[gregholmberg]

Minimum wage laws destroy jobs and reduce overall welfare; they should be repealed rather than extended to novel business arrangements.

This is in fact their purpose. Minimum wage laws destroy low-paying jobs by making them illegal, preventing the least competitive members of our society from having the hours and days of their lives "mined" by an employer for negligible compensation.

That having these laws "reduces welfare" is, I believe, a conclusion not supported by fact.

A living example can be found in urban Brazil. By failing to outlaw and enforce certain minima (building codes, wages), large Brazilian cities have created vast marginal neighborhoods that no one wants to live in.

Based just on the example of favelas alone, I would argue that having laws to guarantee minimum wages is one thing a government can do immediately to protect the weaker members of a society.

I think you have not addressed another important duty of governments: to provide a reasonably rigorous educational launchpad so that the less fortunate need not always remain so.

[yummyfajitas]

I've never been to Brazil, so I won't comment. But I live in India, so I'll discuss the situation here. The GDP/capita here is $3k/year, adjusted for purchasing power.

Pass all the laws you want, there is simply not enough wealth (i.e., not enough material and skilled labor) for everyone to live in a house that meets building codes. No matter what you redistribute (note: India has very low inequality [1]) or demand from people, you can't squeeze water from a stone.

[1] Nominal inequality is low, but inequality of living conditions is high. This is the exact opposite of the US, where the rich have a PS3 and an XBox, and the poor are stuck with only a PS2.

[pedrolll]

Over 70% of indians live in rural areas. Many of these people live completely outside of the monetary economy. Counting these people in the GDP statistics skews the whole thing. Yet many of these people live just fine by farming, but do not need to use money, or use very little of it. To me it seems that when making GDP statistics, it would be wise to count in only people in urban areas, participating in the labor market. Of course this would look quite bad from the point of view of neoliberalist economists.

[gojomo]

So having no job is better than a low-paying job, in your analysis?

Brazil has a minimum wage. If it's not enforceable maybe that's because it's based on wishful thinking, pandering to those with an unrealistic mental models, rather than what's sustainable.

These 'vast marginal neighborhoods that no one wants to live in', they are empty ghost towns because no one wants to be there? I don't think so. And the favelas would just disappear if the firm-handed authorities were just a bit more insistent everyone get paid more (or nothing at all!)?

Rich societies can afford nice neighborhoods and rigorous building codes. Societies get rich by accepting every opportunity for voluntary coordination and incremental improvement. Societies stay poor by enacting showoff policies that appear generous but destroy more productivity than they enable, satisfying the aesthetic hopes of comfortable do-gooders, but trapping the really poor.

[gregholmberg]

... having no job is better than a low-paying job, in your analysis?

Perhaps yes.

A price is a signal. As with any restriction on free speech, outlawing certain prices (low wages) should show a clear and easily demonstrated social benefit.

In this case, private free enterprise is clearly harmed, but the benefit returned to society is an intangible, a void: society receives only the absence or reduction of sweatshop working conditions.

I think we are actually in violent agreement on most of these issues.

The major exception, I think, is that I am deeply skeptical of a society's ability to check the worst behaviors of private corporations. I believe that certain entire business models are better legislated against and rendered completely illegal, to prevent regulatory capture [0].

EDIT: This view seems to be controversial. May I suggest a little light reading? [1]

[0] http://en.wikipedia.org/wiki/Regulatory_capture

[1] http://en.wikipedia.org/wiki/The_Jungle

[gaius]

Minimum wage laws destroy low-paying jobs by making them illegal, preventing the least competitive members of our society from having the hours and days of their lives "mined" by an employer for negligible compensation.

Except this is simply not true. Germany, where workers enjoy generous terms and privileges even for Western Europe, has no minimum wage, and its labour unions vocally oppose introducing one. Countries such as the US and UK with minimum wages have higher unemployment, and things are more precarious even for those in employment.

[gregholmberg]

Declaring the German labor market to be a success while counting only German unemployment is misleading, something like saying US fiscal and labor policy is a blowout success because of yet another year of record low unemployment in North Dakota.

To measure the effectiveness of the policies that lead to German job creation, we need to count every worker who is receiving a wage in the German national currency against the workers who wanted to, and legally could have received wages in that currency.

When we look at the whole picture, the situation is ugly and getting worse. Headline unemployment averaged across the European single currency area is now 10.4% and rising rapidly. [0]

Germany is a manufacturing powerhouse, and its exports are currently red hot. Any breakup of EMU would brutally reprice those goods. I would expect this to lead to significant German unemployment.

[0] "Eurozone unemployment hits new record" http://www.bbc.co.uk/news/business-16808672 - 31 January 2012

[gaius]

who wanted to, and legally could have received wages in that currency

There's the rub: how many unemployed Greeks have the skills to work in a German factory?