Edgar the Exploiter
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- čas přidán 13. 01. 2012
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Edgar the Exploiter is an explanation of how the minimum wage can be expected to harm marginal workers (even while it might help others).
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Edgar the Exploiter is the crowd-funded follow-up to George Ought to Help, • George Ought to Help
Homepage: www.georgeoughttohelp.com
Additional thanks: www.georgeoughttohelp.com/edga...
'Edgar The Entrepreneur' by Daniel Sanchez
mises.org/daily/6004/Edgar-th...
Summary of minimum wage research: www.forbes.com/sites/booked/20...
Use this URL if you'd like to provide a translation for the film's captions: czcams.com/users/timedtext_vide...
Translation Credits:
Hebrew
גיא קדם
German: Manuel Barkhau
Portuguese (Portugal): José Manuel Moreira Batista
Slovak: bulakmartin
French: Edouard H.
Italian: fabristol (www.libertarianation.org).
Finnish: / havaitsija
Spanish: Adam D
Polish: libertarianizm.net
Greek: / soulthorn
Indonesian: Entree 4 class MBA SBM ITB jakarta
Russian: / vparkh
I'm currently crowdfunding a new animation called Sex and Taxes. You can learn more at the campaign page: sexandtaxes.georgeoughttohelp.com/
Seems pretty socialist.
"I'd love to know what country Edgar lives in where they triple the minimum wage in one go."
This did not happened in the film.
The exact numbers are not important to the analysis. The film illustrates how the introduction, or any raise of MW level, is likely to harm the most vulnerable workers.
Excellent video. For those worried about big corporations notice that MW and general intervention in labor market also benefit most of them as it makes competition from small businesses harder.
Well funded big corporations are happy to employ workers at an initial loss (these workers will eventually provide benefit, with training and experience) in exchange of destroying competition from new and small innovative companies.
+Daniel Martínez Yes and bigger firms have capital to invest in alternative models that don't depend so much on cheap human labour.
@Griz zuli
"in countries that have minimum wage, workers are better off."
Correlation does not equal causation. In countries in which wages are higher, implementing a MW of a given level will harm fewer people and its effect on unemployment will be lower. We know MW harms marginal workers for the reasons spelled out in the video.
bitbutter Could you please address the issue of the iron law of wages in relation to the minimum wage? Broadly speaking, the law says that a worker will sell his or her services as long as the market wage equals the subsistence or living wage to meet the expenses necessary to meet his or her fixed costs. Do you see a situation where an employer pays less than this living wage to a permanent employee in markets where the minimum wage law is not instituted?
dmoneytron
Allow me. Firstly, you have misrepresented the 'iron law', which is that market wages will tend towards subsistence levels. Despite its melodramatic name, it is not actually a law, let alone an 'iron' one. In fact it's patently false: practically everyone gets paid much, much more than subsistence (just give some thought to what 'subsistence' truly means).
Secondly, it's patently obvious that MW has nothing to do with the fact that most people make more than subsistence: otherwise nobody would make more than MW. Moreover, in Singapore they don't even have a MW! That's the country with Asia's highest standard of living, according to the polls.
Thirdly, even if the 'law' _were_ worthy of its name, that wouldn't affect the argument in the film., which is simply that a MW limits a worker's ability to compete on price. You really should get this by now.
The iron law of wages has never been disproved because it describes a general very long term trend of what happens in an economic model where a large pool of labor competes for a limited amount of jobs at lower and lower wages.
Its supported in macroeconomic scenarios by the backward bending supply curve of labor.
As a plausible scenario it was a driving force in promoting discussion and conceptualization of other forms of economic thought, like the historical school of economics, to account for other factors than mathematical models or the homo economicus for economic behavior.
Basically, its a good thought tool for our discussion.
Obviously the 'law' is bogus, otherwise nobody would be making more than subsistence (or MW in those places with MW).
For now it is not proven. Many sociologists are saying that with 50% of the economy threatened by automation (automation being inevitable) in the next 20-75 years we will be in an economic revolution similar to the Industrial Revolution.
www.technologyreview.com/view/519241/report-suggests-nearly-half-of-us-jobs-are-vulnerable-to-computerization/
A lot of human labor will be replaced by machine aided or autonomous labor in white collar and blue color jobs.
Suddenly, we may have a huge supply of unemployed similar to the surge of unemployed farmers in the Industrial Revolution flooding the cities.
Obviously, I cannot predict the future, but its just one possibility that might temporarily prove the law of Iron wages correct.
Or it may prove it completely wrong as human capital is multiplied a thousand fold with the aid of autonomous robotic labor guided by human supervision heralding an era of unimaginable prosperity.
Cheers
I just finished reading "The Law" by Frederic Bastiat. Even though it was written hundreds of years ago it accurately describes socialists today.
"mechanisation (which hasn't already happened despite being more profitable long-term because ???)."
Because firms have only so much resources at any time that they can invest in long-term efficiency gains. A 1960s grocer would probably be unwise to invest in a computer, for example.
They're the only two in this series so far. You'll find other videos talking about similar themes on my channel. I'm working on the third in the 'George' series at the moment, you can keep track of its progress by 'liking' the George Ought to Help facebook page (link in the info box).
"homesteading implictly requires that the land in question produces a return without the need to employ others."
No it doesn't.
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Thanks!
"The millions of employees out there"
The 'army of unemployed' exists in large part thanks to laws like the minimum wage which price workers out of the labour market--for reasons explained in the video.
"What I'm saying is that there would be the same rate of unemployment"
There is no reason to suppose that this claim is correct.
Simon's bicycle seat is adjusted too low.
