Minimum wage is probably not working as intended

[Meneye]

I might be missing something, but wouldn't it make sense to replace the minimum wage calculation with a wage floor?

 

[brainiac1530]

You've hit on most of the correct points in here in some post or another, so I'll summarize.

1) Without the minimum wage mechanic, the base wage is scaled to maintain the "minimum expected standard of living" for a laborer. It's not so much that the minimum wage forces all wages to be the same, moreso that they were like that to start with. My guess, since I haven't really played in the recent updates, is that businesses don't pay this minimum expected wage if they would otherwise become unprofitable.
2) The "normal wage" is calculated by averaging the base wage in all buildings (plus a slightly different contribution from peasants. See the defines.)
3) The minimum wage, when it exists, forces every building to pay a base wage at least some percentage of the "normal wage." It seems only the Worker Protections law creates it at this point, so it's in the range of 60-100%. It seems as though in your games you have only ever run it at full level 5 institution, and thus 100%.
4) The minimum wage is self-referential. As more buildings are forced to raise their base wage to the minimum, and potentially go out of business as a result, the calculated "normal wage" goes up, and the minimum with it.

It's impossible to know what the intent was without someone from management coming in here and telling us, but it appears that they work as designed. I'd argue it's an idiotic design, mostly because of point #4. It seems likely to cause problems whenever anything else in the game changes. On a more aesthetic level, I'd say that it's a poor abstraction of minimum wages. Real world minimum wages are closer, in effect, to what the game does without the "minimum wage mechanic" being active.

 

[Leoreth]

I was just about to make a thread about the workers protections death spiral.

What's even worse about it is that passing it raises the normal wage as well, because the normal wage is calculated based on the overall wage situation across your nation. And welfare payments are indexed to the normal wage too, so if you have a high level welfare institution (which to be real, if you are passing WP then you do) there will be a positive feedback loop here as well with welfare costs spiraling out of control.

Do we actually know how the minimum wage actually works, or is supposed to work? Neither vickypedia nor the online wiki have anything to say about this.

Regardless, I think Paradox needs to rethink what these laws are actually supposed to do - right now they are having counterintuitive effects that do not behave at all like you would from real life implementations. In my opinion they need to let go of the idea of tying them to the normal wage. There are just too many feedback loops where the normal wage determines the minimum wage but then the minimum wage also pushes up the normal wage.

My idea:

1. Minimum Wage: this should just bump up the currently unchaging "wage weights" of lower strata professions by the stated percentage. For example, Labourer wage weight goes from 1 to 1.5 with full workplace regulation institution investment - for comparison, Engineers have a weight of 3.
2. Welfare: ideally it should be based on SOL and not the normal wage. Welfare should pay out whatever additional wage is needed to satisfy the needs for the minimum expected SOL for lower strata pops before the institution level is taken into account. The institution then adds the difference between minimum expected lower strata SOL and average lower strata SOL, multiplied by the investment level modifier. Theoretically all pops can receive welfare but since it is pegged to whatever the expected SOL for the lower strata is, mostly lower strata pops will benefit. I think this makes the most intuitive sense.

Lastly another thing that I consider problematic is that there is no way to tune the minimum wage multiplier without making all workplaces more lethal. I'd love to try if minimum wage is actually workable with level 1-2 investment, but am I willing to pass up 60-80% workplace lethality reduction for it? No.

 

[LarsStok]

3) The minimum wage, when it exists, forces every building to pay a base wage at least some percentage of the "normal wage." It seems only the Worker Protections law creates it at this point, so it's in the range of 60-100%. It seems as though in your games you have only ever run it at full level 5 institution, and thus 100%.

I think this makes sense, and I seem to recall the institution mentioning both "50%" AND "10% per level". I did try to reduce the institution level in one of my games, but maybe it isn't reversible once the wage level is fixed. I'll make one last attempt to salvage the save today. This still means you can only have -20 percent safe working conditions if you want a minimum wage floor, as I don't see any floor above 60% as workable. That's.... unfortunate.

 

[LarsStok]

Lastly another thing that I consider problematic is that there is no way to tune the minimum wage multiplier without making all workplaces more lethal. I'd love to try if minimum wage is actually workable with level 1-2 investment, but am I willing to pass up 60-80% workplace lethality reduction for it? No.

And welfare payments are indexed to the normal wage too, so if you have a high level welfare institution (which to be real, if you are passing WP then you do) there will be a positive feedback loop here as well with welfare costs spiraling out of control.

Given the fact that the council communist journal entry entry explicitly asks you to pass (among other laws) both WP and old age pension to level 5 this kind of explains why I've kept ending up where I did.

 

[Leoreth]

Given the fact that the council communist journal entry entry explicitly asks you to pass (among other laws) both WP and old age pension to level 5 this kind of explains why I've kept ending up where I did.

I don't even pay any attention what the journal wants me to do. But if you are doing a leftism you are doing a leftism.

 

[Jon Severinsson]

The Minimum Wage percentage simply means that the Base Wage of all regular buildings (those whose Base Wage are not determined by the Government Wages or Military Wages setting in the Budget Panel) has to be at least that many percent of the country's Normal Wage. A country's Normal Wage is simply the average of the Base Wage of all buildings in all Incorporated States in that country.

