Professor Stiglitz and the Minimum Wage
Minimum wage is one of the only subjects nearly all economists agree upon. The exceptions are economists who are willing to throw out science in defense of the policy positions of political figures. Such is the case with Joseph Stiglitz. But students of economics don't have to look far to see that the circumstances behind his change of mind were highly suspect. FULL ARTICLE
Comments (43)
Here ahother example of goverment propaganda:
Substantial fatal flaw in CRS Report for Congress, Coded RS20826,
June 15, 2005
Congressional Research Service Library of Congress (created in 1914)
Structure and Functions of The Federal Reserve System
http://www.fas.org/sgp/crs/misc/RS20826.pdf
by Pauline Smale
Economic Analyst
Government and Finance Division
psmale@...
-------------------------------
Dear Pauline Smale,
in you report Number RS20826, at page 1 and 2, we read:
"In keeping with its independence within the federal government, the [Federal Reserve] System operates without appropriations from Congress. Its income derives primarily from interest on government securities acquired through monetary policy operations, and fees for banking services, with any excess income returned to the Treasury."
Now this statement overlook the fact that the Fed cook the books by keeping the monetary rent (A.k.a. seigniorage, seignorage) in the
liabilities side of the balance. I.e the Fed write the face value of
the banknotes in the liabilities side so that she can withheld from the Treasury all the difference from the pure cost of fabricating "Federal Reserve Notes" and the nominal value of the banknotes. This is not a minor flaw and in our opinion it is the
single most important fact about the Fed.
The "excess income returned to the Treasury" is creamed-off withhelding the monetary rent. So, instead of putting this rent in the 'Assets' side, we have a damage of 200% of the sum involved.
I.e. the Treasury is "down" of the seignorage instead that having it as a plus. If the monetary rent is 100, instead of having credited
100, the treasury is indebted by 100. The difference is 200.
So to speak, all the US National Debt is now due to this smart 'book cooking' escamotage.
I hope you will notify the Congress about this major issue before they ask themselves why they were not notified of this BEFORE.
Thank you for your cooperation,
Marco Saba
researcher
Italian Center for Monetary Studies
Published: September 4, 2006 8:42 AM
Politics will always trump economics. That's the way it's supposed to be in a democracy.
Published: September 4, 2006 10:26 AM
If the choice was between working and starving then the minimum wage would not be the only incentive for working but this is not the case. In Seattle the bums and winos do quite well begging and eating at the many places which hand out free food. It is said that proficient beggers can net $7/hour which is well over the national minimum wage and close to Washington's minimun wage..
Washington State has the highest minimum wage in the nation and also one of the best economies. Is this happenstance?
Published: September 4, 2006 11:03 AM
It seems billwald has offered two separate arguments above. The first is an attempted economic argument, the second an attempt to make us forget that correlation is not causation. To identify the second, of course, is to refute it. On the first, it certainly seems true that if one can earn more than the minimum wage without working, then increasing the minimum wage will bring some of those bums into the workforce. But how is this supposed to reduce unemployment, rather than increase it? On net, there will likely be less jobs after a minimum wage increase. If all those former bums manage to find work, it will be at the expense of people who were working before. What can be said in favor of getting lazy bums jobs over those who initially desired to work?
Published: September 4, 2006 11:32 AM
While we discuss the wages received, I have not seen the opposite side, the cost to live in today's world.
For many on minimum wage there are few non-montized supports to supplement that wage such as child-care, cost to get to the employment, meidcal support and related services that were, at one time not needed (walk to work), extended and two parent wage earners, and the "family physician" who often could choose what to charge.
It might be interesting for "economists" to return to those days of yesteryear and add back in the externalities conveniently ignored in the past but now appearing in a system that has no flexibility.
The same holds for those who "bum" in Seattle rather than in Duluth
After the externalities get weighed, perhaps the "minimum" wage may not be so different from what the actual "benefits" were when monetized?
thoughts?
Published: September 4, 2006 11:56 AM
IMHO the biggest cost of the mininum wage is opportunity costs. I renember when I was a kid, and all I wanted was just a chance to get my foot in the door someplace. There are millions of teens, uneducated, and people starting out that need a foot in the door more than they need a living wage. IMHO, the costs of raising the wage lasts for decades after it's imposed because of all the people who were delayed in training and starting out.
