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Comment by dan_bk | Hacker News Reader

My personal thought on this topic:

When you work at least 8 hrs/day, 5 days/week (because somebody wants your product/service), you should be able to have a normal/decent life.

If not, you're simply being ripped off.

EDIT: In other words, western societies have more than enough wealth for everybody to live really decent lives. If we still see horrible things like homelessness, etc., it's because society accepts structures that result in this. And personally, I don't want to be part of a society with such values.

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I agree, but what does that have to do with minimum wage? Raising the minimum wage doesn't necessarily raise people's income. If your labor is not worth more than $25/h to your employer you'll just lose your job (or never get hired in the first place.)

Another problem is that the costs are not spread equally. An industry that employs a lot of low skill workers has to burden a huge amount of the cost of it, whereas a business that automates all their employees doesn't have to pay a dime. And those costs might pass on to consumers and cause problems, competing with different countries.

The better alternative is a basic income (or some variation of it.) Tax everyone, not just the industries that employ lots of workers, include the unemployed in the benefits, and don't create artificial disincentives to hire people.

> If your labor is not worth more than $25/h to your employer you'll just lose your job (or never get hired in the first place.)

Well, you can always increase the number of jobs in a country by lowering the country's wages.

By that logic, the taxpayer ends up footing the bill (via social insurance programs => taxes) that the employer should have paid.

Wages should be set by supply and demand like everything else. Taxpayers should pay for social programs, it spreads the cost out among the entire economy. Adding additional costs to a person, should a business decide to hire them, just discourages them from hiring and creates all the problems I mentioned above.

>Raising the minimum wage doesn't necessarily raise people's income. If your labor is not worth more than $25/h to your employer you'll just lose your job (or never get hired in the first place.)

What you're saying here is that raising the minimum wage doesn't necessarily cause a particular person's income to change at the same job that he/she had before. What it does is shift business models that depend on slave labor for their margins. It forces innovation and automation, and the people who can't acquire the skills needed can then rely on a basic income. I don't understand why the government subsidizes margins made on the backs of labor by supplementing their wages with welfare payments.

If the government is supporting people, it should be reaping the benefits of their labor rather than private interests. If it can't come up with work that they can do, it should make sure that they're comfortable.

>What it does is shift business models that depend on slave labor for their margins. It forces innovation and automation

Which is a euphemism for saying "they will lay people off and leave them unemployed." There will be some innovation and automation. More likely outsourcing, and the benefits of whatever innovation there is won't go to the unemployed workers.

>I don't understand why the government subsidizes margins made on the backs of labor by supplementing their wages with welfare payments.

They aren't. The employers are paying their employees the market worth of their labor. The government is providing assistance to those whose market worth isn't that much.

Where's the money coming from though?

Assuming no import/export (a false assumption of course) then increasing the minimum wage just increases costs, and you end up exactly where you started.

There was a time when resources were a large percentage of the cost of good - those days are long gone, today wages are the largest part.

You pay people more, so you have to charge people more, and they have more money so they can afford it so prices are successful in going up. Net result: Absolutely no change.

> You pay people more, so you have to charge people more

Or maybe some overpaid positions will have to accept a cut that they will never even feel in the slightest way.

An INcrease of, say, $500/month to reach $4000/month can "change a World". But a $500/month DEcrease to reach i.e. $39'500/month will never even be felt.

In economic terms: The marginal benefit of an increasing wage decreases. There is a fuzzy limit where more money does NOT make you more happy.

The problem with that is that there are much more workers than CEOs.

It's not such a big problem if you consider that many CEOs are paid well over 200x more than their nonsupervisor worker. http://go.bloomberg.com/multimedia/ceo-pay-ratio/ http://www.businessweek.com/articles/2013-05-02/disclosed-th...

JCPenny, the company with the highest ratio on the first chart appears to employ about 117,000 people[0]. If the CEO gave up all his pay, they would be able to hire 1,795 more people - about 1.5%. Add together the top 20 and it's 18,860 people. Those same numbers likely apply to how many low-paid employees could be increased to around $15/hour[1].

In absolute terms, those sound like big numbers, but the US officially[2] has 9.8 million unemployed people[3] and a great many more working for low pay. 18860 more minimum wage jobs would be less than 0.2%. Flattening out the pay distribution in large companies may appeal to our sense of fairness, but it doesn't actually do much to alleviate poverty.

