3.57% – M, 3.56% – J, 3.63% – J, 3.77% -A. The Average for the year so far is 3.01%. If this is enough evidence for you of QE’s pernicious effects in light of all the rest of this context, fair enough.

                Context again: Averages since QE started 2.17%. 2005-Crisis: 3.43%. Long-term historical average is 3.24%. Average for 2010-2011 so far is 1.83%. In the 90’s we had 3.00%. In the decade before this one, including a deflationary period to close the decade out: 2.56%. The Eighties: 5.51%. The 70s: 7.06%.

                (source: http://inflationdata.com/inflation/images/charts/Articles/DecadeInflation.jpg)Report

              • Avatar Jaybird in reply to Jaybird says:

                As the money trickles into the larger economy (and it will continue to), we’ll see more and more inflation over the next couple of years.

                ow my headReport

              • Avatar Michael Drew in reply to Jaybird says:

                That’s probably true. Kenneth Rogoff says we basically have to inflate at 4-6% for a couple of years in order to deleverage enough to being consumption back. But the truth is that the Fed will never allow that to happen, though they should. Point being that QE’s inflationary effects are going to be constrained while demand is depressed, which will continue until people have delevered enough to start spending and borrowing enough, giving businesses a reason to start investing, borrowing, and hiring again themselves. So QE is not going to have a monumental inflationary effect that we don’t essentially need to go through anyway (by at least one theory), unless policy makers completely change their postures toward inflation.

                And obviously, I could be wrong. True rejection is if we have a year at 7.0 percent inflation at any point. Not a month at a yearly 7.0, but a full year with a 7 average. Short of that, I don’t see how we can call QE “so awful,” if it contributes to/is necessary for recovery. In any case, that is the kind of rise in prices I thought you had to be considering in order to pronounce it thus.Report

              • Avatar Plinko in reply to Michael Drew says:

                Someone posted a comment here recently explaining that most of the money that’s went out for QE1 and 2 has pretty much just gone to cover the bank’s new capital requirements to keep in line with the Basel III accords. Now, it’s kinda nice, maybe, that the megabanks didn’t go bust and all, but all that money isn’t circulating, it’s just there on a ledger so most/all of the major U.S. financial institutions don’t appear to be insolvent.Report

            • Avatar Plinko in reply to Jaybird says:

              I’m pretty sure gas and food prices are up because of increased demand from Asia, not QE.Report

    • Avatar Michael Drew in reply to Jaybird says:

      Incidentally, Jaybird, what is wealth?Report

      • Avatar Jaybird in reply to Michael Drew says:

        Something that’s still worth something the day after a revolution.Report

        • Avatar Michael Drew in reply to Jaybird says:

          So if I gave you a bottle of whiskey and a carton of shotgun shells you’d be wealthier (yes, you would), but if I gave you ten thousand dollars but no booze or ammo, you would deny that you had become wealthier (you shouldn’t.)? Money can be used for kindling or melted down into ammunition if necessary.

          Other question I had meant to ask: your initial encyclical on money and its non-identity to wealth (you’re right they’re not identical, but money can nevertheless contribute to overall wealth) and caution against increasing the amount of money came in the context of considering the minimum wage. But the minimum wage doesn’t increase the money supply; it merely sets a floor for an exchange rate. And money, even if it is not something low-wage workers themselves consider wealth, can be exchanged for what they do consider wealth.

          Is your argument that the minimum wage may contribute to inflation by pushing up production costs and increasing consumer demand? This is a viable argument, though it seems unlikely to me that low-wage workers would find themselves happier if we eliminated the minimum wage because the pressure on prices that their artificially high wages had been removed.

