Committed Democrat: What I’d really like is living wages.
Heathen Republican: So you think the minimum wage is too low and people can’t survive on such a low wage?
CD: Yes. There is enough wealth in this country that we can afford to pay a reasonable wage that anyone can live off of. Companies make enough profit; they can afford to pay a little more to the bottom wage earners.
HR: You’d like the cashier at Taco Bell to make, what, $10 per hour?
CD: More like $12.50.
HR: You’d increase wages by 67%, from $7.50 to $12.50. Okay. But what if the cashier doesn’t provide more than $12.50 worth of value to the Taco Bell every hour?
CD: Whatever. $12.50 is nothing. What’s that, two or three orders per hour? The CEO can afford to pay a little more to the cashier.
HR: Well, let’s say it takes a minimum of four people to keep a Taco Bell open. That’s $50 per hour. Add to that the cost of the food, the lease on the building, the trash service, lights, and water. Do you think it’s possible to sell enough 99 cent tacos to cover all of those costs and increase wages by 67%?
CD: Maybe Taco Bell needs to raise the price of a taco to $1.19 or $1.29. It’s worth it to ensure every person earns a living wage.
HR: Okay, so you want to boost wages by 67% and you think raising prices by 20% or 30% will cover the extra costs? Is that progressive math?
CD: And the rest can come out of the company’s profits, yeah.
HR: Hmm, so now you’ve raised prices by 20%. Do you think customers will feel the price hike? What if they don’t go to Taco Bell as often? Maybe a competitor will undercut them on price and Taco Bells start going out of business.
CD: That can’t happen because all of Taco Bell’s competitors will have to raise prices, too.
HR: And the customers, they won’t feel the price increase? They won’t spend less at Taco Bell after the price goes up?
CD: They all have more money in their pockets now because everyone just got a 67% pay raise, like you said.
HR: Let’s play this out a little bit. Taco Bell gets lettuce and tomatoes from local growers. It buys cheese and ground beef from ranchers and dairies. It buys packaging materials from distributors. The farmer, rancher, and distributor also have to give 67% pay raises and have to increase their prices, too.
CD: Right.
HR: So the rancher has to pay 20% more for feed for the cows and 67% more for labor. He raises prices enough to stay in business. He sells cattle to the slaughterhouse, and it has to pay the higher price, pay 67% more for labor, and raise its prices. The distributor buys the beef and cheese at higher prices, has to pay 67% more for labor, and raises its prices to stay in business. Now we have a taco made up of ingredients that are more expensive at every step in the supply chain.
CD: Wait a minute…
HR: Stay with me. Let’s be optimistic and say that 99 cent taco only has to be priced at $1.99 to still make money for Taco Bell. A 100% increase because of the 67% increase in wages. All of a sudden, the cashier who just got a raise from $7.50 to $12.50 per hour has to pay twice as much to afford her daily life. Food is more expensive, gas is more expensive, rent is more expensive. And it’s all more expensive than what she is now earning.
CD: Sure, prices will go up, but everyone is making more money and can afford it.
HR: You’re not listening. Prices go up at every step in the supply chain. Prices compound at every step. To stay in business, every company has to raise its prices to make up for this living wage you think is such a brilliant idea.
CD: But you’ve created the hypothetical. Prices may not go up more than the hourly wage has gone up.
HR: Well, that’s true. Do you think prices will go up about the same amount? If wages go up 67%, do you think prices will go up about 67%?
CD: That’s probably closer to reality.
HR: Then after all of this, after giving everyone a living wage, all prices go up so that the real world effects of your new wages are no net increase in living standards. If prices go up 67% and wages go up 67%, everyone is back where they started. And you’re going to come back next year begging for a new living wage of $20 an hour. Is that your grand solution?
CD: Umm…
Another nuance to this conversation could be that another person could join the conversation and make the point that you could still depress the costs of food by increasing subsidies.
ReplyDeleteAnd then the CD could say "yeah, and we can raise taxes on the rich to pay for those subsidies!"
By this logic, the minimum wage has not raised anyone's standard of living. Is this your contention?
ReplyDeleteBy the way, Plato used the trick whereby he debated himself. He always one also, even though he was not a capitalist and did not favor free markets.
Yes John, the basic argument is that any minimum wage essentially raises the cost of living and negates any increase in the wage. That's why we have to keep raising the minimum wage, to keep up with an increasing cost of living that keeps getting increased by raising wages. Glad you were able to follow along.
ReplyDeleteInevitably raising the minimum wage negatively affects the small business owners the most. They cannot compete as effectively with the WalMarts and big corporate stores typically on price alone. That means for them to have a chance to stay in business, raising their prices is a non-starter as that would only exacerbate their non-competitiveness. The only solution is to either refrain from hiring a needed employee, or fire some of the employees already on staff, since labor is one of the biggest costs to any business. That means that raising the minimum wage will invariably hurt small businesses and increase unemployment for the poorest among us.
ReplyDeleteAlso, it is not uncommmon for many of the bigger unions to have their salaries negotiated as a percentage above minimum wage. By having their wages thus pegged to the minimum wage in their contract, you are also increasing costs for any product or service being provided by union labor accordingly.
Once again this proves that the good intentions of liberals are often over-ridden by the reality of their short-sighted agendas.
Good post, H.R.!
So, the lowest paid people did not see in an increase in their standards of living as a result of the minimum wage, right? Additionally, places where there is no minimum wage is not more prone to poverty, right?
ReplyDeleteUnfortunately, I don't have time to wait for your answer before I follow up. It is very unfortunate, but I will just follow up immediately, without forcing you to commit to a partisan position more fully beforehand.
