Why Should Anyone Work For Minimum Wage?

[Katrin]

His lack of success in getting a decent job has made me wonder what will happen when I finish MY PhD? People have expressed an interest in my work (also software related) but I fear it may be the same situation where they want my research but they don't want to pay me a decent salary.

Sorry to have to point this out, but employers rarely pay PhD graduates in proportion with their skills and experience regardless of what field they're in. My sister wanted to be a clinical psychologist, so she did a psychology degree and got a training post on an embarrassingly low salary, and eventually she managed to do a PhD in clinical psychology. When she graduated with her doctorate she thought that as a doctor in psychology working for the NHS she would earn quite a lot, but the NHS offered her 17 grand, which has now increased to 21 grand as she has a bit of experience. She showed me the salary scale and she can earn up to 30 grand with experience, but she'll have to become some sort of manager to get into the 30-60 grand salary bracket. It amazes me that she's a doctor in the hospital and she only gets 21 grand.

Edited January 7, 2008 by Katrin

[auk]

There are a number of reasons why a minimum wage is a GOOD THING, but I've always thought that the most compelling one is that it prevents (most) genuinely exploitative situations.

A genuinely exploitative situation would be one where someone was doing a job for substantially below the market rate, but for various possible reasons (lack of knowledge etc) did not tell the employer to stuff it and move to a job paying the market rate.

A job that pays the market rate is not, in iteself exploitative.

If the minimum wage is the market rate, this is not exploitative.

What it may be is "unfair". By this I mean that there is a good argument that someone being paid minimum wage, while I get paid a lot more is unfair.

This is not an objection to the minimum wage. It is an objection to the market driven, capitalist system. Fundamentally, I am paid more because the market values what I do higher than someone cooking fries at McDonald's. This higher value is driven largely by the fact that my employer judges that what I do adds more value to their bottom line than McDonald's judges is added to their bottom line by their chef's labour.

My employer may be wrong. If they are wrong they are likely to go out of business relatively soon, because they are overpaying for labour.

I appreciate the fact that this situation may be unfair. I am in a better job than many because I have had the benefit of a good background and education, and, by a genetic fluke, a relatively high IQ. I do not think I have worked particularly hard to get where I am. My immediate ancestors have been miners, nurses and farmers. That's hard work.

Unfortunately, the only way to solve this problem is to redistribute wealth from "natural" high earners to low earners.

You can do this in a number of ways.

a) Highly redistributive income taxes.

b ) High minimum wages

c) A centrally planned and distributed economy, to a lesser or greater (Communism) extent

c) Has proved, historically, to be both unsustainable and, in the medium term, leading to a worse standard of living for almost everyone in an economy

a), when used in the UK, has also proven to be a bad plan, although it has worked in other economies (scandinavia)

b ) Does not work very well in an internationalist economy. It is a fallacy to say that increasing the minimum wage will automatically benefit those at the bottom of the wage pile. Companies will not necessarily swallow this extra expenditure, even if they are behemoths making $5b profit a year.

The reason why is simple. If Tesco are making £5b a year, it is simply incorrect to assume that this profit comes equally from the labour of each of their employees. The amount of marginal economic surplus generated from a £10k per year checkout person is very unlikely to be more that the fully weighted cost of their employment. Why? If it were much more, then, due to the large number of supermarkets, Asda would try and hire Tesco checkout people for £11k per year etc etc pushing the wage up.

This phenomenon can be seen most easily in investment banks. If Goldman's makes £10b a year, most of this profit comes direct from their highest paid bankers/traders. Its very easy to measure this, hence why they get huge bonuses. Its incorrect to say that this means that Goldman are paying their PA's too little (actually they are pretty well paid!).

If goldmans were made to split all their profits equally amongst all their staff, no one would work for them.

If the minimum wage was increased hugely, companies would choose to employ fewer staff on the bottom rung, because, given the new wage, having fewer staff would be the most profitable solution.

Across the whole economy, this would result in higher unemployment. Those on the new higher minimum wage would be better off. Those now unemployed would be worse off. It is not obvious that this new situation is a preferable one.

