Minimum wage doesn’t have much effect on those making less than minimum wage

Some economists believe increases in the minimum wage will have ‘little or no effect on employment.’

That’s possible. People who aren’t productive enough to make minimum wage will still be able to find sub-minimum wage work and those people won’t show up in unemployment statistics since they are not looking for a job.

Some sub-minimum wage jobs are legal. If you are self-employed, you don’t have to make minimum wage. A buddy of mine once owned a used car lot. While he was a staunch advocate of a minimum wage, his sales people were ‘self-employed’, so he wouldn’t have to pay them the minimum wage if they didn’t sell cars.

Also, unpaid internships and grad students often make less than minimum wage.

Some sub-minimum wage jobs aren’t legal. Many drugs are illegal, but somehow they are readily available everywhere.

So, in other words, while economists use the argument that a minimum wage hike will have ‘little or no effect on employment,’ they don’t come right out and that’s because those who ignore it already will continue to do so, as drugs will continue to be sold.

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22 thoughts on “Minimum wage doesn’t have much effect on those making less than minimum wage

  1. It is a danger that those who do not pay a minimum wage will be able to continue, if the State does not sanction them. Those who ignore the quality and value of the work done for them by people will perhaps try to use them for their own benefit. But local instances, labour controllers, should control wrong activities and police forces should also continue to do so, as rack-renters shall keep trying to make profits on the poor and drugs will continue to be sold.

    • Marcus, after reading your comment and blog post, I have a few questions for you.

      1) If I am a low-productivity employee with limited skills and few prospects, do you think I would be more hopeful or more frightened by calls to raise the minimum wage?

      2) If the minimum wage becomes 10:10 and my productive value is less than that, would I have any options to pursue other jobs or would I become a wage-slave to my employer in hopes that he won’t fire me?

      3) If technological advancements make it cheaper for my employer to automate my job than to retain me, what incentive does my employer have to keep me? If he fires me, he makes more money!

      4) Once I lose my job, what are my prospects? How do I learn the skills and gain the experience necessary to get, keep, and advance in a job? How do I earn my way in the world, progress out of poverty, or raise a family once I have been priced out of the job market?

      5) Now that my only option for survival is welfare and I’ve been forced against my will to become a dependent on the generosity of the government, what are the barriers (and there are many both economic and governmental) that prevent me from changing my status from “freeloader” to independent member of society?

      6) Finally, an easy one: Which raises people out of poverty, government hand-outs or their own individual efforts that enable them to earn their way out?

      The above hypothetical applies to a great many people both currently employed and searching for a job. Why is it that their plight has been completely dismissed in these discussions?

      • I shall start with points 3 + 4:
        it is true one could think people could be pushed more in poverty because they could be priced out of the job market and be exchanged by automatisation. Though mostly the jobs which are not paid enough are those which have to do with services, cleaning toilets, filling the racks in the supermarket, sitting at the counter in the supermarket.
        In Belgium in lots of supermarkets, I do confess, you do not need to go any-more by the cashier. You just scan the products while you put them in your basket or trolley, at the end you put your MasterCard in the machine and everything is paid for without having the cue to have your shopping to be scanned and paid for at the till. But there still be a need to put all the products on the shelves, and that can not be done by machines. Several low paid jobs can not be exchanged or done by machines.

        Getting to learn the skills and gaining the experience necessary to get, keep, and advance in a job is where our society has to invest.

        Everybody his or her job should be respected by all in the community. So from the ‘smallest’, less interesting job, toilet ladies, garbage collectors, waitresses, to child-carers, teachers, nurses (to name just a few not respected and badly paid jobs) all are necessary and should be valued as such. All people working in the service sector should be able to earn their way in the world, progress out of poverty, or raise a family. Once they have been priced out of the job market, they should fall into schemes to have re-education. It should be made possible by the government that they can learn a new trade when their job is not required any more in the system. the world progresses so fast that many jobs become redundant, because the products are not made any more or have no value in our economy any more. This calls for a change and the people do have to change with.

        Either they have to move to places where still such workers are needed or have to change coarse.

