PoliticalChic
Diamond Member
1. In 1938 the Fair Labor Standards Act (FLSA) established a federal minimum wage law for all employees engaged in interstate commerce.($7.25 as of 2009) When Social Security and medial benefits are included, the wage must be considered to be over $10/ hour. This governmental intervention in the labor market makes it impossible to argue that there is a free market in this respect.
a. While legislative bodies have the power to order wage increases, they have not as of yet found a way to order commensurate increases in worker productivity that make the worker’s output worth the higher wage.
b. Further, while Congress can legislate the wage at which labor transactions occur, it cannot require that the transaction actually be made, and the worker hired.
2. Employers, of course, are free to make adjustments in their use of labor. Often said adjustments are at the expense of the workers who are most disadvantaged in terms of their marketable skills. They will lose their jobs, or not be hired in the first place.
a. The workers who suffer most are the most marginal, usually youths, and racial minorities, disproportionally represented among low-skilled workers.
b. Not only are the above made less employable by minimum wage laws, but they lose the opportunity to upgrade their skills via on-the-job training.
3. The weight of research by academic scholars concludes that unemployment among some segments of the work force is directly related to legal minimum wages, See K.R. Kearl, et al., “What Economists Think,” and Alston, Kearl, and Vaughn, “Is There Global Economic Consensus,” both in the ‘American Economic Review.’
4. Minimum wage laws actually lower the cost of discriminating against the racially less-preferred individuals. To understand, consider this nonracial example on the effects of such ‘price-setting.’
a. Consider filet mignon and chuck steak. For argument’s sake, and in reality, consumers prefer the former.
b. Now ask, then why does chuck steak sell at all? And, in fact, why is it that chuck steak outsells filet mignon?? It is less preferred…yet competes favorably with something more preferred??
c. The answer is in what economists call ‘compensating differences.’ In effect the chuck says to you: “I’m not as tender nor tasty, but not as expensive,either! I sell for $4/pound, and filet mignon sells for $9/pound.”
d. Chuck steak, in effect, offers to ‘pay’ you $5/pound for its ‘inferiority,’ a compensating difference.
e. What if filet mignon sellers wanted to raise their sales against the less-preferred competitor, but couldn’t get a law passed forbidding the sale of chuck, what should they aim to do?
f. Push for a law establishing a minimum steak-price, say, $9/pound for all steak.
g. Now…chuck steak says: I don’t look as nice, I’m not tender or tasty as filet mignon, and I sell for the same price….Buy me!
h. Prior to legislation, the cost of discriminating against chuck steak was $5/pound…Now?
5. Thus, any mandated minimum lowers the cost (encourages) indulging in racial preference, or increases the cost of training unskilled labor.
6. Now, if there are mandated minimums, employers will seek the more highly qualified candidate. Due to a number of socioeconomic reasons, white youths have higher levels of educational attainment and training.
7. It should be pointed out that minimum wage increases gives employers an economic incentive to make other changes: substitute machines for labor; change production techniques; relocate overseas; and eliminate certain jobs altogether.
See "Race & Economics," Walter E. Williams
a. While legislative bodies have the power to order wage increases, they have not as of yet found a way to order commensurate increases in worker productivity that make the worker’s output worth the higher wage.
b. Further, while Congress can legislate the wage at which labor transactions occur, it cannot require that the transaction actually be made, and the worker hired.
2. Employers, of course, are free to make adjustments in their use of labor. Often said adjustments are at the expense of the workers who are most disadvantaged in terms of their marketable skills. They will lose their jobs, or not be hired in the first place.
a. The workers who suffer most are the most marginal, usually youths, and racial minorities, disproportionally represented among low-skilled workers.
b. Not only are the above made less employable by minimum wage laws, but they lose the opportunity to upgrade their skills via on-the-job training.
3. The weight of research by academic scholars concludes that unemployment among some segments of the work force is directly related to legal minimum wages, See K.R. Kearl, et al., “What Economists Think,” and Alston, Kearl, and Vaughn, “Is There Global Economic Consensus,” both in the ‘American Economic Review.’
4. Minimum wage laws actually lower the cost of discriminating against the racially less-preferred individuals. To understand, consider this nonracial example on the effects of such ‘price-setting.’
a. Consider filet mignon and chuck steak. For argument’s sake, and in reality, consumers prefer the former.
b. Now ask, then why does chuck steak sell at all? And, in fact, why is it that chuck steak outsells filet mignon?? It is less preferred…yet competes favorably with something more preferred??
c. The answer is in what economists call ‘compensating differences.’ In effect the chuck says to you: “I’m not as tender nor tasty, but not as expensive,either! I sell for $4/pound, and filet mignon sells for $9/pound.”
d. Chuck steak, in effect, offers to ‘pay’ you $5/pound for its ‘inferiority,’ a compensating difference.
e. What if filet mignon sellers wanted to raise their sales against the less-preferred competitor, but couldn’t get a law passed forbidding the sale of chuck, what should they aim to do?
f. Push for a law establishing a minimum steak-price, say, $9/pound for all steak.
g. Now…chuck steak says: I don’t look as nice, I’m not tender or tasty as filet mignon, and I sell for the same price….Buy me!
h. Prior to legislation, the cost of discriminating against chuck steak was $5/pound…Now?
5. Thus, any mandated minimum lowers the cost (encourages) indulging in racial preference, or increases the cost of training unskilled labor.
6. Now, if there are mandated minimums, employers will seek the more highly qualified candidate. Due to a number of socioeconomic reasons, white youths have higher levels of educational attainment and training.
7. It should be pointed out that minimum wage increases gives employers an economic incentive to make other changes: substitute machines for labor; change production techniques; relocate overseas; and eliminate certain jobs altogether.
See "Race & Economics," Walter E. Williams
Last edited: