The Minimum Wage is a Bad Idea

Just some starting arguments:

Minimum wage kills apprenticeships, and people who were failed by the school system or a rough childhood who want to learn job skills, but don't have the cash for trade schools, or the grades for other schools. Trade schools can be more expensive and take longer then on the job training at even zero wages.

Minimum wage workers are younger and/or unskilled. They are usually entry level jobs, not meant to support a family.

It is a myth that wages are set by minimum wage. The vast majority of Americans do not set their salary by minimum wage. There are no skilled positions in America paying minimum wage. Wages are set by competition.

Kids hired at minimum wage are usually entering low skill jobs that have no associated training. They are clerks, bag boys etc... At a low enough wage, a worker can entice their employer to train them. Now, employers need a trained worker b/c the cost to train at the minimum wage is often prohibitive for skilled trades. For example, what do you think a kid starting out in the jewelry business lets say is worth per hour? No experience working with jewelry, but is taking a job with a local craftsman. She will cause many errors as she learns, and there is no guarantee she will stay at that company, the courts are hesitant to demand specific performance in these kinds of labor contracts. How much is her labor worth per hour?

Lot harder to keep up with a work requirement for welfare if you cant negotiate a relatively low wage etc...

This is all protectionist stuff the unions got in, and have been fighting for ever since. And why? Not a single member of their is paid minimum wage. To block out unskilled labor of course, reduce apprenticeships which they effectively banned in all the states they were able to get close shops.

The vast majority of economists agree it hurts the poor. States with higher minimum wage laws tend to have relatively higher unemployment among poor teens as well.

 

Some watching if you are interested:

[video=youtube;RUBK9_4OQIs]http://www.youtube.com/watch?v=RUBK9_4OQIs[/video]
[video=youtube;x6e8Pa6-IZU]http://www.youtube.com/watch?v=x6e8Pa6-IZU[/video]
[video=youtube;3ZDcMjz2hVk]http://www.youtube.com/watch?v=3ZDcMjz2hVk[/video]
[video=youtube;r4SIEl1j8e4]http://www.youtube.com/watch?v=r4SIEl1j8e4[/video]

 

- Walter Williams

 

Top of the morning to you, John.

Now then, enough of that Rand chick. Let's move on to something more contemporary, since it's a topic in DC at the moment: wage minimums.

The thing is, John, they're vital. No entrepreneur with an ounce of sense pays more for worker than they have to. Hell; even if they want to, they cannot, since their competitors surely will pay the least they can, and thus have a competitive price advantage. So without wage minimums, we'd simply have what Venezuela does: world's largest slums, which the locals there call favelas. And while the upper class in Venezuela has unimaginable wealth in comparison to typical Venezuelans, their wealth is a pittance compared to our richest citizens, whose businesses and investments thrive due to our vast and financially-able middle class, albeit, that's shrinking at present, and has been shrinking most of the last one-third century. We're falling behind in wages, compared to other modern Western Economies, and it ain't for being lazy, since we just passed up Japan, whose workers previously worked the most hours on average, but we just passed them up. So, in short, working more and making less, on average, reducing the wealth-creating ability of the Great (formerly) American Middle Class.

And wage minimums are to blame. Here's why:

It's an anchor, John. In psychology the term is "anchor-bias." For example, if we have it in our head that a burger is $5, we will not move too far in one direction or the other. $5 is the anchor. When buying human labor, the same applies. FMW is the anchor, which if too low, drags all other wages down with it. So by opposing wage minimums, as Rightie Retards do in knee-jerk fashion utterly ignorant of the effect on their wages, even if they think they're immune (make more than FMW), still screws you me and everyone else, since the anchor is pulling us all down.

Had the minimum wage paced productivity, as is had up until about 1980, today it would be near $20, in today's Dollars. So a high achiever like yourself, who makes perhaps 150% or double the wage minimum, would be at $30 to $40 an hour, and not $10 to $15 an hour. And since you'd buy more stuff with the more money, your consumption would help drive us nearer to full employment, which should be the ultimate -- and only -- goal of wage minimums.

So policy makers, should not be debating retarded stuff like it'll raise prices and unemployment (it never has; and it in fact lowers unemployment, due to the higher level of buying ... and employers DO NOT hire the workers they can afford; they only hire the workers they need. Thus, with more business activity, they'll increase staff. They'll have to to move their enterprise forward.) What policy makers should do is: use the wage minimum to drive wages to an optimal level; create the consumption required to move us nearer to full employment. No more, no less.

Simple as that.

