Arguments Against Raising Minimum Wage Don't Hold up

Maverick74 · Sep 1, 2014

Wheaties he won't respond with anything remotely resembling an original thought. In his defense he doesn't have any. I'm sure he will either copy and paste a re-tort. Or say you obviously don't get it and therefore there is no reason to respond. I wish we could draft someone on DP's place from the left who actually "is" interested in having this discussion and might be able to offer some original content.

Anubis · Sep 1, 2014

Maverick74 said:
Anubis, you are spot on with your cause and effect relationship regarding wages and the demand for labor. As someone who has studied economics (doubt DP has), we know that by raising minimum wages and the cost of labor on one particular cost curve, you cause all the other cost curves to shift in response. In other words, you create both a substitution effect for laborers who were earning a premium to minimum wage who now find themselves at minimum wage as well as affecting the marginal supplier of labor on the supply curve. This is all basic math and not opinion. And you nailed it.

As was pointed out, if you have two groups of people, one currently at 7.25 an hour and let's say another group at 15 to keep things simple. Say the group at 15 an hour has some discernible skill that has afforded them this wage in the marketplace. They possibly have a more stressful job, have greater responsibility and some skill they had to attain. Now you shift the labor curve so that those with no skills, no responsibility and no stress are now making the same wages as the 15 group. Well, this is where the substitution effect kicks in. Those in the 15 group are now sitting on the wrong indifference curve. They are making the same wages as the min group but with harder jobs that require more skill and more responsibility. The optimal strategy for them is to "shift" to the lower curve. That is, they can trade in their current job for the lesser job and earn the same wage. They now have increased their personal utility at no cost to them. But the rub is, they just now took the jobs meant for those in the 7.25 min group. Which means they lose their jobs. Employers will jump at the chance to higher a higher quality worker at the same rate they would have to pay the old 7.25 min group. So the firm has increased their utility as well given the new wage floor. Each actor in this market has maximized their utility while the low end group finds themselves priced out of the labor pool.

This is why economists have never favored raising the min wage. And most of them are center left politically. Instead they have favored for the increase in welfare and gov't benefits. And yes, your observation and one that is frequently brought up is, if more is better, then why stop at 15 an hour? Why not raise min wage to 100,000 a year. Obviously more is not better. So the next question is, is the labor market operating inefficiently. In other words, is the floor for labor too low relative to the value and productivity they provide. Now this is a genuine argument. You are not going to find widespread agreement here. My opinion is that low end of the labor market offers little to no value to most firms. If firms can afford to enter the labor market and purchase this labor at this rate, they are doing so because they are earning a marginal return on that labor in that particular moment in time that justifies the expense.

On the other side, the marginal supplier of labor is highly sensitive to his marginal cost. As we know from economics, the marginal supplier of labor is the last supplier of labor on the supply curve with the smallest margins. Hence why he is "operating on the margin". Any slight increase in cost and he falls off the supply curve. This means he can no longer be a buyer of labor at this higher cost level. This means all the people working for him are out of a job. Now not every firm is operating on the margin. But enough firms are and they will reduce the amount of labor in the marketplace. This is not a controversial subjected and it's implications are widely accepted across economists all political persuasions. This exercise has been researched and researched to death. This example is used in EVERY micro economics text book in the country. Every 10 years though it gets brought up again by someone new thinking they have come across some new idea that has not been well researched.

Hello Maverick74:

Thanks for your excellent post explaining in detail why raising the minimum wage is a bad idea. It is people like you that make these forums a worthwhile learning experience.

Can you recommend some books on economics for people who would like to delve further in to this subject ?

Thank You

Anubis

dbphoenix · Sep 1, 2014

Maverick74 said:
Wheaties he won't respond with anything remotely resembling an original thought. In his defense he doesn't have any. I'm sure he will either copy and paste a re-tort. Or say you obviously don't get it and therefore there is no reason to respond. I wish we could draft someone on DP's place from the left who actually "is" interested in having this discussion and might be able to offer some original content.

Debating with you is not a productive use of my time since you invariably run out of steam at some point and detour into the usual LOL and disparaging remarks. In other words, once you've run through your dogma party piece, you have nothing left (e.g., your "proof" that white privilege doesn't exist because of high-school dropout rates).

