Sunday, June 17, 2012

Classic Milton Friedman on the Minimum Wage


"The minimum wage law is most properly described as a law saying that employers must discriminate against workers who have low skills."

Update: The minimum wage illustrated (ht/VangeIV):


69 Comments:

At 6/17/2012 11:03 PM, Blogger Jon Murphy said...

Like him or not, the old man can argue

 
At 6/18/2012 12:41 AM, Blogger PeakTrader said...

The U.S. minimum wage is such a low standard I don't know why some people make it a big deal.

There are many hard workers earning the minimum wage or slightly more than the minimum wage.

Without the minimum wage, they'd earn perhaps $7 instead of $8, and those earning slightly more than the minimum wage may also earn less.

The difference may end up in higher incomes for top management and more profits rather than more employment.

 
At 6/18/2012 12:46 AM, Blogger ondra said...

Peak, and the difference is some unemployed would be employed;guess they appreciate your compassion with their slightly-more-productive workers.

 
At 6/18/2012 12:50 AM, Blogger PeakTrader said...

Is it better to make income taxes more progressive and increase the capital gains tax rate to give more tax credits to the working poor (which may result in negative income taxes) or raise the minimum wage?

 
At 6/18/2012 1:00 AM, Blogger PeakTrader said...

Ondra, in the global economy, why should hard working low-skilled workers in the U.S. get paid much more than hard working low-skilled workers in China?

Any difference in productivity can be pocketed by top management and profits.

 
At 6/18/2012 1:12 AM, Blogger PeakTrader said...

I'm sure, there are many U.S. teens who'd refuse to work for $7, because their reservation wages are higher, e.g. $8.

So, they choose to play video games, at their parent's house, instead of working.

 
At 6/18/2012 1:55 AM, Blogger Spontaneous Order said...

Minimum wage laws make all jobs which pay less, ilegal.
If people were not made better off taking a $5.00 /hour job, they would not take the job. With free exchange, if both parties do not benefit, the exchange does not take place, whether it is product or labour. Why must third parties interfere? For their own good?

 
At 6/18/2012 2:27 AM, Blogger PeakTrader said...

It can be reduced to starving or working for $5, while a few live high off the hog.

 
At 6/18/2012 5:49 AM, Blogger VangelV said...

The U.S. minimum wage is such a low standard I don't know why some people make it a big deal.

Really? You can't see how much damage it does to unskilled and/or inexperienced workers?

 
At 6/18/2012 6:02 AM, Blogger VangelV said...

Is it better to make income taxes more progressive and increase the capital gains tax rate to give more tax credits to the working poor (which may result in negative income taxes) or raise the minimum wage?

LOL...Well Larry, you got it wrong as usual. If anyone wants to help the working poor then they should advocate getting government off their back. Minimum wage laws make it hard for young workers without skills to get the training that they need to become marketable in a competitive economy. They wind up caught in a limbo of underemployment and government assistance that makes them dependent for most of their miserable lives. If government got out of the way they could get the skills they need to earn good wages and make good lives for themselves.

Any difference in productivity can be pocketed by top management and profits

Well Larry, you got this part wrong too. Those 'greedy' companies would try to take away excess profits from their competitors by paying just a bit more to the underpaid workers. Of course, as long as there is excess profit to be had someone else will do the same and offer more until the gap is closed. In the real world, unlike the one that you inhabit, people do stop pick up money lying on the sidewalk. It is that 'greed' that protects workers by ensuring that they get paid what they are worth in the competitive marketplace.

 
At 6/18/2012 6:27 AM, Blogger Methinks said...

Peak, from what institution did you receive your degree in economics? I want to know so that I can advise my friends to avoid sending their children there.

They either didn't teach economics or handed out economics degrees to people like you who couldn't grasp the basic law of supply and demand, opportunity cost or basic logic either. Apparently, they were sitting around picking their noses instead of teaching economics.

This is a real doozy: first you say you don't understand why minimum wage is such a big deal because it's so low and in the next breath you claim that getting rid of it would result in excess returns. Then, you proclaim that that there are only choices in the world - either pay the less productive above market wages through taxes or through minimum wage. Those are not the two choices before us. What's next? Are you going to turn full-blown Luddite and screech about machines robbing low-skilled labour of jobs and contributing to the bottom line of the undeserving capitalist who creates non of the value but receives a portion of the profit?

The guy making $X per hour isn't earning that amount because of minimum wage. He's earning it because his opportunity cost is lower and the cost of the alternatives for the employer is higher. The moment his labour isn't worth minimum wage or the cost to the employer is too high to bear, the employee loses his job.

The guy whose labour isn't worth at least minimum wage isn't getting a job and isn't getting an opportunity to learn valuable skills and gain the experience necessary to make his labour worth more in the future.

As you once again babble about "reservation" wages you miss entirely the fact that to wallow in the luxury of a reservation wage, you must be subsidized either by your parents or by welfare. If a teenager's parents decide to subsidize his purchases, then that's their business. Of course, this means that you proudly support a policy that severely damages children of the poor who are not similarly subsidized. Artificially raising the opportunity cost for adults via welfare is a stupidity we don't have to engage in any more than than we have to engage in the stupidity of minimum wage laws.

 
At 6/18/2012 7:09 AM, Blogger Ed R said...

Maybe they do not teach labor economics at Michigan-Flint.

The purpose of the minimum wage is to restrain the ability of large employers who have negotiating leverage to extract part of individual job applicant's (sellers of labor) surplus for the benefit of the employer. That is, employers will apply discriminatory wage policies if it is in their interest to do so.

While it may be correct to say an effect of the minimum wage is that somewhat fewer people may be employed, what is not acknowledged by Uncle Miltie is that large employers can use their labor negotiating advantages to appropriate more of the utility of labor to the return on capital.

