Dictating Contract Terms Limits Bargaining Power

Automobile (or any other product) safety mandates – those consumers that would rather drive more dangerous and less expensive cars may no longer do so

Protections for tenants who violate the terms of their lease.

Verbatim quote from a lettings agent to me after I arrived in NYC with no US credit history:

‘Because New York has such pro-tenant laws, you probably won’t be able to find anywhere good to live’

It is otiose to point out that these and countless other regulations reduce someone’s bargaining ability, restricts their ability to carry out a transaction that would be to the mutual benefit of the two parties to the transaction. What we need to ask is whether the total costs and benefits and redistributional consequences of the regulation are positive or negative. For that it is not enough to know that someone’s bargaining position has been restricted.

@Matthew Moore,
Because New York has such pro-tenant laws, you probably won’t be able to find anywhere good to live
Beautiful. Thanks.
@ThaomasH,
What we need to ask is whether the total costs and benefits and redistributional consequences of the regulation are positive or negative.
I’m taking as given that the costs of such measures, measured in dollar terms, exceed the benefits. Absent externalities and/or monopsony power, that’s a good presumption. Also, I don’t know what you mean by “redistribution consequences” being “positive or negative.”

ThaomasH:

Do you know of any person or organization with a track record of accurate cost and benefit forecasting? Do you even know of any person or organization that produces cost benefit studies and for each study the perform, they go back after a time and measure and report the difference between predicted and realized net benefits?

David,

I have to disagree with you here that some of these restrictions necessarily lower the bargaining power of employees.

Imagine if you will that I wish to be home by six to have dinner with my family and put my children to sleep. I, however, also want to provide well for my children and fulfill some of my ambitions. Deciding whether or not to work overtime is a trade-off between having a better family life at home and being able to provide more for my family and fulfilling some of my ambitions.

It’s for this reason that I might wish to agree to a restriction on working overtime if this means that my colleagues are also not allowed to work overtime. Similarly, my colleagues, provided that they’re similarly inclined, might agree to this restriction if this means that I am not allowed to work overtime. We could all be better-off if we don’t have to compete with one another on that margin.

How does this relate to bargaining power? Well, if our employer would ask me to work overtime, then I can point to the restriction and say that I am not allowed to do so. And I can do so without hurting my career prospects.

Without this restriction the following might occur. I might refuse. The next colleague asked might refuse. Another colleague might refuse. This would leave our employer with fewer and fewer alternatives raising the bargaining power of each subsequent colleague asked. The last colleague asked might very well agree to work overtime and lower my and my colleagues bargaining power. Now our refusal means giving something up, whereas before our refusal did not differentiate us from one another.

I, therefore, don’t think it simply follows that such restrictions necessarily lower the bargaining power of employees.

How about regulations making it difficult to kill workers and customers and bystanders?

The regulations requiring mines be ventilated, coal dust suppressed with chalk are extremely burdensome because miners are going to die young from black lung anyway, so it’s cheaper for them to die in mine explosions.

Regulations requiring equipment lockout that hinder workers continuously feeding matures into stamping machine or crawling into running machines to fix jams cut production, and workers who get limbs cut off or who die can be readily replaced while keeping production going.

Regulations requiring the removal of lead paint are burdensome, and brain damaged kids can be employed in mines and factories as disposable workers.

Regulations on waste ponds of mines and power plants are too burdensome, and the only people killed are the working poor who can easily be replaced with new poor living in shacks built on top of the dead and their shacks.

Regulations to stop Ohio valley coal burning plants sending SOx, NOx, and mercury into the upper atmosphere to fall in New England damaging the forest with acid rain and polluting the streams and lakes with mercury, because they are all liberals who should suffer from knowing why the forests dying and why eating fish is harmful.

Toby: your argument regarding overtime is essentially: “I don’t want to work overtime so I can spend time with my family. Since I don’t want to work overtime, no one else should be able to”.

You then go on to theorize that using the force of government to prevent other people from advancing their careers ahead of yours by working overtime will work out better for you. Of course it will work out better for you, but you got ahead by removing options/bargaining power for other people, namely your co-workers. You might be better off, but everyone else who wished to work overtime is worse off.

