Do you remember that wages rose when unemployment was low?
Why is there a need for minimum wage?
Edit: downvoters, what do you want? A high minimum wage job while many are unemployed? Why focus on minimum wage when you can have low unemployment and decent wages for everybody at the same time by reducing unemployment?
The Federal Reserve has mandate to ensure employment doesn’t get too high, which is high enough to cause inflation. By increasing interest rates, unemployment increases because it costs more to pay people.
Wages rose when unemployment was low because inflation was running away. The Fed was behind on its mandate shortly after the pandemic. Because interest rates were low, it was relatively inexpensive to hire people, and that’s what businesses did, especially after firing so many of them during the pandemic. But, ya know, the pandemic gave people more time to consider what was important to them…and working was pretty low on that list. Thanks to the low interest rates, businesses could pay them more as an incentive to come back to work. That whole “Great Resignation” thing was about workers finally having some bargaining power. And wages rose because workers could demand more.
But now interest rates are having some pressure on inflation. It costs more to hire people, and it costs more to keep people hired. The bargaining power workers had is basically gone. The demand for employees to literally come back into work and stop working from home is evidence that business managers have regained the upper hand. And so, now there’s no reason to pay people more. Just threaten to fire them and watch them dance.
So, basically, the need for a minimum wage is because there is no incentive to raise wages themselves but there’s every incentive to lower them. And the Fed has other methods of dealing with low unemployment that will kick in before businesses start raising wages to attract workers in most cases. The post-pandemic era was “unprecedented”, after all.
We don’t need unemployment as it is. Stephanie Kelton makes the case here (pdf). Here’s an AI summary of how wages are managed without the need for unemployment using a public service employment (PSE) program:
The PSE program would pay a wage of $15/hr plus benefits, establishing an effective minimum wage and compensation level nationwide.
It would provide jobs to anyone ready and willing to work, eliminating involuntary unemployment. The authors estimate the program could employ around 15 million workers currently unemployed, underemployed, or out of the labor force.
By providing jobs at $15/hr, the program would lift wages at the bottom and reduce poverty. The wage floor would pressure private employers to raise wages to compete for workers.
The program is designed not to compete with private employers, except to establish minimum standards. In economic upswings, private employers would recruit from the program, while in downturns the program would absorb laid-off workers.
So the PSE program aims to reduce unemployment by directly providing jobs, while also lifting wages by setting an effective nationwide minimum of $15/hr plus benefits. It establishes a wage floor that would ripple up to benefit other low-wage workers.
In summary, the policy note argues the PSE program could simultaneously reduce unemployment and increase wages for low-income workers through its design and job provision at $15/hr. The wage floor and job guarantee are interlinked policy goals.
It should be insulting to Americans the country over that one of our main economic institutions has determined that people must be unemployed for economic growth. Unemployment has so many socio-economic problems it’s insane, and it leads to physical and psychological problems, and even ultimately to suicide. Why would we want this, and why should it continue to be implemented, if an alternative exist that better manages wages and doesn’t need call for unemployment?
Because I am not convinced by their arguments. It makes sense if you accept a minimum of unemployed people. But why should society settle for that? Employ everybody and find another way to prevent wages from rising too high.
But the workers don’t currently have either- lowering or removing the minimum wage might reduce the unemployment rate, but those jobs are not going to be paid at a livable rate. Currently more theft is wage theft committed by companies against workers, they’re already using the power they have against workers. There’s already a clear divide between union and nonunion blue collar benefits and wages: if there were a textbook play of economic principles, all nonunion blue collar employees would quit and join union companies or form their own.
Let the people decide what a livable wage is. A bad job is better than no job. They can still refuse to work.
The people have a gun to their head. If they’re not eligible for unemployment because a $3/hour job is available, they’ll take it not to starve to death. That doesn’t make it a free or advantageous choice.
Of course, if there is only support if you don’t have a job then minimum wage makes sense.
But that support comes from taxes. I would prefer a society where everybody works so that taxes are low. Of course there must still be something that gives people the freedom to say no.
The unemployment rate does not take into consideration people who are under-employed or people who are working multiple jobs to get by. You could be working 3 part time jobs (none of which offer benefits) and still not make enough money to pay your bills. The “unemployment rate” is a load of bullshit and should largely be discarded in favor of tracking how many people are living above the poverty line.
Except that the published figure is what gets used in policy and calculations. The real rate is largely ignored and the numbers are heavily skewed by ever-changing definitions and parameters making the “unemployment rate” a nearly useless metric. We need to run our country based on keeping people out of functional poverty, not based on keeping profits up.
I’m saying that the unemployment rate is artificially low as well as being a stupid metric to use, but unfortunately, it’s the metric that powerful entities use to make decisions about manipulating the economy at large.
If worker unions were required by law then I would agree. The issue is that companies will corner the job market to suppress wages. The government applies some pressure the opposite way via minimum wages to help force progress. Self checkouts and various other automated processes don’t occur without some kind of selection pressure.
Think of minimum wages as forcing weaker companies out of the market.
Because an employer paying minimum wage is their way of saying “I’d pay you less if it were legal”, because your employer’s interests are in direct competition with your own. A store manager is not only in direct competition with the store across the street, he is also in competition with his own employees. It is in his interest to ensure he maximizes his own profits, but it is in your interest to make as much money as you can aswell.
The focus should be on
"Id pay you less but then you would quit”. Everything else is a weak position.
If there is no competition among stores, workers compete among each other. Though nobody complains because it’s the weakest humans who won’t find a minimum wage job. When there is a choice for the manager, they will pick the better worker.
Is it still a good deal for minimum wage workers?
