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A social-democratic angle at the illegal immigration issue?

 
 
nimh
 
Reply Tue 1 Aug, 2006 03:06 pm
Michael Dukakis (yes, him) and Daniel J.B. Mitchell (an academic) had an op-ed published in the NYT last week.

My first reaction was: unbelievable but true - a social-democratic perspective on the dilemma of the duelling US immigration bills.

As in: pointing out the elephant in the room when it comes to reviewing how the problem of illegal immigration came to run out of hand in the first place. Hear, hear.

Link:
Raise Wages, Not Walls

Relevant quotes:

Quote:


--------------------------------

Now I was going to post this somewhere, but hadnt decided where yet, so was stalling.. when Thomas brought up the very same op-ed in the Las Vegas homeless thread.

His take was radically different from mine. "Welcome to the dark side of American liberalism", he said, regarding Las Vegas's mayor, and continued:

Thomas wrote:
Have you read the Op-Ed by Dukakis and Mitchell, the one where they advertize the minimum wage as a deliberate policy for pricing Mexicans out of the labor market? You may be surprised that Democrats don't really give a shît about poor people. I'm not. `Progressives' have been doing this kind of stuff since the early 20th century, when their selling point for minimum wages was to keep women from competing for white men's jobs.

I fiercely disagree with this take. My response to Thomas's libertarian-inspired response to Dukakis' article was this:

nimh wrote:
I did actually read that, and I was ready to post excerpts from that article here somewhere. I think they make a great point. Illegal immigrants working for hunger wages don't "take the jobs Americans dont want" - they take the jobs Americans dont want at a hunger wage. To point out that obvious elephant in the room is a good and important thing.

You say that their perspective proves that "Democrats don't really give a shît about poor people". Thats two fallacies in one. First off, Dukakis has suddenly morphed into the "Democrats". I didnt know that he spoke for them. Secondly - a disgust at employers dodging the law and legal labour relations in order to pay people hunger wages doesnt sound like "not giving a **** about poor people" to me. It sounds like opposing the attempts by business to trigger or further a downwards cycle in wages and labour conditions, to squeeze those who already earn the least ever more to max their profits.

The West, too, had immense and painful poverty just seventy, ninety, a hundred years ago. That poverty was eradicated or at least reduced by a decades-long struggle to, one step at a time, put in place decent working wages, decent labour conditions, some employer responsibility for health and disability. Those employers, out of logical business interest, will do what they can to erode that progress - and illegal immigration provides them with the perfect tool. But doing away - or letting employers get away with dodging - those long-fought for defences against structural poverty may benefit individual illegal immigrants in the short term - but in the end victimises everyone. Those immigrants will want their children to benefit from reasonable institutional protections against workplace abuse and exploitation too - so its not necessarily in their interest to let businesses get away with destroying them either.

Basically, I dont buy the alternate narrative (the one you are implying?). That allowing business to hire illegal immigrants at illegal, far-below minimum wages is in actuality a social kind of thing, a redistributive thing - because those illegal immigrants were poorer than the American poor, and the begging wages they work for in the US still make them richer than they were back home. I dont think that allowing business to take away from America's poorest to give to illegal immigrant poor is what it really means to "give a shît about poor people" - that's some sick Robin Hood there. In the old days we would have just called it for what it is - playing the poor off against each other, and the rich smile. Good for Dukakis cs to speak up about it.

Meanwhile, none of that has anything to do with happened in Las Vegas. As you very articulately pointed out in your preceding post, this story is not about whether the state should provide for its people, legal or illegal - its about government actually forbidding individual people to help each other. As you pointed out, that is a wholly different ballgame, and an unambiguously outrageous one.

Now this kind of topic has surfaced, in various guises, in different threads, but always somewhere where it was off-topic.

For example, there is a distinct parallel with the discussion Dagmaraka and I had, a few months back, about the pros and cons of EU expansion. Breaking down some of the social protections of the West-European (former) welfare states will benefit, at least in the short term, workers in the new EU Member States (or outside). But, I argued, it harms all workers in the end. See page 17-19 of Why Austria is right about Blocking Turkey into EU and again, in summary, from here on on page 24-25.

Well - open for discussion. Your take?
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Thomas
 
  1  
Reply Tue 1 Aug, 2006 03:14 pm
Copied and pasted from your other thread ...

nimh wrote:
I dont think that allowing business to take away from America's poorest to give to illegal immigrant poor is what it really means to "give a shît about poor people" - that's some sick Robin Hood there.

My rationale is not of the Robin Hood kind -- I don't believe that jobs are the workers' to take away from. They are contracts like any other, and if an employer cancels his work contract with John and makes a work contract with Lopez, he isn't taking away from John anything John owns. The rationale is the same as when you divorce Lucy to marry Joan. By removing yourself from Lucy's marriage, you are not taking anything away from her that is legally or even morally hers.

