Minimum Wage and Unionization (split)

[bilby]

. . . Wages are NOT determined by any trivial supply/demand trade-off. Unions provide workers with a form of oligopoly power to counter the implicit oligopoly power employers often have.

But what is the source of the implicit oligopoly power employers often have, if not the elasticity in their demand for labor?

I am not a professional economist, nor do I play one on TV!

But as one datapoint, Google informs me that, counting seasonal workers, Amazon employs 1.6 million people. That's 'Million' with an 'M.'

There are 3.2 billion people with jobs. An oligopoly is a state of limited competition, in which a market is shared by a small number of competitors. Having a two thousandth of a market doesn't give you oligopoly power.

What gives Amazon oligopoly power is that the typical Amazon worker needs Amazon a lot more than Amazon needs the worker. That's because Amazon can get along without the worker a lot more easily than the worker can get along without Amazon -- i.e., Amazon's demand for labor is elastic. But if ITUC were right that increasing wages doesn't cost jobs, that would imply that Amazon couldn't get along without the worker. So the observation that employers often have implicit oligopoly power workers need unions to counteract is evidence that ITUC is wrong.

Amazon can get along without the worker, not because they don't need a worker, but because most of their workers are easy to replace.

The power of employers over employees stems from the existence of a large pool of unemployed people, which simultaneously makes it easy to replace workers, while making it hard to get work once you have been discarded.

If getting a new job were easy and quick, or finding a new employee were difficult and long-winded, workers would have a lot more clout. But it's not.

A sacked worker has a long hard road ahead of him before he can secure his next pay packet. The company that fired him can expect at least a dozen qualified candidates to show up the very next day, competing with each other for the vacancy.

And this situation is so entrenched that on the rare occasions when vacancies only attract a handful of applicants, or only applicants who will require some training to get them up to standard, the employers scream blue murder about how nobody wants to work anymore.

 

[Loren Pechtel]

And yet when we have had a relatively higher minimum wage and a much more unionized economy none of what you said happened. Wages were higher and profits were lower. This is what happens in the real economy where profits are what is left after the bills are paid, wages are what you negotiate and prices are set by the company to generate an ROI, but not in your fantasy economics 101 where everyone is paid what they are worth, the lower wages are the more people will be hired, and every transaction is a bartered one determined by supply and demand setting prices. You believe that the economy is supply-driven where corporations invest because money is available and not that the economy is demand-driven where corporations invest because there is unfulfilled demand for the product.

Wages were higher for white, male Americans. The shitty jobs were for those that fell into other categories.

 

[Loren Pechtel]

You are cherry picking. You arbitrarily have divided the data into two sets: one point which you claim supports your view, and all the other where you hand -wave away the result that conflict with your view. You hand-waved the Card-Krueger results based on your ignorance about their methodology.

Furthermore, you keep mentioning this "Group A" point without any reference to the actual time frame and context or how it actually supports your position.

The point is it has never been shown how we could observe an effect in most cases. The group B data is unfalsifiable and therefore worthless. And group A has been discussed on here before, I figured you would know it. American Samoa--a good portion of the population was working for minimum wage and it suddenly jumped considerably.

You're showing all sorts of things that will muddy the water, not make it easier to see.

That is my point exactly. It is difficult to parse these things out. It really depends on the data and context. So, your cherry-picked (and undefined) one point really isn't much evidence of anything.

You're continuing to show how unfalisifiable your position is.

 

[ZiprHead]

The shitty jobs were for those that fell into other categories.

Any job that needs to be done is not a shitty job. The only thing that makes it shitty is the (paucity of) wages.

 

[Bomb#20]

There are 3.2 billion people with jobs. An oligopoly is a state of limited competition, in which a market is shared by a small number of competitors. Having a two thousandth of a market doesn't give you oligopoly power.