          I’m also curious about where you think the logic of your view that we should just concentrate on “creating wealth” (i.e. producing things) and not pay so much attention to how much money we get for it. How exactly should we be running this economy, then? Should we all just work for free in the hopes that setting aside our concern with the artificial construct of money will free up so much time and mental energy that we’ll create such a surplus that producers (who own the things they produce) will take it upon themselves to begin distributing products in some fair-ish way, such that we’ll all end up with “some”? (Incidentally, I was under the impression that practically everyone does currently have “some.” I suppose there are homeless people, who quite arguably have “none.”) Or should contracts in labor be denominated in product, i.e. should we get paid in widgets? I don’t see what other implications there are in your suggestion that we are not focused enough on creating wealth because we are too focused on getting paid more money (which is not wealth despite the fact that it can be exchanged for all manner of wealth) for the wealth we do create, (also regardless of the fact that we won’t own the wealth we’ve created unless we have some terms agreed to about a rate at which we’ll be given that stuff in exchange for our work…). Is the idea here a kind of radical deflation that practically pushes money out of common use?Report

          • Avatar Jaybird in reply to Michael Drew says:

            Money can be traded for wealth… but it’s a medium of exchange.

            (Additionally: Education can be wealth as well… someone who knows, say, how to plow a field has wealth. Someone who knows how to melt metal has wealth. Someone who knows how to make alcoholic beverages that taste good from wheat or barley and yeast has wealth. Information is wealth… and it’s the best kind because I can give it to you without losing it.)

            Where the minimum wage fails is that there are people who are trainable who are not worth the minimum wage but might be worth training so that they could become people who are worth the minimum (or more!) wage.

            See: Unpaid internships for example. Now, imagine someone in an unpaid internship who, instead, made 3 bucks an hour, and got no benefits. You’re not particularly worried because the type of person who gets an unpaid internship is the type of person who will be making 50, 60, 70, 80 grand in 5 years, right?

            Well, there are people who are only worth 3 bucks an hour who need training to become 6 or 8 bucks an hour kinda people.

            Is it worth it to me to pay 8 bucks an hour for someone worth only 3 bucks an hour? The answer, of course, is “no”. It’s better for me to do the work myself and save myself 5 bucks an hour. Or close earlier. Or only hire people that I *KNOW* will be worth what I’m paying them… and I won’t take a risk on others.

            Ironically, the vast majority of folks who make the minimum wage are under 25. (And a huge chunk of those are teenagers who are working somewhere in the service industry). I mean, like, a *HUGE* number. After they hit 25, they suddenly look down and have a resume and are able to get jobs that pay more than the minimum wage.

            Raising the minimum wage will really only help teenagers and other folks under the age of 25 while, at the same time, pricing other folks out of the job market.

            Now, you ask: Should we all just work for free in the hopes that setting aside our concern with the artificial construct of money will free up so much time and mental energy that we’ll create such a surplus that producers (who own the things they produce) will take it upon themselves to begin distributing products in some fair-ish way, such that we’ll all end up with “some”?

            No, not exactly. I think that more emphasis needs to be put on energy production and otherwise new technologies so that we can have arguments over whether or not things that didn’t even exist X years ago ought to be considered public goods and subsidized for the poor. The stuff that they talked about in that Heritage poll? That’s wealth… and it’s ubiquitous to the point where it’s assumed to be only trivially interesting that X% have this or that (if not downright offensive to use this as evidence that poor people aren’t *THAT* bad off).

            My focus is on reaching the point where it’s offensive to point out that most people don’t have to pay much for electricity anymore. Or that the Cancer vaccine is cheap to the point where we should allow smoking indoors again.Report

            • Avatar Michael Drew in reply to Jaybird says:

              Money is an actual thing… and any thing can be a medium of exchange.

