Minimum Wage Vicious Cycle

[AllPurposeAtheist]

Here's the great American ethic,  starve poor people out of existence and reallocate the most efficient way. Create MORE poor people! What's the matter Xerox..Your gardener won't cut your grass for 38 cents anymore?

[Jason78]

I'll just leave this here

[SGOS]

Seems to me the vicious cycle in the boardrooms should be a big concern.

[Moralnihilist]

1. I think you and I have different definitions of "hard". 
2.Where did I propose overnight profits?
3.According to you, a minimum wage is necessary because business owners would slash wages.  But business owners would only be able to slash wages if workers could easily be replaced.  Business owners really wouldn't be able to slash wages if workers could easily replace their jobs. 

4. When there are too many workers and too few jobs... then bosses have the upper hand.  When there are too few workers and too many jobs... then workers have the upper hand.

5. Right now you're arguing that the US has a surplus of unskilled labor.  However, you don't think that the surplus of unskilled labor has anything to do with the minimum wage.  So if you don't attribute the surplus of unskilled labor to the minimum wage... then what do you attribute it to?

1. The act of starting a business isn't the hard part. All it takes is an idea and the willingness to put everything on the line. This is why most new businesses are started by the young or wealthy. They can take the risk.
Making the business successful is the hard part. I know Ive done it 3 times.
2. Nice avoidance of the ACTUAL issue presented in this point. Here Ill say it again: Most people don't have the ability to take 2-5 years of sub minimum wage pay to get a business off the ground. Remember, making the business successful is the hard part and most people have responsibilities(wife, kids, house payment, etc) that wont allow them to take sub minimum wage pay for 2-5 years.
The thing most economists miss is what I like to call acceptable risk. IF you have a wife and 2 kids to support then the idea of losing your home while you attempt to get a business off the ground is not an acceptable risk. Another example is that I can cook my ass off(Ive taken several years of culinary school) People have suggested that I open my own restaurant. The fact that over 50% of new restaurants fain in the first year is not an acceptable risk to me, even though I can afford to take the hit.
3. There are, on average, 118 applicants for every job. Employers know this(I know I do). Most of those are people trying to get into the field and are competing  against experienced people. Another thing is that ALL jobs require a skill today. "Unskilled" labor is a misnomer. Field work, for example, requires a very specific set of skills that few people have. You need to be able to not only recognize what item is ready, but be able to pick/pull it leaving the correct amount of the plant undamaged, and then preform any clean up of the item before placing it into the basket so that it can continue on its merry way to the store. Oh did I mention that you need to be able to do this at an incredible rate of speed?
4. The days of bosses or all employees having the upper hand has come and gone. Now its the good vs the lazy/unscrupulous. Lazy workers who only want to do the bare minimum(often less) to get their paycheck. Unscrupulous business owners who know that there are hundreds of people who would take ANY job, even if for only a short time, at ANY pay and use this to fuck over their employees as often as they think that they can get away with it.
5. No there a shortage of GOOD workers. People who show up on time and do their jobs well. Again I will state something that your fantasy land ideals never takes into account. "Unskilled" labor is a misnomer. ALL jobs require a level of skill, even if only a basic skill, it is still a skill. The unskilled laborer has gone with the advent of automation.

[stromboli]

1. The act of starting a business isn't the hard part. All it takes is an idea and the willingness to put everything on the line. This is why most new businesses are started by the young or wealthy. They can take the risk.
Making the business successful is the hard part. I know Ive done it 3 times.
2. Nice avoidance of the ACTUAL issue presented in this point. Here Ill say it again: Most people don't have the ability to take 2-5 years of sub minimum wage pay to get a business off the ground. Remember, making the business successful is the hard part and most people have responsibilities(wife, kids, house payment, etc) that wont allow them to take sub minimum wage pay for 2-5 years.
The thing most economists miss is what I like to call acceptable risk. IF you have a wife and 2 kids to support then the idea of losing your home while you attempt to get a business off the ground is not an acceptable risk. Another example is that I can cook my ass off(Ive taken several years of culinary school) People have suggested that I open my own restaurant. The fact that over 50% of new restaurants fain in the first year is not an acceptable risk to me, even though I can afford to take the hit.
3. There are, on average, 118 applicants for every job. Employers know this(I know I do). Most of those are people trying to get into the field and are competing  against experienced people. Another thing is that ALL jobs require a skill today. "Unskilled" labor is a misnomer. Field work, for example, requires a very specific set of skills that few people have. You need to be able to not only recognize what item is ready, but be able to pick/pull it leaving the correct amount of the plant undamaged, and then preform any clean up of the item before placing it into the basket so that it can continue on its merry way to the store. Oh did I mention that you need to be able to do this at an incredible rate of speed?
4. The days of bosses or all employees having the upper hand has come and gone. Now its the good vs the lazy/unscrupulous. Lazy workers who only want to do the bare minimum(often less) to get their paycheck. Unscrupulous business owners who know that there are hundreds of people who would take ANY job, even if for only a short time, at ANY pay and use this to fuck over their employees as often as they think that they can get away with it.
5. No there a shortage of GOOD workers. People who show up on time and do their jobs well. Again I will state something that your fantasy land ideals never takes into account. "Unskilled" labor is a misnomer. ALL jobs require a level of skill, even if only a basic skill, it is still a skill. The unskilled laborer has gone with the advent of automation.

