Progressive Radio Rants -- Minimum Wage

[Kid Eager]

I don't think that word means what you think it does.


Exactly, take away the last 3 years and the unemployment rate in the US is lower than Australia.

I have no idea what you think your data shows.

Obviously.

Meanwhile, back at the ranch, the role of the Fair Work Ombudsman continues as per its charter.

 

[leftysergeant]

Exactly, take away the last 3 years and the unemployment rate in the US is lower than Australia.

Take away the last five years, and our military forces have a remarkable safety record.

 

[Dorian Gray]

No. I can find somebody else who is not paying a higher rent or I can cut it myself.

Then why can't any employer find someone who will accept less money? Or put another way, why shouldn't a law force YOU to pay me more money?

If you don't want to be forced, why should ANY employer be forced?

 

[Dorian Gray]

Robert Whaples (2006) "Do Economists Agree on Anything? Yes!," The Economists' Voice: Vol. 3 : Iss. 9, Article 1.

37.7% of respondents supported an increase in the minimum wage, 14.3% wanted it kept at the current level, 1.3% wanted it decreased, and 46.8% wanted it completely eliminated.

Just as I suspected. So 52% want to keep or increase minimum wage, and only 48.1% want to decrease or eliminate it. And these stats pretty much negate the title of the article.

 

[leftysergeant]

If you do not want to pay a man a decent wage, you have the option not to hire him. you do not have the option to collude with fellow business people not pay for the labor you use.

We have the option not to buy your product. You want us to buy it, make it worth buying.

If paying for the labor to make it costs more than you get back, make it yourself.

Why should I work at a loss so that you do not go broke manufacturing crap that nobody wants?

 

[Dorian Gray]

True, median is mean in a 2-person country. But Australia and the US have more than 2 people, don't they? And the US has a much higher median than Australia does.

True, my example was flawed. But look over there!

 

[fuelair]

Because the "greedy swine" -- that is, the employment market -- determines what labor is worth, just like the market determines what any other product is worth. I can declare my labor is "worth" $10,000 an hour, and refuse to work for less so I won't subsidize greedy swine who want to steal my labor, but the sole result would be that I'd be unemployed.

Or you would be stealing money OOPS I mean working for an investment banking operation like Goldman Sachs or equiv.

 

[fuelair]

When the minimum wage is high, companies cannot afford to hire new employees. This is what I thought when I heard this being talked about on Progressive Radio. Now I have the statistics to back me up when I later heard that in states that have a high minimum wage also have high unemployment. It is logical to think that if the minimum wage is high, companies will not be able to afford to retain low income employees.

Some companies that depend on unskilled labor will have to fold and go out of business all together.

Companies that depend on products from these closed companies will have to get their goods from overseas competitors.

This is the harsh reality.

It is conceivable that a re session or even a depression could be the end result.

Bill, I don't know how old you are, but I am sixty five and (without ever depending on it) have lived through a number of increases in the minimum wage over those years. You are bringing up the same theories that have come up against MW every time it came up - and no measurable loss occured in jobs after the vote increased them any of those previous times. It's a game the republickers and Democrats play - republickers to look good and Dems because it's correct to do. Neither side has been dumb enough AS A WHOLE to believe those talking points. Note, I am not saying nor do I intend to mean that you are dumb - it is clear you aren't - but on this matter history, in the US at least, indiicates that it just really doesn't happen that way.

 

[MG1962]

How was Australia's unemployment rate during the 1990s? Early 2000s? The current rate is an anomaly, and is in fact at or near an historic low. There's no evidence at all it's the result of a 2-year old labor law.

According to who?

 

[thaiboxerken]

Then why can't any employer find someone who will accept less money?

I agree. We should have a free-market society, like Somalia.

 

[Francesca R]

Old posts . . . .

Minimum wage laws (like maximum hours laws and trade union/other pay scales and compulsory membership of trade organisations) are socio-political ideas not economic ones. The textbook economic argument was always that these things shift the labour supply curve left (or up) and therefore reduce the quantity / raise the price of cleared employment.

My understanding is that economists who have looked for this effect have--almost everywhere--found that it is either too small to see or too difficult to isolate (and some studies have no doubt come up with the opposite result). So there is no economic consensus that minimum wages do actually reduce employment in countries that have them (which is just about all the "rich" ones--poor countries like India have statutory minimum wages too but informal employment is so large in the country that it would be even harder to extract any result).

It is possible that the inefficiency (dead weight loss) that is created by distorting upwards the price of the cheapest (legal) labour is absorbed by lower wage income higher up the scale, rather than by reduced employment. That would be the outcome desired by egalitarians anyway, and would be protested by laisser-faire types. It's also possible that instead of reducing employment it raises retail prices so that there is an income loss shared over more of the population. Again, not so bad for those in favour of redistribution. And because both types of redistribution completely avoid tax-welfare transfers, they are a much easier political sell, though this is pretty much because the redistribution is fairly well hidden.

