Minimum Wages Laws Having Economic Effect Should Be Abolished

Definitions "A minimum wage is the lowest hourly, daily, or monthly wage that employers may legally pay to employees or workers. Equivalently, it is the lowest wage at which workers may sell their labor." http://en.wikipedia.org... The "having an economic effect" caveat in the resolution excludes minimum wage laws that set rates substantially below the market rates for labor in the industry affected. Minimum wages laws that are symbolic, making someone feel good for some reason, are harmless. In my area the market rate for unskilled day labor from illegal aliens, who are effectively exempt from wage laws, is $15 per hour. Setting an enforced minimum wage of $7 per hour for that particular type of work would have no significant economic effect. Arguments The purpose of minimum wage laws is to attempt to force employers to subsidize low wage workers. This attempt fails because there are alternatives to paying the low-wage worker. One is to simply eliminate that business, or the part of he business that is unprofitable with high labor costs. The other is to automate the job, replacing the unprofitable low-wage labor with machinery and skilled labor that turns a profit. 1. Consider an example that is a paradigm for the arguments against a minimum wage. Fast food restaurants employ low-skilled workers. Suppose a higher minimum wage is imposed. The restaurant then raises its prices to cover the costs. The laws of supply and demand dictate that there will be some customers who will pay the higher price, but that some others will not. The chain outlet in an upscale area may continue with only a small drop in business, however in a less affluent area business will drop more sharply. The people not buying hamburgers will bring their lunch or buy pre-packaged food from a convenience store. The outlets that are no longer profitable will be closed, or the hours reduced to prime selling periods. The net effect is that some of the employees will make more wages, but others will lose their jobs and the previous patrons of those outlets will not get hamburgers they can afford. 2. The outlets that survive selling higher priced hamburgers might now find automation attractive. About a decade ago, McDonald's built a prototype fully automated restaurant. None of the tasks involved are beyond automation. All that is necessary it to have labor costs rise above the capital and maintenance costs of the equipment. As labor costs rise, McDonald's is moving to greater and greater automation. http://www.techdirt.com... The Japanese fast food chain Yoshinoya now operates with advanced automation. They sell curries and stews over rice, not hamburgers, so they are easier to automate. In expensive Tokyo, they deliver meals to customers for about $5. http://www.virtualtourist.com... Yoshinoya has entered US markets, and what they need most to succeed in the US are high minimum wage laws. Get fast food burgers to $10 and there will be a dramatic increase in rice bowls. 3. If it were true that minimum wage laws helped cure poverty, then poor countries could just set a minimum wage of, say, $25 per hour. Or why not $100 per hour, so everyone could be well-off? No one believes for a moment that such a tactic would work. Advocates of minimum wage laws must explain why it doesn't work. It is for precisely the reasons I have given. 4. If legislatures want to give money to low-wage-earners people, they can provide welfare benefits, direct government subsidies to low wages, or a negative income tax. Those methods do not destroy jobs, and they do not unfairly try to shift welfare burdens on to employers or the customers of labor-intensive businesses. Minimum wage laws should be repealed for the benefit of employees, employers, and customers alike.