              Your apprenticeship idea has merit; though I’ve proposed a system above that would maintain a minimum wage during times when wages need to float downward to allow businesses to take people on whom they aren’t inclined to take on at the current minimum. Eliminating the minimum wage during good times would allow companies to simply lowball workers into submission. We need to maintain a principle that workers are worth something that’s within a stone’s throw of a dignified wage if we’re going to claim to be a remotely equitable society. We could easily craft apprenticeship exemptions to the minimum wage- I believe they already exist. We could expand them. Doing away with the minimum wage on the theory that workers need to work for what they’re strictly worth would be disastrous and inhumane. The economy’s needs change so fast in this world, we simply need to have a sui generis standard of the inherent value of American labor, or else we’ll be sucked under the impersonal forces of the global marketplace. New Zealand labour, too. If the work isn’t there to pay people a decent minimum wage for work they can do in bad times and this causes somewhat more unemployment rather than $3/hr jobs (do you really think $3/hr jobs are going to leap up to $8/hr jobs, or just become $3.50/hr jobs at the normal increase rate?), then we need to have enough social welfare policy to at least provide subsistence to those who can’t be hired at $7.25. Obviously, this would all be taken care of via a GMI, in which case I’d be fine eliminating the minimum wage. Alternatively, we could institute my programme of wage supports during loose labor markets. In any case, a $3 job is a $3 job. There’s no reason to think it leads to quicker increased worker productivity than starting at $7.25, and it debases the value of labor in our country.Report

              • Avatar Jaybird in reply to Michael Drew says:

                Doing away with the minimum wage on the theory that workers need to work for what they’re strictly worth would be disastrous and inhumane.

                The alternative is people not being hired. This strikes me as less optimal than that which you consider disastrous and inhumane.

                do you really think $3/hr jobs are going to leap up to $8/hr jobs, or just become $3.50/hr jobs at the normal increase rate?

                Let’s look at McDonald’s. First job you get is something crappy. The grill, the fryer, the bathrooms. They need a cashier, who are they most likely to hire? Someone who has proven themselves on the grill. Time goes on and they need a team lead, who do they hire? Someone who has proven themselves as a cashier. They need an assistant manager? And so on.

                There are people who have never been trained to show up on time, showered, and sober.

                They are unhirable. Raising the minimum wage to $25,000/year will not help these people.Report

              • Avatar Mike Schilling in reply to Jaybird says:

                My understanding is that McDonald’s pays above minimum even for entry-level jobs.

                There are people who have never been trained to show up on time, showered, and sober.

                They are unhirable. Raising the minimum wage to $25,000/year will not help these people.

                Nor will lowering it to a buck. They are a net loss.Report

              • I think that training them when they are young, say, 14 or so, might prevent having to train them in these things when they’re in their 20’s.

                Or 30’s.

                Or 40’s.Report

              • Avatar Christopher Carr in reply to Mike Schilling says:

                So, the restaurant where I’m working right now has its high school student workers highlight their shifts on the time schedule to validate them, since they often just don’t show up or show up late (which is all understandable since they’re students first and part-time workers second), and highlighting their shifts apparently reminds them that they, like, have to work and stuff.

                Except that, in response to this sort of thing – since right now there are so many people unemployed that companies can decide they’re only considering math Ph.D.s for their open data-entry/insurance sales/fast-food-restaurant-cashier positions if they want – McDonalds and the other big chain fast food restaurants have opted to hire fresh-off-the-boat-non-English-speaking immigrants (not that there’s anything wrong with FOTBNESIs.) over high school douches, simply because these FOTBNESIs work hard and show up on time. Apparently working hard and showing up are two criteria that together exceed speaking English.

                Being a pernicious (illegal) immigrant lover, I clarify for the record that I support it 100% y’all:”O, wonder! How many goodly creatures are there here! How beauteous mankind is! O brave new world, That has such people in’t!Report

              • Avatar Kolohe in reply to Christopher Carr says:

                Related to this sub-thread and another sub-thread above, Louis CK on 20 year olds and jobs

                Report

        • Avatar Michael Drew in reply to MFarmer says:

          It is, but it seems like a necessary one once we’ve dismissed the possibility that having more money amounts to having more wealth, even on an immediate time scale in a stable regime in which inflation is decidedly under control. If money isn’t wealth in that context, then what is. Is wealth value? To me, I value the idea that I can hold onto easy-to-hold-store bills and coins or give them to a bank and not even have to hold them, and get them back or have the bank pay for things of inherent rather than exchange value to me later on when I figure out what such things I want, rather than having to horde things that I think will be of direct useful value to me later or only ever have things that are of direct useful value to me right now, with the result that i have to wrack my brain to figure out what I’m going to want at various times and get the proportion right, etc. etc. There’s great value in money for me, then, even if its exchange power for goods goes down somewhat over time. I wealth value? Then it seems to me there is wealth for me in my money. But if money is not wealth, but money is valuable, then what is wealth? Money’s value to me will change over time, but so will that of any good. And any good can be exchanged for any other good, but the rate for that won’t be constant over time either (ie. there can be inflation in a barter economy). So if we want to make economic arguments about something not being wealth, it seems to me we need to be able to say what absolutely is wealth, or else admit that values of all things fluctuate in relation to each other all the time, so that money is really no more or less wealth in an absolute way than any other thing is, so there is no particular reason to deprecate the having of money as an end in economic activity.Report

          • Avatar Michael Drew in reply to Michael Drew says:

            Here’s some info I found: http://www.federalminimumwage.org/Basics/exempt-from.html

            Young workers may also be exempt from the federal minimum wage. For example, students working in a vocational education program through a high school or college can be paid only 85 percent of the U.S. minimum wage if they are at least 16 and work part time. Students enrolled in an apprenticeship program can also be paid under the federal minimum wage, but they can only be paid at this rate for their first 240 hours of work. After that, the apprenticeship exemption expires. Full-time college students working at a job in the service, agricultural or retail sectors or at a college or university can be paid less than the federal minimum wage if the employer gets and exemption from the Labor Department and only if he or she works 20 hours or less while school is in session. Also, workers under the age of 20 can be paid less than the federal minimum wage for the first three months of a job.

            I’d certainly be willing to look at expand much of that, especially during down times.Report

            • Avatar Christopher Carr in reply to Michael Drew says:

              Hey, Michael Drew, I’m sad to admit that hearing you too are unemployed makes me happy. Maybe we can do something together. You’re obviously a smart guy. Email me: christopher.carr1984 at gmail dot com

              So, as for the hypotheticals: I’m too stupid to understand that whole passage, but I can run a pretty awesome bakery. Right now, I’m situated in what’s kind of a college town, but kinda not. Some of my prior employees used to get drunk and work at my shop while wasted, or so they say…, but I’m really actively trying to keep that sort of crowd away (which makes me a “cool guy” around these parts. Anyways, I’m willing to offer 6 dollars an hour to work at my place (free day-old bread!), so what’s your response?

              A. how despicable! 6.00 and hour!
              B dude, I’m a college student. I’ll obviously be making bank from the time I graduate.Report

              • Avatar Christopher Carr in reply to Christopher Carr says:

                By the way, this is a thought experiment.Report

              • Avatar Michael Drew in reply to Christopher Carr says:

                Hey again Christopher, sorry to just be getting back. Thanks for reaching out. I’ll shoot you an email.

                Just to fill in my story: I’m jobless now because I relocated recently with my girlfriend who started law school. But before that I was like you employed in the restaurant biz despite being interested and seeking less… tasty employment. Before that (I got that job in March of this year) I was only very sporadically employed for much longer than I care to talk about after a another relocation sans job arrangement, this one spectacularly poorly timed in late summer 2008. Before that I had nice 9-to-5 in New York that paid the bills and bar tabs just fine. So anyway.

