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Ehis Odijie

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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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    Aug 17 2012: Krisztián,

    Please help me out here. I'm not trying to be unreasonable or to be a know it all. I just haven't yet seen an argument to help me confront the cognitive biases that I am sure I have on this subject. (We all have them.) A well reasoned argument based on facts and set up in a logical way would help me change my mind. I can see that you're trying to show this with your example, but I haven't been convinced yet that eliminating the minimum wage will help.

    I do believe that, in democratic countries, we all have a right to help determine how our economic system and every other system that affects our lives works. That is what democracy is all about. Without democratic oversight of the economic system, we simply have a plutocracy.

    Let's try to be civil though.

    Thanks,

    Eric
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      Aug 17 2012: I'm with you Eric. Formulas only work in a perfectly controlled environment where the variables are predictable and the constants are constant. Thank goodness we don't live in an absolute world...that would be dreadfully boring. Due to corruption and crony capitalism the ideal of acheivement is a rigged game. Root out the corruption and minimum wage will only be mentioned in history books.
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        Aug 18 2012: And what of the corruption in government, you know the ones without whom crony capitalism would only be a gleam in George Soros' and Jamie Dimon eye?
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          Aug 18 2012: Don't get me wrong Pat, I'll support captialism in it's true sense. The problem starts when we start to use our monetary power to manipulate legislation through lobbying for our own special interests. Now we not only buy off the legislators but we can obviously buy out journalism to attempt to dumb down our viewers. That's my understaning of crony capitalism, but I'm more than willing and eager to listen to an oposing opinion for something I may not have thought about (which happens alot for me)
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        Aug 18 2012: The question is what could we change that would change the paradigm?

        If as you say we change the ability to influence legislators that would solve the problem or would it?

        1) The constitution allows for companies, unions, or individuals to petition the government. If you do away with this you are throwing out the baby with the bathwater.

        2) Those so inclined are going to find a way to influence the government. Water will find the leaks. No matter what you come up with their will be unintended consequences that will produce the opposite of the intended effect.

        3) The question is the answer. Our government is influencing people's lives when they shouldn't. How do they do this they do it with money. The answer is to take away their money.

        4) Would the above work yes but there is a prerequisite and that prerequisite is education of the people. The meme I hear over and over is the crony capitalism meme. This assigns blame to the banksters. But all this does is get everyone's ire worked up, it doesn't accomplish anything. Since it doesn't work I say it is not the real problem.

        5) What could we do differently that would really effect the real problem? What is the real problem.

        How come we have crony capitalism? Because corporations can influence the law makers.

        How come corporations are able to influence the law makers? Because the law makers pursue their self interest and need money to get reelected and everyone in the beltway does it and are indoctrinated into this corruption.

        How come the law makers pursue their self interest and need money to get reelected and everyone in the beltway does it and are indoctrinated into this corruption? Because it takes a lot of money to get reelected.

        How come it takes a lot of money to get reelected? Because people are not interested in politics and require a lot of repetition or brainwashing.

        How come people are not interested in politics and require a lot of repetition or brainwashing.

        Because they...
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          Aug 18 2012: Excellent point. As part of that education, shouldn't we attempt to expose these crony relationships? How do we replace those in government hold the power. How do we bring back honest journalism? Maybe we should start an idea conversation to try to gather strategies to bring what both you and I seek. Equal oppurtunity as opposed to equal results. I'll provide a link in case anyone else besides me needs brought up to speed.
          http://en.wikipedia.org/wiki/Crony_capitalism
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        Aug 18 2012: There are quite a few of us that are spreading the word.

        Krisztian, Ehis, Bob, the Tea Party, Ayn Rand, since people learn best in small groups I think these message boards are a great vehicle.

        I learned about how a politician named Paul Martin did this in Canada from Debra Smith. I believe he did some education by television that Canada needed to get it's financial house in order in the early 90's. My understanding is that because of his efforts Canada today is the only country in G20 that is not experiencing a recession.
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      Aug 18 2012: Do you agree that a minimum wage system increases the cost of employing low skilled labour? If you do then you must agree that it causes unemployment for the poorest members of the society. If we agree to this point then i find it hard to understand why you are advocating the system.
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        Aug 19 2012: Ehis,

        I need to apologize to you for my arrogant posts. I had about a week of emotional driven thinking here. While its difficult for me, I need to confront my own biases here and make sure my thinking is really clear, or find out if it is based on faulty facts and reasoning. If there are any books or authors you could suggest for me I would appreciate it.