Published: September 4, 2006 12:20 PM
According to the U.S. Bureau of Labor Statistics, the August 2006 unemployment rate was 4.7% or 7.1 million people. It seems there already exists an excess of labor to fill the available jobs in the economy.
Raising the minimum wage will not solve poverty in this country but will provide millions the ability to improve their lives. I doubt that Mr. Vuk ever worked for minimum wage and it would be interesting to see how he would survive on $206 gross for a 40 hour work week.
Published: September 4, 2006 2:11 PM
"While we discuss the wages received, I have not seen the opposite side, the cost to live in today's world."
That is because it is hardly relevant. If you do not go wondering how your plummer or your grocer can afford life, why should it matter to the buyer of labor?
"For many on minimum wage there are few non-montized supports to supplement that wage such as child-care, cost to get to the employment, meidcal support and related services that were, at one time not needed (walk to work), extended and two parent wage earners, and the "family physician" who often could choose what to charge."
ONLY if such minimum wage receiver HAS kids, a car and accrues "related services". People that receive minimum wages do not fall into this category - about 3% of wage earners, according to the DoL. They are mostly first-time job holders, young kids or secondary supporters in a household.
"It might be interesting for "economists" to return to those days of yesteryear and add back in the EXTERNALITIES [emphasis mine] conveniently ignored in the past but now appearing in a system that has no flexibility."
You mean go back to a concept that does not describe anything REAL? Come on.
Published: September 4, 2006 2:34 PM
Professor Stiglitz may be citing Lord Keynes - who is supposed to have said "when the facts change I change my mind".
However, Lord Keynes is (as every student of Austrian economics knows) the most overrated economist of the 20th century (J.S. Mill being the most overrated economist of the 19th century).
As for "empirical studies" - no doubt the New Jersey study will be trotted out (for a certain period of years unemployment was lower and job growth higher in New Jersey, a State that had increased its minimum wage law level, than in certain States that had not increased their minimum wage law levels).
Which simply proves how pointless these black-is-white "empirical studies" are.
If one contructs such a study carefully enough one can get "data" to support any policy (no matter how insane).
The basic point is simple. Do people really believe that passing a law is the way to improve the income of the working poor?
If someone believes that incomes can be improved (without an increase in unemployment) simply by passing a law, that person is a moron (regardless of how many academic qualifications they may have).
The key political test will be in the minimum wage law increase votes in serveral States this Novermber.
It will be interesting to see if most voters are morons.
If the voters prove to be moronic that is no reason to pander to them, as they will simply go on to demand other moronic benefits - for example a free dose of enternal youth drug to be provided by the government.
Old age being simply a plot by wicked corporations.
All one can do is to explain the truth as clearly (and as often) as one can. If people reject the truth, the consequences are their fault.
For all the talk about the power of the statists in both the "education system" and the mainstream media (and their power is indeed vast), in the end most people do get to hear the antistatist position.
Not as often as they get to hear the statist position - but they do get to hear it.
So the responsibility lies with the voters. They can not (with truth) say "we did not know the consequences of our actions".
Published: September 4, 2006 2:39 PM
M.Mischak first quotes a DoL statistic to then make an appeal to emotions and then an ad hominem - meaning he has not a valid argument. The statistics only mention those people actively looking for a job or receiving their unemployed insurance, but it does not mean those 7 million cannot FIND jobs, only that they are currently unemployed - changing jobs or changing locations, or many other reasons. The minimum wage would not affect most o the 7 million because only entry-level workers or youngsters or people with no skills receive the minimum wage. Your attempt to picture Mr. Vuk as a heartless person is not an argument for the minimum wage but a classic form of the ad hominem argument.
Published: September 4, 2006 2:42 PM
Low wages compete directly with colleges and universities. If you have the choice between earning 2$ an hour as a professional apprentice, or paying 5$ an hour to be a college student, what will you choose?
Cui bono my friends, cui fuckin' bono.
Published: September 4, 2006 3:24 PM
Mr. Torres - you state "The statistics only mention those people actively looking for a job or receiving their unemployed insurance, but it does not mean those 7 million cannot FIND jobs..." There were probably 2 million individuals not counted who were unemployed and searching for work no counting those who simply gave up the job search. If part of the problem is the concern of increasing the unemployed due to increasing the minimum wage, it would seem the pot is already full.
