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Comment by tuna-piano | Hacker News Reader

Posted in a previous thread, but I still don't understand this whole "Minimum wage is good/bad" conversation, and it's really bothering me (especially from economists).

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Every minimum wage increase is different!

Even the staunchest free market economist wouldn't claim that a hypothetical minimum wage increase from $.10/hr to $.50/hr in Seattle would increase unemployment. And even the staunchest socialist economist would not claim that a minimum wage increase from $8/hr to $800/hr wouldn't increase unemployment.

Similarly, how can you compare an increase from $5-6 in New jersey in 2005 to one from $11 to $13 in Seattle in 2017? You can't just make blanket statements about this stuff.

The question is not "Are minimum wage increases good in general?" the question is "Given the potential tradeoffs, is this specific minimum wage increase good?"

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> The question is not "Are minimum wage increases good in general?" the question is "Given the potential tradeoffs, is this specific minimum wage increase good?"

That still isn't the right question because it's a false dichotomy.

At any interesting wage, a minimum wage increase will increase unemployment. An increase from $.10/hr to $.50/hr does nothing because approximately zero people make less than $.50/hr to begin with. Once you get into wages that people are actually paid, with high probability there will be some jobs that can't be justified at a higher wage.

Imposing a minimum wage is taking from the people at the very bottom (who become unemployed) in order to give to the people at the almost-but-not-quite bottom. Which is why the whole exercise is folly.

It doesn't matter whether the higher wages outweigh the increase in unemployment in any particular scenario because there is a third option -- increase income without imposing the entire cost on employers who hire people at the bottom.

The simplest way to do that is a UBI. The UBI supplements everyone's wages, which brings up the lowest paid workers to the minimum, and is paid for from general taxes, which minimizes the economic damage by spreading out the burden (and having the rich pay their proportionate share).

Can't help but think there'd be pressure to lower the minimum wage with a UBI because "oh those people have enough money now, they can stand a lower wage" and we end up back where we started with some money shuffled around.

A UBI would replace the minimum wage entirely.

Obviously the question then becomes how much the UBI should be, but at least it gets us away from the folly of a minimum wage.

Unless ubi + new wages actually makes some poorer

But they're just two free floating variables. You could set either of them to any amount of money. If the lowest natural wage paid without a minimum wage is $A then a UBI of $B will make everyone better off than any minimum wage less than or equal to $A + $B.

>At any interesting wage, a minimum wage increase will increase unemployment.

This is not obvious. Increasing the income of the almost-bottom could act as a stimulus which drives down unemployment. It is possible that this effect is greater than the unemployment caused by the minimum wage directly.

Having said that, I agree that the UBI is a generally better way of accomplishing this.

> This is not obvious. Increasing the income of the almost-bottom could act as a stimulus which drives down unemployment. It is possible that this effect is greater than the unemployment caused by the minimum wage directly.

You're essentially arguing the butterfly effect. It could also be the exact opposite, if the employees use the money to pay down debts when the employers would have spent it on new consumption. Or various completely arbitrary outcomes that are always possible whenever making any change to a complex system.

But the real flaw in the stimulus theory is that it assumes the conclusion. If the net loss from people losing their jobs to begin with is more than the net wage gain to the people who kept their jobs to begin with then there is no extra money to create a stimulus to recover from that situation. If it isn't then you didn't need the stimulus effect to come out ahead regardless. (Though you're still even better off with a UBI.)

In some I would argue most cases a job is still viable costs go up or profit goes down.

If a company pays 65% of their employees the minimum and wages go up 5% the company doesn't fire most of its workers it grudgingly pays more.

In a lot of cases the existing low wage is actually below market now and subsidized by benefits like food stamps.

The company already is begrudgingly paying more to a subset of affected employees.

> If a company pays 65% of their employees the minimum and wages go up 5% the company doesn't fire most of its workers it grudgingly pays more.

It depends on what the company's alternatives are. Many companies have only 5% margins to begin with. And most people who suggest minimum wage increases argue for more than just 5%.

> In a lot of cases the existing low wage is actually below market now and subsidized by benefits like food stamps.

That is one of the problems a UBI fixes. Since the money isn't contingent on employment, employers can't pay less against the leverage that without a job the employee would lose their food assistance.

Great comment.

But it doesn't always hold in small markets or markets with little variety. Consider towns where there are only a few important employers.

I still agree that imposing the costs on the employers is arbitrary.

I'm not aware of any academic economists who say "the MW is good/bad". They talk about it terms of positive and negative effects, and frequently qualified to a particular location or industry (read both UW studies, for example; the researchers generally tend to present their findings without editorialization). When it hits the media, it gets blown out into sensationalist headlines that apply broad-stroke good/bad filters to the concept as a whole without any of the subtlety or nuance of the original research.

It's funny, if you really believe yourself, how could you ask the final question? How can a minimum wage increase in one rich neighborhood be compared to a poor neighborhood? How about different industry? How about different businesses? The assumption of your question is a deep believe of central planning and numeric abstraction of the society, which is an ideology. So stop pretending you are free of ideology.

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