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Pastimes : Austrian Economics, a lens on everyday reality -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (190)	4/23/2003 2:10:02 PM
From: gpowell	Read Replies (1) \| Respond to of 445

Minimum wage laws do more than increase the unskilled unemployment rate. By not allowing the market to clear, inequities in the allocation of jobs through favoritism can occur. Combine that with a generous welfare system and one would expect the creation of a persistent economic underclass. Any institutionally caused increase in wages will create multitude inequalities. Labor unions are a good example. I used to be a teamster – many years ago – after a few years in the union I realized I needed protection from the union rather than my employer. In the US, trade unions tend to create a bifurcated job market, in effect union worker’s higher wages (above market clearing) are wages “taken” from non-union workers. Powerful unions combined with socialist governments, such as those in rumsfeld’s “old” Europe cause both high unemployment and lower productivity. One caveat is that workers and jobs are not homogenous, so there is some natural limit in the ability of unions to “take” from other workers. Btw, union power is at it’s strongest within monopolist, or at least oligopoly, industries. The airline industry is a good example. The old airlines created and grown under federal regulation had some of the strongest unions in the country. Since deregulation they’ve experienced a continuous erosion of their ability to demand higher wages.