Author Topic: Evil Entrepreneur  (Read 20286 times)

stevewisc

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Evil Entrepreneur
« on: November 02, 2013, 03:17:23 PM »
I read a while back a post of MMM's where he mentioned on the side a minimum living wage of $15 an hour or so and thought that if you are paying less then that one should reconsider their business model.  So, I thought I would get some thoughts of his hi quality reader to see if I am wrong with how I run my business. 

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First my take:
I have a 30+ employees most with a high school degree, some with a GED, some drop outs of HS or College.  I have a few people with two year degrees and four year degrees.  We live in a fairly low cost part of the country and the starting wage ranges from $9-$10 an hr with a lot of people currently in the $10-$11.50 range.  We have some turn over but not very much.  We treat people well and most all get along and seem to appreciate their job.  It's not uncommon to have people turn down high paid jobs because they prefer working for us for one reason or another. 

So, I believe since they are free to leave at any time and do leave on good terms I don't have to pay them any more then what the market will demand. 

There are people that we have let go in the past that had we been paying them $7 or $8 an hour I would have let them stay.  (They simply did not work at a similar speed to the rest of the group)  I think from my experience that there should be no minimum wage.  For example I would pay $5 an hour for someone to sit in my shop second shift and watch tv as long as once or twice an evening they would spend 20minutes fixing the machine. 

Also we make things which are often imported from Mexico or China so if I raise my prices much (how much for how much loss is a fascinating question) some of the customers will move to overseas sources and these people and all the related taxes from me and them will go overseas reducing somewhat the income of the community and country.  (I am happy to support the aspirations and progress of my fellow humans in other countries - but also do have a fondness for alot of what America stands for) 

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The counter argument - I'm not going to be as good at this as too many points I find completely wrong headed right off the bat. :)

How can you expect these people to live on those wages?  (see the MMM blog )

Why should you keep more that's just greedy?  (In part I create even more jobs in part I find it worth doing in part because of that score and if I don't get paid for that I would instead do a more hard core MMM work lifestyle with no employees)

Minimum wages don't really cause jobs to go away.  (Really?  The job for the student studying at night is gone.  Plus if you make minimum wage $15 and hour there is one whole product line with 4 jobs I would close tomorrow.  fails straight forward boundary condition tests) 

More from from google search

It will reduce turnover.   **The folks we let go because they don't work when they are here or don't come to work consistently will  suddenly change their behavior?  I don't think so but maybe I should test that.  Could be an interesting experiment.

It will increase productivity.  **Again I doubt it but we could test that too. . .

Protects workers from abuse  ** It would provide an incentive for more black market work which would be less protected no?

These aren't intentionally weak so tell me what I missed.  Politely :)

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I am looking for well thought out points and facts counter to or complementary to the argument not complanypants, repetativeness and judgementalism.

Thanks,
Eve E.

directionseeker

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Re: Evil Entrepreneur
« Reply #1 on: November 02, 2013, 05:34:44 PM »
Not every human being is evil but I believed all of us would agreed that all human beings are selfish. We all want to have more for ourself before we would start thinking about others needs.

Wage is and always will be a zero-sum game between the employee and employer, one man gain is another man loss, it is as simple as that. Employee is always trying to get as much money they can from the employer and employer on the other hand will like to pay as little as he can to keep that productive employee on his payroll.

From what I read from your post, it seems you are good are keeping the cost down and your people happy. Your company even managed to convinced people to come work for you with less money, that is a plus point for you as a boss.

From a boss perspective, it is not uncommon for you to think that there should be no minimum wage. Minimum wage restrict the ways a boss can use to expand his business, so I would think that most boss are not agreeable to minimum wage. Why should they? It is a cage that restricted them.

All the points you brought up in the posts are all valid points against minimum wage, we are not living in perfect world, every system used bring along some side effects that affects certain group of people one way or another. Minimum wage or not, there will be some group of people benefited and another group suffered, it is just the way it is.

Conclusion, I would say at least you are doing a good job being a boss, you have happy employee willing to accept lower pay working for you. So, probably you should just keep doing what you are doing right now if they are working for you unless you feel there is something wrong with your current business model.

stevewisc

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Re: Evil Entrepreneur
« Reply #2 on: November 02, 2013, 05:58:52 PM »
Thanks for your thoughts directionseeker.

Interesting comment on the win/lose nature of employment.  Some times this is the case but I love win/win employees.  Some employees have a little mustache stubble and want to know how to do more and make more.  I am happy to get them a basic electronics book or operations research book. Then maybe they can do the inventory counts for their area and start to manage purchase orders as well.  Of course these are higher level jobs and the market for those skills justifies a higher pay rate. 

We have some sales people that are great positions that way - make that segment your business the more you sell the more you get paid.  Those are great win/win jobs.

I wonder how many bosses don't really want those type of employees.

directionseeker

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Re: Evil Entrepreneur
« Reply #3 on: November 02, 2013, 06:16:41 PM »
Hi,

The zero-sum game thought I brought up is purely about number on the paper without considering whatever care you provided to your staff, and that I believed that are quite difficult to set a number on it.

One of the industry in Singapore I think has the most zero-sum game nature is the cleaning industry. The wage of cleaner in Singapore has been decreasing over the year, I would think that is because competition among cleaning company. Cleaner in this case is like a assembly line worker in factory, without any bargain power in their employment. If the company won a cleaning project with low bidding price, someone have to give and usually not the supervisor or the bosses. :-)

marty998

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Re: Evil Entrepreneur
« Reply #4 on: November 02, 2013, 06:34:27 PM »

Wage is and always will be a zero-sum game between the employee and employer, one man gain is another man loss, it is as simple as that. Employee is always trying to get as much money they can from the employer and employer on the other hand will like to pay as little as he can to keep that productive employee on his payroll.


Always fun to replace the word "employee" with "chief executive officer" in all of these discussions to see if the standards are the same.

"I need another $33m in bonuses otherwise I won't be motivated enough to do my job" LMFAO.

marty998

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Re: Evil Entrepreneur
« Reply #5 on: November 02, 2013, 06:42:48 PM »
I understand the difficulty for small businesses attracting the talent they need, but thats the nature of competition and the market. You want the best employees, you are going to have to pay for it.

Entrepreneurs need staff, everyone else needs a job. Always need to find common ground.

The industrial relations employer/employee & min wage discussion has already been had on these forums. I'd rather not go there again. Turns flaming red hot very quickly.

daverobev

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Re: Evil Entrepreneur
« Reply #6 on: November 02, 2013, 06:48:36 PM »
The problem is that none of it is fair. Life isn't fair. Min. wage *tries* to make things a little more fair (but, as you say, tends to fail, cause jobs to go away).

The way I see it is that it's a societal problem. Capitalism "works" but it certainly isn't fair ($3 mil CEO salary, and the *increase* in the disparity between the highest and lowest paid roles). But it's not just the company (any company) that is to blame. If we were good people, we'd buy local, support local business. But we don't. We don't buy hand-made furniture. We have a global economy and that's that - if things are too expensive, produce them somewhere cheaper. Unless you can "value add" - which is complete bullshit, because you end up paying 5x as much for the same product but in fancier packaging. I hate how much here (Canada) you have to pay for service - but it's the illusion of service.

I saw a good meme on imgur - "If hard work was to be rewarded, thousands of mexicans with leaf blowers would be millionaires". In the UK - the trains are, at least around London, cleaned almost universally by black people. Toilets are cleaned by black people. It's just mind blowing. Would I clean toilets for a living? No, it's bloody hard work (or monotonous, or whatever), and I can earn much better money working with computers - completely unfair.

