Hey guys, I don't really have a political ideology, but I am nonetheless interested in politics and economics, and I've been wondering if there are any good arguments for the minimum wage. I genuinely care about the working class, and I think it's messed up that so many people struggle to make ends meet. However, as I'm sure most of you know, basic supply and demand analysis suggests that all the minimum wage does is increase unemployment.
However, supply and demand analysis may not apply to the labor market for a couple reasons. One is that workers aren't commodities, they are active participants in the economy, and workers will spend more money if they make more money. Price floors only lead to an oversupply (e.g. unemployment in the labor market) if creating a price floor doesn't affect either the supply curve or the demand curve. However, if workers make more money, they'll have more money to spend on things, which will give businesses more money which they can use to increase their employees' wages. In other words, the minimum wage does create a price floor, but it also shifts the supply curve to the right, which means that the minimum wage doesn't create a significant amount of unemployment.
However, I'm skeptical of this argument because it lacks the mathematical rigor that the argument against the minimum wage does. Also, even if it were true that the minimum wage is a good thing, it would obviously be bad for the economy if the minimum wage were too high, and this argument fails to explain why the minimum wage can't be too high. Like why should the minimum wage be $15 an hour? or $7.25 an hour? or $10.10 an hour? Since the minimum wage obviously can't be too high, there should be some mathematical formula to help economists determine a good minimum wage: not so high that it would hurt businesses, but high enough that it would help lift a lot of people out of poverty.
Sorry if this post doesn't make any sense. I don't really understand politics or economics that well, but I think they're important subjects, which is part of the reason why I'm interested in them.
That's just liberal foolishness. It doesn't increase unemployment except maybe in the very short term. In the long term with more people having more money, they can buy more stuff, which gives businesses more money, which can be used to hire more workers hence creating more jobs.
They are very important. I'm glad you're taking interesting in them!
Julian Long
I know this isn't the answer you were looking for, but a lot of people here want wages abolished altogether.
Cameron Green
Regardless of whether you raise it or not, the internal dynamics of capitalism will eventually reassert themselves and drop wages back down to where it wants them. Truth to be told, almost all economics is designed to push some agenda and will never be an objective science like physics, biology, or chemistry. There's a reason why the subtitle of Capital is not "Communist Economics" but "A Critique Of Political Economy" (political economy was the word for economics back then). Why do you take it as a given that we support the minimum wage, if I may ask? A lot of people here reject reformism entirely, and even those who do support it critically advocate ones which they see as "giving more power to the people" like nationalization, direct democracy in local government, and support for workers' cooperatives.
Brody Perez
That's basically what I said, but I said I was skeptical of that argument because it doesn't explain why the minimum wage can't be too high. If you take that argument to its logical extreme, you could argue for raising the minimum wage to $50 an hour. However, that's obviously a terrible idea. So that argument needs to be expanded to also explain why the minimum wage is only a good thing if it's not too high.
I never said that everyone here supports the minimum wage, but the minimum wage is considered a leftist idea, so I figured I'd ask here to see if someone had a good argument for it.
And maybe it's not possible to raise wages, either because it'll lead to unemployment, or because people will just work for less than the minimum wage illegally. But if that's true, what do you think society or the government can do to help lift people out of poverty?
And I think that economics is important and I think that just because a lot of economists, perhaps even the majority, have a political agenda, that doesn't mean that economics isn't worth studying. You could say the same thing about history too. A lot of historians have agendas as well, does that mean that history isn't worth studying or learning about?
Luis Howard
Collective bargaining and workers' control of the means of production is far better than minimum wage, which only improves the lot of the lowest paid workers in any case.
Kevin Phillips
Explain how this would work in practice.
Connor Rogers
The minimum wage is closely tied to living expenses. If you increase the minimum wage, the labor cost increases in any area of production which employs minimum wage workers. These areas are often factories which create the commodities which minimum wage workers buy. This means prices for simple mass produced commodities rise. In turn increasing living expenses. This is, of course, a very simplified model.
