Abolish Minimum Wage

[color=#2e1a6b]The promoted purpose of minimum wage is to ensure that employees are getting paid lots of money so that they have a high standard of living. This sounds appealing on the surface, which is why many people support minimum wage. But as with any policy, you need to examine what it actually does rather than what its purpose is. What minimum wage literally does is forbid an employer to hire employees for a price that's less then a certain amount

This increases the cost of production without increasing the amount of production. In order to accommodate for this, entrepreneurs have three options:

• [color=#2e1a6b]switching to capital (Machines that reduce or replace labor)

• [color=#2e1a6b]Outsourcing their labor

• [color=#2e1a6b]increasing the price of the products

[color=#2e1a6b]The first option, switching to capital, is very rarely applicable, since technology is quite limiting.

The Second option, outsourcing their labor, can only apply to goods, not services.

The third option, increasing the price of the products, is the last resort when the 2 options above can't be used. When the prices are increased, demand for the product will decrease. This creates a surplus of supply that will result in the entrepreneur reducing his production, which reduces his demand for labor.

Regardless of which option the entrepreneur chooses, the amount of labor demanded from the country's workers will be reduced. This distorts the entire labor market equilibrium. The supply of labor (employees) now vastly exceeds the demand for labor (entrepreneurs).


The excess in labor supply relative to labor demand causes unemployment. The unemployment caused is not frictional unemployment (temporary unemployment as a result of switching jobs), instead, it is unemployment that will last indefinitely, until something happens to balance the labor market equilibrium. While the workers themselves are not indefinitely unemployed, the amount of people unemployed does not change.

The excess in labor supply also allows the entrepreneurs to be selective about who they employ. There is so much labor available that entrepreneurs can refuse anyone and still find someone better. This causes discrimination against minorities and low-skilled workers. Since minimum wage was presumably intended to help these people, it's ironic that it does the opposite.

tl;dr
The enforcement of a minimum wage causes unemployment and discrimination. It's not helping the economy at all and should immediately be abolished

Edit: I wouldn't mind the -reps if there were flaws in my argument, but this post hasn't even been quoted...

Neutral. There needs to be a new system that pays depending on how much you get done. If someone slacks off or is horrible at the job, their pay is cut by a noticeable amount. If someone is an exceptional worker, they get a little more for every week their progress maintains the above-average output. There would be a chart that shows the "average" amount of work in order to get a clear view on what is and isn't considered good. Everyone would be assigned their own area if possible in order to determine how much each person accomplishes. If groups are needed, then a trusted employee or supervisor would either participate or view the progress in order to make sure nobody is leeching.

Basically, there needs to be a better system for such a thing. If such a thing is allowed, then I support that over minimum wage. Working hard and getting paid as much as the slacker discourages working hard.

I heard minimum wage was being raised to $10. But i could have been lied to.
Eh, if it does welcome to a new world where the price of bread cost as much as a hooker.

Without a legally enforced minimum wage, business will pay there employees as little as they can. Wages are a expense, and since businesses are created with the purpose of making profit most would pay there employees as little as possible(I say most, because there are a few like Costco that try to get there employee a good wage)

Also, if employees can't afford to buy the products businesses put out jobs will not be created.There would be a lack of demand, and income inequality.



Do you really think anyone is maintaining a high standard of living on minimum wage?

[color=#2e1a6b]Exactly. But a limited supply of workers will force the entrepreneur to increase the wages. Simply making it illegal to pay low wages destroys jobs, not embellishes them.



[color=#2e1a6b]Can you clarify what you mean?

A lack of demand for labor is why unemployment exists



[color=#2e1a6b]High is a relative term. Compared to the rest of the world, yes, compare to the U.S. standard, No.

As long as the cost of living keeps going up so shall the minimum wage. It's proportionate.

I laughed so much reading this ...

It's like you were saying that theres pickels in my cheezburger and i don't like pickels so my cheezburger isn't good .