If you increased min. wage you just end up with more debt (figures), more inflation, and other such madness.

And it's hardly fair that some people are cleverer than others, or - more likely - are better at gaming the system. Clever people do stupid things, but someone with the gift of the gab will usually land on their feet.

Ho hum.

daverobev

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Re: Evil Entrepreneur
« Reply #7 on: November 02, 2013, 06:56:09 PM »

randymarsh

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Re: Evil Entrepreneur
« Reply #8 on: November 02, 2013, 07:08:41 PM »
I saw a good meme on imgur - "If hard work was to be rewarded, thousands of mexicans with leaf blowers would be millionaires". In the UK - the trains are, at least around London, cleaned almost universally by black people. Toilets are cleaned by black people. It's just mind blowing. Would I clean toilets for a living? No, it's bloody hard work (or monotonous, or whatever), and I can earn much better money working with computers - completely unfair.

The scale of how your work affects people/the product plays a large part in how you're compensated. Think about movie stars, high profile authors, musicians, etc. They make millions per year because once they perform the job, the product they created is sold over and over again. A movie generates so much revenue because millions of people see it. If I write software for company, it'll be sold to at least thousands of customers. If not millions when you look at the Microsofts and Oracles of the world.

Then there's skill aspect. Both janitors and software developers work hard. But a difference is the software developer could perform the duties of a janitor. The reverse is not necessarily true.

marty998

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Re: Evil Entrepreneur
« Reply #9 on: November 02, 2013, 07:16:29 PM »
I saw a good meme on imgur - "If hard work was to be rewarded, thousands of mexicans with leaf blowers would be millionaires". In the UK - the trains are, at least around London, cleaned almost universally by black people. Toilets are cleaned by black people. It's just mind blowing. Would I clean toilets for a living? No, it's bloody hard work (or monotonous, or whatever), and I can earn much better money working with computers - completely unfair.

The scale of how your work affects people/the product plays a large part in how you're compensated. Think about movie stars, high profile authors, musicians, etc. They make millions per year because once they perform the job, the product they created is sold over and over again. A movie generates so much revenue because millions of people see it. If I write software for company, it'll be sold to at least thousands of customers. If not millions when you look at the Microsofts and Oracles of the world.

Then there's skill aspect. Both janitors and software developers work hard. But a difference is the software developer could perform the duties of a janitor. The reverse is not necessarily true.

That's basically "supply" labor economics in a nutshell. Lots of potential cleaners out there, not as many software developers. Wages are therefore priced accordingly.

Jamesqf

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Re: Evil Entrepreneur
« Reply #10 on: November 02, 2013, 10:38:31 PM »
Then there's skill aspect. Both janitors and software developers work hard. But a difference is the software developer could perform the duties of a janitor. The reverse is not necessarily true.

As it happens, I have done both: cleaned toilets (and did other janitor/maid-type work) and done software development.  It was the toilet-cleaning (plus savings) that supported me through the first couple of years of university, 'til I could actually start making a bit of money with the software.

And you know the thing about those Mexicans with leaf blowers?  Look at the company truck, and it'll probably say something like "Garcia y Hernandez Landscaping", because a couple of those Mexicans got tired of running the leaf blowers themselves.  Same with any low-wage job: it's where you start, not where you have to stay.

stevewisc

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Re: Evil Entrepreneur
« Reply #11 on: November 03, 2013, 08:08:10 AM »
I appreciate the nature of the market and yes finding good people can be hard but I think the market works, but I don't want special incentives (government interference) to reduce the cost of labor. 

I appreciate the fairness issue but really want to know from people who think minimum wages laws are good why they think that. (And would prefer not getting into a flame war as i 'm looking for knowledge not to change opinions.

Two blunt questions - If you think minimum wages laws are good why?

Should and employer feel a moral obligation to pay above market rates to meet some fair wage? (And if so how does one figure out the fair wage?)

Thanks for the thoughts.

footenote

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Re: Evil Entrepreneur
« Reply #12 on: November 03, 2013, 09:25:27 AM »
I don't think you even need to consider morality to find the right answer here.

If you are in competition with other companies for workers, the self-interested answer is to:

- Pay somewhat more base pay (5% or so more) than your competitors are paying. (Note that I don't care if that's minimum wage or not.) Use that differential to lure away the best of your competitors' employees.

- If you can measure productivity (and I sure hope you can!), pay a sliding-scale bonus to your top performers. Size the bonus so that, as your employees' work is more productive, the bonus both pays for itself and makes more money for you.

Top performing employees with above-market base pay (more than competitors will pay them) and a reason to put in extra effort will make you a happy, wealthy entrepreneur.

mgreczyn

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Re: Evil Entrepreneur
« Reply #13 on: November 03, 2013, 06:09:05 PM »
I appreciate the nature of the market and yes finding good people can be hard but I think the market works, but I don't want special incentives (government interference) to reduce the cost of labor. 

I appreciate the fairness issue but really want to know from people who think minimum wages laws are good why they think that. (And would prefer not getting into a flame war as i 'm looking for knowledge not to change opinions.

Two blunt questions - If you think minimum wages laws are good why?

Should and employer feel a moral obligation to pay above market rates to meet some fair wage? (And if so how does one figure out the fair wage?)

Thanks for the thoughts.

I think minimum wages are, on balance, a good thing.  I believe you can find very, very smart economists who can argue completely correctly (in terms of theory) both for and against the position that minimum wages make jobs go away.  In general, I think the argument against jobs going away is that yes, some jobs will go way on the low end of the pay scale, but many will not and those people are now making more money and can afford higher priced goods and services, which foreign markets may not be able to supply, hence creating better jobs than the ones that disappeared.  We're in a consumer economy, so the more money in consumers' hands the more money will be spent on goods and services.

You say you think "the" market works, by which I take it you mean the labor supply market.  I would take the position that markets CAN work, but don't always.  Even the free market's greatest champion, Adam Smith, recognized that markets can and do fail.  Take away the theory and you have to contend with practical reality.  So let's think about a labor supply market.  In  a labor market completely unfettered by government regulation, who has the negotiating power?  Well, it depends on how scarce the supply is, how strong demand is and how much information the participants have about supply and demand.  If we're talking about elite software developers, there is apparently not nearly enough supply to meet demand, hence you hear about Google paying top engineers millions to hang onto them.  If we're talking about someone lower on the skill ladder, say a less skilled software engineer or someone who is a middle manager, somewhat less negotiating power.  What about unskilled people like janitors?  None whatsoever, they are completely replaceable and are price takers when it comes to selling their labor.  When an employee has no negotiating power and faces a counter-party that has an information advantage in that they probably know better than the employee what other employers are willing to offer, you have the very strong potential for the employer to take unfair advantage of that employee and pay a below market wage.  You also have the very strong possibility of a systemic market failure, i.e. collusion among many employers to lower the wage for unskilled labor. Not that you as a caring, nurturing employer would do that, but history clearly shows that this can and has occurred.  Labor unions, which I'm guessing here that you are not in favor of, are a direct result of labor attempting to gain negotiating power against employers to gain better wages and working conditions.  Right there is in my opinion the strongest argument in favor of a minimum wage; it's an attempt to level the playing field ever so slightly between those who have zero power and less information when it comes to negotiating a fair price for their labor. 

