
What harm do minimum wages do? - prostoalex
https://www.economist.com/schools-brief/2020/08/15/what-harm-do-minimum-wages-do
======
gjulianm
> Textbooks state that, in the absence of a minimum wage, a worker is paid his
> “marginal product of labour”, which means the value of what he produces.

> Just as a monopolist can set prices higher than would be the case in a
> competitive market, a monopsonist can set prices artificially lower.

A lot of economic arguments forget these ideas. The labor market is not a free
market: companies have more power in negotiation, they have more information
and, most important of all, they can deal with a job opening not being covered
most of the time. Workers can't usually live too much without finding a job.

That's why minimum wage laws and workers rights are important. Companies will
always push for lower wages wherever they can, without a care for the actual
wealth created by the worker. The only way to counter that push is by giving
more power to the worker, and in low-skilled fields with lots of available
workers, you need to do that through regulations and subsidies.

~~~
aidenn0
>> Textbooks state that, in the absence of a minimum wage, a worker is paid
his “marginal product of labour”, which means the value of what he produces.

This sentence is just wrong. First of all a rational actor will not
intentionally pay a worker the value of their production; you get no profit.

Textbooks actually say that a worker will be paid _no more than_ the marginal
product of labor, and _if_ labor is in short supply, they will be paid very
close to their marginal product of labor. If there are a huge number of
workers willing to work for $5/hr then workers won't tend to make even a penny
more than this.

Information asymmetry and differences in negotiating power will further
distort this, but the initial premise is already a strawman of basic
microeconomics.

~~~
efxhoy
>> Textbooks state that, in the absence of a minimum wage, a worker is paid
his “marginal product of labour”, which means the value of what he produces.

> This sentence is just wrong. First of all a rational actor will not
> intentionally pay a worker the value of their production; you get no profit.

In the econ 101 textbook simplified free market that the author is refering to
firms do not make any economic profit. If a firm in a free market is turning
an economic profit more firms will enter that market, raising supply, lowering
price and driving profits to zero.

~~~
dmalvarado
As an econ major, I've come to the conclusion that the dismal science is equal
parts making models and explaining why they don't work.

~~~
mkoubaa
the dismal science is too generous

~~~
onionisafruit
“The dismal science” is an established name for economics. Similar to the
sweet science or the gay science.

~~~
donw
I know boxing is the "Sweet Science", and a quick search seems to indicate
that "Gay Science"[1] comes from Nietzsche, and seems to refer to... poetry or
song?

A better translation from the original German is probably "Joyful Science",
though.

Not sure if that's where the parent was going, but I learned something new
today.

[1]
[https://en.wikipedia.org/wiki/The_Gay_Science](https://en.wikipedia.org/wiki/The_Gay_Science)

~~~
prewett
"Gay" originally meant "happy", and while "happy" and "joyful" are different,
they are at least reasonably close.

Wasn't Nietzsche nihilist, though? Seems like it would be hard to be joyful if
your science leads to nihilism.

~~~
donw
There are a lot of flavors of nihilism, so I'm not sure that having a
pessimistic worldview precludes joyfulness.

I'd call myself a realist -- and I think there's a lot of overlap with
nihilism there, in that I try and see the world "as it is", and not "how I
wish it was".

The world is a messy, ugly, dark place. It really is, and it's kind of amazing
how people go out of their way to pretend that either that darkness doesn't
exist, or that it's somebody else's job to keep it at bay.

There _is_ a light in our world, though -- it's us, if we choose to be.

And so, regardless of the futility in the grand scheme of things, I invest
effort to find joy in all that I can, and bring that sense of joyfulness to
those around me, because it makes my corner of the world just a little
brighter.

~~~
ganafagol
> The world is a messy, ugly, dark place. [...]

> There is a light in our world, though -- it's us, if we choose to be.

I can easily argue the opposite. The world itself is beautiful. Just sit at a
mountain top or in the forest or on a beach and take in their beauty. Look at
stars, galaxies, how they interact, it's absolutely stunning. Or zoom in
looking at microbes, cells, molecules, atoms. The world is a gorgeous place.

What brings darkness is people. So much hate, greed, awful intrigues, all over
the place. Look at the U.S. today, it's the epicenter. Everybody could be so
happy. But no, hate because somebody wants to raise taxes. Or wears a gun. Or
"wants to take away your 2nd amendment". Or is a misogynist. All covered over
with a culture that expects everybody to find everything amazing, wonderful,
best country in the world, or hate, cancel, exclude.

It's not the world that's ugly. It's the people.

~~~
ragnese
There's still darkness without people. Sickness, suffering, etc, exist without
humans. Hell, even torture exists. Orcas play with their food as they're
killing it. I believe cats do as well.

If you can zoom out from that at see it as some grand, beautiful, process,
then you have to apply the same filter to all of the evil stuff humans do as
well, IMO.

~~~
ganafagol
Fair point. Animals eat each other, and that process is pretty cruel at times.
Do animals have a mental concept of cruelty though? Of guilt? I suspect most
don't. That does not make their actions less cruel, but it reduces the blame
perhaps.

We humans know exactly what's going on. Wr do it anyway. We keep animals in
horrible conditions. And we know it. Yet we keep doing it. We treat each other
horribly. We have really terrible weapons. We use them anyway. It's cruel and
we know it. We spread hate and participate in racism and dehumanisation. Many
of us thrive in either participating or at least watching conflict. We
celebrate movies depicting humans mistreating or killing each other. We know
it and we like it. Oh but it's only against the bad guys!!!1

I think it's not a fair comparison.

~~~
ragnese
> Do animals have a mental concept of cruelty though? Of guilt? I suspect most
> don't.

What if a human, or groups of humans, don't feel any guilt or don't believe
what they're doing is cruel? I don't think that would help you sleep better...

Also, at least some animals are, in fact, capable of complex emotions. Pigs,
apparently, can feel empathy: [https://www.psychologytoday.com/us/blog/animal-
emotions/2015...](https://www.psychologytoday.com/us/blog/animal-
emotions/201506/pigs-are-intelligent-emotional-and-cognitively-complex)

It shouldn't be surprising. We are animals, after all.

> We humans know exactly what's going on. Wr[sic] do it anyway.

Perhaps that makes it _worse_ , but I don't know that it means that animals
being cruel doesn't count as "darkness" as in the grandparent comment. (It
certainly doesn't refute the point that cancer is still a thing from nature
and it's pretty damn dark)

But I'm pretty sure that animals would do the same stuff we do if they ever
developed the capacity to do so. I see no reason to assume they wouldn't.
Again- we _are_ animals. We evolved from the same ancestors. I'm sure if my
dog learned how to farm for meat, pretty much all of dog-civilization would
play out with a lot of the same themes as human civilization. Not because I'm
not creative enough to imagine other outcomes, but because I have no reason or
evidence to assume that their form of life is fundamentally different from
ours.

