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Lowering the minimum wage = crazy?

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Buzz Killington posted on Fri, Sep 7 2012 11:30 AM

http://oi48.tinypic.com/2m3fupf.jpg

One free market/libertarian answer to unemployment and poverty is lowering the minimum wage. My question is, how the heck are people supposed to live off a lower minimum wage?

The minimum wage is already pretty low, if we lower it to say 3-4 dollars an hour, how is someone supposed to survive off that income?

"Nutty as squirrel shit."

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Characteristics of minimum wage workers:

http://www.bls.gov/cps/minwage2011.htm

these 3.8 million workers with wages at or below the Federal minimum made up 5.2 percent of all hourly-paid workers.

Although workers under age 25 represented only about one-fifth of hourly-paid workers, they made up about half of those paid the Federal minimum wage or less

Among employed teenagers paid by the hour, about 23 percent earned the minimum wage or less, compared with about 3 percent of workers age 25 and over.

Never-married workers, who tend to be young, were more likely than married workers to earn the Federal minimum wage or less (about 9 percent versus about 2 percent).

Conclusion? The minimum wage affects the young, never married people. Not established families with children.

By creating a disemployment effect at younger years, the minimum wage prevents young workers from gaining the work experience that results in higher wages. If child labor and minimum wage laws were repealed, kids could 1) Earn some money while still with their parents so that they could start off life with a financial cushion, and 2) Gain work experience which makes them more attractive for better employment.

I'd really like to see their data. I want to do a regression analysis controlling for marital status, age, and hours worked per week. Especially since for people who work at least 40 hours of week who are paid at or below Min Wage sum to 1.7%. Older married people with children who work full time appear to be exactly NOT the demographic that works at or below min wage.

Remove other harmful things like the drug war (and consider the industry it would allow to create), and you have yourself a very likely improvement in the lives of people.

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All out of http://candlemind.com/projects/progclub/file/michael/SSN.php

 

And from the "Costs" article above,

 

Robert L. Woodson (1989, p. 63) calculated that, on average, 70 cents
of each dollar budgeted for government assistance goes not to the
poor, but to the members of the welfare bureaucracy and others serving the poor. Michael Tanner (1996, p. 136 n. 18) cites regional studies supporting this 70/30 split. 
In contrast, administrative and other operating costs in private
charities absorb, on average, only one-third or less of each dollar
donated, leaving the other two-thirds (or more) to be delivered to
recipients. Charity Navigator (www.charitynavigator.org), the
newest of several private sector organizations that rate charities by
various criteria and supply that information to the public on their
web sites, found that, as of 2004, 70 percent of charities they rated
spent at least 75 percent of their budgets on the programs and services they exist to provide, and 90 percent spent at least 65 percent.
The median administrative expense among all charities in their sample was only 10.3 percent. 
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Anenome:
Why does welfare have to be financed via compulsory taxation? Why not allow private welfare to take over? Historically that's worked fine.

How can it get organized without some kind of bureaucracy overseeing it?

"Nutty as squirrel shit."
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gotlucky:
Just above, Wheylous posts actual facts that directly refute your absurd claim.

Oh now I get it, thanks.

"Nutty as squirrel shit."
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Levon replied on Fri, Sep 7 2012 2:31 PM

Would volunteering and interning be an optimal alternative for younger workers who have no skills with which to compete in the labor market? A worker willing to work for little to nothing, simply to gain skills, shows me as an employer the motivation or dedication that workers has, and the likelihood for long-term employment. A kid in high school arguing that they deserve X dollars per hour (higher than any other worker) despite their lack of skill or experience does little to encourage me to spend more on that worker, though their productive level is likely to be nominal compared to the intern or volunteer. And since many workers at this age are more likely to still live at home with family support, it's not unrealistic to see a situation where this works. I'd gladly buy my child a bus pass or drive them to a job where they worked for little or nothing, knowing they were gaining skills that benefitted them as a future laborer or tradesman. I'm more inclined to do that as opposed to co-signing on excessive debt on a liberal arts degree where job prospects are less likely.

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Levon replied on Fri, Sep 7 2012 2:36 PM

HabbaBabba:
Work for a wage? That's not welfare, bud. That's a job. Now we've gone full circle.

