How does minimum wage hurt workers? (again) 

"Employers use their power to coerce employees into accepting low pay and poor conditions." No, you need to think more carefully about this: Offering a person an option they may voluntarily take or leave is not coercion. Nor is it aggression. You may not like the offer, but that is irrelevant.

"So, we need to introduce a maximum wage instead?" Radical idea: How about you let go of the idea of using threats of force to limit the way peaceful people may behave altogether?

"I am to understand then that YOUR argument is not premised on "statistics" ?" Correct. My argument is based on the assumption that most employers seek to maximise profit, and on deduction.

"Unions + minimum wage + reforms = exponential economic growth" Correlation=causation fallacy.

"No overall macroeconomic effect of increase in unemployment exists." I have not made any claim to the contrary. Pay closer attention.

"Brazil has established minimum wages and it helped increase the middle class, decreasing the population below the line of poverty." Correlation=causation fallacy

"The assumption is that all on minimum wage are judged by employers to capable only of low productivity." No. See the info box for the summary of the reasoning, notice that no such assumption is necessary.

I would love to see an animation about privitized road options- the BIGGEST question when confronting anarchy.

(1:10-1:18) "he estimates that the sign guy will generate between one or two extra dollars for the restaurant before the sign guy's wages are paid" The restaurant owner's decision to hire the sign guy is based on the present value of the marginal revenue expected from the advertising initiative in the future. If he trusts the worker he may even pay his wage upfront, as this is unlikely to have great influence on his investment decision.

The issue here is that any attempt to collect said evidence would be comparing apples to oranges. The only way to get good data would be to set up two identical locations with identical people, market conditions, etc. This is impossible, therefore comparing unemployment rates in say, Zimbabwe to rates in say, Greece. It's not a controlled experiment (explained in the video) so no data can confirm or refute the hypothesis. That's why central planning doesn't work. Bad data=bad policy decisions

"Anyway, thanks for the video :)" You're welcome, thanks for the comments.

"Jobs do not have fixed pecuniary standards of productivity" The point is that employers do have an expectation about what employees in certain roles will mean for them in terms of revenue. If the expected MRP is less than the wage that can legall be paid, the employee will not (legally) be hired.

Comments relevant to the content of the video are preferred.

That is significantly higher than what we have here in Australia at $15.51/hr. I believe this is one of the highest in the world. Despite this we find that over 70% of the work force earn above MW. MW is normally introduced as a safe guard to ensure employers do not take advantage of the least fortunate people. It is for government to try and guarantee a minimum standard of living.

"Jibberish" What part of it didn't you understand exactly? (If employers didn't expect that having clean floors would ultimately help the companies revenue, they wouldn't hire anyone to do it)

The negative affect may also be something other than unemployment. People working for minimum wage come under increased pressure from managers, because they themselves are under pressure not to lose money. If you are on the margin of profitability, the manager might decide not to fire you and instead become a slave driver. He tries to get you above the level of productivity you would voluntarily have chosen, even if it means less pay.

"suddenly your position becomes "complex" where "correlation is not causation", it's now so subtle, and not so straight forward "you see", there are "some many variables"." If you can point to any specific instance where I seem to have contradicted myself or modified my position without acknowledging that I've done so, I'd be grateful if you could let me know where (use of actual conflicting quotes would be very useful here).

Great job explaining why minimum wage laws can be expected to harm marginal workers so clearly and explicitly.

My original comment was meant to be a bit tongue in cheek. I understand that MW is not designed to increase efficiency. Although inevitably those employers who are able to adapt and improve the efficiency of their business will do better. As an example say there is a factory owner who employs people to make bed sheets by hand. MW is introduced and he cannot afford to pay his work force. The factory owner could replace his workforce with machines and employ skilled labour to maintain them.

If neither hypothesis can be falsified by empirical evidence, how would i distinguish which hypothesis is an accurate representation of reality?