It is fine for Dr. Friedman and Prof. Perry to have their own agendas but perhaps they should describe these economic issues for what they really are, rather than just select out the effects that support their points of view.

 
At 6/18/2012 7:23 AM, Blogger Mark J. Perry said...

I'm sure all of the millions of unemployed, unskilled workers earning $0.00 per hour and acquiring no skills, who have been priced out of the labor market by the minimum wage over the years, really appreciate your concern for them.

But I think most of them would prefer a job, even if that job paid a wage below the legal minimum.

 
At 6/18/2012 7:35 AM, Blogger Benjamin said...

The USA is following Friedman's advice. The federal minimum wage, adjusted for inflation, is lower today than in the 1960s.

Minimum wage workers have fallen relatively, and absolutely, for 50 years.

 
At 6/18/2012 7:40 AM, Blogger VangelV said...

The purpose of the minimum wage is to restrain the ability of large employers who have negotiating leverage to extract part of individual job applicant's (sellers of labor) surplus for the benefit of the employer. That is, employers will apply discriminatory wage policies if it is in their interest to do so.

No. The purpose of these laws is to protect overpaid workers already in the labour force from competition. Instead of allowing young unskilled workers to learn on the job by being paid what they are worth the minimum wage laws discourage such hiring.

 
At 6/18/2012 8:14 AM, Blogger Jet Beagle said...

peak trader,

The minimum wage is about restrictions on freedom: the freedom of workers to work for whatever wage they wish to work for; the freedom of business owners to pay the workers whatever they wish to receive. That's why it's a big deal.

can you give me a single reason to justify trampling on the freedoms of workers and business owners?

 
At 6/18/2012 8:14 AM, Blogger Jon Murphy said...

Ed,

let's. assume that minimum wage laws were passed with no ill intent. Think about this logically: what happens when prices rise? The purchasers consume less. When people consume less, they phase out the lowest value. The lowest value workers are the one making the least amount. Regardless of the reason, minimum wage hurts the lowest value workers. Unless you can prove otherwise?

 
At 6/18/2012 8:34 AM, Blogger VangelV said...

The USA is following Friedman's advice. The federal minimum wage, adjusted for inflation, is lower today than in the 1960s.

Minimum wage workers have fallen relatively, and absolutely, for 50 years.


If the US had followed Friedman's advice it would have repealed all minimum wage laws and given workers a choice to take low paying jobs in exchange for gaining experience and training that made them more valuable. There is nothing wrong with 12-year olds working for $2.50 an hour washing dishes while they learn what it takes to keep a job. And there is nothing wrong with being an 'underpaid' apprentice in a machine shop while a high-school dropout learns how to operate a lathe or a mill that would make her/him skilled enough to get a high paying job.

 
At 6/18/2012 8:51 AM, Blogger Scott Drum said...

The average household income of those earning a minimum wage is $50,000
http://freemarketmojo.wordpress.com/2009/08/15/demographic-characteristics-of-minimum-wage-workers/

 
At 6/18/2012 9:10 AM, Blogger morganovich said...

http://www.coyoteblog.com/coyote_blog/2012/06/gee-i-wonder-why-teen-unemployment-is-so-high.html

another reason some teens are having trouble finding work: some states require special permits to be allowed to hire them.

 
At 6/18/2012 10:52 AM, Blogger juandos said...

"Without the minimum wage, they'd earn perhaps $7 instead of $8, and those earning slightly more than the minimum wage may also earn less"...

That's exactly what they're worth pt...

No one is hold a gun to the heads of these supposedly valuable 'minimum wage slaves' and forcing them to work that kind of money, right?

 
At 6/18/2012 11:09 AM, Blogger juandos said...

"Is it better to make income taxes more progressive and increase the capital gains tax rate to give more tax credits to the working poor (which may result in negative income taxes) or raise the minimum wage?"...

Well pt its actually better to cut out the progressive income tax rate completely and cut down the size of the corporate and capital gains taxes and make the poor pay for the government services they think they need...

Why should someone making $250K/year pay even one more penny in taxes than someone making $2.5K/year?

Now pt if you have enough money that its burning a hole in your wallet don't be a Buffet but go ahead an gift some of that money to the Treasury Department, the poor & parasitic will appreciate it...

 
At 6/18/2012 11:44 AM, Blogger Ed R said...

" . . . Regardless of the reason, minimum wage hurts the lowest value workers. Unless you can prove otherwise?"

Lack of a minimum wage may hurt medium and higher value workers, if a locally-dominant employer wants to.

Example: A company in a town needs 5 more unskilled workers. (It may be the only employer hiring at that time) The company receives 25 applications. So it asks each applicant what is the minimum he will accept to get a job. They tell him (i. e. bid the value of their services downward) and the employer then hires the 5 who offer their services for the lowest amount.

You might do a little research on the history of labor relations in this and other countries. The situation described above was a typical hiring strategy (multiplied by a factor of several hundred) by the railroads, steel mills, mines, etc. during the 1870's through 1910 or so. And also when the economy turned down (during the various recessions of that period) the corporations would reduce their costs by selectively cutting the wages of their existing work forces.

One of the good biographies of Andrew Carnegie would be a good starting place for researching labor economics as practiced during that period, and as background for why some states and then the Fedl govt have minimum wage laws.

BTW: This doesn't have anything to do with 'my concern' for common laborers or the unemployed. It is merely additional information relating to labor economics that Dr. Friedman neglected to tell us.

 
At 6/18/2012 12:24 PM, Blogger Ken said...

Peak,

The U.S. minimum wage is such a low standard I don't know why some people make it a big deal.

It's so low that unemployment for young blacks is 40%. Jesus Christ, do you think before you talk? A 40% unemployment rate is okay for young black men because they're black or because they're rich? Please tell me.

Take a look at the employment rates before the minimum wage. The employment rates for young black men were the same as whites before minimum wage. Not so much anymore because of the thoughtless like you combined with the do gooders in DC who understand very little economics. First, you degrade blacks by giving them a crappy education, then make it more difficult to get a job after giving them so little skills.

Without the minimum wage, they'd earn perhaps $7 instead of $8

This is 14% difference. Go tell your boss that you deserve a 14% raise, what do you think would happen?

 
At 6/18/2012 12:25 PM, Blogger Ken said...

Peak,

Is it better to make income taxes more progressive and increase the capital gains tax rate to give more tax credits to the working poor (which may result in negative income taxes) or raise the minimum wage

Are these really the only choices? How about doing neither and treating everyone exactly the same, regardless of wealth. Or are you interested in fomenting class war?

 
At 6/18/2012 1:39 PM, Blogger Jet Beagle said...

Ed R,

That's a totally unrealistic example. No sane employer today is going to hire the cheapest employees for any job. Employers are going to look for evidence the employee will show up for work, will show up sober, will not fight with other employees, etc.

So, let's assume employers do screen out the completely undesirable workers. What is wrong with bidding out the job among the remaining workers? What justification can you provide for not allowing a business owner to seek out the lowest price employee among those he finds acceptable? How can you justify restricting the freedom of both the employer and the employee?

 
At 6/18/2012 1:44 PM, Blogger Jet Beagle said...

Ed R: "And also when the economy turned down (during the various recessions of that period) the corporations would reduce their costs by selectively cutting the wages of their existing work forces."

And what is the point you are trying to make? Do you have an objection to employers cutting the wages of their workers during economic downturns? If a business owner decides to do so, isn't that hi right? If the worker decides that is unacceptable, isn't it his right to change employers? Can you see how the employer who employs such a tactic risks losing his good employees? Or, can you understand why an employer would selectively cut wages in order to risk losing only the least desirable of his employees?

What point are you making, Ed?

 
At 6/18/2012 1:47 PM, Blogger juandos said...

"BTW: This doesn't have anything to do with 'my concern' for common laborers or the unemployed. It is merely additional information relating to labor economics that Dr. Friedman neglected to tell us"...

Wrong ed r, Friedman did address this, you just didn't grasp it...

 
At 6/18/2012 1:47 PM, Blogger juandos said...

This comment has been removed by the author.

 
At 6/18/2012 1:53 PM, Blogger Jon Murphy said...

What is wrong with bidding out the job among the remaining workers?

Not only that, but the situation is only half the story. The worker will bid up his wage (what incentive does he have to provide his real minimum wage?).

Negotiation is a two way street.

 
At 6/18/2012 2:47 PM, Blogger morganovich said...

"Ed R: "And also when the economy turned down (during the various recessions of that period) the corporations would reduce their costs by selectively cutting the wages of their existing work forces."

oh, you mean instead of firing them and making taxpayers pay them unemployment?

are you arguing that this was a BAD thing? it seems better than the alternative.

 
At 6/18/2012 4:07 PM, Blogger VangelV said...

Lack of a minimum wage may hurt medium and higher value workers, if a locally-dominant employer wants to.

Example: A company in a town needs 5 more unskilled workers. (It may be the only employer hiring at that time) The company receives 25 applications. So it asks each applicant what is the minimum he will accept to get a job. They tell him (i. e. bid the value of their services downward) and the employer then hires the 5 who offer their services for the lowest amount.


I would think that such a town and such a company might be suffering from skilled people leaving town for better opportunities and paying much more than the cost of living would suggest. If a company needs such workers they would have to bid more than other companies needing the same workers.

And is this the best that you can do? Examples that imagine people with no skills in towns that have one local employers are not exactly applicable to the normal condition. Do we have to ruin our economy so that we can satisfy some obscure lifeboat examples that do not appear much in broader society?

You might do a little research on the history of labor relations in this and other countries. The situation described above was a typical hiring strategy (multiplied by a factor of several hundred) by the railroads, steel mills, mines, etc. during the 1870's through 1910 or so. And also when the economy turned down (during the various recessions of that period) the corporations would reduce their costs by selectively cutting the wages of their existing work forces.

You describe a period of huge increases in productivity and falling product costs but imagine a fiat world governed by inflation. Employment was low and real wages were going up during this time as the standard of living was getting better and better. I suggest that you look to history to shed your ignorance.

 
At 6/18/2012 4:14 PM, Blogger VangelV said...

And what is the point you are trying to make? Do you have an objection to employers cutting the wages of their workers during economic downturns? If a business owner decides to do so, isn't that hi right? If the worker decides that is unacceptable, isn't it his right to change employers? Can you see how the employer who employs such a tactic risks losing his good employees? Or, can you understand why an employer would selectively cut wages in order to risk losing only the least desirable of his employees?

What point are you making, Ed?


I am sorry to point this out but you may be missing out on the vision behind the arguments. Ed and others here cannot imagine a world in which individual workers are able to take responsibility for planning their own future and having the intelligence to pick and choose what kind of experience they want to get even if doing so means taking less pay for a while. For them the individual is not capable of independent thought and must be looked after, particularly if they are a part of the 'underprivileged' groups that the same type of do-gooders were suggesting as candidates for eugenics programs in the early part of the last century.

These people think that blacks are not very smart and in need of protection of a political elite who can look after them by thinking for them and setting rules that would make them better. They think that the 'rich' are so much smarter that they can take advantage of workers who are incapable of thinking for themselves. Of course, in their world companies full of such low priced workers who only do what they are told and are incapable of pursuing their own goals will gain a huge advantage and become dominant powers who call all the shots.

If you think of this vision you will get a better idea where these progressives are coming from.

 
At 6/18/2012 4:22 PM, Blogger Ron H. said...

"Is it better to make income taxes more progressive and increase the capital gains tax rate to give more tax credits to the working poor (which may result in negative income taxes) or raise the minimum wage?"

Neither. And, thank goodness, that ridiculous choice need not be made.

 
At 6/18/2012 4:46 PM, Blogger PeakTrader said...

Ed R says: "...their own agendas...perhaps they should describe these economic issues for what they really are, rather than just select out the effects that support their points of view."

I find it interesting how they just make things up and assume it all makes sense.

They either want to cling to their biased political beliefs or simply have no comprehension of any economics beyond two-dimensions.

 
At 6/18/2012 5:21 PM, Blogger Ron H. said...

Ed R: " Maybe they do not teach labor economics at Michigan-Flint."

They obviously don't teach the tripe you seem to believe in. Where did you learn such nonsense?

"The purpose of the minimum wage is to restrain the ability of large employers who have negotiating leverage to extract part of individual job applicant's (sellers of labor) surplus for the benefit of the employer."

Can you explain how that works? If I apply for a job and determine that the pay offered isn't greater than my opportunity cost, how does the employer's superior "negotiating leverage" - whatever that is - allow them to "extract more of my surplus"?

"That is, employers will apply discriminatory wage policies if it is in their interest to do so."

Well, of course they will - if they can. Are employers always price makers for labor?

"While it may be correct to say an effect of the minimum wage is that somewhat fewer people may be employed, what is not acknowledged by Uncle Miltie is that large employers can use their labor negotiating advantages to appropriate more of the utility of labor to the return on capital."

Again, what is this "negotiating advantage"? Is there only one employer, so that they enjoy a monopoly on the market for labor?

If I'm paid $5/hr and produce $20/hr for my employer, don't you suppose other employers, greedy bastards that they are, will try to woo me away with higher pay until I'm paid close to my true value to employers?

"It is fine for Dr. Friedman and Prof. Perry to have their own agendas but perhaps they should describe these economic issues for what they really are, rather than just select out the effects that support their points of view."

Agendas? Get a grip. Do you believe Uncle Miltie had some sinister anti-worker reason for saying what he did, and that you have a clearer understanding?

LOL

Thanks for brightening my otherwise dull day.

Incidently, why would only large employers enjoy an unfair "negotiating leverage"?

 
At 6/18/2012 5:23 PM, Blogger Ron H. said...

Jon M: "Like him or not, the old man can argue"

That's for sure. Being right about many things didn't hurt either. :)

 
At 6/18/2012 5:39 PM, Blogger Ron H. said...

"Example: A company in a town needs 5 more unskilled workers. (It may be the only employer hiring at that time) The company receives 25 applications. So it asks each applicant what is the minimum he will accept to get a job. They tell him (i. e. bid the value of their services downward) and the employer then hires the 5 who offer their services for the lowest amount."

That's a mythical example. The man asked for proof.

Do suppose that in your fairy tale other employers might begin to hire, seeing how cheaply they can get unskilled workers, and maybe even fire some of their existing workers who are paid more than the new going rate?

What about the other side of that coin? An employer needs 25 more unskilled workers and there are only 5 available. Will they have to bid higher for those workers, or even try to bid workers away from other employers with offers of higher pay?

 
At 6/18/2012 6:12 PM, Blogger Ron H. said...

Ed R: "You might do a little research on the history of labor relations in this and other countries. The situation described above was a typical hiring strategy (multiplied by a factor of several hundred) by the railroads, steel mills, mines, etc. during the 1870's through 1910 or so. And also when the economy turned down (during the various recessions of that period) the corporations would reduce their costs by selectively cutting the wages of their existing work forces."


Are you suggesting that there's a market for labor, just like everything else? Imagine that.

Did anything different happen when times were good and labor scarce? What would you recommend we read to learn about that?

 
At 6/18/2012 8:16 PM, Blogger Unknown said...

Ed R...are you actually making a surplus labor argument?!

You do realize that is a long discredited theory, right?

 
At 6/18/2012 8:44 PM, Blogger MikeK said...

Ed R, what exactly is the difference between labor economics and economics?

 
At 6/18/2012 9:23 PM, Blogger sethstorm said...


"The minimum wage law is most properly described as a law saying that employers must discriminate against workers who have low skills."


Bollocks. The business sawed off the ladder rungs, not government, through their reaction. The business is more than free to not retaliate.

All the minimum wage does is to make slaver uneconomic. Anything else is a retaliatory action by business - which can be addressed by curtailing or prohibiting such retalitation.

As for the Southern revisionism that gets applied to the minimum wage, businesses were using the blacks as pawns - much worse than if the accusations of racism were true.

 
At 6/18/2012 9:32 PM, Blogger sethstorm said...


If the US had followed Friedman's advice it would have repealed all minimum wage laws and given workers a choice to take low paying jobs in exchange for gaining experience and training that made them more valuable. There is nothing wrong with 12-year olds working for $2.50 an hour washing dishes while they learn what it takes to keep a job.


What you describe is slavery, something that was abolished in the 1860s's but maintained by businesses in another form until the 1930's. You give businesses unlimited power and control over people that cannot readily form an objection. You want to return to worse times where workers get shot and killed for objecting to business.

Friedman's advice belongs in the dustbin of history along with slavery.

 
At 6/18/2012 9:41 PM, Blogger sethstorm said...


If anyone wants to help the working poor then they should advocate getting government off their back. Minimum wage laws make it hard for young workers without skills to get the training that they need.