I'm fairly sure that aliens would observe us and the Orca who throws the
crying seal in the air as the same. They would either see both as sad, or
neither because "That's just what Earth life does. They kill others. They form
packs and fight over territory. Some exhibit anti-social behaviors."

~~~
ganafagol
Sure, if animals would be like humans, they would behave like humans. But
that's not an argument to excuse what humans are doing.

If I was just like some serial killer, then I'd also behave like a serial
killer. Does that mean the other serial killer should not get punished? No. It
just means that I should be pun8ished too if I was like them.

But I'm not really arguing humans-vs-animals. I'm arguing against world-is-
dark-humans-are-light. It's the world that's light and humans who make it
dark, for other humans. With exceptions of course.

Cancer is a bad example. It doesn't have an agenda. It's just a side effect of
some mutation or such. Sure we can consider it dark. But compared to humans
who actually have an agenda, i.e., they _choose_ to be dark, that's a
different ballpark.

------
AnotherGoodName
Look i get that USA has a lot of billionaires and the GDP per capita looks
great for the USA but I want US citizens to please take a look at median
wealth per adult and see how far you have to scroll down to find the USA:
[https://en.wikipedia.org/wiki/List_of_countries_by_wealth_pe...](https://en.wikipedia.org/wiki/List_of_countries_by_wealth_per_adult)

This is a great way to rule out outliers. My home country Australia has 3X the
median wealth per adult of the USA. This is similar to the median wealth
difference between the USA and China for reference. It shows to be honest
having lived in both countries. Specifically it shows in the conditions that
minimum wage earners in the USA face, eg. having to live off food stamps as is
common for wallmart workers for example is just horrendous. eg.
[https://www.kiro7.com/news/local/report-amazon-walmart-
worke...](https://www.kiro7.com/news/local/report-amazon-walmart-workers-on-
list-of-top-food-stamp-users/830854650/)

Australians usually call out companies that make things in sweatshops where
pay is below the poverty line. Specifically clothing in Asia. But i believe we
should start doing this for US companies as well. Sure the US minimum wage is
higher than say Bangladesh but since the cost of living in the US is higher
too so it doesn't change the fact that things manufactured at minimum wage in
the US are coming from companies that pay wages below the poverty line.

~~~
umvi
Does that take into account cost of living?

In America you can buy a gallon of milk for $1.50 at Walmart. In Australia
(after some brief googling[0]) it's more like $4.50. Same with gas, video
games, you name it, a lot of things seem to cost 2-4x more in Australia.

[0] [https://www.numbeo.com/cost-of-
living/country_result.jsp?cou...](https://www.numbeo.com/cost-of-
living/country_result.jsp?country=Australia)

~~~
thomasahle
Yes, you probably want to look at the Purchasing Power Parity Median:
[https://en.m.wikipedia.org/wiki/Disposable_household_and_per...](https://en.m.wikipedia.org/wiki/Disposable_household_and_per_capita_income#Median_equivalized_disposable_household_income_\(PPP\)_$)

Or the household version:
[https://en.m.wikipedia.org/wiki/Median_income](https://en.m.wikipedia.org/wiki/Median_income)

------
_ah
The direct effect of the minimum wage is to make certain low-productivity jobs
_illegal_. Consider that for a moment: a person with limited skills and/or
needs is simply _prohibited_ from doing low-productivity work regardless of
desire.

The counter-argument is that many workers do not have a choice; they will
always accept wages vs nothing, but have no power or ability to negotiate.

With a minimum wage we've made the decision as a society that, in order to
prevent worker exploitation, we will also eliminate certain classes of work.
Some of this work does vanish entirely, while some of it reappears in the
shadow economy through untracked cash payments or self-employment.

As with all policy decisions there's a messy balance here and we're arguing
mostly over where the line falls. I do wish there was a cleaner way to protect
against monopsony (higher minimum wages) while also providing good
opportunities for low-skill workers (those who are very young, very old, have
physical or mental impairments, etc).

~~~
klmadfejno
I don't think that's a reasonable point of view. Most minimum wage jobs are
not productivity jobs, but jobs that need to get done by someone but require
no special skills. That is, you can't easily define the value of the
sanitation worker who keeps a restaurant clean enough to pass health
standards. You just observe that there's enough people willing to do it that
you can offer a low wage.

What jobs are being made illegal?

~~~
nickff
Many of the people employed at very low wages have attributes which mean that
they are not worth hiring at higher costs. Factors such as lack of job
history, attendance issues/unreliability, language issues, etc. mean that the
employer will opt for a more 'attractive' candidate if there is a price floor.

As an example, if you are looking for a bottle of wine to accompany your
Tuesday night dinner, you might opt for a low-cost, low-quality option, as it
is adequate for your needs; but if there is a price floor, you will opt for a
different, higher quality option.

Price floors mean that deals below the set price are illegal.

~~~
FabHK
> Many of the people employed at very low wages have attributes which mean
> that they are not worth hiring at higher costs.

The whole article was about how that doesn't seem to be the case, empirically.
When the minimum wage rises, the effect on employment is minimal, and people
on minimum wage get paid more (they're not fired).

~~~
nickff
The data is in aggregate; I am talking about the impact on individuals.

------
pchristensen
(can't read the article, but I've read and thought a lot about it)

I'm on the fence about the net cost/benefit of localized minimum wages. I
think that a federal minimum wage (or at least, a high one), and to some
extent, state minimum wages, are a bad idea. The Fight for $15 movement came
from expensive cities, and it might be the right policy for those places. But
it would severely distort and crush lower-cost cities and states. The right
policy for San Francisco isn't necessarily right for Birmingham. It's one
thing to have uniform national laws for human rights. But the nominal value of
$15 means something very different in different parts of the country.

It seems to me that the right policy to increased pay for low wage jobs would
be to set the minimum wage so a full time job at that rate puts you at some
multiple of the metropolitan/micropolitan area poverty line. Wages would
automatically increase with costs in a predictable way, and local economic
conditions determine the rate. State or federal minimum wages could set a
floor but acknowledge that regional differences matter in economics.

~~~
nobody9999
>The Fight for $15 movement came from expensive cities, and it might be the
right policy for those places. But it would severely distort and crush lower-
cost cities and states. The right policy for San Francisco isn't necessarily
right for Birmingham.

Your point is a valid one. At the same time, if you look at how these numbers
actually play out in reality, $15/hour (assuming 40 hours/week -- certainly
not a given and 50 weeks per year) works out to $30,000/annum. Figure in the
12%[0] Federal income tax plus the 6.25% FICA (Social Security/Medicare)
withholding and that $30,000/annum nets (not including state and local income
taxes, which vary) to ~$25,000/annum.

Assuming (a big assumption) no income tax at the state/local levels, that
leaves ~25,000/annum at $15/hour, 40 hours/week.