Edited January 7, 2008 by auk

[mightytharg]

So the guy on 5 million who pays a thousand times as much works 1000 times as hard to deserve the pay differential?

He probably works smarter, not harder.

Your kidding right? I'm sure the rich hire polish au pairs, nannies, etc to help them out, rather than because they can pay them minimum wage as opposed to 8-12 pounds an hour for english ones. The rich are so nice to have drastically increased the income inequality in the UK. I'm sure it brings a warm fuzzy feeling to their hearts.

Well that's true too, but what I was referring to is that they give away around 50% of their earnings as well (through the tax system). That alone makes them the biggest philanthropists in history. As you say, some of them also work so hard that they have to hire nannies, and in doing so help the poor even in more.

I'm not sure why the communists always drone on about income inequality. The guy could go on the dole instead, depriving the socialists of two and a half million in tax each year and reducing inequality. How would that help the whiners?

[alexw]

He probably works smarter, not harder.

So he has an IQ of 100000 (100X1000) or works 1000 times 'smarter'?

[t350t]

So he has an IQ of 100000 (100X1000) or works 1000 times 'smarter'?

he provides a service 1000 times rarer.

[alexw]

he provides a service 1000 times rarer.

So your saying that because there's only one thousandth as many people in that career that he should earn 1000 times more?

[auk]

So your saying that because there's only one thousandth as many people in that career that he should earn 1000 times more?

I would imagine that he is saying that his employer values his labour at 1000x what the other employer valued the other person's labour at.

[t350t]

So your saying that because there's only one thousandth as many people in that career that he should earn 1000 times more?

Dont know how it is in other industries - but in mine, the people i've met who've made it really big have done something revolutionary that I probably couldn't.

No matter how hard I work I can't provide the service they have, unfortunately, although I have exactly the same opportunity to do so.

A 1000x difference in value does seem a bit extreme i have to admit but bear in mind these things tend to work logarithmically.. it's more like they're 3 rungs up I guess.

Edited January 7, 2008 by t350t

[alexw]

At PhD level there aren't really any jobs requiring that qualification, as by definition you are at the forefront of your field and doing stuff that hasn't been done before. My colleague has spent the past 5 years teaching in the university and developing new (more productive) methods for software engineering, and has published several well received research papers on his new methods. He expected that his teaching skills and considerable research expertise would be worth a decent amount of money to some company, however what has happened is that several companies are interested in his research but don't want to pay him to work for them. He said that one company offered him a lump sum to train their staff on how to employ his new methods; he said he was available and offered to work for them and implement his methods himself, but they said employing him would be too expensive and all they really want is for him to teach their own employees how to use his methods.

Another company offered him 24k to head up a team which would apply his methods on select software projects, and he refused as he felt it was cheeky to offer only 24k and then ask him to be a research team leader. He said he could get more than that doing a cushy teaching job in the university, so why bother working harder in industry for less money?

He has also had researchers in private companies emailing him to ask him to explain the finer points of his methods as published in his papers, as they wanted to use them but couldn't get their heads around them. He replied stating that he was available for employment but was not willing to provide a free support service for everyone who wants to adapt and use his methodology.

His lack of success in getting a decent job has made me wonder what will happen when I finish MY PhD? People have expressed an interest in my work (also software related) but I fear it may be the same situation where they want my research but they don't want to pay me a decent salary.

Sadly this seems to be quite common (and a damning indictment) for UK industry. They don't seem to realize that though they might have to pay a higher initial salary that these are the people that will drive innovation, increase competitiveness, and develop new technologies and products for them to market. You only have to look at silicon valley in the US to see that, and other up and coming sectors which the US generally leads. It'd let us start to build the knowledge based economy the government carps on about. The only real call for PhD's is in finance which is surely a waste in terms of wealth building for the UK as a whole (but not for themselves).

[alexw]

I would imagine that he is saying that his employer values his labour at 1000x what the other employer valued the other person's labour at.

That might be true for a footballer for example. But for financial analysts and bankers, well they are a dime a dozen nowadays.

[auk]

That might be true for a footballer for example. But for financial analysts and bankers, well they are a dime a dozen nowadays.