First of all do you agree we shouldn't threaten peaceful peaceful (such as two people buying and selling labour respectively) with force?

Well for starters, from this axiom it is not too difficult to show how value is imputed from consumers goods to factors of production and then, together with the premise of scarcity, to deduce the law of marginal utility.

I have found equivocal results. Though the studies from reputable economic journals insist that minimum wages can have a negative impact on employment. Even the other ones out there that say the opposite (at least the ones I have seen) are careful to point out that the resulting deviations from the mainstream theory could be the result of confounding variables.

"Does your argument relies on the premisse that a employer would always employ more workers if there´s no minimum wage?" It's an implication of this chain of reasoning (not a premise) that fewer low-productivity workers will be employed each time there's a raise in the MW level.

"To suggest that the poor populations job choice is one that is "voluntary" is a gross oversimplification of the context involved." It can be (and often is) voluntary in the same sense as Crusoe's decision to build a shelter to survive an oncoming storm is voluntary. ie. The decision is not influenced by anyone making a threat of violence.

Applying the term 'speculation' reflects a subjective judgement about how well founded a claim is, one that I don't share. If we start with uncontroversial assumptions (eg. employers seek to maximise profit) we can work out the logical implications of these starting points. We did that. Now, until someone can produce a chain of reasoning that shows how MW is likely to _improve_ the condition of the marginal workers, we should conclude that it hurts them.

@cbl2988 just one point: raising prices isn't inflation. Expanding the money supply (which will raise prices) is inflation. 'inflating' the money supply. Its often used incorrectly, but its an important distinction.

That'd be an option. But i believe this stuff is possible to explain without even going that far. And terms like 'price floor' and even 'supply and demand' can prevent people from watching, who otherwise are capable of 'getting it'.

"but if the end result is an up skilled workforce isn't that better for both the employer and the worker?" There is no 'the worker', there are workers. Some of whom will be unable to find work, who could have done so if it wasn't for the minimum wage law.

" what would convince employers that the wage they should pay would have to be one wich would permit workers a good standard of living?" One thing that would work is the knowledge that they would not be able to find the workers they needed if they offer less than that. I don't believe that a 'good standard of living' (however we define good) is something that must be guaranteed at all costs.

"what would make these employers avoid decreasing wages to the lowest level possible?" Most people try to pay as little as possible for the things they buy, this is no different for employers. So the question is similar to "why isn't the milk free, since everybody would like to pay as little for it as possible"? The answer is competition. Many people would like to pay for workers and they bit against each other.

I think we have come to an agreement in general. However I would say that the fact there are too many variables to control is a big problem with treating economics as a system with any sort of predictive power, and this must be overcome for the subject to have any real use.

"Your explanations take the form of "my argument is rationality sound and therefor they must be true"." No. If you read more carefully you'd have noticed that the argument takes this form: We have a compelling deductive chain of reasoning suggesting that MW harms marginal workers. We know of no reason to expect that marginal workers benefit from MW. Since statistics can't help us here (it's been explained many times why), our supposition should be that MW harms marginal workers.

Here in the states, I believe it was San Francisco,CA recently raised their minimum wage to 10+ an hour. Subway can no longer sell $5.00 subs their, guess why?

I don't think that the hypotheses "MW decreases unemployment" or "MW has no effect on employment rates" are falsifiable by empirical evidence either.

Nice video Ta. In those cases where an employers profit may be reduced, there would come a point at which an employer may decide that his reduced profit isn't worth his effort of continuing his business. (opportunity cost etc). It's also maybe worth noting that minimum wage is a threat of violent interference in voluntary trade. The monetary argument is just a part of the MW thing.

"t's just over simplistic to think that a government would intervene by introducing MW law then just sit back and let people stay unemployable." I've made no claim about what other policies governments are likely to implement. I'm glad you agree that MW prevents certain workers from finding jobs.