I perfectly well understand the econ 101 arguments against these things, but:

Minimum wage: I’ve never had a minimum wage job with other benefits. And employers who pay the minimum wage almost never offer overtime once overtime rates kick in (in fact, most will get very angry at any decision maker who allocates additional hours in a way that leads to overtime premiums). I cannot think of a single minimum wage position I’ve ever worked in where I’d suffer from a higher minimum wage.

Rent controls: I’ve rarely lived somewhere long enough to benefit from rent controls. However, a few times I’ve moved into an up and coming neighbourhood, and benefited from 1-2% max rent increases at times when rents were increasing by 10-20% yearly in the neighbourhood. Since that would have made it unaffordable for me, and would clearly have been a windfall for the owners, rent controls saved me from having to move house at least twice. I don’t see why we should protect windfall profits for owners at a cost to long-term renters. The notion that rent control limits tenant bargaining power could only be made by a landlord, someone who doesn’t rent, or someone who has always had plenty of cash to throw at whatever rent is charged and couldn’t care less who is driven out to satisfy the combination of windfall gains for landlords and the desire of monied people to displace current tenants.

Mandated parental leave: First, parental leave is an option, not mandated (although it’d be silly not to take it for at least a few months if you have the option). My view is that the cost of child bearing should be roughly equally distributed across genders. If this requires regulations, so far as limited witch hunting against employers who systematically discriminate (regardless of whether economically rational to do so in an absence of regulations), then so be it. In fact, these policies work against me. I’m single, male, and do not expect to have children. But they are the obviously correct thing to do.

Restrictions on evicting tenants: OK, let us know what the social cost is of people in tight spots landing up on the streets, in emergency shelters, etc. Many studies have shown that the cost of such situations can easily run into six figures per person per year. Also, you’re basically wrong about the effects on rent, at least for most people. Yes, for the crappiest of crappy apartments, this might be somewhat true. For people who want lower rents and higher risk of being evicted, the options are pretty straightforward – you offer references, proof of employment, and various other ways of demonstrating to a landlord that you will be a reliable tenant. The only people who would be unable to offer such proof, most of the time, would be those who indeed are a higher risk to the landlord. And as much as they might opt in the short-term for less protections to save $50 a month on rent, when the time comes and they find themselves on the street, who actually benefits from such a situation?

Honestly, in each of these case, I feel like the government is indeed bargaining for a very large number of people who would have difficulty representing their situation as individuals or collectively, and the number of those who benefit significantly exceed the number of those who face costs, and also that the aggregate effect on welfare may indeed be positive, never mind what econ 101 says. DH, your focus seems exclusively on costs, not benefits, and on the group of those who lose, disregarding those who benefit. This is not an effective framework for evaluating whether a given policy is desirable.

Here’s a question: How about some evidence for these assertions?

Ralph: I assume that your request for “evidence for these assertions” is directed at David Henderson.

If my assumption is correct, I have a non-rhetorical question for you: Do you really need – in order to accept the “assertion” that, say, rent control limits the ability of a potential tenant to bargain for rental units – empirical evidence that rent control limits the ability of a potential tenant to bargain for rental units? Is not the very point of rent control to limit the ability of people to bargain for rental units by preventing them from offering rents above the legislatively-stipulated maximum? Is not the very point of minimum-wage legislation to prevent workers from competing for jobs by offering to work at wages below the legislatively set minimum?

But perhaps you’re asking instead for evidence that forcibly stripping people of bargaining chips makes people worse off. The world being a complex place, I am aware that fanciful scenarios can be imagined in which preventing Smith from using one of her bargaining chips makes Smith better off. But why should the burden of proof or persuasion be on David Henderson to show empirical evidence that stripping people of the right to use some of their bargaining chips reduces people’s bargaining power and thereby makes them worse off? Shouldn’t the burden of proof and persuasion be on those who assert that if Smith starts with bargaining chips A, B, C, D, and E, and then Jones forcibly prevents Smith from ever using bargaining chip E, that Smith’s bargaining power – and Smith’s welfare – are thereby reduced? Isn’t it this latter assertion – the one that asserts that reducing Smith’s bargaining power enhances Smith’s prospects for striking bargains that suit Smith better – for which evidence should be demanded, and assessed, before we accept the notion that the likes of rent control, minimum wages, and mandated employee leave improve the welfare of those whose bargaining power is so reduced?

