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Should we abolish national minimum wage?
I posed the question to a professor and she screamed “No, we should increase it to help poor people”. So let’s increase minimum wage to, say 100 Pounds per hour. How do you suppose businesses will respond to that? If you work with Tescos supermarket for a wage of 7 pounds an hour you’d lose your job. Why? – is it because Tescos cannot afford to pay 100 pounds? Not at all – it is due to the fact that your productivity level is not up to 100 pounds so it will be an act of charity to keep you employed (Employers don’t pay on the bases of what they can afford – they pay you from what you produce. Just like you don’t buy an item on the bases of what you can afford but the value).
A friend of mine earns about 150 Pounds an hour; she wouldn’t lose her job in a system of 100 pounds minimum wage because she produces more than the MW.
If you understand minimum wage this way then, surely, a MW of 4 pounds could be properly defined as ‘if you cannot produce 4 pounds an hour you don’t deserve a job.’ There is no other way to describe it – if you deny this then you should be in favour of increasing the national minimum wage to 500 pounds -why not?
It is not the doctor or the engineer that is affected by minimum wage. It is the unskilled and poor worker with low productivity - the very group the minimum wage is created to protect.
On the other hand, some giant corporations would not have existed if there was a minimum wage system when they came into existence – so the policy also prevent potential entrepreneurs with low financial capacity from setting up.
If you study minimum wage from any angle you’d realise that it is only the poor that is affected. The poor skilled man, the poor entrepreneur and the poor consumer (YES it affect consumer but that is not my focus).
Off-licenses in the UK (your regular corner shop) cannot take up staffs in a system of minimum wage because it means no profit for them - same for local food stores. In a society of mass unemployed teenagers
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Eric Grovum
First:
Jumping from 4 pounds to 500 pounds in your example is an extreme case. It is a straw man fallacy. You are substituting an unrealistic case that no economist in the world endorse (be they free market or socialist) for a more reasonable case that would raise the minimum wage to just above the poverty line. This reasoning is designed to flare up emotions in the debate rather than debate a realistic scenario. It is not a sound argument.
Second:
If said product or service is worth 4 pounds an hour to a consumer, then the employer needs to determine what the minimum cost of labor, materials, and other overhead needed to pay a worker above the minimum wage is. If that cost is greater than the value that consumers are willing to pay, the product or service does not have a strong enough demand to warrant its existence within the marketplace. If it cuts into the employer's profits too much, she won't hire the worker due to either her selfishness, or an inaccurate estimation of the demand/cost ratio for society. Employers have to balance their profit margin with the moral treatment of their employees and the demand of the market. It is a three ball juggling act that is happening with only the first and third balls right now (profit margin and market demand). We need to juggle all three.
Krisztián Pintér 200+
but somehow, you know better. you know that in fact this service is "not warranted", and "we" need to "balance" moral and margin. on what grounds?
Eric Grovum
Krisztián Pintér 200+
we have X, who is willing to do job A for salary N. we have Y who is willing to pay salary N form the job A. they both agree that it is better for them than not having this exchange. show me how these people do wrong, and what is your moral basis to interfere with it. i don't care about cloudy elusive quasi reasoning like "we don't live on an island". show me how that fact leads to the validity to interrupt these men's cooperation. how will the minimum wage help them? how will anything you plan to do help them? what is the price of that? what we give and what we gain.
when it comes to moral questions, and especially such important questions, it is not enough to answer it "probably" or "to me". you want to interfere with the life of a human being. you want to ban an activity that is about his life. it can not be up to "to me" or "probably". you need a much more stable foundation than that.
pat gilbert 100+