Minimum Wage destroys jobs--again!

[Snide]

There is no tendency.

My observation is that this is not true when talking, as we are, about the very-low-skilled jobs. No, I have no proof, and am willing to change my mind with proof to counter it.

Granted that stacking toilet paper is not a very competitive field, and their is little reason to pay more and more money to get better stackers because the return on the investment there is very slight. As jobs require more responsibility and skill, the competitive naturally increases.

Of course...no one disputes that as a general statement (at least I don't).

Labor isn't an infinite supply, people don't just put up with any conditions, and their is a great deal of competition for worthwhile employees.

Yep...and yet many horrible employees still get jobs. A "much better" burger flipper won't get much more pay (until he is promoted to manager, shift leasder, etc.).

Personal anecdote: I was a pin-chaser at a bowling alley, making minimum wage. As a high school teen, I happily did a good job for low pay. One of my co-workers asked for a raise and was told, bluntly, "Guys like you are a dime a dozen." Still, it wasn't worth it to the proprietor to fire him just because there were much better workers. This is the only point I am trying to make: you are right that the better worker tends to get rewarded, but at this level of job, it tends to not be by much.

Do you have serious evidence to the contrary? I'd like to see it.

Evidence of the tendency I suggest exists, or evidence contrary to what you say above. I admit I have none for the former, and don't disagree with you in general on the latter. And I am simply too apathetic to look anything up. I just want to be clear regarding the point I am making. Perhaps I should not have said "far from reality" regarding your hypo; I merely meant that I felt it was a bit overstated based on my observations.

 

[Snide]

Sure, it's possible to fall off the bottom of the performance curve through laziness. But it's also pretty easy for almost everyone to reach a performance level (should they so choose) with that sort of job where increased skill stops making much difference. The best toilet paper roll stacker in the world won't produce much more value with his labor than the highschool linebacker from Hoeboken - which is certainly NOT the case with brain surgery. Another example: Burger King would never pay Wolfgang Puck much more than a highschool kid to cook burgers, because his additional skills in the kitchen won't make much difference in that job. Different jobs have different value vs. skill curves, and some curves flatten off quite a bit at a point where most workers can reach the plateau.

This is a much better way of making the point I have been trying with burnvictim.

 

[Roadtoad]

(I don't have a solution to it, though. I do not think that you can go totally "free market" with labor in a world that has seen such overwhelming consolidation of corporations. If RoadToad is listening, maybe he'd comment on what de-regulation did to the owner-operator in the trucking industry.)

Just caught up with this. I've been reading several books on this of late, but as to this one point, I'll simply note that some O&Os are right now getting hammered because of deregulation. It's made it possible for the majors to corner whole markets and to run the O&Os out.

On the other hand, it helps to remember that it wasn't all that long ago that in order to run as an O&O, you had to literally have the Federal Government's permission. With the end of the ICC, all you really need is the capital to buy a truck, and the necessary permits. A lot of O&Os are failing not so much because of deregulation, but because of their own greed.

More to follow.

 

[shanek]

Of course, with most cases of "deregulation" you actually end up with more regulations than you had before! They just call it deregulation because that's what people want, and when it doesn't work they can blame the "free market."

California's power crisis was caused by "deregulation." And look at all the regulations there were! The regulations were directly responsible for the crisis, and no economist would have expected any other result.

 

[Roadtoad]

True enough, Shane, (and yes, I'm glad you're back, believe it or not). This was something where voters should have read the fine print, particularly given how Gray Davis handled a crisis which was largely manufactured, particularly by the Enron crowd.

 

[Merko]

This is only true if you don't care about the quality of the labor you get, which is rarely the case. If you can pay slightly more get better labor, you will. Won't you?

The problem is that for MW jobs, only people who are really, really lazy, or extremely stupid, or something, will be performing significantly worse than anyone else. So yes, you want to avoid the extreme underachievers. But there is, at present, a large pool of perfectly capable people that are competing for these jobs. So you don't need to pay people more to get better people, you just fire people who don't work well and employ someone who does for the same wage - they are waiting in line, after all.
Of course, in theory, this still raises the wage somewhat, but this 'somewhat' probably rounds to zero in reality.

And yet, how much. Now there is specific anti-trust legislation against employers and enabling legislation for Unions that make it much much easier to form a union.

But are these changes significant or not? I have never heard of an actual court case where companies have been convicted of conspiring to keep wages down. Have you? I'm not even sure there are laws against this in Sweden. It is evidently clear that employers in some sectors do have wage cartels here. Business school graduates and civil engineers have been targets, for example (though being a civil engineer myself, I think this is funny, because these are groups that have traditionally been poor at unionising, with many people believing they can fend for themselves).

