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  1. #581

    Join Date
    Mar 2007
    Fairfax, VA
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    Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

    I haven't seen this argument before, it is pretty interesting. Apparently the Council of Economic Advisors floated the idea that the minimum wage might reduce crime, conceivably by improving economic conditions lessening the need for crime. Setting aside just how often that connection has failed to be established historically, it appears that the hypothesis fails because the MW does not, in fact, improve economic conditions. In fact, the opposite is true. The MW worsens economic conditions and increases crime:

    An April 2016 Council of Economic Advisers (CEA) report advocated raising the minimum wage to deter crime. This recommendation rests on the assumption that minimum wage hikes increase the returns to legitimate labor market work while generating minimal adverse employment effects. This study comprehensively assesses the impact of minimum wages on crime using data from the 1998-2016 Uniform Crime Reports (UCR), National Incident-Based Reporting System (NIBRS), and National Longitudinal Study of Youth (NLSY). Our results provide no evidence that minimum wage increases reduce crime. Instead, we find that raising the minimum wage increases property crime arrests among those ages 16-to-24, with an estimated elasticity of 0.2. This result is strongest in counties with over 100,000 residents and persists when we use longitudinal data to isolate workers for whom minimum wages bind. Our estimates suggest that a $15 Federal minimum wage could generate criminal externality costs of nearly $2.4 billion.


    There was a discussion early in the thread related to the majority of the evidence being in the US. This is largely true because the US has more disparate policies (thus we are able to actually do research) than European or Asian nations. However, an interesting finding out of Denmark (though it relies on the same legal factors and similar methodologies to a study I referenced earlier):

    We estimate the impact of youth minimum wages on youth employment by exploiting a large discontinuity in Danish minimum wage rules at age 18, using monthly payroll records for the Danish population. The hourly wage jumps up by 40 percent at the discontinuity. Employment falls by 33 percent and total input of hours decreases by 45 percent, leaving the aggregate wage payment almost unchanged. We show theoretically how the discontinuity may be exploited to evaluate policy changes. The relevant elasticity for evaluating the effect on youth employment of changes in their minimum wage is in the range 0.6-1.1.
    "Suffering lies not with inequality, but with dependence." -Voltaire
    "Fallacies do not cease to be fallacies because they become fashions. -G.K. Chesterton
    Also, if you think I've overlooked your post please shoot me a PM, I'm not intentionally ignoring you.

  2. #582
    Registered User

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    Sep 2009
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    Re: Increasing the Minimum Wage hurts those most vulnerable in our society.

    Quote Originally Posted by Squatch347 View Post
    If your claim is that it is an arbitrary choice though, how do you argue that your, personal choice should be forced on others against their will? And why should it be your personal arbitrary choice and not theirs, or mine, or some random guy from the phonebook?
    Once you accept that that is the principle for your justification, the argument seems to lose all force. It certainly loses it's status as an argument. It now is just an opinion, or a matter of taste. Sharmak thinks it should be X. Ok, great, but that isn't an argument.
    It's not my personal choice - I am just adopting ideas that other people, who have thought about this more than me, have decided is a good idea. Versus academics and corporations who appear to gain by keeping the status quo.

    It's a conclusion that every economy tries and they each come up with their own number after doing their own analysis. And each government, presumably elected by the people, will determine the best choice to make on the matter. Sounds good enough to me.

    Well they make legislation, generally in this context laws refer to how people self-organize. But we don't need to go down that rabbit hole. I'm not sure where you got the idea from my last response that I was surprised that governments pass legislation.

    My response was two fold: a) the use of resources for how we define society is incomplete for how that concept is generally understood and b) that even if we accept that definition, businesses pay back all resources they take in, so the argument that the don't pay back their "fair share" seems to fail. Profit is included in that latter concept. Profit isn't kept, however, in a box buried underground, it is returned to the owners. Who are, by your definition, part of society. Thus all resources taken in by the company are returned via wages, or procurement, or other costs, or profits to the society they operate in.

