But it's not true that rising the minimum wage would immediately be cancelled out by inflation. That would be true only if everybody was earning minimum wage.
Increasing the minimum wage from 5 to 50 dollars is unlikely to cause a 10x inflation, it more likely would cause a 3x or 5x inflation.
The poor would have more and the rich would have less.
It would likely reduce the spread of wealth in the society, improve social cohesion and in general may turn out to be a good thing.
High minimum wage doesn't hurt the "rich" it hurts everyone who's making just more than minimum all the way to the upper middle class because their cost of living either increases or their standard of living decreases.
The "rich" are rich enough that it's just a drop in the bucket.
Edit: I don't mean to say that minimum wage isn't worthwhile, just that framing it in terms of a rich to poor wealth transfer is somewhat dishonest.
Well, if that reasoning were true we should just get rid of the minimum wage, surely that will lead to an increase in the standard of living and a decrease in the cost of living.
Really, some of the stuff you read on HN is just mind-boggling.
In spite of the gig economy trying hard to erase decades of stability for millions of people even the smallest attempt at reductio-ad-absurdum would show that there is an optimimum somewhere and that there is absolutely no law of nature that dictates that that optimum lies at $2.75, $7, $15 or anywhere in particular.
Whatever you make the minimum, there will always be people who earn just a bit more and of course it will lead to some inflation but the end result will be a higher standard of living for those for whom the change is the most important.
For all the laughter about the EU from the US when it comes to social security I'd like to point out that Amazon already operates here and has to pay the local minimum wage and that consumers are still buying their products.
We should indeed just get rid of the minimum wage, and replace it with universal basic income guarantee.
Minimum wage + unemployment insurance is basically UBI anyway, except very poorly implemented - with ridiculous overhead, and, most crucially, subsidized through what is, essentially, a regressive tax.
Consider: when you raise minimum wage, the employer will try to put as much as they can into the price of the produced goods. They might be forced to eat some of it by shrinking their profit margin, but ultimately most of it will be passed to the consumer.
Now, who consumes goods and services produced by minimum-wage workers? Everyone, of course - but, generally speaking, the less you earn, the more you have to rely on that. So as the prices on such goods and services go up, poor are the ones that see the biggest increases as a proportion of their overall spending (and hence, their overall income). It's the ultimate con - you get one mark to pay for the other, and the best part is that they don't even notice.
UBI wouldn't have this problem, because the tax would be explicit, applied to income, and (ideally) progressive. So you actually redistribute from the top of the ladder all the way down to the bottom. Better yet if you also tax capital gains for this purpose.
The optimum minimizes the amount of government assistance.
Obviously, everyone not being starved or dead from lack of medical care means everyone gets food and medical care. That is not negotiable at this time.
Some methods of payment for those universal services have extremely low transaction cost like the employer hands money to employee who buys the service or product for cash. Some methods have extremely expensive transaction costs with government departments taxing people and another department full of people paying partial or full payment for people's food and medical care, none of those people work for free and they all need HR and benefits and management and auditors, all very expensive. Of course give/force the employers to hand out too much cash and you get inflation that exceeds the cost of government.
For example everyone at Google eats and has medical care and having the well compensated employees pay for it is extremely low transaction cost. However no one at walmart can eat and obtain medical care so the government provides it at enormous transaction expense. Its believed to be better for the entire economy to slightly tax google employees to pay for government services for walmart employees than just have walmart pay their fair share of the expenses of employees.
At some point in the middle there's a optimum that minimizes the total cost of government programs plus the economic damage wrought by inflation. A lot of people put a lot of time and money into figuring out this optimal ratio, which is probably extremely close to where we are today, and many more in the general public say "eh we should just wing it and +1 one side or the other, because like, what could possibly go wrong?".
There ARE problems such that those highly paid government clerks with fabulous benefits compared to the private sector are not likely to suggest losing their welfare program administrator jobs any time soon, so there are rational human self interest reasons why the minwage is always going to be around the lower bound of optimum. If the general public is not always of the opinion that its somewhat on the low side, then the central regulators and planners are messing up. There should always be this low level of turmoil about it being somewhat too low.
Being part of the gig economy has brought me the best income I've ever had. And a flexible schedule so I get plenty of time with my kid. If I was still forced to look for a 9-5 based on traditional hiring practices I'd be making much less and miserable.
As long as it works... and then when you get ill or something else happens suddenly you find out that all that freedom translates into a complete lack of a safety net. Unless you live somewhere in Europe.
Keep in mind that 'flexible contracts' and 'zero hour contracts' already existed before the Gig economy, and that they still came with all the good stuff that comes with employment.
For the US, where a lot of people were already under the perpetual Sword of Damocles waiting to be told they are no longer required the situation is maybe not all that different. But not all of the world is like that.
The better way to run a life that is free and where you get plenty of time to arrange as you wish is to have a consultancy company where you hire yourself out at a high rate during a few months of the year to take it easy during the remainder.
> Nearly 2/3rd of the federal budget is for social programs.
Not all social programs are safety net programs; notably age- and work-related public healthcare isn't, and neither is work-qualified public pension.
And also a lot of the social spending (safety net or not) is the public portion of the US’s stupendously inefficient hybrid public/private health care system, so even the safety net portions of that (mainly Medicaid) give very little safety net for the money.
