Fixing the fast-food strike

So, thousands of fast-food workers are out on strike against the national burger chains, demanding that their wages be doubled to $15 per hour. But the national chains don’t control employee wages; how much to pay their people is in the hands of local franchise owners,

Therefore, if you are one of the concerned, caring, and vastly indignant activists behind this strike, I’m here to tell you that your social-justice problem has a simple solution. Take out a loan (or put together the money from your like-minded activist friends), buy a franchise from one of the chains, and hire workers at $15 an hour.

There, that was simple, wasn’t it? You’ll make money hand over fist and demonstrate to all those eeevil corporations that they can too pay a “just wage”; they just don’t want to because they’re greedy.

Or…maybe not. If it were that simple, everyone would be doing it. The commercial landscape would be alive with virtuous workers’ collectives paying their members fat wages and thumbing their noses at top-hatted plutocrats. Why doesn’t this happen?

Because in order for you to pay a worker $15 per hour, that worker has to net you more than $15 an hour in revenue. Otherwise your business runs at a loss until it crashes and the job goes away.

But it’s actually worse than that. Employer Social Security “contributions” approximately double the costs per burger-flipper right away; other tax and regulatory burdens push it up further. To sustain $15 an hour in wages, your employees have to pull $35 an hour or more in revenue each.

That kind of revenue per employee is relatively easy to arrange in a profession or a skilled trade, or even at a really chi-chi restaurant. But we’re talking flipping burgers here, which raises two serious problems.

One is that flipping burgers is not neurosurgery. The job procedures are simple and mechanical; adding a lot of value with a human touch is hard. In truth the main reason burger joints have human employees at all (other than maybe one machine-tender) is that people like to have their food handed to them by a human being rather than catching it off the end of a conveyer belt.

The other problem is that price competition in the fast-food industry is brutal. The name of the game is fast and cheap; that means your franchise has to run on a razor thin margin. If you try to charge significantly more over your cost of the basic inputs (meat, potatoes, cooking oil, electricity) than your competitors do, your customers will desert you.

Which is why the workers’ collective scenario fails. Your social-justice intentions won’t change the cost of those inputs one bit; the only way you can generate enough revenue per hour to cover that $35 or more in cost per employee is to raise prices. A lot. At which point your customers will instantly bail out.

Franchise owners aren’t demons. What they can do is constrained by economics. The wages they can pay are effectively bounded above by the amount of revenue each employee can capture, which in turn is bounded by price competition. If that amount is low, the wages will be too, and no amount of political screaming can fix that.

This is why minimum wages kill jobs. In the U.S. of 2013, the magic threshold is abour $14.50 an hour – if an employee can’t generate that much gain, the job either won’t exist at all or will only exist illegally off the books where taxes and regulation can’t more than double its cost.

But if you’re illiterate, unskilled, or just young, you may not be able to net $14.50 per hour for an employer. In that case you get the shaft. You might be willing to work for less, but the system will “protect” you by keeping you unemployed and desperate.

How this logic applies to other low-wage service jobs – in places like (say) big-box retail stores – is left as an easy exercise.

315 thoughts on “Fixing the fast-food strike

  1. Sadly, Eric, the people who need to hear and understand this argument are exactly the ones who will refuse to listen. “You’re a big meanie trying to keep the poor man down! We’re a rich country. We can pay people more!”

  2. Hmmm… I’ve been trying to get a second job for a while now to get out of debt and pay for my childrens’ braces. But I haven’t been able to because there are too many people and not enough jobs. Nobody wants to hire me because I’m “Overqualified” (computer engineer as day job).

    So what I am hearing is that there are a lot of openings at $7.50/hr. right now. Nice!

  3. so how does it works in australia? (this is not meant to read as a confrontation)

    the one piece of this that i flat disagree with is the implication that an owner will pay more if s/he makes more. in general, employers will pay as little as they can to as few people as they can; which makes sense: the less you pay out – the more profit.

    of course, you have to balance that with retaining people and, if you are smart, you will see that paying a bit more will motivate people to run your business for you but i think we’ve lost that lesson by and large.

    in terms of the strikes – isn’t it just simple – if the franchise can’t pay that and they can’t get anyone else to work for minimum wage then they close, no?

  4. Cassandra, I’d agree with you if it weren’t for the fact that as Eric stated, the margins for fast food franchises are razor thin. They are just simply not greedily keeping massive profits.

    That is why this effort will fail. The franchise owners can’t do it. Progressives totally and utterly fail to understand why the real world can’t match the fairy world in their head. I have absolutely no respect for progressives at all because I have realized that their ideas make no sense since I was ten years old. Its not that hard to understand. It takes a completely deluded mind that refuses to see reality to be a Progressive.

    But if they really care so much there is an easier way than buying a franchise. They can just hand every fast food worker they interact with twice the money for any fast food items they buy. Oh wait, they don’t ever do things like that, they want the extra money for fast food workers to come out of other peoples wallets….

  5. “Employer Social Security “contributions” approximately double the costs per burger-flipper right away; ”

    Isn’t the combined SS burden less than 16%? Maybe after all the other regulatory burdens are added in, the cost of the employee doubles, but I doubt it. In the factory I work at, the labor rate is $35/hour, which includes all costs (including benefits, governmental regulations, etc.). The hourly wage is about half of that.
    The overhead rate, which includes all the salaried people, utilities, office supplies, etc. is $150/hr. Assuming fast food restaurants have a similar ratio of overhead to worker pay, then the cost of keeping the building running dwarfs the cost of the employee.

  6. @jason – i appreciate you taking the time but that didn’t really answer any of my questions.

    i looked around for an answer to what the profit margins are. they vary greatly. as such, wouldn’t that then hold that the pay rates would vary greatly?

    are the profit margins higher in australia?

  7. @Cassandra – You’re misunderstanding something – the profit margins don’t define what people are paid (that’s part of the costs), they define whether it’s reasonable to accuse the owners of being greedy. As for Australia, I heard it’s three dollars for a small coke there.

  8. @random832 – are you saying that i misunderstand the reality of it or that i misunderstand what the piece is saying?

    and if that was too much for a coke in australia (presuming it is 3$) then wouldn’t the franchises have gone out of business for lack of customers willing to pay that?

  9. There are many indicators of a healthy economy. For the middle class (those who “possess the gifts of fortune in moderation”) one such indicator is the rate of home ownership. Another indicator is the possibility of an honest day’s labor to sustain the laborer’s family.

    I can think of others, but notice a theme: Progressive legislation (minimum wage, home ownership acts, etc., etc.) attempts to achieve the indicators of a healthy economy by fiat. I propose this variation on Henry Spencer’s maxim: If you lie to the economy, it will get its revenge.

  10. Doesn’t this boil down the question of what is the minimum wage one person should earn for a fulltime job?

    My Swiss mindset is probably a lot different than your American one. I’m inclined towards a “unconditional basic income”. People should be able to pay for a basic life with the job they do, and not be required to work three jobs at 60 hours per week to even begin paying their bills.

    As for the question at hand, asking for a raise of 100% is probably a bit delusional.

  11. Salamandro said:

    People should be able to pay for a basic life with the job they do, and not be required to work three jobs at 60 hours per week to even begin paying their bills.

    Terrific idea!

    Now, how do you set up an economy so healthy that the lowest wages paid for 40–50 hours of work suffice to pay for a “basic life”?

  12. “Isn’t the combined SS burden less than 16%? ”

    Eric was probably simplifying here, because not only is there SS, but there’s the employer side of income tax, overhead for running payroll, any employer portion of insurance costs (typically in the neighborhood of 4x what the employee pays, in my experience) that I can think of off the top of my head.

  13. James Noyes, perhaps you’re looking in the wrong place. I’ve seen Aldi supermarkets around here (Dallas) having help wanted signs and offering $11/hr.

  14. Joel:
    >Terrific idea!
    Thanks, but it wasn’t mine ;)

    >Now, how do you set up an economy so healthy that the lowest wages paid for 40–50 hours of work suffice to pay for a “basic life”?
    Well, I certainly don’t know enough about the American economy, but spending 50billion$ less on secret agencies would be a start or ask your super-rich-guys. No, honestly, I think it would be possible here in Switzerland and maybe some other countries. In fact, we’re doing it already to some extent and with some luck we soon get to vote on it.

    But America… I believe you have too many problems to come anywhere near it for the next couple of years. Or maybe I have just been reading to much Chomsky :-)

  15. “Economics is the study of the use of scarce resources which have alternative uses.” — Lionel Robbins

    Once you internalise the meaning of that quote all the feel good BS of minimum wage, “living wage”, and a thousand other myths will be shown in the starkest light possible. And yes, the US and other states piss away phenomenal amounts of resources in many ways.

    I recommend reading Economics In One Lesson by Henry Hazlit to help the process along.

    — Foo Quuxman

  16. Sketch of proof for what I’m modestly calling the Law of Salomon:

    Model the economy as a control-theory problem. Assume the system is both perfectly observable and controllable. (I’m suspect these assumptions are overly optimistic, but then the maxim holds trivially.)

    Adapting standard nomenclature, the state of the economy is y(t); the desired state of the various indicators is r(t); the actual state of these indicators is a function F(y, t); the difference between the actual state and the desired state is e(t) = r(t) ? F(y, t); and the state of laws, regulations, common market practices (including each individual player’s decisions regarding preference, trust, and trustworthiness) and all other economic inputs is u(t). The search for a healthy economy is a control law u(t) = C(e, t) which will tend to drive e(t) to a minimum value.

    “Lying to the economy” means using the desired state of the indicators r(t) instead of the measured state F(y, t). Under those conditions, feedback has been destroyed, and even the most perfect control law can produce only noise.

    TL;DR: To the extent that a desired indicator is legislated rather than worked toward, the indicator’s function as an economic measure is destroyed, and the economy’s controllability is lessened.

  17. >>“Employer Social Security “contributions” approximately double the costs per burger-flipper right >>away; ”

    “Employer Social Security” is a bad term here. “Allocated overhead” would be a better one.
    SS — something like the 16% you mentioned. Probably one of the smaller bits.
    Unemployement
    L & I. (that’s what they call it in Washington State — on the job accident insurance. For burger flipping, around the hot grease, probably not small — I would expect it to be more than SS but havn’t looked. For logging jobs, I once saw a figure that was more than the gross wage rate.)
    Any bennies — uniforms, free meals, insurance, vacation — probably not much on a burger job, but some.
    All the accounting and reporting necessary to pay all the above and do payroll. Not a small amount. Also scheduling a herd of (on the average) not too bright nor dedicated people who will have a fairly high rate of late, call in not too far out that they won’t make it today, or just no-show.

    The double the wage figure is very plausible at this level. May be low.
    Jim

  18. One thing that amuses me in these discussions is the number of people who say “So what, they’ll just have to raise their prices by 25 cents per burger!” or whatever. Not only do they not realize that for many people the difference between a $1 burger and a $1.25 burger is significant, they don’t understand that pricing is one of the most difficult tasks of any business. Every business wants to charge as much as they can, but knows that higher prices drive people away. Getting the right balance is hard, and if they thought they could charge $1.25, they would already be doing so.

  19. People should be able to pay for a basic life with the job they do, and not be required to work three jobs at 60 hours per week to even begin paying their bills.

    Exactly! And just think of all the high paying jobs involved in slowing down the Earth’s rotation to add 12 hours to the week so they can work three 60 hour per week jobs! Sleep is for slackers anyway…

  20. Well, say McDonald’s could ask less of their franchise takers, that would give the latter more room to pay their employees better. McDonald’s is making billions in net profit. Surely there is room to share some of that wealth with the guy flipping the burger?

  21. It’s pretty clear that if the government pared itself down to the minimum required to do its constitutionally-defined job, more people would be able to live on the wages they are earning.

    Protectionism works, too. We should unapologetically deport all the illegal immigrants, charge a 15% tariff on anything imported from currency-manipulating countries like China, and charge a 25% excise tax on anything made by union labor.

    In other words, let things work the way they’re supposed to, and the economy fixes itself.

  22. I do excuse for my lacking English, but it should have been obvious that I meant 60hours with three jobs combined.

    Or maybe it’s just that 60hours a week is normal you, for which I would pitty you.

  23. Salamandro said:

    Joel:

    Now, how do you set up an economy so healthy that the lowest wages paid for 40–50 hours of work suffice to pay for a “basic life”?

    Well, I certainly don’t know enough about the American economy, but spending 50billion$ less on secret agencies would be a start or ask your super-rich-guys.

    You mean, we should let Europe bear the cost of its security rather than having it ride free on our shoulders?

    No, I see you’re picking on the NSA and suggesting soak-the-rich taxes.

    The recent revelations of NSA overreach show the problems of general government overreach, with troubling implications for personal privacy. Economic implications are tertiary at most.

    And a good case can be made that severe economic disparity is an indicator of a moribund economy. (See also feudalism.) See my posts above about the result of legislating the result of economic indicators.

  24. Once you internalise the meaning of that quote all the feel good BS of minimum wage, “living wage”, and a thousand other myths will be shown in the starkest light possible.

    Unconditional basic income has been advocated by economists going all the way back to Adam Smith. Most notably its effectiveness has been noted by Esther Duflo, one of the few honest economists (she conducts or evaluates social experiments where the beneficiaries of an economic policy are compared against a control group).

    Poverty taxes the brain and makes you less capable of making decisions to get you out of poverty, therefore more likely to be poor. A policy like unconditional basic income will break the cycle of poverty and make people not only happier, but more productive as well.

  25. And a good case can be made that severe economic disparity is an indicator of a moribund economy. (See also feudalism.) See my posts above about the result of legislating the result of economic indicators.

    Sounds like someone hasn’t been reading enough Chomsky. :) One of his groundbreaking insights was that laissez-faire economies are inherently unstable; a sort of feudalism is their ground state.

  26. Jeff, the problem with unconditional basic income is the one Margaret Thatcher pointed out: what do you do when you run out of other people’s money to spend? Free clue: If you confiscated the assets of every one of the hated 1%, you won’t begin to get there. Not the income, the assets.

  27. (Caution: I’m Canadian and more familiar with franchise situation in Canada)

    Unfortunately, franchise owners are a combination of highly constrained and not very bright. Except for someone who bought me a sub at Subway yesterday, I haven’t been to a fast food restaurant in several years. They’re both expensive (compared to buying groceries at the store and cooking yourself, and especially compared to volunteer soup kitchens; most of those don’t know how to cook any better unfortunately) and lousy. I haven’t seen Supersize Me, but I have read The China Study (Colin Campbell and son) and Prevent and Reverse Heart Disease (Caldwell Esselstyn) and have been vegetarian ever since (a practice I violate twice a year at most important social events.)

    As a result of this, I have trouble understanding why responsible people spend so much time and money at fast food restaurants and mall food courts. Why people stand in a fifty metre line at a Tim Hortons is a mystery to me (I’ve even heard theories that THC stands for more than “Tim Horton’s Coffee” and there is some sort of addictive ingredient other than caffeine – I have my doubts because of the lack of withdrawal symptoms in my particular case, among other more obvious things.)

    This is part of the mystery: The franchise brass set the prices and pay for the advertising. They also tend to set the wholesaler chain, equipment suppliers, payroll contractors, and several other things, which locks down most of the knobs franchise owners can twiddle and leaves very little flexibility (and responsibility) for the franchise owner (or manager, as many big companies prefer to own the stores/restaurants and have buyback terms in many cases, including McDonald’s.) This leaves wages and hours as one of the few knobs left to twiddle to keep such a business afloat, and there are strict guidelines on hiring practices (which the franchise owner routinely break in order to keep his positions filled) and legislation (minimum wage in Saskatchewan is now $10.00/hr.) This leaves the franchise owner with very, very little flexibility and responsibility left, which explains why franchise owners (all the ones I’ve spoken with, at least) are not very bright: with all the decisions being made for them, they don’t need to be (and in many cases, they don’t want to be, either.)

    What looking at all this is telling me is that there is an enormous reserve in the performance of human civilization that is either wasted or untapped (various portions of it), and that there are people and spirits in high places who want it that way. The fast food franchise is only one cog in this ignominious machine we have created: fast food businesses keeps some bright people stuck in junk jobs and even unemployed and steals from the time young people should be spending in school (secondary, post-secondary, and healthy after-school activities) while feeding people junk food. That franchise owners are not very bright is part symptom: these franchise owners are often the burger flippers that should have been in school keeping their brightness instead. This junk food causes all of the diseases which were so rare before the twentieth century (and when they occurred, they attended to the nobility and royalty.) These junk diseases (cancer, diabetes – both types, autoimmune disorders, and I think body breakdowns associated with this diet is one of the factors that has allowed AIDS to flourish (the other one being promiscuity), rampant allergies, macular degeneration, arthritis, and number one: vascular disease (which is a bit more than heart disease; people with it are so preoccupied with their hearts that they often don’t notice it affecting their extremities and other organs.)) keep the pharmaceutical industry employed while the victims of the diseases are unproductive.

    It is quite a mess, and I have a pretty decent theory as to how we got into it, and how we can get out of it. You won’t like it because its spiritual.

  28. There is an easier solution that creating workers’ collectives Eric. If these guys think fast food workers should be paid more then they should simply give them a cash tip whenever they buy a burger. Instead of a big strike thingie, start a movement to “Tip your burger flipper”! Might even work.

    But it is so much easier to spend other people’s money. I never really understood our societal disposition that would consider someone altruistic for giving away money earned by someone else.

  29. You won’t like it because its spiritual.

    This blog will try pretty much anything on for size…give us your best shot ;)

  30. Sorry, Fluffy, that’s just not coercive enough. Everyone knows you can’t achieve social justice without the force of the central government. Just look at history: all of the societies most filled with social justice had strong and controlling governments. Right?

  31. “People should be able to pay for a basic life with the job they do” is true in the same sense that “Nobody should have cancer” is true: as a currently-imaginary goal. Confusing that normative statement for a positive statement, and supressing low-paying jobs based on the theory that people will then get high-paying jobs instead, is a plain disasterous idea. We might as well ban chemotherapy because it’s an awful experience which nobody “should” need.

  32. Also note that much of the original “progressive” push for a minimum wage a century ago was explicitly eugenic. They wanted to force women out of the workforce so they’d have more kids, and disemploy blacks, the crippled, and the sick so that they’d be less likely to have children.

  33. It took a while, but I’ve finally stopped laughing at that “poverty taxes the brain” article that Jeff linked to.

    That’s why I dig Jeff….he keeps us hooked up with all the hippest guff ;)

    Gracias amigo

  34. People should be able to pay for a basic life with the job they do

    Where is this “basic life” defined? Who gets to define it?

    Should I be able to support a wife and 3 kids as a burger flipper?

    Should people be tailoring their lives to fit their earning power, or should employers be obligated to subsidize their employees chosen lifestyles?

  35. > My Swiss mindset is probably a lot different than your American one. I’m inclined
    > towards a “unconditional basic income”. People should be able to pay for a basic
    > life with the job they do, and not be required to work three jobs at 60 hours per
    > week to even begin paying their bills.

    I know people are already picking on this. My American opinion is that if you want to pay for a basic life with the job you do, it’s your responsibility to become qualified for a job that pays enough for it.

    I studied computer science in school, partly because I like it and partly because I know that it pays well. I know someone who studied Art History in school because she liked it, but she was surprised that there weren’t many jobs for an Art History major. It seems childish to me to argue that minimum wage should be raised to cover for such a shortsighted mistake.

  36. @Cassandra: “and if that was too much for a coke in australia (presuming it is 3$) then wouldn’t the franchises have gone out of business for lack of customers willing to pay that?”

    Not if *everyone* is charging that price for a Coke.

    Prices are higher in Australia because it’s a smaller market. You have to charge more per unit to make money, because you don’t have the volume of someplace like the US. Similar comments apply to Britain. As another example, folks in Australia are likely to pay twice as much for a book as I do, because the market lacks the economies of scale..

    Folks in Australia are used to prices that would make folks in the US blanch. It’s all relative.

  37. Bravo, Eric!

    In a few hundred words, you’ve distilled Econ 101 into its essence; made it personal, comprehensible, memorable, and applicable to everyday life. However, I wish you have worked in a “no free lunch” metaphor.

  38. There is an easier solution that creating workers’ collectives Eric. If these guys think fast food workers should be paid more then they should simply give them a cash tip whenever they buy a burger. Instead of a big strike thingie, start a movement to “Tip your burger flipper”! Might even work.

    In Australia, as in much of the world outside the U.S., tipping is not customary. It tends to be viewed by non-Americans as a sort of quaintly bizarre ritual at best, and an excuse to not pay staff a decent wage, racially discriminate against certain customers, and sexually oppress women at worst.

    That said, I noticed that many restaurants in heavily-trafficked parts of the hip Brisbane suburb of Fortitude Valley have tip jars set up, often with signage to encourage people not familiar with the practice to leave a little monetary token of appreciation. My thinking on tipping used to be congruent with the non-Americans’, especially now that a 20% tip, considered generous a decade ago, is the new bare minimum for skinflints, 30% being the standard for acceptable service. After seeing tip jars sprout up spontaneously in Brizzy, however, I think that tipping is a sort of Schelling point: a default behavior that restaurant goers resort to to communicate additional feedback about quality of service (and restaurant staff don’t hesitate to encourage once it starts taking hold).

    On the wild chance that Mickey D’s locations start encouraging tips, it may have the secondary effect of improving quality of service, including cleaner locations and friendlier waitstaff, and thereby attracting a more up-market clientele. Wouldn’t that be a hoot. Fast-food gentrification.

  39. Prices are higher in Australia because it’s a smaller market. You have to charge more per unit to make money, because you don’t have the volume of someplace like the US. Similar comments apply to Britain. As another example, folks in Australia are likely to pay twice as much for a book as I do, because the market lacks the economies of scale..

    Things also cost more in Australia because historically the Australian dollar was worth significantly less than the U.S. dollar. However, American companies marketing to Australia would gleefully pretend that the lower exchange rate was in effect even when the AUD exceeded the USD in value because GREED. In 2005 a $60 video game cost about $100 AUD because $100 AUD was worth about $60 USD. In 2012, Australians were still paying $100 AUD for video games even though $100 AUD was worth about $105 USD at the time. This led to comical scenarios like it being cheaper to fly to Hawaii, pick up a boxed copy of Photoshop at retail, stay a couple of nights and have fun, and fly back to Australia than it was to purchase even an online download of Photoshop at Adobe’s Australian retail price.

    When I was there a 375ml can of Coke cost about $2.50, as I recall it.

  40. @BRM
    > the concept of “greed” is basically meaningless.

    I find the idea of people flinging around accusations of greed when they themselves are demanding twice as much money for the same amount of work, to be a situation so dripping in irony, I am surprised they can say it with a straight face.

  41. @Max: “I studied computer science in school, partly because I like it and partly because I know that it pays well. I know someone who studied Art History in school because she liked it, but she was surprised that there weren’t many jobs for an Art History major. It seems childish to me to argue that minimum wage should be raised to cover for such a shortsighted mistake.”

    I knew a guy decades ago who was a Philosophy major. But he was a realist – he said “You get a BA in Philosophy, and that qualifies you to get an MA. You get an MA, and that qualifies you to get a PhD. You get a PhD, and that qualifies you to get post-doctoral fellowships, and hopefully get a tenure track position at a university teaching other Philosophy majors. But most likely, you sell used cars.”

    Your friend who studied Art History has a lot of company. There was a tempest in a teapot on Slate a while back as some folks on food stamps wrote about going to a fancy shop and attempting to pay for gourmet items with food stamps. They failed, as expected. They were all folks who got graduate degrees in disciplines there was a limited market for, and none of them seem to have considered whether they could actually make a living at what they studied when they decided what to major in.

    But pushes to raise minimum wage where I am have more to do with better pay for low-skilled/unskilled workers who lack degrees of any kind.

  42. The problem with the whole minimum wage argument is that you’re trying to constrain the free market to do something other than efficient assignment of resources. ESR is right that there should already be places for low-skill workers to get above-poverty-wage jobs if there is an efficient way to do it…but there isn’t.

    If we want both a free market controlling resource assignment, and a humanitarian system in which everyone has the necessary resources to be out of poverty and has opportunity to advance themselves, then we need a system that decouples the two. The most efficient solution to that is to take the necessary elements to ward off poverty/promote advancement and provide those without involving the market. Provide the minimum necessary food, shelter, health care, education, common defense, law enforcement, etc to everyone without charge, paid for by taxing the output of the market. But provide nothing beyond that; if someone wants private access to transportation, or Internet, or entertainment, or to travel, and so on then they have to pay for it themselves.

    The tricky bit of such a system (besides the political will to set it up in the first place) is determining exactly what is the minimum necessary resources to allow both survival and opportunity for advancement. I’d say offhand that you could provide just basic nutrition, clothing, shelter, health care (excluding cosmetic issues), and education up to the equivalent of community college. That provides enough of a base for someone to get a low-wage job, all of which they can save since they can live on the resources above, and buy whatever they need to advance further (more education, raw resources to start businesses, whatever).

    The first reaction I always hear whenever I share this idea is “but there’s no incentive for people to work!” That’s true only if you’re talking about a person who has no motivation to do anything but survive. Anyone with even the most basic motivations – take a trip to visit relatives; buy a nice gift for your daughter’s birthday; wear something other than common-issue drab clothing; eat a meal at a nice restaurant; go see a movie – has the incentive to get to work since you don’t get those things for free. Most people are going to want a lot of things and thus have motivation to work, spend that output on improving themselves, and gain better jobs for more resources.

  43. … I am surprised they can say it with a straight face.

    Fluffy…you forget…when they say it, it’s because they’re after ‘fairness’

    You need to study your newspeak codebook a little more diligently ;)

  44. Basic wage is a non-starter. Already been done throughout the West; it is called “welfare”. The society always adapts. Landlords jack up rents; cost of food increases. The welfare office makes you run around here and there, burning up your transportation budget. The poor will always be poor. The best solution is guaranteed housing (400 square feet), food (3000 calories per day), public transport (because the car has made foot travel unsafe and uneconomical), and access to the means of production. That means a guaranteed garden plot, and a guaranteed place to work on handicrafts, development, etc. Given these things, any healthy person can pull themselves up by their bootstraps.

  45. <I.My thinking on tipping used to be congruent with the non-Americans’, especially now that a 20% tip, considered generous a decade ago, is the new bare minimum for skinflints, 30% being the standard for acceptable service.

    Wait, what? Where is that?

    They’re trying to convince people that 20% is “standard” in Manhattan, and maybe San Francisco.

    The rest of the US considers 15% “standard” for standard-grade service.

    30% will be met with wild derision.