What gives Amazon oligopoly power is that the typical Amazon worker needs Amazon a lot more than Amazon needs the worker. That's because Amazon can get along without the worker a lot more easily than the worker can get along without Amazon -- i.e., Amazon's demand for labor is elastic. But if ITUC were right that increasing wages doesn't cost jobs, that would imply that Amazon couldn't get along without the worker. So the observation that employers often have implicit oligopoly power workers need unions to counteract is evidence that ITUC is wrong.

Amazon can get along without the worker, not because they don't need a worker, but because most of their workers are easy to replace.

The power of employers over employees stems from the existence of a large pool of unemployed people, which simultaneously makes it easy to replace workers, while making it hard to get work once you have been discarded. ...

So why is there a large pool of unemployed people? Or to rephrase the same question, what is the marginal revenue from employing current $7.25/hour labor?

The folks at ITUC would apparently have us believe that if the federal minimum wage were raised to the level they think appropriate, let's say $15/hour, this would not cause job losses. If they're correct and they think the marginal revenue from employing current $7.25/hour labor is less than $15/hour, do they have an explanation for why they expect employers to be so irrational as to not lay off a person whom they have to pay $15/hour to even though they're taking a loss every hour they keep him on the job? Do they think employers are a naturally benevolent species?

If they're correct and they think the marginal revenue from employing current $7.25/hour labor is more than $15/hour, do they have an explanation for why there still exists a large pool of unemployed people, even though an employer who offers an unemployed person a $7.25/hour job can count on close to $8/hour of additional profit right off the top?

The existence of a large pool of unemployed people is empirical evidence that ITUC is wrong.

 

[laughing dog]

You are cherry picking. You arbitrarily have divided the data into two sets: one point which you claim supports your view, and all the other where you hand -wave away the result that conflict with your view. You hand-waved the Card-Krueger results based on your ignorance about their methodology.

Furthermore, you keep mentioning this "Group A" point without any reference to the actual time frame and context or how it actually supports your position.

The point is it has never been shown how we could observe an effect in most cases. The group B data is unfalsifiable and therefore worthless. And group A has been discussed on here before, I figured you would know it. American Samoa--a good portion of the population was working for minimum wage and it suddenly jumped considerably.

You claim that group B is necessarily unfalsifiable is false. Card and Krueger's work is evidence your claim is false.

You're showing all sorts of things that will muddy the water, not make it easier to see.

That is my point exactly. It is difficult to parse these things out. It really depends on the data and context. So, your cherry-picked (and undefined) one point really isn't much evidence of anything.

You're continuing to show how unfalisifiable your position is.

No, I am showing how attention to context matters. If raising the minimum wage so obviously caused job losses, the empirical work would be clear. It isn't. That's because the real world is much messier than the ideal world of ECON 101 demand and supply market equilibriums.

I think that it is no surprise that in the short-run, small or medium changes in the minimum wage have little effect on hours worked or job loss because many firms cannot quickly change their business operations - it takes time to make the adjustment without unnecessarily losing revenue and/or customers. However, over longer time periods, firm may adjust their business model.

 

[Jayjay]

Sure you can. It makes strategic sense to deplete the reserves of OPEC countries before we deplete ours.

Doesn't really make much sense given that there is high demand for oil now, but the demand in 2050 is likely to be much less.

It does to those who can think strategically.

Yes, you can. You can raise the wages of the poor by raising the minimum wage, aggressively promoting unionization instead of aggressively fighting it, compressing the net income distribution by raising taxes on the high earners, and restricting the number of dollars that the fed will accept from overseas markets limiting the number of foreign trade deficits every year to say 150 billion dollars a year. These measures would go a long way to address the fifty-year-long conversion of the workers' wages into profits. Excessive profits are bad for the economy, wages stopped growing in the first quarter of this year meaning that all of the inflation that we are seeing now is caused by excessive profits.

Both minimum wage and unions are ways to make higher wages for fewer people, while making more people unemployed.

The award of this year’s Nobel Prize in economics has further exploded a decades-old myth that increasing minimum wages costs jobs.

Reality: A small enough proportion of the population works at minimum wage that even substantial changes in minimum wage employment will be lost in the noise. The Nobel prizes should stick to the hard sciences!

