Minimum wage would be $26 an hour if it had grown in line with productivity

I agree that minimum wages are too low but the argument that wages should track productivity is false from economical point of view, in my opinion.<p>The argument would be true if how people contribute to economy did not change.<p>But over time disparity in contribution to economy changed. Hundred years ago people had very similar jobs, mostly physical, manual, where each would contribute rather similarly.<p>Nowadays companies can produce virtual goods, sell &quot;IP&quot;, and many other mechanisms to produce a lot with relatively little that just are not possible with traditional production lines.<p>Now, I think the correct reason to justify better minimum wage is basic human decency and also the role of the state as servants to <i>entire</i> population.<p>I think a person doing honest, important work for 8 hours a day 5 days a week should enjoy a compensation that should be enough for a basic living plus some little extra. Basic living means a decent place to live, medical care, ability to buy healthy, non-extravagant food, etc.<p>It doesn&#x27;t matter if that job is cleaning streets or being cashier at Walmart. We need streets to be cleaned and we need to buy stuff.<p>These people doing basic jobs are unable to defend themselves and that&#x27;s where the state should come in and make sure that people who do basic jobs are able to afford basic living.

This might be the case but many jobs I feel like would no longer be worth paying anyone to do at that rate. That would suggest to me that the productivity of minimum&#x2F;low wage workers has not increased at the same rate as productivity generally. Which would make sense given most of that increase is attributable to technology which isn’t distributed evenly through different sectors of the economy etc.

I&#x27;m struggling to understand how productivity has anything to do with salary.<p>Productivity increases are inevitable for everything as automation keeps improving. Salaries go up with demand for skills. If its more difficult to hire for a critical role (a skilled job or competitive), or the role generates a lot of value for a company, salaries go up. Simple economics.<p>Low skill jobs and physical labor jobs actually require less and less skills as automation improves. In this situation wages would go down. But I do think it&#x27;s a good idea to have a wage floor to account for the inflation and increases in cost of living. A social limit to what we all collectively feel is a minimum amount of money one of us should make to survive in the society we are building. I think universal healthcare and a UBI would solve a lot of this. Especially as its only going to get worse for people at the bottom.

Whenever a minimum wage argument uses 1968, you know you don&#x27;t need to take it too seriously.<p>That was an outlier year with the highest historical value.<p>First Google graph: <a href="https:&#x2F;&#x2F;www.today.com&#x2F;money&#x2F;good-graph-friday-minimum-wage-worth-less-1968-6C9678220" rel="nofollow">https:&#x2F;&#x2F;www.today.com&#x2F;money&#x2F;good-graph-friday-minimum-wage-w...</a>

Yes, weaken labour regulations, allow workarounds like the gig economy, break up unions, enforce no increase in minimum, tolerate regulatory capture, permit highly wealthy individuals and organizations to have substantial say over politics through lobbying, campaign donations and think-tank policy marketplaces and guess what? The elite will pocket basically all of the productivity gains, the more elite the more in your pocket. Those with no leverage are left with a dwindling share of the pie. Trickle up economics

Productivity is a price ceiling for labor. It only raises wages by allowing marginal producers come online and compete in the labor market. It could also reduce the total demand for labor, so there&#x27;s no reason to assume wages and productivity would stay linked. The correlation only makes sense in a first-order way: I produces twice as many widgets; &quot;you should pay me twice as much.&quot; But that widget machine wasn&#x27;t free, and it doesn&#x27;t mean you&#x27;ll sell twice as many.

The productivity of minimum wage labor did not increase by that amount. It&#x27;s largely unchanged. Computers did not do much to revolutionize productivity on your average minimum wage job.<p>This is a major reason why wage growth is unequal across job types.

No it would not. The average productivity of a US worker might have increased by a certain amount, but not the productivity of the minimum wage earners. If their productivity had gone up that much, there would be no need for a minimum wage law, the employers would simply be glad to pay them based on their productivity.

Why should the <i>minimum</i> wage track <i>average</i> productivity?

Wages started to diverge from productivity at about the same time as the USA opened up to non-Western immigrants in 1965:<p><a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Immigration_and_Nationality_Act_of_1965" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Immigration_and_Nationality_Ac...</a><p>&quot;The act greatly increased the total number of immigrants as well as the share of immigrants from Asia and Africa.&quot;<p>Immigrants from poor countries are easier to exploit, and will accept lower wages&#x2F;standard of living, because their &#x27;new life in the new world&#x27; is still superior to their homeland.

All the arguments about “no training” are wrong when a citizen shows up they had 12 years of training. They can presumably read write do basic arithmetic and reasonably socialized and understand a social hierarchy. The public school system did this an having a 28 dollar minimum wage would mean you would have the taxes from those from everyone making at least 28 dollars an hour. But saying they have “no training” is a lie and does a disservice to all the teachers and parents that got this person ready to work.

It&#x27;s getting there. The biggest employer in my hometown, a huge shipping conglomerate, was paying $8.50 until a few years back. Today, they&#x27;re starting at $21. That&#x27;s a huge jump.

By this same metric the median household wage would be 140k The chart says production per worker has doubled.<p>Average household income 1970:10k[0] Inflation adjusted: 70k[1]<p>[1]<a href="https:&#x2F;&#x2F;www.census.gov&#x2F;library&#x2F;publications&#x2F;1971&#x2F;demo&#x2F;p60-78.html" rel="nofollow">https:&#x2F;&#x2F;www.census.gov&#x2F;library&#x2F;publications&#x2F;1971&#x2F;demo&#x2F;p60-78...</a><p>[0]<a href="https:&#x2F;&#x2F;www.usinflationcalculator.com&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.usinflationcalculator.com&#x2F;</a>

Hm - that&#x27;s about 3.5x what it is now. Does that mean everybody else should be making 3.5x what they&#x27;re making now, or does this just apply to the lowest earners?