You think people aren't aware that there is a bad side to the minimum wage ? We have minimum wage and will never be taken down because what we gain from it is way more superior than what we lose from it . "you need to examine what it actually does" you have to examine everything it does also , not just watch you want to examine to prove your point .

Good Lord. Did you just started your economy classes and blindly believe everything they told you?

Maybe we should legalize slavery while we're at it, because, hey, cheap labor force!

Minimum wage is not perfect, but abolishing it will be even worse. Bottom line of almost every business is to cut cost. Without minimum wage laws, all the companies will pay as little as its humanly possible, which will not sustain any of its workers. And once they're out, they will just throw them out and hire new ones.

That's of course assuming that entrepreneurs would bother start hiring people. Just because you lower the minimal wage, it doesn't mean new jobs will magically pop out to take care of unemployment. As long as Chinese, Indonesians and Thai let themselves be assfucked by manufacturing companies, nothing will change, you do know that? And that's without even considering that you can build a fucking robot. Sure, it's more expensive initially, but robot does not demand wages, breaks, food and it doesn't complain. In same way, cutting taxes for the rich does not automatically mean that your rich citizens will bother moving out of Switzerland and Monaco back to you.

And as Black Jesus mentioned, if people are not paid enough, they won't buy the produce. If no-one one buys the produce, manufacturers won't sell - they will make losses and to make up for it they will cut costs, i.e produce less, hire less. Less people work, less stuff gets made. We're back to square one. It's a self-sustaining downward spiral.

>Minimal wage sustains high standard of living.

Mother of God, are you even trying? Go on to Brazilian favelas. Go and take a look at this fucking "high quality living" that their minimum wage affords.

I'm not saying we should pay laborers God-knows-what, but borderline legal slavery IS. NOT. A. WAY. TO. SOLVE. FUCKING. UNEMPLOYMENT.


TL;DR:

Go back and do your classes again.

[color=#2e1a6b]Enlighten me



[color=#2e1a6b]The exact opposite. But they taught me the law of supply and demand, and that was the final piece I needed to form this argument.



[color=#2e1a6b]I can understand your need for a straw man, but really?



[color=#2e1a6b]No, that's actually not accurate. They will pay as little as they can, not as little as its humanly possible. The limited supply of labor will force the entrepreneur to have higher wages.

This exact argument can also be used on the product market, but its flaws are much more obvious since we understand the product market better:

[color=#2e1a6b]Obviously, they don't sell their products for as much as it's humanly possible; they sell them for as much as they can. The limited amount of people buying the product will force the entrepreneur to decrease prices.



[color=#2e1a6b]yep, the labor market's law of demand is just magic nonsense...
/sarc


[color=#2e1a6b]Outsourcing is an even more cost-effective with minimum wage. In fact, it makes it almost impossible for American companies to compete with companies that outsource.



[color=#2e1a6b]Robots are also more cost-effective with minimum wage. Which side are you arguing?



[color=#2e1a6b]"if some people aren't paid enough, they won't buy the products. if no-one buys the products..."

Inconsistent premises



[color=#2e1a6b]I botched my reply to Blackjesus. The word "high" is relative to equilibrium wage.



[color=#2e1a6b]That's not what my claim is. My claim is that unemployment is not a way to solve low wages.



[color=#2e1a6b]I am taking classes. Based on the knowledge you've shown, I think you're the one who needs to re-educate himself (and learn proper etiquette for serious discussion)

If we want to solve low wages, then we have to Nationalize the Economy. As mentioned, American-based companies cannot compete with those corporations that would shift their jobs overseas. So, vastly repeal NAFTA, only limiting trade to those allies who would engage in fair economic premises with us. It's not so much isolationism as it is returning to the premise of "Friendships with many, entangling alliances with none." Lower tariffs and taxes and keep them low, even AFTER signs of economic progress.

One of the things that governments seem to want to do, is to tax the population to sustain it's own meaningless vastly expensive programs. I believe we should keep our taxes low, if not to eventually do away with the whole concept of taxes. The government of the future, must be entirely self-dependant. If Government cannot sustain a value and a product for itself, then it simply cannot exist as a means of governance.

