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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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Anne Dagen 10+
As for teachers, yes they are there to get students through exams, that is part of their function. Behind that is the activity required to ensure the pupil acquires the necessary knowledge and other skills that go into passing an exam, but the major hard measure of their productivity is the passing of exams.
And lawyers are employed to win caseds, not just to turn up. Why would anyone pay legal fees if they didn't have the objective of winning a case.
As regards unions raising wages at the expense of other workers, you have not provided a credible explanation of how that works. When mimimum wage increases, press space is given to the argument that this will mean laying off workers, but there is no record of this actually happening, just a minor blip in inflation as prices go up.
And there is another flaw in using productivity as the sole measure for payment - Eki Goldratt's book The Goal describes the theory of constraints which will give you an idea of the need for contingency.
Krisztián Pintér 200+
Anne Dagen 10+
Take the following simple example. If there are more than enough workers to fill all the vacancies, and all workers are equally productive, then the jobs will go to those who are prepared to work for the least amount. But if there are insufficient workers for the jobs available, employers will pay more to get people to work for them. The productivity hasn't changed, but market conditions have, and that has affected wages.
Krisztián Pintér 200+
the very fact that some workers earn less than they produce puts a pressure on the economy. it represents an opportunity for entrepreneurs to move to that area, because they can earn profit from the difference. entrepreneurs will compete with each other for the cheap workers, up to the point when marginal productivity is close to the wage. when this happens, entrepreneurs stop moving into that field.
and it is good. because it indicates that the market opted for more of that product. if you put a barrier in the way of that trend (for example with minimum wage), you will prevent the market to adjust itself to the needs of the people.
Ehis Odijie 10+
Successful unions, by definition, are the once that reduces the number of jobs available of the kind they control by increasing salaries above market price . As a result employers would take on less employment than they otherwise would. People that would otherwise be employed in the sector will be forces to look for jobs elsewhere - a greater supply of workers for other jobs drive down the wage paid for those jobs.
Higher wage to one group of workers must come primarily at the expense of other workers - there is no other way round it except increasing the price of consumers goods.
Anne Dagen 10+
It is not in the interests of a large union to reduce the number of jobs available because this makes it more likely that market fluctuations will put their members out of a job.
And small unions don't have the negotiating power.
Ehis Odijie 10+
The question should be: do large unions know that they reduce the number of jobs available? Each time unions negotiate pay rise above market price they are creating mass employment. It is a simple case of demand and supply - whenever the price of anything goes up the demand comes down. In this case they are getting higher prices at the expense of potential workers. There is no such thing as a free launch, Anne.