If you and others of your group want to have a chaw over economics classes that you've taken and books you've read and so forth, knock yourselves out. That sort of other-worldly discussion is of no interest to me.

Maverick74 · Sep 1, 2014

Anubis said:
Hello Maverick74:

Thanks for your excellent post explaining in detail why raising the minimum wage is a bad idea. It is people like you that make these forums a worthwhile learning experience.

Can you recommend some books on economics for people who would like to delve further in to this subject ?

Thank You

Anubis

OK, you just opened up a wormhole. Here you go!

http://ocw.mit.edu/courses/economics/

Over 50 free online courses in Economics from MIT. Yes, that MIT.

http://www.openculture.com/economics_free_courses

These are also great. More like short little videos over very specific topics.

http://www.skilledup.com/learn/openu/learn-economics-online-free/

Here is a good mixture of stuff from schools all over the country...yup, all free.

http://education-portal.com/articles/List_of_Free_Online_Economics_Degrees_and_Courses.html

And some more...

Now specifically on the macro side, I do have two books I highly recommend. These books include macro-economics, trading, politics and history.

The first one is:

"Mobs, Messiahs and Markets" By William Bonner and Lila Rajiva

And the second one is like a Market Wizards for the intellectual crowd. Read it twice:

"The Invisible Hands", by Steven Drobny

Now this third item is also a must have. These are audio files you can download and listen to from virtually every, and I do mean every economist on the face of the earth covering every, yes every imaginable topic you can possible think of.

http://econtalk.org/

Good luck!

dbphoenix · Sep 1, 2014

Maverick74 said:
OK, you just opened up a wormhole. Here you go!

http://ocw.mit.edu/courses/economics/

Over 50 free online courses in Economics from MIT. Yes, that MIT.

http://www.openculture.com/economics_free_courses

These are also great. More like short little videos over very specific topics.

http://www.skilledup.com/learn/openu/learn-economics-online-free/

Here is a good mixture of stuff from schools all over the country...yup, all free.

http://education-portal.com/articles/List_of_Free_Online_Economics_Degrees_and_Courses.html

And some more...

Now specifically on the macro side, I do have two books I highly recommend. These books include macro-economics, trading, politics and history.

The first one is:

"Mobs, Messiahs and Markets" By William Bonner and Lila Rajiva

And the second one is like a Market Wizards for the intellectual crowd. Read it twice:

"The Invisible Hands", by Steven Drobny

Now this third item is also a must have. These are audio files you can download and listen to from virtually every, and I do mean every economist on the face of the earth covering every, yes every imaginable topic you can possible think of.

http://econtalk.org/

Good luck!

Gee, schools, courses, books, and economists.

Like I said, knock yourself out.

wheaties · Sep 1, 2014

dbphoenix said:
Gee, schools, courses, books, and economists.

Like I said, knock yourself out.

Absolutely correct! Lets not let facts get in the way of this discussion!

Seriously dbphoenix the concepts explained here are fairly simple to understand if you put emotion behind you and do the (easy) maths.

Several posters here including myself have invited you to present your argument in specific terms and you have not replied.

I do admire your desire to argue on behalf of those less fortunate. If you want to take a stand, why don't you address the root of this problem which is illegal immigration. If you want to stand up for the poor, write some commentary on how entitlement programs are being diverted to criminals instead of citizens who paid for them and deserve them. Write a little something about how budgets for social services are being stretched to their limits by opportunists who pilfer them unabated. Tell us about how wages for construction and service jobs have been driven into the ground by employers who pay wages under the table, don't comply with insurance laws, don't comply with labor safety laws, don't obtain certifications. Tell us about how by allowing illegal immigration, we implicitly condone corrupt governments who drive their poor to the US because they have no one else to turn to. There is a lot for you to write about dbphoneix...

dbphoenix · Sep 1, 2014

First, this isn't about concepts; it's about life.

Second, "the root of this problem . . . is illegal immigration"? Seriously? More dogma.

Third, "entitlement programs are being diverted to criminals". Still more dogma.

Fourth, "budgets for social services are being stretched to their limits by opportunists". Yet more dogma.

