Comments

1. 

   International

   December 25, 2017

   Terry Bennett

   If the minimum wage is $7.25, a worker employed at that rate is competing on two fronts: (a) can the employer get more than $7.25 in production from the worker, and (b) can the employer get anybody for that price whose production will be greater.

   If the minimum wage goes to $9, a worker whose production value is $8 is no longer a feasible investment for an employer. However, in most jobs production value is such a nebulous calculation that employers don’t even pretend they can pinpoint it, so they’ll probably keep most of their unskilled people anyway on the theory that they are sort of necessary and there will still be an overall profit. I.e., there will be minimal disruption and loss of jobs.

   However, if there is a big jump in the minimum wage to say $15, it becomes a little more obvious that even given the benefit of the gray area, these employees do not warrant the outlay. Second, and far more impactful, front (b) from above kicks in – suddenly a guy whose output is $8 is competing with people whose output is more than the $15 in wages they would legitimately command in the absence of government interference. The effect of such a law, as Professor Becker correctly forecasts, will be to greatly increase the number of workers tied for last place and calcify the chronically unemployable class, sending them the message that if your natural output doesn’t exceed $15 an hour, don’t even bother trying to participate in the market. (It will also force prices to rise.)

   If it is society’s problem that people need their earning power supplemented in order to subsist (and to that extent I agree that it is), then it is appropriate for society to provide that supplement, as we do. If we force employers to pay $15, they will hire the best person available for $15 instead of the best person available for $7.25, and society will end up entirely supporting the bottom segment instead of merely subsidizing them. Designers of government policies have been trying to corner the haves into paying for the have nots for decades if not centuries, and they always fail. People who spend their days trying to earn money are, as a class, far more knowledgeable about money than people who spend their days running governments. Governments cannot outfox them, and there is not the collective political will to sink to openly taking their wealth from them, as much as it would suit the current President and his ilk. Unless the plan allows money to flow to the people whose lives are spent seeking money, those people will adjust their behavior and the plan will fall short under the weight of its own unintended consequences.

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2. 

   International

   December 25, 2017

   Daniel Chai

   There seems to be recent research (based on the US, not abroad, so more relevant than the cited French study) that suggests that a higher minimum wage (at least at current levels) has no negative employment impact. Slate’s Yglesias summarizes some here: http://www.slate.com/blogs/moneybox/2013/02/13/minimum_wage_research_the_case_for_a_higher_minimum_wage.html.

   I’m curious your thoughts on this research. Politically liberal economists seem to cite these studies a great deal, while politically conservative economists fall back to models. To me, the studies seem compelling in supporting a higher minimum wage, but I’d curious to see a contrarian view.

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3. 

   International

   December 25, 2017

   Bruce

   Society must find a better way to divide labor and give more people a path to finding real and fulfilling work. The cost of inequality is taking a toll on our culture. Robots and new technology have streamlined production increased productivity and eliminated many jobs. Big business is good for big business but not necessarily for the masses. Consolidation often means a gain in efficiency, but this often comes at the cost of losing diversity and a “robustness” to both society and the economy. The benefits of efficiency sometimes have a huge hidden cost, in the 1993 movie Demolition Man, “everything is Taco Bell”. How the fruits of labor are divided is important, this includes not just the wage deserved by a common laborer, but how much CEO’s, those in management, and those that can’t, or choose not to work, receive. While we have become far more efficient in producing goods, all people should in their lifetime contribute to the good of society and the economic pie.

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4. 

   International

   December 25, 2017

   Jack

   My belief is that moderate increases in the minimum wage have little to no effect on “job loss” for a number of reasons.

   First is the businesses of those paying some of their employees a min wage would be affected similarly by the rise. Thus, no loss of competitive edge. So what about substitution? Say, that a ten percent increase in fast food worker’s pay added 3% to the cost of the offerings? (3% because there are many other cost factors including the food, rent, utilities and manager or owner’s pay/profit that goes into the price of the product.) Would a $3 meal that was raised to $3.10 be shunned in favor of returning to carrying a lunchbox or brown bag?

   Then there is the “productivity” argument. Some seem to believe they can accurately depict productivity at the low wage end, but, somehow, CEO increases of 400% or more are then claimed to be “market driven” with the implication of far more genius and productivity than when CEO’s were paid a small fraction of their current gleanings.

   So, “we’re sure” that the guy on the drive up window at a fast food stop grossing a million or more a year is “worth” $58 (at 7.25) but that a 10% increase to $63.80 renders the biz plan unworkable? If the store gets rid of him/her? then what? Do less biz? The owner’s wife or kid does it for the old $58 rate?