    So given that, how are they not returning their fair share? 100% would seem to be a pretty good share.
    Ah - but profit is what we're discussing though. Why should the owners take a lion's share of said profits whilst having the government supplement the poor wages they're paying? I don't begrudge owners profiting obviously, but if they do so by taking advantage of their own workers and then the taxpayers (which in some cases, they aren't)?

    Generally, yes that is the case. This is a well known concept within economics and should be relatively intuitive if explained. Automation generally has a cost associated with it, a large initial investment and an on going service and maintenance cost. Likewise, retaining labor has a stream of ongoing costs (wages, training, government compliance costs, etc). If the Net Present Value of the former is lower than the net present value of the latter, a company will invest in automation. IE, if it costs less to buy and maintain a machine to do a job, companies will do it.

    No one really argues that point. The question you are raising is, does minimum wage alter that equilibrium? Given that not all jobs currently capable of being automated are, in fact, automated, we can agree that there is evidence that companies are considering cost and not just moving to automation because its automated. If you were to change one of the calculations above, in this case the cost of labor long term, that would (at the margin) change whether it is profitable to automate, right? That is all I'm pointing out here, that if you raise the costs of labor, some portion of the labor force will be automated where it is profitable to do so.

    For empirical evidence that this does, in fact, happen see below.
    And that's what McDonalds tried to do but it's generally a failure because having people around is still good for business and there are many things to do with the service industry that can't really be automated. That said, automation is a huge win *no matter* the labor cost because it allows many other automation processes such as what Starbucks is doing. So I don't think they're directly correlated in the way that you're suggesting. Plus, the fact that a lot of companies don't even know how to automate should be taken into account.

    This is a relatively easy read detailing some of the evidene with the journalists' predilection to include personal interest stories: https://www.wsj.com/articles/the-emp...035945?tesla=y

    If you are only going to read one paper, read this one. It specifically shows that companies are making cost reducing automation decisions contemporaneously with minimum wage hikes: https://www.nber.org/papers/w19262

    This paper goes more in depth to the causal mechanisms, showning that firms are specifically automating and laying off workers because of the minimum wage increase: http://ftp.iza.org/dp7674.pdf

    This paper shows a similar relationship, but only at the correlation level. I'm really only offering it because one of the authors is of Card and Krueger fame, and it is that author stating an opposing position to the earlier paper: https://www.nber.org/papers/w3997

    A great paper showing that automation specifically hurts teens from economically disadvantaged backgrounds: http://irle.berkeley.edu/files/2011/...Employment.pdf
    I will read them at some point - I don't doubt that those are legitimate reasons for automation, whether driven by MW or not. We're in a modern age where automation is inevitable regardless of MW - it all just makes sense and no doubt many jobs may disappear due to this. But I still don't see this as a reason not to pay a living wage and having the taxpayer foot the rest of the bill.

    The point that I was making above though is that by imposing those rules, you are also imposing unintended consequences. There are no solutions in life, only trade-offs. The government imposing a law to raise the minimum wage has a lot of unintended consequences. In this case, and from the evidence, consequences that outweigh the benefits. So the question is, if we are going to impose ourselves into the decisions made by individuals, are we going to make the world a net better place. It isn't clear at all that that is what is happening, and it isn't a good idea to impose negative consequences on people with the "we'll fix it later" mantra, because the fix also has negative consequences. Unless we can, at least, do a due dilligence on what those consequences are, it isn't the responsible thing to do to impose a policy that hurts those who are the most vulnerable.
    Are they unintended consequences? Or are we learning how to make better legislation? And what decisions aren't made by individuals any way?
    As for doing better due diligence, I would still raise MW and see what loopholes need to get closed rather than try it make a super complicated set of regulations happen in one fell swoop. The latter probably won't get passed - it's more realistic to make changes incrementally.

