What Should the Minimum Wage be? | A rebuttal
A couple of years ago @thepholosopher came out with a post summed up by this video:
She made some interesting arguments which I feel I should address despite the elapsed time. I cannot say if she continues to hold these views but in light of the significant increase in minimum wage recently in Ontario adds to insight people would have on the topic. My recent post with two videos describing what has happened over the last 3 months might be interesting for @thepholosopher to review.
Her statements about minimum wage
- It should be $0.00. Why? Because that's the real minimum wage.
- The minimum wage does not lift people out of poverty.
- The cost of the minimum wage is unemployment.
- The cost of the minimum wage is a barrier to those trying to gain job skills.
- The cost of the minimum wage is higher prices for goods and services, as the expense of the minimum wage is passed down to the customers.
Minimum wage should be $0.00
A society is composed with a wide spectrum of interests and economic capacity. What happens without a minimum wage. There are two types of countries currently without minimum wage: those whose labour force is so strong, they are able to dictate their own minimum wage or those whose labour force is so weak, they have no influence over pricing. The former are some European countries while the latter are many third world countries. Countries like the Republic of Congo have an average wage of roughly $1.00 per day. This mean that many people earn much less than this. Since they have no money... how can they live? Fortunately these people can grow their own food (subsistence farming). Imagine that you allow businesses to set their own rates. This article describes what happens when foreign workers were brought in for jobs in Australia.
Two years ago, she found a job cutting hair in the Lidcombe area of Sydney. It paid about $9 an hour. To get the job, she put down about $380, refundable if she was never late or absent from work.
At the time, the minimum wage was $18.29 Australian dollars (AUD). Over the two year period, the business underpaid the employee by $30,000 AUD. Not all salons carried out this practice so it cannot be said it was necessary. Whose pocket did that money go into. This was strictly a case of exploitation. Other cases found Filipino workers being paid as little as $4.00 AUD in manufacturing. In other cases foreigners in Australia worked six days a week for nine to 11 hours each day, and were housed in overcrowded accommodation. Minimum wage is not just about paying a set dollar amount but the entire process protects workers from other forms of exploitation.
The minimum wage does not lift people out of poverty.
When ever I discuss minimum wage to people from the USA, they describe the failure of the increase applied in Seattle. Unfortunately the initial findings came from a non-peer reviewed paper which was incomplete in the analysis. A more complete analysis
Free-market fanatics around the country flung praise at the study, and serious publications like the Washington Post deemed it “very credible.” But fortunately for working people, it turns out the study’s findings are far from that.
The research has significant flaws—most glaringly that its data excludes 40% of the Seattle workforce. It also stands in contrast to a massive trove of actually credible studies showing that raising the minimum wage is a boon for working class families and the communities they live in... They’ve consistently found that higher wages boost worker pay and haven’t led to either job loss or a slowdown in economic growth...There are big benefits for broader society as well. Poverty goes down, as does reliance on public assistance programs—one of the few things both Democrats and Republicans can agree is a net positive. Also improved are infant health and adult mental health outcomes, including a significant reduction in depression.
While minimum wage increase do not "lift" people out of poverty, it does give them options. Public assistance programs are reduced. Companies like Walmart that fail to provide sufficient income for people working full time post substantial profits ($1.75 billion) while their employees need to get food from food banks. This is clearly a corporation making US taxpayers subsidize its workforce.
The cost of the minimum wage is unemployment.
Paradoxically an increase in minimum has a long term effect of increased employment. At roughly the seven minute mark in this video there has been no evidence in 78 years of minimum wage hikes of "job-killing" consequences. In fact in Ontario many businesses have had to expand their employee base to accommodate new traffic. If more money goes into the hands of poor people, they tend to buy things like food, clothing etc locally.
The cost of the minimum wage is a barrier to those trying to gain job skills.
I mentioned the flawed report in Seattle which found that minimum wage jobs were lost. What that report failed to report but subsequent reports did find that while "less" minimum wage jobs were lost ... "more" better paying jobs were gained. Businesses trained their employees better and gave them more opportunity to earn better wages and also increase the profitability of the businesses at the same time.
The cost of the minimum wage is higher prices for goods and services, as the expense of the minimum wage is passed down to the customers.
Yes I will concede this point... sort of. Inflation is mistakenly described as too many dollars chasing after too few goods. This is not exactly true considering that there is an almost inexhaustible supply of goods now. What does cause inflation (the 1970s is before your time) has to do with full employment. In my city of Small Town, Ontario Canada there is a war going on. Every fast food place is trying to hire people. There isn't enough people to fill the jobs available. This means that to hire additional staff for the increase sales, they need to hire people from other stores... so they need to pay in excess of minimum wage. The price of minimum wage labour is a very small component of the goods that we actually buy. It is only in those segments that hire predominately minimum wage employees (eg Walmart, McDonalds etc) that have had to adjust their prices. In fact in the early minutes of this video the minimum wage and targeted price increase has had a positive effect on sales.
I hope that you will accept this post as I try to respectfully try to illustrate how the Canadian experience so far has been positive @thepholosopher. I cannot even say that this trend will continue (it is only the first quarter). While your philosophy of libertarianism may be better than our existing system, unfortunately we need to play the game by the rules that we currently have. So far increasing minimum wage is one of those tools that the people currently have to make lives better in North America.