Or more robust legislation can be put in place that disincentivizes employers from using the minimum wage to avoid workers.

I see you defending a disturbing shift to please business at the cost of everything else - as if they were some almighty creature.

A good business wouldnt let the minimum wage get in the way of introducing "unskilled" workers to the world of work.

 
At 6/19/2012 1:40 AM, Blogger Ron H. said...

"A good business wouldnt let the minimum wage get in the way of introducing "unskilled" workers to the world of work"

Yes, a good business would subsidize unskilled workers out of the goodness of their little black hearts by paying them more than their worth.

LOL

 
At 6/19/2012 4:58 AM, Blogger VangelV said...

Bollocks. The business sawed off the ladder rungs, not government, through their reaction. The business is more than free to not retaliate.

I think that you are forgetting the consumer. Businesses don't force anyone to buy what they are selling. They have to convince consumers by offering a good price and acceptable quality standards. When its input costs rise a business has to increase its prices and consumers buy less of its products. While there may be some 'protection' by laws that force every other domestic provider to increase its own costs such laws do not apply to goods made abroad. That provides incentives for domestic manufacturers to get rid of as many people as possible by automating their domestic lines or simply to move their operations abroad where the cost of labour is low enough to make up for the higher transport costs.

In a market economy the consumer rules. All of you central planning advocates may wish to remember that before you post.

 
At 6/19/2012 5:08 AM, Blogger VangelV said...

What you describe is slavery, something that was abolished in the 1860s's but maintained by businesses in another form until the 1930's. You give businesses unlimited power and control over people that cannot readily form an objection. You want to return to worse times where workers get shot and killed for objecting to business.

What I describe is freedom. I see no reason why young black men and women should not have the choice to do as I did and take low paying jobs while gaining experience. I used to work for less than minimum wage when I started taking part time jobs. While I was unhappy that I could not make more I knew that at eleven I did not have the experience to get more money and was happy to find an employer who would take me at slightly less than minimum wage. I still made enough to pay for a fence around our new house and to furnish a few of the rooms. When my parents, who got off the plane with $100 in their pockets a year before they purchased the house, finally paid off the mortgage three years after they made the purchase most of the money I made went to savings for university and to purchase books and entertainment. Many kids in my neighbourhood also had similar jobs and learned skills and habits that they would need later on when they became full time workers.

The government's rules deny kids the opportunity to learn on the job and establish a record that shows that they are trustworthy enough to be hired by employers looking for dependable workers.

Friedman's advice belongs in the dustbin of history along with slavery.

While Friedman my not be very good on monetary policy his arguments on trade, labour, etc., are on the money. The fact that you cannot understand shows that your bias and emotions get in the way of your logic.

 
At 6/19/2012 5:18 AM, Blogger VangelV said...


Or more robust legislation can be put in place that disincentivizes employers from using the minimum wage to avoid workers.


How do you do that? And where do you stop regulating?

You forget that you cannot force anyone to stay in or open a new business. If consumers are not willing to pay what you are asking and go with your competitors instead you either have to fire more workers and automate your operations, move your production abroad, or close down. Government destroys jobs because it has no capital of its own and is incapable of planning effectively.

I see you defending a disturbing shift to please business at the cost of everything else - as if they were some almighty creature.

You don't see well. I argue for the consumer, who calls the shots by making purchasing decisions using a subjective process. You can't regulate that process by telling people what they must buy and from whom they must buy it. (Or is that what you are proposing?)

A good business wouldnt let the minimum wage get in the way of introducing "unskilled" workers to the world of work.

You use the word 'good' as an economic illiterate. A business is primarily concerned with convincing consumers to buy its products without violating the rights of its shareholders, workers, vendors, and customers. That is all it is supposed to be concerned with and how well it does its jobs shows up in market share, profit margins, cash flows, etc.

What you are suggesting is that people risk their own savings to pursue some nebulous social goals that elevate the unskilled workers above everything else. But that is very unrealistic and is quite unknown in any successful economy in history. Of course, you Utopian socialists, were never concerned much with history or human society because they have no place in your fantasy.

 
At 6/19/2012 4:55 PM, Blogger sethstorm said...


Yes, a good business would subsidize unskilled workers out of the goodness of their little black hearts by paying them more than their worth.

You make the incorrect presumption that they're worth less than the minimum. Their least worth is pegged to the minimum wage.

Besides, I thought it was some Southern politician that said something about a good job being the best welfare program.



How do you do that? And where do you stop regulating?

The regulations are initiated through legislative bodies, preferably at a pace that keeps businesses blind until the regulations take effect.

One stops regulating when business continually complies in good faith, not as a means to circumvent something else. Not at the behest of some amorphous, voracious, indifferent construct that causes someone equivalent injury for equivalent attack.

 
At 6/19/2012 5:21 PM, Blogger sethstorm said...


I think that you are forgetting the consumer/I argue for the consumer/etc.

Using the "consumer" for the basis of your argument is to rely on an amorphous, voracious, and (sociopathically) indifferent construct. You're just wishing to have something with destructive actions and no defense against it.


The government's rules deny kids the opportunity to learn on the job and establish a record that shows that they are trustworthy enough to be hired by employers looking for dependable workers.

The rules do not prevent the opportunity to learn on the job and to establish an initial record of work. It is business that makes the decision, for the have the freedom to choose otherwise and still profit.


A business is primarily concerned with convincing consumers to buy its products without violating the rights of its shareholders, workers, vendors, and customers. That is all it is supposed to be concerned with and how well it does its jobs shows up in market share, profit margins, cash flows, etc.

All of which can still be done while doing well by all of their own without regard to perceived skill level. You just wish to defend the ones that do not.


