It's more nuanced than this, in my view. It's not just "high minimum wage bad for teenagers!"
There are a lot of reasons for decreased teenage employment:
- Older employees who should be retired hanging on to jobs longer because they can't afford retirement
- Students finding part time work an inferior return on investment compared to college preparation and other resume-building activities like volunteer work
- College costing so much that high school summer jobs can't possibly pay for a significant fraction of it, essentially making it a less time efficient option than just using future wages to pay for it (loans)
I do think that it might make sense to have a lower teenage minimum wage than the normal adult minimum wage. I personally don't assume that a low minimum wage is good for low-skill employees, that just doesn't add up to me.
The inability to pay a living wage equates to all of us not paying the real cost of a good or service.
When I was in high school and part-time shelving books at the local town library, no I didn't. Not for that work. Pocket money for a teenager was about the right amount of pay.
Not everyone is a single mother trying to make ends meet for her two children. We should not make economic policy as if they are.
"So why don't we take care of them?" Single mothers trying to make ends meet have access to a wide array of social programs already. We are already not abandoning them to the tender mercies of minimum wage and nothing else.
Yes. Let's go with this logic. Do you know what percentage of people in this country make minimum wage (or less)? According to the BLS it's 2.3% of wage earners, which are 58% of workers, which are 78% of the population of adults.
So, 1.04% of the adult population of the US makes minimum wage.
In your logic, why should we set national economic policy based on 1%?
Can you restate this please? It doesn't make sense; how are 2.3% of wage earners actually 58% of workers actually 78% of the adult population actually 1% of adult population?
From [1]: 1.8 million workers made the federal minimum wage or less. But that does not say how many people made less than $15 an hour, which is considered a living wage. According to the NELP in 2016, 42% of US workers make less than $15 per hour. Nearly half of US workers. [2]
So raising the minimum wage would support nearly half the US workforce to be able to, you know, live. I think setting economic policy with this in mind makes more sense than only considering what teenagers need.
Exceptions to minimum wage laws already exist for the case you mentioned, so there is no issue with raising the federal minimum wage to account for the increased cost of living for those that depend on it for this.
> Not everyone is a single mother trying to make ends meet
In the meantime, student loans are at an all time high!
Whether or not you had college paid for by somebody else who saved or even if you didn't need to go; Teenagers need more than pocket money, afterall, in 2 years they will, for the median, be committing to loan terms that will take 10+ years to pay off, if they ever do.
Not in isolation. A 16 year old's upcoming expenses are a car, car insurance, tuition, housing, food, and more... And if possible should be contributing to a retirement account as well.
A 16 year old also may not have a college opportunity and may decide to go straight to work, may decide to go straight to having a family with a high school sweetheart. At that point, the 16-18 year old needs a liveable wage too.
No, 16-year-olds should not be contributing to retirement accounts. The return on investment in such an account will be far less than the return from investing that money in increasing their own human capital. This could be by buying good books to read, buying a computer to learn to program on, or paying for movie tickets to go out on a date with someone who may be their future spouse.
But not every job has to provide it. Teenager working part time at McDonalds does not have to earn $100k, they just need to earn enough to buy them new pair of jeans, or few beers for Saturday night party. It is up to them to eventually move from such low skill, low pay jobs to an actual career.
Frankly, I think UBI is a much better solution than increasing federal minimum wage. I think the problem with increasing minimum wage is that employers will be less likely to hire or more likely to look to automation to decrease human hiring needs. McDonald’s has already rolled out self-service kiosks, replacing cashiers entirely.
Why does UBI reduce automation? Whenever I read an article, about, say, Amazon, everyone says that it's evil to make people pack packages all day. With UBI, these employees can say "screw this!" and not do that, meaning automation is the only way Amazon can stay in business.
There are lots of jobs nobody wants to do, but have to to stay alive. UBI removes the "have to to stay alive" part. If we still need the economic value that those tasks generate, there is no choice but to have machines do them. That, to me, sounds like automation.
I have yet to see any UBI proposal that would wholly replace someone's income, so no, I don't think low skill workers would be any more likely to just up and quit. People often live to the extent of their means, so they'll still need a job.
Nobody would agree to a UBI threshold that is equal to the median income. UBI proposals are far lower, closer to $10k/yr than $45k. It should be enough to cover the bare necessities of survival, like not starving. 10k won't be enough to cover housing in many markets.
I'd argue for something around $20k-30k/year. Don't index it to the median income; index it to the cost of living in around 80% of cities (ignoring outliers like Silicon Valley and Manhattan). High enough that you can absolutely live on it, including housing.
Ignoring the trillions of dollars that would cost, what makes you believe that housing costs wouldn't inflate dramatically? Supply isn't magically going to boom and people all of a sudden have more spending power.
> Ignoring the trillions of dollars that would cost
(Most reasonable proposals I've seen for UBI include an assumption, stated or unstated, of drastically reduced administrative costs and costs of numerous other more specific programs for both aid and employment. And that also ignores other secondary effects. For the moment, let's treat that as a tangent, please, though.)
> Supply isn't magically going to boom
Not overnight, no. And not without some fixes in housing regulation. (That's also another reason to avoid indexing it to ridiculously-high-cost-of-living areas.) But in general there's no fundamental reason supply can't increase to match demand.
Also, right now supply has a massive constraint created by "proximity to work". If people have a lot more flexibility about where and how they work, the economics of "where do people live" changes drastically.
It may be better to index it to the percentage of total income tax paid by everybody to prevent feedback loops, when higher ubi increases cost of living, increasing ubi and eventually driving the whole economy off the cliff. Something like a tax return but calculated not as a percentage of the persons tax but of mean tax. It can start as a very small percentage at the start (1% ~ 1K/year) and then grow as other social payments are folded into it.
That still produces a feedback loop. When the economy goes down, people recieve less UBI and therefore spend less, slowing down the economy more.
Over the short/medium term, ww want UBI inversly correlated to total income tax (which I would expect is correlated with total economic health), so it can serve a dual purpose as an economic stimulus.
Setting the UBI should be a matter of monetery policy set by the Fed, within parameters set by Congress.
If economy goes down and you keep printing money not backed by anything, the value of the money goes down and you end up with hyperinflation like in Venezuela or Zimbabwe.
So that's a very useful feedback loop: if too many people decide that they want to do art instead of driving trucks, the total income tax will go down, decreasing ubi and making more people to work. If someone invents self driving trucks and starts to get huge profits, ubi goes up, helping the drivers to live while they learn new useful skill.
Over the short term, recessions are still not going to be caused by changes in aggregate behavior; they will continue to be caused by business cycles, so we want to have counter-cyclic forces.
I believe with fixed 20k UBI, that is increasing when income tax decreases, the hyperinflation would happen very quickly (1-2 year) much quicker than the business cycles. But even if i am wrong it is better to start with small and conservative UBI scheme to be safe.
>I have yet to see any UBI proposal that would wholly replace someone's income
Agreed, but partially replacing someone's income would result in a net reduction of hours worked (if UBI is equivalent to half my full-time salary, then why not just work half the hours?) This would still result in a net loss in human productivity and therefore still spur investment into automation.
We should have UBI that is at least sufficient to wholly replace the income of low-paid workers. I think $20,000 a year is a nice round number to start a discussion at.
Pay them medium wages, or make the job suck less. If a job sucks to work at, you should pay the workers more.