"Actually, no. It's not so hard. In fact I've seen people, in person, recently, work so for just such a rate ;) In quite hard labor mind you." In the West, at least, I believe it would be hard to find such people--i don't think i could find any. The reason is competition from other uses of their time (including working for other employers, for a better wage). The point is that firms are not at liberty to offer arbitrarily lower wages, not if they want to stay in business.

If by economics you mean econometrics, then I would agree. If by economics you mean the sub field of praxeology, then I also agree to the extent that the predictive capabilities are indeed very limited. That doesn't mean it is entirely useless though. For example it can clearly show that breaking windows does not lead to prosperity, even though there are economists who claim they have measured otherwise.

"...nothing garantees that employers would pay a decent wage anyway......" True - no guarantee. But remember that an employer is bidding for workers just as workers are bidding for jobs. e.g. The employer isn't dictating a wage. He is making an offer. It's unlikely he'd get a worker for $0.01, so he'd have to bid higher, until he attracts a worker. This whole subject revolves around one group of people threatening another bunch of people who are trying to trade peacefully amongst themselves.

"To create jobs (even with the lowest wage possible) is always better than to improve the living conditions of the already existing ones?" I have no opinion on that. But i do believe that coercion (which is inherent to MW law) is unacceptable.

"Whats to stop rates going to such if not more lows ?" The opportunity cost of accepting any given job & wage. ie. Competition. If you'd watched Edgar the Exploiter you'd know this.

"You are having a problem with the latter part." I don't think so. You certainly haven't shown otherwise.

" Even if you could calculate pluses and minuses for whole economy, you cannot calculate the opportunity cost of the consequences of a employer gone bust because of MW" This can be said about anything. There is no way you can calculate the affect not brushing your teeth could have on the lady who served you coffee this morning. It could save her live if she's allergic to peppermint.

" Of course they are. They want people to have money to buy the stuff they produce" I disagree a single employer will simply react to the market place, if people do not have money to buy what they want to produce they will simply not produce it, they will not go out of their way to make the economy better so people can afford their product. Governments are in a unique position where they have the ability to affect the economy as a whole.

"Bit, I don't think you've considered how your theory conflicts with reality." It doesn't. I believe you're misunderstanding the hypothesis, or misunderstanding what the presence/lack of statistical correlations means/doesn't mean. "One of them is making sure that a group of people is not exploited by another for commercial profit." Trade is mutually exploitative: both parties exploit one another (in the sense that they use each other for their own advantage), and both are better off for it.

Well, here in Brazil we also have a minimum wage. When the government increases it, the general standard of living increases too, but we have a great number of workers at the "informal economy", without any rights, and also, as the world knows, poverty and misery... The question is: are we better with minimum wage or without it? Maybe it´s better to have one, because nothing garantees that employers would pay a decent wage anyway...

"I understand the entire ideological background of all your statements, what you are saying is jibberish" It's a shame you're not willing or able to explain exactly where you believe the reasoning is mistaken.

"What about a first step? Why not introduce wages that are tethered together in an all for one and one for all kind of way?" The same reply works for you too: How about you let go of the idea of using threats of force to limit the way peaceful people may behave altogether?

The action axiom: Human action is purposeful behavior. It is using means in the environment of the conscious actor, which he believes will allow him to attain his ends. Note that any attempt to deny this axiom is inherently contradictory, as the attempt itself would fit the definition of human action. It almost seems like a meaningless thing to point out, but the implications are quite profound and I would again point you to Man, Economy and State for some deductions.

I agree there will be workers who are unable to find work because of MW law. It's just over simplistic to think that a government would intervene by introducing MW law then just sit back and let people stay unemployable. In reality they will offer incentives to employers to keep people employed and help up skill those workers who find they can not get employment. At lease they would do if they want to get elected again.

For example, companies, rather than firing some of their workers or hiring less, can actually opt to cut hours and pass the addition costs on to consumers, i.e., inflation (which I don't think is a good thing), it is likely the case that the MW is still lower than the market wage, which means the MW wouldn't have a negative effect (but could possibly hurt the economy during a downturn).

