This For That

One of the issues that comes up in economics is the idea that there are no solutions, only trade-offs. And in this article in Bloomberg View, Megan McArdle points out some of the trade-offs of the march towards a $15 per hour minimum wage in Seattle. When compared to before the law went into effect, according to a study, the average worker who previously earned less than $11 per hour earned an extra $72 per quarter, while at the same time, working 4 less hours in that same timeframe. But as she points out, that 4 hours is an average. Some people kept all of their hours - but about 1.2 percent of low-wage employees became unemployed.

The best guess is that workers who remained employed saw a quarterly increase in earnings of about $184. If you live in a low-income household, $736 a year is a substantial sum. On the other hand, if you live in a low-income household, “no wages at all” is catastrophic.

The question becomes is one worth the other. And it's a trade-off that we have to make, if we don't have the ability to make labor more valuable, which would serve (to a lesser or greater extent) to obviate the problem of wages too low to live on.

There is a point to be made that it's definitely worthwhile. After all, unless one is making more than a little over $60,000 annually, that extra $736 is more than 1.2% of annual income. And in that sense, the portion of the pie that is going to people at the lower end of the income distribution has increased. But that's also what makes things like this tricky - because at the far end of that logical chain is an Omelas scenario, where some unfortunate few suffer greatly, to allow the rest to live better than they otherwise would.

This is the nature of trade-offs, and it's one of the difficult things about policymaking - opponents of whatever choices are made will always seize on the negative aspects of the trade and loudly proclaim that they have a method that eliminates the need for trade-offs - which commonly turns out be little more than an ideological commitment to ignoring the downsides of those methods.

The best-case scenario would be that some of the "extra" $736 a year would go into spending that would necessitate the hire of a new worker, to bring some number of that 1.2 percent back into the labor force. But wealthier people do not see keeping others employed as a reason to reduce their savings and investment rates - it's difficult to see how less affluent people would come to that conclusion.

This, of course, suggests something of a solution, although not a popular one. But eventually something will have to be done. Whether we chose it or it's imposed by circumstances.