People whose labor is worth less than the minimum wage become unemployable. Being unemployed means you can’t acquire skills or experience and is bad for your mental health and social attachment.
If you want to look at the literature you can start with Card and Krueger, which shows minimal effects for a small minimum wage discontinuity, I believe on the NJ/NY border. The Seattle minimum wage study showed a reduction in hours and benefits and reduced likelihood of new entrants to the labor market. It’s an exciting example of people looking really hard for ways to confirm their priors on both sides.
Or you can look at Europe. Greater employment protections raise the price of employing someone leading to greater unemployment. Minimum wages do the same thing more explicitly. Businesses buy less of things that are more expensive.
Minimum wage may have some complexities to be played out and examined, but to go back to the parent, the net harm here seems to be minimal at best, if not helpful over harmful, quite unlike how most feel about eugenics. That comparison, while criticizing the moral compass of economists generally, is quite something.
Is that article accurate? My understanding was that Seattle commissioned a multi-year study, and then when the results didn't go their way, quickly rushed a study out the door that said what they wanted. I got this from Marginal Revolution, and I can't find the article, but here is the actual study https://evans.uw.edu/policy-impact/minimum-wage-study and here is an MR article summarising the report: https://marginalrevolution.com/marginalrevolution/2017/06/se...
The first two points from MR:
> – The numbers of hours worked by low-wage workers fell by 3.5 million hours per quarter. This was reflected both in thousands of job losses and reductions in hours worked by those who retained their jobs.
> – The losses were so dramatic that this increase “reduced income paid to low-wage employees of single-location Seattle businesses by roughly $120 million on an annual basis.”
> My understanding was that Seattle commissioned a multi-year study, and then when the results didn't go their way, quickly rushed a study out the door that said what they wanted.
Do you have any source for that? Because the same author sets are on both studies. The article I linked to is directly criticizing the study you linked to (and also directly links to it).
Admittedly I am not a field expert and I haven't dived into the weeds on these studies. But my points I think aren't reliant on these details. The are simply:
1. There is much debate over if minimum wage laws or even specific implementations do more good or harm, which would seem contrary to the parent appearing to try to claim the harms as facts.
2. All of this seems to make the claim that the harm of eugenics is equal to minimum wage quite egregious.
I'm not trying to start a flame war over the details of viability of minimum wage here - I don't think that will be productive for anyone. I just want to underscore how egregious comparing minimum wage to eugenics is here.
So this is discussing two competing studies done at the same time. I linked to an article about the authors from the original study actually revising their results a year later with new data and basically saying "our previous conclusion was wrong".
The problem with minimum wage is that there is no minimum wage guarantee by the state. The same problem applies to price controls of any kind. If nobody is willing to sell you a product that satisfies the price controls then you go home empty handed. If the rules are too strict and end up preventing the market from working then the government is to blame and the government has to step in and actually provide whatever nonsensical guarantee it made.
If the government wants to prevent you from getting a job that pays less than minimum wage it has to provide you with a job that actually does pay minimum wage.
> If the government wants to prevent you from getting a job that pays less than minimum wage it has to provide you with a job that actually does pay minimum wage.
I like this way of putting it. I'll use it in the future.
Similarly here, if the government wants to make it illegal to sell hand sanitizer at $5/bottle, they should provide hand sanitizer at $1/bottle.
> People whose labor is worth less than the minimum wage become unemployable. Being unemployed means you can’t acquire skills or experience and is bad for your mental health and social attachment.
Could being employed on a low wage also have it's own negative hedonic consequences? I suppose you have answered the question: 'What happens if you change this single lever of minimum wage in terms of employment?' But whether it is harmful also depends upon other government economic policy, specifically welfare. The trade-offs for minimum wage, in this light, don't exactly speak of how it is 'harmful' in an ethical sense, but it's specific effect on unemployment.
In terms of minimum wage and how it harms the economy, it would be interesting to know if a higher minimum wage has as effect on Economic Complexity and whether that would have a net benefit to an economy?
This line of online questioning is the lazy dismissal of the 21st century. This comment has a positive score and even a child that agrees with it and yet it's akin to asking any theorist "do you have sources for that?" in response to them saying something wildly uncontroversial within their domain. It adds nothing to the discussion and only shows that the respondent is so wildly out of touch with the relevant mainstream that they're not worth answering because the challenge is going to be one of persuading them rather than informing them.
