Starting to rethink my views on minimum wage...

Discussion in 'Economics' started by peilthetraveler, Jul 16, 2012.

  1. So I was a little surprised when I found out today that minimum wage in Australia is $16.52 per hour(about $17 US dollars per hour). Sure the average home price is $300-$500k around the cities but after doing a little searching I did find a town called Gnowangerup which is about 60-70 miles from the coastal city of Albany, and they have homes there that have recently sold for under $50k.

    Given that Australia has only a 5% unemployment rate, I am really starting to rethink my stance on that the free market should be in charge of wages. I recently went online to see what the job market was like in western Australia and I happened to come across a simple forklift driver job that a company was looking for someone to work for 3 weeks at 6 days per week and 12 hours per day. The pay was $39 to $42 AUD per hour. (It didnt say anything about overtime, but I assume they probably get time & a half for OT) A normal work week in Australia is 38 hours instead of 40 too, but even without overtime, someone could pull in almost $10k for 3 weeks of driving a forklift. That was just one job I saw. Another one I saw was a night patrol job. Pay was $59k AUD. 7 weeks paid vacation(They give you just over $10,000 aud for that paid vacation) 10 days personal leave and up to 4 weeks of study leave and tuition reimbursement!

    So why does high minimum wages work in Australia? Because if it works there, why cant it work here?
  2. Minimum wage should be higher in the US. I'd start with 1$ per year for the next 5 years just to get things moving.

    But I think you're comparing apples to oranges.

    Look at jobs in North Dakota where truck drivers are making tons of money to see a better comparison. The place you looked at in Aus is likely remote (like ND.)

    Minimum Wage is not higher in the US cause corporations write the rules.

    People who will counter that minimum wage is only for lowest of low end jobs FAIL to grasp that minimum wage sets a higher floor for every other hourly wage job out there.
  3. What makes you think that the things you observed were due to the minimum wage? Far more likely is that the BRIC-driven resource boom has massively increased demand for mining projects and thus labour (and housing etc) in Australia. Remember, in economics there are always multiple factors influencing things, you must not automatically assume that it is one factor that was the cause rather than another. One must compare like with like, and at the moment the US economy is sluggish compared to the Australian one.

    If the minimum wage is below the market-clearing wage (i.e. where wage rates per hour would be in a totally free market), then the minimum wage will have no impact, because no one would work for so little when they can easily get a higher-paying job. The minimum wage only becomes harmful when it is set above the market-clearing wage - in this case, someone would willingly work for below the minimum wage, and someone would willingly employ them at that lower rate - but because of the law, they would be unemployable. Instead of making $X per hour, they make zero; instead of the employer finding someone to do profitable work, the job goes untaken. Both potential employer and potential employee are worse off.

    That's the reason why most free-market economists think the minimum wage is harmful. Just like any other price control, it prevents supply and demand allocating resources in the most efficient and productive way, leading to a dead-weight loss in output.
  4. Eight


    In the US inner cities, minimum wage is a real killer of entry level jobs and contributes to the high youth unemployment. The LA inner city fights WalMart because they aren't unionized. Gadz, Walmarts employ lots of people and make them feel like they are part of the culture. Socialism seems to alienate people from their own culture and from each other..
  5. You are correct.

    Should be paying $4.25/hr, then more kids would be hired, and would learn responsibility !

  6. I am rethinking too.

    If it doesn't work here, abolish it. Let the free market decide

    Maybe I can get a big MAC value meal for $3 and not $6!!!
  7. very good point..
  8. The reason Australia has a good economy is because it gets demand for its raw materials from China's boom. America goes bust China goes bust Australia goes bust.
  9. Maverick74


    And you don't think doubling wages would not increase the cost of goods? I remember when I was in high school and my parents took me to CA for the first time. We walked into a McDonalds for lunch and I noticed that every item on the food menu was almost twice what it was back home, or at a minimum 50% higher. On the way out of the place I noticed a sign showing that they were hiring and paying almost twice what minimum wage was in my home state.

    Payroll cost is one of the largest if not the largest cost to every employer. You can't raise that input without raising the output.

    The problem is we all want to get things as cheap as possible yet earn as much as possible. Trying to beat the cost of living arb. You can't have it both ways. So we have cheap wages in this country. We also have cheap food, cheap housing, cheap gas, cheap consumer goods, etc. Raising the wage won't change the ratio.

    But as others have pointed out, in a country with a lot of minorities and immigrants, raising the minimum will only guarantee poverty for those groups. Which will require the expanding of the welfare state, which will require higher taxes, which will all lead to inflation. There is no way around this.

    The problem we have right now is there is a disconnect in this country because we have a federal reserve that is printing money and thereby driving up inflation without driving up wages. If the Fed didn't exist, inflation would collapse, and those low wages by default would be worth more and have more buying power thereby leading to a more equitable life.
  10. BSAM


    Good post, brother Leaf.

    As I've said here on ET before, the minimum wage should be at least $10 per hour.

    Minimum wage???---Is that the ultra-conservative BSAM saying that???
    Yes, it is.
    As brother Leaf points out, the minimum wage is kept low in this country because the corporations own our 535 whores in D.C.
    You know the particular whores I'm talking about.
    The ones many of you are so proud to shake hands with, you send them money, go to their little "town meetings" and are just so eager to clap for them and express your kindest regards for them.
    Oh sorry, drifting off topic a bit.

    ...In other words, we don't operate on a level playing field.
    Unfortunately, most poor people in this country are too damn dumb to understand this.

    So, if all things were equal, then there shouldn't even be any such thing as a minimum wage.
    But all things ain't equal.
    So, there should be a minimum wage---$10 or higher.

    Let's take about 10 to 20 billion dollars away from these overpaid lazy fat cats at the top and spread some financial benefits to the real workers.
    #10     Jul 22, 2012