[0] http://www.macroaxis.com/invest/ratio/JCP--Number_of_Employe...

[1] The underlying assumption being that most of these companies have a large number of minimum wage employees.

[2] Unemployment numbers are skewed low because they don't count people who aren't following a specific pattern of job-seeking.

[3] http://www.bls.gov/news.release/empsit.nr0.htm

You totally forgot about this thing called "profit." Higher wages requires lower profits which is a good thing because it increases purchasing power. It also incentivises companies to invest in new technology to reduce labour costs.

E.g. Copenhagen has cool driverless subway trains. But the rest of the world doesn't.

There are a few more: https://en.wikipedia.org/wiki/List_of_driverless_trains#Grad...

Copenhagen has cool driverless subway trains. But the rest of the world doesn't.

There are quite a few cities with driverless trains now: http://en.wikipedia.org/wiki/List_of_driverless_trains

Vancouver's system is both the oldest (opened in 1985) and the largest (68.6 km) driverless train system in the world: http://en.wikipedia.org/wiki/SkyTrain_(Vancouver)

If I were an experienced train driver, I'd be opposed to a minimum wage hike that would cause my country to invest in driverless trains.

You seem to be arguing that raising wages requires lower profits. I take the opposing point of view that lowering potential profits requires (read: causes) less demand for employment in the aggregate.

(Unsurprisingly, I'm against minimum wage laws). An investor or entrepreneur is going to look at the potential profit vs risk of his new venture or indeed even against hiring his next employee. If the market-clearing wage for a position is 10 units and legislation forces that to 20 units, it's reasonable to conclude that some ventures will never get started and that others will employ fewer people, will employ them for less than a full workweek, or will contract for them in such a way as to make the minimum wage law someone else's problem (maybe using off-shore labor for remotable work, maybe by contracting with a company with few enough employees [perhaps zero non-founders] that minimum wage doesn't apply).

Let's say I own a hotel and I'm trying to decide whether to have someone at the front desk taking check-ins and providing customer service 24 hours a day, or only 12 hours[0]. I will have to hire at least two people (full-time) or more (part-time) to accomplish this.

I will only do this if the increase in business resulting from more flexible check-in times and better customer service will exceed the cost of hiring two more full-time employees. If a minimum wage is high enough that hiring these two people isn't profitable, I'll just stick to the restricted hours. Instead of being underpaid, the two people I would have hired are unemployed. Is that better?

Of course, if I'm successful enough, I might be able to hire more people by reducing my own income or deferring other ways that I might re-invest in the business, but why would I do that if I'm running a business, not a charity? Any analysis of a specific minimum wage must consider the effect on unemployment. It's probably possible to calculate with a fair degree of precision - would someone with a background in economics like to chime in on this?

[0] In the US, hotels without 24-hour check-in are rare; in Europe, they're common.

Not having 24-hour check-in is probably the most efficient way to run things, depending on your location. What you're saying here is that employers may decide that feeding, clothing, housing, entertaining, and educating an entire human being is not worth it if you're then going to sit that person behind a check in desk overnight at a hotel in order to check a couple of late guests.

That's probably a wise decision for most hotels. The only reason that they're not having to face it now is because the taxpayer is supplementing that wage with welfare payments. This discriminates against less labor intensive businesses, which don't get subsidy, and devalues investment in automation.

People who can't find work that supports them should be on a basic income, and/or their labor should be used by the state. A basic income could also be a lever for direct stimulus to the economy during a demand crisis.

Without getting in to the merits of a basic income, the fact is Switzerland does not currently have one. Creating a high minimum wage without adding one would likely result in a large increase in unemployment.

One thought experiment I encourage everyone to try, even for a day, is to look at things you buy as a product of your locale's minimum wage.

For example in the UK a lunchtime coffee is about 25 minutes 'worth' of min wage. A one-hour flying lesson is 25 minimum-wage-hours.

Even a can of humble baked beans in sauce is five minimum-wage0minutes.

It is very humbling.

I do this! Very good exercise for deciding if things are worth it.

What basket of goods/services defines a "normal/decent life"? And what goods/services in the aforementioned basket do you believe people in the west are lacking?

> When you work at least 8 hrs/day, 5 days/week (because somebody wants your product/service), you should be able to have a normal/decent life.