Minimum wage is a widely studied issue with well documented pros and cons. It's weaknesses, when addressed in isolation, are so well understood that most discussion at a high level on the topic is not whether it has pros/cons but what instruments it should be combined with to mitigate its cons (the mainstream answer is usually tax breaks of various kinds, often targeting the employee and not the employer.)
Would you ask a Gender Studies professor to defend the assertion that the feminine gender construct is typically defined by its submissive traits or would you ask how these observations are used to make observations and proposals about the real world?
Would you ask a mathematician their sources when they begin to explain linear algebra or would you ask questions that help to understand their perspective on the matter?
Hacker News supposedly has a rule against shallow comments and yet for some reason knee jerk requests for sources with no additional substance to drive the dialogue forward are considered 'reasonable'.
> Hacker News supposedly has a rule against shallow comments and yet for some reason knee jerk requests for sources with no additional substance to drive the dialogue forward are considered 'reasonable'.
Their statement begged the question, and it was asked.
I wasn't asking out of hostility, but out of curiosity. If the point can be made, and as you say, there is overwhelming evidence, I'd like the self-described expert of their field to provide an authoritative source. That's to the benefit of all readers.
Instead, we have a bunch of hand-wavey replies on both sides with dubious back-up, balanced with maybe a more illuminating discussion about the intersection of morality and economics, specifically regarding slavery and minorities - which I feel somewhat swayed by.
> Minimum wage is a widely studied issue with well documented pros and cons.
Throw us a bone then :) There are many countries around the world that do have a minimum wage, surely there's some data out there we can grok. Perhaps a minimum wage to quality-of-life measure? Inform this naive individual.
As far as I can tell from reading the (very well sourced) Wikipedia article on minimum wage, the general consensus amongst economists on the pros and cons is not at all what user "notidentified" to is claiming, and is backed up by plenty of actual studies.
> Hacker News supposedly has a rule against shallow comments and yet for some reason knee jerk requests for sources with no additional substance to drive the dialogue forward are considered 'reasonable'.
There's also a rule that you are aware of, having read the rules, about not creating throwaway accounts routinely. Though to be fair to you, it doesn't specifically say don't create a throwaway because you don't want to abuse other posters under your regular account.
That seems like a strange thing to do, though, when your side of the argument is "wildly uncontroversial".
The parent said unequivocally that minimum wage is a bad idea (and compared it to eugenics of all things), not that it has cons that need to be mitigated.
This is not an uncontroversial opinion, even among economists.
It is though. Most economists will advocate a mix of minimum wage and EITC (Earned income tax credit). Few will say that minimum wage by itself is a good thing and those that do will typically qualify it by saying that it's a good thing if you're only concerned with optimizing particular metrics, the persuit of which will likely have unintended consequences if chased with tunnel vision.
Again: parent said that minimum wage is a bad idea period, compared it with eugenics and added nothing else to clarify. They didn't say it's a bad idea if chased with tunnel vision, or that it's a bad idea if used in isolation (I don't think that statement even makes sense - having a minimum wage is always going to be one decision amongst the context of a lot of other decisions being made).
I am questioning the particular way they worded their comment, I thought I made that obvious.
They didn't actually compare it with eugenics though, they compared the nature of the discourse around eugenics to discourse around minimum wage with the penultimate point of explaining a mix of why/how they distrust economists, specifically economists, to handle discussions about ethics. They weren't making a direct comparison between the topics themselves and yet most of the replies are reacting as if they had, illustrating why these sorts of talks with laymen are bad ideas.
Condescension by experts is one means by which bad ideas can promulgate, and lead to bad policy. Everyone you speak with is a potential voter, and at the end of the day, badly or uninformed voters are bad for democratic outcomes.
To go back to your original criticism, asking for background information is a lazy dismissal wasn't a fair assessment. Is wasn't a dismissal but a request for more information. It's important than when you make an assertion that a lay-person might have some misgivings, that you provide some real evidence, or qualify your statement as opinion. An appeal to one's own authority isn't enough, at least it ought not to be in HN, where it would seem many people really care to know more, and want to engage in real discourse.
