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12/19/2005 - 8:42pm
Abolish Minimum Wage
Here are a few minimum wage myths that need debunking:
1) Without minimum wage, people won't be paid what they're worth / will be underpaid.
What someone is worth depends on what wage they secure in the free market, just like the value of real estate is based on what someone will pay for it. If the most someone can find for a job is $2/hr, then that's what they're worth.
2) Minimum wage makes it so that someone can at least hope to make enough money to survive, whereas otherwise they couldn't.
Businesses don't just magically have more money available for payroll just because a minimum wage is instituted. What happens instead, as minimum wage increases, businesses have to pay people more than what they're worth. This results in the business having to layoff some workers to free up enough cash to pay those still on staff. The end result is that there are now more unemployed workers because the business can't afford them. It must either make due with the staff it can afford or go out of business, putting all of its employees out of work.
Minimum wage is meant to make it so that those at the lower end of the income scale make a better living, when in fact it results in a higher unemployment rate among that same income class.
3) Without minimum wage, the days of sweatshops would return.
Perhaps, though no one is forced to work in such an environment. An employer should be free to offer a job at a $0.50/hr wage, just as a worker is free to turn it down.
4) Minimum wage helps increase the quality of life for those in lower income brackets.
Not at all. If a business is forced to pay its workers more, the money has to come from somewhere. In most cases, this is in the form of increased prices for goods and services. Someone making more money because of minimum wage only ends up spending more to buy the items they need to survive, ending right back where they started.
If I were an employer that wanted to offer someone $1/hr to perform a particular job, and someone wanted to accept that offer, why should anyone stand in the way of that mutually-consenting agreement?
Posted by: Schuyler
Interesting comments and thoughts. Do you have any research or reliable sources to back up your theories?
Posted by: CPD
If the minimum wage is so great, why not raise it to $25 or $50 an hour and stamp out poverty for good? What criteria should be used to determine that the minimum wage is "too little" or "too much"?
In a booming economy, like the Dot.Com boom/bust of the '90s the minimum wage has minimal impact because many people get higher pay from employers who need more workers. When the economy is great, token minimum wage increases affect few people, makes lawmakers look good, and wins them lots of votes. However, in a poor or mediocre economy, nobody talks about how the minimum wage kills job creation and retention. When the minimum wage was enacted in 1938, up to 500,000 low-skilled black workers lost their jobs.
The simple economic Laws of Supply and Demand also govern the minimum wage:
- When the "price" of labor goes up, the demand for labor goes down.
- Employers would rather pay higher overtime rates temporarily, than hire new permanent workers.
- To compete and survive, companies are forced to lay off people or cut benefits.
- Employers tend to use more part-time workers than full-time workers.
- Minimum wage increases means much higher social security, Medicare and unemployment taxes.
- Small businesses (like me) exempt from minimum wage cannot hire or keep workers because they cannot compete with bigger companies who can pay the minimum wage.
- No one hires at $7.25/hour for a product or service worth $4 an hour.
- Higher minimum wages make it harder for the young and low-skilled to find work.
- Dedicated and hard-working employees have less chance of getting good merit raises when the employer has to pay everyone else higher minimum wages, regardless of productivity.
- When prices go up with higher labor costs, minimum wage earners lose buying power the most.
- In-state minimum wage increases drive jobs out of state, or out of the country.
Here are a few links to expert articles on the minimum wage:
But don't take my word for it! Search the web for minimum wage discussions, and decide for yourself what is "reputable", or ask your favorite small business person, or neighborhood small store, about the true impact of the minimum wage on employment and productivity. I think you will get the best research on why the minimum wage inflicts maximum pain--on everyone!
Posted by: Nick Coons
<Interesting comments and thoughts. Do you have any research or reliable sources to back up your theories?>
Just a logical thought process.
As the post after yours points out, labor falls under the whims of supply and demand like anything else. Price fixing by the government (which minimum wage is a form of) has historically had adverse affects. Forcing prices down causes demand to increase without an increase in supply (i.e. shortages), and forcing prices upwards decreases demand without a decrease in supply (i.e. surplus, or in the case of labor, unemployment).
If a minimum wage employer has X dollars available to pay his staff of Y employees, and minimum wage increases, the only way he can continue business in accordance with law is to either A) cutting back on his work force by laying people off (in which case unemployment increases), B) reduce other services to cut costs in other ways, or C) raise prices. Minimum wage surely wasn't intended to decrease the quality of services that business provide to their clients. And if it results in raising prices, it effectively cancels out the benefit that minimum wage earners receive by their wage increase.
If someone wants to earn more, then they should improve their skills so that they're worth more.
