Wow, Demand Curves Really DO Slope Downward!
From the article "Restauranteurs Wrestle With State's Minimum Wage Hike to $9.04," about the January 1 increase in Washington state's minimum wage to $9.04 per hour, the highest state minimum wage in the country and almost $2 more per hour than the $7.25 national minimum wage:
"Some restaurants will increase prices. Others will reduce the hours of employees on minimum wage. And others will find cost savings elsewhere.
"Some restaurants will increase prices. Others will reduce the hours of employees on minimum wage. And others will find cost savings elsewhere.
For Chad Mackay, president and chief operating officer of the Mackay Restaurant Group, the minimum wage hike computes to an additional annual cost of around $50,000 for his company's five restaurants.
Mackay says he will reduce the scheduled hours for servers by starting shifts later and phasing them out earlier at the end of the evening.
“The increase in the minimum wage is one of these things that there’s a real financial cost,” Mackay said. “We don’t just sit back and take it. We have to run labor tighter.”
At Joey in Bellevue, like at Mackay Group restaurants, employee hours will be reduced to adjust for the difference.
“We are already making adjustments on how many people we are staffing at the beginning of the year because business is slower during that time,” said Nick Rehse, a shift leader and bartender at Joey. “We make adjustments to dial down the hours.”
MP: This example provides evidence that minimum wage workers are not necessarily better off with a higher minimum wage. With a reduction in hours thanks to that pesky downward-sloping demand curve for restaurant labor, minimum wage restaurant workers might actually see their weekly earnings go down, not up. And it also provides an example of how the number of workers employed might not be significantly reduced following an increase in the minimum wage, even when there could be a significant reduction in hours worked. Therefore, minimum wage workers could be made worse off with an increase in the minimum wage from reduced hours and income, even if it doesn't show up as an increase in the unemployment rate.
124 Comments:
A higher wage and more leisure time could be a net benefit.
And if prices rise, higher wage earners will help pay for a wage floor.
In addition to the higher min wage, Seattle restaurants must now provide "paid sick and paid safe time", as a result of a recently passed city ordinance.
Anecdotally, I am hearing of most resturants staffing by on-call and calling off for scheduled shifts, depending on business. This seems to be a direct result of state and city meddling.
Ah, the Seen and the Unseen once again rears its head.
Tipping, minimum wage and the resulting misallocation of resources
RIDER COMMENT: In my ongoing effort to eventually piss off everybody, here’s my outing of the tipping racquet in California.
SAN DIEGO UNION-TRIBUNE columnist Michael Stetz writes well, with insight and humor – even when I disagree with him. Recently he had a pretty good column on tipping – “Here's a tip, or maybe not – it all depends.”
http://tinyurl.com/q4k2dr
I was inspired to waste some time posting three comments online with his article. Realizing my mistake, I did some “cut and paste” below to waste YOUR time.
Still, you might find my ruminations interesting. And yes, is it partly political.
***
RIDER: The story includes an error common in such stories about tipping in California. Stetz asserts in passing that "waiters and waitresses . . . work below the traditional minimum wage because tips are an assumed supplement."
True in many states, which have lower minimum wage for such tip-oriented jobs. Not true in CA.
Waiters, valets and indeed any hourly employee in CA is paid at least the full CA $8 minimum wage -- plus tips (if any). This results in CA having some of the brightest, most over-educated waiters in the world.
It is very common for such workers to make a total of $15-$20 an hour -- and more. Plus they "get paid" daily, and they usually forget to report the full amount of the tips for tax purposes.
Our ill-advised minimum wage policy results in what economists coldly call a "misallocation of resources." Educated, intelligent people are performing menial work, wasting their talents doing work best left to less over-qualified workers (who indeed need the work just as badly). The productivity of America suffers as a result.
I've seen young dentists forgo starting their profession to remain as bartenders -- making hundreds of dollars per night. [Why a dentist would prefer serving drinks over working inside people’s mouths – inflicting pain and earning hatred – is a mystery to me.] Throughout CA, there are talented people wasting their abilities waiting on tables, parking cars and doing other work best left to others.
Few of us have the courage to tip really low to reflect this economic windfall -- and to encourage our talented tipees to find more productive work. But at the very least, don't over-tip.
Note to restaurant workers – ignore my comment’s accompanying photo. I'll be in disguise when next I eat out.
***
A couple other points:
- 1. Watch your bill. Some restaurants do not highlight the included gratuity when charged. Too many people tip on an already tipped bill. And the waiters too often fail to point out the duplication.
- 2. Don’t tip on the full bill – the part called “sales tax.” The sales tax has nothing to do with the restaurant’s product or service. With the sales tax, we are being “serviced” by the state – like cows being serviced by the local bull.
We’ve actually put waiters, waitresses and busboys in a position where they profit from higher sales taxes – which results in higher tips from most patrons. We’ve already got all the government workers voting for higher sales taxes – let’s not add the legions of restaurant staff to the “raise taxes” side.
***
One other thought (just in case I haven't yet made an enemy out of ALL food service people).
The generous state of California provides a full minimum wage floor for folks who normally make their living off of tips. Naturally that wage is cranked into the price of the meal. Then we pay a tip on that inflated meal price. In essence, we pay a tip on the hidden extra wage.
'Vat a country!
Yeah, these dimwits who work in restaurants---they need to copy lawyers, and restrict supply through licensing.
You see, a minimum wage is bad, these guys are getting rich at $9 an hour. They will get lazy.
Licensing to restrict supply of lawyers is A-OK.
$450.00 an hour for glorified clerks (lawyers)? Oh, that is fine.
