UC San Diego - New Study Finds Minimum Wage Reduces Employment

[Canard DuJour]

The argument is not that they literally make his calculation every 5 minutes.

Yeah, that would be a strawman.

The argument is that this is the calculation that they will directionally move toward optimizing it over time. You agree they try to optimize profits over time? Do you also agree that they would shed workers they don't consider profitable? Do you also agree that the exact same worker doing the exact same job suddenly becoming more expensive makes them more likely to be considered not profitable?

How could it not?

Of course they try to optimise profits. But not by making absurd and impossible calculations per worker. They might shed fitters or drivers, but not the fitter or driver with the lowest marginal contribution, and not without shedding production.

Of course not. Do you actually believe that across the entire economy wages have no effect on demand for goods and services?

We're not talking about raising the entire economy's wages. About 2% of people make minimum wage.

Fine then we're not talking about the price of labour "accross the whole economy," which is what you asked about for some strange reason.

We're also not conjuring up this money from nowhere. The money comes out of someone else's pocket. As it turns out it comes out of the pocket of people most likely to hire minimum wage workers or the sort of customers most likely to frequent minimum wage paying establishments. If you wanted to target a group of people for whom having less money would decrease the demand for minimum wage labor this would probably be the group you'd go after.

On the contrary, it might equally put money in the pockets of those who frequent said establishments : either the workers themselves or the taxpayers and families who increasingly support them. And demand for labour is first contingent on demand for its product.

Do you also believe that if we set a minimum price for broccoli of $1000 per bunch it would have no effect on the demand for broccoli?

Of course not. We'd stop buying broccoli. Not the marginal florets on heads of broccoli.

It's good to know the law of demand operates for broccoli. Now all we need is a coherent explanation why it magically gets suspended for low skilled labor.

Who says it is? It just doesn't involve absurd and impossible calculations about individual workers or florets. Wages and labour differ in that broccoli isn't ultimately the consumer of broccoli.

 

[Nice Squirrel]

You didn't answer my question.

I am not required to answer your question.

 

[coloradoatheist]

You didn't answer my question.

I am not required to answer your question.

You are right, but people who say that raising the minimum wage has no impact on employment levels needs to then provide why raising the minimum wage to a million dollars has impact.

 

[Nice Squirrel]

I am not required to answer your question.

You are right, but people who say that raising the minimum wage has no impact on employment levels needs to then provide why raising the minimum wage to a million dollars has impact.

First people have to explain why having a pebble fall on their head has the same impact as a the Chicxulub asteroid falling on their head.

 

[coloradoatheist]

You are right, but people who say that raising the minimum wage has no impact on employment levels needs to then provide why raising the minimum wage to a million dollars has impact.

First people have to explain why having a pebble fall on their head has the same impact as a the Chicxulub asteroid falling on their head.

The impact is the same, it's the matter of degree of how much it hurts that differs. The same way with a min wage hike, the impact of a smaller hike in the minimum wage has less affect on employment levels. You keep avoiding answering the question.

 

[Canard DuJour]

I am not required to answer your question.

You are right, but people who say that raising the minimum wage has no impact on employment levels needs to then provide why raising the minimum wage to a million dollars has impact.

No they don't. It's a human rights issue. The question is demeaning to the reader, the respondent and - above all - the inquirer.

 

[Nice Squirrel]

First people have to explain why having a pebble fall on their head has the same impact as a the Chicxulub asteroid falling on their head.

The impact is the same, it's the matter of degree of how much it hurts that differs. The same way with a min wage hike, the impact of a smaller hike in the minimum wage has less affect on employment levels. You keep avoiding answering the question.

So the impact of a Z-Scale freight train model will have the same impact as a real freight train on the body if it were to run into you?

 

[coloradoatheist]

The impact is the same, it's the matter of degree of how much it hurts that differs. The same way with a min wage hike, the impact of a smaller hike in the minimum wage has less affect on employment levels. You keep avoiding answering the question.

So the impact of a Z-Scale freight train model will have the same impact as a real freight train on the body if it were to run into you?

