The US Minimum Wage

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08 Sep 2014, 3:19 pm

Pew Research just released a short report (actually, they updated a previous report) showing the development in the US minimum wage since 1938:

Furthermore, Pew provided a breakdown of the occupational categories where minimum (or below-minimum) wage workers are found:

Sources:
http://www.pewresearch.org/fact-tank/20 ... imum-wage/
http://www.bls.gov/cps/minwage2013.pdf (see page 16-17 for methodology)

As evident, minimum-wage workers are mostly found in the food, serving and sales occupations. And - as equally evident - the real federal minimum wage in the US is more or less at the same level today as 50 years ago.

Furthermore, It should be noted that the share of the workforce being paid the minimum wage has been declining (see page 13 in the second link above):

- In 1979 (the earliest year in the BLS data record) the minimum wage was paid to 13.4 percent of hourly paid workers
- The ratio being paid the minimum wage gradually declined and reached the lowest point of 2.2 percent in 2006
- The ratio increased again (likely due to the financial crisis) up to 6.0 percent in 2010
- It has dropped again and reached 4.3 percent in 2013

Anyway, I made the following post back in February. Although the Pew study above uses more recent data, I believe the observations I made about the effect of minimum wage laws are still valid:
http://www.wrongplanet.net/postp5901194.html#5901194

Please discuss.

Humanaut
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08 Sep 2014, 3:29 pm

1024
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08 Sep 2014, 11:19 pm

The classical argument against minimum wage goes like if you earn significantly below the (newly introduced) minimum wage, and you can't get a better paying job, you have a big chance to lose your job with the introduction of the minimum wage, instead of earning more.

In the other thread, you said that according to some large studies the minimum wage has little or no negative effect on employment. But does it have a positive effect on wages? Isn't there a lack of negative effect because most people on minimum wage would earn the same, or almost the same, even without the law? Or was there a significant number of people whose wage was boosted by the minimum wage increase studied by those articles?

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The_Walrus
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09 Sep 2014, 4:43 am

Humanaut wrote:

Minimum wage in terms of gold

Given that gold is not a necessity, that seems a strange metric to use. It is irrelevant how much gold you can buy with your money, what matters is how much of the stuff you actually need you can afford.

Last edited by The_Walrus on 09 Sep 2014, 5:04 am, edited 1 time in total.

zer0netgain
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09 Sep 2014, 4:49 am

1024 wrote:

Both apply.

Higher minimum wages will cause employers to expect more from people they hire...because they will not hire as many people.

As jobs are consolidated, you might get cut or you might be kept but expected to work harder.

As everyone I know will agree, if you raise the minimum wage too much, hiring someone to be a pair of "helping hands" in the office becomes impossible to approve. Some tasks are too menial to justify a big paycheck, but you do need the extra help from time to time.

Just remember, when there is a job crisis, everyone is put on notice that if they can't meet production quotas, the company can find someone else who will try harder.

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09 Sep 2014, 5:03 am

The_Walrus wrote:

Given that gold is not a necessity, that seems a strange metric to use.

Compared to what? What standard of measurement do you recommend?

The_Walrus
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09 Sep 2014, 5:08 am

Humanaut wrote:

The_Walrus wrote:

Given that gold is not a necessity, that seems a strange metric to use.

Compared to what? What standard of measurement do you recommend?

Something like the Retail Price Index. Compare price inflation with wage inflation and you can see the real-terms change in wages.

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09 Sep 2014, 5:38 am

The_Walrus wrote:

Compare price inflation with wage inflation and you can see the real-terms change in wages.

That's just a relative comparison of nominal values.

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09 Sep 2014, 5:46 am

Humanaut wrote:

The_Walrus wrote:

Compare price inflation with wage inflation and you can see the real-terms change in wages.

That's just a relative comparison of nominal values.

Nothing has an absolute value. Why would you pick gold, and not silver? If you picked silver you would get a different (but somewhat similar) graph. If you picked oil you'd get a different graph again.
Maybe measure the US min wage against a basket of other currencies? Still, for the people getting the min wage what they would care most about is how their wage compares to the value of stuff they actually buy or want to buy.

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09 Sep 2014, 5:46 am

Humanaut wrote:

The_Walrus wrote:

Compare price inflation with wage inflation and you can see the real-terms change in wages.

That's just a relative comparison of nominal values.

Assuming we are not talking at cross purposes (by "price inflation" I mean the RPI (or equivalent), by "wage inflation" I mean "the increase in wages" - if wage growth outstrips price growth then you've got an increase in disposable income), then frankly I don't think it matters whether comparisons are relative or absolute. Wages are only relevant relative to costs, and costs relative to wages.

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09 Sep 2014, 6:08 am

trollcatman wrote:

Why would you pick gold, and not silver?

Silver can be used too, but gold has traditionally been preferred due to its superior properties.

http://www.npr.org/blogs/money/2011/02/ ... insteinium

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09 Sep 2014, 8:19 am

Humanaut wrote:

trollcatman wrote:

Why would you pick gold, and not silver?

Silver can be used too, but gold has traditionally been preferred due to its superior properties.

http://www.npr.org/blogs/money/2011/02/ ... insteinium

The arguments in that article are not really of an economic kind. Why should we value gold? It doesn't have much use apart from decoration or in electronics.
The first "money" wasn't metal. The Babylonians and Egyptians used letters of credit: clay tablets with numbers on them. The numbers represented the amount of grain or beer or whatever you owned, stuff that is actually useful. Clay is not rare. These clay tablets are more or less fiat currency, like what we have now. I don't see why should measure things in gold, if anything we should measure wages against the stuff people actually buy, like food and energy.

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09 Sep 2014, 11:07 am

trollcatman wrote:

...we should measure wages against the stuff people actually buy, like food and energy.

The problem with this method is that only relative fluctuations are measured.

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09 Sep 2014, 11:11 am

Humanaut wrote:

trollcatman wrote:

...we should measure wages against the stuff people actually buy, like food and energy.

The problem with this method is that only relative fluctuations are measured.

The value of something is always relative to the value of something else. I think the price of food and the other common goods we buy is probably more stable than gold. Gold has gone up in value so much over the last 6 years: if you measure the value of ANYTHING in gold you would come to think it has gone down. What you are really measuring is a gold bubble.

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09 Sep 2014, 11:23 am

trollcatman wrote:

Gold has gone up in value so much over the last 6 years...

Compared to what monetary standard?

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09 Sep 2014, 11:29 am

Humanaut wrote:

trollcatman wrote:

Gold has gone up in value so much over the last 6 years...

Compared to what monetary standard?

Gold has gone up in dollars and in euros, I don't think there is any currency that has increased in value more than gold. Gold has also gone up against most commodities I think.
This is the main thing gold does not have that would make it suitable for use as currency: a stable value. A currency that doubles or halves in value in a matter of years will ruin an economy. Seriously, onions would be a better currency than gold.

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