The reason why most people with business ineterests are against a higher minimum wage is that it decreases buying power for people above the minimum wage. Additionally, it causes a headache for the business owners who have to deal with the planning and uncertainty in addition to dealing with a year or two where production is hampered until prices have found a new equilibrium.
The only way you will truly increase the standard of living under a capitalist system is by redistribution of wealth. While increasing wages creates a ripple effect with sometimes unforeseen consequences. Redistribution doesn't actively affect the production process.
Brandon Hill
I'm not sure if you want to know.
Gavin Murphy
It's actually pretty simple and has been true empirically. (Note: I only have the view from the US, some of this doesn't apply globally, some of it does)
All you have to do is organize your workplace by convincing everyone that they'd have better working conditions if they bargain collectively. This has happened since the mid to late-1800s. Unions and other methods of collective bargaining are responsible for all of these things we take for granted in the West in trades and educated professions: healthcare, pensions, higher wages, child labor laws, workman's comp etc.
However, unions were much more powerful just 20 years ago (and even more powerful in the early days of capital) than they are now. There was a confluence of factors that led to this. Originally, in the early days of unionizing, capitalists would basically organize and fund violent strikebreaks to try to get the crowds preventing work to disperse. Then, there were laws put in place to protect union organizing and most people sided with labor in strikes. However, in the past few decades, there's been a concerted effort to subvert public opinion against unions, painting them as massive organizations that are highly ideological. There's also been legislation 🇬🇧🇬🇧🇬🇧right to work🇬🇧🇬🇧🇬🇧 passed in many US states that protect people who cross the picket line, making union organizing pointless (if everyone walks out, we'll just hire a ton of new people!). There's also the effects of outsourcing (if everyone walks out, we'll just build our plant in Bangladesh!).
The most powerful unions today are for government employees. This is the case because governments, for jobs like teachers and police, can't just hire people across an ocean to do those jobs. People also really like teachers and police and they have a lot of political clout that shields them from most legislation. Even this is changing though, and the climate is getting even worse for unions.
Andrew Bell
>mathematical rigor
Neoliberal economist spotted.
Seriously dude, the economy is not a simple equation you can put into a nice abstracted model. Maybe the formulas against the minimum wage add up nicely, but that's because they are conceived of in the dream-space of neoclassical modeling. You shouldn't base economic policy on mathematics but on logic based on solid empirical evidence.
David Stewart
Yeah, but history isn't implicated in policy directly like economics is. History therefore, isn't used as actively for direct apologia for the status quo.
I would personally suggest sticking to heterodox economics like Austrian, Post-Keynesian, Institutional and Marxian economics. Austrian economics is even more radically free market than neoclassical economics, but at least it's not fundamentally dogmatic and deluded as neoclassicism is.
Isaiah Brown
Not OP (but guy who posted the two posts above) but collective bargaining can lead to the same wage-inflation as a high minimum wage, should keep that in mind.
Austin Barnes
What about the Schumpeter's economic school? It is heavily based on Marxian school.
Nathan Perez
praxeology is ridiculously dogmatic and deluded.
This too though. The reason that shipbuilders and other trades had high wages was because they organized and went on strike. If people in unskilled trades would organize and actually prevent people from going to McDonalds or some other places like that, the capitalists would be forced to come to the table. Whereas minimum wage laws require either legislation (with politicians who can be paid off or scared off by threat of a well-funded primary/general election opponent) or ballot initiatives (where public opinion can be manipulated by big money advertising, it's difficult to gather enough signatures because of complex laws, and some states literally don't have initiatives)
Robert Cox
That is part of institutional economics!
Yeah, but Austrians at least don't place heavy faith in calculus. I tend to agree with Keen on Austrians: better than neoclassicals, but well-placed to become the next economic church should neoclassicism go out of favour.
