The Wage Standard: What's Wrong in the Labor Market and How to Fix It

The Wage Standard: What's Wrong in the Labor Market and How to Fix It by Arindrajit Dube

I kept thinking "yes, but..." in response to the arguments in this book. He argues the minimum wage should be risen in part because many people spend a long time in minimum wage jobs. However, he focuses too much on looking at the wages and not at the jobs. Why are people stuck in these jobs? He dances around a few concerns, but misses some of the biggies. We require people to have health insurance, yet policies available publically are horrible compared to those you can get from companies. Work flexibility also comes into play.

The arguments with unions are also similar. With more heavily unionized and regulated job markets, employees that have jobs are better off, but it is harder for new employees to find jobs. It also limits new job creation. Longshoreman make huge amounts of money as blue collar workers. However, getting a job is extremely difficult for those not in the family. Tech jobs are high paying and much more open, but also more volatile. Big companies tend to be more lucrative, better places to work.  However, all these big companies started out small. It is extremely difficult to compete in the industry with big companies. New companies must typically start somewhere else. Tech companies opened their new markets and went from small to big. Tesla is still seen as a tech company, even as it competes with automakers. Unions typically succeed in companies that have grown and become fossilized. They help provide greater stability and predictability at the expense of dynamism. They also introduce friction and costs. 

The author complains about companies "subcontracting" out workers. Alas, that is driven by some of the same policies advocated. Companies have core competencies and labor relations. Hiring others to do non-core items is the wise choice. Especially with regulations, it can be difficult to keep track of everything in their own field, let alone many others.

There are many things wrong with the labor market. When people work as true independent contractors, they are free to set what they charge and find somebody willing to pay. Alas, the regulatory market forces people into "for-hire" schemes of employee and employer. People a century ago would cringe at this. Why are we making policies to further force people into this situation?