A higher minimum wage also has the benefit of reducing the tragedy of the commons in economies with social safety nets.  The tragedy of the commons is a classic market failure that basically amounts to overuse of a "free" public resource to the point of severely degrading or destroying it.  In this context, I would call the social safety net the commons and the overuse would be large number of employers shifting the burden of paying a liveable wage or providing health benefits onto the social safety net.  Society has decided that people starving to death or not having access to healthcare is bad, and at the same time tends to look at someone who has a job as self-sufficient.  However, if that job pays $5 per hour and has no benefits, that person may be likely to end up soaking up large amounts of social services at some point. 
 
In your case, apparently you have employees who could take a higher paying job elsewhere but choose to work for you, which to me says you provide a great working environment or some other benefit, tangible or intangible, that they value over higher W2 wages.  This illustrates the fact that money isn't everything, and I say good on you! 

Moral obligation to pay a fair wage?  Well, employers are people, so they will be guided to varying degrees by their own morals.  This means in the absence of an external influence, everyone will have a different answer to that question.  To the extent that society at large thinks people have a moral obligation to do anything, we have laws. 

I'll leave you with this interesting discussion RE minimum wages in Australia: http://www.globalpost.com/dispatches/globalpost-blogs/weird-wide-web/gina-rinehart-australian-billionaire-worlds-richest-woman-clive-palmer-mining-aussie
« Last Edit: November 03, 2013, 06:13:15 PM by mgreczyn »

stevewisc

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Re: Evil Entrepreneur
« Reply #14 on: November 04, 2013, 10:38:43 PM »
Thanks for the thoughts mgreczyn. There is a ton there so I will start at the beginning.

On the smart economists this always bothered me on two fronts.  One both groups can't be right. The basic rules of logic mean either raising a minimum wages reduces jobs or it doesn't. It simply can't be both. Saying raising a very low minimum wage a very little may have no measurable effect because of static friction in the labor force but any significant increase will push the needle in the direction of lower jobs.

A simple thought experiment of raising minimum wage to $20 and hour will prove the direction the curve is shaped.  The other side of that experiment is eliminating minimum wage.  I Dont believe there is any scenario where that would decrease the number of jobs.

I've seen the studies before and I can't imagine any logic where the system behaves any different then I described above.  I would truly appreciate you thoughts on this subset as it seems unassailable.






stevewisc

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Re: Evil Entrepreneur
« Reply #15 on: November 04, 2013, 10:43:21 PM »
I'll take a look at the next point tonight as well.

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"I think the argument against jobs going away is that yes, some jobs will go way on the low end of the pay scale, but many will not and those people are now making more money and can afford higher priced goods and services, which foreign markets may not be able to supply, hence creating better jobs than the ones that disappeared'.   

In studying this I first thought it would take some thinking but then it appeared that what you are saying is that we are going to use the power of the state to make the people having the hardest time getting a job and making a living unemployed.  We are going to do this so the people in just a little better position can make more money at the expense of those people we just forced out of the labor market.  That doesn't seem very nice.

In fact this is what bothers me the most about minimum wage laws.  They punish those that need the work the most.

For example I once had a guy apply for a job who just got out of prison for robbing a bank.  (2005 - who robs banks?) He seemed like a hard luckcase and maybe deservrisk. of a second chance. Of course I'd be taking a risk that he might rob me or my employees, or maybe cause some other issues.  If he'd been willing to work for $5 an hour for a few months while we saw how it went it might have been worth the risk.  As it was I didn't hire him as I could get some good employees at about the same costwithout that risk. So, he was stuck without a way back into the system at least for a while longer.

So I really don't like the idea of punishing those people that need the job the most.
« Last Edit: November 04, 2013, 10:53:33 PM by stevewisc »

gooki

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Re: Evil Entrepreneur
« Reply #16 on: November 05, 2013, 01:54:44 AM »
I dunno, seems like the person you hired instead would have been equally deserving of employment.

Dr. A

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Re: Evil Entrepreneur
« Reply #17 on: November 06, 2013, 09:53:47 AM »
I'll start by pointing out that I am in no way an economist. Also, while I generally fall into the camp that thinks the minimum wage should be higher than it is, I don't pretend to know what the ideal level is, and I can't be certain that I'm even right that it's too low.

On the smart economists this always bothered me on two fronts.  One both groups can't be right. The basic rules of logic mean either raising a minimum wages reduces jobs or it doesn't. It simply can't be both. Saying raising a very low minimum wage a very little may have no measurable effect because of static friction in the labor force but any significant increase will push the needle in the direction of lower jobs.

A simple thought experiment of raising minimum wage to $20 and hour will prove the direction the curve is shaped.  The other side of that experiment is eliminating minimum wage.  I Dont believe there is any scenario where that would decrease the number of jobs.

I've seen the studies before and I can't imagine any logic where the system behaves any different then I described above.  I would truly appreciate you thoughts on this subset as it seems unassailable.

The problem here is, I think people try to apply models that are far too simple to reflect a real economic system. I've always thought economics and meteorology have much in common. They both study absurdly complex systems where the sheer number of variables means that, at best, we can make general statements about what will probably happen over the very short term. For that reason, I see your example as akin to stating that, because I know that the coldest day of the year is generally clear and sunny, while the hottest day of the year usually involves a severe thunderstorm, that as the temperature increases, the severity of the weather must increase. Well, yes, that's generally true, but if we stop there we wouldn't predict blizzards.

For example, any reduction in the minimum wage would necessarily reduce the spending of the workers affected, which in turn reduces demand for the products and services, which then reduce the demand for the workers that produce those products and services. And don't forget, that workers making a little more than minimum wage probably see a reduction if the minimum wage is reduced, expanding the pool of people affected. That's just 1 variable. A economist could easily tick off 100 more just like it. So, to me, it's not hard to see how you could make a logically-valid argument in either direction. And, yes, one is right and one is wrong... at this exact moment. Maybe an increase of the minimum wage from $7 to $7.25 increases employment, but an increase from $8 to $8.25 decreases it. That doesn't seem implausible to me, despite the fact that I have no idea whether its true or not.

Also, not all unemployment is equal. Let's take your $20 an hour. In that case, unemployment would definitely increase, but how much of it would be voluntary? If you take a family where 2 parents work for $11 an hour, and then you boost the minimum wage to $20, maybe one of them quits, even if their job is still available. There are a whole bunch of other reasons why such a move would be terrible for the economy as a whole, but job reduction doesn't tell the whole story.

In studying this I first thought it would take some thinking but then it appeared that what you are saying is that we are going to use the power of the state to make the people having the hardest time getting a job and making a living unemployed.  We are going to do this so the people in just a little better position can make more money at the expense of those people we just forced out of the labor market.  That doesn't seem very nice.

This assumes that having two people with jobs that don't pay enough to support themselves is better than one person with a job that does pay enough. I would not agree with that assumption. To me, a job that doesn't pay enough to live on is only marginally better than being unemployed, whereas, a job that does pay enough is much, much better than unemployment; so, you may be able to maximize happiness in the universe under the latter scenario. Just yesterday I was listening to an interview with the author of a book that gets into why this might be more true than we realize: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/13/being-poor-changes-your-thinking-about-everything/. In a nutshell, they have found that worrying about money (as low-wage workers often do) taxes our mental "bandwidth" and makes it more difficult to make good decisions and be productive in all aspects of our lives. Kind of like how it's harder to eat healthy when you're feeling shitty (physically or emotionally); because so much "bandwidth" is taken up by dealing with how you feel, your ability to make good food choices is compromised (that's my understanding, not an example from the authors).
 
