>From sci.econ.research
On Mar 13 2006, 1:58 am, "baskinmyglory" <baskinmygl...@[EMAIL PROTECTED]
>
wrote:
> Hello,
>
> I have heard from numerous sources that the minimum wage
> actually hurts poor workers the most. I was wondering if anyone could
> comment on this with actual information. Thank you.
The arguments are familiar (particularly those posed later in the
thread), and one can be excused from thinking that the split in
opinion is little more than paritsanism barely disguised.
To address the issue more objectively, one has to go back to basics as
well as addressing the question of what actually constitutes
employment (as opposed to slavery or share-cropping, for instance).
Using the wrong definition or inappropriate definition, one can easily
say that Germany in the 1930's or 1940's had near 100% employment and
then proceed to argue that we should all be like Germany was. But then
the question is: was that actually a good thing?!
Of course, an object lesson in this is that you can't do economics
without value judgements. It's not a pure science, Nobel
notwithstanding.
The mechanics are simply, conceptually:
There is a market underlying wage-based labor. The employer buys a
time and labor committment from the employee.
However, nobody who lives outside a cave, however (apologies to the
Geico cavemen), will seriously argue that this is a balanced or free
market.
One of the key criteria you need for a free market is freedom of entry
and exit. "Freedom", though relative as a term, in this context means
that you should be free to do (or not do) something without serious
en***brance to your life or livelihood. Though it is true in theory
one can start their own business, the facts on the ground make the
reality clear; e.g. 1/2 of all small businesses fail in their first
year; never mind what subsistence-level "self-employment" actually
involves -- a common term, in fact, for small-time subsistence
contract-based labor is "whore". There is no viable alternative to
being caught up in the wage-labor market for most people; particularly
when one is facing a serious crunch.
There is therefore no freedom of exit.
The general term for the resulting condition is a "monopsony" -- a
buyer's market or (more appropriately) a captive market. Any time you
have a market where one segment has something critical at stake (e.g.
imminent death as in a heart attack, shelter, food, making a living),
this is ripe ground for monopsonies or monopolies to breed in.
Invariably, you find that costs or pricing tends to go completely out
of kilter in each case: the major swings in the housing market, the
sky-high raise in health care, particularly in the US with its
"insurance-ization".
You only need to look at the "Career" columns in your typical paper or
talk to job placement specialists for a brief while before it becomes
clear that the entire frame of mind of what proceeds from their advice/
conversation/observations is premised on one basic fact: the Employer
calls the shots and you'd better please them.
One clear way to see this (at least in the US) is the simple
observation: they don't come to your place to work with you (not even
with the virtual obsolence of the office by telecommuting, and the
rise of energy costs making it silly to want eveyrone to waste time
and energy in the unproductive work of travel) -- you go to *their*
place to work.
It's rare that you get a reprieve from the general condition. The time
around the late 1990's stands out prominently (in the US). There was a
brief time where all you had to do was practically show up and say
"here I am!" and get in reply "how about coming to work for us for
$50,000 ($10,000 more than you asked for?)" But that rarely happens.
The more general situation is that it is a buyer-controlled market
because of the asymmetry in the stakes issue. Though a business may
thrive or fail on its ability to recruit staff, its gains and losses
are spread over many hiring decisions. You can go a while without a
small number of personnel, and normally expect to. However, the
situation is entirely opposite for the individual: unless you've come
equipped with a bunch of money at the outset, you can't go without a
job for any period -- without precipitous consequence.
The "exit" condition for this market, in fact, is just that: the
ability to entirely leave the wage-employment field without
deleterious consequence. The disadvantage latent in the lack of
symmetry also affects negotiation power, which further erodes the
sellers' side of the market.
It comes down to the question of who's the big hulking giant with
infinite resources (or something 10% short of infinity) vs. who's the
gnat. In some ways this is analogous to the Gambler's Ruin problem in
probability theory. Though it's not well-known, you can actually stack
a game in your favor (e.g. card-counting, roulette wheel scam) and
STILL have a greater likelihood of losing in the long run! If the
casino starts out with resources several orders of magnitude beyond
yours, a biased random walk won't do you any good. You'll still be the
one to hit the wall first. (That's why good card counters have
"backers").
Notwithstanding what the more conservative elements may suggest (those
that tend to be biased toward the absence of a minimum wage), you need
a prop to counterbalance the asymmetry in this or any other monopsony.
Without the leveraging power, your negotiations are compromised
(unless you bluff, like in a good poker game, and go "all out"
pretending to have all the cards).
It's not a free market. Therefore the absence of a prop will hurt
workers -- the pain and degredation of enduring "employment" in a sub-
minimum wage job is worse than having no job at all, and worse even
than starving. I speak from experience when I say that.
Like the example of Germany, the question of whether there's greater
"employment" is seen to be misleading (and even disingenuous).
Unemployment is better than employment below a certain level of
(non-)subsistence -- because at least you still have your time to
yourself.
But very few people have the courage or ability to make that choice if
it should ever come to that last resort. Conseqently, one needs a
minimum wage and arguments concerning "greater employment" are seen to
be completely the opposite with "greater employment" (in this context)
a liability rather than an asset: arguments for, not against.
The monospony is the insiduous bane of the Libertarianism, though the
American strain of the philosophy has gone the complete opposite way
on this. It is a violation of the Libertarian creed even for the
"velvet force" against lndividual liberty of uneven negotiations in a
captive market.
What should be most prominently noted beneath the heat of the partisan
rhetoric barely disguised as economics "empirical studies" (where, as
mentioned above, the wrong definitions of what's actually good vs.
what's not seem to invariably find their ways into the arguments and
conclusions) -- the *actual* minimum wage in the US, accounting for
the cost of living, has dropped like a rock over the past several
decades.
Unlike just about everything else the US government doles out,
regulates or supervises over, this has no cost of living adjustment.
The absence of such, and the absence of any notice of this rather
large elephant sitting in the room (pun intended) speaks plenty and
drowns out the studies and papers into irrelevance or evasion -- on
both sides of the issue, in fact.
It also serves as a clear-cut refutation of any argument that pur****ts
to derive ill-effect from any raise in the minimum wage (regardless of
how "ill" is defined) that does not even so much as meet the COLA
equivalent of what it had once been. If such increase were, itself, of
negative consequence, then its mere presence in the former time would
have seen those very negative consequences. None were seen when the
COLA equivalent was higher than what's being proposed for a raise,
none therefore exist. Period. "Empirical studies" notwithstanding.
It's time to address the Elephant in the room and completely remove it.
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