I do contend, though, that the effect of the employer's action on the happiness of workers is positive -- the richer American worker loses a job, the poorer Mexican worker gains one. Because the same job means more to the poorer person than to the richer, there is a net gain in utility here.
0 Replies
 
Thomas
 
  1  
Reply Tue 1 Aug, 2006 03:38 pm
Re: A social-democratic angle at the illegal immigration iss
nimh wrote:
The West, too, had immense and painful poverty just seventy, ninety, a hundred years ago. That poverty was eradicated or at least reduced by a decades-long struggle to, one step at a time, put in place decent working wages, decent labour conditions, some employer responsibility for health and disability.

You are getting the timing wrong. The incomes, life expectation, education etc. of workers increased well before the progressive era and its European counterparts. Specifically, they increased substantially in Britain's and America's laissez-faire era, and continued to increase after governments got more involved in regulating wages and the workplace. This suggests that the decisive factor was the continuing industrial revolution and the economic growth it brought. Government involvement after 1910 didn't hurt workers, but that's about the best I can say about it.
0 Replies
 
nimh
 
  1  
Reply Tue 1 Aug, 2006 03:51 pm
Thomas wrote:
My rationale is not of the Robin Hood kind -- I don't believe that jobs are the workers' to take away from. They are contracts like any other, and if an employer cancels his work contract with John and makes a work contract with Lopez, he isn't taking away from John anything John owns.

The individual job isnt John's. But the legal minimum wage and regulated labour standards are his - and every citizen's.

Dukakis is writing about employers dodging the law, hiring illegal workers at below-minimum wages, and ignoring laws and standards regulating labour conditions, benefits etc. By breaking the law - and with the state letting them get away with it by not exercising its right to control - the employers are taking away what is rightfully the American workers' - and what these workers have long fought to obtain. Rights. (Halfway) decent minimum wages.
0 Replies
 
nimh
 
  1  
Reply Tue 1 Aug, 2006 03:55 pm
Re: A social-democratic angle at the illegal immigration iss
Thomas wrote:
Government involvement after 1910 didn't hurt workers, but that's about the best I can say about it.

Before the 1950s, there were no state pensions in Holland. Many old people just went poor - if you were among those who'd always just earned enough to keep living, after retirement you just fell into a hole of poverty or dependence.

In the 1950s, when Labour was in government with the Roman-Catholics, Labour Prime Minister Drees implemented the first, universal state pensions. For decades since, he was lovingly called "Father Drees" for it.

There's a lot more to say about "government involvement after 1910" than that "it didn't hurt".
0 Replies
 
Thomas
 
  1  
Reply Tue 1 Aug, 2006 04:12 pm
nimh wrote:
Thomas wrote:
My rationale is not of the Robin Hood kind -- I don't believe that jobs are the workers' to take away from. They are contracts like any other, and if an employer cancels his work contract with John and makes a work contract with Lopez, he isn't taking away from John anything John owns.

The individual job isnt John's. But the legal minimum wage and regulated labour standards are his - and every citizen's.

I disagree with this on two points. (1) The legal minimum wage is not every citizen's because no citizen has an enforcable right to any wage at all. The state can set a minimum wage -- but nobody has to employ anyone at that wage if they don't want to. Thus, even in minimum-wage countries, the true minimum wage is zero, and it's paid to those who don't have a job. And the higher the legal minimum wage, the more people can't find a job at all, at any legal wage.

(2) The way you see it, people have some kind of property right to earn a minimum wage in a minimum quality job. I see it differently. The way I see it, wage floors deprive both the employer and the employee of their freedom of contract, which is a fundamental right. Every worker has a right to sell his labor to the employer who pays the highest price for it. If you are a Mexican worker and that employer sits in the USA, so be it. The US government deprives you of a fundamental right by locking you out. Conversely, every employer has an equal right to buy his labor from the worker who sells it the cheapest. If you are an American employer and that worker sits in Mexico, so be it. Thus, in my view, the law legislating minimum wages is an example of the "tyranny of the majority". Not the worst one I could imagine, but still bad. It's a popular deprivation of fundamental rights, but the fact that it's popular doesn't make it right.

nimh wrote:
Before the 1950s, there were no state pensions in Holland. Many old people just went poor - if you were among those who'd always just earned enough to keep living, after retirement you just fell into a hole of poverty or dependence.

In the 1950s, when Labour was in government with the Roman-Catholics, Labour Prime Minister Drees implemented the first, universal state pensions. For decades since, he was lovingly called "Father Drees" for it.