"are you saying that Economics is not a legitimate science?" No. But it is properly primarily an a priori science, not amenable to empirical study.

"you declare certain things as facts, and I'd like to know what evidence you used to establish these as facts." What declarations are you having trouble with specifically?

this is fine. But when he says it does not falsify the hypothesis, he should say "it does not falsify the hypothesis that in a system where every other variable is controlled, minimum wage harms low skilled workers". What it does falsify is the hypothesis that in the real world, minimum wage has a measurable harmful affect on low skilled workers. And in my opinion, the real world is what matters.

This was bloody brilliant! Thanks!

You are excellent at using visuals to explain economic concepts.

@LeoMRogers BTW, there is plenty of evidence suggesting MW causes unemployment for marginal workers (among other negative effects). It's just been contested in recent years due to equivocal research (some of which is also contested).

"what experimental evidence WOULD falsify this hypothesis?" I don't think its falsifiable by any empirical evidence. But speaking for myself: If every single instance of introducing or raising the minimum wage were accompanied by a significant and rapid _drop_ in unemployment figures I'd be suspecting that we're overlooking an important countervailing dynamic associated with MW.

I'd like to see the deductive reasoning for why minimum wage workers are treated like shit by not only employers but also fellow workers, customers, and the general public.

"I argue that, long term, the class of people "marginal workers", who we can say are likewise members of a certain population ( the poor ) are overwhelmingly HELPED by MW standards," Can you explain how this mechanism--that you believe has a significant enough effect to outweigh the negative effects of MW--works? "and I believe the facts support my premise." Statistics are not very useful here, for reasons spelled out many times already.

@MercifulMing @MercifulMing Re. Reducing hours. Maybe im misunderstanding but If edgar judges a workers hourly mrp to be less than the hourly MW i dont see why theyd want to hire them for any number of hours.

"..I disagree a single employer will simply react to the market place.." Yes. You're right. However they'd prefer the economy to be "healthy." They realise that the only way they can influence it is via their business. They at least have the sense to realise that they don't know how to run anyone else's business. "..Governments... have the ability to affect the economy..." Unfortunately true. But they cannot have a good effect. It's impossible.

No, you're just not paying attention despite being asked to do so pointedly--you're not welcome here any more. The claim is that raising or introducing MW harms _marginal workers_. Neither video makes a claim about the effects of MW on overall unemployment level, as you would know if you'd been paying attention.

"would a reading of relevant academic source material support your assertion?" What assertion are you referering to? (my conclusion was backed by a chain of reasoning that was spelled out, if you believe i made a mistake, tell me what it was).

I would agree with you more if the title of the video was 'How does minimum wage hurt certain workers?'

@LeoMRogers I tend to side with the great majority of economists and I think that demand curves slope downwards and that supply curves slope upwards. If that's not true, and if our understanding of price floors and ceilings are not true, then there goes centuries of work and research.

So I guess what you're saying is that having a minimum wage forces businesses to improve their efficiency as they can't afford to employ as many people to do the work. This would seem to result in a need to up skill the work force. I guess this would see an increase in trade apprenticeships being offered by employers to bring the work force up to speed. Government might even offer some kind of incentive to businesses who offer apprenticeships. Sounds like winning for everyone.

"I'd say you just attempted to rationalized away data in contra to your point" I believe the data is not very useful, because of the impossibility of controlling variables. I would not have made use of it if it appeared to corroborate the hypothesis either (and a bunch of studies do), for the same reason.

"So there is no thing as cost push inflation?" Yes there's such a thing, but that name is also a misuse of the word 'inflation'. Imo it's important to differentiate between increasing the money supply (the original meaning of inflation) and one of the consequences of doing so: prices increasing. If we fail to do that i think we make it harder for folk to appreciate the harm of 'printing money'.