In the end though, this:
In your case, apparently you have employees who could take a higher paying job elsewhere but choose to work for you, which to me says you provide a great working environment or some other benefit, tangible or intangible, that they value over higher W2 wages.  This illustrates the fact that money isn't everything, and I say good on you! 

If you can run your business competitively and genuinely do right by the people who make money for you, I'd say what you're doing is just fine.

willn

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Re: Evil Entrepreneur
« Reply #18 on: November 07, 2013, 08:41:24 AM »
There is a powerful moral argument that  having a minimum wage is unfair to employees, and in fact was brought to the Supreme Court by an employee who wanted to work, but couldn't because the employer couldn't afford to offer the minimum.

Adkins v. Children's Hospital found that the minimum wage was an unconstitutional infringement of liberty of contract.

Basically, if I'm willing to work for less, why shouldn't I be able to?

Mega

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Re: Evil Entrepreneur
« Reply #19 on: November 07, 2013, 10:52:57 AM »
There are a lot of great points on both sides of the debate.

My $0.02 is the minimum wage is a good thing, a bad thing, but overall a necessary thing.

Good points:
1 - Increase availability of money to consumers (the Ford theory - Pay your employees enough to buy your product: ~70% of US economy is consumer driven)
     In theory, this would also create jobs by creating demand.
2 - Stops widespread creation of us-against-them unions (nothing against unions, but they can be a big impediment for an organization to adapt to change)
3 - Minimizes 'poverty' (there is a huge difference between making $1 vs $10 over 40 hours)
4 - Minimized the 'need' for government subsidy programs (You can find a chart online that shows the US government programs adjust people's income to somewhere around 30K a year or so. If you only pay $10/hour (20K/year), the government subsidizes that person 10K.)

Bad points:
1 - Prevents people from working in less valuable roles. (Goes on the 'dole')
2 - Slows accumulation of capital in low wage industries. (Money not saved by owner)
3 - Changes to minimum wage increase inflation. (Because people are spending more money)
4 - Raises the prices of low value goods. (Price of a Big Mac goes up)

Why we need it:
1 - Provide a means to prevent labour disruptions.
2 - Increases aggregate GDP.

Those are just my rough thoughts...

mgreczyn

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Re: Evil Entrepreneur
« Reply #20 on: November 12, 2013, 10:33:36 AM »
It would be interesting to hear from some folks in the restaurant industry on this subject, as I understand that the minimum wage applies very differently to hospitality workers who get tips.  Also, the idea of salary; professionals with lower salaries sometimes get paid on an hourly basis WAY below minimum wage.  Academics, junior pilots, medical residents all come to mind.

As with all things in economics, what seems to be a simple question becomes infinitely complex when you dig into it a little more.  Entire branches of economics are founded on the premise that markets are rational, but the assumption that millions of completely irrational economic agents somehow manage to spit out entirely rational outcomes on a macro basis is by no means settled and accounts for many of the discrepancies that frustrate us non-economists. I think when it comes to the minimum wage we have a concept that seems very simple, but when you dig into it you eventually run into the very foundations of how society allocates resources between labor and capital, as well as the role of the government in that allocation. As technology and globalism progress, that role may change out of necessity faster than society can make decisions about whether or how it should change.

I get the moral argument against a minimum wage. If an employer is only willing to pay $1/hr for a task and there is someone willing to perform that task for $1/hr, then why not?  And I would agree, but for the fact that in the employee/employer relationship there is always a third party: the government, and by extension every taxpayer in the nation. When an employer pays somebody too little to live on, doesn't provide a safe working environment, doesn't provide things like health insurance, etc. in our society it then falls to the state or federal government to step in and render a cure or provide assistance, hence as a taxpayer in a government system that provides a social safety net I would view an employer's unwillingness to pay a living wage and provide basic benefits as a subsidy from me to that employer. Not that such a thing would be entirely inappropriate in a system riddled with subsidies from top to bottom, but if taxpayers are going to be providing that worker with benefits maybe it's more effective do so directly, rather than indirectly while also supporting a business model that relies too much on cheap workers and not enough on innovative products or methods.  This issue is something that Wal Mart has run into.  Wal Mart's business model relies on efficiencies in logistics, purchasing and distribution to provide low cost goods, but they also rely on very low cost labor. Yes, they  create jobs, but those jobs are sometimes paid very little with low benefits and replace higher paying local jobs.  Local and state governments find themselves in a position where yes, lots more jobs were created, but the demand for government services goes way up putting financial strain on the system.  Oops, now those tax incentives they dangled in front of Wal Mart to attract them to the area don't seem like such a good idea anymore, but if they hadn't done it the next town over would have and the result may have been worse.  As long as there are state-provided social programs linked to the concept of employment, it would appear to me that the state can and should impose a minimum wage, or maybe there's some way of providing something on the revenue side like a tax on employers whose wages are below a threshold.

If you want to argue against there being any sort of social safety net and that programs like medicare/medicaid, welfare, unemployment insurance, OSHA, etc. all should be dismantled so that we can take the labor market down to a pure free market model, then fine.  We can all go back to negotiating wages and conditions without a floor, eventually some group of disgruntled third-tier computer programmers will demand the right to organize, Google will crush them with robots and we'll have ourselves another labor movement.  I think plenty of people would argue against that course, including Adam Smith were he alive as well as almost every current employee of every business in the country.  But I don't think as things stand now, in this country, that you can isolate the minimum wage as an issue and say that it's a contract between two people and only two people and I don't think the result of allowing a pure free market model with respect to labor would be any sort of capitalistic utopia, or maybe it would ultimately be a utopia for a few folks. You don't have to look much farther than China to realize that, while yes when large numbers of people are in desperate economic circumstances you can get them to work in insane conditions for almost nothing, as soon as they get a little breathing room 1) they're going to give the government the stink eye and 2) the government in turn will mandate higher wages and improved conditions out of a healthy sense of self-preservation. 

mgreczyn

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Re: Evil Entrepreneur
« Reply #21 on: November 12, 2013, 10:54:45 AM »
There is a powerful moral argument that  having a minimum wage is unfair to employees, and in fact was brought to the Supreme Court by an employee who wanted to work, but couldn't because the employer couldn't afford to offer the minimum.

Adkins v. Children's Hospital found that the minimum wage was an unconstitutional infringement of liberty of contract.

Basically, if I'm willing to work for less, why shouldn't I be able to?
The "employee" could always just volunteer, since below minimum wage they'll need government assistance anyway just to survive this could be more efficient.  Volunteer and collect welfare. Of course, the employer could argue that since the volunteer's not getting paid, then they don't have any real incentive to show up on time, perform to a standard, etc.  But if the employer "can't afford" minimum wage, those aspects of the job must not be very valuable anyway.

mgreczyn

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Re: Evil Entrepreneur
« Reply #22 on: November 12, 2013, 11:34:17 AM »
I'll take a look at the next point tonight as well.

****
"I think the argument against jobs going away is that yes, some jobs will go way on the low end of the pay scale, but many will not and those people are now making more money and can afford higher priced goods and services, which foreign markets may not be able to supply, hence creating better jobs than the ones that disappeared'.   

In studying this I first thought it would take some thinking but then it appeared that what you are saying is that we are going to use the power of the state to make the people having the hardest time getting a job and making a living unemployed.  We are going to do this so the people in just a little better position can make more money at the expense of those people we just forced out of the labor market.  That doesn't seem very nice.

