Some jobs that certain humans perform are not worth very much money to an employer. If the state tells the employer they can’t pay someone that meager a sum, then they simply won’t hire a person to perform just that job. They will hire someone for more money to do that job plus something additional to make it worth hiring the person, or they will find a way to automate out or contract out that portion of the work.

Yes, if a business is not successful in managing around a government wage minimum then they will lose money. Companies are mismanaged all the time. But the general economic theory is based on rational actors, and at the macro level that is the effect that has been observed.

There is a reason they don't exist anymore. They were the quickiest to build but did not survive a downturn most closed up shop after the mine was closed.

Towns built with various piblic/private spaces/businesses can survive one part of the economy doing poorly.

Don't pine for a made in China solution until you could actually live one. If you were in that situation (the average Chinese factory worker) now you wouldn't be on the internet writing this you would be working your 7 day 16 hour shift.

(none intended)

Also, I thought intended servitude was abolished quite a while ago.

Minimum wage is elastic in (your) theory but in practice it appears the majority of companies opt to take the hit in profits rather than fire people.

If labor was plentiful and cost $1/hr, we probably wouldn't see nearly as many automated checkout stations or ordering kiosks. If low-skilled labor costs $100/hr, you can bet there's going to be a lot more automation in place.

It seems like most people can grasp the general slope of this demand curve, but seem to be unable (and I think in a lot of cases it's rather unwilling) to reason about whether the curve has a fundamentally different slope/shape in the $8-20/hr range.

The curve that's actually interesting is the expected value to an individual worker of the minimum wage, i.e., the wage multiplied by "how likely am I to be employed fully" (approximately 100% at $1/hour, quite a bit less at $100/hour). Obviously, that curve starts at zero, goes up linearly for a bit, then heads back towards zero in the limit. The question is where "a bit" is and what the argmax is.

No, it isn't. But neither is $0/hour because you don't have a job, and society doesn't get the product that the $1/hour job produces.

Ideally, the system would pay the workers the marginal value of their input for the work done, and the government would "top up" the wages to whatever the living wage is. Everyone wins. Of course, this is hard to measure and apply.

This is some real galaxy-brain level thinking. Enforcing a minimum wage is a more efficient market.

For the vast majority of the world, outside of ultra-expensive first world metropolises, $15 an hour is beyond a comfortable living wage.

That's largely because the basic necessities of living (housing, clothing, food, transportation) are needed in roughly the same amount by all people, and don't scale with class/income/wealth. I live in a 1-bedroom apartment and eat about three meals a day and wear jeans that cost about $50. I have friends who make an order of magnitude more and less than I do. They don't live in a 10-bedroom or 0.1-bedroom place, respectively. They don't eat 30 or 0.3 meals a day, respectively, and their meal themselves don't cost ten times more or less - maybe there's a factor of two or three. The ones who make ten times more than I do might occasionally buy $500 jeans, but even they won't wear it for everyday use, and the ones who make ten times less generally don't buy $5 jeans either.

So, demand is roughly the same from everyone / doesn't scale very much, and the rich can afford to pay quite a bit more. So a market that has rich people in it will have a higher cost of living.

If you want to stop this, the obvious solution is to prevent income inequality (in all its forms - Paul Graham points out, correctly, that this would require us to rethink the very idea of for-profit unicorns - see https://twitter.com/paulg/status/886953410356011008 and https://twitter.com/paulg/status/645343476662427648). Useful tools include extremely high wealth and income taxes. (And, as someone who by any objective standard makes a lot of money, this is why I'm personally in favor of my own marginal tax bracket being 90% or higher - because it means that people who make even more money than I do can't as trivially outbid me for housing, etc.)

I strongly agree with this, but this requires altruistic employers, or unions to accomplish. And this results in jealousy and hostility towards workers in high-margin industries. Workers in general have no idea what their value-add to the company really is.

Some portion of that marginal value must be retained by the business to pay fixed costs of the business and likely financing costs as well.

So when you push the value of labor to a leave where people cannot afford to live, folks in the US either end up on social services, social security disability, or are incarcerated.