You are wrong. If a banker is being paid £10,000,000 per year, and a checkout attendant is being paid £10,000 per year, then that's what their respective employers value them at. If the banker's employer really thought that people like him/her were "dime a dozen" then they would pay a much lower bonus, watch them run off in a huff, and employ someone else.

What might be true is that the banker's employer has made a mistake, and continues to pay £10m a year when they could have got someone much cheaper. However, since the banker's employer is also a banker, and not known for giving £10m of their own bonus pool away to people if they don't need to, this is unlikely.

Edited January 7, 2008 by auk

[GDS]

Unfortunately, the only way to solve this problem is to redistribute wealth from "natural" high earners to low earners.

Redistribution is not the only way.

The problem with the minimum wage is not the resulting inequality of incomes, but the fact that it usually has to be subsidised by state benefits, and/or by both partners in a family working full-time, if a reasonable standard of living is to be enjoyed.

If the nation’s money supply were created by an accountable public authority, and distributed as a non-means-tested basic income (or national dividend) to all adult citizens, it would provide a platform which would make a decent standard of living for families on the minimum wage possible without resorting to benefits; and part-time work, job-sharing and one-wage-packet families might become the norm.

More automation equals fewer jobs - and even some of the people who think themselves safe are going to find their livelihoods threatened, as companies rely less and less on what they call “human resources” (not human beings, you notice) - so if enough purchasing power is to be distributed to keep firms in business, it will have to come, in part at least, from somewhere other than the wage packet.

More unemployed people dependent on means-tested state assistance, or working in state-created non-jobs, and resented by those still paying taxes in full? Or the same allowance of publicly-created, non-taxable debt-free money for all, enabling those with fewer skills/less intelligence the chance to accept low-paid work and still have a decent standard of living, while taking nothing extra from those fortunate enough to have well-paid jobs? See http://www.freewebs.com/whosemoney

Of course, a universal basic income is out of the question, as long as the money supply is created as a debt owed to the banking system, and the nation has nothing but the publicly-created cash component (now a mere 3% of the total money stock) to call its own.

[dubsie]

It's not just as simple as pay, it's about the cost of living also. Why is that we even tax the poorest paid, surely it would be better to raise the tax threshold so those on the min wage are better off working. Housing is far too expensive in this country and we need to curb population growth, you should be able to buy a house for £300 pcm.

To make housing cheaper wouldn't it be better to encourage people to build there own homes on there own land. There are ways to build low impact housing on green belt areas thus free up land without spoiling the countryside. Bricks and mortar might be the tradition but timber is a better more green alternative. Anyone can build a simple timber frame house...they just need cheaper land and more imaginative planning laws.

[GDS]

Unfortunately, the only way to solve this problem is to redistribute wealth from "natural" high earners to low earners.

Redistribution is not the only way.

The problem with the minimum wage is not the resulting inequality of incomes, but the fact that it usually has to be subsidised by state benefits, and/or by both partners in a family working full-time, if a reasonable standard of living is to be enjoyed.

If the nation’s money supply were created by an accountable public authority, and distributed as a non-means-tested basic income (or national dividend) to all adult citizens, it would provide a platform which would make a decent standard of living for families on the minimum wage possible without resorting to benefits; and part-time work, job-sharing and one-wage-packet families might become the norm.

More automation equals fewer jobs - and even some of the people who think themselves safe are going to find their livelihoods threatened, as companies rely less and less on what they call “human resources” (not human beings, you notice) - so if enough purchasing power is to be distributed to keep firms in business, it will have to come, in part at least, from somewhere other than the wage packet.

More unemployed people dependent on means-tested state assistance, or working in state-created non-jobs, and resented by those still paying taxes in full? Or the same allowance of publicly-created, non-taxable debt-free money for all, enabling those with fewer skills/less intelligence the chance to accept low-paid work and still have a decent standard of living, while taking nothing extra from those fortunate enough to have well-paid jobs? See http://www.freewebs.com/whosemoney

Of course, a universal basic income is out of the question, as long as the money supply is created as a debt owed to the banking system, and the nation has nothing but the publicly-created cash component (now a mere 3% of the total money stock) to call its own.

