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Why do some think abolishing minimum wage is good?

Strelok

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I see it as a means of restricting employers from employing people at disgustingly low pay where the pay does not come close to their labour.

It might create more job spots but they would be lower income on average. Wouldn't that thereby reduce the motive to get off of welfare?
 
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drz-400

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I see it as a means of restricting employers from employing people at disgustingly low pay where the pay does not come close to their labour.

It might create more job spots but they would be lower income on average. Wouldn't that thereby reduce the motive to get off of welfare?
There are many positions to take regarding the minimum wage. The most common argument against it assumes that the labor market is a perfectly competitive market, and the minimum wage is effectively a binding price floor. This does not allow the market clearing wage to be reached and results in a surplus of labor (unemployment). In a perfectly competitive market, a binding price floor creates other inefficiences such as overly high quality products (like a college grad working at mcdonalds), and also allows for some discrimination such as favoritism when employers are hiring since it creates a surplus and the market can no longer effectively ration the jobs in the labor market through the price.
 

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Well I suppose my argument would be, if you agree with a national minimum wage than you arent aloud to complain about unemployment. America cannot have industries that produce cheap products that are able to compete with foreign markets. (Lets use pencils for example) If a pencil company hires 100 Americans to produce pencils cheaply (under minimum wage) wouldnt that be better than the company not being able to turn a profit using a US factory and shutting its doors (in turn firing the 100 workers), moving to "China" and slow-boating the pencils to America.....
 

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Labor is a commodity like any other. The government imposing price controls on commodities does not change what those commodities are actually worth, nor how much businesses can or will pay for those commodities. All the minimum wage does is deprive people of jobs and raise the costs of other goods and services. In other words, it makes poor people poorer.
 

VonDutch

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Labor is a commodity like any other. The government imposing price controls on commodities does not change what those commodities are actually worth, nor how much businesses can or will pay for those commodities. All the minimum wage does is deprive people of jobs and raise the costs of other goods and services. In other words, it makes poor people poorer.
Nicely put, and I fully agree.
 

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Price floors create deadweight loss, which decreases efficiency. Besides, I have no problem with people actually being paid what they're worth. It's not like employers can just charge whatever they want, and expect people to flood the offices with applications to work for 2 dollars an hour. An individual's acceptable wage should, and usually does, compare to a living standard. Do you think you're going to find people making 7 dollars an hour in Los Angeles or New York City? Nope.

Minimum wage is just a Democratic political tool to garner votes from the lazy and uneducated.
 

phattonez

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If all cars had a minimum price of $20,000, then we wouldn't see Toyotas, Hyundais, or used cars. It would be illegal to produce them and sell them for a good price. Selling them for $20,000 would mean much less would be available (diminishing marginal productivity and such). If you have to spend that much, might as well get something good. In the same way, if you create a minimum wage, people of low skill sets would simply not be hired. They're not worth the wage, so why would a company take a loss?
 

Kushinator

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Labor is a commodity like any other. The government imposing price controls on commodities does not change what those commodities are actually worth, nor how much businesses can or will pay for those commodities. All the minimum wage does is deprive people of jobs and raise the costs of other goods and services. In other words, it makes poor people poorer.
Not quite.

Demand for labor is based on productivity and expectations. As DRZ stated, if you assume a perfectly competitive labor market (sheer fantasy at the lower wage bound), then maybe you have an argument. Perfect competition is a textbook tool used to take highly complex concepts to a more general realm.

A minimum wage actually induces gains in productivity from the standpoint of capital and human capital.

The most basic analogy is the disappearance of full service gas stations. From an opportunity cost perspective and within the context of an increasing minimum wage, it is more profitable to invest in capital intensive expansion (convenience store, carbonated soda machines) than to offer labor intensive services (full service gas).
 

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Ok, something is not making sense to me here.

Lets say that in society XYZ, the minimum life expense (barring no major accidents, medical issues, or other big life changing things) is $200 a week in the local currency. Person X gets a job at $5 an hour, because that is the minimum wage and he is able to live a basic lifestyle.