@Philo,
What is “bargaining power”; how might it be measured?
That’s a very good question. Toby has quite a good explication of one type of bargaining power, and it is the type that is normally talked about in economics texts: the power to extract a bigger part of the surplus created by trade.
With my examples, I have in mind a different, and not necessarily less important, type of bargaining power: the power to adjust various parts of a complex transaction. The apple example is relatively simple. The examples I gave above are relatively complex because there are so many margins on which to adjust. In all the examples I give above, both sides can be better off because they have the various margins on which to adjust.
I hope that helps and there’s no need to apologize for asking a question when my original post should have made that clearer.

Professor Boudreaux,

You make a number of unwarranted assumptions about what I am aware of. I have spent most of my professional life in international development arguing with officials that I thought were underestimating the costs of trade restrictions, interest rate caps and other interferences with price-setting in markets.

I suppose I should not be surprised, as I feel you also make unwarranted assumptions about being able to make a judgment on economic policy without looking at the results of that policy, results some of which may be good, “benefits” and some that may be bad, “costs.” I am more than aware that estimates of the results of policy, their costs and benefits, are uncertain. That uncertainty exists whether one makes policy after attempting to foresee consequences, or not or indeed whether the policy is adopted or not.

I will re-affirm, because I do not think anything you have said refutes it, that it is not enough to know that a specific regulation prevents a non-coerced transaction between two parties to conclude that that regulation is undesirable.

Professor Henderson,

Clearly, monopsony, monopoly and externalities are part of cost benefit analysis. By “redistribution” benefits (or costs) I mean that one might judge that the redistribution effects – say the value of the income lost by those who fail to gain employment, because they are the least skilled or perhaps otherwise disadvantaged workers (and possibly losses to consumers of the good produced by minimum wage workers and owners and suppliers of firms), is greater than the value of the income gained by those whose income rise because of a minimum wage – makes a minimum wage undesirable.

What I was rejecting was the implication that because a regulation reduces the bargaining power of someone that it is necessarily undesirable, even necessarily from the point of view of the person whose bargaining power is restricted. I say, (as we used to joke in graduate school) IDOTE, “it depends on the elasticities,” in other words, it depends on the balance of effects.

Take Toby’s example of overtime work. The restriction on his and his colleagues’ ability to bargain over overtime benefits him and those who have a similar valuation of on job income and off job time. (For simplicity, let’s assume that the employer will adjust by lowering wages) It harms those with a higher value of income over off-job time. With no sense of the magnitudes of how many people feel one way or the other and of by how much employers will need to reduce wages, one cannot know whether it is a good idea in this case to override the presumption that setting wages and working conditions is best left to bargaining among the parties.

The prohibition against the sale of human organs is a good example.

As a sidenote to what Toby is saying, there is a wealth of theoretical and empirical economic literature showing that restricting one’s choices can improve one’s bargaining power, as the term is commonly used, and as Krugman is using the term.

In regards to parental leave, what is the difference in bargaining power if the (paid) leave is paid for by the government rather than the employer?

That said, your reasoning does suggest that flexible parental leave rules are most likely preferable to rigid ones (and that it should be possible to split the leave in any way the the mom and the dad desire it).

More generally, you could argue that these rules limit the ability to bargain, but that they also provide better outcomes to those with a limited bargaining ability.

To the extent that these people may be just as productive as others with higher bargaining abilities, you could make the argument that these rules lead to a fair outcome.

I’m not sure if this one fits.

Obamacare’s insurance mandate on individuals to buy insurance forces the individual to pay for a policy that might not fit their needs, absorbing the resources with which they could pay for the policy that they want. In particular, I’m thinking of the “no caps” part, which drives up the cost to a young, health person who might prefer a minimed policy.

@Don Boudreaux,
David’s point (he can correct me if I’m mistaken) is that forcefully restricting the range of options that Smith can offer to Williams when Smith and Williams are bargaining with each other is much more likely to weaken, rather than strengthen, Smith’s bargaining power.
You are not mistaken.
@Toby,
I am not directly aware of any such studies but let me remark that I did not make the claim that forcefully restricting one’s choices could improve welfare.
I would remind Toby that whatever claim he made, my post was about forceful restrictions. That’s what government restrictions are.

Re the back and forth on preventing overtime.

I have talked to many people over the years that have worked two and three jobs because one was not enough to pay the bills. The vast majority would have been much happier working one job with overtime than several without. Whether it is the company, union, general agreement, or government regulation preventing the overtime, the individuals I have known suffer. It is not just working for straight time instead of time and a half, it is also scheduling multiple obligations and often having to choose which employer to annoy. There is also the dead cost of travel to multiple locations, and often multiple uniforms to maintain.

I have a very low opinion of restricting overtime for the convenience of a few that don’t happen to need the money.

@David: I don’t agree that a government restriction is necessarily a forceful restriction. It might very well be considered voluntary.

Take the model in the Calculus of Consent for example. Reasonable individuals can agree that we need less than an unanimity agreement to impose rules on ourselves because we believe that the costs of agreeing are outweighed by the benefits of preventing external costs. Provided that we can agree to this, then we are consenting to the rules imposed on us under this mechanism. How can we speak of forcefully restricting our choices then when we’ve consented to the procedure through which these will be imposed? The coercion we impose on ourselves is voluntary in this example. A government restriction is, therefore, not necessarily a forceful restriction.

Now this model, of course, does not describe the US. Today’s citizens never were part of such a constitutional stage and live in a post-constitutional world. However, if a citizen would happen to agree with the restriction imposed on her and would even to have happened to have voted in favor of such a restriction, then we cannot speak of a forceful restriction for that citizen. I suppose that you agree with this?

Furthermore, if a citizen has not agreed to such a restriction, but has voted, directly or indirectly, for another restriction to be imposed with which she does agree, then I find it hard to argue that the restriction is forcefully being imposed on her. She seems to be a more than willing participant in the system.

Finally, in a democratic polity such as the US I find it hard to believe that more than a small minority of citizens actually has restrictions imposed on them forcefully. By far most of the citizens seem to agree with such policies. Public opinion rules as Dicey would have observed. I, therefore, find it inaccurate to say that government restrictions are forceful in general as far as the US is concerned.

The restrictions might still be bad, the same way that consuming large quantities of sugar is bad for you, but I find it difficult to call it forceful. Today it seems that the worst things people do is to themselves, and they do this entirely voluntary.

The same holds for food safety mandates – those consumers that would rather buy melamine infused, but less expensive, pet food and baby formula may no longer do so.

That was Toby’s “bargaining power,” which is readily quantifiable. David Henderson’s “bargaining power” is more difficult to quantify. Maybe I could get the supermarket to bundle some service together with my purchase of apples–maybe they would deliver them to my door for an extra fee. I have the “power” to negotiate such agreements with them, power which is reduced if the government forbids some of these possible agreements. But this power seems unmeasurable.

Land use restrictions via zoning.

I had a piece of commercial property once that could have been a profit center except that I couldn’t legally rent sections of it to people that wanted space for RVs and boats. Or build the shop I wanted as small and cash built. Lost it in the construction downturn.

So, would it be accurate to say that your position on this is that the minimum wage guy operating the fryer at McDonalds or the minimum wage gal cleaning toilets at Motel 6 would have bargaining power against those giant corporations if only they didn’t have that pesky minimum wage guarantee? As a young lad, I worked a few minimum wage jobs, and I can assure you that I had no bargaining power.
And the fact that you are a Libertarian, and thus presumably an open borders advocate, just furthers how ridiculous this argument is. In a world without a minimum wage guarantee, and with a constant supply of desperate workers, I’m not seeing much bargaining power.

How many times do I have to point this out — that’s the whole point of rent control. The current tenant gets to live there and pay a modest rent, even though someone in New Jersey would be wiling to pay much more.

@David: If I hire a nun to smack me with a ruler on my fingers every time I try to bite my nails, then that’s also a forceful restriction then. Even though it’s completely voluntary and I believe it will improve my well-being.

Fair enough. I am not a native speaker and I seem to have conflated the use of force with coercion.

And I think you also fell into the trap of saying that the fact that someone votes means that he or she consents to everything that the government does.

1. I think we both can agree that under the model in the Calculus of Consent, that every participant consents to everything by agreeing on the rules of the game, right?

2. For the US or any other democracy I think that it is correct to say that you consent by voting when you willingly vote to restrict yourself.

Would you agree with me here?

3. Similarly, I think that it is reasonable to say that if you willingly vote to restrict others you implicitly consent to be restricted yourself. If you have no problem when you can use the rules to restrict others, then you cannot reasonably have a problem when the rules are used to restrict you.

