Is it reasonable to expect that a minimum wage earner should be able to afford to buy a house and a newish car? Were minimum wage earners doing that in 1970?
This is nothing but a platitude that attempts to shame businesses for not meeting some idealistic vision of how the world ought to be.
There's no hard rules about what wages should or should not be, as with any other market price. A business will pay however much they need to attract and keep the labor they need. If no one wants to work for them they need to increase the wages they offer, which may in turn result in higher prices for customers which is also an undesirable outcome. If what they provide is of enough value that customers will continue to pay for it then the higher costs can be absorbed, if they don't, they will fail. If they can't attract workers they will likely also fail. Delivering value at prices people are willing to pay while still covering costs is ultimately what keeps a business in business.
I sometimes wonder if minimum wages are a net benefit at all as it creates several distortions. Some laborers aren't worth paying a minimum wage, they wind up earning nothing from not having work instead of what their true worth is and being able to build up skills. I think it could also remove some negotiating power from laborers. Businesses can peg their wages at the minimum and balk at those asking for raises, they pay the legally mandated price for that tier of work after all. Try to find a new job and you would also find other businesses doing the same, not paying an iota more than legally necessary instead of a more fluid labor market with people switching jobs for marginal gains, driving wages up. What may more naturally be a range of prices, both higher and lower, gets compressed to the minimum, unless that minimum is so low as to not have any effect on wages at all because no one would willingly work at that price.
With no minimum wage, you create a race to the bottom on wages in jobs that are currently minimum wage. No matter how little you pay, you'll find someone who is so desperate for scraps that they'll accept less.
And with that, you create a drop in the standard of living, where even having your own bedroom is considered a luxury.
> Some laborers aren't worth paying a minimum wage, they wind up earning nothing from not having work instead of what their true worth is and being able to build up skills.
No, what happens then is they work 3 jobs to survive and die an early death.
> I think it could also remove some negotiating power from laborers. Businesses can peg their wages at the minimum and balk at those asking for raises, they pay the legally mandated price for that tier of work after all.
That makes absolutely zero sense whatsoever, that someone would make MORE money if there wasn't a legal minimum? What?
Laborers don't have negotiating power in the bottom end. As I said above, there are enough desperate people to create a race to the bottom. If you eliminate the minimum wage, then you're not giving them leverage, you're just creating more desperate people.
> some idealistic vision of how the world ought to be
Yeah, I think it's a tragedy that we have constructed a society where everyone doesn't have basic needs met. I think it's a bigger tragedy that the alternative to the current system is considered idealistic. You don't have to agree with me, but if nobody talks about the ways that things could be, not the way that they are, then things will never change.
I'm not sure I follow your last paragraph. Are you suggesting that minimum wages are bad because it sets a minimum for employers to pay as though without a minimum wage they would pay a rate more in line with value? If folks earning a minimum wage today, in a world with a minimum wage, can't afford basic living expenses, would you expect more people to afford basic living expenses without a minimum wage? If so, can you justify that? If not, what are you optimizing for?
I don't have a strong position either way on exactly what the best minimum wage is, but I think it's clear that there are people who have skills and abilities in line with creating maybe $10, $12, or $15 per hour of value for a business. If you make it illegal for an employer to employ them at a rate where it's profitable, you're either forcing them to be out of work, to accept a quiltwork of hours ("we will only employ you for 2 hours at lunch and 3 hours of dinner rush"), to be in a precarious situation at work, or to find an employer willing to dress charity up in work clothes and lose money by employing them. I don't know how common it is, but I'm quite certain that I know people (in the sense that I can name them) who fall into that category.
I think substantial increases in the minimum wages force those people into a lottery where some are made better off and others are made worse off, but where the ones made worse off are made much worse off (out of work, higher barrier than today to finding work, everyone around them has more money and everything is more expensive than today).
Yeah, I think this speaks to a much broader problem with how we attribute value in our society.
Monetary value has no bearing on actual value. For example, a smartphone is only $1000 because some people were paid $0 to produce it. Did those people not produce value? Take a fast food hamburger, it only costs $1 because it's not real meat (mostly), and the person who heated it up is being paid a wage with which they cannot afford reasonable housing and healthy food.