Right. I've worked many jobs. I can't think of but a few where I was unskilled going in, and that was back working for my brother as a hod carrier when I was 14; and later working in landscaping when in high school. Even as a Firefighter out of the Navy I had previous training. Working part time as a cook for Sambo's I had training. Every job I had I had some form of prior training for, mostly because of skills learned in the Navy.

Lazy people in my experience don't last long at any level. Even waitresses, which many people think of as unskilled, require smarts and hustle to do their job. I had a Hispanic dishwasher at Sambo's that worked his ass off and eventually learned to cook. Dude watched me while I worked and asked questions. The big problem I had working for the DOD was that they wouldn't give you the leeway to do what you were capable of. Everywhere I worked I did extra stuff, running the coffee fund, running the MIC in the welding shop, eventually assistant facilities manager on the last job. Some jobs might reward laziness, but I'm not aware of them.

[doorknob]

Laziness is a chronic problem where I've lived. I remember working entry level jobs where I was so frustrated because my job depended on them to do their job. Essentially I was doing both jobs and not getting paid for both jobs. I complained and nothing was done about it. after a while though they did start firing and hiring people at a rapid turn over and the problem did not go away. The new employees were equally lazy as the fired ones. I eventually left that job. But I've had several other entry level jobs with that same problem. And the problem seems to be in direct correlation with how close to the city the job was.

Also I will like to point out that I was not treated very well in these jobs despite being a really damn good worker. Trust me when I say employers are always looking to get away with paying less or offering less benefits as they possibly can.

I also look at my poor sister who thankfully has an office job now that is much more relaxing, how ever she worked for a CVS. She worked and worked her butt off. Every night she would come home screaming because of how stressed she was from that job! They expected a lot from her and weren't willing to match the wages at the giant across the street. But that didn't matter since my sister applied at giant and they wouldn't hire her. So she applied all over the place and no one else would hire her, despite her being a really hard worker. She had such mental issues to the point where she developed a fear of working for minimum wage. She went a long time with out working before my mom finally hooked her up with her current job.

I can go into further details with why I never became a successful business owner and how it relates to minimum wage. You can't get ahead working a minimum wage job end of statement. If you drop minimum wage employers will pay less and we will have a compounding problem. No one can get ahead as it is let alone if wage is dropped all together! We have enough poor people who depend on a shrinking welfare system. They wouldn't need welfare if they were being paid a livable wage to begin with.

Dropping minimum wage is the most asinine thing I've ever heard of. You've basically already said screw the poor people who's situations you have no knowledge of. They deserve being poor right?

[Aletheia]

Agreed Doorknob, there is intense laziness among the entry-level/minimum wage jobs, but could you really blame people for being apathetic? Hard work is rarely rewarded and advancement is nearly impossible. Couple that with nepotism, and you're stuck in a dead end job. There is a glass ceiling 10 feet thick when you're at the bottom.

I'm relieved I have a job that does appreciate all that I do, and a manager who does fight the uphill battle for me, but everyone gets so tired of fighting the bureaucracy. It's tedious, thankless, and often ends in failure - usually because of irrational reasons. If they can't reduce your wage, then they'll reduce your hours and hire more people - more people working fewer hours means less overtime pay. When people quit, the hours stay low and they just hire replacements.

The tactics are obvious, but the solutions are substantially more obscure. 

[Xerographica]

Dropping minimum wage is the most asinine thing I've ever heard of. You've basically already said screw the poor people who's situations you have no knowledge of. They deserve being poor right?

If the minimum wage isn't a problem... then neither are free-riders.

Let's try and visualize things...