  46. I’m definitely +1 with Eric. If they don’t like their wages, form a coop and pay your members better. Incorporation (or the LLC equivalent) is pretty easy to do in most of the US. Stop whining and start acting.

    For the international readers, it seems a common theme that the U.S. needs some kind of guaranteed income act. While the US lacks a unified approach to such (and a truly unified approach is unlikely given our federal structure), it is a bit lazy on your part to assume that we lack such. Although complex, the generosity of our welfare system is impressive. Federal, state, and even lower levels of government provide supplementary assistance for nutrition (“food stamps”, WIC, etc.), housing, child care, and so on.

    As an example, my wife has done work for Supplementary Education Services (additional tutoring and educational resources that are provided to low-income families in school districts that perform poorly) off and on for the last decade and I’ve had the opportunity to meet and get to know quite a few families that were enrolled in supplementary education services, most of whom were also the beneficiaries of several other assistance programs, as well. Where we live in the midwest, the cost of living is rather low, but even here a single mother with four children would receive enough in benefits to cover about $3k / month in childcare costs. (This is what the “out of pocket” cost would be, I’ll grant the possibility that the childcare providers issue discounts to those paying with public assistance…but I think this very unlikely, to say the least.) This is just in childcare (over the summer vacation months). IIRC, this particular family was receiving from wages (from the mother’s near minimum wage employment) and government assistance for a real income that would be equivalent to a family (with no explicit public assistance) of the same size earning in the neighborhood of $60k USD/ year. (Remember that most public assistance isn’t taxed as income.) Furthermore, this isn’t just an isolated anecdotal case. There have been various studies at various levels of rigor that show similar numbers.

    Our system of welfare could be improved, of course. But for all of the non-US readers, it’s a bit parochial on your side to keep eluding to a lack of basic income and services here in the US.

  47. @Skip

    “The tricky bit of such a system (besides the political will to set it up in the first place) is determining exactly what is the minimum necessary resources to allow both survival and opportunity for advancement. I’d say offhand that you could provide just basic nutrition, clothing, shelter, health care (excluding cosmetic issues), and education up to the equivalent of community college. That provides enough of a base for someone to get a low-wage job, all of which they can save since they can live on the resources above, and buy whatever they need to advance further (more education, raw resources to start businesses, whatever).”

    We (in the US) pretty much already have this covered:

    Basic nutrition: USDA supplemental nutrition program (i.e. “food stamps”), WIC, the USDA “school lunch” (free and reduced) subsidies, and so on.

    Shelter: Federal level Housing and Urban Development provide programs for publicly owned housing, privately owned apartments (to incentivize leasing to low-income tenants), and vouchers (Section 8) to supplement choice in housing. There are often similar programs at the State level.

    Health Care: MEDICAID and S-CHIP.

    Education: Provided at no cost to the student through 12th grade. Community colleges are often funded through the state and local levels and are already heavily subsidized. The “out of pocket” expenses to students are modest (by US standards) and there are federal level grants and guaranteed loans that more-than-cover the cost of attendance. (Including cost of living while studying full time, etc.) These grants and loans will also cover post-secondary schools that are more trade-oriented, as well.

    Clothing…you might have a point there. I’m not immediately familiar with any gov’t assistance programs directed at providing a minimum level of clothing. However, churches typically give out clothing for free and cash assistance programs (e.g. EIC, Supplementary Security Income, etc.) coupled with low cost thrift stores makes clothing pretty affordable to most, I believe.

  48. I used to work with people paid below minimum wage like 5$ or something when I would get 9$ something — and I made tips and tipped out [restaurant work and a bakery]

    From what I understand most of the dishwashers had cars but, worked 80 hour weeks – I think the owner had been a dishwasher where I worked as it had been established for 20 years or, so he said and one of the dishwashers confirmed – he turned round and bought the place halfway through my working there.

    From what I can tell it was a step up for most people working there – some of which could not perform basic arithmetic – people that were fleeing severe crime or other things

    I don’t know what I am trying to get at by saying this but, it was a tough thing to be aware of.

    Also 15$ is a lot to make an hour – I usually made 25$+ with tips as full service server – making drinks bus an etc..
    15$ is a lot to pay an entire staff an hour – I usually had a dishwasher as support – you don’t need to be a manager to know this but, minimum wage is kind of shitty across the board – everyone I know that has a minimum wage job has to have at least two or some other financial backing/interest to pay rent –

    Oh and @ Sigvald
    After 6 years of serving and managing – some Non Americans believe tip is included in the bill, other Non Americans don’t believe in tipping – most dreadful experience is waiting on bigots

    Personally; I would rather see tip included as pay rate or, some other means – tipping is to me often toxic even if handled properly – I’ve witnessed some abhorrent things for few dollars. I say this from both working in a bar setting and breakfast setting –

    I would try to put it to words but, try reading pursuit of attention by Charles Derber or getting a restaurant job.
    Anyway; I learned how to not get less than 15% an entire shift. Thanks to everyone who stiffed me at one point or another – sometimes it had nothing to do with insuring prompt service.

  49. @Jeff Read

    >[tipping] tends to be viewed by non-Americans as a sort of quaintly bizarre ritual at best

    Tipping is entirely routine in restaurants in the UK. Not in fast food outlets, granted, but in any restaurant where you sit down and order a meal from waiting staff a 10-12.5% tip is expected. Tipping seems to be a lot higher and more widespread in America, certainly, but it’s definitely not regarded as “bizarre” by “non-Americans”. Not in the UK anyway.

    @esr

    Great article.

  50. @DMcCunney: “But pushes to raise minimum wage where I am have more to do with better pay for low-skilled/unskilled workers who lack degrees of any kind.”

    I feel obligated to mention that I don’t think there’s anything sinister in workers asking for higher wages, but I don’t think there’s anything virtuous in it either. It’s a perfectly reasonable move, regardless of how it affects the larger economy. Economists generally assume that everybody looks out for themselves; and that’s a feature, not a bug (“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”).

    As far as low-skilled workers: they certainly exist, it’s certainly true that some are profitable (to the employer) even when paid $15/hr, it’s also true that some are not. Raising the minimum wage will help some low skilled workers, but cost other workers their jobs. My first job — other than cleaning pools or mowing lawns — was a minimum wage job at the local mall. I was in high school, and didn’t really need the money. To be honest, if the minimum wage were as high then as it is today — adjusting for inflation — I’m not sure I would have been a profitable worker, and as such, I don’t know if I would have even had the job. The teenage unemployment rate in the US is at an all time high, so it’s clear that many employers aren’t willing to bet on finding profitable teenagers. It seems to me that raising the minimum wage *at this time* would hurt low skilled workers more than it would help them, given that the unemployment rate among low skilled workers is already so high.

  51. They’re trying to convince people that 20% is “standard” in Manhattan, and maybe San Francisco.

    Source: My sister held a waitressing job a year or so ago, and she said 20% was the standard. This was the Hartford area.

  52. of the hip Brisbane suburb of Fortitude Valley have tip jars set up,

    Fortitude Valley? Hip? I would have described it as Squallid or Delinquent but each to their own.

    Actually in Brisbane most coffee stores and greasy spoons have a tip jar out. It’s rare that I see anyone put anything in them though. Usually it’s the leftover 5 or 10 cents which i understand is poor form in US tip etiquette.

  53. @ Fluffy

    I find the idea of people flinging around accusations of greed when they themselves are demanding twice as much money for the same amount of work, to be a situation so dripping in irony, I am surprised they can say it with a straight face.

    No kidding!

    And, of course, the reason people are paid $7.50/hr is that they can be replaced for $7.50/hr – most are presumably working at jobs that can be learned in one day. This is how freedom works.

  54. In the movie The Petrified Forest (1936), which takes place largely inside a roadside diner, there is a sign on the wall that says:

    TIPPING IS UNAMERICAN
    KEEP YOUR CHANGE

    I wonder if fast food restaurants made tipjars standard and dispersed the proceeds to the hourly workers if it would deflect some of the criticism. Probably not much.

  55. @nate “We (in the US) pretty much already have this covered”

    I disagree. The programs you mention mostly have heavy restrictions, with the effect that trying to use them as a basis for improving your life means you end up disqualifying yourself. In addition, the effort needed to sign up for and obtain the benefits is substantial, leaving less time for things like work or bettering oneself through education. Not to mention all the effort being put in by politicians to cut such programs. No, the US system of support programs is not even close to providing what I mentioned in my earlier post, and in fact is working against the primary concept, which is that what workers earn should be decoupled from basic humanitarian needs.

  56. There is something slightly hazy about the concept of how much “value” a particular worker added. When the end result is result of the co-operation of many workers all doing different things, how can you allocate the price charged to the customer among all these individuals?

    This includes minimum wage restaurant workers, management of the franchise, and everyone who works in head office: accountants, lawyers, people to make advertising, business analysts etc. If any one of these groups were removed, the business could not function at all.

    This does not mean that, since the marginal return of, say, the restaurant workers is the whole revenue, then the revenue of the business should all go to the restaurant workers. The theory is that an individual is paid what the business would lose if they did not work there, i.e. the marginal return of the *last* individual hired. (In practice, it is not a fixed return; it factors in (a gut perception of) risk.))

    Suppliers are included as well. Without beef farmers, there could be no hamburgers. How much are they to be paid?

    I fear that the distribution is based too much on relative bargaining power (simply, how long a party can wait without agreeing to a deal) and cultural conceptions of how much certain groups deserve to be paid. Suppose all the beef farmers cartelized so that there were few suppliers to negotiate with. Furthermore, suppose it was the law that you had to study agriculture for many years at university to be allowed to be a beef farmer, that university places were limited and expensive. Suppose the regulatory barriers to starting a beef farm were so great that they hardly had any competition. Then you would expect beef farmers to be well paid. Nonetheless, the economic structure of production would be no different and they would need no more talent than they do currently.

    The answer to low paid restaurant workers is to start their own restaurants. However, maybe they can’t get planning permission from the local authorities. Maybe it would be argued that building a new restaurant would cause too much car traffic and the roads wouldn’t cope. This is an example of how one aspect of government control (state-owned roads) can lead to another. Forcing restaurants to pay their staff more would be a logical extension of this.

  57. @Sigivald:
    >The rest of the US considers 15% “standard” for standard-grade service.

    I’ve generally heard 15%. I generally tip at the most easily calculable percentage between 15 and 25%.

  58. @Joseph: “The answer to low paid restaurant workers is to start their own restaurants. However, maybe they can’t get planning permission from the local authorities. Maybe it would be argued that building a new restaurant would cause too much car traffic and the roads wouldn’t cope.”

    Forget local government permissions. They would never get that far. Before they could do anything, they would have to secure financing. Starting a new restaurant takes a substantial amount of money. They won’t have it. Who would lend it to them? No one in their right mind, because they have no track record or demonstrated knowledge of the business. Being a waiter, busboy, or the like does not qualify you to open and run your own place.

    If they were to somehow take over an existing business, they would fail miserably, because they wouldn’t know how to run it.

  59. Pingback: Fixing the fast-food strike | The Freedom Watch

  60. Up here a Tim Hortons franchise (the Dunkin’ Donuts of Canada) nets about $300,000 a year so a local health authority in Windsor Ontario bought out the hospital lobby Timmys at three hospitals to raise some money for health care. They all lose money now. The math doesn’t work when you’re paying the union workers $26/hr instead of the usual $10.25.

  61. @ Joseph

    There is something slightly hazy about the concept of how much “value” a particular worker added.

    You start from the other end. It is a matter of how much staff you need at different times of the day and different days of the week. Fortunately the staff requirement goes up with expected number of customers, but the trick is using enough staff to provide good service but still make money.

    …how much certain groups deserve to be paid.

    That isn’t how it works in anything approaching a free society. Businesses hire workers to try to make money. “deserve” doesn’t enter into it.

  62. @Joseph
    The problem with that analysis is that people are not paid what they are worth, rather what they are worth sets an economic upper limit to how much they can be paid. Everything else is determined by supply and demand. Lots of people have little skill but super high demand (I’m looking at you Kim Kardasian), lots of people have lots of skill but super low demand (I’m looking at your mechanical watch makers). Lots of things are worth a lot but lots of people will do it on the cheap (web sites, meet Pakistan) I’m sure there are things are not worth much, but the maximum value can be extracted by the tiny few pepole who can do it, but I can’t think of an example.

    The network of pricing that you are talking about is very effectively managed by the free market, and government regulation almost always screws it up. The USSR tried to manage all the network of pricing centrally, needless to say they screwed it up, and a free market, denominated in cigarettes and vodka arose to fill the gap.

    It is an individual’s responsibility to make himself or herself valuable, and keep themselves valuable. If people spent as much time doing that as they do whining about how unfair the world is we’d all be richer.

    Some people are legitimately in need of compassion and help. However, anyone who uses the word “entitlement” goes to the back of the line as far as I am concerned.

  63. @Joseph: “There is something slightly hazy about the concept of how much “value” a particular worker added. When the end result is result of the co-operation of many workers all doing different things, how can you allocate the price charged to the customer among all these individuals?”

    Mostly, you can’t. You allocate overall labor as a cost of doing business, along with rent, utilities, equipment, taxes and the like.

    But a common metric for how well an enterprise is doing is to divide total revenue by number of employees, and get a revenue per employee figure. Obviously, higher revenue per employee is better. You want to produce the highest revenue with the least number of employees you can, and if your employee count is significantly higher than a competitor with revenue similar to yours, you are arguably overstaffed and doing something wrong.

    But like most other things, it’s relative. Different industries will have different ranges that will be considered acceptable, and what you look at is the relative position of a particular company in its industry. The bar in terms of revenue per employee will be set far higher for a high tech outfit than for a fast food chain.

  64. @Jay Maynard: “The world does not owe anyone a living. If you want a European cradle-to-grave nanny state, you know where to find it.”

    You’re entitled to that opinion, though I don’t share it. I believe in second chances and helping those less fortunate than myself. As I said in my first post: “If we want both a free market controlling resource assignment, and a humanitarian system in which everyone has the necessary resources to be out of poverty and has opportunity to advance themselves, then we need a system that decouples the two.” If you don’t believe in the second criteria there, then there’s not a lot of point in further discussion.

    I wouldn’t be surprised, however, if you actually do support that second criteria, in areas outside government; charity through non-profit groups, for instance. I find that the vast majority of people think it’s fine to redistribute wealth as long as the government isn’t the redistributor. If there was a functioning system of non-government agencies providing what people need to live and improve themselves, I’d support that just as well as a governmental solution. The problem is that no such system exists, because there’s not enough participation. The one thing government brings to the picture that NGOs cannot is full participation in the system (if properly designed).

    As for existing “nanny states”, there are none doing what I suggested: providing minimal living standards freely while leaving the rest of the free market intact. Those that come closest to the former severely restrict the market, while those with the freest markets provide very little to the poorest.

    @Fluffy “It is an individual’s responsibility to make himself or herself valuable, and keep themselves valuable.”

    Agreed. But how do you go about making yourself valuable? Working hard leads to experience, which is valuable; but if you can’t earn a living while getting that experience, you’re stuck at the bottom. Educating yourself is valuable, but that assumes you can afford to take time away from earning a living plus afford the cost of the education. Building up debt while you work to improve your value is viable only as long as A) you can find someone willing to let you borrow and B) you can find good enough employment to pay back the debt. That’s why I believe the best solution is to decouple earning a (most basic) living from the need to improve value as a worker; once you do that, everyone is able to spend the time and effort to improve without being stuck in a situation where it’s just not affordable.

  65. @Skip
    > I wouldn’t be surprised, however, if you actually do support that second criteria, in
    > areas outside government; charity through non-profit groups, for instance. I find
    > that the vast majority of people think it’s fine to redistribute wealth as long as the
    > government isn’t the redistributor.

    I don’t think that word (“redistribute”) means what you think it means in this context. If it’s not a government taking wealth by force and apportioning it, but is instead voluntary, then it’s just charity. You seem to be under a misapprehension that those of us against the former are also against the latter.

  66. @Skip: “I find that the vast majority of people think it’s fine to redistribute wealth as long as the government isn’t the redistributor.”

    Because when the redistribution is done by a non-government organization, you have a *choice* about where your contributed wealth is redistributed, and what causes you will support.

    When the government does it, you have no such choice. Your wealth is collected in the form of taxes you do not have an option about paying, and allocated as the government sees fit, often to places you don’t agree with.

    The other issue is that redistribution of wealth requires that you *have* wealth to redistribute, and too many government schemes to do so have a side-effect of impeding *creation* of wealth.

    “If there was a functioning system of non-government agencies providing what people need to live and improve themselves, I’d support that just as well as a governmental solution. The problem is that no such system exists, because there’s not enough participation.”

    There is a functioning system. The problem you seem to have with it is that you don’t see it providing the level of support you think desirable to the causes you think worthy. You might ask *why* there isn’t enough participation, and the answer might be that too many people do not see the causes you think worthy as places their contributions should go. The question becomes why they feel that way.

    Government tax policy permits you to deduct charitable donations, largely because the things the charities do are things that might otherwise be funded by taxes. It might be instructive to look at charities which are tax deductible over all, and see which get what levels of donations. That might be a useful guideline to what people will *voluntarily* support.

    Since what you want to do is help enable people to make a better living than they can now, the best efforts I can see will focus on providing things they can do that will earn a profit, and instead of donations, contributions are investments, and if the enterprise does well, investors will see a return.

  67. Skip:

    As I said in my first post: “If we want both a free market controlling resource assignment, and a humanitarian system in which everyone has the necessary resources to be out of poverty and has opportunity to advance themselves, then we need a system that decouples the two.” If you don’t believe in the second criteria there, then there’s not a lot of point in further discussion.

    I don’t believe in the second criterion as you formulate it. If you were to say it as “a system in which everyone has the opportunity to lift themselves out of poverty and advance themselves”, then I’ll buy it. Your formulation is nothing more than “from each according to his abilities, to each according to his needs”, and we all know that ends in the gulag.

    You have to have the element of the person lifting themselves out of poverty, or else you’re just handing them a living without their having to work for it. The moral hazard there is that they learn they will be provided for even if they don’t do a lick of work in their lives, and that destroys the value of work. Indeed, it’s easily argued that that’s the problem with today’s urban welfare underclass: they get their basic needs provided for, with no need to work, and that leaves them with lives full of emptiness – which they fill in all kinds of ways that are destructive to themselves and to society.

  68. We could go back and forth forever on the best way to give people a chance at a better life, and I doubt either side would persuade the other. So I’ll end with this: if a society has the potential to distribute wealth in such a way that all its citizens are able to survive and have the opportunity to thrive, I believe it’s incumbent upon that society to find a way to fulfill that potential. Individual citizens play a large role, certainly, but society needs to have structure such that no group of citizens are deprived of that survival and opportunity to thrive. I’d consider supporting any system consistent with that belief. It’s not hard to look around and find where our current structures fail; the tricky part is suggesting solutions.

  69. @Jay Maynard
    “Jeff, the problem with unconditional basic income is the one Margaret Thatcher pointed out: what do you do when you run out of other people’s money to spend? ”

    The GDP per capita of the USA is $51,688 (2012). An average family with two kids could get $200k if all was distributed equally. The total taxation as percentage of GDP was approximately a quarter of GDP in 201, so that would leave the average two kid family with $150k/year.

    However, the population in the USA below poverty line is 15.0% (2011). This should give some leeway to improve income at the lowest end. Especially as the only OECD countries doing worse are Turkey, Mexico, and Chili.
    https://en.wikipedia.org/wiki/List_of_countries_by_income_equality

  70. I’m sure there are things are not worth much, but the maximum value can be extracted by the tiny few pepole who can do it, but I can’t think of an example.

    Pet psychology? Auditing in that sense?

    if a society has the potential

    There is no such thing as society, there is just emergent behavior from many individuals. Declaring that an aggregate has its own independent existence leads immediately to both the forcing of individuals’ participation regardless of their own desires and the appointment of some individuals to positions of power over other individuals, and it’s rarely long before those positions are coopted by the power-hungry at the expense of all the “members of society” who are forced to obey them.

  71. However, the population in the USA below poverty line is 15.0% (2011).

    Before taxes (including refundable tax credits) and government transfer programs.

  72. @Christopher Smit
    That is all you can bring up? An unquantified correction to smear the statistics. So I assume your position is there is no poverty in the USA?

  73. …if a society has the potential to distribute wealth in such a way that all its citizens are able to survive and have the opportunity to thrive…

    That condition is the condition of a post-scarcity economy. If we were at that stage, this entire discussion would be about as academic as one about what would happen if the Vikings had succeeded in colonizing the New World. We’d be wondering how we might allocate goods if they were ever in short supply, in between our talks about what superpowers we figured out how to give ourselves with our 3D printers and who managed to to beat level 5 of holodeck karate.

    I get the strong impression that a large part of the left believes we’re at that stage. I believe we’re not, with about the same certitude that I believe in gravity. The math, combined with what I know of the assets currently accessible by humans, simply doesn’t support that claim. The simplest theory I can construct that explains this state of affairs is that that large part of the left doesn’t understand the math, or doesn’t understand that different assets have differing rates of return, and is simultaneously distracted by the apparent unfairness of asset concentrations fueled by a religious attachment to just world theory.

  74. @Christophee Smith
    “There is no such thing as society, there is just emergent behavior from many individuals.”

    All humans have lived in organized groups since before we even can call them human. The collective word for all such groups from small bands to mega countries is “society”. It is silly to claim there is no such organisation of human life.

  75. The claim that humans choose to live in organized groups doesn’t refute Christopher’s assertion that it’s emergent behavior from many individuals. In fact, it strengthens it: it stipulates that it is a choice. It also in no way refutes the right of any of those individuals to choose otherwise. It furthermore requires recognition that those individuals have influence over the rules everyone chooses to commit to. If one or more of those individuals doesn’t like the rules so far…

    Can we move past social contract 101 stuff here please?

  76. @Winter
    > However, the population in the USA below poverty line is 15.0% (2011). … the only OECD countries doing worse are Turkey, Mexico, and Chili.

    Here is a great article on poverty in the OECD from that Neo Con Conservative Rag, The Huffington Post:

    http://www.huffingtonpost.com/howard-steven-friedman/5-oecd-countries-with-the_b_877368.html#s290780title=5_Highest_Poverty

    “Measuring poverty rates is mixture of art and science, a combination of objective measurements and subjective decisions.”

    Which is a social science way of saying “It is all bullshit.” And…

    “Someone who is considered poor in the United States may be considered wealthy in another country based on their assets. There are global measures of extreme poverty but those measures aren’t relevant when discussing middle and upper-income countries.”

    When people talk of the high poverty level in the USA it is just a sleight of hand. To most people poor means can’t feed your family, can’t clothe them, can’t provide housing for them or basic medical care. In America poor means “drives an old car”, “Doesn’t have a XBox and a PS3” or “is locked into a crime ridden, utterly non functional school.”

    America’s poor have four really serious problems: 1. They are obese from eating far to much of the food that the Great American system has made cheap and abundant. 2. They have dreadful schools that the government forces them into. 3. They have an illegitimacy rate through the roof because the government pays girls to have babies. 4. They don’t have jobs, and don’t need to because it pays as much to sit on their butts as to begin the process of entering the workforce. 5. Their societies are overwhelmed with drugs and crime

    These problems are mostly caused by the very systems put in place to supposedly help them.

    The idea that somehow the poor in America are in anyway equivalent to the poor in India is ludicrous.

    The objective measurements are the well grounded statistics such as the wealth distribution within a country. Less objective data like cost-of-living rates or price-purchase-parity adjustments are often incorporated as well. Since poverty can often be context-specific, the subjective decision of how to define poverty is a key challenge in comparing poverty rates across countries.

  77. @ Skip Franklin – “the tricky part is suggesting solutions”

    The most dangerous conceit of the Left is that they think there really is a “solution”, and that it should be imposed, and that it will “work”; and, by golly, try-try-again no matter how many dead bodies it takes.

  78. Winter: “The GDP per capita of the USA is $51,688 (2012). An average family with two kids could get $200k if all was distributed equally. The total taxation as percentage of GDP was approximately a quarter of GDP in 201, so that would leave the average two kid family with $150k/year.”

    The flaw in this is that you assume GDP would remain constant after the imposition of such a system. That is very much yet to be proven.

    Fluffy: “Five is right out.”

  79. I agree in principle with Skip Franklin, Jeff Read and others: there is a reasonable argument to be made that government should should supplement the income of poor folks – including unskilled workers – so as to ensure a minimally comfortable standard of living. Doing this would avoid a number of social pathologies, and we should not expect “voluntary charity” to fulfill this role, any more than we expect to fund the justice system or national defense through charitable contributions. A tax-financed basic grant or an EITC-like system are reasonable choices here, with very mild incentive properties.

    Among other things, this would make the arguments favoring minimum wages (and other kinds of burdensome labor regulation) simply moot. Indeed, even “welfare” as we know it would largely disappear, as unemployment woud fall and mostly anyone of working age would be expected to be either working or in education.

    And yes, income redistribution is quite costly in economic terms, but this would not be a huge amount of redistribution. Indeed, it wouldn’t even be a “basic income” in the conventional sense.

  80. The best way for the government to “supplement the income of poor folks – including unskilled workers – so as to ensure a minimally comfortable standard of living” is NOT to hand out money it doesn’t have, but to just get out of the friggin’ way.

    Cut back on the thicket of regulations (healthcare, farming, zoning, finance, environment, etc., etc.) that often raise costs for little or no good. Stop spending money for the purpose of raising food costs (a.k.a. farm subsidies). Stop “protecting” people from cheaper imports. Don’t do idiotic things like destroy a bunch of cheap and serviceable used cars to “fight global warming” when it makes the remaining used cars more expensive for the people who can least afford them. Let people and businesses keep more of their own money.

    I could go on all night, but you get the idea.

    One exception: they could also tighten the labor market at the bottom, which would increase demand and raise wages, by actually enforcing our borders. What a thought. But of course that idea is seen as old-fashioned, if not racist… even though it hurts unskilled black workers more than just about anyone else.

  81. @PapayaSF: “One exception: they could also tighten the labor market at the bottom, which would increase demand and raise wages, by actually enforcing our borders. What a thought. But of course that idea is seen as old-fashioned, if not racist… even though it hurts unskilled black workers more than just about anyone else.”

    Dream on. We’re all in favor of competition when it benefits us in terms of lower prices and increased choice. We are less thrilled when *we* are expected to compete.

    I see variants of this demand elsewhere, often from union members because “Those immigrants will work cheaper than I’m willing to and take my job!” I see a different variant on the high end of the market, with engineers unhappy at H1B visa holders who they see as threats to their jobs because the H1B visa holders will work cheaper. That’s called competition, guys. Deal with it. If someone can do your job as well as you can and is willing to do it for less than you, why should a potential employer pay your rate?

