See also: hiking the minimum wage (possibly the most egregious example of academic corruption), rent controls, taxing the rich, etc.
There are a number of reasons for this, but the primary ones are 1) economists also respond to incentives and those think tank jobs pay better and 2) prestige in the industry is also a commodity - a commodity which can be bought and sold. The level to which money talks in this industry is reflected by the wages - always higher than all other humanities.
As an example the freakonomics guys popularity are to popular economics what k pop is to music: a slick, highly refined, marketed product from a superbly well oiled marketing machine.
There is of course still a black market
A minimum wage is a ban on certain baskets of compensation for work.
It doesn't prevent 'exploitation', whatever that means. Companies fiercely competing for labour is what you want here.
No, it's not.
Most restaurants you go to to eat would have to close if they needed to employ their workers legally. Same thing applies to bars and similar venues.
Source: worked in that industry 10+ years
And then there would be much more demand for restaurants, then there is supply, causing the prices to rise until they could afford to pay the workers legally.
stage 1 is it hammers profit margins <-- for 95% of businesses we are here.
Stage 2 is then it increases prices <-- only affects very low margin businesses which are a small minority.
Stage 3 is it triggers job losses <-- to my knowledge it's never been raised high enough to make this happen. maybe $50 / hour would be the threshold.
Businesses adapt, raise prices and do more automation to keep their margins, which have been remarkable stable if you look back. The losers are consumers and workers, because everything costs more and salaries don't rise as fast.
> Stage 2 is then it increases prices <-- only affects very low margin businesses which are a small minority.
Every mom and pop shop is a low margin business. Most business are low margin, only a few have a really high margins, the ones we all know and talk about.
>Stage 3 is it triggers job losses <-- to my knowledge it's never been raised high enough to make this happen. maybe $50 / hour would be the threshold.
I can only recommend you expanding your knowledge. It's like saying why do we need car seats for babies, because when we were younger we didn't have them and did just fine. Of course those that didn't make it aren't here to tell their story.
Why are people so focussed on employment? Employment is only one area that minimum wage affects, and as you say, with moderate minimum wages and an otherwise functioning economy, employment effects are relatively minor.
Not everyone has the time, energy or patience to do that though.
Point being if you were to make an assumption, "pop economist says that thing that is bad for profits is bad for you too is probably bullshit" is a fairly safe one.
I think the most common "mistake" is that most economists are used to thinking about money in absolute terms, but in real life it's a lot more useful to treat prices as a percentage of your income. That means the utility of money is not linear, so redistribution is good by itself unless it hurts growth so much that average incomes start going down in real terms.
The other one is way deeper and harder to fix but I don't think a lot of people actually believe it, they just use it implicitly in their research. It's that the goal of economics is to maximize efficiency (measured by ROI = profits), not to deliver the best outcomes for the greatest amount of people.
From this point of view a platform like Doordash is efficient because they underpay workers and overcharge customers, and so are surveillance data brokers. That's clearly not a perspective that gets us into a better society. But measuring quality of life is much harder than taking two numbers every company is legally required to count.
I always found the question “what is a good life?” to be one of the most interesting and consequential philosophical questions. People have found very different answers for this over the millennia.
But rent control? Really?
Really, can you at least provide some napkin calculations to see the cons and pros? Some countries have tried it, notably France. It backfired as expected and they had to revert.
What actually happens is that profit margins get hammered (notice how you forgot about those? they can go down too) and those businesses that rely upon minimum waged labor complain bitterly.
Very low margin businesses do raise prices but in the studies I saw the only two examples from a wide survey were, like, nail salons and catering.
The whinging manifests as money piled into lobbying and public outreach to prevent this type of thing from happening again and the result of that public outreach is where you formulated your opinion about what happens.
So I live in a country with no rent controls with very high rents and housing costs. The capital is disincentivized from creating more supply by the fact that creating more supply devalues existing supply.
Rent controls would 1. lower the rent (obviously), 2. lower the price of existing apartments since the profit you make on them is lower, 3. like a sibling comment points out, hammer the profits of capital.
> Taxing the rich lowers the velocity of money, disincentivizes capital to search for more profit seeking enterprises.
Wow... Taxing the rich means less taxes for the poor means more people with money/time to start their own companies.
That said, your 3 examples are very well studied, and rent controls are completely different from taxing the rich and hiking the minimum wage.
That said I think Jury is still out on pay transparency mostly because there isn't that much practical data. The EU has been navigating it for a few years but research is still ongoing.