   I recall working for a medium sized company as a fairly well paid, partly commish, sales guy. Across the aisle we had “temps” working as receptionists because their low pay was considered “burden” not authorized by budget restrictions. Ha! when prospective customers called in for one or another of we “highly productive” sales force guys, guess who they talked to first? And what a diff it made when one stuck around long enough to learn something of the job, products and who was responsible for what and perhaps had a talent for putting the customer at ease.

   It seems we’ve lost the concept that things get done as a team. Who wins a baseball game? Pitcher? Catcher? Base hitter? Slugger? Who won WWII? Generals? Sargents? Millions of low ranking grunts doing what they were told? Would the quality of Generals rise dramatically were they paid in the 10’s of millions like private sector CEO’s? And ha! would the same be true for the sargents? and low paid privates?

   For whatever cause wage inequality has gotten all out of reason. As a much richer nation than we were when the min wage topped $11 (1968) and the pay scale was much flatter, we’d all be doing much better were we to have maintained the wage ratios of that era.

   The additional demand from those having a buck to spend would create a faster turnaround of money with more goods sold, and more hired to produce or distribute the goods, and ha! finally that which made us great in the past: Creative managers trying to contain labor costs with labor saving technology and spawning whole new, generally higher paying industries.

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5. 

   International

   December 25, 2017

   Jack

   You may be surprised to know that a “guaranteed income” was bandied about and got serious consideration during the Nixon admin.

   Ha! way back then, another time of economic strife, we likened our economy to a lifeboat with a max capacity of 9 but with 10 passengers. Someone is to spend time in the ocean, ie out of a job.

   As our economy will not function with 100% employment, are those 5% to 10% who are unemployed lazy laggards? or soldiers in the “war” against inflation in general and rising wages in particular? Then, how should they be treated?

   If, as I suspect, we have a structural unemployment problem in which unemployment above 6% or so is the new norm, along with underemployment of another 6%, how are we to handle it?

   In my younger years of reading a lot of sci-fi there were many stories of most of what we needed or wanted being produced robotically. Those stories always assumed far more leisure time with most of our wants fairly well satisfied. The trouble in our world is that ALL of those gains from robotics and productivity increases went to the “one percenters” with working folks working LONGER days and weeks just to survive.

   But is something akin to a living wage w/o work a good idea? Some could greatly benefit. Say artists, musicians, writers, single parents with young kids to care for and others might make good use of the time. But mostly, it would seem not such a good idea. And truth is that while most of what we can afford to buy doesn’t employ our entire workforce, not all of the work is being done.

   We’re short of those who’d care for our elderly or ailing and those who might care for our national parks and other infrastructure of the commons and many, many more jobs left undone than I can possibly know of. Soooo, a modern WPA? the government as employer of last or preferable resort? As in the response to the Depression, public works that would not have been considered a decade earlier? The arts were supported too, so grants of some certain length for those wanting to write? or beautify the landscaping of a park or city hall?

   If we are to run this country with but 85% of its workforce being gainfully employed we are going to have to cross that bridge of “What do we do with the rest?” at some point.

   On the other hand (economists have to have at least two and perhaps a spare hidden away?) IF our wage structure returned to the distribution curve of the 60’s there would be FAR more demand for the goods and services we’ve long produced. IF…. we were to man up and address some $2 trillion of long delayed roads, bridges and other infrastructure maintenance, say at $300 billion/year that would directly sop up several million of unemployed of the hard hit construction sector with the multiplier effect, as those now employed spent their incomes another several million would find employers calling them back.

   What will NOT work is a UK style austerity program (a complete bust there) or sticking our heads in an age-old hole and pretending the high numbers unemployed are “simply lazy” or that 15 million or more of our fellow citizens don’t exist, or count.

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6. 

   International

   December 25, 2017

   The minimum wage, to the extent that it exceeds the market wage, is a tax on those who buy labor. Apart from the noted theoretical disincentive upon the purchase of labor, is it fair to tax that behavior? An employer who pays less than a living wage is getting a resource for less than it costs to sustain that resource; on the other hand if the market price is interfered with, the cost to the employer may be higher than the value of the resource. If it costs $10 an hour to feed, clothe, and house a person, and he or she generates $8 in output and is paid $6, is the state subsidizing the employer or is the employer subsidizing the state?

   The supposed horror of meritocratic capitalism is that if you give people freedom, some of them will exercise that freedom by pursuing, and often acquiring, great wealth. Income inequality is not a problem. The fact that some people are poor is a problem, but the fact that others are rich is not. If everyone were middle class, more people could afford Microsoft’s products and Bill Gates would be even richer than he is. One person’s efforts to create wealth do not somehow subtract from the wealth of someone who is or is not working to create other wealth.

