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Thread: Minimum Wage

  1. #41
    Gotta catch you all! Blackmail!'s Avatar
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    Quote Originally Posted by JHBowden View Post
    Blackmail!--

    Your example was an imaginary parable. In real life, wages don't get bargained down to nothing, therefore, without explaining why it is false, we know it is false.
    I'm glad you realized it is false. But then, why didn't you notice the necessity of minimal wages, to prevent the absurd outcome of my little parable?

    My example referred to an actual business situation, a concrete business decision, and real people. In other words, experience.
    Believe me: when I'm speaking of labor market segmentation and its consequences, I too am speaking of concrete business decisions, real people and experience.

    Like exploitation, propaganda is a word with a bad reputation. It is merely deliberately disseminated information. You ought to be more concerned whether statements are true or false.
    It's propaganda. And a very naive one, I should say. I mean, the model you use and scenario you describe aren't realistic at all, despite your (sincere?) claims.

    I ask you once again:
    1/ Are you currently looking for a starter job?
    2/ Do you think a whole society where everybody would look such jobs to be conceivable?
    3/ Why?

    You may have missed several factors.

    I'll give you another clue of this complex puzzle:

    Why are the USA or Europe still richer than China?

    (concrete example)
    "A man who only drinks water has a secret to hide from his fellow-men" -Baudelaire

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  2. #42
    Don't Judge Me! Haphazard's Avatar
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    Quote Originally Posted by Blackmail! View Post

    Why are the USA or Europe still richer than China?

    (concrete example)
    There are a ton of reasons for that.
    -Carefully taking sips from the Fire Hose of Knowledge

  3. #43
    Senior Member JHBowden's Avatar
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    Blackmail!--

    I referred to a real situation. An actual event from my life. Real life business, bro. And it is completely rational behavior, for a company that doesn't pay attention to productivity considerations will find itself in trouble very quickly. So minimum wage policy has consequences; I've seen it first hand.

    The USA and Europe are richer than China, but certainly not because of minimum wage policy. China fell behind during Communism, didn't exploit or even develop its intellectual and environmental resources, and is now playing catch-up.

    But isn't always about where we are, but where we're heading.

    I personally was laid off from that job I used in the production example earlier this year (I do not tell lies), and am using my downtime to buff up my software design skills-- I intend to break into software engineering spring or summer 2010. I have several friends already working in the field, so I'm getting excellent advice and will have good references. So much for market segmentation.


  4. #44
    Senior Member Bamboo's Avatar
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    Some numbers:

    History of California Minimum Wage


    In 2007 changed from $6.75 to $7.50
    In 2008 changed from $7.50 to $8.00
    Don't know how much it'll bend til it breaks.

  5. #45
    Senior Member Bamboo's Avatar
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    Quote Originally Posted by Magic Poriferan View Post
    In theory, let's say several companies pay their employees $7.00 an hour. then, suppose all but one business decides to start paying $2.00 and hour to it's employees, while one continues to pay $7.00 an hour. Assume all other factors are equal for the sake of argument. We can presume that the ones only paying $2.00 an hour will profit more, and probably have and advantage in outcompeting the one that pays $7.00.

    ...

    This is at least one reason for enforcing a minimum wage.
    Quality of labor you will get for $2.00 is crap, and the business would almost certainly fail. Also, people would find something else to do.

    I understand that this is a conceptual model, and maybe it's just an S vs. N thing, but...what's your point?

    Quote Originally Posted by spamtar View Post
    No +300% compared to less than 15% ($7.50 per hour compared with $20/25/30 per hour) is blowing the facts way out of proportion.
    The numbers are 11% from 2006 to 2007 and 7% from 2007 to 2008.

    When you're running a small business with tight profit margins, two & three quarter increases in wages add up fast.

    Quote Originally Posted by Blackmail! View Post
    I don't know if somebody here has ever heard of the "parable of piano movers"?

    Here it is:

    1/ Let's say that to move a grand piano, you need at least two men. Each one has a specific role: one near the keyboard, and another near the opposite frame. The two movers can't exchange their roles (I.e: the market is not infinite), they are too specialized.

