…and the minimum wage.
It’s a shame that we have economic ignorami running the country. What’s particularly stupid about a federal minimum wage is that it’s one-size-fits-all in a country with a wide disparity of living costs. And the degree to which it keeps the young and unskilled from reaching even the first rung of the career ladder is criminal, and a major reason that unemployment is so high among young people in the inner city. But they keep voting these morons in.
Ignoramus aut nolimus videre? đ
Whatâs particularly stupid about a federal minimum wage is that its one-size-fits-all in a country with a wide disparity of living costs.
Interestingly even Germany doesn’t have a federal minimum wage. It does have nation-wide universally binding wage agreements so it’s still a bad situation. A whole generation of former East Germans has had their economic prospects taken away. They are again wholly dependent on the state.
The problem is actually a little more complicated. Some states, Florida included, where I am, have a separate Minimum Wage law that is better than the Fed’s law. In fact, it seems to go up as the fed wage does, but it’s always ahead. Not bad for a state that’s actually based on an $8 per hour tourist economy – at least in the Orlando area.
“Not bad for a state thatâs actually based on an $8 per hour tourist economy – at least in the Orlando area.”
Not good for the 12.6% unemployed, either.
What politicians don’t seem to understand is that the mininum wage is always zero… no job. Raising past the natural wage point guarantees more people at the actual minimum.
Within unemployment limits, a minimum wage is not necessarily a bad thing – it forces a high productivity economy and the raising of living standards. It serves to discourage low labor cost industries, including ones which encourage “illegal” immigrants. The US is addicted to low cost labor, despite all the problems and low average living standards that come with it.
Excepting the youth training problem, should the US really be indulging in low labor cost industries? Should the US really be trying to compete with the third world with regard to low labor costs? A minimum wage seems silly from an economic stand point, but it does serve to tar and feather third world industries in first world countries.
The reason that we are “addicted” to it is because it makes us wealthier. You destroy wealth when you are forced to pay more for labor than it’s worth, and when you don’t deploy available labor because it’s overpriced.
Is that some new vernacular for sending those jobs overseas?
“Should the US really be trying to compete with the third world with regard to low labor costs?”
As soon as you figure out how to outsource mowing my lawn to India, let me know.
As soon as you figure out how to outsource mowing my lawn to India, let me know.
Let me know how the lawnmower economy works for you. My take is that a society based on mowing lawns isn’t going to have a lot to offer.
As to a minimum wage, if eliminating that means that the US really can compete with the Third World for labor costs, then I say “Go for it”. I don’t see the point of having a lot of unemployed people who could be working, but can’t due to the minimum wage.
Actual wage levels are driven by productivity, and productivity is driven by educational quality.
So in a sense the minimum wage is a liberal’s way of trying to legislate into existence that which their communist education system has utterly failed to produce naturally.
Actual wage levels are driven by productivity, and productivity is driven by educational quality.
So in a sense the minimum wage is a liberalâs way of trying to legislate into existence that which their communist education system has utterly failed to produce naturally.
Exactly, the point of having a whole lot of unemployed people who can not work due to the minimum wage is that they have a very strong incentive to get a high productivity job – a high paying, high tax paying, high standard of living, job.
One of the primary goals of a government is to increase living standards – increase *average* productivity. In part that means identifying and discouraging low socioeconomic industries – eliminating the supply of low cost labor, forcing labor to become more productive. Yes this is somewhat counter intuitive, unemployment hurts the economy, but so does low productivity – there is an optimal point.
Importing low socio economic populations lowers the average socioeconomic standing of the country. Importing low labor cost goods made in low socioeconomic countries does not.
If lawns are not worth mowing at a minimum wage, then perhaps they are not worth mowing.
One of the primary goals of a government is to increase living standards
Where is that written in the US constitution? or the Canadian or Australian constitution? Or indeed in the constitution of any relatively-free country in the world?
<emIf lawns are not worth mowing at a minimum wage, then perhaps they are not worth mowing.
Precisely. And so the homeowner will do it himself, rather than paying some kid to do it. Now extend that to the entire economy.
One of the primary goals of a government is to increase living standards – increase *average* productivity. In part that means identifying and discouraging low socioeconomic industries – eliminating the supply of low cost labor, forcing labor to become more productive. Yes this is somewhat counter intuitive, unemployment hurts the economy, but so does low productivity – there is an optimal point.