Tomorrow, his place of employment closes down (lets say the owner dies and noone wants to buy the business) and there has been employment law changes that remove any minimum wage. Person X is now only able to get a job at $3 an hour since that's what employers now offer for the job he is skilled to do. He has no choice but to either take it or starve (which he will eventually do anyway at that wage). (Planet XYZ is a libertarian model world, so there is no assistance for the poor except for a few charities that don't really do anything in a large enough scale to make a real difference, like we had in the 1920s or previously)

I fail to see how this would make people less poor.
 

Kushinator

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Price floors create deadweight loss, which decreases efficiency. Besides, I have no problem with people actually being paid what they're worth. It's not like employers can just charge whatever they want, and expect people to flood the offices with applications to work for 2 dollars an hour. An individual's acceptable wage should, and usually does, compare to a living standard. Do you think you're going to find people making 7 dollars an hour in Los Angeles or New York City? Nope.

Minimum wage is just a Democratic political tool to garner votes from the lazy and uneducated.
Nope! Although perfect competition does exist in labor markets (sub contracting) where compensation is entirely production based, it is not in the lower income demographic.
 

Kushinator

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Also, minimum wage only impacts a very tiny portion of the whole labor market. The effects on price and demand are negligible if non existent.
 

phattonez

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Goldenboy I've had this argument with you already and you keep advancing the same arguments that should have been debunked when I brought up the Broken Window fallacy. Remember you mentioned elevator boys being put out of work by some law, forcing new buildings to provide automatic elevators? You thought that this plan was genius because it forced the elevator boys to find other jobs (probably producing for some other human want). However, I mentioned that the reason elevator boys were used was because they were cheaper than the automatics. I then speculated that this would cause a shortage of housing because this would mean that building a new complex would require a greater investment, hence less construction. So I ventured the idea that it was better for the elevator boys to be working there than to do other things just by the mere fact that they were doing that. It was the best possible job for them at the time. Furthermore, it made buildings that much cheaper so that housing was cheaper for everyone. This makes people that much richer because they can use that money for other goods that suit them more.

This is the same with full service gas stations. The people working there were at the best possible job they could get, otherwise they wouldn't be there. If it was more profitable to have those capital investments you alluded to, then why weren't entrepreneurs doing that? After all, if the investment was worth it, wouldn't their profit have been higher than the full service gas stations? It seems that most people valued the full service and its price more than the capital investments and their price.

Minimum wage only increase productivity when you blind your eyes to the cuts in productivity it causes. Notice that in all of this I did not even mention the fact that minimum wage certainly does cause unemployment. Even without this factor you already have a loss. The Broken Window Fallacy destroys the myth that a minimum wage is a good thing.

Also, you don't need perfect competition for this to be true. Not in the slightest. People will always do what satifies them most. You don't need perfect competition for that; it's a basic tenet of human action.
 

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Ok, something is not making sense to me here.

Lets say that in society XYZ, the minimum life expense (barring no major accidents, medical issues, or other big life changing things) is $200 a week in the local currency. Person X gets a job at $5 an hour, because that is the minimum wage and he is able to live a basic lifestyle.

Tomorrow, his place of employment closes down (lets say the owner dies and noone wants to buy the business) and there has been employment law changes that remove any minimum wage. Person X is now only able to get a job at $3 an hour since that's what employers now offer for the job he is skilled to do. He has no choice but to either take it or starve (which he will eventually do anyway at that wage). (Planet XYZ is a libertarian model world, so there is no assistance for the poor except for a few charities that don't really do anything in a large enough scale to make a real difference, like we had in the 1920s or previously)

I fail to see how this would make people less poor.
Because instead of making $3 an hour they would earn $0 an hour. Of course it makes them poorer.
 

phattonez

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Also, minimum wage only impacts a very tiny portion of the whole labor market. The effects on price and demand are negligible if non existent.
Sure, when you ignore the cost to production which affects all of us.
 

tacomancer

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Because instead of making $3 an hour they would earn $0 an hour. Of course it makes them poorer.
Maybe, maybe not. It could be a low paying job that is essential to the operation of a business, yet is low skilled and easy to find people for (like being a cashier). The market might price it at $3, but the person got $5 because that is what is legal.
 

