Minimum Wage

Discussion in 'Economics' started by Cache Landing, Jul 10, 2006.

  1. Obviously, every president that pushes a minimum wage increase is doing it for the PR. My question is...

    Given that almost every economist out there agrees that it is a horrible way of accomplishing the proposed goal. Why is it such a popular idea?
  2. I'd also like to expand the question. What would happen if we were to get rid of minimum wage?
  3. Four reasons:

    1. The number of potential voters who earn minimum wage vastly exceeds the number of business owners who might have to pay minimum wage -- for every voter that owns a McDonalds, there are 20 voters that work there. (And the 1,000 consumers that eat at that McDonalds aren't likely to get off their supersized butts to vote down the measure).

    2. Many people believe profit is evil and businesses are too greedy. So forcing companies to pay a "decent" wage and benefits is the "right thing to do."

    3. Most people understand very little about business and economics in terms of how costs flow through businesses to consumers and how businesses don't have to hire people whose labor is not worth minimum wage.

    4. Democrats are learning the Republican's tactic of putting an issue campaign on the ballot that draws party loyalists to the polls.

    Bottom line is that a higher minimum wage is great in the short-term for one large bunch of people but very few people think about or understand the long-term consequences.

    Although I do agree that living on $5.15/hr would be extremely difficult, I'm not sure how society can address the core problem that some peoples' labor simply isn't worth more than $5.15/hr.
  4. But if the minimum wage laws didn't exist, do you think the competetive market wage would drop below $5.15?
  5. A minimum wage is absolutely essential if we are to have cheap illegal immigrant labor.
  6. Yes, because wage is always a spectrum unless constrained by law. But whether this drop is good or bad is less clear.

    1. Some people who currently earn 5.15/hr might see a drop in wages.

    2. Wages at the bottom might fluctuate -- creating boom/bust cycles for people living on the economic margins. (This probably already happens in an all-or-nothing way as employers shed workers during bad times when they can't cut wages below the minimum).

    1. Some people who can't get jobs at $5.15/hr may become employable at lower wages. Employers might be willing to "give someone with a chance" if they know they only have to pay $4/hr. These employees might parley that employment and experience into higher wage, higher-skill employment.

    2. Prices can drop on some goods so that more people can afford those goods and the poverty line drops. This has a weak second order effect in which the increased volume of the goods creates a further improvement in efficiencies and a further improvement in price.

    Net results: Whether more people drop below the poverty line or whether more people ultimately rise above a declining poverty line is very unclear.
  7. nampooya


    My guess is you can rip welfare for more than $4/5hr,especially with kids.At about $160/week,in this world,most people lose interest in working.Saw a great shirt at concert this weekend:"Will not work for anything!"
  8. Asazel


    I have often wondered about the effects of raising minimum wages.

    The additional capital needed for a wage increase, eventually, must come from raising the cost of goods and services.

    If not, where does the money come from?

    If this is the case, will increasing minimum wage even help the poor if everything they buy is, in turn, more expensive?
  9. As a hard core right wing capitalist, I would like nothing more than to say.."let the market take care of wages...competition will take place among businesses and workers and wages will go up".

    However after quite a few years enjoying and promoting our system, I have to say 'BULLSH*T". Free market capitalism is a thing of beauty in many cases....especially when you have a semblance of an honorable, ethical society. Sorry folks...we have neither anymore. Our corporations have shown time and time again...quite a few very recently, that they just cannot be trusted to do the right thing.

    We all come on here and talk real tough...problem is, in this richest of countries, we have AMERICANS who are hungry, sick and uneducated. I fear our model no longer works. We no longer have people in charge, either in the public or private sector who possess the honor, integrity or fortitude to continue the work.

    It is really quite sad to see.

  10. It's ideal purpose was to allow the masses to keep up with inflation, you know, kinda allow the average Joe Shmoe, the backbone of the economy, to at least try to maintain their standard of living.

    The last Congressional ruling pretty told you the change in that mentality.
    #10     Jul 10, 2006