When CEO's increase their salaries by millions of dollars, we do not hear of schedules adjustment to decrease their earning power or adverse effect on production costs. Often what we hear from the elites is that they deserve it (meritocracy). Perhaps, for them the demand curve has a different slope, or it is only when the minimum wage increases that output is affected. Of course, both claims cannot be true. The problem with the analysis is that it does not consider the income effect of a rise in the minimum wage. It we include the income effect from the increase in the minimum wage, there would be some outward shifting of the demand curve for goods and services. Therefore, demand for goods and services will increase, as well as the demand for more workers. If the analysis is inclusive, there is a net benefit to the rise in the minimum wage. Demand is both a function of income and prices.
"When CEO's increase their salaries by millions of dollars, we do not hear of schedules adjustment to decrease their earning power or adverse effect on production costs"...
Then apparently you need to broaden your horizons on who you're listening to...
It's not a "misallocation of resources" when a firm hires the best worker, e.g. "young dentists forgo starting their profession to remain as bartenders -- making hundreds of dollars per night."
Good bartenders are hard to find.
If there were abundant jobs and starting a business became easier, then you can hire less qualified workers.
Some people prefer to work as a bartender for $100,000 a year than a dentist for $150,000 a year.
And some people prefer a good bartender than a bad dentist.
It [sic] we include the income effect from the increase in the minimum wage, there would be some outward shifting of the demand curve for goods and services. Therefore, demand for goods and services will increase, as well as the demand for more workers.
There is no "income effect" if their hours are cut. And even were they not, there would be no increase in the demand for goods and services because the restaurants would have to reduce either their capital purchases or the restaurant owners would have to take it up the keister and cut back on their own consumption spending.
Wage increases that result from productivity improvements do result in your predictions. Wage increases created by government legislation do not.
You could do with a good dose of capital theory, but, come to think of it, any sort of economic theory would help.
Restaurants get stuck more than just with the minimum wage increase: the IRS is making them pay FICA and Medicare on tip income also. Restaurants already get socked with absorbing the credit card processing fees on tips (they cannot pass the fees on to employees) and now, another 10% gets added on.
In an ironic twist, higher minimum wages mean higher costs to the restaurant, which means higher meal costs to the consumer. And, as tips are based upon those higher meal costs, higher income for the servers.
Labor is a big part of the overhead of many restaurants. We personally know of one restaurant in a medium-sized town where most of the servers, working less than 28 hours per week, are making over $40k per year.
Does someone making $40,000 per year really need an increase in minimum wage?
Employing teenagers, particularly black teenagers, at market prices is the best thing, since it :
a) Consumes their time and keeps them out of trouble.
b) Teaches them skills that makes them employable later.
By increasing the minimum wage and keeping them out of the labor force, they join gangs. And every time they shoot each other as part of these gangs, the costs to the taxpayer in police/court/hospital charges is about $2M.
Plus, a high minimum wage increases illegal immigrants coming here, as they will work at market wages.
Mark,
An analysis that finds the correlation between an increase in minimum wage and youth crimes/gang activity would be interesting.
Well, at least all the illegal immigrants know that Seattle is where they should be going. They can make $8/hour there as opposed to $6/hour in the rest of the country.
They can make $8/hour there as opposed to $6/hour in the rest of the country.
Which may not do much for them, since the cost of living in Seattle is increased because of the big minimum wage. Lots of other big cities do the same thing: crush business with regulations and then wonder why working class people can't live there anymore.
They really need to make a suggested minimum wage endorsed by government, that way liberal business owners would have an incentive to pay their folks more because every regulation is sacred.
Mr. Mackay - you mean you don't pick the money from the magic money tree?
If government didn't raise the cost of living through more regulations, taxes, fees, fines, fares, tolls, etc., then government wouldn't have to raise the minimum wage too.
Big government makes people work harder for less, ceteris paribus.
All they have accomplished is to outlaw all jobs that pay less than $9.05 an hour. Why must government insist on interfering with two parties mutually agreed transactions?
Rebutting right wing economists follows a familiar pattern. Right wingers don't like looking at data, studies, or history. They like to concoct an idea that sounds plausible to them. If you raise minimum wage employers will hire less people or work them less hours. Sounds plausible. Where is the emperical evidence that long term this is the consequence? Because there are counter acting forces. A wage boost can spur demand, and demand can spur more hiring and longer working hours. Which effect predominates? That would require looking at studies or history. So the right winger knows nothing of it.
Here's one study that serves to evaluate the effects of minimum wage increases. The study may have weaknesses. But it's a better basis for a conclusion then an anecdote about how one business owner will scale back working hours.
For Liberty, presumably, when one person has money and another needs money, desperately, then there can be exploitation, particularly with an oversupply of labor.
An example of exploitation is a poor Mexican immigrant willing to work for $5 an hour to wash windows of skyscrapers without a safety cord.
Businesses think they are the light that shines through a prism, when they (like the worker) are just a part of the prism that receives it.
...there are talented people wasting their abilities waiting on tables, parking cars and doing other work best left to others.
Blame business for wanting too much out of these people or not paying them enough. They made the decision, and had every opportunity to choose otherwise.
If there were abundant jobs and starting a business became easier, then you can hire less qualified workers.
Not everyone is blessed/cursed with entreprenurial qualities. Forcing people into that by desperation does not change that they do best when they work for a stable, secure organization.
Stronger regulations get there quicker without the need of business formation by those that do not truly wish to do such.
By increasing the minimum wage and keeping them out of the labor force, they join gangs.
Again, the blame can be put on busineses for not hiring. The business failed to hire, thus the teenagers join gangs.
Plus, a high minimum wage increases illegal immigrants coming here, as they will work at market wages.
This too, is another case of business making the choice of thinking they're above the market. Vigorous enforcement of immigration law (e.g. Arizona SB1070, Alabama, Georgia models) is the proper path - to deny businesses the ability to enslave.
An example of exploitation is a poor Mexican immigrant willing to work for $5 an hour to wash windows of skyscrapers without a safety cord.
That's an example of free exchange. I notice there's no requirement to work as a window washer. Is there a reason you are so allergic to people making their own decisions - beyond your own erroneous assumption that you are superior to these Mexicans?
Blame business for wanting too much out of these people or not paying them enough. They made the decision, and had every opportunity to choose otherwise.
I blame you for denying workers employment by refusing to get off your duff and start a business to employ them at cushy wages with loads of benefits.
You complain about others not paying employees enough while you pay NOTHING and employ nobody. Zero. You are negligent. You are the worst sort. The fault is yours.
A point that needs to be made is that an increase in the minimum wage of tipped servers of say, $2, increases the wages of those who continue to work by $2 but causes those who lose a job to lose $20 an hour (minimum wage + tips!). Thus, even if after a minimum wage hike, the total wages paid by employers stayed the same, those losing jobs (work hours) still lose due to less tips.
That's an example of free exchange.
No, that is an example of a business wanting self-disposing slaves instead of a mutually respectful relationship. Thus the person must be denied the job in favor of a legal citizen.
$5 and no safety equipment is asking for that person to die.
I blame you for denying workers employment by refusing to get off your duff and start a business to employ them at cushy wages with loads of benefits.
Yet you make the incorrect assumption that everyone is meant to be an entrepreneur, and that there is something wrong if one isnt. Some people are better as part of a secure business as opposed to being a business owner; it is not a deficiency despite your implications as such.
Add to that comment that as a restaurant raises prices in response to increased overhead from increases in minimum wage, fewer people can afford to eat at the restaurant.
Fewer customers = fewer hours worked = less tip income also.
Methinks, perhaps, that poor Mexican doesn't believe he's being exploited and believes the odds of getting killed or injured is only 1% (when it's really 10%).
Afterall, some labor is expendable, right?
It's uncertain if the Chinese masses were exploited.
Moving from the farm to the factory likely raised their living standards (i.e. they became less poor), although they had to work hard for it, and many were forced to move, because of pollution, deforestation, erosion, etc.
Of course, U.S. multinationals and the communist elites made huge profits, while U.S. consumers benefited from lower prices.
Methinks, perhaps, that poor Mexican doesn't believe he's being exploited and believes the odds of getting killed or injured is only 1% (when it's really 10%).
Right. Perhaps the poor Mexican is not as smart as you are and doesn't realize that your arbitrary definition of exploitation is the correct one.
I agree he may have assessed the odds poorly. But then, people managing their own money almost always assess the odds poorly. Perhaps there should be a law that only experts like me should be allowed to trade securities on the exchange. After all, we wouldn't want your ignorance to be exploited by professionals like me when there's every chance that I'm on the other side of your trades, eh?
And why allow you to make your own car buying decision. There's no evidence at all that you are expert on cars. You're likely to make a mistake. That shouldn't be allowed to happen. Car companies will exploit your ignorance.
Actually, you're not an expert in almost any decision you make (save professional decisions - and even that's not always a given). Why allow you to make any of your own decisions?
Yet you make the incorrect assumption that everyone is meant to be an entrepreneur, and that there is something wrong if one isnt.
Nope. I make exact same complaint about you that you make about entrepreneurs. They don't pay you enough. They don't tuck you in at night with eiderdown quilts, wah wah wah.
Instead of demanding handouts from others, you either need to shut up or put up.
Methinks, people learn from their mistakes, and even the mistakes of others, e.g. the realization that a safety cord is important when washing windows of skyscrapers, after you watched a few people fall 80 stories.
I suspect, most people who earn the minimum wage are the young and the poorly educated.
Prime targets for exploitation.
All they have accomplished is to outlaw all jobs that pay less than $9.05 an hour.
There are jobs for which I'd gladly hire a disabled or retarded (is that too un-PC here?) employee, if I could pay a wage appropriate to their productivity level. Instead, they have been intentionally and permanently rendered unemployable.
Randian, I think, we should get all the people who aren't disabled or retarded employed first before thinking about how to get them employed too.
QED, the minimum wage hurts the people it is supposed to help. But the minimum wage is a political issue and the Dems win on this one. If I was running as a Republican I'd take 'their' $9.05 per hour and raise it to $11.00.
"Right wingers don't like looking at data, studies, or history. Blah, blah, blah." -- Jon
Like most leftists, Jon unquestioningly adopts the position of his comrades and assumes that those with a different opinion must be ignorant of the facts. The National Employment Law Project (NELP), which is the source for the Hill article that Jon links to, is the creature of several left-wing foundations including the Tides Foundation and the George Soros' Open Society Network. It's express purpose is to advance leftist policies. So, calling anything that they fund, release and promote "research" is simply laughable.
Prior to the attempted imposition of a higher minimum wage in Missouri, via a ballot initiative, the Show Me Institute conducted a survey of all the available economic research of the effect of the minimum wage:
This paper provides an overview, based on a large body of existing research, of evidence on the effects of federal and especially state minimum wage increases ... The evidence from a large body of existing research suggests that minimum wage increases do more harm than good. Minimum wages reduce employment of young and less-skilled workers. Minimum wages deliver no net benefits to poor or low-income families, and if anything make them worse off, increasing poverty. Finally, there is some evidence that minimum wages have longer-run adverse effects, lowering the acquisition of skills and therefore lowering wages and earnings even beyond the age when individuals are most directly affected by a higher minimum.