Kushinator

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Goldenboy I've had this argument with you already and you keep advancing the same arguments that should have been debunked when I brought up the Broken Window fallacy. Remember you mentioned elevator boys being put out of work by some law, forcing new buildings to provide automatic elevators? You thought that this plan was genius because it forced the elevator boys to find other jobs (probably producing for some other human want). However, I mentioned that the reason elevator boys were used was because they were cheaper than the automatics. I then speculated that this would cause a shortage of housing because this would mean that building a new complex would require a greater investment, hence less construction. So I ventured the idea that it was better for the elevator boys to be working there than to do other things just by the mere fact that they were doing that. It was the best possible job for them at the time. Furthermore, it made buildings that much cheaper so that housing was cheaper for everyone. This makes people that much richer because they can use that money for other goods that suit them more.
Static analysis to explain a dynamic effect fails! Not only are capital intensive goods created, designed, etc..., but other aspects of labor are made necessary to create the plants that build the machines. For future reference, there is a great difference between static and dynamic cost structures.

Lol, if you could identify an income effect from the absence of the mw, the debate would have ended generations ago.

This is the same with full service gas stations. The people working there were at the best possible job they could get, otherwise they wouldn't be there. If it was more profitable to have those capital investments you alluded to, then why weren't entrepreneurs doing that? After all, if the investment was worth it, wouldn't their profit have been higher than the full service gas stations? It seems that most people valued the full service and its price more than the capital investments and their price.
Capital requires investment, which is is not anywhere near the risk adversity of say low wage labor.

Minimum wage only increase productivity when you blind your eyes to the cuts in productivity it causes. Notice that in all of this I did not even mention the fact that minimum wage certainly does cause unemployment. Even without this factor you already have a loss. The Broken Window Fallacy destroys the myth that a minimum wage is a good thing.
News flash: it is actually cheaper to produce labor intensive goods in a high cost of labor country than say China. Why?

Also, you don't need perfect competition for this to be true. Not in the slightest. People will always do what satifies them most. You don't need perfect competition for that; it's a basic tenet of human action.
Still harping about the rational being? Come back when you have caught up with the times.
 
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LaMidRighter

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Labor is a commodity like any other. The government imposing price controls on commodities does not change what those commodities are actually worth, nor how much businesses can or will pay for those commodities. All the minimum wage does is deprive people of jobs and raise the costs of other goods and services. In other words, it makes poor people poorer.
I have nothing to add to this, you nailed it.
 

Kushinator

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Sure, when you ignore the cost to production which affects all of us.
Inflation entirely and everywhere a monetary phenomenon. It is productivity that keeps prices in check, not the other way around.
 

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I see it as a means of restricting employers from employing people at disgustingly low pay where the pay does not come close to their labour.

It might create more job spots but they would be lower income on average. Wouldn't that thereby reduce the motive to get off of welfare?
This is provided that the market is perfect... it aint... far far from it.
 

phattonez

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Inflation entirely and everywhere a monetary phenomenon. It is productivity that keeps prices in check, not the other way around.
I didn't say inflation, did I? Minimum wage will give you less production, there's no way around that.
 

phattonez

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Static analysis to explain a dynamic effect fails! Not only are capital intensive goods created, designed, etc..., but other aspects of labor are made necessary to create the plants that build the machines. For future reference, there is a great difference between static and dynamic cost structures.

Lol, if you could identify an income effect from the absence of the mw, the debate would have ended generations ago.
So what exactly is wrong with the analysis. Your reference to broad difference between dynamic and static analysis means nothing unless you can prove that the static analysis was wrong.

Capital requires investment, which is is not anywhere near the risk adversity of say low wage labor.
But if it was profitable then entrepreneurs would have taken the risk. That's what entrepreneurs do. Just because there was more risk does not mean that it never would have been done. Think of all the risk that entrepreneurs put into building anything.

News flash: it is actually cheaper to produce labor intensive goods in a high cost of labor country than say China. Why?
Why are you ignoring the Broken Window Fallacy with this red herring?