There's a lot more to say about "government involvement after 1910" than that "it didn't hurt".

I am not surprised that politicians are taking credit for diminishing poverty that coincided with programs they initiated. Neither am I surprised that a large share of voters buys that. This is especially true of the first generation of retirees, who probably got a free lunch from the introduction of state pensions.

But how hard have you tried to distinguish the effect of government programs from raw economic growth? For example, if you take the economic growth Holland experienced since 1950 and leave the income distribution of 1950 unchanged -- how much higher would the poverty rate be than it currently is?
0 Replies
 
joefromchicago
 
  1  
Reply Wed 2 Aug, 2006 08:25 am
Thomas wrote:
The way you see it, people have some kind of property right to earn a minimum wage in a minimum quality job. I see it differently. The way I see it, wage floors deprive both the employer and the employee of their freedom of contract, which is a fundamental right.

It may or may not be a fundamental right, but it is clear that the government interferes with the freedom of contract all the time. Whether that's a good thing or a bad thing can be debated, but it is beyond question that, in practice, the "freedom" to contract is highly constrained.

In the case of minimum wage laws, the libertarian argument has always been that such laws make no economic sense, and it must be conceded that, on this particular point, the libertarians are probably right. The problem, however, is that minimum wage laws are, in large part, not economic measures -- they're sociopolitical measures designed to insure that there is no permanent economic underclass in the country (both by raising the wages of those covered by the law and by raising wages in general) and that the costs of social welfare programs are borne, in part, by employers rather than entirely by the state. One can argue, of course, that minimum wage laws don't even achieve these aims, but in dismissing those laws solely because they don't make economic sense, one criticizes them for something they're not designed to do.
0 Replies
 
Thomas
 
  1  
Reply Wed 2 Aug, 2006 09:07 am
joefromchicago wrote:
In the case of minimum wage laws, the libertarian argument has always been that such laws make no economic sense,

No, not always. Ever since the idea of minimum wages came up, there have been classical liberals who have attacked it as an infringement of a fundamental right, too. See, for example, the Lochner-era Supreme Court cases on the matter. (I am citing these cases as examples of libertarian reasoning, not for their legal correctness.)

joefromchicago wrote:
The problem, however, is that minimum wage laws are, in large part, not economic measures -- they're sociopolitical measures designed to insure that there is no permanent economic underclass in the country

I agree that a Rawlesian liberal, or an adherent to Catholic social teaching, or even a Utilitarian, can argue, consistent with standard microeconomics, that a minimum wage can be an improvement in terms of what they are trying to optimize. That means that in attacking the minimum wage, we libertarians can't behind technical economic arguments alone. We have to defend our choice of optizing welfare measured in dollars (as Posner does for example) or defend that we are pushing freedom of contract farther than competing ideologies do.
0 Replies
 
Thomas
 
  1  
Reply Wed 2 Aug, 2006 09:17 am
Returning to the subject of nimh's thread, my problem with efforts to curb immigration -- through border protection or minimum wages -- is this: Even if I take these policies at face value, they prevent the rise of a permanent underclass inside the country at the cost of sustaining a permanent underclass outside the country. I object to this (a) because I'm a libertarian, and stifling immigration is bad for liberty, and (b) because I'm a utilitarian, and stifling immigration hurts people who are poor by international standards in order to help American workers, who are middle-class internationally. (Just in case it needs saying, my problem is with hurting the poor, not with helping the middle class.)
0 Replies
 
Thomas
 
  1  
Reply Mon 7 Aug, 2006 02:40 am
joefromchicago wrote:
The problem, however, is that minimum wage laws are, in large part, not economic measures -- they're sociopolitical measures designed to insure that there is no permanent economic underclass in the country (both by raising the wages of those covered by the law and by raising wages in general) and that the costs of social welfare programs are borne, in part, by employers rather than entirely by the state. One can argue, of course, that minimum wage laws don't even achieve these aims, but in dismissing those laws solely because they don't make economic sense, one criticizes them for something they're not designed to do.

On reflection, I disagree even with your distinction between economic and socio-political effects implications of the minimum wage.

To a first approximation, economists believe that raising the minimum wage has two effects. (1) Some workers get a raise, which their employers pay. (2) Employers find that some jobs are no longer worth doing at the increased minimum wage. They lay off all workers who worked in those jobs, leaving these workers unemployed. The reason most economists don't like the minimum wage is effect #2. (Depending on the economist, they consider effect #1 either a gain or a wash. Accordingly, their opinion of this effect is either indifferent or favorable.) They consider effect #2 a loss for two reasons: (a) workers lose jobs even though employers would pay them a mutually agreeable price to do them. Conversely, (b) employers can't get jobs done even though they could find workers to do them at mutually agreeable terms.