    As a general rule, work flows to where it can be done cheapest. As another general rule, value is relative, and something is worth what someone else will pay for it, including the worker’s labor. Attempts by unions and government regulation to get around that at best delay the inevitable. The union paradigm is denial of service though striking, but that only works if the employer has no alternative to the striking workers. Increasingly, they do, up to and including relocating to a place there is no requirement they hire union labor. Government regulation is hard to enforce when employers can pay undocumented workers off the books, or when the work can be done from anywhere (like programming), and can be contracted out overseas.

    I see a lot of the former where I am, as NY has a large Hispanic community and a lot of illegal immigrants. The get jobs as things like groundskeepers, casual laborers, and nannies for below minimum wage, and generally manage to send money back home. Or they work in the food trade as busboys and dishwashers, and work their way up They don’t *want* to be paid on the books, because that would make them visible and subject to deportation.

    Are they taking jobs away from poor blacks? If the poor blacks in question had any interest in the jobs the immigrants did, perhaps. But the black communities involved where I am lack that interest. Most will see such work as beneath them. Young black boyz in the hood have dreams of being sports or hip-hop stars, and the career path otherwise is selling drugs. They’ll likely be in jail, in the hospital, or dead in 5 years, but thinking ahead isn’t something most do. They see their drug-dealing friends with gold chains, the latest hot sneakers and cash in their pockets, and want to do likewise. Being a gangsta thug is cool. Busting your ass for shit money in hopes of bettering yourself isn’t. They also likely join whatever gang owns the turf where they live. This is a necessity for simple safety. If you are down with a gang you have some level of protection. If not, you are fair game. Any black guy (or girl) who tried to get one of the jobs the Hispanic immigrants do would get all sorts of grief from their community for *wanting* such jobs and would be unlikely to attempt to get one. (And if a poor black did try to get one of those jobs, the potential employer would likely have strong reservations about the applicant’s ability, motivation, and trustworthiness – reservations which would unfortunately be merited.)

    The fundamental problem is that the number of jobs available for unskilled workers is steadily diminishing, and the jobs that are available pay poorly because no one will pay well for unskilled labor. The folks who get jobs working off the books for below minimum wage get the jobs because they are willing to work for those wages, and because what they do isn’t worth minimum wage to those who hire them.

  82. @guest
    Doing this would avoid a number of social pathologies

    This is a nice theory except for one slight problem. In the real world it has the exact opposite effect, as predicted.

    @PapayaSF
    One exception: they could also tighten the labor market at the bottom, which would increase demand and raise wages, by actually enforcing our borders.

    What? Reduce supply to increase demand? What?
    All that will do is raise prices all around which will effect the marginal workers the most, this was tried with many commodities in the ’20s and ’30s with disastrous results.

    First there is the slight problem of justifying state intervention in something that it can only fuck up and never improve, then justifying state intervention at all.

    — Foo Quuxman

  83. @fluffy girl
    I was talking about the Ginny coefficient. The distribution of income in the USA is quite unequal. Of the OECD countries, only Turkey, Mexico, and Chili have a more unequal distribution.

    @Jay Maynard
    The Germans seem to manage. And they can compete with the Chinese.

  84. @winter
    >I was talking about the Ginny coefficient.

    Who cares about the Gini coefficient? “Fairness” is not, in my view, an goal all to itself. A few things really matter. 1. Do the poorest in society have the ability to provide for their most basic needs? 2. Does society provide an economy where the energetic, smart and hard working can progress so that they are rewarded for the fact that they make life better for everyone?

    “Fairness” is an unquantifiable distraction. It is unfair that Chicago has half a million people who sit on their ass all day doing nothing, while I bust my butt to pay the taxes that fund their lethargy and profligacy. It is unfair that the poor in America whine about their low entitlement levels on their fancy smart phones, driving their air condition cars to the drive thru to stuff their face with a 2000 calorie meal, while the poor in India dig through the garbage to find a few calories to feed their starving children and hold a celebration when they catch a rat to cook.

    In fact it is vacuous political theater to use the word “poor” as a description of both groups. Compared to Steve Balmer I live in grinding poverty.

    Gini is macroeconomics, and macroeconomics is mostly bullshit. Income should be unevenly distributed because contribution is equally unevenly distributed. Compare Steve Jobs and Tyrone the guy who sells badly cut cocaine on the street corner and who kills five year old kids who get in his way if you doubt that is true,

  85. @Winter: “The Germans seem to manage. And they can compete with the Chinese.”

    Referring to manufacturing? Germany *doesn’t* compete with China.

    China’s manufacturing prowess is based on a pool of cheap labor relative to developed countries, and it can make and export fungible commodities with low margins were price is the determining factor in the purchase decision and you rely on volume to make money. China has the lowest costs (though that’s changing), and can make such things profitably.

    Germany exports primarily luxury goods where price is not the deciding factor in purchases, and they can charge a high enough price and make a high enough margin to cover much higher labor costs.

    They are operating in different areas of the market and do not directly compete.

  86. The most dangerous conceit of the Left is that they think there really is a “solution”, and that it should be imposed, and that it will “work”; and, by golly, try-try-again no matter how many dead bodies it takes.

    Indeed, those of us who understand reality know that there are no “solutions”; just tradeoffs. “Progressives” believe that they know the right formula by which various components of “good” and “bad” can be reduced to a scalar by which they can measure “progress”.

    But different people value things differently. I value the comfort of air conditioning on a 100°F day more than I value the work I do to pay for it. The manufacturer of the air conditioner and the electric utility value my money more than their contributions to my comfort. We each are left with more value (as we each assign that value) after the transaction than before. The Left cannot see this, because they believe every transaction is zero-sum (according to their One True Value system). Ironically, they’re the same people who teach cultural relativism. Go figure.

  87. Why do some among us favor income redistribution and anxiously yearn for government to be the instrument of coerced (or forced) wealth confiscation?

    Here is one possible explanation. In a longstanding and affluent society, a lot of parasitic dead weight tends to accumulate on the back of the productive elements of society. The never-ending growth of government, at all levels, is one manifestation of this. But subsidizing non-work among the “poor” is fast becoming the largest cohort of national economic suicide.

    Should a period of scarcity arise once again (think ice age), then there’s not going to be a whole lot of gravy for the dead weight. So if you think you might be in the dead weight category, you’re probably inclined to vote for Big Brother government and hope that misery is egalitarian.

  88. @DMcCunney: A tighter labor market that raised wages at the bottom wouldn’t cure all social pathologies, but it would help. I don’t advocate this regarding software engineers or other skills, just for unskilled labor.

    @Foo: It would raise some prices, sure, but that would not be catastrophic. There was a period in the ’90s when starting wages in some areas rose to higher than minimum wage, and the poor didn’t suffer. Supply and demand was working. Unfortunately, Congress jumped in and increased the minimum wage.

    This would also reduce the need for lots of welfare expenditures (for both natives and immigrants).

  89. Skip Franklin says (repeatedly): “If we want both a free market controlling resource assignment, and a humanitarian system in which everyone has the necessary resources to be out of poverty and has opportunity to advance themselves, then we need a system that decouples the two.”

    So, Skip, how do you propose to fund the latter without destroying the former? A “free market” is an uncontrolled market. Any form of taxation, even hidden forms like diddling the money supply, exerts control over the market.

    You express two incompatible goals. It’s very Zen but out where people need to pay the rent and buy groceries, it’s a sky-blue-pink square circle.

    Somebody’s got to pay for that “basic life” (really actually pay, not print more money and thus rob everyone). Somebody’s got to define what a basic life it. The first group will be exploited. The second will be the exploiters. And by and by, the only other group will be the people living that “basic life.” Toss democracy at it and what you get is Mencken’s, “Every election is a sort of advance auction of stolen goods,” in which the group doing the defining offers to take more from the group with the money in order to provide a better basic life. Do you believe this to be a desirable outcome? Do you think it is stable over the long term? Does it offer a disincentive to success and reward complacent, low-achieving conformity?

  90. @PapayaSF: “@DMcCunney: A tighter labor market that raised wages at the bottom wouldn’t cure all social pathologies, but it would help. I don’t advocate this regarding software engineers or other skills, just for unskilled labor.”

    Save that it simply would not work.

    I mentioned people like engineers along with union workers in my comment, because the underlying notion is the same: “Close the borders to protect me from having to compete on price with people willing to work cheaper than I do.”

    The problem is, you *can’t*. As mentioned, work flows to where it can be done cheapest, and all things like union activity and government protectionist legislation do is delay the inevitable. And as also mentioned, value is relative, and things are worth what other people will pay for them, including the worker’s labor. I mentioned the Hispanic illegal immigrants in my area, getting paid off the books at below minimum wage rates. (But since taxes are not withheld, their take home pay may be higher than an on-the-books minimum wage worker.)

    If you could somehow stop the illegal immigration, do you suppose a pool of jobs at higher wages, like government mandated minimum wage would magically appear? I don’t. The folks employing these illegal immigrants off the books at less than minimum wage are doing so because the work they want done probably isn’t *worth* minimum wage to them, and their response to being unable to hire illegal immigrants off the books will likely be “do without.”

    Unions attempt to maintain high wages for members by limiting supply: you must hire a union member, at union rates, to do the work that union does. That works only if the employer has no alternative to hiring a union member, but increasingly, they do.

    Government regulations attempt to enforce a higher wage at the low end by requiring employers to pay a mandated minimum. Again, it works only if the employer has no alternative. But they do: hire off the books at below mandated rates, or simply don’t hire at all.

    Your scheme assumes employers will have no choice but to pay more for help. I don’t think that’s true.

  91. >>Your scheme assumes employers will have no choice but to pay more for help. I don’t think that’s true.

    No, if the $15 minimum wage were to go through, one will start seeing that conveyer belt serving system that ESR mentioned in his post. Three people on a shift, one at the cash register, one in the back feeding the machinery and one cleaning tables and restrooms and taking out the trash. Might automate that last one as well, along with much of the product loading and make do with two.

    If the price of a burger goes up 25% at the more automated joint and 100% at the one with traditional staffing, there will be customers. Probably the automated fast food outfit will be profitable at around the same or lower level than the current fully staffed micky d’s after the initial capital investment in design and production for the automated kitchen tools. The first few off the line will be pretty expensive, and it will take a while to get the bugs really out so that it just sits there and runs with minimal maintainance and tending

    The ones who will win are the machinery manufacturers, and the repair staff on 24-7 two hour or less call. And in a smaller way, the two people still working at the burger place, who are getting $20 instead of $15 because you need higher quality people to work that job.
    Jim

  92. @Jim: “No, if the $15 minimum wage were to go through, one will start seeing that conveyer belt serving system that ESR mentioned in his post. Three people on a shift, one at the cash register, one in the back feeding the machinery and one cleaning tables and restrooms and taking out the trash. Might automate that last one as well, along with much of the product loading and make do with two.”

    You won’t get it that low. If nothing else, at peak hours, you’ll need more than one working the registers. You can, if you spend the money, automate a chunk of actually preparing the food. Machines can fill and cap cups, dunk potato slices in the deep fryer, and flip burger patties.

    One thing I expect to see whether the $15 rate goes through or not is more automation in the payment setup. The Lowes building supply store near me has done that: there are still registers operated by human beings, but there are also a batch where you take your purchase to a station, scan the bar codes on the merchandise and bag it, the register calculates the total with tax, and you swipe your credit or debit card to pay. There’s a human standing by to help, but it’s likely one person to cover six stations, instead of six checkout clerks.

  93. @Max: “I feel obligated to mention that I don’t think there’s anything sinister in workers asking for higher wages, but I don’t think there’s anything virtuous in it either. It’s a perfectly reasonable move, regardless of how it affects the larger economy. Economists generally assume that everybody looks out for themselves; and that’s a feature, not a bug (“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”).”

    I agree. We all act in what we believe to be our own best interest, and any worker will certainly *want* to be paid more and likely will ask to be. The issue arises when there is lack of realism about how much the job is worth. Low skilled/unskilled workers aren’t the only ones with problems. Technological advances are creating steadily increasing structural unemployment, as whole classes of jobs that *had* been considered “skilled” can increasingly be done by machine. A lot of folks are effectively being told “What you do simply isn’t *worth* what you are being paid to do it.”

    Decades ago I had a conversation with the mother of a woman I knew. Mom was a skilled Linotype operator, who had made $400/week at her peak, in the days when $400/week was very good money indeed. But hot type was on the way out, being replaced by cold type (phototypesetting), and jobs for linotypists were few and far between, She angrily blamed corporate executives who “spent 6 months of the year on safari in Africa” for her woes. I said “Imagine I run a typesetting business using the new photo-setting equipment. I can hire a kid out of high school who did well in typing class and has good speed and accuracy, spend a couple of weeks teaching her to use my gear, then pay her $150/week to set type for me. What makes *you* worth $400? *Nothing.* You need to upgrade your skills, become expert in the new technology, and look at becoming a supervisor in such a shop.” Linotype use had been declining for years, with only large newspapers the remaining users, but she had been oblivious to changes in her industry until they bit her. Her skills had become irrelevant as new technologies were introduced to do the same thing faster and cheaper, but she didn’t notice till she no longer had a job.

    On a more personal level, I’ve been a computer guy for decades, but was once a designer and print production guy. I have memories of using drawing boards, T-squares, eXacto knives, rubber cement, non-reproducing blue pencils and the like, assembling typeset galleys on a board the printer would shoot to make the plates from which what I did would be printed. Mechanical artist is another skilled job that has been automated out of existence. Everything now is done on-screen in a DTP program, and the output is a PDF the printer feeds to an image setter to make the plates. The first time I used DTP for a project it was a revelation. I don’t missing doing mechanicals at all.

  94. @TomA

    Why do some among us favor income redistribution and anxiously yearn for government to be the instrument of coerced (or forced) wealth confiscation?

    The late Ric Locke often wrote about how, in the Ancestral Evolutionary Environment, tribal hunting/gathering societies developed under the assumption that there is just so much Stuff to be had in any given area.

    A good strong leader might help the tribe drive away competing tribes, and thus get more Stuff for our tribe. A good hunter (do note that the skills for hunting game and killing competing humans have a large overlap) might bring in meat more quickly and efficiently, but the flora in a given area can only feed so much fauna, so the idea that any human action can increase the total amount of available Stuff (other than perhaps indirectly, by sacrificing someone to appease the gods) is just unthinkable.

    If you get more Stuff, that means I get less Stuff. The belief in a zero-sum economy is probably in our hardware, or at least our firmware. Western Civilization is software that we have to load on top of that firmware in order to access the productivity gains from the agricultural, industrial, and information revolutions. Leftism, fundamentally being tribal hunt/gather mentality, assumes that all this Stuff Just Is, and it’s unfair for The One Percent to have so much of it. It’s like thunking back to 16-bit BIOS calls rather than implementing everything in the kernel, and only being able to access the first 8 gig of a hard drive as a result.

  95. That is all you can bring up? An unquantified correction to smear the statistics. So I assume your position is there is no poverty in the USA?

    I see Jessica already took your soapbox apart, but to reply directly: Your strawman is, in fact, nearly accurate: My position is that there is almost no poverty in the USA. It certainly does exist, but nowhere at levels of 15% of the population. More specifically, as I mentioned, you’re using a metric that seems almost custom-designed to inflate the poverty numbers of the United States by ignoring the differences in the way the US and most European countries handle accounting for government handouts.

    Doing this would avoid a number of social pathologies, and we should not expect “voluntary charity” to fulfill this role,

    Why shouldn’t we? Why is charity by force morally superior to voluntary charity, not to mention the much higher overhead forced charity has demonstrated over the last half-century?

  96. @Salamandro, to my Eastern European mindset, unskilled fast-food workers are NOT supposed to live the kind of normal life (i.e. an own apartment, kids, family) skilled, learned workers who have a proper trade high school education and a licence for a real trade have, because then where is their advantage? They are supposed to live with their parents and not think about moving out or reproducing until they got a real job. Who the hell came up with the idea that unskilled minimum wage laborers can be somehow middle class? I see – mainly from the US – weird analyses saying the minimum wage does not pay for an apartment rent and utilities – who ever came up with the idea that minimum wage laborers should rent anything more than a room? Or if they have kids that should be seen a mistake, not something society should cater for. (Yes, this is a little bit social darwinist. But the Earth is overpopulated anyway, so putting off reproduction until one has a decent job is not really a bad idea.)

    I mean, to me some Westerners act all surprised that there is a such a thing as a lower class and being there one does not live like the middle class, for example one only rents a room or even just a bed. Well, isn’t that something to be expected – what else makes the lower class lower?

    Ultimately, adult people, 25+, should have a trade and not flip burgers and make way above the local minimum wage.

  97. > Ultimately, adult people, 25+, should have a trade and not flip burgers and make way above the local minimum wage.

    I agree. First it is to be noted that educated and skilled people will always draw more salary than their unskilled peers because the skill has a value and demand. Rarer the skill, higher the demand and greater the pay.

    Secondly the quality of life you lead is not just about how much you earn, but how you prioritize your spending in life. Quality of life is more than just how much money you have. A poor person living in dignity and saving and carefully investing his money, while living a frugal life has a better quality of life than a temporary jackpot winner who spends all his money gambling, drinking and eventually going back to his old ways.

    The problem with poor people (as far as I can see) is that they are unable to save enough to make good investments and even if they get an opportunity they are not educated enough to utilize their good fortune.

    The solution is in education. Quality basic education. I believe quality education up to a level, where you can get a decent job must be made affordable to every class of society and from there, it is up to the individuals to shine or excel in their chosen fields.

    ( In India, most of the workers in restaurant chains/fast food/retail are all from the poor urban classes who live in slums or at least low income tenements and their quality of life actually is better with such jobs, rather than working as domestic helps in households. I cannot imagine a middle class educated youngster taking a full time job in these industries, except probably in five-star chains as a management trainee )

  98. @Shenpen: Part of the issue is that Americans have become accustomed to living far beyond their level of production because of very easy credit over the last couple of decades. This has accelerated a trend of adults’ living alone even as students when in past years they would have had roommates or perhaps rented a room or small apartment from a larger family. This phenomenon is also responsible for much of the hand-wrought-over statistics demonstrating falling “household” metrics such as income; the average “household” size has shrunk dramatically over the last 30 years, and somehow it’s shocking and appalling that one person doesn’t make as much as two.

  99. Not to beat an absurdity to death; but in the United States, our “poor” are literally dying of obesity-related medical conditions. Once upon a time, “poor” was synonymous with near-starvation. Now it means, only one auto and TV.

  100. Eric is perfectly correct to say that a cooperative of workers couldn’t run its own fast-food franchize and pay itself $15 an hour. But his jump from there to his statements about the minimum wage involves a fallacy of composition. One single franchize paying $15/h would immediately get outcompeted by others that do not. But a minimum wage of $15/h would apply to every work contract in the economy, eliminating the element of individual businesses outcompeting each others over wages.

    Now, I’m not saying there’d be a free lunch for workers if the US government were to double the minimum wage like that. The supply-and-demand model from economics 101 predicts that employment of minimum-wage workers would fall, to an extent consistent with the number of workers affected and the elasticities of supply and demand for the labor market as a whole.

    Since these elasticities can at least in principle be measured econometrically, I wouldn’t be surprised if somebody had figured out and published them somewhere. Plugging the observed elasticities and the observed wage distribution into the supply-and-demand model would be the fallacy-free way of predicting the outcome.

    I have no strong feelings on how the numbers ought to turn out, and whether the amount of disemployment would be worth the raise for the workers who keep their jobs. But I’m rather curious how the numbers do, in fact, turn on. Does anyone have pointers to a paper on this matter from some reputable econometrist?

  101. @hari yes, education, but specifically trade school education, I think today it is fairly obvious how the trade school and intership based German model works better than the everybody-becomes-a-barista-with-an-art-degree kinds of, well, not models but bubbles, trends, temporary fashions.

    I think such national strategies are often based on who the ruling elites are, Germany’s luck is that the elites are often STEM, in Hungary they are exclusively lawyers (and almost no economists) and it seems sometimes that America was taken over by humanities educated elites who not only believe in Rawls or Dewey but actually wrote term papers on them. I think this is the reason for the sometimes strange “official” or elite American attitudes to education: partially treating it as an almost sacred thing, like a Mason would, with a strong sense of purity/sacredness, and partially focusing too much on books and little on practical experience: because this is what humanities oriented people in every country tend to do.

  102. @Thomas: “Eric is perfectly correct to say that a cooperative of workers couldn’t run its own fast-food franchize and pay itself $15 an hour. But his jump from there to his statements about the minimum wage involves a fallacy of composition. One single franchize paying $15/h would immediately get outcompeted by others that do not. But a minimum wage of $15/h would apply to every work contract in the economy, eliminating the element of individual businesses outcompeting each others over wages.”

    This conflates two separate issues.

    The workers are on strike to try to get higher wages from employers. The employers are individual franchises. They must pay minimum wage as a government requirement. Beyond that, wages are a matter of agreement between workers and local management. If some franchises caved in and paid $15/hour, they would have to raise prices to cover the higher costs. Other outlets that did *not* cave would not, and competition on price would rear its head.

    A raise in the minimum wage for *everybody* is not what this is all about, and it would take such an action to level the playing field and force all fast food places (and everyone else hiring minimum wage labor) to pay those rates.

    “I have no strong feelings on how the numbers ought to turn out, and whether the amount of disemployment would be worth the raise for the workers who keep their jobs.”

    Worth the raise for *whom?* It would certainly be worth it to the workers who *had* minimum wage jobs and would be covered by this (as long as they *had* jobs, as employers would have incentives to reduce headcount to lower costs.) It would certainly not be worth it for those unable to get jobs because no one will pay them $15/hour for what they are able to do. Whether it would be worth it to the government depends on its goals: if the goal is to increase employment and see more people *have* jobs, policies that *impede* job creation are a questionable idea. (Not that that has stopped government before: a belief that 2+2=5 for sufficiently large values of 2 seems endemic to policy makers.)

  103. DMcCunney> This conflates two separate issues.

    I agree with you. But it’s Eric, not me, who seems to be the one conflating them. He’s the one who draw conclusions from his single-franchize scenario about the minimum wage.

  104. @Thomas

    Any minimum-( or prevailing-)wage law that has any effect on wages will cause unemployment. The only question is how much.

    The idea that forcing everyone to pay $15/hr somehow means the laws of supply and demand no longer apply is absurd. Fast food franchises do not only compete against each other. On the one hand, they compete against grocery stores and the consumers’ own labor; on the other hand their competition is the casual-dining segment. People are not going to pay table-service prices at fast-food restaurants.

    And Harry Harrison’s depiction of the fully-automated fast food franchise McSwiney’s in A Stainless Steel Rat Is Born (wherein a truck arrives once a week to deliver more frozen food, take out compacted trash and money, and perform any other maintenance, allowing the protagonist and his mentor to hide from the police for several days) will become the only economically feasible way for fast food to be done. Well, with the exception of the need to collect money, which will all be electronic…

    Those who are saying more employees will be needed to operate “cash registers” (where no cash actually changes hands) don’t see the vision of the fully-automated fast-food franchise with a few touch-screen ordering kiosks for those who don’t have smart phones or don’t want to download the app. And the app in question doesn’t have to be specific to the restaurant; I can easily see someone like Visa/Mastercard working with developers to create a standardized payment module that can grab menu information from the local wi-fi or even over the Internet to be able to order in advance from the car. After all, they can collect a fraction of a percent extra on every transaction that uses the module and make plenty on the process.

  105. @Shenpen: “hari yes, education, but specifically trade school education, I think today it is fairly obvious how the trade school and intership based German model works better than the everybody-becomes-a-barista-with-an-art-degree kinds of, well, not models but bubbles, trends, temporary fashions.”

    There are a couple of other factors at work in the US. One is status, and the distinction between “white collar” and “blue collar” labor. White collar labor has higher status than blue collar work, even though the blue collar worker may make *more* money than a white collar worker.

    A correspondent elsewhere teaches night school, and has a student who is a skilled auto mechanic. He probably makes more money than a lot of the people whose cars he services. But they have degrees and he doesn’t, so they have higher status. He’s going to school to get the degree for status, not money, and will continue to be a mechanic.

    Manual blue collar labor has lower status than degreed white collar work, and that lower status is a disincentive for seeking it, even though it may pay quite well.

    And trade school education has another issue: skilled trades here tend to be unionized, and the unions run the training programs. To get the training, you must get *into* the union, and where I am, that requires sponsorship by an existing union member (who is usually a relative or friend of the family.) Unions have an incentive to keep the supply of union labor low to successfully charge higher rates for doing it, and push hard for local regulations that require unionized employers to *only* hire union members for jobs the unions cover. The unions can use denial of service via strike to bargain for what they want, and it works if the employer has no alternative to union labor. (Many companies have relocated to areas that do *not* impose that requirement in consequence.)

    But economics catches up with the unions, too. An old friend was a union member. After an unsuccessful attempt to make money as a rock musician, he chose plan B, and followed his dad into the electrical trade. Dad had been a union electrician for 40 years, and sponsored his son for a membership in the IBEW. Son passed his apprenticeship and became a journeyman, and worked for contractors, first as part of Local 363, and later as part of the more prestigious Local 3. The entire time, he was moonlighting and doing electrical work on his own on nights and weekends.

    Moonlighting was not well thought of by the union. If caught, he would at least have his membership revoked, and if caught by Local 3, being found beaten in an alley was a strong possibility. He talked about going to job sites in a suit and tie with his tools in a briefcase to disguise his intent. But he moonlighted because it beat sitting in the union hiring hall waiting for a call in slow times, and that was tthe rule, with actual jobs the exception. His moonlighting expanded till it became his full time occupation. He paid his union dues and kept his membership current, but he stopped working for union contractors.

    The union workers had priced themselves out of the market. His customers were home owners, apartment renters, and small businesses that couldn’t *afford* what a union shop would have to charge just to cover its expenses. He could charge half what a union shop would, “make out like a bandit”, and have a happy customer who would recommend him to others. (It helped that he took pride in his work, and did it right the first time. Some of his jobs involved fixing what union labor had done *wrong*.)

  106. @The Monster: I did not dispute that a hike in the minimum wages causes disemployment. It’s a straightforward prediction from the supply-and-demand model. Although the empirical data is surprisingly shaky about this prediction— a point even Steven Landsburg, a notable libertarian economist, confirms — I do believe in the supply-and-demand model and its prediction that raising wages tends to reduce employment.

