Minimum Wage

[Metternich]

((This post is taken from my blog, as I post a new entry - I take the one it replaced as most recent and spread it around the forums I contribute too. That way I feel like I contribute to here, as much as you guys contribute to my blog.

Taken from: Here))

As of late, minimum wage has laid heavily on my mind. It's not out of economic necessity, I'm not trying to pass myself off as another disgruntled minority begging you to feel guilty on my behalf, but instead casual reminiscing. What is minimum wage, why is it so important and most importantly: who like it and who doesn't? It seems like one of those issues that 'everyone' seems to know 'everything' about and for that reason I knew most were lying. It's not an election issue, so there's less fire brands running around screaming - an improvement. Anyhow, without much further ado: Minimum Wage.

The case for a Minimum Wage is obvious, but nonetheless in need of being restated. Many economically authoritarian elements within the country see the issue not as of merely a 'minimum' in the sense of absolute bottom threshold but more as a "Living Wage." [1] Namely, If the minimum wage went up at least to $7, or better still to near $10 an hour, millions would be lifted out of poverty - by last estimates. Those estimates, I hasten to assure people skeptical of the so-called 'economists' these days, are not exactly exact and have their share of criticism.

The other benefit, say supporters, is that it is inherently racist to not support it. That indeed a minimum wage can bring up minorities from poverty, as long as the minimum wage is high enough. [3] There is wide consensus, even among some conservatives, that a Minimum Wage helps out certain minorities - mostly excluding affluent Asian American populations - to get a leg up in life. While there is no direct correlation between race (size of minorities within a state) and adoption of minimum wage laws. [2] One must keep in mind the persistence of the belief - on both sides of the aisle - indicate that such a statistic doesn't tell the full story, or at the very least shows that Minimum Wage opponents are not as divided by race as first thought.

Speaking of which, the opposition does seem to be large and well organized. Mainly concering themselves with an attack through the plain technical economics aspects - not the race preference of this (alleged) silver bullet for poverty. The Independent Institute reports that In an American Economic Review poll, 90 percent of economists agreed that minimum wage laws increase unemployment among low-skilled workers." [6] While initially I was skeptical of such a number, the sheer amount of articles and economic institutes dedicated to looking at various topics - like Minimum Wage - who disliked it made such a figure low; if anything. The Ludwig von Mises Institute (Located in Auburn, Alabama) says that "Tragically, a higher minimum wage and workplace-safety regulations are likely to exacerbate rather than mitigate social inequalities." [5] While The Heritage Foundation declares that "it doesn’t just take away current jobs, but also future job opportunities." Indeed, any effort to find any sort of true - socially liberal - economic reports on the subject mostly makes the case 'it doesn't affect enough workers to hurt the economy,' [7] which to me: sounds like acceptance that a Minimum Wage hurts economic growth but not enough to change anything (hopefully). Though even ACORN (famous for last year's Registration of The Year Award after they got Mickey Mouse registered for the Democrat Party) has made the case that higher minimum wages prevents them from hiring more people. [8]

Economic critics also make the case that minimum wage doesn't actually improve employment, overall. Indeed, there is ample evidence that minimum wage laws hurt employment. [9] [10] For indeed, of the top 15 employment rates only one (Iowa, at #5) has a minimum wage higher then Federally mandated, while four have one lower (Wyoming #3, New Mexico #7, Kansas #12, Arkansas #13). The majority do have one at par with the Federal level, but that is constantly attacked as to low while most who have a higher minimum wage all but have a monopoly on high unemployment (7 out the 10 highest unemployment rates have higher minimum wages).

The case is also made by the Austrian School redoubt, no less, called the Ludwig von Mises Institute [4] (along with a collection of similarly minded institutions, such as the Libertarian Party of America) that a minimum wage is actually somewhat racist. In short, that it is hard for a (Mises.org's example) reformed black convict (with a special emphasis on the high incarceration levels of African-American males) who is clean, looking for a little work while he picks his life back up to compete against some rich, white, frat boy. Because, to be perfectly blunt, if the convict can't undercut the lazy frat boy's wage then he won't be hired.



[1] A Moral Minimum Wage

[2] (Page 10 of 24) - Race and Policy Responsiveness in an Era of SubtleRetrenchment authored by Beamer, Glenn.

[3] Higher Minimum Wage Can Lift Minorities

[4] The Minimum Wage, Discrimination, and Inequality - Art Carden - Mises Institute

[5] Minimum Wage—Maximum Nonsense: Newsroom: The Independent Institute

[6] Minimizing Economic Opportunity by Raising the Minimum Wage

[7] The Economic Effects of the Minimum Wage

[8] RealClearPolitics - Commentary - Liberal Doublespeak on the Minimum Wage by Bruce Bartlett

[9] Unemployment Rates for States

((Discuss, deliberate, am I right or am I wrong?))