This is a fantasy. Imagine if I decide to become a human calculator, and that my job is going to be solving algebra problems. People will mail me simple problems (5+7) and I'll mail them back a solution.

You might say "thats ridiculous! We have computers that can do that much more efficiently". Can I then argue "well, I work 8 hours a day! therefore I deserve a living wage"?.

You're missing the part where they said "because somebody wants your ... service". No one would want your service, so why should you get a living wage for doing it? I still disagree with GP, however. If someone wants your service more than they want to keep a minimum wage worth of money, you could negotiate for that. The fact that so many people do not or cannot is proof that raising the minimum wage is at best an extremely short term solution, and we'll just have to keep raising it forever and ever to keep up with inflation. It doesn't magically start getting people what armchair politicians think people deserve.

Raising the minimum wage doesn't push up inflation like that.

But why $25/hr? A 50 hour work week would bring in $62,000 a year. A married couple working "minimum wage" jobs would make over $120,000 a year. That's crazy. The "minimum wage" would put a couple in the top 10% of American household earners.

Working backwards from a stated goal that a hard working Amarican married couple should be "middle class", and should make a middle class income of $60,000 (about what people consider middle class), working 50 hours a week equates to a minimum wage of $12/hr.

(Given, my equation breaks down when considering unmarried parents, but it's a quick way to discuss what is the "ideal" minimum wage. If you work, you're middle class - if you choose not to work, that naturally results in lower income)

Why would you calculate on a 50 hour work week? That's ~10 too much.

The common Swiss work week is 42 hours.

So it's "only" a 8 hours difference.

42 paid hours?

Yes, although if you work full-time, you are usually not paid by the hour, but have a fixed salary.

Too much by whose definition? What's wrong with the notion of "work hard and get a middle class life". The notion of "work the bare minimum and get an upper middle class life" won't have the same result.

By European definition.

Doesn't most of Europe lag the world in economic growth?

So? They still work around 40 hours a week, and not 50.

High taxes, high social welfare and a stagnant economy are recipes for disaster - see Greece, Italy, Portugal....

The point was that your calculations were off since you were basing them on a 50 hour work week when in reality the average is around 40 hours. Not how to run an economy.

The calculation also assumes working 50 (actually, 49.6) weeks per year. Swiss employees, however, have more holiday time than the US. $25/hour * 40 hours/week * 47 weeks = $47,000 .

Don't assume cost of life in US and Switzerland are identical (unless you live in the bay area they are not).

To be more realistic figures for Switzerland, we might use these figures for full-time employment:

$25/h pay

42 hours/week typical working hours

45 weeks/year typical working days

That gives us a figure of $47,250/person, or just under $95k for a household with two full-time earners.

In the US, that would be a little under the midpoint of household incomes, i.e., more households do earn more than that. [This is wrong. See edit below.]

Remembering that Switzerland has relatively low income inequality, relatively high cost of living, and relatively high salaries (typically 2-3x what the same job would earn in most of Europe), the proposed figure doesn't look crazy from here.

Edit: The first source I found turned out to be completely wrong about US income levels. Thanks to 'bluedevil2k for pointing this out. Checking multiple other sources, the median individual income is reported as around $27k, though it's not immediately clear whether the various alternative stats I found were calculated only for full-time employees or also included the unemployed, part-time staff, pensioners, and the like, all of which would presumably tend to bring the figure down.

On reflection, for this discussion the mean individual income, including all income types, is probably more interesting. That is a little over $40k in the US, or about $81k for a household with two full-time earners, if it could be translated directly into wages. Given the differences in cost of living and typical salary levels for Switzerland, and the wide variations in salary depending on which part of the US you're looking at, I'm not sure this would change my overall conclusion that the proposed minimum wage in Switzerland isn't completely crazy on direct affordability grounds, though clearly it looks more optimistic in light of the adjusted figures.

"In the US, that would be a little under the midpoint of household incomes" -- that's not true at all. The median household income in the US in 2012 was $51,371 (www.census.gov/prod/2013pubs/acsbr12-02.pdf). That's WELL below $97k. $97k would put you about the 70th percentile.

Thanks. The first source I found (without much more than a quick search, I admit) turned out to be way off what everyone else seems to say. I've edited my original post accordingly.

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