But we aren't saying that that a dollar raise in minimum wage will have the same impact as raising minimum wage to a million dollars. And from your example, the same thing applies. The pain of the impact from the two bodies colliding depends on the size and the speed of the freight trains.

 

[Nice Squirrel]

So the impact of a Z-Scale freight train model will have the same impact as a real freight train on the body if it were to run into you?

But we aren't saying that that a dollar raise in minimum wage will have the same impact as raising minimum wage to a million dollars. And from your example, the same thing applies. The pain of the impact from the two bodies colliding depends on the size and the speed of the freight trains.

And you got my point. Thanks for playing.

 

[coloradoatheist]

You are right, but people who say that raising the minimum wage has no impact on employment levels needs to then provide why raising the minimum wage to a million dollars has impact.

No they don't. It's a human rights issue. The question is demeaning to the reader, the respondent and - above all - the inquirer.

huh? Talking about raising the minimum wage and its impacts on everyone is not an important question?

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But we aren't saying that that a dollar raise in minimum wage will have the same impact as raising minimum wage to a million dollars. And from your example, the same thing applies. The pain of the impact from the two bodies colliding depends on the size and the speed of the freight trains.

And you got my point. Thanks for playing.

So just to make sure. Your answer to my question is 1 and that the impact of minimum wage and employment levels is a line where the high the increase, the more jobs lost?

 

[Jarhyn]

Now let's suppose that I'm your competitor, who has always taken that hit, and paid my workers more. Because I'm not an unethical piece of shit, I gain massively when your business takes a hit because the overall need for widgets is fixed, and all that business comes back. I might increase the price of my widgets a few cents but because my company is technically worker-owned, they just hire me as a CEO to make executive decisions, there are no investors to make panicky. I can ignore Las WallStreet. Everyone in my factory stays employed, and we take a loan to scale operations by whatever margin your hit was. Which means hiring all your workers.

If you could do that, why didn't you hire them before?

And the overall need for widgets is usually NOT fixed. It depends on price. If you raise the price of a widget, some customers will decide that they can do without.

The need for widgets doesn't hinge on price, it hinges on availability. I suppose for some meta-types of widgets there's plasticity in the form of widget (like food; if carrots lose, then something picks up the slack because a guy's gotta eat). Similarly, if ford loses out on car sales, Honda picks them up because a guy's gotta get to work.

The reason I haven't stolen all your business and workers befor now is a simple one: slaveowners CAN make things more cheaply, because they subsidize the costs of production with the misery of their workers. So if the law bans slavery, slave holders suffer and non-slaver businesses pick up the slack. The thing is, yes, your business will suffer and even flounder. But Because they only pay me 80k a year to structure their business, they already far exceed the legal requirement. And if the minimum wage goes up, they only stand to gain more.

 

[Jayjay]

If you could do that, why didn't you hire them before?

And the overall need for widgets is usually NOT fixed. It depends on price. If you raise the price of a widget, some customers will decide that they can do without.

The need for widgets doesn't hinge on price, it hinges on availability. I suppose for some meta-types of widgets there's plasticity in the form of widget (like food; if carrots lose, then something picks up the slack because a guy's gotta eat). Similarly, if ford loses out on car sales, Honda picks them up because a guy's gotta get to work.

If cars cost more, people are more likely to hold on to their old cars longer or use public transportion, and sales decrease across the board.

Similarly, while people have to eat something to satisfy basic metabolic requirements, there is no fixed level how much (otherwise there would be no obesity) or how expensive said food is. If food prices go up you might opt to cook yourself more often instead of eating out. There are always alternatives.

The reason I haven't stolen all your business and workers befor now is a simple one: slaveowners CAN make things more cheaply, because they subsidize the costs of production with the misery of their workers. So if the law bans slavery, slave holders suffer and non-slaver businesses pick up the slack. The thing is, yes, your business will suffer and even flounder. But Because they only pay me 80k a year to structure their business, they already far exceed the legal requirement. And if the minimum wage goes up, they only stand to gain more.

the niche that the non-slaver company occupied before was to sell more expensive goods, demand for which is less than for the cheaper salve-made goods. When slavery is banned, prices go up for everyone, and while some customers will pay the higher price, some will not. The total demand decreases. If everyone was willing to pay the higher price to begin with, the slave-based producers would have set that price level already and just pocketed the difference as higher profits... but in that case, there is no reason why your company could not have expanded by hiring more people.

