I love how a lot of people seem to think this is some outrageously difficult dilemma that takes only the smartest people to even converse about.
Its not. Just pay your fucking workers so they can eat and continue working for you. It's really, really not hard. And the topics that should be discussed are why so many refuse to do this simple thing and what we're going to do about it. But 'Ooh Jingly jingly awards time guys.'
This year's nobel prize in Economics has been awarded. As I was listening to / reading about it, I couldn't help but feel a lot of the results were pretty obvious, even before the studies.
The idea that labor can be treated with a supply and demand curve similar to elastic goods should have never even been a consideration in economics, and I can't stress enough how much of an indictment of the field it is that examining this this was Nobel-Prize worthy.
I'll give a basic background and explain why I feel this way.
David Card was one of the winners of the nobel prize for "for his empirical contributions to labour economics". Specifically, his publications which showed "... among other things, that increasing the minimum wage does not necessarily lead to fewer jobs."
His experiments were accomplished by examining the labor market in 1992 after a raise of minimum wage in New Jersey. The same restaurant chains in similar geographic areas with the same corporate structure did not reduce employment even after a raise of minimum wage on the New Jersey side from 4.25 $/hour to 5.05 $/hour.
A laborer on average does not make a wage that is equal to the amount of monetary value they produce for the employer. If this happens, no business would hire anybody. Period. End of story. Hiring would never be profitable. In the real world wages are far lower because they are profit-oriented, and wages are depressed by labor competition.
Since the laborer does not make a wage that is equal to or above the value they produce, they will always produce value for the business. If hiring staff will increase the amount of value generated for the business, the person will be hired. It doesn't matter if the person makes 10x their wage for the business, or if the person makes 1.1x their wage for the business. As long as, on average, the position makes money for the business after all considerations, the position will be retained. If the position can be eliminated and the business will only lose 0.75 the value of the laborer, the position will likely be eliminated. (This is an over-simplification, but will hold on-average for an efficient economy over a sufficient period of time)
So we see a contradiction here. If minimum wage increases 50%, but all of the workers that were previously below the new minimum wage are still below the "positive value threshold", then their position will not be eliminated. The thing is, virtually every laborer produces several multiples of their cost for businesses. Even in labor-heavy industries, like fast-food and supermarkets, national chains could afford to double or triple worker wages and still make a massive profit. I've done the calculation on the forum before that Wal-Mart could quadruple every person's wage and would still be profitable. So the idea that modest minimum wage increases, even doubling of minimum wages, would have a significant impact on employment has always been ridiculous.
IMO it's easy to understand why this knowledge has been suppressed, and we still hear about how minimum wage increases will kill jobs. There's a lot of money on the line, so research that says otherwise is hyped, and research that doesn't is suppressed. Business and economics departments all over the country are massively compromised by business interests, and while they don't write "Only libertarians" on their grants, the soft power they push to down play this kind of research is significant.
https://cepr.net/documents/publications/min-wage-2013-02.pdf - Summary from 2013 with papers and meta-analysis going back to the 90's.
So what are your thoughts? I'm sure ^thesnipa will chime in about automation, but this has implications going back to before the 90's, so there's plenty to discuss outside of the consequences of automation.
This was my favorite video so far. It also has implications for immigrants, but that's not the part I'm interested in right now. Even when you increase the labor market by 7% it doesn't depress wages.
https://www.youtube.com/watch?v=8BqLnRGOyDo
Case studies which show little / no impact on employment aren't suppressed, in contrast they're quoted ad nauseum by sympathetic media outlets.
Higher labor costs get passed on to the business, which adjust through a combination of reduced employment (either net headcount or hours), lower profitability, and higher prices. Where alternatives to labor exist, companies pursue automation. Automated check-outs and self-ordering at fast-food / coffee shops has exploded over the past few years. It's certainly possible that there are situations in which businesses can't reduce employment easily, and in which most of the costs are either pushed onto consumers or eaten by the business itself. And there are scenarios where existing operations are maintained, given that there's a cost to reallocating capital at the expense of existing growth. Calculating profitability is complex. But the notion that costs will be eaten entirely by the business, and not by either employment or consumers, is likely just as wrong as the inverse.