Now what is the socio-political consequence of effect #2? It is to stimulate the rise of an underclass, not to inhibit it. While the proverbial "working poor" do exist, most people who work aren't poor, and most poor people are unemployed. Hence, effect #2 tends to worsen poverty, not to alleviate it. With that in mind, I now contend that the choice you present between economic efficiency and the prevention of an underclass is mostly a false one.
0 Replies
 
BernardR
 
  1  
Reply Mon 7 Aug, 2006 03:19 am
MINIMUM WAGE LAWS COST JOBS

Minimum Wages
by Linda Gorman

Minimum wage laws set legal minimums for the hourly wages paid to certain groups of workers. Invented in Australia and New Zealand with the admirable purpose of guaranteeing a minimum standard of living for unskilled workers, they have been widely acclaimed as both the bulwark protecting workers from exploitation by employers and as a major weapon in the war on poverty. Minimum wage legislation in the United States has increased the federal minimum wage from $.25 per hour in 1938 to $5.15 in 2001, and expanded its coverage from 43.4 percent of all private, nonsupervisory, nonagricultural workers in 1938 to over 87 percent by 1990. As the steady legislative expansion indicates, the minimum wage has had widespread political support enjoyed by few other public policies.

Unfortunately, neither laudable intentions nor widespread support can alter one simple fact: although minimum wage laws can set wages, they cannot guarantee jobs. In reality, minimum wage laws place additional obstacles in the path of the most unskilled workers who are struggling to reach the lowest rungs of the economic ladder. According to a 1978 article in American Economic Review, the American Economic Association's main journal, fully 90 percent of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers. It also reduces the on-the-job training offered by employers and shrinks the number of positions offering fringe benefits. To those who lose their jobs, their training opportunities, or their fringe benefits as a result of the minimum wage, the law is simply one more example of good intentions producing hellish results.

To understand why minimum wage policies have such pernicious effects, one must understand how wages are determined in the free market. Consider, for example, the owner-operator of a small diner. To stay in business, he has to make sufficient profits to provide adequate support for his family. The market dictates how much he can charge for his meals because people can choose to eat at other restaurants or prepare their meals at home. The market also dictates what he must pay for food, restaurant space, electricity, equipment, and other factors required to produce his meals. Although the restaurant owner has little control over either the prices he can charge for his meals or the prices that he must pay for the inputs needed to produce them, he can control his costs by changing the combinations of inputs that he uses. He can, for example, hire teenagers to wash and slice raw potatoes for french fries, or he can purchase ready-cut potatoes from a large company with an automated french-fry production process.

The combination of inputs used and the amount that the diner owner can afford to pay for each one depend both on the productivity of the input and on the price that customers will pay for the product. Suppose that a trainee french-fry cutter can peel, cut, and prepare ten orders of fries in an hour, and that the diner's customers order about ten orders of french fries an hour at $1.00 each. If the minimum profit required to keep the owner in business plus all costs except the cutter's labor amounts to $.80 for each order, then the owner can afford a wage of up to $2.00 per hour for one trainee. Legislating a minimum wage of $4.50 per hour means that the diner owner loses $2.50 an hour on the trainee. The owner will respond by firing the trainee. The minimum wage prices the trainee out of the labor market. Similarly, other employers will respond to the increased minimum wage by substituting skilled labor (which does not cost as much more than unskilled labor as it did before the minimum wage) for unskilled labor, by substituting machines for people, by moving production abroad, and by abandoning some types of production entirely
0 Replies
 
Anonymous Net Surfer
 
  1  
Reply Mon 7 Aug, 2006 04:50 am
One can argue, of course, that minimum wage laws don't even achieve these aims, but in dismissing those laws solely because they don't make economic sense, one criticizes them for something they're not designed to do.
-joefromchicago


What is throwing me is the term "economic sense." What do you mean by that? In many ways, minimum wage laws can make perfect economic sense. For instance, as Thomas noted, one of the effects of price controls is the benefit afforded to particular group. In his hypothetical scenario, those who have kept their jobs are now benefiting from the artificially increased wages. So, I'd imagine that they'd argue that minimum wage laws are perfectly sound, both in theory and in practice.

However, those who, because of the minimum wage, lose their jobs or who are hired for fewer hours might disagree. Of course, there are those who prior to the wage increase abstained from entering the job market; they too should be considered. Some of whom will now likely be enticed into entering the job market by the higher wages. This further increases the unemployment rate. Remember, unemployment is defined by those who are jobless but actively seeking employment (competing for jobs), not simply those who are unemployed. So those who were uninterested in working at a rate of say $5.50/hour might change their attitude and decide to enter into the job market at rate of $7/hour; and since the number of unemployed active job seekers has increased, so too has the rate of unemployment.

