Best Possible Thing for Low-Skilled Workers: Having Others Get Rich off Their Labor

I had an argument in a comment thread of one of Kevin Drum's minimum wage or some such posts (sorry, I can't even find which one now to link it).  Anyway, my concluding remark was that the best thing that could ever happen to the unemployed, and particularly to low-skilled workers, would be if people were to discover ways to get rich from their labor.   Of course, I was met with total scorn, as if I had suggested sacrificing virgins to improve the climate.

The reason I mention this is that this disconnect seems to be at the heart of the problem of Progressivism.  I am convinced that they honestly want to help low-skilled workers and the poor do better economically, but they advocate for policies that are 180-degrees askew.  Most of what they wish for -- higher minimum wages, larger mandated benefits packages, more paid leave, more ability to sue employers over trivial slights -- absolutely, with near mathematical precision, raise the cost of hiring low-skill workers, making it increasingly unlikely anyone will do so.  Low-skill workers get hired for one and only one reason (which is the same reason any worker gets hired):  someone thinks they can profit from that labor.  It is the potential for profit that is the sole reason for hiring anyone, but it is exactly that profit potential that Progressives most fear and deride.

  • Seattle Steve

    This just gets me all sad as to how misguided progressivism is. Making profit, even just making margin to cover costs, seems to be inimical to far left thinking. For example, if I'm paying Fred $15.00 per hour, and charging Joe $17.50 for that hour to cover overhead and a miniscule profit, it would be considered the same as robbing Fred of $2.50 per hour. No matter how carefully the business process is explained, they can't grasp anything beyond simply giving products, services, status, everything, away. This could be a fundamental personality trait that might not be able to ever understand basic economic concepts. Perhaps some distant point in the future productivity will be so vast, even the poorest of the poor won't realize they are "poor" materially, but the far left would still be able to gripe about status inequality.

    Thanks for your posts, been addicted to them for some time!

  • Bill Drissel

    I retired recently from 45+ years of consulting .... stayed mostly always employed because I kept my rates low. I always hoped my clients got rich from my efforts so they could fund even more development projects that gave me so much so much intellectual (and, yes, so much economic) satisfaction.

    This formula enabled me to do the technical work I loved until I was in my eighties.

    Regards,
    Bill Drissel
    Frisco, TX

  • Noel Davis

    Hi Coyote, I would like to see some of the responses to your post, one never gets to see such, don't know how you could offer that up for comment or review?

    Harris

  • Matthew Slyfield

    "as if I had suggested sacrificing virgins to improve the climate."

    Hey, that's no more ridiculous or unrealistic than any of the other proposed solutions. :)

  • tex

    As economists Joan Robinson said "The only thing worse than being exploited by a capitalist is not being exploited by a capitalist."

  • Onlooker from Troy

    Their economic ignorance knows no bounds.

  • http://nomayo.mu.nu Stephen_Macklin

    "I am convinced that they honestly want to help low-skilled workers and the poor do better economically"

    I'm not convinced.

  • CapitalistRoader

    Low skilled workers will continue to be hired. It's just that they'll be hired under-the-table, making the US more like the EU with its informal labor sector two- to three-times the size of the US, as a percentage of GDP.

  • joe

    It is often pointed out that higher minimum wages impede the ability of entry level workers to get job where they can learn basic job skills such as basic work ethic, showing up to work, etc .

    What is often overlooked is the cost of supervisory time which a big expense.

  • Another_Brian

    I am convinced that they honestly want to help low-skilled workers and the poor do better economically, but they advocate for policies that are 180-degrees askew.

    They focus on the goals of their actions, rather than the results.

  • Captain Profit

    An awful lot of people have no idea what profit really is. Profit occurs when a misallocation of resources is being corrected. Explaining this to someone who views profit as theft is nigh impossible.

  • joe

    Confirmation bias - Numerous studies show the unemployment rate does not change when the minimum rate goes up. Each of this studies refutes the right wing talking points that unemployment rates go up when the minimum wage is increased.

    The caveat that these studies acknowledge (usually only in footnote) is that hours worked are reduced. Thereby confirming the law of supply and demand.

    For a reference - look at any article written by Krugman regarding the minimum wage and the studies he cites.

  • mlhouse

    Actualy "profit" in most situations is the return on capital of the owners. That is a "cost". In situations were there is a misallocation of resources there will be "excess" profits were the return on investors capital is above an equilibrium risk-return rate. In the free market this situation will cause more capital to flow into that market which will return the rate of return back to "normal".

