I should stop reading the economy-related blogs, people, because they are confusing me. See the following post, for example:
In the midst of the Second Great Depression, Senator Tom Harkin of Iowa has introduced a bill increasing the minimum wage to $9.88 an hour.
“If my proposal went through, a $15,000 a year worker will make $20,000 a year,” he says. “You know $5,000 a year is significant to someone in that category. [It] may not get them out of poverty, but it makes life better.”
OK, we can all agree that $15K per year is abysmally low and nobody can live on that. An income of $20K per year, while still low, sounds much better.
What I don’t get, though, is how the conclusion is being drawn that raising the minimum wage would raise incomes from $15K to $20K. Wouldn’t the employers simply outsource the jobs overseas? And wouldn’t the rest of employers simply stop hiring new workers and, instead, burden the existing workers with even more job responsibilities?
It is probable that I’m not seeing something important here but such suggestions sound like nothing but pretty, self-consoling speechifying. If a politician proposes that the minimum wage be raised, that politician should either find the courage and make it clear that such measure needs to be accompanied by outlawing the outsourcing of jobs and introducing a very stringent regulation of the workplace, or stop blabbering on the subject irresponsibly.
Again, correct me if I’m wrong here, but it seems to me that the economy in this country suffers from being subjected to endless half-measures. It’s like nobody has the courage to select a course of action and follow it without vacillating, going two steps backwards for every step forward, and without actually moving in any direction.
Is it any wonder that we are stuck in a protracted period of economic stagnation at this moment?
Clarissa's Blog 
I don’t know much about the economy, but wouldn’t something like that also encourage an increase in inflation?
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All other things being equal, yes, but sometimes inflation is a good thing.
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I agree.
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I don’t know much about the economy, but wouldn’t something like that also encourage an increase in inflation?
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No, because there are so many people working on other salary scales.
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Clarissa is exacrtly right. High minimum wages are job killers. Firms substitute capital for labor, as you will see in any major supermarket or department store. One reason for high youth unemployment in Europe is the high minimum wage. Many famous Americans benefited from ther absence of the minimum wage when their parents fled from Europe in the early twentieth century. Sweatshops, as they are sometimes called, offered first job toe-holds and invaluable work experience for individuals who otherwise would have remained unemployed. $15,000 a year is an enormous wage from a world-wide perspective!
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High minimum wages are job killers.
Not always. According to various studies a truly minimum wage actually increases jobs as there is more money to go around. The keyword here is *minimum* as in very low, like $6 or $7 an hour. Beyond it does seem to be a net negative (“job killers” is a bit of an overstatement).
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“Sweatshops, as they are sometimes called, offered first job toe-holds and invaluable work experience for individuals who otherwise would have remained unemployed. ”
Stop praising child slavery, fucktard!
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David 2:50, I can’t speak for Clarissa, and one her programming posts says that she doesn’t mind if people are aggressive and rude, so I guess your comment is okay with her. But if all you have to say to a commenter you don’t agree with is to give them orders and call them names, then some of us might wonder why you even bothered.
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“$15,000 a year is an enormous wage from a world-wide perspective!”
Too bad cost-of-living doesn’t scale on a global perspective.
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Even if it’s true that “high minimum wages are job killers,” I’m not sold on the converse proposition that low minimum wages mean ample chances for “first job toe-holds and invaluable work experience for individuals who otherwise would have remained unemployed.” Surely in the Golden Age of Immigration, some (many?) failed to gain a toehold. Appealing to the sense of immigrant heritage of living Americans is OK, but so is pointing out that economic failures at migration can be expected to be underrepresented in the population of “people with descendants.”
Like you say “$15,000 a year is an enormous wage from a world-wide perspective!” As voxcorvegis says “…cost-of-living doesn’t scale on a global perspective.” Actually, it does, sort of, but it doesn’t ‘track.’ But procuring the very rawest of necessities in the very cheapest of forms available in America still requires a wage that simply won’t compete against a global south in which the going rate for labor is pennies on the American dollar. If my take on your [Charles Rowley’s] worldview is correct, then I’m guessing you’re of the school that working should be a necessary, but not sufficient condition for economic independence. If you’re also of the mind that independence is a prerequisite for freedom, then I will do everything in my ability to draw some frankness out of you. If your views are a little more moderate than that, then I’d welcome hearing in what way (and of course would enjoy watching you get pilloried as a RINO by the increasingly frothy “movement conservatism” that’s “out there”).
Note that if moonlighting is often a prerequisite for solvency/independence/survival, then the number of jobs needed to meet the population’s needs gets bigger—well above and beyond enough “jobs created” (a sick and twisted expression, but I’m rambling as it is) to keep up with population growth.
Many in the alter-globalization movement (to which I’m a sympathizer) point out that the WTO model of globalization has created a world in which capital and goods flow between countries almost frictionlessly, while ports of entry most places are more and more authoritarian (and resistant) towards human beings (migrants). Now if these multilateral treaties essentially abolishing economic policy also contained agreements to radically lower barriers to migration (effectively a “no borders” or “no one is illegal” policy) maybe we could talk about some countries’ workforces being “uncompetitive” without that being a patronizing insult, but even then, it would seem likely that many workers who aren’t “killer resumes” will have to settle for life in poor countries, which are seldom if ever free countries. So political freedom (maybe even basic human rights) becomes (for Americans, too) a privilege not a right. Bleeding-heart libertarians are neither.