Why would you think that? There are a number of things that are problems here. First, as Ed Minchau mentioned, that isn’t one of the stated roles of the US government. Also, “increase standard of living” is not equivalent to “increase average productivity”. Discouraging “low socioeconomic industries” (unless there is blatant violation of protected rights, like slavery) doesn’t improve average productivity because you are inhibiting the efficiency of the economy (and hence, of productivity).
I would label your last sentence “wrong” not “counterintuitive”. Unemployment is pretty low productivity since nothing is being made (sure, you aren’t getting paid much, except in terms of government services, but you aren’t doing anything either). You can’t get lower unless you actively destroying value (say by committing crimes). That tends to happen as well in a high unemployment situation. So somehow, low but positive productivity is worse than zero or negative productivity. That’s “counterintuitive” all right. As I see it, the only optimal point is no minimum wage.
Think yourself lucky, here in Australia we have both minimum wage laws and universal welfare.. so it’s like two separate minimum wage systems, cause who is going to go out and work if they can get as much sitting at home?
As an aside, I think the inner cities are a great example of failure for attempts at improving standards of living. For example, there was a famous study of the economics of a gang in 1990-1995 (the actual years are unclear). Some relevant facts, the neighborhood had a 35% unemployment (well, legitimate employment) compared to a bit over 6% nationally in 1990. That’s more than five times as much unemployment. The gang itself tended to have about 40-50% of its workforce employed elsewhere at any given time.
The foot soldiers were making an estimated $2.50 per hour (in 1995 dollars) at the start though it went up to $7.10 per hour in year four after the conclusion of a takeover of a neighboring gang. That apparently went from paying below minimum wage (which probably was under $4 per hour at the start to a bit over $4 per hour at the conclusion of the research) to paying a bit over minimum wage at a time when the leaders needed more loyalty from their foot soldiers.
While there’d still be significant gang membership, if there weren’t a minimum wage, it is likely that a number of these people would have full employment, if it weren’t for the minimum wage. They already show that they’d work for wages well below minimum wage (and with high risk of jail or death too!).
Forgive me Pete, but you are so wrong…
[minimum wage] it forces a high productivity economy and the raising of living standards.
Only in your imagination. The only thing it does is raise unemployment. It lowers living standards… remember the definition of good vs. bad economist. The bad one only looks at they guy whose pay went up due to minimum wage. The good one looks at the entire effect.
the point of having a whole lot of unemployed people who can not work due to the minimum wage is that they have a very strong incentive to get a high productivity job – a high paying, high tax paying, high standard of living, job.
This is total fantasy. Everybody already has the incentive to get a better paying job. Without any job, it just gets harder.
I agree with you in principle, but there is something wrong with your statement of the problem. If the problem of a federal minimum wage is that living costs vary widely, then it would seem that a uniform minimum wage would be less of an obstacle in, say, New York City, where living costs are high, than in rural Shelby County, where we live high on the hog for not much moolah. So unemployment of inner city ‘utes should be less affected by a federal minimum wage and their unemployment rate should be lower. And the point here is that inner city unemployment is more due to lack of skills (and I mean everything from making change to saying “thank you”) than any federal policy. So I would say don’t look to the federal government to solve the inner city unemployment problem — the solution has to come from those who feed, clothe, house, educate, and indoctrinate those youths. If anything, the problem is that the federal government has created a hollow culture of dependency by doing too much to feed, clothe, house, educate, and indoctrinate those folks.
I don’t think that anyone proposes that the feds fix the unemployment problem in the inner city so much as stop doing things that make it worse.
Come now people, the job of government is largely about keeping its citizens happy through their pay packets – least they get voted out for stuffing the economy or lose the mandate of heaven for not maintaining consistent economic growth. Citizens mostly care and vote on their standard of living. I am sorry I am so bad at explaining this stuff, I had thought this generally accepted.
I too once upon a time thought of this in simple economic terms, where having people work is obviously better than not having people work and a minimum wage is an unnatural and inefficient distortion on the free market for labor. But economics gets a lot more complex than that when you start looking at non zero sum games, capacity building, long term incentives, etc.
Yes it would be far better if governments could increase productivity through better education, better economic management, better social policy – better governance. But it is often easier for governments to simply make this the problem of the individual – who is often more competent about such things. That is, overtly encourage their citizens to be more productive and discourage them from being less productive through more than just their pay packets. Governments are advantaged by more productive citizens.
