Minimum Wages

[The Terrible Sweal]

Ford did not raise wages so that his employees could afford a car, he did it to combat absenteeism and high employee turnover.

Oh please. You can't seriously cite the Mises institute as probative of anything in economic matters. Obviously Ford saw a range of reasons for raising wages, but the level targetted was related to the price of the commodity and the effect of manufacturing wage increases was to raise demand to the point that economies of scale were realised.

"Minimum-wage laws, an icon of the political left, are particularly damaging to low-income workers. Many are locked out of jobs. The Employment Policies Institute figures that the first 50 cents out of the $1 hike in the minimum wage in 1996 through 1997 cost 645,000 jobs...

Using the same reductionist analysis as you did earlier, obviously they would come to the same conclusion. You have added nothing further by quoting this source, which merely re-iterates the same flawed beliefs.

Note that you can be reasonably sure they did use flawed analysis because they paint their prejudices ("icon of the political left") right into their analysis.

Unemployment for black teens in the USA is now at 30.1%, considerably higher than for white teens. Before minimum-wage legislation they were almost indistinguishable.

This demonstrates something exactly different than what you propose. If it were indeed due to the economic effect oyou suggest for minimum wages, all teens (and other low-wage workers) would affected similarly.

It is a fact that minimum wages cause unemployment.

No, it is not. It is the theory you subscribe to. Saying it is a fact won't make it a fact.

it is proven correct by empirical facts (i.e. every time minimum wage is raised, unemployment goes up for low-wage earners, even amongst overall job-creation),

Where then is this proof?

As for the 'market wage' argument, you need to recognize two things: first, below a certain level a wage will not be accepted no matter how poor someone is

Then why would we need a minimum wage law?

To avoid the problem of a race to the bottom wherein a substantial proportion of wages become uneconomical (thus hindering liquidity, purchasing, accumulation and ultimately growth).

there are perfectly sensible reasons why a society may want to affect the market with a minimum wage.

Yes, unfortunately, they are misguided. Most leftists have their hearts in the right place but are woefully ignorant on the matters of which they preach,

Your wild attributions of what leftists are all about are entirely irrelevant in a serious discussion, particularly with a counterpart such as myself who is not leftist. Perhaps you could deal with the points presented in an intelligent fashion rather than with political rhetoric.

So it is with minimum wage. Leftists argue that it will help the poor and raise their standard of living, but in actual fact, what it does is make the poor unemployed and lowers their standard of living,

Again with the vapid and repetitive assertions. How dreary.

[Hugo]

Oh please. You can't seriously cite the Mises institute as probative of anything in economic matters.

Ad hominem fallacy. Refute the author's points or give it up.

Obviously Ford saw a range of reasons for raising wages, but the level targetted was related to the price of the commodity and the effect of manufacturing wage increases was to raise demand to the point that economies of scale were realised.

If I were you, I'd keep quiet about Ford's wage raise because it refutes the point you and Thelonius are making.

Before 1938 (when Ford paid his workers this wage), there was no minimum wage. You and Thelonius have both stated that without minimum wages, the labour market is a "race to the bottom" in which wages will fall.

Ford operated in a free labour market without a minimum wage, and his wages were increased. This contradicts what you are saying.

If you're going to cite things, it's considered smart to first make sure they don't refute your own argument!

Note that you can be reasonably sure they did use flawed analysis because they paint their prejudices ("icon of the political left") right into their analysis.

Ad hominem fallacy again, therefore invalid. Make a citation of your own or give it up. Facts and research trump feelings.

Using the same reductionist analysis as you did earlier, obviously they would come to the same conclusion. You have added nothing further by quoting this source, which merely re-iterates the same flawed beliefs.

No, this is an analysis of unemployment data. If you dispute it, either provide conflicting data or a superior logical analysis of the same data.

This demonstrates something exactly different than what you propose. If it were indeed due to the economic effect oyou suggest for minimum wages, all teens (and other low-wage workers) would affected similarly.

You don't understand.

Blacks earn less than whites in the US. The minimum wage laws make low wage-earners unemployed. After minimum wage legislation, the unemployment of lower-wage earners (black teenagers) rises up more dramatically than the unemployment of higher-wage earners (white teenagers). Therefore, minimum wage laws have made more low-income people unemployed. Does that clear it up?

