Smiling Dave & ChroMattic - thanks for the example of American Samoa, that will be very useful.
Clayton - thanks for the quote. Just as a technical point to improve my understanding…
This is not necessarily true, because the minimum wage itself may make some workers productivity worth more, such that they keep their jobs. If a minimum wage of £10/hr was introduced, some people may get a pay rise from say £9/hr to £10/hr. These are the people whose marginal profitability has increased because there are now no longer any cheap employees. Is that right?
Another question: who benefits from minimum wage laws? In the long-run, nobody, because of reduced productivity, but in the short-run, does everyone with a job benefit from the existence of minimum wage laws, by having higher wage rates?
Sowell said “productivity” not “profitability”. Productivity has to do with how efficient or productive a worker can be by virtue of his natural talents, skills, experience, tools (capital equipment), and so on. Artificial changes to the minimum wage rate do not make those earning the minimum wage have more talents, skills, experience or tools. In other words, it does not make them really more valuable.
Those who are currently making the minimum wage. Sowell also discusses how unions indirectly benefit by reducing the availability of cheap substitutes to union labor - sometimes it’s cheaper to pay two non-union workers to replace a single union worker, but the minimum wage drives up the price of low-skilled labor generally, making it less likely that employers will be able to replace their union workers with non-union workers. This is in the same chapter of that book I quoted above. Sowell deserves credit for turning me on to economics and, ultimately, Austrianism and liberalism.
If the socialist shifts the debate to being about welfare, then all the better for me because that’s the easier argument (in my opinion). Should welfare be provided by government or free market charities? As with all other goods and services, with free market competition in welfare, we will have effectiveness, efficiency, diversity, quality, etc. And with government welfare we will have waste, inefficiency, incompetence, corruption, etc. And besides, only one is true charity; the other is simple forced redistribution of wealth, subsidizing idleness.
I’m not sure if I understand the difference between productivity and profitability. You seem to be suggesting productivity is something objective. But productivity depends on how highly valued the product is (how else would one measure it?), so is entirely subjective. Surely if the £9/hr worker is retained when the £10/hr minimum wage is introduced, we can now say he is more productive and more profitable, not because his skills have improved, but because now he is valued more highly. Or would you say his profitability has increased but his productivity has not?
Cool. I haven’t read anything by him.
Since the minimum wage applies to everyone, I don’t see what unions or union workers in particular benefit. Doesn’t this same argument apply to all workers? All existing producers of labor must benefit from the government placing a barrier to entry into the labor market.
You may be right about the general socialist view of minimum wage and welfare. But this statement makes no sense. Forcing employers to pay a minimum wage (ie preventing workers from taking a job at a wage they’d accept) and forcing people to pay taxes to support welfare obviously can’t reduce coercion compared to a society that doesn’t.
And you haven’t provided any evidence that it would create “more general wealth” either.
I wouldn’t use the word “objective” but it is non-arbitrary. Valuation is somewhat arbitrary since an individual might value something greatly for no apparent reason (think of sentimental value). But productivity is not arbitrary - you can either produce X widgets per hour or you cannot. You can either frame a house or you cannot. Wishing that you could make more widgets per hour or frame a house will not make you able to produce more widgets or frame houses.
Not at all. Productivity depends on specialization and division of labor. The more specialization and the greater the division of labor, the greater individual productivity can rise.
He is not valued more highly than he was before, the most we can say is that he is more valuable to the employer than 10 pounds/hr., in the wake of the new minimum wage.
Profitability is a result of calculation, I think you should avoid using the word in this context. His income has increased but his productivity has not increased at all.
You may be right about the general socialist view of minimum wage and welfare. But this statement makes no sense. Forcing employers to pay a minimum wage (ie preventing workers from taking a job at a wage they’d accept) and forcing people to pay taxes to support welfare obviously can’t reduce coercion compared to a society that doesn’t.
And you haven’t provided any evidence that it would create “more general wealth” either.
Well, the assumption that underlies the minimum wage is that earning below that rate constitutes absolute, as opposed to relative poverty. As in, not being able to meet basic needs. One idea is that absolute poverty will lead some people to turn to violent crime who would not normally turn to violent crime. So if a social safety net prevents absolute poverty but costs society x dollars, and removing it would cause an increase in poverty related violent crime that would cost society 2x dollars, then the social safety net is actually saving society x amount of dollars. Also, I think the hope is that social safety nets can help productive people bounce back from a string of bad luck rather than being wiped out by it.
