Why do you think minimum wage laws exist? It's because at one point in our nation's history, businesses implicitly colluded to set wages low. They have more power in wage negotiations than workers do, because there are generally people who can afford to do unskilled labor for very small amounts. Businesses got greedy and took that too far, offering people wages far beyond a minimum standard of living. So in response, the people voted to set a minimum that would prevent corporations from being outright exploitative.
The same thing could happen today. Google engineers will always be paid a lot of money, but the average McDonalds workers could see their income fall way below the national average cost of living. Whether the minimum should be $5/$10/$15 is up for debate, but without businesses would have an unfair amount of bargaining power.
The average McDonalds worker will very soon be a robot.
Already everywhere in Europe, there are order-taking kiosks in McDonalds, each one replacing at least two workers. Fast, convenient, never demanding a raise, never joining a union. Pure win.
The good news is that society already survived this kind of economic transition, no less dramatic: moving from manual labor to automated manufacturing.
The bad news is this transition required a world war and temporary export of working class in China (the latter won't happen this time). There are almost no unemployed at wartime.
Collusion to suppress wages is already illegal. All you're saying is that you don't have any faith in the government to prevent collusion. Which is a whole separate issue.
The other problem is that today we have labor gluts, particularly of the unskilled variety. Automation reduces the need for workers, those workers become economic outcasts with no influence to have their needs satisfied by capitalism, and the ownership class does not create demand for more unskilled labor - they want founders and professionals who can grow their wealth, that is what they demand.
If you drop the minimum wage you do not need collusion to see real wages for jobs drop insanely low, ironically because those who can live off other income will work them when there is no other easy way to earn additional income - IE, those with wealth will work for less because their life does not depend on that income providing their base needs, which already are in many places more than what the minimum wage offers already (ie, living wage).
We don't have labor gluts at all. In the US working mothers struggle to find child care for their children, houses go uncleaned, and productive people drive themselves to work.
That's a situation of labor scarcity, not a labor glut.
No, we have a labour glut (unemployed people) and a jobs glut (work not being done) at the same time. In other words, a market failure -- caused in part because for work which is valued at less than minimum wage, the market can only function by evading minimum wage laws.
Well, childcare, house-cleaning and car driving have potential costs far in excess of the cost of wages - if someone steals your stuff or damages your furnishings whilst cleaning your house, or crashes when they're driving you to work, or injures your kids, that can be hugely expensive. Also, getting someone else to drive you to work is really inefficient - it means that two people are stuck in a car being unproductive for the entire drive rather than one, plus the driver probably has to drive back afterwards.
If you offered sufficiently high wages to do those jobs, you would find plenty of people willing to do them.
A labor glut does not necessitate me being able to ask for someone to mow my lawn for one cent and having someone volunteer. You have a labor glut when the availability of living wage work declines below the working population who need to earn such a living.
That's fine - the point is that people aren't obsolete and work is available. People are just unwilling to do the work.
That's not an argument in favor of a basic income - a basic income just increases the incentives for laziness and makes the labor scarcity worse. (10% or so in the Canadian experiments.)
Basic income gives the poor bargaining power in wage negotiations. It would require cultural adaptation, but I know of few individuals whose whole needs can be satiated by just having food and shelter. People still want things. They take out insane loans, mismanage their money, and even sacrifice those base necessities to possess things. We have a strong consumer culture, and UBI can take advantage of that to reduce suffering and empower workers more to actually negotiate with employers rather than it being a one sided conversation with your only failsafe being an undesirable minimum wage.
I highly doubt making labor more scarce, when we are in such a glut (and continued automation will perpetuate and expand the glut) would actually cause any real harm to the economy. We already pad economics with millions of ghost jobs that exist solely because the marginal loss in productivity and efficiency having unnecessary workers is less than the cost of having mass destitution and social instability.
A glut is when the supply is available to anyone who wants it and additional supply goes unused.
We've already established that we have the exact opposite problem. Our national infrastructure is crumbling because no one is fixing it. Skilled women stay home with their children because child care is unavailable. Homes go uncleaned, nails go un-manicured, etc, because no one is available to do these things.
If we reduce the labor supply by 13% (what was done during the Mincome experiment) that only makes these problems worse. For comparison, the great recession cut labor supply by 5%.
The supply and demand of labor does not care what people need - it does not care at all that mothers want childcare, or the citizens want better roads. All that matters is if that mother or if the citizenry are willing to pay for it.
Predominantly most of that is due to the labor glut driving down median incomes and leaving people with less economic negotiating power to get the things they want done.
It isn't appropriate to talk in absolute figures of reducing labor supply. That is one side of an equation without considering the other. UBI would generate tremendous real demand for cheap housing, cheap healthy food, and all manner of amenities that can fit in that universal budget. Those demands would be met, because everyone than has the economic negotiating power equal to their UBI as a minimum, rather than today where many people have no (unemployed) or negative (indebted) negotiating power at all and thus have no effective economic influence at all.
It is always about supply and demand, and to only talk about economics in terms of one or the other is to argue for an intended outcome rather than seeking out the best possible one.
If there were actual demand for childcare, the going rate of childcare workers would continuously rise as capital fought to be supplied by limited demand. The rising prices would create incentive for people to enter that labor force. That does not happen because real economic demand does not exist at those levels - it is not an actual labor shortage if all you want is childcare workers at minimum wage. If I want rocket scientists at minimum wage, I cannot claim there is a shortage of rocket scientists period if they are not willing to take the lowest possible payment I can give them.