 

In the debate about minimum wage remember that Baxter is waiting in the wings.

http://www.rethinkrobotics.com/index.php/products/baxter/

And Burgeon, too.

http://www.geekologie.com/2012/12/burger-robot-can-crank-out-360-bph-burge.php

And this one.

http://www.youtube.com/watch?v=2hxje6I9UPw

Every time the minimum wage increases, rapidly improving automation makes more economic sense.

 

Good to see you. I am between answering customer emails right now , so I will just jab a bit and then dig into the argument later, I like that you didn't go with any of the normal fallacy arguments, and went with something more complex.

If all wages were lower like you suggest, wouldn't our products be more attractive to foreign buyers thereby increasing employment? How does anchoring our costs higher make us globally competitive?

What businesses pay a worker more then they produce because of the minimum wage?

 

Some, indeed. But not the bulk of our workforce, which is services (others of us spending our paychecks, creating jobs that cannot be out-sourced). And as you know, services is our largest growing job sector. So we must create policies with that in mind, and not destroy consumption / jobs by paying crap wages to 60% of our workers, in service of making a few extra manufacturing job, which will also be dragged down by the anchor that lower wages creates. It's just stupid, and increases unemployment, in aggregate.

Bear in mind, John, that globalization is only about 17% of our economy, and the bulk of it is Capital flow and not goods and services. It's a pittance.

Moreover, rather than competing at the low end, we can compete at the higher end. Where wages are higher, such as Europe, the goods the average consumer, there, buys, are of high quality, making locally-manufactured products preferred to the cheap Asian-made products our workers can afford, principally from China. So instead of cheap GE refers (private labeled Chinese junk) they buy Electolux refers, which I can tell you from personal experience, is way, way better than the crap GE puts their label on.

 

The elimination of the minimum wage would be a shot in the arm for unions; organizing would increase as people would find that bargaining collectively for wages and benefits (something many of them do not currently enjoy) would place them in a better spot financially.

 

Service can be automated and reduced. Look at WalMart for examples of both. Self Checkout etc.. Service jobs today make more then the bad manufacturing jobs overseas by the way, (as valued internationally), no one wants to bring that up, but these days it is worth far more to be in sales of junk then making it. People who do service well can make a living for themselves if they also know to ask for raises or leave for the best retailers that put a premium on service.

In either event, the ones we have to watch for you are describing are low skill jobs that are usually above minimum wage , not determined by it, but come with no or little training for advancement. What do you say about the argument we have less opportunities for underprivileged kids b/c they have no access to apprenticeships? If you agree that more can be trained in skill professions - meat cutter, plumber, electrician, welder etc... many which cannot be outsourced.

 

Not at all, they fight for higher minimums tooth and nail. No union anything gets minimum wage, but they are worried that people will enter their trade, and be available as competition. That is why unions support minimum wage, to keep other Americans unskilled and relatively poorer. Unions leaders are horrible people.

 

Europe has slipped in PPP b/c of all their labor rules. You can buy anything you want in America, people choose crappy stuff because they value other things more then a high quality version of that thing. Up to them to decide what they want, not you.

 

1. Work before play. So, indeed, take all the time you need.

2. Because we're not China, John. Nor do we want to be like China, with, roughly 10% of its population at what we'd consider middle class.

3. None that are still in business, John. But worry not; our worker productivity in 1980 supported our prevailing wages at the time. And the American worker has been more productive since then, to a very great extent, while wages have shrunk in real Dollars. Productivity is not the problem, since it's very high in America. Wages are the problem, since they're way too low and have not paced worker productivity for over one-third century. We gotta fix that, which wage minimums does fix, if well implemented (scaled to the level needed to drive us nearer to full employment).

 

Idk, I've worked union all my working career and my experience has been the complete opposite. We go out and organize the unorganized explaining the benefits of unionizing. True, no on in my union makes minimum wage; in fact most of them make 5-6x the minimum wage not including benefits and job security as well. If people want to improve their working conditions, that's great. If not, then all you can do is to wish them good luck. People certainly have an unfettered right to work for less if they want.

 

Actually because of ours. We drive the world, John. And just as Europe followed our lead during and after the New Deal, they're being forced to follow our lead into the gutter. Bear in mind, neither will they ever become China, any more than we can. But they see us, the world's largest consumer market, and need a piece of us way more than we need a piece of them; and thus they have to adjust to the foolishness we allow to persist and worsen in our society.

 

A minimum wage is there to provide at least a basic standard of living. With life being tough enough already for the low paid, how do you suggest they survive on even less?

 

min wage is not a living wage, it's just the min a employer can hire someone for

 

1. Indeed, I get a few minutes between each new one that comes in though.
2. Every country grows from somewhere, lets now point to a difference with a poor country and say that is the cause of the difference. If China made wages at 10 an hour, would they be richer and better off or losing market share and growing unemployment?
3. Agreed! So minimum wage does not increase wages, it just makes certain economic activity below a certain value illegal.

