Minimum wage is probably not working as intended

[LarsStok]

After several games I've found that minimum wage calculation is probably not WAI at the moment. The way it works now is literally every business in integrated states will pay the exact same wage with no way to reduce it to be able to employ people. This isn't how a minimum wage works IRL and it's not how it should work ingame, as it completely destroys the economy with knockon effects on the more profitable businesses when their input goods get much more expensive. I find the wages keeps increasing, and not decreasing, because everything gets more expensive as nobody is working, as the businesses are unable to hire, which AGAIN causes wages to rise instead of fall. Wash, rinse, repeat. I previously made a post where I said not to use command econ, but as it stands minimum wage seems to be the true econ killer.

 

[LarsStok]

I think the wage rises in order to satisfy needs and keep pop wealth high, but that means it's doomed to become a death spiral because the businesses are already struggling - that's why the pop needs are more expensive, after all - it's because everybody is unemployed and there's no throughput

 

[_karl_]

I don't get your point. Maybe you should have added some screenshots in your explanation.
Of course the minimum wage is common, and of course businesses cannot cut salaries below the minimum wage, that's the whole concept of minimum wage. And of course it makes that some businesses will have to close (so that you may have to import those goods instead, from some countries with low SoL or no minimum wage).
Another thing is how minimum wage should be computed ("indexed" IRL), which I guess is as a percentage (defined by law) of the average base wage, or at least that's how I would have implemented it.

 

[LarsStok]

I don't get your point. Maybe you should have added some screenshots in your explanation.
Of course the minimum wage is common, and of course businesses cannot cut salaries below the minimum wage, that's the whole concept of minimum wage. And of course it makes that some businesses will have to close (so that you may have to import those goods instead, from some countries with low SoL or no minimum wage).
Another thing is how minimum wage should be computed ("indexed" IRL), which I guess is as a percentage (defined by law) of the average base wage, or at least that's how I would have implemented it.

The wage is identical everywhere. I don't see how you can misinterpret this statement unless you're being deliberately obtuse. Of course the minimum wage should make some businesses struggle more - what it should NOT do is force every business to pay EXACTLY the same wage - because NO real life minimum wage does this. As you write, it should be a percentage (the tooltip says 50% but that's clearly not the case).

 

[Notme1]

Minimum wage costs much more than it should:

Lets say 1000 laborers earn $9 and 50 capitalists earn $54. Total: 11 700
Minimum wage forces laborer and everyone else wages up because they are completely stiff in given building.
Now its $10 for laborers and $60 for capitalists. Total: $13 000

If minimum wages acted like some sort of dividend to make up differences, then capitalist wages would be unchanged.
Building would pay $12700

 

[LarsStok]

Because some people on here don't trust people unless they show photographic proof I've added these screenshots of four enterprises. Notice how all of them are bleeding money and have the exact same base wages (the annual wages are different but this is due to different profession compositions because a machinist is paid more than a laborer at the same workplace).

 

[LarsStok]

I suspect the minimum wage is calculated using a "normal wage" based on general pop wealth, but the issue is it seems to think the minimum should be 100% of said normal wage. But that's untenable. Some businesses in this game are less profitable than others, e.g. the output is less valuable than input + wages at equilibrium. Those businesses will struggle, leading to input goods being less available. Subsidizing them costs enormous amounts of money, more than I can recoup at max 35% income taxes.

Importing those goods will lead to mass unemployment among the less profitable enterprises. It's a "damned if you do and damned if you don't" situation.

 

[XxxSorak515xxxX]

and what is your suggestion now? how to keep salaries low

 

[LarsStok]

Just make the institution do what it actually says, e.g. businesses can't pay less than 50% of the normal wage when it's at level 5. You could even argue it could be higher, but it shouldn't be 100%. I can't really make it work as it stands, not without introducing regressive laws for consumption taxes in order to afford subsidies. That might work (and if you're going that route isolationism + command econ might actually be worth it for the combined 75% authority boost. You're gonna be ignoring market mechanisms anyway, might as well go the whole mile).

 

[_karl_]

Because some people on here don't trust people unless they show photographic proof I've added these screenshots of four enterprises. Notice how all of them are bleeding money and have the exact same base wages (the annual wages are different but this is due to different profession compositions because a machinist is paid more than a laborer at the same workplace).

I don't see any mention of the minimum wage here. The base wage is something completely different.

Your problem even seems to be the opposite of a minimum wage issue: you have a huge hierarchy in salaries. Of course nobody wants to work as a laborer for $4k in a logging camp if they can work for $120k in a power plant (and this one is fully staffed).

Also, you're in a weird situation where you decide to have a Soviet Union with worker cooperatives but don't subsidy anything. It's not really the way the Soviet Union is supposed to be played. You can't expect the market mechanism to be perfectly balancing in a system whose central point is to break capitalism.
Turning on the subsidies might just fix everything.

 

[_karl_]

Actually I just checked (as I didn't play communist myself), minimum wages just don't exist in Victoria 3.
The fact that there is written "minimum wage" in "worker's protection" (and nowhere else I believe) is just a label, or a mistake in the label, but it seems obvious that the role of this law has always been to increase the wages of ALL workers.

https://vic3.paradoxwikis.com/Human_rights_laws#Labor_Rights

 

[Fawr]

Because some people on here don't trust people unless they show photographic proof I've added these screenshots of four enterprises. Notice how all of them are bleeding money and have the exact same base wages (the annual wages are different but this is due to different profession compositions because a machinist is paid more than a laborer at the same workplace).