   The fundamental problem is none other than supply and demand. Lots of people want to acquire the American dream, and have nothing with which to buy it. They offer up their strong backs and weak minds in the market, in competition with the rest of the teeming horde, and there is far more supply than demand, driving the price of unskilled labor down, a lot.

   I fully agree that the practical effect of the 20% increase he proposes will be absorbed with some grousing and little other consequence. We can afford it. New Jersey has just voted to enshrine automatic increases in the minimum wage into our constitution. It sticks in my craw, but I have no plans to move. I just wish we’d call it what it is.

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7. 

   International

   December 25, 2017

   Jim kirby

   It seems to me that the curve of employment vs. minimum wage has to be monotonically descending with a flat horizontal stretch at the beginning, after which it descends rapidly all the way to $100/hr and beyond.

   If so, raising the minimum wage will have negligible effect up to the knee, after which the effect will be ever more drastic.

   If the knee in the curve is at $10/hr, a raise fromj$7.25 to $1.10 will have little effect, while a raise to $15 might have drastic effects.

   So the pronouncements by economists that raising the minimum wage has no effect on employment might well be true now, whereas in 1968 a raise would have been devastating to employment.

   Nobody knows where that knee is, of course, which makes the economic theory of minimum wage vs. employment just another one of many with a foundation in sand.

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8. 

   International

   December 25, 2017

   Terry Bennett

   Maybe there’s another way to slice this. We’re all familiar with the concept of dumping, the practice of selling a product for less than it costs to produce. Let’s suppose it takes my $10/hour to “produce” a laborer, keep him fed and fit for work, etc., and he sells himself on the open market for $6. He’s dumping labor, selling it at a price with which an honest laborer trying to support a family cannot compete. The minimum wage can thus be thought of as a restriction on the employee’s anti-competitive behavior, not the employer’s.

   Building on that line of reasoning, there are people who don’t cost $10/hour to sustain themselves because their sustenance is partially or wholly provided by their families. This is an oft-stated argument against the minimum wage – more than 50% of those who receive it are under age 25. Low-wage labor can be of individual and social value to those selling it, apart from consideration of the benefits to those buying it. How many college graduates had a first job flipping burgers or waitressing in a shore town for the summer? As the advocates rightly say, you can’t raise a family on $7.25 an hour. As the detractors rightly say, most people earning minimum wage aren’t trying to raise a family; they are trying to make a little pocket money, save for school, get some experience, contribute a little bit to help their parents, and maybe develop the discipline of getting up in the morning which will serve them in good stead in subsequent employment of higher responsibility and commensurate compensation. Some people even temporarily take jobs with no pay at all – internships – to obtain this benefit. So, the suddenly obvious fix is to exempt people under 25 from the minimum wage law, and almost everybody should be happy.

   Of course this might entice employers to terminate workers approaching age 25, but most of these workers will self-terminate anyway, and look for something better once they finish college or mature to the point that they realize they want and need to be more productive and successful. Furthermore, if the rules are known going in, we will be encouraging a structure wherein workers will know they need to progress, i.e., to have a career instead of just a job. In time, most such unskilled work may be done by new workers, as it should be, and older workers with experience will be goaded to move into at least slightly more skilled positions warranting higher pay. I thus think any practical skewing effect will be minimal and manageable, and may even be beneficial.

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9. 

   International

   December 25, 2017

   Dan Johnson

   One of the states should try partially replacing the minimum wage with a wage subsidy. It would basically work like the earned income tax credit, except it’d paid at regular pay periods (so it’s a true replacement for the lost wages). The government would pay the subsidy electronically to the employer, and the employer would pay the employee in the normal way (by check or whatever).

   I’d imagine the effects could be much more progressive. The subsidy would be means-tested, so the working poor would get the benefits, but not affluent teenagers who are just looking for spending money. Obviously, this would be a big windfall to employers, who are generally the constituency of Republicans, so in exchange liberals might get a bump in the income tax’s higher brackets to pay for the program, along with a fairly generous subsidy.

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10. 

    International

    December 25, 2017

    Bruce

    If people were willing to work for a little less money, a great number of jobs would be created, these jobs are needed at a time that many Americans claim they have been looking for employment and will do almost anything for work. Unemployment remains high, yet the President wants to raise the minimum wage. So what gives? How do we reconcile these strange reports? This is my take on this phenomena, it could be called a “tale of two cultures.” It could be that the crux of the employment problem, is cultural and structural in nature. It may be based on unrealistic expectations created over the last decade by our growing government centered economy. Government employees are often paid better then in the private sector because government does not need to make money to exist.

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