What I describe is freedom... ...they became full time workers.

That employer was violating the law; the better case would have been through immediate family.



What you are suggesting is that people risk their own savings to pursue some nebulous social goals that elevate the unskilled workers above everything else.

Hardly. You propose to make it even worse for those people just so that they aren't "unskilled" - without regard to the actual capacity of the person.

Defending the required adulation of business for jobs, while denying same to workers, is not even close to freedom.

 
At 6/19/2012 8:57 PM, Blogger Jon Murphy said...

Wow...this is starting to sound like paranoid ramblings.

 
At 6/19/2012 9:24 PM, Blogger VangelV said...

Using the "consumer" for the basis of your argument is to rely on an amorphous, voracious, and (sociopathically) indifferent construct. You're just wishing to have something with destructive actions and no defense against it.

Amorphous? Voracious? No. I am simply talking about anyone who buys anything at any time. Companies depend on the individual who chooses what to purchase among the many options that are offered in a competitive marketplace. It is these consumption decisions that usually drive economic activity, not some big bad company that has power over the marketplace. The only place where such power to harm exists is when government allows some institution to have a monopoly on a particular good or service.

The rules do not prevent the opportunity to learn on the job and to establish an initial record of work. It is business that makes the decision, for the have the freedom to choose otherwise and still profit.

Sure they do. If someone is only worth $4 per hour and the minimum wage is $7 the regulations prevent the individual from getting the job that would provide experience and a record of reliability, not to mention a marketable skill set.

All of which can still be done while doing well by all of their own without regard to perceived skill level. You just wish to defend the ones that do not.

No, it can't be done by hiring people at above market wages. When that happens consumers, who drive this bus, go elsewhere and the company management has to face irate investors who get rid of them, or outside forces that buy the shares and manage the business more effectively or simply sell of the pieces.

That employer was violating the law; the better case would have been through immediate family.

A law that limits the choice of workers is a bad law and should be violated.

Hardly. You propose to make it even worse for those people just so that they aren't "unskilled" - without regard to the actual capacity of the person.

Potential is useless unless it it realized. The only way to reach it is to act, and the rules that you favour make that very difficult by limiting choice and pricing unskilled workers out of the labour force.

Defending the required adulation of business for jobs, while denying same to workers, is not even close to freedom.

Adulation? We do not worship businesses because most of them wind up going under. What we like is the process in which people are free to cooperate and interact as they see fit and by doing so make us much richer. We take the countless errors because they are necessary in a process that develops new ideas and comes up with new products and services that make all of our lives much better.

You really need to learn a few things about economics because it is obvious that you are entirely clueless.

 
At 6/20/2012 3:32 AM, Blogger sethstorm said...


Amorphous? Voracious? No. I am simply talking about anyone who buys anything at any time.

You cannot give specific form or shape to this entity, merely that "anyone who buys anything at any time" consists of the set of people known as consumers.

The behavior, as demonstrated by this group in general, is to simply destroy or cause destruction in a manner not unlike that of a wild animal consuming its meal.

Since you cannot give specific shape or form, and at best cannot dispute the behavior of this group, the terms are accurate.


Sure they do. If someone is only worth $4 per hour and the minimum wage is $7 the regulations prevent the individual from getting the job that would provide experience and a record of reliability, not to mention a marketable skill set.

You make the fallacy of presuming that they are not worth the declared value that they are worth for work, the minimum wage.


No, it can't be done by hiring people at above market wages. When that happens consumers, who drive this bus, go elsewhere and the company management has to face irate investors who get rid of them, or outside forces that buy the shares and manage the business more effectively or simply sell of the pieces.

Yet it has been done and can still be done to discourage unproductive behavior - without having to antagonize, micromanage, or otherwise stand in opposition to the worker.

Your argument also falls apart when the company is privately held - and generally not beholden to outside investors. The company is then free to do well by its workers - so the workers do well by the company's customers.


Potential is useless unless it it realized. The only way to reach it is to act, and the rules that you favour make that very difficult by limiting choice and pricing unskilled workers out of the labour force.

Again, it is the business that is refusing by any obscure technicality possible.

The rules I favor make it difficult if not impossible for business to not act in good faith. If employers thought not to stand athwart to hiring people - directly, in good faith, and on a voluntary basis(most importantly) - no problem would exist.

Adulation?
What you call a process of interaction ignores all the issues of handling all those non-trivial errors. As a consequence of these errors, millions can and do end up on the wrong side thanks to business (and to a lesser extent, a business-favored-over-everyone-else government).

 
At 6/20/2012 6:15 AM, Blogger VangelV said...

You cannot give specific form or shape to this entity, merely that "anyone who buys anything at any time" consists of the set of people known as consumers.

The behavior, as demonstrated by this group in general, is to simply destroy or cause destruction in a manner not unlike that of a wild animal consuming its meal.

Since you cannot give specific shape or form, and at best cannot dispute the behavior of this group, the terms are accurate.


You are rambling and grasping at straws because you are ignorant of how economic systems work. This is not about classes or groups but about individuals acting. It is individuals who drive market activity and all by simply choosing what they prefer to the other alternatives. Now I know that in Karl Marx PS you were never taught any of this but that is no excuse for ignorance and muddled thinking.


You make the fallacy of presuming that they are not worth the declared value that they are worth for work, the minimum wage.


I presume nothing, just state facts. If you cannot find a job to pay you $5 an hour you are not worth $5 to any employer and have to find a clearing price. Once you find a job it becomes easy to show that you may be worth more as you gain skills and show that you are reliable. Once you do you make employers bid for your services and get a higher wage. You are under no obligation to work for a lower wage than you can find elsewhere so your employer has to match the best price if he wants to keep you.