In fact this is what bothers me the most about minimum wage laws.  They punish those that need the work the most.

For example I once had a guy apply for a job who just got out of prison for robbing a bank.  (2005 - who robs banks?) He seemed like a hard luckcase and maybe deservrisk. of a second chance. Of course I'd be taking a risk that he might rob me or my employees, or maybe cause some other issues.  If he'd been willing to work for $5 an hour for a few months while we saw how it went it might have been worth the risk.  As it was I didn't hire him as I could get some good employees at about the same costwithout that risk. So, he was stuck without a way back into the system at least for a while longer.

So I really don't like the idea of punishing those people that need the job the most.

I'm curious as to how you went about quantifying the risk posed by this employee and deciding it was too high?  Assuming the minimum wage in your state is somewhere around $8, that means that you would be willing to risk a robbery, embezzlement, the social harmony of your business, etc. for $3 / hr over "a few months" (lets assume 5 months to be conservative) for a total of about $2,500 less than the law would have required you to pay this individual over that time.  It seems to me that had any of the risks you are seeking to be compensated for, had they come to pass, could have easily cost you 10x that amount.  Maybe that is the right price for that amount of risk, I don't know.  Admittedly I've never run a business so I don't know what value I would place on such a thing, but it seems that if those are the real risks then the difference between $5 an hour and minimum wage is not nearly enough to trigger that decision. It's fine if there were some other thing that made you think this guy was a bad risk, or maybe you hired a single mother instead.  Please forgive me, I'm not calling you a liar, but I don't buy that it was the minimum wage that drove the decision.

willn

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Re: Evil Entrepreneur
« Reply #23 on: November 12, 2013, 12:12:18 PM »
There is a powerful moral argument that  having a minimum wage is unfair to employees, and in fact was brought to the Supreme Court by an employee who wanted to work, but couldn't because the employer couldn't afford to offer the minimum.

Adkins v. Children's Hospital found that the minimum wage was an unconstitutional infringement of liberty of contract.

Basically, if I'm willing to work for less, why shouldn't I be able to?
The "employee" could always just volunteer, since below minimum wage they'll need government assistance anyway just to survive this could be more efficient.  Volunteer and collect welfare. Of course, the employer could argue that since the volunteer's not getting paid, then they don't have any real incentive to show up on time, perform to a standard, etc.  But if the employer "can't afford" minimum wage, those aspects of the job must not be very valuable anyway.

Interesting mental exercise:   If you were on a desert island with two people, and couldn't stay in business if I hired the other person at the minimum wage of $10/hr, would it be more ethical to not hire him, or to violate the minimum wage and hire him at $7/hr which I could afford?

There is not a simple or certain answer, nor a direct analogy to a nation of 300+ million in a complex economy, in general I err on the side of giving each side the most options for fully informed, voluntary decisions.  There are undoubtedly downsides to this approach.

Supply and demand says that when the price of a service (labor) goes up, demand (jobs) go down.  There is some elasticity which make is hard to determine quantitatively how much demand goes down, though. 


clutchy

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Re: Evil Entrepreneur
« Reply #24 on: November 12, 2013, 06:23:18 PM »
I used to be relatively conservative and over the last year i've moved much farther left than I'm actually comfortable with...

that being said; If you're paying people such that they end up on social services you are in fact a socialist and are running a social enterprise. 

If you pay people enough to not need public assistance then you are a capitalist and are running a capital enterprise. 



Either you and the market bear the costs or society bears the costs.  Generally I don't consider it acceptable to socialize costs and privatize profit.

stevewisc

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Re: Evil Entrepreneur
« Reply #25 on: November 12, 2013, 10:37:33 PM »
clutchy - Any people that I employee that may be on social services received benefits that are then paid for with my taxes.  However, every full time employee I have can make as must as MMM lives of in a year between base and overtime.  So, they shouldn't need any social services.  (The part timers are all retires looking for extra money and something to do for part days.)


I appreciate all of the thoughts.  It looks like Seattle is going to try the $15 per hour bit - I still think that will be hard on the lowest income employees, but we will see if they go through with it one way or another.  Much more useful data then a $0.25 change in the minimum wage.   

Of course the the automation revolution will continue as well . . . and more lower paid jobs will go that route.

http://www.businessweek.com/articles/2013-11-06/as-smoothie-store-sales-slow-jamba-juice-turns-to-machines


bacchi

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Re: Evil Entrepreneur
« Reply #26 on: November 14, 2013, 04:58:08 PM »
Adkins v. Children's Hospital found that the minimum wage was an unconstitutional infringement of liberty of contract.

A v. CH ruled against minimum wages for women and children in the 1920s. Adkins was fairly quickly overturned because, the Court wrote, "freedom of contract" is not in the Constitution. Further, the Court determined that the government may, in fact, have a place in contracts between an employer and an employee.

"(3) This exploitation and denial of a living wage is not only detrimental to the health and wellbeing of the women affected, but casts a direct burden for their support upon the community."

Pretty much what mgreczyn wrote.

stevewisc

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Re: Evil Entrepreneur
« Reply #27 on: November 14, 2013, 07:11:34 PM »
Hi Bacchi,

I'm not saying the constitution says one thing or another. I am saying it appears clear to me that the higher the minimum wage law the more jobs in that price range will go away.  And I haven't heard anyone provide any solid evidence to the contrary.  If you have evidence that I am wrong please share it. 

If the minimum wage law is works why don't they pass one for $50 per hour? 

I think it is because most jobs don't create that much value so they will not exist.

The idea of a minimum wages seems great at first glance.  Look how much we can help these people, but in reality we have easy to see people that win and hard to see people that lose.

I have seen the people that lose on this deal, and they deserve to be able to find work and have a shot at a normal life.  It appears to me that they are misled by people that should know better.  Maybe Seattle will provide evidence making clear what I don't see.

ritchie70

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Re: Evil Entrepreneur
« Reply #28 on: November 15, 2013, 08:44:35 AM »
When an employer pays somebody too little to live on... it then falls to the state or federal government to... provide assistance, hence as a taxpayer in a government system that provides a social safety net I would view an employer's unwillingness to pay a living wage and provide basic benefits as a subsidy from me to that employer.

This is my primary objection to removing a minimum wage, and the primary reason I would support a fairly dramatic increase in it. I do not believe the taxpayer should subsidize Walmart's labor costs.

People who do not understand basic accounting like to say that "if you double wages then Walmart has to double prices." But if labor costs are 25% of revenue, then you have to increase prices 25% to maintain the same profits, not 100%.

All that would do is bring some of Walmart's prices up into the range of stores who pay their people a reasonable wage (like the unionized grocery stores.)

mgreczyn

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Re: Evil Entrepreneur
« Reply #29 on: November 15, 2013, 09:16:46 AM »
There is a powerful moral argument that  having a minimum wage is unfair to employees, and in fact was brought to the Supreme Court by an employee who wanted to work, but couldn't because the employer couldn't afford to offer the minimum.

Adkins v. Children's Hospital found that the minimum wage was an unconstitutional infringement of liberty of contract.

Basically, if I'm willing to work for less, why shouldn't I be able to?
The "employee" could always just volunteer, since below minimum wage they'll need government assistance anyway just to survive this could be more efficient.  Volunteer and collect welfare. Of course, the employer could argue that since the volunteer's not getting paid, then they don't have any real incentive to show up on time, perform to a standard, etc.  But if the employer "can't afford" minimum wage, those aspects of the job must not be very valuable anyway.