The survey is available in PDF at their site.
What's more, the vast majority of those adults earning the minimum wage are not the breadwinners of their families, accounting for 30 percent or less of their households total income. And most employees do not remain at minimum wage for very long. Those adults that are depending on minimum wage jobs to support their families qualify for a plethora of government programs which, taken together, would provide them with more disposable than a comparable family earning $60,000 a year.
Minimum wage laws are a form of discrimination against the inexperienced and unskilled. Milton Friedman explains.
"The inverse relationship between quantity demanded and price is the core proposition in economic science, which embodies the presupposition that human choice behavior is sufficiently rational to allow predictions to be made. Just as no physicist would claim that "water runs uphill," no self-respecting economist would claim that increases in the minimum wage increase employment. Such a claim, if seriously advanced, becomes equivalent to a denial that there is even minimal scientific content in economics, and that, in consequence, economists can do nothing but write as advocates for ideological interests. Fortunately, only a handful of economists are willing to throw over the teaching of two centuries; we have not yet become a bevy of camp-following whores."
~James M. Buchanan, 1986 Nobel laureate in economics, writing in the Wall Street Journal on April 25, 1996
"When tax credits and medical and housing benefits are included, an average single mother of two with an $8.25-an-hour job in New York City receives a $63,000 annual income." -- City Journal
Oh, the cruelty of it all! The system is obviously rigged in favor of the one percent! It enough to make people want to grab their tents and bongs, put in their nose and nipple rings and occupy a city park until someone else is forced to pay for their degrees in queer and ethnic studies.
"Actually, you're not an expert in almost any decision you make (save professional decisions - and even that's not always a given). Why allow you to make any of your own decisions?" -- Methinks
You are on fire. I'm lovin' this.
It's uncertain if the Chinese masses were exploited.
Safe to say they are. They are a captive supply of labor with no way to object and a government willing to make sure they don't.
Afterall, some labor is expendable, right?
That implies a lack of respect for the person doing the job, and the job itself.
Never mind that it exposes the company to liability should the body smash into someone's belongings. On top of that, I'd most certainly report it even if it was just missing safety gear, documenting it with a good camera.
Methinks, people learn from their mistakes, and even the mistakes of others, e.g. the realization that a safety cord is important when washing windows of skyscrapers, after you watched a few people fall 80 stories.
Great. When can we expect you to start learning from mistakes?
Minimum wage laws are a form of discrimination against the inexperienced and unskilled. Milton Friedman explains.
Not at all. The companies are making the decision, not the government. They are free to comply with the law and hire those unskilled.
"Rebutting right wing economists follows a familiar pattern. Right wingers don't like looking at data, studies, or history. They like to concoct an idea that sounds plausible to them"...
Well jon apparently 'leftie-socialists' like the studies even less...
Note the American Samoa concoction but out by the GAO just a few months back for instance...
The Cato Institute has a similer study dated 1988...
Anecdotally, I am hearing of most resturants staffing by on-call and calling off for scheduled shifts, depending on business.
Then shore up regulations such that it becomes a FT job.
There are jobs for which I'd gladly hire a disabled employee, if I could pay a wage appropriate to their productivity level. Instead, they have been intentionally and permanently rendered unemployable.
Nice words, but trying to cloak in the language of "appropriate to their productivity level" isn't going to help you against the EEOC. Unless you like the pain that would come from litigation.
I suspect, most people who earn the minimum wage are the young and the poorly educated.
Prime targets for exploitation.
...by businesses that use employment law to screw those people over. Doubly so if done with casual or temporary labor.
The more reason to make it impossible for them to pull such off - with iron-clad regulation. When given an inch in de-regulation, they will take a hemisphere's distance.
Note the American Samoa concoction but out by the GAO just a few months back for instance...
That's what happens when you let employers become near-deities. They threaten to move when the workers can't.
More sethstorm nonsense: "No, that is an example of a business wanting self-disposing slaves instead of a mutually respectful relationship. Thus the person must be denied the job in favor of a legal citizen"...
Gee! "slaves"?!?! Are you telling us that employers are using physical coercion to make people work their places of business?!?!
Really?!?!
sethstorm how come you don't dump your Keynesian fairy tales?
Gee! "slaves"?!?! Are you telling us that employers are using physical coercion to make people work their places of business?!?!
The only choice those people have, is not to do it and die from starvation.
sethstorm says: "The only choice those people have, is not to do it and die from starvation"...
Wrong!! How about those people making better choices in life so they don't have to settle for the menial job?
Why should employers subsidize essentially useless people?
"That's what happens when you let employers become near-deities. They threaten to move when the workers can't"...
And that's a problem why sethstorm?
Maybe the American Samoans should've invested in their own tuna cannery and paid the workers whatever they wanted instead...
And that's a problem why sethstorm?
By asking that, you support employers having more freedom than regular citizens. Freedom isn't something for just businesses, y'know.
Why should employers subsidize essentially useless people?
They already are through the tax code, whether the employer chooses to hire them or not.
At least if they're hired on mutually respectable terms, at least you get something out of the arrangement. For good businesses, it has been something they knew how to do from the 1930's until the 1980's. Then every hellhole in the world was used to marginalize every US citizen of all ability and skill since the 1980's, since mutual respect was no longer necessary.
