The Trouble With the Minimum Wage…

Opponents of the minimum wage tend to focus their attacks on the idea that it causes unemployment by forcing employers to discriminate against employees whose working abilities justify a wage less than the legal minimum:

Whether or not increases in the minimum wage (or minimum wage laws more generally) actually increase unemployment is a hotly-debated subject. Krueger and Card (1992) found that to not be the case; more recent meta-analyses of the academic literature such as Neumark and Wascher (2006) have found it to be true, but only to a small extent.

I want to come at this from a different angle. My intuition is that the minimum wage — even if it does not lead to decreased employment — is not an effective means to a fair wage level. This is because it is a price control set by the government, and as Hayek and Kirzner noted, the government has no scientific way to determine what an appropriate price level is for a good or service. Only a negotiation process between the employer and employees can organically determine such a thing. Moreover, as government is often bought out by large corporate interests, it is often in no position to fight for a fair share for workers. The notion that government dominated by corporate interests should set the minimum wage puts the fox in charge of the henhouse.

The empirical evidence seems to tally with my intuitions. Defenders of the minimum wage must confront the basic failure of minimum wage laws to secure the working class a fair share of the pie. Since the Federal minimum wage laws were introduced in the 1930s, wages and salaries as a percentage of GDP have gone on a general downward trend:

WASCUR:GDP

And the minimum wage has stagnated, even as productivity has risen:

min-wage1-fig2-2012-03

If the minimum wage is not meeting its aims, why do we continue to persist with it? There are other possible approaches.

Repealing minimum wage laws may be a better bet. Let the market negotiation process deal with wage levels. Accept that government has no scientific means to determine an appropriate wage level throughout the economy. Then treat any overhanging issues of poverty and living costs entirely separately, perhaps with a basic income guarantee as proposed by Milton Friedman and embraced by economists from across the political spectrum from Friedrich Hayek on the libertarian right to Lord Skidelsky on the Keynesian left. Such a scheme combined with a repeal of minimum wage laws would free labour markets from unnecessary price fixing, while still addressing the issues of poverty and unequal access to capital by providing citizens with a basic income to spend or invest.

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73 thoughts on “The Trouble With the Minimum Wage…

  1. Because people who work in minimum wage jobs have to spend almost all of their income just to survive, all a higher minimum wage does is drive prices up on all of the goods these people buy. So while a minimum wage worker that receives a $2 an hour bump in pay may initially feel like they just made a great leap forward in their standard of living, over time they will see, that in real terms they have not.

  2. Yeah, but what if market is ineffective here? There is, as Ricardo noted, a natural minimal wage floor for the workers, but it is equivalent to a bare minimum of commodities and just enough food to live. Sure, the wages could deflate to the new equilibrium level, but the economics will deflate as well and there might be a lot of real wealth losses.

    To put in another way: now the amount of wealth of even the poorest worker has in the First world countries is much higher than that of the Third. Sure, if recession makes workers more desolate and willing to work even for less, there might be a level of wage that will make them all employed; but why should we prefer it if it will erode the living standards.

    To put it in yet another way, I think that it’s better to think of AD curve as a rising one (deflation pushes pushes down the output), so even if prices will eventually adjust, there might be a major loss of infrastructure and output before that.

    • Why should we assume the market is ineffective? Germany has no minimum wage law, and unemployment is much lower there right now than in the UK or USA, while real wages are comparable (yes, there are probably other factors at play here).

      I tend to think that repealing unemployment laws would not lower wages for workers currently employed so long as employees are given full rights to unionise and negotiate (after all, if the wage is sustainable today, it won’t be any less sustainable without minimum wage laws) but bring new workers (particularly younger workers) into the workforce at lower margins.

      • You said “Germany has no minimum wage law…” but they have Kurzarbeit (http://www.rttnews.com/story.aspx?Id=1296996&pageNum=1).

        Under Kurzarbeit, the German government compensates as much as 67% of the foregone net wages of an employee, if the employer needs to cut wage cost and working times amid economic slowdown. When an employee is covered under this scheme, his/her social contributions such as pensions, health care, longtime care, jobless benefits are fully met by the Federal Employment Agency.