No, it is not. It is the theory you subscribe to. Saying it is a fact won't make it a fact.

Unfortunately for you, I've got the facts, figures and studies, and you have nothing. Therefore, it is I who has the fact, and you who has the theory.

Where then is this proof?

I gave it to you. You didn't understand it.

To avoid the problem of a race to the bottom wherein a substantial proportion of wages become uneconomical (thus hindering liquidity, purchasing, accumulation and ultimately growth).

This problem does not exist. If it did, then logically, before 1938 in the US the average real income should have been spiralling downward, instead of rising upward as it actually was, barring the effects of the Great Depression, which was itself caused by interventionist policy.

Again, the facts completely contradict what you are saying. This is why what you call "my theory" is a fact, and yours is just a falsehood.

[theloniusfleabag]

Dear Hugo,

QUOTE 

Sure there is a limit, and that limit is zero.

Ah. Then you must believe the price of everything is zero. Because if the price of everything is not zero, then your whole theory is refuted.

I thought you disliked the 'strawman argument, but here you are using it. Who in their right mind would sell a product at cost? Everytime a product is touched, moved or stored, value (and a profit margin) is added. Thus, while one might get to use slave labour for free, materials and marketing cost money, thus Lear Jets aren't free. While it may be argued that 'even slavery isn't free', (one needs to hire an overseer and buy the 'cat-o-nine tails') it can come pretty close. The Nazi regime often worked their slaves, some Jews but mostly Slavs, to death. No worries about feeding and housing them this way, and you production costs go down immensely. Does that mean that IG Farben sold their product at cost, or gave it away? Of course not.

[Hugo]

I thought you disliked the 'strawman argument, but here you are using it.

It isn't a strawman argument, Thelonius, it's called "reductio ad absurdum", which means to take a fallacious argument to its logical conclusion to show how fallacious it is.

In your case, you are arguing that the lower limit on prices is zero, and that prices will always tend to move downward, therefore in reductio ad absurdum, according to you the price of everything should be zero.

Who in their right mind would sell a product at cost? Everytime a product is touched, moved or stored, value (and a profit margin) is added. Thus, while one might get to use slave labour for free, materials and marketing cost money, thus Lear Jets aren't free.

So then you contradict yourself, because now you are saying that labour would never be sold for free because a margin will be added to it by the seller (i.e. the worker) in addition to the costs (the lifestyle of the worker)? That isn't what you said a few posts back! Can you please make up your mind what it is you're arguing?

While it may be argued that 'even slavery isn't free', (one needs to hire an overseer and buy the 'cat-o-nine tails') it can come pretty close. The Nazi regime often worked their slaves, some Jews but mostly Slavs, to death.

That was not a market. Markets involve trades made of the free will, and slave labour is not freely given.

[theloniusfleabag]

Dear Hugo,

you are arguing that the lower limit on prices is zero, and that prices will always tend to move downward,

I do not recall saying that prices "always tend to move downward". If I did say so, I challenge you to quote it. I was simply arguing with August1991, I believe, that it was possible to have a price on labour as zero.

So then you contradict yourself, because now you are saying that labour would never be sold for free because a margin will be added to it by the seller (i.e. the worker)

This is why I referred to labour as a commodity rather than a market unto itself. Commodities, while having a 'market value', do not make that price up by themselves, rather, they are assigned a value.

That was not a market. Markets involve trades made of the free will, and slave labour is not freely given.

Indeed. But it still is, today, part of the market.

[Hugo]

I do not recall saying that prices "always tend to move downward".

You have been arguing throughout this thread that wages will tend to shrink and this is why we need a minimum wage, to prevent (in your words) the bottom dropping out of the market. This is despite the fact that since the beginning of the industrial revolution, real incomes have risen, and risen fastest before the introduction of minimum wage laws!

Since labour is traded in a market like anything else, a minimum wage makes about as much sense as a minimum price on food or cars.

This is why I referred to labour as a commodity rather than a market unto itself.

<sigh> Complete the following sentence:

Labour is bought and sold in a ...