This reminds me of when I was a child and homeless. I was eager to work and happy to do so and try build myself a life, but many people tried to stop me from working by saying I was too young and many other nonsense things that had nothing to do with them. They went as far as publicly criticizing my customers and trying to shame them for hiring me. Those people are evil and they survive by suppressing us and using their system to steal the fruits of our labor to nourish themselves. They were the reason for my parents losing the family home, now I am older and a bit wiser, I have had the same thing happen to myself that caused my parents financial strife. They systematically rob us and shut down our businesses to stop us from being a threat to their monopolies.
Not evil, just stupid and/or ignorant.
@@anarchic_ramblings caring about nobody but themselves is evil
None. This is an independently crowd-funded production.
Do you understand why we can expect MW to harm the most marginal workers?
"It implies that there is upward mobility in Simon's position."
There might well be. Work experience of any kind is valuable for those who have not been employed before.
"If Simon is unable to earn a living wage"
Simon can clearly live off the wage(s) he earns combined with whatever other help (if any) he's receiving.
"I take issue with the way the video cleanly quantifies labor."
You mean how Edgar is able to know in advance what the precise expected MRP of each employee is? Of course that's different in real life (employees have a much more vague idea of expected MRP), but the principle remains exactly the same: an employee will not hire anyone for a wage that is greater than the revenue they expect that person to generate for them.
Do you understand how minimum wage harms the most vulnerable marginal workers? If not, watch the video before replying, it's explained in detail there. If anything isn't making sense to you feel free to ask questions.
At 0:42 Simon lays down the harshest whip of 2015
If i had 100k$ i would give it to you if it meant a lot more videos like this. This is exactly what people need to understand liberty, keep up the good work
what do you do for a living?
reachforacreech I'm a programmer but I'm also a full time student
Cameron Belt
programmer.hm.im sure you wouldnt be against the free market would you?
reachforacreech nope im not against the free market, never said i was against it either.
Cameron Belt well your job is under protected status.if those indian programmers were allowed to come over here,as it would in a free market,then your wages would drop to a third.yep most free marketeers dont even know what the consequences are of what they espouse.
"a janitor with 10 years experience will still be a janitor whether he stays or moves to another company."
Showing up to work, demonstrating social skills, showing a certain level of conscientiousness and trustworthiness. These are all things that holding down even the simplest job demonstrates that a person is capable of. Even a janitor can incrementally better his employed position, and the work experience of his or her first job will help them in doing so. What's to disagree with here?
This is the simplest way I can put it: The 'exploiter' is helping the desperate poor person by offering them a job in a sweat shop (assuming he accepts the offer). If you complain about this 'exploitation' the complaint must be that the exploiter isn't helping the poor person enough. But he's already helping this person more than you are (very probably).
So unless you're going to reserve more severe blame for yourself than for the exploiter, your position is incoherent.
"Edgar, in his capacity as exploiter of labour, does not simply 'deserve' the fruits of his proposed intellectual labour."
Edgar's contribution is to risk his own resources to have the factory built, and carry the risk of the venture personally--profits are his, but so are losses. Meanwhile, he forwards workers wages, irrespective of whether the venture will ultimately be profitable for him. Judging by workers' voluntary acceptance of his offer, they prefer not to carry these risks themsleves.
If I understand your point correctly, the exploiter would have a right to profit from merely being the owner of the means of production because he's taking some kind of risk partly because he forwards resources to the workers so they can live independantly from the endeavour's success.
If that is correct, it would imply that the exploiter already had a wealth of resources, but not the workers. So I would like to know how you explain that the exploiter has all these resources in the first place, but that the workers cannot fulfill their needs by themselves and thus have to sell their labor to the exploiter?
@@hecagamer "explain that the exploiter has all these resources in the first place," Just look at your own life. Do you have any savings? How did you acquire them?
@@hecagamer "but that the workers cannot fulfill their needs by themselves and thus have to sell their labor to the exploiter?" Poverty is the default state of existence. We are born naked, without possessions. The question is, how is it that there is any wealth in the world at all. This brings us back to the first part of your question: where do savings come from. Again, look at your own life for the answer.
@@anarchic_ramblings Are we born naked, or do we, when we come into this world, have at our disposal the immense, unimaginable wealth of knowledge, infrastructures, and technologies amassed by our ancestors? Why would the worker have to ask permission to any single exploiter to have the right to be productive, to use land cleared out or machines conceived and built by the collective work of the entirety of humanity? How dare does this one individual, by what right, does he claim "this is mine! Not yours! And you will have to give me a share of everything you produce or you will be forbiden the right to be a productive member of society!"
These machines, these lands, these roads, these tools, these houses, this food, this medicine, everything should belong to all of us to begin with, for all of us have worked to the maximum of our capacities to allow for their existence! The idea that we should even have to work to earn the right to work is absurd!
@@hecagamer "the immense, unimaginable wealth of knowledge, infrastructures, and technologies amassed by our ancestors" The key word is 'amassed'. These things don't merely exist; they were created through a process of saving and investment. Anyone can be a capitalist. You just have to save up and invest your savings.
Beware of the minimum wage.
Three situations:
1. Edgar doesn't build a factory and doesn't hire anyone.
2. Edgar builds a factory (at great risk and personal outlay) enforces property rights in that factory, and hires simon (as in the film).
3. Edgar builds a factory (at great risk and personal outlay) and walks away from it.
You'd prefer 3. You characterise 2 as Edgar 'pushing simon down a well'. Yet you behave just like Edgar in 1, in which Simon is left the worst off of all scenarios. Odd.