ReplyDeleteIf we remove the minimum wage, some people would still be paid 7.25 per hour, while others that were making 7.25 per hour would start earning 2.00 per hour. Even with the boom to business, as they would now be able to produce more products and hire more people since they are not really paying them, the employees of such businesses would not be able to pay rent, go to the doctor, pay their electric bills. Even with all the extra snickers bars produced, and all the trinket production of mom and pop shops, we would see an increase in poverty. That is OK, though, because people working for 2.00 per hour is not post New Deal exploitation, ala an early Andrew Carneigie factory. No, in fact, an increase in the minimum wage has no effect on the one currently receiving the enhanced wage at all.
However, if we are going to make this false claim, then we must also assume that it has no effect on businesses who can and will sell their products for more. If your theory is correct, then the inverse effect on business is negated also. Therefore, since the workers want this irrelevant thing, why are you against it? If it is true that the increase in wages does not help the worker, then the inverse must also be true: it does not harm the business. Prices go up and wages go up. Everyone’s standard is the same. If your reduction of the formula to the simple sale and purchase of manufactured goods is accurate, then I am not sure why the resistance.
" If it is true that the increase in wages does not help the worker, then the inverse must also be true: it does not harm the business. Prices go up and wages go up. Everyone’s standard is the same. If your reduction of the formula to the simple sale and purchase of manufactured goods is accurate, then I am not sure why the resistance."
ReplyDeleteSuch is not entirely the case, but for the sake of argument, lets say that it is. If no net changes occur for the business or the worker as a result of raising the minimum wage, then why are you advocating this? Is this simply change for changes sake, Mr. Myste?
Being that 97% of American workers already make in excess of the minimum wage (and a large chunk of them are young people, retirees, and second wage earners), it seems to me that Mr. Committed Democrat just might me wasting a lot of political capital for nothing here....But, hey, who am I to complain?
ReplyDelete@John
ReplyDelete"If we remove the minimum wage, some people would still be paid 7.25 per hour, while others that were making 7.25 per hour would start earning 2.00 per hour."
Agreed. Unless those making $2/hr can provide additional value and command a higher wage.
"Even with the boom to business, as they would now be able to produce more products and hire more people since they are not really paying them, the employees of such businesses would not be able to pay rent, go to the doctor, pay their electric bills."
Admittedly I made a simplified argument, but now you are oversimplifying. You are acting as though everyone is making a minimum/living wage, but that's not how it would work.
Businesses will continue to pay people for the value they provide. You can still command your six figure salary, and so can I. Everyone making the minimum wage can educate themselves, gain experience, and command a higher wage.
"However, if we are going to make this false claim, then we must also assume that it has no effect on businesses who can and will sell their products for more. If your theory is correct, then the inverse effect on business is negated also."
Not if you remove your oversimplification above. People earn what they are worth. Some people don't create enough value to earn a living wage. Paying them more than the value they create inflates business costs and increases prices for everyone.
Those who provide more value than they earn create a net positive to businesses, allow them to lower prices, and lower the cost of living.
John, this is my rebuttal to your comment above.
DeletePaine,
ReplyDeleteSuch is not entirely the case, but for the sake of argument, lets say that it is. If no net changes occur for the business or the worker as a result of raising the minimum wage, then why are you advocating this? Is this simply change for changes sake, Mr. Myste?
It is not change for change sake. I reject the hypothesis for many reasons, among them, those I mentioned above. Poor people have to pay rent, pay electric bill, etc. They cannot do it on 2.00 per hour. It is not all about manufactured goods. The minimum wage did ensure a certain standard of living (along with other New Deal Initiatives), and the premise that it is all about how much a trinket costs is flawed. Additionally, the premise that inflation will match and undo the effect of the minimum wage is also specious. It is a theory that probably has some truth to it, and is not 100% true.
Laws preventing worker exploitation resulted in less worker exploitation. It is undeniable. Read the history of Andrew Carnegie before he became a philanthropist and you will see what unchecked capitalism can do.
You can be a good capitalist and still regulate the ability of employers to exploit the desperation of those they employ.
You have now admitted that you see no harm in the minimum wage (for the sake of the discussion), and I have shown that there would be harm in not having it. I assume you now embrace the concept.
Plato always chose personas to debate, people like "Committed Democrat," and Plato would be Socrates. The personas did not represent the arguments that the real life people they were intended to represent would make. Instead they made asinine arguments that Plato's character Socrates could easily answer, and they stuck with them at all costs.
ReplyDeleteI think Plato imagined that his readers thought: "Wow Plato is really good at debating these guys." I thought: "Wow, Plato is unwilling to debate these guys and must make up the dialog himself."
Though I liked the Republic very much, it is a complete straw man work of fiction. It allows Plato to give his opinion, but no where does he actually address the arguments of his philosophical opponents. There was no comments section in the "Republic."
I consider this a non-rebuttal. You ignored all of my points from yesterday and offered a monologue on Plato instead.
DeleteJohn, all I got from your last comment was, "Yada, yada, yada, I don't have a rebuttal." Apparently you now object to rhetorical devices like a dialog. I'm sorry that I just can't satisfy you with my writing. I will now go into seclusion until I can find a way to make you happy.
ReplyDeleteOkay, I'm back. If you think I misrepresented the views of CD, I welcome your better counter arguments. As I recall, you are the one who most encouraged me to learn to debate the other side's points. I think I represented the living wage view point pretty well, but I'm always open to being schooled by you.
Instead of offering non-rebuttals and broad criticisms, why don't you offer some specifics. How would you respond to the points in the dialog above? For example, do you think it's possible to sell enough 99 cent tacos to cover overhead costs and increasing wages for everyone by 67%?
Where do you think the extra money for wages should come from? Price increases? Hidden profits? The CEO's salary? What happens if customers stop visiting Taco Bell because prices go up? Do you think anyone making the living wage would lose his/her job?