Published: September 4, 2006 4:28 PM
Minimum wage is all about additional tax revenues from "high" wages, and additional permanent welfare bureacracies from the high unemployment rate cause by such a policy. This article is sound theory in application, the state bribes and forces high profile intellectuals to sell out so they favor false ideas that brings politicians and their cronies new money. The more the altruistic politician realizes this is wrong, the quicker he'll be replaced. So as long money exists, the state should not. I'm always thankful for the former, never the latter.
Published: September 4, 2006 7:40 PM
Yes, it's true: eliminating minimum wage laws is the only humane thing to do.
I wonder why socialists advocate such cruelty. Surely they must be unaware of the damage their cause causes.
Published: September 4, 2006 7:56 PM
M. Mischank, does it matter if 2 million people more are unemployed? The point Mr. Vuk correctly establishes is that few wage earners receive minimum wage; I fail to see how can saying there "could" be 2 million more unemployed makes this point any less valid. Seems like you are trying to make an argument and then shoot yourself in the foot.
And how does the extra 2 million unemployed dove-tail with your "You are a mean one, Mr. Vuk" argument?
Published: September 4, 2006 9:12 PM
To waste anyone's time writing about minimum wages is, well a waste of everyone's time writing and reading about it. But here is two cents more.
The subject is totally a political shell game. That is a tactic used so as to distract attention and, again waste time in the political process from so many thing that truly have greater need of attention. ( No need to mention any here.)
However minimum wage need only be applicable to under adult aged individuals to protect them from exploitation. After that age the subject if void for any actual value. Fore employment or unemployment is not relative in the sense of just compensation for work-for-hire individuals. It's simply a matter of choice. Like the wage? Work. DOn't like it? Move on. Unemployed? Well the land of capitalistic opportunity is open for business to anyone with imagination.
But the real the thing that should be discussed and shake the whole corporate world to the foundation is MAXIMUM WAGES !
This is in regards to monetary reward for work done, not, not done or just because the person being reimbursed for their job
beyond appreciation by the good ole boys club standing.
In my opinion no one "working" or contracted for their knowledge or talents even knows (beyond blatant conspicuous consumption what to do with the over-the-top exhorbanant salaries being dished out to ball players or "executives".
But keeping the wages down on the glue and mortar people that actually make products and services of business in order to pay those exhorbanant wages is the greatest insult to one and all.
This is the demise of the whole of the corporate model. The depth of unjustness leeches the very breath of passion and value of humanity.
Then of course, corporations aren't about justice, right?
But if anyone dares, start discussing maximum wages! That’s worth discussing!
Published: September 5, 2006 12:24 AM
Vanmind said:
'Yes, it's true: eliminating minimum wage laws is the only humane thing to do.
I wonder why socialists advocate such cruelty. Surely they must be unaware of the damage their cause causes.'
Response: yes - to the extent that they are honestly sincere, they are indeed unaware, as they remain coinvinced that the policies they propose will make a better world. This is because:
- no (honestly sincere) socialist has ever understood the fundamental truths of economics, and
- every socialist believes that people are too stupid to make their own choices, and
- every socialist believes that he (or his party leader) is better qualified to decide what is good for other people than they themselves are.
Show me a socialist who DOES understand economics, and I'll show you a cynical, powermongering, dishonest opportunist.
Published: September 5, 2006 3:31 AM
"But if anyone dares, start discussing maximum wages! That’s worth discussing!"
Okay. Maximum wage does the same thing as minimum wage. Discussion Over.
Keep up the good work, Vedrun.
Published: September 5, 2006 4:55 AM
How about neo-Ricardian economics where its not necesserily true that the increase in the wage rate will lead to a decrease of employment ? In this theory there is no simple inverse relationship with the factors price and its employment in the different production processes.
Robert Vienneau's blog Thoughts on Economics
contains much discussion why it's not true that marginal principles in a production are not same as the marginal principles in the theory of distribution of incomes.
Vienneau's critique is directed more againts orthodox economics and the Austrian econ might be immune to major part of this critique. Neoclassical econ contains too many internal inconsistencies that it's beyond any hope of salvation.
Published: September 5, 2006 5:47 AM
"On net, there will likely be less jobs after a minimum wage increase."
Yet no one ever gives an example of where the employment rate decreased when the minimum wage was raised.