It's a law and a model. But as you might have noticed (if you paid attention in class), models are not perfect.


You assume that magically supply and demand will sort it out. I have never said that these two have no affect - but they are hardly magical pills you envision them to be.

Also, today's companies seem to be pretty satisfied with amount of labor they have (not every single company of course, and not in every single sector). So, suppose America abolishes minimum wage overnight. How does that bring back jobs? Jobs were already outsourced. They are already in China. And China will probably make people work for free in this regard. Business stay in China. Nothing achieved. Restart Y/N?

Oh, and, um, this may be a news to you, but people will not magically flow to all magically appearing job offers, because a very fair part of Western society values its skill. You know, people want to get paid. Or did you assume that supply and demand model works one-way only? Working for a dollar a month in a factory after university degree? Fuck that. I'd rather get my social service benefits and rob a bank.

Simple version: It will be laborers who will not provide their services. Ergo, who will employers employ exactly?

"Will decrease prices of their products" - Again, if they sell it at lower prices, they have to cut production cost. What's a simple way of cutting cost? Cutting wages. And with no minimum wage, you can reduce it all the way to $1, and no-one can give you hard time about it. Try to live off a $1 per month.

You see, you forget one little thing: economy works with people. People are not models. Models are simply simplifications, often made for academic benefit - and the frequently fail when applied to real life.


"Unemployment is not a way to solve low wages" - okay, on this, I am legitimately confused. Where does this come into minimal wage? That minimal wage can be eliminated by...unemployment?

Oh, and in case this wasn't said before - without minimal wage, you would be, in some cases, be borderline legalizing slavery. As long as people are paid 0.01$, they are still "paid". They work for nothing, but your law would allow it, because employers still "pays" them. Nothing, to be exact.


I see someone's sarcasm detector have failed.
I'd sell you mine, but you see, I don't make them anymore. Not enough demand.

[color=#2e1a6b]there's this really cool thing you can do in these discussions called... um...

Addressing the opponents argument

you use these tags that look like this [*quote] [*/quote]. It's really cool, I recommend you try it sometime.



[color=#2e1a6b]I never claimed they were. The imperfections come from an inability to calculate magnitude, as well as not taking into account other variables. But none of my claims predicted magnitude, and you haven't pointed out any variable that alters my conclusion. All you have done is ridiculed and denied basic economic principles, without any argument or evidence.



[color=#2e1a6b]You're the one calling them magic



[color=#2e1a6b]That's because they're satisfied with the amount of labor they have at that price. A change in wage will change the demand for labor



[color=#2e1a6b]The wages will decrease, which decreases the cost of production, which decreases the price of the product, which increases the demand for the product, which increases production, which increases the need for labor, which causes the entrepreneur to hire more labor, which brings back jobs.

^this is just an explanation of why the demand for labor increase as wages decrease; the law of demand.



[color=#2e1a6b]As I just explained in my last reply, Outsourcing is even more cost-effective with minimum wage. In fact, it makes it almost impossible for American companies to compete with companies that outsource.



[color=#2e1a6b]Please do us both a favor and stop using the word magic; it's completely irrelevant to this discussion (if I can call it that).

This is exactly why the entrepreneur can't have wages "as little as its humanly possible". The supply of workers decrease as wages decrease, which forces the entrepreneur to raise its prices.



[color=#2e1a6b]No-one. Entrepreneurs who offered such low wages will go out of business. The entrepreneur who stays in business will be the one who offers wages high enough to get people to work for him.



[color=#2e1a6b]I have no idea where you're quoting from.

You're contradicting yourself. You just said above that no one would work for low wages, and now you're saying that "no-one can give you a hard time about it".



[color=#2e1a6b]Then you should have no problem citing a "frequent failure" of the law of supply and demand



[color=#2e1a6b]No, I didn't say minimum wage can be eliminated by unemployment.

I said that low wages can be eliminated by unemployment (minimum wage = unemployment)



[color=#2e1a6b]Again, you're contradicting what you said earlier:

No, I don't have to.