This works out to ~$2100/month for a single earner. Given that rent, food
cost, transportation requirements, etc. vary widely across various localities,
it's difficult to determine how well folks can get by on that amount of money.

The median rent in the US[1] is ~$1000/month. That represents ~50% of net
income (again, assuming zero state/local income tax. Which doesn't bode well
for those making $15/hour, given that many don't get 40 hours/week.

Even in the places with the least expensive rent[2], that's still ~25% of
income. That's often considered an appropriate level of housing cost relative
to income.

What's more, given that the median income in the US is more than twice as
high[3] as 40 hours/week at $15/hour, a $15 minimum wage wouldn't put any
upward pressure on median income (how relevant such an eventuality might be is
arguable, but is interesting to note).

So yes, a national $15/hour minimum wage isn't a panacea. Those living in the
_poorest /cheapest_ places could likely live pretty well on $15/hour (again,
assuming 40 hours/week, 50 weeks/year -- which doesn't apply to many).

Contrariwise, those who live in places with costs around the median for the US
would likely struggle with $15/hour, and those living in the most expensive
places would likely not be able to live on just one full-time job.

So yes, $15/hour nationally is a bad idea. In fact, it should be significantly
_higher_ in places that are more expensive.

[0][https://en.wikipedia.org/wiki/Income_tax_in_the_United_State...](https://en.wikipedia.org/wiki/Income_tax_in_the_United_States#Marginal_tax_rates_for_2019)

[1][https://www.deptofnumbers.com/rent/us/](https://www.deptofnumbers.com/rent/us/)

[2][https://dailyhive.com/mapped/10-cheapest-cities-rent-
usa](https://dailyhive.com/mapped/10-cheapest-cities-rent-usa)

[3][https://www.census.gov/library/stories/2019/09/us-median-
hou...](https://www.census.gov/library/stories/2019/09/us-median-household-
income-up-in-2018-from-2017.html)

[Edit: Fix spacing typos]

~~~
wccrawford
But it's okay to have a national minimum wage and _also_ a state, county or
city minimum wage that's higher than the national. That doesn't mean we
shouldn't at least start with the national one. Individual areas can fight for
their own raised minimum wage in their area. Everyone can fight for the
national one, which would still be a big increase over what minimum wages are
everywhere.

~~~
nobody9999
>But it's okay to have a national minimum wage and also a state, county or
city minimum wage that's higher than the national. That doesn't mean we
shouldn't at least start with the national one.

You won't get any argument about that from me.

My point was that, except in the poorest places in the US, $15/hour is _not_ a
living wage. Especially since many, if not most folks earning the minimum wage
_don 't get health care benefits (a big additional cost) and often are not
afforded 40 hours/week either_.

------
sparker72678
I know research is hard, and these issues are fraught with complexities and
challenges in acquiring data, but it still boggles my mind just how many macro
economic theories don't have strong empirical data to support them.

~~~
fragsworth
It is basically impossible to produce real empirical evidence in economics.
You can look at data/correlations, and try to reason about cause and effect.
But real empirical evidence requires you use the scientific method to test
hypotheses (ideally done in a double-blind way), which is impossible for
economists to do even if we had a national desire to do it, because the test
itself would impact reality for its participants too much. It's similar to the
"observer effect" in physics, but on a massive scale.

At best, I think you can create mathematical simulations built on certain
assumptions about reality. Those simulations depend on how well the
assumptions model reality, and very easy to miss an important detail.

~~~
ipnon
AI researchers are important for this reason. Super intelligence, even if
limited to simulations, can find results outside of the mainstream that are
more optimal than the economic convention.[1]

[1] [https://blog.einstein.ai/the-ai-economist/](https://blog.einstein.ai/the-
ai-economist/)

------
CraigJPerry
The more research i do in economics the less impressed i am with the
discipline.

Economics is defined as a social science. That point never really struck home
with me until recently. I think the fancy models, the cutting edge statistics
and clever use of logic blinded me to the fact that the entire discipline is
built on top of stories.

There’s no gravity, there’s no absolute zero, there’s no kilogram. There’s no
fundamental tangible truths underlying the concepts of free markets.

It’s stories we tell each other as a way to explain a system we don’t and
possibly can’t understand.

I’ve never been so disappointed to realise all the arguments of economic
theory are built on a foundation of sand. Shifting sand at that.

~~~
Discombulator
All disciplines studying complex systems like societies down to something like
the human body, simply do not have the luxury of absolute truths like in
mathematics or even the ability to run experiments like in physics (often for
ethical reasons, e.g., in medicine or economics).

But does that mean that it is not worth doing?

For these fundamental reasons economics is “hard”, but I argue that it is
still worth doing because economic policies have a big impact on people’s
lives, and partial understanding is better than nothing.

~~~
arp242
I feel the biggest problem with economics is that it's very infused with
ideology, which makes it even harder to say what's true or not. There's a lot
of what I would call "arm-chair economics" – entire government policies are
based on nothing more than conjectures, guesses, and ideological preferences
of so-called "economists". Okay, maybe guesses and conjecture is the best we
have to go on, but at least be honest about what it is.

This is the case for some other social sciences as well, but I have the
impression it's (much) worse for economics. The effects are certainly a lot
more impactful.

~~~
gruez
>I feel the biggest problem with economics is that it's very infused with
ideology, which makes it even harder to say what's true or not. There's a lot
of what I would call "arm-chair economics" – entire government policies are
based on nothing more than conjectures, guesses, and ideological preferences
of so-called "economists".

Is it any better in fields other than math and the natural sciences? For
medicine and nutrition we're constantly backtracking on our previous
discoveries. First it was fat that's bad, then it was sugar.

~~~
arp242
Both are bad.

Nutrition is really complex and hard, and we learn more every day. But for the
most part, it's not like complete bullshit is invented whole-cloth on a piece
of napkin. It slowly builds and expands on prior knowledge; as far as I know
it's not really "constantly backtracking".

~~~
CraigJPerry
Yeah, I’m persuaded that nutrition is evolved as we learn.

I’m not persuaded that economics has that quality. It seems to be infected by
political interests too easily.

As evidence of that statement i submit the example of Austerity as a concept.
It’s something that’s been applied hundreds of times, there was a resurgence
in the 2010s but it was very popular after the First World War too.

One problem, despite all these applications of the concept, its only ever
worked twice in documented history. Both instances occurred in a context that
doesn’t apply today and, well it’s not impossible but almost impossible for
that context to appear again.

The concept has no economic foundation, it’s a device born of a political
belief. It even contradicts economic assessment.

And yet, It’s continually proposed. It’d be like suggesting sugar is a
weightloss product if you consume enough. If you gained weight, you didn’t do
it right, you just need to consume more sugar, then you’ll lose weight.

------
dayjobpork
The richest person in Australia seriously floated an idea to import foreign
workers and pay them $2 a day to work in her mines

I've always looked at minimum wage as an employer saying "I'd pay you less if
I legally could". In workplace negotiations all of the power is held by the
employer, unless you have some form of collective bargaining, and having a
Government mandated minimum prevents companies from totally exploiting low
paid workers.