We have one data point from where a minimum wage change actually influenced the income of a decent chunk of the population--and we saw what standard logic says: Lots of unemployment. All other "data" points are cases where you would not expect to be able to observe a change. We shouldn't be awarding Nobels for finding that we can't detect a signal expected to be below the noise floor.

Ah the old cherry picking defense - my data point is valid and all others are not. Really, your argument is a case of ridiculous special pleading.

It's not cherry-picking. We have only one known case where there was a trigger big enough that we should expect to be able to observe an effect--and we got one. Since only about 1% of the population works for minimum wage (watch out for the misleading at-or-below figure that includes tipped workers) something that costs 10% of minimum wage workers their jobs causes only .1% change in unemployment--undetectable.

The problem is with the economists who pretend that a failure to observe a signal they shouldn't expect to be able to observe means something.

The problem with your argument is the assumption that they compared overall unemployment figures, rather than just the unemployment figures of the minimum-wage earners. It doesn't matter what the relative proportion of minimum-wage earners is to the total population, all that matters to make it statistically significant is if the sample size for minimum wage earners is big enough.

The same way it doesn't matter whether you do a presidential poll in one state or all 50 states: the margin of error is practically the same for the same sample size.

 

[Jayjay]

Not sure what your point is -- I didn't say anything against unions. Unions are a basic component of free market economies, same as corporations. But when you describe "right-to-work" as a euphemism for "forbidden-to-unionize", what are you basing that on? Because if we take the ITUC article at face value, and believe that Dr. Card et al. truly showed that when employers have to raise wages they do not compensate by eliminating any of the jobs, then how the heck would a right-to-work law stop anybody from unionizing?

I regard many conversations here as addressing the topic rather than the poster. I meandered along my own path without regard for whether you (the quotee) agreed or disagreed with me.

But right-to-work laws most assuredly DO discourage unionizing.

You misunderstand -- I wasn't asking for your assurance that there's an effect. I was asking for the mechanism by which the effect operates, so we can examine whether it still operates if ITUC is right that demand for low-skill labor is infinitely inelastic.

I haven't read the papers either, but I've listened to a podcast where an economist explained it. So here's my take, others can correct me if I'm wrong.

The effect is due to the fact that in a single workplace, like a restaurant, the employer cannot realistically have unequal pay for different employees. So let's say a restaurant owner has 8 waiters making $12 an hour. And let's further assume that after all the other expenses except the waiters' salaries, the restaurant makes $20 profit per hour per customers served by one waiter. And thirdly, the restaurant would have capacity for 2 more waiters before running out of tables to serve. So at the moment the owner makes $160 - $96 = $64 per hour.

If he could find two more people willing to serve at $12 / h rate, he could profit 2 x ($20 - $12) = $16 more per hour. But not everybody is willing to work at that rate. He might need to pay $15, which would give him $10 more profit per hour. But that would mean that the other waiters would probably find out and also demand $15 / h. Making his total profit just $50 / hour. So in this situation, it makes no sense for the owner to hire more people, but rather stick with the few who are willing to work for less. Which leads to higher unemployment. With a minimum wage of $15 he would still make a profit and continue to hire everybody, and there would be no reason not to hire the extra two people that are available at that price point.

Why don't the old employees ask for a raise anyway, you might ask? Because of asymmetrical negotiating power. They need their jobs more than the restauranter needs any single employee. And they don't know what the owner would be willing to pay.

 

[Jimmy Higgins]

Yes, you can. You can raise the wages of the poor by raising the minimum wage, aggressively promoting unionization instead of aggressively fighting it, compressing the net income distribution by raising taxes on the high earners, and restricting the number of dollars that the fed will accept from overseas markets limiting the number of foreign trade deficits every year to say 150 billion dollars a year. These measures would go a long way to address the fifty-year-long conversion of the workers' wages into profits. Excessive profits are bad for the economy, wages stopped growing in the first quarter of this year meaning that all of the inflation that we are seeing now is caused by excessive profits.