I suppose you would disagree with me here. My objection though is that this would mean that you’re likely inconsistent in how the rules are to be applied.

4. If you accept #3 and you agree that the restrictions passed in a democracy largely reflect public opinion, then for most individuals it will probably hold that they’ve consented to these restrictions by willingly participating.

For example, I don’t believe that minimum wage legislation is a restriction that most individuals wouldn’t consent to. I am pretty sure that an overwhelming majority would vote in favor of such a restriction.

Jon,

In response to John Hare’s observation that rent control “protects the current tenant” and, thus, makes it more difficult for other tenants to bid for existing rental units, you write:

Once again I must reiterate that this is the whole point of rent control – providing housing for people who work low wage jobs in the same city where they do those jobs.

Questions:

(1) What reason have you to believe that the current tenants whom rent control causes to be artificially ensconced in their rental units are people who work low wage jobs in the same city where they do those jobs? (I believe if you look at the evidence you’ll find that the tenants that rent control artificially keeps in their current units include a disproportionately large number of older couples whose children have left home. These couples would otherwise have moved into smaller units but rent control keeps them where they are, both because the rents they pay for their current units are kept artificially low and because of the increased difficulty – thanks to rent control – of finding other rental units. Also, rent control artificially encourages tenants who move to other cities to keep as second homes the units in their previous city of residence. New York City is full of such rental units.)

(2) Because rent control artificially encourages conversions of rental units into condominiums, as well as artificially encourages the building of owner-occupied housing as it artificially discourages the building of units for rent, how can you be sure that rent-control’s benefits are captured by the working poor? (Rent control likely harms the working poor and artificially helps the more well-to-do by putting downward pressure on the prices of owner-occupied housing in rent-controlled areas.)

(3) How would you respond to Thomas Sowell’s economic analysis of rent control?

Minimum wage is an attempt to extract by force that which one is unable to earn by right.

Exactly! We have an underclass of people who, left on their own, would be very unlikely to earn a living wage by right (and, of course, the current minimum wage is not a living wage). So what do you suggest we do with these people?

@Don: I’m currently in transit, I’ll respond later.

I respond, at my blog (Cafe Hayek) to Jon’s latest comment. Here’s the bulk of that comment:

Jon’s defense of the minimum wage is strong evidence that the world does indeed include people who really do believe that government-officials’ stated intentions determine the outcomes of government actions. Jon writes as though minimum-wage legislation really does improve the lives of the (as he describes them) “underclass of people who, left on their own, would be very unlikely to earn a living wage.” Judging from this comment (and from some of his other comments at EconLog), Jon doesn’t even bother to consider the possibility that the minimum wage might not raise incomes in the way that he supposes that it does.

Another error is reveal by his question, “So what do you suggest we do with these people?” Even if it were true that the United States has lots of people who “left on their own … would be very unlikely to earn a living wage,” and if it were also true that John hare and every other opponent of the minimum wage can offer no good ‘solution’ for how to improve the economic well-being of such people – it does not follow that the minimum wage is, therefore, a policy that will help to improve the economic well-being of such people. If Smith advises Jones not to drink a gallon of gasoline by pointing out to 65-year-old Jones that drinking gasoline will not, contrary to Jones’s stated belief, turn Jones again into a 25-year-old man, Jones would be mad – and illogical – to respond by asking rhetorically: ‘So what do you suggest I do to turn myself again in to a 25-year-old man?’ Not all problems have solutions, and certainly the failure to offer a solution to a problem does not imply that the proposed solution currently under consideration will work.

Jon’s response to John hare also suggests that Jon believes that prices and wages are rather arbitrary numbers the only function of which is to determine how a fixed-sized economic pie is to be sliced. Raising the minimum wage will (apparently in Jon’s view) cut bigger slices for low-skilled workers by cutting smaller slices for business owners and others. There is in Jon’s comment no evidence whatsoever that he is even aware of (much less that he has a response to) the concern that the minimum wage prices out of jobs the very workers that Jon understandably seeks to help.