I should further add that there is an optimal rate of unemployment, something like 5%. It is actually cheaper to pay these 5% welfare than it is to employ them – the cost of supervision/employing them exceeds their productive output. It is the productive output of the entire country that matters, not that of the bottom 5%. Obviously one also has to prevent the generational growth of dependency cultures, there needs to be a graceful way of falling off the bottom or climbing up to higher productivity.
Below a certain level of productivity, it is better to retire citizens to social welfare or send them back for more training, more motivation, retraining in a more productive industry, etc. Simply employing them in perpetuity at very low labor rates is not worth the hassle or the precedent. Poverty is not something to be encouraged and institutionalized.
“Poverty is not something to be encouraged and institutionalized.”
And yet minimum wage and government welfare programs tend to do exactly that.
Well, as much as I like to deride the welfare system in Australia, at least they have some things right. For one, if you’re on unemployment benefits you’re expected to get a job. They start you off with some gentle nudging.. demonstrate that you’ve been looking for work. After some period of time they start pushing harder.. assign a case worker.. put you into a program.. etc. Eventually it gets to a point where getting unemployment is more work than actually working.
The other thing is that just about anyone can get unemployment benefits, rent assistance, etc, so there’s no poverty excuse for being homeless, or begging. Unfortunately they don’t go as far as to make begging illegal.
âPoverty is not something to be encouraged and institutionalized.â
And yet minimum wage and government welfare programs tend to do exactly that.
No, low productivity tends to do exactly that. Around the world, high social welfare and minimum wage rates actually generally correlate quite strongly with the absence of poverty – poverty comes from elsewhere.
It is the low productivity that I am objecting to, a minimum wage may have a significant beneficial (and I suspect quite unintended) effect in confronting it.
Welfare – money for doing nothing – comes from a productive person’s wallet to pay the unproductive. Raising the minimum wage – paying someone more than their labor is worth – is an immediate decrease in the per-dollar productivity of that individual. And you argue that these drains on productivity somehow magically increase productivity?
I can only conclude that you don’t actually believe what you are writing, and are merely playing devil’s advocate.
…it is often easier for governments to simply make this the problem of the individual
Spoken like a person that believes in government over the individual.
It is the low productivity that I am objecting to
Then you need to reexamine your argument. Putting people out of work does not increase productivity. You are arguing a fantasy.
So tell me again how the loss of one persons productivity is offset by part of the productivity of another?
Come now people, the job of government is largely about keeping its citizens happy through their pay packets – least they get voted out for stuffing the economy or lose the mandate of heaven for not maintaining consistent economic growth. Citizens mostly care and vote on their standard of living. I am sorry I am so bad at explaining this stuff, I had thought this generally accepted.
It’s not your presentation of your opinions, it’s that you are operating from false principles. Citizens aren’t required to vote for things that are collectively beneficial to society and can legally pursue their self-interests at the expense of everyone else. So sure, they might want government to provide things that boost their personal standard of living. But it’s worth noting that these things routinely harm other peoples’ standard of living.
I too once upon a time thought of this in simple economic terms, where having people work is obviously better than not having people work and a minimum wage is an unnatural and inefficient distortion on the free market for labor. But economics gets a lot more complex than that when you start looking at non zero sum games, capacity building, long term incentives, etc.
And this is valid reasoning.
Yes it would be far better if governments could increase productivity through better education, better economic management, better social policy – better governance. But it is often easier for governments to simply make this the problem of the individual – who is often more competent about such things. That is, overtly encourage their citizens to be more productive and discourage them from being less productive through more than just their pay packets. Governments are advantaged by more productive citizens.
This is not accomplished via a minimum wage. You end up with a class of zero to negative productive people as a result.
I should further add that there is an optimal rate of unemployment, something like 5%. It is actually cheaper to pay these 5% welfare than it is to employ them – the cost of supervision/employing them exceeds their productive output. It is the productive output of the entire country that matters, not that of the bottom 5%. Obviously one also has to prevent the generational growth of dependency cultures, there needs to be a graceful way of falling off the bottom or climbing up to higher productivity.
If it really cost more to employ them than “supervise” them, then they wouldn’t be employed. And the bottom 5% can cost quite a bit. You have to include law enforcement and incarceration costs.