Both minimum wage and unions are ways to make higher wages for fewer people, while making more people unemployed.

The award of this year’s Nobel Prize in economics has further exploded a decades-old myth that increasing minimum wages costs jobs.

Reality: A small enough proportion of the population works at minimum wage that even substantial changes in minimum wage employment will be lost in the noise.

That sounds like a concession.

We have one data point from where a minimum wage change actually influenced the income of a decent chunk of the population--and we saw what standard logic says: Lots of unemployment.

So did the railroads stop being profitable when unions organized?

All other "data" points are cases where you would not expect to be able to observe a change. We shouldn't be awarding Nobels for finding that we can't detect a signal expected to be below the noise floor.

These days, minimum wage isn't really as important as keeping people to part-time as the overhead cost part of an employee (health care, benefits, etc...) is a much more notable new expense than $1 or $2 of wage increases.

 

[steve_bank]

I had an uncle who strted as construction labor. He said before unions if you did not want to work for $0.80 an hour there was someone behind you who'd work for $0.75 and hour.

He also said unions got out of control. He was a firefighter and a carpenter. As he put it to move up as a bricklayer in a union you had to be able to accurately lay a min number of bricks a day. In the late 70s when I had the discussion he said now unpins negotiate a max number of bricks.

Min wage was not intended to provide a living wage. It was about providing a wage floor to give some protection to workers.

Providing a min income is something else.

Unions have positives and negatives. When I was a kid my father got our medical benefits through his union funded by dues. Today the exception is cradle to grave support.

 

[ZiprHead]

Min wage was not intended to provide a living wage. It was about providing a wage floor to give some protection to workers.

 

[Jimmy Higgins]

I had an uncle who strted as construction labor. He said before unions if you did not want to work for $0.80 an hour there was someone behind you who'd work for $0.75 and hour.

He also said unions got out of control. He was a firefighter and a carpenter. As he put it to move up as a bricklayer in a union you had to be able to accurately lay a min number of bricks a day. In the late 70s when I had the discussion he said now unpins negotiate a max number of bricks.

Min wage was not intended to provide a living wage. It was about providing a wage floor to give some protection to workers.

The zombie bodies of Eugene V. Debs, Samuel Gompers, and William Jennings Bryan just walked by and went "BLARUGHGHHGH" which is zombie for "What are you talking about?!" If it isn't a "living wage", what the heck is it?! The male used to be the only wage earner... so if that wage isn't enough for a family to live on... what in the heck is the point?!

My problem is that the low wages... the taxpayers are subsidizing the food, housing, and health care of those low wage workers. IE, WE (notice, bold, italic, and underlined!) are subsidizing the substandard wages of the corporations.

 

[steve_bank]

Teddy Rossevelt? He was dead by the time of modern legislation.. In the 50s/60s when I was growing up min wage was not a living wage. I worked in grocery stores and restaurants in high school, made min wage, and it was not a living wage.

It was unions that negotiated working family wages and benefits. Jobs like MacDonalds were mostly for kids and students, part time jobs paying min wage.

History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938 - 2009

www.dol.gov

Amazon should IMO unionize. They have plenty of labpr issues.

Starbucks paying a living wage to serve coffee is a stretch. Starbucks tried to provide a high level of benefits to all workers including part time, and could not financially susyeam it.

For a place like Starbucks if unionized workers will pyt dues and get little back for the investment. I never met him, he left my garnmother and my family haed him. My grandfather along with another guy started a union for carpet and tile installers. As one of my uncvles put it, they used to break heads. Starbucks stores in Seattle ae voting on unionizing.

The thing to keep in mind unions today are big business that pay corporate salaries at the top.

 

[Jimmy Higgins]

Teddy Rossevelt? He was dead by the time of modern legislation..

Yes, Teddy Roosevelt. When the idea of workers' rights were a novel idea.

In the 50s/60s when I was growing up min wage was not a living wage. I worked in grocery stores and restaurants in high school, made min wage, and it was not a living wage.