        In several jobs it is quite normal to change direction more than once.
        – I myself had to face a turning point more than once in life. As a dancer I was limited by the physical possibilities by ageing. As a topsporter a dancer mostly has to face an end of his dancing career around 30. Then I had to concentrate more on the creative site and became a choreographer. But to make a living I also had to take on other aspects in the theatre business, so I had to go back to college to become a choreologist and a (theatrical) dance teacher and history teacher. Just our of interest I also followed psychology at the university. All that studying had to take place whilst I had to support myself and my family. I do agree that did not make life easy. But it is part of life and evolution. After choreographing for some years and being an artistic director of a company, such things also came to an end I had to concentrate on the teaching (because working about 56 hours per week, only having two weeks free a year, I did want to have more time for my family.) –

        We have to move on and be aware of the changing trends and job-opportunities.
        – When at a certain age I got to hear a younger girl was much more cheaper than I, and I was “overqualified” to do an other job I was made redundant. 16 days after I was put on retirement I had signed an other contract for something totally different job than I had ever done. So I had to study again to become a security officer. –

        The will to learn and the availability of study opportunities will be very important. I do believe the state has an important role to play in that. They should provide possibilities for those who want to work. Those who lose a job and have no prospects should be made able to study a new job, whilst they are paid a minimum wage.
        But the backbone should already have been created before working age. From 4.5 unto 16 à 18 years old children should get a general formation, so that they will have a base for different orientations. From 16 to 24 more direction should be given to specified fields.
        Specific requirements studies, like ballet and theaterbusniness should be exempt, providing professional training from 6 to 18 specifically on the subject. The specific training will create hardworking people who will be able to study other things when time shall be there, and jobchange would be required.

        Point 2:
        When a person his productive value is less than 10:10 there is a problem of productivity and it is time to look at the matter weighing all consequences and checking if the person would not better have better options to pursue other jobs. It is no use to keep a job in the market when there is no place for it any more. Today, for example we do not need so many people any-more who make gas-lamps, pick-ups Bakelite or vinyl disk players, compact cassette players (the last ones you cannot even buy any-more). We also do not need coalminers in our country. In the US miners are still used, but in many countries they are too expensive to be ‘rendable’ or productive.

        We always will have to weigh the pro’s and con’s. But the greatest problem is that the high wages, the payments made for CEO’s and other white collar workers are much too high. It is unacceptable that there may be a difference in wages of 300 times or more.

        Back to point 4, adding 5:
        It is true in the proposed system we shall have people depending on a welfare system. That would not have to mean that money is just given like that for nothing in return.
        In Belgium when people get fired they can receive unemployment money which starts of 80% of the original income and reduces after some time to come after a few months to a minimum, which is in many case even higher than some low paid jobs. It is wrong that they can receive such unemployment money at infinitum. It should be reduced in time and I do find they should do something in return for the community or find themselves an other job.

        You might become “been forced against your will to become a dependent on the generosity of the government” but you may not forget you are not obliged to take the money or certainly should not use it in the wrong way. As I said above, something in return should be demanded, like a re-schooling and proof of searching for a new job.

        The society has to build in a safetygap for every body (work and health wise). We know that certain people would misuse the system. But we also should be aware that certain figures of our society are psychological unfit for this society. Those we also do have to take into the welfare system, but should only pay the bare minimum to survive. Though I am convinced they also could be forced to do community work. Streets and communal green and building have to be kept clean. People may consider that bringing in a form of slavery again, but they always would be better of than the slaves we encounter today in many factories and in many countries.

        The general community should take care by giving a communal sense of responsibility, an educated attitude, that can show the the barriers that prevent people from changing their status from “freeloader” to independent member of society.

        Most of it has to do with a change of mentality. Having people respect for others and their work. As well as governments taking care that no disproportions do come into the community.

        – May I give the example of Calvin Klein. He has clothing made in Bagladesh at the firm which collapsed. there the people earn $4 per day and have to work from 6 am to 11 pm, some even from 4 am.
        In Belgium an male’s brief of Calvin Klein was sold in December 2013 for €85 in the supermarket, which means in a private shop for even more. (As retired person I earned €4,65 net per hour whilst a brown bread in the bakeries would cost me €4,42 for a kilo. So I would have to work more than 18 hours just to have a Calvin Klein brief. Naturally I would not buy such an short.) Such proportions are not right.
        – I myself in previous times earned much more as a choreographer, I do agree. I know very well how much fashions shows cost. I also made some which costed millions. But the costs of advertisements and shows do not permit such a difference when the material is made for such a low cost. The gains are all going in the wrong pockets. Those who do the hard work do earn the least, and that is wrong and unacceptable. –

        Governments should look at the proportional rightness of wage differences, and such high differences should not allowed. In Belgium we do have people who earn €3.650.000 a year whilst a big majority has to do it with 18.000. The government is working at getting their semi-governmental institutions CEO’s to work for €650.000 à €850.000 a year, but it does not seem so easy to get it through.

