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The Minimum Wage Fallacy

kylestephens123

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The idea of a minimum wage is-despite being good intentioned- deeply flawed. Wage control, in the long run, actually has the opposite effect of its original intention, and that is, to raise the standard of living for the average worker. Although this may seem ludicrous, let me explain.

Before a minimum wage, employers are able to hire and pay as they see fit. A typical restaurant can employ as many bus boys, cooks, waiters and waitresses, hosts, or whatever else they would like, as needed. Employees with higher sets of skills are paid more handsomely, albeit nominal for their position, and other employees, with less important jobs, are paid less. Those workers who are paid less typically are people with less skill, less education, or less experience. Now, with a minimum wage, the employer must cut back and consolidate in order to still run their business at an operable level; the lower-skilled persons are fired, and only the workers with higher skill levels are kept, but now those workers must take on the responsibilities that are now given them from having those who had them before being fired.

Since the firm has free reign over who they hire and who they fire, it can be inferred that the firm will only keep the high-skilled workers. Those with less education, less skill, and/or less experience are now without a job, or money. On top of this, the workers that do remain in hire now must take on more work, thus lowering the actual working conditions of the job. Those who were fired (or never even hired) will not have the means to get better education, obtain skills in the workplace, or in general, add to any experience they might have. Ironically, the people who benefit from wage control (if anyone at all) are the workers who would have been paid that wage anyways.

This is just a micro-level analysis, though. On a macro-level, wage control gives the incentive for firms to off-shore their production to countries with lower wage demands than countries with high wage demands.

Thoughts? Errors in my analysis? Agree or Disagree?
 
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The idea of a minimum wage is-despite being good intentioned- deeply flawed. Wage control, in the long run, actually has the opposite effect of its original intention, and that is, to raise the standard of living for the average worker. Although this may seem ludicrous, let me explain.

Before a minimum wage, employers are able to hire and pay as they see fit. A typical restaurant can employ as many bus boys, cooks, waiters and waitresses, hosts, or whatever else they would like, as needed. Employees with higher sets of skills are paid more handsomely, albeit nominal for their position, and other employees, with less important jobs, are paid less. Those workers who are paid less typically are people with less skill, less education, or less experience. Now, with a minimum wage, the employer must cut back and consolidate in order to still run their business at an operable level; the lower-skilled persons are fired, and only the workers with higher skill levels are kept, but now those workers must take on the responsibilities that are now given them from having those who had them before being fired.

Since the firm has free reign over who they hire and who they fire, it can be inferred that the firm will only keep the high-skilled workers. Those with less education, less skill, and/or less experience are now without a job, or money. On top of this, the workers that do remain in hire now must take on more work, thus lowering the actual working conditions of the job. Those who were fired (or never even hired) will not have the means to get better education, obtain skills in the workplace, or in general, add to any experience they might have. Ironically, the people who benefit from wage control (if anyone at all) are the workers who would have been paid that wage anyways.

This is just a micro-level analysis, though. On a macro-level, wage control gives the incentive for firms to off-shore their production to countries with lower wage demands than countries with high wage demands.

Thoughts? Errors in my analysis? Agree or Disagree?


If your economics work correctly, and jobs such as waitressing and sale clerk have different skill sets and one job is harder than the other (waitressing is harder than being a sale clerk say), if they are paid the same thing, then most people will apply to be a sale clerk (they get the same wage for less work). The number of qualified people applying for waitressing falls, and pays will have to rise to attract qualified people to that job.

Businesses can only fire people if they are overstaffed. Then according to economic theory, they are inefficient businesses anyway, irregardless of wages, someone else with better business sense should take over and run a leaner operation to maximise their profits.

Anyone can make arguements, what counts is the evidence. Do you have evidence that wage control leads to lower standard of living? Try comparing countries with wage control and no wage control and their average standard of living. There could be reverse causation or no causation at all, but if you can't even establish a positive correlation between wage control and lower standard of living, then there's nothing wrong with your argument.
 
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Another Minimum wage string.
OK, sure.

We've lost all/or certainly most of the jobs we can lose that are wage sensitive. Raising Minimum wage won't lose many more. We make little now.
We've even lost service phone jobs to India et al. And remote engineering too.
They can't move the restaurant etc, jobs offshore, so why not give a decent wage?