Also, what David Gendron said, minus the !@#$%^&* expletives.
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You’re too kind! 😉
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Hm, I’m also not an economist, but I’m not convinced it would lead to a net loss of jobs. Certainly manufacturing positions in very large companies could get moved elsewhere, but my impression is that those jobs are mostly gone already or will be gone shortly. The minimum wage service positions can’t really be exported, and small businesses probably also can’t move their jobs (though if they’re barely making ends meet, I could see this potentially strangling some small businesses as well). I think there is no way of knowing if this would be good or bad overall unless someone ran all the numbers.
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A lot of minimum-wage jobs can’t be sent overseas. For example, the lifeguards at the municipal pool where I live. What tends to be outsourced are jobs with truly high labor costs (e.g. computer tech support). The minimum would have to be quite a bit higher to make ordinary minimum wage jobs worth outsourced. A lot of unskilled labor will be automated anyway, whether or not the minimum wage is raised (self-checkouts at the supermarket).
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I agree that these jobs are disappearing very fast. Plus there are always illegal immigrants who agree to work for lower wages.
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In econ 101 one can see a simple graph
However, in real world many things may make it less simple. F.e. if there is no demand, there is no supply. If a small business owner can sell X sandwitches per day, and min wage goes down, he won’t take workers he doesn’t need anyway. But he will pay his min wage workers less.
What’s the point to make even a bit more people work, if they will need welfare system anyway because of very low wages, insufficient for life? The idea, hopefully, is to make more people able to support themselves with honor, not to make all “earn” 0.5$ a day.
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Also want to support J.’s point about:
“A lot of unskilled labor will be automated anyway, whether or not the minimum wage is raised”
And overseas wages are so low that no matter how much you lower min wage in US, it won’t be low enough. Interesting table:
http://en.wikipedia.org/wiki/List_of_minimum_wages_by_country
F.e. I see that in Palau min wage is US $2.50 per hour. In Estonia it’s 290 euros (350.581 American dollars) per month. Should it be lower or max the same in US to compete with this great country? In Yemen there is no min wage at all.
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We pay a minimum wage to our lab workers because there simply isn’t money for higher wages. If the minimum wage were to be raised, we’d simply have to let one or two of the workers go. Then the rest would have to work that much harder. Which doesn’t sound extremely fair.
Eventually, this could all lead to people having to work at the lab for no money at all. The man who oversees the lab, for instance, isn’t paid for this work. It has simply been heaped on him on top of his other duties.
I have no idea how this issue could be solved.
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We have that problem but it is not caused by size of minimum wage but by levels of state funding for university, university funding for department and departmental decisions re use of budget.
Minimum wage isn’t a living wage and should be raised. I think it is sometimes imagined to have more power than it does to cause inflation, ruin businesses, and so on. If a business is in that much trouble, running so close to failing that a rise in the minimum wage will kill it, maybe it needs to look at a number of issues. I have a strong impression that the oft invoked image of the poor, kindly little business run over by the wage needs of its workers is propaganda.
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How do the pressures of globalization affect the very rich? Ought their salaries to be capped so that the developing world managers don’t feel envy and rage and throw a coup?
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They pay their own salaries, so who can coup them? 🙂
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I don’t know but we should surely wait and see. Managers from the third world can be very clever. Once they accumulate a bit of capital, they may wish to get rid of the higher management in another country, extend their factories and take over the world.
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Not too many minimum wage jobs can be outsourced at that level. Minimum wage jobs tend to be jobs which need to be done at the locale, like a short order cook or dishwasher. Jobs like that are in far more danger of being automated than outsourced. 🙂
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A minimum wage is a price floor. Theoretically, this means that, if the price floor is above the equilibrium point, it induces businesses to reduce the number of low pay jobs and increases the number of people looking for them. Since there are fewer jobs and more people looking for work, this idealized construct increases unemployment among those whose labour is worth less than the minimum wage.
WP discusses a number of studies regarding the effects of the minimum wage. For example, one possibility is that the US minimum wage has been close to the theoretical equilibrium point, which means that it may well not really be making much of a difference.
The negative income tax system (which I favour) would make a minimum wage pretty much unnecessary.
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Yup, it’s one of two things, I’m quite convinced, gated communities for the still-economically-viable (I’m guessing the professional-managerial elites and above), or negative income tax (which I prefer to call universal basic income, but tomāto, tomäto) for the restofus.
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State imposed minimum wage is outright stupidity. But we should consider abolishing these anti-syndical “right to work” corporate Nazis laws, though.
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OK, you have confused me completely, David. You are against governments forcing people to pay taxes but in favor of letting unions force people to pay the union dues? I honestly don’t see the logic here.
