Guys, it's very simple what would happen .... What would happen is unemployment among the lowest skilled workers would double overnight. You have no proof of that statement. In a free market system, wages are determined entirely by replacement cost. It is also determined by what an employer can get away with, especially with the poor and uneducated. Not very long ago in this country the free market allowed child labor, sweat shops, and wages that equate to working slaves. If you really are a 100% free market guy (I bet your not) you would be for repealing ALL labor laws and letting the market dictate wages, hours worked and working conditions. But you don't and that's good. You can raise wages all you want. Hell, you can make minimum wage $100 an hour. Now your just being silly.
That's nonsense mav, first of all no one is talking about doubling the minimum wage, second if Company A needs 10 employees to get the job done - it will keep all 10 employees, it will certainly not risk losing revenue and pissing off clients. If the company does not need 10 employees to get the job done it will downsize and get rid of 5 of them right now regardless of the minimum wage. Moreover employees making more money will be spending more money, companies will likely have to hire more employees to meet increased demand for their goods and services.
You are making the assumption that an increase in the minimum wage would not impact the number of minimum wage jobs available. A dangerous assumption IMO.
Hey guys, give Mav a break. Most economists would agree with his statements. Increasing the minimum wage will result in fewer jobs for the unskilled workers and thus higher unemployment. That is an accepted fact in economics. The debate is whether or not there is a better way of accomplishing the goal.
I'm also a Republican, and although it pains me to admit it, I have to agree with the points here. The assumptions that lie at the foundation of our U.S. Republic (yes, a Republic, not a true democracy) depend on an EDUCATED, MORAL, and INVOLVED CITIZENRY to function effectively. All of these are prerequisites for the system to work correctly. When you have a LACK OF INTEGRITY rewarded at the top of the government and corporate organizations, then the system breaks down. When you have IGNORANT or UNINVOLVED CITIZENS (ie voters), they are easy to fool by those with LACK OF INTEGRITY and the system degrades further. Then the system basically becomes a sellout to those who can afford to pay the most to back candidates, influence the votes in Congress and keep the masses of people voting them back in by running a little 8 month charades every 2 or 4 years saying a bunch of "feel-good" rhetoric to fool people into keeping the status quo. If these underpinnings of society were really in place like they should be, there wouldn't be corporate scandals on the level of ENRON, MCI WORLDCOM, etc. When you have things like the insane NYSE pay package going through for Grasso, and rewarding CEOs of perpetual money-losing enterprises such as airlines with millions of dollars in golden parachutes, bonuses, etc. while at the same time the company is losing money, laying off employees, and demanding pay cuts of the front line workers, you really have to admit that the system is broken. In a true free market situation, a minimum wage would not be necessary. However, when you have corporations willing to hire illegal aliens at sub-market wages, CEOS that pay themselves 200x of what the lowest paid worker makes with zero correlation to profitability of the company, stock options only granted to executives even though the company is profitable through the efforts of all of the employees, then you have to do something to counterbalance the situation. The minimum wage isn't the best solution to these issues by a long shot, but the people in power are not going to implement the reforms that are really needed, so you have to start somewhere.
That's certainly not the concensus and not an accepted fact in economics. "We believe that a modest increase in the minimum wage would improve the well-being of low-wage workers and would not have the adverse effects that critics have claimed. In particular, we share the view the Council of Economic Advisers expressed in the 1999 Economic Report of the President that âthe weight of the evidence suggests that modest increases in the minimum wage have had very little or no effect on employment.â While controversy about the precise employment effects of the minimum wage continues, research has shown that most of the beneficiaries are adults, most are female, and the vast majority are members of low-income working families." ... 552 other economists agree. http://www.epinet.org/stmt/economistsminwage200410web.pdf The last minimum wage increase in 1996-1997 clearly did not have any negative consequences for the economy or job market.
I agree to the points above, but there is one statement that seems to have been repeated here a couple times that I'm not sure about. It's been suggested that in order for a free-market system to work, people need to be honest and posess a certain degree of integrity. That very idea seems to be contrary to the free market system. The "idea" of a competetive market is that supply/demand govern the wages, not the integrity of those hiring workers. If your boss won't pay you at least the competetive market rate, then you go get a job that will. Employers are forced to be price takers or they will not have any employees. I understand that people can't move freely between jobs, especially in small towns. But the idea that employers would be able to find a whole bunch of workers below the current minimum wage, to me seems incorrect. The other thing that seems to be common for this thread is that minimum wage, child labor laws, hiring illegals, etc. are all the same issue. It seems to be suggested that we couldn't get rid of minimum wage without dropping the other labor laws with it. So hypothetical situation: We get rid of minimum wage, but keep the other labor laws including child labor, maximum hours worked, etc. And we enforce the idea that US companies cannot hire illegal workers without a permit. What then?
Sorry, I shouldn't have said "FACT". But it is the majority consensus that any price ceiling/floor causes dead weight loss. In this case the dead weight loss consists mainly of unskilled workers.
Its difficult to rebutt such a statement without knowing (1) What is the definition of "modest" (2) What are the adverse effects that critics have claimed In other words, they are saying that some unspecified level of minimum wage change will not have some unspecified level of adverse affect which is a pretty meaningless statement. That is far from saying it will have no effect on employment. Not sure what those economist all agreed to. The above quote says that "controversy about the precise employment effects of the minimum wage continues" - certainly doesn't sound like this has been settled. I'm sure that its possible that modest increases would have little effect on employement but the question is how modest is modest - how far can you push the level before a significiant affect is caused. Have those 552 economists reached a consensus on that? There is no way to prove that statement without knowing how the economy or job market would have played out if the minimum wage increase had not happened.
Previous increases in the minimum wage have had little to no effect in increasing unemployment. This is one of the many mysteries in the world of labor economics. The last minimum wage increase (federal) did not lead to increased unemployment; in fact, unemployment decreased. I would not say that one caused the other; correlation isn't causation.