You’re wrong that the minimum wage doesn’t affect people who earn more than the minimum wage. Economists who’ve done empirical research into minimum wage law changes have shown that a ripple effect occurs – whereby if the minimum wage was $X and is now $X+2, then people who used to earn X+2 go up to X+4, and the people who made X+4 go up to X+6, and so on. Obviously, it’s not a 100% effect – it peters out once you get far enough away from the original level, and it’s not like everyone goes up by the same level, but it’s not accurate to say that there’s no effect beyond those earning minimum wage.

McDonald’s actually isn’t the best example, because they generally pay a bit above minimum wage ($8/hr I think is their national average), but let’s use it for the sake of argument. Now McDonald’s applicants are likely to be more desperate than UPS applicants – because UPS applicants can at least use some elements of skill, such as physical strength needed to move boxes, a driver’s license for drivers, and so on; McDonalds applicants are totally replacable hands.

2. I agree about bargaining power.

3. Here’s how you beat down a wage below market level – employers tactitly agree to not pay more than a certain level, even if normally comparable labor would earn more. Employers use their unequal level of economic power to artificially force wages to a certain level below where they would be if employers were freely competing to hire freely bargaining workers. Despite the economist’s argument that this should never ever happen, historically it does happen – take the historical wage discrimination between black and white workers in the same occupations, or the wage discrimination that currently occurs when women are paid less than men for doing the same work.
While theoretically this can’t happen, the theory assumes prefect information and perfect mobility on the part of the employee – in the real world, lack of information, spatial mismatch, risk aversions to potential unemployment, and other factors create a situation much more similar to monopsony, which can reduce wages below their normal market level.

4. See above. For examples of wage discrimination in fast food, see the case of Yum Brands (Taco Bell, KFC), Burger King, and McDonalds, and the Florida Tomato Growers Association in dealing with the Coalition of Immokalee Workers, or Doyel et al. v. McDonald’s Corp, and similar cases. For more, see Labour Relations in the GlobalFast-Food Industry by Tony Royle, and Brian Towers.

5. Another possibility is that Wal-Mart pays its workers an average of $8.23 an hour and CostCo an average of $17 an hour, even though the workers and work is almost identical, because Wal-Mart is able and willing to use its labor market power to dictate wages. And as has been seen in Braun v. Wal-Mart Inc and dozens of other cases, many employers are willing to run the risks of lawsuits and criminal investigations to shave off extra profits.

If any of this is the case, it’s not fair to conclude that the source of low wages is inadequate skills and simple supply and demand. In which case, employers who oppress their workers should have to pay fair wages.

Clearly, you don’t like the implications (i.e.: the laissez-faire equilibrium would force a considerable number of people to do hard labor at the edge of starvation), so you propose that everybody should chip in and help them out.

Fine, but this changes the equilibrium too. In this new equilibrium, why wouldn’t the McD offer a $2/hr wage instead of $4/hr? The worker is subsidized anyway, she doesn’t care; McD wants to cut its labor costs, increase profits. You will have a ripple-effect of businesses cutting wages to take advantage of EITC, until you you reach a new equilibrium with lower wages, higher taxes, and people not caring about their work (because they are paid regardless); something like a Soviet-style state-capitalism economy.

The minimum wage, OTOH, causes the opposite ripple-effect; wages go up not only for the minimum wage recipients, but above them as well. All the market incentives are still in tact. Frankly, I don’t understand why this approach should bother you; it doesn’t affect the market mechanism at all, all it does is replacing the physiological “below this wage people starve” limit with “below this wage people can’t live comfortably enough” limit.

But that doesn’t make any sense. Let’s say (for the sake of argument), that the minimum wage is $6 an hour, and that McDonalds pays $6 an hour while UPS pays $12 an hour.

Clearly the minimun wage effects the pay of workers at McDonalds. They are paid exactly the minimum wage, and its probably safe to assume that McDonalds would pay them less if they could get away with it. But the minimum wage does not effect the pay of workers at UPS. they make twice the minimum wage, so the minimum wage is irrelevant to them.

Now, why is it that McDonalds pays workers $6 (and presumably would pay less if they could)? Let’s list the possible answers, based on your argument:

1) Applicants to McDonalds are desperate. Perhaps. But any more desperate than applicants to UPS? Hardly. UPS receives dozens, sometimes hundreds of applicants for every opening it has. McDonalds locations frequently run under-staffed, actively recruit workers through the friends and family of current workers, and never stop hiring.
2) McDonalds employees have little bargaining power relative to their employer. Perhaps, but they probably have more bargaining power than employees of UPS. Workers at McDonalds can find similar work with a couple of dozen national fast food chains plus any number of independent low end eating and drinking establishments. Workers at UPS can find similar work at FedEx, and that’s about it.
3) Fast food restaurants are able to beat down the price they pay for labor below the value of the labor. This is a curious statement. The economic “value” of something is a function of the price it will earn in an open market. It is true that the labor that an employee offers to McDonalds is worth more to McDonalds than the wages that the company pays to the employee. But that’s the case, more or less, for every single job in the economy. Companies that pay workers in excess of the value they generate go out of business. Given that nobody holds a gun to any McDonalds employee’s head, we can also safely assume that the wages that McDonalds employees take home with them are worth more to them than the time they spend on the job. Otherwise they would quit.
4) Fast food restaurants are able to collude to drive down wages to lower levels than they would otherwise be. Reiterating my earlier argument, this is really, really far-fetched. Colluding in any market but especially labor markets is a felony. Corporate executives go to jail for this type of thing. And there are whole departments of the federal government dedicated to finding and prosecuting companies for this behavior, not to mention 50 state attorneys general, each of whom would love nothing more than to pad their political resume by taking down a big high profile employer for unfair labor practices. And yet, despite all this there has never been a major wage fixing action against the industry. Add in the fact that fast food providers compete aggressively against one another in every other aspect of their business and you really need to take a HUGE leap of faith to buy this argument.