Wages are also depressed by 11 million illegals who are happy to work for half of it.
So, workers are not only squeezed by $1 an hour overseas, but $3/$4 here.. illegally. A False oversupply.
I'd be OK with no minimum wage if we had a REAL market for domestic citizens/legal workers. We don't.
The Fallacy in your post is that we do.

Send a few million illegals back and wages go up across the board.
Let's see what OUR sons and daughters want to bus tables and wash dishes (or day-work carpentry) when there's no false labor supply.
My niece wouldn't wash dishes for $15 an hour even before she got her job. You?

Lets's put our seniors who need to supplement their SS back to work in many other jobs and make the hiring of illegals.. illegal with Stiff penalties.
Like, 5k first offense.
10K, second offense.
Jail, Third offense.
Let's see hat the Real Market minimum wage is for low-skilled jobs and we probably won't need to legislate one.
 
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I have never actually met a business manager who said "I would hire more people if I could pay them less than minimum wage". I start out new unskilled hires at considerably more than minimum wage. The only people I know that make minimum wage work in fast food or retail as part time workers, most are teenagers living with their parents. I believe minimum wage to be a moot point.
 
The idea of a minimum wage is-despite being good intentioned- deeply flawed. Wage control, in the long run, actually has the opposite effect of its original intention, and that is, to raise the standard of living for the average worker. Although this may seem ludicrous, let me explain.

Before a minimum wage, employers are able to hire and pay as they see fit. A typical restaurant can employ as many bus boys, cooks, waiters and waitresses, hosts, or whatever else they would like, as needed. Employees with higher sets of skills are paid more handsomely, albeit nominal for their position, and other employees, with less important jobs, are paid less. Those workers who are paid less typically are people with less skill, less education, or less experience. Now, with a minimum wage, the employer must cut back and consolidate in order to still run their business at an operable level; the lower-skilled persons are fired, and only the workers with higher skill levels are kept, but now those workers must take on the responsibilities that are now given them from having those who had them before being fired.

Since the firm has free reign over who they hire and who they fire, it can be inferred that the firm will only keep the high-skilled workers. Those with less education, less skill, and/or less experience are now without a job, or money. On top of this, the workers that do remain in hire now must take on more work, thus lowering the actual working conditions of the job. Those who were fired (or never even hired) will not have the means to get better education, obtain skills in the workplace, or in general, add to any experience they might have. Ironically, the people who benefit from wage control (if anyone at all) are the workers who would have been paid that wage anyways.

This is just a micro-level analysis, though. On a macro-level, wage control gives the incentive for firms to off-shore their production to countries with lower wage demands than countries with high wage demands.

Thoughts? Errors in my analysis? Agree or Disagree?

on the whole i think you are wrong. no business owner hires more people than he needs, or he wouldn't be in business long. common sense tells you that.
 
I'm saying we should get rid of the minimum wage in order to (hopefully) have some of those jobs that went foreign return, because our economy as it is is unsustainable. We need imports just as much as we should rely on exports, and the only reason are economy has remained the way it has is because of the fact that the U.S. dollar is the World Reserve Currency, that being the currency that all countries trade in. It gives our money an edge over other currencies.

And the illegal immigrant argument is a misguided one. There is substantial evidence that the economy expands as immigration does, and typically, the skill set of immigrants compliments the skill set of Americans-immigrants have either really low or really high skill sets, but most Americans have an average skill set, like a bell curve. Seeing as i do not have the time to bring up any research work are academia to support this, I'll link this video and hope that it spurs you to investigate for yourself. Top Three Myths about Immigration - YouTube
 
Excerpts from the first message of the tread “The consequences of repealing minimum wage rates”,
posted on the economics board at 11:55 AM, March 27, 2012:

If there were no minimum wage many additional lower wage jobs would be created.
The vast majority of those newly induced jobs would be what we now describe as sub-minimal wage paying jobs that do not justify the current $7.25/Hr. federal minimum wage rate................................................. There are many job tasks that do not justify the minimum rate but they now exist because their performance is necessary to our public or private enterprises. Those jobs will continue to exist but their wage levels will plunge down to sub-minimum rates.