Monetary value is the value to the business, though. If Pat can only serve enough customers to create $10 in value (above COGS) that customers are willing to pay for, a business can't pay Pat $15 for that work on a sustainable basis.
My objection to the parent post is the notion that a business which can't pay a living wage shouldn't be in business. It insinuates that businesses should be responsible for paying a living wage out of some sense of it being morally right, which is ignorant of how economics operates. Wanting people to be able to meet basic needs and have some financial security is, I believe, universally desirable. Please do think that I don't want this as well. To expect it to come via altruism is idealistic.
> Are you suggesting that minimum wages are bad because it sets a minimum for employers to pay as though without a minimum wage they would pay a rate more in line with value?
I'm also suggesting there could be other effects due to loss of agency over one's labor price, similar to how collusion of employers to fix wages harms employees. Maybe someone has studied it, maybe not.
>If folks earning a minimum wage today, in a world with a minimum wage, can't afford basic living expenses, would you expect more people to afford basic living expenses without a minimum wage?
Ultimately prices are fluid based on what people can afford, especially so for local markets like housing. If minimum wages increase one would expect increased housing prices as those prices were set in line with what people could afford. If they make more, now they can afford to pay more. If you were making marginally above minimum wage you now also want an increase to protect your increased buying power.
W.E. Upjohn Institute for Employment Research found that modest minimum wage increases have minimal affect on prices increases while larger ones can create price increases. This makes intuitive sense, based on market theory.
https://research.upjohn.org/cgi/viewcontent.cgi?referer=&htt...
Because minimum wage job is supposed to be temporary. You do it right after high school, for couple years, before you decide on what you want your "real" job to be. Or you do it part time to pay your expenses while attending college. No minimum wage work should be something you do your whole life.
I wonder: what's the average age of a worker whose wages would increase if the federal minimum wage increased to $15/hr? There's "supposed" and then there's what's actually happening. I suspect most people in those jobs are not the people you're saying should be doing them.
The average minimum wage worker is 35. 80% of minimum wage workers are over 20. 56% are women, 28% have children. On average, minimum wage workers earn half of their family's income.
> Because minimum wage job is supposed to be temporary.
Historically, this is flat-out wrong. It's a lie. It's just a new talking point invented by corporations to convince the population to vote against minimum wage increases.
My grandparents had my mom at 17 in 1965, were disowned by their parents, and bought a house at 19 on a single carpenter's apprentice salary. They bought a new car a couple years later.
My grandmother only started working part-time ~1980 as things started getting harder to afford on a single salary.
I think about this a lot because even with two people working full time we couldn't afford a house (in the same city) until we were in our late 20s, without a child. Still have never owned a new car.
Carpenter's apprentices look to make around double the federal minimum wage today, which checks out that they could afford a house in the mid 60s. https://news.ycombinator.com/item?id=29593398
The minimum wage went up to $1.45/hr in Feb, 1970. 2000 hours of that would be $2900. I used the following assumptions: 7.5% fixed-30, median house $17K, down payment of 20%. That was unaffordable by a factor of almost 2x.
The house that seemed affordable with no car payment was a little over $9K (down payment of $1800). Adding in a $50/mo car payment took the affordable house down to a little over $8K, less than half the price of the median home in 1970.
Was there a minimum wage worker sometime in 1970 who bought a house and a newish car? I'm sure there was. Was it typical to do so? I don't think so.
If I apply the same calculation today, on a minimum wage of $7.25…
Wage: $7.25/h
per-month affordable: $362.50
median home price: $374,900
3.519% fixed, 30-yr
20% down
required monthly payment -> $1,350
which is unaffordable by a factor of almost 4x.
In fairness, the comment chain you're responding to is talking about the thing you're responding to in your comment, but I think the increase in unaffordability at the minimum wage still speaks to the problem: while it wasn't likely to allow home ownership in the past, but it's even less possible now, and that translates up into the higher wages where people then might have afforded a home, but cannot now.
Plenty of maps have been drawn to show that minimum wage can't even afford to rent median 1-bed apartments.
I agree that it’s gotten worse; I just think people underestimate how much it has always sucked to be among the lowest earning households.
You can look at these retired 70-something boomers driving nice cars, owning a house, and taking a couple trips a year and assume they lived on Easy Street their whole lives when in fact they were probably struggling to pay bills 40 and 50 years ago as well.