    2/ Let's say that the two men are payed €1000 to move the grand piano.

    We can imagine that, after a short discussion, the two movers would agree to share the contract, and take €500 each. And that would be fair, since each of them produces approximately the same effort, despite their specialization.

    But now, imagine that a third mover appears. And he knows only how to handle the piano near the keyboard (-> Here we introduce competition within a specialized niche).
    Rationally speaking, he will propose to do the job for €499. But then the other mover will propose €498... and so on, and so on.

    So in the end, assuming it's better to earn something rather than nothing, we will have a situation where you will have one mover that earns €1, and the other (near the opposite frame of the grand piano), €999.

    ---

    Now, do you understand the purpose of a minimal wage? It's only a regulation tool.

    I should add that if our CEOs usually earns so much, it's not because they are capable or competent, or because they are the only ones who are able to take risks: it's only a myth they retrospectively invented to justify their crazy salaries.
    Most of the time, it's rather because they manage to prevent or circumvent any possible competition around their working niche. This way, they will stay as long as possible in the situation of the mover that will earn €999.

    (That's the real trick, and it works everywhere)
    Nice story, give a real life example of that.

    ...

    On the subject, I've moved pianos before. Not for $1/hr.

    Guess why.

    Quote Originally Posted by JHBowden View Post

    The irony is that progressive policies such as the minimum wage hurt those they are designed to help the most -- minorities, the poor, and young workers looking for starter jobs.
    To some extent, but essentially right.

    Quote Originally Posted by Blackmail! View Post
    I ask you once again:
    1/ Are you currently looking for a starter job?
    2/ Do you think a whole society where everybody would look such jobs to be conceivable?
    3/ Why?

    You may have missed several factors.

    I'll give you another clue of this complex puzzle:

    Why are the USA or Europe still richer than China?

    (concrete example)
    This wasn't directed toward me, but I'll chime in.

    How is this related to...anything?

    Question 1 means nothing.
    Question 2 is silly. Of course not. The whole country isn't planning to be paid minimum wage. Just the guys working at Burger King.
    Question 3: Because those jobs suck, I have skill to do other things, and I can get paid more.
    Don't know how much it'll bend til it breaks.

  6. #46
    ^He pronks, too! Magic Poriferan's Avatar
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    Quote Originally Posted by Bamboo View Post
    Quality of labor you will get for $2.00 is crap, and the business would almost certainly fail. Also, people would find something else to do.

    I understand that this is a conceptual model, and maybe it's just an S vs. N thing, but...what's your point?
    First of all, a lot of businesses for a lot of jobs don't need quality labor. In fact, a lot also benefit more from making shitty products than quality products (again, specifically if they are oligopolies or monopolies). Secondly, to attract talent (and I'm not even going to get into all of the problems with that theory) one need only pay more than the other options, no matter how low that is. It's all about comparison. The point then, again, is that if an oligopoly of companies all agree to be equally cheap, people will not have the choice to get a better paying job in that particular field/market, because there won't be any.
    Go to sleep, iguana.


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  7. #47
    Don't Judge Me! Haphazard's Avatar
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    Setting a minimum makes sense.

    Changing it now, of all times, doesn't.
    -Carefully taking sips from the Fire Hose of Knowledge

  8. #48
    Ghost Monkey Soul Vizconde's Avatar
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    Quote Originally Posted by Bamboo View Post
    The numbers are 11% from 2006 to 2007 and 7% from 2007 to 2008.

    When you're running a small business with tight profit margins, two & three quarter increases in wages add up fast.
    .
    I understand that it unduly harms the small businessman but most businesses will be able to continue with small incremental raises especially when they know there coming. They wouldn’t be necessary in the first place if the Fed were not given blank checks to create trillions of dollars that were not in the system before.

    That wasn't the point. The point was that BHJ's 300-500% raise hypothetical would not be just an aggravated version of the small incremental raise in minimum wage rather it would spell economic disaster and social unrest.

