Winstonm, on 2012-August-08, 05:55, said:
The data indicate that minimum wage increases are followed by boosts to GDP. Whether this evidence is correlated versus causitive I cannot say, but it makes sense that when 72% of GDP is based on consumption to increase the amount of capital available to those who consume 100% of revenue would be stimulative to the economy, don't you think?
The problem is that the minimum wage involves a mass of sticky concepts that are not easily untangled. It certainly seems implausible that it affects enough revenue to appear in GDP statistics though
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People are generally paid close to their marginal productivity, so a minimum wage can make some jobs unprofitable. If the aim of the minimum wage is to redistribute wealth, a nakedly redistributive position is surely better.
Further, some jobs have non monetary benefits. Accountants for example, are put through training worth tens of thousands of pounds a year. It makes sense then to work at quite a high level job for low wages if you are getting such a large `hidden' benefit. Of course, accountants get reasonably paid anyway, but a fraction of what they do when they qualify, mostly because of training costs. Less well paid apprentince ships also suffer. Particularly those who would take young workers. Schemes where kids work with a friends dad as a plumber for the summer holidays for a relative pittance, in order to gain work experience, are now essentially illegal. Internships are likely to go the same way in the UK, where it will shortly be illegal to work for free, as it is said to benefit the children of the wealthly (probably true).
Other consequences often include mechanisation, and replacing jobs with machines that cost less. By raising the wages this effect moves up the priority list.
Of course, there are some odd beneficial effects. Some employers who were happy employing lots of cheap labour and not really working them very hard, were forced into laying of some staff and improving the productivity of those who remain. This effect has been quite widespread, and is obviously a huge win for those who remain unemployed.
In practice very few workers remain on the minimum wage for very long. For those persons whose time on the minimum wage is only a step into better paid employment, there is a clear case that they can lose out since the minimum wage makes it harder to get on the ladder. This also applies to those who lack the skills even for minimum wage employment, they may once have been able to generate an employment history by working sub minimum wage, inorder to graduate into minimum wage employment.
ON the other hand, the only real winners are those workers who were being exploited, in the sense of being paid much less than their marginal product, since when their wages are raised, it makes no difference to their employment status, as they remain profitable. I have no real sense of how common that situation might be. It seems that workers rights in the UK are fairly well established, and I am not at all convinced that that type of problem really existed.
On the note of redistribution: It is generally dangerous to mess with market outcomes, as it can have unpredictable effects. Instead I prefer in naked redistribution? if you work more than x hours a week in employment, and your wage is less than y per hour, the government will make it up to y in benefits. This type of policy also avoids the poverty trap, as it is always profitable to work more hours.
The physics is theoretical, but the fun is real. - Sheldon Cooper
Help
Maybe Richard and I can get a write-in draft Bachmann for v.p. petition started .