        Thanks,

        Eric
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          Aug 19 2012: Following on from Krisztián, you can access free books/Audio from mises institute. It is strictly a libertarian site. Also, you can read Milton Friedman's 'Free to Choose' and 'Freedom and capitalism'.
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      Aug 18 2012: you have been repeatedly asked a single question you refuse to answer. it is not that difficult.

      the question is still this: if two adult, mentally sane individuals agree on an employment contract, what gives you the right to interfere with it?

      there are many such questions, and the answer is always muddying the waters with generalizations like "we live in a society". so what? it somehow makes unnecessary to argue? we can arbitrarily take a position because "we live in a society"? then why i can not say, minimum wage is bad because we live in a society? i can use that argument too? it is intellectual sloth.
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        Aug 19 2012: Kristian, I'm going to force myself to try to see this from your perspective. If an employee is seeking work, and can't find a higher paying job, he will apply for the jobs that are available, and that will be his free choice. The society in which the employer and employee are members have no say in an agreement freely made between those two people. If I look at it from the point of view of the non-aggression principle as I've read on Wikipedia, then I can see your side. The problem for me is that my world view and moral value system which more closely resemble utilitarianism, seem incompatible with this. Maybe I need to reevaluate my value system. It certainly won't be as easy as flipping a switch, because our value systems are part of our identity. It takes time to change them. One of my goals in the last few years has been to confront my paradigms when new information comes in. Its difficult to do to say the least.

        Could you give me a few books or authors that you think will clarify my thinking on this matter?

        Thanks, Eric
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          Aug 19 2012: you can only pick another moral system if you refuse mine. so if you want to believe something else than the non aggression principle, then you in fact say sometimes it is good to initiate aggression (emphasis on initiate) against other people. i'm ok with that, but you need to admit it. i'm ready to admit that my value system refuses utilitarianism. even if one could show me that some form of aggression makes the world a more pleasant place, i will still choose the non aggression and the less enjoyable world.

          some good sources to learn about non aggression and where it leads includes the mises institute

          www.mises.org

          they also have a youtube channel, on which you can follow the mises summer university lectures.

          http://www.youtube.com/user/misesmedia

          this is mostly economics issues, but covers ethics to lesser degree. if you want a more ethical/social approach, the freedomain radio is for you:

          http://www.freedomainradio.com/

          it also has a youtube channel, linked from the main page

          and if you want to dive right in deep, i recommend basically anything from murray rothbard, who is in my view the absolute champion of the philosophy of liberty.
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      Aug 18 2012: Eric

      Are you willing to be Honest and genuinely confront this subject?

      If so is there something about your premise that does not quite add up or doesn't quite make sense?
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        Aug 19 2012: Pat,

        I'm going to try to honestly reevaluate my thoughts and beliefs on this. Can you give me some authors or books that you think would help me see a logical analysis of any misconceptions I have?

        Thanks,

        Eric
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          Aug 19 2012: I prefer Thomas Sowell he was a student of Milton Friedman he is long on examples and short on theory which I like.

          I get that you are taking a hard look at this subject and find that to be a breath of fresh air.

          What happens is that an individual inadvertently and unknowingly adopts a meme that can change his life for the worse because the meme is fallacious. There is no shortage of fallacious memes on the subject of economics.

          Here is an example of how this works. There was a kid that was about 10 or 11 who had trouble in school so the counselor sent him to the school doctor the doctor told him that he had "learning disabilities" and gave him some medication and took him out of the advanced classes and put him in the regular classes. The medication had adverse effects on the kid so he quit taking it. But for the rest of his life the kid thought that he was a "poor student" because of the learning disabilities. Then one day the kid (40 years later) had an epiphany that he was not a poor student it was just that some "know best type" said he could not learn. Realizing that this was sitting there all those years explained a lot of things and I was quite relieved.

          Again ask yourself the question what about economics does not add up? What about economics does not make sense?

          If you will answer these questions honestly we can probably point out the facts that will set the you straight on the part of economics that doesn't quite add up.

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