        Coming to point 6:
        Naturally each individual has to try to find ways to survive himself. I am totally convinced we ourselves do have a lot in our hands. We all can find an opportunity to find some work when we are not afraid to do any dirty or less liked job. As I mentioned already above, though I would be considered too old for the jobmarket, but needing some additional income to be able to survive, I did find a job though so many youngsters are on unemployment and say they can not find a job. Problem is that they do not want to work in shifts on irregular hours. Today there is a shortage of workers in many jobs, but also many people put our of their jobs because the factories can go produce for cheaper in other countries. They do forget to compare the quality of work and the extra costs to the environment. The greatest problem of having the workforce to be to expensive is often the taxes put on it by the governments. (In Belgium an employer pays three times more than what the employee get in his hands.)

        It should not be the government hand-outs which gets people out of poverty. We as individual can be strong enough, if we want, to get by our own individual efforts, finding our way out.

        • Marcus,
          I’m going to tackle your long post which means I will jump from topic to topic. I hope that’s ok.

          You said: “But the greatest problem is that the high wages, the payments made for CEO’s … are much too high.”
          Who is in the best position to determine an appropriate rate of pay for the person who sets company strategy that determines whether or not a company is positioned to survive future decades? You? Or the board that actually pays his salary? Since it costs you nothing and them everything, why do you think your opinion is better than theirs?

          I agree with your general point on unemployment/welfare: Those who receive those benefits should work to receive them. And I agree also that the benefit rate should be low enough to entice people back into the regular workforce.

          Regarding Bangladesh: If you went to the factory where people are earning $4/day and fired 10 people, those people would be mad at you for taking away their livelihood and there would be 20 more clamoring for those open jobs.

          You said: “Governments should look at the proportional rightness of wage differences, and such high differences should not allowed.” Why not? If a person produces sufficient value and is able to negotiate a portion of that value returned to him as a wage, what is wrong with that? Kobe Bryant increases attendance at basketball games, why shouldn’t he get a portion of that additional value he generated? Samsung developed products that enhance millions of people’s lives around the world, why shouldn’t the CEO who took great risk developing that strategy be compensated for making so many people’s lives better?

          Finally: “It should not be the government hand-outs which gets people out of poverty. We as individual can be strong enough, if we want, to get by our own individual efforts, finding our way out.”
          Great Conclusion. I would say that government is incapable of getting anyone out of poverty — the only one who has that power is the individual himself. The problem is, government handouts tend to reduce individual confidence and drive, trapping people in poverty. There was a TV show in the US that gave a homeless man $250,000 and followed him to see what would happen. Within 3 months he was broke again and was angry at the show for “ruining” his life.

          Now if he had earned that money the story would be the opposite.

      • Paying less than the minimum wage is exploitation, taking advantage of the bad position a person might encounter. It undermines the survival opportunities of those who respect their labourers and give them good wages. It distorts a normal market and undermines normal competition. It can create a cut throat or fierce competition in a region, making away with the honest employer and creating a vacuum where the dishonest player on the market has the sole right to speak, having worked away all possible competitors. Once he has the monopoly he can charge whatever he wants for his products and consumers are worse off.

        • Exploitation is forcing people to earn ZERO if they can’t produce value above your arbitrary minimum.

          Taking the opportunity for ANY wage away from low-skilled workers undermines their survival opportunities.

          Applying a price floor to any commodity, including labor, is what distorts a normal market.

          Monopolies cannot survive in a free market unless they are protected by government enforcement.

        • Marcus — Do you think employers pay good wages because they are kind and fair or do you think they do so because it is worth it?

          The vast majority of workers make well above minimum wage anyway w/o a gov’t mandate, why do you think that is?

          Why don’t more employers pay the minimum wage, instead of more, so they can have low prices and gain the monopoly advantage that you mention?

          Do you always buy the lowest priced products? If not, why? Do you think it might be the same reason employers don’t always hire the people willing to work for the least amount of money?

        • Marcus,
          I’m sorry, but I think your entire post is based on false premises. You use the word “market” in a way that seems to be the exact opposite of what a market is. Fundamentally, a market is purely mutually agreed upon exchange — you like my hat, I like your lemonade, we trade if we each agree that the other product is more valuable. As soon as one person backs out of the deal, there is no market.

          If someone were to come along and mandate that hats cannot be exchanged in trade for anything less than a car, it restricts a wide range of deals that can be made: THAT is a market distortion.

