Capitalism, The Best Solution to Poverty

[Sean Hayden]

In 2014 the minimum wage in Seattle was around $9. Today it's closer to $17 and nearly $20 for larger businesses. Did all the minimum wage jobs disappear? According to the US Bureau of Labor Statistics, jobs in the leisure and hospitality sector (the largest employer of minimum wage workers) have continued on similarly to years before increasing the minimum wage. There was a drop during covid, but more interesting is how fast those jobs came back after reopening.

All employees --leisure and hospitality-- (in thousands): 2015 - 2019, from 185.2 in 2015 to 207.7 in 2019. Around here covid hits and by December of 2020 that number is just 126.8. Perhaps this is the time when having a higher minimum wage should have the most negative impact on employment. But the latest provisional numbers for December 2023 are already at 198.3.

--//--

Obviously I'm not an expert, and this is the first time I've looked at these numbers. I'm making a lot of assumptions here. For example, not all employees included in the figures are minimum wage workers, but I'm assuming the majority are. Also, the data include Seattle, Tacoma and Bellevue, all of which have seen an increased minimum wage, but Seattle's has been the greatest. This is fairly zoomed out and may be hiding losses. There are bound to be many hidden consequences, and given my ignorance these jobs may not even be in the ballpark of reliable metrics for measuring the effects of higher minimum wages.

--anyway, just starting to go through this piece for fun:

The real differences between progressives like Reich and classical liberals like myself come then not in the proposition that markets depend in multiple ways on public support. Rather, the disagreement is over the means chosen to generate social improvements. It is here that Reich repeatedly misfires. In dealing with property rights, it’s nice that Reich comes out against slavery—but it is troublesome how he dismisses the right of all persons to determine what job offers to accept for work in the open market. The issue comes to center stage on the question of the minimum wage, where Reich takes the sunny view that the huge increase of the minimum wage to $15 per hour from its current level of $7.25 will largely be a transfer of wealth from rich CEOs and their shareholders to workers, who can use the money in question to get off of public assistance.

Dream on! Reich is in serious denial when he assumes that hard pressed firms in competitive markets won’t make serious changes in how they do business when labor costs move sharply higher. If the minimum wage shoots up, it will start to make more economic sense for these firms to replace low-skilled labor with machines and technologies that can do the same work. The employees that do remain will be, by and large, more skilled, shutting out the poor further. For example, Reich never considers the exceedingly high levels of unemployment among minority teenagers, whom regulation has shut out of the labor market.

The unintended consequences of regulations count. The early returns on the minimum wage increases in Seattle are a loss of 1,000 restaurant jobs in the city compared to an increase of 2,300 restaurant jobs in the rest of the state. And this is only for the first round of minimum wage increases. It is unlikely that Reich knows more about the restaurant business than the businesses themselves who will likely turn to customer self-order kiosks and other adjustments to offset rising labor costs. It is just foolish to project that the relatively small declines in employment levels from small increases in minimum wages will carry over when they increase the wedge between the market and the minimum wage.

https://www.hoover.org/research/economi ... bert-reich

[Brian Peacock]

'The market' is doing a lot of heavy lifting there I think. Of course, increased costs will impact a business' bottom line and reduce profit, but 'the market' is not a neutral economic space, but one tied to sets of laws and regulations, practices, assumptions, and expectations. If the expectation is that a minimum wage should not in any way impact returns to investors and owners then a minimum wage is clearly a bad thing. However, minimum wages get spent in other parts of the economy, help mitigate the impacts of poverty in areas such as hunger, health and educational achievement, and reduce personal indebtedness - all of which have wide social as well as economic benefits. Here 'the market' seems to encompass assumptions regarding the distribution of surplus value, specifically into the hands of those people and entities which can already meet their basic needs/cost. The minimum wage is therefore a small step on the path to a redistribution of gains, that is; a distribution away from business owners and towards those whose labour generates that surplus value in the first place. Reich's view is that 'the market' could easily be mechanisms which met everyone's material needs, rather than operating as a system of contractual rights designed to generate surplus value for the exclusive use of a minority. In this regard I'm not surprised a classical liberal doesn't like the smell of a guaranteed minimum wage - even in it does have broader benefits for the society in which the classical liberal is obliged to operate.

[Sean Hayden]

If the expectation is that a minimum wage should not in any way impact returns to investors and owners then a minimum wage is clearly a bad thing.

That does seem to be what he's saying.

[Brian Peacock]

It really grinds my gears when people talk about 'the market' in all earnestness as if it's a natural force or fact - like the tides or the balance of atmospheric gasses; something that just is.

It's not 'the market' that determines average CEO pay should be 300 times average worker pay. It's not 'the market' that decides that share dividends should not be classed/treated as either income or capital gains, or that the effective tax rate for board members or investors should be half that of the people they employ.

[macdoc]

Nor is it inherent in capitalism or in government oversight...it's individual choices and clumps of misbehaving humans.
We've always been tribes and gangs...

Ever since primatologist Jane Goodall's pioneering work at Gombe Stream National Park in Tanzania in the 1970s, researchers have been aware that male chimps often organize themselves into warring gangs that raid each other's territory, sometimes leaving mutilated dead bodies on the battlefield.

so are our near cousins....
To our credit we've mostly given up the cannibal aspect.

[Brian Peacock]

Sounds a bit like like a naturalistic fallacy to me mac.