    Housing is a market like any other. Regardless, the point isn't industry specific. Let's change it to fresh vegetables, something we all agree the poor should still have access to (and by the way the largest single issue when creating the food deserts referenced by the former first lady). Let's say you are a company that provides some kind of obvious good to a community, fresh vegetables. You are currently earning $995K a year. Do you provide that next shipment of fresh vegetalbes? Your cost structure changes a lot in that case, so it likely isn't worth it to send them to that next market and make the additional $5K. Thus the community is (at least) worse off by one grocery store's access to vegetables due to this provision.
    Fresh vegetables aren't that great example either - I think most poor people can't even afford that - it's cheaper to buy canned veges.

    Which we also talked about and which we also showed that you can't absent some kind of soviet style central planning board. Even if you could freeze labor before increasing prices, some companies would be bankrupt (and therefore there would be job loses) and, probably the larger effect, new companies wouldn't start up because labor costs are too expensive. Similarly, existing companies wouldn't expand or create new jobs as often because the costs of doing so were so high.
    That sounds like scaremongering - no-one is asking for communism. No doubt some companies won't make it - no matter what happens there will always be some that won't be able to take on the burden. But in that case, as I've pointed out before, those companies are likely only surviving because of paying low wages and if so then good riddance!

    That's the rub. We can easiliy say "lets stop them from firing" but the actual implementation isn't so clean and has problems of its own.
    Well, so be it - companies that react badly should just be fined. That'll be easy.

    Corporate welfare, or advocating for corporate wellfare? The former is undoubtedly true, but is a red herring to this debate. The latter is untrue here unles you can offer me a quote of me advocating it.

    What is probably more relevant to this point is exactly what I was saying earlier about each intervention leading to more intervention. The reason you are offering here for the government to get involved in wage rates is because the government got involved in corporate profits earlier. It seems an odd argument to say the government is the best solution to fix a problem the government creates. Why not advocate for just stoping the underlying problem created by government?
    That's exactly what would happen - if workers were paid a living wage, then there'd be less of a need of corporate welfare by having a smaller safety net to run. It might not get down to zero but at least those people that are working would no longer need government assistance.

    Why are they not good? How do they not apply?
    Because the workers, the ones being helped, aren't dying.

    I'm not just suggesting it, I've given you the evidence that they do, in fact, cut hours due to an increase in the minimum wage. It isn't a hypothetical.

    You are claiming that we can counter that. You haven't offered any evidence for that, much less any evidence that your solution wouldn't cause larger problems then it was trying to fix a la above.

    That is the fundamental difference between my argument and yours here. I am offering evidence that the effect is happening, you are appealing to an undefined solution with no details or supporting evidence. How would we force companies to not cut hours? Please be specific.
    Well, all you're doing is describing how companies can work around government mandates. I don't have evidence because I haven't seen the next moves possible. It's also possible that this isn't a widespread issue and some companies will pay and not doing anything; maybe if we had a Democratic government, we could punish Amazon via some other means.

    Ok, which would, from the company's point of view be an additional cost right? So why wouldn't the company then lay off that person? Or, specifically, not hire that person? And don't assume companies are evil here, this doesn't require them to be monsters to have a negative impact. If the cost means that the labor no longer is profitable eventually the company will have to fire them or go bankrupt.

    So it isn't clear at all that this, on net, helps the poor.

    Now, of course you will say it is better that those "unproductive" companies don't exist. Setting aside that the use of the term unproductive is meaningless here because the standard you are applying is arbitrary, the fact is, it still doesn't help the poor. They are net worse off, with lower pay, less future job opportunities, and less services and goods in their community. And it lowers the effective tax base (by decreasing profits and income which are taxed) meaning that governments have fewer resources to help the poor with.
    All I can say is that companies that won't pay a living wage shouldn't exist - I don't see anything wrong with that.

    Of course it is because all status quos are necessarily bad. We don't live in a perfect world so, by definition, the status quo is bad (not perfect). The only relevant question is, will a minimum wage increase make the world better or worse than the status quo. The evidence is unambigious that it makes it worse. So why advocate for it?
    Because it is the only thing that can be currently done and we take things from there.


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