People aren't criticizing these laws for something they were or weren't designed to do; that is really insignificant. People are criticizing these laws for what they are actually doing. In this case, minimum wage laws are creating higher levels of unemployment than would have otherwise been without artificial price controls. The goal(s) of enacting minimum wage laws may or may not be the result of a noble endeavor, but it is the result(s) of this law that should be considered.
0 Replies
 
nimh
 
  1  
Reply Mon 7 Aug, 2006 07:29 am
Anonymous_Net_Surfer wrote:
minimum wage laws are creating higher levels of unemployment

That was the warning that resounded loudly from conservative opponents of the minimum wage in the UK, when the Blair government readied itself to first introduce a national minimum wage there.

However, the predicted shock rise in unemployment never materialised. The government introduced a national minimum wage in April 1999. There was no subsequent rise in unemployment - none. Not even the slightest tremor.

In fact, the unemployment rate kept steadily falling in exactly the rate it had been - well, ever so slightly faster, actually:

Apr-Jun 1998 6.3
May-Jul 1998 6.3
Jun-Aug 1998 6.3
Jul-Sep 1998 6.2
Aug-Oct 1998 6.2
Sep-Nov 1998 6.2
Oct-Dec 1998 6.1
Nov-Jan 1999 6.2
Dec-Feb 1999 6.2
Jan-Mar 1999 6.2
Feb-Apr 1999 6.1
Mar-May 1999 6.1
Apr-Jun 1999 6.0
May-Jul 1999 6.0
Jun-Aug 1999 5.9
Jul-Sep 1999 5.9
Aug-Oct 1999 5.8
Sep-Nov 1999 5.8
Oct-Dec 1999 5.8
Nov-Jan 2000 5.9
Dec-Feb 2000 5.8
Jan-Mar 2000 5.8
Feb-Apr 2000 5.7
Mar-May 2000 5.6

Source: UK Office of National Statistics
0 Replies
 
Thomas
 
  1  
Reply Mon 7 Aug, 2006 07:58 am
nimh wrote:
In fact, the unemployment rate kept steadily falling in exactly the rate it had been - well, ever so slightly faster, actually:

It's not that easy, for at least two reasons. (1) Since only a small fraction of the workforce earned something between the old market wage and the new minimum wage, it is misleading to look at the unemployment rate of the entire workforce. Whatever you observe there is dominated by those who don't earn the minimum wage. (2) The legal minimum wage is only one of many factors affecting the unemployment rate. To retrieve a statistically meaningful correlation between the minimum wage and unemployment, then, you have to control for those other factors -- which you didn't.
0 Replies
 
joefromchicago
 
  1  
Reply Mon 7 Aug, 2006 09:08 am
Thomas wrote:
On reflection, I disagree even with your distinction between economic and socio-political effects implications of the minimum wage.

Well, I am not necessarily making the argument that the minimum wage accomplishes even its sociopolitical goals. The comments I make here, then, should be understood with this in mind.

Thomas wrote:
To a first approximation, economists believe that raising the minimum wage has two effects. (1) Some workers get a raise, which their employers pay. (2) Employers find that some jobs are no longer worth doing at the increased minimum wage. They lay off all workers who worked in those jobs, leaving these workers unemployed. The reason most economists don't like the minimum wage is effect #2. (Depending on the economist, they consider effect #1 either a gain or a wash. Accordingly, their opinion of this effect is either indifferent or favorable.) They consider effect #2 a loss for two reasons: (a) workers lose jobs even though employers would pay them a mutually agreeable price to do them. Conversely, (b) employers can't get jobs done even though they could find workers to do them at mutually agreeable terms.

Jobs at the lower end of the wage scale frequently disappear, regardless of the amount of the wage being offered or demanded. Although it is a general rule that machines replace human labor only when machines are less costly than human labor, there are intangible costs that make machines more attractive to employers even when human labor is cheap.

As an example, consider picking cotton. This job, prior to 1865, had the lowest wage possible -- $0 per hour. Even after the thirteenth amendment altered the prevailing economic paradigm, cotton picking remained a remarkably low paid job, and it continued that way into the 20th century. Nevertheless, cotton growers changed over to mechanical harvesters in preference to human labor. Introducing the minimum wage for cotton pickers might have accelerated the transition to machines, but the failure to introduce minimum wages for cotton pickers certainly did not prevent that transition. And the same is true in many other types of agricultural work, where the presence of an almost inexhaustible supply of cheap labor has not forestalled the introduction of machines and the elimination of jobs.