As for coercion, most socialists do not believe that coercion has to actively originate from another individual. For socialists, physical harm has no place in the marketplace, (whether it originates from an individual or just general circumstances) and that working below minimum wage for a self-supporting individual is construed as resulting in physical harm. For a socialist, a person who has to keep their job to be able to afford heart surgery or food for their spouse is in the same position as a person whose boss says “do your job to my satisfaction or I’ll shoot your spouse.” The causation is completely different, but the resulting situations are similar.
The idea is that a social floor of survival (guaranteed income, shelter, health care) removes coercion from the marketplace, because economic factors will never result in actual physical harm.
Price floors (minimum wage) either lead to no effect or shortages, neither makes it a good idea. In Game Theory that is what is called “GG” Just kidding on the last part.
Even if we take it for granted that poverty leads to crime, in order for minimum wage laws to make sense, you’d first have to establish that they reduce poverty. Since they make it illegal for employers to hire unskilled workers, minimum wage laws increase poverty, especially among the poorest and least skilled people in society.
So you’re actually in favor of government coercion (minimum wage laws) that creates more poverty, which leads to more coercion (violent crimes).
Unless you’re paying for that social floor entirely through voluntary donations, you’re still involving coercion. And the government locking up people who don’t pay taxes does involve physical harm. So unless you’re saying the socialist is okay with me not paying taxes to pay for other people’s welfare, your position is inconsistent.
What need does a teen living with his or her parents have to “meet basic needs”. The money earned mowing lawns or whatever is just play money, nevertheless, under the current laws, it’s illegal. That’s retarded.
It turns out that absolute poverty is not so absolute. The vast majority of people in the world live on less than the US “poverty line”, ($19,000 last I checked, it may be higher now). The so-called “poverty line” has been steadily growing far faster than inflation for quite some time. In the foreword of a book on the history of economic thought (I cannot remember the author or title), the author relates the story of Nathan Mayer Rothschild’s death, due to an infected abscess in 1836. At the time, Nathan Rothschild was far and away the richest man in the world. But today, an abscess is a routine medical problem easily cured, even for the poorest individual. It turns out that “absolute wealth” is absolutely problematic to define. All the money in the world will not buy you access to the medical technology that will exist 100 years from now for even the poorest of the poor of that time.
Society cannot valuate, so it cannot “save” or “lose” money.
You are dwelling in fairy-land where mystical forces magically “cause harm” to hapless individuals, like Zeus randomly zapping mortals in his fits of rage. Law properly concerns itself only with causality, that is, with determining the cause of property rights violations and determining appropriate damages to rectify wrongs committed.
You are comparing unlike things. The “boss” (aka employer) has no obligation to prevent the death of an employee’s spouse due to any cause. He does, however, have an obligation not to be the cause the death of the employee’s spouse. It is the late modern idea of the employer as caretaker which has resulted in this muddled nonsense.
[8-)]
“A government big enough to give you everything you want is a government big enough to take from you everything you have.” - Gerald Ford (unfortunately)
The most important flaw in your thinking is the assumption that the government is benign or that it has no interests of its own or that its interests are “society’s” interests.
This isn’t making sense to me. When I say he is valued more highly, what I mean is “his employer now values him at greater than £10/hr, whereas previously he valued him at greater than £9/hr (but not greater than £10/hr). So, assuming no change in the employer’s evaluation of money, the worker is now valued more highly by his employer”. This is how I am using the term “profitability”. The employer now believes that employing the worker at £10/hr will be profitable for him, whereas previously he believed that employing him at £10/hr would not be profitable for him.
I think I understand what you mean by productivity but maybe a more detailed scenario will help…
A pub landlord employs two waitresses at £6/hr. Then a minimum wage law of £10/hr is brought in. The landlord fires one employee, but keeps the other one, giving her a pay rise to £10/hr. The £2/hr saving compensates the landlord for the decrease in customers caused by a poorer waitressing service. If the one waitress works harder now, she can be said to have increased her productivity. But if she works in exactly the same manner, she has not increased her productivity. But, I would argue, in either case her profitability (and hence, her income) has increased. This is because she now the makes the crucial difference between having no waitresses and one, whereas before she was only the difference between having two waitresses and one.
This is all just semantics, but I want to know if my use of the term of profitability is correct here.
My main point is that it’s an oversimplification to say that with the introduction of a minimum wage, everyone who is currently earning less than that minimum wage will become unemployed. Because some people will get a pay rise. There is Group A, who will become unemployed, and Group B, whose wages will be raised to the minimum wage. Group A suffers. Group B benefits. What I am not sure about is whether Group C, those who are currently being paid above the minimum wage, benefit from it being introduced, and if so how the benefits are distributed among people in Group C.