Heathen,
ReplyDeleteOK, point Heathen on the rhetorical device. You are correct and my objection is withdrawn. It is completely legitimate.
As for the non rebuttal, I offered a clear rebuttal, which you did not rebut. If you don't see the rebuttal, then I suppose it is impossible for us to converse on this topic at all, as there is a fundamental communication break. I think you do see the rebuttal, though.
Your assertion did not withstand logical scrutiny. I sincerely believe that you had not thought about it in a circumspect way and now you see that. You don't have to concede, but claiming the rebuttal was not there is dishonest.
I saw your original rebuttal where you wanted to talk about minimum wages. I responded to your comment (almost) point for point. You have not replied to that comment, so I consider that a non-rebuttal.
DeleteInstead of conceding, I think your lack of response validates my rebuttal and your non-responsiveness (twice now) is a concession in its own right.
Since I'm not the kind of person to keep score or track points, I'll just concede and allow you to save face.
This comment has been removed by the author.
DeleteThe Plato discussion was a separate and unrelated comment that followed my rebuttal. I separated them, did not mix them. You conveniently took the Plato commentary to be the rebuttal and ignored the rebuttal. I think you skim comments on your own blog, which I find ridiculous.
ReplyDeleteTo be clear for those of you who don't read the comments in full: The Plato discussion was not a rebuttal to anything, nor was it intended to be. The rebuttal that preceded it was.
ReplyDeleteLet me help you:
ReplyDeleteIf we remove the minimum wage, some people would still be paid 7.25 per hour, while others that were making 7.25 per hour would start earning 2.00 per hour. Even with the boom to business, as they would now be able to produce more products and hire more people since they are not really paying them, the employees of such businesses would not be able to pay rent, go to the doctor, pay their electric bills. Even with all the extra snickers bars produced, and all the trinket production of mom and pop shops, we would see an increase in poverty. That is OK, though, because people working for 2.00 per hour is not post New Deal exploitation, ala an early Andrew Carneigie factory. No, in fact, an increase in the minimum wage has no effect on the one currently receiving the enhanced wage at all.
However, if we are going to make this false claim, then we must also assume that it has no effect on businesses who can and will sell their products for more. If your theory is correct, then the inverse effect on business is negated also. Therefore, since the workers want this irrelevant thing, why are you against it? If it is true that the increase in wages does not help the worker, then the inverse must also be true: it does not harm the business. Prices go up and wages go up. Everyone’s standard is the same. If your reduction of the formula to the simple sale and purchase of manufactured goods is accurate, then I am not sure why the resistance.
It is not change for change sake. I reject the hypothesis for many reasons, among them, those I mentioned above. Poor people have to pay rent, pay electric bill, etc. They cannot do it on 2.00 per hour. It is not all about manufactured goods. The minimum wage did ensure a certain standard of living (along with other New Deal Initiatives), and the premise that it is all about how much a trinket costs is flawed. Additionally, the premise that inflation will match and undo the effect of the minimum wage is also specious. It is a theory that probably has some truth to it, and is not 100% true.
Laws preventing worker exploitation resulted in less worker exploitation. It is undeniable. Read the history of Andrew Carnegie before he became a philanthropist and you will see what unchecked capitalism can do.
You can be a good capitalist and still regulate the ability of employers to exploit the desperation of those they employ.
Swear to God, John, I don't know what I'm going to do with you. I postponed this to get some real work done thinking I'd really need to dig in to give you a quality response. And then I see that you simply copy-and-pasted (!) your earlier comment. You have the nerve to say that I didn't respond to your comments?
ReplyDeleteFor the record your first comment was posted at 12:57 on 8/21. My rebuttal at 6:27 on the same day. You have yet to respond to any of my points from that comment.
Because you apparently missed it the first time, I'll respond in kind.
***
"If we remove the minimum wage, some people would still be paid 7.25 per hour, while others that were making 7.25 per hour would start earning 2.00 per hour."
Agreed. Unless those making $2/hr can provide additional value and command a higher wage.
"Even with the boom to business, as they would now be able to produce more products and hire more people since they are not really paying them, the employees of such businesses would not be able to pay rent, go to the doctor, pay their electric bills."
Admittedly I made a simplified argument, but now you are oversimplifying. You are acting as though everyone is making a minimum/living wage, but that's not how it would work.
Businesses will continue to pay people for the value they provide. You can still command your six figure salary, and so can I. Everyone making the minimum wage can educate themselves, gain experience, and command a higher wage.
"However, if we are going to make this false claim, then we must also assume that it has no effect on businesses who can and will sell their products for more. If your theory is correct, then the inverse effect on business is negated also."
Not if you remove your oversimplification above. People earn what they are worth. Some people don't create enough value to earn a living wage. Paying them more than the value they create inflates business costs and increases prices for everyone.
Those who provide more value than they earn create a net positive to businesses, allow them to lower prices, and lower the cost of living.
John wrote:
ReplyDelete"Even with the boom to business, as they would now be able to produce more products and hire more people since they are not really paying them, the employees of such businesses would not be able to pay rent, go to the doctor, pay their electric bills."
HR wrote:
"Admittedly I made a simplified argument, but now you are oversimplifying. You are acting as though everyone is making a minimum/living wage, but that's not how it would work."
HR, I believe that John meant to say that the low-wage employees would not be able to pay for their needs, which is what he said elsewhere. You ought to address the rest of his comment. These, I believe, are the most important parts:
"Poor people have to pay rent, pay electric bill, etc. They cannot do it on 2.00 per hour. It is not all about manufactured goods."
"Additionally, the premise that inflation will match and undo the effect of the minimum wage is also specious. It is a theory that probably has some truth to it, and is not 100% true."
On to my own arguments...
Point 1:
If the benefit to eliminating the minimum wage is that an employer gets to pay its employees according to the value that they create for the business, then the implication is that some people are currently over-paid.