Below a certain level of productivity, it is better to retire citizens to social welfare or send them back for more training, more motivation, retraining in a more productive industry, etc. Simply employing them in perpetuity at very low labor rates is not worth the hassle or the precedent. Poverty is not something to be encouraged and institutionalized.
You used to have better ideas. Where did you go wrong? They wouldn’t be employed at “low” labor rates, if they weren’t creating more value than they cost.
âŚit is often easier for governments to simply make this the problem of the individual
“Spoken like a person that believes in government over the individual.”
Actually quite the opposite, governments are too incompetent to help (rather than hinder) productivity improvements themselves, so they demand that the individual manage it in spite of them.
It is the low productivity that I am objecting to
“Then you need to reexamine your argument. Putting people out of work does not increase productivity. You are arguing a fantasy.”
A 2-3% short term gain in national productivity at a far greater long term loss in productivity gains as these people are not driven into higher productivity jobs and the virtuous circle that creates. Penny wise but pound foolish.
They wouldnât be employed at âlowâ labor rates, if they werenât creating more value than they cost.
The reason I made my original comment is because I found it intriguing that the above statement does not necessarily remain true if one considers some interesting second order effects. You seem to be excluding how much they also “cost” the government, is that really a justifiable assumption?
Eliminating a poverty line allows one to gain an extra 2-3% say in national productivity at the bottom end, but at what cost? This group will never cover their share of taxes – they will always be effectively subsidized by everyone else, these are effectively subsidized jobs. Economically speaking, do you support subsidized job schemes? How about the importation of cheap labor into subsidized job schemes on a large scale?
Hence the desire to drive people on low wage rates to higher productivity jobs that can effectively pay their own way with respect to government taxes and expenditures.
What methods would you suggest for achieving this?
Do you think creating a class of very low wage workers is conducive to raising long term average productivity? How do you think this could be discouraged?
Eliminating the minimum wage does not “create a class of very low-wage workers.” It instead allows people to get jobs at the lower rungs, from which they work their way up. The minimum wage creates a permanent class of unemployed (those whose skills and experience are not worth the minimum wage, and who therefore never get an opportunity to change that through work experience). Not to mention that it’s immoral to not allow someone to offer his labor for an agreed-upon price.
[[[âŚit is often easier for governments to simply make this the problem of the individual
âSpoken like a person that believes in government over the individual.â
Actually quite the opposite]]]
The government can not, not make this an individual problem. The problem is always the individuals. I say you are a believer in government solutions because your statement suggests “if only the government got more involved…”,”if only they took the harder path…”, etc.
A 2-3% short term gain in national productivity at a far greater long term loss in productivity gains as these people are not driven into higher productivity jobs
You have not made any case that a minimum wage drives people to ‘higher productivity jobs.’ You can’t because it just isn’t true.
Eliminating the minimum wage does not âcreate a class of very low-wage workers.â It instead allows people to get jobs at the lower rungs, from which they work their way up. The minimum wage creates a permanent class of unemployed (those whose skills and experience are not worth the minimum wage, and who therefore never get an opportunity to change that through work experience). Not to mention that itâs immoral to not allow someone to offer his labor for an agreed-upon price.
Unfortunately not everyone treats a low wage job as an educational opportunity.
A minimum wage brutally forces a choice, be highly productive, or be unemployed – an almost amusing unintended consequence of such legislation which culls low productivity from the workforce.
I agree with your moral point, but I am not sure a government would. Whether everyone agrees to it or not, they are spending a lot of money subsidizing people who do not earn enough to pay their share of tax, and they are thereby in some position to make demands in return.
Constellation is a not completely dissimilar government subsidized jobs program, would you advocate lower wage rates or unemployment in that case? đ
I agree with your moral point, but I am not sure a government would. Whether everyone agrees to it or not, they are spending a lot of money subsidizing people who do not earn enough to pay their share of tax, and they are thereby in some position to make demands in return.
If you feel the government should redistribute wealth (and I’ll leave you to argue for the morality of such a scheme), then a basic income below subsistence level (everyone gets it, no means testing) is a more moral way of doing it. It still requires people to pay taxes but it does not forbid people to sell their services at a price they agree with a buyer.
The government can not, not make this an individual problem. The problem is always the individuals. I say you are a believer in government solutions because your statement suggests âif only the government got more involvedâŚâ,âif only they took the harder pathâŚâ, etc.