Not exactly, they would be working, and yes for minimum wage, but they would also have a little additional welfare to support themselves until they developed their skills more.

That seems to me to be a subsidization of underperformance.

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All out of http://candlemind.com/projects/progclub/file/michael/SSN.php

 

And from the "Costs" article above,

 

Robert L. Woodson (1989, p. 63) calculated that, on average, 70 cents
of each dollar budgeted for government assistance goes not to the
poor, but to the members of the welfare bureaucracy and others serving the poor. Michael Tanner (1996, p. 136 n. 18) cites regional studies supporting this 70/30 split. 
In contrast, administrative and other operating costs in private
charities absorb, on average, only one-third or less of each dollar
donated, leaving the other two-thirds (or more) to be delivered to
recipients. Charity Navigator (www.charitynavigator.org), the
newest of several private sector organizations that rate charities by
various criteria and supply that information to the public on their
web sites, found that, as of 2004, 70 percent of charities they rated
spent at least 75 percent of their budgets on the programs and services they exist to provide, and 90 percent spent at least 65 percent.
The median administrative expense among all charities in their sample was only 10.3 percent. 
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I'm considering making a presentation on the poor under Libertarianism.

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Mary, a teen fresh out of high school who doesn't have enough money for college, goes to work. Or tries to, Mary finds that people don't think her work is worth the minimum wage, so Mary ends up like the millions of other unemployed people. One day the minimum wage law is repealed, Mary immediately finds a job, working for $3 a hour isn't Mary's cup of tea but it's better than nothing. The welfare office decides Mary still isn't making enough money, they decide she is eligible for welfare, Mary is thrilled that now she actually has enough to live off of. Mary stays in her $3 a hour job, continues to recieve welfare benefits, she tries to save up enough money to go to college, but there just isn't enough left over to do that. (It would take her about 30 years to save up enough for college.) Mary, having had the years crush her spirit, stays in the $3 a hour job, since if she makes more the welfare benefits are cut, making it more difficult for her to make it. She can get a better job, lose the welfare benefits, which would damage her financial security, or she can stay in the $3 a hour job which will be the more secure option. Almost everyone chooses the more secure option. They, being able to make it in a crappy job, with the help of welfare, stay in the crappy job instead of taking the time to gain more valuable skills.

That's what $3 a hour plus welfare will do. It will mean people stay in the crappy jobs instead of improving themselves and getting better jobs. (This is because many people won't take the chance of dropping welfare for a job which is only slightly better.) Welfare destroys people's incentive to do better, it's as simple as that, if I (a former bleeding heart hippy Democrat) can understand that I don't see why others can't grasp it as well.

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Levon:
That seems to me to be a subsidization of underperformance.

How so?

"Nutty as squirrel shit."
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Serpentis-Lucis:
Mary, a teen fresh out of high school who doesn't have enough money for college, goes to work. Or tries to, Mary finds that people don't think her work is worth the minimum wage, so Mary ends up like the millions of other unemployed people. One day the minimum wage law is repealed, Mary immediately finds a job, working for $3 a hour isn't Mary's cup of tea but it's better than nothing. The welfare office decides Mary still isn't making enough money, they decide she is eligible for welfare, Mary is thrilled that now she actually has enough to live off of. Mary stays in her $3 a hour job, continues to recieve welfare benefits, she tries to save up enough money to go to college, but there just isn't enough left over to do that. (It would take her about 30 years to save up enough for college.) Mary, having had the years crush her spirit, stays in the $3 a hour job, since if she makes more the welfare benefits are cut, making it more difficult for her to make it. She can get a better job, lose the welfare benefits, which would damage her financial security, or she can stay in the $3 a hour job which will be the more secure option. Almost everyone chooses the more secure option. They, being able to make it in a crappy job, with the help of welfare, stay in the crappy job instead of taking the time to gain more valuable skills.

That's what $3 a hour plus welfare will do. It will mean people stay in the crappy jobs instead of improving themselves and getting better jobs. (This is because many people won't take the chance of dropping welfare for a job which is only slightly better.) Welfare destroys people's incentive to do better, it's as simple as that, if I (a former bleeding heart hippy Democrat) can understand that I don't see why others can't grasp it as well.