Whenever there are changes to minimum wage, the parade of chamber of commerce types bemoan the horrors that will befall them. Yet somehow burgers get flipped and shelves get stocked.

No we aren't.

> Which is guaranteed to attract a huge amount of low skilled labor. Which guarantees low wages (simple supply-demand). And if you artificially control wages, it will result in unemployment of the unskilled.

Right now, the government is artificially suppressing wages by threatening to deport immigrants. Employers take advantage of government enforcement by promising to hide the worker in exchange for poor wages and living conditions.

Giving immigrant workers visas, thus rights is a solution to this. No more artificially suppressed wages because the workers don't fear the government

> Why do you think we have tent towns all over California?

Because they won't allow for enough housing to be built.

Yes, you are.

https://www.npr.org/2019/09/12/759442642/immigration-where-2...

You just showed us a counter example. The structure of the market changes toward automation or away from it but the businesses are still being started as usual.

Whether this is possible will depend on the cost of capital and state of technology.

I really like the way Nick Hanauer puts this particular topic. It has a certain logic to it, and appears to be supported by some historic data and trends.

I won't do it justice, but in effect the message is that if my employees can afford my product, it's better for the economy and business. Using restaurants as an example, if all service workers can afford to eat at a restaurant, then restaurants as an industry do better, and the economy grows, and individual businesses do better.

My take on it is, without public policy, such as a minimum wage, it's hard for a business to be an outlier. If one business pays a living wage, but non of the competitors do, that business doesn't necessarily have enough of an advantage to stay ahead of lower priced alternatives. It's only when we create rules through policy, do we create a level field for competitors to operate in, with effects such as increasing the customer base by increasing the purchasing power of a class of citizens.

This of course doesn't mean the rich should be eliminated, or everything should be equal of course, but the attitude that "I won't be as profitable if I have to pay a living wage" isn't necessarily correct, and it's possible for businesses to thrive once the shocks of rapid changes work themselves out. It also depends a great deal on other elements of policy, such as international trade, but those are other topics for other days.

The corollary being "You're actually worth LESS to me and my business, but the state won't allow it"

But, the middle-class problem doesn't hold in practice. Raising minimum wage has the effect of bumping other salaries up as employers have to compete with the new minimum.

I saw in my grocery store how, even when they had all available staff working the registers, the longest line would tend to the self checkout. This past summer they doubled the self-serve area.

The interesting thing is even though all full-service registers were in use, the deepest queue in any of them was two waiters. That means shoppers' perception of too long a line has shifted because of self-serve. They were choosing self-serve based on the belief it would be quicker, even if it means standing in the longest line. And that was mostly born out, mostly because the choice also depended on how many items were being purchased. People buying many things went to full-serve, which makes waiting in the longer, which drives people with hand baskets or half-full buggies to the self-serve.

The upshot being stores are installing more self-service checkouts because customers want them. It's not like adding those self-service lanes comes at no cost to the business. In the above grocery store, they had to remove part of the floor they previously used to display products. If they didn't think it was necessary they wouldn't have done away with that selling space.

Also, the lanes they added were in addition to the ~12 basket self checkouts. The new lanes are setup for people pushing carts.

Another way of looking at this would be: a job in McDonalds is not supposed to be a means of supporting the family of four. It's a side gig for teenagers, not a "full-scale" job.

Supposed by whom? McDonalds will suggest it's best their jobs be seen as side gigs for teenagers because that's the explanation that best supports their profit margins. The reality is that families of four will have to be supported by McDonalds wages if no other jobs are available for the individual in question.

Another way of looking at it is: what percentage of citizens do you think society should artificially inhibit from being able to support children? Is it 5%? 20%?

And wasn't a high school education good enough 50 years ago for most positions? Companies have been able to force the burden of debt for gaining the skills required for a job onto the individual, through exorbitant college fees and unpaid internships, now you're advocating the government should take on the specialization that the private industries require?

As a college student one is barely able to figure out their interests - there's so much push to start planning well in advance, I have no idea how we can expect a tween to commit to a career path.

Nothing, then import twenty million more of them?

- What is the average age of a McDonald's employee?

