The Book!

Wednesday, June 29, 2016

Minimum Wage






The idea of raising the minimum wage seems to me plainly a bad idea; like thinking you can catch your own tail, or pull yourself up by your bootstraps. Am I missing something?

If anyone is working for below the proposed minimum wage now, that means he or she is relatively content to provide that service for that money; and the employer is relatively content to pay that money for that service. Raise the wage, and you upset this equation. The worker is probably going to be happier, should the job continue, but it is entirely possible that the employer is not prepared to value that service that highly. Result: someone who had a job before, and was relatively content, now has no job. Someone who was getting some service before, and was relatively content, now is no longer getting that service. Two people are less happy, perhaps desperately so.

People who advocate raising the minimum wage sometimes say it will not hurt the economy, because, after all, it will put more money in the pockets of workers. They will spend it, and the whole economy will benefit. Even if there are some jobs lost, this will make up for it.

I can't see how that math adds up. You cannot create new money out of thin air. Central banks have been known to try it. But if there is no growth in real value of the products and services generated, printing more currency only causes inflation in prices. The paper, in itself, is worthless. The denomination is just a number.

THe difference ain't going to come out of "profits." The free market makes pretty sure profits are at a minimum already. Reduce the profits in one business, or industry, and investment just flows to an area in which profits are higher. Business closes, or is not begun.

So if you up wages for some people, that money comes out of somebody else's pocket. If it adds to the money these workers are able to spend, it also, to an identical amount, reduces the amount of money the next guy has to spend. It cannot boost the economy as a whole. Even if it produces no job losses, raising the minimum wage raises the condition of some producers on the backs of some consumers. This is most likely to be poorer consumers, who are most sensitive to price rises.

Cutting out jobs at the lowest rung also throws more people on to public assistance; people who might prefer to work and to support themselves. Making their condition worse, while costing us all more. The new bottom rung of the ladder is above their reach. Moreover, there is a reason why we commonly use that image of a ladder, with rungs. If you never get on the first rung, all the higher rungs are also beyond your reach. The poor can never get ahead. Let them get their foot on at the bottom, and they may.

And again, no minimum wage law can be enforced beyond Canada's borders. Make sure that no Canadian's labour can be got for less than, say, ten dollars an hour, when a Chinese worker can be got for one dollar an hour, and where are all the new factories going to be built? Where are all the services going to be sourced? Instead of improving the lot of the Canadian poor, you are shovelling money off to China.

Granted, you are probably thereby improving the lot of the Chinese poor. And thqat is a good thing. But racial discrimination is not: Canadians ought to be given an equal chance at those jobs, if they want them.


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