Is There A Cartel Effect Under Minimum Wage?


Something troubles me about this debate on the minimum wage.

How do we know that employers in at least some sectors, artificially reduce wages by forming a wage-price cartel using state-sponsored price fixing of minimum wages?

Wages are, aside from compensation, also a form of data, and employees can rate a company’s status or viability, or ‘greediness’ based on it’s wage rates. Fixing minimum wages distorts this information, and allows owners and managers to exhibit ‘bad behavior’ under the guise of minimum wage laws.

Also, in many sectors, ‘labor’ in the sense of physical expenditure, is irrelevant, and other skills are not (literacy, attractiveness, manners). But those valuable skills are not paid for in the form of wages because all related businesses can claim minimum wage barriers, and if they compete at all, do so by trading entirely on environment rather than wages? Doesn’t this subsidize bad businesses?

There are plenty of people who will work at certain companies simply in exchange for the environment (at a discount) rather than in sectors where the cartel effect drives down wages (less comfortable environments). In other words, they’re compensated partly with education, partly with environment, partly with lifestyle.

Retail clerks, ie: jobs with comfortable social, clean environments that require unskilled, easy labor, seem vulnerable to low wages. But thats the discount the employee accepts for the ability to work in such an environment.

Mexican “illegal” construction day labor on the west coast generally costs no less than $14 per hour. And if the buyer wants people who know concrete, it’s as much as $20. Waitresses in popular restaurants can, and often do, earn hundreds of dollars per day – often more than in their ‘day jobs’. Janitorial labor in office buildings costs well above minimum wage, even in our current economy.

It appears that a cartel effect is in place, at least in the upper two quintiles. Has anyone studied that distortion?

I don’t have a stake in this argument, it’s not my area of expertise, but I’m not entirely confident that the cartel-effect created by the minimum wage (at least in some sectors) is not driving down wages in at least some areas of the economy. And I don’t see any literature that grasps that much of the minimum wage economy is indeed the ‘on-the-job-training in exchange for rate discount’ ecosystem. Or ‘I’m husband shopping with this job”. Or “every other job is real work, and this makes my parents happy”. Or “I’m doing this job that’s easy while I”m in college.” All of these are not meaningful if considered on wages as compensation alone.

What might be more interesting is experimenting with minimum wages in certain sectors in order to drive talent and ‘social status’ into them. I don’t think its important for us to subsidize retail and fast food clerks. It’s more important to drive more people back into skilled and semi-skilled labor.

For example, (to be a bit crass) if we’re talking about single moms flipping burgers and waiting tables, or performing office work, (and we’re accepting the fact that we aren’t educating men and women on mate selection, and we’re saying that it’s acceptable for women to have children that they can’t support, and therefore that it’s acceptable for them to export their preference for childbearing, and poor choice of husband onto others) then why don’t we simply wage-match people with such problems rather than distort the entire pricing structure?

I’m not advocating this but just wondering if there is any work in that field that isn’t riddled with the typical errors so endemic in quantitative probabilism (rather than evidence) preferred in the field.

I’m sure there is quite a bit of data out there. I just am not sure that any paper that I’ve read on this topic relies on anything other than errors-of-aggregation, unsupportable probabilism, or questionable a priori logic, all of which run counter to observation.

Again, this isn’t my field, but I don’t see the cartel-effect or these other issues addressed in the literature that I’ve spent time on.

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