There are two points here: (1) the cost of wages is only one consideration for employers, and sometimes not the most important consideration, when determining whether to keep or eliminate jobs; and (2) if a job is worth doing, an employer will figure out a way to get it done. Whether that means that a human will do the job is another question entirely.

Thomas wrote:
Now what is the socio-political consequence of effect #2? It is to stimulate the rise of an underclass, not to inhibit it. While the proverbial "working poor" do exist, most people who work aren't poor, and most poor people are unemployed. Hence, effect #2 tends to worsen poverty, not to alleviate it. With that in mind, I now contend that the choice you present between economic efficiency and the prevention of an underclass is mostly a false one.

Effect #2 doesn't increase poverty if the people who are jobless because of Effect #2 would be only marginally better off if they had jobs at a sub-minimum wage. If Worker descends into poverty because employers have eliminated jobs rather than pay a minimum wage, how much better off is he if he descends into poverty while fully employed at a job that pays a sub-minimum wage? You may see a difference between the man who sinks in a rowboat and the man who sinks in a yacht, but, in the end, they both drown.

Now, of course, the social democrat (to get back to the general theme of this thread) would argue that the social safety net should rescue the indigent Worker, regardless of whether he has a job or not. And there may be little practical difference between the state providing the unemployed Worker with 100% of his economic needs or providing the poorly paid Worker with 50% of his economic needs. In both cases the state is stepping in to provide a sociopolitical response to a perceived failing of marketplace mechanics, just as the minimum wage is a sociopolitical response to those failings.

It should also be remembered that, for the state, it may be preferable for a citizen to be on the dole than to be employed in a job that doesn't pay well. That's because state aid programs to the poor are not just the means of distributing social welfare, but they are also instruments of exercising social control. From the state's point of view, a jobless but complacent underclass, feeding off the state's largesse, is better than an poorly paid and discontented underclass. Of course, libertarians would protest most vehemently against this aspect of the question, and I am not saying that their protests are without merit, but that particular aspect of the question must also be considered in the minimum wage debate.
0 Replies
 
joefromchicago
 
  1  
Reply Mon 7 Aug, 2006 09:21 am
Anonymous_Net_Surfer wrote:
What is throwing me is the term "economic sense." What do you mean by that?

From reading the rest of your post, it is evident that what I meant by "economic sense" is what you mean by "economic sense." There is, therefore, no need to explain myself any further.

Anonymous_Net_Surfer wrote:
In many ways, minimum wage laws can make perfect economic sense. For instance, as Thomas noted, one of the effects of price controls is the benefit afforded to particular group. In his hypothetical scenario, those who have kept their jobs are now benefiting from the artificially increased wages. So, I'd imagine that they'd argue that minimum wage laws are perfectly sound, both in theory and in practice.

However, those who, because of the minimum wage, lose their jobs or who are hired for fewer hours might disagree.

A minimum wage law, unaccompanied by any kind of social welfare plan that would assist the person who is unemployable because of the effects of the minimum wage law, would be difficult to defend. On the other hand, a system that ignored the needs of those who are only employable at starvation wages would be, I think, equally difficult to defend. Now, if there are lots of people out there who are complaining because they can't be both destitute and employed, then I might reconsider my position.

Anonymous_Net_Surfer wrote:
Of course, there are those who prior to the wage increase abstained from entering the job market; they too should be considered. Some of whom will now likely be enticed into entering the job market by the higher wages. This further increases the unemployment rate. Remember, unemployment is defined by those who are jobless but actively seeking employment (competing for jobs), not simply those who are unemployed. So those who were uninterested in working at a rate of say $5.50/hour might change their attitude and decide to enter into the job market at rate of $7/hour; and since the number of unemployed active job seekers has increased, so too has the rate of unemployment.

People aren't criticizing these laws for something they were or weren't designed to do; that is really insignificant. People are criticizing these laws for what they are actually doing. In this case, minimum wage laws are creating higher levels of unemployment than would have otherwise been without artificial price controls. The goal(s) of enacting minimum wage laws may or may not be the result of a noble endeavor, but it is the result(s) of this law that should be considered.

As I noted to Thomas, those who criticize minimum wage laws simply because they don't make economic sense are missing half the picture.

By the way, welcome to A2K, A_N_S.
0 Replies
 
Thomas
 
  1  
Reply Mon 7 Aug, 2006 12:20 pm
joefromchicago wrote:
Jobs at the lower end of the wage scale frequently disappear, regardless of the amount of the wage being offered or demanded.

Not just the lower end of the wage scale. The coachmen and hoofsmiths of 100 years ago were reasonably well-paid by the standards of their time. Almost all of their jobs are now gone. The same is true of farmers, transcontinental railroaders, and the employees of the thriving ice-cube industry that got crushed by the refrigerator. Technical progress eliminates and creates jobs in all percentiles of the income distribution.

joefromchicago wrote:
Although it is a general rule that machines replace human labor only when machines are less costly than human labor, there are intangible costs that make machines more attractive to employers even when human labor is cheap.