Therefore, without a minimum wage, those people would be paid proportionally less than what they are paid now.
Since the minimum wage is already not a living wage, further devaluation of these workers would distance them even further from a living wage, producing additional poverty.
I understand that you do not want to try to solve this problem by making businesses pay excess wages. What, then, do you propose to do besides leaving people to fend for themselves? Some economists who oppose the minimum wage propose that the government provide a living wage instead, but I doubt that you support such an idea.
Point 2:
Will made a point that I have often seen conservatives raise in debates over the minimum wage:
"...97% of American workers already make in excess of the minimum wage..."
The relevant number in this case is not how many people work for the minimum wage, but how many work for less than a living wage. If 3% of people work for $7.25, yet another 10% work for a wage that is only slightly higher, then we have a very significant number of people who are not making enough money.
Point 3:
Businesses are free to not employ people who do not bring the value of the minimum wage in our present economy. Businesses are also free to ask their employees to do enough additional work to provide the value of the minimum wage. It's all just a part of market adaptation.
That a business may have a difficult time finding people who can meet its demands is not the fault of the minimum wage, whose inflationary effects, according to you, neutralize its benefits. Either the worker pool is inadequate or the business demands too much. Those problems require different solutions.
Point 4:
I can agree (even if you didn't bring the point up) that the minimum wage makes us less competitive with countries with a lower or no minimum wage, at least in terms of jobs that (1) can be done by either an American or a foreigner in his own country equally well and (2) can be set up in other countries without a massive cost to the business. However, this is true of everything that interferes with profit-making here--including good regulations and taxes. It is not clear, then, that we should blame the minimum wage. We could blame profit-seeking at the expense of all other motivations.
"HR, I believe that John meant to say that the low-wage employees would not be able to pay for their needs, which is what he said elsewhere."
ReplyDeleteRyan, always happy to see you assist John make his points.
"Poor people have to pay rent, pay electric bill, etc. They cannot do it on 2.00 per hour. It is not all about manufactured goods."
Setting a price floor, whether a minimum wage or living wage, is not the way for government to address this problem. If we wanted a government that set prices to keep people out of poverty, we would have a board of bureaucrats setting maximum prices on milk and eggs. We don't have that.
Instead, government offers food stamp assistance to keep the poor fed. Similarly, when people don't earn enough to survive, we provide welfare assistance.
If the argument is that wages are too low to live on, the answer is not to skew the market for labor. The answer is to augment wages through existing government assistance programs that have been created to do just that.
"Additionally, the premise that inflation will match and undo the effect of the minimum wage is also specious. It is a theory that probably has some truth to it, and is not 100% true."
To me it is a logical argument. Inflation is defined as the general increase in price levels, increasing wages affect prices because they are a cost input, which will naturally lead to an overall rise in prices. I welcome your evidence that this is specious, or a challenge to the simple logic.
Ryan, I'd like to take more time to address your arguments so you'll have to wait a little longer on your four points, but I wanted to offer a quick response since you tried so hard to help John.
Yes, John needs to offer evidence that the minimum wage in particular does raise our standard of living or that the rise in wages is not offset by a rise in costs. The minimum wage potentially boosts the standard of living of the least valued employees, but otherwise it is not clear that it makes a difference.
ReplyDeleteI was hoping that you might have heard some evidence in support of John's position and could dispute it.
For the record your first comment was posted at 12:57 on 8/21. My rebuttal at 6:27 on the same day. You have yet to respond to any of my points from that comment.
ReplyDeleteYou ignored the parts you didn’t like.
"HR, I believe that John meant to say that the low-wage employees would not be able to pay for their needs, which is what he said elsewhere."
Ryan, always happy to see you assist John make his points.
That is exactly what I said, only I used examples of those needs, rent, electricity, instead of using an abstract concept. Since more money in payment of these needs would assist is a prima facie fact, the burden of proof is on you to refute it. Your rebuttal seems to be that the price of trinkets produced in factories would go up. I don’t consider that rebuttal a rebuttal. Nor do I consider that it even addressed the issue, so there was nothing further for me to say on the matter.
Now you have addressed the issue because Ryan expressed it in a more abstract and less precise manner, which apparently you understood better. Funny that Ryan had no problem understating it even when I expressed it with specifics. I also thank Ryan in helping Heathen understand.
Setting a price floor, whether a minimum wage or living wage, is not the way for government to address this problem. If we wanted a government that set prices to keep people out of poverty, we would have a board of bureaucrats setting maximum prices on milk and eggs. We don't have that.
You opinion in this matter is irrelevant to the topic, which is whether a minimum wage assists those earning it. You are now changing your argument to suggest that it does not work because it is not something we should have. Remember you post was about whether it works or not, not whether it is just to have it. If you would like to address this second topic, write a post about it and if I am interested, I will comment with my opinion on this new topic.
Ryan,
Yes, John needs to offer evidence that the minimum wage in particular does raise our standard of living or that the rise in wages is not offset by a rise in costs.
That is obvious without rebutting data. The burden of proof is not on me. Why do you think I should offer more evidence that additional wages help offset the cost of rent and electricity?
John,
ReplyDelete"Why do you think I should offer more evidence that additional wages help offset the cost of rent and electricity?"
HR's argument was that raising the minimum wage would cost businesses money, which they would have to recover by raising prices. At the end of the day, the increase in prices would presumably counter the increase in wages.
Now, if everyone had more money, the costs of rent and electricity would likely increase as well. Minimum wage workers would still have trouble with their bills.
HR,
ReplyDeleteI'd edit the Committed Democrat's argument here:
HR: Okay, so you want to boost wages by 67% and you think raising prices by 20% or 30% will cover the extra costs? Is that progressive math?