I believe that the collapse of the union movement has been a tragedy for the US. But then I also don’t see anything bad in taxes.
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“in favor of letting unions force people to pay the union dues” Yes, I’m in favor, if this disposition is part of the collective bargaining agreement, not enforced by the government like in Québec.
One exception: I’m not in favor of that Rand Formula in government services.
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Right to work laws:
http://en.wikipedia.org/wiki/Right-to-work_law
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A misnomer if there ever was one. The literal meaning of “right to work” is zero unemployment. The PR concept called “right to work” is simply “non-union shop.” Plutocrats, tools and fools draw a dichotomy between union shop and “open shop,” implying that union membership is a choice in the latter, but that distinction is de jure, and therefore mooot. In practice, an open shop is irrevocably a non-union shop.
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Exactly!
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“The negative income tax system (which I favour) would make a minimum wage pretty much unnecessary.”
I agree with Rob on this, even though I want to abolish all taxes ultimately.
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Knock a decimal point off and understand what inflation has done to our economy. 20,000 is the equivalent of 2,000 in the 50’s. The average low-skilled or no skilled job paid about 3,000 a year, the equivalent of 30,000 a year. This means in real terms that poorly paid workers are being paid much less than they were being paid in the 50’s. I can’t understand why anyone thinks it’s OK to expect people to work all day for wages like that. It’s easy enough if you are affluent to imagine you could get by on that kind of money, but really you couldn’t.
Furthermore, it’s the service economy where most of the minimum wage jobs are. That means women, mostly. I’ve done those jobs and been treated like dirt by people above me in the miserable pecking order societies of office work and hospital work and openly sneered at by hospital patients as I washed their bodies. So ungrateful were these people that I remember well the two or three people who treated me like a human being. And I had to work very hard and cared about what I was doing but was always being reprimanded by my so-called superiors for the slightest things.
Try minimum wage work and see how you like it. And read Barbara Ehrenreich’s book on the subject, Nickel and Dimed.
Don’t let the way you are currently being spoiled cause you to identify with the rich.
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I hope the “being spoiled” comment wasn’t addressed to me because I don’t really appreciate people condescending to 3rd world immigrants.
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Draw your own conclusions.
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What is the point of saying things if you are not even trying to be understood?
Of course, this is not the first time I encounter hatred of immigrants among people who consider themselves progressives.
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I have worked for minimum wage when I first began my career. I was never treated like dirt and was not reprimanded more or less than I have been in high paying positions. @Hattie: I’ve noticed that your comments are often aggressive and your attacks are unfounded. Could it be that the treatment you received was prompted by the vibe of negativity you put out?
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“Once they accumulate a bit of capital, they may wish to get rid of the higher management in another country, extend their factories and take over the world.”
I am sure this has already been done by several individuals at least, since there are so many powerful multinational corporations. But the obvious example of it already having happened is the drug cartels.
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Those who praise child slavery are fucktards.
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The minimum wage in Australia is around $15 per hour which is around twice what it is in the US, yet we have only 4.5% unemployment. Perhaps the US should try giving all workers a wage that they can live on. Even Henry Ford realised having workers that could afford to buy his products meant that he sold more product.
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Australia is a freer economy than USA, except for minimum wage, so this is not a big surprise.
“Henry Ford realised having workers that could afford to buy his products meant that he sold more product.” I agree with Henry Ford on this! Even now, Ford is less fucktard than Government Motors!
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freeer
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I also think that Henry Ford was a lot more progressive than anything that has happened around GM since his times.
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David, what do you mean when you say Australia has a freer economy? Our employers pay the 9% soon to be 12% superannuation guarantee for each employee (so add another 9% to that $15) that gets put away for the retirement of the employee. We have minimum 4 weeks paid holiday per year for everybody and 10 weeks long service leave every 10 or 15 years (depending on state or federal award). So removing workers conditions in an attempt to beat the costs of the third world is not the only way of doing business.
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4 weeks paid holiday! I’m hugely envious. This sounds so unattainably civilized. My husband has 10 vacation days this year, poor mite.
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Henry Ford wasn’t progressive, he was a die-hard anti-Semite and Nazi supporter, who had the Grand Cross of the German Eagle bestowed on him in 1938 by the Nazi party, the highest decoration the Nazis could give to foreigners.
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we also have 10 days sick leave per year. So if you have a day off because you are sick you get paid (upto 10 days) usually if it is only one or two days at a time you need no proof you are sick any longer and your employer can ask you to get a certificate of sickness from your doctor.
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These 10 days include both sick leave and vacation. So now that he used them all up, he’d better not get sick until Bee Year’s.
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Why doesn’t everybody just e
migrate to Australia?
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I don’t know about everybody but for me the only negative thing about Australia is that Hispanic Studies aren’t a flourishing field. I need to be where my work takes me and make the best of it.
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“I don’t know about everybody but for me the only negative thing about Australia is that Hispanic Studies aren’t a flourishing field.”
No suprise here. There’s almost no hispanic people there.
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I talked about this:
http://www.heritage.org/index/default
And this is not a liberal site.
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