Minimum wage puts a floor on the amount of value necessary for someone to be employable. Many people, especially those just starting out can't produce that much value.
The irony of this comment is that it is exactly missing the morality in an economic situation, the claim being that if you are capable of work and are trying your best, you deserve to have enough pay to live off of.
Minimum wage does not price people out of jobs, it puts a cap on the profit that a corporation can squeeze out of its workers. Employers who would be paying under it are simply not viable moral businesses, they would be businesses based off the exploitation of its workforce.
Now we can have economic arguments about what is true here, but the purpose of minimum wage today is a moral one and that must be factored in.
Here's a thought experiment for you. Think of college as a job. You go there, you do work, you get paid. The amount you get paid is negative because your productivity to the school is near zero and their cost of "employing" you requires them to have a lot of buildings and faculty etc. Yet people take on a lot of debt to be able to work as a student at a college, so they obviously perceive some value in it.
Should we prohibit colleges as "simply not viable moral businesses"?
Now suppose we have something which is halfway in between. The benefit to the institution is positive but small. You're doing productive work but it's only worth $4/hour. On the other hand, you're learning stuff and that's very valuable to you -- much more valuable than an $8/hour job where you're not learning anything. Should we prohibit this and not the school? Why?
The argument you're making requires that you are making a significant personal investment in yourself at that $4 an hour job, which I have yet to find such an example of. I'd be happy to hear about some.
Internships for lucrative fields where knowledge experience/investment pay off have no issues existing in economies with minimum wages as very clearly demonstrated by the fields of software engineering, businesses, and many other fields. Not to mention that most minimum wage laws make exceptions or reductions for internships, and people do unpaid internships often for things like PolySci students for political campaigns.
So, yes, we should continue to support internships that invest in people and we already regularly make such considerations in minimum wage laws. $4 an hour jobs in a place where $8 an hour is the minimum wage is not an example of an internship where you are going to learn something valuable, though I am open to hearing about these jobs. The cost of an intern is often far less the pay and much more the hours of those senior to them who would be teaching. Minimum wage is not standing in the way there.
Even if these jobs exist, what percentage of $4 jobs will those be? In reality this will be exploited by large corporations every time, pricing as low as the market will let them, irregardless of livability.
How would you expect to you hear of some when they're prohibited by law?
Try it like this. Federal minimum wage comes out to around $15,000/year. This is in the same ballpark as college tuition -- which is generally regarded as costing a lot of money. If you go to an institution where you're a novice and it takes half your hours to learn the trade and the other half is productive but effectively unskilled work for the employer, you would expect these two to net to approximately zero, right? So why is it at all unexpected that it would frequently net to a number which is slightly positive but less than minimum wage?
> Even if these jobs exist, what percentage of $4 job will be those?
Probably the large majority of them, because otherwise why would anybody take those jobs? They wouldn't be paying enough to attract employees unless they were offering something else of value that existing jobs with higher compensation don't have.
Corporations can't just offer to pay $0.25/hour and get a line of workers lining up at the door. They have to outbid other companies for labor. That's why most companies already pay more than minimum wage for most jobs. And it's why most of the jobs that would pay less than minimum wage are ones that offer the workers something else in its place -- education, more flexible hours, a shorter commute etc. Taking those options away makes peoples lives worse, not better.
> Try it like this. Federal minimum wage comes out to around $15,000/year. This is in the same ballpark as college tuition -- which is generally regarded as costing a lot of money. If you go to an institution where you're a novice and it takes half your hours to learn the trade and the other half is productive work for the employer, you would expect these two to net to approximately zero, right? So why is it at all unexpected that it would frequently net to a number which is slightly positive but less than minimum wage?
Again, you are missing the point. Either that job is an internship (non-permanent and I already addressed it) or you will quickly become a fully productive worker (this is literally just training/ramp up and is not a significant cost to employers). These are not the jobs/pay structures minimum wage laws are affecting nor are people discussing, this is just a straw man.
---------------------------------
> How would you expect to you hear of some when they're prohibited by law?
Legality does not define what concepts exist in the world, so let's hear them! You have yet to even mention a single example.
Companies can and do regularly lobby for laws. They don't appear to be using this line of reasoning because if large minimum wage employers like McDonalds or Walmart tried this they would be laughed at even in political spheres.