What should workers do with abusive managers? With minimum wage, there is no option to be willing to work for less but with better conditions.
Do you remember that wages rose when unemployment was low?
Why is there a need for minimum wage?
Edit: downvoters, what do you want? A high minimum wage job while many are unemployed? Why focus on minimum wage when you can have low unemployment and decent wages for everybody at the same time by reducing unemployment?
The Federal Reserve has mandate to ensure employment doesn’t get too high, which is high enough to cause inflation. By increasing interest rates, unemployment increases because it costs more to pay people.
Wages rose when unemployment was low because inflation was running away. The Fed was behind on its mandate shortly after the pandemic. Because interest rates were low, it was relatively inexpensive to hire people, and that’s what businesses did, especially after firing so many of them during the pandemic. But, ya know, the pandemic gave people more time to consider what was important to them…and working was pretty low on that list. Thanks to the low interest rates, businesses could pay them more as an incentive to come back to work. That whole “Great Resignation” thing was about workers finally having some bargaining power. And wages rose because workers could demand more.
But now interest rates are having some pressure on inflation. It costs more to hire people, and it costs more to keep people hired. The bargaining power workers had is basically gone. The demand for employees to literally come back into work and stop working from home is evidence that business managers have regained the upper hand. And so, now there’s no reason to pay people more. Just threaten to fire them and watch them dance.
So, basically, the need for a minimum wage is because there is no incentive to raise wages themselves but there’s every incentive to lower them. And the Fed has other methods of dealing with low unemployment that will kick in before businesses start raising wages to attract workers in most cases. The post-pandemic era was “unprecedented”, after all.
What would be a fair way to manage wages without the need for unemployment?
We don’t need unemployment as it is. Stephanie Kelton makes the case here (pdf). Here’s an AI summary of how wages are managed without the need for unemployment using a public service employment (PSE) program:
It should be insulting to Americans the country over that one of our main economic institutions has determined that people must be unemployed for economic growth. Unemployment has so many socio-economic problems it’s insane, and it leads to physical and psychological problems, and even ultimately to suicide. Why would we want this, and why should it continue to be implemented, if an alternative exist that better manages wages and doesn’t need call for unemployment?
This sounds reasonable. Too bad that the post lost focus. I would love to know what others think about this.
Why are you so against a minimum wage when people keep telling you why it’s important?
Because I am not convinced by their arguments. It makes sense if you accept a minimum of unemployed people. But why should society settle for that? Employ everybody and find another way to prevent wages from rising too high.
But the workers don’t currently have either- lowering or removing the minimum wage might reduce the unemployment rate, but those jobs are not going to be paid at a livable rate. Currently more theft is wage theft committed by companies against workers, they’re already using the power they have against workers. There’s already a clear divide between union and nonunion blue collar benefits and wages: if there were a textbook play of economic principles, all nonunion blue collar employees would quit and join union companies or form their own.
Having neither, it’s the same as the saying about liberty and security. If you don’t seek employment for all then you won’t get minimum wage.
Let the people decide what a livable wage is. A bad job is better than no job. They can still refuse to work.
Of course, without new ideas, things don’t change. Not the workers but the companies need a reason for full employment.
The people have a gun to their head. If they’re not eligible for unemployment because a $3/hour job is available, they’ll take it not to starve to death. That doesn’t make it a free or advantageous choice.
Of course, if there is only support if you don’t have a job then minimum wage makes sense.
But that support comes from taxes. I would prefer a society where everybody works so that taxes are low. Of course there must still be something that gives people the freedom to say no.
The unemployment rate does not take into consideration people who are under-employed or people who are working multiple jobs to get by. You could be working 3 part time jobs (none of which offer benefits) and still not make enough money to pay your bills. The “unemployment rate” is a load of bullshit and should largely be discarded in favor of tracking how many people are living above the poverty line.
Right. This is important to remember. I think my question is still valid because it’s about the real rate and not the published figure.
Except that the published figure is what gets used in policy and calculations. The real rate is largely ignored and the numbers are heavily skewed by ever-changing definitions and parameters making the “unemployment rate” a nearly useless metric. We need to run our country based on keeping people out of functional poverty, not based on keeping profits up.
Policy and calculations don’t matter if there is low unemployment. It’s minimum wage that’s gamed. Why fight that lost battle?
I’m saying that the unemployment rate is artificially low as well as being a stupid metric to use, but unfortunately, it’s the metric that powerful entities use to make decisions about manipulating the economy at large.
There is the published figure and there is the actual number of unemployed people.
You rightfully point out that the figure is manipulated. I am talking about the actually unemployed people.
If worker unions were required by law then I would agree. The issue is that companies will corner the job market to suppress wages. The government applies some pressure the opposite way via minimum wages to help force progress. Self checkouts and various other automated processes don’t occur without some kind of selection pressure.
Think of minimum wages as forcing weaker companies out of the market.
How do companies corner the job market?
Doesn’t minimum wage support the cornering because new competitors cannot start with lower wages?
Because an employer paying minimum wage is their way of saying “I’d pay you less if it were legal”, because your employer’s interests are in direct competition with your own. A store manager is not only in direct competition with the store across the street, he is also in competition with his own employees. It is in his interest to ensure he maximizes his own profits, but it is in your interest to make as much money as you can aswell.
The focus should be on "Id pay you less but then you would quit”. Everything else is a weak position.
If there is no competition among stores, workers compete among each other. Though nobody complains because it’s the weakest humans who won’t find a minimum wage job. When there is a choice for the manager, they will pick the better worker.
Is it still a good deal for minimum wage workers? What should workers do with abusive managers? With minimum wage, there is no option to be willing to work for less but with better conditions.
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