[Butthead]

...allowance of publicly-created, non-taxable debt-free money for all, ...

Inflationary?

I think so Let's print money out of thin air and give it to people for nothing.

[auk]

Redistribution is not the only way.

If the nation’s money supply were created by an accountable public authority, and distributed as a non-means-tested basic income (or national dividend) to all adult citizens, it would provide a platform which would make a decent standard of living for families on the minimum wage possible without resorting to benefits; and part-time work, job-sharing and one-wage-packet families might become the norm.

Of course, a universal basic income is out of the question, as long as the money supply is created as a debt owed to the banking system, and the nation has nothing but the publicly-created cash component (now a mere 3% of the total money stock) to call its own.

This is interesting. Do you have any links to economic papers on this? My new year's resolution to drink only two cups of coffee a day means that my brain isn't working well enough to think about the implications of this. My instinct is that it would be horribly inflationary, but I could be wrong.

[Knut]

More or less it in a nutshell. When employers talk about lack of suitable graduates, what they are really talking about is a lack of suitable graduates prepared to work for the pay and benefits they're offering.

Exactly!

It drives me crazy when I hear some company executive complaining about the difficulty they are having finding staff, meanwhile the interviewer never once raises the point that they could try offering higher pay. Market forces cut both ways.

[auk]

It's not just as simple as pay, it's about the cost of living also. Why is that we even tax the poorest paid, surely it would be better to raise the tax threshold so those on the min wage are better off working.

If people are better off being on the dole than working on the minimum wage then this would be a VERY BAD THING. However I am sure that this is not the case for the majority of people.

[alexw]

If people are better off being on the dole than working on the minimum wage then this would be a VERY BAD THING. However I am sure that this is not the case for the majority of people.

Its not just being better off working, for many its "am i better off and is the increase in income large enough for the effort required to work vs the dole" 2.6million long term sick say its not.

[auk]

Its not just being better off working, for many its "am i better off and is the increase in income large enough for the effort required to work vs the dole" 2.6million long term sick say its not.

you are, of course, absolutely right, but the fact that people are putting a high value on "lazing around on the sofa watching tv" is not a particularly good argument for increasing the minimum wage unlesss we were at a very full level of employment (which we are not). Welcoming economic immigrants who place a much lower value on "lazing around on the sofa watching tv" is a better idea IMHO.

[alexw]

you are, of course, absolutely right, but the fact that people are putting a high value on "lazing around on the sofa watching tv" is not a particularly good argument for increasing the minimum wage unlesss we were at a very full level of employment (which we are not). Welcoming economic immigrants who place a much lower value on "lazing around on the sofa watching tv" is a better idea IMHO.

Actually thats very very bad. You still generally have to support minimum wage migrants via infrastructure, schooling, tax credits, etc. I'm willing to bet the amount they put into the system is far less than they take out. Add on the cost of also supporting the dole'e, and you can safely assume paying 9-10 pounds an hour would be less costly overall for the system (but not for that particular employer).

[BoomBoom]

he provides a service 1000 times rarer.

No he does not.

[BoomBoom]

Inflationary?

I think so Let's print money out of thin air and give it to people for nothing.

We do this now, the difference being it is a privilege afforded only to banking institutions

[nick22abdn]

If you work a full week on minimum wage you pay income tax.

Where is the ******* justice in that.

Becuase why should it be anyone elses job to pay for their medical services, military, street lighting etc. Most people on minumim wage will also be living in subsidised property, once again paid for by others.

Everyone has one life - they should at least be able to support themselves through it without expecting others to pay for them. If they wish to earn more, maybe investing their time in college rather than the pub would be more productive.

[alexw]

Everyone has one life - they should at least be able to support themselves through it without expecting others to pay for them. If they wish to earn more, maybe investing their time in college rather than the pub would be more productive.

And minimum wage allows them to do this? As for college we already have a devalued degree due to the numbers with this qualification. More won't help. There simply are not enough jobs that pay a rate that allows someone to survive without being supported by benefits.

If they were to be able to support themselves higher wages would have to be paid for lower end jobs, full stop.

Edited January 8, 2008 by alexw