Meanwhile, we certainly have laws that curtail unions. For example, there are many rules that regulate the right to go on strike. It is, for example, illegal for workers in Sweden to go on strike because the company they work for is doing something bad in Germany, or the other way round. I've also heard that in the US (some states only?) there may be only one union at any single work place (that organises the same workers, I presume).

So while I do agree that laws against unionising are much weaker than before, the overall pattern still prevails: the law does little or nothing to prevent employers from combining, but it does still impose severe restrictions for employee's rights to organise freely.

 

[Thanz]

But are these changes significant or not? I have never heard of an actual court case where companies have been convicted of conspiring to keep wages down. Have you?

The most famous one is in major league baseball. Here is the wiki:

http://en.wikipedia.org/wiki/Baseball_collusion

Meanwhile, we certainly have laws that curtail unions. For example, there are many rules that regulate the right to go on strike. It is, for example, illegal for workers in Sweden to go on strike because the company they work for is doing something bad in Germany, or the other way round.

What you see as a restriction on the union, I see as relief for the company. What really is at stake is not the right to strike, as you put it, but the right to go on strike and not get fired for it. The people could go on strike for what their company may be doing in Germany, but then the company can fire them for it. The laws that govern the certification of unions in a workplace are extremely slanted in favour of the employees.

Previously, workers couldn't unionize at all. NOw, they can unionize, and the law is set up to make it easier for them to do that than ever before. And you are worried that they can still get fired for picketing because the company does something in another country, and somehow this is stil;l the same ol', same ol'.

the law does little or nothing to prevent employers from combining, but it does still impose severe restrictions for employee's rights to organise freely.

Severe restrictions? Baloney.

 

[pipelineaudio]

In many jobs you are FORCED to be in the union

 

[burnvictim77]

In many jobs you are FORCED to be in the union

Forced would mean you do not have the option of not taking the job.

 

[burnvictim77]

The problem is that for MW jobs, only people who are really, really lazy, or extremely stupid, or something, will be performing significantly worse than anyone else. So yes, you want to avoid the extreme underachievers. But there is, at present, a large pool of perfectly capable people that are competing for these jobs. So you don't need to pay people more to get better people, you just fire people who don't work well and employ someone who does for the same wage - they are waiting in line, after all.
Of course, in theory, this still raises the wage somewhat, but this 'somewhat' probably rounds to zero in reality.

Who's waiting in line for a MW job?

More pointedly, who's waiting in line for a MW job as a way to make a living?

 

[shanek]

Forced would mean you do not have the option of not taking the job.

Force means that employee and employer do not have the option of hiring on the employee without union membership, even if both of them agree to it.

 

[burnvictim77]

Force means that employee and employer do not have the option of hiring on the employee without union membership, even if both of them agree to it.

Who has the authority to do this? Only a Gov't it would seem. What I assumed was being spoken of were 'closed shop' policies, which are by no means force and do not violate the principles of free markets.

 

[shanek]

Okay, yes, if an employer on his own wants to require union membership, then no, it's not force. I'm talking about union laws here.

 

[quixotecoyote]

Let me get this straight.

When an employee takes a MW job because it's that or nothing, that's not being forced to accept low wages.

But when an employer takes a unionized employee because it's that or nothing, that is being forced to accept a union.

Not that I agree with closed shop jobs necessarily, I just want to make sure my doublethink is working properly.

 

[shanek]

When an employee takes a MW job because it's that or nothing, that's not being forced to accept low wages.

But when an employer takes a unionized employee because it's that or nothing, that is being forced to accept a union.

Who on Earth said that??? I said it was force when the laws require the worker to be union--in other words, an employer and a non-union would-be employee are not allowed to enter into an employment agreement without the worker joining the union. That is force.

A better corollary to the MW situation is if all of the potential employees were union, or insisted on a union. But that wouldn't be force any more than the MW situation is.

 

[luchog]

Riiiiiiight. You use Windows because it's the best, most secure and easiest to use operating system and not because of it's dominance of the market. Keep living that fantasy.

False dichotomy. Although Windows and Microsoft came to prominence because of legal manipulation, it did so long before Gates had anything even remotely resembling a fraction of his current economic power. It remains dominant because it provides what people want -- that is ease of use, interoperability with other computer users, support, and an acceptable level of security and reliability (note i said "acceptable", as in, what the market demands or will tolerate, and not "good"; this is a very important distinction), in precisely that order of importance, for a price that the market considers an acceptable value.

