Defining The Minimum Wage
Harsh But True
By Pejman Yousefzadeh Posted in Economy | Featured Stories — Comments (11) / Email this page » / Leave a comment »
An entry for the dictionary courtesy of Greg Mankiw. The definition has the benefit of being dead-on-target accurate in addition to being quite cutting. Dollars to doughnuts continues to be ventured, however, that no matter how logical, well-founded and emipirically justified the case against the minimum wage is, Congress shall pass and the President shall sign a substantial minimum wage increase--and without the tax cuts for small businesses that are needed to give the minimum wage increase at least the patina of palatability.
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Defining The Minimum Wage 11 Comments (0 topical, 11 editorial, 0 hidden) Post a comment »
Please stand up. anyone? buehler?
I think the names of primary household earners that make minimum wage are something like Casper.
If you always find yourself arguing the exceptions rather than the rule you just might be rapidly sliding down your own slippery slope to irrelevance. -CommonCents
If you always find yourself arguing the exceptions rather than the rule you just might be rapidly sliding down your own slippery slope to irrelevance. -CommonCents
Well actually, I used to to work in a manufacturing plant supervising the shipping department, and I can speak from experience that at least half the males over 25 years of age that worked there were the primary wage earner. They all made minimum wage or just a few cents over it. Huge amounts of turnover, bad attitudes constantly and management could care less about the problems it caused for the line managers. There was always someone else standing in line for any job they could get. Primarily Vietnamese, Hispanic, Chinese etc. They got paid twice a month and once they paid rent and bought food for the next two weeks, many could not even afford bus fare to get to work. I saw a couple even go homeless while earning a paycheck.
If the government did not conspire with the employers to import millions of new low wage workers.
"Nothing works like freedom, Nothing succeeds like liberty"
Kyle
I am a staunch believer in the free market. But I'm also for some sort of minimum wage as well. How can that be so? Because in our current system, the supply of jobs is manipulated by the feds through interest rate policy.
If the demand for jobs gets too high, it gives the unskilled or semi-skilled laborers clout to demand higher wages. This in turn leads to inflationary pressures and is one of the reasons the federal reserve will raise interest rates, to "soften" the market up. Then end result of raising interest rates is higher costs for all businesses which leads to either laying people off or slowing down the creation of new jobs. This is certainly NOT a free market ideal.
Our current economic system depends on there being a certain level of people unemployed. The pool of jobs is manipulated to always be less than the available labor pool and this fact keeps wages depressed and hence also keeps inflation in check.
So minimum wage laws are a counter-balance to this market meddling on the other end.
The REAL free-market solution is to remove the feds ability to control interest rates and let the world financial market decide what they should be, which would also make the dollar more competitive. Yes, there will be times when inflation rises (during times of heavy economic growth) but the free market itself will correct it eventually.
The political problem with this approach is that a lot of it is timed with world events, not convenient to a political election calendar. So a short period of higher wages and inflation would result in the voters blaming the current elected leadership. For example, right now I can't beat into many of my liberal friend's heads that gas prices going down just before the election and now going back up was not some devious scheme by the President to manipulate the elections, it was a combination of demand, world market for crude, and lack of need for summer additives.
The problem with raising the federal minimum wage, as Jon Sandor mentions above, is that there are different costs around the country. Therefore it's really best to let local governments decide how this is best approached, and indeed that is what is happening now. Many states and cities impose their own minimum wage laws that are above the federal rate because they feel it's needed for their area.
The argument that raising the minimum wage will throw people out of work is a bit disingenuous. This also happens when the federal reserve raises interest rates, but no one cries about the evils of that to the lowest paid workers. The bottom line on job availability is that it is a business's responsibility to operate as efficiently as possible. If Subway can get by with only having two people behind the counter instead of three, they certainly should be doing that whether the employees there are making one or ten dollars per hour. No business should have extra staff on that are not needed, just to be nice. They'll end up being whipped by a competitor and then all of their staff are on the street.
Past increases in the minimum wage have not lead to long periods of increased unemployment or inflation. If it was heading that way, the feds could just decrease interest rates to counter effect it.
Market manipulation is an evil thing to do, but minimum wage laws are only one piece in our continuing interference in the free market. If we want an honest free market for labor, we need to stop meddling in that market in other areas as well and let it REALLY be a free market.
on the matter I have ever seen and it is spot-on. Unfortunately the chances of the government ceasing to meddle in the economy are about equal to my chances of becoming Pope.
First point, if by meddling you mean (as in my above post) the government conspiring with employers to artificially increase the pool of low wage workers, then I concur.
As to your point of manipulating interest rates. Well, let us just say that we have had a monetarist policy at the Federal Reserve for nearly 25 years and it has corresponded with the most amazing increase in wealth probably in the history of mankind, so I would not be so quick to change it.
Labor is a market commodity. We might be better off subsidizing to some extent, low wage adults with dependents rather than raising the minimum wage. But we might not have to do either if we just stopped the constant flow of new labor. The market would raise the price of labor all on its own.
"Nothing works like freedom, Nothing succeeds like liberty"
Kyle
How many times in the past have you read that the economy is growing too fast, so the feds are going to raise interest rates to slow it down? Or unemployment is getting too low, leading to fears of inflationary pressures, and therefore the feds are expected to raise interest rates? Or the flip side of, because of slowing economy the feds are expected to cut interest rates to spur economic development and creation of new jobs?
These are all market manipulations. Yes, we have gotten it down to a science and we've smoothed out the normal natural business cycles, but one of the impacts of this policy is that unemployment rate is also kept pretty near constant as well.
So in your example of the constant flow of new labor, if that was to be cut off and unemployment went down and the market started to raise the price of labor on its own, the feds would raise interest rates to slow the economy down, which has the end result of throwing more people out of work.
By policy we are therefore manipulating the supply of jobs available. When you get into market manipulation, you also have to dabble in corrective counter-measures as well, and minimum wage is an unfortunate part of that.
My position here is that you can't argue against minimum wage laws by throwing out the free market ideals when the labor market is not currently a free market due to other anti-free market pressures currently practiced. The supply of jobs is manipulated through federal reserve policy. Whether that's a good thing or bad thing ultimately is not my point. My position is, labor is not a free market regardless of the absence, presence or current level of minimum wage laws.
The real problem with the minimum wage is that it penalizes the low cost, low wage parts of the country. It's part of an effort to impose the same labor costs everywhere, so no employer will ever be tempted to leave New York for Florida.