    ***

    As to the case of the striking workers: In my old country of Germany, where every business in the gastronomy sector has to pay the union wage, burger flippers at McDonald’s make 8 Euro ($10.50). Because unions have much more power in Germany than they do in the US, that’s an upper limit on what the fast-food workers’ union can achieve in this strike. But the limit does seem to be one of union power, not of disemployment. The current unemployment rate in Germany is lower than in the US, and it’s not unusually high in the gastronomy sector.

  107. Here’s a question for the floor:

    Suppose we could wave a magic wand and give all our young people degrees in useful things…engineering, science, law, medicine, etc. By this, I mean that they actually have the knowledge that the degree implies; they are fully qualified. How many of them would actually end up with better jobs? Does our economy have room for them? Wouldn’t most of them end up flipping burgers anyway?

  108. The ones with degrees in law and particle physics would be boned. Both fields have very few openings these days.

  109. @Thomas: “I agree with you. But it’s Eric, not me, who seems to be the one conflating them. He’s the one who draw conclusions from his single-franchize scenario about the minimum wage.”

    He’s not really conflating them. He is looking at likely outcomes in the specific case, and generalizing that to minimum wage jobs overall. I think you can make the exact case Eric is making, because the underlying issues are the same. The worker’s labor is worth what someone else will pay for it. Try to raise it by forcing them to pay more by government regulation, and at some point employers will refuse to pay and simply not hire because the work just isn’t worth that much to them.

    What is likely to happen if the fast food workers succeed in their goals ia a microcosm of what would happen if minimum wage in general got boosted to that level.

    “As to the case of the striking workers: In my old country of Germany, where every business in the gastronomy sector has to pay the union wage, burger flippers at McDonald’s make 8 Euro ($10.50). Because unions have much more power in Germany than they do in the US, that’s an upper limit on what the fast-food workers’ union can achieve in this strike. But the limit does seem to be one of union power, not of disemployment. The current unemployment rate in Germany is lower than in the US, and it’s not unusually high in the gastronomy sector.”

    Germany is a much more homogenous culture than the US, and it works in Germany because pretty much everyone agrees it’s the way things should be done. A level of redistribution of the wealth is largely built into the German system. You simply won’t get that sort of national agreement here.

    Along similar lines, there were a couple of Swedish girls living in my building years back, in the US for a long visit. One was telling me about the Swedish setup. Every industry was unionized. Once she passed her probationary period at an employer, she was in the union, and untouchable. It didn’t matter what she did or didn’t do. I asked “If the employer can’t fire you for *not* working, what’s the incentive to work at all?” and she said “I work hard because I am a good Swede and that is what good Swedes do.” Again, a homogenous culture where pretty much all concerned agreed it was The Way Things Should Be Done.

    Sweden is an extreme example of an egalitarion society. Swedish pop group Abba was a source of conflicted emotions. On the one hand, there was pride in them because they were a Sweush group and international superstars. On the other, their popularity and record sales made them multi-millionaires, and no Swede is *supposed* to be substantially richer than another. “*Everybody* is middle class” is the national ideal.

    I recall hearing of a German economist whose name I’ve forgotten who has been studyng employment. His concern is that advances in technology are creating large numbers of folks who simply won’t *get* jobs, because technology has automated their old one, and they aren’t qualified (and may not be able to *become* qualified) for jobs that still exist. We are looking at similar issues in the US, with far less agreement on what might be done about it.

  110. There is a pretty simply way to illustrate the impact of raising the minimum wage. It is this simple thought: if fast food workers would not suffer any ill from raising the minimum wage to $15, then why not raise the minimum wage to $100. Then we’d all be so much better off, wouldn’t we?

  111. Adults tip 10%.

    Jews tip 12%.

    White men tip 15%.

    Republicans tip 20%.

    I’m a Republican, and anyone else can be too.

  112. DMcCunney on 2013-09-02 at 13:50:18 said: I asked “If the employer can’t fire you for *not* working, what’s the incentive to work at all?” and she said “I work hard because I am a good Swede and that is what good Swedes do.” Again, a homogenous culture where pretty much all concerned agreed it was The Way Things Should Be Done.

    A society can run on that sort of accumulated cultural capital for a while. But if there’s nothing replacing it, it runs out and the society crashes. It will run out. A certain number of people will discover that they can live comfortably without working. Some will discover it because they are incompetent for various reasons.

    They get a leisure benefit, and no economic penalty. That will cause the number of parasites to increase. If there is a social disapproval penalty, that will deter parasitism, but it has to be strong. The parasites will increase, and the workers will diminish (and become demoralized). Then the whole system crashes.

  113. @Rich: “A society can run on that sort of accumulated cultural capital for a while. But if there’s nothing replacing it, it runs out and the society crashes.”

    Agreed.

    “It will run out. A certain number of people will discover that they can live comfortably without working. Some will discover it because they are incompetent for various reasons.”

    It works because there *is* a strong disapproval penalty. Like I said, Sweden has a homogenous culture. You work hard because that is what a Swede does. There are probably parasites, but not to a dangerous level. They’ve been getting away with this for decades.

    The bigger issue is that such redistribution of wealth requires *having* wealth to redistribute. That means a strong level of profit in economic enterprises. As long as the economy is healthy, you can afford such things, If the economy takes a dive, “you have trouble right here in River City.”

    Since Sweden is part of an increasingly interconnected global economy, things happening far away may cause side effects that will make their social contract hard to sustain.

    I think of Japan in this context. Decades back, the tradition was lifetime employment. You landed a job with a company, that was where you spent your working life, and the company took care of you. In recent years, Japan has been forced to abandon that notion, and has resorted to layoffs. This is especially traumatic in Japan because of the nature of Japanese society. A Japanese in a member of a group first and foremost, and derives *everything* – money, status, even identity – from membership in a group. Stories about suicide among unemployed salarymen come as no surprise: they have not merely lost their job, they have been cast out of their group.

  114. I think of Japan in this context. Decades back, the tradition was lifetime employment. You landed a job with a company, that was where you spent your working life, and the company took care of you.

    Where “lifetime” is defined as “until age 55” in the case of the major corporate groups, at which point they’d persuade one of their suppliers to give you a (presumably lower-paying) job for another ten years.

    Furthermore, your base pay was typically about half of your total pay, and the rest was bonuses based on how profitable the company was. Thus, in bad times, everyone effectively took an automatic pay cut, and the company didn’t have to lay anyone off to accomplish that.

    I don’t know how much of this is still true, but it was true when Theory Z was written.

  115. @The Monster: “I don’t know how much of this is still true, but it was true when Theory Z was written.”

    A fair bit of it likely is, since it has roots in Japanese culture. The part about everyone taking a pay cut in bad times is a good example. In the US, there has been a good deal of argument over the years on the topic, like whether it’s fair for everyone to pay for failings of a few. If a company is doing well in other areas, but results are dragged down by one under performing division, should the entire company forfeit bonuses? The Japanese answer is that they’re all part of the same group, so everyone suffers or benefits.

    But Japan has difficult issues to work through. Because Japanese society was organized so that large scale layoffs didn’t happen, they were left with no organized mechanism for coping with the effects once they did. Those issues will simply get worse, as weaknesses in their high tech sector continue. Sony, Panasonic, and Sharp, for example, are all in trouble because of massive losses in big screen TVs, and Sharp may not survive. A lot of folks who worked in those divisions are unlikely to have jobs down the road.

  116. @Monster wrote:
    “[In the ancestal environment] A good strong leader might help the tribe drive away competing tribes, and thus get more Stuff for our tribe. A good hunter might bring in meat more quickly and efficiently, but the flora in a given area can only feed so much fauna, so the idea that any human action can increase the total amount of available Stuff (other than perhaps indirectly, by sacrificing someone to appease the gods) is just unthinkable.

    “If you get more Stuff, that means I get less Stuff. The belief in a zero-sum economy is probably in our hardware, or at least our firmware. Western Civilization is software that we have to load on top of that firmware in order to access the productivity gains from the agricultural, industrial, and information revolutions. Leftism, fundamentally being tribal hunt/gather mentality, assumes that all this Stuff Just Is, and it’s unfair for The One Percent to have so much of it.”

    That’s a very interesting viewpoint. In effect, you are saying that the mindset of the Left is very much like that of cargo cults. They think that the issue is not to figure out how to make more Stuff, but how to transfer/signal/steal Stuff that is currently going elsewhere (which is practically the definition of left-wing political theory).

  117. @Shenpen:
    “Part of the issue is that Americans have become accustomed to living far beyond their level of production because of very easy credit over the last couple of decades. This has accelerated a trend of adults’ living alone even as students when in past years they would have had roommates or perhaps rented a room or small apartment from a larger family. This phenomenon is also responsible for much of the hand-wrought-over statistics demonstrating falling “household” metrics such as income; the average “household” size has shrunk dramatically over the last 30 years, and somehow it’s shocking and appalling that one person doesn’t make as much as two.”

    This.

    If you look at the history of workers’ per-capital earnings in America, it peaked somewhere around 1980. In the following decades, household income continued to increase, but it did so because the second earner in the household (i.e., the wife) went to work, usually full-time.

    When that option was fully played out, there was a boom in stocks. When that crashed, there was a housing boom, with many borrowing against their inflated home values to sustain their consumption levels.

    Only in the post-2008 period is America having to redefine what a normal real income is, and what it really means to be middle class. Many of the assumptions that were made after WWII are having to be revisited, such as the ability to own a home in the ‘burbs and raise children while working only 40 hours per week without specialized skills.

    I often see journalists talk about the “postwar” world, e.g. such-and-such a figure for unemployment/stock levels/wages/etc. is at a high/low for the postwar world. The reality, however, is that we are not longer in the postwar world, but the pre-whatever-comes-next world. We live in interesting times.

  118. @Cathy: “That’s a very interesting viewpoint. In effect, you are saying that the mindset of the Left is very much like that of cargo cults. They think that the issue is not to figure out how to make more Stuff, but how to transfer/signal/steal Stuff that is currently going elsewhere (which is practically the definition of left-wing political theory).”

    It’s also the largely the definition of the Mercantilist economic theory popular before Adam Smith wrote The Wealth of Nations. Back then, wealth was gold, there was only so much of it, and you got more by taking it away from someone else. Smith pushed the novel notion that wealth encompassed much more than gold, that it was *produced*, and that your nation had wealth in proportion to its ability to produce.

    The Left tends to see economics as a zero sum game, and doesn’t grasp that if you have people perceived as getting too small a slice of the pie, you are better served by trying to increase the size of the pie than by trying to legislate how the slices are cut and distributed.

  119. @Cathy: “I often see journalists talk about the “postwar” world, e.g. such-and-such a figure for unemployment/stock levels/wages/etc. is at a high/low for the postwar world. The reality, however, is that we are not longer in the postwar world, but the pre-whatever-comes-next world. We live in interesting times.”

    I concur. I’ve thought for a while that we are in the Singularity, with no idea what things will look like on the other side. The Singularity is a product of increasing technology and the spread of the Internet.

    Comments like the possible effect of raising the minimum wage are almost irrelevant in the larger context. We are near or at a point where 20% of the workforce can actually produce everything we need on a day to day basis. What do the other 80% do?

    Automation is steadily encroaching on labor. It’s no longer simply the unskilled that are affected. Lots of things that *were* considered *skilled* labor are being automated, and increasing numbers of people are bitten by structural unemployment as categories of jobs go away. People point to new jobs that technology will create, but forget or ignore the fact those new jobs won’t go to the ones left unemployed. By definition, the new jobs will require talents and skills they don’t have and may not be able to acquire.

    Throughout history, regardless of the society or the economic system, there was an underlying assumption: you had an economic function, and you did something that contributed to the survival of your society and got what you needed to survive in return.

    Those economic functions are being assumed by machines. What happens when many or even most members of our society simply no longer *have* an economic function?

    Buckminster Fuller spoke decades ago about the need to abolish the concept of “making a living”, because he foresaw what we were moving toward. The question is what concept we use instead, and how we get from here to there.

  120. “People should be able to pay for a basic life with the job they do”

    Then don’t work at McDonalds. Fast food jobs are not for people who have to support themselves and/or a family. They are for people who other means of support (teens, spouses, retirees, etc.).

  121. “@Salamandro, to my Eastern European mindset, unskilled fast-food workers are NOT supposed to live the kind of normal life (i.e. an own apartment, kids, family) skilled, learned workers who have a proper trade high school education and a licence for a real trade have, because then where is their advantage? They are supposed to live with their parents and not think about moving out or reproducing until they got a real job. ”

    Shenpen, I see a number of issues here. First is that, as DMcCunney says, many workers in the “trades” earn substantial monopoly rents through licensing regulatikon, unionization and other shenanigans. In a reasonably free market, it’s not clear that they would be that much better off than less-skilled working class folks.

    Also, I think many people would take issue with your describing working class folks as undeserving of a “normal” life. One could say that most folks should ultimately have enough earnings that they can lead a basically comfortable lifestyle, if a rather frugal one, and that using some redistribution in order to achieve these goals is not really unreasonable. And yes, being frugal here probably involves taking roommates or perhaps being moving to a location with cheaper housing costs. (Many places have extreme zoning regulations which create artificial scarcity, so relaxing them is a critical issue.)

    Should they be expected to have kids? I don’t really have an answer here, but many social conservatives would say that, yes, a stable, dual-income household should be able to afford that regardless of being “working class”, as a matter of basic morality.

  122. The mere use of the word “redistribution” concedes the looters’ case from the beginning. It implies that all the wealth belongs to the “society”, and it has somehow, through some mysterious and arbitrary process, been “distributed” among the society’s members in an unsatisfactory manner, so the society can decide to “redistribute” it. Gather it all up and reallocate it, this time according to some rational scheme that will achieve the society’s goals. Makes sense, doesn’t it? But only if you accept the false premise.

    Once you recognise that there never was a distribution in the first place, then it follows that it can’t be “redistributed”. As Alice said, “I’ve had nothing yet, so I can’t take more”. All wealth was created by the people who have it, and is thus naturally with them; since it rightfully belongs to them, the correct verb for taking it away from them is not “redistribute” but “loot”. One might as well, and with exactly as much right or justice, gather up all of “the society’s babies” from the parents who somehow managed to end up with them, and “redistribute” them according to some system of “fairness”, some plan designed to better achieve “the society’s goals” (meaning, of course, the goals of those who have power and use it to implement this thuggish scheme). .

  123. With regard to the American poor.

    I do not think that car ownership in America can be considered luxury in any sense. The whole country has been built around car transport. Almost everyone who wants to buy something, visit a doctor, commute to work… must use a car, as the public transport system is not well developed.

    So having a car in America is like having legs in Bangladesh or having a prepaid monthly metro ticket in Prague – quite a low standard of necessity.

  124. I do not think that car ownership in America can be considered luxury in any sense. The whole country has been built around car transport. Almost everyone who wants to buy something, visit a doctor, commute to work… must use a car, as the public transport system is not well developed.

    This is not true. I have several friends in DC and Baltimore who do not own cars and are nevertheless able to get to just about everywhere they want to be. New York City is famously able to support large populations who largely live and work within a few blocks, and can take the subway for most of the rest, and train for some of what’s left of that. Large parts of the Boston – DC area are accessible without having a car.

    The tradeoff is of course that they’re on the public transport’s timetable, and they can’t leave the city without help – friend with a car, etc. And people in rural areas need cars or trucks. But this is not that different from, say, modern Europe.

  125. @Paul: ” New York City is famously able to support large populations who largely live and work within a few blocks, and can take the subway for most of the rest, and train for some of what’s left of that.”

    Yep. I live in the borough of Manhattan in NYC. I do not own a car, and tell others anyone who does is either paid to drive or nuts. Anything I need on a day to day basis is available within a couple of blocks walk, and there is comprehensive 34/7 transport by subway or bus to any point in the city, and extensive commuter rail and bus service for points in the area surrounding the city. I grew up in Philadelphia, which also had comprehensive public transit.

    The timetable limitation isn’t much of one. During the day, service is every few minutes It drops off late at night but so does demand.

  126. @Guest: “Shenpen, I see a number of issues here. First is that, as DMcCunney says, many workers in the “trades” earn substantial monopoly rents through licensing regulatikon, unionization and other shenanigans. In a reasonably free market, it’s not clear that they would be that much better off than less-skilled working class folks.”

    They would be better off because they *are* more skilled, and people will pay more for what they do. They simply would not be as well off as they are, because they would have to compete on price with other workers. In places where trade unions are strong, the union sets the floor level for worker’s wages, and customers have no choice about paying it. (This is also often coupled with work rules designed to increase the number of workers required for a task, to insure employment for union workers.)

    “And yes, being frugal here probably involves taking roommates or perhaps being moving to a location with cheaper housing costs. (Many places have extreme zoning regulations which create artificial scarcity, so relaxing them is a critical issue.)”

    Moving to another location with lower housing costs is not always an option. For example, you must be able to get from where you live to where you work, and lower hosing costs may involve distances that aren’t feasible unless you have a car, and a car may not be affordable if you’re in that situation.

    NYC has the artificial regulations you refer to: rent control and rent stabilization laws. They date from WWII, and were part of misguided attempts to keep housing affordable. But Manhattan is an island, with only so much land on which to build housing, so the regulations are distortions in the market.

    “Should they be expected to have kids? I don’t really have an answer here, but many social conservatives would say that, yes, a stable, dual-income household should be able to afford that regardless of being “working class”, as a matter of basic morality.”

    Save that if you *have* kids, you *aren’t* a dual-income family for at least the early period after having them. Who looks after infants/young children when mom and dad both have full time jobs? If mom is working, she has little choice about quitting her job to devote her time to caring for the kids until they become old enough to go to school. Working class folks don’t have the spare income to pay caregivers to take mom’s place so she can go back to work.

  127. “(LS) Suppose we could wave a magic wand and give all our young people degrees in useful things…engineering, science, law, medicine, etc. By this, I mean that they actually have the knowledge that the degree implies; they are fully qualified. How many of them would actually end up with better jobs? Does our economy have room for them? Wouldn’t most of them end up flipping burgers anyway?”

    “(PapayaSF) The ones with degrees in law and particle physics would be boned. Both fields have very few openings these days.”

    I would propose that this would be a tautology: if too many people had particle physics or law degrees (which would be the case today) then they wouldn’t be useful degrees. Thus, the only way we could have burger-flippers with useful degrees would be if we either had useful “burger-flipping” degrees, or recognized that there were “apprentice” degrees (ie not yet awarded), or employed retirees as burger flippers.

    Which, incidentally, is somewhat what we are like right now!

    The reason why we *aren’t* like that, is that we as Americans insist on doing silly things that skew the market in ridiculous ways. We subsidize useless degrees through federal student loan programs; we disdain perfectly viable and fulfilling careers by calling them “blue collar”; to a certain extent, we even discourage education via welfare.

    How many English majors would we have today if we didn’t fawn over them for pursuing their passion (right into a job at Starbucks), and if we didn’t give them easy money that’s not subject to reasonable interest rates (as opposed to ridiculously held-low ones) and is impossible to bankrupt (and hence removing risk from both student and lender)?

  128. @LS
    > Suppose we could wave a magic wand and give all our young people degrees in useful things…engineering, science, law, medicine, .. How many of them would actually end up with better jobs?

    To me this is zero sum thinking.

    Let’s simplify it. Let’s say we had twice as many good computer programmers. Could they create a lot of extra value? Do you think there is an open ended amount of computer software to be created? I think people come up with amazing ideas all the time that have never been though of before.

    Have you seen the Occulus rift? Think of the possibilities of what google glasses can do, or when there is deeper personal integration of people and their devices. Imagine the profit to be had from finding a more efficient solution to the traveling salesman problem. How much money can be saved by developing a better way encode data signals over fiber optic cables. What other ideas would all those young minds come up with were they given the training and opportunity?

    The world of inventiveness is open. The constraint is $$ capital and talent. In my world, software, $$ capital is much less important. So yeah, the world would be a lot better place if it were better educated, not just for the educated individuals, but for everyone.

    BTW, regarding particle physicists and lawyers — both of these are basically pseudo government jobs, so there is a natural limit to them.

  129. @Alpheus: “The reason why we *aren’t* like that, is that we as Americans insist on doing silly things that skew the market in ridiculous ways. We subsidize useless degrees through federal student loan programs; we disdain perfectly viable and fulfilling careers by calling them “blue collar”; to a certain extent, we even discourage education via welfare.”

    “The market” is the sum total of the economic actions of all the participants, and those actions inherently skew the market in various ways.

    The usefulness of a degree is a supply and demand function. It wasn’t that long ago that a law degree, for example, was a *very* useful one. But attempting to read the tea leaves is fraught with uncertainty. Lots of folks who got law degrees and are now looking unsuccessfully for employment decided law was a good career choice back when there *were* lots of jobs for lawyers. It was a defensible decision at the time. The economy took a nose dive, demand for lawyers plummeted, and suddenly there aren’t that many law jobs to be had. Was that something the aspiring lawyer could have predicted? What should they have done instead? Hindsight is always 20/20.

    Deprecation of blue collar work goes very far back. Every society has status, and once you have the basics of survival covered, your focus shifts to maintaining and enhancing yours. Higher levels of society looked down upon tradesmen who worked with their hands, and that was the case in the cultures the original settlers in America came from. Such cultural patterns change with glacial slowness. I expect those attitudes to shift somewhat here, as skilled trades become more important as a source of well paying jobs. By definition, the work a skilled tradesman does has to be performed here, so they won’t worry about the work being outsourced overseas. (They *will* have to worry about price competition from other skilled tradesmen in their line.) But meantime, if you wear a suit and tie and work in a office at a profession, your status is higher than if you wear coveralls and work at a trade. Never mind that the mechanic who services your car may make more than you do – your status is higher.

    Status and economic success don’t always correlate. If a quartet of Jewish mothers are talking about their kids over a game of Mahjong, one will go on about her son, the doctor, the second will talk about her son the lawyer, the third will talk about her son the investment banker, and the fourth will talk her son, the rabbi. Mom number four will trump, even though her son probably makes a lot less money than the other three sons. Rabbi is a high status position in the Jewish community. There are many different status markers, and money is only one of them.

    And a college education is expensive enough that very few can afford to pay for one out of pocket. Parents may establish accounts accounts for their kid’s college education they put money into when they can when the kid is born, crossing fingers that when the kid is college age the account will cover the costs. (I know a well paid professional who not long back took an additional Saturday job, because the downturn in the economy savaged the accounts he had set up to fund his daughter’s schooling, and he’s trying to rebuild them.) To get a degree at all, you need some form of subsidy, in the form of a student loan or a scholarship. See above about reading the tea leaves – who would have predicted a law school graduate might have a hard time getting a job?

    There *are* jobs for particle physicists, and for English majors (what degrees do you suppose half the teachers have?), and for most other degreed specialties. There just may not be very many of them. It’s reasonable to expect someone choosing a major to think about job opportunities in that field once they have a degree, and to think about having a plan B if they can’t get a job in their preferred field.. It’s *not* reasonable to withhold loans to get a degree based on someone *else’s* notion that it’s a “useless” degree. The kids might just have the smarts, skill, and luck to score a position in one of the more obscure fields. In any case, it’s the kid’s responsibility to repay the loan.

  130. Finally! One of my longstanding hobby horses that my friends are probably sick of hearing is that unions should purchase the stock to run the business the way they want to.
    If they are correct in their belief that the greedy managerial folks are useless to running the business & therefor don’t deserve a paycheck, & the lowly worker bee should get that money then the business will flourish
    If they are incorrect & the business tanks they will have no one to blame but themselves
    Whether they will accept that responsibility is a separate question=)

  131. @ Milhouse – “One might as well, and with exactly as much right or justice, gather up all of “the society’s babies” from the parents who somehow managed to end up with them, and “redistribute” them”

    You realize that the Left is now going to co-op this idea as a platform plank in the next Presidential election.

  132. @DMcCunney:
    “Throughout history, regardless of the society or the economic system, there was an underlying assumption: you had an economic function, and you did something that contributed to the survival of your society and got what you needed to survive in return.

    “Those economic functions are being assumed by machines. What happens when many or even most members of our society simply no longer *have* an economic function?”

    We’ve been here before. The situation is very reminiscent of the British Isles during the period when large landowners concluded that raising sheep (which required relatively little labor) was more profitable and less trouble than leasing the land to produce farmers (which required a great deal of labor). The result was to do enclosure on their lands and to turn enormous numbers of former tenant farmers out onto the streets with nowhere to go, and no way to earn money.

    A significant number of them emigrated overseas. But what would Europe have looked like in the 1600 – 1800 period without the New World to act as a safety valve, and without the rise of mass employment in factories? (The sheep farming episode was not a result of the industrialization of England and Scotland, and the former could have occurred without the latter.)

  133. “It’s also the largely the definition of the Mercantilist economic theory popular before Adam Smith wrote The Wealth of Nations. Back then, wealth was gold, there was only so much of it, and you got more by taking it away from someone else. Smith pushed the novel notion that wealth encompassed much more than gold, that it was *produced*, and that your nation had wealth in proportion to its ability to produce.”

    In the 17th century, the Spanish proved pretty decisively that it was possible to crash your economy despite having enormous piles of gold.

  134. @murph: “Finally! One of my longstanding hobby horses that my friends are probably sick of hearing is that unions should purchase the stock to run the business the way they want to.”

    If you want a good predictor of what will happen, see the experience of Yugoslavia before it melted down in spasms of “ethnic cleansing”.

    The workers owned the factories. The factories were run to make a profit. The worker’s councils hired professional managers to run the businesses to make money.

    If the enterprise had a good year, the worker’s council would vote to use the profits for higher wages and better benefits. They would *not* vote to plow earnings back into the business to improve efficiency and lower costs.

    The results were predictable – they fell increasingly behind their competition in other countries, had rising costs, could not compete on price, and Yugoslavia had double- digit inflation.

    The worker’s councils did not make the connection.

    The interests of the enterprise and the intersts of the workers are not the same and cannot alwys be harmonized.

  135. @Marian Kechlibar:
    “I do not think that car ownership in America can be considered luxury in any sense. The whole country has been built around car transport. Almost everyone who wants to buy something, visit a doctor, commute to work… must use a car, as the public transport system is not well developed.”

    It’s totally dependent on where you are in the U.S. If you live in San Francisco or New York City, a car is an expensive nuisance. (I’ve heard some crazy stories about trying to manage car ownership in SF.) On the other hand, if you live in a mid-sized or smaller town or rural area, you are completely helpless without a car.

    On the other hand, there are a lot of cheap “junker” cars out on the roads, bought for a few hundred dollars and kept running from paycheck to paycheck. Just visit any small town (excluding wealthy exurbs) or rural area and you’ll see plenty of them on the road.

