Here’s a longish response to Blonde’s last comment on “A question about the living wage.”
Yet again I’m late. I understand your logic better than before, and I agree with the rationale. I guess then, for me, and I assume for at least some others, it comes down to a social-economic issue rather than a purely mathematical-economic issue.
These issues are not incompatible. The apparent incompatibility arises from the fact that not all forms of cost and benefit are as easily quantifiable as dollars are. Effective economic thinking takes non-financial factors into account, though still analyzing them mathematically. We prefer greater happiness to less happiness, don’t we?
I understand the productivity vs. wage argument, and that this is a significant factor for businesses and corporations in their bottom line. We are a capitalistic society, after all, and businesses typically exist solely for the purpose of gaining capital.
It’s more accurate to say they exist for the purpose of gaining profit. For most businesses, capital is a means to an end, the end being profit.
But I think there’s an issue when working 40 hours a week does not guarantee a person or family sufficient food, housing, or clothing, and I think this is hugely problematic. What is the incentive to work or educate yourself if there is not a strong likelihood of a good outcome for the individual?
Did you ever work a job that paid less than enough to support yourself independently, or to support a family? What was your incentive? There’s your answer.
According to a BLS report from March of 2014 (very first paragraph), there were approximately 3.3 million hourly workers in America who work for minimum wage or less. Ask them why they bother. Are they suckers? Presumably there were millions more who earned above the minimum wage, but less than a hypothetical living wage. What was their incentive? And I’d bet there are hundreds of thousands, if not more, of people who are looking for work, but can’t get it because the federal or local minimum wage is too high. Why are they looking for work at all?
Given that there are people working for less than a hypothetical living wage, and given that there are unemployed people looking for similar jobs, and given that both groups are clearly responding to some incentive, why make it harder to hire them?
By the way, it is imprecise to suggest that people seek “good” outcomes, because “good” is in the eye of the beholder and, more importantly, “good” outcomes aren’t always available. People seek the best available outcomes. Minimum wage laws limit access to some people’s best available outcomes.
And by the way by the way, is it reasonable to demand (I use that word because we’re talking about laws here) that a teenager should be able to earn enough in 40 working hours to feed, house, and clothe himself? Or a family? That’s an important question because according to that BLS report, that’s almost a quarter of the 3.3 million in question, and raising the minimum wage as high as you suggest puts those jobs in peril.
Workers are trading their time and energy for capital. Why bother to participate in this process if the tradeoff doesn’t leave you able to feed yourself? Why not go into a nefarious and illegal profession instead of wasting tuition payments and time on being a productive member of society if your productivity is deemed to be below the threshold of a livable wage?
Again, I ask, why make it harder to hire these people? I know you don’t want to make it harder to hire marginal workers. I know you don’t want to make it harder for them to earn some money, gain experience, build skills, and make contacts. But that’s exactly what minimum wage hikes do to those workers who need money, experience, skills, and contacts the most. That’s why I oppose minimum wage laws.
And in keeping with the free-markety tone of my answers, many (not all) of those nefarious and illegal professions wouldn’t be so nefarious if they weren’t illegal, and probably shouldn’t be illegal in the first place.
I will always be a product of a capitalist society, and I do not think that there is anything inherently wrong with the goal of a business or corporation being profits. But I also think that as such an ingrained part of our society, businesses and corporations also have a responsibility to pay their workers living wages, even if this means decreasing profit somewhat.
Nope. They have a responsibility to pay their workers what they contract to pay their workers. The end.
If you think that there’s a social responsibility to ensure a minimum standard of living for everyone, then a minimum living wage is an inefficient way for society to provide that standard to those in need. If society wants to provide that standard, it should do so through transfer (welfare) programs. Don’t get the wrong idea– I’m not a huge fan of that either, but it’s more direct, it’s more efficient, and it doesn’t force businesses to hang on to workers who cost them too much money.
After all, if people en masse are unable to afford the necessities of living based on their jobs, business will ultimately decline as a result of decreased purchasing power. It’s in the business or corporations best interest to take a loss now (through increased wages) in order to ensure stabilized or growing profits later (through increased purchasing power), no?
Not necessarily. That’s partly why I don’t want to mandate higher wages. And despite stereotypes, the business world is interested in long-term profitability.
I can imagine situations in which businesses make themselves better off by paying workers more money specifically so that those workers can buy the businesses’ products. But I can’t think of any off the top of my head… can you? They say that’s what Henry Ford did, but it was a myth– he raised wages in order to attract and keep the most productive workers.
Just out of curiosity, what do you think would happen to businesses if the feds enacted a minimum profit law? Or to landlords if there were a minimum rent law? Or to banks if there were a minimum interest rate law?
Anyhow, I just wanted to keep this conversation going because it’s an important and enjoyable topic. I’ll delve into the responsibilities of businesses later.