It sounds as though you don't yet understand how MW harms the most vulnerable workers. The video explains the dynamic. If you believe there's a fault in the reasoning then let me know. Otherwise, if anything is unclear in the video feel free to ask for clarification.
I look forward to the next installment in the George Ought to Help series, "You Can Always Leave," to be released next week!
"then Edgar is a bad businessman for selling something that's either worthless or people can produce better/cheaper for themselves."
If Edgar and Simon are harmed by the intervention of the state then its because Edgar is a 'bad businessman'? Your willingness to go to such lengths to avoid placing the blame where it clearly belong signals to me that this conversation has run its course.
Edgar is not selling something that is worthless he is selling something that is NOT worth MORE.
Just because someone won't pay more doesn't mean the customer can make it for less (not likely possible because of ECONOMIES OF SCALE) they are willing to do with out. So EVERYONE ( the consumer, the employees. the company, the society) is HARMED. It is a NO WIN for EVERYONE.
The film limits itself only to explaining how MW can be expected to harm marginal workers (it doesn't even make the claim that MW is bad, although that is my opinion). If you believe any part of the reasoning in the film is unsound let me know. Or if you have trouble understanding anything in the film let me know.
"Secondly, the overall point of the video is that minimum wages cause unemployment. "
1. The video explains how MW causes unemployment _for the most vulnerable group_ of which Simon is a member. It says nothing about overall employment levels.
2. Inter-country comparisons are mostly useless because of the thousands of uncontrolled variables.
This one tells my story. I am Simon. And I say fuck socialism! Cut my taxes instead of forcing my boss to fire me! Being unemployed is a nightmare.
I see, you're talking about Edgar's firing of Simon when he starts to cost Edgar more than he makes for him. That layoff leaves Simon in a similar situation to where he was at the beginning, before he was fortunate enough to be offered work by Edgar.
Let me rephrase: When you appreciate that MW can be expected to harm marginal workers you'll realise that punishing Edgar for his greed means harming Simon too.
My concern is employers, especially in areas where there are limited job opportunities don't pay "fair wages" and look for cheapest labor possible. It happens all the time where someone who is highly skilled, but not irreplaceable, are let go. Half the time they end up training their replacements.
SouthernSara7 _"fair wages"_
Whether or not a wage is 'fair' is entirely subjective. The only useful question here is whether the employee consents to the terms of her employment (which she does by definition if she accepts the job).
_"look for cheapest labor possible"_
Yes, and it is a bad thing that MW interferes with this dynamic. MW is a law that puts a lower limit on the price at which a worker may legally sell her labour. In other words, it is a law that restricts a worker's ability to compete with other workers on the basis of price, which is BY DEFINITION harmful to a worker *to the extent that she relies on being able to compete with other workers on the basis of price*. In other words it reduces bargaining power for those at the very bottom of the labour market, who have the least marketable skills and experience and, therefore, have the least leverage to start with! (Of course, artificially increasing labour costs doesn't benefit employers (especially smaller ones) or consumers either!)
_"especially in areas where there are limited job opportunities"_
And how will increasing labour costs help to attract more entrepreneurs to this industry or region? Remember, wages are affected by competition among employers. Low labour costs are a major factor in attracting new players to an industry or region.
"because employers only take on workers they need to continue operations."
Employers never expand their operations? New employers never come into existence sensing a profit opportunity? You're imagining the market to be a much more static thing than it actually is, and this is leading you to mistaken conclusions.
"the most disadvantaged are those judged to have sub-MW MRP in any role the employer may consider them for (Simon, in the video)?"
"Yes, I disagree. The most disadvantaged are those that can make the least money in a given scenario."
It sounds to me like we're talking about the same group. No?
"They will ALWAYS replace people with machines because that is more profitable. No question."
Eventually, as prosperity increases, many jobs currently done by humans will be mechanised. But this does not mean that at any given moment mechanisation is more efficient for a given firm. Machines have a certain cost, and hiring low cost labour can be cheaper.
"I do disagree. Edgar can pay Simon minimum wage will still making a profit if he simply asks for more money"
That doesn't follow. The unjustified assumption you're making is that Edgar's product would still sell (enough) at the higher price. You don't know that. Asking more money increases the risk that Edgar's firm fails to sell its output (which would also harm Simon).
"You didn't answer his question at all."
Yeah I did. And he apologised privately for overlooking it. Your angry ignorance is not welcome here.
Why Edgar the exploiter? He is a regular businessman.
In the technical sense anyone who trades is an exploiter.
because that is how media portrays every businessman now a days
+You don't get to see my name here it's a pro capitalist video...
Creepy Cooter yes, the term is being used satirically.
Do you disagree that the minimum wage harms marginal workers as explained in the film? if so, which part of the reasoning shown do you believe is faulty, and why?
"My point in the question is to figure out the best thing that could happen if MW was abolished."
One very positive thing is that if MW were abolished, then marginal workers like Simon would not be (further) disadvantaged.
"What's the difference, except for the fact I name the problem more specific (hurting vs. company goes abroad)"
The fact that companies may go abroad is not important (they may also mechanise, or they may simply disappear). The important point is that the consequences of MW are likely to hurt workers like Simon.
This is just great, thank you so much! And thanks for the subs, it helped me even more since my native language is not English! Once again, thanks for your hard work!
"My interpretation was that the video implied that minimum wage leads to unemployment"
It's more specific than that. MW can be expected to harm the most marginal workers (it makes no prediction about the effect of MW on overall employment levels).
"right now our supply of labor is greater than the demand for labor."
Absolutely true. The solution is to remove that state imposed artificial barriers to entry that are currently preventing large firms from feeling the full force of competition from small firms that they would in a freed market.