                I guess my response to your entrepreneurial baker hypo is that I suspect if minimum wage were $8.25 he (you) would be offering the drunks $7 (even though I don’t quite understand why he’s offering them $6 now). So I think the minimum wage sets a standard that affects employer’s first-blush impression of what they should pay for labor that ends up effecting wages in the low-wage sector of the labor up well above the actual minimum level set. I’m sure there’s a literature (perhaps one that shows this to be an intuition without factual basis). But to get an idea, think of Dan Ariely’s story about how if he shows you the number 100 before you go into a wine shop, you’ll (probabilistically) pay more for the same bottle of wine than someone whom I’d shown the number 10 instead (or something like that, I’m just recalling a radio interview of him I heard).

                (I’m also pretty much down with black market labor in various situations, TBH, but let’s keep that on the DL for now, okay? And maybe that just makes me flat-out wrong on the minimum wage in some sense, I don’t know. I’ve been thinking about this all more this weekend. I certainly see the arguments against the mw.)

                Actually, by the by, his is probably as good a time as any for me to confess something more general about my commenting here, actually. I have so much respect and get so much stimulation out of the discussions here that sometimes (though by no means all the time) what I’m doing in some of my comments is really just trying to articulate a stronger, more intellectually crafted version of a given position that I’m stating than I actually hold. I’m not usually giving a 180-degree Devil’s Advocate position from my actual view unless I say so, but frequently I offer a stronger version of my view than I hold simply to help frame and clarify the discussion a bit more as well as to provoke thoughtful people like yourself into offering the ideas in response that will help me to clean up and strengthen mine. I figure whatever I detract from the site in terms of forthrightness in doing this (and it’s not like I misrepresent myself by miles or anything…), I make up for it with typos. 😉

                Which is just a long way of saying I’m not always as convicted on issues as I sometimes make myself out to be, so rethinks and partial changes of mind are hardly out of the question. And the minimum wage has been a question that I have long been conflicted on, so some of my crusading in this thread is definitely to get these things out there in pixels so that people can start reacting to them and so I can see if I still like how they look.

                Another benefit is that when I put out clunkers like I did elsewhere in this thread with Jaybird on QE, money supply and inflation (“prices didn’t rise?” He was right: what’s that supposed to mean?), I sometimes end up doing some remedial self-tutoring that I wouldn’t have if I didn’t just occasionally throw caution to the wind and say, “Do I really think this? I’m not sure, but screw it it’s going up.”

                So everyone can keep that in mind when they read what I write here.

                P.S. to the Editors: Somehow I would feel much more free to do this in comments, whereas I would really feel the need to at figure out what I really do think about something if I wrote posts. Which means my writing would suddenly fill up with even wordier caveats and hemming and hawing than I already use and so forth. Which is why I don’t submit guest posts. Well, that and a certain inability to produce clean prose in a reasonable amount of time.

                Thanks again for your kind interest. You can also email me any time (for that matter anyone here can) at drew.mike at gmail dot com, and I’m also on Twitter at @MikeDrewWhat (as in, when I was a kid the others would be like “Mike Drew? Mike Drew what? har har har, and also as in “Mike Drew! What!”

                Cheers & best in your searching.Report

              • Avatar Michael Drew in reply to Michael Drew says:

                AAAA-fecting!!!! God, that is the one grammar mistake I do not tolerate in myself. …I NEVER do that one! Gah!Report

  17. Avatar jfxgillis says:

    Harkening back to Erik’s Marx was Right” thread from a couple of days ago, one of things Marx was right about that didn’t make it into the lists (because he’s been obviously right about it for over 100 years and only certain stuck-in-the-188os libertarians and assorted other Randian crackpots think it’s even a matter of controversy) is the Minimum Wage.

    Adam Smith and other early liberal political economists–Ricardo, if memory serves, but I could be wrong–suggested there was a natural floor to wages, that they couldn’t fall below sustenance level. Marx on the other hand, claimed they very well could, and provided a theoretical basis for why they would, and then was later shown to be empirical confirmed because they did.

    The reason, of course, is very simple. Capital’s priority is not to “sustain labor” but to “maximize returns” It may be, and frequently is, the case that those two results may not be in conflict, so no problem. But when they do conflict, there’s no wage floor unless one is exogenously imposed.