~~~
qeternity
These policies are always double edged swords. The other way to frame minimum
wage is that it makes it illegal to work unless you can produce $X value per
hour.

~~~
csours
Ehhh? What are you talking about? It's not illegal to do things that don't
make money. That's called a cost center. I don't make money for my company, I
reduce the risk of losing money, and provide tools for people who do make
money.

~~~
qeternity
I didn’t say making money, I said providing value. You’re creating some value
for your company that exceeds what they pay you, otherwise you wouldn’t have a
job.

Let’s say I’m a widget maker. I can make 10 widgets per hour for my company,
and they in then earn $1 profit per widget. This company is not going to pay
me $15/hr if I’m only able to generate $10/hr in value for the business. But
if minimum wage is $15 then it makes it illegal for me to work for them.

~~~
csours
That still doesn't make it illegal. It only makes it non-viable from a unit-
economics point of view.

Now if you want to talk about how larger companies have better unit-economics,
and small companies can suffer with high minimum wage, then we can certainly
have that conversation.

~~~
incadenza
This entire discussion is about laws regarding minimum wage, the act of
literally making it illegal to hire for less than a certain wage. I’m not sure
I see the confusion

~~~
csours
> "The other way to frame minimum wage is that it makes it illegal to work
> unless you can produce $X value per hour."

Wages are a cost to a company. There are other costs to a company. Companies
also return a profit to the owners. If a company's costs are too high, they my
not return a profit; they may not be able to pay their creditors.

My dad ran his own very small business. I am familiar with a business not
making a profit for a period of time. I am familiar with workers who are not
profitable to employ.

It is a reduction to absurdity to state that minimum wage "makes it illegal to
work unless you can produce $X value per hour."

There are interesting, non-absurd discussions about the effects of minimum
wage, but this is not one of them.

~~~
akvadrako
So you're saying your Dad would be better off if he kept the $X then paying
someone. That's what it means to produce value.

The number of employers seeking such an arrangement is so small it's
irrelevant. In practice, not being able to pay people less that $15/hour means
you won't hire people who bring less that $15/hour of value.

------
chanfest22
[http://archive.is/zF4ei](http://archive.is/zF4ei)

tl;dr — when labor markets are artificially depressed by employers with
monopsony power (e.g. workers only have one employer to work for), a minimum
wage can improve efficiency of the marketplace.

Enjoyed the dispassionate take on the age old minimum wage question. It is
difficult to figure out which people are in monopsony labor markets because it
depends on so many things including geography and even within a zip code could
vary based on a variety of factors such as internet access, public
transportation access, etc. Makes sense that in some cases, when there is only
one employer, they are artificially driving the price of labor down because
people have no choice.

Have policymakers considered other solutions to this monopsony problem? For
example guaranteed government jobs that pay a certain $ amount adjusted for
the geography to incentivize private sector to match or beat that price?

------
sthnblllII
The only politically feasible alternative is increased welfare spending, which
means a low minimum wage is just a way to have taxpayers cover employers’
labor costs.

[https://www.realclearpolitics.com/video/2014/02/13/ron_unz_h...](https://www.realclearpolitics.com/video/2014/02/13/ron_unz_how_raising_the_minimum_wage_will_reduce_welfare_spending.html)

~~~
crooked-v
See, for example, how Wal-Mart has the single largest collection of workers
who get food stamps in the US.

~~~
pchristensen
Not defending Wal-Mart's labor practices, but there are probably very, very
many companies where they have the single largest collection of workers who
$INSERT_CONDITION_HERE.

~~~
Ekaros
I would actually say that it is the opposite... As there is few very large
employers. Wal-mart being largest one of them. Companies employing lot of
people also has largest collection of workers with $INSERT_CONDITION_HERE.

Not that the whole sector couldn't do better. Wal-Mart just having that
statistic because they employ the most.

~~~
pchristensen
Sorry, that's what I meant to say. Wal-Mart is the largest private employer by
a factor of 3. They're probably first in many categories (of absolute numbers,
not percentages) based on the size of their workforce.

------
moth-fuzz
I’m going to flip this one around and ask: why are businesses entitled to low-
cost labor? In other markets, markets of objects, if you don’t have the funds
to purchase something you don’t get to have the thing, and if you attempt to
coerce the thing into your ownership, we call that robbery, and prosecute it
accordingly. So why doesn’t that apply to human labor? Labor is a product, it
exists in a market, and there is a baseline amount of money a person needs to
survive - the ‘price’ of a human doing work (compare this to covering the cost
of materials, production, etc for some nonhuman item). If companies cannot
meet that price, why are either laborers or governments expected to shoulder
it so that businesses can get their hands on the human product regardless? Why
is human labor constantly sold at a loss?

~~~
drak0n1c
There is no distinction - all markets are ruled by consent. Both parties have
to agree to a voluntary transaction, and that applies to employees and
products.

~~~
grumple
Well, that’s only true if we ignore that companies used (or currently use)
slave labor.

------
lokar
The anti-min-wage / free market argument ignores a key fact: as a society we
have decided we won't let people starve to death. So, if someone can't make
ends meet, we will (via taxes) support them, at least to some extent.

This support factors into the wage negotiation, allowing the employer to force
a lower wage (absent a state imposed min). Absent state sate welfare style
support many low wage (min and sub-min) jobs would simply not work, people
could not feed themselves, and they would not accept the jobs.

~~~
qeternity
This gets to the heart of the problem of minimum wage. Walmart is often cast
as a villain because many of their workers receive government benefits. Nobody
stops to ask the very real question of: what if the average Walmart worker
doesn’t add $X in value per hour. What if the value of the “Walmart Greeter”
is less than that of minimum wage? Is it better for Walmart to fire this
person because they’re not worth minimum wage (presumably it’s the highest
paying job they could find, suggesting they’re not worth “minimum wage”) or is
it better to have lower minimum wage with state benefit offsets? At least in
the latter scenario Walmart helps shoulder the burden.

Tl;dr - Often corporations are accused of abusing state benefits by not paying
workers more as opposed to shouldering some of the burden that states would
otherwise be left with due to unemployed masses of unskilled labor.

~~~
DangitBobby
They also get a bit of a bad wrap for pricing out local businesses. Would you
rather work minimum wage for a giant, faceless megacorp in a soul sucking
minimum wage job with few growth prospects? Or would you rather potentially
work for a local business with people you might care about and that might care
about you? At least now we can have all the cheap plastic shit we ever wanted.

------
supernova87a
A most frustrating thing about many kinds of protectionist economic policies
is that frequently the people who would benefit from the opposite policy
aren't allowed to vote to count the value of it.

The people who would get hired if you didn't put this policy in place are the
ones who don't get to vote against it.