You see, you automatically assume that since there is a custom/regulation/etc. people will follow it. They don't have to.

I was trying to make several points attacking the concept from several sides. However, I will try and limit myself to be chronological.

The Law of Supply of demand:

I have not stated that these are *completely* useless. However, I have questioned your conclusion that "because laws say so, it must happen!". I keep trying to say, it doesn't!

Let's take diamonds. Diamonds are valuable in several industries, and there's a lot of them. If we assume that quantity of diamonds (which is large), then demand for diamonds (which is somewhat smaller, but still large), then you'd think that, with accordance to supply/demand model, price would fell to a price where the most consumers could get them, and miners would still make a profit.

And yet, diamonds are expensive as fuck, elite product.

Why?

Because diamonds are being carefully hoarded. The sellers themselves show a big middle finger to the economy, by carefully regulating the flow so that there is always fewer diamonds around then what are needed. Thanks to this, the price can remain disproportionately high to the actual quantity of diamonds.

And to be honest, I see nothing in your posts that indicates at any other line of thinking besides "minimum wage is bad, we have to get rid of it, because it stifles the law of supply and demand!" Uuuhhhh, okay.

Let's go a little farther: You assume that lower wages will mean cheaper production. A bit, but not much. Where does all American materiel comes from? Where is your oil from? Your steel? Your plastic? Your guns, your car doors, your microchips? Changes in minimum wages do not change the prices of commodity, that may be required to make yours. Where is any blast furnance in the U.S? In France they closed one of the last ones last week! In industrial heartland, no less.

Which brings to another point - many primary and secondary industries are about extinct in the West. How can you hire people for jobs that do not exist? And if you lower the wages in tertiary sector...well, people will leave. And why should then employees bother about local market then? They can say with clear conscience "there are no people that want to work here" and outsource everything to India anyway.

If you really want to, I could also get into the whole debate that it certainly wasn't minimum wage that started the crisis that closed down multiple factories, forced hundreds of thousands around the world to be unemployed, and encouraged even more outsourcing.

Speaking of outsourcing: Majority of firms that remain in countries such as the USA, France, England, etc. and haven't outsourced will, for the most part, be unable to compete with the juggernauts like Apple that moved most of its production over to China. We also have to consider that outsourcing is in China's political interest. They *will* do something that will make it even more attractive for production to be done in China - slave labor, government protection, you name it. In the worst part, they yank your debt chain. Jobs will not come back, and enterprises that remain will gain little.


Actual Wages:

Again, you're arbitrarily assuming that companies will keep a certain level of pay. Have it occurred to you, that without minimal wage regulation, companies can co-operate with each other to *force* the labor market to accept substandard wages? Even if, we assume that someone breaks out and offers workers higher salaries, there will be a limited amount of places he can offer. Once they're filled, you're still left with lots of workers without a job.

Yes, this kind of collusion is illegal. That has not stopped any industries from trying. Shipping and unloading. OPEC for oil. It's been known for years that majority of diamonds sit in Rotterdam for decades before being finally sold.


It was the point of my "and you can't give them (employers) a hard time about it."They can all lower their wages to an unreasonable limit. It's no longer illegal, and everyone can be doing it, so you, as a worker, do not get to choose.

I have not stated "Your model is, without fail, wrong". But you absolutely fail to consider that entrepreneurs can be a bunch of greedy dicks.

Oh, and the wage-cutting idea as product price reduction? That was made by my econ teacher as a part of the lecture. I think I can draw on what he told us, given he's rich as fuck and major financial advisor to French government.

Also, emigration. What if U.S abolishes minimum wage, and the average wage comes down to beneath what some of the countries with minimum wage offer? It will encourage skilled workers to leave. Promising students will consider working outside of States. Brandrain ahoy.

You forget the most elemental rule that economy had demonstrated time, and time, and time again after 2008:

Unless rained in, majority of entrepreneurs, financiers and etc. are greedy fucks. Regulations are not perfect. None of them are. But they were created because you cannot trust someone who has a vested interest in keeping the market unfair to regulate it. Go and read the diamond part, if you still fail to understand that one.