Minimum wages don't help reduce poverty in the case of poor households where nobody has a job, and they would increase it if they raise retail prices. And they're unnecessary (from a distributional equity standpoint) for households that are not poor because a low-earner lives with a high earner. For both of these situations, working tax credit (earned income tax credit / negative starting rate of income tax) is more effective. But it suckks up tax revenue so it's harder to do.

My view is that social welfare transfers are better than market regulation.

Minimum wage laws and trade union action raises the price of a unit of labour. In economixspeak that shifts the supply curve left. Unless demand is inelastic, or the demand curve slopes the "wrong way" (not likely) then these developments reduce demand for labour, which clears at a higher unit price.

Restricting hours is no different from asking for wage increases.

If government legislation is what raises the unit cost of labour then (again in economixspeak) this creates a deadweight loss, because presumably some employment contracts which would have been economically viable (to both sides) are not legally viable. If the resulting unemployed people are compensated by social insurance then the deadweight loss is transferred to higher income sectors of the population.

This is well known and understood by those knowledgable in welfare economics although a free-market proponent usually likes to point out that it creates economic "waste" in the system, which it does. The rationale for the creation of this waste is typically a prevailing social consensus that the free choice of the putative below-minimum-wage employees is impaired by inequitably differential bargaining power (IE they have none; the employer holds all the cards)

If minimum wage laws are there to express normative social consensus views then you might expect them to be proposed and voted in by concerned citizens without any help from special interest groups like trade unions. However this is problematic and it is a central prediction of public polocy and group theory that large diverse groups like electorates do not effectively organise themselves to further their own (group) interests. In these circumstances, a smaller highly organised group like a union can counterbalance this, so that society ends up getting what it wants.

None of this is pre-destined to work out for the best of course.

 

[leftysergeant]

Then why can't any employer find someone who will accept less money? Or put another way, why shouldn't a law force YOU to pay me more money?

If you don't want to be forced, why should ANY employer be forced?

There is a minimum wage for the same reason that you are not allowed to sell yourself into indentured service or prostitution.

 

[Kid Eager]

Old posts . . . .

There's some good economic theory there. One of the points I was making in a a previous post was to note that the world doesn't end if you do establish a base wage - recognising that this action is performed for primarily social equity reasons, rather than economic. I used as the example Australia's scheme (not suggesting it's perfect, but rather that it serves a purpose).

Since those previous postings, I got to wondering about not GDP or average salary levels, but whether there was a correlation between lack of minimum salary levels and higher levels of national poverty.

Unfortunately the inability to isolate these two factors alone amongst all other economic and social levers will, allow the argument to continue ad infinitum, BUT the OECD figures (using USA and Australia as the previously argued examples) would appear the indicate *something*..

Have a play here (unfortunately the data is a little dated, but it's the latest I could find that did this):

http://graphs.gapminder.org/communityproxy/ChartDataServlet?key=plL7_TnAeMdBLyRVf1rehGg#$majorMode=chart$is;shi=t;ly=2003;lb=f;il=t;fs=11;al=30;stl=t;st=t;nsl=t;se=t$wst;tts=C$ts;sp=6;ti=2003$zpv;v=0$inc_x;mmid=XCOORDS;iid=plL7_TnAeMdBAvXX8r5__Vw;by=ind$inc_y;mmid=YCOORDS;iid=plL7_TnAeMdAktDNHMaxdJQ;by=ind$inc_s;uniValue=20;iid=plL7_TnAeMdCTpDLPYo-_VA;by=universal$inc_c;uniValue=255;gid=CATID1;iid=plL7_TnAeMdC8GEnotAixIg;by=grp$map_x;scale=lin;dataMin=1.814;dataMax=36$map_y;scale=lin;dataMin=2.77;dataMax=22$cd;bd=0$inds=i13_t001994,,,,;i37_t002003,,,,;i238_t002003,,,,;i239_t002003,,,,

Damn! That's a long url: you'd better copy/paste it into the browser address bar...

 

[Francesca R]

a base wage [ . . . ] is performed for primarily social equity reasons, rather than economic.

I would re-iterate from above that it is also preferred for political reasons over using tax/welfare transfers to a greater extent. It is far easier to get electoral support for minimum wages than for higher taxes, but it is probably less equitable for society.

Since those previous postings, I got to wondering about not GDP or average salary levels, but whether there was a correlation between lack of minimum salary levels and higher levels of national poverty.

Probably there is, because a redistributive state / social safety net--which is what minimum wage laws are a part of--is normally only to be found in richer countries (which have lower poverty) in the first place. As mentioned--India has the legislation, but not the means to enforce it, and if it could, it would probably cripple India's scant safety net, which amounts to little other than health care, and then only if you can get to where it is (such as a large metro area).