As Mises points out frequently in HA, the Socialist view seems to think scarcity is somehow an effect of Capitalism and Free Markets, rather that determining factor that leads to them (or more specifically, the best method of responding to scarcity.) It’s only with the adoption of Socialism that scarcity will be abolished in their view.
It’s not shocking then that their causal views are warped and backwards, and something like the minimum wage is seen as a magical solution to making sure everyone has enough to survive, as if simply decreeing a law will change the course of nature. It’s easy to see why they would assume something like paying below the minimum wage is some form of aggression, as any mode of capitalism to them is contrary to “nature.” Of course, their real enemy is nature, as it’s the natural facts of the world that make it impossible to wish more matter into existence, or bestow upon humans god like powers that will make scarcity a thing of the past.
The most important flaw in your thinking is the assumption that the government is benign or that it has no interests of its own or that its interests are “society’s” interests.
Oh, I totally agree. I wouldn’t trust the U.S. Federal government as far as I could throw it; it’s way too big, for one thing, and even more importantly ‘society’ has few mechanisms for really influencing it because it’s a purely “representative” and highly Byzantine affair.
It’s a sliding scale though; different governments are benign and have the interests of their society at heart to varying degrees, which mostly has to do with how they’re structured. Contrast the structures the various German governments have had over the past 150 years and how those government have acted with the structure the Swiss government has had over the past 150 years and how it has behaved:
Swiss citizens are subject to three legal jurisdictions: the commune, canton and federal levels. The 1848 federal constitution defines a system of direct democracy (sometimes called *half-direct or representative direct democracy since it is aided by the more commonplace institutions of a parliamentary democracy). The instruments of Swiss direct democracy at the federal level, known as civic rights (*Volksrechte,droits civiques), include the right to submit aconstitutional initiative and areferendum, both of which may overturn parliamentary decisions.[32][36]
By calling a federalreferendum a group of citizens may challenge a law that has been passed by Parliament, if they can gather 50,000 signatures against the law within 100 days. If so, a national vote is scheduled where voters decide by a simple majority whether to accept or reject the law. Eight cantons together can also call a referendum on a federal law.[32]
Similarly, the federalconstitutional initiative allows citizens to put a constitutional amendment to a national vote, if they can get 100,000 voters to sign the proposed amendment within 18 months.[note 7] Parliament can supplement the proposed amendment with a counter-proposal, with voters having to indicate a preference on the ballot in case both proposals are accepted. Constitutional amendments, whether introduced by initiative or in Parliament, must be accepted by a double majority of both the national popular vote and a majority of the cantonal popular votes.[note 8][37][38][39]
The vast majority of people in the world live on less than the US “poverty line”, ($19,000 last I checked, it may be higher now)
Yeah, but that’s a silly comparison. The exact same products (not to mention essentials like rent, transportation, medical) cost vastly different amounts of money in different places: you can’t just compare dollar to dollar like that.
The idea that an American making $19,000 a year is wealthier than an Indian making $5,000 a year in India may or may not be true; you have to look closer.
I disagree. Structure of the government is relatively unimportant except that we can say that the more efficient the structure, the more oppressive the government. Governments are never benign and never have the interests of the subject population (not “their society”) at heart to any degree. This is like saying that some muggers are benign and have the interests of their victims at heart to varying degrees. That’s never true. A mugger is always making a deal that cannot be refused and is never a proper object of sympathy. The government, likewise, is always violating our rights in innumerable ways and is never a proper object of sympathy. The raison d’etre of government is the violation of human rights. It has no other purpose.
My only point is that “poverty” is a moving goalpost. Are we talking poverty in Tanzania circa 2010? Or are we talking poverty in England circa 1800? If we’re talking poverty in the USA circa 2010, then we’re not really talking poverty, we’re talking about a standard of living less than that which pertains for most overpaid, over-consuming, empire-subsidized Americans.
Henry Hazlitt said of economics that it is the art of tracing the effects of a policy not only on some groups for some periods of time but on all groups over all periods of time. What this means is that it’s not enough to pass a law jacking up the minimum wage then pointing to some workers who are now making more per hour and say, “Aha! See! MW laws work!” If the real outcome is that unemployment is higher, then the result is that poverty has actually been increased, not decreased. The problem facing those making low wages is that they have low productivity. This could be the result of a lack of education, talent, skills, experience, lack of capital investment in their area or regulatory obstacles. Mandating that employers not employ people for less than some arbitrary number does nothing to address the root problem or even alleviate the poverty. It actually increases poverty.
Note: I have followed a utilitarian approach, leaving aside the more important ethical/legal problem of the MW.
Just kidding on the last part.