> Probably the large majority of them
I suspect we're gonna have to agree to disagree here on what's going to happen without a minimum wage.
> because otherwise why would anybody take those jobs?
People take badly paying jobs because if you're faced with bad and really bad, you'll take bad. Companies are free to exploit this without minimum wage laws in place. This type of exploitation only works in a buyers (if we put employees here as "buyers" of jobs) market, and immediately pushes wages significantly lower in a sellers market, which we have seen for quite a good deal of the past few decades. We can't have economics that are only moral when things are going well.
> Taking those options away makes peoples lives worse, not better.
The flaw here is that you're looking at only one side of the equation. You are improving the lives of every job that has a raised salary as a result. Now the calculus on how many jobs that removes vs raises, what kind, and where is a valid debate, but again, this tradeoff is a moral one. Economists are doing studies to get numbers so that then we as a society can make the moral decision on the tradeoff. That moral question however is not one that economists can answer. They can only study and communicate the effects.
> And it's why most of the jobs that would pay less than minimum wage are ones that offer the workers something else in its place -- education, more flexible hours, a shorter commute etc. Taking those options away makes peoples lives worse, not better.
Big citation needed here.
----------------------------
I'm not looking to get into the weeds here frankly, that is not the point of my original comment. There are many studies on both sides of the minimum wage debate, and that's just going to turn into a linking war between people who are not economists and are also not likely to change their minds on the internet. I have my beliefs based on the data I have seen but again, this doesn't seem fruitful to go down this route.
The point I am making here which none of your points address is that minimum wage legislation is very much tied to moral considerations, and economics aids in giving numbers for those. At the end of the day, the viability rests on morality as interpreted based on data produced by economics.
> it puts a cap on the profit that a corporation can squeeze out of its workers.
No, it doesn't. Competition does that. Minimum wage puts a floor on the economic value of labor that can get hired at all.
It might limit value extraction where there is a monopsony purchaser of labor who is not also a monopoly supplier of the good produced with that labor, but that's not actually all that common a situation.
> Employers who would be paying under it are simply not viable moral businesses
If there is work to be done that genuinely has value less than the minimum wage, is it truly better for society that the worker instead has no job prospects and the one who would have the work done instead has no work done? Who benefits from that.
> Now we can have economic arguments about what is true here, but the purpose of minimum wage today is a moral one and that must be factored in.
Any legitimate moral purpose of minimum wage is served better by taxing business income and high-end personal (including capital) income
and providing a UBI as high as economic productivity can bear without out-of-control inflation.
Which is not to say that in practice minimum wage isn't better than nothing, it's just far from the best means of achieving it's legitimate purposes, in large part due to the adverse consequences it has in limiting employability.
Competition can also do it, but idk how that eliminates minimum wage from doing it. Neither raises revenue, both simply put pressure on profit margins. The only difference is one is regulation, the other is market force.
> It might limit value extraction where there is a monopsony purchaser of labor who is not also a monopoly supplier of the good produced with that labor, but that's not actually all that common a situation.
I think that's a very narrow view. If you look at Walmart and the like, these are still huge chunks of the market with low pay precisely because of economies of scale, so they are monopsony purchasers, even without being the only supplier or a product.
Also not covered is that with high unemployment, competition isn't there. People in minimum wage job searches are often picking between a job and no job, not two different jobs. You're assuming that employment markets are both efficient and equally balanced.
> If there is work to be done that genuinely has value less than the minimum wage
I think this is where the moral disagreement comes in. An economy that regularly squeezes people below living wage for work needs to be corrected. Minimum wage is an attempt at that by lowering corporate profit.
> Any legitimate moral purpose of minimum wage is served better by taxing business income and high-end personal (including capital) income and providing a UBI as high as economic productivity can bear without out-of-control inflation.
I would love to see this! But realistically that's not politically possible (though it is looking more so with the pandemic but still, generally speaking) and we can't be idealistically categorical in our policy. Minimum wage is fully pragmatic to me, not an ideal. It's a net positive compared to the current situation.
> Competition can also do it, but idk how that eliminates minimum wage from doing it.
