I think we all agree that the minimum wage will cause unemployment, since the labor markets which it impacts are fairly competitive. However, if there is no perfect elasticity for labor demand, then an increase in the minimum wage will create more gains than losses. Therefore, a 10% increase in the minimum wage won't decrease employment by 10%, so there's a positive income gain for minimum wage workers.
nibbler491: Also, you're completely wrong in saying there's any gain. The only thing you can do by raising the minimum wage is force business to reallocate resources. If the minimum wage is 10 dollars, and you increase it 10%, bringing it to 11 dollars, also increasing unemployment by 5%, how is there a welfare gain? Hundreds of thousands of people who were once making 10 dollars are now making nothing, and the people who were making 10 dollars are now making 1 dollar extra. Clearly all you've done is given workers a handful of extra dollars at the expense of hundreds of thousands of people's livelihood. This is entirely irrelevant however. Utilitarianism is bullshit.
Also, you're completely wrong in saying there's any gain. The only thing you can do by raising the minimum wage is force business to reallocate resources.
If the minimum wage is 10 dollars, and you increase it 10%, bringing it to 11 dollars, also increasing unemployment by 5%, how is there a welfare gain?
Hundreds of thousands of people who were once making 10 dollars are now making nothing, and the people who were making 10 dollars are now making 1 dollar extra. Clearly all you've done is given workers a handful of extra dollars at the expense of hundreds of thousands of people's livelihood.
This is entirely irrelevant however. Utilitarianism is bullshit.
To make the numbers simple, if the minimum wage is 10 dollars and there are 10 people employed, and it's increased by 20% and employment decreases by 10%, that means 1 person lost his job (so a loss of $10) but the other 9 people gain a $2 raise, which equates a $18 gain for everyone. So the net gain is $8
liberty student: Juma:Well I think it's important to isolate the policy and hold other factors constant so we can assess its effectiveness. That's not natural. Juma:I'm not sure why you're bringing up other policies that aren't necessarily relevant. They are relevant. You are trying to chart a direct correlation between a price floor and employment. It seems to me, that if you are dealing with prices (minimum wage) then perhaps you should be looking at the aggregate of wages in an economy before and after minimum wage rate changes because changes won't just occur at the minimum wage margins when the floor is moved, there will be a ripple effect through all wage levels and jobs. Like I said, not as simple as making a direct correlation. We don't live in bubbles.
Juma:Well I think it's important to isolate the policy and hold other factors constant so we can assess its effectiveness.
That's not natural.
Juma:I'm not sure why you're bringing up other policies that aren't necessarily relevant.
They are relevant. You are trying to chart a direct correlation between a price floor and employment. It seems to me, that if you are dealing with prices (minimum wage) then perhaps you should be looking at the aggregate of wages in an economy before and after minimum wage rate changes because changes won't just occur at the minimum wage margins when the floor is moved, there will be a ripple effect through all wage levels and jobs.
Like I said, not as simple as making a direct correlation. We don't live in bubbles.
It may not be natural, but even Austrian economists agree that you must use the ceteris paribus condition to assess economic policies. The other effects of the minimum wage you are speaking of that make affect other industries or sectors, however, are legitimate changes that need to be considered. I was speaking of welfare taxation which is not really relevant to this case.
As Hans Hermann Hoppe says, when a scientific error is committed no one benefits, but when a moral error is committed someone always benefits.
Those who benefit most from minimum wage laws are state educators, who must compete with private business for students. If private business begins to offer paid apprenticeships with education, no one will attend state-licensed schools and pay for them. The intellectual class that defends the state must also defend the minimum wage.
The fallacies of intellectual communism, a compilation - On the nature of power
Knight_of_BAAWA:And what about those who are priced out of a job because of the meddling? Remember to consider that which isn't seen.
