Yogi -
We used to argue back and forth on the old Prodigy in the early to mid-1990's about raising the minimum wage, and whether or not it would bring on higher inflation and unemployment. Folks would always try to convince me that the free market should control how much to pay anyone, and I of course would disagree with that, because in a pure free market, we would probably go back to having slaves on one end of the spectrum, and robber barons and royalty on the other.... In any case we had our raises in the minimum wage which was so widely put down and feared by my CEO and private investor Prodigy friends, and guess what happened? Unemployment kept going down, and inflation remained tamed! And no one thanked me for winning the incredibly long argument which went on for years. Now I am not pretending to know what the magical minimum "living wage" should be set at, but we can start by considering the costs of a family surviving with at least a minimum amount of comfort in different areas of the country, and perhaps even consider indexing the living wage both ways to the rate of inflation or deflation.
Your idea of the free market is incomprehensible to me, so it is not too surprising that you may have a view of the legal minimum wage that differs from my version of objective reality. A judgement on the minimum wage cannot be made from unemployment statistics, because the real question is whether, with everything else equal, a legal effective (meaning significantly above the market rate) minimum wage reduces the quantitative or qualitative demand for labor. If an effective minimum wage didn't reduce the demand for labor, compared to no minimum wage in the same hypothetical time and environment, that would mean that labor would likely be the only economic good in the world whose demand is completely insensitive to price.
Labor is only employed if, and only if, the employer can derive sufficient benefit from doing so to outweigh its costs by an adequate margin. As a potential minimum wage is increased from a penny/hr to $1000/hr it should be clear that at first there will be little or no effect, followed by a range that results in lower and lower employment of less productive workers, finally followed by a range in which virtually no workers ( ignoring sports and entertainment superstars and CEOs ) can earn their pay.
Regards, Don |