By the standards of the developed West, the US has a very weak safety net, however much money it might spend on public social programs.
> Increasing the minimum wage from 5 to 50 dollars is unlikely to cause a 10x inflation, it more likely would cause a 3x or 5x inflation.
I' guessing it would rather create massive unemployment, and subsequently be cancelled. Think about it - middle-class people are ok with paying $4 for their Starbucks coffee, but if they were to pay say $10 (because the baristas salaries just tripled), probably a lot of them would cut back on them. Maybe even Starbucks would disappear altogether. Multiply that effect across all industries hiring minimum-wage workers. It would be a train wreck.
The rich will not have less, they will have a lot more (in dollars at least), because they are mostly storing wealth in inflation-proof assets. And businesses owners will make more than 10x, because when you increase the wages from $10/hr to $50/hr, the amount of spare (fun) money actually grows much more than 5x.
That will hurt the current middle class the most, those earning close to $50/hr. These are skilled professionals who will get equalized with someone who dropped out of high school. It's actually a good example of why socialism is such a dumb idea.
There is a difference between everybody being 'rich' and simply paying a living wage. Note how Ford got as big as it was in part not just because he made a damn good automobile but because he paid his employees a wage large enough that they could afford a car.
A couple of billionaires less and a higher standard of living for the masses is a good thing.
Probably it won't but there is a small risk that some people will due to round-off errors end up just below the billionaire line of they start paying their employees a half decent wage. Or it might take some people a bit longer to get there. In the long run it is irrelevant.
Living wage: a wage sufficiently high that after paying taxes there is still enough left over for small family or individual to live off when all normal expenses are accounted for based on a workweek no longer than 40 hours in total.
That works out to $2400 gross per month (so before taxes) which if you can't recoup it from the work input says more about the company you are working for and their inability to capture value. Keep in mind that raising the wage across the bar will increase inflation but will level the wage disparity between 'smart' work and 'dumb' work.
(Edit: sorry for the annoyance. I just tried to understand how did you work out that the right number is $2400 with such precision. Surely that's the right number everywhere in the US, as well...)
What is a little bit of money for a small family - but still a living wage - is going to be a bit more for an individual. Some countries make up the difference by giving parents of children some money each month.
So that the employers do not have to take the family situation of the people they employ into account.
Np. As for the $2400, $15/hour * 40 * 4 is close enough, and that seems to work based on the salaries of a number of people that I am familiar with.
Working two jobs at $7/hour should not be a requirement to make ends meet. And that's another way in which the low minimum wage hurts employment: people working two shifts because they have to.
Have you given any thought to how wide the gap between "smart" work and "dumb" work should be? Who should decide such a thing? If someone spent their youth doing drugs and having children out of wedlock do they really deserve to earn a salary within say 10% of someone that spent their youth working to gain the skills and experience necessary to be a doctor or lawyer? Just because the outcomes need to be more equal?
> Have you given any thought to how wide the gap between "smart" work and "dumb" work should be?
Large enough to stimulate people to learn, small enough that those working hard do not end up wearing out their bodies before their pension, end up on the streets or dead.
> If someone spent their youth doing drugs and having children out of wedlock do they really deserve to earn a salary within say 10% of someone that spent their youth working to gain the skills and experience necessary to be a doctor or lawyer?
Do you mean to imply that there are no doctors or lawyers with children out of wedlock or on drugs?
> Just because the outcomes need to be more equal?
I would avoid the word equal, I would use the word fair.
Your buying into the argument people who are poor deserve it some how. That's a similar argument used against the 8 hour day - the working classes would waste this extra new time on drink and enjoying themselves.
> Your buying into the argument people who are poor deserve it some how.
Not sure how you got that impression. If you thought that the 'large enough to stimulate people to learn' is a factor in that: I was thinking of kids looking around them seeing zero advantage of having an education might not be incentivized enough to acquire one.
I have given you a definition and a number that +- 20% satisfies all of the US demographic data that I have my disposal, if you're looking for an essay complete with citations you're going to have to line up behind the paying customers.
You started this thread in bad faith ('and no dancing around') and went to worse from there.
In the UK there's a foundation that exists to work out what would a fair living wage, to promote this idea to businesses (getting them to commit to pay this to all workers even though the legal minimum is lower) and to make sure that when media people have your question they've got somebody who can confidently provide quotes/ appear on TV/ whatever to explain.
This was sufficiently successful that the government tried to rebrand their arbitrarily chosen (55% of median earnings) minimum wage as a "National Living Wage" but to their annoyance people continue to refer to the foundation's numbers which you know, are based on evidence.
The Living Wage Foundation uses a "basket" system like economists measuring inflation. For example they imagine that a person should rent somewhere to live, so they go find out how much it would typically cost to rent somewhere a person could live in various parts of the country. They figure you will want food, so they work out a set of groceries you might buy, and so on.
Is it possible to live on less? Yes, and it so happens that I do even though I'm fairly wealthy. But it's very obvious that even small changes in my lifestyle would significantly increase my spending, and many of my choices just aren't open to people who aren't wealthy. For example I spend very little on housing, because I own my home outright. But obviously people trying to get a minimum wage cleaning job don't own a house!