I believe that most apprenticeship programs are covered under the minimum wage laws. I suspect that these days the average college graduate (AB/BS) never recoups his college costs and lost wages.
Published: September 5, 2006 11:40 AM
Remove the word "is" from the sentence, "If unemployment is the real problem why would he lend is his support to a policy that will only increase it?"
Put a space between Rothbard and or in the sentence, "If he didn't know he was wrong, he might have consulted Murray Rothbardor looked at almost any microeconomics textbook (e.g., his own).
Published: September 5, 2006 12:19 PM
I think most people intuitively understand that wage floors decrease employment, all else being equal. This is why the advocates of minimum wage rates are always flustered when you ask them why not raise the minimum to $50/hour; they then fall back, hands waving the whole time.
Published: September 5, 2006 2:48 PM
I have two points for discussion. I am agnostic regarding minimum wage as a national policy. I would like to hear what thoughtful people think, rather than kneejerk "free market" dogma.
1) Economists think the government legislating a minimum wage is the greatest sin and that makes the government complete idiots (that term has been used here). BUT, the Fed prints a ton of money and in effect engineers everybody a pay cut (which hits the poor the hardest) all the time, and that does not seem to bring up the same indignation. Why? How can any discussion of minumum wage not also include the fact that the government is engineering a pay cut? Is this not a lot worse both economically and morally? Sixty years ago, a person could work as a dish washer and have 4 kids, but still keep a roof over his head, and his wife would not be working. Today, he would be homeless or barely making it working three jobs and his wife working as well. This is caused by inflation - not the minimum wage.
If we used gold as money and had no paper, people would be doing a lot better and perhaps minimum wage would be a non-issue. But in an infationary, fiat, loose credit, fractional reserve banking world, perhaps there *could* be an argument for a minumum wage if the data supported it.
2) I too would like to see the actual data regarding the effect of minimum wage. If 1000 people get a higher standard of living a 1 person ends up unemployeed as a result of minumum wage (and therefore motivated to improve his skills to get a higher wage),why is this bad? In the real world, why would an adult be better off making $1 per hour rather than be unemployed? If 500 people get a raise and 500 people get fired, obviously that would be a problem. I understand the THEORY of it being bad, but theory and reality often don't line up. Can anybody site the "70 years of data" mentioned.
Published: September 5, 2006 10:12 PM
What is wrong and right with a minimum wage. There are several problems with business practices that bring about a need to have a minimum wage set.
The one's making a good living wage of $12 per hour or more and corporate management are the most outspoken against a minimum wage for the other workers.
There those in what has been called service sector jobs who are very skilled at their jobs and are barely paid more than minimum wage. I am one of those folks. I am very skilled at my job, there is not a union here nor would the corporate owners of the hotels and resturants let a union be formed for service workers here. The employers would just let us go and hire cheaper Mexican workers who are less skilled. Do you like to eat out? Do you care who fixes your meals? Do you know if the people who make your meals are skilled at their jobs? Or how much they are paid? Here the average resturant worker gets $6.50 an hour after a year on the job. I make $9 after 6 years after you figure in tips. Can you survive on that? I do but I have to hustle side jobs to fill the voids and work 50 hours a week. When business is slow the management reduces the crew size to cut their costs. Can you live on that? How much do you make an hour? Do you have a union to fight for your pay raises and working conditions? We don't. There isn't the promotions and pay raises in the service industry like there is in the manufacturing industries or government jobs. Don't get hurt on the job in the resturant business. Their replacement for workmans comp is an insurance company that doesn't compensate you for time lost from work until after you have been out of work for 2 weeks and you don't get paid for the 2 weeks you have lost due to the work related injury. This happened to me and I feel used.
This is just the tip of the iceberg. People who don't or have never worked in the service sector should not be saying the minimum wage is a bad thing. Just try and get ahead on that income for a few years, you will be begging for a union after that. Oh yeah, don't complain at work or you will be replaced by cheaper green card holders or even an illegal immigrant. It is not much different than slavery. At least the slave owners fed you, gave you medical care and housing.
Maybe all of the service workers of the US should form a union and strike for better pay or real benifits. I don't want to hear this crap about getting a real job, this is as real as it gets here. And don't tell me to move to a big city to find a better job, the cities are out of real good paying jobs for service workers, they have all been taken by the laid off workers from the other industries who have laid off thousands and moved their factories overseas. The prices keep going up and our wages stay the same. Corporate greed and the stock market are the cause of this problem. It has to end, or the whole house of cards will fall.