Wrong!! How about those people making better choices in life so they don't have to settle for the menial job?
How about businesses rediscover something called respect for US citizens, since all businesses have is contempt - evidenced by every single statement you have made.
Profitability and respect are not mutually exclusive.
"How about businesses rediscover something called respect for US citizens, since all businesses have is contempt - evidenced by every single statement you have made"...
Why should business chase this fairy tale dream about respect sethstorm when its painfully obvious that those who actually deserve respect are those that earned it?
In the real world actual, useful skillsets are what earn both a better wage and respect...
juandos said...
Even more evidence that you are OK with freedom only as long as it favors a business, and not the people working for it.
Respect is what allows those skillsets to develop. Some large business said something about happy employees being productive employees. To that end, treating your employees like dirt - especially with the lower wage work - only makes them more prone to cause problems. Treat them with respect, and work gets done.
"By asking that, you support employers having more freedom than regular citizens. Freedom isn't something for just businesses, y'know"...
Thanks for the chuckle sethstorm...
This is especially true now that American businesses have to operate with an increased burden of over regulation...
Wrong again sethstorm: "To that end, treating your employees like dirt - especially with the lower wage work - only makes them more prone to cause problems"...
That's why these people can't get jobs in the first place, they bring nothing that a business needs...
hmmm.....let me count the number of businesses that I've visited today alone who show their contempt for me by tripping over themselves to serve me in order to keep my business.
If that's contempt, I'd like an endless supply of it. Perhaps "public servants" would consider switching to that brand of contempt.
"When tax credits and medical and housing benefits are included, an average single mother of two with an $8.25-an-hour job in New York City receives a $63,000 annual income."
And, hey, since most of that is untaxed welfare, that's equivalent to almost $120,000 in pretax income for a chump dumb enough to actually both work for a living and strive too!
Jon - your statement is laughable. So much so, that I won't even waste any time looking up the studies - you won't believe them anyway, since your mind is made up. There is so much data out there that the simple fact that you are unaware of it is indicative of some serious problems with clear thinking.
The biggest irony here is that the entire basis of the left/socialist/populist thought is based on theory that is entirely unsupported by any facts. Actually, the facts indicate that every time it is tried, it fails.
And you tell us it's the right that doesn't care about facts?
Old question: If minimum wage is so good, why don't increase it to 100USD/h?
Yet you make the incorrect assumption that everyone is meant to be an entrepreneur, and that there is something wrong if one isnt.-Sethstrom
We're all entrepreneurs in the sense we sell our services to the highest bidder. What else would you call a person who leaves one position for another due to better financial considerations? So, in fact everyone is meant to be an entrepreneur.
However, if you already pay more than the minimum amount, there is no cost, except to your competitors.
. And even were they not, there would be no increase in the demand for goods and services because the restaurants would have to reduce either their capital purchases or the........
+++++++++++??+?
Interesting. When Larry made a similar argument over retail sales, he got dumped on.
relationship between quantity demanded and price is the core proposition in economic science, which embodies the presupposition
+++++++++++++++++++
It is not the only proposition in economics, or is rational behavior a given.
Your narrow understanding of economics leads you to faulty conclusions.
Anon says: "If minimum wage is so good, why don't increase it to 100USD/h?."
Because $100 an hour is more than a subsistence wage, i.e. you don't need to rely on government or your family to help pay for your most basic bills or expenses.
Because $100 an hour is more than a subsistence wage, i.e. you don't need to rely on government or your family to help pay for your most basic bills or expenses.
Subsistence as defined by whom?
It is not the only proposition in economics, or is rational behavior a given.
Rational behaviour is, in fact, a given. It is impossible to predict irrational behaviour and most people do behave rationally most of the time. While some individuals behave irrationally, they usually a minority that cancels each other out and the the group of people in question does behave rationally. Thus, when predicting for a group of people, rational behaviour is the only sane expectation.
Hydra: "However, if you already pay more than the minimum amount, there is no cost, except to your competitors."
I don't think that's correct, Hydra.
If you purchase inventory or supplies or services from a vendor who was not paying $9.05 for labor, then you will likely see an increase in your business costs.
If a competitor of one of those vendors goes out of business because he cannot afford the higher wage rates, you are also likely to see an increase in your business costs.
If your customers included workers who are now priced out of the labor market and lose their jobs, you will likely lose revenue.
If your customers included business owners who now have increased business costs, you will likely lose revenue.
Every time government interferes with markets, the result includes both seen economic losses and unseen economic losses. Your assertion about who is impacted by minimum wage increases ignores the unseen losses, IMO.
"Your narrow understanding of economics leads you to faulty conclusions." -- Hydra
Hey, genius, that was a quote from James M. Buchanan, 1986 Nobel laureate in economics.
LMAO
Because $100 an hour is more than a subsistence wage
In my country, 2USD/day is a subsistence wage, and when I say subsistence, I really mean it.
Methinks, here's what VF/H.H. Cutler’s CEO said when asked if the 28-cent-an-hour wages they paid in Haiti were subsistence wages:
“Well, the workers are alive aren’t they? So they must be subsistence wages.”
James M. Buchanan: The inverse relationship between quantity demanded and price is the core proposition in economic science ...
Hydra: It is not the only proposition in economics, or is rational behavior a given.
Che is dead: Hey, genius, that was a quote from James M. Buchanan, 1986 Nobel laureate in economics.
He didn't say the proposition wasn't true, only that it is not the only proposition.
Hydra: It is not the only proposition in economics, or is rational behavior a given.
Methinks: Rational behaviour is, in fact, a given.