    Thus, the question of the Minimum wage resolves to a normative one: Do we want to live in a society where wages can be–and will be–driven below sustenance level at certain points in the long cycle?

    The humane answer is No. Any other answer, regardless of little charts posted by the CATO Institute or pumped by labor-intensive multi-national corporations or pretty models in economics textbooks, is inhumane.Report

    • Avatar James K in reply to jfxgillis says:

      But Marx wasn’t right, his Iron Law of Wages predicted that all wages would be pushed to or below subsistence, and this is clearly false.

      There is a floor for most people below which a person’s wages won’t fall (barring temporary perturbations), which is the reserve price of their labour (i.e. the best pay offer they could get from someone else), unfortunately for some folks this floor is very low indeed, below subsistence (and in some cases the floor actually hits 0).

      So yes, there are people who can’t offer the labour market enough value to be able to subsist, and there’s nothing wrong with objecting to that, but you’ve fallen victim to one of the classic blunders of policy analysis – going directly from “we need to implement a solution” to “we need to implement this solution”. a minimum income programme would secure subsistence at least as well as a minimum wage, and with fewer nasty side-effects. Furthermore it seems more intuitive to me that if society (however we’re defining that) has declared it is indecent for someone to receive less than $x per year in income, it should be society that collectively pays the costs (through taxation) of ensuring that person’s income is raised to $x or above. The minimum wage boils down to an attempt to make the for-profit sector pay welfare, which is a fundamentally ill-conceived notion.Report

      • Avatar James K in reply to James K says:

        OK, on reflection, I should have read that article on the Iron Law more closely, but I still maintain mainstream economic models based on Marginal Product of Labour are superior to anything Marx came up with, and the rest of my comment stands.Report

      • Avatar jfxgillis in reply to James K says:

        James:

        Fair enough. You overstated your position and I overstated mine in support of the early liberal political economists who overstated their position and Marx who overstated his. So let me modify what I said to something like “Marx was less wrong about his position than his adversaries were about theirs.”

        The funny thing is, you reached the critical fact, but you dismissed it in a paranthtical as if it were a mere detail:

        (barring temporary perturbations)

        In the mainstream models, those perturbations are squiggles on a chart following the Marginal Product of Labor, but for the millions of wage earners “perturbed” it’s a humane disaster. And it’s not temporary for them because the effects alter the destiny of themselves and their children for a lifetime.

        We only need to know that it could happen and indeed has happened–even if only temporarily–to be able to reach the normative question. And once we reach the normative question, the superiority of the mainstream models to Marx’s model is irrelevant.

        That is why thousands of years before those models even existed the Lord of Hosts commanded the ancient Hebrews to pay their employees a living wage (Malachi 3:5). A classic example of an exogeneously imposed condition, btw.Report

        • Avatar James K in reply to jfxgillis says:

          Which brings me to the second half of my last comment. I agree that free markets won’t guarantee a living income for everyone (I just prefer the mainstream economic explanation for why not to Marx’s), but I still disagree with your proposed solution. Minimum wages impose the burden of supporting low-productivity workers onto the employers who hire such workers. This has predictable effects on the incentives of those employers – like reducing the demand for low-productivity labour, greater offshoring and worse non-pay working conditions (by creating a surplus of labour, you’ve just given employers less of a reason to have regard for the well-being of their workers).

          Why create all those perverse incentives when you don’t need to? Transfer payments can guarantee subsistence income with far fewer distortions (not none, because the revenue to pay for it has to come from somewhere, but raising a broad-based income tax is going to distort an economy less than a minimum wage will because the ill effects are spread more evenly.Report

          • Avatar Michael Drew in reply to James K says:

            Given the choice between a minimum wage in a society without wage-support transfer payments and no minimum wage in that society, which do you prefer, James?Report

            • Avatar James K in reply to Michael Drew says:

              I’ll tolerate a minimum wage in the status quo, but I’m still going to oppose raising the minimum wage, especially in a recession.Report

              • Avatar jfxgillis in reply to James K says:

                James:

                That’s actually funny. And true. And paradoxical.