Published: September 5, 2006 10:51 PM
"BUT, the Fed prints a ton of money and in effect engineers everybody a pay cut (which hits the poor the hardest) all the time, and that does not seem to bring up the same indignation. Why?"
What are you talking about? I bet if you read five messages on any thread on the LvMI blog, at least one of them will express indignation at the Fed.
"How can any discussion of minumum wage not also include the fact that the government is engineering a pay cut?"
That's easy: the two aren't related. You seem to be implying that since the Fed does what it does, a minimum wage is OK to ameliorate the damage; but of course it only makes the damage worse, so why bring it up? That said, I doubt you can find any discussion of minimum wage here that doesn't (so again, what are you talking about?)
Published: September 6, 2006 6:35 AM
What ever happened to bilateral contracts between two mutually consenting adults? Shouldn't the only people that worry be the ones actually taking part in the transaction?
No one complains if you look up dirty movies on the internet or buy fried chicken, yet people are devasted because and employer and employee agree on a wage rate? (emphasis AGREE)!!!!!!!!
Published: September 6, 2006 7:18 AM
Richard, apologists for slavery in the American south actually used your argument to show that their system was morally superior to capitalism. They claimed it was the real goal that European socialists were working toward. How right they were.
You know, Wal-Mart, that big bad evil company advocates a minimum wage. Their entry level wage is high enough that it could be raised significantly and not effect them at all. Their competitors, like Target (where I got my first job), pay less initially but raise it after a few months so they don't lose out due to high turnover.
Published: September 6, 2006 8:45 AM
GunderDog,
A man is cheating on his wife and wishes to continue. He solves his guilt by taking her out to dinner (of course, he gets the money by forcing others to pay for it).
Published: September 6, 2006 11:36 AM
Richard, I've worked in the service sector for $6.50 an hour (unofficially) assistant managing a fast food joint. I know how much it sucks; but yet I still oppose a minimum wage. Why? Because economically speaking, its untenable. Why? Because it violates a simple economic principal: increasing the price of a good decreases the demand for that good.
Lately, a lot of people have been advocating a "living wage" minimum wage, such as $12-$14/hr. "Nickel and dimed" by Barbara Ehrenreich (which I regrettably have to read as part of my indoctrination into college) is one such book. Its about 200 pages of sob stories followed by 20 pages of "we should be ashamed of ourselves." Of course, her entire theory that setting the minimum wage at a "living wage" is the solution is demolished by the fact that raising prices lowers demand, so at the end of the day, she is actually advocating firing the people she was trying to defend, as well as preventing them from getting re-hired somewhere else. Of course, she arrogantly refuses to see this, blinded as she is by her own envy and self-righteousness.
Unfortunately what most people don't realize (due to government propaganda) is that the government is responsible for our current economic woes, not the "wealthy." What is truly unfortunate is that the unraveling of socialist systems (which, by the way, is inevitable because governments always take more, and people, once softened to the idea of government assistance, always demand more) takes time, so in the mean time, the ignorant think that it is working, but in the end, production suffers exponentially, government grows astronomically, and, taken to its logical conclusion, the people end up wallowing in abject squalor.
Government = bad; freedom and private property = good.
p.s. In case anybody didn't mention this, I feel like I should point out the obvious political benefit of advocating minimum wage. First of all, they never actually raise it significantly.. just enough so that it disenfranchises the unskilled while not significantly affecting corporate income (at least not to the degree it would if, say, they raised it to $12).
Of course, the point of all the political rhetoric about minimum wage is to rally the poor behind the particular politician/political party in order to get more votes. Which is, by the way, exactly what the welfare system is. And by "rally the poor" I also mean college professors (the socialist ones, which is almost all of them) because the "leftist" college professors are so envious of their economic superiors that they love the thought of stealing their money. Of course, these very same professors also develop a sense of self-righteousness to hide their envy from themselves, and the concept of redistribution of wealth plays right into this psychological complex.
Unfortunately, colleges and university have been inudaded by these "blind mouths," but I guess that's just part of growing up American.