CD: And the rest can come out of the company’s profits, yeah.
Edit:
CD: And the rest can come out of the company's profits and/or the wages of other workers. If we lowered the wages of or postponed raises for other workers to help pay for minimum wage workers, prices would fall because everyone besides the minimum wage workers has less money. It would then be easier for minimum wage workers to pay their bills and perhaps only slightly more difficult for everyone else.
This is effectively the same as having people pay additional taxes to the government for it to re-distribute the money to the least valued workers, except it cuts out the unnecessary middleman. In fact, it is presumably what at least some businesses already do when the minimum wage increases.
Point One: "...the implication is that some people are currently over-paid. Therefore, without a minimum wage, those people would be paid proportionally less than what they are paid now."
ReplyDeleteI'm not very happy that this thread is turning into a debate over the minimum wage since I posted on the minimum wage in May and John didn't want to talk about it then.
This post is about a living wage. The implication, therefore, is that a wage of $12.50 an hour exceeds the value that an unskilled and inexperienced worker provides to the average entry level job.
"What, then, do you propose to do besides leaving people to fend for themselves? Some economists who oppose the minimum wage propose that the government provide a living wage instead, but I doubt that you support such an idea."
I propose NOT raising the minimum wage and NOT creating a living wage. If the minimum wage is insufficient, I propose that government welfare programs make up the difference because that's what they're designed for. We should not create a new, arbitrary, higher price floor on labor.
Point Two: "If 3% of people work for $7.25, yet another 10% work for a wage that is only slightly higher, then we have a very significant number of people who are not making enough money."
I agree in principle. Maybe 3% hides the real effects. What matters is how many people make between $7.25 and $12.50, or $7.25 and any proposed increase.
So Ryan, what's your threshold of significance? You more than tripled the 3% and picked 10%, but is another 3% to be concerned with, or another 5% making slightly higher than minimum wage?
On my minimum wage post linked above, a progressive economist measures the effects of an increase from $7.25 to $8.25, pointing out this would give a raise to 10 million workers. If true, this means another 3% make within a dollar of the current minimum. Is that insignificant enough?
Point Three: "That a business may have a difficult time finding people who can meet its demands is not the fault of the minimum wage, whose inflationary effects, according to you, neutralize its benefits. Either the worker pool is inadequate or the business demands too much. Those problems require different solutions."
Actually, a minimum wage or living wage would be part of the problem. It creates a price floor on labor, and business is required to comply. Your argument is like saying a price floor on electricity of $1,000 per kwh is not the problem; the problem is the business uses too much electricity.
Point Four: "However, this is true of everything that interferes with profit-making here--including good regulations and taxes. It is not clear, then, that we should blame the minimum wage."
I don't know what you consider good regulations. I consider good regulation to be those that keep the market free of corruption and maintain a level playing field. I do not propose a market free of regulation or government interference; I propose one with as little as possible.
Markets work. They aggregate more information than a politician can, and sets prices and allocates goods and services, including labor. Changing that dynamic with an arbitrary price, which is what a minimum/living wage is, slows markets and makes us less competitive.
"Now you have addressed the issue because Ryan expressed it in a more abstract and less precise manner, which apparently you understood better. Funny that Ryan had no problem understating it even when I expressed it with specifics."
ReplyDeleteJohn, you've become quite contentious lately. I thought you were over it when you disappeared for two months, but I see that not much has changed.
You normally respond to my points directly by quoting a sentence and responding. You did none of this and brought up manufacturing trinkets. I'm talking about tacos.
Yes, Ryan made it more abstract. There was a time when you were patient enough to restate your arguments in order to sustain the debate. I don't know why you refuse to do so now.
"You opinion in this matter is irrelevant to the topic, which is whether a minimum wage assists those earning it. You are now changing your argument to suggest that it does not work because it is not something we should have. Remember you post was about whether it works or not, not whether it is just to have it."
Actually, this post is about the living wage. You refused to talk about the minimum wage in May and decided to introduce it here.
I have not changed my argument, I responded to yours. You know this and are being obstinate.
You said not offering a minimum wage harms the poor. I countered that by saying the minimum wage is not the proper means to assist the poor because other tools are already available. And I'll add that a price floor harms the free market whereas welfare does not.
Not a new argument, but a rebuttal to a point you made. I thought that's how debates worked. I oppose price floors like a minimum/living wage because they harm markets. You offered a problem (helping the poor) and I countered with an existing solution that doesn't harm free markets.
Ball is in your court.
Also Ryan,
ReplyDelete"CD: And the rest can come out of the company's profits and/or the wages of other workers. If we lowered the wages of or postponed raises for other workers to help pay for minimum wage workers, prices would fall because everyone besides the minimum wage workers has less money. It would then be easier for minimum wage workers to pay their bills and perhaps only slightly more difficult for everyone else."
I don't think redistributing wages within a company is a good way to motivate workers. People who provide more value expect to be paid more money. I appreciate that you're looking for alternatives, but this one strikes me as very anti-capitalist and un-American.
HR,
ReplyDelete"So Ryan, what's your threshold of significance? You more than tripled the 3% and picked 10%, but is another 3% to be concerned with, or another 5% making slightly higher than minimum wage?"
Any number above 0 is significant because it would mean that a human being isn't making enough money. I only brought it up because Will (and others in my experience) suggested that, since 97% of people make more than the minimum wage, the issue is not very important. I don't know what percentage would be significant for them.
"...a progressive economist measures the effects of an increase from $7.25 to $8.25, pointing out this would give a raise to 10 million workers. If true, this means another 3% make within a dollar of the current minimum."
Minor point: 10 million people represent 3% of the population, but we're looking for the percentage of the workforce.
"Actually, a minimum wage or living wage would be part of the problem. It creates a price floor on labor, and business is required to comply. Your argument is like saying a price floor on electricity of $1,000 per kwh is not the problem; the problem is the business uses too much electricity."