Yet it has been done and can still be done to discourage unproductive behavior - without having to antagonize, micromanage, or otherwise stand in opposition to the worker.

First, nobody is standing in opposition to the worker. Second, "You cannot give specific form or shape to this entity, merely that 'anyone who sells his labour at any time' consists is in a class known as 'the worker'." See how that works?

 
At 6/20/2012 6:16 AM, Blogger VangelV said...

Your argument also falls apart when the company is privately held - and generally not beholden to outside investors. The company is then free to do well by its workers - so the workers do well by the company's customers.

Not at all. Such a company still has to bid for workers just as public companies do. While its owner(s) can choose to reduce their margins below the industry average by paying people above market rates or even run at a loss such activity cannot last very long because in a competitive environment it is the consumers, not owners or workers, who drive activity. They will select the best products in a specific price range, which means that companies that overpay or waste resources do not stay viable for very long.

Again, it is the business that is refusing by any obscure technicality possible.

No it is not. It is the consumer who has no time for unrealized potential. In the real world where consumers part with their own money what matters is actual real world performance. They do not buy products that are higher priced because employers are paying more than the market rate. And you forget that paying a higher wage in anticipation of some potential being met later does not mean that the worker will take less later. In the real world, unlike the Utopian fantasy that you imagine, workers use employers to bid against each other and leave when a better offer comes along. In the real world the fundamentals of the labour market is ultimately just like other markets.

The rules I favor make it difficult if not impossible for business to not act in good faith.

How the hell does that work? Who decides and on what criteria? Do we have some pointy-headed Utopian-dwelling bureaucrat who is ignorant of how business works make arbitrary decisions using his/her discretion or will you provide an objective way to determine this? If it is the former you have nothing but a corrupt system that enriches those that wield discretionary power. If it is the latter please point us to the rules that allow such objective determinations to be made.

If employers thought not to stand athwart to hiring people - directly, in good faith, and on a voluntary basis(most importantly) - no problem would exist.

Faith? Thought not to... How the hell do you make an objective decision using faith when value is subjective and the marketplace is driven by billions of subjective decisions made by voluntary transaction? And isn't it hypocritical to talk about voluntary basis when you are arguing to limit voluntary activity? Or did you ignore that?

What you call a process of interaction ignores all the issues of handling all those non-trivial errors. As a consequence of these errors, millions can and do end up on the wrong side thanks to business (and to a lesser extent, a business-favored-over-everyone-else government).

It is a marketplace you moron. In it you have consumers bidding for labour against each other. If I think that you are only $3 per hour to me that does not prevent you from getting $10 per hour somewhere else if you can find such an offer. If you can't and my bid is the highest you still don't have to take it. Why should I as the consumer be forced to pay more that should because you side with the seller of the services?

 
At 6/20/2012 5:12 PM, Blogger Ron H. said...

"Wow...this is starting to sound like paranoid ramblings."

Welcome to the world of sethstorm. A frequent visitor in the past, BJM.

(Before Jon Murphy)

 
At 6/20/2012 5:17 PM, Blogger Ron H. said...

"Bollocks. The business sawed off the ladder rungs, not government, through their reaction. The business is more than free to not retaliate."

Retaliate? More silly blather. The government made it illegal to hire people who are unqualified to stand on that first rung. Businesses can't legally hire them.

 
At 6/20/2012 5:24 PM, Blogger Ron H. said...

"The only place where such power to harm exists is when government allows some institution to have a monopoly on a particular good or service."

Such as labor for example

 
At 6/20/2012 5:37 PM, Blogger Ron H. said...

"Since you cannot give specific shape or form, and at best cannot dispute the behavior of this group, the terms are accurate."

The form is you, and other individuals...

Well not really *you*...

You're not a good example of anything.

Picture individual people, but different from you in that they are rational, making buying decisions based on things they consider important, including price.

Now picture millions of them. That's "consumers". They are the ultimate deciders of life or death for all businesses, so give them some respect.

 
At 6/20/2012 5:42 PM, Blogger Ron H. said...

"You make the fallacy of presuming that they are not worth the declared value that they are worth for work, the minimum wage."

It's an easy thing to measure. Do you think government bureaucrats can "declare" what a worker is worth?

 
At 6/20/2012 5:49 PM, Blogger Ron H. said...

"Your argument also falls apart when the company is privately held - and generally not beholden to outside investors. The company is then free to do well by its workers - so the workers do well by the company's customers."

What nonsense. The "owners" of a company are "shareholders" by any definition, whether or not they hold paper certificates, and whether or not that ownership is traded publicly.

 
At 6/20/2012 5:57 PM, Blogger Ron H. said...

"The rules I favor make it difficult if not impossible for business to not act in good faith."

You silly person, rules cannot compel "good faith", as by definition it can't be coerced, just as "charity" and "compassion" can't be coerced.

The word you are looking for is "compliance".

 
At 6/20/2012 6:15 PM, Blogger Ron H. said...

"Again, it is the business that is refusing by any obscure technicality possible. "

Nothing technical or obscure about it, it's just this simple: I can hire anybody I wish, or not hire anybody I wish, based on my estimation of their value to the company. As it should be. If, in my judgement they aren't worth the amount I'm required to pay them, they won't get the job.

What could be simpler than that?

Don't ask me to pay people more than they are worth to me, and don't ask me to train them at my expense while paying them more than they are worth to me.

It's not my responsibility, and it's just not going to happen.

If I can't make money at what I do, I won't do it. That means there will no job(s) to argue about, and fewer of the goods or services I produce, thus higher prices for those that remain.

It's hard to believe anyone would continue to make the ridiculous, non-economic comments you do.