Is this a better market?  Gabe (the gay) is paying Alex (the atheist) for a cake.  Isaac, who's wondering what to do with his life, is observing this exchange take place.  Because neither Alex nor Isaac are omniscient... they can't see how much Gabe values the cake.  All they can see is how much he pays for the cake.  Only Gabe knows that he values the cake a lot more than he's paying for it.

By sharing the wrong information, Gabe increases the chances that Isaac will do the wrong thing (not supply cakes).  Garbage in, Garbage out.



Is this a better market?  In this scenario Gabe is paying a lot more than he values the cake.  Gabe is lying again.  This increases the chances that Issac will do the wrong thing (supply cakes).  Garbage in, Garbage out.

X < Y = free-rider problem
X > Y = forced-rider problem

A minimum wage is an example of the forced-rider problem.

Let's think about water.  Is Isaac always going to value water equally?



In the Sahara... Isaac is suffering from a severe shortage of water (dehydration).  In Niagara... Isaac is suffering from a severe surplus of water (drowning).  Therefore, he values water very differently in these two very different circumstances...

Y1 > Y2

Whether it's water, cake, labor, a Netflix show or national defense... what we pay should accurately communicate our valuations.  This increases the chances that other people will do the right things.  Otherwise, we all end up with more of what we want less and less of what we want more.

Accurate information = treasure in, treasure out
Inaccurate information = garbage in, garbage out

Coincidentally, Alex Tabarrok recently shared some relevant thoughts in his review (Is Capitalism Making Us Stupid?) of Joseph Heath's new book Enlightenment 2.0...

Advertising may sometimes trick us into buying products that don’t serve our interests, but the more we are tricked the greater the incentive to become informed. In the market, we can act on information to improve our purchasing decisions. In politics, it doesn’t pay to be informed because as individuals we have nearly zero power to improve collective decisions. In the market, information is power. In politics, information is impotent.

Also...

Heath’s conservatism makes him unwilling to suggest radical ideas. But big problems often need radical solutions. Voting, for example, reduces the cost of ignorance and irrationality. Raise the cost and people become more informed and rational. When pollsters ask Democrats and Republicans factual questions such as did inflation fall during Reagan’s presidency or were weapons of mass destruction found in Iraq, they answer in a highly partisan manner. But partisan bias greatly diminishes when voters are told that they will be paid if they answer correctly. Betting is a more reliable guarantor of objectivity than voting. Or, as I once wrote, “A bet is a tax on bullshit.”

[Atheon]

And further, what you are proposing is what the Republican party wants.

Which is sufficient grounds for dismissal as BS.

[Aroura33]

Why do I feel like I'm reading complete gibberish when I read Xero's posts?  I really tried hard to understand that last one with the cartoons, but it makes no sense. He's drawing conclusions without anything except a thought experiment that makes NO SENSE to start with.

Anyway, I'll just share this here.  A Seattle company decides to raise their own minimum wage to 70k.
http://www.nytimes.com/2015/04/14/business/owner-of-gravity-payments-a-credit-card-processor-is-setting-a-new-minimum-wage-70000-a-year.html?_r=0
I guess he's just setting his employees up for failure, right Xero?

[Aletheia]

Xero, at the end of the day, the most logical way to increase the economy of the workforce is to cull the excess unskilled labourers. The most logical way in which to cull them is to remove resources from them in which there isn't any meaningful return - most specifically food, water, and healthcare. This will ensure the surplus of excess unskilled labourers are removed from the workforce, therefore shifting resources to other areas in which they are more beneficial. Rounding up the carcasses can be rather costly, not to mention a health hazard for the rest of the workforce. The best solution would be to round up the surplus unskilled labourers into one location which allows for a massive die off in one manageable area away from the rest of the community. Less workers will be needed for clean up and general maintenance of such an area. Introduce the use of labour-saving robots, whose cost may be high initially, but earn their keep by preventing the spread of disease, psychological damage, and creation of redundant jobs. Designers of these machines can be pulled from the skilled labour force and only a few general labour workers will be required for maintenance and upkeep of the machines.

Imagine how much more efficiently the Nazi's could've eradicated the "useless" segment of society if only they had a more automated process from collection of undesirables to disposal? Yes, they saved a little labour costs by having the Jews do much of the work, but they still had to feed the Jews and perfectly good German workers had to assist in management and labour, when they could've been allocated to more beneficial areas with robots serving in their place.