Giving low-paid workers the freedom to not work levels the playing field. In the classic supply/demand curve, the supply of labor is relatively fixed under the "you must work to live" model. With UBI, the supply of labor and the demand for labor will act in concert to determine a new, fairer price.
As a business owner, I will tell you that the cost of the higher wages will not be paid by my business. It will get passed on to customers who can spend a little extra UBI to help support the "you don't have to work to live" populace.
My chief complaint with that argument is the 50-year olds that are replaced by automation are unlikely to find new jobs, especially if the price is artificially raised. In other words, it doesn’t solve the transitional issues.
Most UBI proposals do not seek to be an income replacement. The bigger question then is what do we do with the 50-year olds that can’t find jobs due to reduced demand if they can’t live solely off UBI and have years before retirement age? I agree we should discourage reliance on labor that can be automated, but there’s also the empathy and humanity side that isn’t being addressed.
Why do we need 50 year olds to work in the first place? We're automating more jobs than ever, and I don't even think I've ever held a job that actually had 40 hours of work to do per 40 hour work week.
We seem to be maintaining the idea that full time employment is necessary for life long after that's no longer been the case. We've arrived at a point and time where the productivity of every able bodied person is not needed to sustain us, so when do we start reaping the rewards of that?
The percentage of total people employed is fairly low in the US. Retirement, Education, Prison, Disability, etc all remove many people from the workforce.
That’s why I prefer negative income tax as a solution that disproportionately supports the lower class without universally raising the cost of living by the exact amount of UBI nationwide.
UBI does not create any money and thus has zero long term impact on inflation.
Remember even 2.5% inflation still means money is worth 1/2 as much every 30 years. That can only happen if either the economy is smaller every 30 years or new money is created every 30 years.
Debt and printing money are two different things with very different impacts on inflation. Critically debt requires the money to already exist in circulation. Government bonds can act like currency, but can’t cycle endlessly. EX: Government in 2525 may need to borrow more money each day than currently exists, if they never print any money nobody can lend that much to them on a given day.
PS: The velocity of money is one of those odd things that seems irrelevant in simple models but turns out to be really critical.
> otherwise UBI subsidizes inefficiency and reduces automation.
If someone has a UBI that pays enough for them to live, why would someone do work they don't enjoy for a few bucks an hour? I'd suggest that UBI would encourage efficiency and automation, precisely because it raises the pay threshold necessary to make someone willing to take a job at all. (Effectively, it raises the coefficient of static friction.)
Why do young kids get a babysitter job below minimum wage when their living expenses are already paid? They still want pocket change and it’s the best available job they can get.
But there will be fewer people taking such jobs if everyone taking them wants them rather than needing them. That pressure would in turn push salaries up and encourage automation.
I've heard the opposite quite often. With a UBI you can eliminate minimum wage. Employers would be encouraged to offer fair wages: nobody is going to work for peanuts because they won't starve without the job.
Seattle is not a good sample of the country as a whole, but I think it's still worth reading the various studies that have been done on our minimum wage increase.
2. Businesses with high labor costs like daycares are affected and have to either increase prices or reduce staff.
In my opinion, the businesses in #2 are instances where the customer isn't paying the true cost of the service. Rather, the service is being subsidized by providing inadequate wages for its employees based on the fact that the labor is in much higher supply than demand.
#2 can be handled by government subsides. I doubt the feds would be able to do it but the states should absolutely do it. My prior employer used to provide stellar day care but they shut it down the day after their state tax break for the daycare ended.
Overall the employer daycare subsidy solution just seems absolutely terrible to me.
It favors large corporate employers over small businesses and self-employed, favoring the upper middle class employee who's got an employer providing extensive benefits already (similar to how you're completely hosed in this country if your employer doesn't provide a good healthcare.
If we want to use subsidies, it needs to be a lot less regressive than that.
And we need to seriously get away from quality of life benefits being tied into one specific employer.
Isn't that obvious? The cost of doing business plus profit while the company's employees are making a living wage.
If you want a tangible metric, let's just say that someone working 40 hours a week making minimum wage shouldn't need to receive government safety net benefits, because that is basically a transfer of wealth from the taxpayer to the company employing that person.
It will accelerate automation if the math makes sense. McDoanld’s are going cashierless, and grocery stores will increase self-service checkout (requiring only sentries and stockers at the store). Retailers will shut down brick and mortar stores (30% of malls will shut down in the next 5 years).
I’m all for automation, but the greater question is transitioning people gracefully.
Again, these things are already happening. Hurting today's minimum wage workers in order to save these industries from something they are already doing seems like a fool's errand. The minimum wage hasn't changed in a decade and the math is already making sense. What's the point in waiting longer?
I assume you mean automating away any job that they can figure out how to automate?
Raising the minimum wage might accelerate that somewhat, but I don't think that is the main concern.
Let's consider only jobs that there will be no good way to automate for the foreseeable future.
The existing minimum wage already eliminates some jobs that cannot be automated but just are simply not worth $7 per hour to the would-be employer. Not many people would be interested in holding such jobs, but probably a few who kind of like that sort of work and only need a very small income. The number of such people could be expected to increase in the presence of a UBI scheme.
There may be a lot more jobs that currently pay $12 per hour, but that the employers will simply forgo rather than pay $15. (Imagine an old man who pays a worker $12 per hour to mow because it makes him happy to have a nice lawn, but whose budget has no room for a $3 raise. If the minimum wage rises to $15, he has to pay nobody, let his lawn go to hell, and live a slightly-less-satisfactory life. Meanwhile, the worker has to find a new gig, if he can.)
A nitpick, but the old-man paying someone to mow his lawn is not subject to Fair Labor Standards Act [1]. Specifically: "The FLSA only applies if you pay your employee more than $1,900 in a single year or works more than eight hours a week."
On your broader point, I'm not sure that those are viable "jobs" if they can't be done for ever $7.25/hr. What are the jobs going undone today because they are only worth $7.24/hr? Why isn't anyone wringing their hands over that injustice?
The real question is, what would the impact be. Isn't it possible that raising the minimum wage lifts more people out of poverty than it pushes into poverty through joblessness? If yes, it is likely worth trying.
Federal minimum wage should be increased BUT probably not to something like $15, simply because the economies and costs of living of rural Kentucky are nothing like the economies of urban Seattle. Raise the Federal minimum wage in an amount that the poorest state can manage, but then give States room to implement any further increases to what best fits their circumstances. Edit: Or some formula that takes into account costs of living and size of economy.
I also think UBI is a good solution. For example Andrew Yang "Freedom Dividend" $1k per month UBI plan is like getting paid for working an additional 67 hours a month at $15/hour.
I have yet to see any evidence that UBI would accomplish any of the things its proponents think it will. The first unintended consequence I predict would be increases in rent, food, and other basic things. I believe a better solution to helping the lower end of the economic ladder would be things that reduce the basic cost of living.
I'd be interested in an answer to this too. We've seen a similar phenomenon in college costs - more government loan money available, higher tuition, repeat. Why would UBI not result in a general uptick in costs that would mean the "purchasing power" of the consumer is the same? I think providing the basic services themselves would be more effective and efficient, even with the bureaucratic overhead.
Im sure Im wrong, but wouldnt it make sense to start with like "all rice, bean, potatoes, and broccoli consumption at the personal level is free" and start with a food stamp / ebt that buys unlimited of something very specific? It wouldnt be a currency thats worth trading to other people, landlords couldnt collect ebt credits in lieu of rent, because everyone would already have unlimited.