One paper (which is more focused on pay gap reporting, which is longer implemented and seems to have limited impact) suggests salary disclosure in job ads actually increases wages.
https://www.oecd.org/en/publications/pay-transparency-in-pro...
It's definitely obvious that internal salary transparency will a) act to normalise salaries over the long term and b) generally depress salaries. But disclosure at the job as stage is less clear.
There's a difference between coworkers talking to each other and the system being set up in a transparent way where everyone can see everyone else's salaries, these two aren't the same thing.
We will invent narratives to protect our ego and will happily keep other people down (including ourselves) instead of confronting this.
"He just got promoted because he's charming and outgoing, he's not more talented than me!"
Ok let's assume thats true. But if your job involves spending 40 hours a week with someone (more than your family), it turns out humans value being around charming, outgoing people. Is this wrong or is it the market accurately assessing relative value in the context of the actual work (collaborating with other humans)?
It goes other way round too. It might just be that the your higher salary is not rational, you got lucky or got unfair advantage.
Like, in the bottom of your comment, you made up situation that might just not apply. Or might just not counteract anything
Or, might be directly damaging - agreeing with everyone makes you popular, but causes a lot of damage in the long term. Lying about important stuff makes you popular, but causes damage to company and everyone else.
People go out of their way to rationalize and defend unfair or damaging systems.
So it's far more likely these comments are over-indexing on the "its all luck/unfairness" explanation than the "it's all rational" explanation given there's 100X more people who will have their egos protected by the former positioning.
The percentage of executives at an organization to worker bees is like 100:1
It’s more that the “i work hard and hustle everyday” narrative from successful people is to protect their little egos from the realisation that 90% of their success is pure luck / chance / chaos.
Yes, both parties use motivated reasoning to protect their ego.
But there's 100X more of the worker bees than there is of the uber-successful.
Therefore any discussion like this one will over-index on the luck explanation.
We're obviously not at risk of assigning too much competence to successful people here on HN, a leftist internet forum.
Mediocre and average employees like the idea of reducing inequality, because the mediocre employees stand to financially benefit and the average employees can expect little to no change in compensation while reaping emotional rewards.
For highly paid employees (high impact, high competence, whatever the reason), reducing inequality goes against their direct financial interests. Inequality gets reduced by dragging their compensation down, not increasing everyone else's.
The reality is that in most industries competence and impact has very little to do with compensation. Compensation is the result of political status games, not demonstrable ability.
Speaking as someone who's been a super high performer in some roles, and a terrible performer in others, I definitely want to reduce inequality.
Like, it's entirely unfair that I (because I negotiate well) get better options than others. If you want to pay someone outside of band, give them a different title.
If someone performs unexpectedly well, give them a bonus/promotion etc.
It's deeply sad (but unsurprising) that so many people can only focus on their particular benefit (especially when the vast majority of that benefit is context dependent).
Like, if you hired John Carmack or Fabrice Bellard and just told them to take tickets, they'd probably be an average performer at best. If you told them never to take initiative, they'd perform badly. So lots of performance is dependent on context, there are very few "good" employees in a vacuum.
Then give your money to people who don't negotiate as well. In practice, you don't: your revealed preference speaks louder than your stated preference does.
And the transaction costs on such an approach would be too large, as I'm sure that you know.
M I note that you don't address the notion of context dependent high performance.
No its not. This is a skill that is useful when exchanging value with other entities (the basis of the economy). You're being compensated for having that skill.
Would you hire a salesperson or head of procurement or media buyer with bad negotiation skills? How about a developer who can't properly negotiate with teams demanding their time to properly allocate themselves where needed?
> Speaking as someone who's been a super high performer
This might be true, or it could be your subjective view tainted by the need to protect your ego.
As an EM, a person's current salary is an anchor. If someone is paid at the bottom of the band, but then later the company learns about their high impact, they aren't given a raise, they are told to push harder and get promoted.
And then when they are promoted, they are probably at the bottom of the next band.
if a person threatens to leave, the EM (rarely) can magically wave a wand to increase the salary, but they can promise to put them up for promotion next cycle.
I'd like the boss to do his work and write down the rationalization. Then, when we have an objective measure of the rationalization of the wage, I can work towards getting a higher wage myself.
The biggest opponents of wage transparency (and many other things) are incompetent managers refusing to do their work.
Signed, a high earner.
It's very hard for people to accept that this might even be the case, many people just assume that transparency is better for workers.