Brilliant.
Wonderful explanation of the harmful effects of the minimum wage! You guys have some real talent! How many of you are working on these animation videos? I like your style. I want to incorporate something like this in my own videos. Keep up the awesome work! :-)
Hi Peaceful Anarchism. Aside from hiring a narrator to speak the script it's just me making these. Glad you like them!
bitbutter Very cool! Your animation style is awesome! I love it! Do you do animation work on other channels or just your own? Where did you get the music for the opening section?
Thanks. I wrote and recorded the opening tune on a guitar borrowed from a friend.
I've done a couple of animations and some writing for the Learn Liberty project too: czcams.com/video/DvxT7fryE3Q/video.html
czcams.com/video/jwPGzkui8ow/video.html
bitbutter Beautiful work my friend! I'm delighted to see you are able to contribute your talent to such a wonderful channel as Learn Liberty. I have used their videos a lot in my articles. They are truly top quality!
"your hypothetical with Edgar introduced a MW that was 3x the market rate; I don't know of any government that would do that."
Three times the market rate of what?
Do you understand why the minimum wage is likely to hurt the most vulnerable workers? (explained in the video).
"To the extent Edgar (and others like him) enforce their authority in controlling access to factories, they are stopping others from doing exactly that."
If Edgar couldn't depend on being able to possess the factory he paid to have built, he wouldn't have had it built in the first place (and Simon would be worse off for it). I already pointed this out. The fact that Edgar did have it built, and hired Simon, helped Simon. This is not difficult to understand. Think carefully please.
"I did not wish to enter into a reasoned debate on this forum"
Then you ought not have commented here.
So, basically, bitbutter is saying a firm only hires somebody if their output is equal or more than their wage. So, if minimum wage is $8 an hour, but the workers output is $10 an hour, then the firm will be more than happy to hire that worker. If minimum wage is $15 but output is still only $10, the firm will not hire that worker because it's payoff is negative.
It must also be noted that decreasing Edgars profits means that it’ll take longer to pay back the cost of producing the means of production, which’ll disincentives future investment.
"if Edgar disappeared, those people who he employed could quite easily carry on working there."
Physically, yes. Your point's not clear.
Can you explain why you seem to believe that Simon's has some ownership claim to that land/factory?
Excellent explanation. Exactly what I would have liked to have said if I could have found the words.
You forgot to say that ironicly big corporations actually benifit from such laws. Sure, they might have to pay more, but that means that smaller businesses will close because of said laws and regulations, therefore less worries about competition for them, and more profit. Minimum wage jobs are meant for unskilled workers to gain skills and experience to get a better job later. If the minimum wage is too high they wont gain said skills and will stay poor forever.
"When you have countries like china where they will work for a tenth of the salary (or even less) of a comparable western worker, even the removal of minimum wage laws will not protect you. "
It would help some. Less harm will be done it it's removed. If general restrictions preventing small firms from competing with more established ones were lifted, it would help even more.
*This is how minimum wage creates unemployment!*
#MinimunWage and #Unenployment
"If there was no minimal wage, the very few factory owners would get together and pay the least they could so that their employees are able to work"
Cartels are inherently unstable. This is because a defector (and any new entrant into the sector) will be incentivised to pay slightly higher than the going wage rate--up to the level of expected MRP of the employee--to ensure that their supply of labour is steady, and to poach the proven employees of their competitors.
I've been in the work force for 16 years and have watched the requirements creep upward. I was searching for work 6 years ago, and currently I'm searching for work again. The same jobs I applied to back then are paying $2000-$5000 less today than when I applied before.
So many people are unemployed and more underemployed that we're all being undercut by our peers, struggling desperately to find work, any work. It's am employer's market and they will do anything that can to milk us dry.
"it seems identical to Jeff claiming to own the Northern hills in your "You Can Always Leave" video."
It's different in that there's no Intentional-causal chain that links Jeff's desire to possess the hills with the actual 'improvement' of those hills. There is such a chain in the case of Edgar, even if we assume he doesn't set foot on the land until the factory is complete.
To understand this, simply imagine that there's a universal minimum wage of $10000 per hour. If you understand why that would be a bad idea, you're on the right track.
"And there are plenty of other reasons to leave the country."
Of course there are. And MW is one more reason. Not clear what you believe your point is here.
What is it that i've said that you still disagree with (if anything)? Do you disagree that the most disadvantaged are those judged to have sub-MW MRP in any role the employer may consider them for (Simon, in the video)?
"I disagree that "need" is vague. It means "necessary to continue operations"."
Operations meaning 'production as it's currently arranged' or something else? Bear in mind that Edgar can always rearrange his structure of production, in small or large ways. So like I said 'necessary' is hopelessly vague here.
Bear in mind that "employers only really hire people when they expect to be better off by doing so", then re-watch the video.
"The higher the MW, the further the employers will have to increase their cost to consumer"
That's an option. One which harms their market position relative to all producers of substitute goods/services not relying so much on unskilled labour. This increases the likelihood of that firm not being able to survive, which translates to harm for unskilled workers it would otherwise have hired.
So: The higher MW, the fewer workers employers will judge to be profitably employable (in the long term)
This argument is incomplete. For one, profit conditions worsen as the low-wage labor disappears, cutting on the other workers' wages. Also, importantly, the market will marginalize the case "Bob", the only one where the minimum wage has a positive effect.
Long story short, a positive effect only shows that something even worse is going on, such as an illiquid labor market. First order, in a healthy market, the minimum wage does only damage and nothing else.
"couldn't the factory owner raise the prices of his products in order to increase profits and account for the amount he is forced to pay his workers?"