Interesting mental exercise:   If you were on a desert island with two people, and couldn't stay in business if I hired the other person at the minimum wage of $10/hr, would it be more ethical to not hire him, or to violate the minimum wage and hire him at $7/hr which I could afford?

There is not a simple or certain answer, nor a direct analogy to a nation of 300+ million in a complex economy, in general I err on the side of giving each side the most options for fully informed, voluntary decisions.  There are undoubtedly downsides to this approach.

Supply and demand says that when the price of a service (labor) goes up, demand (jobs) go down.  There is some elasticity which make is hard to determine quantitatively how much demand goes down, though.
Interesting mental exercise: you find yourself on a desert island and ponder whether it's ethical to kill and eat the guy who just offered to pay you $7 an hour to stock his shelves.  By attempting to run a business in a two person subsistence economy he's demonstrated that he's delusional and thus a threat to the survival of the group.

Apologies for the tongue in cheek response, and though I enjoy thought exercises I think it's overly simplistic economic models such as this that lead to economic theories that crumble upon first contact with reality.

Guizmo

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Re: Evil Entrepreneur
« Reply #30 on: November 15, 2013, 04:44:30 PM »
I'm in favor of minimum wage. Of course the hard part is figuring out where it should be. If you look at US history and the time before minimum wage laws were in place were a terrible place for working people and a great place for bosses.

acroy

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Re: Evil Entrepreneur
« Reply #31 on: November 15, 2013, 06:41:32 PM »
stevewisc: THANK YOU FOR BEING AN ENTREPRENEUR and employing people so well they do not want to leave for money. You sir are the salt of the earth.

The only fair minimum wage is what the employer is willing to take, and the employee is willing to accept. It is a voluntary transaction, just like purchasing a house or a diet coke. Both accept willingly. Neither are forced. The employee trades labor for money. Minimum wage is a sneaky price control.

From my own perspective: I had time and desire to work - ANY work - during summers starting about age 8. Happily would I have pumped gas - whatever - trade some time (which I lots of) for $$ and experience (which I had none of). Legit 'jobs' did not exist, as they had been legislated out of existence. So I mowed laws, picked weeds, etc for neighbors, paid in cash, under the table.

Frankly I think age and wage controls foster a culture of immature workers. I believe MMM's experience mirrored mine to an extent. I am quite surprised & disappointed by his stance on minimum wage.

stevewisc

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Re: Evil Entrepreneur
« Reply #32 on: November 16, 2013, 10:07:07 AM »
Guizmo - I've thought about how bad working conditions used to be but I think it's highly likely that these working conditions got better because society got wealthier and people refused to work in terrible conditions.  US minimum wage started in 1955 but lots of the stereotypical 'bad' jobs were gone by then.

It seems at any time in history there is an 'edge' to what jobs anyone will do.  In meat parking plants now lots of people won't do those jobs at current wages(around $12BLS).  Minimum wage laws won't effect these tough jobs without a big jump.  Even at $12 an hour many of these employees are brought in from other countries where wages average far less.   If those countries were wealthier there would be no supply of labor for meat packing and wages would have to go up further to get that work done.

stevewisc

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Re: Evil Entrepreneur
« Reply #33 on: November 16, 2013, 10:23:09 AM »
I think the best case for minimum wages law leverages the stickiness of wages and business.  If you raise the minimum wage $1 how many people will lose their jobs vs how many will get a raise?  If only 5% lose their job and 95% get a raise that might seem like a good policy, however if the ratios are opposite it would be a bad policy. 

An issue in testing this is tricky too, if you raise the minimum wage by $1 how many jobs will be lost right away?  Probably not very many. If the job will be displaced by automation that will take time.  If the job is lost to overseas production that too will take some time to occur.  Also, how do you measure jobs not created? 

- How many jobs have been lost at Walmart et al from adding self checkout lanes?  Lots of evil $8 jobs gone.  Will those people be better off not working or on the dole?  Seems like a great example of the negative job killing potential of raising minimum wages.  An honest attempt to help these people ends up hurting a great many.  *first do no harm*

bacchi

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Re: Evil Entrepreneur
« Reply #34 on: November 16, 2013, 12:43:47 PM »
- How many jobs have been lost at Walmart et al from adding self checkout lanes?  Lots of evil $8 jobs gone.  Will those people be better off not working or on the dole?  Seems like a great example of the negative job killing potential of raising minimum wages.  An honest attempt to help these people ends up hurting a great many.  *first do no harm*

Isn't that the result of the negative job killing potential of automation rather than minimum wage? Or maybe you're just using that as a comparison.

Let's say that WalMart has to pay an additional $1/hr. What could WalMart do?

1) Lay off people. If that's the case, then the business was being run inefficiently because they had too many workers. E.g., if they need 10 cashiers then they need 10 cashiers. If they could run with only 8 cashiers then why aren't they doing that right now?
2) Raise prices slightly (by about 1%). This would slightly lower their volume, which WalMart needs because of its razor thin margins, and decrease their profits.
3) Keep prices the same and take less profits. Walmart's profits (after inventory, assets, SG&A, etc.) are about $6000/employee so they could easily absorb an extra $1/hr ($2000/yr) raise without changing prices.

It's obvious why WalMart doesn't want to do #2 or (especially) #3. Their stock would take a hit and the investors (including the Waltons) lose money. Why would society want a higher minimum wage? Because it puts more of the burden of their employee costs on the employer rather than society. In other words, what the court said in 1937 about minimum wage: the denial of a living wage "casts a direct burden for their support upon the community."

Quote
If the minimum wage law is works why don't they pass one for $50 per hour?

That's absurd because no one is suggesting anywhere close to $50/hr. If it did happen, then obviously most businesses would close because very few workers are that productive and no one would pay $15 for a burger.

Simple Abundant Living

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Re: Evil Entrepreneur
« Reply #35 on: November 16, 2013, 01:23:49 PM »
My experience with raising minimum wage:  Years ago I worked retail part-time while we were finishing college. I had received raises for my time and performance and made about $2/hr over minimum. When they raised minimum wage, all new employees now made the same wage that I did, but my wage did not go up. That seemed pretty unfair to me, and I didn't stay long after that.

I think a national minimum wage is will be unfair by definition. What is barely a "living wage" in the Bay Area would allow me a great living in a lower COL area.  I really don't have a solution for these problems, but I wanted to bring them up.

StarswirlTheMustached

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Re: Evil Entrepreneur
« Reply #36 on: November 20, 2013, 03:51:29 PM »
I used to be relatively conservative and over the last year i've moved much farther left than I'm actually comfortable with...

that being said; If you're paying people such that they end up on social services you are in fact a socialist and are running a social enterprise. 

If you pay people enough to not need public assistance then you are a capitalist and are running a capital enterprise. 



Either you and the market bear the costs or society bears the costs.  Generally I don't consider it acceptable to socialize costs and privatize profit.

That's why I'm in favour of minimum wage. The ideal, anyway. What the occupy types called "corporate welfare" really sticks in my craw. Now, in some Randian nightmare/paradise with no social assistance, it'd be up to labour to say "eff you, we ain't workin' fer less dan we can live on!" and you'd have free contracts and all that. Presumably, they would, in theory. In theory, it'd be great.

I don't care much for theory, though. I prefer to look at history. Look at the early industrial revolution: Satanic Mills, the rickets, the wide-scale malnourishment and horrid living conditions that that sort of free market for labour produced. Then, look at the reaction to that. Our system evolved into its current form for good reasons*. Social legislation was enacted even by Arch-reactionaires like Otto von Bismark, not because of bleeding-heart sympathy, but to dodge the (then) very real risk of revolution.