The people who would be able to afford to live in a city that has rent
control, don't get to vote against it.

It's not until you have some external shock that shows you how much this
little island of protectionist policy has cost you that you realize what it
did. And in the meantime you've favored and built up a system that is that
much less resilient to whatever new problems you face.

------
baron816
If society decides that people should have a minimum income/minimum quality of
life, then the burden of providing that minimum should fall on society as a
whole. I don’t think it’s right (or efficient) to place that burden on a
certain set of firms or industries that are providing jobs for low skilled
workers. We would be much better off with a negative income tax plus universal
health care.

~~~
rjbwork
We definitely would, but generally those who argue against a minimum wage also
argue against that.

Friedman withstanding in the case of the negative income tax.

~~~
imtringued
I argue against minimum wages because people who like minimum wages don't like
job guarantees. It's just hypocrisy.

Why does everyone talk about the stupid minimum wage? It's just a number
invented by government. It does nothing.

A job guarantee works fine without minimum wages. Minimum wages don't work
without a job guarantee so the minimum wage always loses.

------
Wump
Chris Rock had a great sketch about minimum wage:

'I used to work at McDonald's making minimum wage. You know what that means
when someone pays you minimum wage? You know what your boss was trying to say?
It's like, "Hey if I could pay you less, I would, but it's against the law."'

[https://www.youtube.com/watch?v=F_Fr1djc67U](https://www.youtube.com/watch?v=F_Fr1djc67U)

------
whiddershins
I’ve always been all for the minimum wage. Seems like it should be a helpful
and/or necessary leveler.

Lately though, sometimes ... I’ll get a disorienting flip around in
perspective and I will think _just what gives you the right to step between me
and another consenting adult when we attempt to make a transaction!_

And it feels almost gross that the government would paternalistically step in
and tell us what agreement we are allowed to make.

I’m not sure what I think in the end. Somehow both things feel true
simultaneously.

~~~
galvin
The notion of the government being some abstract external entity is really
strange to me.

Some consenting adults don't have the power to negotiate fair transactions so
we, as a society, can use our collective bargaining power to define what a
fair transactions is.

------
mjevans
Another side to this question is: __What is the value of a dollar? __that is,
what does a minimum wage job actually empower a worker to obtain?

The argument for harm should be re-framed in terms of minimum wages devaluing
the buying power of a dollar, of raises to those wages as a tax upon the
middle-class (who's wages presumably do not increase accordingly), but
crucially not the __rent taking __(wealthy) class.

Rather than focusing just on dollars and an hourly wage, efforts must be made
to correct the market for life essentials so that everyone is able to invest
in themselves and the future. Taxes should be structured to prevent the
wealthy from abusing the poor. There are other market distortions as well,
such as artificially limited housing and many other forms of ladders being
kicked out from behind of those who already have their place in life, and
don't care for those whom are still seeking a place of their own to belong.

------
greggyb
Is the goal for people to receive a certain amount of money? There are many
approaches to this.

Is the goal for companies to pay some people (specifically, those employed) a
certain amount of money? There are fewer approaches to this.

Is the goal to shift the distribution of revenue in a company? There are fewer
approaches to this. A minimum wage is a poor one.

------
temp_supply
Something the article hints at but should be looked at are concrete examples
of minimum wage removing entire job sectors.

For instance, almost all low skilled manufacturing and textile jobs have left
the US for mainly Asian countries as a direct result of minimum wage. It's not
like those companies want to pay shipping costs of getting products across the
globe, but the minimum wage makes it more profitable to do so.

Another example is automated grocery store scanners. Grocery stores lose a ton
of money from people gaming the system of automated checkout machines. But
even with those losess, it's still profitable for a grocery store to install a
machine than hire a worker.

Without a minimum wage, those jobs would still exist in the US and provide an
opportunity for low skilled workers to enter the job market.

------
jsanford9292
What a useless article. No real conclusion and no new information.

Raising the minimum wage CAN have negative effects. This is obvious. If you
raise the minimum wage to $10,000 per hour, what happens? Hamburgers cost
$1,000 each and nobody buys them. Restaurants become insolvent and they close.
Bad outcome.

I believe no minimum wage CAN also have negative effects but those effects are
less clear to me. Maybe workers get taken advantage of by companies? But is a
minimum wage the best way to fix this? Would love to hear other thoughts on
what specifically a minimum wage fixes compared to having no minimum wage.

~~~
machiaweliczny
Minimum wage gives more efficiency to spending power. These people are
subsided anyway but if they are given foodstamps it's inefficient (I don't
know how it work in US but here people won't eat most of it, even if poor,
unless starving).

So if your goal as economy is to select for producing nice products at
affordable rate then adding purchase decision to low income workers is best
way to let them get out of powerty. Maybe they don't need shitty food produced
by rich folk with connections to gov but computer for their childeren or some
tool to start business?

------
calkuta
What I find important to remember about minimum wage is that it constitutes a
restriction on the freedom of workers to negotiate for their labor. The
existence of a meaningful minimum wage implies that there are people in the
society who desire to negotiate for lower compensation (because they are more
motivated to get the job for whatever reason), but they are disallowed from
doing so. It might be our opinion that it is undignified or exploitative to
work for a certain wage, but we should not have the right to bar others from
doing so if they wish.

As individuals, we should demand the freedom to negotiate the terms of our
employment without government influence, including wages, benefits, and even
working conditions. Using the government to coerce employers into giving
greater compensation is appealing in the short term, but ultimately it
disenfranchises others by blocking them out of jobs and results in long term
economic stagnation.

Mandatory minimum wage significantly above the "natural" level dictated by
prevailing economic conditions unquestionably causes harm, mostly to workers
who, if they choose to continue to work for less money, are now doing so
illegally. Mostly they just don't get work. This is why politicians tend to
let minimum wages lapse behind the market rate - economies work better without
this restriction. And when a _significant_ minimum wage hike is imposed, like
$15/hour in some places today, the economic harm to workers quickly becomes
apparent.

~~~
eesmith
Indeed we should - demand the repeal of Taft–Hartley Act and other laws which
have nerfed collective bargaining power far from any "natural" point.

Jurisdictional strikes, wildcat strikes, solidarity or political strikes,
secondary boycotts, secondary and mass picketing, closed shops, and monetary
donations by unions to federal political campaigns are all part of the freedom
to negotiate the terms of our employment, which we are currently disallowed
from doing.

~~~
Discombulator
On the other hand, employers are also barred from colluding to keep wages
artificially low, which arguably would be considered a “negotiation strategy”
if one follows your interpretation.