      • I do agree with the interesting points you make (but please dont glorify Hayek&c for stating the obvious). Still the way to a virdict on minimum wage is not so short and easy: look at Italy and the disastrous situation of young workers, there having no floor has not worked since somehow “frictions” make their contractual position irrelevant; often it is even the case that they have to pay for working (while moving to towns with higher cost of living, when the parents can and will do, of course)! Would you even oppose a minimum wage of 0?
        The last government just introduced a minimum wage, there are pro and contra, let’s see how it evolves…
        (and iirc Germany *does* have a minimum wage, but please someone correct me here)

        Anyway one shouldnt discuss the dynamics of minimum wage without including atleast the forces from unemployed support, it’s an interacting system.

  3. The wages share of output is u = wL/paL = w/pa . u’/u = w’/w – p’/p -a’/a , p is price, a is productivity

    w’/w = Ph(E) Phillips Curve, E is employment percentage.

    Employers can give workers a’/a, productivity gains, but can offer nothing for p’/p (inflation) because to do so would reduce profits to zero.

    Therefore u’/u is less than zero whenever p’/p is greater than a’/a. The lost wage share goes to the welfare state, government employees and munitions which are financed by p’/p > 0.

      • The baby boomers with their 401k funds are benefiting. This is an inter-generational political phenomena. Your jilted generation thesis is correct.

        Baby boomers have a lot of assets. They have to hand it down to their children who can’t buy a house.

        Its OK if your parents are wealthy. If not, welcome to the Third World.

        • Most baby boomers are in REALLY bad shape. In the U.S., there will be tens of millions of us roaming the empty spaces [aimlessly] when we get to our 70′s, 80′s, 90′s.

      • I would guess that the jump in corporate profits comes from manufacturing products in China at a low wage and selling in the higher wage US market. This competitive advantage will last until US wages are at the Chinese level.

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  5. It is true the minimum wage is price control, you could pay less for a very values employee and you could pay more for a lazy one. The alternative is to get the courts engaged in determining what is the fair value for a certain employee at a certain job.
    Very impractical.

  6. I agree with your obsevation that the establishment of minimum wages, and subsequent revisions upward, do not seem to increase overall employment; and they have not done anything to get people out of poverty. But they do not have the adverse effects upon overall employment that some think it does; and it has had a marginal -albeit short term- benefit to the standard of living for the bottom of the labor pool.

    The workers in China, India, etc. are performing the necessary repetitive tasks of basic assembly and fabrication that do not require any significant levels of literacy and education. They are being paid about a dollar per hour to perform tasks once done by poorly-educated workers in this country. Before the Chinese sold their proletariat into enduring economic servitude to globalists, the vast majority of them were underemployed and living on heaviliy-subsidized wages. None of us whould want such a turn of events to unfold in this country as the solution to our under-employed and unemployment problems. But be sure that unfettered global capitalism is determined to have it that way. So don’t count on some commitment by capitaists to sustain the standard of living for Americans nor for anyone else.

    Until yesterday, I did not know who Maurice Taylor was, nor did I ever hear of the company, Titan Industries, before. But Taylor’s rejection of the offer to run a tire plant in France says everything that one needs to know about the structural defect in globalization. Taylor bragged that he can build a tire plant in India or China, pay the workers there about a buck an hour, and sell all the tires that France could handle.

    As long as there are no limits to the way capitalists can arbitrage the cost of labor across the world, and thereby lower wages and living standards to below subsistence levels in all but the poorest places on earth, their is no hope for the least among us to survive, much less succeed or even aspire to succeed. Furthermore, this is a hellish process through which most -if not nearly all- people will be sucked into a life of economic depression and dependency.

    • I’m not sure the situation is really so hopeless…… I think once energy costs begin falling again (i.e. when solar power begins to cost less than coal and oil) we will have strong growth, and strong wage growth around the world.

      • Sorry, John, for this “late hit” as in American football.