Instead of subsidizing agriculture at the production side, you can combine farm subsidies, food stamps, and ubi into one consumer credit, designed to persuade people to consume mostly free food over luxury food.
Whats the next thing it would make sense to subsidize for everyone without creating some kind of cyclical purchasing power loop?
For food, goods, and services, for much of the market there is both sufficient competition and means to increase supply, that I do not think prices can be raised unilaterally with an UBI. If you raise your prices, but I don't, I get your customers. Basic free market ideas.
However, for rent, there is real scarcity in supply AND limited ability to raise production. I expect that UBI will be an inflation ratchet for rent, unless it is paired with a policy that somehow increases housing supply.
UBI could help more inland cities become more attractive to business as their economies would grow with UBI, but have more land to build housing on.
I know someone who lives in subsidized housing. Rent is a percentage of income. Barring additional changes, that percentage of UBI would go directly to rent as a matter of law. That might be less of it than normal unregulated rents.
As economists say "inflation is a monetary phenomenon". So if you pay for UBI by printing money, then of course it would increase inflation. But Friedman's original proposal and most others pay for it by having the rich pay for the poor through taxes and the middle class pay for themselves.
And on the demand side, the poor in America are generally obtaining food and housing somehow. The food's not nutritious and the housing might be a shelter, but only a small fraction of the homeless let alone the working poor are actually sleeping outside.
On the housing side, proponents hope that UBI will encourage people to move out of the expensive areas where jobs are to areas that are cheaper to live in. So a good argument could be made that housing costs will go down.
On the food side, food is a commodity. The price of a commodity is the marginal cost. So as long as the producer costs are similar between producers, demand has very little effect on the price of food.
> But Friedman's original proposal and most others pay for it by having the rich pay for the poor through taxes and the middle class pay for themselves.
It would increase inflation in this example not because the government is printing money, but because the source of the money (the "rich") are not in the market for low-end housing, but the recipients of the taxes are.
There's a response to the parent comment that has real data on increasing the minimum wage. It's only two papers on one location, but until we see at least the same kind of thing on UBT, it's all wild speculation.
I don't want to be in the location that passes UBT only to see it fail wildly, but we need that data. I would certainly argue an economy the size of the U.S. or China (as if...) shouldn't experiment without better data.
Personally, I seriously doubt UBT will fail wildly, and I want to see it move forward, responsibly.
I believe replacing minimum wage with a UBI would effectively cause a net rise in peoples earnings - no one will take a job for 3 dollars an hour even if they have UBI.
The problem is that instituting UBI will require a political fight that will make the fight over Obamacare look positively cordial, and there's no way that fight can even begin until 2020 at the earliest anyway because of who currently holds the White House and Senate. Whereas bumping up the minimum wage is a much smaller lift, since it's just an incremental adjustment to a program that already exists.
If I were working for minimum wage, and I was offered a choice between a small wage increase right now and a possible shot at a completely new compensation regime whose details have only begun to be worked out, I know which one I would take.
The USA went 149 years, from 1789 to 1938, with no federal minimum wage – so yes, America has gone longer without any hike than just than the 10 years since 2009.
Many economic experts, ignored by this article, consider no minimum wage to be the optimal level.
Do you mean that you'd get low unemployment, but most workers get paid starvation wages, but t a few most valuable workers get much larger salaries?
Poverty was absolutely horrible before minimum wage for most workers. I can't help but think that such policies you are proposing are historical revisionism at its worst.
The sum of all the money earned by all workers without a minimum wage is higher than with one. With a minimum wage you have one fry cook in your neighborhood making $100/hr and everyone else unemployed, without one you have 100 people making $2/hr each. More total money is given out in the second case, although I guess you can decide you'd prefer having the rich few if that's what you want (economics doesn't judge which outcome is better, it just tells you which outcome you will get).
Edit: numbers made up to illustrate the claim, not to provide evidence. This claim is a widely accepted principle that you can find in any introductory econ textbook.
Decrease that $100/hr to $10/hr and increase the 100 people making $2/hr to 1 million people making $2 an hour, that way you go from $10/hr in earning potential to $2million/hr. Just by getting rid of the minimum wage!
I can see why the minimum wage is such a bad idea, you are totally correct.
Your example, although meant to show that the point was silly, can still serve to illustrate it. Imagine that for the vast majority of people, widgets are worth $3 each, but for one person they are worth $10 each (because he really likes them). Further, suppose that a widget takes an hour to make. With a minimum wage, one person can make $10/hour serving the one person who want widgets that badly, but without one it becomes profitable to open up an entire new market sector of mass-produced widgets for the common man.
You can change the numbers and the details, but the general principles of microeconomics will prefer the free market every time.
To carry that example further, you have many people that are willing to pay $3 per widget. But there are barriers to opening a widget factory, such that there is only one widget factory in town. And the owner of that factory only wants to pay worker 50 cents per hour, selling the widgets produced for $3.00. Now total money paid to workers is much lower than if minimum wage is set to $3.00
So the moral of the story is minimum wage should be raised to the point where total employment is still at an acceptable level.
Presumably where output is maximized on the production possibility curve [0], i.e. a purely theoretical petri dish where every individual, corporation and government's actions can be neatly quantified in a 2-dimensional chart.
and where information is symmetrical, so that each rational actor always makes the perfectly optimal economic choice.
give the rugged individual all the relevant information (wages/benefits, available jobs, hidden risks, corporate strategy, market dynamics, etc.), and then maybe we can talk about labor market deregulation.
People who want no minimum wage are usually people who think the goal is to increase the GDP as much as possible or to lower unemployment as much as possible.
No minimum wage would definitely increase GDP, I don’t think there’s a lot of debate on that, but there really isn’t solid evidence or theory to know what effect it would have on unemployment. (1)
The other goal, the one most focused on by people who support increasing the minimum wage, is ensuring that minimum wage earners are making enough that they have a decent quality of life and don’t also need government benefits.
(1): It depends on the slopes of the demand and supply curves for labor and measuring those is really hard. People who want to raise the minimum wage usually claim that the demand curve for labor is relatively flat. People who want to get rid of the minimum wage usually claim that the demand curve is steeper.
My concern around the minimum wage is around employment. A high minimum wage guarantees that you will either be paid well or paid nothing. If the point of the policy is that everyone should receive a living wage, then half the guarantee is missing.
Whether a job guarantee would be good idea, I don't know. But a good policy needs to be comprehensive. It shouldn't let people slip through the cracks.
> The USA went 149 years, from 1789 to 1938, with no federal minimum wage – so yes, America has gone longer without any hike than just than the 10 years since 2009.
You're (likely deliberately) omitting a ton of context as well as presenting a bad faith argument in general. Of course there were no minimum wage increases prior to the minimum wage. I also suspect there was no highway funding increases prior to the New Deal, does that in turn mean we shouldn't fund infrastructure now?
> Many economic experts, ignored by this article, consider no minimum wage to be the optimal level.
I'm sure they do, economic experts are the only ones who still think trickle-down economics is a good idea. Our economy is exploding, and our current problems are far more social, so maybe we should be listening to the sociologists and put the economy on the back burner for right now?
The kind of experts gojomo is thinking of are still resolutely convinced that they're correct, and no facts will change their mind about that. Like the people the tobacco lobby used to wheel out to tell you that they were confident smoking was actually not dangerous, or the same handful presented as offering an "alternative" explanation for global climate change, they are fiercely resistant to the obvious conclusion from the available facts, and I don't really need to care whether that's because they're they're actually paid not to look at the obvious or they're not smart enough to see it.