True, but my original point was that strong trade-unions can lead to wage-inflation due to wages becoming so high it causes a continued rise in the general price level. This can lead to public support for union-busting like in the Thatcher era. We avoid this in the Netherlands due to a type of collaborative bargaining; we a have a collective and binding agreement called the Collectieve Arbeidsovereenkomst (CAO) which keeps wages on a 'bearable' level for neat profits for the employers. Problem is, this just makes workers cucks who still agree with huge profits for employers while they forget the need for unions. Now union membership is going down and the CAO is being eroded.
So fundamentally, wage conflict will lead to wins for capital in the end; the only way to keep the worker's product of labour high is socialism.
Zachary Bell
Capital requires a constant reserve labour army of unemployed in order to drive wages down. Supply and demand is rigged in favour of the bourgeoisie, which is the only reason you can make that stupid fucking argument. The solution socialists propose is not just to increase the minimum wage but to take the means of production out of the hands of the bourgeoisie and have it be owned by the whole of society. Math is pointless if it doesn't actually reflect reality. There is empirical and historical evidence that shows that increases in minimum wages improve the standard of living and don't destroy the economy despite the whining of the employers. The employers may not like it but they can go fuck themselves. In the end, the bourgeoisie are ultimately self-destructive, since they will always seek personal gains at the expense of the broader society. They would rather destroy us all than give an inch, which is why we should fight them at every turn, and why we eventually will have to destroy them.
Carson Baker
OP, this isn't really relevant to your question, but judging from your post it seems like you'd be into Richard D. Wolff's content. He's an economist who tackles economic topics from a leftist perspective, which is refreshing because most economists today tend to be extremely right wing. His YouTube channel is: youtube.com/user/democracyatwrk
Eli Davis
The purpose of the minimum wage is not to increase wages. Rather, it is to put fake "employers" out of "business".
Think of all the people under the poverty line. Their wages alone aren't sufficient to sustain their lives (let alone families), yet they aren't dead. Obviously, this means their "job" isn't valuable enough for the economy, so they're subsidized by other mechanisms, such as welfare, charity from family/friends, debt, or unsustainable privation.
These subsidies, rather than the meager "revenues" from customers too disinterested in the employer's "products" to "buy" them at full price of production, are the true source of all their profits.
Minimum wage laws act to shut down these con artist operations, and raise the real wages of workers only indirectly by ensuring we either work at a job valuable enough to require no leeching, or are recognized as truly unemployed and supported as such by the system.
Wyatt Young
There are plenty of studies which have concluded minimum wage increases does not effect unemployment. That is a muh feels argument that has no real world basis. If u look at productivity and corporate profits, they have skyrocketed since the late 60s while the real wage of workers hasn't changed. Which means the margin or divide has increased, so the only reason not to raise minimum wage is to maintain the wealth divide
Caleb Turner
Rather than really give an answer to your question, which others have done already, I'd like to focus on a particular part of your post that I saw critiqued in an article recently, because I think it's an interesting point. Basically, the argument I saw recently is that "lifting people out of poverty" as the focus of economic improvement is a fundamentally neoliberal concept, one that the neoliberals have promoted so effectively that it's even sunk into the consciousness of the left. Why is this a wrong-minded concept? Because "poverty" can be presented as a mere force of nature that society (even capitalist society) can work to ameliorate. This ignores the real essence, which is inequality and exploitation. While poverty might be the concrete problem faced by the poor everyday, the social form of this problem (i.e. the one that politics can deal with) is that the propertied class *makes* those people poor by exploiting them. By focusing on the arbitrarily drawn line of poverty, neoliberals can effectively erase inequality from the conversation, and cast the exploiters (global corporations, billionaire "philanthropists", etc) not as the source of the problem but as a third party capable of solving it.
How does this relate to your question? Because the socialist perspective is fundamentally different from the liberal one you're approaching this with. We're not concerned with society as a project to be improved from above, but with the fight of the exploited class against the exploiters. Clearly, raising minimum wage is a gain for the working class and a way to reduce inequality, so we support it.
Sorry if this was long-winded, but I've been seeing this talk about "poverty reduction" everywhere lately and I wanted to get this off my chest.