Finally, this unawareness on Jon’s part (which, I do not doubt, he shares with the vast majority of minimum-wage supporters) makes it fair to ask Jon the following question: What line of reasoning leads you, Jon, to believe that people who are so unskilled and inept that when “left on their own” they are incapable of earning a “living wage” will continue to be attractive to employers when the government prohibits these unfortunate workers from offering to work at hourly wages below the wages that are currently paid to more skilled and competent workers?

jon,

“We have an underclass of people who, left on their own, would be very unlikely to earn a living wage by right”

We do NOT have an “underclass”. Pretty much everyone in bottom quintile of income gets out of that quintile at some point in their life, putting the lie to your claim that they “would be very unlikely to earn a living wage by right”. Additionally, many making less than minimum wage, they still earn a a wage on which they can live, i.e., a “living wage”.

Also, no one has a right to fruits of other people’s labor. In fact, we have a constitutional amendment forbidding involuntary servitude. No one has the obligation to ensure anyone else has anything. Of course, we do help others, voluntarily, all the time. Americans are the most charitable people on earth. However, everyone has the obligation to NOT be a burden to anyone else.

“and, of course, the current minimum wage is not a living wage”

The minimum wage, if you’re working full time, is $15000 per year. The typical American before 1950 earned no more than $15000 per year (in constant 2009 dollars), yet ALL lived and most lived well (john hare is wrong to claim you can’t live well on minimum wage). Further, in constant 2009 dollars, the typical American earned $1107 per year in 1790, $1509 in 1800, $2303 in 1850, and $6003 in 1900, with everyone being able to live, i.e., even $1107 is a living wage. To claim that $15000, which is ten TIMES what Americans lived on in 1790, isn’t a living wage is simply to say you don’t know history, from even just 60 years ago.

In 1999, I earned just $8000, which is equivalent to $10,301 in 2009, a full 33 percent less than a full time worker earning minimum wage) as a waiter in Seattle. Not only was I getting by, but I lived very well. I shared an apartment with three others, in which I had the master suite, with plubming, heat, hot, clean running water on tap; I had plenty of food and clothing, with enough income to buy these things as needed. I owned a car and a motorcycle, driving both frequently, all over the state of Washington. I dated and had an active social life.

It’s not hard to live on a little bit of income. Those who whine that minimum wage isn’t a “living wage”, really, either have no idea what they are talking about or have probably lived on less at some point in their lives, so are just lying.

“So what do you suggest we do with these people?”

I suggest you leave them to live their own lives.

Logically, the people helped by an increase in the minimum wage will be those who keep their jobs – or who can still get a job – after the increase. Likely, they will be those most skilled and experienced and will be members of ethnic groups that not discriminated against. Those hurt by the increase will be those who lose their jobs or who cannot find work at the higher wages. Likely, they will be the least skilled and experienced and will be members of the least “popular” ethnic groups. In other words, Jon proposes that we help those who need help the least at the expense of those who need help the most. What does Jon propose that “we” do with the people we hurt?

I felt kind of honored, in a weird way, that you would devote a blog post to me. So I initially intended to respond there as well as here. But then I discovered that your blog is facebook only for comments. An odd choice, to put it mildly, for a purported Libertarian.
Also, this

What the World Looks Like to Someone Who Doesn’t Understand Economics

seemed a bit harsh. My views on the minimum wage are backed by actual research (although not the kind that someone living in a Libertarian bubble is likely to encounter):

We confirm our earlier findings that business assistance living wage laws boost wages of the lowest-wage workers, at the cost of some disemployment, but on net reduce urban poverty. Second, we expand the analysis of distributional effects beyond looking just at the poverty threshold. We do not find that living wages increase the depth of poverty among families that remain poor, and we find that families somewhat below and somewhat above the poverty line are also helped by living wages.

http://www.nber.org/papers/w9702

These are at least legitimate potential critiques of rent control — unlike Prof. Henderson’s complaint that rent control achieves exactly what it sets out to do. And this very blog provided at least one anecdotal piece of evidence that this is a real problem. There is a video of Breitbart talking about how his time living in a rent-controlled apartment in a building his family owned turned him against the concept. Obviously, rent control isn’t intended for the family members of the owner of the building. But rather than scrap the whole thing, wouldn’t it make more sense to just double check the records to make sure there isn’t so much fraud?

@jon

Let’s test your theory, hm?

Tell me: who, exactly, are the “underclass.” What are their demographics? What percentage of the workforce do they encompass? Things like that.