I agree though that employers have naturally more negotiation power in the
vast majority of cases.

~~~
eesmith
You'll notice that when Adobe, Apple Inc., Google, Intel, Intuit, Pixar,
Lucasfilm and eBay colluded for years to keep wages artificially low, their
final penalty was far less than they saved in costs, and none of the corporate
people involved faced jail time for their illegal actions.

In other words, that collusion was profitable for those companies and for
upper management like Eric Schmidt who participated but face no real ostracism
for their illegal actions.

That law has no real teeth.

Compare that to, say, UC filing charges against UAW Local 2865 following
wildcat strikes at UCSC claiming that UAW Local 2865 didn't do enough to
prevent the strike UAW Local 2865 didn't authorize in the first place.

------
gfxgirl
> By contrast, jobs in restaurants are hard to automate

They are not so hard to eliminate. Some people claim the raise of self busing
restaurants is in response to hiring people to do those jobs is too expensive.

[https://www.nytimes.com/2018/06/25/dining/san-francisco-
rest...](https://www.nytimes.com/2018/06/25/dining/san-francisco-restaurants-
service.html)

The article above claims it's housing costs but the same trend is happening
everywhere even places where housing costs are not SF. Of course it could just
be a new trend of businesses and nothing to do with any other inputs
whatsoever.

These studies claimed a negative impact on new jobs meaning they claim the
minimum wage hike made it harder for young people to find a job after the
minimum wage went up. That could be because less people quit their now higher
paying jobs. Whether that's a net plus or a net minus is probably debatable.

[https://evans.uw.edu/policy-impact/minimum-wage-
study](https://evans.uw.edu/policy-impact/minimum-wage-study)

[https://evans.uw.edu/sites/default/files/webform/w25812_summ...](https://evans.uw.edu/sites/default/files/webform/w25812_summary_final.pdf)

------
hpoe
One thing I found was interesting

> The effects of a wage floor can also be felt outside low-pay sectors. A
> preliminary study in 2019 of the impact of Germany’s minimum wage found it
> led to more reallocation of workers from smaller, lower-paying firms to
> larger, higher-paying ones.

Is it possible that although the change in overall employment was muted
smaller shops were closed up and their work simply transferred to larger ones
better able to expend the capital?

------
snake_plissken
I've thought about a similar question: what happens if there is no minimum
wage? If people are already struggling when being paid the minimum wage, what
happens if business are able to lower it even more? Yeah I get the dynamics of
supply demand are supposed to work here, but it just feels like at some point
it's not worth people's time to work for such a low wage and they just give up
and go on the dole.

I also wonder if in some perverse way, a minimum wage does some harm to
workers. Basically the thinking goes like this: companies that are looking to
hire labor at these pay levels don't really need to compete for the labor
because they know all of their competitors are going to be also paying the
minimum wage. The resulting effect is stagnant wages that never go above the
minimum wage because everyone knows they only ever need to pay that.

Anyway, I support concepts like the minimum wage which are well intentioned,
it's probably just time we reevaluate how to help low income workers achieve
more financial security.

PS: didn't read the article, just wanted to get my thoughts out there real
quick while on lunch break.

------
coldtea
They harm the bottom line of people using the Economist to suggest public
policy...

------
pcvarmint
A lot.

They make it illegal for you to hire someone at a rate below the minimum wage,
even if they agree to it.

They force unemployment of those with skills below the average minimum-wage
employee's.

They pick an arbitrary minimum wage mandated by government fiat, instead of
determined in the marketplace. Such an arbitrary wage suffers from the
economic calculation problem, where rational allocation of goods is impossible
without free markets and prices to communicate supply and demand.

Changes in the minimum wage affect other things, like the price of food in
restaurants, in way which is nonlinear from the actual supply and demand of
those goods and services. It's as though there is pressure for prices to move
upwards or downwards in response to market conditions, but the minimum wage,
or other prices directly affected by the minimum wage, are not allowed to
respond to those market conditions, and so a shortage or oversupply occurs.

[https://fee.org/articles/topics/minimum%20wage](https://fee.org/articles/topics/minimum%20wage)

------
trentnix
_Minimum wage_ , despite all manner of contortion by those that seek to
justify its existence, is a political concept. The minimum wage is, always,
zero.

Minimum wage is also what drives the market for illegal immigrant labor. As
Milton Friedman pointed out decades ago, immigration is most beneficial to
employers precisely when it's illegal. Those workers don't enjoy the
protections, wagers, and respect their legal counterparts enjoy. If illegal
immigrants are made legal, then the benefit of employing an illegal plummets.

These wages also avoid other form of government oversight, such as taxation.
Lack of immigration enforcement and lack of penalties for those that hire
illegals provides an unfair advantage to those employers who, brazenly, break
the law. They get cheaper labor, avoid taxes, and gain an unfair market
advantage over those employers who follow the law. There's nothing "free"
about a market whose government selectively enforces its laws.

Consenting adults should be able to work for whatever wage they like.

~~~
jandrese
I'm not sure how your first three paragraphs support the fourth. Illegal
immigration drives down wages so we shouldn't have a minimum wage?

~~~
trentnix
Illegal immigration is a side effect of minimum wage. And minimum wage puts
unskilled Americans (or Americans whose skills aren't valuable because of a
changing market) at an unfair disadvantage in their attempts to obtain
employment and acquire new skills.

Sorry if that wasn't clear in my post.

~~~
jandrese
So why not provide a legal path to immigration instead of abolishing the
minimum wage then?

~~~
trentnix
Illegal immigration and immigration in general is its own rabbit hole. You
shouldn't assume from my post whether I'm _for_ or _against_ illegal
immigration (or any type of immigration) because it doesn't really matter one
way or the other to the points I'm trying to make.

Economically speaking, granting legal status to unskilled illegals results in
a combination of undesirable side effects:

\- it increases the price of the goods they produced reducing the buying power
of the _minimum wage_ ,

\- it prices many of those illegals out of the market because they are unable
to produce value for the wage they are paid (but now they are eligible for
government benefits),

\- and it encourages new types of "black market" employment.

Try all you like, but you won't outsmart the market.

~~~
jandrese
This is where you lose me. The jobs still need to be done. Some companies
might just fold up and die, but most would be just as happy passing on the
higher costs to customers, and said good or service still needs to be produced
so the companies that survive will take over for the ones that folded.

Economists have this weird idea that all fast food would close because the
people working there clearly aren't worth $15/hour because they're doing jobs
that currently pay only $10/hour.

The crazy part is that higher minimum wages tend to increase the market, not
decrease it. Turns out that poor people are bottlenecked on money. If you
reduce the bottleneck they can spend more, which increases demand for labor
(to fill the supply) which increases the labor rate. You can see this effect
all throughout history, the more wealth gap an economy has the slower its
economic growth rate is. The super rich can't spend the money fast enough or
broadly enough to increase the economic base, the economies grow stagnant.

~~~
imtringued
The customers of McDonalds are other poor people. The margins are already
slim. If you raise prices to cover the minimum wage those poor customers won't
eat at McDonalds.