Yes. But notice that not all of his competitors have to raise prices. Those who are already heavily mechanised, or those who use primarily more skilled labour, are not affected. So Edgar loses market share to these competitors, and risks bankruptcy. The result is still that Simon is worse off (greater chance of being jobless).
"This video assumes the very incorrect stance that Employees have the choice to work for any company they want at any time "
No it doesn't. You misunderstood the point, which is that if Edgar were to offer Simon an arbitrarily low wage (say 1 cent per hour), there'd be many other employees willing to bid higher. Employers would continue this bidding until just underneath whatever they expect Simons MRP to be for them.
Phrases such as "standard of living" and "poverty" are not objective. Everyone lives differently from each other. Stop shoving your ideals into reality.
it has some official standards for measuring tho an approximation
Me who's name is actually Edgar in real life:
Am I an exploiter, what kind of exploiter?!
sorry man! (though, I believe we're all exploiters, and that's good)
As someone that was off work injured for a long time, i was searching for an alternative job that i was physically capable of doing such as an office job. Because of government intervention i couldnt find a job since i wasn't skilled enough to qualify for minimum wage although i was willing to work for less. The other issue was that any new employer couldn't employ me because of my injury and didn't want to risk getting sued.
"It would help small businesses within their (or comparable) economies, but not with regards to globalization (where third world labor enters the equation)"
There is only one economy. Removing barriers to entry helps small firms full stop.
Wonderful video!
Excelente muchas gracias por el vídeo.
If Simon's life depended on this sweeping job (as you imply), then Edgar's offer of employment would have saved Simon's life.
"because the flood of workers who would like to have his dead end job."
The number of unemployed workers is minimised to the extent that the myriad barriers to entry for small firms--imposed by the state--are removed. As i believe all should be.
You might be interested to know that this video was crowd-funded.
"Ownership of the means of production (factories, machinery, land) by someone other than the producers."
The capitalist is a producer. Producer meaning one who employs scarce means (money reserves, time, labour) in order to bring a product into existence.
This is a very cute video and it passes the muster of macro economics 101. If you artificially raise the price balancing the supply and demand of labor, there will be a surplus of labor, hence unemployment. However, sometimes the real world is more complicated. This Georgia State University paper (www2.gsu.edu/~ecobth/IZA_HKZ_MinWageCoA_dp6132.pdf) suggests the following about the minimum wage (MW):
"Exploiting variation in the cost impact of the MW across restaurants, we find no significant effect of the MW increases on employment or hours over the three years. Cost increases were instead absorbed through other channels of adjustment, including higher prices, lower profit margins, wage compression, reduced turnover, and higher performance standards. These findings are compared with MW predictions from competitive, monopsony, and institutional/behavioral models; the latter appears to fit best in the short run. "
Of course that is just one study. Nonetheless, the actual wage situation is much more complicated than that presented in this video. Much government regulation is setup to help very rich individuals and corporations. The distribution of wealth gets more skewed towards the ultra wealthy every year. No one factor controls the economy but this situation is at the very least alarming. Eventually, such inequality historically leads to revolution. When speaking of the issues with government regulation of markets, it is disingenuous to focus on minimum wage and ignore the rest.
I am a big proponent of free markets but they are not perfect. See for example the "Tragedy of the Commons." Sometimes everyone acting in their own interest is worse for the whole. Sometimes markets need to be regulated. I can't tell you what the total effects of raising the minimum wage will be but this video doesn't explain it either. It is dangerous to take such an important subject and boil it down to such a cute but trite seven minutes.
"It is not so easy to directly align costs with revenue"
No its not. But as long as an employer has _some_ expectation of the likely range of MRP of an employee, the dynamic described in the video is still relevant. The higher the MW, the greater the number of marginal employees are judged to be unprofitable to hire.
"Completely free markets are not perfectly efficient."
No one has suggested otherwise.
"The video slipped in this concept of the 'revenue' each employee generates, but there's not really such a thing."
You're claiming that employers have _no idea_ how any prospective employee is likely to affect revenue. Please think carefully about this claim and I trust that you'll see that it's false.
Unfortunately, this video assumes (among other things) that workers are fully knowledgeable about working conditions prior to employment, and that there are enough nearby jobs to create a demand for workers in excess of supply (which would allow workers to shop around). In the real world, especially w/r/t unskilled (or low-skilled) labor, the employer has a *much* stronger position in negotiations than the employee, as the employer has more information about the value of marginal increases in labor than the employee does. If the employee earning $15/hr knew that she was worth $23/hr to her employer, she might be more willing to negotiate a higher rate than she's getting. Indeed, this information asymmetry is one (of many) reasons we have to have minimum wages - employers act in their best interests by not sharing that kind of information with their employees, so the government steps in to limit the degree to which the most economically vulnerable employees can be exploited by this asymmetry.
"this video assumes (among other things) that workers are fully knowledgeable about working conditions prior to employment"
No it doesn't.
"In the real world, especially w/r/t unskilled (or low-skilled) labor, the employer has a much stronger position in negotiations than the employe"
It's true that right now competition between employers is kept artificially low by state interventions that maintain high barriers to entry for new and small firms (including individuals who want to work for themselves). People like Simon would be in a much better position without these.
I agree that the information asymmetry in the current situation is good to bear in mind. This is also something that sufficient competition could mitigate: given a choice between otherwise equally attractive employers, the employee will choose to sell their labour to the one that is as transparent as possible about the revenue they're creating for the firm (since this is the one in which his bargaining position will be stronger).