There is some truth in that, good governance does matter – look at Africa. But good governance does not mean more government. On an international per capita basis the US already has a big government – it just gets little for it.
You have not made any case that a minimum wage drives people to âhigher productivity jobs.â You canât because it just isnât true.
This reminds me of the old Dutch cure for laziness; a basement and a hand powered water pump… Some became driven.
A minimum wage culls low productivity from the workforce. In the long term does this strengthen or weaken the economy? I do not know – but it seems an interesting question.
A minimum wage culls low productivity from the workforce.
Yes, they go from low productivity, but being properly compensated for it, to zero productivity. That means there is less produced, and therefore less societal wealth.
In the long term does this strengthen or weaken the economy? I do not know – but it seems an interesting question.
Figure out it from what I wrote above.
A minimum wage culls low productivity from the workforce.
“Yes, they go from low productivity, but being properly compensated for it, to zero productivity. That means there is less produced, and therefore less societal wealth.”
In the long term does this strengthen or weaken the economy? I do not know – but it seems an interesting question.
“Figure out it from what I wrote above.”
Well to use an evolutionary analogy, carefully culling the weak animals in a herd weakens the herd in the short term but strengthens it in the long term.
As I have attempted to argue, I suspect this may also be the case in this circumstance, but I can not say for sure or to what extent it may be true.
Somehow, I doubt this is an answer you will like.
It’s not a useful analogy. This is a cultural problem, not a genetic one.
Genetic algorithms can also be applied to cultural problems, though success in doing so may vary.
If you feel the government should redistribute wealth (and Iâll leave you to argue for the morality of such a scheme), then a basic income below subsistence level (everyone gets it, no means testing) is a more moral way of doing it. It still requires people to pay taxes but it does not forbid people to sell their services at a price they agree with a buyer.
One possibility I have seen suggested is a flat 25% tax rate with a universal $10,000 rebate. It bypasses a lot of government directed spending.
Perhaps scale the size of the rebate such that the dependent population is fixed at a given percentage of the total, or scale it to a fixed percentage of the average wage. This might prevent the growth of a dependency culture.
Genetic algorithms can also be applied to cultural problems, though success in doing so may vary.
That’s why there are 50 states that can each try things like minimum wage on their own, and that’s why Texas by and large succeeds and why California is a basket case.
And still you see no problem with an overriding federal minimum wage eliminating that natural selection process. Astonishing.
One possibility I have seen suggested is a flat 25% tax rate with a universal $10,000 rebate.
$10,000 sounds very high, especially if it is per person, not per household. $5,000 should be more than enough. Again, I’m not saying this would be necessary, but it would be a lot better than a minimum wage + welfare.
Genetic algorithms can also be applied to cultural problems, though success in doing so may vary.
“Thatâs why there are 50 states that can each try things like minimum wage on their own, and thatâs why Texas by and large succeeds and why California is a basket case.
And still you see no problem with an overriding federal minimum wage eliminating that natural selection process. Astonishing.”
I never said that I did not see any problem with a minimum wage, let alone an overriding federal one.
One possibility I have seen suggested is a flat 25% tax rate with a universal $10,000 rebate.
“$10,000 sounds very high, especially if it is per person, not per household.”
Well, that number was actually suggested in New Zealand dollars…
“$5,000 should be more than enough. Again, Iâm not saying this would be necessary, but it would be a lot better than a minimum wage + welfare.”
I would agree, although there are probably some troublesome loop holes in this approach somewhere, like it may need to be scaled with local average incomes.
I think part of the suggested intent was to make it efficient enough that it could sustain a degree of being abused, and that this would be cheaper than policing it. That is, a small proportion of people would take it as a life style choice, and that would not be a problem as that cost would be far less than the administrative burden of a typical social welfare system.
A thing that I do like about such an approach is that it would take some of the power of social spending away from the government and put it back in the hands of the individual.
I never said that I did not see any problem with a minimum wage, let alone an overriding federal one.
(checks the post again to make sure I read it right… yep, this post is about a one-size-fits-all overriding federal minimum wage… checking to see that Pete has been defending that all along… yep)
Well, Pete, you’ve certainly come to the right blog. You have much to teach us, having already achieved interplanetary travel.
take some of the power of social spending away from the government and put it back in the hands of the individual
Well by golly, that’s the easiest thing in the world to do. Cut the damn taxes!