Delete comment from: Captain Capitalism
"If you raise the minimum wage all that's going to do is inflate the cost of living correspondingly, because now grocery stores and gas stations will also have to be paying that minimum to their workers. The poor will end up no farther ahead than before."
There's a problem with that argument. Workers making the minimum wage are a lot more rare than most people seem to think they are. Without a substantial increase in the minimum wage, relatively few workers would be affected. Higher labor costs passed along to consumers in the form of higher prices would be minimal without a substantial increase in the minimum wage.
The key to analyzing the minimum wage is to look at the people primarily affected: workers who are currently making less than the new minimum. Workers making more than the new minimum will be unaffected, while those making less than the new minimum are at risk of losing their jobs.
Would a minimum wage increase actually raise wages? Yes, for both the workers affected by the law and also the average wage, but not for the reason that minimum wage advocates believe. Hiring additional workers brings diminishing marginal returns, to the point where the last person hired is just about breaking even for their employer if the employer is managing their business well. If the employer is now legally required to pay higher wages, employees who are generating less revenue then the new higher cost of keeping them will be laid off. This means a slight wage increase for the remaining workers, since the supply of profitable labor is artificially restricted by the minimum wage.
A government dictate to fire half the workforce them would have the same impact in the long run as a minimum wage that makes half the workforce unprofitable employees. Sure it raises the wages of the ones who are left, and raises average wages even more because unemployed workers don't bring down the average, but it's still a terrible idea.
Minimum wages and other regulations that artificially increase the cost of labor will strike hardest the people who already have the hardest time finding work. France is a good example of this; labor's expensive there, and they have a sizable minority population of Algerians living in France. Unemployment among Algerians is over 20% even during normal years. The unemployment rate for ethnic French is still high, but nowhere near the level for Algerians. Advocates of racial equality would do well to oppose minimum wages, but this is usually not the case.
Jul 2, 2009, 5:48:34 AM
Posted to Wal-Mart Cheaper Than Goodwill