 

[Kevin_Kennedy]

You are correct, the minimum wage does lead to unemployment. If a company is forced to pay every employee a minimum wage then there are going to be some people, or positions, that simply aren't worth that minimum wage in the eyes of the owner, and that will lead to more unemployment.

Also, the Mises Institute is located in Auburn, Albama, not Mobile.

 

[Metternich]

My mistake.

Glad you enjoyed reading it.

 

[neurosport]

there is no need to argue about minimum wage - just think what it actually is

minimum wage is treating the symptoms, not the problem

the problem is that 80% of people are good for nothing but flipping burgers and merely 20% of people would be enough to flip all the burgers there are. therefore these 80% of people have to chase 20% of jobs and the value of their labor plunges to zero.

now we could either try to educate them so they are able to do something more advanced or we could recognize that these people are USELESS, will NEVER be able to feed themselves and simply give them food stamps and housing in the projects. that way most of them will stay at home and the few who are workaholics can continue to flip their burgers for $1/hour ( as well as receive their food stamps and housing ).

instead we have half the useless people getting a nice minimum wage and making ends meet and the other half sitting in jail because there were not enough jobs flipping burgers for them.

 

[KittenKoder]

there is no need to argue about minimum wage - just think what it actually is

minimum wage is treating the symptoms, not the problem

the problem is that 80% of people are good for nothing but flipping burgers and merely 20% of people would be enough to flip all the burgers there are. therefore these 80% of people have to chase 20% of jobs and the value of their labor plunges to zero.

now we could either try to educate them so they are able to do something more advanced or we could recognize that these people are USELESS, will NEVER be able to feed themselves and simply give them food stamps and housing in the projects. that way most of them will stay at home and the few who are workaholics can continue to flip their burgers for $1/hour ( as well as receive their food stamps and housing ).

instead we have half the useless people getting a nice minimum wage and making ends meet and the other half sitting in jail because there were not enough jobs flipping burgers for them.

You are an idiot ... plain and simple. Many people who are stuck "flipping burgers" have higher education, for one thing. The other is that no matter how "educated" you are, you can still be a moron. I am a proud highschool dropout, and I fix what higher educated people fuck up ...

 

[neurosport]

Many people who are stuck "flipping burgers" have higher education, for one thing. The other is that no matter how "educated" you are, you can still be a moron. I am a proud highschool dropout, and I fix what higher educated people fuck up ...

My love - do you have a point ?

 

[KittenKoder]

Many people who are stuck "flipping burgers" have higher education, for one thing. The other is that no matter how "educated" you are, you can still be a moron. I am a proud highschool dropout, and I fix what higher educated people fuck up ...

My love - do you have a point ?

First two sentences, read much? Higher education is for morons who can't get paid for their own ability and need that piece of paper to lean on, most who get it are complete morons.

 

[auditor0007]

I support reasonable minimum wages. But let's not get carried away. First of all, a national minimum wage is a complete joke, because the cost of living varies dramatically from one part of the country to another.

In many parts of the country, no one can be hired for the standard minimum wage because the lack of demand for even the lowest paying jobs pushes those wages well above the minimum. At the same time, in other parts of the country, those same minimum wages cannot be sustained by local employers because wages are so much lower overall to begin with, and it just becomes impossible to pay those wages and stay in business.

It seems to me that the federal government should stay out of this and leave it up to the individual states to decide what the minimum wage will be for their state. This actually happens in some cases where state minimum wages are higher than the federal minimum. This definitely is an issue that the fed has no need getting involved with, other than for say, military personnel.

 

[neurosport]

Higher education is for morons who can't get paid for their own ability and need that piece of paper to lean on, most who get it are complete morons.

no silly goose.

higher education is so u can spend 4 - 6 years chilling in college while your parents pay for it.

 

[Metternich]

I support reasonable minimum wages. But let's not get carried away. First of all, a national minimum wage is a complete joke, because the cost of living varies dramatically from one part of the country to another.

In many parts of the country, no one can be hired for the standard minimum wage because the lack of demand for even the lowest paying jobs pushes those wages well above the minimum. At the same time, in other parts of the country, those same minimum wages cannot be sustained by local employers because wages are so much lower overall to begin with, and it just becomes impossible to pay those wages and stay in business.

It seems to me that the federal government should stay out of this and leave it up to the individual states to decide what the minimum wage will be for their state. This actually happens in some cases where state minimum wages are higher than the federal minimum. This definitely is an issue that the fed has no need getting involved with, other than for say, military personnel.