Ah, yeah that's a good point.

"Nutty as squirrel shit."
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Levon replied on Fri, Sep 7 2012 3:06 PM

I can't imagine that supplemental benefits to a $3/hr job would be much. Would they be less than the benefits currently given to 100% unemployed potential workers under current wage laws? Like the current system, it seems that this proposed method would have a similar effect; underemployed workers receiving partial benefits would be vested, and support politicians and policies that maintained or strengthed the system of welfare (even revised, tiered welfare).

(I'm still a sort of a hippie, but old-school. Born on a commune, grew up at Rainbow Gatherings, hated big government. I was at odds with the movement to modern liberalism by most hippies, who hated the state, but wanted to use the state to infringe upon the rights of those they opposed. Funny, that.)

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Levon replied on Fri, Sep 7 2012 3:11 PM

If a worker can't compete by improving their skills or gaining new skills, subsidizing them through welfare doesn't encourage them to grow in their abilities, it encourages them to stay where they are, to protect their welfare benefits. Having a system that increases the scope from only subsidizing zero labor productivity to subsidizing low productivity doesn't seem to me to be a step in the right direction, but one in the opposite.

Now, if private firms and individuals choose to use charity or donate to private charitable institutions that assist unemployed or underemployed individuals, I see nothing wrong with that. The primary point of contention I have is not with the welfare system itself, but the method by which it is funded; through involuntary taxation based on forced coercion. True charity is voluntary.

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 Yes, 3 dollars an hour is better than 0 dollars an hour, but it's still crap, my solution would be to support them via welfare while they're working for that much and developing their skills (the conservative idea of a moderate welfare state to get people back on their feet).

There is a labor-leisure trade-off. Individuals, and this is a purely empirical observation with torrential support, prefer leisure to labor. In other words, they would rather do less work than more work, all other things equal. In order to get them to work, you must compensate them somehow (usually with a wage). People will take-on more challenging endeavors usually (but not always solely) because the tangible remuneration is higher.

Thus, paying people more, for work that warrants less, will subsidize those individuals employed in less-productive jobs. You are reducing the opportunity cost for finding better, more challenging work, and this is especially true if you withdraw those welfare payments once an individual finds a better, higher paying job. In principle, it yields the same effects as unemployment insurance (higher unemployment, especially frictional unemployment). And I’ve chosen to ignore the fact that in order to pay someone to not seek more difficult, productive work, you must first steal from someone who is engaged in such work, which creates its own set of problems.

"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."

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When you suggest making working a perquisite for welfare, are you not essentially suggesting the negative income tax, with the caveat of no welfare benefits received at $0 earned/year level? 
 
If so, the problem is simply in the flaws of the negative income tax (if you do not know them, I am sure JJ could show you several links). The difference being that someone could simply earn $1/year and make the rest up with welfare, which is hardly different from doing no work and making the rest up with welfare.
 
If you should say, "Well, we would not give out the welfare benefits if one earns $1/year (probably doing 10 minutes of busy work for someone)!" then who should decide what the minimum income would be required to receive the welfare benefits? And how would they decide such a thing? Also, realize that this would result in unemployment the same way minimum wage does (ie, if the Grand Bureaucrat decides one must earn $10,000/year to receive welfare benefits, all those whose work is worth less than that might not even bother taking the job, and what would you do with all those people earning zero? The bleeding hearts would cry out!)
 
And, if you were unclear as to what JJ was suggesting with the whole "punch in the face" bit, it goes like this: taxation is theft; theft is harmful -- punching someone in the face is assault; assault is harmful -- if causing more harm does not help the situation, how is stealing (taxing) more from others helpful?

The only one worth following is the one who leads... not the one who pulls; for it is not the direction that condemns the puller, it is the rope that he holds.

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I think the really obvious point that is being missed here is that adjusting the minimum wage downward does not mean that market prices in general can remain at current higher levels, or that they will.  Most prices will eventually adjust downward to accommodate the lower cost of labor (and purchasing power).

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Did I forget to mention that in numerous large American cities it is illegal to feed the homeless without a license? Woops.

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