        We’ve had gains in technology bringing lower costs, better health, etc. to the world’s masses. China moved into capitalism and the USSR collapsed, liberating masses of people into labor and consumer markets, and potentially liberating resources from armaments. [A former Malthusian-rejecting respected economist has switched to worrying that meat*-eating emerging massive middle-class populations (>> 19th-20th century European, North American, and elites-only elsewhere) will over strain global agricultural capacity].

        But human frailties (e.g., see The Seven Deadly Sins and nearly any human history) have managed to screw things up. For example, after “surviving” Y2K and the info tech bubble burst, we had booming emerging nation economies and booming markets for fertilizer, energy, materials, metals and everything made therewith. Then, OOPS! Pennsylvania Ave. and Wall St. conspired to (accidentally) ignite** near-total destruction of global finance — capital, credit, and equity.

        So can we hope that cheap energy*** will cure the world’s economic ailments? I’m afraid not, unless/until PEOPLE**** — enlightenment, politics, ethics, leadership — want it bad enough!

        * Meat from grain is very inefficient human food compared to grain itself.

        ** Of course decades of short-sighted self-indulgent developed nation populations assembled the fuel waiting to be ignited.

        *** Cheap energy doesn’t stay cheap: petroleum vs. whale oil, hydro and geothermal, nuclear fission, coal, wind, fusion?, biomass.

        **** Can’t resist presenting my wife’s brilliant but too-late solution: God should have given DOGS dominion over the earth!

    • Globalism doesn’t work for many, many reasons, but none more obvious than the above pointed out by AB. The free movement of capital in its never ending quest to find the lowest labor costs doesn’t work so well when you start crossing national boundaries [radically different living standards].

      This is most of what has caused the great increase in income disparity over the past 50 years [capital v. labor]. The minimum wage is an attempt to attenuate this differential, but like all misdirected palliative measures, it creates more problems than it solves.

      Having a nearly free market in labor is great for capital because it results in the lowest labor costs. Otoh, the markets labor must confront to eek out an existence are completely manipulated in every way, shape and form.

      Life is not so very fair.

  7. Aziz: while you omit a few detailed arguments against minimum wage laws, e.g., that affected (“starter”) jobs need not support families or be a career, you have hit another nail on the head by showing that “wage-fixing” by politicians rather than free market negotiations is as counter-productive as price-fixing.

    A you also point out, dealing with poverty* is a different problem with better solutions available.

    *I suggest we call it “government charity”. Poverty is an affliction demanding cure; charity is well understood to be a gift, hopefully temporary, deserving gratitude — and, by the way, not a RIGHT.

    • I think when it comes to dealing with poverty we generally need to look more at teaching/encouraging people to fish rather than giving them fish. I don’t think government charity as you rightly call it is desirable at all. It’s humiliating and dependency-creating for those who receive it, and it’s a drain on the productive. But right now, it is the norm. I want to reform the system to reduce dependency on it, so that fewer and fewer people need it. In 50 years, I hope to see a very different world. If most homes and local communities have their own source of energy generation (solar, wind, maybe even nuclear) and food production, very few people will need the government dole.

        • I did not expect gratitude but the recipients should have been grateful.

          It is almost that they expect to be fed for free, so they can spend more money on casinos, smokes or booze. Is casino money, smokes and booze a right?

        • Ingratitude, expectation of handouts (fruits of others’ labor), demands, “rights”, etc. Our discussions have hit the age-old wall of the “Deadly Sin” of SLOTH (call it culturally deprived or unmotivated to be politically correct).

          In the great depression there was a “sign of the times” sick joke: A farmer stops a policeman escorting a hobo out of town to starve to death on the prairie — “I will give him some of this wagon load of corn!”. The hobo asks “Is it shelled?” When the farmer answers “No”, the hobo says “Drive on”.

        • Jan is correct. People who are THAT beaten-down have few ways to express their [negative] emotions other than striking out indiscriminately.

          Anger is ALWAYS self-directed. You give to these people without expectation, as what they might eventually give back to you [or another] is your reflected compassion.