 

[Kharakov]

The need for widgets doesn't hinge on price, it hinges on availability.

I don't understand why you didn't just say "The need for hinges doesn't hinge on price, it hinges on the need for unimpingement devices which hinge upon the use of hinges."

 

[ksen]

lol

 

[Loren Pechtel]

That doesn't make your explanation right. Lets say I make widgets for $9 each, sell them for $10. Labor is half my cost. Labor goes up 10%. Now it costs me $9.50 to make that widget, the 10% increase in labor costs translated into a 50% decline in profits. I know that a 5% increase in price translates into a 40% drop in sales so I held my price at $10 before (150% profit * 60% sales = 90% of the original profit.) Now, though, that price increase doubles my profit for a net change of +20%. I'm making less than I was but more than if I didn't raise my price. After all the ripples settle I'll be selling my widgets for $11 with cost of $9.90 and the only people that benefitted will be debtors who get to pay their debts with inflated dollars. Everyone will have been hurt by the economic disruptions, though.

Nah, if you up your price 5% and sales drop 40%, you'd be getting a little over 60% of your previous profit, not 90%. Still better than 50% ..BUT you're still not maximising profits. You now have 40% idle capacity and a 40% hole in the market of consumers willing to buy widgets at some price between $10.00 and $10.49. Even at the reduced margins that's still additional profit. If you don't do it, a competitor will and he'll gain the market share you lose too. Unless costs are driven over or right up to revenue, it doesn't make sense to cut existing production.

If you could sell some widgets at $10.50 and some at $10.25 you would be right. You normally can't, though. The point of maximum profit is when dropping the price would cost you more in lost profit from reducing the price than the increased profit from selling more units.

 

[Loren Pechtel]

Now let's suppose that I'm your competitor, who has always taken that hit, and paid my workers more. Because I'm not an unethical piece of shit, I gain massively when your business takes a hit because the overall need for widgets is fixed, and all that business comes back. I might increase the price of my widgets a few cents but because my company is technically worker-owned, they just hire me as a CEO to make executive decisions, there are no investors to make panicky. I can ignore Las WallStreet. Everyone in my factory stays employed, and we take a loan to scale operations by whatever margin your hit was. Which means hiring all your workers.

I'm alright with this.

The thing you don't seem to get is that just because it hurts the unethical pieces of shit in the world who live on margins, margins aren't fucking necessary. Labor costs SHOULD expand to within 1% of margins for any decent company, and it's the duty of the CEO and owner to guarantee that happens or be helped to there through taxation. What is the incentive? 1% of a huge lot is still a pretty big slice.

Until the effects of the increase propagate through the supply chain. Now your workers are making less. And where will the equipment to expand come from? The workers don't have the money.

 

[Loren Pechtel]

It's good to know the law of demand operates for broccoli. Now all we need is a coherent explanation why it magically gets suspended for low skilled labor.

Is this the old, "If we raise the minimum wage by one cent, why not raise it by a superzillion dollars?," fallacy?

Except it's not a fallacy. It's a standard estimating technique--look at what a big change will do. Small changes almost always simply do less of the same thing.

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Except that it's not a fallacy. One of the three things can happen with raising minimum wage in regard to employment loss

1) It looks somewhat like an upward trending line where raising the min wage causes loss
2) There is a laffer curve with regard to min wage
3) It's a flat line, so raising it to a million dollars has no affect.

Glad to see that faith-based economics is alive and well.

What's the 4th option then??

 

[Crazy Eddie]

The need for widgets doesn't hinge on price, it hinges on availability. I suppose for some meta-types of widgets there's plasticity in the form of widget (like food; if carrots lose, then something picks up the slack because a guy's gotta eat). Similarly, if ford loses out on car sales, Honda picks them up because a guy's gotta get to work.