Oh, and what's your evidence? Besides one graph, I've seen nothing. Nothing, beyond your self righteous belief in theory. And gain, I do not say that this theory "fails forever". But that you completely ignore anything else. Tax breaks for companies. Corporate taxes. Availability of materials and their price. The list goes on.

[color=#2e1a6b]How can you be a fakku elder and not know how to quote?



[color=#2e1a6b]If you quoted me, you could show where I claimed that they have to follow it. but I didn't claim that they have to follow it. When we make claims about how people will economically behave, we assume that people will act out of self interest (they do what benefits themselves). So, if someone were to say that they "have" to do something, we really mean that they have to do that if they want to preserve self-interest



[color=#2e1a6b]again, we assume that people act out of self-interest. These "laws" are just helpful ways to describe a person's self-interest. They don't have to follow them, but they do because it serves their self-interest.



[color=#2e1a6b]The law of supply and demand only applies to products in the market. If the diamonds are hoarded, then they are no longer in the market's supply of diamonds. You aren't disproving anything



[color=#2e1a6b]Then quote where I said that instead of making shit up. I gave a very thorough explanation of what minimum wage does, but you're completely ignoring it



[color=#2e1a6b]I know what the affects of outsourcing are. But I'm confused how this defends the need of minimum wage. From what I understand, minimum wage makes it even harder to compete in industries that outsource.



[color=#2e1a6b]Can you quote where I made that assumption?



[color=#2e1a6b]When considering issues like this, I like to examine how an identical scenario would work in the product market, so:

[color=#2e1a6b]This problem could be solved by having tons of people break out and offer consumers low prices. This would put the companies charging a high price out of business.

In the same way, the problem you brought forth could be solved by having a bunch of entrepreneurs break in and offer higher wages. This would put the companies offering low wages out of business, since no one would work for them.



[color=#2e1a6b]You can choose whether to be an entrepreneur or an employee. if wages are too low, become an entrepreneur, which will actually help increase wages



[color=#2e1a6b]Everyone is greedy, even the workers. It's just that wealthy entrepreneurs can empower their greed.



?



[color=#2e1a6b]Minimum wage doesn't directly affect skilled workers. If the average wage is too low when minimum wage is abolished, then we need to encourage entrepreneurship. This would increase the demand for labor and decrease the supply for labor, thereby raising equilibrium wage.



[color=#2e1a6b]This is a different issue. We can talk about monopolies on a different thread.



[color=#2e1a6b]I'm not ignoring anything. You're the one that's ignoring everything that I say. If you there are flaws in my arguments, then PLEASE point them out. I want to learn whatever flaws exist in my argument, but your completely ignoring them with each reply, making this kinda a 1-way discussion.

Quote, quote what?


No matter what I say, it still goes over your head:

What you have proposed is a theory. T-H-E-O-R-Y. Backed by more theoretical models which sometimes work - sometimes don't.

And it's either your unfortunate wording, or more likely, completely blind faith in this theory that makes you come out just raving

Just this once:


*Will* Why the confidence? WHY? Because model said so? What will happen if they don't? Absolutely nill alternative perspective on your part.


You assume that everyone has same self-interest. Again, this is height of model-inspired arrogance. NO. Not everyone has the same self-interest. Have you ever studied social sciences for God's sake? Generalizations like that do not work when making a law as big as this. Some people will be motivated by this. Some will not! Just assuming that the same line of reasoning applies to all market players is just silly undergrad reasoning. And not a good one either.

"If diamonds are hoarded, they're not in the market!" - Straciatella ice cream is sitting in my convenience store's storeroom rather then shelves, so it doesn't exist! Obviously it will not affect whether the store will order more, what price they may charge when people start demanding it at the counter and store owner says "Well, we have some in the back..."

And then:

Oh. No-one will employ me, so I'll become entrepreneur myself.


I...

I....