    I have lived all over the U.S. and have seen both extremes firsthand. But I would say that a car is a necessity in far more places than it is a nuisance. For one thing, even in high-density cities, many of the jobs are out in the nearby suburbs.

  136. “And a college education is expensive enough that very few can afford to pay for one out of pocket.”

    This wasn’t always the case. It’s a very recent market distortion caused by government funding of education. Without government in the mix, colleges and universities would be forced to compete for students on price. Only elite institutions would be able to charge more than middle-class could readily afford.

    Look back at the 1930’s, 50’s, and 60’s and see what college cost relatively to income (hint: not much).

  137. @Cathy: “In the 17th century, the Spanish proved pretty decisively that it was possible to crash your economy despite having enormous piles of gold.”

    Yep, by failing to understand the real nature of wealth.

    A modern day parallel is likely Venezuela. Hugo Chavez used Venezuela’s oil revenues to prop up his regime, buy support from his followers, and reward his cronies. It didn’t seem to occur to him that that pot would run out at some point, and that investment in other things that could generate wealth and benefit his country might be a good idea. Venezuela is paying the price for his lack of foresight.

  138. @Cathy: ““And a college education is expensive enough that very few can afford to pay for one out of pocket.”

    This wasn’t always the case. It’s a very recent market distortion caused by government funding of education. Without government in the mix, colleges and universities would be forced to compete for students on price. ”

    While government didn’t help, I can’t blame it all on government funding. Like most things, it’s a supply and demand function. When demand far outstrips supply, prices go up. It’s exacerbated by the current notion that *every* kid should go to college. The bachelor’s degree is the new high school diploma, and I have met degreed graduates with skills that would have gotten them flunked out of high school when I attended.

    I grew up in a period when the assumption was that most kids in public schools would *not* go on to college. There was a commercial track for folks who would go on to become secretaries, bookkeepers, clerks and the like, and industrial arts track for those who would go on to a skilled trade, and an academic track for those expected to go on to a degree and a profession. The last group was by far the smallest. Most kids did not go to college.

    Now they are all supposed to. Soaring prices are predictable.

  139. IGnatius T Foobar,

    Deport illegals? That’s racist! Tax Chinese exports? NO! We should encourage the Chinese system here; it’s the best in the world. Tax Union labor? That would make the world look like this.

    Now listen, you right-wing extremist. I’ve had enough of your racism, xenophobia, and bigotry. Now stop this capitalism right now!

    How’s my satire?

  140. @guest the problem is that it sounds like you accepted that there will be a perpetual unskilled “servant” class without any kind of path towards a respected trade and skilled real jobs before them. That is not a working class, but a servant class, a human automaton class, and it is horrible.

    Trying to secure comfortable levels of consumption for this class is putting the effect before the cause, and even when you succeed you still have not fixed the root problem that this sort of work sucks – because it lacks the autonomy, the room for decision making the skilled trades have, and human beings ultimately deserves.

    Thus, you should be putting your efforts towards dis-perpetuating the servant class, offering everybody a path up from McD through trade education, internships etc. instead of trying to make it pay more.

    You are making the same kind of mistake that became an accepted wisdom in Austria where we currently live – there are a million laws trying to make life more bearable for people who clean hotel rooms in the Alps, but there is comparatively less effort put into making hotel room clearing only a transititional stage in people’s lives, a temporary stop on a path towards real jobs. Here it is typically a migrant job, often done by skilled people who lack language skills only, so even just language education only should more or less automatically create a path out and up. Looks like a better way to spend taxes than welfare. You know, the give fish vs. teach fishing parable, actually a lot of these people only need to learn to be able to talk to the fish-buyer, they have the rest.

    I don’t care how much cleaning maids make, what I care about is that I don’t want to see a 40 or 50 years old cleaning maid, at least not if she can speak the local language. Yet I do see them, and it seems much more horrible to me than the income – because the job itself does not have the autonomy and dignity in them that separates people from animals and automatons.

  141. @DMcCunney: on the status of blue-collar jobs: trust me on this, you in the US are less classist as far as status and respect goes, as opposed to money, than even then most egalitarian Western European welfare states. They equalize money, but precisely because of this equalization i.e. that people can easier compete for status through ranks, titles, what is printed on their business cards, than through income and conspicuous consumption, and thus there is a huge status gap between blue and white collars.

    It seems to me that status and respect in the US is more based on income than what is printed on the business card, the US is more able to respect a well paid plumber, especially because there is a certain, how to put it, ethos of simplicity? I know Americans who have a million in the bank yet wear typically working class attire like white tennis shoes and trucker caps. Or putting it differently for example clothing is not so consciously class based as in e.g. Western Europe where a doctor in Vienna goes to the shopping mall in the weekend in a sports jacket, chinos and leather shoes because he would never think of looking like a “prole” in a t-shirt and so on. It seems to me that Americans dress for the occasion, not for the class, a t-shirt has its proper place and occasion even in the lives of high status professionals, correct?

    So I guess this should be less of a problem for you, just tell 14 years old kids who suck at math and history and would drop out of high school sooner or later how much they can charge for a quick plumbing fix on a Sunday and they will find the idea of a trade school appealing.

    It’s very interesting how the equalization of money leads to the disequalization of titles and class barriers and suchlike, because people always status-compete. Soviet-type economies were the most ridiculous in it, if two people worked together they formed a committee with a chairman and a deputy chairman, not kidding, because they could not really have a nicer Lada car than their brother-in-law so they all they could do is telling more impressive sounding workplace stories: “When we had this committee meeting my deputy told me that…”

    Another factor is how strongly a country is trained in the Enlightenment ideal of philosopher-kings, where “smart” people rank much higher than “dumb” people. With a healthy level of anti-intellectualism – yes, I think it is healthy, smart sounding people can be the craziest -, a well paid plumber should not feel inferior to a poorly paid intellectual because if he so friggin’ smart why ain’t he rich? So I think you are lucky in this regard, too.

    So as long the income inequality is high and people can status compete through conspicuous consumption, and as long as you don’t treat intellectuals like a priesthood, the status assigned to certain job titles should not be a big problem for you…

  142. @DMcCunney – interestingly the worker council type of thing seems to work for http://en.wikipedia.org/wiki/Mondragon_Corporation so the devil may be in the details. Mondragon was organized by a priest, by and for religious small town people who generally tend towards being conservative, and that means that certain very important details may be organized more sanely – assuming human fallibility and corruptiblity and so on – than those organized by Titoist Marxists in a fit of utopian thinking. Catholic co-ops often tend to be based on medieval guilds etc.

  143. @Shenpen: I’m aware of Mondragon Corporation.

    It might be more accurate to say “The devil is in the culture”, as such things are based on a shared culture, many of whose precepts are embedded at an unconscious level.

    I didn’t say it was impossible for worker-owned means of production to succeed, and there are many attempts to do it.

    The issue is what I stated: the interests of the worker and the interests of the enterprise are not identical. The worker wants security and an increasing standard of living. The enterprise wants to survive and open its doors to do business again tomorrow. The latter imperative can lead to negative effects on the workers, especially if the overall economy takes a nosedive. What will the worker’s council do if the alternative to going out of business entirely is massive layoffs?

  144. @Shenpen: “I don’t care how much cleaning maids make, what I care about is that I don’t want to see a 40 or 50 years old cleaning maid, at least not if she can speak the local language. Yet I do see them, and it seems much more horrible to me than the income – because the job itself does not have the autonomy and dignity in them that separates people from animals and automatons.”

    I sympathize, but what *else* would you have them do?

    I mentioned earlier that we are near or at a point where 20% of the workforce can actually make everything we need on a daily basis. What do the other 80% do? The usual answer is “services”, but the problem is that most service positions don’t pay well.

    There was a minor tempest in a teapot in my circles a few years back. A group I’m involved with produces an annual convention. Word reached the group that the hotel where the convention was being held had replaced its housekeeping staff with outsourced workers at minimum wage. The replaced workers had made higher wages and had a level of company benefits. To make it worse, they had been asked to help train the people who would replace them but were not told the workers they were helping to train *would* replace them

    That was a *lot* of unhappiness in the group about it, but not much the group could do. It wasn’t possible to move the function to a new venue on short notice in protest, and it was the last year of a multi-year contract, with the function moving elsewhere next year in any case. The advice to the group was attend the function, but don’t give grief to the local management. The decision was made above their head by the owning corporation (which was apparently prepping an IPO and wanted to make its numbers look better.) Register strong protests with the controlling corporation, and make clear they wouldn’t stay at properties that treated staff like that, but stay polite and friendly with those still working there for the last year the function was there.

    Supply and demand raises its head again. Hotel housekeepers are low-skilled and easily replaced. There is a fair sized pool of folks for such jobs, and plenty of competition to get the jobs available. This means the available work force must compete on price, and those willing to work for less will get the jobs. Government regulation can adjust things somewhat by specifying a minimum wage the employer must pay and benefits the employer must provide, but the jobs will still be low income and taken because the worker can’t do anything else.

  145. @Shenpen: “I don’t care how much cleaning maids make, what I care about is that I don’t want to see a 40 or 50 years old cleaning maid,

    Why? Lots of 40-50 women want a job that makes them a little extra income for a simple job. I think it is pretty narrow minded to think that just because it isn’t what you want that no-one else wants it. I think cleaning maid is a perfectly serviceable profession and provides a useful service to others. It is a fabulous example of a win/win situation. I can barely clean my own house, so kudos to these people for the benefit they bring society.

    >I mentioned earlier that we are near or at a point where 20% of the workforce can actually make everything we need on a daily basis. What do the other 80% do?

    But that is zero sum thinking. what “we need on a daily basis” is entirely different today than it was fifty years ago. We are far richer today. What do the other 80% do? They make new stuff that over time falls into the category of what “we need on a daily basis.” Certainly service jobs are important because many of them are hard to replace by technology. But that changes over time. Ask a Blockbuster cashier if you doubt that.

    But you have to remember that most people in western societies live better than kings and queens did three hundred years ago by objective measures (excluding all the bending, scraping and genuflecting — hey I just had a great idea for an XBox game….)

    What we need is smart people doing innovative things to make us all richer. It is why the dreadful union controlled government funded education system in most western economies is such a disgrace, and moreover makes us all poorer than we could be.

    > The replaced workers had made higher wages and had a level of company benefits.

    It is an individual’s responsibility to make themselves valuable. It is an ugly thing when people start using the government to keep their wages and benefits artificially higher than than the market will support. It leads to screwed up pricing throughout the system. To me it is a curious thing that on the one hand states are passing laws to prevent “price gouging” but on the back end they are doing exactly the same thing. It is a shame there is no such expression as “wage-gouging.”

    > Register strong protests with the controlling corporation,

    I suggest you register protests if your rooms are inadequately cleaned. Anything else is just narcissistic navel gazing.

  146. @Fluffy

    And you can extend this out to almost any distance, suppose we have star trek or orions arm type replication tech. There is still an economy in many different commodities:

    1. Matter / Energy to fuel replicators
    2. Location
    3. Information (don’t even need IP to sell it)
    4. Replicator time
    5. Transportation / Communication (two sides of the same coin)
    and a host of others…

    — Foo Quuxman

  147. I don’t care how much cleaning maids make, what I care about is that I don’t want to see a 40 or 50 years old cleaning maid, at least not if she can speak the local language. Yet I do see them, and it seems much more horrible to me than the income – because the job itself does not have the autonomy and dignity in them that separates people from animals and automatons.

    Are you kidding? Cleaning makes good bank, especially if you are going to be scrubbing other people’s toilets and that.

    Jobs that people don’t want to do tend to pay well. We programmers are unusually lucky, that we have a job that we like that people want to pay good money for. There’s a reason why they call the best of us “rock stars”: the economics are similar.

  148. “”What we need is smart people doing innovative things to make us all richer.”

    Half the population has below average intelligence. What are they supposed to do?

  149. It’s very interesting how the equalization of money leads to the disequalization of titles and class barriers and suchlike, because people always status-compete.

    And unlike an economy of goods and services, where it is possible to raise the level of consumption available to everyone, status is *fundamentally* zero-sum.

  150. >munro: Finally! One of my longstanding hobby horses that my friends are probably sick of hearing is that unions should purchase the stock to run the business the way they want to.

    uh…yuh. That’s how the employees of United Airlines got suckered. They bought the company, the management drove it into bankruptcy. The employees lost everything.

    @Fluffy: “Zero sum thinking?” Economies change slowly. At any given moment an economy is approximately zero sum. A proposed policy change might result in ultimately expanding the pie, but that takes years…more likely generations. Republicans see policy proposals as plans for a better future, while Democrats see such debates as a fight for share.

  151. @Cathy
    > Half the population has below average intelligence. What are they supposed to do?

    Things that require special skills peculiar to them, aside from intelligence.

  152. @LS
    > “Zero sum thinking?” Economies change slowly. At any given moment an economy is approximately zero sum.

    Oh my, do we really have to do macroeconomics? An economy is made up of individuals. Any specific individual can grow the economy proximate to him very rapidly. The YouTube guys built a multi billion dollar business in twenty months out of nothing save a wing and a prayer. The fact that that growth is dissolved into a tiny change when averaged over the whole economy is more a reflection of that fact that everyone ain’t doing it rather than the capacity of an economy to grow.

    The thing that traditionally limits the growth of economies is capital formation. Of course capital formation is severely retarded by taxation, another way that the government makes us all poorer, but fortunately in an information economy capital formation is much less important, and so the economy can grow rapidly. Which, of course, it did. The computer industry grew by leaps and bounds until it got straight jacketed by a lot of bull, including funny money, taxation, anti trust, patents, protectionism and the general stagnation of the rest of the economy due to the funky way the economy is run.

    Just because economies have traditionally grown slowly doesn’t mean they have to in the changed environment we live in.

  153. @Jeff Read if cleaners in the US make good money then stop being so uncritically in love with “Europe” :) Hotels in Austria pay minimum wage (€1050 per month after taxes, that’s $8.6 an hour a.t. with much higher prices in everything except cable and Internet), and although they strictly uphold the 5 x 8 hours per week, during those time they drive the staff really hard – up to 40 rooms per day, means a constant stressful rush and basically doing it running. My wife did this for a while until her German picked up and it was seriously bad. Although the real problem was not the low wage but the nature of the work itself.

    BTW this why I am skeptical about all sorts of worker protection laws, because there are two things that cannot be regulated. One is simply workload, pushing people to spend their 8 hours running. Not in the sense of do-or-I-fire-you, that can be regulated against, rather in the sense of do-or-I-destroy-your-self-esteem, make-you-feel-like-a-lazy-worthless-nobody sense. Basically my wife had to cheat against herself, doing unrecorded, unpaid, unasked for, unknown overtime (clock out for lunchtime then go back to work), to be able to cope with the workload without getting yelled at and made feel worthless.

    Another is if they want to fire people but it is not easy, then chewing people out and destroying their sense of pride in their work and the good feelings about the work until they break down quit willingly. It is perfectly possible to do this and is not even hard.

    These two can suck at least as much as other kinds of worker abuse which is regulated against, but these cannot be regulated against, so when every other kind of worker abuse is regulated against then there is often a heavy case of these two.

    Which suggests to me that fewer worker protection laws could at least make workers able to choose between different kinds of abuse…

  154. An extremely ignorant and possibly pernicious blog post. Before Raymond manages to infect other people with this kind of disinformation I better put a few things right:
    – If wages rise in a whole product sector it has no relevance on the competitive position of each employer in that sector. If all fast food workers get a rise, no fast food business will loose market share.
    – Empirical studies have shown that a rise of the miniumum wage leaves employment numbers practically unchanged (though it can have an effect on the growth rates of certain industries). The reason for this is probably that low wage employees make much less in wages than they produce for their employees.
    -Knowing a little bit about supply and demand does not an expert in economics make! Raymond is a good example for that.
    – Complaining of other people trying to negotiate a better compensation for their work is silly if you have no skin in the game anyway. It’s downright disgusting if you complain about people making extreme low wages while never having held a real job in your life. Mixing stupidity and lack of economics with lies (it’s not about doubling of wages, since the average ff-worker makes between 9 and 10 $) is despicable.
    Since I don’t think Raymond is getting money from the fast food industry, I must conclude he likes playing the useful idiot.

  155. @Norbert
    > – If wages rise in a whole product sector it has no relevance on the
    > competitive position of each employer in that sector. If all fast food workers
    > get a rise, no fast food business will loose market share.

    No, it’ll just cause an increase in prices that ends up most impacting people who have the least money (like, say, fast food workers).

    > – Empirical studies have shown that a rise of the miniumum wage leaves
    > employment numbers practically unchanged (though it can have an effect
    > on the growth rates of certain industries). The reason for this is probably that
    > low wage employees make much less in wages than they produce for their employees.

    The majority of the many decades of research into this suggests that minimum wage rises cause a small (~1 to 2%) impact to employment in the vulnerable teenage and low-skill segments. Only in relatively recent years have there been studies showing that this may not be the case. Point being, this is debatable.

    The rest of your post is empty ad hominem.

  156. Can’t tell if Norbert’s trolling, but this sounds like too many of the alleged intellectuals I hear from. I’ll note the absurdity of talking about “market share” when such an enormous variety of substitute goods are readily available and stop there before I incur dain bramage.

  157. Raymonds argument was not “wage rises, FF seller goes broke because nobody buys hamburgers anymore and eats steak instead”, but “wage rises, FF seller goes broke because customers buy a cheaper burger next door”. The existence of substitute goods does not make any comparison with directly competing products meaningless.
    Let me join your club for a minute: “Ha HA intellectualz ha ha me know serious expression like ‘substitute goods’ blain bamage”.
    That felt good!
    Anybody else wants to demonstrate his/her intellectual prowess?

  158. Empirical studies have shown that a rise of the miniumum wage leaves employment numbers practically unchanged (though it can have an effect on the growth rates of certain industries)

    Citation needed. There is one study that minimum wage proponents always trot out, but I believe the fly in that ointment is that the workers paid a higher minimum wage ended up getting fewer hours.

    And admitting that it can slow growth rates contradicts your case: you are saying that it doesn’t cause people to lose jobs, it just causes future people to not get them.

  159. Norbert, you mischaracterize Eric’s argument. It was indeed “wage rises, people go buy cheaper fast food next door” – but that rise was explicitly not a rise across a whole product sector, just one competitor within that market raising wages and therefore prices. You aren’t answering his argument; you’re answering a strawman, a common tactic of the moonbat Left.

    If you raise the minimum wage such that all costs within the sector rise, then the viability of that sector as competition for other sectors becomes an issue to the extent that those other sectors are not equally impacted by that rise – as they may well not be due to different cost structures.

    And I’ll back Eric’s arguments, which defeats your ad hominem – because I have indeed had real jobs, even if you don’t accept that Eric has.

    So how about some real discussion instead of the leftist version of it?

  160. Here is a rather recent paper:
    http://escholarship.org/uc/item/86w5m90m#page-1
    The Wikipedia page
    http://en.wikipedia.org/wiki/Minimum_wage#Empirical_studies
    gives an overview over several studies.
    Does raising the minimum wage have a negative influence on employment? Under certain conditions, of course. It is however silly to claim that mw-employees produce just a tiny bit more than they earn, and every raise would make their employers lose money.
    > And admitting that it can slow growth rates contradicts your case
    What case? This blog posting is wrong, and the author tries to disseminate misinformation about economics to keep his worldview intact. You too seem to have a hippy shaped hole into which you try to stomp any information that creates cognitive dissonance.

  161. Jay: Raymond said clearly
    >The other problem is that price competition in the fast-food industry is brutal. The name of the >game is fast and cheap; that means your franchise has to run on a razor thin margin. If you try to >charge significantly more over your cost of the basic inputs (meat, potatoes, cooking oil, >electricity) than your competitors do, your customers will desert you.
    in the context of “fast food workers on strike against national burger chains”. It is obviously you who mischaracterizes his argument.
    > a common tactic of the moonbat left
    Why is it so important for some people here that burger flippers earn as little money as possible? Because any rise in wages would be “left” and therefore wrong?

  162. No, I am not mischaracterizing his argument at all. He placed it specifically in the context of a worker’s collective buying up a fast food joint and setting wages to the level the Left wants: “Therefore, if you are one of the concerned, caring, and vastly indignant activists behind this strike, I’m here to tell you that your social-justice problem has a simple solution. Take out a loan (or put together the money from your like-minded activist friends), buy a franchise from one of the chains, and hire workers at $15 an hour.”

    Not the entire industry, and not an across-the-board wage hike.

    It’s not important to me that the wage a burger flipper makes be low. What is important is that it be connected to reality, in terms of the costs and the competitive landscape. Paying a burger flipper $15 an hour is neither in today’s market.

  163. @DMcCunney: “But attempting to read the tea leaves is fraught with uncertainty. Lots of folks who got law degrees and are now looking unsuccessfully for employment decided law was a good career choice back when there *were* lots of jobs for lawyers.”

    Yes, it’s true that reading tea leaves is a challenge, and that we get hurt all the time because we fail to correctly do so…but by removing the risk of student loans from the bankers, and neutralizing the risk through various laws, bankers no longer help students evaluate that risk! Thus, students are left on their own in trying to figure out what they will major in, and whether it will be financially worthwhile. Even worse, students are fooled into thinking the risk isn’t as bad as it is, because interest rates, which normally act as a barometer of risk, are kept artificially low. How many people would want to be an English major if the interest rates on a loan was 30%, but only 7% for a loan for an Engineering student?

    If bankers had to live with the consequences of funding a lousy education, do you really think that so many students would be majoring in “fluff” majors, or even going to college at all?

    “Deprecation of blue collar work goes very far back. Every society has status, and once you have the basics of survival covered, your focus shifts to maintaining and enhancing yours…Status and economic success don’t always correlate.”

    Yes, I am aware of that competition for status. It doesn’t have to happen, though, and neither you nor I need to compete for it…or, if we feel the need to do so, there are ways to obtain that status without going into gobs of debt.

    “And a college education is expensive enough that very few can afford to pay for one out of pocket.”

    First off, there are multitudes of ways to get a college education without going into debt; furthermore, the ease at which we can get student loans encourages colleges to dramatically increase their tuition, to the point that it’s out of reach even *with* the student loans made available!

    But all this also assumes that *college* education is the only way to go. My Dad had an Associate’s degree, and repaired electronics for a living. There were a couple of rough patches in providing for his family, but overall he did pretty well.

    For that matter, shortly after getting my doctorate, I looked into getting training as a CNC machinist. The degree would have been relatively inexpensive, and the pay coming out would have been fairly decent. I didn’t go for it because I had $100k debt, but if I were fresh out of high school (or perhaps even *in* high school), it would have been a *very* reasonable choice. Indeed, given that the program was for three months, it probably would have been *extremely* reasonable to get a degree in that, throw in some training as a carpenter or welder, and work my way through a Bachelor’s degree of some sort!

    “It’s *not* reasonable to withhold loans to get a degree based on someone *else’s* notion that it’s a “useless” degree.”

    I don’t see why it isn’t reasonable. We’ve always known that some degrees are worth more than others, so why shouldn’t availability for loans for such degrees reflect that? To claim that it isn’t reasonable, would be to imply that it’s perfectly reasonable to make cheap money available to those students who are inclined to postpone finding work, so they continue on to get a doctorate in English, even though there’s a glut of doctorates in the humanities (so getting even a professorship–let alone a tenure-track position–is nearly impossible), all the while making them even less employable than if they never had a degree in the first place. Pardon me if I have such a difficult time seeing the “mercy” in that situation; it’s even worse, if we are sacrificing the well-being of a large number of people, just so that a few individuals could “shine brightly” in their chosen field. (And I would propose that such individuals would find a way, even if the student loan situation was “stacked” against them.)

    (For the record, as much as I loved mathematics–enough to get a doctorate–it so far has proven foolish of me to pursue that degree. When I graduated, I eventually landed work in computer programming, where the pay literally “picked up” where it left off in a job I had left in order to go to graduate school.)

  164. @Norbert
    > Why is it so important for some people here that burger flippers earn as little money as possible?

    Because it is a corporation’s fiduciary duty (generally speaking) to keep their costs as low as possible to give their investors as much return on their money as possible. If they don’t the capital will depart and go to another alternative business, such as a burger joint that uses machine that replaces all the burger flippers, or a different industry entirely, while people choose to flip their own burgers at home.

    Nonetheless, there is a certain amount of truth to what Norbert says. The food’s price is fairly inelastic with respect to wages. According to a recent study (which certainly had some methodological flaws but I think gives a ballpark) 17%-26% of the cost of a burger comes from wages.

    http://www.cjr.org/the_audit/a_big_mac_miss_by_the_huffingt.php

    (BTW, the premise that wage cost is 17%, therefore doubling wages would only add 17% to the cost of a burger is plain wrong. Pricing is a lot more dynamic than that.)

    But the bottom line in this whole thing is it is nobody’s business how much McDonalds pays their employees. It is a free market transaction. The corporation offers a certain amount, the workers accept it or reject it. If the corporation doesn’t offer enough they won’t get enough workers, if they offer too much their competitors will gain an advantage and they will loose shareholder value. It really is nobody else’s business how much of the shareholders’ money the corporation offers potential employees in exchange for their labor.

    If we want to help people who don’t make enough money then we have charity, or it’s modern non-judgmental equivalent “welfare” also offensively called “entitlements.”

    And Norbert can begin to fix his philanthropic angst immediately if he wants. “Act local” is the cry of the progressives, so Norbert and all those who share his sensibilities can simply give their burger flipper a dollar cash tip. A very cheap way to make the world better, though perhaps lacking the self righteous satisfaction of raging against the machine.

  165. @Fluffy Girl: “>I mentioned earlier that we are near or at a point where 20% of the workforce can actually make everything we need on a daily basis. What do the other 80% do?

    But that is zero sum thinking. what “we need on a daily basis” is entirely different today than it was fifty years ago. We are far richer today. What do the other 80% do? They make new stuff that over time falls into the category of what “we need on a daily basis.” ”

    “What we need is smart people doing innovative things to make us all richer.”

    Agreed. Unfortunately, folks like that will be a minority in any society.

    “It is why the dreadful union controlled government funded education system in most western economies is such a disgrace, and moreover makes us all poorer than we could be.”

    And if it were otherwise we’d all *be* smart and creative and making innovative new things?

    Sorry, can’t agree. I agree our educational system is in need of changes, though I’m not sure I agree with your analysis of *why* it has problems. But the number of smart, creative, innovative people I agree we need will always be a minority in any society. Most folks simply won’t be *able* to do that.

    I want an educational system that recognizes and nurtures such folks, instead of one that hobbles them to the pace the less gifted students can manage, but most students *will* be less gifted.

