Depends on how strictly you define "rationally". If you mean "spend a month collecting data, download, install, and learn R, and run sophisticated statistical analysis on the data before making any decision", then no, clearly not. IOW, humans are not the fictional "rational agents" mentioned in economics textbooks and papers. We're not Homo Optimizicus.
But if you mean "give some thought to the options based on known information, weigh the different options, outcomes and consequences, and then make the best decision", then I would say that people are generally rational.
It would probably be most accurate to say that humans "are semi-rational agents that employs lots of heuristics, including satisficing[1], to make decisions that are not necessarily the best possible, but usually aren't the worst possible either". Or to put it another way, we employ "bounded rationality"[2].
I'm jobless, hungry and desperate. Minimum wage is $15.00 /hour. Given my skills and abilities, no one can justify hiring me at $15.00 / hour. I have two options:
1. Work for $8.00 / hour, which sucks balls, but at least lets me eat.
2. Not work at all for $0.00 / hour, and starve to death.
I don't think it's hard to guess which option many people would pick. A high minimum wage just hurts the people at the lowest rung of the economic ladder, by knocking them completely off the ladder.
1. I can hire these guys at ~$8/hr federal minimum wage.
2. I can hire these guys at $2/hr and make shareholders very happy.
I don't think it's hard to guess which option many people would pick. No minimum wage just hurts the people at the lowest rung of the economic ladder, by accelerating the race to the bottom.
Your "argument" is just a caricatured strawman that has no basis in reality. If your position were an accurate reflection of reality, no company would ever pay above minimum wage. And yet that happens all the time. So maybe, just maybe, the reality is that companies pay based (in part) on the economic output the workers they are hiring...
Probably in part for this reason and others, it was Franklin Roosevelts's opinion that businesses that cannot survive unless they paid substandard wages, should not be allowed to exist. (https://takingnote.blogs.nytimes.com/2014/03/07/f-d-r-makes-...).
But the question isn't necessarily "survival of the business". It's whether or not the business can afford to bring more people into the fold, based on an arbitrary fixed-point in terms of how much they can pay.
Maybe I'm running a company that's humming along, profitable but only marginally so, paying 100 workers some rates ranging from exactly minimum wage, up to $WHATEVER. Now I'd like to hire 5 more workers to do some fairly low value manual labor, but if I hire them at minimum wage, it pushes the company into the red. Where does that leave us? I can:
1. Hire the workers at less than "minimum wage". This creates the most jobs, but has the downside of paying people less than what some people feel that they "should* earn.
2. Hire fewer workers, but at minimum wage. That's fine for the 2.5 workers I do hire, but how does it benefit the 2.5 that I don't hire?
3. Do nothing. This benefits none of the 5 workers I might have hired.
4. Buy a machine that does the kind of work those workers would have done, don't hire anybody new, and then lay off 10 workers once the machine is up and running.
5. Reduce costs somewhere else in the business, to allow for hiring the 5 workers at minimum wage. This might or might not be viable, depending on lots of other details.
6. Hire the 5 workers at minimum wage, and raise prices, passing the increased cost on to my customers. This might work, but again, there are a lot of variables in play here. And this negatively impacts my customers.
Obviously there's a lot of nuance to all this, but my point is that it's a bit Pollyanna'ish to think that jacking up the minimum wage results in a better outcome for everybody.
Obviously there is such a thing as too high of a minimum wage, that will severely dampen employment for lots of businesses. Jacking up the minimum wage in itself to an arbitrary value that is too high is pretty poor policy.
But in the current state, too often, those on full time minimum wage jobs are still below poverty level, and thus qualify for many government benefits. In effect, my tax money contributes to your low-wage employee. From a personal perspective, I don't really like your option 1. I'd actually ideally want that person who is only worth sub-minimum wage to linger in the safety net for a while and learn skills that will make them more valuable than below-minimum wage level. Such would be a far better value for my tax dollars than subsidizing low-skill employment.
Some economists feel that up to a certain point, minimum wage actually increases employment (in non-competitive labor markets, eg monopsonies) and increases aggregate demand enough to compensate for the cost effect (because low-income workers have a higher marginal propensity to consume, which would offset the cost effect). Of course, minimum wage is not the only anti-poverty tool out there and some economists feel it is too blunt. And the "correct" minimum wage probably varies hugely by location. As you say -- there are a lot of nuances. I'm just saying, there is more to this than just the employer perspective.
The needs of business do not supercede the needs of human beings. If a business cannot operate without virtual slave labor, the business should not exist.
> Your "argument" is just a caricatured strawman that has no basis in reality.
As is yours. Businesses regularly have costs which they cannot turn a profit on, but the work must be done, so it gets done.
Poverty is the natural state of humanity. Trade / business allow us to rise above that. The people you are referring to as "natural slave labor" are better off working for less than the sum you find optimal, than not working at all. And unless someone has a gun to their head, they always retain the option to do the latter.
As is yours.
I don't find it to be so, but feel free to convince me.
Businesses regularly have costs which they cannot turn a profit on, but the work must be done, so it gets done.
Sure, but there's a limit to that. A business can't run in the red indefinitely. And again, we already know from actual, demonstrated, empirical evidence in the Real World that business are forced, by economic reality, to pay more, often FAR more, than "minimum wage" to workers. But again, when we are talking primarily about the workers on the bottom rung of the ladder, the question is, do you want to lock them out of participating in the economy altogether?
And yours isn't?
Seriously, everything you're complaining about their argument, can be applied double to yours.
No.
Seriously, everything you're complaining about their argument, can be applied double to yours.
I don't find that to be supported, but please give do expand on that.
Also, do you think humans (in an economy or not) always act rationally?