[JimC]

I agree that our evolutionary past strongly influences many aspects of our social behaviour (influences, not controls). However, I still say that capitalism has an inherent tendency to tempt those in control of companies to act in ways that are selfish and take no account of social or environmental problems. This can be dealt with quite effectively by sufficient government oversight (and strong unions), but without that, capitalism will drift in the "robber baron" direction

[macdoc]

wrong - malfeasance is no more "inherent" in than in religious or other social institutions..."just following orders", "it's in the scriptures", "bobby made me do it "....etc etc.
I suspect the underlying attitude is those decrying capitalism do not like the idea of profit and then at the same time do not understand risk or more likely are risk adverse.
Better to work for the public gas company than be a tradie doing gas fitting.

What is the failure rate of small business startups?
About 90% of startups fail. 10% of startups fail within the first year. Across all industries, startup failure rates seem to be close to the same. Failure is most common for startups during years two through five, with 70% falling into this category.4 Jan 2024

If you wanna bitch....start with "fractional lending".

[Brian Peacock]

Pathologising those who critique the inherent flaws in the current justifying ideology of social organisation is straw herrings all the way down.

[Sean Hayden]

I’ve been busier than a funeral home fan in July, so I haven’t devoted much time to this. Still, I have managed to take a few more notes. If you want to separate this into Hayden’s 99 cent value thread and park it in the pub that’s fine. First, I’m still only focused on these claims atm:

Dream on! Reich is in serious denial when he assumes that hard pressed firms in competitive markets won’t make serious changes in how they do business when labor costs move sharply higher. If the minimum wage shoots up, it will start to make more economic sense for these firms to replace low-skilled labor with machines and technologies that can do the same work. The employees that do remain will be, by and large, more skilled, shutting out the poor further. For example, Reich never considers the exceedingly high levels of unemployment among minority teenagers, whom regulation has shut out of the labor market.

The unintended consequences of regulations count. The early returns on the minimum wage increases in Seattle are a loss of 1,000 restaurant jobs in the city compared to an increase of 2,300 restaurant jobs in the rest of the state. And this is only for the first round of minimum wage increases. It is unlikely that Reich knows more about the restaurant business than the businesses themselves who will likely turn to customer self-order kiosks and other adjustments to offset rising labor costs. It is just foolish to project that the relatively small declines in employment levels from small increases in minimum wages will carry over when they increase the wedge between the market and the minimum wage.

–taken from this piece: https://www.hoover.org/research/economi ... bert-reich

Regarding employment, I think we may do better than before by focusing on “fast food and counter workers” instead of the broader “hospitality and leisure” category. Employment estimates provided by the Washington Employment Security Department show little movement for fast food and counter workers since 2020. I think it’s reasonable to assume a significant impact on employment from minimum wage hikes would show up here, but I could be way off base. The author used restaurants as an example himself though, so… but still, assumptions again…

Sticking to restaurants, and to better understand the impact of minimum wage hikes on the use of technology (e.g. higher minimum wages will mean more jobs lost to kiosks) I’m looking at one company: McDonald’s –which btw has trimmed thousands of jobs since 2015.

Looking at McDonald’s financial statements it is clear that their interest in kiosks goes beyond labor costs. First, the company has found that kiosks help them to serve more customers. Second, kiosks lead to more money per sale.

This may look like support for the claim that higher minimum wages will lead to fewer jobs as companies replace workers with tech. But I don’t think that’s how McDonald’s will see it. For one these changes are coming whether minimum wages increase or not. The studies I’ve looked at so far tend to talk about increased minimum wages hastening the adoption of automation rather than being a primary cause –an important distinction in this context I think.

Furthermore, it’s not at all obvious that automation means replacing workers, at least not in the way it has been claimed. As it is now the kiosks operate alongside employees to increase the number of orders that can be taken during busy times. Rather than thinking solely in terms of replacing workers to reduce costs, it’s more likely that management will be motivated to strike the right balance between automation and employees.

cont...

[macdoc]

The automated checkout for grocery stores has face planted. We never ever use them....we're not alone.

'It hasn't delivered': The spectacular failure of self-checkout technology

https://www.bbc.com/worklife/article/20 ... oped%20for.
Australia does fine with very high minimum wage and no tipping
https://www.primecapital.com/insights/a ... ong%20Kong.

[pErvinalia]

The automation "concern" is an argument for a universal basic income. Let the machines take our jobs. The we can focus on more personally meaningful pursuits.

[Brian Peacock]

You're such a fucking lotus-eating communist pErvy! Don't you know it's working and making our bosses feel happy about their own work that actually gives proper meaning to our otherwise pointless lives?

* * *

Sean's work peeling back that article's many vales on the other hand seems to suggest that the automation argument for maintaining low wages is mostly an exercise of putting the cart before the horse. British textile workers in the early 1800 experienced significant downward pressure on what were already poverty wages with the introduction of the steam loom, which de-skilled weaving and required fewer employees to operate and maintain. Their protests were suppressed by the govt, who deployed the army to violently disrupt meetings and demonstrations, round up and execute ringleaders, and transport over a thousand textile workers from the north of England to the colonies. It was the increasing automation of agriculture in the preceding decades that had already driven so many off the land and into the cities to seek employment in the textile and mining industries, with high levels of unemployment ensuring wages remained low.

Sean's article typicality assumes the classical liberal perspective, which is that the employers side of the equation is the only valid basis for any form of economic and/or social analysis.

[Sean Hayden]

Well yeah, it's difficult to imagine researching this from the pov of employees being willing to accept lower pay to stave off automation. We could get there though, and I imagine that it's closer to that in countries with strong union integration.

[macdoc]

Supermarket shelves depleted of soda water and soft drink amid low supply of carbon dioxide
By Sue Daniel
Posted 9h ago9 hours ago, updated 9h ago

https://www.abc.net.au/news/2024-03-01/ ... /103532172