How Do We Calculate a Just Wage?

[Texas_Roofer]

The Church teaches that wages should not be determined just by the market. It is wrong to pay people less than what their work is really worth. But if we aren’t using the market to determine what work is worth, how do we calculate it?

I do not think the church is referring to ignoring the market

1. Based on how much the person needs to live? Does this mean it’s okay to pay a single person less than a parent for the same job? Do we have to pay a person even more if they have lots of kids? If so, is it wrong to intentionally hire only single people?

Pay is an issue but expense is a different issue, suppose public school is free or insurance is same price all policies are family policies, etc

1. Based on how much profit the employer makes from their work? Does that mean that a company that does poorly is justified in paying its employees less for the same work they could do elsewhere?

yes, except do companies make profits or do employees do that? Here is an example; Wal-Mart ( who I love) has 2,055,00 employees(1) Wal-Mart claims a $9.68/hr average wage(2) that is $19,747 per year so these employees will receive a lot of government aid like Medicare, food stamps, WIC, etc. Now Wal-Mart also listed a 12.731 billion dollar profit(1) that is $6,195 per employee. So the employee receives about 75% while the owners take about 25%, so here is the question should Wal-Mart owners take 25% while other tax payers subsidize the employee welfare?

1. Some other criteria?

Yes, a just wage should see the employee taking home most of the profit he generates (not all) however the tax and benefits systems should assure a reasonable minimum standard of living is achieved.

hope that helps

(1) money.cnn.com/magazines/fortune/global500/2008/snapshots/2255.html
(2)ufcw.org/press_room/fact_sheets_and_backgrounder/walmart/wages.cfm

 

[royal_archer]

yes, except do companies make profits or do employees do that? Here is an example; Wal-Mart ( who I love) has 2,055,00 employees(1) Wal-Mart claims a $9.68/hr average wage(2) that is $19,747 per year so these employees will receive a lot of government aid like Medicare, food stamps, WIC, etc. Now Wal-Mart also listed a 12.731 billion dollar profit(1) that is $6,195 per employee. So the employee receives about 75% while the owners take about 25%, so here is the question should Wal-Mart owners take 25% while other tax payers subsidize the employee welfare? Yes, a just wage should see the employee taking home most of the profit he generates (not all) however the tax and benefits systems should assure a reasonable minimum standard of living is achieved.

That profit is mostly consumed by taxes and return on investment for investors. These stores wouldn’t be there to offer any jobs if people were not willing to invest in them.

There are workers who are paid based on the profitability of their companies and who get paid significantly less when the company looses money but most employees are not willing to take that risk.

That average fails to consider the numerous part time workers who hold the jobs for extra cash and not as a sole source of income.

You should be asking why welfare programs are enabling Walmart to offer lower wages than what you think people should be making.

 

[Texas_Roofer]

That profit is mostly consumed by taxes and return on investment for investors. These stores wouldn’t be there to offer any jobs if people were not willing to invest in them.

There are workers who are paid based on the profitability of their companies and who get paid significantly less when the company looses money but most employees are not willing to take that risk.

That average fails to consider the numerous part time workers who hold the jobs for extra cash and not as a sole source of income.

You should be asking why welfare programs are enabling Walmart to offer lower wages than what you think people should be making.

I will gladly send you a dollar for 25% of all your future earnings

 

[royal_archer]

I will gladly send you a dollar for 25% of all your future earnings

Are you looking for 25% interest or are you planning to share with the other 30 million people who also put in a dollar?

 

[Texas_Roofer]

Are you looking for 25% interest or are you planning to share with the other 30 million people who also put in a dollar?

Spinning? I’ll pay you and many others a $1 investment and you and they can then send me 25% of all future earnings, that is capitalism.

 

[royal_archer]

Spinning? I’ll pay you and many others a $1 investment and you and they can then send me 25% of all future earnings, that is capitalism.

If someone agrees to that, good for them, capitalism based on voluntary agreement.

 

[Le_Cracquere]

This is a social justice forum, some people (not me) might just be assuming that employers should act in the interests of another, dependng on what they can afford, without government forcing them to.

I assume the same. I also assume that no government has any business forcing an employer to act in this manner.

Then you must believe that the wages and conditions of industrial workers in the 19th Century were by definition fair. Funny how economies didn’t collapse in the wake of the labour movement, and that’s well before they had the means to shift jobs overseas… To some extent history proves the libertarian/Adam Smith p.o.v wrong.

I do, in fact, believe them fair. Whether or not entire economies collapsed as a result of the labour movement is no gauge of the latter’s righteousness, and says nothing about Adam Smith’s philosophy.

In fine, it is morally wrong for an employer to beggar or cruelly exploit an innocent employee, but legal proscription merely reverses the direction of the exploitation. In addition, an employee who unionizes or commits other acts of extortion against his employer ceases to be an innocent employee, and whatever his misery or exploitation, has by so doing earned no better (quite a bit worse, in fact).

 

[aspawloski4th]

If someone agrees to that, good for them, capitalism based on voluntary agreement.

But if it is under deress it’s not truely a voluntary agreement.

 

[CPA2]

The Church teaches that wages should not be determined just by the market. It is wrong to pay people less than what their work is really worth. But if we aren’t using the market to determine what work is worth, how do we calculate it?

1. Based on how much the person needs to live? Does this mean it’s okay to pay a single person less than a parent for the same job? Do we have to pay a person even more if they have lots of kids? If so, is it wrong to intentionally hire only single people?
2. Based on how much profit the employer makes from their work? Does that mean that a company that does poorly is justified in paying its employees less for the same work they could do elsewhere?
3. Some other criteria?

Economics cannot define the term “need.“ “Fairness” is another word that economics cannot define. Additionally, accounting cannot define fairness as an operational criterion for cost-allocation. Fairness is a lofty objective rather than an operational criterion.

Trying to define fairness and needs is like trying to change a tire on a moving automobile. Assume, for example, that I own a grocery store. I want to help the “needy” people who are in a rush. Therefore, I dedicate a cash register for people who are “legitimately” in a rush. What happens? The line clogs up because everyone is in a rush! I know in my heart what “needy” means, but it is a concept that I cannot enforce without assuming the role of judge. Fairness and needs are not quantifiable.

If you want to help sexually abused children, eliminate Social Services. If you want to decrease our dependence on foreign oil, eliminate the Department of Energy. If you want to help the poor workers, eliminate the minimum wage. If you want to reduce crime, eliminate the war on drugs.

Fairness is equal opportunity. It is not equality of outcome, as the judicial activists would have us believe. The role of government is an umpire, not a participant. These ideas go back to Adam Smith and Thomas Jefferson.

 

[Ender]

Fairness is equal opportunity. It is not equality of outcome, as the judicial activists would have us believe. The role of government is an umpire, not a participant. These ideas go back to Adam Smith and Thomas Jefferson.

Nice post. It’s probably too little too late to revive this thread but it was a good comment nonetheless.

Ender

 

[CPA2]

The minimum wage causes unemployment among unskilled workers and teenagers. There is over 50 years of solid economic research to support this statement.

I was willing to hire young and unskilled workers; however it was illegal to pay them what they were worth in the marketplace. The government makes it illegal to pay wages that are below the minimum wage.

The minimum wage is a floor on wages that causes a surplus of young and unskilled workers if the minimum wage is above what employers are willing to pay (the equilibrium wage). Why should I hire unskilled and teenage workers when I can hire skilled and older workers for the same minimum wage?

 

[royal_archer]

The minimum wage causes unemployment among unskilled workers and teenagers. There is over 50 years of solid economic research to support this statement.

I was willing to hire young and unskilled workers; however it was illegal to pay them what they were worth in the marketplace. The government makes it illegal to pay wages that are below the minimum wage.

The minimum wage is a floor on wages that causes a surplus of young and unskilled workers if the minimum wage is above what employers are willing to pay (the equilibrium wage). Why should I hire unskilled and teenage workers when I can hire skilled and older workers for the same minimum wage?

Your argument is based on a faulty premise. The minimum wage was not put in place to help the needy get fair wages, it was put in place to buy the votes of those who don’t understand ecconomics while at the same time forcing more people into government dependency. It has been very effective in it’s true intent to create a larger dependent class.

 

[CPA2]

The minimum wage does not work. It is bad economics. My college economics book states, “The minimum wage is a price floor…As the wages of low-skill workers are pushed above equilibrium, there will be more unskilled workers looking for jobs than businesses are willing to employ at the minimum wage. Theory indicates that minimum-wage legislation increases the rate of unemployment among low-skill workers…(Additionally), the proponents of a higher minimum wage nearly argue that it will help the poor. The composition of minimum-wage workers should cause one to question its effectiveness as an antipoverty device. Perhaps surprising to some, in 1997 more than half of all the minimum wage workers were members of a family with an income above the median.”