Juma:True, but I think that's the point of saying it's an empirical question. The people who lose their jobs and income suffer, but all the other people still employed gain from the higher wages. And if the elasticity is less than perfect, the gain will exceed the loss
Juma: nibbler491: Also, you're completely wrong in saying there's any gain. The only thing you can do by raising the minimum wage is force business to reallocate resources. If the minimum wage is 10 dollars, and you increase it 10%, bringing it to 11 dollars, also increasing unemployment by 5%, how is there a welfare gain? Hundreds of thousands of people who were once making 10 dollars are now making nothing, and the people who were making 10 dollars are now making 1 dollar extra. Clearly all you've done is given workers a handful of extra dollars at the expense of hundreds of thousands of people's livelihood. This is entirely irrelevant however. Utilitarianism is bullshit. To make the numbers simple, if the minimum wage is 10 dollars and there are 10 people employed, and it's increased by 20% and employment decreases by 10%, that means 1 person lost his job (so a loss of $10) but the other 9 people gain a $2 raise, which equates a $18 gain for everyone. So the net gain is $8
Juma, what about the person that lost their job?
wilderness: Juma: nibbler491: Also, you're completely wrong in saying there's any gain. The only thing you can do by raising the minimum wage is force business to reallocate resources. If the minimum wage is 10 dollars, and you increase it 10%, bringing it to 11 dollars, also increasing unemployment by 5%, how is there a welfare gain? Hundreds of thousands of people who were once making 10 dollars are now making nothing, and the people who were making 10 dollars are now making 1 dollar extra. Clearly all you've done is given workers a handful of extra dollars at the expense of hundreds of thousands of people's livelihood. This is entirely irrelevant however. Utilitarianism is bullshit. To make the numbers simple, if the minimum wage is 10 dollars and there are 10 people employed, and it's increased by 20% and employment decreases by 10%, that means 1 person lost his job (so a loss of $10) but the other 9 people gain a $2 raise, which equates a $18 gain for everyone. So the net gain is $8 Juma, what about the person that lost their job?
It's unfortunate, but that's the nature of policy and markets. There's always winners and losers. The goal is to try to create more winners than losers
Juma: wilderness: Juma: nibbler491: Also, you're completely wrong in saying there's any gain. The only thing you can do by raising the minimum wage is force business to reallocate resources. If the minimum wage is 10 dollars, and you increase it 10%, bringing it to 11 dollars, also increasing unemployment by 5%, how is there a welfare gain? Hundreds of thousands of people who were once making 10 dollars are now making nothing, and the people who were making 10 dollars are now making 1 dollar extra. Clearly all you've done is given workers a handful of extra dollars at the expense of hundreds of thousands of people's livelihood. This is entirely irrelevant however. Utilitarianism is bullshit. To make the numbers simple, if the minimum wage is 10 dollars and there are 10 people employed, and it's increased by 20% and employment decreases by 10%, that means 1 person lost his job (so a loss of $10) but the other 9 people gain a $2 raise, which equates a $18 gain for everyone. So the net gain is $8 Juma, what about the person that lost their job? It's unfortunate, but that's the nature of policy and markets. There's always winners and losers. The goal is to try to create more winners than losers
But you insisted it was all about gains. In a State economy, such as in the U.S., we're talking about an average of 625,000 people going unemployed each month because somebody else wouldn't allow their wage to drop $1. Your focus is too narrow. Meanwhile, wage prices could drop, prices of goods drop, but unemployment wouldn't need to drop. That's more like a win-win.
wilderness: Juma: wilderness: Juma: nibbler491: Also, you're completely wrong in saying there's any gain. The only thing you can do by raising the minimum wage is force business to reallocate resources. If the minimum wage is 10 dollars, and you increase it 10%, bringing it to 11 dollars, also increasing unemployment by 5%, how is there a welfare gain? Hundreds of thousands of people who were once making 10 dollars are now making nothing, and the people who were making 10 dollars are now making 1 dollar extra. Clearly all you've done is given workers a handful of extra dollars at the expense of hundreds of thousands of people's livelihood. This is entirely irrelevant however. Utilitarianism is bullshit. To make the numbers simple, if the minimum wage is 10 dollars and there are 10 people employed, and it's increased by 20% and employment decreases by 10%, that means 1 person lost his job (so a loss of $10) but the other 9 people gain a $2 raise, which equates a $18 gain for everyone. So the net gain is $8 Juma, what about the person that lost their job? It's unfortunate, but that's the nature of policy and markets. There's always winners and losers. The goal is to try to create more winners than losers But you insisted it was all about gains. In a State economy, such as in the U.S., we're talking about an average of 625,000 people going unemployed each month because somebody else wouldn't allow their wage to drop $1. Your focus is too narrow. Meanwhile, wage prices could drop, prices of goods drop, but unemployment wouldn't need to drop. That's more like a win-win.