Sub-minimum jobs will be the vast majority of additional jobs created and (because many of those qualified to perform sub-minimum tasks were previously not qualified for employment at minimum wage rates), we’ll have a pool of eligible labor that will far exceed the number of those additional jobs.

The affect of those extremely poor paying jobs will ripple throughout our entire labor market. All labor compensation will be somewhat affected but the general extent of the effect upon a task’s wage rate will be inversely related to the difference between the purchasing power of the eliminated minimum wage rate and the job’s rate; (i.e. the more you’re earning, the less you’re hurting. That’s the meaning of minimum wage rate’s inverse affect upon all jobs’ rates).

Lower wage earners will all then be paid in wages of extremely poor purchasing power. Prior to the elimination of the minimum wage rate, many of those now earning the lesser purchasing powered wages will have been unemployed or not worked steadily but they will be joined by those who already had been the working poor and some who were previously getting by slightly better.

There’ll be net increased needs for public assistance and our states can’t now handle the present needs.
That’s a scenario of increased national poverty.
I ‘m a proponent of an annually cost of living adjusted minimum wage rate similar to the annually COLA’d Social Security benefits.

Respectfully, Supposn
 
Kyle stephens123, I suppose it’s conceivable that an excessive minimum wage rate could be detrimental to a nation’s economy.
I’m unaware of such an effect upon any nation’s economy during any historical period.

Respectfully, Supposn
 
The biggest fallacy related to minimum wage is that people stick at that level. No, it is generally a start, and people move up. Most minimum wage is for those that start in the work force.

And yes, if you push it up, it devalues the work done.
 
If I had a nickel for every time this topic has been rehashed...
 
The biggest fallacy related to minimum wage is that people stick at that level. No, it is generally a start, and people move up. Most minimum wage is for those that start in the work force.

And yes, if you push it up, it devalues the work done.

LOL, so giving more value to a job, devalues it? Next time you will say the older I get my age starts decreasing.
 
LOL, so giving more value to a job, devalues it? Next time you will say the older I get my age starts decreasing.

Do you value something you work hard to achieve more than something handed to you?
 
Do you value something you work hard to achieve more than something handed to you?

Working for something isn't equivalent to being given a handout.
 
The idea of a minimum wage is-despite being good intentioned- deeply flawed. Wage control, in the long run, actually has the opposite effect of its original intention, and that is, to raise the standard of living for the average worker. Although this may seem ludicrous, let me explain.

Before a minimum wage, employers are able to hire and pay as they see fit. A typical restaurant can employ as many bus boys, cooks, waiters and waitresses, hosts, or whatever else they would like, as needed. Employees with higher sets of skills are paid more handsomely, albeit nominal for their position, and other employees, with less important jobs, are paid less. Those workers who are paid less typically are people with less skill, less education, or less experience. Now, with a minimum wage, the employer must cut back and consolidate in order to still run their business at an operable level; the lower-skilled persons are fired, and only the workers with higher skill levels are kept, but now those workers must take on the responsibilities that are now given them from having those who had them before being fired.

Since the firm has free reign over who they hire and who they fire, it can be inferred that the firm will only keep the high-skilled workers. Those with less education, less skill, and/or less experience are now without a job, or money. On top of this, the workers that do remain in hire now must take on more work, thus lowering the actual working conditions of the job. Those who were fired (or never even hired) will not have the means to get better education, obtain skills in the workplace, or in general, add to any experience they might have. Ironically, the people who benefit from wage control (if anyone at all) are the workers who would have been paid that wage anyways.

This is just a micro-level analysis, though. On a macro-level, wage control gives the incentive for firms to off-shore their production to countries with lower wage demands than countries with high wage demands.

Thoughts? Errors in my analysis? Agree or Disagree?


