RE: Help with a Minimum Wage Model

From: Rafal Smigrodzki (rafal@smigrodzki.org)
Date: Fri Apr 18 2003 - 13:21:59 MDT

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    Matt wrote:
    > Rafal Smigrodzki writes:
    >
    > > But forbidding a below-minimum wage contract does not make the poor
    > > person more likely to have a "dignified existence". Quite the
    > contrary, as > evidenced by current levels of unemployment.
    > Regardless of one's ideology, > minimum wage laws are irrational,
    > whether you want to benefit the rich or > the poor.
    >
    > As far as I'm aware there's no substantial empirical evidence linking
    > unemployment with increases in the minimum wage, if there were such a
    > strong effect as you suggest I'd expect such data to be easy to come
    > by. Certainly blaming the current economic downturn on the minimum
    > wage is foolish, several steps sillier than the choice of words you
    > call me on below.

    ### Of course, the current depression is not due to minimal wage laws (maybe
    to some minimal extent), however, it is a reliable observation that limits
    on the freedom of contract in employment tend to correlate with
    unemployment, all else being equal. This is observed in Germany, for
    example. Also, minimum wage laws have their most pernicious impact on the
    very people they are supposed to help - the unskilled or young workers.
    While introducing a minimum wage law doesn't necessarily greatly increase
    the total level of unemployment, it does increase the difficulty in finding
    a job at the lowest level.

    ------------------------------------

    >
    > But I do want to be clear I'm sympathetic to your position - it may
    > well be, in the final analysis, the minimum wage is simply not a very
    > useful tool for achieving the kind of ideological objective I
    > outlined in my previous post. I might add "irrational" is a loaded
    > term, that we disagree doesn't necessarily mean I'm foaming at the
    > mouth: One could look at the minimum wage as a legislative mechanism
    > for mitigating the enormous transaction costs inherent to collective
    > bargaining. (I liked Damien Sullivan's remark on this point further
    > up this thread very much.)

    ### I do think that our goals are very much in synch.

    I do not think that legislation lowers transaction costs, except if it
    imposes requirements of disclosure of information on the parties involved.
    Any other limitations are likely to be destructive (but this is a whole
    complex subject).

    ------------------------------------
    >
    > One point to be clear about though, and one that often doesn't get
    > taken seriously enough in this sort of abstract argument from
    > principle, is that while a particular policy tool might not be the
    > ideal choice from the perspective of an armchair theorist, it might
    > be the only one which is politically achievable. Even if we were to
    > agree the minimum wage is an inefficient means of achieving a goal,
    > one might still support it because it's here, it does some good, and
    > the superior alternatives aren't going to happen. If you actually
    > want to talk about the real world, you've got to deal with what is
    > and not what should be: I'd trade the minimum wage for a negative
    > payroll tax in an instant, but as a practical matter it's foolish to
    > let the good be the enemy of the just-about-adequate.

    ### Taking the easy way is not in the long run going to result in good
    outcomes, I think. If "politically achievable" means allowing large groups
    of people to avoid taking responsibility for their actions (as in shifting
    the financial burden of supporting the poor to a small group of businesses),
    then it is better not to achieve. In the long run, removing the economic
    feedback loops from political decisions will lead to catastrophes, as always
    when incompetent users remove built-in safety measures from e.g. steam
    engines and nuclear reactors.

    -----------------------------------

    >
    > > Also, the use of "dignity" as a general catch-phrase to bolster
    > one's > ideology is manipulative. No nice person would oppose
    > "dignity", and this is > why so many want to twist the meaning of
    > the word to sell the pet project. > There is nothing undignified
    > with sharing an apartment with others (as I do, > to save money). If
    > I can do it, the janitors can do it as well.
    >
    > But that's the whole point of rhetoric, to make such a compelling
    > case no reasonable, nice person could possibly disagree!

    ### Which is why the piercing intellect always ruthlessly tears rhetoric
    tricks apart, to let the truth shine in its glory! :-)

    ------------------------------------
    >
    > What I mean by dignity is open to discussion, it's an admittedly
    > vague concept: I live in Manhattan where you can barely find a *room*
    > in a shared apartment for less than $1000 a month: If the woman who
    > cleans my place has to take the train in I don't see that as any
    > great insult to the rights of man. I would like her to be able to go
    > to the doctor when she gets sick though, or get her teeth fixed if
    > they start to hurt, and maybe even take her kid to a movie and buy
    > some popcorn every once in a while. Does that give you a better sense
    > what I'm getting at?

    ### Now, this is also know as "basic needs generosity" (except the movie and
    popcorn), a concept I very much agree with. Apparently the vast majority of
    humans (all the nice ones) agree that BNG for the deserving poor is a
    fundamental duty of all of us, unfortunately, these good intentions
    frequently get perverted when it comes to paying for them, and the political
    system allows little tricks to be used ("I voted for Democrats!") instead of
    genuinely discharging this duty of solidarity.

    Rafal



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