I..... gave up right there. No, seriously. I'm a poor worker, earning 10$ a day. I'm out of job, cannot feed my family and no-one will employ me...so I make my own company.

Out of what? How will I acquire the workplace? The materials?

I'm sorry. I'm used to talk with people who have rational view of the world, and acknowledge that there are different ways of thinking, and that there may be different causes for same events.

Go back to computer fantasy land. Because actual economy...tuttuttut, It's not a model. It might do something unpredictable!


I recommend you go and do field experiment sometime. It may prove to be quite enlightening.

[color=#2e1a6b]It's amazingly simple:

quote what I said that you disagree with, and explain why it's wrong



[color=#2e1a6b]Did you really just equate the principles of supply and demand with "blind faith"?

I want a solid answer here: are the principles of supply and demand just "blind faith"?


[color=#2e1a6b]well, you already said that "It will be laborers who will not provide their services". So if he were to stay in business, he would have zero employees. I suppose he could just stay in business, keep paying rent and electricity even though he has no means of creating profit.

I'm glad you finally quoted me, but is this really your argument?



[color=#2e1a6b]O_o

it's not a good to assume that people act out of self interest? did you really just say that?

You have sparked my interest. I'd like to know what economist would defend this claim.



[color=#2e1a6b]The products in the back of the convenient store are part of the market supply.



[color=#2e1a6b]My father was an ice cream truck driver. Just roving around Houston with blasted music. Then he created a business that hung door flyers on houses. Eventually, he got together with someone, bought a used printing press, and started an advertisement company. Sometime later, he managed to buy some collating machines and some other equipment, and then his company became a direct mail company (he mails envelopes with advertisements in them). 29 years later, he still has that company, he's upgraded his equipment, hired graphic artists, salesman, telemarketers, etc.

He is currently paying for 16 different people to have full time jobs, and about 6 part time jobs. At his peak (roughly 10 years ago), he had about 30 people working for him.


I know that many people can't start a small business, but too many people don't even try. In addition, the education system doesn't even try to teach people how to start a business. We might see more people starting businesses if people were taught how.


[color=#2e1a6b]If starting a business is irrational, then the free market is screwed.



[color=#2e1a6b]I've sat next to my Dad while he was at a job fair, and I did get plenty of observation. Though I am a little curious about what you know about the entrepreneur's perspective.

Yes.

The principals of supply and demand assume things that simply are not true. As has been repeated to you time and again, and you keep waving this away as absurd.

Supply and demand presumes perfect competition. However, according to Alan P. Kirman, "Whom or What Does the Representative Individual Represent?" Journal of Economic Perspectives, V. 6, N. 2 (Spring 1992): pp. 117–136, he says..."economists have no adequate model of how individuals and firms adjust prices in a competitive model. If all participants are price-takers by definition, then the actor who adjusts prices to eliminate excess demand is not specified"

Further, according to Goodwin, N, Nelson, J; Ackerman, F & Weissskopf, T: Microeconomics in Context 2d ed. Sharpe 2009, ""If we mistakenly confuse precision with accuracy, then we might be misled into thinking that an explanation expressed in precise mathematical or graphical terms"(Like you used in your opening post Lelouch) "is somehow more rigorous or useful than one that takes into account particulars of history, institutions or business strategy. This is not the case. Therefore, it is important not to put too much confidence in the apparent precision of supply and demand graphs. Supply and demand analysis is a useful precisely formulated conceptual tool that clever people have devised to help us gain an abstract understanding of a complex world. It does not—nor should it be expected to—give us in addition an accurate and complete description of any particular real world market."

Ain't that just interesting?

As far as minimum wage goes, the picture you grabbed that graph from comes from a textbook which has an article using it as an example NOT to get rid of the minimum wage, but to not make it higher.