Not trickle down, but Laffer (the guy the Laffer curve is named after) worked for Donald Trump in his 2016 campaign, and currently blames Barack Obama for the Great Recession.
Laffer's curve is 100% real, it's also 100% irrelevant to real world economics. It's as though after explaining about relativity and why it's impossible to accelerate an object with mass to the speed of light, a physicist turned around and told you that therefore they are confident that it's impossible to move at more than a walking pace and so Olympic sprinters don't exist. And then an entire political party pretended to believe them because it would make very wealthy people even richer. The analogy breaks down there actually I guess. Also the part where loads of people die in miserable poverty, that's not really in the physicist analogy either.
> Our economy is exploding, and our current problems are far more social, so maybe we should be listening to the sociologists and put the economy on the back burner for right now?
You seem to have misunderstanding about economics and sociology. It seems you think (I am guessing) economists only care about economy growth, and sociologists know how to make social improvement. This thought appears also embedded in other comments.
It is wrong in many levels:
1) economists care about social improvement in general, not just in economics indies. However, many times economics indies are the best measure of general social improvement.
2) sociology is not supposed to be a discipline about making social improvement, before it's taking over by far left scholars.
3) sociologists usually do not know how to make social improvement in general. sociologists seem to understand the problem facing specific group of people, and they seem to know specific methods to make specific improvement, but they usually do not know how to make social improvement in general, because their social change program also never include cost analysis, and also never address side effects, unintended consequences, etc. They may know how to improve the life of a few people, but all their analyses do not care what cost to the rest of the world.
There was no highway funding before the New Deal because there were no highways.
There were wages in 1790. They chose not to implement a minimum wage, but they could have if they wanted.
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Regarding "trickle-down economics", this isn't a real term anyone actually argues for. It's a sneer term created for the purpose of strawmanning libertarian economic positions to make them easy to attack. Not sure why this became such a meme, or how so many people seem to not realize that they're attacking an Emmanuel Goldstein. But it would be good if you stuck to criticizing positions that real people actually hold.
As an outsider (I'm Canadian), I find this debate to be interesting. From my perspective, the American project is one that emphasized individual liberty, with only a small set of powers granted to the federal government by the constitution. It was expected that helping others would happen via voluntary means (churches, charitable organizations, etc.) rather than compulsory ones.
In that context, you could look at the data on inequality and still make a principled argument as to why a federal minimum wage is undesirable.
If that is true, which, as an american, i don't really care if that was the goal of the american project, it has demonstrably failed and we should act in the interest of human rights.
put otherwise - some people are working 2-3 jobs in order to feed, house, and clothe their children and it still is not enough. i have no ears for any principled argument in favor of the current state of things.
We're definitely the wealthiest. Our power is slipping thanks to awful foreign policy, and success is limited. We've been successful in generating massive amounts of wealth, but our standard of living isn't great compared with many other countries, and despite our wealth, our middle class is shrinking, and we have more homeless than ever, many of whom are veterans. And that's not even going into how a huge amount of our wealth can be directly traced to extremely exploitative attitudes and actions concerning other countries.
There's a lot to be proud of but there's also a lot to be ashamed of.
The American Constitution was created to expand the powers of the federal governmet (replacing the prior Articles of Confederation that existed prior). Since the creation of the constitution, the federal government has seen an increase in scope; driven in large part by new deal policies and an (absurdly) broad definition of "interstate commerce".
Under both the articles of confederation and the current constitution (with and without amendments), the idea of limited federal government was not personal freedom, but state's freedom (eg. powers not given to the federal government are given to the states).
Arguably, the strenthening of the federal government led to more constitutionally protected individual rights, as it led to the bill of rights being interpreted as restricting states as well.
The constitution (including amendments) does place strong limits on what states can do to curtail individual liberty, a topic that's covered extensively in The Federalist Papers. So I don't entirely agree with you on this.
This is a misunderstanding. The Federal government has a small set of powers because almost all legal and political power is vested in the individual States, which have most of the remit and authority of sovereign countries. Americans have always lived under the expansive social policy regimes of their respective States, which vary widely. It is only in the 20th century that the Federal government started dabbling in social policy at all.
Every State I have ever lived in had their own unique minimum wage laws. The Federal government is more like the EU, much of its policy function is to harmonize the laws of the States. Americans have almost no interaction with the Federal government; the laws they live under, the taxes they pay, and the social programs available to them are almost always specific to the State.
I wasn't trying to make a point per se, just clarifying a common misconception about social policy in the US. The policies that exist or not at the Federal level tell you very little about the policies Americans live under; at best, it bounds variability of policy.
relying on churches to provide charity puts an emphasis on crowds rather than individuals
if you don't at least pretend to be Christian, or if you're say, gay, or like abortions, you lose access to many charitable funds, reducing your individual liberty when the rubber hits the road
Does this mean growing, shrinking, improving, or failing? I have seen people argue for each of these points right now, and I think they all believed their own arguments.
DJIA grows: yay that means things are good!
Outstanding student loans grow: The bubble is about to burst!
Medical bills and insurance premiums are hampering everyone: Shrug
Do said economic experts take into account the societal costs of that position? The economically "correct" position isn't always the absolute best thing for society when the people have access to both the voting booth and weapons to effect changes.
I think that sometimes some people forget that actual people with families are impacted by their decisions.
But there's another thing people are forgetting about: entry level positions.
Consider a case like grocery store baggers. A position which has been devastated because it's become too expensive to justify, even though it's something everyone would still like to have.
Stuff like that are great first jobs for teenagers and functions as a low-risk way for them to get introduced to the work force. Learn about money, working with customers, getting to work on time, etc. Useful skills down the line and gives them some spending money in the meantime.
I think you misunderstand the position of experts who believe a minimum wage is not “optimal”.
It’s never been easier to discover and apply for new jobs. That is to say, the transaction costs of changing jobs has never been lower.
In a competitive market with low transaction costs of changing jobs, an employee will achieve their highest wage on the open market based on their skill set.
Based on this theory a minimum wage sets a minimum skill level or value proposition a worker must present in order to be entitled to employment. Anyone who performs below that level is denied a job by the Federal minimum value proposition law.
The higher the minimum value proposition of a worker, the higher functioning / more productive individual workers must be, and the fewer people need to be employed.
So the theory is that a minimum value regulation directly hurts the people who are capable of providing the least value. Is it the best thing for society for the least productive workers to be legally unemployable?
Of course this glosses over all the inefficiencies and particularly the power imbalances that exist most dramatically at the jobs with the least skilled workers.
Companies are profitable because they can pay their employees dramatically less than the value that they produce for the company. Usually that value is a result of the infrastructure and intellectual property of the company multiplying the productivity of the worker to create the added value. But sometimes it’s simply on the backs of the workers being underpaid for the value they are personally creating.
Personally I think the minimum wage is low enough at this point where the overhead for just having the employee dominates the total cost of payroll. If there’s a cost saving to be had, it’s in lowering that overhead, not lowering payroll. This typically is achieved through reducing employment regulations in general, of which minimum wage/value is just one of hundreds or perhaps thousands.
> That is to say, the transaction costs of changing jobs has never been lower.
i'm just going to venture a guess, but i suspect you have never worked as a dishwasher. this sort of overly academic language is tone deaf to the reality of working for minimum wage.