- The average age of an 'hourly-paid' employee is 20. You might like to know that we employ 120,000 people of all ages, from school leaving age to people in their 80s. We're also one of the biggest providers of first-time jobs in the U.K.

https://www.mcdonalds.com/gb/en-gb/help/faq/18338-what-is-th...

It would make sense if the minimum wage for "teenagers" jobs had kept up with the cost of college tuition, or even the increases in costs of a used car or insurance over the last 10 years.

Some teenagers in impoverished areas are helping their parents make ends meet too; others are emancipated and need a living wage.

The writing of the time speaks of minimum wage as a worker health and safety issue. The first minimum wage laws in the U.S. only applied to women and children. As part of the labor movement, it was often described as a type of collective bargaining. Where it was seen as providing a living wage was not directly at the minimum wage but because of the inflation effect it would have on more skilled wages. That by raising the wage floor, the industries in which a head of household would be employed in would have to raise their pay accordingly to that of a living wage.

So there's truth that minimum wages weren't introduced to be living wages themselves. At the same time that was 100 years ago and we shouldn't be writing laws for today based on the assumptions of the 1900's.

Then make the minimum wage for <18s $8/hr, and the minimum wage for >18s (or maybe >22s) $15/hr.

Secondly, why should teenagers have to work in the first place, instead of studying?

There are some jobs that don't create $15/hour in value. Why is that hard to imagine? Minimum wage dictates that those jobs and the products they provide will not exist. Whether you think that's a net benefit to society is another question.

If the inflation keeps low, total amount of money in the economy is relative constant, thus the cake is not getting much bigger, increasing minimum wage is going to reduce the number of jobs in the sector that is paying previous the minimum wage.

Because those jobs don't disappear when that minimum wage is raised. This has been tested by comparing the job differences across state borders where the minimum wage has been raised on one side but not the other (Dube/Lester/Reich and Card/Krueger).

>Minimum wage dictates that those jobs and the products they provide will not exist

The reality is that that it tends to dictate whether cashflow is funneled into profit margins or wages.

Yeah, input costs have no effect on whether a business can operate at the margin...

>This has been tested...

If we suddenly care about what the economic research says, you should do a search for papers that don't confirm your biases.

How the fact that raising labour costs will reduce the demand for labour is controversial is beyond belief, truly. We have social programs here in Canada that do exactly this: subsidize wages of employees in certain industries because the value that the labour of some people doesn't cover the costs. But hey, what do we know up here...

I guess this mentality comes from the new wave of socialism or comes from people who have never run a business in their lives.

They can but that's obviously a rather different question.

>If we suddenly care about what the economic research says, you should do a search for papers that don't confirm your biases.

I have.

>How the fact that raising labour costs will reduce the demand for labour is controversial is beyond belief

Why is it so hard to believe that demand for minimum waged labor is very inelastic?

How is this a "different question"? It's the question. If there are businesses that can be economically profitable paying $14/hour, but minimum wage rises to $15/hour, those businesses are no longer viable.

We can argue about how many of those businesses there are, but it's merely a fact that they exist at the margin. If you've ever run a small business yourself, you'll understand how small changes in the cost of labour can be painful. I'm not talking about about McDonald's or Walmart here.

Again, we have social programs in my country to alleviate these issues. And they work.

>Why is it so hard to believe that demand for minimum waged labor is very inelastic?

So businesses optimize for the number of people employed, regardless of prevailing wages? I don't buy that, sorry.

Because most businesses make profits so it's perfectly possible to raise input prices without them closing.

>We can argue about how many of those businesses there are

That's what we were doing. The answer was "not a statistically significant amount".

>If you've ever run a small business yourself, you'll understand how small changes in the cost of labour can be painful.

I understand all too well the kind of caterwauling that happens when you do something that could threaten the profits of any business.

>Again, we have social programs in my country to alleviate these issues.

And a historically high % of profit to GDP, so maybe we can give some of those programs a break and take the money from a sector of the economy that is actually flush with cash.

>So businesses optimize for the number of people employed, regardless of prevailing wages?

Absolutely they do, yes!