Indeed. But it still is, today, part of the market.

That makes no sense! You agree that coercion is not part of the market, but say that it is part of the market? Which one of your multiple personalities am I talking with this morning?

[The Terrible Sweal]

Ford operated in a free labour market without a minimum wage, and his wages were increased. This contradicts what you are saying.

I'm afraid you seem to misunderstand my argument. Ford's raising of wages brought results which are desireable and possibly obtainable by minimum wage laws.

To avoid the problem of a race to the bottom wherein a substantial proportion of wages become uneconomical (thus hindering liquidity, purchasing, accumulation and ultimately growth).

This problem does not exist. If it did, then logically, before 1938 in the US the average real income should have been spiralling downward, instead of rising upward as it actually was, ...

It was being sustained by other factors.

[Hugo]

Ford's raising of wages brought results which are desireable and possibly obtainable by minimum wage laws.

No, they would never be obtainable with minimum wage laws. Ford's wage raises were brought about by market measures and, as such, were sustainable and beneficial. Minimum wage laws are a non-market measure, because the wage increases are not necessitated or even justified by any market measure.

It was being sustained by other factors.

How convenient for you. However, I win this debate because God backs my argument. (You see how silly things can get when you throw out completely unsubstantiated claims?)

[August1991]

I'm afraid you seem to misunderstand my argument. Ford's raising of wages brought results which are desireable and possibly obtainable by minimum wage laws.

Ford raised wages because it was beneficial for him to do so. He made bigger profits.

The idea that I would do something of benefit to someone else because it is in my own self-interest is at the heart of co-operation and voluntary trade.

So, there is a free lunch! It is the extra food that appears on the table when two people co-operate.

In this case, both Ford and the workers got a free lunch; and that's why Ford did it. He was greedy and wanted some more.

If a law is required to duplicate such, I'd like to know why the employers and workers can't negotiate the free lunch on their own.

[theloniusfleabag]

Dear Hugo,

<sigh> Complete the following sentence:

Labour is bought and sold in a ...

...Bawdy House!

You are right, I quoted too much of your sentence. It should have read...

and slave labour is not freely given.

I should have replied "Sadly, it is still part of the market."

You have been arguing throughout this thread that wages will tend to shrink and this is why we need a minimum wage, to prevent (in your words) the bottom dropping out of the market.

To clarify, I did not say that wages tend to shrink. I was referring to the removal of an artificial barrier (minimum wage), which would open up 'the market' to the real barrier, zero. The wages that I suggested would fall, would be a one-time only event, caused by removing the minimum wage barrier, not overall market force. Since the tendency is to rise, (except for a few rare anomolies), it must have a starting point to rise from. At present, that starting point is minimum wage. The 'bottom dropping out' is a reference to the starting point dropping from 'minimum wage' to zero.

[Hugo]

I should have replied "Sadly, it is still part of the market."

Maybe slavery exists in some places, but until you can show me the whips and guns that drive Indians into the factories of Madras and Calcutta, it isn't there, and wherever slavery exists that will not be a labour market by definition. Apples cannot be oranges.

To clarify, I did not say that wages tend to shrink. I was referring to the removal of an artificial barrier (minimum wage), which would open up 'the market' to the real barrier, zero.

Only things that are either worthless or (effectively) infinite in supply are sold for nothing. Everything else has a 'barrier' greater than zero.

In the case of labour, the lowest price or wage is the sum of S (standard wage rates, or the wage that would be earnt if workers were robots without preference to any place of employment) plus A (attachment, or the maximum difference between market wages and standard wages that do not cause workers to migrate i.e. the factor of preference for a given employer) plus C (the cost to the worker of fulfilling his want-satisfaction). In all cases this will be a positive figure and not zero, as you have claimed. In some cases, M (the market wage) will be less than S+A+C, and people will tend to move from those employers to ones where M>S+A+C, which will over time and in a free market and given freedom of movement create a tendency for M=S+A+C.

[August1991]

Maybe slavery exists in some places, but until you can show me the whips and guns that drive Indians into the factories of Madras and Calcutta, it isn't there, and wherever slavery exists that will not be a labour market by definition. Apples cannot be oranges.

