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Source link: http://archive.mises.org/5395/but-who-would-work-for-such-exploitably-low-wages/

But who would work for such exploitably low wages?

July 27, 2006 by

When debating the merits of a “minimum wage,” one common battle cry for its increase is that no one in their right mind would want to work for such a seemingly low wage. And as we saw yesterday in Chicago, politicians and “poverty experts” believe private companies should be forced to pay higher, “living” wages.

Interestingly enough, when the Evergreen Park store was opened in Chicago at the beginning of the year, more than 25,000 applications were submitted for 325 positions.

Perhaps these people were mentally insane, maybe they were brainwashed through some kind of subliminal message (e.g., Max Headroom), or maybe, just maybe under their own free-will, they were willing to work for the wages being offered.

Cafe Hayek has a worthwhile note on this issue. See also: 1 2 3 4 5

Via The Stalwart.

{ 11 comments }

Robert July 28, 2006 at 4:37 am

But don’t look certain implications of the theory of capital or certain attempts to examine the data.

Chris R. July 28, 2006 at 7:54 am

“When debating the merits of a “minimum wage,” one common battle cry for its increase is that no one in their right mind would want to work for such a seemingly low wage.”

Individuals are not only willing to work for such a “low” wage, there are also those who would work for LESS than the minimum wage…if the bureaucrats who care about them so much would only let them.

banker July 28, 2006 at 10:35 am

I wonder if the data can explain why minimum wage can’t be raised to $20 per hour? What kind of economics model derives the exact living wage? Hocus Pocus me thinks…

Lisa Casanova July 28, 2006 at 11:57 am

banker,
I don’t know about an economic model, but I did have it suggested to me once that we just keep raising the minimum wage until we see an effect on the unemployment rate!

billwald July 28, 2006 at 12:10 pm

Logically, people will work for a low wage if the net is higher than the available welfare if the alternative is doing nothing.

In washington State the farmers are crying for farm workers while every city is full of people begging for money. Begging must pay better than thinning apples.

adi July 28, 2006 at 12:12 pm

Neo-Ricardians ( like Robert Vienneau ) seem to hold that there is no general inverse relationship with factors price and its employment in the production processes. This is of course all about so called “re-switching” question.

Neo-Ricardianism ( or Sraffian economics ) is a theory which is like manna from the heaven to labour unions and populist politicians. Main point I think is supposedly we can separate formation and distribution of incomes.

But then we may ask why these linear systems would correspond at all with our knowledge about economics. We are not interested about Perron-Frobenius roots of linear economic models.

Then little joke; What was Piero Sraffas influential (1960) book called. It was of course “Production of Fallacies by Means of Fallacies”…

banker July 28, 2006 at 1:07 pm

A business manager does some sort of NPV calculation (either explicitly or in his/her head). Cost = Wage (including benefits) and Revenue = incremental benefit from hiring new employee.

Job seeker does value judgement. Is the wage rate worth the work that is required in exchange?

So the only 2 ppl who can decide on a wage rate is the two ppl who are actually involved in the transaction. What is wrong with this?

Kristian Joensen July 29, 2006 at 11:00 am

Bakner, absolutely nothing is wrong with that, that is exactly the way it should be.

Bill, Helper to the unskilled. July 29, 2006 at 4:12 pm

Banker and Kristian and any other proponents of the minimum wage, be careful about hurting individuals for their own good. The issue I have with minimum wage is that the legal requirement hurts those willing to work at a lower wage the most. The reason people work at a lower wage is that this is the point where an employer values their labor. Simply raising the amount the employer must pay will force the employer to decide between the labor and not paying it OR WORSE paying someone else. This hurts those with low skills and helps the most skilled.

Robert July 30, 2006 at 10:19 am

What is wrong with that? A lack of understanding about how markets participants are able to strike the bargains they do.

Robert July 30, 2006 at 10:37 am

“Neo-Ricardians ( like Robert Vienneau ) seem to hold that there is no general inverse relationship with factors price and its employment in the production processes. This is of course all about so called ‘re-switching’ question.”

Since reswitching is sufficient but not necessary for capital-reversing, I fail to take “adi”‘s point. Furthermore, I don’t know what Sraffianism has to do with it. After all, Edwin Burmeister, Frank Hahn, Paul Samuelson, and Robert Solow, for example, recognize that both reswitching and capital-reversing are logical possibilities under the assumptions of textbook economics. I guess “adi” is rejecting Mises’ a priori methodology.

I’ve noticed a tendency on this blog for commenters to assert that certain doctrines are true or false based on whether they are convenient or inconvenient for certain political interests, e.g. those of “labour unions and populist politicians”. Serious people, of course, need not take such balderdash seriously.

“We are not interested about Perron-Frobenius roots of linear economic models.” Apparently, “we” exlcudes the Bureau of Economic Analysis.

I’m not sure why “adi” finds Robert Murphy’s work “a little joke”.

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