A reason, at least why employers might treat them that way is, that the minimum wage turns them into slave drivers. Rather than simply fire a person who they don't see as being productive enough to justify a wage, they might feel that it is possible to whip the extra productivity out of them.

"you come from a background in a state that provides people with CARE such that such a rate is "unattractive"" You're mistaken, that is a reason, but it's certainly not not the only one (hint: capital investment and attendent increases in productivity, leading to firms being able to bid higher). If it were, why would any firm pay employees more than minimum wage?

"This is a clear understandable declaration of your premise." It's not a premise. It's a conclusion. The reasoning is spelled out in the video. "what FORM of evidience would you say would support this premise?" I can't think of any that would provide compelling support. "What predictions about [] will be discovered" I can't make sense of this passage, so I can't answer.

"Racism. It can, in many demonstrable instance, play out, and subvert competition as a driver of labor rates, if not entirely contracting, at least substantially." But assuming a given background of racism, worker's wages will still be higher with more employer competition than they will be without it.

I do not deny this axiom, I just fail to see what your point is. And i will definitely consider the book you recommend, but of course for the purposes of this discussion, we must continue without me having done so.

If you consider that this would be happening accross the economy in time this would lead to a greater need for skilled labour and a decreased need for unskilled labour. To fill this need industry and government would need to respond by training up the unskilled work force, the end result being a more efficient economy and a more skilled and highly payed work force. Basically what we see in developed countries that have MW.

More efficient use of a countries labour force might not bring more profit for a particular business but it will have a positive affect on the wider economy. Employers are not interested in improving the state of the economy at large their interest is in increasing their own profits. I believe that Governments are far better placed to make decisions that will affect all industries and their employers.

I don´t really have specific knowledge about economy, but I have some questions: 1) If it´s not a minimum wage, what would convince employers that the wage they should pay would have to be one wich would permit workers a good standard of living? And in the opposite way: what would make these employers avoid decreasing wages to the lowest level possible? 2) To create jobs (even with the lowest wage possible) is always better than to improve the living conditions of the already existing ones?

Hi - "..employers who are able to adapt and improve the efficiency.." But employers always want to improve efficiency. It may be efficient to replace people with machines in low skill jobs. Nothing wrong with that, but, an employer is the best person to make that calculation, not a bureaucrat. A bureaucrat is not accountable for his actions. An employer pays the cost of his actions and a bureaucrat's actions. There is no incentive for a bureaucrat to "get it right."

I can understand that, but it's another way that minimum wage hurts workers. Because they are unable to create appropriate jobs, employers are forced to put workers into jobs where they will be unproductive in at least some portion of the required work. Also, overpaid employees become complacent.

"..having a minimum wage forces businesses to improve their efficiency..." Is it likely that a businessman has to be forced to improve efficiency? Efficiency increases profit. If MW increased efficiency then surely an employer would raise the wages of his employees. In fact he does this anyway, but by an amount & at a time that actually benefits his company. A forced minimum wage is very unlikely to improve efficiency. Central planners cannot make that calculation.

It may be that raising the MW will cause better living conditions, because it drives more people into the "informal economy". Since black markets are a good thing, that might be one reason for me advocating MW.

I really liked the format.

@LeoMRogers The predictive power of economics is its ability to predict economic outcomes. If it can do that, it's pretty useful (which it has, even Austrian economics has done as well as any other kind).

blackheartsbirth except McDonald's isn't so much food industry as much as they are in the real estate industry.- they deal with franchise royalties. McDonald's would get it's money either way, they're just selling a license to make money. The weight would be on the shoulders of the managers at the local store level and the owners of the property.

No, in the case of Brazil (Brasil) the Unions + minimum wage + reforms = exponential economic growth. Really. You can deny it, but it will still exist.

"Black. Hispanic. Ghetto. White. Slavery. Racism. Poverty. Injustice. Discrimination. Social inequality. I conjecture that introduced into your sterile premise, I dont quiet think you would speak with the same clarity." That's true, because these terms have no bearing on the dynamic I'm explaining. There is no shortage of terms i could have injected to make things less clear.