Minimum wage only potentially does it for a narrow range of work with actual economic value that is between the minimum wage and a small multiple of it, and only for jobs where there isn't effective competition for labor (because effective competition for labor already does it as much as is possible, leaving nothing for minimum wage to do), and always has the cost, whether or not the conditions exist to provide the benefits, of making impossible all wage labor with an actual economic value less than the minimum wage, which not only kills jobs, but prevents upward mobility from the experience people would gain in those lower-value jobs.
> Minimum wage is fully pragmatic to me, not an ideal. It's a net positive compared to the current situation.
Minimum wage + means- and behavior-tested public benefit programs is the current situation.
Sorry, to clarify, I mean a minimum wage increase generally as a policy. Specifics needed for nuance of course taking into account COL by location and economic climate. Again, I agree UBI via corporate profit taxation would be much more efficient.
> but prevents upward mobility from the experience people would gain in those lower-value jobs
You can see my other threads here but I would love to hear about these jobs with valuable experience that need to pay under any reasonable minimum wage that would not be already existing internship programs. I just can't imagine what these are.
As to the rest, I just don't believe that area is as narrow as you describe.
> jobs where there isn't effective competition for labor
I really don't think you have experienced/have an idea of what it is like to be anywhere near unemployed and "unskilled". Nearly all of retail/warehouse/gig/delivery jobs experience little to no competition since they all go as low as possible and say "take it or leave it" because they know the alternative in unemployment. Competition only exists today really in skilled job markets.
I think you misunderstand what a minimum wage does. A minimum wage doesn't increase the bargaining power of an employee. It means the employee has to have a minimum amount of bargaining power to get hired in the first place. It doesn't actually prevent any exploitation. Imagine you are an exploited worker. You hate your boss, your job and the pay sucks. Do you really need a minimum wage law to be allowed to leave the job? No, you can just quit at any time. If you already had enough bargaining power you didn't need the minimum wage in the first place.
A minimum wage does absolutely nothing. It's like the British Queen: a political symbol that you can talk about.
If it actually did something then you wouldn't choose a low limit. You'd increase it to $100/hour but then you realize something. Even your well paid software developer job is at risk of being stomped by the minimum wage.
I never said it increased the bargaining power of an employee. A minimum wage ensures that employees are paid enough to survive at a human level.
I think you misunderstand my use of the word "exploit" here. The underpayment is the exploitation, not work conditions here. I'm not sure where someone wanting to quit their job factors into my argument.
Agreed, what harm does a minimum wage cause? We have a reasonable minimum wage in Australia (though I don't think it's been adjusted for inflation for a while) and it facilitates time for education, which in turn facilitates social mobility.
On the other hand, you can have no minimum wage, and end up with a class of working poor who have no time to educate themselves, thus condemning them to a life of constant work with no hope of social mobility.
Australia has relatively high youth unemployement, a predicted effect of a high minimum wage: https://www.statista.com/statistics/811644/youth-unemploymen.... Having difficulty finding work after graduating high school or university is a common complaint among Australian youth, in my experience. The hardest part is getting the first job, getting the foot in the door, and this is because a minimum wage prevents many entry-level jobs from existing, where the value the positions would generate is much less than the minimum wage, so it makes no sense to create the positions.
>On the other hand, you can have no minimum wage, and end up with a class of working poor who have no time to educate themselves, thus condemning them to a life of constant work with no hope of social mobility.
The minimum wage can also create cycles of poverty by pricing people out of work. Some portion of the people who are "least hireable" are unable to get jobs because nobody would pay them $15/hour, so their only option is living permanently on welfare, which has a demoralising effect, and is associated with poor outcomes for their children. Imagine for instance the stereotypical Frankston junkie.
> Imagine for instance the stereotypical Frankston junkie.
I'd like to see data comparing minimum wage to drug abuse, but there's a few problems with trying to make that correlation. E.g., social welfare measures would largely factor in here, but I imagine that both minimum wage and welfare measures typically go hand in hand. But by naive comparison, just this wiki article seems to show that opiates abuse is about 5 times greater in the US vs Australia.
> Having difficulty finding work after graduating high school or university is a common complaint among Australian youth, in my experience.
Those numbers don't look all that different from the US. Are people pursuing minimum wage jobs after graduating high school or university? Even high school graduates with no intention of pursuing higher schooling seem to pursue a vocation at something higher than minimum wage.