"If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces, the quantity of unskilled workers employed will fall. The minimum wage will price the services of the least productive (and therefore lowest-wage) workers out of the market. ... The direct results of minimum wage legislation are clearly mixed. Some workers, most likely those whose previous wages were closest to the minimum, will enjoy higher wages. This is known as the "ripple effect". The ripple effect shows that when you increase the minimum wage the wages of all others will consequently increase due the need for relativity. (Formby, J., Bishop, J., & Kim, H.. (2010). The Redistributive Effects and Cost-Effectiveness of Increasing the Federal Minimum Wage. Public Finance Review, 38(5), 585. Retrieved April 18, 2012, from ABI/INFORM Global. (Document ID: 2140268271).) Others, particularly those with the lowest prelegislation wage rates, will be unable to find work. They will be pushed into the ranks of the unemployed or out of the labor force. Some argue that by increasing the federal minimum wage, however, the economy will be adversely affected due to small businesses not being able to keep up with the need to subsequently increase all workers wages." (Belman, D., & Wolfson, P.. (2010). The Effect of Legislated Minimum Wage Increases on Employment and Hours: A Dynamic Analysis. Labour, 24(1), 1–25. Retrieved April 18, 2012, from ABI/INFORM Global.

Since our relatives and personal experiences apparently count in this thread, I'd like to point out my father owns a small printing business(he didn't make it himself, he worked his way up it until he owned the place) he keeps his wages 50 cents above minimum wage. That's what that quote speaks about. It causes workers to be more likely to work there. It also prevents him from having to raise it again if there's a sudden slight increase in the minimum wage, allowing him to adjust his budget accordingly before raising it again by 50 cents.

That's just good business models.

Concerning your textbook reading where you demonstrate you don't read further from the textbook(which all classes that are good should say that you should) Here are some economists that believe this to be logically incoherent.

P. Garegnani, "Heterogeneous Capital, the Production Function and the Theory of Distribution", Review of Economic Studies, V. 37, N. 3 (July 1970)

Robert L. Vienneau, "On Labour Demand and Equilibria of the Firm", Manchester School, V. 73, N. 5 (September 2005)

Arrigo Opocher and Ian Steedman, "Input Price-Input Quantity Relations and the Numeraire", Cambridge Journal of Economics, V. 3 (2009)

Michael Anyadike-Danes and Wyne Godley of Machester argue that the application of this model is only hypothetically flasifiable, and as such little empirical evidence even exists for its coherency.

Here's Gary Fields, Professor of Labor Economics and Economics at Cornell University, "the predictions derived from the textbook model definitely do not carry over to the two-sector case. Therefore, since a non-covered sector exists nearly everywhere, the predictions of the textbook model simply cannot be relied on."

So what's a two-sector system? A system where there is one sector which has minimum wage put in play, and a sector where it's not. According to Fields: "the self-employed, service workers, and farm workers are typically excluded from minimum-wage coverage… [and with] one sector with minimum-wage coverage and the other without it [and possible mobility between the two]".

In the United States, the minimum wage is set close to the equilibrium point, so the minimum wage really has no effect. The only arguments against the minimum wage that economists actually lodge is against the RAISING of it arbitrarily, it's rarely, if ever argued that we get rid of it entirely. It CAN be done, however, in an instance of inflation, if long term estimates show that the inflation will remain where it is.

Currently there's still a bit of a scuffle going on in the academics of economics where there's accusations being thrown about that there's publication bias against any research that might show that an increase in minimum wage could increase employment, or at least have no statistically significant impact on unemployment.

This isn't my theory that I pulled out of my ass of course, it's a theory lodged after a meta analysis, or rather a couple, of studies was published by Hristos Doucouliagos and T.D. Stanley, called "Publication Bias in Minimum-Wage Research? A Meta-Regression Analysis," British Journal of Industrial Relations

Being skeptical, I'll be waiting to see how this pans out. However the fact still remains that using the textbook model like you are Lelouch, is very highly criticized among economists. Because...as has been explained before...it assumes what is not true, in order to work, and has little empirical evidence to its credit. So yeah...believing something is true based on little to no evidence? Sounds like blind faith to me.



Considering your counter is that employees WILL leave, and they WILL get different jobs under a competitive model, when that assumes things you literally could not possibly know...then yeah, I think his incredulousness is justified.