I don't want to frighten you, but the year is 2022, not the 1950s/60s. Job opportunities have expanded in some places, contracted in others, and the minimum wage job is what some people are dealing with. They may not always be at minimum wage, but it is hard to impossible to get started at minimum wage without support.

Starbucks paying a living wage to serve coffee is a stretch. Starbucks tried to provide a high level of benefits to all workers including part time, and could not financially susyeam it.

I question how a company that sells burnt coffee for 200x its actual value could possibly have problems paying benefits to workers.

 

[laughing dog]

The thing to keep in mind unions today are big business that pay corporate salaries at the top.

That is simply not true for many unions.

 

[steve_bank]

To think unions are somehow less corrupt at the top is ignoring reality. Unions are political, a lot of money and influence pedaling.

No shit Sherlock. Frighten me? Does growing civil unrest frighten you today? Are you worried about potential food shortages? Min wages and unions are going to become irrelevant at some point. Permanent drought from hthe PNW down through Mexico which provides about 60% of our produce.

Min wage is the same principle today as it was in the 50s. m
How much more are you willing to pay in goods and services for higher wages? That is what it really cones down to.

It is not politically possible to restructure the economic system for today's realities and we are likely to decline. Unions and min wage are bandiads. It won't come close to solving the income problems.

As long as welth can be unlimited wiout any social responsibility it will get worse. Recently 6 people took a 10 minute joy ride into space while increasing numbers have trouble finding housing. That is the problem.

If history repeatss itself we will decline, fail, and rebuild.

 

[laughing dog]

To think unions are somehow less corrupt at the top is ignoring reality. Unions are political, a lot of money and influence pedaling.

You really do not know what you are talking about. Some unions are unresponsive to the membership or corrupt but some are not. Sorry, but "On the Waterfront" or "Hoffa" does not accurately portray many unions.

Lumping them all together is both lazy and ignorant.

 

[TV and credit cards]

I wonder what percentage of minimum wage/low wage jobs there are in today's service economy compared to the manufacturing economy of decades past. I don't know if there are historical numbers on this. Does seem to be a hell of a lot more fast food joints these days.

Time was a not so college bound teen could transition from McDonald's to some manufacturing job that did provide that living wage. If Brookings is correct, with half of all jobs considered low wage positions, that doesn't seem likely these days. Even with a four year degree, you could still be struggling for upward mobility.

Here's a report from Brookings Institute if anyone cares to look at their charts.
And an associated story.

So if good paying manufacturing jobs were replaced with lower paying service jobs, do the people filling these jobs have less needs? I think not. I think all it's given us is two low wage earners in a household with children no one is raising. And what are their chances of success? We're bleeding ourselves out here. Destroying our own future.

 

[bilby]

I think many people have lost sight of what a nation is meant to be trying to achieve with its economy.

It's not life, liberty, and the pursuit of shareholder value.

You needn't be rich to be happy. But you probably do need not to be poor. And, of course, it's perfectly possible to become rich and powerful, only to discover that your life is utterly miserable - likely because of the things you chose not to do when you were busy getting rich.

Refusing to pay people a living wage, in pursuit of more cash for people whose marginal happiness from an extra dollar is a minuscule fraction of that of the low paid, is counterproductive to the goal of maximum happiness. That it might well maximise GDP, is not something anyone should find particularly impressive.

 

[Loren Pechtel]

If they're correct and they think the marginal revenue from employing current $7.25/hour labor is more than $15/hour, do they have an explanation for why there still exists a large pool of unemployed people, even though an employer who offers an unemployed person a $7.25/hour job can count on close to $8/hour of additional profit right off the top?

The existence of a large pool of unemployed people is empirical evidence that ITUC is wrong.

And if there's $8/hr in profit per employee that would encourage someone to open a new business even though they didn't make as much profit per hour.

The reality is that absent monopoly factors the profit ratio will shift to a baseline. If there is more profit to be made new competitors will show up. If there isn't enough profit to be made when companies fail no replacement will step up to fill the void. There can not be long term extra profit no matter how much the left wants to fund everything with it.