In classical economics, it's an axiom.
Methinks: It is impossible to predict irrational behaviour ...
That is incorrect. A simple example is a crowd in a panic. Though the trajectory of individuals can be chaotic, the overall pattern of the crowd can not only be predicted, but channeled.
Methinks: and most people do behave rationally most of the time.
Perhaps, but any theory of economics that ignores irrational behavior is, at the very least, incomplete.
Methinks: Thus, when predicting for a group of people, rational behaviour is the only sane expectation.
If people act irrationally sometimes, then expecting otherwise is not the sane expectation.
Jet Beagle: Every time government interferes with markets, the result includes both seen economic losses and unseen economic losses.
That is correct. Markets are too complex to think that one action won't have ripple effects elsewhere. There is a cost involved with any market distortion.
That's why these people can't get jobs in the first place, they bring nothing that a business needs...
Or the business asks too much of them, which is precisely what is happening in this economy. Too many unreal requirements placed by business for the job, not enough push to hire the people we already have and train them to actual requirements.
That is incorrect. A simple example is a crowd in a panic. Though the trajectory of individuals can be chaotic, the overall pattern of the crowd can not only be predicted, but channeled.
What gave me a chuckle is that you're refuting what I said by saying exactly the same thing.
If people act irrationally sometimes, then expecting otherwise is not the sane expectation.
If people act irrationally sometimes, then they act rationally most of the time. Since most people act rationally most of the time, the ex ante supposition for any group of people is rational behaviour.
Or the business asks too much of them, which is precisely what is happening in this economy. Too many unreal requirements placed by business for the job, not enough push to hire the people we already have and train them to actual requirements.
So, instead of bitching about it, get on your bike! Start a business and expect of your employees only that which they can deliver.
If they are only able to sleep all day, then pay them for that. If they're too stupid to cross the road unassisted, pay them to sit quietly on a chair.
It is you who is causing the problem by providing no employment opportunities at all.
Methinks said...
You still don't get it.
You're asking for someone to fit a round peg into a square hole - where such interests are better served as a part of a existing, secure organization as opposed to the instabilities of forming a business.
Your answer seems to be for everyone to form a business even if they aren't suited for the high level of instability that comes with it. My answer is to not be as limiting as you are.
Those who can't do teach, eh, Sethy?
Too many unreal requirements placed by business for the job, not enough push to hire the people we already have and train them to actual requirements.
Many apparently irrational business practices, like this one, have a rational basis: lawsuit avoidance.
Methinks: It is impossible to predict irrational behaviour ...
That is incorrect. A simple example is a crowd in a panic. Though the trajectory of individuals can be chaotic, the overall pattern of the crowd can not only be predicted, but channeled.
Methinks: What gave me a chuckle is that you're refuting what I said by saying exactly the same thing
A crowd in a panic is hardly acting in a rational manner by any reasonable construal of what it means to be rational.
Methinks: Since most people act rationally most of the time, the ex ante supposition for any group of people is rational behaviour.
Sorry, but that doesn't follow. If a group of people usually stand still, but sometimes move, then the assumption of non-movement will yield a false conclusion.
Nor is it clear that people usually act in a rational manner.
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Methinks said at 2:10pm
I'm only demonstrating comparative advantage in a way that you might not find in your favor.
Plenty of people are more well-suited to being non-entrepreneurial, doing best at doing or managing work. At one time, these people were recognized for such value and did well for themselves. Your policy of forcing them into a position that they cannot do well at - using the Third World's population as leverage for such force - is completely wrong.
randian said at 2:38pm...
Its corollary, jurisdiction avoidance, will become openly impossible to do. Governments have the tools for which to handle issues of jurisdiction, but currently do not wish to use them.
"Not at all. The companies are making the decision, not the government. They are free to comply with the law and hire those unskilled." -sethstorm
Sure. It's just that it doesn't pay them to do so because the value generated by those employees doesn't exceed the costs imposed by the fatally conceited, such as yourself.
How much unprofitable activity can you afford to take on?
"Your answer seems to be for everyone to form a business even if they aren't suited for the high level of instability that comes with it"...
So now not only do employers have to take on the burden of excessive taxations, fees, and regulations, you want them to take on the extra added expense of hiring less than suitable people in an atmosphere of 'high level of instability sethstorm?!?!
Why should they? What's in it for them?
Businesses are not running some charity service for ne'er do wells...
A crowd in a panic is hardly acting in a rational manner by any reasonable construal of what it means to be rational.
Oh, Zach. How do you not see this? The reason what you say is true (I'm assuming it is for the sake of argument) is that when you're predicting the behaviour of a mass of people what matters is not the possibly irrational behaviour of a few, but the likely behaviour of the whole.
As a predictive assumption, rational behaviour is better. That doesn't mean every individual will always behave rationally under all circumstances.
If good A and good B were perfect substitutes for each other and good A usually trades at a lower price than good B, when the price of good A rises above the price of good B, would you expect people will buy less of good A and more of good B?
If you said "yes", then you expect that people are rational. That doesn't mean that every single person will buy good B instead of good A. It just means that if you're predicting the the behaviour of the group, that's what you would expect.
How much unprofitable activity can you afford to take on?
Large, stable, secure organizations can take on tons of that. The same ones that can afford to put people through 30-50 years if the first few are devoted to training.
Not everyone is made for the Fukushima-like instability of small business.
Why should they? What's in it for them?
How are they unprofitable? Nothing says they can't turn those people into productive assets by being the employer that treats them as an investment versus the employer that has only contempt. The past 30 years has been an exception - where US citizens are considered contemptuous for various reasons.