  8. If the increase in minimum wage does not bring one out of poverty. Where is the incentive for one to work? And even if one works where is the gurantee that the person is productive? If the increase in wage does not improve the environment or encourage the person to be effective, than unfortunately the society is in square one all over again. History proved more than once that government charity without any economic changes never worked…

    • Aziz has pretty well answered your “Where is the incentive for ONE (the individual) to work?” — pride, experience for upward mobility, etc. But you got the bottom line right: government charity (well, government anything*) has never worked!

      * Traditional saying: “Government can’t do anything but make war and print money, and they don’t do that very well!” My preference: “Government can’t DO anything, only prevent and stop things.”

  9. I must be a little thick, because I can’t see any point in debating minimum wage, when government policy is destroying the value of the currency. Inflation figures are massaged regularly. Items are thrown in and out of the baskets used to calculate various government stats to avoid presenting the real picture. I recollect thinking it was extremely disingenous of Gordon Brown when he crowed in parliament about a ‘large’ rise in the minimum wage ( I think it was about 25p/hr) when he must have known his own policies were reducing the buying power of workers faster than the wages were going up. Of much more value to the low- paid and vulnerable such as pensioners on fixed incomes would be to maintain the purchasing power of their money. Minimum wage is surely a distant second to consider?

  10. Australia’s minimum wage is $15.96 We have one of the lowest unemployment rates (Government statistics but reality it is much higher) and our economy is booming due to low labour high machine productivity in the resources boom (We are spending our inheritance).

    http://www.fairwork.gov.au/pay/national-minimum-wage/pages/default.aspx

    I would pay $20 per hour for an unskilled but hard working and reliable worker, but our health and safety and workcover (The employer pays insurance that covers workers in the event of injury, but you need to be a top administrator to manage the process once an employee is injured) and this scares the life out of small tradesmen who would employ physically fit workers, when they get to old to do the job (Or expand their business) Instead these skilled tradesmen, don’t employ apprentices or workers, and they just retire.

    http://www.worksafe.vic.gov.au/

    Australia had one of the ealriest Union movements, and minimum wages were set in stone very early on (The judge decided a labourer needed a certain level of wages to work a 60 hour week just to survive. “Harvester Judgement

    http://www.skwirk.com.au/p-c_s-14_u-127_t-352_c-1219/harvester-judgement-basic-wage/nsw/history/australia-to-1914/social-legislation-1901-1914

    History lessons.

    http://en.wikipedia.org/wiki/History_of_the_minimum_wage

    http://www.time.com/time/magazine/article/0,9171,1912408,00.html

    It was clear due to low productivity back in the early 20th century, that goods were so expensive, one would have to work their guts out just to survive. Now, one has disposable income which far exceeds this.

    Assuming minimum wages were reduced to this level again, many people on welfare would be working, but no better off. Here we have the dilemma. Do we force people to survive, or do we assume a level of unemployability for certain members of society, and we have a duty to keep them in existence?

    I think if we call a spade a spade and find that certain people do not have the intellectual or physical strength to work in modern society (High tech production and services), then they either pay their way by providing very menial jobs (Sweeping, greeting customers, cleaning etc) to give back to society, or we as a society accept a level of socio-economic decay and boredom, leading to delinquency alcoholism and crime, that goes with welfare payments.

    Personally I think that anyone who is unemployed for say 2 years or more, or who has a disibility, should be encouraged to provide some sort of community service in exchange. They will see the link between their payment and civic duty.

    There is no need to have education courses, with the internet if one wants to learn a skill they can, then they can approach an employer and ask for a job.

    If someone came to me and said I went online learned accounting, then I bought a software package and have practiced, I would give them a chance at a job. It is the drive in ones ambition that gets them employed.

    For example fruit rots on trees, because farmers can’t get labour (Hot hard work). Cheaper fruit at the market decreases inflation and increases economic output.

    Welfare is stagnant opportunity. We all must pull our weight.

    • BR, if it’s really the case that your minimum wage is $16./hour, then I would short your economy BIG TIME! There is no way Australia is going to be able to compete in the world economy once your resource boom has petered out.

      • I agree. With the end of the housing construction boom (No more securitization splurges) housing tradesmen are really suffering, and to boot they got low documentation loans and bought new cars and houses.