  • mlhouse

    Another "profit" factor in a business is the costs of management that a business owner does in managing their own business. While this is money that goes to the owner, it also has a true substitution cost if the owner delegates those responsibilities.

  • mlhouse

    1. One aspect that is being ignored is the absolute idiocy of the party that is calling for increased minimum wage rates AND amnesty for illegal immigrants. Clearly these policies are counter intuitive. If you want higher wages and/or more opportunity for the lower income earners then INCREASING the supply of low income earners will not help.

    2. Minimum wage legislation is a political device, not an economic one, and is more related to the interests of labor unions than it really is to poor, low productuctivity earners.

    3. The trend right now should eb to lower minimum wages, not increase them. I have proposes that we reduce the minimum wage for workers under the age of 20 and work less than 20 hours per week to $5/hour. At the same time, we should eliminate the FICA taxes on workers that make less than $10.10/hour. These measures would improve the competitiveness of low productivity/entry level workers and give them a start.

  • Another_Brian

    Numerous studies show the unemployment rate does not change when the minimum rate goes up.

    Right, unemployment generally increases prior to the actual minimum wage increase. Considering also that minimum wage jobs are generally entry-level positions, you also won't see an increase in the unemployment rate because the people most affected by the increased cost of their labor have never been employed.

  • SamWah

    Warren, you recalcitrant and unrepentant problem child, it's BECAUSE they want no one to make a profit hiring low-skilled/no-skilled workers!

  • McThag

    The line that's gotten me the most traction explaining it to low-information/uneducated/ignorant types is:

    Jobs are a side effect of a profitable business. Without profits, there will soon be no business and thus no jobs.

    Virtually any counter argument can be smushed by asking them if they'd do their job for free. When they indicate no, you can say that is true for the business owner as well. When they complain that they don't enough pay for the job they do compared to the profits the owner receives, remind them that many owners are losing money getting their business established, so monthly or even annual profit may not have overtaken losses and debts already incurred.

  • Swami Cat

    Joe makes a good point which is too often oversimplified in the higher minimum wage equals higher unemployment mantra. In reality, it is number of hours which is reduced, which doesn't necessarily translate into lower employment stats. Another effect is changes in who works these fewer hours -- demand shifts to more hours worked by more skilled employees and less hours to less skilled and experienced. Finally, many of the hours reductions occur over time as technological replacements are made possible, and as long term capital investment decisions are made on lease renewal or new location expansion.

    The point of this argument isn't that advocates of minimum wage increases are right, it is that their proof in various studies that short term unemployment isn't rising much (even if true) is insufficient to support throwing out the law of supply and demand.

  • Not Sure

    "When they complain that they don't enough pay for the job they do compared to the profits the owner receives..."

    At that point, I'd be asking how they know what the owner's profits are, as I'm pretty sure they believe business owners all have Scrooge McDuck vaults where they go to roll around in their money when they're not at work.

  • Captain Profit

    Yes, of course. The greater the misallocation, the greater the profit potential, and as the misallocation diminishes, so do the profits. This has the happy consequence of prompting profit-seekers to move on to the next worst misallocation and begin correcting that one. And again, you'll have a hard time convincing someone that this is a good thing if he can't abide the idea of someone making a buck just for helping his neighbor out of a jam.

  • obloodyhell

    }}} Of course, I was met with total scorn, as if I had suggested sacrificing virgins to improve the climate.

    The sad thing is, this would be just as effective as most suggested remedies...

  • Joe_Da

    Another article today by Krugman - showing increases in minimum wage increases employment.

    Citing a study with its own set of errors that even a freshman could recognize - but which Krugman doesnt / cant recognize.

    http://www.nytimes.com/2015/07/17/opinion/paul-krugman-liberals-and-wages.html?_r=0

    http://www.nber.org/papers/w4509

  • tex

    There is an old Krugman who won the Nobel, and the new one, a NYT spokesman pretending to be an economists. In 1998, decrying the idea of a "Living Wage," Krugman wrote:

    "So what are the effects of increasing minimum wages? Any Econ 101
    student can tell you the answer: The higher wage reduces the quantity of
    labor demanded, and hence leads to unemployment."

    One economist said of Krugman, "He's forgotten more economics than I ever knew."