At no point is charity being asked of business; I am only stating that they holding the closest opportunities to profit - US citizens - in contempt.
I see where you're coming from, Sethstorm.
You don't want the risk of starting a business, you just want the benefits - dictating how things "ought" to be done chief among them.
I hear you. I don't want the risk of getting fat from eating pint after pint of ice cream, I just want the benefits of the yumminess. I'm not well suited for obesity. Round peg, square hole and all that.
The difference is that I understand that risk and reward are inexorable.
Methinks: A crowd in a panic is hardly acting in a rational manner by any reasonable construal of what it means to be rational.
Zachriel: The reason what you say is true (I'm assuming it is for the sake of argument) is that when you're predicting the behaviour of a mass of people what matters is not the possibly irrational behaviour of a few, but the likely behaviour of the whole.
When a crowd is panicked, few, if any, act rationally.
Methinks: As a predictive assumption, rational behaviour is better. That doesn't mean every individual will always behave rationally under all circumstances.
Keep in mind your original claim: "It is impossible to predict irrational behaviour". Impossible? It isn't true. Completely irrational or even chaotic individual behaviors can have predictable results.
Methinks: While some individuals behave irrationally, they usually a minority that cancels each other out and the the group of people in question does behave rationally.
Irrational behavior in a few may have an inordinate effect, or the sometime irrational behavior of the many may have devastating consequences. In any case, it's not a *given* (except in the context of a simplified model), but something that has to be empirically supported.
So Che my study is to be dismissed because it's from NELP, but yours, from a right wing think tank is acceptable?
Here's another source that reaches the same conclusion.
If you want low minimum wage, try Haiti. Obama beat back 61 cents an hour on behalf of Hanes and Levi Strauss, granting merely 31. He's called a socialist by the right. This low wage, low regulatory, low tax country with privatized education and additional services is so pro business it's obviously the fastest growing economy in the world and has been for decades. You don't have to worry about building codes there, which is why a stiff wind will kill thousands of people, whereas a hurricane through Cuba won't cause much damage.
Also of course tariff protections. Minimal in Haiti. How did the US become rich? Highest tariff rates in the world. It protected our infant industries from British competition. Our economy grew faster than any other at the time. South Korea followed a similar course from 1950 onward. Today's high growth economies do the same. India, China. Those that are interested in contrasting reality with right wing theory should read Bad Samaritans.
"It is impossible to predict irrational behaviour".
++++++++++++++++
Not true. Irrational behavior is often predictable.
Right wing rhetoric, for example. Lottery ticket purchases. All kinds of risk evaluation that we know is irrational. We fear losses more than we enjoy wins. Etc. Etc.
They join gangs and shoot people.......
Sounds like a full employment plan for law enforcement.
Hydra, can you predict which way a drunk will tip over?
Doesn't a higher minimum wage act as an incentive for the unemployed to do what is necessary to get employable. Isn't this another case where only the best succeed?
How can that be a bad thing?
It's irrational to buy a lottery ticket only when the chance of winning is zero.
"We fear losses more than we enjoy wins."
And you feel worse when you're wrong than feel better when you're right.
Doesn't a higher minimum wage act as an incentive for the unemployed to do what is necessary to get employable.
Not if "get employable" has too long a time horizon or is, in some cases, impossible. Since businesses do not hire people as an act of charity, the higher the minimum wage and the more BS mandates like "paid safe time" there are the less a business will tolerate having to spend time training people and the greater productivity they'll demand. That's why you're seeing people with crap degrees like "La Raza Studies" waiting tables. Government can't afford make-work jobs for these people, but they're somewhat smarter (but not that smart otherwise they wouldn't get a crap degree like that) and more productive than the traditional demographic for this kind of job.
PeakTrader: It's irrational to buy a lottery ticket only when the chance of winning is zero.
From a betting vantage point, you should only play when the expected winnings exceed the investment. However, most people just play for fun.
PeakTrader: can you predict which way a drunk will tip over?
That's random rather than irrational. But stochastic behavior can often be predictable, though usually the predictions are statistical in nature. Casinos, for instance, rely on both the predictability of random events, and the predictability of irrational behaviors. Without that, their business models wouldn't work.
It's irrational to buy a lottery ticket only when the chance of winning is zero.
Except under certain and uncommon circumstances, the purchase of a lottery ticket is a negative expectancy bet.
So, in your estimation, it is completely rational to pay $1 for something that has an expected value of $0.50 or even $0.01, so long as the expectancy is not $0.00?
Gooooood thinking.
I have some things I'd like to sell you, Peak.
Zachriel, are you saying people will buy lottery tickets if the chance of winning is zero?
Which way a drunk will tip over is a random event, because of irrational behavior (the chance of falling in the best way may be equal to the worst way).
Methinks, a dollar is immaterial to many Americans.
Not if "get employable" has too long a time horizon or is, in some cases, impossible.
One reason to make it harder for businesses to skip US citizens - regardless of skill level.
Since businesses do not hire people as an act of charity, the higher the minimum wage and the more BS mandates like "paid safe time" there are the less a business will tolerate having to spend time training people and the greater productivity they'll demand.
The more reason to deny business that ability to make such unreasonable requests.
Peak,
You're right. For instance, I won't wipe my behind with anything less than than a $50 bill.
However, that fact does not make a negative expectancy bet any more rational.
Zachriel, are you saying people will buy lottery tickets if the chance of winning is zero?
My dear Peak, the chances of you winning the lottery if you don't have a ticket are about as good as if you did.