There is a shortage of something when the real supply cannot meet demand at sustainable price points. Are Nannies expensive? Yes. Is that not a sustainable cost? Absolutely not, Nannies are a valuable commodity, and those that can do a good job should be paid for the scarcity of their skillset. The reason there are not more Nannies is not because of some incredibly bullshit argument about how "nobody wants to do the job, we would pay them anything, but people just refuse to act rationally economically" it is because nobody is willing to pay anyone sufficient wages to justify the career pivot into the discipline.
And that relates back to my central argument for UBI - our economy prioritizes the work "worth doing" as a central tenant of capitalism. All a UBI does is potentially drop out the labor force of the work being done now that is the least worth doing to begin with.
But TLDR, fundamentally, it is important to recognize that in capitalist economies, demand is not people wanting something (better roads), it is the money willing to be spent on the supply. So if nobody will supply the money to build better roads at rates construction workers are willing to take, you do not have a shortage of construction workers, you have a shortage of funds to pay for better roads and thus you are not generating enough demand for them.
We have a demand problem, not a supply problem, as long as major corporations are hoarding money and the stock market is at all time highs, capital is out there. There is just nothing the controllers of that capital actually want that anyone who isn't working now could supply.
Conversely, if there was an oversupply of labor prices would come down. Note that I said labor is scarce, not that there is a shortage.
The fact that prices remain high suggest people are choosing not to work, not that their labor is worthless and they can't find any job. Why do we need a BI if labor is valuable and people are merely lazy? Why do we want to make a scarce resource even scarcer?
One important, central consideration must remain that labor is local. Surely some cities in the US have a labor shortage, and the worse it gets the more financial pressure it puts on the unemployed elsewhere to somehow manage the opportunity cost to immigrate. But the workforce participation rate is at a twenty year low, it is below 1960s levels before women even entered the workforce en masse, and it is continuing to decline.[1]
I'm also curious who is "lazily" not working, and somehow still eating and sleeping under a roof. And then I'd also argue that if you can find people that are refusing to work minimum wage and instead prefer to be homeless, that is probably because they have no negotiating power in wage relations because... there is a glut of labor. If there is work to do, that is valuable, prices will rise to find supply. If the prices will not rise, then you do not have actual demand, you have desire. Money is the only thing that speaks in economics.
In the macrospective economy, I would like to see evidence of unsupplied demand at the minimum wage for child care or construction workers. My father works construction, and there is a tremendous glut of foreign laborers in our area (Eastern PA) that drive wages down straight to the minimum with no benefits. There is a shortage of skilled labor in the industry, but only because the hiring practices of firms has prioritized the unskilled cheap workers and thus drove talent westward. So now there is a shortage of skilled workers, but only at non-competitive pay rates that the skilled workers left because there was a labor glut, with firms simultaneously unwilling to raise rates back up to attract them back.
The vast majority of poor people (75% or so) don't work and are not seeking work yet have consumption of approximately $20k/year/consumer unit. Where do you get the idea that people will be homeless if they don't work?
In the macrospective economy, I would like to see evidence of unsupplied demand at the minimum wage for child care or construction workers.
It's pretty easy. Offer child care for $7.25/hour and see if anyone tries to hire you.
> This confirms what I said - people don't want to work. Workforce participation rate = (working + seeking work) / population.
The majority of the decline in participation is not some magical "nobody wants to work anymore" because people are on average poorer than they were 30 years ago. If...
> People on public assistance.
This is true, then losing workforce participation of millions would cripple our economy if productivity were actually related to peak utilization of human labor. I do recognize the increase in social security disability participation, but 9 million does not make a near 20% drop in participation rates. It is certainly a contributing factor, though.
> It's pretty easy. Offer child care for $7.25/hour and see if anyone tries to hire you.
If there were unfilled positions I would find them online on job sites, but I'm not finding examples. Additionally, remember that 7.25 is not a living wage in many areas, and people have to make the moment to moment decisions whether working at or near minimum wage is worth it if you are still insolvent doing it versus seeking more lucrative income with that time.
> Where do you get the idea that people will be homeless if they don't work?
My mother was effectively days away from homelessness last year, she quit her job in 2012, did not seek additional employment for two years, by being a property owner was ineligible for most welfare, and was being forclosed on for property tax collection. We got to experience the real options she had on where to live - there was no public housing available for at least 18 months, she might have been eligible for subsidized rent but she was not going to get free money for living and the process to get social security disability is not as easy as people on HN like to make it sound.
Here is another thought - if people are dropping out of the labor force and using welfare as a substitute, UBI is in every possible way superior. Social security disability is a disincentive to work, because you lose benefits if you do. The same thing happens at every welfare cliff in the current broken system. I argue personally for UBI because of the negotiating power it gives workers, the capacity for it to normalize the cost of labor against the human cost it incurs rather than exclusively the rarity of the skills necessary to perform it, the normalization of economic stability enabling people to be more entrepreneurial, the extreme amount of social stability it would create to correct for growing wealth inequality, and the extreme simplification of an out of control welfare state bureaucracy.
But obviously valuable work is not going undone. If there were valuable work to be done that nobody were doing, I or any other active market participant would weigh whether pivoting to in demand jobs were out there was economically worth it, and capital really wanted it done, it would raise the price to find someone to do it.
If the marginal value of labor is as low as it must be to prevent the rapid expansion of wage offerings for work done, it means the work not being done as little or no marginal value according to the wills of capital, and we aren't actually losing any economic efficiency having people drop out of participation because the work they would have done, if any, would have been of negligible significance.
You can revoke laws. In fact, this whole discussion is basically about revoking minimum wage laws. How useless of an argument would it be to say "paying less than minimum wage is already illegal, so we can revoke the anti-collusion laws?"
The same thing could happen today. Google engineers will always be paid a lot of money, but the average McDonalds workers could see their income fall way below the national average cost of living. Whether the minimum should be $5/$10/$15 is up for debate, but without businesses would have an unfair amount of bargaining power.