Lelouch, this is a common problem I've seen when you debate people. Read what he said. He didn't say people don't act out of self-interest, he said they don't act out of the SAME self interest. Some people prefer to have a job, even if it's a shitty one, just to feel secure. Some people prefer higher paying jobs to support their families. some people prefer low paying jobs where they have little work to do because they're lazy. There are meta levels of self interest you are not addressing aside from some weird presumption that, "Everyone wants more moneh."



Then so are the diamonds.



The vast majority of people are average, and are more likely to WORK for small business than own one. Your father? Is not an example of what most people would do.

If your father counts as an example for you, then my completely inept co workers, who vastly outnumber our employer, and couldn't tie their own shoes if they didn't have an instructional video is an example for me.



It is irrational for everyone with a shitty job to go, "Imma start a business!"

the only people who should start businesses are people who have the cognitive capabilities to understand how to compete with other businesses, otherwise they'll fuck themselves over. Also, where the FUCK are most people going to get the start up capital to start a business if they're starting one because they aren't making any money?



Oh! Oh! I know!

My dad's an entrepreneur too! Worked at his plant for 2 years!

entrepreneurs work their asses off to make sure they can match basic costs for most customers and prices. Competition is rough, and depending on your market, you might get screwed because the Chinese, or some other out of america business can sell what you sell for 50% off what you could ever afford.

My dad gets fucked by the Chinese regularly, he's a printing company that can't even afford to sell notebooks for 5 cents each, and he's only able to do that because the paper is used from FREE recycled paper. The Chinese STILL beat him on that.

In any case, that chart's a little off. Unemployment shouldn't be at 50% at equilibrium. It should disappear at equilibrium. Just saying, it's not a bad idea to ask your professor questions about what's in the textbook. Economics isn't a hard science like biology or physics.

[color=#2e1a6b]Thank you for finally responding. I was getting tired of that 1-sided discussion



[color=#2e1a6b]Your sources seemed to focus on the inaccuracy of supply in demand, not the principles themselves. By that I mean that they aren't denying that price affects demand, or that price affects supply. They appear to be saying that the magnitude of how much these are affected are unpredictable, which I already know.



[color=#2e1a6b]I only assumed things that Room101 already claimed.



[color=#2e1a6b]Well, you're half right.

He said "You assume that everyone has same self-interest". But I never made this assumption. The assumption I made was that people act out of self interest.



No, because the hoarded diamonds are not available to the market.



[color=#2e1a6b]I fully acknowledge that both kind of people exist. I don't think room101 acknowledged that ordinary people can become entrepreneurs, which is why I brought this up.



[color=#2e1a6b]Then there's a problem with our education system



[color=#2e1a6b]They will need some amount of money to start the business.


[color=#2e1a6b]I'm assuming this is sarcasm. If so, what's your point?



[color=#2e1a6b]My professor has a heavy African accent, so he's really hard to understand. But after class, I'll talk with a few students for literally an hour. My inspiration to make this argument came from one of my discussions after class, not from the class.
My textbook didn't talk about these negative affects of minimum wage

Keep in mind Lundi that much of the manufactured goods coming out of China is subsidised by the Chinese government which is why you can buy a microwave for 20 bucks.
Not to mention the absurdly low wages the workers are paid (if at all).

OP you'd be surprised how little people (especially desperate people) are willing to work for and in unreasonably poor conditions. Heck even here in Australia big brand companies try to pull dodgy shit by not paying staff for their hours or trying to get them to do extra hours for nought (worked for one of those companies).

So abolishing minimum wage would only make the problem worse.

The educational factor is a real big factor, I believe Lundi. Many more young Americans are taking a path for business learning(I myself, aiming for a bachelor's in International Business), but the growth isn't enough. And often, with an absolute lack of direction in most American high schools(I should know, I had no training in business, or anything at all. I just took my classes like a dumbass robot. "Uh, okay, today I go to math."

Robert Kiyosaki, very prominent businessman and you could say an economist also points out the disparity in education, and in fact that those who've "made it", if you will want to keep it that way.