Given the exerpt below, answer the following questions. 6. Roberts and Munger bring up a number of non-monetary forms of compensation in
which firms compete for workers: benefits, on-the-job training, etc. What is an
example of a form of compensation that firms provide to workers that is not
mentioned in the podcast? What might happen to this non-monetary compensation
if there is an increase in the minimum wage?
7. Prior to 1978, prices for flights in the U.S. were set by the government through price
floors. Because of this, airlines primarily competed based on quality. Roberts at the
51:59 mark states: “Here’s the irony. That mix of price and quality was not the mix
that the consumer wanted.” In 3 to 5 sentences, describe why economists generally
agree that consumers wanted a different mixture of price and quality.
8. List 3 things that were either unclear about the podcast or readings, or general
questions related to the material that you would like to know more about . Exerpt: People fundamentally misunderstand the minimum wage. It's a floor, but it creates a difference between the market price and the price that people are allowed to transact, so a lot of transactions don't take place. Get paid more if you have a job than you would without the minimum wage. But what if you don't have a job? Creates a reserve army of unemployed. Whole bunch of people looking for this job. Employer looks around and decides who to hire based on other criteria. Standard way to teach about a price floor like this--say the wage for a particular low-skilled person. In the absence of the minimum wage, say you make $5/hour; but it's $7.25 with minimum wage, so there are not many of those jobs. Orson Scott Card: That's good because those are crummy jobs, jobs that people can't make a living on. A bunch of people are hurt, say the economics-trained supporters, but some people are making $7.25, so they are better off. Utilitarian: add up the gains to the people who get to keep the jobs, take away those who lost the $5, and now it's an empirical question: What's the elasticity of the demand for low-skilled labor? How responsive to price? What if it's not very many fewer? What if thousands get a raise and only one person loses a job? Plus social safety net available. Blind application of supply and demand. Barzel, how competition takes place. On a different margin. Price is one way people compete. When wage is artificially high, more people want to work--excess supply. Normally that pushes wages down; but that's illegal; assume no black market, though plenty of that. Created a reserve army of people who would like to work at $7.25. Not just waiting outside. The beneficiary who is employed at $7.25 is in a position to be exploited by his employer and often exploits himself: how hard you work, how many breaks you get, split shift, pay for own uniform, do you get training on the job--mentoring, get better at what you are doing. All of that will be reduced. Plus some of these businesses that were close to failing will fail. It's not just that your employer will take advantage of you, but you realize that if you lose your job it will be a lot harder. Pushes down non-monetary compensation.
50:20	Like hydraulics: if there is this surplus, it gets pushed to some other margin. Regulating airline prices in the 1960s--couldn't lower your price, so they started competing on the kinds of meals they offered, sandwiches, then steaks; lunch was large sirloin steak between two tiny slices of bread, called a sandwich. Also competed by offering more flights for connecting cities, meaning more seats available. Stewardesses more attractive, seats more attractive. But that mix was not the mix the consumer wanted. The guy employed at minimum wage would prefer being treated better at lower wage. Not true for every single worker; some employers will be just as pleasant, won't fire anybody, won't substitute machines for people; but maybe not true now when times are hard-pressed. Ironic: employer who responds to the incentives is an exploiter, barks at workers, no benefits, no health care, no ride to work if living nearby; will fire at the drop of a hat. Then people say that's what happens with greedy employers--yet it's the law. Flip side: you're going to tell me that in the absence of the minimum wage that people making $5 an hour are going to get health care benefits and friendly employers? At the margin, it has to be true. Workers will exploit themselves in the presence of the minimum wage. Two economists talking in their fantasy world about competition. Is that naive? Faith-based economist? If you close off one margin, we do see people to compete on other margins. Munger worked minimum wage job for two summers; wouldn't have been able to find a job had it been higher--a "living" wage of $10-$14/hour. Couldn't have worked way through college. Raising the minimum wage means some people who are economically marginal are able to find a foothold, develop work skills, and maybe move to something else. Some don't, but big increase between $7.25 and $5. Most would understand the effects if it were $50/hour.