 

[leftysergeant]

I would re-iterate from above that it is also preferred for political reasons over using tax/welfare transfers to a greater extent. It is far easier to get electoral support for minimum wages than for higher taxes, but it is probably less equitable for society.

The logic of that statement utterly eludes me.

Probably there is, because a redistributive state / social safety net--which is what minimum wage laws are a part of--is normally only to be found in richer countries (which have lower poverty) in the first place.

Yeah..huh? The bolded part is absurd. Taxing the rich and giving to the poor is redistributive. Minimum wage laws simply codify as a formal norm a certain standard of ethical behavior for business. As for the italicised part, did it occur to you that thelevel of poverty may be direcrtly traceable to whether or not there is a minimum wage? Before the abolition of slavery, rise of unions and minimum wage laws in America there was a vast and growing impoverished class and a small but growing-like-a-tumor oligarchy. You may well be confusing cause and effect.

 

[Kid Eager]

I would re-iterate from above that it is also preferred for political reasons over using tax/welfare transfers to a greater extent. It is far easier to get electoral support for minimum wages than for higher taxes, but it is probably less equitable for society.

Probably there is, because a redistributive state / social safety net--which is what minimum wage laws are a part of--is normally only to be found in richer countries (which have lower poverty) in the first place. As mentioned--India has the legislation, but not the means to enforce it, and if it could, it would probably cripple India's scant safety net, which amounts to little other than health care, and then only if you can get to where it is (such as a large metro area).

Hmm...yes - I can just imagining everybody smiling sweetly as we (re)introduce higher marginal taxation rates as a means of funding welfare or transferring wealth. I suspect that in the Australian context, a quite granular minimum wages scheme (specifically in the case of the junior wages scenario) was established as a means of reducing the inefficiency or market distortion resulting from a minimum price for labour. In other words, it reduced the differential between specific minimum wages for a type of employee, and their perceived value to the employer (ie their specific level of uselessness was mitigated).

Sorry, I'm a bit rusty on my micro and macro - haven't used it for a while.

 

[Francesca R]

The logic of that statement utterly eludes me.

Min wages are an attempt to make pre-tax incomes less unequal. Tax/welfare changes post-tax incomes. The difficulty with trying to bend pre-tax incomes (put a floor under them) is that you don't have much idea of where the redistribution happens. Sometimes it goes the wrong way (at least some jobs don't exist because the min wage is too high). Plenty of labour regulations contribute to benefiting lucky middle-class workers at the expense of poor/unemployed ones. This is contrary to the received wisdom (which is mostly fiction) that the middle-income segment is "squeezed". I mentioned it already.

Conversely with tax and welfare, you know a bit better who pays and who receives.

Yeah..huh? The bolded part is absurd. Taxing the rich and giving to the poor is redistributive. Minimum wage laws simply codify as a formal norm a certain standard of ethical behavior for business.

If you don't think minimum wage laws are redistributive, then you have no reason to advocate them. They are certainly intended to redistribute relative to their absence (in which some wages would presumably be lower . . . or else why have the law)

As for the italicised part, did it occur to you that thelevel of poverty may be direcrtly traceable to whether or not there is a minimum wage?

Yes, but I don't really think it is. The causation goes the other way IMO.

 

[WildCat]

Obviously.

Meanwhile, back at the ranch, the role of the Fair Work Ombudsman continues as per its charter.

Meanwhile, the median income of Australian households is still thousands less than in the USA.

 

[WildCat]

According to who?

Every statistic I've looked at... what are you looking at?

 

[leftysergeant]

Min wages are an attempt to make pre-tax incomes less unequal. Tax/welfare changes post-tax incomes. The difficulty with trying to bend pre-tax incomes (put a floor under them) is that you don't have much idea of where the redistribution happens. Sometimes it goes the wrong way (at least some jobs don't exist because the min wage is too high).

That is unproven. If the job is not worth a day's provisions, it is not neccessary to the business concerned or there is no demand for the service or product. Otherwise, the employer could do it himself, or he is just throwing money down a rat hole or, in the case of a contractor, is in the wrong line of work.

Plenty of labour regulations contribute to benefiting lucky middle-class workers at the expense of poor/unemployed ones. This is contrary to the received wisdom (which is mostly fiction) that the middle-income segment is "squeezed".

Balderdash. Minimum wage benefits the middle class largely because the poor, in a minimum-wage country, have money with which to buy the goods and services of the middle class. The middle class then have money to expand their operations, hiring more minimum-wage workers, which reduces the number of available workers and makes the employers compete for them, like by paying more. This is obvious to anyone whose brain has not been sucked out by twits like Laffer and Friedman.

Conversely with tax and welfare, you know a bit better who pays and who receives.

The people who own the fewest legislators (middle class)pay and the poor wind up with less than they would have if the investor class were required to pay them a decent wage for what they do to fatten the Wal Street piggies.

Yes, but I don't really think it is. The causation goes the other way IMO.

Your biased opinion is exactly what it is.