Published: September 6, 2006 12:12 PM
Peter: "That's easy: the two aren't related. You seem to be implying that since the Fed does what it does, a minimum wage is OK to ameliorate the damage; but of course it only makes the damage worse, so why bring it up?"
They are totally related in terms of the political debate. Inflation is *THE* reason people feel (right or wrong) that there is a need for a minimum wage. If we did not have inflation making it harder and harder for the working poor to survive, I doubt minimum wage would be such a big issue(perhaps I am naive). If the argument does not at least acknowledge the real pain working poor are feeling, it just is not going to sell. You are basically telling people "you are better off not getting a raise, even though you are starving."
Peter: "That said, I doubt you can find any discussion of minimum wage here that doesn't (so again, what are you talking about?)"
Actually, the article we are commenting on did not mention Fed money printing or inflation at all (granted, it was not the topic). Also, the Murray article linked to practically implies that inflation is good, because it in effect lowered the minimum wage and increased employment. I see plenty of indignation about the Fed and money printing from the Austrians (it is a main reason I find them compelling), but please refer me to any articles on the Mises site about minimum wage that acknowledge inflation making it harder for the working poor to survive.
Again, I say show me the data. Where's the data that proves the theory? Where's the solid research that looks at the real world and shows the overall economic damage is worse than the benefit? CAN ANYBODY REFERENCE ACTUAL STUDIES? If I make more money at one job because of minimum wage and get fired from second job (which I now no longer need to pay the rent) why is that bad? Perhaps what we need is a smaller labor force - with more women (or men) staying home and raising their children, and less people making more money. Certainly society would be a lot better. In other words, I am not sure why less employment is necessarily a bad thing. When you consider women staying at home, we had a lot more unemployment 50 years ago. Yet we were arguably much better off.
Published: September 6, 2006 3:04 PM
GunderDog...for more of the quantifiable increases in unemployment check out Walter Williams book, The State Against Blacks. You don't even have to read it. There is a nice chart of about 70 years of data and corresponding increases in unemployment. Secondly, it is impossible to calculate exactly what is better higher wages with unemployment or just more employment. I can tell you that something is definitely not good about helping poor people at the expense of other poor people. Ruining one life completely by throwing a person out of the labor force so one person can make $2 an hour more doesn't sound rational. You can't simply even add up the numbers because the minimum wage law pushes people out of the labor force. It does not just cause unemployment but specifically pushes out of the labor force. What does this mean? This means people with low productivity will have an extremely difficult time of getting experience or a job leading to a possible lifetime of unemployment. What do people start doing when they simply can't get a job at all legally. Well, there's always drugs and crime. That's one area people with low productivity are pushed to since they can't acquire legal jobs. So, the cost on society is not as simple as adding up the pay checks. The effects of the law trickle all the way down to your local neighborhood thug. How many of these people would not be criminals if they could get a job and experience.....how much less crime and murder would occur....who knows....no one can really calculate that. What we can say for certain is that unemployment is bad. Raising wages for the poor at the expense of other poor people is bad. Coercively destroying the ability of employers and low productivity employees to negotiate wages is bad. Pushing people out of the labor force is always disasterous for a society as a whole. You don't need numbers to figure this out really just some logic.
Published: September 6, 2006 4:49 PM
Vedran Vuk: I have worked with poor youth of color for years, and I can tell you that the reason they go to drug dealing and crime has nothing to do with there not being a minimum wage job at a fast food restaurant. The low-paying jobs are there for anybody who shows up, but people don't get any real skills should they take them (these jobs are specifically designed so that monkeys could do them adequately, and with little training so the business can handle lots of staff turnover). With all due respect, it is statements like yours that show most (not all) advocates of no minimim wage don't have a clue about the realities the working poor, especially people of color, actually face. Go talk to these people and you will find they are just as likely to become criminals if there is a $3 per hour job for them than if there is no job.
Now, if there was a $12/hour job for them (or a truly meaningful job at a lower wage that did have potential for moving up) they might take them in order to avoid a life of crime. People who work 60 hours per week at $6/hour flipping burgers or cleaning houses spend all their time hustling from one crisis to another and don't have time to think about improving their skills. Perhaps if they got paid more and could work 40 hours, some of them would actually do something to improve their skills. So you would have unemployment in the short run, but perhaps in the long run you would have more skilled and productive workers, and everybody would win. As Hazlitt and others suggest, we have to look at how a policy effects the entire society in the long run rather than on group in the short run.