So, for example, a veteran recieves a higher Federally mandated minimum wage then his co-workers? I like it, but I believe it goes against the General Welfare clause in the constitution.

 

[trueblue]

I agree with the conclusions that say minimum wage reduces the number of jobs. I'd also add that as firms attempt to deal with the added costs of a minimum wage ('added' in that a minimum wage is more than an equilibrium wage, or a wage that the labor some provide is worth) it contributes, often significantly, to inflation as prices rise to meet the added cost. In other words, much of the costs of a minimum wage are born by the consumers, not the firms; so, minimum wage hurts everybody that buys things, not just some, arbitrary, greedy, corporate hog.

 

[auditor0007]

I support reasonable minimum wages. But let's not get carried away. First of all, a national minimum wage is a complete joke, because the cost of living varies dramatically from one part of the country to another.

In many parts of the country, no one can be hired for the standard minimum wage because the lack of demand for even the lowest paying jobs pushes those wages well above the minimum. At the same time, in other parts of the country, those same minimum wages cannot be sustained by local employers because wages are so much lower overall to begin with, and it just becomes impossible to pay those wages and stay in business.

It seems to me that the federal government should stay out of this and leave it up to the individual states to decide what the minimum wage will be for their state. This actually happens in some cases where state minimum wages are higher than the federal minimum. This definitely is an issue that the fed has no need getting involved with, other than for say, military personnel.

So, for example, a veteran recieves a higher Federally mandated minimum wage then his co-workers? I like it, but I believe it goes against the General Welfare clause in the constitution.

No, the feds determine the minimum wage or salary for all those enlisted in the military, which they already do.

 

[Luissa]

I live in a state where the min wage is $8.65 and is used as living wage and our unemployment is higher then the national average.

 

[Toro]

There is mixed empirical evidence on the effects of minimum wage. However, when the price of anything gets artificially too high above its clearing price, you will have excess supply, which in this case is unemployment.

 

[Agnapostate]

As I've remarked several times prior to this, we might as well maintain an inaccurate and naive conception of labor markets being perfectly competitive or something near it to maintain these beliefs about the minimum wage's alleged adverse effects on unemployment. However, this perspective fails to incorporate the existence of monopsony and oligopsony, "[n]ot monopsony in the sense of there being a single buyer of labor, but monopsony in the sense of the supply of labor to an individual firm not being infinitely elastic." As put by Alan Manning:

[M]inimum wages...are seen as raising wages above the market-clearing level, reducing employment in the affected sectors. But, in oligopsonistic labor markets, minimum wages and trade unions are unlikely to have the same effect. If labor markets have substantial wage dispersion (and both theory and evidence suggest that they do), then minimum wages are likely to "push" the wage distribution from below as, by definition, they directly affect the lowest wages in the market...

The reality that firms are confronted with upward sloping labor supply curves thus yields an analysis that must incorporate that fact, which is why the empirical literature does not support the assertion that the minimum wage has an adverse effect on employment. For instance, we could turn to Machin et al.'s (in which Manning is included), The Effects of Minimum Wages on Employment: Theory and Evidence from Britain. Consider the abstract:

Recent work on the economic effects of minimum wages has stressed that the standard economic model, where increases in minimum wages depress employment, is not supported by empirical work in some labor markets. We present a general theoretical model whereby employers have some degree of monopsony power, which allows minimum wages to have the conventional negative impact on employment but which also allows for a neutral or positive impact. Studying the industry‐based British Wages Councils between 1975 and 1992, we find that minimum wages significantly compress the distribution of earnings but do not have a negative impact on employment.

However, it does not surprise me that the proponents of the Austrian school mentioned in the OP are ignorant of this reality, as it's merely a component of their ignorance of labor economics, and that another component still of their disdain for empirical research that has earned them a well-deserved marginal status, even for a heterodox school.

 

[Metternich]

Your whole argument can be boiled down to one fact, and that 'fact' is no more a fact then - at best - a feeling. That feeling, is of course, the feeling that companies do not have a limitless pool of labor to draw on and that they are exploiters (which I will explain later down the page). The first assertationis technically and academically true, mainly because nothing is actually infinite; so technically it is true but fails completely to realize the economic position of the firms affected by minimum wage nor does it realize that it is assuming that supply has never, and will never be, considerably larger then demand. To the point that while it is not 'infinite,' the supply of labor always extends beyond the desired need that the difference is moot; at least, until said firms are confronted by the possibility of full employment in which case wages would rise - without help by the government - anyhow.