~~~
jandrese
If you raise the minimum wage those poor people won't be as poor. And since
the labor is only a fraction of the cost of the burger the poor people come
out ahead. The danger is inflation, but honestly we're in bigger danger of
deflation these days.

~~~
trentnix
Labor is _most_ of the cost of the burger, whether it’s the labor to sell it,
the labor to cook it, the labor to transport it, the labor to butcher/harvest
it, the labor to tend to it prior to butcher/harvest, etc. And the expense of
ALL of that labor will inevitably increase causing the price of goods to
increase causing the price of labor to increase and so on...

------
spo81rty
At my last startup 15 years ago we paid our support staff $12 and had no
problem hiring people. But the people we could hire for $12 sucked at the job.
They just didn't have the skills or talent.

So we started paying $16+ and hired much higher quality people.

Companies always want to pay as little as possible, but they also have to be
able to attract the right level of talent.

------
alex_young
Why don't we index the minimum wage to inflation?

The 1968 minimum, in todays dollars, is over a third higher than our federal
minimum wage today. [0]

[0]
[https://en.wikipedia.org/wiki/Minimum_wage_in_the_United_Sta...](https://en.wikipedia.org/wiki/Minimum_wage_in_the_United_States#Historical_trend)

~~~
jldugger
You probably know this but the opponents of raising the minimum wage fear that
it will lead to inflation. The old adage "labor is 2/3rds the cost of
everything."

~~~
fulafel
Many countries effectively do this and it doesn't make inflation get out of
habd.

~~~
jldugger
States can and sometimes do set higher rates than the national minimum. And
frankly, a national minimum wage doesn't make sense -- why should wages in low
CoL areas like rural Alabama be the same as high CoL areas like NYC/SF?

Even state lines may be too coarse grained for minimum wage policies, Since
there are many metro areas that cross state lines. On the other hand,
economists have been able to treat these places as natural experiments with
mixed success: when one state raises the minimum wage but the other does not,
you can measure a variety of things, including regional inflation. But it's
still difficult to disentangle causation and substitution effects, since the
minimum wage directly affects only a small portion of society. The evidence on
that front has been... shedding more heat than light. I'm not sure anyone's
proved conclusively that inflation does or does not happen, or that
unemployment does or does not happen.

Probably the most interesting study I've heard of is one looking at
restaurants as a sort of model species for minimum wage jobs, the same way
that biologists study fruit flys because they have short lifecycles. The
supposed evidence there is that the type of restaurants change in response to
wage increases: more self-bussing, less staff hired per dollar turnover. The
people left get paid more, but fewer people employed overall. That said this
was from a podcast discussion and I haven't reviewed the peer reviewed article
personally.

------
StreamBright
There are valuable insights and measured numbers on minimal wage laws.

[https://www.aei.org/economics/thomas-sowell-on-the-
cruelty-o...](https://www.aei.org/economics/thomas-sowell-on-the-cruelty-of-
minimum-wage-laws/)

------
aussir
If you raise the price of cigarettes through taxes, less people buy cigs. Same
for gambling, driving, flying, etc.

If you raise the price of labor through minimum wage, you fix poverty. Opposed
to literally everything else plus evidence.

~~~
simsla
This fallacy is addressed in the article, I suggest you read it.

The key point is that wages are being kept artificially low by monopsonies.
And the evidence supports this. (Current hyperlocal minimum wage laws make for
good A/B-ish tests.)

------
Naac
>> This school of thought argues that some labour markets are characterised by
a market structure known as monopsony. Under a monopolistic regime one
dominant supplier sells to many buyers, whereas under a monopsonic regime, one
dominant buyer purchases from many sellers. Just as a monopolist can set
prices higher than would be the case in a competitive market, a monopsonist
can set prices artificially lower.

I had a really hard time understanding this paragraph. Did anyone else?

------
Wolfenstein98k
It cannot be that raising the price floor of a good does not cause consumers
to buy less of it, or substitute where possible.

Employers rent the labour of employees, and if their price floor is raised, it
cannot have no effect on how much their labour is demanded - the equation has
been tipped toward higher input costs.

It may not have enough negative effect to cause any adjustments, but it must
at the margins.

------
pwfisher
Non-paywalled: [http://archive.is/zF4ei](http://archive.is/zF4ei)

Great read. The real labor market is more complex than a simple model of
supply and demand. It's like the old physics joke, "I have a solution, but it
only works for a spherical chicken in a vacuum."

~~~
Shinchy
Thanks :)

------
seiferteric
I know that in economics it is difficult to do proper studies hence the
"dismal science", but my understanding is that most economists agree that
minimum wages don't work right? So why is it still pushed? Shouldn't we
"listen to the experts"? Besides there are other tools like the EITC.

~~~
fulafel
There doesn't appear to be consensus like that - but not because lack of
trying: [https://www.anderson.ucla.edu/faculty-and-
research/anderson-...](https://www.anderson.ucla.edu/faculty-and-
research/anderson-review/minimum-wage-primer-leamer)

~~~
seiferteric
Sorry but that seems to be an opinion article by a non economist? Or am I
mistaken?

~~~
fulafel
I thought it was a pretty even handed piece covering the debate in the field.

Here are personally penned unedited opinions from econ nobelists etc if you
prefer :)

[https://www.nytimes.com/2015/07/17/opinion/paul-krugman-
libe...](https://www.nytimes.com/2015/07/17/opinion/paul-krugman-liberals-and-
wages.html)

[https://www.epi.org/publication/raise-minimum-
wage/](https://www.epi.org/publication/raise-minimum-wage/)

~~~
seiferteric
Thanks, those are a bit better, though still single opinions. I guess I am
looking more for a survey of economists opinions. What was interesting about
Krugman's piece was that he said minimum wage used to not work, but now it
might due to changes in the economy, which is surprising if true. To me,
neither one was a resounding affirmation of minimum wage, both said that $15
did not seem to hurt, and might help slightly.

------
Trias11
In a poor areas government-enforced minimal wage will cause mass layoffs,
black market economy and more misery.

------
neonate
[https://archive.is/R8WCe](https://archive.is/R8WCe)

------
mbrodersen
Economics is ideology not science. The "textbooks" are whatever ideology is
currently fashionable. Please also note that the "textbooks" will always
support the current power elite unquestionably.

------
alkonaut
> Textbooks state that, in the absence of a minimum wage, a worker is paid his
> “marginal product of labour”, which means the value of what he produces.

This assumes the laborer is selling work as an individual and not negotiating
e.g. as part of a union.

------
afinlayson
Without a minimum wage, some jobs would pay effectively zero.

You see that with waiters, who get paid below minimum wage, and are expected
to make tips, the issue is if there's no customers because of a pandemic, they
are now making no income.

------
11235813213455
I'm against it, because it promotes consumerism, which is the root of
environmental problems, the most likely number 1 issue of the current and next
decades

People should have minimal essential/vital needs rather: home, water,
electricity, (organic) food, healthcare.

