Thursday, January 4, 2007

Minimum wage

The imposition and subsequent increases of minimum wage hurts the economy and hurts the working poor who actually work at minimum wage the most. When the minimum wage was first imposed in 1933, it resulted in the loss of jobs of 500,000 blacks:

"For example, the minimum wage provisions passed as part of another act in 1933 threw an estimated 500,000 blacks out of work"

Proponents of minimum wage increases often show that increases in minimum wage have not resulted in increased unemployment or decreased economy or show states with higher minimum wage have higher employment, but they state numbers at times when the economy is expanding which would mask the negative effects of minimum wage, and different states with totally different economies can't be compared. What would be needed would be statistics of what the economy would be for the same location and economic history, but that is not possible. During economic rise, the negative effects of increasing the minimum wage are minimized because businesses can afford to pass the additional cost to their customers who then can afford it because they have the money, but the increased cost to consumers does have an impact on demand so that it is lower than it would have been without the higher cost. So the minimum wage acts as factor in pulling down the economy. Where the increase in minimum wage hurts most is long past the point at which the minimum wage is increased. When the economy enters its next cyclical downturn, that is when the additional cost hits the hardest and when unemployment is worse than it would have been without the minimum wage increase. The working poor are the worst hit because they tend to stay at minimum wage because they lack the skills for higher paying jobs. When the minimum wage squeeze is felt the most by businesses, it the same working poor that the politicians who say they are protecting are the ones hurt the worst. Instead of getting a living wage, these people end up with no wage at all. The government needs to be stopped from helping us shortsightedly to the point where they actually hurt us in the long run.


Gilgamish said...

an interesting read, but isn't nowdays that unskilled workers in the west lose their jobs bcz of the competition of that lower paid zones in places like the philipines, china ect....

i think if companies concentrate their accountability for their countries only, things will be much much different.

and i think this trend is the one responsible for unskilled labor in the west to lose their jobs more than anything else.

also, the cyclical shifts of the economy hurts skilled workers in the same time , not so long ago my mom lost her very skilled job as an enginner as the technology sector in canada went down.

Sang J. Moon said...

Cyclical shifts are a part of life. They indicate that a shift in the workforce must occur. The problem is when the government tries to make things better by prolonging a economic environment that is out of equilibrium. It only makes the adjustment even harder when equilibium occurs. Repeatedly, the government has ended up making things worse in the long run by trying to make things better shortsightedly. Anyway, we are talking about minimum wage. Any job that pays minimum wage in the west is not a job that is going to be shipped overseas. These kind of jobs are affected by the status of the economy, and when the government gets involved, it actually makes things worse for the economy in the long run more often than not.