  11. And may I add that I believe that with a minimum income guarantee (Survival payment, potentially asset means tested), we will reduce the administrative burden of the Welfare State.

    Provided the citizen provides some output for the payment the Nation will benefit.

  12. Pity the poor minimum wage workers! They don’t make enough to live on. How can we help them? Should the Minimum be raised?
    First, let’s find out why they don’t earn more. After all, a lot of people do, so what makes the minimum wage earner so unfortunate?

    There are no minimum wage doctors or lawyers.

    You can’t hire a plumber, an electrician or an auto mechanic for $7.25 an hour. We are willing to pay those people a lot more for their expertise. Employers pay more for skilled workers, too.
    So, the best way to help those who are only making the minimum is to provide them with knowledge, skills and experience so they can command a higher wage.

    It’s the difference between giving a man a fish, and teaching him how to fish.

    Of course, that would take time and effort. In these days of instant gratification, we don’t like having to actually DO anything, or being told that we might have to wait for results!
    Let’s do something NOW! Let’s just raise the minimum wage. So, instantly, everyone who only gets $7.25 today will get $9.00 tomorrow. Problem solved, right?

    Every action has consequences.

    The Minimum Wage earners probably have co-workers with a little more time and experience on the job, and who are paid a little more. Let’s say they make $7.50. Then, there must be a supervisor for these workers. That person earns even more. Let’s say $8.00.
    If we give the first person a raise, to $9.00, what about the person who worked there awhile? Does he/she still make $7.50? Of course not, but don’t they still deserve more than the Minimum? That person is going to have to get a raise, too. How about $9.50? That’s only fair. Then there is the supervisor. Let’s give him $10.00 per hour. Of course, if there is anyone above the supervisor who is making less than $10.00 per hour now, they will need raises, too.

    If the minimum wage goes up, EVERYBODY gets a raise! Wonderful!

    Or is it? Let’s take a look at your favorite fast-food emporium. That’s probably a good place to find people making the kind of wages we’re talking about.
    When you buy your cheeseburger, you are paying for the wages of everybody who works there … and the people who baked the buns, the people who slaughtered the cattle, the people who made the patties and the paper products, the people who milked the cows and made the cheese, the people who harvested the lettuce, and the people who delivered all those things to the restaurant.

    And ALL of those people got a raise!

    The price of your cheeseburger just went up so much that you might want to reconsider getting fries with that! But you can afford it, because you got a raise, too, didn’t you?
    Well, you pay taxes, don’t you? When you get a raise, part of it goes to the government. The more you make, the more you pay in taxes. In fact, for every dollar you earn, you’ll take home about 75 cents to 80 cents, if you’re lucky. But the price of EVERYTHING is going up to cover the FULL cost of everybody’s raises. Now a dollar won’t buy as much as it used to – and 80 cents will buy even less!
    After the government takes its raise out of our paychecks, we might find that we can’t afford as much as we used to. And when there is less demand for products and services, businesses need fewer employees. So some people will lose their jobs, while others will get a raise that won’t be enough to cover the higher cost of everything!
    And here’s the worst part. Guess who will lose their jobs first? The people with the least skills – the minimum wage earners – the people you were trying to help!
    Even if they keep their jobs, the unskilled workers are still on the bottom of the heap, making MINIMUM WAGE, and that will never be enough because everything costs more!
    Did you help them? Did you help anyone? In fact, you hurt most everybody. Especially retired people on fixed incomes. Because they are out of the workforce, Minimum Wage laws won’t affect them, so they won’t get a raise. Yet, everything they need to buy went up in price!
    The Minimum Wage earner thinks he got a raise, so he doesn’t see the need to improve his skill level, which is the only way he will ever improve his earning potential.
    Did anyone benefit from this? To find out, follow the money.

    The more you earn, the more you pay in taxes.

    Remember this the next time your nice elected officials tell you they want to help you by raising the Minimum Wage.

    • “There are no minimum wage doctors or lawyers.”