American workers increasing their productivity are not the issue, minimum wage means nothing to them. It is the people and the economic activities, (like apprenticeships), valued below minimum wage that is important. What activities below minimum wage currently illegal do you disagree with, or what people do you think would be better unemployed then working below minimum wage?

Are you saying if wages were higher more labor would be purchased here instead of overseas?

 

Sure. Self checkout at the grocery store. Better tools for handling inventory, or bringing carts back into the store. Banks with few tellers, since we "bank" online or at ATMs. But that's happening, and will happen, regardless of the wage minimum. And if services jobs could be reduced with automation, they would be being reduced, right now. But they're not; they're exploding, and indeed, are the largest source of new job creation in the private sector.

 

Welfare is there to supply a basic standard of living. Minimum wages does not raise salaries, it just makes some people unemployable and some activities illegal.

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You just rattled off a bunch of automation and say it isn't happening?

Agreed service sector is expanding, but not b/c of a higher minimum wage. It is expanding b/c selling junk in the US is worth more then making it overseas.

 

That'll only get worse when middle class consumption drops, making for higher unemployment, still.

Figure it out John: we have high unemployment, so it's buyer's market for human labor. No McDonald's franchisee is going to hire your inexperienced and pimple-faced kid when more experienced adults are now vying for those jobs. But pay those adults (and some kids) a decent wage, and they'll consume at a level needed to get unemployment low to the point, that now workers are more scarce, and thus your inexperienced and pimple-faced kid is a peach, and snapped up quickly, by any fast food joint in town. So he can tune his little Japanese car, helping create some extra business for the local performance auto parts store (where the business genius that opened the store, made is all on his/her own!!! LOL).

It all goes round John, and will come back around, even to folks who sell stuff online.

 

How high is teen unemployment again in these countries?

The problem with minimum wage laws is they are too broad, cover too much. Where they make sense s when they are so low to even matter. A $1 minimum wage means nothing. If you have to pay what the President wants, after taxes and etc... $400 + a week to train someone full time for a month or two it is really obvious you are going to look to outsource to a supplier already filling that supply (whether here or abroad), or for skilled people. That is whhy all the classifieds say "Must have experience". You are in the sign business, I have no clue how that works. If I walked into your shop and said "I want to start cutting up some signs and learn how to use a machine, I am going to need like an indefinite amount of time from you or other trained staff to teach me how to do it. Then I may or may not leave as I please. " How much would my labor be worth? You would first try to size me up to see if I could be a fast learner right? Well that is a job skill, what about a poor kid who is obviously poorly educated? How much more is the education is he getting then then the minimum wage? That is my point. In my line of work we have to train people, there are less then 100 in the fishery so there isn't much training for it. I will definitely give more time to people until they refuse hours before training new staff. If I could train them for free, I would take more risks with lower skilled hires wouldn't you?

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How is middle class consumption going to drop? By definition they do not make minimum wage.

Oh trust me I know, I can tell from my sales when the stock market had a bad day in the beginning of the recession. I am in a middle class luxury business.

 

as a society we should offer some assistance to anyone living on their own, working 40 hours a week making less then a living wage

 

Try to stay with me: I said it is happening, and will happen, whether we do or do not raise the wage minimum. And yet, more jobs are being created in services, despite it. There's only so much that automation can do. Warm bodies are needed for everything else, which if they pay a decent wage, it gets spent driving more hiring. None too complicated, is it John?

 

Well first I don't mind an income support like the Earned Income Tax Credit, or even better a Negative Income Tax that solves the problem for the worker's end. Would you agree these mechanisms at least solve the problems at that end? I will agree that they would exist for many without them.

McDonalds pays more then minimum wage. But lets say they did, those kids are becoming skilled, McDonalds has very high turnover, they have work experience, and are more valuable hires to the next company they apply for. People who stay their forever tend to go into management, and they do fairly well and making a living even if it is not a killing. In either way, it is a stepping stone to better things, the more you ratchet it up in costs, the more automation (MCDonalds kitchens are highly automated today compared to those just a decade ago when my friends worked there), and the less training occurs.

 

1. Not high, since they have free college. Kids are in school and adults are making a decent wage, and not having to pay for their kid's college. Imagine that.

2. Middle class consumption already is dropping!!!! Where ya been, John? Did you start a Web enterprise not knowing the market? Here's a real bellwether: Procter & Gamble and Colgate-Palmolive. Mainstream consumer products, which are principally need-based items, and not luxury or want items. Both have lower sales in the US, DESPITE growing population. They're having to make up sales in foreign markets.