          Now, if you’re a hat dealer selling hats for $50 each and I find a way to sell hats for $25, you won’t like that very much. It will force you to either become more efficient (cut costs), differentiate (sell nicer hats), or provide other value to customers if you want them to continue coming to your store. This is better for customers — they get cheaper hats, better hats, better service, etc. It is also better for you — it pushes you to become a better hat merchant or get out of the business because you are not good enough for it.

          I’d like to go further in depth with your larger post later; running short on time right now. Thanks for sharing some of your personal experience and for the civil discussion. Take care.
          Adam

    • Marcus,
      In your first comment you wrote: “Those who ignore the quality and value of the work done for them by people will perhaps try to use them for their own benefit.”

      If I’m producing more value for my employer than my compensation reflects, my choices include: 1) tolerate the misalignment, 2) negotiate a raise with my employer, or 3) seek employment with a different company. Each choice has costs and benefits, each one carries risk, and ultimately I have to live with the choice I make.

      How does it benefit me if an uninvolved person/organization makes the choice for me based on his ideas of what’s best for me? That sounds like parental control, something I freed myself from 20+ years ago.

  2. Pingback: Call to raise the wage | Marcus' s Space

  3. Seth and Adam – I applaud your efforts, but I think your efforts to persuade Komrade Ampe are futile. It’s probably better to simply clarify your position and let him consider it. Most Belgians have been steeply indoctrinated in Marxism from birth and refuse to consider anything else.

  4. I thank all for the very good answers. To Mike I would like to say we are not indoctrinated with Marxism, though I do agree my personal choice is not the way capitalism is going to now.

    • Marcus – I didn’t necessarily mean that as an insult, but rather to clarify your views on the subject which, while you may not like the label, are Marxist. I agree with Adam that you seem to confuse the way Western economies operate today with free market capitalism. The “problems” of these economies today is not that the markets are too free or too capitalistic, but that they have slowly drifted towards socialism (in its various forms) with too much government intervention rather than too little.

      To be fair, it’s not just the Belgians who are steeped in Marxism, but a significant part of Europe. It’s ironic that during Marx’s stay in Belgium, he was not allowed to publish papers regarding his political philosophy. Now the Begians embrace his philosophy – even if they don’t recognize that their beliefs coincide with those of Marx!

      • Socialism in the previous years has been much stronger in Belgium than now. The socialsists are loosing much ground in this region where the right wing parties like the Flemish National Partie NVA (National Flemish alliance) and VB (Flemish concerns, previously Flemish Bloc) the last decennial have gained lots of sympathisers.
        The PvdA or Party of the Labour or Communist Party has always been a very tiny party, only sympatised by the underdogs and perhaps people like me who wanted a counter reaction to the Establishement.

        :-* I could consider myself belonging to the defunct Utopians. But as a follower of Christ, those followers always have been a weird kind of people, not liked by many and having a lot of cross winds. 8-|
        So by the years I tried to get wide shoulders, though as an emo person my skin has not yet grown strong enough. 😉

        ({) Always open for good debate, loving to have people think about the matters which concern our world we are living in.

        • Marcus — Thanks for the contributions. I appreciate your willingness to discuss w/o strawmen, red herrings and ad hominems. You’re always welcome here.

          Seth

        • Marcus – In the US, the term “liberal” carries a negative connotation from many. Indeed, the US is often considered – in polls that simply ask whether one is conservative, moderate or liberal – a center right nation. Yet, if people are asked about core tenants of what they believe, it’s apparent that we are further left that we like to admit.

          Now, how does this relate to Europe. IMHO, socialism, etc. has a negative connotation for many and while many Europeans are socialists in their actual beliefs, most refuse to label themselves as such. It’s my premise that if Europeans read Marx’ “CAPITAL”, without knowing the title or author, many would agree with it.

          If you haven’t, I would encourage you to do so. However, I would also suggest that you read a pro free market book afterwards and see which (a) makes more sense, and (b) as a Christian, which is truly more moral. One suggestion that comes to mind is either Milton Friedman’s “Free To Choose” or “Capitalism and Freedom”. For your convenience, the former is also available as a TV documentary. I’ve attached links for both the original series:

          http://www.freetochoose.tv/broadcast.php?series=ftc80

          and the updated series:

          http://www.freetochoose.tv/broadcast.php?series=ftc90

          While I don’t agree with everything Dr. Friedman says, he was one of the greatest expositors of free market capitalism.