      Give it a couple more years and I’ll probably be making minimum wage. I made considerably less in my 32nd year of practice [2012] then I did in my third year in practice [1983], NOT inflation adjusted!!

      IF you are honest, there is little money to be made in health care in the U.S. [unless you happen to be in a few of elite sub-specialties/connected to a corporate system/or a corporate consultant].

    • This is an excellent example, and in Australia, not only have we had increased minimum wages, but expensive training for the people on welfare. This training is theoretical and impracticable and employers see no value in it. But it keeps Bureaucrats in a job administering the scheme, and a new industry in “training” has sprung up, receiving government money.

      However even with minimum wages many smal businesses would employ staff, as they age or seek less hours in the business, but employment laws make it burdensome for people with limited administrative skills, but excellent practical skills (Mechanics, Carpenters etc)

  13. Let’s not forget the impact that demanding consumers have on wages. When I bought my first desktop computer twelve years ago I paid about $3,800. They were all manufactured in the US at that time. How many of you who posted here are willing to pay that now? We have become a throw-away society demanding cheaper and cheaper gadgets and we want the latest and greatest every 6 months. Manufacturers have moved jobs offshore not just because of greed, but also because all of you out there who talk of negotiating, collective bargaining, wage controls and the like, talk the talk but don’t walk the walk. Not one union worker pays more to buy the ‘union label’ in order to support his/her organized bretheren. It’s every man/woman for him/her self. You all want your cheap phones and PCs and the only way to make them cheap is for manufacturers to chase the fleeting cheap labor all over the world. Zimbabwe anyone?

    • John, this seems a good place to expand the discussion to explore other ways to RAISE (not close the gap with high salaries or corporate profits, please!) wages — unions, taxation (especially corporate), “globalization”, etc. Maybe there also is more to debate in banking, government controls, etc

      • In Australia our biggest money earning companies are virtual monopolies. Not only are their workers paid well with great benefits, their shareholders get big fat dividends.

        Try setting up a Wet Market to compete against extortionist duopolies Super-Markets meat sections and you will be fined with a raft of laws and by-laws. Instead the poor can only afford horse meat and fish fingers (May contain traces of seal)

        • “In Australia our biggest money earning companies are virtual monopolies.”

          EXACTLY. The global economy is set up for companies that can leverage [or impose] debt and who are cartels. But, it’s always been this way, as it is the stealth purpose of government to carve out markets for special interests. It’s just almost completely this way now.

      • “Maybe there also is more to debate in banking,…”

        Yes, I agree, DG. The main question is, “what do you do with these completely worthless [occupationally] people once you have eliminated their witchcraft?”

    • Extend the pension to all (Asset means tested) age groups, including teens, and index to inflation. As inflation would not be boosted by wage based inflation (Wage rise on disposable income), it would be minimised. But in return they must provide civic duty (Cleaning streets – see above comments)

      I laugh when I hear people saying they need a CPI indexed wage rise and they are on $50,000 plus. All that is happening is you are fueling wage inflation.

      The irony is all the unionised countries are now in decline. Union members had fat pay cheques and if wise bought equities. Now they are global companies making profits, so it is a double whammy for the powerful and connected workers in closeted industries.

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  15. Its just politicians tinkering with something they have very little understanding of once again. This is why democratic forms of government are totalitarian in the sense that once a government is elected it claims legitimicy for everything it does…the people chose!

    And these people will interfere in everything and anything if they have a chance to. They are the great do gooders, they have a vision of the world and they want to make a difference. Too bad their interference has unintended consequences. The solution is get these people out of our lives, stop allowing them to control our lives. Tell them to stop creating money from nothing and giving licenses to banks, tell them to stop taxing us. Taxation makes you poor, and bloates the state.

    • robc, you have almost written a new Declaration of Independence, complete with a modern “train of abuses and usurpations, pursuing invariably the same object … to reduce (us) under absolute despotism”! Just add dictator wannabes like Obama and Croesus wannabes like Goldman Sachs to “tinkerers” and “do gooders”.

  16. The obvious problem with Aziz’s “citizens basic income” is that it is a HUGE incentive not to work – at least for the relatively unskilled.