&gt; Yet rising productivity is no guarantee of a healthy economy. Equally important is how the fruits of productivity are divided.<p>It sure seems like you can. Isn&#x27;t the article about how productivity has gone up without a commensurate increase in wages for the last 50 years? Where&#x27;s the basis for a skeptical employer to buy this seeming counter-factual?<p>I support a much higher minimum wage, but this article wouldn&#x27;t have convinced me of anything I didn&#x27;t believe already.

Wages in the broader workforce haven&#x27;t risen with increased productivity (in the developed world). Any additional profits aren&#x27;t exactly getting shared with workers.<p>The article kind of a raises a moot point, if regular wages aren&#x27;t tied to productivity what should minimum wages be tied to?<p>I believe that minimum wage should probably be set to some social factor, above some level of worker exploitation and a wage that a person could actually live on.

How much of this increase in productivity is the result of off shoring low wage jobs?

1. I don&#x27;t think there&#x27;s a good argument for tying minimum wage to median productivity gains across the entire economy. Is an accountant today 5x more productive than an accountant in the 1960s? Perhaps. But is a dishwasher or a frycook 5x more productive? Probably not. I also think the biggest problem impacting lower income folks is housing costs and IMO minimum wage is not the best tool for fixing that issue.<p>2. 1968 as a start year is super mega cherrypicked. A lot of people say &quot;if minimum wage had kept with with CPI inflation since 1968, it&#x27;d be $12&#x2F;hour now!&quot; They usually neglect to mention that if minimum wage had kept up with CPI inflation since 19<i>4</i>8, it&#x27;d only be $4&#x2F;hour. The only reason to use 1948 vs 1968 is to massage the data to match your preexisting hypothesis.

Going off of productivity has a lot of gotchas, I&#x27;d go for tracking purchasing power for non-imported goods like housing for the zip code that the job is located in. There might be some interesting side effects to that. Pushing businesses into poor areas, which should have a positive effect on society as a whole to get money coming into those areas without handouts or mandates. It&#x27;d be a fun experiment to run.<p>I see zero arguments against pegging the minimum wage to $12 an hour in 2021, maybe a tad more to offset years of what amounts to theft from worker&#x27;s pockets. People on one hand will badmouth those on welfare, and then turn around and not want to reward those that go to work either. Those two together never sat well with me. Seems like people are just envious, bitter creatures all around.

Imagine if executive compensation had also been pegged to productivity.<p><a href="https:&#x2F;&#x2F;wtfhappenedin1971.com" rel="nofollow">https:&#x2F;&#x2F;wtfhappenedin1971.com</a><p>Stagnant wages and record profits. Coincidence?

Wages are based on supply and demand. Minimum wage is an artificial propping up of wages. If there are too many workers, then employers don&#x27;t need to compete to hire them, and wages are depressed.<p>Meanwhile we import over a million new legal immigrants each year (along with unknown numbers of illegal aliens), the vast majority of whom are low-skilled workers. The people decrying low-skilled wages are the same ones supporting policies that actively reduce those wages through increased competition.

The real question is, why did wages in general ) not just minimum wage) start to diverge from productivity in the early 70s?

Keeping that in line would mean to socialize wins - it wont happen and doesn&#x27;t make sense either. Sorry.

Has the productivity of minimum-wage workers grown in line with overall productivity?

Minimum wages and tax reductions should all be indexed. Plenty of things are indexed to go up annually based, so why not the few things that really matter be it indexed down for taxes and up for minimum wages.

Minimum wages were designed to protect workers live&#x27;s from being wholesale sacrificed in factories. The theory of a government mandated &quot;livable wage&quot; is a concept from 3rd wave Socialism.<p>It is truly the worst possible way to guarantee quality of life as it gives employers an excuse to be &quot;legal&quot; while being horribly out of line ethically.

This comment thread has really dashed my hopes of ever having a well-informed economic discussion on HN. Seems like a large majority of commenters are stuck in the 19th century, and have no idea that we moved on from the labor theory of value. Perhaps modern economics education is to blame…?

When productivity increases, you have 2 choices:<p>1. increase your wages. pay your suppliers more.<p>2. decrease your prices.<p>It doesn&#x27;t really matter which you do. Do we want higher wages or lower prices? You can&#x27;t do both. Does it even matter? The net effect is the same. Who cares that we&#x27;ve universally chosen #2?<p>Note: I&#x27;m assuming there&#x27;s modest competition. Monopolies have a 3rd option: more profit.

If minimum wage workers aren&#x27;t responsible for the growth in productivity, why should they be paid as if they were? Would productivity actually be increased, if business owners not only had to invest in, say, machinery to improve productivity, but also needed to pay employees more now that they were using machines that improved their productivity?<p>For example, I build fences for a living. Usually I pay a guy $100&#x2F;day to dig post holes, and he can dig 20 post holes in a 6 hour day.<p>I decide to scale up, so I buy a post hole digging machine for $20,000. This machine is pretty much point and shoot, and now lets the same guy dig 200 post holes in 6 hours. Not only has he dug 10x more post holes, but he also feels better at the end of the day because he was using a machine and not his own muscles to do the job.<p>How much should that guy get paid now? Is it $1000, since he is 10x as productive? Is it $100, because he is working the same amount of hours as before? Is it $80, because his job is actually easier now because I put in $20k of my own money to make it so?