Now, let’s consider one more possibility:

5) In an unregulated market McDonalds would pay less than $6 an hour ($4 for example) because that’s the wage at which the supply of labor for them would balance against their demand for labor.

None of this has any bearing on whether society has an obligation to help those whose skillsets do not allow them to earn a living wage in an open economy. As I have said many many times on this thread I believe that society does have such an obligation and so I support expanding the EITC greatly.

What I do not think is that we best help the under-skilled by, in essence, placing an extra tax on companies that employ a lot of under-skilled people. In fact, that strikes me as flat out looney. And I have to wonder about the mindset of people who think that the under-skilled should be taken care of, but that they should be taken care of by OTHER people, thankyouverymuch.

Or there’s the possibility that low-wage laborers in a labor market full of desperate people have little bargaining power compared to their employers, who are thus able to beat down the price they pay for labor below the actual value of that labor, and make a profit off the difference. And that what minimum wage laws do is force a redistribution of the labor value of those employees’ work.

How many Bachelor’s or Master’s educated end up robbing 7-11’s or carjack? I am for enforced education through college/trade school and enforced school in prisons. If criminals are going to use my taxes to live off of I demand they get educated at the same time, so they have a better chance of making it without crime and additional costs to taxpayers.

“Right. Also, it seems quite unseemly that someone should put out 5 days/week of honest hard manual labor, get paid a pittance and rely on some handouts calculated by politicians.”

That’s what the minimum wage is – a handout calculated by politicans. The vast, vast majority of jobs already pay well above the minimum wage. So the market for labor seems to have no problem paying people above what the government dictates as a minimum – provided that the fair market value of that labor is higher than the minimum wage. The labor market may not be perfectly efficient, but it doesn’t drive all wages down to zero. So if a job won’t pay above minimum wage we have two possibilities:

1) Somehow the labor market, which seems to pay many people far in excess of minimum wage, is somehow uniquely inefficient and oppressive in certain occupations, regardless of the specific employer or location. In other words, that flipping hamburgers generates more value per hour than minimum wage but that somehow McDonalds, Burger King, Wendy’s, and every independent diner in the world somehow has coercise power to deny their workers the market value of their labor, and that they’ve been able to collude to maintain this power without being caught by the government for decades, despite the fact that they bitterly compete against one another and operate out of thousands of locations the managers of which would each need to be in on the con game to perpetuate the system.

or

2) The labor in certain occupations is less productive than the minimum wage, and thus would command wages less than the minimum wage in the absence of the minimum.

If #2 is true, which, it seems to me, you’d need to be pretty bone headed to deny, then certain jobs are “worth” less than a living wage. If we agree that nobody who is willing to work should be paid less than a living wage, then we must decide who is responsible for making up the difference. You say that owners of businesses that, by their very nature, employ labor that is low skilled and low productivity, should bear this burden while the rest of society gets off scot free. I say that if we have a basic human responsibility to our less fortunate brothers and systems then we ought to pony up and chip in to solve the problem.

Is there a direct relation between the EITC and the amount of taxes paid by the corporations that employ the recipients? I don’t think so. I don’t know, but it seems likely that more federal dollars are spent for the benefit of corporations than corporate taxes collected. What then?

The actual scale of the Speenhamland parish taxes is hard to identify, but the effect isn’t – wages fell below subsistence, and poverty did not decrease, despite the subsidy. E.P Thompson might have figures that would allow for a comparison, but Idon’t know for sure.

As for the market argument, I’m strongly of the opinion that wage rates, especially at the low end of the market, are not set purely by market forces. Political, social, and cultural power have a huge impact, and even economists such as Adam Smith have noted an inherent inequality between employers and employees, such that:

… the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same…It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, a merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long run the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate…Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy, till the moment of execution, and when the workmen yield, as they sometimes do, without resistance, though severely felt by them, they are never heard of by other people.

Given this, I believe that the minimum wage actually works to make markets more efficient, by bringing wages closer to where they would be according to supply and demand, and by ensuring a steady and increasing consumer purchasing power to keep up with the increasing production of an expanding economy.

Considering the state of the economy….

MickyD’s won’t go out of business and would likely merge with some online/distance learning program churning out new MBA’s as all their employees would become assistant managers. For every hour of extra time they’d get a 20 minute Ed. credit. No telling yet how big the subsidy McD’s get’s for flippin’ students.

I think it’s important to note that the EITC does not subsidize companies that refuse to pay a living wage – because (theoretically, at least) the difference is made up in their corporate taxes. I doubt that farmers under the Speenhamland system were subject to comparable tax rates. It is quite conceivable that, in certain sectors, too high a minimum wage would act as a tax on employment. It would be far more efficient to let markets determine wage rates and then use an expanded EITC to take car of all those who fall beneath the pre-determined social minimum.

Driving businesses that employee low skilled labor out of business is, broadly speaking, not an especially smart poverty reduction program. Or perhaps you’re suggesting that those people who would lose their jobs if McDonalds went out of business could easily get higher paying jobs at investment banks and think tanks. Why they don’t do that anyway today is puzzling.

As far as the 4th child in a low income family – I’m sure there are many different ways to preserve child’s dignity. And, while doing it, to address the apparent thoughtlessness of his or her parents.