  166. @Fluffy

    But the bottom line in this whole thing is it is nobody’s business how much McDonalds pays their employees. It is a free market transaction.

    I’m sorry, but you are beating your head against a cast iron wall with menacing spikes in it, Norbert types will never understand that concept.

    — Foo Quuxman

  167. Fluffy Girl> “There is a pretty simply way to illustrate the impact of raising the minimum wage. It is this simple thought: if fast food workers would not suffer any ill from raising the minimum wage to $15, then why not raise the minimum wage to $100. Then we’d all be so much better off, wouldn’t we?”

    No we wouldn’t, but that doesn’t debunk the argument for a moderate minimum-wage increase. From the workers’ point of view, raising the minimum wage is a tradeoff between some workers losing their jobs and other workers getting a raise. To work out the costs and benefits of this tradeoff, econ-101 has you draw a supply-and-demand diagram and run a welfare analysis of a price floor such as the minimum wage, as on page 6 of this PDF document.

    What would you find with such an approach? As the price floor rises,workers’ welfare loss from disemployment grows quadratically. At the same time, their welfare gain from rising wages grows slower than linearly, and eventually even starts to decline. Hence, while a rising minimum wage initially benefits workers overall, there comes a break-even point beyond which its rise becomes a net loss to them. A minimum wage of $100, which would disemploy nearly every worker, would surely harm workers as a whole. But a modest minimum-wage increase can still be a benefit. That’s where your appeal to this extreme case becomes fallacious.

    (Footnote: this whole analysis is from the workers’ point of view, ignoring the welfare of employers. If you equally value both emplyers’ and workers’ welfare on a dollar-by-dollar basis, you will end up concluding that any minimum wage that makes any difference at all harms the general welfare.)

  168. @Fluffy
    “But the bottom line in this whole thing is it is nobody’s business how much McDonalds pays their employees. It is a free market transaction.”

    With that reasoning, McDonalds employees are also free to organize a national strike. It is a free world, or not? Workers are also free to organize unions to get them bargaining power. The employers “organize” as a franchise too.

    So what is the problem?

  169. DMcCunney
    “Germany exports primarily luxury goods where price is not the deciding factor in purchases, and they can charge a high enough price and make a high enough margin to cover much higher labor costs.”

    No, the Germans export the machinery that the Chinese use to produce their consumer products. In the same vein, the Chinese produce mobile handsets, but the machinery needed to make the ARM chips comes from the Netherlands (ASML).

  170. @Jessica/Fluffy girl (that JAD got you to change your “name” is idiotic)
    “Who cares about the Gini coefficient? “Fairness” is not, in my view, an goal all to itself.”

    In many sense the feeling of “fairness” is important. Without a sense of fairness, people will disengage from the “social contract”.

    @Jessica/Fluffy girl
    “A few things really matter. 1. Do the poorest in society have the ability to provide for their most basic needs? 2. Does society provide an economy where the energetic, smart and hard working can progress so that they are rewarded for the fact that they make life better for everyone?”

    I think your point 2 is where the problems are. A bad Gini coefficient means that almost all economic growth will end up in the hands of a few. Essentially, people are working harder and innovating, but they do not get the income generated by that work and innovation. This means that the incentive to grow income could start to erode as the growth would not end up in the hands of those who do the work.

    This might be happening in the USA. Over the last three decades, more than 90% of economic growth has ended up in the hands of (much?) less than 10% of the people.

    “For example, the poorest 10% in Sweden have incomes 1.5 times the level of the poorest 10% in the United States even though average incomes are higher there.”

    http://www.oecd.org/els/soc/41494435.pdf

    • >In many sense the feeling of “fairness” is important. Without a sense of fairness, people will disengage from the “social contract”.

      Indeed. I measure “fairness” not as the inverse of inequality but by the degree to which people are free to make their own choices and not robbed of what they earn. High taxes and redistribution alienate me from the “social contract”.

  171. All McD’s employees are indeed free to assemble and demand higher wages, both according to U.S. Constitutional law and to laissez-faire philosophy. Note that according to the latter, at least, McD’s is free to try to find new employees that will freely agree to work at the current wage. This is important, since if McD’s was arbitrarily forced to not fire all the original employees, the original employees would have McD’s over a barrel – they could demand $100/hour in wages if they so chose.

    Anyone in their right mind (as in not Norbert) would know this would never work. Even if McD’s consented to such a forced wage, they would consequently be forced to operate at a loss until their available capital for payroll ran out and they went bankrupt, or to raise prices so high that customers sought other alternatives – either other restaurants or cooking at home – and McD’s goes bankrupt anyway. Which is precisely what the OP says.

    People in their right minds would likely include many aforesaid employees; they would never plausibly demand $100/hour, because they know they would enjoy that for maybe all of a week before being jobless. Nor would they demand $50/hour, or even $30/hour. They -might- demand $15/hour, but there’s no clear point to everyone where the demand is between a sustainable wage and an unsustainable one.

    No one knows exactly where that point is; many people know it depends on multiple variables; a free-marketeer would bet that the payroll accountants or related employees at McD’s would know most about how that dial could be tweaked, but would hedge his bets at the same time, because of those variables. In other words, the employees demanding raises might be -right-. But that’s okay, because those employees have several ways to offer a falsifiable claim that is fair to the employer: either set up their own competing firm with the higher wage that survives and demonstrate that it is possible, or walk out and claim that McD’s will consent to raises before it can survive the phase of finding replacement employees.

    They don’t even need to do market research to try those options (although it would probably be wise), and even if they do research, smaller, local groups of them will have more leverage, since they’ll presumably have a much smaller market to try to survive in, and therefore learn about.

  172. The more this goes on, the more I have to admit that my demand for research into why people think minimum wage is a good idea and how to more efficiently deal with their views (including detecting and effectively addressing trolls) is gradually approaching the point where I would pay for it. (Problem is, I know part of me knows nothing short of mind control would be satisfying, and that would clobber other goals. Harumph.)

  173. @Paul this is the same question as why people take a painkiller when something hurts as opposed to figuring what caused it – isn’t it sort of obvious why this happens?

  174. @DMcCunney
    > Agreed. Unfortunately, folks like that will be a minority in any society.

    I totally disagree. You are only thinking of one type of innovation, intellectual innovation. It is truly amazing what seemingly ordinary people can do when they are motivated and given the space to succeed. Of course there are people who can’t but most people are remarkably capable.

    School, however, an institution designed to produce compliant factory workers, beats all that out of them before they hit the second grade. Thankfully, some of the more robust mange to submarine their spirit through the layers of bull often by going dormant for a while.

    How many really remarkable people have you heard of that said “School really made me what I am today”?

  175. @Thomas Blankenhorn
    > From the workers’ point of view, raising the minimum wage is a tradeoff between some workers losing their jobs and other workers getting a raise.

    The purpose of the reductio ad absurdium it to get the concession you make above — namely that minimum wage causes unemployment. To sensible people that is plainly obvious, but there are plenty on the looney left who think that that isn’t true.

    As you say, minimum wage is a form of welfare, a special taxation on employers who take on low skill workers and give them a leg up into the workforce. It isn’t clear to me why such a special taxation is a good idea. One of the biggest problems with welfare is that it is splurged over hundreds of different programs and so is entirely impossible to keep track of.

    As an earlier commenter said: why do we have a school lunch program if we already have SNAP?

  176. @Winter
    > that JAD got you to change your “name” is idiotic)

    It was Dan, and it has kind of grown on me. Some of my rl friends even call me Fluffy now. :-)

    >In many sense the feeling of “fairness” is important.

    Fairness is impossible to measure. Fluffy measures (excuse the pun) of a “feeling” are dreadful ways to make policy. Gini doesn’t seem at all to correspond with any sense of fairness I have. My sense of fairness is that people who produce value should be rewarded commensurately. Government manipulation of the market notwithstanding, the market is pretty good at that.

    My sense of fairness also says that the people who couldn’t make it in society should be helped. But my sense of fairness also says that it is outrageous to take money from people under threat of criminal prosecution, give it to someone who didn’t earn it, and pat the government thug who did it on the back for their wonderful altruism. Charity is a very good, very human, very win/win thing. Welfare and worse “entitlements” are none of these things. To give the other side, my sense of fairness bristles raw when huge badly run companies also partake of that same welfare on the maniacal notion that they are too big to fail, to the detriment of other companies that are well run and pay their own bills.

    So can we go with my sense of fairness instead? If you do, I’ll totally commit to your putative social contract.

  177. @Fluffy Girl:
    >> Why is it so important for some people here that burger flippers earn as little money as possible?

    > Because it is a corporation’s fiduciary duty (generally speaking) to keep their costs as low as
    > possible to give their investors as much return on their money as possible.
    Just as it is an employee’s “duty” (or in in his interest) to get a higher wage. Both statements are trivial. But why is it important for _you_ that ff chains maximize their profit while their employees don’t? Possible reasons:
    – you are a fast food chain (or own part of one)
    – you hope to save a few cent on each burger as long as wages stay low
    – you dislike the people who work there
    This is about a normal business negotiation between parties (probably) completely unrelated from you or most people here. Nevertheless most people here seem to take sides for the employers. The blog post tries to paint the employee side as crazy and stupid, and claims their negotiation goals are completely unrealistic, by using arguments that are clearly false, but rather seductive for people who know only little about economics.
    > If they don’t the capital will depart and go to another alternative business, such as a burger
    > joint that uses machine that replaces all the burger flippers, or a different industry entirely,
    > while people choose to flip their own burgers at home.
    Do you think it’s in the strategic interest of the united states to have a vibrant and growing fast food industry? And why is everybody repeating these trivialities (“companies must make money”, “higher prices lead to lower demand”) as if they were the result of some recent groundbreaking new research?

  178. @Norbert
    It doesn’t matter to me personally what strategy a business uses, or that fast food workers get paid as little as possible, or that McDonalds maximizes their profit. What does matter to me is that the government doesn’t interfere in the economy with such abominations as the minimum wage, because that actually does make me, and everyone else poorer. The free market is excellent at optimizing prices and processes, and getting maximum value out of all resources according to the needs profile of the population. Government tweaking screws that all up and reduces all of our wealth (even, ultimately, the potential beneficiaries who eventually get a non minimum wage job.)

  179. Fluffy Girl In a Mans World on 2013-09-05 at 18:25:58 said: According to a recent study (which certainly had some methodological flaws but I think gives a ballpark) 17%-26% of the cost of a burger comes from wages.

    That “study” is essentially noise. Zero useful content. The author used the sales and employee count of McDonalds Corporation as the sales and employee count of all McDonalds stores.

    In fact, nearly all McDonalds stores are owned and operated by franchisees. McDonalds itself owns some, but its main activity is receiving franchise fees, which pay for national marketing and product development. Also, I think, provision of McD-branded supplies to franchisees. Thus McDonalds Corporation sales and employee count are a small fraction of the same numbers for all of “McDonalds”. (And most McDonalds Corporation employees are marketing, financial, and distribution staff, not store workers.)

  180. @Norbert

    It doesn’t matter where the minimum wage is set when you have no job at all and the cost of living is beyond your reach.

    Much of the progressive legislation of the 20th century has been feel-good/look-good without doing so much good. Various housing quality and affordability measures have made housing much more expensive at the bottom end. Rent control laws create housing shortages, which makes non-rent-controlled housing wildly expensive, increasing demand for rent control laws.
    Much of employment law makes labor more expensive at the bottom end, without improving productivity, so that business cannot afford it.

    Workers at the bottom end get squeezed between the two. Either they cannot get a job at all or everything is too expensive for them. Government programs for the unemployed and the working poor are usually funded by employment taxes, making labor more expensive and thereby increasing unemployment, while minimum wage laws have the same effect.

    You’ll have to come up with better arguments than “You’re all a bunch of meanies who side with the bad guys.”

    • >Workers at the bottom end get squeezed between the two. Either they cannot get a job at all or everything is too expensive for them.

      Or both.

      Look up the concept of “deadweight loss”. Anything that screws with market signals (like employment taxes and minimum-wage laws) increases deadweight losses. For various reasons, their impact is worst on the poor.

      Or, to put it differently, the effect of redistributionism is to partly replace natural market pressure on the poor with iatrogenic state failures that are much worse for them.

  181. @esr
    > the effect of redistributionism is to partly replace natural market pressure on the poor with iatrogenic state failures that are much worse for them.

    Just an FYI, I love this use of the word iatrogenic….

  182. iatrogenic

    Showoff.

    (saves it for future reference)

    Norbert, to the extent the OP portrays the employee argument as “crazy and stupid”, I’ll claim (and Eric can refute if untrue) that it’s largely portrayed that way to counter its portrayal as noble and moral by the other side. That latter portrayal is either naive or willful misrepresentation; the evidence comes in the post. Your counter claims were either refuted by various commenters if they were substantive, or dismissed with prejudice if not. In fact, you seem unable to make these claims without repeated use of argumentum ad probrum, which outs you as arguing in bad faith and as conspicuously ridiculous to boot – reminiscent of a chihuahua in a roomful of Bengal tigers.

    By the way, there’s an underlying motif to the OP that extends into past posts on topics that appear unrelated at the surface: it has a falsifiable claim. You can disprove many of the assertions it makes by starting your own business, paying what you consider a fair wage, and then simply being profitable. That’s not much to ask. You don’t even have to do it yourself; just know of someone who does. “Fluffy” made it even easier to just live by your preferred code, albeit one that wouldn’t disprove the OP: tip your fast food servers.

    Employee claims are unrealistic, contingent on one simple fact (if not perhaps others): an employer can find employees willing to work at the current wage. And don’t try to play the “wage slave coal miner” card; there is no epidemic of fast food franchisees subjecting their staff to lifelong indentured servitude. Anyone wishing to quit is free to do so. If the local Mooby’s is willing to pay $10.35/hour, there’s nothing the local McD’s can do about it at $7.50.

    In fact, here’s something else you need to get past your premises: if employers couldn’t find employees willing to work at the current wage despite being free to look for them – if a walkout succeeded, or the employer promptly had to close down – it wouldn’t bug us from a moral perspective. If fast food vendors began going out of business across the country for lack of serving staff, and those that were left were forced to sell meals at $12 and up just to meet operating expenses, including payroll, the Fluffies of the world would see that as the necessary expense of a convenient meal, shrug, and move on. You obviously don’t get that. Maybe someday you will – but not as long as you cling to this “worldview” notion you’re so keen to project onto the other side.

  183. Do you think it’s in the strategic interest of the united states to have a vibrant and growing fast food industry?

    um, what?

    what does that question even mean?

    oh well, here it goes: the “strategic interests” of the US are served by producing as much wealth as possible, a “vibrant and growing fast food industry” does this as long as it is operating in a market that hasn’t been too massively fucked up.

    And why is everybody repeating these trivialities (“companies must make money”, “higher prices lead to lower demand”) as if they were the result of some recent groundbreaking new research?

    Because it still hasn’t gotten through the incomprehensibly thick skulls of people like you.

    — Foo Quuxman

  184. Minimum wages apply to all joints and franchises, so they cannot cause a joint to become uncompetitive. Surely all joints just put their prices up to cover the increased cost?

    Eric has already noted that the employee alone costs $35 in total — what’s an extra $7.50 going to mean when it’s not a matter of competition within the industry? Are the McDonalds customers suddenly going to dine at fine restaurants instead?

    • >Eric has already noted that the employee alone costs $35 in total — what’s an extra $7.50 going to mean when it’s not a matter of competition within the industry?

      It will mean at least the following things.

      (1) Fewer people will get hired by the chains and franchisers. Those who are will get fewer hours, during which they will be pressured to work harder.

      (2) The lowest-skilled jobs will be eliminated first.

      (3) There will be as much substitution of off-books work by illegal aliens as the feanchisees think they can get away with, and the increase in legal minimum wage will increase the payoff from that risk.

      (4) Those who will be hurt most by this shift are minorities, the poor, and the young.

      (5) McDonald’s customers will have to spend more on food, leaving less to spend on other essentials.

      (6) Again, this burden will fall most heavily on minorities and the poor.

  185. Paradigm Arson on 2013-09-07 at 09:21:25 said: Eric has already noted that the employee alone costs $35 in total — what’s an extra $7.50 going to mean…

    First, ESR is probably wrong when he estimates the total labor cost of an employee receiving $8.00/hr in nominal wages as $35.00/hour. There’s a fair amount of indirect burden on employment, but it’s not that bad.

    Second, however, any increase in the wages received by the employee will cause an increase in the employer’s other labor costs. Payroll taxes, for instance. FICA/Medicare, also unemployment insurance tax, and possibly workmen’s comp insurance premium.

  186. Or, alternatively:

    “Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a government-mandated minimum wage, because they lose their jobs or fail to find jobs when they enter the labor force. Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount—and, if it is not, that worker is unlikely to be employed.” — Thomas Sowell

    — Foo Quuxman

  187. Fluffy> “[M]inimum wage causes unemployment. To sensible people that is plainly obvious, but there are plenty on the looney left who think that that isn’t true.”

    By this standard, David Friedman — who is beyond libertarian, he’s the leading anarcho-capitalist alive — would not be a sensible person, and would arguably be part of what you call “the loony left”. He explicitly acknowledges that the supply curve for labor may well bend backwards. (The relevant section is about one-third of the way down the page. You can search the page for the term “backward-bending” to get there.) And when you draw the supply-and-demand curve for the labor market with a backward-bending supply curve, it is far from “plainly obvious” that a minimum wage causes unemployment. It could just as well reduce it by keeping entrants from swamping the market.

    I’m not saying this just to be contrarian and argumentative, though I happen to be that too, and with zest. I am saying it to raise your consciousness to the fact that you can’t decide matters like this by economic theory and libertarian doctrine alone. You have to decide them by looking at the econometric data. That’s why I asked, in my very first post, if anyone had a pointer to econometric data on the matter.

  188. Thomas, David Friedman’s argument for a backward-bending supply curve is based on the idea that the rate of pay per hour of labor can be high enough to where the marginal utility of the increased income is outweighed by the value to the person of the leisure lost. I strongly doubt that that operates in the minimum-wage range of income for anyone who’s actually willing to work.

    • >I strongly doubt that that operates in the minimum-wage range of income for anyone who’s actually willing to work.

      David Friedman is a friend of mine (he’s commented here on occasion) and I have a pretty fair grasp on how he thinks. David would not mrely “strongly doubt” this, he’d find it tranaparently ludicrous.

  189. @ Thomas Blankenhorn – “you can’t decide matters like this by economic theory and libertarian doctrine alone”

    This is especially true if the underlying cause/motivation for the strike is not fundamentally about minimum wage, economic self interest, employee disgruntlement, or any of the other media-promulgated memes that are currently in the news.

    An incipient tyranny needs a rabid mob and social unrest in order to justify the use of state power to “crack down” and restrict freedoms. If the media wanted to accurately represent the causal meme of this strike, the headline would read . . . “Workers of the World – Unite!”

    Now where have you heard that before?

  190. @Fluffy girl etc.
    “My sense of fairness is that people who produce value should be rewarded commensurately. ”

    Fairness is a fundamental “feeling” or “emotion” in humans. Even very small children have a sense of fairness. It is indeed a feeling. I can think of many people who share your definition for at least part of their lives (there is also fairness in school and in interpersonal relations).

    The point is that many people, like those on strike here, do not feel the proceeds of their enterprise and work are shared fairly. High Gini coefficients tend to go together with strong feelings of “unfairness”. I admit that people do not always need real facts to feel unfairly treated. On the other hand, having real facts on your side does help a lot in feeling treated unfairly.

  191. @Jay Maynard: That’s a fair point. A backward-bending labor-supply curve is more likely to apply to the high end of the wage distribution, not the low end. While I reserve the option to dig the concept back out if the discussion here ever turns on the Laffer curve and the top marginal tax rate, the phenomenon doesn’t apply to the minimum wage. I stand corrected.

  192. The correction, however, does not change my larger point that the effect of minimum-wage hikes, and when they present an attractive tradeoff from the workers’ point of view, needs to be judged by empirical data. We can’t know what the relevant elasticities are from theory alone.

    • >We can’t know what the relevant elasticities are from theory alone.

      Hold on to that point, but data tells us the same as theory and will almost certainly continue to do so. As has been pointed out here before, the study most cited by minimum-wage boosters pulled a fast one by looking only at nominal employment levels and ignoring a decrease in hours worked (and thus income).

  193. esr> Hold on to that point, but data tells us the same as theory and will almost certainly continue to do so.

    As I said a few days ago, Steve Landsburg isn’t so sure about the data, even though his politics is far closer to yours than to mine. And even in theory, I think your friend David would surprise you if you asked him in a private email, without his anarcho-capitalist reputation at stake. I predict he would confirm that labor-supply curves can plausibly have weird shapes and parts that slope the ‘wrong’ way. I would expect him to tell you that they make the econ-101 case against intervention in the labor market less ironclad than libertarian orthodoxy would have you believe. I would also expect him to tell you that they furnish a case for government interventions like the minimum wage that rises to the level of non-absurdity. To be sure,I wouldn’t expect him to conclude that these concerns should prevail, and that acting on them would amount to good policy. But then again, non-absurdity (“far from plainly obvious”) is all I have claimed could be derived from his price-theory textbook.

    On the specific question of the labor-supply for burger flippers, I keep disagreeing with myself on whether I should correct my correction in response to Jay Maynard. Maybe the phenomenon can, after all, apply to all segments of the labor market. I will spare you the annoyance and me the embarrassment that would come with endless changes of mind. I’ll get back to it when I have a reasonably-solid conclusion.

    • >I would expect him to tell you that they make the econ-101 case against intervention in the labor market less ironclad than libertarian orthodoxy would have you believe. I would also expect him to tell you that they furnish a case for government interventions like the minimum wage that rises to the level of non-absurdity.

      Why don’t you ask him? His email address is on his website.

      I think your expectations will be disappointed. I have never experienced any divergence between Dvid’s public stance and his private beliefs; he is consistently rational.

  194. Comment on this backward slope supply curve: I found it pretty interesting, and frankly I disagree a little with Jay and Eric. I can certainly see why some minimum wage workers would cut back on hours. College students for example need to make enough money to survive college only, and they definitely have to juggle hours working at the burger joint against hours spent studying for the test. Which is to say, if the minimum wage were higher it is certainly possible the balance would tip in favor of studying. Which would of course open up hours for others.

    However, there are all sorts of other countervailing trends such as decreased demand due to increased prices, reallocation of resources to buy burgers and not other things, automation to replace expensive workers and so forth. But Thomas certainly succeeded in his goal of making me think a little more broadly on this matter.

    However with regards to econometric data, there I have to disagree. In my view there is pretty much no such thing as useful econometric data. An economy is such a complicated thing with so many chaotic variables that any experiment on that data with tuning one variable tends to get buried in all the randomness. You can maybe get some general trends, but even these are pretty unreliable.

  195. If wages rise in a whole product sector it has no relevance on the competitive position of each employer in that sector. If all fast food workers get a rise, no fast food business will loose market share.

    What difference does it make whether they lose market share. The point is they will lose sales. There is no difference between losing share in a static market, and maintaining share in a shrinking market. You’re losing either way. If all fast food workers get a rise, then the price of fast food will rise, and people will buy less of it. This, of course, harms the businesses and workers, which is of course a bad thing, but more important is the harm to the consumers who are no longer able to enjoy as much fast food as they used to. That harm is completely omitted from left-wing so-called analyses.

  196. Raymonds argument was not “wage rises, FF seller goes broke because nobody buys hamburgers anymore and eats steak instead”, but “wage rises, FF seller goes broke because customers buy a cheaper burger next door”.

    Idiot. Most people won’t eat steak instead, they’ll eat something cheaper and less enjoyable instead. Though if the price of hamburgers rises in relation to steak (because wages are a higher proportion of the price of hamburgers than of steak) then some people who are relatively better off, but have been buying hamburger because it’s so much cheaper, will indeed decide that with the smaller difference it becomes worth paying the extra for steak.

  197. Raising the minimum wage has to increase unemployment, unless the minimum was so low that nobody was getting it anyway, in which case raising it is harmless but stupid. If you do a study and find otherwise, all it means is that there’s a flaw in your study. If you can’t find the flaw, it just means you haven’t looked hard enough. It’s the same principle as perpetual motion machines; they can’t exist, so any design that seems to work must be flawed.

  198. you will end up concluding that any minimum wage that makes any difference at all harms the general welfare.

    That is exactly correct.

  199. But why is it important for _you_ that ff chains maximize their profit while their employees don’t? Possible reasons:
    – you are a fast food chain (or own part of one)
    – you hope to save a few cent on each burger as long as wages stay low
    – you dislike the people who work there

    Nobody here has argued for maximizing the business’ profit. What we are arguing is for maximizing consumer benefit, by keeping all cost factors as low as they can get. Consumers are more important than producers, first of all because the whole purpose of production is consumption. Also, producers’ interests are concentrated, so they are able to effectively advance them, while consumers’ interests are diffuse, so nobody speaks for them, and yet for any given good or service most people are consumers but very few are producers. Advancing producers’ interests in any one sector at the expense of consumers is therefore a conspiracy of the few against the many.

  200. “””In fact, here’s something else you need to get past your premises: if employers couldn’t find employees willing to work at the current wage despite being free to look for them – if a walkout succeeded, or the employer promptly had to close down – it wouldn’t bug us from a moral perspective. “””

    Then what in the hell is bugging you now? This is a strike, not a movement to legislate a minimum wage. This is what’s got Norbert baffled, and I’m starting to see his point. It’s not any of our place to take sides in a negotiation between parties that we have no affiliation with.

  201. I think someone (ESR?) needs to explain to me the libertarian argument against unions, because I’m really having trouble seeing that there is one.

    • >I think someone (ESR?) needs to explain to me the libertarian argument against unions, because I’m really having trouble seeing that there is one.

      There is no libertarian argument against unions per se. Workers have every right to form voluntary associations for purposes of mutual support and collective bargaining.

      Libertarians do, however, object to closed-shop laws and other regulations that force people to affiliate with a union in order to work.

  202. This is a strike, not a movement to legislate a minimum wage. This is what’s got Norbert baffled, and I’m starting to see his point. It’s not any of our place to take sides in a negotiation between parties that we have no affiliation with.

    Of course it’s not. Sides are being taken in the rhetoric of the larger narrative underpinning both the strike demands and minimum-wage advocacy, which asserts that wages can be raised with no harmful effects on anyone other than the fat-cat owners, who are also somehow preventing the mistreated workers from working around them.

  203. Then what in the hell is bugging you now? This is a strike, not a movement to legislate a minimum wage.

    Except that it isn’t a real strike; it’s a political action by a small number of SEIU/ACORN activists to put political pressure on the company. If it were merely workers withdrawing their labor, with the employers completely free to hire replacements if they can find anyone willing, and there was no intimidation on either side, libertarians would have no problem with this. But it isn’t. Union action rarely is, but this is especially blatant.