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[spoiler]

[/spoiler]
The reason why minimum wage cannot be dropped is because a lot of people will starve and die. America learned this during the depression. Economics is easy when you only focus on the numbers, it becomes substantially more complicated when you take into account the human element. A purely capitalistic society is built upon the death and destruction of others. That's why most capitalistic societies are tempered with socialist concepts. It's a balancing act between maintaining a budget and the value of human life.

[Aletheia]

A minimum wage is an example of the forced-rider problem.

Let's think about water.  Is Isaac always going to value water equally?



In the Sahara... Isaac is suffering from a severe shortage of water (dehydration).  In Niagara... Isaac is suffering from a severe surplus of water (drowning).  Therefore, he values water very differently in these two very different circumstances...

Minimum wage is not an example of a forced-rider problem, in that the value an average person has in their will to live is very high, barring mental distress that interferes with this valuation.

You are creating a straw man argument when you try to quantify the value of human life in a purely logical way. Human beings rarely value life in a purely logical way, and even less so in a purely financial way. Furthermore, devaluing human life can have a profoundly negative effect on an economy composed of human beings who are emotionally driven. In matters of self-interest you can convince society to devalue a person's life (such as in cases of murder, in which anyone risks personal harm should an individual remain in place). However, devaluing a person based on financial implications is seen as a risk of personal harm to the individuals who make up society and is not tolerated on an instinctual level. To do so risks eventual economic collapse and revolution.

Your view of economics cannot be free of the lessons history and human behaviour has to teach us. Failure to take that into account can lead to instability only unpredictable to the economist who didn't take into account human nature. Yes, we have greed and logic, but we also have empathy - which is what compels us to be cooperative enough to even have an economy.

Yes, we may value goods and services differently and these value are subject to change, but the value of human life on an individual level remains consistent. Societies that violate this succumb to eventual ruin.

I have already offered a possible solution to increasing the productive value of unskilled labour surplus , which you were happy to ignore. It is a longer process, but one more likely to increase the wealth and stability of a country in the long run. What you propose will cause immediate gains at the cost of long term stability.

[Xerographica]

The lessons of history?  The Great Leap Forward.  Millions died.  Why?  Inefficient allocation of resources.  Deng Xiaoping's economics reforms.  Millions lifted out of poverty.  Why?  Efficient allocation of resources. 

The efficient allocation of resources depends on accurate information.  Which thread in this forum is the most valuable?  Nobody knows.  Is this a problem?  Only if you care about the efficient allocation of resources. 

Let's say that taxpayers could choose where their taxes go.  Except for women.  Would this be a problem?  Why should we care about the valuations of women?  Why should we care about women's valuations of defense, or the environment or welfare? 

And if we don't care about women's valuation of public goods... then why should we care about their valuations of private goods?  Why should we care about women's valuations of clothes, music and computers? 

It's economically incoherent to think that the free-rider problem is a problem but that minimum wages are not a problem.  Both are problems because inaccurate information results in the inefficient allocation of resources. 

Preventing women from shopping in the private sector would result in the inefficient allocation of resources.  Preventing women from shopping in the public sector does result in the inefficient allocation of resources. 

Lying about your preferences results in the inefficient allocation of resources.  Lying about your valuations results in the inefficient allocation of resources. 

These things are all true because nobody is a mind a reader.  Orange farmers can't read your mind to determine how much you value oranges.  You have to give them this information.  How?  Communication.  Specifically, cash.  If you lie with your cash... then the supply of oranges will be wrong.  The supply of oranges will produce less value than it should.  Resources will be inefficiently allocated. 

[Fidel_Castronaut]

Like it was quoted from an undergraduate economics text book of supply and demand.

[doorknob]

"These things are all true because nobody is a mind a reader.  Orange farmers can't read your mind to determine how much you value oranges.  You have to give them this information.  How?  Communication.  Specifically, cash.  If you lie with your cash... then the supply of oranges will be wrong.  The supply of oranges will produce less value than it should.  Resources will be inefficiently allocated."

once again an example of you living in magical fairly land. Sure if we could read minds but we can't and i hope we never will. And who are you to judge how much any one values anything. Maybe those oranges are worth more to bob in his mind but in reality only worth a few dollars. So we should charge bob more than some other person? That is insane oranges are only worth what oranges are worth regardless of who you are selling too. Or are you saying only the rich should get to eat oranges? Because maybe bob thinks highly of oranges but can't afford oranges? Then what genius? Bob goes hungry is what. And that is where the problem starts.

We will have an influx of poor people who can't afford to live if what you are proposing to do would happen. You are insane! No one lives in the world you are imagining and honestly I"m kind of glad I don't want to be ripped off just because I like oranges more than bob does.