The main reason that Windows hasn't been dethroned is that no one has created an effective competitor.

Linux lacks the most important factor, ease of use. Although it's orders of magnitude more secure and reliable, the mass market classes those factors as far less important than ease of use. It also has interoperability problems, some of which are being solved, others of which will probably take longer, if they can be solved at all. The biggest obstacle to Linux uptake has been ease-of-use, and a developer base that is not sufficiently interested in developing that factor sufficiently to create mass-market appeal (a few attempts have been made, but were mostly abortive and sacrificed Linux's strengths without providing the promised ease-of-use).

Macintosh has an equivalent or better ease of use (considering that Microsoft stole their model); but has historically had similar stability problems, and some security issues. It has had much greater interoperability problems than Windows has had. Its biggest problem has been a dramatically higher price that has, along with the interoperability issues, kept it from being attractive to the mass market. With recent improvements this is changing, but slowly. Price and interoperability are still serious obstacles to Mac uptake.

BeOS was never even finished. Had it been, it had the potential to be a serious competitor, much more effectively than the Mac; but would likely have interoperability problems similar to the Mac.

No one else has ever developed a system with the potential to be competitive with Windows.

Bill Gates does not have the financial muscle to restrict economic choice in more than small, limited ways; and only in collusion with other financial giants. And what control said consortia have managed to impoose have been incomplete and ephemeral. The same goes for other financial giants such as Disney. What little control they manage to get is usually usurped by competitors and/or advances in technology.

 

[luchog]

Is "wealth" only generated in currency?

Currency is not wealth, it is merely a tangible token representation of, and medium of exchange for, an inherently intangible concept.

The problem too many armchair economists have when discussing wealth is equating it directly to "money". It is possible to create and exchange wealth without resorting to a tangible representation system; but it's increasingly more difficult once one gets beyond a simple barter economy.

Are we not getting "wealthier" by becoming (hopefully, when people read what I write) more knowledgeable?

Only if others value that knowledge. I can spend my entire life studying the wonderful world of walrus polishing, writing the definitive treatise on variations in technique, tools, historical vs modern styles, and the culture significance of walrus-polishing. But if no one else ever has any interest in polishing walruses, I haven't really created anything anyone else would value, and therefore have created no functional wealth.

For wealth to exist, there must be a mutually agreed-upon value for the representations of wealth.

 

[Darth Rotor]

The old Macroeconomics thread (which I have archived) covered it. Here's the relevant part:

Glad you dug this up, it was a good read.

To meet that demand, they need to run longer hours and hire more people and buy more materials. The idea is that as AD increases, the demand for individual inputs increases, including the demand for labor. This directly reduces unemployment. As we get farther and farther along in the business cycle, moving towards the peak, what we notice is that employment goes up, unemployment of course goes down, and labor markets begin to tighten.

A couple of observations.

The bolded part is industry dependent. You can probably count on it in a service intensive industry, but you may see an increase in productivity, and a smaller employee count, in more manufacturing or production based industries. So, while his observation has merit, it is industry dependent.

The other comment is the time factor between the change in policy, or the change in the macro level factors, and the implementation of the new paradigm. The length of that transition time is not trivial, in either the political nor the economic sense.

People still need to eat.

Anyhoo, this thread is very interesting, tip of the cap to all involved.

DR

 

[luchog]

How much simpler does it need to be?

Investors (who already have a home to live in) are driving house (as in a place to live) prices to insane dimensions, by buying (paying money to purchase something), more, sometimes many more houses than they plan on living in.

It's self-correcting, however. Real-estate speculation only works as long as the market price keeps going up. Eventually the market will crash, and many speculators will lose their investments as their properties are devalued.

Part of the problem with real-estate speculation, and the reason it's so effective in certain regions, is restrictions against development. Were development more extensive, there would be more options for lower-income buyers, and the effects of speculation would be much lower. I'm seeing something similar in Seattle, where development is hugely restricted. Lower-income and middle-income housing is being bought up not only by speculators, but also being re-zoned and re-developed by the city; creating an artificial shortage which is creating a huge speculation market. Estimates are that the market is due for a huge crash sometime in the next 5 years; possibly sooner if development is opened up or if there's a net decrease in population (so far employment opportunity has resulted in a net increase in population).

In either case, it's not the market that's causing the problem; it's manipulation of the market by municipal and county government that is causing it.

 

[luchog]

No, but I do believe that in an ideal situation, where the power gap between employers and employees is small, such a balance will be found. their connections rather than for having any entrepreneurial skills.

Yes, and in a free market, the balancing force is collective bargaining, also known as "Unions". No government intrusion necessary.