What I think you are saying, is that we cannot measure any harmful affects in the real world, therefore the affect is negligible and irrelevant. I don't believe they are negligible and would point for example to youth unemployment in Spain, but even if it were so, you have to consider what is not being or cannot be measured. People who stay in school don't show up in unemployment statistics even if they would prefer an entry level job or low paying apprenticeship, which are no longer available.

I wonder if these short low cost videos may be a better way to promote the crowdfunding campaign.

"How is society affected by people being employed at that rate?" I think it would be very difficult to find a person who would agree to work for 1 cent an hour, I hope you agree--so we wouldn't have a society of people being employed at that rate. Do you know why that is? (the answer can be found in the film Edgar the Exploiter).

Perhaps you should illustrate this using supply and demand curves. Also, instead of just focusing on MW, you could cover price floors in general. That way, they would be denying the laws of supply and demand and the consensus on price floors. It's amazing how people don't make the connection and think the MW is special somehow because of its political implications. Those knowledgeable in Economics ought to know better.

You make the mistake of assuming the number of units of currency are what enables people to buy stuff, that's not the case. The buying power matters not the number of dollars, pounds, euros that you get. Plus all employers want to pay as little as possible, all workers want as much as possible. That's how a market rate is established. The less skill a job requires the more people could be employed, meaning that employer can offer lower wages. Artificially mandating that the employer... contd

It is the exact same argument one would use to debate if mathematics is a science.

"Again, would be true IF competition where the ONLY factor involved." You asked 'Whats to stop rates going to such if not more lows'. Competition is the answer. Of course there can always be some possible unspecified hypothetical factor that outweighs the effect of competition. I don't know what you believe you've demonstrated here though.

Glad you liked it.

A. Employers will not employ workers at a higher wage than their expected marginal revenue product. -Employers will do everything to make profit, it´s like eating for a company. Not regulating companys, will result in in a greater disthopia, because companys are phycopaths. Most goverments are ruled by phycopaths. B. Applying minimum wage law creates a situation in which a greater number of workers are expected by employers to result in a net loss of revenue if legally employed. -if we removed some other laws their will be even greater profit but if everybody plays by the rules there will be no problems. we just have to get some good laws C. We can therefore expect fewer of these marginal workers to be legally employed under minimum wage law than otherwise would have been. -so if agian we remove alot of laws we could have better profits I most say it´s hard to disagree with, but it might be very easy to disagree witch laws we have to change best regards I like the topic and videos bitbutter well every edgar would have the same disadvantage (minimum wage), if it was universal min.wage, then competition should be the same for every edgar, and then its no longer a dis-advantage, it is simply the rules. Just like playing football, it´s not a dis advantage that only the goalkeeper may touch the ball with it´s hands, it just the game. Maybe quality will improve, FX in china they have low wages and in general low quality, if every one has the same minimum wage maybe it will improve quality.

"..do what they can to increase their profit.." - agreed. I think I can use efficiency to represent profit here. Increased efficiency for employer represents increased profit. I guess you mean efficiency in whole economy. But you're condoning some unemployment to offset what you see as efficient means of production. A man is not efficient collecting other people's money (welfare) when he is not producing goods. The new machines would have to pay for that. Which means the employer pays more tax..

"Premise; In society, you cannot do business with the poor with an end net result of making them poorer." I almost agree: we should expect most voluntary trade to be mutually beneficial. I have a feeling you mean something else though. "Thats why MW is MW, it is the base level for self sufficiency" Do you understand how MW harms marginal workers?

The real minimum wage is $0.

I think you are using efficiency in place of profit. Employers will do what they can to increase their profit without regard to how this effects the economy as a whole. Using my example again if the initial expense of replacing low skilled labour with machinery is not going to increase profit then an employer will not do it. Once the cost of low skilled labour is increased it makes sense to replace them with machinery.