    I think someone (ESR?) needs to explain to me the libertarian argument against unions

    This libertarian’s problem with unions is that they seem to operate mostly through the explicit or implicit threat of violence. That’s essentially what a picket line is, especially one that actually blocks access, and that the police refuse to move. It’s true that I’ve seen polite pickets, who readily allowed customers through, though I don’t know how they behaved towards strike-breakers or scabs. But the history of unions is violent enough that a picket line is often enough to get the message through to people that they should be afraid to cross it.

    Even polite pickets, whose sole function is to try to persuade people nicely not to do business with the employer, either as customers or as employees, I have a problem with. Not that they should be banned, but they’re making a so-called moral case that, from a libertarian point of view is based on false and immoral principles. They’re trying to persuade people to side with them and against the employer, just because they’re workers, and workers by definition have right and justice on their side, and that’s just not so. There’s no valid reason why those not involved in the dispute should sympathise with either side, so what is the basis of the picket line? Why don’t they just stay at home and enjoy their unexpected leisure, while they see whether their negotiating tactic works or not. The very fact that they’re standing outside the business means they’re either engaged in intimidation or preaching a false morality. I have a problem with both, though obviously a different kind of problem with each.

  204. On elasticities. For a while I was torn between two methods. One is the “Austrian” method which is so strongly focus on logical theory that it dismisses – in actually thoughtful and at least partially valid ways – empirical observation, claiming that the actions of _learning_ beings cannot be subject to _repeatable_ experiments and observations. This makes sense, yet it is so strongly against everything that otherwise works well in the sciences, and all too easily lures one into a kind of intellectual hubris, that I have to be a bit skeptical about it.

    The other extreme is vulgar-Keynesianism, the attitude that a gram of observation dismisses a ton theory – the minimal wage was raised, unemployment did not raise, your theory is invalid. Although such brutally empirical approaches are valid in .e.g physics, it’s always a bit fishy in economics, in economics logic must not be so defenseless against empirical observation: when human beings talk about the logic of how humans make decisions, at some level it has to be valid no matter what the observation says, because our brains are not external objects to be observed but ourselves. Empiricism can trump other-knowledge but not self-knowledge. That is a nice conundrum, isn’t it?

    One way out from this dilemma is that we use the a priori methods of the “Austrian” school to nail down the cornerstones of theory, and they are not subject to empirical testing. However we also accept that every single cornerstone can have all sorts of elasticities, and these are to be measured. In theory raising a price reduces demand, in practice the price elasticity can be near infinity, so it may not necessarily happen in practice, thus the ultimate word is to the empirical measurement of elasticities. What the theory tells is exactly what to measure.

  205. @Thomas re: union power in Germany. You know well enough that nobody actually born in Germany will work in these kinds of jobs, except maybe when doing so while studying, but it is a very typical migrant job. Same for retail, most of gastro, and so on. Anything that does not require a trade school paper or a licence. The average Turkish, Bosnian or Polish McD employee of Munich will not join a union or when has to, will not be very active in it, because lacking the language skills, and because being ashamed or afraid of being pushy, or is generally not used to the idea that this sort of stuff works. I know many fellow Hungarians who live in Austria and I see that nobody even reads the collective contract. Most couldn’t read it, legalese can be undecipherable even with a B2 – B3 language level which few people exceed. I didn’t read it either, it bored me. People are just happy to have a job in a rich land and they are used to the idea that when you are not happy with it, you don’t argue, you just quit.

    Anyway, my point is that it is exactly the worst kind of experiment to test union power. Focus on non-migrant industries, like industries where localizing a trade school diploma and getting a licence can be hard – like electricians.

  206. “Libertarians do, however, object to closed-shop laws and other regulations that force people to affiliate with a union in order to work.”

    Are closed-shop laws actually a thing? I was under the impression that a “closed shop” was one where the union threatens to go on strike if the employer doesn’t have a policy requiring anyone hired to join the union, and that the only “laws” being discussed are laws outlawing that practice.

  207. Which, again, I’m at a loss for understanding the libertarian case against this and for laws forbidding it.

    • >Which, again, I’m at a loss for understanding the libertarian case against this and for laws forbidding it.

      Assuming I understand your referent, libertarians object to laws that impair freedom of contract. If A wants to work for B and B wants to work for A, and they agree on compensation, we think it isn’t anyone else’s business and shouldn’t be anyone else’s privilege to prevent that from happening.

  208. @PapayaSF: I think the short answer is that unions are a form of cartel.

    Even granting that for the sake of the argument, that just moves the question to, what’s the libertarian case against cartels?

  209. @Shenpen
    “In theory raising a price reduces demand, in practice the price elasticity can be near infinity, so it may not necessarily happen in practice, thus the ultimate word is to the empirical measurement of elasticities.”

    No, in theory raising a price reduces the “quantity demanded”, not “demand”. To the casual reader, the two terms are interchangeable, but the former is a specific point on the demand “curve” function, and the latter is the entire function. Elasticity is simply the derivative of the function. A reduction in demand is a shifting of the entire curve toward the price axis, such as is caused by Obamacare forcing costs additional to the nominal wages paid.

    The rare exceptions to the law of demand are those status goods/services perceived to be valuable because of their high prices, which have a very low aggregate demand due to the simple fact that very few people can afford them.


    *I always make the price axis horizontal, because the quantities supplied and demanded are functions of price, whereas economists seem to like making it vertical, for reasons that elude me.

  210. @Random832
    > Even granting that for the sake of the argument, that just moves the question to, what’s the libertarian case against cartels?

    There is no libertarian case against cartels. Though the prevailing view is that absent government support for cartels (which is quite common) cartels tend to fall apart very quickly.

    I had a comment on unions that disappeared into the WP filter limbo, however, one type of “closed shop” regulation that is quite common is building codes that require union labor to perform various building functions. Why does it cost so much to get a leak in your pipes fixed at 3am on a Sunday morning? You can thank your local Plumbers Union for that.

    BTW one of the things that can potentially be good about unions is an mark of quality, if it is union it means he has passed a certain standard of capability judged by people who are qualified to judge.

    I actually think unions are in principle a good idea for fungible professions, it is just that in practice they tend to be run by left wing loonies who want to jam their viewpoint down your throat via violence or legislation, rather than convincing you in a win/win way of the value they offer.

    • >BTW one of the things that can potentially be good about unions is an mark of quality, if it is union it means he has passed a certain standard of capability judged by people who are qualified to judge.

      Libertarians think this service, of being a trust nexus for consumers, is one of the services unions should offer their members.

  211. Fluffy, I think there is a distinction between economics and politics here. The economic argument against cartels is that they are a market distortion, an inefficiency that benefits a group of producers at the expense of consumers. (In this case unions are producers of labor.) Thus, I think libertarians oppose them on economic grounds.

    However, as you say, they are usually not stable, so perhaps libertarians might not oppose them politically (i.e. support anti-trust and price-fixing laws).

    @Random832, “closed shop” means that you must join the union to work there.

  212. Random832, US federal law does allow unions to effectively force everyone to belong, unless state law says otherwise.

    Terminology:
    “Closed shop” means that every employee (in positions covered by the union contract) must belong to the union. The closed shop is illegal in the US.
    “Union shop” means that every employee must either belong to the union or else pay the union a fee that can be as much as the dues he would pay if he were a union member. This is legal in the US in the absence of state laws that prohibit it (called “right-to-work laws”). Roughly half of the states have such laws.
    “Open shop” means that employees are not required to do business with the union in any way. In practice, unions in open shops tend to convince reluctant employees to become members with violence. Needless to say, libertarians object to such.

  213. @PapayaSF
    > libertarians oppose [cartels] on economic grounds.

    I don’t agree. Libertarians advocate free association. Cartels are a (somewhat mendacious) form of free association. The ever prescient Adam Smith had the following to say on it:

    “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.” — Wealth of Nations, Adam Smith.

    The last point being so pertinent to today one wonders that it was written the same year as the Declaration of Independence.

  214. There is disagreement about this. Yes, some libertarians want to abolish all anti-trust laws. Others see price-fixing as a form of interference in the free market, and seem to be OK with laws banning cartels. (Unless you don’t think Richard Posner counts as a libertarian.)

    Free association is fine, but to me, cartels arguably fall into the category of “your right to throw a punch ends at my nose”: they are distortions of markets that are somewhat coercive. I’m sure we agree that government-protected cartels are objectionable, but I don’t see positive economic effects for even cartels not protected by government, and there are certainly negative effects. I’m not sure that saying they tend to be unstable is enough of an argument against laws banning them, and I’m not seeing negative effects of those laws.

  215. @PapayaSF
    > but I don’t see positive economic effects for even cartels not protected by government,

    The positive effect is that it means the government doesn’t get a chance to fiddle with the economy. I have read your comments, and I am sure you recognize that that is an absolutely HUGE economic benefit.

    Here is the thing — at Apple there are thousands of employees. Those that have the power to do so have agreed that an iPhone should price at $700 (or whatever it is.) These individuals have cartelized together to fix the price of an iPhone.

    Should we have laws preventing these individuals from agreeing together on a price? How exactly is that any different from groups of individuals (namely firms) agreeing together on pricing?

    Insofar as someone can come in and beat out the cartel’s price, they can do whatever they want and pay both the cost and receive the benefit of doing so.

    You might say “barrier to entry” but the cartel has paid the barrier to entry and seek to recover that cost with elevated prices. That seems perfectly reasonable to me. If they over charge then the barrier can readily be breached with money and time, and they will eventually get their butts kicked.

    Honestly, in a free economy, where others have no legal barriers to enter the market, I see nothing wrong with cartels. Of course there are many legal barriers to entry in many industries, but that is, to reuse Eric’s excellent terminology, an iatrogenic malady.

  216. I think your Apple analogy is inapt, because one firm pricing its product is not a cartel. Otherwise I hear what you are saying and largely agree, but from a “libertarian perspective” I don’t think it’s a slam-dunk either way.

    Of course not having the government fiddle with the economy is a huge benefit, but all fiddling is not equal, and I am always willing to see how theory and reality collide. In this case, and somewhat paradoxically, there are libertarian aspects to both sides: libertarians want free markets and not government intervention, but is this an instance where a small and relatively harmless intervention (as far as I can tell) can make markets freer overall? Not just by removing the deadweight loss of cartels, but by preventing their formation, might they also be preventing the rent-seeking and regulatory capture that often happens with government-sanctioned cartels? A cartel may not be government-sanctioned at first, but may then use its position (however short its natural lifespan might otherwise be) to become so, so I think the libertarian argument against government-sanctioned cartels could extend to opposing cartels in general.

  217. I would say Richard Posner is indeed not a libertarian.

    Free association is fine, but to me, cartels arguably fall into the category of “your right to throw a punch ends at my nose”

    Um, what? In what way have I and my cartel engaged in force or fraud, that would justify your using force against us in self-defense? What right of yours have we forcibly deprived you of?

    I don’t see positive economic effects for even cartels not protected by government, and there are certainly negative effects.

    True, but so what? If I and my buddies choose to form a cartel, thinking that we will be the exception that proves the rule, and will not collapse in short order, what gives you the right to forcibly prevent us? Yes, we are making your quality of life less than it could be, but what gives you the right to the maximum quality of life you can possibly have? Anything we deny you is ours, and while it would make economic sense for us to give it to you, surely it’s our right not to. Of course you have no obligation to help us, and every reason to do whatever you can peacefully to break us apart, by making each of us offers that one of us is eventually bound to accept; but I hope you agree that you may not beat us up, or burn our offices, or simply take that which is ours, so how does that change when you call yourselves a government? As I see it, your only moral course of action is to wait patiently until we come a-cropper, just like almost every other cartel has done, and then tell us you told us so.

  218. The best defense against cartels raising prices to rapacious levels is free capital markets, which would react to such moves by funding competitors to underbid the cartel. But there are many entry barriers in the capital markets, which conveniently favor the large players who can afford to devote staff to compliance. Take a look at how many Obama administration officials have spent time at firms like Goldman Sachs. And they’re supposedly the political enemies of the “banksters”.

  219. @The Monster
    > The best defense against cartels raising prices to rapacious levels is free capital markets,

    But there is another defense as well. It is found in the answer to this question: “In a ballpark, there is only one hot dog vendor, so why don’t they maximize their profits by charging $50 for a hot dog?”

  220. News Flash – SEIU sponsors fast food strike.

    It could be altruistic compassion for the plight of the low wage worker. Or, it could be a Jesse Jackson-style fundraiser (corporate blackmail). I wonder how much the professional protesters are being paid? Better be more than minimum wage.

  221. “””Assuming I understand your referent, libertarians object to laws that impair freedom of contract. If A wants to work for B and B wants to work for A, and they agree on compensation, we think it isn’t anyone else’s buseness and shouldn’t be anyone else’s privilege to prevent that from happening.”””

    So if you’re _for_ freedom of contract, and _against_ laws impairing it, then you should be in favor of the existence of closed-shop policies (being a contract between the existing workers as negotiated by the union and the business, or an implied consequence of the fact that everyone will quit and they’ll lose all their workers if they change the policy) and against laws that prevent them from making such a contract.

    I can’t find any indication that “closed shop laws” (i.e. the government actually mandating that businesses should require people to join a union) actually exist, based on a google search for it. It seems to be an imaginary bogeyman of people trying to reconcile “pro-business” with “libertarian”.

  222. “””Random832, US federal law does allow unions to effectively force everyone to belong, unless state law says otherwise.”””

    So the F!@# what? What is the libertarian argument against the law allowing anything? That’s non-interference, which libertarians should love. The “closed shop law” that ESR seemed to be talking about was a misconception that the law required it.

    • >So the F!@# what? What is the libertarian argument against the law allowing anything?

      The verb “allow” is misleading here. What’s really going on is that the government acts as an ally of unions in coercively rigging the labor market. Union-shop laws (and the now illegal closed-shop arrangements that preceded them in the U.S. and still obtain in, for example, Germany) are one means; the Davis-Bacon law is another.

      If the market weren’t rigged, lockouts would be approximately as common as strikes as labor and management both maneuvered around the supply/demand equilibrium. Mostly they’re illegal in the U.S. (there are complicated exceptions).

  223. @Random832, “closed shop” means that you must join the union to work there.

    And what is a “closed shop law”? I’ve been going on an assumption that it means a law that mandates this, because it is the obvious plain-english interpretation of the phrase.

  224. I’d say one thing that could be very good about unions is helping to turn a job into a true vocation, that has a culture, identity, tradition, a sense of pride. Something similar to guilds, minus the monopoly power. But generally speaking when medieval guilds all carried their flags at processions etc. that sort of thing was a good thing.

    I have seen something like that in England on a 1st May in the Black Country Living Museum, trade unions with old flags and old songs, it doesn’t cost money and gives a certain pride to the working people so I really find it respectable. Of course it was way too leftie for my taste, with a Chumbawamba gig and the kind of folks who still think Che t-shirts are cool, stuff like that, but anyway.

    I think we could have something like modern guilds – with identity and pride but without the monopoly power – by simply letting employers into trade unions, maybe without voting rights but the rights to observe, participate and speak, so they are less seen as the enemy, and more as a member of the same profession so that the culture and identity of the union would be steered more towards being the representative of a profession, and not just the workers organization against the employer.

    But again, the whole basis of such an organization is that they have a skill others don’t, this is what they can be proud of, so with fast food it will not work.

  225. @The Monster capital markets also require enormous amounts of trust, just saying. BTW this is the most obvious thing that sets the first world apart from the rest: the rest of the world is amazed that in the first one people can get investment for their business without a collateral and won’t run away with it? When there is not enough trust for this, only the already rich can start businesses, so you would have a rigid class system, which means people will go leftie and so on. Capital investment without collateral is the No. 1 reason of social mobility in the first world IMHO and just about the only thing that prevents average people from hating on capitalism, because without this kind of mobility they would find it too classist. But this sort of trust can be lost in the first world too, I think a serious economic downturn could make a lot of people less trustworthy. So anyway, I am just saying, this is really the No. 1 think you need to guard and the rest of us needs to develop because capitalism cannot be popular without it.

  226. Turns out the fast-food strike may have been orchestrated by PR firm BerlinRosen.

    As I said, SEIU/ACORN.

    Late-stage capitalism is weird…

    Capitalism?! On the contrary, this is organised anti-capitalism.

  227. @esr – so you’re basically saying two wrong make a right… that since the government interferes by forbidding lockouts, they should also forbid strikes, rather than stepping back and allowing both. (I’m not sure your reasoning that they would be approximately as common actually makes sense in the presence of a minimum wage, in which case you’d be confusing the effects of one market distortion for evidence of a different one)

    • >@esr – so you’re basically saying two wrong make a right… that since the government interferes by forbidding lockouts, they should also forbid strikes, rather than stepping back and allowing both.

      No, just the opposite. I don’t think the government should rig the labor market in either direction.

  228. A response to the guy who started with “my swiss mindset…”:

    Switzerland doesn’t have a minimum wage. It’s one of the few industrialized countries that doesn’t.
    In spite of that wages are quite high compared to other developed countries, and that even for unskilled labor. Unemployment is low, and the government doesn’t interfere to much in the labor market… Maybe there’s a relationship :-)

  229. Pingback: Best Idea I’ve Heard Yet | Rotten Chestnuts

  230. You can’t tell me, when McDonalds CEO and that of other big fast-food chains, are making $$billions$$ every year in dishing out gains for their shareholders, that they can’t afford to pay their employees better.
    Those companies make plenty of profits, and funnel it all up into the hands of a very few people, when it is the workers who ARE earning those profits, not the fat-cats sitting in a leather chair in an office in some high-rise, planning their next golf excursion in Cancun.

  231. @tazman: If only there were some coherent discussion of the issue through which you could enlighten yourself about the facts before resorting to poutrage.

  232. I read the first 50-100 comments on this page and this my personal views on the minumum wage.

    My wife and I have 1 child. I can normally keep us barely afloat with oil change job. They normally start at about $9.00hr where I am. That JUST pays for rent, electricity, heat, internet and home phone with gas for the car. A cheap apartment in our area runs $600.00 on average and we are a hair under it. So all said and done we have about 900.00 in basic bills not including food per month. at $9.00hr take home per month is about 1100.00 Try to toss in food, car insurance into that mix. You have nothing left. I will admit it. We recieve government food stamps and health insurance. I want nothing else from the government. My wife and I for the last year have both been plagued by injuries to our legs and have spent that time with only 1 of us working at a time.

    Minimum wages should be nationally increased to an even $10.00hr. The reason for that is we will not see another increase for another 20 years. What that means for us,(meaning my personal family) My wife can continue to work with the minimum wage jobs and still keep the flexible hours required for a child not in school yet. My general job choices wage will more than likely be bumped to about 11/13 dollars an hour. Wages across the board will increase. People seem to forget that.
    As a result of wages increasing, yes we will see prices on certain things like fast food raise on average probably $1.00 per burger. Frankly I don’t care about that. We eat fast food MAYBE once a month as treat. Not because it is convenient. $7.25 is NOT a livable wage for anyone w/o recieving government assistance.

    Anyways my two cents worth.

    • >Minimum wages should be nationally increased to an even $10.00hr.

      You appear to suffer from the common delusion that the universe owes you a living, and that what “should” be is what makes life sustainable for you.

      Sadly, this is not the case. Your wages are capped by what is economically sustainable. Trying to beat that reality with political market-rigging or income transfers never works in the long run (socialism runs out of other peoples’ money) and usually fails in the short run (by killing your job).

      We all wish this weren’t so. We also wish we could fly by flapping our wings. Alas, the laws of gravity and economics are indifferent to our wishes.

  233. To say that all wages should be “livable” is to ban all non-livable wages, which are actually beneficial to many people: the young, racial minorities, the poorly-educated, the handicapped, retired people who want something to do. And as I pointed out above, the minimum wage was pushed by progressives as a eugenics measure.

    We could make huge strides against poverty if everyone followed the maxim: “If you can’t feed ’em, don’t breed ’em.”

  234. @Worker
    > Minimum wages should be nationally increased to an even $10.00hr.

    Eric has discussed all the reasons why that would be terrible for you. However, may I offer the other side? I feel compassion for your difficult situation… but you are not powerless to resolve it. Don’t buy into the crazy notion that you are a victim of your circumstances and must look askance and beg from others your living.

    Rather take a step forward yourself. What can you do with your life and your skills that can add real value to other people’s lives? Perhaps you can start a business yourself? Perhaps you can get some more education to boost the value of your skills? Perhaps you can work the system where you are currently working to get promoted from your current situation to a better one — something you do by doing an excellent job and going beyond the simple “what I am expected to do.”

    Same with your wife. She probably has a lot of time flexibility to do things while the child is otherwise occupied. How can she use that time to add value to other people’s lives.

    Don’t allow fate to determine your future. Be bold and reach for the brass ring. We, the people who live in this society, need the skills, energy and passion that is in you to make our society better, and if you can and will do so we would be happy to reward you with an abundant living.

    Which is to say take charge of your own future. We all wish you the very best of good luck.

  235. @ Fluffy Girl – “Don’t allow fate to determine your future. Be bold and reach for the brass ring.”

    Jessica, you are the most positive and hopeful person I have ever encountered. Worker would do well to choose seeing the glass is as half full rather than mire in self pity. Physical evolution has programmed us to turn duress into innovation, but unfortunately the recent phenomenon of cultural evolution has overridden that impulse with politically correct grievance entitlement. It is interesting that these evolutionary currents are oppositional.

  236. @TomA
    > Worker would do well to choose seeing the glass is as half full rather than mire in self pity.

    Thanks for the compliment Tom. But let me say again, not only Worker would do well but we all would do well should he choose to excel. The greatest tragedy of the poverty trap foisted on us in part by self righteous do-gooders, is not just the terrible lives the poor live, but the fact that the fabulous contribution all these amazing people could make to the world is utterly lost forever. There are few things so terrible as a wasted life. For in one person is the capacity to change the world in a positive useful way. We aren’t all Steve Jobs, but everyone from the simplest to the smartest has a unique profile of natural and learned skills that can make a very big difference.

    Welfare is a tragedy for us all, not just the poor souls trapped in is angry maw.

  237. Tazman on 2013-09-17 at 10:23:40 said:You can’t tell me, when McDonalds CEO and that of other big fast-food chains, are making $$billions$$ every year in dishing out gains for their shareholders, that they can’t afford to pay their employees better.

    Those companies make plenty of profits, and funnel it all up into the hands of a very few people, when it is the workers who ARE earning those profits, not the fat-cats sitting in a leather chair in an not the fat-cats sitting in a leather chair in an office in some high-rise, planning their next golf excursion in Cancun.

    McDonald’s Corporation had $5.5B in profits last year. There are 34,000 McD’s around the world, with 1.7 million employees. If all of McDonald’s profits were distributed to these employees, they would receive an extra $3,200/year each – about $1.60/hr, if they all work 40 hours a week. Of course many are part time, so that could be tweaked to $2.50/hour.

    However, that would leave nothing to pay a return on the capital investment required to build and equip all those McD’s – a few million $ each, probably about $100 billion. Without that capital investment, the employees would be standing around in empty lots. No, on street corners, because the real estate requires capital too.

    Meanwhile, what about those “very few” shareholders? How about CalPERS (California Public Employee Retirement System)? As of 12/31/2012, CalPERS held 2.94 million shares of McDonald’s, worth $260 million. (Up over 100% from CalPERS’ cost, which is a very good thing considering California’s pension underfunding problem.) Are CalPERS’ 1.6M beneficiaries among those “very few”? What about the other millions of people whose IRA and 401K and pension funds are invested McDonalds stock through index funds?

    The notion that capital is a parasite opposed to the interests of labor is fairy-tale socialism.

  238. Beside which, if the shareholders don’t get at least the going market rate on their investment, why on earth would they want to hold the shares? They would have no choice but to take their money out and invest it elsewhere, and that would be the end of all those jobs. You do realise, don’t you, that making money is the only real purpose of any business?

  239. Fast-food margins are razor-thin due to competitive pressure. If the minimum wage was raised, then all players in the market would have to raise prices together, having zero competitive effect, internally, within the fast food industry, because each chain’s costs would go up about the same amount.

    Externally, in the wider competition between fast food vs all other food sources, it is possible, albeit unlikely, that raising the minimum wage would price fast food out of the food market, wiping out McDonald’s and all fast food restaurants in one fell swoop. However, we have raised the minimum wage before and I’ve never heard of that having a significant impact on demand for Big Macs, so I think we can rule out this possibility right now.

    In the context of fast food, raising the minimum wage would be America deciding that as a society, we want to pay fast food workers better for waiting on us when we want a quick meal. The fact that we pay fast food workers so badly today is an example of a market failure that would benefit from careful government intervention.

    Remember, the free market isn’t magical. It doesn’t tend to find good solutions — it tends to find profitable solutions. If treating the lower class as one step above slave labor happens to be the most profitable solution, then that is the solution the free market will tend to find.

  240. ”The free market is not a creed or an ideology that political conservatives, libertarians, and Ayn Rand acolytes want Americans to take on faith. The free market is simply a measurement. The free market tells us what people are willing to pay for a given thing at a given moment. That’s all the free market does. The free market is a bathroom scale. We may not like what we see when we step on the bathroom scale, but we can’t pass a law making ourselves weigh 165. Liberals and leftists think we can.” —P. J. O’Rourke

  241. > The free market tells us what people are willing to pay for a given thing at a given moment.

    That’s incorrect. The free market tells us what final price was negotiated between suppliers and consumers. It tells us little or nothing about what people were secretly willing to pay.

    Ex: Most people might be willing to pay $10 for a Big Mac or similar burger. But how would we know? $5 Big Macs are available today so why would anyone pay $10? They were willing to pay $10 but they didn’t have to due to competitive forces on the supply side.

  242. The people who run McDonald’s aren’t idiots. They devote their working lives to figuring out (among other things) what they can charge for Big Macs. If they could charge $10, they would be doing so, right now.

  243. But my point was that if a minimum wage law effectively required everybody to charge $10 per Big Mac or Whopper or similar burger, and if everybody was secretly willing to pay $10, then we should obviously pass that law so that minimum wage workers can get paid more reasonably.

  244. “Unfortunately, the real minimum wage is always zero, regardless of the laws, and that is the wage that many workers receive in the wake of the creation or escalation of a government-mandated minimum wage, because they lose their jobs or fail to find jobs when they enter the labor force. Making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount—and, if it is not, that worker is unlikely to be employed.” —Thomas Sowell

    Not to mention the fact that your plan would shaft the people who won’t be able to afford Big Macs.

