This is known as the "Efficiency wage" theory. Megan McArdle has written a number of posts about where it does and does not make sense. Her conclusion (and I agree) is that generally speaking, "WalMart worker"* isn't beholden to efficiency wages.
It's also worth mentioning that a side effect of efficiency wages is more unemployment. Paying more results in a better class of applicant, meaning that people who would normally use WalMart as the bottom rung of their career ladder are shut out.
*Yes, Costco can do it, but Costco also has a very different business model.
> It's also worth mentioning that a side effect of efficiency wages is more unemployment. Paying more results in a better class of applicant, meaning that people who would normally use WalMart as the bottom rung of their career ladder are shut out.
This assumes that workers are of a fixed quality. I know I worked harder for $10/hour than I did for $7.25. Higher pay means stronger incentives to do well and less stress from poverty.
"getting a job is made harder" isn't a problem, when the the people are getting better at getting a job.
"increase in productivity will be insufficient to cover the increase of wages" is only true if the company isn't turning a profit or paying high salary to managers. This is relevant for some small businesses and bankruptcy-threatened large business, but not for the largest players in the economy, like Walmart.
1) Given that there are fewer jobs available, and more people seeking those jobs, its simply absurd to think that people are just going to get better at getting those jobs to make up for it.
2) Whether the company is turning or a profit or paying a high salary is completely irreleavent. The question is whether or not you are productive enough that hiring you makes the company more money then they pay you.
Sure. But I was specifically speaking about these higher-paying jobs at Wal-Mart. The fewer jobs at Wal-Mart are more then offset by increased jobs elsewhere.
> This assumes that workers are of a fixed quality. I know I worked harder for $10/hour than I did for $7.25.
Efficiency wage theory definitely doesn't assume that. In fact, a big part of the theory revolves around your existing workers becoming more productive.
Even if you assume your applicant pool stays the same, you would see less turnover with efficient wages—and hence fewer job openings.
> Paying more results in a better class of applicant
In higher populated areas, yes.
In lower populated rural/areas, not necessarily. In fact, by raising wages in rural areas, additional money coming in from income taxes could be funneled into infrastructure, poorly-funded schools, and law enforcement. This would in theory help produce new areas of innovation and growth which in turn help provide more tax revenue for the state and country. It could also bring more people out of poverty, reduce crime and violence, and help to shutdown meth labs which are more common in rural areas.
I think there are some good arguments against raising wages of workers, like much higher wage workers already making enough to be so comfortable as to not require more (depending on how they pay their employees if they are a small business), or to things such as some cases showing that raising minimum wage causes inflation which causes the quality of life of everyone over the minimum wage to go down, such as: http://www.latimes.com/opinion/op-ed/la-oe-0419-goldberg-min...
However, for most of those reading HN, salary raises have more to do with being competitive, in which case paying more for a better applicant is a good thing.
The post didn't argue that raising wages of workers was bad, it argued that raising the wages of workers produces unemployment which you didn't address at all.
It's also worth mentioning that a side effect of efficiency wages is more unemployment. Paying more results in a better class of applicant, meaning that people who would normally use WalMart as the bottom rung of their career ladder are shut out.
Citation wanted. It really doesn't make sense. Sure, a different class of applicants may fill those higher paying positions, but either those people weren't employed to begin with, which contradicts your point, or they had to leave other jobs to apply for this one, creating open positions where they left, which results in overall employment staying the same.
You are assuming that Person A is capable of taking the job that Person B vacated. That may or may not be the case. Inevitably, there will be come cases where Person A isn't suitable for the position.
You do realize that we are not talking about three specific persons, right? I will grant you that at any given time there are people who are unemployed even when there is demand for labor, because for some reason or other they do not fit the available positions, right at that moment. Being unskilled is certainly a factor when it comes to that. But I remain highly skeptical of the mechanism described by the grandparent. If wages were to increase at e.g. Walmart and grandparent was right, it would mean that skilled people would leave the jobs they are already doing to come to Walmart to work. Now, maybe the people laid off at Walmart don't have the skills to fill these now vacant positions, but presumably they must still be filled somehow. Which means that either the employers must accept less skilled labor to do the same job or they have to do what Walmart did, and offer higher pay to attract the right workers.
I will also grant that as wages rise, certain jobs simply cease to exist, because it becomes uneconomical to pay anyone to do them. Being from Denmark where wages are very high, I was astounded to be greeted by not fewer than ten clerks in a small, mostly empty Swatch store I visited in Beijing. To have that much staff to do mostly nothing can only happen where wages are extremely low. If wages were to rise, one by one those clerks would probably be laid off. But not because a more skilled person would claim their position, but simply because it would become too expensive to pay any person to do that job given the value it creates.
I don't think you can assume that the position will be filled. The position may be no longer be economically viable at higher wage rates or lower skill levels and thus be eliminated.
However, there are some additional factors that complicate this picture. If there are fewer unskilled jobs, people will adjust by working to become more skilled. If people have higher paying jobs they will spend more, producing more jobs. If there are many unskilled people looking for work, there is incentive for somebody to find a way to make use of that resource.
But really, the only point I sought to make here was that your original comment which didn't look at the non-skilled worker was missing a bit part of the equation, and so its logic didn't work.
It's also worth mentioning that a side effect of efficiency wages is more unemployment. Paying more results in a better class of applicant, meaning that people who would normally use WalMart as the bottom rung of their career ladder are shut out.
*Yes, Costco can do it, but Costco also has a very different business model.