Not the person you're replying but I've worked as a dishwasher and what he/she says about ease of switching jobs is spot on. I did a lot of other menial jobs too before I got a degree. Construction laborer was my favorite but janitor wasn't bad. Unless you have a really interesting criminal record it's super easy to bounce between menial jobs. Go on Craigslist, fire off a "resume" (in quotes because it's more of a work history than anything else) to anything that looks tolerable and roll with whatever replies you get back. There was one time I told a boss to shove it on one day and showed up to a different job the next but that was the exception not the rule. I suspect if anything it's easier now. The economy was not as strong back when I was working those jobs.
Edit: I can write an email with proper grammar, show up on time and can pass a drug test which I know now are two of the major pain points for minimum wage employers so I guess I was privileged in that regard.
I recall seeing an interview (many years ago) of some random store manager, on one of those TV news magazine shows. His biggest complaint was that anyone he hired just randomly would not show up, or come in a couple hours late. Being reliable is something that gives you a huge legg up on the competition.
>In a competitive market with low transaction costs of changing jobs
Ignoring reality makes it easy to solve all sorts of problem. It simply isn't the case that, for most people, changing jobs is a low cost transaction once you take into account the costs (all of them not just monetary) of changing jobs.
If minimum wage had simply kept pace with inflation it would be > 20 dollars per hour today.
Edit - the 20 dollar amount may not be correct. I need to verify where I got it from so please research it yourself.
> If minimum wage had simply kept pace with inflation it would be > 20 dollars per hour today.
I just plugged in 1970's minimum wage (1.45) into an inflation calculator (I tried the first several links in Google), and it shows 9.38 in 2018. Of course, inflation varies based on different items in a basket of goods, and there are a number of things we have now that didn't exist in 1970 (cable / satellite TV, internet, cell phones, mobile internet, Netflix). On the flip side, you no longer pay an outrageous per minute fee for long distance.
Seems I’m being judged harshly for that comment. What I’m saying is that the theory is that if you have a competitive market and low transaction costs for switching, then...
The term “transaction costs” is a reflection of the total cost to the employee, including time spent searching, applying, interviewing, potential lost wages if the new start date doesn’t match the end date, even time value for filling out the W-9. All of it.
There’s a lot that can be done on the regulatory side to reduce these costs. The really big one is probably health insurance switching costs, particularly if deductibles are getting reset mid-year.
So my conclusion is the most effective and economically efficient way to improve the conditions for low skilled workers is to reduce overhead costs and reduce transaction costs for switching jobs as much as possible.
Dialing up the legal minimum value proposition of a worker in theory does not help, and can only possibly hurt low skilled employees, if the labor market is competitive and job switching costs are zero (that is to say, in an idealized—not real-world—model).
The first federal minimum wage was .25 in 1938. An inflation calculator shows that would be $4.54 in 2019. Based on that, I would have to conclude the minimum wage has more than kept up with the inflation rate.
The trustworthy experts are the self-interested ones.
The sugar producers, for instance, have a price floor for the goods they supply. But they have experts who know the danger of price floors, so they made sure their deal requires that the government purchase unsold sugar.
And, of course, even that doesn't prevent sugar consumers from using alternatives, hence the number of products that replace sugar with high-fructose corn syrup.
I agree it's unsettled! My complaint is that the article treats the matter otherwise: only referring to "experts" who think a rising wage floor is overdue, and only quoting those with pro-price-control beliefs (like representatives of the large-labor-union-funded EPI).
That's in keeping with the article's myopic, misleading, pandering headline that ignores over a century of pre-1938 precedent.
Can you link to some of this research? I'd like to see the experimental conditions where a no minimum wage system exists harmoniously with a rising gas prices, tuition costs, housing and food costs.
They can do that because unions are part of the labour market structure, and can do collective bargaining directly with the employers, instead of leaving the government to impose a one-size fits all minimum wage [0].
That to me is the right way to approach this (advocate for workers' interests, but leave the government out of it), but if that was ever considered in the US, a good chunk of the HN readership would go apoplectic and beg for the state to intervene.
A good overview of the case against minimum wages based on economic research & reasoning is this Cato Institute summary paper, "The Negative Effects of Minimum Wage Laws":
(This understanding was popular enough in 1987 that even the NYTimes endorsed it in an unsigned, editorial-board opinion piece – that meaning "this is the consensus opinion of the paper's editors": https://www.nytimes.com/1987/01/14/opinion/the-right-minimum... )
Does any of that research suggest that a zero minimum wage is optimal in some sense? No. But I will grant you that raising the minimum wage might not do what we hope it would do.
So.... about slavery? This is just a bad argument that dismisses the historical context and structure of the US labor market and continues to ignore the on going inequality of labor.
For comparison in the same time period (2009-2019) the UK minimum wage for over 25s has increased from £5.80 to £8.21. This roughly tracks UK inflation (CPI) and changes to the average wage over the same time period.
I'm only just learning about the UK's age-dependent minimum wage [1] Is there any explanation for why such a system is used? Certainly there's plenty of financially-independent under-25s who are paid less merely because of their age, which doesn't really seem appropriate. Do other countries in Europe follow similar minimum wage schemes?
EDIT: I found a paper [2] from the Netherlands (who also use an age-dependent minimum wage) suggesting that such a system can increase job termination rates close to employees birthdays.
If the wage was the same for an 18yo with no experience vs. a 25yo who doesn't need much handholding, nobody would hire the 18yo. In most cases, older workers will also have greater financial responsibilities than a teen, so a higher wage makes sense.
Here in Canada, the provincial minimum wage is consistent regardless of age and yet I still see plenty of employed high school students. I also don't think that its fair to make policy-affecting assumptions regarding peoples financial responsibilities based on their age alone. I know plenty of independent 20 year olds who have significant financial responsibilities as well as 25 year olds who are voluntarily financially dependent on their parents etc. In this situation I believe an age-dependent minimum wage can actually increase inequality by determining wages based on an arbitrary metric such as age.
According to StatCan[1], the unemployment rate for people aged 15-24 is more than double that of people over 25. Speaking for myself, it was brutally difficult to find my first job. I was unemployed for months.
Alberta is introducing a lower minimum wage for ages 16–18. I don't particularly like having a minimum wage that discriminates based on age, but we already have a bunch of special employment laws for minors. I actually lost my job as a concessions cashier to one of those restrictions when I was 17.
Yet also a clear sign of ageism. I used to work in my college book store. I was blown away to find out “adults” were paid vastly differently than students. I also learned that age is only a protected class in CA if you’re over 40.
While in my opinion the minimum raise should be raised quite a lot, there are a lot of labor reforms needed. In particular for work that falls outside of the salaried work. Waged, contracted, seasonal, and temp workers do not have a lot of power in the labor market. It's actually a pretty hostile environment for individuals who don't want to collect a salary and sit at a desk.
I view the problem through this lens. That essentially we have a labor surplus because the current regulatory environment is designed around salaried office workers - barring a few holdovers in the form of labor unions. The total size of the labor market is larger than the carrying capacity of office jobs. As the environment has aged firms learned how to play the game and have pushed a lot of small competition out. Meanwhile laborers compete for a smaller pool of office jobs or hope they land on their feet.
This is really the nature of regulation though, it can rarely be meant to last forever and should receive continuous development and audits.