Let me write the point out more clearly:
Premise 1 (your words): "Then after all of this, after giving everyone a living wage, all prices go up so that the real world effects of your new wages are no net increase in living standards. If prices go up 67% and wages go up 67%, everyone is back where they started."
Premise 2: If the prices and wages cancel each other out, then the business is not harmed.
Conclusion 1: Raising the minimum wage would not harm the business.
Everyone would be back where he started. If the business was able to find workers before the minimum wage increase, then it would be able to find them after the increase. If it was unable to find workers before the increase, then it would still be unable to find them after the increase. The problem must lie elsewhere, such as the quality or quantity of the workforce or the demands of the business.
"I don't know what you consider good regulations. I consider good regulation to be those that keep the market free of corruption and maintain a level playing field."
We also use regulations for public safety in terms of product quality, environmental impact, and so on; or to make sure that inherently harmful products or services (like assassinations) cannot be sold.
So, some good regulations interfere with profit-making. That is not our sole standard. We would not praise a country for knowingly or recklessly poisoning part of its population for an economic edge, nor would we argue (I hope) that we should do the same in our country in order to stay competitive.
The minimum wage's negative impact on our competitive ability is therefore not a sufficient reason to oppose it. We could just as (or more) easily blame the desire to profit regardless of its effects on other people. Instead, we have to show that its negative effects outweigh its positive ones. You are trying to do that already; as I mentioned, you did not bring up the issue of competition with other nations. I did. This was just a separate point.
"I don't think redistributing wages within a company is a good way to motivate workers. People who provide more value expect to be paid more money."
ReplyDeletePeople who provide more value would, for the most part, make more money. I am not suggesting that we pay everyone the same wage, but that those who are able to live well enough on lower wages give up enough collectively (and in proportion to their existing wages) to help those at the bottom be able to meet their needs. However, I realize that not every business would be able to cover the costs by doing so, since not every business employs enough higher-wage workers to help its minimum wage workers meet their needs.
"I appreciate that you're looking for alternatives, but this one strikes me as very anti-capitalist and un-American."
Like I said, this is what businesses already do to address the minimum wage. They know that they need a certain number of minimum wage workers, need a certain number of higher wage workers, and have a certain amount of money to pay for it all. Since the wage of the minimum wage workers is already determined, all that's left is to figure out how many higher wage workers they can afford at what cost. If the minimum wage rises, then the business might (1) pay future higher wage employees less to compensate or (2) postpone raises, perhaps indefinitely.
Moreover, if we are just going to redistribute wages through taxes anyway, the higher wage workers end up with the same amount of money that they would have if the business simply did the redistribution itself. The only question then is: Would you prefer to make $20/hour and pay $1/hour in taxes to help minimum wage workers or to make $19/hour and pay nothing in taxes to help minimum wage workers? (I am even assuming that the government would use the money just as efficiently for that purpose, even though we know that that is not the case.) It's just a matter of perception.
Lastly, our country is full of diverse opinions that can also be found in other countries, so I don't find "un-American" to be a very meaningful label for my suggestion. But I assure you that I take no offense at the rhetoric.
I'm going on a brief vacation, so I may not be able to respond for the next couple of days. You and John should behave.
Ryan said: " If the minimum wage rises, then the business might (1) pay future higher wage employees less to compensate or (2) postpone raises, perhaps indefinitely."
ReplyDeleteThere are other things that happen, such as the company being forced to fire minimum wage earners. Because the company can't afford the "cost" of hiring them; a cost which means that if you hire them, you not only pay their wage, but you give them an unearned handout above this.
Ryan,
ReplyDeleteNow, if everyone had more money, the costs of rent and electricity would likely increase as well. Minimum wage workers would still have trouble with their bills.
The burden of proof is on you here. There is no direct causal relationship to the real-estate market and the general economy. They do not have to walk in lock-step. The assumption that if the minimum wage doubled, housing costs and electricity costs would also double is preposterous. Again, the burden of proof is on you. I hope you will simply see the absurdity of the supposition and not try to argue the case for the sake of trying to win.
Heathen,
ReplyDeleteYou said not offering a minimum wage harms the poor. I countered that by saying the minimum wage is not the proper means to assist the poor because other tools are already available. And I'll add that a price floor harms the free market whereas welfare does not.
Not a new argument, but a rebuttal to a point you made. I thought that's how debates worked. I oppose price floors like a minimum/living wage because they harm markets. You offered a problem (helping the poor) and I countered with an existing solution that doesn't harm free markets.
Ball is in your court.
The only thing I responded to or cared to discuss was to correct the assumption that raising the minimum wage would not raise the standard of living of those receiving it. You had implied that prices go up, and so the extra income is not worth any more than the lesser income prior to the increase in wages. That assumption is false, so I delicately challenged it.
In “rebuttal” you changed your argument to ignore the direct effect on those receiving increased wage and only focus on your belief that it hurts businesses. I chose not to address your belief that it hurts businesses. I never challenged that notion, so you said I ignored your rebuttal. You offered no rebuttal to my assertion, which was that raising the minimum wage increases the standard of living of those receiving the higher wage, even if “tacos” cost more.
Either you still disagree with that or you no longer disagree with it, in which case my work is done. However, you cannot “rebut” my assertion by saying that you offered other assertions that I did not dispute. Surely you can see the flaw in this reasoning? I disputed a single datum. I am not required to address everything else you ever uttered (not only address them, but disagree with them), in order to legitimize pointing out the inaccuracy of a this very important single assumption.
And now on to unrelated gripes:
ReplyDeleteYou normally respond to my points directly by quoting a sentence and responding. You did none of this and brought up manufacturing trinkets. I'm talking about tacos.