The logic of statism involves piling on new interventions to solve the problems exacerbated by previous ones, which causes new 'unintended' consequences, and so the cycle continues. Very rarely are interventions undone, since this diminishes rather than grows the power of the state.
"the employer has a much stronger position in negotiations than the employee"
And MW laws prohibit individuals from legally selling their labour for below a certain amount, thus _reducing_ their bargaining power.
Vnam72
And yet many people earn more than the minimum wage. Why?
Source for that?
Trick is, people need a certain amount of money to afford even basics. Another trick is that corporations don't work alone. They have learned to cooperate to the detriment of workers.
+Laughing Breeze
_"people need a certain amount of money"_
And the argument in the film is that MW does NOT ensure that people like Simon get a 'living wage', but are simply that much less likely to get ANY wage.
_"They have learned to cooperate to the detriment of workers"_
And one way they do this is by supporting MW. (But please remember that 'workers' aren't the issue per se. The issue is *workers like Simon*.)
Then how in the hell is Simon supposed to support himself if his wage is too little to pay for his basics? Government aid?
Laughing Breeze
Well, not through MW. MW only makes life harder for him, as the film shows.
You didn't answer my question. How is Simon supposed to support himself?
That is not the subject of the film.
But this is the beauty of competition. Say that employers and factory owners banded together like that and lowered wages. By banding together, they make it all the more profitable for another employer to come along offering higher wages. The new employer will be able to hire the best employees because he offers the best wages. Competition exists for labor as it does for everything else.
"If the video does not depend on the dynamic being possible 'IRL',"
That's not what I said. Re-read the comment more carefully "Yes the video simplifies by assuming Edgar can know precise MRPs. But the dynamic does not depend on this being possible IRL."
All that's necessary is that Edgar has _some_ idea of a workers likely range of MRP in a particular position. The higher MW is raised, the more workers Edgar will judge to be unprofitable to employ at that rate. Do you understand?
This assumes upward mobility. Working for the one company and moving up the ranks is something that is increasingly rare.
In today's world, Simon is going to be on $3 for the rest of his life, worked to the bone, because someone who knows someone got the job on the next rung of the ladder time after time.
This is libertarian (miser and miser-want-to-be) scaremongering. 'Society enabled me to becomes super successful, now fuck everyone else, I want to give everyone who comes after me less of a chance than I received! me me me! If they don't like it, we'll ship the jobs to chinamen! Do as I say and be poor, so I might be disgustingly rich!'
"Simon is going to be on $3 for the rest of his life"
Nah. Even in today's world, in which competition between would-be employers is kept artificially low by state-maintained barriers to entry, upward mobility exists. It is true that the Simon's are better off to the extent that competition between employers is strong. We can foster that kind of situation by abolishing legislation like the minimum wage, that prices new and small firms out of the market.
"I want to give everyone who comes after me less of a chance than I received!"
On the contrary. Libertarians have a better understanding than most about exactly what would help the poor and marginal, and tend to be motivated in part by a desire to help exactly this segment of the population. This site, for example, has a particular focus on this subject: bleedingheartlibertarians.com/
See also: Jeff's Story
Let's take an example of upward mobility, I think everyone on YT knows pewdiepie and his story. He was selling hotdogs and get by with doing that, and the important thing is that he got by and have the ability to make some videos that eventually kicks off his career.
If he were just unemployed, he wouldn't have the ground to even start his YT career.
Why not just stop Edgar from exploiting the workers, and give Simon, Bob and Vicky the full value of their work? Socialism!
Watch again. If you have something constructive to say that directly addresses the argument in the film, that would be nice.
+Simon Rosén The full value of their work is the amount that was previously agreed upon between them and Edgar.
+Simon Rosén Simon, Bob and Vicky are free to open their own factory and share their profits.
Everybody cant open a factory.
Simon Rosén
Is that your idea of 'something constructive to say'?
Then your understanding is faulty.
"businesses only really hire the people that they need" 'need' in this context is hopelessly vague. You'll be able to think about this with a lot more clarity if you instead bear in mind that "employers only really hire people when they expect to be better off by doing so", then re-watch the video.
Depends on the exact sense of 'upper limit'. It's true with an 'army of unemployed' Edgar might be able to get away with paying less than MRP, if people are desperate for work. Such an army of unemployed can be maintained by legislative interventions in the market, such as the minimum wage law. But Edgar would be willing to pay up to the expected MRP if he couldn't get a 'better deal', and not further, in this sense expected MRP is a hard limit.
Demand in unskilled labor is perverted.
The author of this video has suggested in other comments that the wage for unskilled labor - because this is what this animation deals with - could be bid up by companies. I believe that this is nonsense. It is in no interest for a company to raise its wage for unskilled labor to "steal" laborers from other companies. This principle is certainly applicable for skilled labor, which is highly desirable, but unskilled labor is always a necessary annoyance. If companies could replace people with machines, they would - in fact they do it all the time. Because unskilled labor is an undesirable necessity, companies pay out the lowest going rate possible for it. You rarely see unskilled labor being paid at any higher than the minimum wage. This is a basic rule of capitalism: maximise your profits! With unskilled labor, companies' agency to do this is without limits.
In a nutshell, unskilled labor wages are artificially depressed by their very nature.
So is this an acceptable status quo? "The hidden hand will always do its work but it may work by strangulation.” -Joan Robinson
Forget the days when unskilled labor was the "lower rungs of the ladder" the "first step upwards" in social mobility. In our modern economy, the experience obtained from unskilled labor is practically worthless with regards to the transition towards the skilled labor market. A developed economy's most valuable source of capital is human capital - this is derived from education, and higher education is the experience nowadays that leads to the skilled labor market. Minimum wage jobs today are mainly filled by those for whom the acquisition of skill is not a future possibility. They have either failed at doing so already, or their already acquired skills were rendered useless by technological advancements in the economy. For unskilled laborers, the minimum wage is a long-term subsistence wage. Thus the motivation for it to be a "living wage."