158 comments
[ 5.3 ms ] story [ 170 ms ] threadThere are a lot of reasons for decreased teenage employment:
- Older employees who should be retired hanging on to jobs longer because they can't afford retirement
- Students finding part time work an inferior return on investment compared to college preparation and other resume-building activities like volunteer work
- College costing so much that high school summer jobs can't possibly pay for a significant fraction of it, essentially making it a less time efficient option than just using future wages to pay for it (loans)
- Lengthened academic years with shorter summers
https://www.apnews.com/66a5d6cade1743fb897aad56e300c99c
I do think that it might make sense to have a lower teenage minimum wage than the normal adult minimum wage. I personally don't assume that a low minimum wage is good for low-skill employees, that just doesn't add up to me.
The inability to pay a living wage equates to all of us not paying the real cost of a good or service.
Not everyone is a single mother trying to make ends meet for her two children. We should not make economic policy as if they are.
"So why don't we take care of them?" Single mothers trying to make ends meet have access to a wide array of social programs already. We are already not abandoning them to the tender mercies of minimum wage and nothing else.
So, 1.04% of the adult population of the US makes minimum wage.
In your logic, why should we set national economic policy based on 1%?
From [1]: 1.8 million workers made the federal minimum wage or less. But that does not say how many people made less than $15 an hour, which is considered a living wage. According to the NELP in 2016, 42% of US workers make less than $15 per hour. Nearly half of US workers. [2]
So raising the minimum wage would support nearly half the US workforce to be able to, you know, live. I think setting economic policy with this in mind makes more sense than only considering what teenagers need.
[1] https://www.bls.gov/opub/reports/minimum-wage/2017/home.htm [2] https://raisetheminimumwage.com/fight-for-15/
Therefore 0.0230.580.78 = 0.0104, or just over 1% of adults earn minimum wage.
> Not everyone is a single mother trying to make ends meet
In the meantime, student loans are at an all time high!
Whether or not you had college paid for by somebody else who saved or even if you didn't need to go; Teenagers need more than pocket money, afterall, in 2 years they will, for the median, be committing to loan terms that will take 10+ years to pay off, if they ever do.
A 16 year old also may not have a college opportunity and may decide to go straight to work, may decide to go straight to having a family with a high school sweetheart. At that point, the 16-18 year old needs a liveable wage too.
It would be nice if they could pay for a semester or 2 (or 8) of college instead of using student loans.
You also assume that their parents are able to put healthy food on the table every night; which statistically, doesn't hold for 100% of Americans.
Able bodied people that choose to do nothing deserve to receive nothing.
UBI, on the other hand, can supplement wages.
Basically, replacing people with machines is a long term gain and should be encouraged with a high minimum wage.
There are lots of jobs nobody wants to do, but have to to stay alive. UBI removes the "have to to stay alive" part. If we still need the economic value that those tasks generate, there is no choice but to have machines do them. That, to me, sounds like automation.
(Most reasonable proposals I've seen for UBI include an assumption, stated or unstated, of drastically reduced administrative costs and costs of numerous other more specific programs for both aid and employment. And that also ignores other secondary effects. For the moment, let's treat that as a tangent, please, though.)
> Supply isn't magically going to boom
Not overnight, no. And not without some fixes in housing regulation. (That's also another reason to avoid indexing it to ridiculously-high-cost-of-living areas.) But in general there's no fundamental reason supply can't increase to match demand.
Also, right now supply has a massive constraint created by "proximity to work". If people have a lot more flexibility about where and how they work, the economics of "where do people live" changes drastically.
Over the short/medium term, ww want UBI inversly correlated to total income tax (which I would expect is correlated with total economic health), so it can serve a dual purpose as an economic stimulus.
Setting the UBI should be a matter of monetery policy set by the Fed, within parameters set by Congress.
So that's a very useful feedback loop: if too many people decide that they want to do art instead of driving trucks, the total income tax will go down, decreasing ubi and making more people to work. If someone invents self driving trucks and starts to get huge profits, ubi goes up, helping the drivers to live while they learn new useful skill.
Over the short term, recessions are still not going to be caused by changes in aggregate behavior; they will continue to be caused by business cycles, so we want to have counter-cyclic forces.
Agreed, but partially replacing someone's income would result in a net reduction of hours worked (if UBI is equivalent to half my full-time salary, then why not just work half the hours?) This would still result in a net loss in human productivity and therefore still spur investment into automation.
We should have UBI that is at least sufficient to wholly replace the income of low-paid workers. I think $20,000 a year is a nice round number to start a discussion at.
Giving low-paid workers the freedom to not work levels the playing field. In the classic supply/demand curve, the supply of labor is relatively fixed under the "you must work to live" model. With UBI, the supply of labor and the demand for labor will act in concert to determine a new, fairer price.
Most UBI proposals do not seek to be an income replacement. The bigger question then is what do we do with the 50-year olds that can’t find jobs due to reduced demand if they can’t live solely off UBI and have years before retirement age? I agree we should discourage reliance on labor that can be automated, but there’s also the empathy and humanity side that isn’t being addressed.
We seem to be maintaining the idea that full time employment is necessary for life long after that's no longer been the case. We've arrived at a point and time where the productivity of every able bodied person is not needed to sustain us, so when do we start reaping the rewards of that?
One of the lowest unemployment rates in history and not enough people picking crops seems to disagree with your premise.
> We seem to be maintaining the idea that full time employment is necessary for life long after that's no longer been the case.
Remember even 2.5% inflation still means money is worth 1/2 as much every 30 years. That can only happen if either the economy is smaller every 30 years or new money is created every 30 years.
PS: The velocity of money is one of those odd things that seems irrelevant in simple models but turns out to be really critical.
If someone has a UBI that pays enough for them to live, why would someone do work they don't enjoy for a few bucks an hour? I'd suggest that UBI would encourage efficiency and automation, precisely because it raises the pay threshold necessary to make someone willing to take a job at all. (Effectively, it raises the coefficient of static friction.)
https://www.washington.edu/news/2019/02/06/two-new-studies-p... is a good place to start.
1. Minimum wage increase results in basically insignificant price increases, except for...
2. Businesses with high labor costs like daycares are affected and have to either increase prices or reduce staff.
In my opinion, the businesses in #2 are instances where the customer isn't paying the true cost of the service. Rather, the service is being subsidized by providing inadequate wages for its employees based on the fact that the labor is in much higher supply than demand.
It favors large corporate employers over small businesses and self-employed, favoring the upper middle class employee who's got an employer providing extensive benefits already (similar to how you're completely hosed in this country if your employer doesn't provide a good healthcare.
If we want to use subsidies, it needs to be a lot less regressive than that.
And we need to seriously get away from quality of life benefits being tied into one specific employer.
How would you determine the "true cost" in this case?
If you want a tangible metric, let's just say that someone working 40 hours a week making minimum wage shouldn't need to receive government safety net benefits, because that is basically a transfer of wealth from the taxpayer to the company employing that person.
I’m all for automation, but the greater question is transitioning people gracefully.
Raising the minimum wage might accelerate that somewhat, but I don't think that is the main concern.
Let's consider only jobs that there will be no good way to automate for the foreseeable future.
The existing minimum wage already eliminates some jobs that cannot be automated but just are simply not worth $7 per hour to the would-be employer. Not many people would be interested in holding such jobs, but probably a few who kind of like that sort of work and only need a very small income. The number of such people could be expected to increase in the presence of a UBI scheme.
