Not everyone is expecting a living wage though. Case in point - I have a family member who's making less than minimum wage (which alone would be barely sufficient to survive), but when she combines this with her husband's income, she's not living terribly bad. If her boss was forced to pay minimum wage and adhere to all other laws, he'd likely close the business and she (my family member) would end up being worse off. The reason why he'd close the business is that it's a shitty clothes shop where the increases employee costs would eat a lot of his (meager) profits.
> he'd likely close the business and she (my family member) would end up being worse off.
This is exactly the train of thought I think is incorrect: Businesses that can't pay workers a living wage should have to shut down. Workers (as a collective, and in the long run - not individuals in the short term obviously) are better off.
The idea is that businesses should compete on efficiency, not lower wages. When a business that can't pay a living wage closes, another can take its place that hopefully can.
> she combines this with her husband's income
This is another reason for having living wages: this persons low wage makes her economically dependent on another person. This might be a happy marriage but what about all marriages that aren't? Living wages means people can leave destructive and abusive relationships too.
> The idea is that businesses should compete on efficiency, not lower wages. When a business that can't pay a living wage closes, another can take its place that hopefully can.
In this case, these shops are located in a sort-of marketplace, where there are dozens of shops selling very similar goods. They all effectively share the same customer base and they are all barely functioning, and are only doing that thanks to avoiding all sorts of laws. If they started paying minimum wage, some of them would close, which would increase profits for the rest, allowing them to stay in business. From the workers' perspective though, it would create a bimodal distribution where employees of surviving shops are better off, while the rest is fired. I'm not sure if that's a positive outcome.
It would indeed suck for those folks that get laid off - temporarily, at least. But those same folks will likely find another job somewhere - and as a bonus, that job will pay the higher wage. They can work less hours and be in the same situation as before or work the same amount and be a bit better off.
If the US had an actual safety net, those laid off workers wouldn't be so bad off either.
If you agree that the minimum wage would likely mean that there would be fewer businesses, and therefore fewer jobs, then isn't it hard to also believe that the people who lost their jobs would likely find other work? Isn't it also likely that at least some of them will become permanently unemployed?
Sure, but some of that is normal. Economic downturn? A few folks get permanent unemployment. Big enough place closes? Sure, a few get permanently unemployed. I don't think there is a way to stop that, nor do I really see that as an issue so long as it is a minority of folks. It definitely isn't something special to minimum wage hikes in any case.
In fact, I'd argue that even then we are better off. Say you have 20 low-paying jobs, the sort which means you are still eligible for food stamps and other tax-payer funded assistance. All 20 get laid off. 13 find full time work at the new minimum wage, so they no longer need assistence. Four find part-time work, making nearly what they did before with fewer hours. They still need assistance, but slightly less since they don't need as much child care. One makes less money. The other two are unemployed forever, requiring assistance. I'm gonna guess this is a win in the end.
> From the workers' perspective though, it would create a bimodal distribution where employees of surviving shops are better off, while the rest is fired. I'm not sure if that's a positive outcome
Actually ending up with a positive outcome requires more reform than just minimum wage - which may actually be negative (on its own, and short term).
There has to be good unemployment benefits for all, you have to have good employment security so hours can't be cut and so on and so forth. The idea is to have such a strong labor collective that driving bad employers out of business is a sustainable strategy. Organization level needs to be pretty high, say at least 50% for unions to have any real power here.
A minimum wage seems like an attempt to compensate for weak labor collectives and the lack of a safety net. Sweden, for example, has no minimum wage, but a combination of strong unions/labor collectives and decent unemployment benefits manage to keep wages up anyway.
My concern minimum wage wise is simply that firms seem to use social programs to subsidise wages, rather than a minimum wage I'd like to see the tax write off removed for wages below the cost of living. Below the poverty line I'd like to see employers pick up the entire tax bill of their workers.
> he'd likely close the business and she (my family member) would end up being worse off.