Anybody who signs a long term contract is engaging in a form of slavery. What is the present value of all my future labour services to a particular employer?

Slavery as noted here would be if someone else received the present value of my future labour services. The danger here is that someone might want to "steal" me to sell me to someone else. This would be wasteful rent-seeking. (It would be akin to a gold-digger or a gigolo who marries for the money.)

In the case of labour, the lowest price or wage is the sum of S (standard wage rates, or the wage that would be earnt if workers were robots without preference to any place of employment) plus A (attachment, or the maximum difference between market wages and standard wages ......

ZZZZZ.

Someone is going to offer their labour services if they value what's offered (a wage) more than the alternative use of the time/effort given up. I don't think you can say more than that.

I was simply arguing with August1991, I believe, that it was possible to have a price on labour as zero.

What about charity work?

[theloniusfleabag]

Dear August1991,

QUOTE 

I was simply arguing with August1991, I believe, that it was possible to have a price on labour as zero.

What about charity work?

Indeed, I am a long-term volunteer with an Animal Rescue Foundation, and received nary a penny. However, Hugo's formula

plus C (the cost to the worker of fulfilling his want-satisfaction). In all cases this will be a positive figure and not zero, as you have claimed. In some cases, M (the market wage) will be less than S+A+C, and people will tend to move from those employers to ones where M>S+A+C, which will over time and in a free market and given freedom of movement create a tendency for M=S+A+C.

would indicate that C was being fulfilled, an inherent value. I think, though, that Hugo's idea of working for no monetary reward would be like a free kick in the S+A+C.

[Hugo]

Anybody who signs a long term contract is engaging in a form of slavery.

August, I grow tired of your constant attempts to change the meaning of words to suit whatever crackpot theory you're espousing today. Get a dictionary.

It is not slavery unless the labour is coerced, i.e. if the worker is forced to accept a lesser wage than he otherwise would if not threatened by violence.

Unions work this way too, interestingly. They force an employer to pay a higher wage than he otherwise would if the union was not threatening him with violence.

What about charity work?

Acts of charity are traded for metaphysical things e.g. self-satisfaction, promise of a "place in heaven" etc. This is indeed possible, since people make trades of the physical for the metaphysical every day.

It's also quite easy to assess the value of metaphysical things in this way. Obviously, the value of the metaphysical reward Thelonius receives for his charity work is equal to or greater than the value of his labour, or he wouldn't do it.

[caesar]

Slavery as noted here would be if someone else received the present value of my future labour services. The danger here is that someone might want to "steal" me to sell me to someone else. This would be wasteful rent-seeking. (It would be akin to a gold-digger or a gigolo who marries for the money.)

No probably just dumb.

[August1991]

It is not slavery unless the labour is coerced

Hugo, I think it is you who are wedded to a particular usage. You insist on equating coercion with slavery.

We frequently sign long term contracts where many conditions are not specified. Is it slavery or coercion to enforce such a contract?

In my post above, I was thinking of marriage. Marriage is a long term contract. If one party breaches, a judge will determine damages. This may mean that one party will be forced to pay a regular sum (alimony) to the other party, often determined by income.

Alimony is similar, if not identical, to a tax. In your usage, it is slavery and coercion.

You would say that a person who marries voluntarily signs such an open-ended, ill-defined contract. And in the same breath, I'd answer that by living in Canada, a person has signed also an open-ended, ill-defined contract.

BTW, long-term employment contracts are similar.

Unions work this way too, interestingly. They force an employer to pay a higher wage than he otherwise would if the union was not threatening him with violence.

Unions are monopolies. I think this is the standard notion of coercion.

It's also quite easy to assess the value of metaphysical things in this way.

Metaphysical? I'm sure the pleasure Thelonious derives from seeing a happy dog wag her tail is quite real. At least, the pleasure is as real as the utility I derive from using the English language.

[Hugo]

Hugo, I think it is you who are wedded to a particular usage. You insist on equating coercion with slavery... You would say that a person who marries voluntarily signs such an open-ended, ill-defined contract... BTW, long-term employment contracts are similar.

Show me the consent form that slaves (in the traditional rather than the Marxist useage) sign, please.

