Effects Of Minimum Wage Laws

Effects Minimum Wage Laws - Politics, Business, Civil, History - Posted: 20th Aug, 2004 - 4:03am

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24th Jun, 2004 - 4:16pm / Post ID: #

Effects Of Minimum Wage Laws

In the OpinionJournal (part of the Wall Street Journal) today, there is an excellent article on what minimum wage laws actually accomplish. I think that there are some important issues left out of the analysis, and would like to discuss all of these effects.

https://www.opinionjournal.com/editorial/fe...ml?id=110005263
The Wages of Politics
How many low-wage workers does John Kerry want to throw out of work?

QUOTE
John Kerry says he wants to raise the minimum wage to $7 an hour from $5.15, and his proposal has us thinking: Why stop there? Why not $10 an hour, or $20, or for that matter whatever a U.S. Senator makes? If Mr. Kerry thinks government is obliged to guarantee Americans a certain level of income, why not simply elevate everyone at least into the middle class?

The reason, as Mr. Kerry well knows, is that wage floors aren't manna from heaven. Here on Earth, they tend to price certain kinds of labor out of the job market. Businesses hire and pay workers what they think their skills are worth relative to other ways they can spend their capital. Force the price of labor too high, and suddenly businesses hire fewer workers, especially those at the lower rungs of the skill ladder.


There are several excellent points, and this one about pricing low-skill labor out of the market is one of the most important ones.

However, there are some other concepts at work, that affect everyone, not just the unskilled or poorly educated members of society.

If the minimum wage goes up, then unions use that idea to press for higher wages for their union members. Since union shops are already at the top of the job market for wages in their particular types of labor, this causes more competition for higher wages throughout industry. Since companies must still make a profit in order to exist, they must raise prices, so the jump in the minimum wage may be more than offset by rising prices across all segments of the market.

Of course, now the minimum wage is no longer providing the boost that the politicians wanted, so they start trying to raise the wage again. It becomes a never-ending, vicious cycle, contributing heavily to inflation.

When I was a teenager, I knew people who were making a good living at $7.00/hour. Now, Mr. Kerry wants this to be the minimum wage. As many people have pointed out, it is impossible for even a single person to live on minimum wage throughout most of the US.

QUOTE
These low-paying jobs are important because they are a gateway into the world of work for people who lack experience and skills. One study showed that, of a sample of workers earning minimum wage, fully 63% were already making more a year later.
The truly unfortunate are those who cannot find work at all. These tend to be the least skilled Americans, which means the young, or the poorly educated. It's no accident that under current minimum wage levels the unemployment rate for teenagers is 17.2%, three times the national average. For black teenagers it is a scandalously high 32.5%.

How much worse does Senator Kerry want to make it? Bill Clinton's Small Business Administration followed a group of workers after the last increase in the minimum wage, in 1997, and found it slowed wage growth at small businesses and more than doubled the likelihood that low-wage workers at large firms would be unemployed. And that was at a time when the national jobless rate was falling rapidly and hamburger flippers in some places were earning $8 an hour.


Which is more important? Making it so that people can work and learn skills to gain better employment, or getting the political boost at the expense of many of those jobs, leaving more people in poverty - permanently?


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24th Jun, 2004 - 9:53pm / Post ID: #

Laws Wage Minimum Effects


Nighthawk,

This is absolutely right. Of course, the good old EU has minimum wages laws which the UK is signed up to.

Another, even more blatant, reality is that it would be wrong of me to use force to have my employer (or anyone else's employer) set a minimum wage so HOW the heck can I delegate that power to government when I don't possess it in the first place?

Dubhdara.


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26th Jun, 2004 - 4:53pm / Post ID: #

Effects Of Minimum Wage Laws History & Civil Business Politics

Another thing that happens is teenagers who hold summer jobs and/or work a few hours after school end up with much more disposable income. They are probably the largest segment of the US population anyway that hold jobs at minimum wage. They don't need to make a "living wage," but because it is the minimum wage they too earn it. Now, marketers realize this. Teenagers actually are heavily marketed to because they have such large disposable incomes. They generally aren't paying mortgages, utility bills, etc. Prices go up for movies, CDs, video games, etc., because the market can afford to pay the prices demanded. Part of inflation has to do with demand. Demand goes down as price goes up, but affordability (can your budget handle the increase) plays a large part in at what price demand goes down enough to force a lowering of price.


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Post Date: 20th Aug, 2004 - 4:03am / Post ID: #

Effects Of Minimum Wage Laws
A Friend

Laws Wage Minimum Effects

Why even have a minimum wage? Let the rate people earn be set by supply and demand. If I want to offer someone $2.00 per hour to help me in my business, I should be allowed to offer this. Not likely anyone will take me up on it, so I will have to offer more until someone does.

I notice the government doesn't have a maximum wage. That's because if someone is worth $500 per hour, they should be able to get it. Same is true on the opposite end. Why be forced to pay someone $7 per hour if the're only worth $5?


 
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