I said it's about OVERALL NET GAIN. I didn't mean to imply there wouldn't be any losses
Juma:I said it's about OVERALL NET GAIN. I didn't mean to imply there wouldn't be any losses
I think I made the same point earler: how can you make such comparisons? One person's income is destroyed, while a few other people have had their's slightly raised. How can you compare these two, and then tell us that there has been an overall utility increase?
Or an even more simple example: The government seizes (involuntarily) $10 from A, and gives it to B. Is there a utility increase?
Irish Liberty Forum
MatthewWilliam: Juma:I said it's about OVERALL NET GAIN. I didn't mean to imply there wouldn't be any losses I think I made the same point earler: how can you make such comparisons? One person's income is destroyed, while a few other people have had their's slightly raised. How can you compare these two, and then tell us that there has been an overall utility increase? Or an even more simple example: The government seizes (involuntarily) $10 from A, and gives it to B. Is there a utility increase?
It's hard to speak in terms of utility because people are so different. That's why I said the assumption that everyone affected is of similar nature is problematic. But if you measure the social welfare in terms of dollars, there's a clear net gain
Juma:It's hard to speak in terms of utility because people are so different. That's why I said the assumption that everyone affected is of similar nature is problematic. But if you measure the social welfare in terms of dollars, there's a clear net gain
Right, but otherwise it's impossible to tell. Even if we agreed with your analysis, no-one has become any more productive after the wage increase. There will be fewer goods produced mutatis mutandis. The price of the produts will rise.
The economics of coercion have failed time and time again--this is no different.
MatthewWilliam: Juma:It's hard to speak in terms of utility because people are so different. That's why I said the assumption that everyone affected is of similar nature is problematic. But if you measure the social welfare in terms of dollars, there's a clear net gain Right, but otherwise it's impossible to tell. Even if we agreed with your analysis, no-one has become any more productive after the wage increase. There will be fewer goods produced mutatis mutandis. The price of the produts will rise. The economics of coercion have failed time and time again--this is no different.
I thought according to Austrian economics prices wouldn't be affected because there is no change in supply and demand for the product
True, but I think that's the point of saying it's an empirical question. The people who lose their jobs and income suffer, but all the other people still employed gain from the higher wages. And if the elasticity is less than perfect, the gain will exceed the loss
What "gain"? What if the loss of the jobs of the individuals is (subjectively to them) a far greater loss than those with higher salaries? How will the firms find the resources to pay these higher wages without making cutbacks elsewhere, that put the market on a suboptimal track (the unseen)? How does "elasticity" magically make an uneconomic policy economic? Whether it causes 2, 10 or 100% unemployment is irrelevant to whether it's efficient, regardless of how much of a "gain" (read: how much those who are still in employment can extort from their employers) it offers. I'm not even sure supply would be unaffected as lines of production reliant on cheap labour that is now outlawed (effectively) would certainly be impacted, with entire swathes of individuals engaging in productive work now out of a job (reducing net output, as the "winners" did not increase productivity to merit higher wages.)
Freedom of markets is positively correlated with the degree of evolution in any society...
Juma:Therefore, a 10% increase in the minimum wage won't decrease employment by 10%, so there's a positive income gain for minimum wage workers.
That's ridiculous!
Putting 8% of workers out of work is okay because someone else's income went up 10%? So much for equality!
Peace
It seems like a heirarchy of low productivity.