LOL LOL LOL .Oh, tacos, sorry for the confusion.
As for becoming more contentious, I only did that in relation to your increased propensity to use partisan rants with no backing, which is one of the things that caused me to become less interested in your site. You started posting a few things that inspired me to respond again, so I did.
As for point by point rebuttals, I do that when I have something to rebut for every point. Otherwise, I rebut the thing I disagree with and have interest in discussing. Nothing has changed. The assumption that raising the minimum wage would have no value to those receiving the increased wage is patently false, so I responded, using rent and electricity as two examples, as they are the places where most of the income of those earning minimum wage goes and none of them fit into your algorithm.
By the way, you have become more contentious as well. You commonly use personal attacks / pokes as part of your “persuasive strategy.” I don’t remember you do that so much before (such as Ryan, always happy to see you assist John make his points.).
Yes, Ryan made it more abstract. There was a time when you were patient enough to restate your arguments in order to sustain the debate. I don't know why you refuse to do so now.
I did not know making the argument more abstract and less specific makes it easier for you to follow. If I had known this, I would have been very vague so you could understand without having Ryan interpret it for you. I am not claiming that his reading comprehension is better than yours. I am only claiming that you are claiming that it is. My specificity was not meant to muddy the waters, I assure you.
Actually, this post is about the living wage. You refused to talk about the minimum wage in May and decided to introduce it here.
Define a “refusal to discuss” something. Are all things I have not commented on, on all blogs in existence, billions of examples where I have refused to engage?
"Premise 2: If the prices and wages cancel each other out, then the business is not harmed."
ReplyDeleteRyan, I don't accept Premise 2. That increasing wages leads to increased prices does not mean they cancel each other out from the standpoint of the business. I argued that they cancel out for the employee.
The business has other factors to consider, such as profit margins (the difference between cost and price), competitive pressures, price sensitivity of customers. I can't accept Premise 2 and, therefore, can't accept your Conclusion that "Raising the minimum wage would not harm the business."
"So, some good regulations interfere with profit-making. That is not our sole standard."
We agree. The difference in the area of regulation is always a matter of degree. The right does not argue for no regulation, just minimal regulation.
"The minimum wage's negative impact on our competitive ability is therefore not a sufficient reason to oppose it."
That isn't the only reason. The minimum wage raises unemployment; raises the cost of doing business; and interferes with free markets, which for me is a core principle that should not be violated.
"Lastly, our country is full of diverse opinions that can also be found in other countries, so I don't find "un-American" to be a very meaningful label for my suggestion. But I assure you that I take no offense at the rhetoric."
I'm glad you took no offense because I didn't mean "un-American" in the usual way of demonizing an idea or person. I just think it is counter to American principles.
dmarks,
ReplyDeleteYes, there are other methods by which a business could save money and continue to run. I raised two in particular simply to show that the idea of paying other employees less in order to pay the least valued workers more is not foreign to the US or business in general.
"...if you hire them, you not only pay their wage, but you give them an unearned handout above this."
Yes, but if we instead just paid taxes for welfare to help those workers (as HR recommends), then at least the same amount of money would be extracted from businesses and other workers anyway. It would probably be more.
John,
I agree that raising the minimum wage would increase the standard of living of those who make the minimum wage. I agree that the assumption that doubling the minimum wage would double housing and electricity costs is preposterous. I agree that individual markets do not necessarily walk in lock-step with the general economy.
I do not know about the effects on the general standard of living. It makes sense to me that any improvement in our standard of living through raising the minimum wage would be offset by reduced employment, reduced wages at higher levels, or higher prices. Perhaps I mixed this position up with others over the course of the debate, but the rest of what I have said should be clear.
It makes sense to me that any improvement in our standard of living through raising the minimum wage would be offset by reduced employment, reduced wages at higher levels, or higher prices.
DeleteTo me that is a theoretical hypothesis, not a thing beyond that; and the the theory (guess, whatever) is of little comfort to the real-world obvious benefit to those receiving the enhanced wage.
Also, those with fewer jobs are more likely to end up on public assistance. If the minimum wage is too low, there is not a whole of difference in this, and working for minimum wage. Again, that guess is nothing more than a hypothesis that exists amid real-world transparent effects.
"To me that is a theoretical hypothesis, not a thing beyond that; and the the theory (guess, whatever) is of little comfort to the real-world obvious benefit to those receiving the enhanced wage."
DeleteIn this scenario, the money supply is not increasing. If the minimum wage were increased, then a business could eat the costs, pay other employees less, employ fewer workers, raise its prices, etc.
Businesses can only sacrifice so much profit before they begin to decline. Perhaps many businesses could afford a minimum wage hike to some extent in this way, but not to the point that it becomes a living wage. In response to such a dramatic hike (especially if it were sudden), they would have to turn to the other methods to reduce costs. (Note again that they could only use these other methods so much before they would begin to decline for different reasons.) Those other methods could cover the costs of the higher minimum wage, but would also offset the increase in the overall standard of living. For example: if you replaced two workers who make $7.25 with one worker who makes $14.50, then there would be no net improvement in the economy. However, there would be fewer employees to do the necessary work, which would cause harm in a different way.
Rather than argue that raising the minimum wage alone would mysteriously increase our overall standard of living or that we just don't know what would happen (which isn't a compelling reason to do anything at all), perhaps you should simply argue that raising the standard of living for the least valued workers is more important than improving our overall standard of living. Whether we raise the minimum wage or raise taxes to provide for these people, the money is coming from everyone else. We simply have to determine the most efficient way to collect and distribute that money.
Having thought about this issue further, it does seem to me that using welfare programs to supplement wages is a better solution than forcing businesses to pay a living wage. I imagine that the costs of the bureaucracy, waste, and public employees involved in such programs would be lower than the costs of the harm done to businesses by raising the minimum wage. Why be attached to one method when others are on the table?