This means that with a 100% minimum wage, the minimum wage is fixed to the average wage. So if any building ever increases it's wage (for example if there is a labor shortage in one state) all other buildings are forced to increase their wage to match the new average. As there is a one week delay, wages can differ slightly between buildings and states, but over time the base wage of all buildings will converge towards the highest base wage of any building. This isn't a problem as long as your GDP per capita is constantly increasing, but even a two week stagnation can totally wreck an economy.

Note, however, that buildings whose Base Wage are determined by the Government Wages or Military Wages settings are not affected by the Minimum Wage percentage, but that they are included in the calculation of the Normal Wage. Thus the paragraph above only applies if both are set to Medium. If you set them to High or Very High you get an unending spiral of wage increases, but if you set them to Low or Very Low you can give the overall economy a respite (at the cost of your goverment employees becoming radicals).

That said, a minimum wage of 100% of last weeks average wage is an idiotic law and is doomed to wreck an economy eventually, so don't do that...

 

[BPZ1941]

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.

Just... why? The workers are already getting their share from dividends, all you're doing is transferring the money in such a way that buildings rather fire people than pay less.

 

[LarsStok]

Just... why? The workers are already getting their share from dividends, all you're doing is transferring the money in such a way that buildings rather fire people than pay less.

I guess I know better now, don't I? Anyway, I still think there should be a minimum wage law in the game for people who want to make wages more equal, just not in the way it's programmed right now. As for why I wanted minimum wages in the first place, I'd hoped it'd set a minimum floor (like how there's a federal minimum wage of 7.5$ an hour in the US) so that I could subsidize those businesses and thus make the workers in those businesses make a more decent wage. It's not their fault the ingame market thinks their work is worth less than someone working in an oil well?

 

[_karl_]

The Minimum Wage percentage simply means that the Base Wage of all regular buildings (those whose Base Wage are not determined by the Government Wages or Military Wages setting in the Budget Panel) has to be at least that many percent of the country's Normal Wage. A country's Normal Wage is simply the average of the Base Wage of all buildings in all Incorporated States in that country.

This means that with a 100% minimum wage, the minimum wage is fixed to the average wage. So if any building ever increases it's wage (for example if there is a labor shortage in one state) all other buildings are forced to increase their wage to match the new average. As there is a one week delay, wages can differ slightly between buildings and states, but over time the base wage of all buildings will converge towards the highest base wage of any building. This isn't a problem as long as your GDP per capita is constantly increasing, but even a two week stagnation can totally wreck an economy.

Note, however, that buildings whose Base Wage are determined by the Government Wages or Military Wages settings are not affected by the Minimum Wage percentage, but that they are included in the calculation of the Normal Wage. Thus the paragraph above only applies if both are set to Medium. If you set them to High or Very High you get an unending spiral of wage increases, but if you set them to Low or Very Low you can give the overall economy a respite (at the cost of your goverment employees becoming radicals).

That said, a minimum wage of 100% of last weeks average wage is an idiotic law and is doomed to wreck an economy eventually, so don't do that...

This summary clarifies the situation.
Do I understand correctly that 100% comes from 50% with the "worker's protection" law plus 10% per level of the "workspace safety" institution?
The breakdown of this doesn't seem to be shown anywhere, which is maybe the actual issue. If it were clearly written, people would easily understand what "100% minimum wage" means and how radical it is. Obviously max law plus max institution shouldn't be considered a default, and I wouldn't be worried by this choice being unstable / difficult to hold, the player has to be aware that it's a dangerous setting.

By the way, there is an easy suggestion for Paradox : just set the Minimum Wage at X% of the median Normal Wage, not the average. Then the bottom 50% gets compressed to the minimum salary (pretty much like in real life nowadays in developed countries) but the top 50% is not affected, because the displacement of the bottom 50% doesn't change the median.
Computationally, a median is a bit more costly to estimate than a mean, but that's probably not a big issue compared to all the other computations.

 

[Ranamar]

The Minimum Wage percentage simply means that the Base Wage of all regular buildings (those whose Base Wage are not determined by the Government Wages or Military Wages setting in the Budget Panel) has to be at least that many percent of the country's Normal Wage. A country's Normal Wage is simply the average of the Base Wage of all buildings in all Incorporated States in that country.

This means that with a 100% minimum wage, the minimum wage is fixed to the average wage. So if any building ever increases it's wage (for example if there is a labor shortage in one state) all other buildings are forced to increase their wage to match the new average. As there is a one week delay, wages can differ slightly between buildings and states, but over time the base wage of all buildings will converge towards the highest base wage of any building. This isn't a problem as long as your GDP per capita is constantly increasing, but even a two week stagnation can totally wreck an economy.

AIUI, it's actually even more problematic than this at 100%: The base wage (remember: laborer) is set to the average of all wages, including things that aren't laborer wages. Therefore, unless all work in the country is being done by laborers, it will automatically ratchet itself simply by using advanced production methods.

 

[LarsStok]

I kept going in my save and found that when I changed the WP institution level to 4 base wage levels started to differentiate both between states and between workplaces in the same state. It seems like the real problem is to have Workplace Safety Office at lvl 5. While I still think minimum wage laws and safety laws should be two separate institutions so as to not force me to accept less than 100%, I'll accept an 80 or 60% hazardous working conditions reduction if it means keeping my economy alive. I get that they don't have enough "law slots" to make an entirely separate law. I also sorta like that there's an economically unviable option, like "yeah you can actually attempt to make EVERY business pay the exact same base wage regardless of profitability, good luck!"