Posted by: Nick Coons
A real-world example follows.. how odd that this should occur only an hour after my previous post.
This past election, Arizona (where I live) enacted it's own state minimum wage of $6.75, which begins January 1, 2007, whereas we previously observed the federal minimum wage of $5.15.
I went out to my favorite little pizza place this afternoon because they make the best salad dressing I've ever had, which they sell by the bottle for home use. Normally a single bottle costs $4.50. The cashier rang up the purchase at $5.95, which caused me to immediately ask what the price hike was all about. He responded that the owner decided that they're raising their rates across the board because of the minimum wage hike that's taking place in just over a month.
Now, my favorite pizza place and salad dressing surely won't be the only ones to raise their prices. Pricing is likely to go up in various places where minimum wage labor is used to produce the product or service, like groceries. And the purpose of such necessities aren't just the rich (in other words, the rich aren't the only ones "suffering" from a price hike); minimum wage earners also have to pay for groceries.
So if the costs incurred by minimum wage earners goes up because of their artificial raise, it's sounds like it's break-even for them, a net loss for the rest of us who aren't making an increased wage because of the minimum wage hike, and a net gain for government (more payroll taxes).
I'm completely against price fixing, and against social programs funded by taxpayers. But if you're going to campaign to help the poor, at least do it in a way that will have the desired affect (like earned income credits), because minimum wage doesn't help the intended beneficiaries.
Posted by: CPD
I left out an important point. When the minimum wage goes up, it also encourages the economy to go underground, i.e., undocumented workers become an attractive source of cheap labor, aggravating the already difficult illegal immigration problem.
The earned income credit (EIC) itself makes lawmakers look compassionate, but why funnel such good money through the inefficiencies of government?
Here's an idea that no politician would dare even think about. Abolish the minimum wage (and the EIC) and cut taxes further, and permanently. In the short term, wages will fall across the board, people will grumble for a while, and some elected proponents of such a measure will surely lose their seats. In the longer term, consumer prices will fall, jobs will multiply like rabbits (even my small business could use a lot of inexperienced, trainable talent), national productivity will rise with greater employment, tax revenues will soar, non-union manufacturing jobs will come back home to America, and the US can compete even better in the world economy.
I would even venture to say that using illegal workers will become less attractive, the federal deficit would fall even faster and there will be a better chance to win the "war on poverty" that minimum wage supporters have been fighting for 70 years!
Utopian? Perhaps, but I believe much of it is possible, just by understanding (and acknowledging) that any economy is ruled by the simple laws of supply and demand.
Many skeptics will probably say such a solution would only encourage Big Business to exploit the poor. I say more laws and regulation will not fix that. Enforcing the thousands of existing laws will.
Posted by: Darcy
You have some messed up ideas... and need to redo this site... make it more powerful if you want people to actually care what you are writting about... think harder then just what you know!
Posted by: Nick Coons
That's a pretty good bot entry.. I almost thought for a second that you were a real person.
Posted by: miranda
i think it should be a abolished because people deserve more money than the miimum wage. it's not fair that people who get paid for singing or playing a sport get ALOT of money but people who actually work get paid little
Posted by: BCinNV
I agree with you to an extent, but can't help but feel this would have a drastic affect across the board (all classes and jobs would have lower incomes, because competition would force it). I would prefer a worker to have the right to sign-away the min. wage requirement; rather then abolish it completely. That should deter a major impact across the board, I would think.
I for one would love to be able to open a manufacturing plant here in the US knowing I could serve Wal-mart cheaper then China can. It's ridiculous they can not only manufacture everything, but ship it across the world for such a ridiculous cheap price. It's rediculous America's stood by and allowed our leaders to keep allowing this to happen.
I doubt China's people will ever understand how much they are taken advantage of. I hope they do; one that competes with a world market... not the enclosed system China suppresses them with.
Posted by: traslochi internazionali milano
That's great, I never thought about Abolish Minimum Wage like that before.
Posted by: C
Some of the hardest working people in the country are paid minimum wage. If you lowered it alot of people wouldn't be able to survive. In the real world, rent, transportation, food, and utilities cost money. At $5.15 an hour you would literally have to give one of them up. Look at the list. YOU pick which one you could live without then ignorantly grandstand. My guess is the author was born into wealth, and has no idea about life. or the real world.
Posted by: C
In addition, most minimum wage jobs offer no insurance, and you sure as hell arn't going to be able to afford it yourself on 5.15 an hour. SO you get sick, and guess what? You die or go to the ER and hike up the prices the rest of us pay. Or I guess we could give them welfare, but then we pay for it... hmm, see a pattern? Give people what they need to live, and some fucking dignity, and we all win.
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