There may be a lot more jobs that currently pay $12 per hour, but that the employers will simply forgo rather than pay $15. (Imagine an old man who pays a worker $12 per hour to mow because it makes him happy to have a nice lawn, but whose budget has no room for a $3 raise. If the minimum wage rises to $15, he has to pay nobody, let his lawn go to hell, and live a slightly-less-satisfactory life. Meanwhile, the worker has to find a new gig, if he can.)
On your broader point, I'm not sure that those are viable "jobs" if they can't be done for ever $7.25/hr. What are the jobs going undone today because they are only worth $7.24/hr? Why isn't anyone wringing their hands over that injustice?
The real question is, what would the impact be. Isn't it possible that raising the minimum wage lifts more people out of poverty than it pushes into poverty through joblessness? If yes, it is likely worth trying.
[1] https://blogs.findlaw.com/law_and_life/2015/06/hire-a-kid-to...
edit: had the minimum wage wrong.
Yes. It's possible. Probable even. But not certain.
I also think UBI is a good solution. For example Andrew Yang "Freedom Dividend" $1k per month UBI plan is like getting paid for working an additional 67 hours a month at $15/hour.
Instead of subsidizing agriculture at the production side, you can combine farm subsidies, food stamps, and ubi into one consumer credit, designed to persuade people to consume mostly free food over luxury food.
Whats the next thing it would make sense to subsidize for everyone without creating some kind of cyclical purchasing power loop?
However, for rent, there is real scarcity in supply AND limited ability to raise production. I expect that UBI will be an inflation ratchet for rent, unless it is paired with a policy that somehow increases housing supply.
UBI could help more inland cities become more attractive to business as their economies would grow with UBI, but have more land to build housing on.
As economists say "inflation is a monetary phenomenon". So if you pay for UBI by printing money, then of course it would increase inflation. But Friedman's original proposal and most others pay for it by having the rich pay for the poor through taxes and the middle class pay for themselves.
And on the demand side, the poor in America are generally obtaining food and housing somehow. The food's not nutritious and the housing might be a shelter, but only a small fraction of the homeless let alone the working poor are actually sleeping outside.
On the housing side, proponents hope that UBI will encourage people to move out of the expensive areas where jobs are to areas that are cheaper to live in. So a good argument could be made that housing costs will go down.
On the food side, food is a commodity. The price of a commodity is the marginal cost. So as long as the producer costs are similar between producers, demand has very little effect on the price of food.
It would increase inflation in this example not because the government is printing money, but because the source of the money (the "rich") are not in the market for low-end housing, but the recipients of the taxes are.
I don't want to be in the location that passes UBT only to see it fail wildly, but we need that data. I would certainly argue an economy the size of the U.S. or China (as if...) shouldn't experiment without better data.
Personally, I seriously doubt UBT will fail wildly, and I want to see it move forward, responsibly.
If I were working for minimum wage, and I was offered a choice between a small wage increase right now and a possible shot at a completely new compensation regime whose details have only begun to be worked out, I know which one I would take.
Many economic experts, ignored by this article, consider no minimum wage to be the optimal level.
Poverty was absolutely horrible before minimum wage for most workers. I can't help but think that such policies you are proposing are historical revisionism at its worst.
Edit: numbers made up to illustrate the claim, not to provide evidence. This claim is a widely accepted principle that you can find in any introductory econ textbook.
I can see why the minimum wage is such a bad idea, you are totally correct.
You can change the numbers and the details, but the general principles of microeconomics will prefer the free market every time.
So the moral of the story is minimum wage should be raised to the point where total employment is still at an acceptable level.
[0]: https://www.tutor2u.net/economics/reference/production-possi...
give the rugged individual all the relevant information (wages/benefits, available jobs, hidden risks, corporate strategy, market dynamics, etc.), and then maybe we can talk about labor market deregulation.
No minimum wage would definitely increase GDP, I don’t think there’s a lot of debate on that, but there really isn’t solid evidence or theory to know what effect it would have on unemployment. (1)
The other goal, the one most focused on by people who support increasing the minimum wage, is ensuring that minimum wage earners are making enough that they have a decent quality of life and don’t also need government benefits.
(1): It depends on the slopes of the demand and supply curves for labor and measuring those is really hard. People who want to raise the minimum wage usually claim that the demand curve for labor is relatively flat. People who want to get rid of the minimum wage usually claim that the demand curve is steeper.
https://imgur.com/a/KtC7BD0
Whether a job guarantee would be good idea, I don't know. But a good policy needs to be comprehensive. It shouldn't let people slip through the cracks.
You're (likely deliberately) omitting a ton of context as well as presenting a bad faith argument in general. Of course there were no minimum wage increases prior to the minimum wage. I also suspect there was no highway funding increases prior to the New Deal, does that in turn mean we shouldn't fund infrastructure now?
> Many economic experts, ignored by this article, consider no minimum wage to be the optimal level.
I'm sure they do, economic experts are the only ones who still think trickle-down economics is a good idea. Our economy is exploding, and our current problems are far more social, so maybe we should be listening to the sociologists and put the economy on the back burner for right now?
Not trickle down, but Laffer (the guy the Laffer curve is named after) worked for Donald Trump in his 2016 campaign, and currently blames Barack Obama for the Great Recession.
Laffer's curve is 100% real, it's also 100% irrelevant to real world economics. It's as though after explaining about relativity and why it's impossible to accelerate an object with mass to the speed of light, a physicist turned around and told you that therefore they are confident that it's impossible to move at more than a walking pace and so Olympic sprinters don't exist. And then an entire political party pretended to believe them because it would make very wealthy people even richer. The analogy breaks down there actually I guess. Also the part where loads of people die in miserable poverty, that's not really in the physicist analogy either.
You seem to have misunderstanding about economics and sociology. It seems you think (I am guessing) economists only care about economy growth, and sociologists know how to make social improvement. This thought appears also embedded in other comments.
It is wrong in many levels: 1) economists care about social improvement in general, not just in economics indies. However, many times economics indies are the best measure of general social improvement.
2) sociology is not supposed to be a discipline about making social improvement, before it's taking over by far left scholars.
3) sociologists usually do not know how to make social improvement in general. sociologists seem to understand the problem facing specific group of people, and they seem to know specific methods to make specific improvement, but they usually do not know how to make social improvement in general, because their social change program also never include cost analysis, and also never address side effects, unintended consequences, etc. They may know how to improve the life of a few people, but all their analyses do not care what cost to the rest of the world.
4) our economy is "exploding" in America
There was no highway funding before the New Deal because there were no highways.
There were wages in 1790. They chose not to implement a minimum wage, but they could have if they wanted.
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Regarding "trickle-down economics", this isn't a real term anyone actually argues for. It's a sneer term created for the purpose of strawmanning libertarian economic positions to make them easy to attack. Not sure why this became such a meme, or how so many people seem to not realize that they're attacking an Emmanuel Goldstein. But it would be good if you stuck to criticizing positions that real people actually hold.
You're talking about roads.
These are not the same thing and I think you're playing dumb about it (or at least I hope so).
In that context, you could look at the data on inequality and still make a principled argument as to why a federal minimum wage is undesirable.
put otherwise - some people are working 2-3 jobs in order to feed, house, and clothe their children and it still is not enough. i have no ears for any principled argument in favor of the current state of things.
There's a lot to be proud of but there's also a lot to be ashamed of.
Under both the articles of confederation and the current constitution (with and without amendments), the idea of limited federal government was not personal freedom, but state's freedom (eg. powers not given to the federal government are given to the states).