Do a little reading into the history of labour relations, rather than the theory, and you'll see why we have the apparently-inefficient mixed economy we ended up with.   

*This, in fact, used to be the motto of conservatism. If it still was, I'd consider myself a conservative. Instead I'm a flaming pinko.

(For the same reason of historical conservatism, I support raising the minimum wage: to work as the policy originally intended, it needs to keep pace with inflation, which it has not.)

stevewisc

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Re: Evil Entrepreneur
« Reply #37 on: November 20, 2013, 07:01:59 PM »
Bacci,

With Walmart the point is that if the minimum wage is $15 the business logic will say that it now makes sense to invest in automation, instead with a minimum wage of $8 it makes financial sense to hire people. 

The same math applies to overseas labor. We don't want to move the call center or manufacturing plant and at current wages it may make sense to keep those operations in the US.  However at some wage level it makes sense to move.   Each operation will have different decision points but unless there is a global minimum wage the higher the US minimum the more operations make sense to move.

My point about the $50 per hour minimum is to point out the shape of the curve.  At $50 everyone(?) agrees lots of jobs will be lost.  At $40 fewer jobs will be lost and so on to asymptotically approach zero jobs lost at no minimum wage.   

With Mr. MM's original comment I was thinking maybe I missed something.  At this point all evidence seems to support the fact that minimum wage increases will have a negative effect on the number of jobs. 

Many people seem to assume that we can raise wages by fiat and not lose some of those jobs.  Then a larger minimum wage looks attractive.  I know as an employer if I was forced to raise wages to $15 per hour the increase of my product cost would cause me to lose business to non-US manufacturers and I would have to layoff good people.  I work with good people everyday that would lose their jobs at the $15 an hour range and I think that is crap. Yes, I might be wrong but I've not heard any argument refuting this fact.


willn

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Re: Evil Entrepreneur
« Reply #38 on: November 21, 2013, 07:14:58 AM »

 Look at the early industrial revolution: Satanic Mills, the rickets, the wide-scale malnourishment and horrid living conditions that that sort of free market for labour produced. Then, look at the reaction to that. Our system evolved into its current form for good reasons*. Social legislation was enacted even by Arch-reactionaires like Otto von Bismark, not because of bleeding-heart sympathy, but to dodge the (then) very real risk of revolution.


But the early industrial revolution was NOT a free market.  Large scale business enterprises were protected and supported because they curried the favor of government. Corruption and rent seeking were rampant.  Barriers to entry in any industry were high due to state interference, access to information wasn't free, etc.  Civil and criminal liability was not fairly attributed because courts and contracts weren't enforced. 






StarswirlTheMustached

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Re: Evil Entrepreneur
« Reply #39 on: November 21, 2013, 08:30:26 AM »

 Look at the early industrial revolution: Satanic Mills, the rickets, the wide-scale malnourishment and horrid living conditions that that sort of free market for labour produced. Then, look at the reaction to that. Our system evolved into its current form for good reasons*. Social legislation was enacted even by Arch-reactionaires like Otto von Bismark, not because of bleeding-heart sympathy, but to dodge the (then) very real risk of revolution.


But the early industrial revolution was NOT a free market.  Large scale business enterprises were protected and supported because they curried the favor of government. Corruption and rent seeking were rampant.  Barriers to entry in any industry were high due to state interference, access to information wasn't free, etc.  Civil and criminal liability was not fairly attributed because courts and contracts weren't enforced.
I concede that the early 1800s weren't the ideal libertarian dream-world, either. You will never have, in the real world, a 100% free market. Either rent-seeking moneyed classes will use their influence to corrupt it, or government will curtail it for its own protection. I picked that example because that's where we started enacting these annoying labour-protection laws that supposedly curtail the freedom individuals to make contracts.
That said, you can keep going forward in history, if you'd like. When would you say the market was freest? I think most would point to the last Guilded Age, before the progressive movement got power. Which is to say: when a Socialist could run for the White House and be a serious contender, when labour activists were having pitched battles in the streets with private police (sometimes backed up with federal troops) and domestic terrorists were planting bombs on Wall St.-- one even managed to assassinate President McKinley.

As in politics, this is the worst possible system, except for every other that's been tried. (This is, of course, a meta-argument to the main discussion of minimum wage laws, and I should perhaps stop to avoid derailing the thread.)

My point about the $50 per hour minimum is to point out the shape of the curve.  At $50 everyone(?) agrees lots of jobs will be lost.  At $40 fewer jobs will be lost and so on to asymptotically approach zero jobs lost at no minimum wage. 
I suspect, though I admit it's basically just a guess, that the shape would look something like a logistic curve-- which is to say, S-shaped: a flat region in which changing the minimum wage has only a small effect on overall employment, an inflection point at some critical wage, past which jobs will be lost at a very steep rate, followed by another inflection point to a flattish region where high-wage/do-at-any-price jobs remain. Thus the shape of the graph at 40$/hr may not tell you about the shape at 8$/hr, or 15$/hr. (Although you may very well be right that 15$/hr is near or past the inflection point on the logistic curve, if that's the kind of curve we're dealing with.)

I should note that Sweden*, that most progressive of nations, has no national minimum wage. As I understand it, the minimum is set by job sector via arbitration, in order to get a good balance between unemployment and purchasing power. This seems to work for them, and seems like a good system, since not every employer will have the same price-elasticity when it comes to labour. That jibes with what SteveWisc suggests, too.

*(Protip: when arguing economics or politics, you can always get me to reconsider if Sweden is on your side. As a pragmatist, I have to admit that things seem to be working out okay over there.)

Gerard

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Re: Evil Entrepreneur
« Reply #40 on: November 22, 2013, 07:02:24 PM »
It seems to me that minimum wage lets governments try to protect their most vulnerable citizens from being exploited by "freedom to starve" employers, without actually committing any of their own money. The more expensive way (in terms of government budgets) is to have social benefits that are generous enough that employers can't get too stingy (in effect, because social benefits act as a competitor for low-income employees -- if you try to pay your burger flippers six bucks an hour, they'll quit and collect $5.50 an hour in benefits, because they're rational economic actors). That, it seems to me, is what Sweden and its neighbours do.

The "all the jobs will move to Bangladesh" argument doesn't work as well in those countries because their citizens have bought into the idea of the greater social good, so they'll pay three times as much for local garlic as for imported because they know they're helping to employ their neighbours by doing so. And, of course, because local garlic is better. I think we in North America have pretty conclusively proved that we're not willing to do that, either in terms of the price of goods or the taxes on them (or our incomes). We're too busy buying shit from Walmart and Joe Fresh. So what passes for the left is reduced to proposing weakened or compromise ideas -- high minimum wage, mutant health insurance -- that are neither free-market enough to satisfy the right nor socialist/generous enough to work. 

bacchi

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Re: Evil Entrepreneur
« Reply #41 on: November 23, 2013, 03:41:06 PM »
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My point about the $50 per hour minimum is to point out the shape of the curve.  At $50 everyone(?) agrees lots of jobs will be lost.  At $40 fewer jobs will be lost and so on to asymptotically approach zero jobs lost at no minimum wage.   

As stated above, a $0 minimum wage would benefit companies at the expense of the taxpayers. In effect, it would create some weird corporate-socialist market where the government props up business by providing benefits to the people who can't live on $1/hr (but at least they'd be employed, right?), much like how the government helps WalMart.