If cars cost more, people are more likely to hold on to their old cars longer or use public transportion, and sales decrease across the board.

Not if the increase in costs is matched by a corresponding increase in income. This is actually the reason why inflation (theoretically) doesn't destroy the market overtime, because the rising cost of widgets means a rising income for widget makers.

Ultimately the need for widgets hinges on both availability and the purchasing power of its potential customers. It only depends on prices inasmuch as the relationship between the cost of goods and the buying power of consumers:
If consumers make less money and prices stay the same, sales drop.
If consumers make more money and prices stay the same, sales rise.
If consumers make more money and prices go up, sales stay the same.

the niche that the non-slaver company occupied before was to sell more expensive goods, demand for which is less than for the cheaper salve-made goods. When slavery is banned, prices go up for everyone, and while some customers will pay the higher price, some will not. The total demand decreases. If everyone was willing to pay the higher price to begin with

You're forgetting the effect that all of those thousands (millions?) of workers who used to be slaves are now employees with paychecks and now have the capacity to buy those goods independently. Demand actually DOES increase because the pool of consumers increases dramatically. Moreover, the former slaves see an improvement in their quality of life which in turn increases their productivity; this effect is much harder to quantify, but it partially offsets the sudden rise in labor costs.

Is this the old, "If we raise the minimum wage by one cent, why not raise it by a superzillion dollars?," fallacy?

Except it's not a fallacy. It's a standard estimating technique

No it isn't. You estimate by establishing a viable upper limit and a viable lower limit and then narrow the field based on known factors. "Superzillion dollars" is an upper limit; it's easy to see that's too much, so the upper limit is too high. A million is also too high. A thousand is too high. A hundred is too high. Etc etc.

And it's a fallacy because it ultimately devolves to the strawman argument. Just because drinking 10 gallons of water in one sitting will make you sick doesn't mean water is bad for you.

What's the 4th option then??

The 4th option is that the increase in minimum wage increases the demand for products and services locally, resulting in an increased demand for workers to meet the new demand. Simply put: people have more money, they use more services, and providing more services means more employees.

 

[Loren Pechtel]

Except it's not a fallacy. It's a standard estimating technique

No it isn't. You estimate by establishing a viable upper limit and a viable lower limit and then narrow the field based on known factors. "Superzillion dollars" is an upper limit; it's easy to see that's too much, so the upper limit is too high. A million is also too high. A thousand is too high. A hundred is too high. Etc etc.

It's a standard technique for trying to figure out how the output reacts to a certain input. It's not meaningful in trying to figure out the value, only the direction.

What's the 4th option then??

The 4th option is that the increase in minimum wage increases the demand for products and services locally, resulting in an increased demand for workers to meet the new demand. Simply put: people have more money, they use more services, and providing more services means more employees.

That's option #3--and you need to show why it works. And if it's true the insanely high minimum wage would create even more benefits.

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Except it's not a fallacy. It's a standard estimating technique

No it isn't. You estimate by establishing a viable upper limit and a viable lower limit and then narrow the field based on known factors. "Superzillion dollars" is an upper limit; it's easy to see that's too much, so the upper limit is too high. A million is also too high. A thousand is too high. A hundred is too high. Etc etc.

It's a standard technique for trying to figure out how the output reacts to a certain input. It's not meaningful in trying to figure out the value, only the direction.

What's the 4th option then??

The 4th option is that the increase in minimum wage increases the demand for products and services locally, resulting in an increased demand for workers to meet the new demand. Simply put: people have more money, they use more services, and providing more services means more employees.

That's option #3--and you need to show why it works. And if it's true the insanely high minimum wage would create even more benefits.

 

[NobleSavage]

Is this supposed some sort of universal truth? The final word that puts to bed the argument? Or is this a single study, currently under scrutiny, with a plethora of studies that came before it that say the opposite?

I think it's more like the plethora of studies that came before it are divided and the studies that come after it will also be divided. Last time I looked at the CBO numbers it seemed to be a wash. Maybe I'm wrong, but that's the impression I got when looking into it. I didn't try very hard.