I spend less than 50€/month on food, because I forage it (even if I live in a
city) (figs, oranges, medlars, persimmons, grapes, ..), and I buy some
vegetables at a local producer and some rice at supermarket, and I'm pretty
much full with this

We need high-scale changes, less cars, less consumerism, less pollution, less
useless activities, more (public) fruit trees and vegetables

------
quadrangle
> Firms do not know how much each worker contributes to their revenues.

THIS. So obnoxious when free-market dogmatists make arguments based on that
bullshit assumption.

------
jefurii
What harm does a living wage do? What kind of fucked up bullshit question is
that? Folks gotta eat and pay the rent and all that.

------
csours
OT: Is there an economic theory that explains or talks about job creation?

------
sirmoveon
We don't need more slave rights; we need more systemic equity.

------
sys_64738
They don't do any harm anywhere other than in an ECON 101 class. The invisible
hand and equilibrium ECON 101 doesn't account for unlivable wages. That's why
there's a minimum wage.

------
known
What harm do Free Universal Health Care do

------
spo81rty
Nobody has to work for minimum wage. Nobody is forced to take the job.

Companies will only pay it if people are willing to work for it.

It's basically supply and demand.

------
DINKDINK
"The first thing that happens, for example, when a law is passed that no one
shall be paid less than $106 for a forty-hour week is that no one who is not
worth $106 a week to an employer will be employed at all. You cannot make a
man worth a given amount by making it illegal for anyone to offer him anything
less. You merely deprive him of the right to earn the amount that his
abilities and situation would permit him to earn, while you deprive the
community even of the moderate services that he is capable of rendering. In
brief, for a low wage you substitute unemployment. You do harm all around,
with no comparable compensation.

The only exception to this occurs when a group of workers is receiving a wage
actually below its market worth. This is likely to happen only in rare and
special circumstances or localities where competitive forces do not operate
freely or adequately; but nearly all these special cases could be remedied
just as effectively, more flexibly and with far less potential harm, by
unionization.

It may be thought that if the law forces the payment of a higher wage in a
given industry, that industry can then charge higher prices for its product,
so that the burden of paying the higher wage is merely shifted to consumers.
Such shifts, however, are not easily made, nor are the consequences of
artificial wage-raising so easily escaped. A higher price for the product may
not be possible: it may merely drive consumers to the equivalent imported
products or to some substitute. Or, if consumers continue to buy the product
of the industry in which wages have been raised, the higher price will cause
them to buy less of it. While some workers in the industry may be benefited
from the higher wage, therefore, others will be thrown out of employment
altogether. On the other hand, if the price of the product is not raised,
marginal producers in the industry will be driven out of business; so that
reduced production and consequent unemployment will merely be brought about in
another way.

When such consequences are pointed out, there are those who reply: “Very well;
if it is true that the X industry cannot exist except by paying starvation
wages, then it will be just as well if the minimum wage puts it out of
existence altogether.” But this brave pronouncement overlooks the realities.
It overlooks, first of all, that consumers will suffer the loss of that
product. It forgets, in the second place, that it is merely condemning the
people who worked in that industry to unemployment. And it ignores, finally,
that bad as were the wages paid in the X industry, they were the best among
all the alternatives that seemed open to the workers in that industry;
otherwise the workers would have gone into another. If, therefore, the X
industry is driven out of existence by a minimum wage law, then the workers
previously employed in that industry will be forced to turn to alternative
courses that seemed less attractive to them in the first place. Their
competition for jobs will drive down the pay offered even in these alternative
occupations. There is no escape from the conclusion that the minimum wage will
increase unemployment."

[...]

"As to the prices, wages and profits that should determine the distribution of
that product, the best prices are not the highest prices, but the prices that
encourage the largest volume of production and the largest volume of sales.
The best wage rates for labor are not the highest wage rates, but the wage
rates that permit full production, full employment and the largest sustained
payrolls. The best profits, from the standpoint not only of industry but of
labor, are not the lowest profits, but the profits that encourage most people
to become employers or to provide more employment than before."

Henry Hazlitt “Economics in One Lesson.”

To those who are downvoting: There are no illegal people, there is no illegal
two-party consensual trade.

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huntermeyer
Non-paywall link:
[https://web.archive.org/web/20200819180537/https://www.econo...](https://web.archive.org/web/20200819180537/https://www.economist.com/schools-
brief/2020/08/15/what-harm-do-minimum-wages-do)

------
dalbasal
There was a debate between the pro & con side of minimum wages a few years
back. The debaters are all pretty intelligent, intellectually honest and deep
people... all things considered.

The debate was a spectacular failure, hinging on marginal interpretations of
marginal datasets measuring marginal impacts. Most of the theoretical
downsides end up below the noise threshold, in data.

The pro side took this as a win, disproving the orthodox economic position.
The con side demanded a counter theory. Obviously, a $1,000ph minimum wage
_would_ increase unemployment. That's hard to argue against. Why is a $14
minimum wage different? Where's _your_ theory. It's not fair if you can debunk
_my_ theory, but don't have a theory for me to debunk.

" _Interesting. It works in practice, but does it work in theory?_ " to
paraphrase a cliche from the late 40s.

It's all a good reminder that economics is not a science. The gap between
theory and practice can be vast, often is. Keynes (and most of his generation)
was famously wrong about the future of working hours. Even so, the theories
(income effect & substitution effect) used to make this failed prediction were
not discarded. Even today, college economists teach the theories and Keyne's
prediction. They find a way where the theories are still right, but "below the
noise threshold." IE, other factors just happened to be more important in this
case.

I would also point out the the intellectual founders of modern, liberal free
market theories (Hayek, Coase, Popper kinda) emphasized this. Economics is not
a science.

There is no universally true answer to the question " _increases unemployment
among young and low-skilled workers?_ " There are theoretically true answer,
but this may or may not be operative in practice. It's also true that food
availability increases reproduction rates. This doesn't mean that adding more
burger joints will increase the human population of Manhattan.

In Portugal, youth unemployment rates often tend to be high. If I were
deciding for portugal, I'd be careful with my minimum wage policy. They are
low in the UK. I wouldn't be concerned about gradual increases if I were
deciding for the UK.

There is another possible conclusion to the "economics is not a science" point
which many economists concede. One most economists are uncomfortable with.
Economists shouldn't be the only word.

For example: ask low wage earners. They're the ones theoretically affected by
minimum wages, for better or worse. If we want to know about the effects of
some corporation policy on silicon valley, we would value the opinions of
those companies. Same here. What do low wage earners think about minimum
wages?

[https://www.npr.org/2013/04/09/176272083/should-we-
abolish-t...](https://www.npr.org/2013/04/09/176272083/should-we-abolish-the-
minimum-wage)

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MisterBastahrd
The people who argue hardest against minimum wages are those who would never
expect to be paid a minimum wage for their services. Our "essential workers"
are usually some of our lowest paid workers. If a UBI is ever implemented, I
would suggest that these people get those funds first

