Newsgroups: alt.politics.clinton,talk.politics.misc,sci.econ
From: mfriedma@uucp (Michael Friedman)
Subject: Re: Minimum wage: balancing job losses vs pay increases
Organization: Oracle Corporation
Date: Mon, 27 Jul 1992 05:05:47 GMT
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In article <1508@cogsci.ucsd.EDU> king@cogsci.ucsd.EDU (Jonathan King) writes:
>(Wish I could have consolidated this response with the other one; I'll
>try to keep it short.)

>mfriedma@uucp (Michael Friedman) writes:
>>king@cogsci.ucsd.EDU (Jonathan King) writes:
>>>First, I know that you know it's not just entry-level workers who get
>>>canned.  Second, this is how the economy works.

>>Only when you mess it up with things like the minimum wage.  Do you
>>really think that it is good to be firing the most vulnerable people
>>in our economy?

>Do you really think it is good to promote the creation of jobs that
>*keep* people in the most vulnerable situations?

Mind explaining how minimum wage jobs keep people in the most
vulnerable situations?  More than bein unemployed, that is?  I know
you would prefer training programs, but they don't exist.  Personally
I would prefer nice benevolent aliens from Alpha Centauri who would
make us all wealthy, but they don't exist either.  Let's stick with
the real world.

>>>[Shifting costs hurts them if there is no way they can become skilled 
>>>workers, for certain; that's the real problem.  I suggest that government 
>>>policy might better be aimed towards training a highly skilled 
>>>workforce earning real money than towards ensuring a pool of cheap 
>>>labor for low-wage employers.

>>Duhh.  How the heck do you become skilled?  Well, very often you start
>>on the job as an unskilled laborer and acquire skills.

>If I thought that modern day minimum wage jobs helped you acquire useful
>skills, I would agree with you.  But I don't think that they do; have
>you ever seen anybody hired for a real job because of their ice cream
>scooping experience?  Or hired for anything but another no-future job
>for their cash register experience?  The only thing these jobs really
>seem to do is provide some form of bogus "credentialing"; they could
>help give you a continuous work history.  What a skill.

Yo've obviously never worked with minimum wage workers.  Believe me,
that's a damned important skill.  Also the ability to read and the
understand instructions and carry them out.  Also, if you're worth
promoting thenyou don't stick with your minimum wage duties.  You
watch your boss and learn what they do and get promoted to telling a
bunch of people in your old position what to do.  In other words,
after a few months scooping icecream if you demonstrate competence you
fill in for the store manager when he's out sick.  A year later when
he quits you get promoted if you're the best available.

Anyway, see above.  You may want all these nice training programs but
they do not exist.

>>2.  I contend that almost by definition the gain in productivity can
>>not offset the extra cost of labor.  Why?  Well, without a minimum
>>wage your productivity as a function of cost is at a maximum.  As soon
>>as you make people move away from that maximum then, by definition,
>>the production per dollar must go down.

>Oh, please.  So the maximally productive wage is $0.00 per hour, and
>if we can get people to work for less than it takes to keep body and
>soul together, than that's a good thing? 

You misunderstand.

Let's say I make widgets.  To do this I hire widget makers.  Depending
on how much I pay I get more or less productive widget makers.  Here's
a table in widgets per hour per person

Pay      	2.00	2.50	3.00	3.50	4.00	4.50
Productivity	  10	  15	  21	  23	  25	  27

Given these numbers I should hire widget makers at $3.00 per
hour.  My widgets get made for 7 widgets per dollar in labor costs.  This
is the local maximum of widgets per dollar.

Now let's say the minimum wage goes to $4.00.  Well, I fire my $3.00
an hour widget makers and hire $4.00 an hour widget makers.  Now I get
6.25 widgets per dollar.  I have to raise prices and decrease
productions.  Total production of goods and services decreases.  Our
productivity gain has had some effect - the situation would be even
worse if my $4.00 an hour widget makers only make 21 widgets an hour -
but not enough to compensate for the fact that I am not running my
factory at the optimum point on the curve.

>Further, why *can't* the gain in
>productivity offset the extra cost of labor,

Because if it did then the change would get made even without the
increase in minimum wage.  Double all the salaries in my table above
and then increas the minimum wage from $3.00 to $4.00.  If I was
stupid enough to be payin my people only $3.00 an hour then forcing me
to bump the wage to $4.00 would help - productivity gains would offset
the extra cost in labor.  But if I'm at all intelligent I'm already
paying them $6.00 and hour and the increase in minimum wage has no
effect.

As before, try it with numbers.  Show me an example where the gain in
productivity does offset the increase in wages.  Go ahead.

>>>And you keep ignoring the other way out:  the company could decide to
>>>"skill-up" its workforce, and try to make money with higher quality
>>>products; no, I guess that would never work. :-)

>>Sure it would.  But it would work without the minimum wage too.  So we
>>don't need the minimum wage to arrive at this result.

>One certainly doesn't exclude the other

I don't follow.  Certainly the minimum wage doesn't prevent training
your workforce, although it does make it more difficult - after all,
you have to pay them more as raw recruits - but you were citing the
training as a benefit of the minimum wage.  Switching to a claim that
it just doesn't prevent it aborts your argument.

>And has this ever worked anywhere
>without some wage regulations or other government action, or without a
>simultaneous massive poverty for many people?

>Once again: our chief
>economic competitors have minimum wage regulations, and often have
>better quality products, too.  They're eating our lunch, and we're
>just flippin' burgers.

Great.  Now show causation.  We all have minimum wage laws.  The most
obvious hypothesis is that they cancel out.




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