HR,
ReplyDelete"Ryan, I don't accept Premise 2. That increasing wages leads to increased prices does not mean they cancel each other out from the standpoint of the business."
Good point. Premise 2 as a universal claim is false, though it is not always so. It depends on how the business offsets its costs, the price of its products, etc.
I suppose that this issue consistently comes down to how much other workers are able and willing to sacrifice for others in terms of lower wages, higher taxes, and/or higher prices. If we agree that we ought to do something, then we have to determine the most efficient way to do it.
I wonder, then, what you think about my point about taxes in that comment. Supplementing wages to meet some standard of living costs X dollars in total, plus the related costs of the method we employ to do so. Higher taxes, higher prices, and lower non-minimum wages each have a related cost. Are you saying that higher taxes are the least costly or economically harmful overall?
Ryan,
ReplyDeleteIn this scenario, the money supply is not increasing. If the minimum wage were increased, then a business could eat the costs, pay other employees less, employ fewer workers, raise its prices, etc.
Businesses can only sacrifice so much profit before they begin to decline.
I know. McDonalds almost failed as a result of the last minimum wage increase, but they survived it.
In response to such a dramatic hike (especially if it were sudden), they would have to turn to the other methods to reduce costs.
I don’t actually recommend sudden dramatic hikes.
Rather than argue that raising the minimum wage alone would mysteriously increase our overall standard of living
I never made that argument. It is not mysterious. The poor man’s income goes primarily to housing and utilities, which are not manufacturing. How is this mysterious to you?
perhaps you should simply argue that raising the standard of living for the least valued workers is more important than improving our overall standard of living.
While I agree with that statement that raising the standard of living for the least valued workers is more important than improving our overall standard of living, I reject your false dichotomy.
Whether we raise the minimum wage or raise taxes to provide for these people, the money is coming from everyone else.
From somewhere else, yes.
Having thought about this issue further, it does seem to me that using welfare programs to supplement wages is a better solution than forcing businesses to pay a living wage.
If you are worried about small businesses, you could exempt them, and again, a radical sudden shift would be dangerous and I doubt that many people would support it. More incremental shifts should be supported. The idea that some people have to be impoverished for an economy to succeed is unproven malarkey.
Why be attached to one method when others are on the table?
False question, as there is no one who is attached to one method. All methods are routinely examined by liberals and routinely dismissed by conservatives.
"It is not mysterious. The poor man’s income goes primarily to housing and utilities, which are not manufacturing. How is this mysterious to you?"
DeleteThere is nothing mysterious about a minimum wage worker's standard of living improving when the minimum wage increases. There is something mysterious about the overall (or just everyone else's) standard of living improving when the minimum wage increases.
"I reject your false dichotomy."
Whether or not we can improve everyone's standard of living is not the issue. Whether or not raising the minimum wage does so is.
"The idea that some people have to be impoverished for an economy to succeed is unproven malarkey."
Who here has supported that idea?
"False question, as there is no one who is attached to one method."
There is most certainly knee-jerk opposition to the minimum wage among some conservatives and knee-jerk opposition to replacing the minimum wage with wage supplementation among some liberals. If we are looking for the most effective solution to the given problem, it is not enough to promote raising the minimum wage. One must show how it is better than the alternatives.
For example: If we simply supplemented wages, businesses would lose their incentive to pay anything to employees who are valued below a living wage. If I would normally be worth $8/hr. but the government promised to pay enough to get me to a living wage, a business could simply pay me $1 instead and take advantage of what is effectively a wage subsidy. Therefore, we ought to use the minimum wage instead.
Anyway, while I would love to settle economic issues with science so that we can move away from mere reasonable guesswork, we just don't have the means to do it. It is too difficult to isolate and control the variables and it is not ethical to gather data at the expense of everyone's well-being. Perhaps our economic positions are just guesses, but that applies to yours as well.
"I wonder, then, what you think about my point about taxes in that comment. Supplementing wages to meet some standard of living costs X dollars in total, plus the related costs of the method we employ to do so. Higher taxes, higher prices, and lower non-minimum wages each have a related cost. Are you saying that higher taxes are the least costly or economically harmful overall?"
ReplyDeleteRyan, I think that income taxes are generally harmful economically. They discourage earning and, in the current environment with many deductions and loopholes, they are anything but transparent.
In terms of economic harm, I would opt for sales taxes over income taxes.
Ryan,
DeleteIn terms of economic harm, I would opt for sales taxes over income taxes.
To put it another way:
I would opt for taxing the rich less and the most impoverished among us, much more. I think taxing the impoverished more is what we need to get this economy moving.
John,
DeleteThe first half of your interpretation is how I read it as well, but I will wait to hear how he would address that problem.
"I think taxing the impoverished more is what we need to get this economy moving."
ReplyDeleteThe question was about economic harm, which to me means "harm to the economy." I do not, for example, think income inequality is harmful; I think it is normal and expected in a free market.
In response to the question, I chose sales taxes over income taxes. I've acknowledged in the past that sales taxes are regressive. No question. If we are talking only about income taxes, I think a flat tax does less economic harm than a progressive income tax.
As for John's restatement, I don't think taxing the impoverished more -- which John well knows -- will get the economy moving. I don't think increasing taxes on anyone will get the economy moving.
Of course, President Obama does claim that raising taxes on some people will improve the economy.
The question was about economic harm, which to me means "harm to the economy." I do not, for example, think income inequality is harmful; I think it is normal and expected in a free market.
ReplyDeleteAnd I agree fully with is statement. Looks like the conservatives and the liberals are once again uniting.
Of course, President Obama does claim that raising taxes on some people will improve the economy.
I think Obama feels that that we have budgetary issues and it will help with that.