I agree there are intangible costs (and benefits) of hiring a worker. But however intangible, they will be reflected in the wage at which employers are willing to hire. Hence, an economist's supply-and-demand analysis would be the same whether the costs are tangible or not.

joefromchicago wrote:
Effect #2 doesn't increase poverty if the people who are jobless because of Effect #2 would be only marginally better off if they had jobs at a sub-minimum wage. If Worker descends into poverty because employers have eliminated jobs rather than pay a minimum wage, how much better off is he if he descends into poverty while fully employed at a job that pays a sub-minimum wage?

It could be anywhere between zero and the market wage -- and because the worker is jobless by his employer's choice, not his own choice, there is no way to know with any greater precision.

joefromchicago wrote:
From the state's point of view, a jobless but complacent underclass, feeding off the state's largesse, is better than an poorly paid and discontented underclass.

I like this idea. I'm not sure if nimh will.
0 Replies
 
Anonymous Net Surfer
 
  1  
Reply Mon 7 Aug, 2006 02:46 pm
"On the other hand, a system that ignored the needs of those who are only employable at starvation wages would be, I think, equally difficult to defend."
joefromchicago

What you term "starvation wages" is really an agreed upon wage that is freely entered into by both parties. By the way, if minimum wage laws are the remedy for starvation, perhaps instituting them if some of the African countries that actually have a starvation problem might alleviate a few of their societal woes. However, I doubt that government implemented price controls will do much, but you may be right- who knows. Also, it is interesting to note that in this country (U.S.) the poor are not starving; in fact, the poor here seem to have obesity problem.

Now, I understand that on the surface it may appear to be heartless to standby and watch your neighbor work his or her hands to the bone just afford the minimum comforts of life, but it's not at all clear that government interference (via min wage or social programs) do anything to curb that scene; in fact, they may cause more unintended problems.

You seem to agree that minimum wage laws do increase unemployment or, at least, lessen employment opportunities (i.e. hours of work offered), but maintain that some social programs should be included to assist those who are injured by the government initiated price control. In effect, you are asking that tax payers bear the cost of the price control. So, now we have: 1.) Workers earning wages above market rate 2.) More people unemployed and/or people working fewer hours 3.) Tax payers footing the financial cost of supporting those injured by the price control on wages. Overall, that hardly seems like a net gain.

Price controls are usually helpful to a few, but always harmful to many. Of course, just how harmful is not always readily seen or obvious. But it is clear that price controls (min wage) do financial harm to some, and that is precisely why Dukakis is asking that they be implemented.

"Illegal immigrants working for hunger wages don't "take the jobs Americans dont want" - they take the jobs Americans dont want at a hunger wage. To point out that obvious elephant in the room is a good and important thing.
-joefromchicago

These people aren't "taking" anything from "Americans," they are out competing them in the free job market. If Americans don't want to work for "starvation wages" one must wonder how they are meeting their daily caloric needs without any income. Where's the starvation epidemic among Americans? Also, one should ask: how do these "illegals," if they are subsisting on "starvation wages," manage to ingest enough calories to maintain the physical fitness to out compete Americans in the free job market?

One would think they'd be dropping left and right if they are unable to take in enough calories needed to sustain long hours of physical effort. But the thing is, they aren't dropping left and right; they are out performing their American competitors and Americans don't like it. So rather than pick up their game, they ask that the government subsidize their relative laziness.

There aren't any "starvation wages," if people were starving as a result of wages there would be no one around to collect a paycheck made from starvation wages; that's just political capital designed to buy sympathy from the voting public. To call attention to those elephants is also good.

By the way, welcome to A2K, A_N_S.
-joefromchicago

Thank you for the welcome, and thanks for readin' and responding.
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joefromchicago
 
  1  
Reply Mon 7 Aug, 2006 03:16 pm
Thomas wrote:
Not just the lower end of the wage scale. The coachmen and hoofsmiths of 100 years ago were reasonably well-paid by the standards of their time. Almost all of their jobs are now gone. The same is true of farmers, transcontinental railroaders, and the employees of the thriving ice-cube industry that got crushed by the refrigerator. Technical progress eliminates and creates jobs in all percentiles of the income distribution.

Agreed, although I'd guess that the jobs on the lower ends of the wage scale are more frequently replaced by machines.

Thomas wrote:
I agree there are intangible costs (and benefits) of hiring a worker. But however intangible, they will be reflected in the wage at which employers are willing to hire. Hence, an economist's supply-and-demand analysis would be the same whether the costs are tangible or not.