          To address more specifically the issue of why capitalism is more moral than the alternatives, I would suggest Steve Forbes’ “Freedom Manifesto” or Father Robert Sirico’s “Defending the Free Market”

          • Years ago I have read (more than once and in different langauages) “Das Capital” by Marx. I consider myself an Utopist so I do admit many ideas would be similar or could find my approval, though there are also many points where I would not agree with. It is like every worldly system has some good and bad points.
            Marxism and communism never shall succeed (on its own) because of the egoism of people and when there is no incentive given to the people who do better their best or contribute more, the system would not work. We need differentness in payment and clear righteous rewards. The only thing is that we should look for ways to have a good recompense for what people do. I also do believe we are all part of the community so should take care for that community. Living on it as a parasite should be not allowed but also being recognised as a unbefitting and a-social attitude.

            When you look at the Nazarene Jeshua (Jesus Christ), he was a Marxist or communist avant la lettre. I strongly believe more people should come to take the same attitude as this rabbi or Jewish master-teacher. Christians should spread his message and should try that more people would come to live according to the Messiah his teachings.

          • Thanks Mike for the links. It are many video’s to see, but I would take some time to see what they have to say. It would not be bad to have a short review on them.

          • MARCUS – Sorry this appears out of order, but it’s in reply to you last two posts. I think we all agree that there should be a way that compensates people “accurately” or “fairly” for what they do. The difference between true free market capitalism and socialism (in its various forms) is WHO gets to make that decision.

            In capitalism, we acknowledge that we are all human and subject to the inherent problem that we act in our own self interest. As Adam Smith pointed out, the free market composed of all individuals solves this problem. When we all know that everyone else is acting in his own self interest, we keep that in mind, but we also realize that when we do what’s best (in terms of providing goods and services) for the other guy, that is in our own self interest as well. In sum, capitalism does not depend on some righteous human acting in non-human ways and with non-human prescience.

            On the other hand, socialism – or the masses who allow themselves to be subject to rule by socialist leaders – hypothesizes a righteous leader acting in unnatural ways with a perfect knowledge of what is “fair” for everyone. Can you tell me who that individual is?

            While some complain that capitalism results in wealth inequality, a look at socialist countries reveals even grosser disparities in wealth and income – and these are usually not arrived at by merits, but by force. The problem in the US is not capitalism, but rather government interventions and cronyism – both of which true free market capitalists abhor. It’s similar to Christ and Christians. In the same manner that we can’t blame Christ for the way many Christians practice Christianity, we can’t say that capitalism is bad simply because some “capitalist” governments are really pseudo capitalist.

          • To borrow from Don Beaudeaux, “the miracle assumed by the socialist/leftist is that government will act (1) apolitically, (2) without any of the human imperfections, myopia, and psychological quirks that (are assumed to) give rise to the market imperfections that allegedly justify government intervention, and (3) with more information and wisdom than is discovered and used in markets.”

          • Hi Marcus –

            I disagree with your assertion that Jesus advocated Marxism (or any other form of socialism). There are HUGE philosophical differences between advocating that individuals have mercy for others and advocating that governments force people (ultimately with the threat of Moa’s “barrel of a gun”) to act in certain ways (despite what may or may not be in their hearts) and huge practical differences between Jesus as a ruler and humans as rulers. Humans are far from perfect and their nature is not to be charitable and merciful towards their fellow man – that’s why Christ came to earth. In theory, socialism sounds noble and Christian – everyone puts in an equal effort and we all split the pie equally at the end.

            In practice, socialism distorts incentives with the result that people DON’T put in an equal effort. But you can bet your bottom dollar they the government leaders fill their pockets. Look at the nations that have instituted full blown socialism/Marxism/communism – Russia, Cuba, Venezuela, Red China, etc. – the masses live in abject poverty and have little incentive to work (“they pretend to pay us and we pretend to work”) while the government leaders live lives of luxury simply because they control the armies.

            Now, I find it puzzling that simultaneously label yourself a Christian and a Utopian. I find these beliefs contradictory. In the US, I’ve observed that leftists (especially those who dismiss religion) have the mindset that things must be made right on earth because there is no God who will ultimately make things right, while people on the right – who tend to be religious – accept that things will never be perfect on earth. Believing that we can make things perfect in this life has implications – if it’s perfect here, what’s the point of heaven? – if it’s perfect here, it must be because sin and human nature have been overcome by men.

            If you allow me to make some assumptions and crude analysis:

            Even though your initial posts contained the usual Marxist stuff about “exploitation” etc., several of your more recent comments about people getting rewarded for differences in work and not getting incentives to be parasites on society are really quite capitalistic. I sense that a big difference between us is that you believe or hope that bigger government can fix this thru more involvement whereas I believe more government “solutions” will almost always lead to more distorted incentives and corruption (politicians and their cronies stuffing their pockets with our tax dollars).

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