Which brings up a fairly interesting point; by Manning's reckoning minimum wage doesn't hurt because it is in effect doing the market a favor by eliminating the freedom of the exploiters (cues horror music) to exploit their poor little proletariat. Of course, that assertion is only good for the socialist circles that he often frequented and should likely be avoided in a true academic setting.

Since you are a fan of empirical evidence, let me bring out a widely overlooked and simple but nonetheless influential bit: unemployment. There has never been a time - even though it is entirely possible - that unemployment has been at a full 100%, and especially more so at the bottom end of the market (where minimum wage affects) where the targeted workforce is usually at 20% unemployed. So indeed, firms that are most directly affected by minimum wage are damaged as I said earlier because in a pragmatic model the claim "not being infinitely elastic" is at best a academic consideration until unemployment falls to at least approachable figures.

Indeed, as my previous pointS back up with regards to state employment levels - minimum wage does indeed hurt employment and since there’s no real reason (on any level, anywhere) why a firm would employ more people, at higher wages, to produce the same goods less people could make at less wages; I believe the study is flawed for the same reason if I read a study that told me the sky is green and that things fall upwards.

 

[bill777]

I miss the days when the minimum wage was for retirees and children. I agree that the minimum wage hurts employment numbers, but I don't think that's any worse than the alternative, which is working age adults earning wages that won't meet basic expenses. My concern with eliminating the minimum wage is that I think it will lead to a long-term state of decreased wealth and decreased spending power for working class adults. I think that if minimum wage is a topic of discussion at all, it indicates a greater problem exists. We need more jobs, period. If entrepreneurship booms in this country, then the labor pool won't be so overloaded, and the competition for workers will eliminate any discussion of the minimum wage, but if it doesn't then we've got trouble because a sizable portion of our economy won't have the money to participate, and that hurts almost everyone. Business needs customers, and people with no money don't buy much of anything. It is interesting to me that the worse the economy gets, the more I see arguments for and against the minimum wage, which in my opinion is irrelevent and misses the point as far as economic concerns go in this country today.

 

[Bern80]

Many people who are stuck "flipping burgers" have higher education, for one thing. The other is that no matter how "educated" you are, you can still be a moron. I am a proud highschool dropout, and I fix what higher educated people fuck up ...

My love - do you have a point ?

First two sentences, read much? Higher education is for morons who can't get paid for their own ability and need that piece of paper to lean on, most who get it are complete morons.

I guess that is what who didn't go would have to tell themselves, isn't it.

 

[alan1]

The whole false concept that a minimum wage (or living wage as some like to put it) can lift people out of poverty is pretty easy to destroy. One merely has to set an artificially high minimum wage to understand how it works.

Lets say that we decide the minimum wage should be $25.00 an hour. That comes out to about $50,000 a year for a full time employee. A decent middle class income. However, this is where things go south. Is the person taking your order at McDonalds worth $50k a year? what about the person that assembles your hamburger, is he worth that much? Of course not. But, for the sake of the argument, lets assume each of them still gets $25.00 an hour. Now, do you think McDonalds can afford a dollar menu paying those kinds of wages? At wages like that, the price of a plain hamburger would skyrocket to probably $4.00. And of course, the price of everything else would be increased also, because of the extensive labor costs. A $50k salary would become the new poverty level.

It's no different if you raise the minimum wage from $6.55 to $7.25, it just isn't as pronounced and obvious.

 

[Care4all]

The whole false concept that a minimum wage (or living wage as some like to put it) can lift people out of poverty is pretty easy to destroy. One merely has to set an artificially high minimum wage to understand how it works.

Lets say that we decide the minimum wage should be $25.00 an hour. That comes out to about $50,000 a year for a full time employee. A decent middle class income. However, this is where things go south. Is the person taking your order at McDonalds worth $50k a year? what about the person that assembles your hamburger, is he worth that much? Of course not. But, for the sake of the argument, lets assume each of them still gets $25.00 an hour. Now, do you think McDonalds can afford a dollar menu paying those kinds of wages? At wages like that, the price of a plain hamburger would skyrocket to probably $4.00. And of course, the price of everything else would be increased also, because of the extensive labor costs. A $50k salary would become the new poverty level.

It's no different if you raise the minimum wage from $6.55 to $7.25, it just isn't as pronounced and obvious.

sure there is....there is a $18.45 difference an hour paid between the $6.55 and the 25.00 an hour and there is an hourly difference of 75 cents between 6.55 and 7.25.....???

one is about $1,500 more a year for a 40 hour a week employee....

the other is about $38,400 a year more for the same employee/hours.

Clearly ONE is manageable with productivity improvement, or with a slight increase in sales, or with tweaking ones overhead expenses, or by saving on freight etc., while the other is sort of a strawman and something no one is asking businesses to do MM???

care