The bottom line is this: If you want to help the poor and inexperienced workers, eliminate the minimum-wage laws. There is 50 years of solid economic research to support this proposition. Anyone who has taken an economics course in college knows this. Supporting the minimum wage will only make you appear foolish in the eyes of college business students.

 

[Texas_Roofer]

The minimum wage does not work. It is bad economics. My college economics book states, “The minimum wage is a price floor…As the wages of low-skill workers are pushed above equilibrium, there will be more unskilled workers looking for jobs than businesses are willing to employ at the minimum wage. Theory indicates that minimum-wage legislation increases the rate of unemployment among low-skill workers…(Additionally),

That is supply side theory (only)

the proponents of a higher minimum wage nearly argue that it will help the poor. The composition of minimum-wage workers should cause one to question its effectiveness as an antipoverty device. Perhaps surprising to some, in 1997 more than half of all the minimum wage workers were members of a family with an income above the median.”

The bottom line is this: If you want to help the poor and inexperienced workers, eliminate the minimum-wage laws.

The majority of economic data indicates job creation and increased GPD

There is 50 years of solid economic research to support this proposition.

I have not seen such data. The third party data general (not all case) show increases in economic activity. I would be glad to look at this data you speak of but be careful not to confuse supply side data with macro data.

Anyone who has taken an economics course in college knows this. Supporting the minimum wage will only make you appear foolish in the eyes of college business students.

??

 

[stinkcat_14]

The bottom line is this: If you want to help the poor and inexperienced workers, eliminate the minimum-wage laws. There is 50 years of solid economic research to support this proposition. Anyone who has taken an economics course in college knows this. Supporting the minimum wage will only make you appear foolish in the eyes of college business students.

As an economics professor, let me clarify things a bit. The literature on the effects of the minimum wage does not unambiguously assert that the minimum wage is a major destroyer of jobs among the unskilled. The evidence is more mixed. For example, David Card and Alan Krueger found evidence to suggest the opposite. One issue is that in many areas unskilled jobs pay more than the minimum wage anyway, so raising the minimum wage would have little effect here, as your economics textbook should tell you.

The minimum wage may have a negative effect on employment. For example, raising the minimum wage to $30 an hour would probably cause massive unemployment, but at current levels it is for the most part a minor issue. That is not to say that it is a good policy, it is a policy that tends to generate more heat than light.

 

[CPA2]

As an economics professor, let me clarify things a bit. The literature on the effects of the minimum wage does not unambiguously assert that the minimum wage is a major destroyer of jobs among the unskilled. The evidence is more mixed. For example, David Card and Alan Krueger found evidence to suggest the opposite. One issue is that in many areas unskilled jobs pay more than the minimum wage anyway, so raising the minimum wage would have little effect here, as your economics textbook should tell you.

The minimum wage may have a negative effect on employment. For example, raising the minimum wage to $30 an hour would probably cause massive unemployment, but at current levels it is for the most part a minor issue. That is not to say that it is a good policy, it is a policy that tends to generate more heat than light.

About 70% of economists surveyed agree that the minimum wage is responsible for an increase in unemployment among the young and unskilled laborers IF that wage is above the equilibrium wage. As an economics professor, you already know this. As you mentioned, the minimum wage would have no effect on unemployment if the minimum wage were below the equilibrium wage.

As an employer I experienced a surplus of unskilled workers seeking jobs when Clinton and Congress rapidly increased the minimum wage above the equilibrium level.

Government is only capable of producting surpluses of young and unskilled workers through a price floor such as the minimum wage. Additionally, government is only able to produce shortages through price ceilings. Government is a parasite. I am not aware of government producing much good. In yesterday’s gospel, God told the people of Israel through Samuel something to that effect when they asked for a king.

 

[Texas_Roofer]

About 70% of economists surveyed agree that the minimum wage is responsible for an increase in unemployment among the young and unskilled laborers IF that wage is above the equilibrium wage.

It is rather easy to get any answer you wish in a survey. All economic changes cause job creation AND job loss. Many changes result in more of one and less of the other. Productivity is the primary measure and all changes which increase productivity immediately result in job loss (ie the work of 10 men is now done by 9). So does that make productivity bad for jobs? NO, the unemployed man can now preform another job which did not exist, so you have the original products + new workproducts = increase in overall in products

As an economics professor, you already know this. As you mentioned, the minimum wage would have no effect on unemployment if the minimum wage were below the equilibrium wage.

your equilibrium wage is a scale not a point. Heart surgeon’s have a higher “equilibrium wage” than a retired person working a cash register part time

I experienced a surplus of unskilled workers seeking jobs as an employer when Clinton and Congress rapidly increased the minimum wage above the equilibrium level.

