Minimum Wage Corollary
November 16th, 2006 | by Craig |All my sinestra pals make a loud noise about how great a hike in minimum wage is.
If that is so good, why don’t we take it a step further?
Not only should we have a price floor policy on wages, shouldn’t we also have a price ceiling policy on necessities, such as housing, utilities, internet, gasoline, automobiles food, etc.?
Seems only logical, doesn’t it?
20 Responses to “Minimum Wage Corollary”
By Gman on Nov 16, 2006 | Reply
Gee wiz, Craig, don’t give them any ideas. Although, if we take the liberal philosophy to its logical conclusion, the gov’t should confiscate every inch of property and every penny of wealth and redistribute it as the gov’t sees fit. Funny how that leads to poverty for everyone and riches for a very, very, very small minority of politically powerful. Ever hear of the USSR…
By Craig on Nov 16, 2006 | Reply
That’s kinda what I was getting at, only I was trying to be a little more subtle.
By Walter Greenspan on Nov 16, 2006 | Reply
In lieu of the minimum wage, what about Milton Friedman’s idea of a “negative income tax”, whereby low income earners receive a payment (a negative tax) from the government?
Low income earners would then get a boost to their incomes while not warping the economy by artificially raising wages.
By david on Nov 16, 2006 | Reply
My answer to the minimum-wage idjits: if increasing the minimum-wage to $6.15 per hour is good, then surely increasing it to $25 per hour is better. And by that logic, increasing it to, say, $100 per hour would be GREAT!
Right?
Oh, but that’s not what you meant? That’s not reasonable?
Well then what makes your figure of $6.15 per hour (or any other mandated wage) reasonable?
By DMerriman on Nov 16, 2006 | Reply
This, of course, is why I voted against the minimum wage increase last week.
By Matt Singer on Nov 16, 2006 | Reply
Y’all think markets are so great. Let’s legalize all drugs.
Walter — your idea is partially in place, it’s called the Earned Income Tax Credit. It still warps the economy by providing a disincentive to raise wages.
By Shane Mason on Nov 17, 2006 | Reply
Good call with the slippery slope thing Craig.
By Craig on Nov 17, 2006 | Reply
Matt–
What’s legalizing drugs got to do with anything? Plus, who says that I’m necessarily against some legalization?
Frankly, on Friday night down at the roadhouse, I’d much rather have a run-in with someone who just smoked a fat one than someone who’s pissed off with a snootful of Black Jack Daniels.
As long as they both stay the hell of the road, of course.
By Gman on Nov 17, 2006 | Reply
Subtlety is not one of my strong points Craig if you haven’t figured that out yet!
By Rocky Smith on Nov 17, 2006 | Reply
Yes, the Earned Income tax credit. Pay in little to nothing and get back a $7000 tax return. And they say only the rich got tax cuts? How do you cut taxes on someone who paid in nothing and got thousands back?
By Matt Singer on Nov 17, 2006 | Reply
Regulations, including prohibitions, simply distort markets. If there’s a downside to drugs, the market will find it better than some heavy-handed government policy.
By Mark Tokarski on Nov 17, 2006 | Reply
People who get EIC do not pay in nothing. They pay payroll tax at 14.2% of their earnings. The original EIC was set up to refund that tax, and no more. It’s since been expanded, and as Matt says, that’s been an excuse for not raising the MW.
Minimum wage prevents sweatshops. Without it, labor markets with a surplus of unskilled labor would end up holding jobs for ridiculously low wages. Is there a wage that you guys think is too low?
Anyway, no one gets hurt by it, except in theory. What’s the problem?
By Gman on Nov 17, 2006 | Reply
Theory helps you identify and quantify the problem. Human nature is what bears it out. As a businessperson, you will cut hours of your MW employees in order to remain marginally profitable. You will also hesitate to hire unskilled workers who are nonetheless willing to work, primarily because what you pay them is not returned via productive capacity. Mark T, you simply have to look at the effect of MW aggregately across the entire economy. Don’t single out some individual that won’t be affected. There are always exceptions to the rule, that’s why economists invoke ceteris paribus. It’s a way of anticipating aggregate human behavior in light of particular economic variables.
By Mark Tokarski on Nov 19, 2006 | Reply
But, and this is critical, has theory ever been born out in practice? I’ve never seen dire predictions of untoward effects of minimum wage increases actually work out in the real world.
Keeping wages low is a political objective. Economists are tools towards this objective. That’s how I see it, anyway.
By Gman on Nov 19, 2006 | Reply
I suspect that, but I’m not sure, the effect in MW mandates on unskilled teenagers and others doesn’t necessarily have a considerable impact on unemployments figures. Nonetheless, it’s simple economic fact that creating artificial wages WILL have an impact on what employers do. Do you understand what it means to look at economic effect in the aggregate?
By The Polish Wolf on Nov 21, 2006 | Reply
Just a thought…
If we did raise the minimum wage to 25 dollars an hour, it would have increased almost as much as CEO compensation. The reason we need a minimum wage (and the reason that we passed the raise) is simple: left to its own devices, Capitalism creates an unequal distribution of wealth, leaving the many out of the equation. Voting to increase the minimum wage is just one alternative; the other, more common one historically, is to break out the guillotines. 6.15 is a compromise between the rich and the desperate.
By Craig on Nov 22, 2006 | Reply
Ah, yes, the old “Poverty Causes Crime” canard. I thought that had been fairly thoroughly debunked.
Mark asks above if there’s been any proof that raises in minimum wage have had deleterious effects. I would ask if there’s any evidence to prove that minimum wage raises actually lift anyone out of poverty.
By The Polish Wolf on Nov 22, 2006 | Reply
I’m not saying just petty crimes (and debunked in what way? One need only look at a few examples to see where this is in action: where the lower classes are less desperately poor, they are less likely to steal.); I was referring more to the sort of class conflicts that occur inevitably whenever the wealth divide gets too wide. Not that there is immediate danger of that here, but the brilliance of Democracy is that it can adjust its policies well before there is the threat of someone working outside the system, because working within the system is so effective.
I can’t prove that MW raised anyone out of poverty, but it certainly improved their buying power.
By Rocky Smith on Nov 24, 2006 | Reply
After price increases to pay for higher wages, you lost your improved buying power “Polish Wolf”.
By Ron on Jan 1, 2007 | Reply
Rocky Smith has it right. An increase in minimum wage is going to be paid back by the employer chopping minimum wage hours or raising the price of their product. The vast majority of minimum wage earners in this country are in the service industry, so they either lose hours or we see an increase in the price of consumables and services. Part of that means an increase in the CPI, which trickles down into an increase in the poverty thresholds, which means, that the increase in pay cannot lift them out of poverty.
Based on our current economy, I think our minimum wage is sufficient. At least up to a family of 4. Families larger than this, even with two minimum wage earners, fall below the expenditure needed to ensure a tolerable life (which happens to be my favored definition of a living wage). But if you want to breed like rabbits on minimum wage, then you get what you deserve.
Ron