Arguably, the strenthening of the federal government led to more constitutionally protected individual rights, as it led to the bill of rights being interpreted as restricting states as well.
Every State I have ever lived in had their own unique minimum wage laws. The Federal government is more like the EU, much of its policy function is to harmonize the laws of the States. Americans have almost no interaction with the Federal government; the laws they live under, the taxes they pay, and the social programs available to them are almost always specific to the State.
if you don't at least pretend to be Christian, or if you're say, gay, or like abortions, you lose access to many charitable funds, reducing your individual liberty when the rubber hits the road
Does this mean growing, shrinking, improving, or failing? I have seen people argue for each of these points right now, and I think they all believed their own arguments.
DJIA grows: yay that means things are good!
Outstanding student loans grow: The bubble is about to burst!
Medical bills and insurance premiums are hampering everyone: Shrug
I think that sometimes some people forget that actual people with families are impacted by their decisions.
Consider a case like grocery store baggers. A position which has been devastated because it's become too expensive to justify, even though it's something everyone would still like to have.
Stuff like that are great first jobs for teenagers and functions as a low-risk way for them to get introduced to the work force. Learn about money, working with customers, getting to work on time, etc. Useful skills down the line and gives them some spending money in the meantime.
It’s never been easier to discover and apply for new jobs. That is to say, the transaction costs of changing jobs has never been lower.
In a competitive market with low transaction costs of changing jobs, an employee will achieve their highest wage on the open market based on their skill set.
Based on this theory a minimum wage sets a minimum skill level or value proposition a worker must present in order to be entitled to employment. Anyone who performs below that level is denied a job by the Federal minimum value proposition law.
The higher the minimum value proposition of a worker, the higher functioning / more productive individual workers must be, and the fewer people need to be employed.
So the theory is that a minimum value regulation directly hurts the people who are capable of providing the least value. Is it the best thing for society for the least productive workers to be legally unemployable?
Of course this glosses over all the inefficiencies and particularly the power imbalances that exist most dramatically at the jobs with the least skilled workers.
Companies are profitable because they can pay their employees dramatically less than the value that they produce for the company. Usually that value is a result of the infrastructure and intellectual property of the company multiplying the productivity of the worker to create the added value. But sometimes it’s simply on the backs of the workers being underpaid for the value they are personally creating.
Personally I think the minimum wage is low enough at this point where the overhead for just having the employee dominates the total cost of payroll. If there’s a cost saving to be had, it’s in lowering that overhead, not lowering payroll. This typically is achieved through reducing employment regulations in general, of which minimum wage/value is just one of hundreds or perhaps thousands.
i'm just going to venture a guess, but i suspect you have never worked as a dishwasher. this sort of overly academic language is tone deaf to the reality of working for minimum wage.
Edit: I can write an email with proper grammar, show up on time and can pass a drug test which I know now are two of the major pain points for minimum wage employers so I guess I was privileged in that regard.
Ignoring reality makes it easy to solve all sorts of problem. It simply isn't the case that, for most people, changing jobs is a low cost transaction once you take into account the costs (all of them not just monetary) of changing jobs.
If minimum wage had simply kept pace with inflation it would be > 20 dollars per hour today.
Edit - the 20 dollar amount may not be correct. I need to verify where I got it from so please research it yourself.
I just plugged in 1970's minimum wage (1.45) into an inflation calculator (I tried the first several links in Google), and it shows 9.38 in 2018. Of course, inflation varies based on different items in a basket of goods, and there are a number of things we have now that didn't exist in 1970 (cable / satellite TV, internet, cell phones, mobile internet, Netflix). On the flip side, you no longer pay an outrageous per minute fee for long distance.
Will research.
The term “transaction costs” is a reflection of the total cost to the employee, including time spent searching, applying, interviewing, potential lost wages if the new start date doesn’t match the end date, even time value for filling out the W-9. All of it.
There’s a lot that can be done on the regulatory side to reduce these costs. The really big one is probably health insurance switching costs, particularly if deductibles are getting reset mid-year.
So my conclusion is the most effective and economically efficient way to improve the conditions for low skilled workers is to reduce overhead costs and reduce transaction costs for switching jobs as much as possible.
Dialing up the legal minimum value proposition of a worker in theory does not help, and can only possibly hurt low skilled employees, if the labor market is competitive and job switching costs are zero (that is to say, in an idealized—not real-world—model).
https://bebusinessed.com/history/history-of-minimum-wage/
https://www.usinflationcalculator.com/
The sugar producers, for instance, have a price floor for the goods they supply. But they have experts who know the danger of price floors, so they made sure their deal requires that the government purchase unsold sugar.
And, of course, even that doesn't prevent sugar consumers from using alternatives, hence the number of products that replace sugar with high-fructose corn syrup.
That's in keeping with the article's myopic, misleading, pandering headline that ignores over a century of pre-1938 precedent.
https://www.fastcompany.com/3052798/can-fast-food-work-ever-...
That to me is the right way to approach this (advocate for workers' interests, but leave the government out of it), but if that was ever considered in the US, a good chunk of the HN readership would go apoplectic and beg for the state to intervene.
Citation needed. It's only optimal (and in a limited sense at that) in the presence of a host of unrealistic assumptions.
https://object.cato.org/pubs/pas/PA701.pdf
(This understanding was popular enough in 1987 that even the NYTimes endorsed it in an unsigned, editorial-board opinion piece – that meaning "this is the consensus opinion of the paper's editors": https://www.nytimes.com/1987/01/14/opinion/the-right-minimum... )
Does any of that research suggest that a zero minimum wage is optimal in some sense? No. But I will grant you that raising the minimum wage might not do what we hope it would do.
EDIT: I found a paper [2] from the Netherlands (who also use an age-dependent minimum wage) suggesting that such a system can increase job termination rates close to employees birthdays.
[1]: https://www.gov.uk/national-minimum-wage-rates
[2]: http://ftp.iza.org/dp9528.pdf
Here in Canada, the provincial minimum wage is consistent regardless of age and yet I still see plenty of employed high school students. I also don't think that its fair to make policy-affecting assumptions regarding peoples financial responsibilities based on their age alone. I know plenty of independent 20 year olds who have significant financial responsibilities as well as 25 year olds who are voluntarily financially dependent on their parents etc. In this situation I believe an age-dependent minimum wage can actually increase inequality by determining wages based on an arbitrary metric such as age.
Alberta is introducing a lower minimum wage for ages 16–18. I don't particularly like having a minimum wage that discriminates based on age, but we already have a bunch of special employment laws for minors. I actually lost my job as a concessions cashier to one of those restrictions when I was 17.
1: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=141003...
https://www.worklawyers.com/age-discrimination-california/
The metrics we use to measure inflation (e.g. CPI) have grown slowly, but that doesn't mean that inflation is low.
I view the problem through this lens. That essentially we have a labor surplus because the current regulatory environment is designed around salaried office workers - barring a few holdovers in the form of labor unions. The total size of the labor market is larger than the carrying capacity of office jobs. As the environment has aged firms learned how to play the game and have pushed a lot of small competition out. Meanwhile laborers compete for a smaller pool of office jobs or hope they land on their feet.
This is really the nature of regulation though, it can rarely be meant to last forever and should receive continuous development and audits.
And we have very low unemployment, rising wages, and a roaring economy. We've also got low inflation and a robust stock market.
This bears further consideration. The economy may be close to optimal.