Not if "get employable" has too long a time horizon or is, in some cases, impossible.
++++++++++++++
So, same as getting to the top one tenth of one percent, eh?
I guess incentive doesn't count.
Hydra, not being able to get into the top 1% is not the same as being prevented from getting any kind of job at all. One can live extremely well at an income far below the riches four people in the country.
It's much more like erecting artificial barriers to rises in your income.
The easiest way for most of these low skilled people to increase their income is to first find any job at all that will increase their experience and knowledge. While their labour may be worth much less than whatever is set as the arbitrary minimum wage at first, the value of it will rise with time and experience. And if the problem is that it never will because they haven't the capacity for even basic learning, then minimum wage denies these people employment forever.
Some muddled idea of "incentives" is not a justification for the erection of artificial barriers to brighter futures.
Blogger Methinks said at 9:34PM...
Get rid of the barriers that business uses to avoid hiring under terms of good faith. Business is setting the barriers, and wonders why people are calling them on it.
They're the ones that are denying prosperity. Why should business be able to ask for things that are beyond reason, much less do anything in return?
"So Che my study is to be dismissed because it's from NELP, but yours, from a right wing think tank is acceptable?" -- Jon
From your source (Wikipedia): "The Show-Me Institute is a free-market think tank ...". The Institute provided a survey of economic studies related to the minimum wage, it was not their study.
"Here's another source that reaches the same conclusion." -- Jon
"The Card-Krueger studies are flawed and cannot justify going against the accumulated evidence from the many past and present studies that find sizable negative effects of higher minimums on employment." -- 1992 Nobel laureate in economics, Gary S. Becker writing in Businessweek
"How did the US become rich? Highest tariff rates in the world. It protected our infant industries from British competition." -- Jon
Yes, we had high tariffs, maintained at the expense of the consumers of those protected products. The tariffs provided little or no net benefit to the US economy overall. In fact, early tariff policy nearly led to civil war. As usual, you know only half the story.
Yes, we had high tariffs, maintained at the expense of the consumers of those protected products.
Almost all of today's rich countries used tariffs and other government interventionist policies during the period at which they became rich. The most dramatic economic growth over the last 50 years has been in S Korea. They were the equivalent of Haiti 50 years ago. Look at them now. How did they do it? High tariffs, limits on capital movement, and draconian government intervention in the economy.
Was that all at the expense of S Korean consumers? Should they have pursued Haitian policies instead?
These self-righteous lawmakers are today's Master Hughs.
Gary S. Becker writing in Businessweek
Sounds like it's flawed only because it didnt go with the ordained conclusion.
"The most dramatic economic growth over the last 50 years has been in S Korea. They were the equivalent of Haiti 50 years ago. Look at them now. How did they do it?" -- Jon
First, we get rid of the teachers unions:
"In its report series “Education at a Glance,” the Organization for Economic and Cooperation and Development (OECD) compiled school trends among its economically advanced member countries. It reported that East Asian countries with large private school sectors and popular for-profit tutoring schools continued to excel on achievement examinations and graduation rates. South Korea, for example, was one of the poorest education performers in the 1970s. By 2010, its high school students’ scores in mathematics and science were near the top. Among the industrialized OECD countries, South Korea ranked first in high school completion rates of adults aged twenty-five to thirty-four: 97 percent."
"Unlike the United States, South Korea, Japan, and other East Asian countries funded privately governed schools directly, without the administrative complications of charters and vouchers. Most impressive, however, were the tuition-funded tutoring schools that were free of government regulations. Unlike most public and private schools in the West, South Korea’s for-profit tutoring firms made use of the nation’s internet service—fastest in the world— and paid teachers for their individual performances, often sharing with them the student tuition they generated." -- Defining Ideas, Hoover Institute
Che is dead said...
No.
Those countries give freedom to a few, as opposed to freedom for all to have education.
Che is dead said...
That, and they rely on defective PISA statistics, which do not control for admission criteria.
"No. Those countries give freedom to a few, as opposed to freedom for all to have education." -- sethstorm
Did you grow up in an older home, around a lot of lead paint?
Che is dead said...
I'm just pointing out that the US model of education favors access versus the European/Asian model of controlling access to education with test scores - and thus controlling one's freedom with that score.
Schooling in Haiti is almost exclusively for profit. No teachers union problems there. Sounds like a dream come true.
If unions and the source of funding were the only variables, Jon, you would have a point.
Yeah, there's also tariff rates, minimum wage, welfare expenditures, investor rights, freedom of capital movement, tax holidays for those willing to set up shop. Haiti follows the right wing prescriptions right down the line, as they've been doing for 50 years.
S Korea on the other hand has followed the opposite course. Both nations were at a similar level of poverty 50 years ago. These results generalize.
I'm sure you think it does, Jon.
I'm equally sure that no amount of evidence or logic will disabuse you of your errors to which you cling. I won't waste my time
Yeah, there's also tariff rates, minimum wage, welfare expenditures, investor rights, freedom of capital movement, tax holidays for those willing to set up shop. Haiti follows the right wing prescriptions right down the line, as they've been doing for 50 years.
Haiti's failure is a failure of culture.
Haiti's failure is a failure of culture.
They used to say precisely the same of the Japanese as well as the Germans. Just too lazy. It's in their culture. Another book from Chang covers this. 23 Things They Don't Tell You About Capitalism. A quick read for those interested.
South Korea, Britain, and the US were extremely corrupt during the period in which they made massive economic gains. Same was true in Indonesia. Again, read Chang. He covers all these excuses offered by the right wing for why neoliberalism continuously fails.
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