>>This is exactly the train of thought I think is incorrect: Businesses that can't pay workers a living wage should have to shut down.
So are you saying that no business should ever start or get off the ground because they don't have all the funding they need to do so (including paying proper wages)? Many of these minimum wage jobs were not suppose to be a full-time career path. These jobs were intended for people getting their first job, people in retirement or those seeking just a little bit of extra cash.
Long answer: Yes, and it's an acceptable drawback because being allowed to underpay worker is an unacceptable competitive edge. If one wants exceptions it's better to do with directed efforts such as lower payroll taxes for small or new companies.
So I guess I should just give up and stop working on anything since I don't get paid for what I do and it might be "..an unacceptable competitive edge".
> Businesses that can't pay workers a living wage should have to shut down.
This should emerge as a natural consequence of economic reality. If workers can't earn a living from a business, they are supposed to either resign or die (per definition). And the business would have to either increase its wages or shut down.
There should be no need to regulate that with laws.
There is no need to regulate this with laws if the parties of the labor market are of comparable strength (which is the definition of a functioning market - that the parties involved have some kind of parity).
In most parts of the US labor market there is no such power parity between employees and employers - and minimum wage laws are just trying to band aid the problem instead of addressing the root cause.
I doubt the US will see scandinavian levels of worker organization any time soon, but a reasonable fix would be to have a social safety network that is so strong that it competes with employment. A non time-limited unemployment insurance that paid a reasonable fraction of the minimum wage (e.g. 50-75%) would likely have a significant effect on the bargaining position of workers.
Why would we be worse off if the shop closed? I can imagine gutting minimum wage in a basic income works but even then I think we'd need workplace safety regulations and so on.
Minimal wage is nothing but an instance of price control[1] and "Although price controls are sometimes used by governments, economists usually agree that price controls don't accomplish what they are intended to do and are generally to be avoided."
Yup. So having minimum wages to ensure people can make a living wage is exactly the same as having to have price fixing for food to ensure people can eat. It's a knee jerk response to a fundamental problem (that workers make too little in relation to price levels).
The problem with the US discourse on the subject is that it's a debate for/against higher minimum wages rather than a debate of "what regulations need to change so that the minimum wage without regulation is a livable wage".
Would you rather have price controls or a subsidy? People that support themselves on jobs that pay less than minimum wage generally need support from the state to live. So a minimum wage is basically a refusal by the state to subsidize business.
Well, you could also look at it as a minimum wage being the government (trying to) force one group of people to subsidize poor people, namely, business owners. I'd much rather the government helps poor people directly, both so that it's on everyone and not only business owners, but also because it doesn't tamper with the market price, which causes all sorts of problems.
That's the point, it certainly does tamper with the market price. If somebody is receiving EITC & food stamps, they may be willing to accept a job paying $2 an hour because that $2 an hour will allow them to buy a little bit of meat to go with their rice & beans.
Without EITC & food stamps and other assistance $2/hour wouldn't cover food & rent even working 2 jobs, so they'd be forced to turn those jobs and look elsewhere, most likely to crime.
EITC & food stamps to the employed are a subsidy for the employer and distort the true market price for labour. Perhaps less than a minimum wage does.
Exactly. It's not lethal because of state & community support. But state support for the employed is just a subsidy for the employer. It's better to have them be fully unemployed on state support so they can look for better jobs, improve their education or start a micro-business.
That's exactly what the EITC is. The main benefit is that it's a direct subsidy by the government instead of burdening businesses with paying people above what a free market demands.
From a political standpoint. It's also a lot easier for people to support. You have to work to receive it and it's been popular in both Republican and Democratic administrations. I can't speak for the current one. I don't think Trump has any core set of beliefs.
Over 60% of government benefits go to the employed. Walmart has built a whole business model around this, giving workers information on collecting government benefits, which is essentially a huge government subsidy for Walmart and similar businesses.