But let's leave the controversial, moralistic aspect aside. Raising the minimum wage makes economic sense too.
Increasing the minimum wage would create more consumption in the economy, driving demand and therefore economic growth. The argument based on inflation is fallacious in the sense that inflation is "sticky"; it might slightly increase on the short term, but it would be offset on the long term by an increase in production as a direct result of higher demand. More production would mean more job creation which pushes up the demand curve for unskilled labor, bringing the theoretical market price of unskilled labor back in line with the artificial price created by a minimum wage increase through meeting the induced increase in supply.
This is basic supply-demand economic argumentation. Is it not our duty to artificially readjust the market when the invisible hand works by strangulation? Remember that the unskilled labor market's context - both on the sides of supply and demand - truly is unique.
Food for thought.
>The author of this video has suggested in other comments that the wage for unskilled labor could be bid up by companies. I believe that this is nonsense.
> You rarely see unskilled labor being paid at any higher than the minimum wage.
How does it come to pass, in your opinion, that employers offer unskilled workers a wage of more than 0, when not legally compelled to do so? (This is the case in places with no MW, and historically was the case in places that do currently have MW).
+bitbutter Well one must pay workers at least something to attract them. The debate of course is whether that "something", in a modern, developed economy's eyes, is enough.
For instance, like you, I do agree that however unfortunate the work conditions maybe, sweatshops are necessary evils in developing economies and should not be closed down.
> Well one must pay workers at least something to attract them.
At least something, yes. And an arbitrarily small amount won't be enough either. Naturally: when unskilled workers are considering whether or not to sell their labour to a firm, they will consider what other firms are offering for that labour - and if employer X is offering much less than Y (all else equal), they won't sell their labour to X. That's how firms bid up the price of labour until it reaches MRP level.
+bitbutter However, there is little to no shortage of supply in unskilled labor, meaning that there a rarely any vacancies to choose from - because demand is relatively fixed.
The tricky thing here is that we are dealing with the labor market. Let's take the corn market. If too much supply but relatively fixed demand is causing corn prices to plummet, farmers can simply choose to produce less corn. With time, prices will again rise to acceptable market levels.
When dealing with "last-chance" labor, that is to say, the last working opportunity offered before unemployment (I.e. unskilled labor) can you simply rely on the market to reduce supply in order for wages to rise? Can you let hundreds of thousands "simply choose" to go unemployed? This is the special context of the labor market. People's livelihoods are at stake.
I also believe, as do some economists, that increasing the minimum wage will help to boost demand in the long run anyway - but that of course is a heated and unsettled debate.
> rarely any vacancies to choose from
There are rarely any vacancies in unskilled labour? Seems like a strange claim to me. Vacancies signs in many of the shops/restaurants i visit, and ads in the local papers seem to contradict you.
So if a person reading one of those ads notices that another ad for unskilled labour pays better, he'll choose the second. And if he's already at an unskilled job, and hears of a vacancy that pays better elsewhere, he may well switch.
Firms are competing to attract the workers they need. Wage level is an important factor in how attractive a job is. The existence of alternative employers means that a firm can't get away with offering arbitrarily low wages.
This is a false analogy. The crux of this video is to tie individual people to company profits. But it's impossible to tie people who do essential jobs, like cashiers and janitors, to profits. Surely customers want to shop in a store that's clean, so a janitorial position of some sort would be necessary to ensure customers walk in. But it's a common expectation that stores should be kept clean, and our expectations are always going to improve with technology. And as all that is happening, the company is reigning in billions of dollars in profits! Yeah, profit, as in "money after everything else is paid for." Companies can use this money to pay for employees at the bottom, to improve everybody's wages as a collective whole.
Seattle is seeing very low unemployment since wages started rising (
> Seattle is seeing very low unemployment since wages started rising (
Seattle employment has actually been hurt in the Restaurant (minimum wage) industry compared to other similar nearby cities that did not increase the minimum wage. That is the way to really analyze it -- not just look at overall employment (because there are other things beside min wage that effect employment), but to isolate out the effects of the minimum wage on employment. See www.forbes.com/sites/timworstall/2015/08/10/seattles-15-an-hour-measure-the-unemployment-effects-and-there-they-are/#2715e4857a0b918f7c23e7d0 Also, you are incorrect to assume that a company is a collective effort. It is collective ownership. Think of it as one person paying another person for his assistance/labor. If the first person did not pay the second person, it would be a collective effort. But trading effort for compensation is not collective.
Unfortunately, that's not a fallacy. The duties of the janitor that require one person working full time cannot be spread to any other person: it would have to be shared by a multitude of people who have other responsibilities, and the burden would require hiring more people to do those responsibilities which do actually require more skills.
Therefore, it is more cost effective to hire a janitor and pay a higher wage for him than to hire an even more expensive employee to offset the burden of moving Edgar's responsibilities to people who are doing higher-paying jobs.
This film also fails to explain the benefits of slavery: there are none. We had slavery in this country, but areas with high slave and plantation populations did not see better economy than areas with industrialization and paid workers. All the money in a slave population went to the incredibly wealthy slave owners, not the citizens. The only way the citizens saw that money is if they worked for the slave owner and were paid, which didn't happen, or if the government taxed the slave owners and gave that money back to the people, which also didn't happen. There are societies right now that have socialism and are doing it very well, which disproves all the points this video is making, there are cities in America that are seeing booming business with higher minimum wages, and there are businesses that are seeing their company profits soar after raising their own wages. When more people have more money, businesses prosper.