Published: September 6, 2006 11:11 PM
I'm surprised there hasn't been more comment on this: "Low wages compete directly with colleges and universities. If you have the choice between earning 2$ an hour as a professional apprentice, or paying 5$ an hour to be a college student, what will you choose?
Cui bono my friends, cui fuckin' bono.
Posted by: Urbanitect at September 4, 2006 3:24 PM
I think this idea hits the mark. The "minimum wage" supports demand for the Edu-Indoctri-dustrial complex. It, the MinWage, and associated state mandated privations (i.e. "Child Labor" laws, Compulsory "School" attendence, et al.) suck the lifeblood out of, once effective, Apprenticeship venues.
Published: September 6, 2006 11:50 PM
Gunderdog....thank you for assuming that I believe minimum wage is the only reason for these problems. Perhaps you would like to enter into the realities of real argumentation. Obviously, there are many reasons for crime and drugs. I was simply pointing out the impossibility of quantifing the issue in terms of numerical benefits versus losses. For more information at the realities you should perhaps look at the New Orleans situation where jobs are paying $12 an hour and people still can't find employees mixed with an incredibly high crime rate. There are some jobs being uneducated one can be taught very easily such as being a fry cook at McDonald's however take an uneducated person who can barely speak English (born here or elsewhere) raise the minimum wage and I can guarantee you that they won't have a chance at getting any job that may involve communication.
Published: September 7, 2006 12:06 AM
Also may I add that any job helps out a person in the long run. Who would you rather hire at a restaurant to train as a cook? A guy who worked at McDonald's for a year or a person who hasn't worked at all. Or let's say the situation is completely unrelated to the job. You have a construction company. Who would you rather hire a person who has never worked at all or a guy you know is at least reliable enough that he showed up to work at McDonald's for a year. I think the answer is pretty simple. Having a job is not so much training as proof that you're willing to work and if someone is willing to work employers will take their chances and be willing to train them more so than someone with no experience at all. From personal experience (since we're using that as some loose form of justification) knowing lots of people in the service industry and plenty of other low paying jobs I see constant progression of better jobs. It's always slow but it's there.
Published: September 7, 2006 12:31 AM
If we acknowledge a justificatino for a minimum wage, inflation would be reason to increase it. If we do not, then it does not.
Published: September 7, 2006 8:20 AM
gunderdog,
Why raise the minimum to $12/hour. Why not set a minimum of $50/hr? Or are you going to tell me that I am being ridiculous?
Published: September 7, 2006 9:06 AM
"Again, I say show me the data. Where's the data that proves the theory? Where's the solid research that looks at the real world and shows the overall economic damage is worse than the benefit? CAN ANYBODY REFERENCE ACTUAL STUDIES?"
http://www.mises.org/hoppeintro.asp
Gunderdog,
Go to this web address and read Hans Hoppe's introduction to his book Democracy: The God that Failed. There are 4 or 5 paragraphs near the middle dealing specifically with a priori theory verses empiricism/positivism.
Published: September 7, 2006 9:09 AM
Yancy:
It's just a question of what the goals of the minimum wage are. I completely acknowledge that higher minimum wages hurt business. I think a small hurt is justified, given a fiat currency, easy credit system making the bottom. This is different than sticking it to businesses and putting them out of business with a $50 minimum wage.
We are talking about a policy that only benefits those struggling the most. I don't (although others may) advocate a policy that legislates everybody being middle class. I merely think government does have a valid right to help keep people from being trapped in a dire poverty/starving situation.
Where I live they passed a living wage of $9.50 per hour. A friend who ownes a restaurant was not happy, but he also pointed out that the increase in his payroll (he already payed really well) was just one increase among many (Fees to the credit card companies as more and more people pay with plastic, and increase in energy prices, higher food prices, etc.) If the living wage had been $20, it would have been really damaging to business, but so far, while there have been price increases, everything else has gone up also (because of inflation and other factors) and nobody has gone out of business.
Labor is only one of many business expenses. Government policies effect the costs of many things, yet the one that benefits the most in need gets all the indignation, while (outside of the Austrians) things like money supply are ignored.