Still harping about the rational being? Come back when you have caught up with the times.
People don't do the things that are most profitable? People don't do the things that are best for them? What world are you living in?
 

drz-400

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Why are you ignoring the Broken Window Fallacy with this red herring?
Stating that US labor is more productive than the lower paid chinese labor is not a red herring. It proves your notion that the minimum wage destroys productivity to be false, which makes sense. What three things contribute to long term economic growth (aka an increase in total factor productivity)? Physical Capital, human capital, and technology. I believe goldenboy cited 2 of these in his discussion of the effects of the minimum wage.
 

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Stating that US labor is more productive than the lower paid chinese labor is not a red herring. It proves your notion that the minimum wage destroys productivity to be false, which makes sense.
No, it doesn't. Minimum wage is not the only difference between China and the US. Just because we are more productive with a minimum wage does not mean that minimum wage has no effect on productivity. I mean, I could easily say that we are productive despite the minimum wage. So why are we so productive? Access to capital, education, etc.

What three things contribute to long term economic growth (aka an increase in total factor productivity)? Physical Capital, human capital, and technology. I believe goldenboy cited 2 of these in his discussion of the effects of the minimum wage.
Minimum wage puts people out of work, so that means there is less savings. This decreases physical capital and human capital. Does it increase technology? Maybe in some areas, but it decreases in others (you'll get more automatic elevators, but you'll have people spending less in those other industries now because housing is more expensive, so those industries will see lower technological improvement).

So like I said, we're productive despite it, not because of it.
 

Kushinator

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No, it doesn't. Minimum wage is not the only difference between China and the US. Just because we are more productive with a minimum wage does not mean that minimum wage has no effect on productivity.
It does have an effect on productivity. Research shirking and labor turnover rates, and how they correspond to wages; then get back. :lol:

I mean, I could easily say that we are productive despite the minimum wage. So why are we so productive? Access to capital, education, etc.
So the absence of a wage floor does not encourage the utilization of resources to low skilled labor? Fascinating!

Minimum wage puts people out of work, so that means there is less savings.
At the low end of wages, savings is (for the most part) non exist ant.

This decreases physical capital and human capital. Does it increase technology? Maybe in some areas, but it decreases in others (you'll get more automatic elevators, but you'll have people spending less in those other industries now because housing is more expensive, so those industries will see lower technological improvement).
So let me get this straight; housing is more expensive due to gains in productivity and efficiency? Again, fascinating.

So like I said, we're productive despite it, not because of it.
Nobody said we were productive because of a minimum wage. Up to a certain parameter, it helps induce capital investment at the expense of low skilled, low wage labor. Using a human being as opposed to a machine or a skilled human being achieves efficiency?
 

phattonez

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It does have an effect on productivity. Research shirking and labor turnover rates, and how they correspond to wages; then get back. :lol:
This is unrelated to a discussion of minimum wage.

So the absence of a wage floor does not encourage the utilization of resources to low skilled labor? Fascinating!
Is that what I said?

At the low end of wages, savings is (for the most part) non exist ant.
The more you earn, the more you save. So better to earn something than to earn nothing.

So let me get this straight; housing is more expensive due to gains in productivity and efficiency? Again, fascinating.
Housing was forced to be more expensive in the example you cited.

Nobody said we were productive because of a minimum wage. Up to a certain parameter, it helps induce capital investment at the expense of low skilled, low wage labor. Using a human being as opposed to a machine or a skilled human being achieves efficiency?
Since when were all capital investments worth it? How do you determine whether capital investment or human investment is more productive if you outlaw the latter? Why is it that you don't allow cost to be compared here?

All of your views are still misguided because you're only looking at certian things and ignoring everything else. Some elevator boys got new jobs. Others did nothing. Housing became more expensive because automatic elevators are more expensive than elevator boys. This means that the people buying the housing have less money to spend on other things, so investment in those areas decreases. Furthermore, some people lose access to housing because housing has become more expensive. Who are you to say that the capital invesment is worth it when you have no way to prove this? Cost-benefit analysis in this regard was outlawed because the other option was made illegal. The poor who can't afford it lose that housing (so they must get a less desirable option), the rich who can afford it have less to spend on other things. The elevator boys now must go to jobs that are less desirable (because why would you stay at a job when you can get something that is more desirable)?
 
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