                The Minimum Wage was first introduced during the Great Depression, which was empirically the worst possible time to do it in terms of economic efficiency.

                Yet, it passed with some good degree of popularity. Why? Answer: Because it’s a normative question, not an empirical question.

                To keep from double-posting, the answer to your real-politik point below is that a top-tier Republican candidate has recently called for reducing the minimum wage (I assume that’s what sparked Chistopher’s question) and the issue does in fact arise in Congress–and some state legislatures–with regularity.

                So Minimum Wage is salient in a way in which minimum-income-transfer program is not.Report

              • I actually don’t pay a lot of attention to politics, so I wasn’t aware that the well of lowering the minimum wage had been poisoned through its being supported by an evil Republican.

                I agree with you that it’s a normative question, but know that we’re trading overall wealth for equality.Report

          • Avatar jfxgillis in reply to James K says:

            James:

            First of all, I think this wrong:

            Minimum wages impose the burden of supporting low-productivity workers onto the employers who hire such workers.

            Because I think what it really does is shift the burden to low-skill-labor-intensive sectors. It’s the sector that bears the burden and ultimately the consumers of the goods and services of that sector, not so much the employers.

            All your arguing about employer incentives does is extend either the liberal or Marxist arguments for why wages might be depressed, or too depressed. I know all that. I might even agree with some or all it. But it’s irrelevant. If the exogeneously-imposed Minimum Wage carries with it some bad incentives, we should simply exogeneously impose countervailing incentives.

            However, that’s not the core point. As Michael below just implied, the choice we have isn’t between your preference and my preference, it’s between my preference or nothing. And I mean that in both the terms of this thread set in the question Christopher asked up top and in terms of the social/political system we live in now.

            There’s ZERO chance that the US Congress is going to enact or the US President sign into existence the kind of minimum income transfer program you support any time in the foreseeable future. So until enacting that program is feasible, I prefer what we already to nothing.Report

  18. Avatar MFarmer says:

    If rich business owners succeed in their scheme to crush the middle class and the poor, who will buy their products unless the rich severely reduce the price of their products? And if they severely reduce the price of their products, won’t foreign countries want to buy the products, thus creating a demand to produce more, thus increasing the need for workers, creating a demand for good workers and putting pressure on wages? How are the rich ever going to keep the middle class and poor down? Business owners are in a catch-22. They can continue progress in automation, but then this means more people out of work and fewer customers. They can sell cheap goods overseas and let the unemployed in America starve, I suppose. Maybe there is hope afterall. The only think is, though, they can’t raise prices in the global market, and automation has costs, plus government will surely raise their taxes to pay for welfare, unless the business owners can control the political process and cut out welfare, so the middle class and poor are properly screwed, but then this might cause social unrest and violence, and there are more middle class and poor than there are rich business owners, so even getting political advantage is doubtful if all the middle class and poor vote for representatives who will strengthen the welfare system and redistribute wealth. The only way I can see is for rich business owners to offer Somalia a deal they can’t refuse, so owners of wealth have a place to operate without having to benefit the middle class and poor in America. Maybe someone can think of a better way to destroy the middle class and poor — there has to be a better way.Report

  19. Avatar Jaybird says:

    For the record, though, I don’t think that lowering the minimum wage would help in this present crisis.

    There are tons and tons of little regulations that come with opening a business and *THOSE* are the main problem right now. I’ll repeat myself and talk about the various hoops that you need to jump through if you want to do something as simple as opening a bar downtown… just a simple place with beer and maybe some mixed drinks. There are onerous regulations that you have to meet (that have nothing to do with making sure that people don’t die of ptomaine) that cover everything from proximity to schools to proximity to other places that also sell beer and mixed drinks (downtown, you need to get permission from other businesses to open a place that has an alcohol license… if you don’t get the necessary signatures on your petition, you can’t open your place. Which means that a couple of bars on a block can collude to refuse to let a third place open up).