In the screenshots the base wage is 26.08. The words there suggest that is being impacted by the "minimum wage", which would otherwise be 16.3 (if my math is correct).

Labourers in all industries appear to be earning about 0.5 per week. That would be 26 per year, which is the base wage. That is higher than normal due to the minimum wage.

Engineers are earning 1.5 per week, triple what each laborer is earning. In the game files engineers have wage_weight = 3, while labourers have wage_weight = 1, explaining the difference. In effect their wage is being set by the base wage, which is being increased by the minimum wage.

Similarly, the wages of shopkeepers (paid 1 per week each, wage_weight = 2) and machinists (paid 0.75 per week each, wage_weight = 1.5) means they are doing the same as the engineers.

I want to check my game now.

 

[_karl_]

In the screenshots the base wage is 26.08. The words there suggest that is being impacted by the "minimum wage", which would otherwise be 16.3 (if my math is correct).

Labourers in all industries appear to be earning about 0.5 per week. That would be 26 per year, which is the base wage. That is higher than normal due to the minimum wage.

Engineers are earning 1.5 per week, triple what each laborer is earning. In the game files engineers have wage_weight = 3, while labourers have wage_weight = 1, explaining the difference. In effect their wage is being set by the base wage, which is being increased by the minimum wage.

Similarly, the wages of shopkeepers (paid 1 per week each, wage_weight = 2) and machinists (paid 0.75 per week each, wage_weight = 1.5) means they are doing the same as the engineers.

I want to check my game now.

Looks right. I was not able the find the formula to reproduce these numbers because I hadn't realised the base wage was annual, so I misunderstood the popups. There are some small deviations of the last digits but this seems to work the way you compute it.
So maybe the base wage does behave like a minimal wage after all.
And this means that in a communist system all the workers receive the same wage, determined solely by their qualifications, where the market dynamics play no role... Well, fair enough, not really a surprise.

 

[Fawr]

Looks right. I was not able the find the formula to reproduce these numbers because I hadn't realised the base wage was annual, so I misunderstood the popups. There are some small deviations of the last digits but this seems to work the way you compute it.
So maybe the base wage does behave like a minimal wage after all.
And this means that in a communist system all the workers receive the same wage, determined solely by their qualifications, where the market dynamics play no role... Well, fair enough, not really a surprise.

Certainly in my 1936 Chile game I just fired up the formula work the same way.

The difference is that every factory has a different base wage. Is that a soviet thing?

 

[LarsStok]

Actually I just checked (as I didn't play communist myself), minimum wages just don't exist in Victoria 3.
The fact that there is written "minimum wage" in "worker's protection" (and nowhere else I believe) is just a label, or a mistake in the label, but it seems obvious that the role of this law has always been to increase the wages of ALL workers.

https://vic3.paradoxwikis.com/Human_rights_laws#Labor_Rights

It's almost like my initial post was entirely correct and the law which claims to introduce minimum wages does something else entirely. Also you don't need to be communist to instate the law, you're free to ruin your economy with this institution even if you're using capitalist modes of production.

 

[LarsStok]

I don't see any mention of the minimum wage here. The base wage is something completely different.

Your problem even seems to be the opposite of a minimum wage issue: you have a huge hierarchy in salaries. Of course nobody wants to work as a laborer for $4k in a logging camp if they can work for $120k in a power plant (and this one is fully staffed).

Also, you're in a weird situation where you decide to have a Soviet Union with worker cooperatives but don't subsidy anything. It's not really the way the Soviet Union is supposed to be played. You can't expect the market mechanism to be perfectly balancing in a system whose central point is to break capitalism.
Turning on the subsidies might just fix everything.

You are reading the pictures wrong (the power plant was fully staffed but it's bleeding money and will eventually need to fire people when it runs out of cash). The base wage is set by the minimum wage and is the same everywhere when it should be different depending on profitability - even worker coops do this when you don't have workers protections. Turning on subsidies made things worse in another save file where I had mandatory subsidies across the board due to command econ, because I as the state am paying for the inflated wages.

 

[LarsStok]

Certainly in my 1936 Chile game I just fired up the formula work the same way.

The difference is that every factory has a different base wage. Is that a soviet thing?

The base wages being the same in every enterprise is the central point of my post. No, its nothing to do with me being the Soviet Union, it' cause the minimum wage calculations are properly snafued.

 

[Fawr]

The base wages being the same in every enterprise is the central point of my post. No, its nothing to do with me being the Soviet Union, it' cause the minimum wage calculations are properly snafued.

Is this the same game where you previously used a command economy?

 

[LarsStok]

As mentioned, I've played several games with minimum wage laws, some with command econ and some without. They all seem to end in economic meltdowns. None of my other games have this issue - in my latest China run I was swimming in money and was struggling to find places to spend it.

 

[LarsStok]

In the save file presented I was on interventionism and was using coops across the board. Things were humming along neatly until I introduced workers protections.