There was very good economic growth during Clinton’s presidency, so though any small area maybe in reverse the greater economy did well

Government is only capable of producting surpluses of young and unskilled workers through a price floor such as the minimum wage. Additionally, government is only able to produce shortages through price ceilings.

The reason increasing minimum wage can work is by spuring demand by shifting income into low wage hands

As an economics professor, let me clarify things a bit. The literature on the effects of the minimum wage does not unambiguously assert that the minimum wage is a major destroyer of jobs among the unskilled. The evidence is more mixed. For example, David Card and Alan Krueger found evidence to suggest the opposite. One issue is that in many areas unskilled jobs pay more than the minimum wage anyway, so raising the minimum wage would have little effect here, as your economics textbook should tell you.

The minimum wage may have a negative effect on employment. For example, raising the minimum wage to $30 an hour would probably cause massive unemployment, but at current levels it is for the most part a minor issue. That is not to say that it is a good policy, it is a policy that tends to generate more heat than light.

Whether a particular change in minimum wage will work or not is measurable in sound economic theory. Factor 1) will the change disrupt the market (ie if avg =$15 and minimum moves from $3 → $5 it will not disrupt change is from 20% to 30% of market average) 2) Unfulfilled demand exists. This means the workers making $3/hr have unfulfilled needs, the shift in income thus goes straight to consumption. CP2 - try to understand the reverse is also true. If you give Bill Gates a tax cut it does not matter because he has no unfulfilled demand. He will be able to afford a Ford Focus because of the tax cut, however he could have afforded that before the cut, so no likely change in consumption.

In summary it is the relationship of minimum wage to average wage which matters. And measuring the affects of minimum wage can only be done in macro economic data not supply side data.

hope that helps

 

[royal_archer]

The minimum wage does not work. It is bad economics. My college economics book states, “The minimum wage is a price floor…As the wages of low-skill workers are pushed above equilibrium, there will be more unskilled workers looking for jobs than businesses are willing to employ at the minimum wage. Theory indicates that minimum-wage legislation increases the rate of unemployment among low-skill workers…(Additionally), the proponents of a higher minimum wage nearly argue that it will help the poor. The composition of minimum-wage workers should cause one to question its effectiveness as an antipoverty device. Perhaps surprising to some, in 1997 more than half of all the minimum wage workers were members of a family with an income above the median.”

The bottom line is this: If you want to help the poor and inexperienced workers, eliminate the minimum-wage laws. There is 50 years of solid economic research to support this proposition. Anyone who has taken an economics course in college knows this. Supporting the minimum wage will only make you appear foolish in the eyes of college business students.

This is made worse by many lower skilled workers who may be able to justify their wages in some lines of work but not others. then it is a matter of finding the right job and thier willing to do that work.
I noticed that there has been a distinct drop in people willing to work as domestic help or in other jobs that are more suited to those with minimal skills. Many such jobs have been sent oversees.

 

[Ender]

About 70% of economists surveyed agree that the minimum wage is responsible for an increase in unemployment among the young and unskilled laborers IF that wage is above the equilibrium wage.

I recall the last time this was debated in Congress. The disagreement between the parties was not over the question of whether raising the minimum wage would cause unemployment to rise it was instead over how much unemployment it would cause. I’m surprised that only 70% of economists agreed with that. I understand that if no ones wages increase because everyone is at or above the new minimum that no one would be laid off but in the real world that isn’t the case; there are always people who’s jobs are terminated.

In some cases entire categories of jobs are wiped out. When the minimum wage was first passed, many teenage boys, who worked for trivial wages at filling stations pumping gas and washing windshields, not only lost their own jobs but saw that service entirely disappear. In the South, before the introduction of the minimum wage, many middle class white families could afford to hire maids and gardeners because levels of black unemployment were so high and opportunities for them so low. After the minimum wage, I would take a SWAG and say that perhaps half of them lost their jobs.

It is unarguably a good thing that such conditions no longer exist for minorities but the point is that a lot of people lost their jobs then … and the effect continues today.

Ender

 

[royal_archer]

That is supply side theory (only) The majority of economic data indicates job creation and increased GPD I have not seen such data. The third party data general (not all case) show increases in economic activity. I would be glad to look at this data you speak of but be careful not to confuse supply side data with macro data. ??

You are both right. minimum wage has an impact that increases the higher the dictated wage gets but it is only one of several factors.