Sure,this is a form of taxation that only hits business. But what else is new? I feel it's a much more effecient form of taxation than setting up some governement bureaucracy, because it could also be argued that there is a saving in tax revenues as people can work less and are more economically stable require less government services.
Published: September 7, 2006 2:51 PM
Very few Austrians, or any economists, will actually argue that small minimum wage increases will noticeably increase unemployment. Labor supply and demand has some elasticity, and most employers pay above the minimum wage (and most minimum wage employees make more than them minimum wage after a couple months of punctual, reliable employment). Small mandated wage increases can be accomodated by most existing businesses.
People who have no work history, or a poor one, are affected, because employers aren't willing to risk the higher wages on training an employee who hasn't demonstrated past value. New employees have zero value to a company because it takes time and money to train them, and time for the employee to perform profitably. Any skilled job will take around 90 days for an new employee to know the ropes and begin offsetting the employers initial 3-month investment. In high tech jobs, it may take closer to six months. This is one reason why these jobs pay better and have better benefits: it is a costly investment to employ someone and an employer wants to attract the best, and most reliable, talent, and prevent turnover.
The lag time of unskilled jobs is much less. They pay less largely because an employee, even someone who has worked in the industry for years, is often replaceable on the order of days to weeks with someone new. Wages are thus low compared to skilled positions. Turnover, on the other hand, is high. Employers of unskilled laborers or people in the service industry desire reliability and punctuality. People entering the workforce for the first time, or people with a spotty work history, haven't demonstrated these qualities and an employer is less likely to risk training and higher wages on these persons. After all, most employers pay higher than the proposed minimum wages to new employees, even those starting at minimum wage, within months to a year.
Small increases in the minimum wage probably won't lead a noticeable amount of new unemployment. They are likely to prevent the employment of a class of people, on the other hand, which is the point.
Published: September 7, 2006 5:24 PM
Gunderdog,
Very few people actually earn the minimum, and so small raises in the minimum actually benefit very few people. So what is the point? Why not help more with higher increases? At what point, in your opinion, does the benefit outweigh the cost? It has always appeared to me that that tipping point for most minimum wage supporters is the one in which they may be put out of work or out of business because of the increase.
Published: September 8, 2006 10:30 AM
Yancy: "Very few people actually earn the minimum, and so small raises in the minimum actually benefit very few people. So what is the point?"
That is *my* point exactly. I completely admit that this is a slippery slope, and that there is no easy, cut and dried answer. It's also a local issue. A minimum wage in a place where rents are really high like Santa Barbara should be higher than Des Moines.
I can't speak for other advocates, but too me, the tipping point is it should high enough so that in a locale people who want to work, and who in fact do work 60 hours per week, are not on the verge of homelessness. If a person is working 60 hours per week getting minimum, and they can barely make the rent and food, I would think the minimum wage should be higher. Again, I am not a socialist - I just think (in theory, anyway) that it's OK for government taxes (or regulations) to support keeping people from being homeless. I don't think government should keep people from being poor and make everybody middle class. It's just that level of desperation that so many people are in right now that I don't see a need for and it seems a minumum wage is an efficient way to address.
I know, that's real fuzzy. Perhaps the tipping point should be where it makes economic sense to work versus being on welfare. I think you stumped me on where the tipping point is. :-)
I must say, this conversation has been useful for me. But I need to let it rest now. Thanks for taking the time to respond.
Published: September 8, 2006 10:58 AM
GunderDog, after Yancey;
"Yancy: "Very few people actually earn the minimum, and so small raises in the minimum actually benefit very few people. So what is the point?"
That is *my* point exactly. I completely admit that this is a slippery slope, and that there is no easy, cut and dried answer. It's also a local issue. A minimum wage in a place where rents are really high like Santa Barbara should be higher than Des Moines."
Yancey is right, it probably isn't a very significant macroeconomic phenomenon, whether measurable or not. But if the one job eliminated by a raise in the minimum wage is the one you were in need of to start your climb out of poverty, then, to you, it might as well be 100% unemployment.
Raising the minimum wage hurts workers at the margin. The higher you raise it at once, the larger the margin of workers who never get the unskilled opportunity. At least admit this economic truth, even if politically it's inadmissable. This is why these minimums are raised slowly and deliberately, i.e., to keep the loss of marginal jobs low enough so that the voters will not notice.
Published: September 8, 2006 12:17 PM