Do you not think for yourself at all?

dbphoenix · Sep 1, 2014

Tell you what. Since it becomes increasingly less likely that grown-up discussion will take place here, this may as well be moved the the P&R Forum.

Maverick74 · Sep 1, 2014

DP, there is no reason to move this to P&R where the modus operandi is name calling and snarky remarks. You know this may shock you, but we do have intelligent conversations up here. I have no idea why you can't behave like a normal person. If we were chatting in a bar about this stuff would you really act like this? Look, if you don't agree with me or anyone else on here, why don't you offer up your own ideas? Don't copy and paste. Don't call us names. Just say, hey, this is what I personally believe and this is why I believe it. I tried to do this with you. I gave you a personal account from my life and you resorted to name calling. I tried to use actual economic theory, and you resort to name calling. I try to cite actual numbers to things from sources on the internet, more of the same from you. What gives man? You get back what you put out. If you put out crap, then that is usually what comes back in return. I don't know what more you want from me or anyone here. There is nothing, absolutely nothing I can say that will trigger an intelligent response from you. You seem to have all the answers. You got it all figured it out. The world is such a simple place for you. Why don't you try, just once, just one time to offer something personal, something sincere and genuine. And just see what you get back. You might actually be pleasantly surprised. It doesn't cost you anything right?

Anubis · Sep 1, 2014

dbphoenix said:
Debating with you is not a productive use of my time since you invariably run out of steam at some point and detour into the usual LOL and disparaging remarks. In other words, once you've run through your dogma party piece, you have nothing left (e.g., your "proof" that white privilege doesn't exist because of high-school dropout rates).

If you and others of your group want to have a chaw over economics classes that you've taken and books you've read and so forth, knock yourselves out. That sort of other-worldly discussion is of no interest to me.

Hello dbphoenix:

Sounds like you are describing your self. You ran out of steam after you made your first post.

And perhaps you should refrain from making disparaging remarks like you did in post #29 where you said to Maverick74

"Lol all you like, but so far your "well-reasoned arguments" are nothing more than the usual patrician rationalization."

Your posts can be given the same dismissive label. But how does that shed light on the subject ?

You say you do not want to discuss economics in post 53, because "That sort of other-worldly discussion is of no interest to me."

Then why did you start this thread. Did you think you could just copy and paste some article and not have people challenge it and expect you to defend it. And tell me exactly what world does a discussion about the minimum wage belong in if not in the world of economics.

You present articles with straw man arguments for raising the minimum wage like post 49 saying

"That’s a far cry from the apocalyptic drumbeat emanating from the Wall Street Journal’s editorial page, for whom the prospect of a minimum wage increase sounds like a gamma-ray burst shearing through the solar system to extinguish life on this planet."

So the world did not end, therefore no harm was done. Is that the best you can do ?

In post 39 you say "I value minimum-wage workers. You don't. Perhaps that's all that needs to be said."

But if all markets are created by people who disagree on value but agree on price then of what relevance is it to say that you value minimum-wage workers but some one else does not. That is just a disparaging remark.

In post 26 you say
"Nor does the argument that consumers will flee in droves if prices are raised (McDonald's hamburgers used to be 15 cents)."

More straw man apocalyptic arguments. Wages went up but the world did not end. You say this article by Jonathan Swift's "A Modest Proposal" was also "well-reasoned". So why don't you present these reasons ?

Your reference to a discussion of economics as an "other-worldly discussion" I think explains why you don't realize why you are wrong. In your world the laws of economics do not apply. The government can just raise the minimum age and make every one better off with no increased unemployment or other bad side effects. By raising the minimum wage workers will be able to afford the products their companies produce, otherwise as you say in post 26 "a capitalist economy with diminishing demand will be short-lived.". I wonder how high the wages of the workers at the Lamborghini automobile company will have to be raised so they can all afford a Lamborghini ?

And your reference to Christian compassion in post 26 as a reason to raise the minimum wage is just plain wrong. Christian compassion is about you as an individual showing compassion to some else. It is not you sticking your hand in some ones pocket and taking their money and sticking it in some else's pocket. Especially when the government raising the minimum wage ultimately hurts the people as a whole it is suppose to help. That is called misguided compassion which is a better description of what you want to do.

Anubis