    When robots are doing virtually all the work we’ll be able to have a large proportion of the population not working. But we aren’t there quite yet.

  17. Even when there are robots some people will want to control who gets what share. I believe the ruling elites would cull the human race and perhaps use genetic engineering or eugenics to create docile ‘consumers’.

  18. Instead of being concerned with how to dive-up the crumbs scattered on the floor, one should take a seat at the dinner table and start a serious discussion with principal players currently stuffing their faces with roast beef and the like.

  19. Lowering, or getting rid of, the minimum wage may be the only way to face the present and future unemployment problems of most industrialized countries. It is difficult to approach this problem without setting off a major backlash. The kind that may break a political candidate’s prospects.

    • “The kind that may break a political candidate’s prospects”

      I agree with you. Politicians are narcissistic. Even in high school, they would sell out their student fraternity for fame and glory.

      When you look at them as Sociopaths, then you get a clearer picture. Enlightened ones, vote Statesmen, but with a democracy, the masses vote for Mr Popular.

      THEY DON”T HAVE OUR BEST INTERESTS!!

      • How tragically true, Buddy! Since before you were born I have been pointing out to the sheeple that: Bi-partisan is NOT non-partisan! Republican politicians are bad — Democratic politicians are worse! It’s Washington D.C. VERSUS the people!

  20. In liberal capitalism, what you get depends on how much power you can bring to the metaphorical bargaining table. If you have a lot of money, connections, or other resources, that will raise your ability to bargain considerably. So will membership in a monopolistic or oligopolistic cabal, like the medical and legal professions or a powerful craft union. (Are there any of those left?) So will valuable skills, a capacity to work hard, or the ability to appear to have valuable skills or work hard, which is actually much more important. Being the right age, race, sex, look, ethnicity, religion, etc., count in many situations. Those who do not possess any of these powers have low-wage jobs, down to the point where Welfare, begging, scavenging or theft have better ROI, which is pretty low. Hence, if the minimum wage is raised above what the low-end workers are already making, the more powerful persons above them will simply raise their own salaries, dividends, fees, prices, and so on, to compensate. Thus, I think raising the minimum wage can be expected to lead to inflation, not unemployment, and that this would be obvious to anyone who cared to think about it. I conclude that minimum-wage proposals are in the category of feel-good legislation.

    • ” I conclude that minimum-wage proposals are in the category of feel-good legislation.”

      Precisely!

      The irony is, in Australia, unless you don’t go to the best schools, you are unlikely to get a Government job, which pays WAY OVER the minimum wage. You have to be the same white, anglo, private schooled, good family connection to get into our Capital city bureaucracy gravy train (D.C.) equivalent.

      The Government sector needs to be culled, so as to reduce taxation and allow employers to pay a higher real wage.

  21. After talking with a few small business owners who work on their own, they would pay someone more than the minimum wage, but they want to be able to fire them if they are no good at their job.

    If employment based on statistic rules is more than a few hours a week, everybody would be employed. They might do 8 hours, get fired, then find another job a week later. Based on the statistics they were employed for the 2 weeks!

  22. Waiiit, so what exactly demonstrates that the *market* can or does pay wages that can keep body and soul together, exactly?

    (Assuming we aren’t performing that perverse upper-middle-class dodge of presuming that your teenage kids somehow represent a representative sample of minimum-wage earners.)

    If the minimum wage doesn’t do the job, it should be raised. If the market can handle it, the point is mooted, because the minimum wage would never be paid in the first place. A basic minimum-income wouldn’t necessarily do any better job than the minimum wage does, except as a way of transferring wealth into the hands of the Walton family and the like.

    • Just as a bit of a followup…it’s somewhat dangerous to presume that Americans are representative here. America has a political system that is famously resistant to improving the plight of the poor. Meanwhile, the Canadian province of Ontario just raised its minimum wage to $10.75, and other jurisdictions around the world have done the same.

      Presuming that the failure of the American minimum wage is somehow representative of a failure of the *concept* is like presuming that the troubles of the post-Cameron NHS proves that socialized health care doesn’t work.

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