Let's say that Employer has a job that Worker is willing to perform for $3.00 an hour, while a machine would do the job for $5.00 an hour. Employer, taking some intangible (or, to put it more precisely, non-monetary) factors into consideration, decides to use the machine instead of hiring Worker. An economist would say either: (1) that the real cost of hiring Worker is more than $5.00/hour, or (2) that the real cost of the machine is less than $3.00/hour. Of course, the only reason that the economist would say that is because, without resorting to the fiction of the "real" cost, Employer's decision would be inexplicable. That's why most people find economists baffling.

Thomas wrote:
It could be anywhere between zero and the market wage -- and because the worker is jobless by his employer's choice, not his own choice, there is no way to know with any greater precision.

I think you miss my point. You can't blame minimum wage laws for causing poverty if the people are deprived of jobs that pay a poverty wage. Minimum wage laws only increase poverty if they eliminate jobs that would have provided a wage equal to or greater than the level needed to stay above the poverty line.
0 Replies
 
joefromchicago
 
  1  
Reply Mon 7 Aug, 2006 03:51 pm
Anonymous_Net_Surfer wrote:
What you term "starvation wages" is really an agreed upon wage that is freely entered into by both parties.

Depends on what you mean by "freely."

Anonymous_Net_Surfer wrote:
By the way, if minimum wage laws are the remedy for starvation, perhaps instituting them if some of the African countries that actually have a starvation problem might alleviate a few of their societal woes. However, I doubt that government implemented price controls will do much, but you may be right- who knows. Also, it is interesting to note that in this country (U.S.) the poor are not starving; in fact, the poor here seem to have obesity problem.

I never suggested that minimum wage laws are the remedy for starvation.

Anonymous_Net_Surfer wrote:
Now, I understand that on the surface it may appear to be heartless to standby and watch your neighbor work his or her hands to the bone just afford the minimum comforts of life, but it's not at all clear that government interference (via min wage or social programs) do anything to curb that scene; in fact, they may cause more unintended problems.

I never said otherwise.

Anonymous_Net_Surfer wrote:
You seem to agree that minimum wage laws do increase unemployment or, at least, lessen employment opportunities (i.e. hours of work offered), but maintain that some social programs should be included to assist those who are injured by the government initiated price control. In effect, you are asking that tax payers bear the cost of the price control. So, now we have: 1.) Workers earning wages above market rate 2.) More people unemployed and/or people working fewer hours 3.) Tax payers footing the financial cost of supporting those injured by the price control on wages. Overall, that hardly seems like a net gain.

Taxpayers would be footing the bill whether workers are living in poverty and earning nothing or living in poverty and working. Unless, of course, we eliminated all social welfare programs to aid those living in poverty, in which case the taxpayers would pay the cost of the inevitable social unrest that would result.

Anonymous_Net_Surfer wrote:
Price controls are usually helpful to a few, but always harmful to many. Of course, just how harmful is not always readily seen or obvious. But it is clear that price controls (min wage) do financial harm to some, and that is precisely why Dukakis is asking that they be implemented.

"Illegal immigrants working for hunger wages don't "take the jobs Americans dont want" - they take the jobs Americans dont want at a hunger wage. To point out that obvious elephant in the room is a good and important thing.

On that point, I think Dukakis is absolutely correct.

Anonymous_Net_Surfer wrote:
These people aren't "taking" anything from "Americans," they are out competing them in the free job market. If Americans don't want to work for "starvation wages" one must wonder how they are meeting their daily caloric needs without any income. Where's the starvation epidemic among Americans? Also, one should ask: how do these "illegals," if they are subsisting on "starvation wages," manage to ingest enough calories to maintain the physical fitness to out compete Americans in the free job market?

The lowest wage that an employer will pay is the amount needed to keep a worker alive and that will cover the costs of finding his replacement once he dies from overwork and malnutrition. Thus, for example, if it costs $100 to replace a worker, and a worker's labor produces $100 of value for his employer per month, and it costs $50 a month to keep the worker alive, then the employer will attempt to keep the worker alive for at least two months and pay him somewhat less than $50 in order to make a profit from his labor. That's a starvation wage. Any higher wage than that would be the result of the effect of competition for the worker's labor on the open market and on the employer's own inexplicable generosity.

For a variety of reasons, most employers of illegal aliens pay more than a starvation wage. For one thing, illegals are usually free to go elsewhere, including staying in their countries of origin. The wage that the employer pays, therefore, must be better than the wage offered by the other employers of illegal aliens and by the employers in Mexico, China, Poland, or wherever. That's usually better than a starvation wage, but much less than what would be required to maintain the worker above the poverty line.
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