    If you want to serve food (nuts, pretzels), there are more hoops. If you want to have a grill and serve hot food (perhaps even with a fryer), there are more hoops.

    It’s easier for a guy to say “you know what, I’d rather work for Massive Conglomerate. It’ll be less hassle.”

    Massive Conglomerate gets bigger. The guy who would have hired a bartender and a person to walk drinks around is now a cubicle monkey who is counting down until he gets outsourced to Singapore.

    Those little regulations that make it tough to open one’s own business play into the hands of Massive Conglomerate.Report

    • Avatar DensityDuck in reply to Jaybird says:

      I was gonna post this but you beat me to it.

      The reason that illegal workers are cheaper is not the minimum wage. As I understand it, it’s not unheard of that a worker known to be skilled might be paid more than minimum wage.

      in cash. As in, no payroll taxes, no requirements for benefits, no Federally-mandated standards for things like ergonomic workspaces, or mechanical assistance for heavy loads, or protective gear when working in extreme heat or sunlight conditions, or even a goddamn bathroom.

      (you know what e. coli is? It’s the bacteria that comes from human shit. You know how it gets on lettuce? Because there’s human shit on the lettuce. You know how the shit gets there? Because there ain’t no law that says you gotta spend good money renting a port-a-potty for wetback pickers.)Report

    • Avatar Christopher Carr in reply to Jaybird says:

      This is brilliant. Please, copy, paste, and post on the main page.Report

    • Avatar Murali in reply to Jaybird says:

      now a cubicle monkey who is counting down until he gets outsourced to Singapore.

      Now that I think about it, my recommendation has changed. Please increase your minimum wage! As a Singaporean, I want the jobs to move here, where we dont have a minimum wage.Report

  20. Avatar Member548 says:

    As a business owner, various regulations besides minimum wage keep me from hiring. Various layers of paperwork and workers comp among them.

    Many times while I’d be happy to hire someone new at $10 an hour or more, I consider the other problems this can cause me and I simply work harder myself and make more money for myself.

    If it was easier for me to hire and lay off people as I needed them, then more of my wealth would be spread around, and I may well gain more myself in the long term knowing I can more easily gain the people I need for large projects and let them go when I have no work and eventually hire permanent people, but as it is, I simply tend to stick an easy balance that makes me an okay living.Report

    • Avatar Tom Van Dyke in reply to Member548 says:

      As a business owner, various regulations besides minimum wage keep me from hiring.

      Bingo, Mr. Member-with-the-Chevy. Going rate in SoCal for day labor picked up outside Home Depot is $10/hr plus lunch.

      Job creation hasn’t hit the wall of recession as much as it’s hit the death of a 1000 cuts of labor regulation in a down time. It snowballs.

      It’s sort of like how marriage is dying off. Not so much not wanting to get married but the fear of commitment. In fact, I’d bet that during this current crisis, the business owner is more likely to propose marriage than make a job offer.Report

  21. Avatar trish mcgrory says:

    There are many who have to rely on tax credits when they are working because they do not earn enough to pay their all their bills and rent/mortgage. They do not have much if any left for clothes and all the other things in life, even bus fare chomps through their money now at a rate which is getting more all the time. The minimum wage is meant to protect people from poverty, but it did not work, therefore-working tax credits were introduced. Get rid of the over paid and underworked and pay those lower down a much better rate per hour. The economy will not be kept going by the rich, they will not step in and take over what the poorer ones cannot do any longer. The ones lower down in the scheme of things usually work far more in real terms than those higher up the scale. The ones further up wear the suits, drive the bigger cars and live in better houses, that says it all.Report

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