Your post is full of flaws...but Im assuming that you may not realize it....you have to go back in history a bit to understand why we need a minimum wage and labor laws that RESTRICT unscrupulous employers from doing whatever the choose...
Before unions and labor laws and minimum wage...12 yr old were working in sweat shops...women working 16-18 hrs a day an not making near a livable wage back then....enviromental hazards everywhere...buildings were firetraps were many perished in fires...Just like the conditions people they employ in china work under now...thats why they are in china..
If any one tried to speak up about bad working conditions or low wages the boss' had hired thugs to come on in an straighten them out...the unions formed out of a "FEW" men that were willing and had the gumption to stand up and organize mass's of workers...GOOD FOR THEM....the same employers with the same mentality exist today...the law and unions stop them from applying it again out of greed..
Americans that are unskilled and get out of bed everyday and go to work deseve not a wage to make them live wealthy...but a wage that they can SURVIVE with, many areas of the country you cant a furnished room in a halfway decent place for minimum wage and have enough to eat on....they deserve some security for when they are old and broken and cant work..<medicare-SS> not anything to get rich on the average SS check is 900 bucks...cant rent an apartment in NY for that....
Some peoples thinking today baffles me...its like horray for me and pffffft to everyone else...and I dont care if they work and cant afford a place to live and have food.
Remember something...without unskilled labor...the rich pigs at the trough would have to stick their hand in their own toilet it and clean and get their soft arse out and cut their own lawns and raise their own kids and scrub their own floors and wash their own clothes and.. on and on....
 
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Raising the minimum wage would actually increase employment and help the poor.

"Higher wages means higher income and thus higher consumption spending, which induces firms to employ more labor. So the truth is that economic theory does not tell us that raising minimum wages will lead to more unemployment, indeed, theory tells us it can go the other way—raising the minimum wage could increase employment. That’s one of the reasons why Henry Ford believed in paying his workers a decent wage: so that they could buy his product."

"You'd pay down your mortgages and car loans, getting yourself out of debt. You’d pay more taxes — on sales and property, mostly — thereby relieving the fiscal crises of states and localities. More teachers, police and firefighters would keep their jobs. America would get a virtuous cycle toward higher employment and, more importantly, the cycle would be based on a policy which creates higher incomes, not higher debt via credit expansion."

"The point is: wages are a source of demand, as well as a cost input. Reduce wages and demand plummets, which more than overrides any cost savings derived from paying less to workers (especially given today's paltry minimum wage, which is hardly a living wage for any American)."

Why Low Minimum Wages Kill Jobs and Crush Living Standards for Everyone | Economy | AlterNet
 
From the source of above: "AlterNet’s aim is to inspire action and advocacy on the environment, human rights and civil liberties, social justice, media, health care issues, and more. "

Inspire at any cost, eh?
 
From the source of above: "AlterNet’s aim is to inspire action and advocacy on the environment, human rights and civil liberties, social justice, media, health care issues, and more. "

Inspire at any cost, eh?

Ad hominem fallacy, try again.
 
There should be no minimum wage.

If the best job you can get only pays $2 per hour, then you need to learn to live on that salary.
 
From the source of above: "AlterNet’s aim is to inspire action and advocacy on the environment, human rights and civil liberties, social justice, media, health care issues, and more. "

Inspire at any cost, eh?

I wouldn't it "at any cost", if a higher minimum wage would improve the economy like the article aledges. there would be no cost at all. There would be a win-win-win net gain for everyone.
 
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There should be no minimum wage.

If the best job you can get only pays $2 per hour, then you need to learn to live on that salary.

What if it only paid 2 cents an hour?
 
I wouldn't it "at any cost", if a higher minimum wage would improve the economy like the article aledges. there would be no cost at all. There would be a win-win-win net gain for everyone.

:roll:

what happens to demand for a product when price is artificially hiked above it's worth?
 
What if it only paid 2 cents an hour?

When JC Penney was starting out, he worked for free, to learn the retail business. He had no skill set, and he sought value instead from increasing the value of his labor. It seems to have worked out well enough for him.
 
:roll:

what happens to demand for a product when price is artificially hiked above it's worth?

Who says that a job isn't worth $7.50/hr? I don't know of any businesses that base their pricing at rates that low.
 
When JC Penney was starting out, he worked for free, to learn the retail business. He had no skill set, and he sought value instead from increasing the value of his labor. It seems to have worked out well enough for him.

Are you suggesting that if we all worked for free we would become rich? Or are you saying that we should work for free?

There is a difference between an internship and a job.

So can you explain how JC Penney afforded his food when he was working for free?

Do you REALLY believe that our unemployment rate would be significantly lower if we didn't have a minimum wage?
 
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