Basically, I'm rejecting the notion that anybody who consents of their own free will to labour for a wage or no wage can be considered a slave. I say that a slave is somebody who never consented to the conditions of their labour.

In my post above, I was thinking of marriage. Marriage is a long term contract. If one party breaches, a judge will determine damages. This may mean that one party will be forced to pay a regular sum (alimony) to the other party, often determined by income.

Well, in marriage one party (the alimony seeker) is claiming that the terms of a contract were breached and the other (the unwilling donor of alimony) claims that they were not. Just as in any other breach of contract, an arbitrator must be brought in to make a judgement.

The sued party may not have anticipated the outcome, but it is fairly predictable that in the event of a divorce one may well be sued for alimony. It's not really coercive, August.

Metaphysical? I'm sure the pleasure Thelonious derives from seeing a happy dog wag her tail is quite real.

Real, maybe, but it does not exist. You can't pick it up and put it in the trunk of your car. Therefore it is metaphysical.

[The Terrible Sweal]

Ford's raising of wages brought results which are desireable and possibly obtainable by minimum wage laws.

No, they would never be obtainable with minimum wage laws. Ford's wage raises were brought about by market measures and, as such, were sustainable and beneficial. Minimum wage laws are a non-market measure, because the wage increases are not necessitated or even justified by any market measure.

You are simply resorting to kapitalystic dogma again: 'Non-market things (as conveneintly defined from time to time) are Evil.'

But you fail to explain why the minimum wage cannot function exactly as I suggested.

[theloniusfleabag]

Dear Hugo,

Real, maybe, but it does not exist. You can't pick it up and put it in the trunk of your car. Therefore it is metaphysical.

Funny, that is what the 'Originals', or First Nations people felt when they 'sold their land' to the Europeans. They thought they were coming out ahead in the deal, because no one can 'own land' (you can't pick it up and take it with you!) Does this make the land, or 'ownership', metaphysical?

[Hugo]

You are simply resorting to kapitalystic dogma again

Whatever, you godless Commie pinko.

But you fail to explain why the minimum wage cannot function exactly as I suggested.

Ford's raise wages did not cause unemployment, because he raised demand without a corresponding raise in supply, thus causing the price of labour (wages) to increase.

Minimum wage laws raise the price of labour without an accompanying increase in demand. The demand for labour therefore declines, creating unemployment, because the supply of labour remains unaltered.

The problem with your argument is that you take a formula in which two variables have been changed, and think that it would work exactly the same way if only one variable was changed and the other was artificially held static. Mathematically, that is impossible. To claim otherwise is to deny the law of supply and demand, which is as factual as the law of gravity.

[Hugo]

They thought they were coming out ahead in the deal, because no one can 'own land' (you can't pick it up and take it with you!) Does this make the land, or 'ownership', metaphysical?

No. The land physically exists, it is made of atoms. Ideas and emotions are not.

[August1991]

No. The land physically exists, it is made of atoms. Ideas and emotions are not.

Is a haircut 'metaphysical' until I climb into the trunk of my car?

And why do I have to pay good, hard cash to watch 'metaphysically' a movie in the cinema?

-----

But you fail to explain why the minimum wage cannot function exactly as I suggested.

I can buy cheap light bulbs or expensive light bulbs.

It may be true that the expensive light bulbs are better quality, last longer and would cost me less in the long run.

The onus is on you, TTS, to show me how the government would help me learn this by forbidding me from buying the cheap light bulb.

Apparently small detail: In the excellent article for which Hugo provided a link, you'll note that Ford's workers were afraid of losing their well-paid jobs. Ford found a way to identify good workers and good workers found a way to identify themselves. (The article refers to an efficiency wage.)

[Hugo]

Is a haircut 'metaphysical' until I climb into the trunk of my car?

Only if you are a bald man with nothing but the (metaphysical) memory of the flowing, vibrant locks of your youth.

And why do I have to pay good, hard cash to watch 'metaphysically' a movie in the cinema?

You don't watch it "metaphysically", you watch it physically. The projectionist passes light (photons) from the bulb that the cinema paid to buy and operate through a film that they own onto a screen that they own into your eyes while you sit in seats that they own. There are plenty of physical things involved in a trip to the theater.