 
At 6/20/2012 8:22 PM, Blogger Jon Murphy said...

Welcome to the world of sethstorm. A frequent visitor in the past, BJM.

I've butted heads with him before on Cafe Hayek. I usually ignore him. I learned quick that he is not worth my time (mostly because his posts are the aforementioned paranoid ramblings). Every once in a while I like to kick the bee's nest, but for the most part, I'll just let him be. I realized he was not worth my time when, on a post in a similar vein at Cafe Hayek, he made a comment along the lines that everyone should be gaurenteed a job doing what they want to do. If no company will hire them, then the government will pay them a salary to do what they want.

 
At 6/20/2012 9:33 PM, Blogger sethstorm said...


Nothing technical or obscure about it, it's just this simple: I can hire anybody I wish, or not hire anybody I wish, based on my estimation of their value to the company. As it should be. If, in my judgement they aren't worth the amount I'm required to pay them, they won't get the job.

Thanks for proving my point. The technicalities come in when a business wishes to use prohibited criteria but cannot do so openly.

Examples can be found in: age discrimination, labor relations (w/r/t union supporters), H1-b/L-1/B-2/etc. "no citizen found" fraud

In none of those examples does the business openly admit it - they hide it. When they get caught (such as the case with Grigsby Cohen), they do whatever it takes to not admit fault for their wrongdoing.



The word you are looking for is "compliance".

Nope. Compliance implies the potential use of loopholes. Doing something in good faith implies you are not.

Besides, rules can compel good faith by providing a huge incentive for it.




The form is you, and other individuals...

But not a specific form, always a general form of "you and others".

What I ask for is quite simple - stop thinking that businesses act with impunity, and pointing to the consumers when the business actually did it.

 
At 6/21/2012 4:43 AM, Blogger Ron H. said...

"I've butted heads with him before on Cafe Hayek. I usually ignore him. I learned quick that he is not worth my time (mostly because his posts are the aforementioned paranoid ramblings)."

I have suspions that he may be using really cheap language translation software. I used to see similar results in instructions that came with electronic parts from Asian countries.

"Every once in a while I like to kick the bee's nest, but for the most part, I'll just let him be."

Ah yes. Bee nest kicking is one of my weaknesses. I have trouble abstaining. :)

"I realized he was not worth my time when, on a post in a similar vein at Cafe Hayek, he made a comment along the lines that everyone should be gaurenteed a job doing what they want to do. If no company will hire them, then the government will pay them a salary to do what they want."

Yeah, he's a peach.

 
At 6/21/2012 6:22 AM, Blogger Jon Murphy said...

I never understood why minimum wage laws causing increased unemployment among the poor was controversial. Even ignoring the reams of research done on this and the nearly universal acceptance of this fact by economics and laymen of all stripes, this doesn't even pass the small test if you think about it.

Think what the premise says: If we make it more expensive to hire people, then the same or more people will be hired. A third grader can pick out the problem there.

Let's give an example:

Assume we have a company whose goal is to employ as many people as possible. They do not worry about profit; all they want to do is employ as many people as fiscally possible. Let's further assume they make a widget that everyone wants and they currently sell it at a price everyone can afford. They spend a lot of time working in the community, building houses, schools, parks, etc. In other words, they are the ideal "community company."

Now, let's suppose that the town determines the wages they pay aren't high enough. They pass a minimum wage law that raises the wages the company must pay. What happens? The company can either raise prices (which would mean less people consume their product, hurting their bottom line) or they would have to cut costs: hire fewer workers, contribute less to the community, etc. Either way, the folks who need it most are hurt.

Now, one may argue "well, most companies make profit, so what's wrong with making them take a little less?" Well, two things: firstly all economic entities, from individuals like you and me to companies, are profit-seeking. No one just "accepts" that they are making less: they cut costs elsewhere to make up for the difference. Secondly, and related to the first, all economic entities will only act if they are receiving a benefit equal or greater to the cost. If a worker costs $8/hr, but only generates $7/hr, he will be let go.

 
At 6/21/2012 7:15 AM, Blogger VangelV said...

Thanks for proving my point. The technicalities come in when a business wishes to use prohibited criteria but cannot do so openly.

Of course. The law prohibits businesses from hiring unskilled workers for their market price. That is what this debate is about. That means that unskilled individuals who have few connections are going to be unemployed or underemployed for far too long and will be doomed to being a member of the underclass that the left needs to justify its existence.

Examples can be found in: age discrimination, labor relations (w/r/t union supporters), H1-b/L-1/B-2/etc. "no citizen found" fraud

Yes. Those are stupid laws too. A business should be able to hire any worker it wants just as any worker should be able to take any job s/he wants without meddling from the state. Minimum wage laws hurt the unskilled. The visa rules hurt businesses, investors, and their workers.

In none of those examples does the business openly admit it - they hide it. When they get caught (such as the case with Grigsby Cohen), they do whatever it takes to not admit fault for their wrongdoing.

Typical nonsense from a fool who does not know what it takes to compete effectively. Businesses need skilled workers who are reliable and get paid the market rate. Workers need to be able to select the best offers that they can get. There is no justification for anyone meddling in what is a voluntary transaction in a competitive market.

 
At 6/21/2012 7:18 AM, Blogger VangelV said...

Nope. Compliance implies the potential use of loopholes. Doing something in good faith implies you are not.

Besides, rules can compel good faith by providing a huge incentive for it.


This is so stupid that no response is necessary?

But not a specific form, always a general form of "you and others".

What I ask for is quite simple - stop thinking that businesses act with impunity, and pointing to the consumers when the business actually did it.


Did what? Offer a job to an unskilled person at the market wage rather than an arbitrary figure that idiot politicians consider to be more appropriate?

 

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