The minimum wage.
I’ve just had a thought. The minimum wage raises the cost of labour which makes investment in capital more attractive.
This means that for the poorly skilled who this affects there are less jobs. This shifts power even further to the employer, enabling worse working conditions to be accepted (if you don’t like it then lose your job, there’s plenty more waiting for your job).
So, not only does a minimum wage increase unemployment, it will have a detrimental effect on the employment conditions of the lowest paid.
All in all, a minimum wage is a rather bad deal for those its meant to help…
(the situation without the minimum wage is not ideal either of course, but that’s due to other imbalances caused by state interference).
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April 18th, 2008 at 10:43 pm
I don’t think your reasoning follows. We don’t have a particular problem with unemployment, and our worst problems occured when we didn’t have a minimum wage. Possibly there is a connection, but it doesn’t make sense in the context of your second point.
Employers fail to employ due to the costs of the minimum wage, but without it they would create even more jobs with more expensive conditions? If the minimum wage produces worse conditions it makes it more favourable to invest in labour, and creates jobs! Of course, it doesn’t, so your second point doesn’t make sense.
Its an empirical fact that take home pay for the lowest paid has increased in every country that has introduced a minimum wage. I mean, the facts do not back your reasoning, so one of them has to be wrong, and I’m pretty sure where ideology comes when it faces data.
April 19th, 2008 at 12:15 am
I’m unaware of any evidence to actually support this. The introduction in 1999 didn’t have any effect on employment rates and since its risen modestly above the RPI inflation rate without any obvious ill effect. You seem to be making the fairly crude argument that price rises always cause falls in demand. Some products are quite inelastic and minimum wage jobs particularly in the service industry where they can’t be shipped abroad are one of them.