Ken-

Actually, jon is right to say birth control and abortion were originally advocated for the purpose of eugenics. Planned Parenthood was founded for the exact reason to keep the black (and other undesirables)population in check by providing birth control and abortion.

“As a young lad, I worked a few minimum wage jobs, and I can assure you that I had no bargaining power.” -jon

I think this statement better illustrates what the world looks like to someone who doesn’t understand economics.

I’m guessing in jon’s mind, ‘bargaining power’ only means the ability to bargain for significantly higher wages.

I’ve worked a few minimum wage jobs and my work ethic and attitude gave me plenty of bargaining power, but not for making double or triple the going-rate that my competition (fellow low skilled workers) were willing to work for.

To do that, I knew I would either need to differentiate myself from my competition or limit my competition.

In the former case, if I was able to differentiate myself from my competition and my current employer didn’t want to pay for that differentiation, someone else would.

In the latter case, if I was successful at limiting my competition, great for me! But I should understand that I gained that bargaining power off the backs of even lower skilled workers, not by wresting it away from businesses.

jon sees Kling’s axis of oppressor (businesses) and oppressed (low skilled workers).

He doesn’t realize that when gov’t passes a higher minimum wage it just became the oppressor, not to businesses, but to guys lower on the employment ladder than the new minimum wage.

@jon-

So Jon and Ken claim to be Libertarians, but they aren’t even pro choice?

As per usual, you assume facts not in evidence. Ken is not a libertarian and I never gave my stance on abortion. I just made a statement in support of your history of birth control and abortion in this nation.

Higher wages for low-income people, a net poverty reduction? Sounds like support to me.

You need to either reevaluate your claim or reevaluate that paper. That paper does not support your claim that, absent minimum wage, there would be a permanent underclass. In fact, it actually supports us that minimum wage creates a permanent underclass. If you re-read the part just after your first bold, you’ll see all the evidence against you.

Either way I am still interested in testing your hypothesis:

What are the demographics of the underclass?

And if you re-read the part just after the part just after my first bold, you’ll see all the evidence against YOU!

@jon-

And if you re-read the part just after the part just after my first bold, you’ll see all the evidence against YOU!
on net reduce urban poverty

Actually, that doesn’t despute anything we’ve written. However, the immediately prior statement ( at the cost of some disemployment,) invalidates your theory.

Then test away!

Thanks. I did. The evidence you provided further invalidates your claim:

“William Julius Wilson (1985) defines the underclass as those who lack training or skills, are out of the labor force or long-term unemployed, and who engage in deviant behavior.”

Given that these people are out of the labor force or long-term unemployed, then a hike in the minimum wage couldn’t possibly help them. In fact, given the fact that minimum wage results in fewer jobs, then increasing minimum wage would perpetuate or expand the underclass, not shrink it.

This is further evidenced by the effects of minimum wage in minorities, that the disemployment effects fall disproportionately upon minorities (See: Neumark 1988, Hellerson et al 1996, Williams 2011, Sowell 2015 etc), then we can say the minimum wage achieves it’s original “Progressive” goal of keeping minorities permanently unemployed.

So, based upon the evidence you furnished, supplemented by some additional insights on MW’s effects on minorities, we can deduce your hypothesis is incorrect.

[Comment removed for supplying false email address. Email the webmaster@econlib.org to request restoring your comment privileges. A valid email address is required to post comments on EconLog and EconTalk.–Econlib Ed.]

@jon

The research shows that minimum wage laws on net reduce proverty [sic], it really stretches logic to try to twist that into evidence against MW laws.

I said it invalidates your hypothesis regarding minimum wage, not that it is evidence against MW laws (that I have a whole other batch of studies, including some of my own).

re: MW discussion:
Employer option A (MW law example): Hire one worker for MW.
Employer option B (No MW law example): Spend the same amount of cash to hire more than one worker, spending less than MW on each.

Under which option are more total employees likely to be hired? B.
Under which option are lesser qualified employees more likely to be hired? B.
Under which option are employees more likely to be able to trade cash income for other benefits (i.e. accommodate other job with flexible hours, partially lift job restrictions, lighter job duties)? B.
Which option creates the most overall benefit to the most people (including employer, consumers, potential employees, etc..)? B.

These results are all consistent with economic theory and empirics as I understand them.