    If there was a 300 to 500% raise in minimum wages a substantial number of businesses in California would go under there would mass firing, riots and other social unrest. He addressed it as if both humans and small businesses were these super resilient machines that wouldn't break if placed under undue stress. BHJ didn't seem to appreciate this and appeared so removed from reality that I found it was pointless to belabor the point.
    I redact everything I have written or will write on this forum prior to, subsequent with and or after the fact of its writing. For entertainment purposes only and not to be taken seriously nor literally.

    Quote Originally Posted by Edgar View Post
    Spamtar - a strange combination of boorish drunkeness and erudite discussions, or what I call "an Irish academic"

  9. #49
    Senior Member avolkiteshvara's Avatar
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    One thing no one is mentioning is timing. Its not like X happens then Y, fossilized in time. X happens, in the short-term it creates Y. In the long term it creates Z.

    The argument about needing minimum wage to prevent collusion by companies to depress wages depends on how competitive the industry is.

    Perhaps we could assess minimum wages on more monopolistic industries and float wages on perfectly competitive industries; tying the enforced minimum wage to an averaged indexed rate of the other competitive industries.

  10. #50
    pathwise dependent FDG's Avatar
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    Quote Originally Posted by Blackmail! View Post
    The moment you realize markets are per se limited to specific niches in society, when you introduce specialization, then marginalism becomes less and less effective as a theory. When you have a competition (however tiny!) over a limited sector of the economy, theory says wages will inevitably drop to... zero. Or at least, to the minimal possible wage. Here, the so-called "invisible hand" will always lead to absurd results.
    What type of theory, sorry? I think you're conflating two different concepts. Minimal possible wage does not mean low wage (or even zero, as you say). Indeed, if the ratio of labour offered to labour demanded is low, the minimal wage will be a quite high wage. It will still be the minimal among all possible wages, given that the firm wants to minimize costs, but it won't be necessarily low relatively to other wages and/or possess a low purchasing power.

    But now, imagine that a third mover appears. And he knows only how to handle the piano near the keyboard (-> Here we introduce competition within a specialized niche).
    Rationally speaking, he will propose to do the job for €499. But then the other mover will propose €498... and so on, and so on.

    So in the end, assuming it's better to earn something rather than nothing, we will have a situation where you will have one mover that earns €1, and the other (near the opposite frame of the grand piano), €999.
    Well, the italicized assumption is highly unrealistic. We have conceived the abstract (and quite useless in pratical application, but useful for understanding) concept of utility function in order to model more realistically those situations. Working has a cost, called "disutility"; whenever the disutility is higher than the wage, he will drop out from competition. So, in a modern society (thus, leaving out considerations of the kind: he needs to eat!), one of the two will thus drop out before reaching a wage of one (f.e. if the utility function is logarithmic, wage = 1 -> utility = 0, thus a wage of 1 will never be accepted). Yes, you might object that I am basically supposing an infinite market when I say that "the other worker will drop out". Let's put it this way: my reasoning applies to a good number of workers, but there is a segment of which is more subject to "take it or leave it" type of situations. This is one of the reasons why I support minimum wage.

    Anyway, however, if you add imperfect/asymmetric information & market failures (thus the worker does not exactly know his value to the company, demand might be too low because wages are too low (another reason why universally low wages would be a really dumb choice for industries - who are you going to sell stuff to?)) and timing problems (during expansionary times inflation might be really high because industrial production rises, but wages will likely be stationary, since CEOs aren't the nicest people ever, thus purchasing power will lower), then minimum wage becomes an absolutely necessary measure.

    One thing no one is mentioning is timing. Its not like X happens then Y, fossilized in time. X happens, in the short-term it creates Y. In the long term it creates Z.

    The argument about needing minimum wage to prevent collusion by companies to depress wages depends on how competitive the industry is.

    Perhaps we could assess minimum wages on more monopolistic industries and float wages on perfectly competitive industries; tying the enforced minimum wage to an averaged indexed rate of the other competitive industries.
    Yeah, I agree.
    ENTj 7-3-8 sx/sp

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