Before corona, it was around 12-13% in Australia compared to 8-9% in the US, 3-4% is a non-trivial difference. In rural areas it's worse (https://www.abc.net.au/triplej/programs/hack/youth-unemploym...), which is expected as even if minimum wage is set "properly" for the cities, where most people live, it may be relatively too high for rural areas where cost of living and wages are lower.
>Are people pursuing minimum wage jobs after graduating high school or university? Even high school graduates with no intention of pursuing higher schooling seem to pursue a vocation at something higher than minimum wage.
Not everybody is able to find a higher-paying job, that's why we still see people at age thirty working in checkouts or McDonalds. Try not to think of the average person; instead imagine the worst behaved, most disruptive, academically failing students at your high school, and consider what kind of jobs are available to them. It's the least hireable people that are affected by minimum wage laws, not anybody who's capable of getting a better job.
> Before corona, it was around 12-13% in Australia compared to 8-9% in the US, 3-4% is a non-trivial difference.
I was looking over the past 10-20 years (I have no idea how long Australia has had a high minimum wage...I figured that wasn't a recent development). Around 2008 the discrepancy had the US 10% higher.
> Not everybody is able to find a higher-paying job, that's why we still see people at age thirty working in checkouts or McDonalds.
I agree. What I had (incorrectly) drawn from your statement was graduating implied they were pursuing a field--not the average person. I just saw that the US has 44% working low-wage jobs.
I think most people agree that minimum amount of money should be a basic right of every working person, but a minimum wage isn't the only way of accomplishing this — a guaranteed basic income or a negative income tax are superior alternatives to accomplishing the same goal. The US already has the Earned Income Tax Credit.
When you institute minimum wages (wage floors), businesses pass on those costs to the customer, resulting in inflated prices.
Imagine a pizza maker's market value is (say) $5/hour. They are able to produce (for simplicity's sake) 5 pizza's per hour, or $1/pizza. Including other operating costs + 3-5% profit margin (that's the average for most restaurants), let's say that the pizza sells for $5. Thus the pizza maker can expect to earn $40/day, on the market. Suppose the "livable minimum wage" should be $15/hour, or $120/day. There are 2 ways to guarantee this:
A) The government deposits an extra $80 to the worker, allowing them to make $120 that day. They can buy a pizza for $5, which is about 4% of their daily wage.
B) The government mandates a minimum wage of $15/hour, which means that the labor portion of the pizza cost goes up from $1 to $3 per pizza. The pizza now sells for $7 so that the shop doesn't go out of business. The worker makes $120/day, and can buy a pizza for $7, which is about 6% of their daily wage.
Notice that in (B), the worker is actually worse off, even though they have the same amount of money in their pocket. The worker has to pay a higher percentage of their pay to afford to eat, but this $2 extra means absolutely nothing to a billionaire, it's pennies to a rich person. This is functionally a regressive tax. In scenario (A), the worker is better off, and the welfare system that sustains it can be funded through progressive taxes, which targets rich people.
We as a society (rightly) demand a minimum standard of living for everyone, and we collectively pay for that one way or the other. Either we pay taxes to fund a welfare state, or we pay inflated prices for goods and services to maintain wage floors.
Paying taxes for welfare is more progressive, as the burden falls on richer people. Paying inflated prices for goods and services is regressive as it's a burden that falls equally on the rich and the poor.
I love how the parent stakes out several moral positions but tries to present them as objective truth or just “the way things are” with no evidence presented. Clever.
In my experience, once you get past the basics, economics is largely about dressing up ideology in the trappings of science. More generously, economics seems to be most similar to philosophy with competing schools of thought that differ primarily in what assumptions and axioms they choose when modeling human behavior.
This seems to be a very common tactic with American right wingers (on the internet at least) - speak/write as if the actually controversial/differing parts of your belief are obviously true, and only go into detail on what logically follows from those axioms.
If you want to look at the literature you can start with Card and Krueger, which shows minimal effects for a small minimum wage discontinuity, I believe on the NJ/NY border. The Seattle minimum wage study showed a reduction in hours and benefits and reduced likelihood of new entrants to the labor market. It’s an exciting example of people looking really hard for ways to confirm their priors on both sides.
Or you can look at Europe. Greater employment protections raise the price of employing someone leading to greater unemployment. Minimum wages do the same thing more explicitly. Businesses buy less of things that are more expensive.