Or we (the US) could do what Sweden does and have enough unemployment benefits to artificially make a minimum wage.

Or we could just ignore the impoverished entirely and let them live in squalor. Bootstraps and all that, much like we did in the 1900s.

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With Mr. MM's original comment I was thinking maybe I missed something.  At this point all evidence seems to support the fact that minimum wage increases will have a negative effect on the number of jobs. 

Here's some evidence:

Oz has a minimum wage of over US$15/hr. Their unemployment rate is lower than the US' and they aren't in a recession.

Mexico has a minimum wage of less than US$1/hr. Their unemployment rate is ~5%, better than the US', though Mexico isn't exactly a shining beacon as far as standard of living for most of its populace.

Canada is near $10/hr and their unemployment rate is slightly lower than the US'.

In other words, there isn't any evidence that high minimum wage causes high unemployment. If the inverse were true, then Mexico's unemployment should be lower than Australia's but it's not.

What StarswirlTheMustached wrote is more likely -- the min-wage/employment graph is more complicated than a simple diagonal.

stevewisc

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Re: Evil Entrepreneur
« Reply #42 on: January 31, 2014, 12:59:23 PM »
Ive' been doing some experimenting to see where I want to go with this. 

For some products I've decided to raise the prices.  I am doing a little more early retiring and don't need the headaches that come from extra employees and customers if they aren't helping the business a lot.  With the price increases we have lost a customer which amounts to about one employee full time.  So,  I am identifying the weakest employee and letting them go.  The competitor is in Mexico so this job just moved overseas.  Maybe someone in favor of the minimum wage will hire the employee I let go to do something but I doubt it.  With unemployment fairly far from zero for HS/GED/someHS educated level folks it would seem to me pretty clear that I haven't helped the employment situation. 

Note this was done in part in anticipation of the minimum wage going up, so it won't correlate with the date the minimum wage law is passed or approved (if it even is) making causation within the statistics harder to see. 
 
Regardless what choices are made about government transfer payments it's better to have them employed then not.  Better to have them creating some economic value then none. 

If only Seattle or the city of DC would do us all a favor and raise the minimum wage to $15-$20 an hour this could be settled.  Surly the benefits would be obvious if we would just do this and raise the rate to $18 across the board!




   

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Re: Evil Entrepreneur
« Reply #43 on: January 31, 2014, 02:17:08 PM »
My point about the $50 per hour minimum is to point out the shape of the curve.  At $50 everyone(?) agrees lots of jobs will be lost.  At $40 fewer jobs will be lost and so on to asymptotically approach zero jobs lost at no minimum wage.

I am having a hard time following your logic here. I understand the overly simplified idea that you put, but it doesn't seem to make a lot of sense. By your statement it seems you believe that if minimum wage was $1/hour then unemployment would be lower than if minimum wage is $15/hour. But, if someone is making $1/hour are they really employed? I understand that their name may be on some form somewhere stating that they have a job, but if their weekly pay is $40, does that really count as having a job? I do not believe that fewer jobs would exist if minimum wage is set at an APPROPRIATE level. Your $50/hour argument is illogical because it is completely outside the realm of what would be deemed appropriate. I don't think very many people believe that minimum wage positions should afford people the lifestyle of someone who makes 6-figures, but that is should afford someone the lifestyle such that they can actually eat a couple times a day all year long. I know it is a lot to ask companies to pay their employees enough to eat, and maybe even enough to put a roof over their head, but it still seems pretty fair to me.

I know as an employer if I was forced to raise wages to $15 per hour the increase of my product cost would cause me to lose business to non-US manufacturers and I would have to layoff good people.  I work with good people everyday that would lose their jobs at the $15 an hour range and I think that is crap. Yes, I might be wrong but I've not heard any argument refuting this fact.

This would mean that the amount of profit you are making through your company is at the exact level you need it to be to feel fairly compensated. There is no rule that says you have to raise prices if you increase how much you pay your employees. You only do that if you want to maintain the exact same margin. This leaves two cases:

  • You are barely making enough to support yourself at this point and an increase in cost would cause your company to no longer be able to support you. This would go to MMM's point that yes, you have a bad business model.
  • You are making more than enough, but you are unwilling to make less. This is a personal decision about the morality of the situation.

My own view is, if you cannot run a profitable company while paying employees $15/hour then you probably shouldn't be running a company. My view of mustachianism  means you are only looking to make what you NEED and you can use the rest to help the others.

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Re: Evil Entrepreneur
« Reply #44 on: February 01, 2014, 08:49:01 AM »
My own view is, if you cannot run a profitable company while paying employees $15/hour then you probably shouldn't be running a company. My view of mustachianism  means you are only looking to make what you NEED and you can use the rest to help the others.

So, if you can't afford $15 an hour for your employees, the business should be shuttered and everybody should be unemployed?  Sorry, but some professions don't warrant $15 an hour.  If employees are unhappy with the situation they are free to leave or improve their skills.


Making Cookies

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Re: Evil Entrepreneur
« Reply #45 on: November 01, 2015, 08:08:10 AM »

The "employee" could always just volunteer, since below minimum wage they'll need government assistance anyway just to survive this could be more efficient.  Volunteer and collect welfare. Of course, the employer could argue that since the volunteer's not getting paid, then they don't have any real incentive to show up on time, perform to a standard, etc.  But if the employer "can't afford" minimum wage, those aspects of the job must not be very valuable anyway.

Like an intern?

HipGnosis

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Re: Evil Entrepreneur
« Reply #46 on: November 05, 2015, 01:57:38 PM »
There shouldn't be a minimum wage without a minimum productivity.

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Re: Evil Entrepreneur
« Reply #47 on: November 06, 2015, 03:03:36 AM »
There shouldn't be a minimum wage without a minimum productivity.

We already have that.  With at-will employment, any employer can decide what level that is and replace the worker if they don't meet that level.  So higher min. wage would help the worker out, cause the employer already can get the minimum productivity they want, or fire the person.
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puglogic

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Re: Evil Entrepreneur
« Reply #48 on: November 06, 2015, 07:45:59 AM »
I pay well and get great people, which gets me more business, because my workers are the ones whose actions determine whether my customers are getting an average product or an amazing product.

I make a little less than most entrepreneurs in my field, but I don't need a friggin' McLaren to be happy; I do it so I can pass the savings on to the people who work for me.  I'm respected by my community, routinely have to turn away business because we have too much, and employ a happy crew of my neighbors who become my greatest evangelists. It's even part of our PR.

Entrepreneurs who whine about having to pass the increased cost of paying people a living wage directly on to customers -- without ever searching for other places to absorb the increase, including their own salary -- are common. 

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Re: Evil Entrepreneur
« Reply #49 on: November 07, 2015, 09:18:36 PM »
Until very recently, I worked for minimum wage. I recently found out that I've been given a $0.05 raise, so now I'm at $8.15/hr. Anyway, for the bullshit we have to deal with at my job, this is nowhere near enough. Hell, Walmart pays more than that ($9/hr). I'm actively looking for other jobs, some in the same industry, others not. Almost every other job in the same industry pays more. Fwiw, I have a masters degree, but am unable to find work in my field (shut up!).

The primary reason I want to leave this job is because it pays so little. And after the "union" takes its cut, I end up making less than minimum wage. I work for a multibillion dollar company; the largest grocer in the US. It can definitely afford to pay us more. You have to be there for many, many years before you start to make halfway decent money, or be a department manager or assistant manager.