+mariomguy Your assessment holds only if the work of janitor is totally ancillary to the production process and only for a very short time.
As +John Colt alludes in his video, the structure of production is not fixed (an immutable fact that collectivists can never seem to grok). Certainly the entrepreneur might briefly choose to lose money on Simon the janitor until he can restructure is production so as to eliminate the job of janitor. This creates a brief illusion that lawgiver's scheme is working. However, it cannot last.
The degree to which Simon's work is core to producing the product will determine how fast and how fast and how completely Edgar eliminates the Simons. If Edgar's production process requires a lot of labor that yields value below the wage floor, then as +John Colt also points out, the shift might even mean switching to an entirely new (economically viable) product which requires no unskilled labor at all. Edgar would rather automate or rearrange production of his current product, but entrepreneurs simply do not persist in utilizing en-economical resources. This is why the Western world is so unbelievably rich and the rest of the world is catching up so fast.
What you write here is true for massive businesses, and of course they can afford the hurdles. The ones who can't are the little guys. The corner stores. They're the ones that are hurt by this. They are the ones we're sympathizing with.
Either unemployment rises or prices rise, usually a combination of both. A rise in unemployment means smaller wages since there is an abundance of workers, higher prices mean a requirement for higher wages since people need more money to afford what they could afford before that.
If taken to the extreme and done fast this would completely trash the economy and destroy a nation. It's happening slowly right now, but it's still happening.
And that's not taking into account all the other horrible stuff the state creates, like inflation, taxes etc. The state is making everyone poorer, but the rich can run to other countries, evade taxes, hire lawyers, have reserves... The poor people are left behind getting destroyed to the bone by the state.
"I see no prima facie reason why Simon's output is not his stuff"
The prima facie reason is that Simon and Edgar have an agreement: Simon does X for Edgar, Edgar pays him money in exchange. Simon's output occurs in this context. By entering into the agreement Simon relinquished whatever claim he may have had on his output in this context.
the 3 bucks aren't a living wage. This video does not in any way, shape, or form count in that there is quite the abundance of workers that keep the wage low since there are enough eager to work for it; Companies aren't so thirsty for workers that they have to supply attractively-paid jobs, especially in the low-wage sector.
Lets also not forget that the brushing up job isn't going to get outsourced, that's just a job left empty after the fatcat had to fire the young guy. Yeah, plenty of jobs will be moved to other countries, but those countries have different economies; surviving on 3 bucks an hour in India is slightly easier than in the USA or Europe.
There's barely any difference living off 3/h bucks and having to stock up via government aid (ask germans and their 1 euro jobs!) or to completely survive on govt. funding.
Great propaganda video, could use more logic, 3/10.
Vogerl1337 Do you understand why introducing or raising the minimum wage can be expected to harm the most vulnerable workers?
I understand why it won't.
Vogerl1337 Then you haven't understood the video yet. Let me know if there's anything in particular that isn't clear.
Oh I understand the video, I just completely disagree with the message. Don't frame it as the only possible viewpoint, makes you sound very condescending and arrogant.
Vogerl1337 The video spells out, in detail, why we should expect marginal workers to suffer from MW law. If you see a fault in the reasoning please explain where and why you believe it's going wrong. Be specific.
Thanks.
"I do wonder, how can you be so sure?"
I'm not sure. We have strong reason to suspect that MW actively harms marginal workers, for the reasons explained in the video. We also know that MW necessarily involves threats of violence against peaceful people. To overcome these defects, at minimum, there ought to be an extremely compelling case for the overwhelming benefits of MW before we considering using it. I don't believe that case can be made.
I already told you. Either: Edgar was given the land from someone who was part of an unbroken chain of legitimate owners--back to the original homesteading of the land. Or: (more likely) in the case of a broken chain, and no challenger, he's considered the homesteader of the abandoned land that he bought himself, until a challenger with a stronger claim can demonstrate the superiority of that claim.
Last chance: What is Simon's claim to that land in your view?
"You make it sound like people are generally incapable of working - alone or together - to fulfill their needs and desires without someone else paying them"
They're capable. But they seem to prefer not to in general (most factories have not been set up by worker collectives). This is understandable, given the large risk that the capitalist takes on.
"Without any regulation, we get indentured servitude and even slavery and sorts of abuse."
State 'regulation' is a misnomer, since it does not make markets somehow more 'regular', but rather works to concentrate wealth and power into the hands of the wealthy and politically connected.
If you believe that answering your question plainly is a dodge then we don't have enough common ground to carry on this conversation.
Answer the question please. Would it be morally preferable, in your view, for Edgar not to employ Simon (or interact with him at all), rather than hire him?
"employing others to work a factory ultimately requires an aggressive act (specifically, the alienation of labour from production)."
Would it be morally preferable, in your view, for Edgar not to employ Simon (or interact with him at all), rather than hire him?
The fact that minimum wage harms marginal workers follows deductively from the fact that employers will not knowingly pay a worker more than their expected marginal revenue product-as shown in the video. That you have to ask this indicates that you've not yet understood the video. If any parts of it are confusing please let me know which and I'll try to explain further.
His current production arrangement means that having Simon cleaning the floors helps facilitate production by some small amount. The important thing is that since he hired SImon, we know that Edgar expected Simon's marginal revenue product in that role to be non-zero _and_ higher than the legal wage he had to pay him. If this was not the case then Edgar wouldn't hire Simon (since employers don't like losing money).