    Ultimately, wage and price controls create more problems than they solve.

  245. But my point was that if a minimum wage law effectively required everybody to charge $10 per Big Mac or Whopper or similar burger, and if everybody was secretly willing to pay $10, then we should obviously pass that law so that minimum wage workers can get paid more reasonably.

    Broken windows much? What about all the other things that people could have done with the $6 difference–especially since the people buying Big Macs tend to be the people who have less income to spend in the first place?

  246. You have both dodged my point, because I’m right.

    If consumers are willing to pay $10 for a burger then they are willing to pay $10 for a burger. The fact that they could have paid $5 for the same burger had some minimum wage law not forced the price increase to $10 is mostly irrelevant, because they were willing to pay $10 for a burger, and that extra $5 went to something that a majority of the voters found valuable: a higher average standard of living for society.

    Now you can imagine an infinite number of theoretical arguments about how maybe that $5 would have been better spent elsewhere, but the practical reality is that a higher standard of living isn’t a terrible use for that $5.

    Government is largely a practical exercise, not a theoretical one. Your opposition to minimum wage laws is based on your belief that group actions are automatically assumed to be wrong. But reality is rarely that black-and-white.

  247. Do you have any experience at all running a business that sells at retail? I doubt it, or you would not be so blithe about forcing retailers to raise their prices.

  248. Your opposition to minimum wage laws is based on your belief that group actions are automatically assumed to be wrong.

    No, it’s based on the belief that using force to impose your will on unwilling others is wrong, especially when it’s blatantly obvious that you could choose to follow your proposed course yourself but refuse to.

  249. On last night’s CNBC show Mad Money with Jim Cramer, Dominos Pizza CEO Patrick Doyle said that 90% of Dominos franchisees started as hourly workers in their stores.

  250. the one piece of this that i flat disagree with is the implication that an owner will pay more if s/he makes more. in general, employers will pay as little as they can to as few people as they can; which makes sense: the less you pay out – the more profit.

    Employers compete for employees as employees compete for jobs. An employer who pays below the average wage for a given occupation will get the less valuable employees. An employer who pays above the average wage for the occupation will get the more valuable ones. “Less valuable” and “more valuable” translate into lowered or increased productivity per employee, and this may include negative productivity: for instance an employee who embezzles from or sabotages a workplace may wind up doing far more damage than he is worth.

    The main effect of a minimum wage — when it has any effect at all — is to create a “wedge” between employers and employees. Employers are willing to offer jobs at a given wage which employees are willing to do for that wage — but the State steps in and says “No.” Hence, the jobs are not offered, and the potential employees remain unemployed.

  251. Now you can imagine an infinite number of theoretical arguments about how maybe that $5 would have been better spent elsewhere, but the practical reality is that a higher standard of living isn’t a terrible use for that $5.

    You assume that the same number of burgers are sold at $10/burger that were sold at $5/burger, in other words that consumers are indifferent to the price of a burger. This ignores the principle of economic substitution. Consumers may choose to eat other things than burgers, they may choose to eat less, and (most relevantly here) they may choose to purchase less of their food from the fast food restaurants which now must charge more from a burger. One obvious substitution is for them to buy unprepared food and cook or otherwise prepare it at home.

    Your lack of appreciation for — and understanding of — economic theory has been noted. You are confessing yourself ignorant, rather than “practical.” This is something of which you should not be proud.

  252. The free market tells us what final price was negotiated between suppliers and consumers. It tells us little or nothing about what people were secretly willing to pay.

    Do you comprehend the concept of supply and demand curves? Yes, some people will pay $10 for Big Macs, but less people will buy Big Macs at $10 apiece than would at $5 apiece. The same applies for everything on the menu. This will reduce volume of sales for the same degree of profits, and pretty much ensures that lots of fast food restaurants would have to close down. How much of a “living” can a worker make at a restaurant that has gone out of business?

  253. @Shawn, “Your opposition to minimum wage laws is based on your belief that group actions are automatically assumed to be wrong. But reality is rarely that black-and-white.” Seriously?? You’re trying to tell us what we think, and then have to explain that reality isn’t what we think? Try this idea on for size: that you have no fucking clue what we think, and that OUR reality is a lot more nuanced than your “Well just pay them more and there will be no negative consequences”.

    The problem with YOUR group actions is that you force them on people. OUR group actions are multitudinous, plentiful, peaceful, and voluntary.

  254. I once worked at a retail job that paid just a shade over minimum wage. The guy who ran it was raking money in hand over fist–he could easily have afforded to pay us $25 or more an hour. I know because I had full access to his books. He was just greedy. I’ve never worked in fast food, but I suspect the story is the same there. Those guys are rolling in dough, but once again they are greedy and they hold their staff in contempt.

    It’s disgusting that in countries as rich as the U.S. and Canada, we can’t “afford” to give everyone a living wage, and no, you can’t live off $8 an hour.

  255. I also find it puzzling that someone who supports free software, which is fundamentally an anarchist stance, could have such far-right views in regards to economics. Aren’t companies like Microsoft born of the free-market? How well did that go? My attitude toward free software is that I hope the concept ripples out to all other aspects of life so that we soon have free food distribution, free housing, etc.

    • >I also find it puzzling that someone who supports free software, which is fundamentally an anarchist stance, could have such far-right views in regards to economics.

      Wow. That’s an amazing amount of self-confident ignorance to pack into one sentence. More than I can answer in a blog comment. You’ll have to go read my writings, I’m afraid.

  256. > >Which, again, I’m at a loss for understanding the libertarian case against this and for laws forbidding it.

    > Assuming I understand your referent, libertarians object to laws that impair freedom of contract.

    You obviously did not, because I was asking for an explanation of the libertarian objection to a type of contract, not to a law.

  257. Oops… I was rereading this thread because it came up in the comment RSS, and forgot that I had already replied to that at the time.

  258. @Petey: “I once worked at a retail job that paid just a shade over minimum wage. The guy who ran it was raking money in hand over fist–he could easily have afforded to pay us $25 or more an hour. I know because I had full access to his books. He was just greedy. I’ve never worked in fast food, but I suspect the story is the same there. Those guys are rolling in dough, but once again they are greedy and they hold their staff in contempt.”

    There’s retail and there’s retail. You did not specify what the retailer you worked for sold, but that’s a crucial bit of information. A retailer selling luxury goods can charge a far higher price and make a far greater profit than one like a supermarket selling fungible commodities where competition is on price.

    Fast food restaurants are the latter kind of retailing. What they sell is expected to be quick and cheap. Labor costs are a major cost in any restaurant, and the low prices expected in fast food are a major pressure to contain costs.

    “I also find it puzzling that someone who supports free software, which is fundamentally an anarchist stance, could have such far-right views in regards to economics. Aren’t companies like Microsoft born of the free-market? How well did that go? My attitude toward free software is that I hope the concept ripples out to all other aspects of life so that we soon have free food distribution, free housing, etc.”

    And just who will *pay* for that free housing, food, and what have you? The definition of “free” tends to reduce to “someone *else* pays for it”. Just who will that someone else be?

    The folks who write open source software are largely donating their labor, and make their living doing other things. If you want to get *paid* for writing open source code, your normal option is to get a job working for someone like Google or IBM who makes extensive use of open source code and pays engineers to work on what they use. If you are a contract programmer writing for clients, your code is almost certainly proprietary.

    Tell me who will donate the material and labor to *provide* that free food and housing? People who produce food and build housing do it for a living and get paid for it. Who will pay them?

  259. “There’s retail and there’s retail. You did not specify what the retailer you worked for sold, but that’s a crucial bit of information. A retailer selling luxury goods can charge a far higher price and make a far greater profit than one like a supermarket selling fungible commodities where competition is on price.”

    He was not selling luxury goods. Not by a long shot.

    “And just who will *pay* for that free housing, food, and what have you? The definition of “free” tends to reduce to “someone *else* pays for it”. Just who will that someone else be?”

    Just as I donate my labour to produce free software (amongst other things), others will donate theirs to produce free food. See how that works?

    Contrary to what others believe, I do not hold that humans are fundamentally selfish and do not wish to work towards the common good. It is only the pyschopath who believes this. Most (normal) people want to work and they want to help out their fellow human.

  260. Burger joints won’t even need human staff very shortly. Because of the increase in productivity cause by automation, the idea that everybody has to have a job needs to fall by the wayside. And with it the whole concept of “free markets” because there simply is not enough work to go around. What are we supposed to do with the jobless? Just leave them on the streets to starve?

    As for striking, isn’t that more free-market than prohibiting it? People have the right to make mutually beneficial transactions. Lets face it, workers are in a very weak bargaining position relative to corporations. Yes, even white collar workers–in Canada they were talking about making it legal for IT workers to work 60 hr weeks without overtime. If they need to increase their bargaining power by uniting with other workers, who is the government to prevent them? You cannot live on minimum wage…

  261. Just as I donate my labour to produce free software (amongst other things), others will donate theirs to produce free food. See how that works?

    You’re committing two errors here.

    One: you think food works like software, in that enough will be donated to cover demand to an extent sufficient to justify enforcing said donation. This first error is wrong itself in multiple ways. One: no one enforces donation of software. No one here even advocates forcing people to donate their software. Two: software, when produced, can do its job as many times as there are copies, which are virtually free to create once the first one is, but food, when produced, does its job once, and cannot be copied except at cost similar to the first.

    The second error is that, despite the above distinction, obvious to most readers here, you offer it as if you’re correcting us (“See how that works?”), like a teacher gently chiding her student that no, the textbook is correct and 8 times 12 really is 98.

    This argument isn’t going to go well for you as a result. (If it goes as some I’ve had in the past, you might infer that we are too close-minded to change our views to what you clearly see to be true, to agree that 8 times 12 is 98, and then to be on the correct side of history; that we are therefore unreachable and are to be ignored. I invite you to prove me wrong.)

  262. Contrary to what others believe, I do not hold that humans are fundamentally selfish and do not wish to work towards the common good. It is only the pyschopath[sic] who believes this. Most (normal) people want to work and they want to help out their fellow human.

    You clearly misunderstand what selfishness can yield when combined with the ability to think ahead. People with both qualities (which likely is, indeed, most people) will be helpful in order to acquire more over a longer term. This is commonly known as voluntary trade. It achieves far, far more than the short-term instinctive rush that comes from what I suspect you refer to as “helping out their fellow human”, mostly because it works off that ability to think ahead, and the understanding of specialization’s benefits and limits.

  263. Burger joints won’t even need human staff very shortly. Because of the increase in productivity cause by automation, the idea that everybody has to have a job needs to fall by the wayside. And with it the whole concept of “free markets” because there simply is not enough work to go around. What are we supposed to do with the jobless? Just leave them on the streets to starve?

    What’s that? Automation producing millions of hours of labor, in less time, for phenomenally less initial investment? We should all be so lucky! Do you realize how much this would drive the price of production down? A hamburger, priced at 99 cents today, would go for little more than the cost of the raw materials plus the labor of maintaining the automation! The poor, who I’m sure you genuinely care about, would likely end up paying only 49 cents for that hamburger; after a while, it might even drop to 19 cents! That you want to deny them this tells me you neglected to think this through.

    It’s certainly plausible that this price wouldn’t come about instantly. Such automation would have to be installed, and that would cost a fair bit, and that cost would have to be amortized over the food sold; that this process would have to be repeated for each facility; that there would be initial discomfort with having one’s food dispensed by what is essentially a robot rather than an acne-faced teenager; and a host of other technical problems that would turn this entire refitting into a gradual phenomenon. In a sense, that’s quite good news for the legions of fast food workers who would require that time to retrain so their labor is expended on more valuable pursuits.

    As for striking, isn’t that more free-market than prohibiting it? People have the right to make mutually beneficial transactions. Lets face it, workers are in a very weak bargaining position relative to corporations. Yes, even white collar workers–in Canada they were talking about making it legal for IT workers to work 60 hr weeks without overtime. If they need to increase their bargaining power by uniting with other workers, who is the government to prevent them? You cannot live on minimum wage…

    Striking – refusing to work – is everyone’s right in a free market, yes. But it would also be an employer’s right to hire replacement labor, if it can be found. Otherwise, strikers could insist on refusing to work until they get any desirable wage at all, no matter how extravagant (that is, until the employer goes bankrupt – perhaps someone someday will advocate suing employers for going bankrupt rather than raising wages).

    If you wish to forbid that acquisition of replacement labor, I could then ask why you wish to make it harder on people even further down the economic ladder than the people currently occupying your attention.

  264. “I invite you to prove me wrong.”

    Of course I cannot prove you wrong because it requires a sufficient number of people to agree to the system before it can even begin to work. I guess you just have to take a leap of faith. But consider the alternatives: sweatshops in third world countries, environmental disasters like the Alberta tar sands, pollution of the air and waterways, massive economic instability, the difficulty, in today’s world, of getting stable employment. The list of problems caused by industry and big business is endless.

    “The poor, who I’m sure you genuinely care about, would likely end up paying only 49 cents for that hamburger; after a while, it might even drop to 19 cents! That you want to deny them this tells me you neglected to think this through.”

    That assumes they can even afford $0.19. I didn’t say anything about preventing this automation, I suggested that we need measures that address the reduction in employment it causes, such as “basic income”. I believe that increases in automation are a good thing, if, and this is a big if, it means that people can start working less, by which I mean as little as 10 hours per week. I keep hearing philosophers predicting a coming “age of leisure” made possible by these increases in automation and worker productivity. Yet it doesn’t seem to work that way. Instead, corporations are encouraging people to both produce and consume more while working hours stay the same or even increase. Meanwhile, the shortage of good jobs means that wealth becomes increasingly concentrated. I haven’t heard anyone come up with a good way to address these problems. There needs to be some way to distribute the excess of goods to those who need it most.

    I don’t believe anyone is safe from losing their jobs to automation. The best chess players have already been supplanted by machines and mark my words, it will happen to scientists and computer programmers as well. Perhaps then the machine age will have arrived and all bets are off anyway: we only live if the machines decide to let us live. But rather than considering these changes and possibilities, we are just moving full steam ahead without any pause to ponder the consequences.

  265. What I wanted you to prove me wrong on was not what you thought, but that no longer matters.

    People actually do get more leisure time than they did in the past – and then promptly start applying that time toward doing other types of work, or exploiting the automation to produce even more. A common example is agriculture. A report from NC State cites around 90% of the US population as farmers in 1790, vs. 2% in 1990. That actually means there were slightly more farmers in 1990 (roughly 4 million), but any one farmer is able to feed 60 times as many people (probably much more – we export much more food, and even pay farmers to not grow food). There are over 200 million people that would have needed to grow food at 1790’s technology that don’t in 1990, and clearly, most of them aren’t simply using that time sitting around enjoying all the food supply.

    Your time is likely better spent worrying about how fast millions of people are able to master new technologies and jobs. A free market advocate’s position is not to put the brakes on capitalist innovation, but to exploit it to turn labor retraining itself into a problem to be solved with a solution that can be sold. This is as opposed to treating it as a problem to be solved with a solution to be forced upon other people against their will.

    I’ve lost count of the number of times I’ve heard people complain that labor retraining is expensive because of education, or that labor movement is hard because of the cost of moving, and imply that they simultaneously have no desire to go into business as a retrainer or a mover, and reaping all this apparent gold mine of wealth from satisfying this demand. It’s like complaining that you can’t find a well because of all the water in the way.

  266. > clearly, most of them aren’t simply using that time sitting around enjoying all the food supply.

    Because we don’t let them. We also don’t let them get by on just the amount of labor it takes to produce their portion of the food supply (i.e. 1.3% of the labor done by one of those four million farmers).

    What happens when we run out of stuff to make people do, but still don’t let them eat for free?

  267. I reject the premise that we’re in charge of what stuff people do, let alone that we control their food supply.

    If there were literally nothing for people to do, then these various goods and services would be free by definition, and it could go to them with hardly a thought. Contrapositively, so long as these good and services are not free, there is demonstrably demand for labor which has not yet become the sole dominion of robots, and therefore something they can make a living doing.

  268. What happens when we run out of stuff to make people do, but still don’t let them eat for free?

    We think up new stuff for people to do, like writing novels or creating movies or designing Web sites.

  269. > We think up new stuff for people to do, like writing novels or creating movies or designing Web sites.

    Why can’t it be a choice to do these things, rather than a requirement? If it really only takes 1.3%* of the average amount of farm labor to produce enough food to feed someone, why can’t someone only do that much to feed themselves, and have the rest of their time to do whatever they want?

    *I didn’t explain that number when I posted it earlier. It’s 4 million divided by 300 million.

  270. I know you were addressing Christopher Smith and not me, but I’ll respond: I think Christopher was misspeaking somewhat. I believe not even he considers himself or anyone else to be on the hook to decide what anyone should do when they are rendered jobless by automation, except for those specific people rendered jobless by automation. They and they alone choose what new trade to pick up and try to make a living on; the rest of the people control that only so far as in what goods and services they express a demand for.

    For example, if someone were to invent a program tomorrow that greatly simplifies the process of writing other programs, and this triggered a flurry of people installing this program everywhere to automate their software development, and eventually led to my development company folding for lack of work and my resume becoming a list of suddenly very low-value sources of experience, it would be my problem to identify what else is out there for me to do, that I have a shot at making a living at, just as it was when I was plodding through high school and thinking about my future college major. In my particular case, there are dozens of alternatives I could consider – installation and management of aforesaid program, adapting it to new problem domains, documentation writing, software testing, data management, math research, astronomy research; a fallback living in raising beef cattle, fence repair, or hay production; a more drastic retraining in an unrelated trade like manufacturing, accounting, or home repair; or a supporting role for people similarly unemployed, as a mover or tutor. I’m going to know, better than anyone else, the set of things in demand in my area intersected with the set of things within my skills. Same goes for anyone else.

    I must admit I remain genuinely puzzled why this mechanic eludes collectivists, particularly brighter ones. Even they play games enough to be aware of strategies with payoffs and risks.

  271. I’m not at all suggesting that I personally will be the one to reassign labor. I’m saying that we have repeated examples–essentially all of civilization–in which individuals have come up with creative new products and services that simply didn’t exist before and that other people are willing to pay for. That’s the answer to the question of “what will people do?”: Something new. Most of us have no idea what that will look like. A few crazies out there have the next big thing and will make it work.

    If it really only takes 1.3%* of the average amount of farm labor to produce enough food to feed someone, why can’t someone only do that much to feed themselves, and have the rest of their time to do whatever they want?

    In large part, because that’s a misleading summary of the situation. It only takes, say 1/60th of the labor, but each farmer also employs a large amount of capital, beyond the land, in the form of machinery, storage and processing facilities, and growing paraphernalia such as fertilizer and irrigation, in addition to the indirect use of roads, nitrogen-fixing facilities, and so on. The upkeep of this capital employs a very significant further fraction of the labor of the economy. In the end, it probably ends up that something like, say, 20% of the previous labor is required in sum, and most people in the United States spend about 12% of their income on food and the rest on other items. People could choose to work dramatically less and live a more spartan life, but most choose instead to work more and use the income to purchase luxuries.

  272. > People could choose to work dramatically less and live a more spartan life

    Is that true? Being able to get a job that pays half as much doesn’t mean you can get a job that pays the same per hour for half as many hours.

  273. I’m not sure I disagree with the idea that increases in worker productivity don’t necessarily result in a decrease in employment, but remember, we live on a finite planet with finite resources.

  274. Finite resources that even so are astronomically huge.

    Really, I tend to find Malthusian predictions to be canards, given how many times humanity has run into a limit of one resource only to render it irrelevant by moving on to something else.

    Is that true (that people could choose to work less and live with less)? Being able to get a job that pays half as much doesn’t mean you can get a job that pays the same per hour for half as many hours.

    If enough people truly wanted that, that they could meet the needs of such a reduced lifestyle, yes, they could. The Amish and Mennonites are proof enough of that.

  275. > If enough people truly wanted that, that they could meet the needs of such a reduced lifestyle, yes, they could. The Amish and Mennonites are proof enough of that.

    Do they actually work less? They certainly aren’t able to benefit from the economies of scale that get us down to 2% farmers.

    Remember, the question is if it is possible to truly do only put in as much work as is truly used to provide your basic subsistence needs, in modern society where that is significantly less than the average work that people actually do. Living in a society where you actually [i]do[/i] need to work full time to support yourself is not an answer to that question.

  276. “Finite resources that even so are astronomically huge.”

    How far do you have to drive for a solitary walk in the woods? (20 km in my case) To have a clear view of the stars? (300km) When was the last time you visited a beach that wasn’t covered in trash? Or that didn’t have a view of some monstrously ugly industrial structure? When you drive in the country, how often do you pass a quarry or open-pit mine?

    If you can honestly say that without irony, I don’t think you’ve been keeping your eyes open. Even in the last 20 years or so I’ve noticed changes. The last time I cycled along the shore of Lake Ontario, a lake that’s normally thought of as quite clean, it was filled with algal blooms. Swimming from one of the beaches in Toronto, it was like pea soup.

  277. Bah – it’s okay, I realized a little while after I wrote that that Amish and Mennonites don’t fit the specific example. And in fact, I know of no society OTTOMH that puts a robot tractor out to run all of its farming and then literally sits around “enjoying life” for the remaining 98% of their day.

    Christopher’s point is not vacuous even so. People *do* spend plenty of time putting work into entertainment, that they would not have had opportunity to do in a world where 90% of people are farmers.

    How far do you have to drive for a solitary walk in the woods? (20 km in my case) To have a clear view of the stars? (300km) When was the last time you visited a beach that wasn’t covered in trash? Or that didn’t have a view of some monstrously ugly industrial structure? When you drive in the country, how often do you pass a quarry or open-pit mine?

    When’s the last time you lived in a world where “access to resources” was defined solely in the terms you wanted it defined in? You speak as if everyone wants exactly what you want, no more, no less.

    How many people had access to food from six continents within walking distance in 1900 AD? How many could store that food for longer than four days without it spoiling? How many could see a show on a large screen? How many could see it again whenever they felt like it, without leaving their homes? How many could create such a show themselves? How many had their own homes? How many had enough clothes to wear a different outfit every single day for a month? How many could send a message to several hundred other people so cheaply that the greatest cost was the time they took to compose it? How many could read? How many could do arithmetic? How many could afford a handheld device that did that arithmetic for them? While informing them of a show within 30 minutes’ travel, what hundreds of other people thought of it, and directions for getting there?

    Sounds to me like you opened your eyes wide enough to notice <1% of what's around, concluded anything else did not exist, and then attempted to claim my own eyes weren't open enough for not noticing the exact <1% that you did.

  278. “How many people had access to food from six continents within walking distance in 1900 AD? …”

    And yet with all this bounty, some 25% of people are taking medication for depression or some other mental illness. I think what we have gained pales in comparison to what has been lost and what is continuing to be lost. It’s well known that access to green-spaces improves your mental health.

    • >I think what we have gained pales in comparison to what has been lost and what is continuing to be lost.

      Spoken like a spoiled, rich, white, First-World fool.

      I have lived in Third World countries where there is real poverty. Six months of that would drive this nonsense out of your head.

  279. @Petey
    “It’s well known that access to green-spaces improves your mental health.”

    That is “parks”. Most people in the world are (very) poor. The “green spaces” around them tend to be a danger to their health and livelihood. Moreover, mental health is not the most pressing health concern for these people.

  280. @Paul Brinkley
    “Really, I tend to find Malthusian predictions to be canards, given how many times humanity has run into a limit of one resource only to render it irrelevant by moving on to something else.”

    The global human appropriation of net primary production (HANPP) is currently around 25% of total. That gives food for thought about the future.

    http://www.pnas.org/content/110/25/10324.full

  281. “Spoken like a spoiled, rich, white, First-World fool.”

    Oh brother. Recently I was at a discussion about science and policy. One of the panelists was a water-quality expert who said that pollution in the Great Lakes is at the same levels it was in the 70s. Most of the things I’ve mentioned are markers of the health of our land. Maybe you think that if the lakes, rivers and waterways are poisoned today, that your tap water won’t be poisoned tomorrow. Yeah, maybe all the riches you’ve earned after pulling yourself up by your bootstraps will protect you.

    • > Yeah, maybe all the riches you’ve earned after pulling yourself up by your bootstraps will protect you.

      Going for the goalpost-moving marathon, there? Yes. Yes, in fact, they will – because only wealthy people can afford to care enough about “wild spaces” to preserve them. Rich first, then green – trying it the other way around doesn’t work.

  282. @esr: I’m not sure what kind of willful ignorance it takes to not see that the pursuit of wealth is the cause of our current ecological woes, not its solution. If it’s not immediately obvious, I’m not sure what hope I have of convincing you or what hope there is for this world for that matter. Count the disasters: Chernobyl, Fukushima, Exxon Valdez, Deepwater Horizon, the Great Pacific Plastic Whorl, etc. etc. And then there are things like the Alberta Tar sands which is just business as usual. And these are just the ones we know about. What’s the current rate of species extinction? You do know that diversity is a well-known marker of both population and ecosystem health?

    Fortunately, the birth rate is dropping precipitously so maybe that will be our ultimate salvation.

    • >@esr: I’m not sure what kind of willful ignorance it takes to not see that the pursuit of wealth is the cause of our current ecological woes, not its solution.

      Oh, I see. You’re one of those, the kind whose entire knowledge of history and economics consists of a collection of half-understood and objectively false political slogans.

      Exercise: Compare the ecological state of the five wealthiest countries of the planet with the five poorest. Use any broadly applicable measure you like; air pollution, water pollution, habitat loss, legal protections on green spaces – anything.

      Exercise: Find any pair of countries with a common cultural history divided by the Cold War. Repeat the previous audit, comparing the relatively free-market country with the socialist/communist one.

      I know what you’ll discover. If you did, your dimwitted certainties would already be disturbed.

  283. @esr Yeah, you may have a point there. On the other hand, a lot of those countries are trying very hard to emulate the success of so-called “first-world” nations. We don’t call them “developing nations” for nothing. It is this push towards industrialization which generates a lot of the pollution. They are also specifically targeted by Western corporations for the very reason that they have lax regulations. Neither of these are positive developments in my book.

    You also have to look at the relative population densities: of course Bangladesh is going to have worse pollution than Canada since there are several hundred times as many people per square kilometer. In this regard I suspect that Europe, certainly more socialist than either than the U.S. or Canada, is faring a lot better than either.

    • >You also have to look at the relative population densities:

      You’ll find the same gradient if you match countries with the same population densities. Environmentalism is a luxury good; only the wealthy can afford it.

Leave a Reply

Your email address will not be published. Required fields are marked *