The minimum wage should be abolished

I thank ResponsiblyIrresponsible for presenting his case. Now I will do my best to refute it. 1. Consumption I will not dispute that raising the minimum wage would increase present consumption; perhaps it would. But I would not label this as a positive effect of the policy. If anything, I would consider it to be a negative effect! The more resources are consumed in the present, the fewer are available to be saved and invested in longer production processes. If producers detect that the market society"s overall consumption/savings ratio is tending towards more consumption, they will tend, more so than before the shift, to employ shorter, but generally less productive, production processes, over longer, generally more productive, production processes. The result will be that the economy as a whole will become less productive overall, and workers will have less productive production processes to integrate themselves within, resulting in a drop in average worker productivity and with it, a drop in average real wages. Savings and investment, not consumption, are the driving force of economic progress, thus encouraging more consumption via policy measures should not be considered a benefit of that policy measure. I doubt that my opponent and I will see eye to eye on this, since he seems to be an adherent of Keynesian economics, whereas I am an adherent of Austrian School economics; schools of thought which have diametrically opposed views on the role of present consumption in the economy. As such, onlookers will just have to judge for themselves which theory makes the most sense. 2. Efficiency Wage Hypothesis Here, my opponent claims that forcing businesses to pay higher wages to their low skilled workers via a minimum wage would actually be beneficial to these businesses, because for a number of reasons, employees that are paid higher wages work more effectively. In response, I would ask: who would you think would be more likely to set their employees" wage closest to the profit-optimizing point, individual business owners who actually receive whatever profit their businesses make, or government legislators, who are motivated by different, mainly political, considerations? I submit that the individual business owner (or franchise owner, or shareholder operating through a corporate structure, etc") has a much greater incentive to seek out and then implement wage rates that are as close as possible to the profit-optimizing point for their employees. Compared to them, the incentive of a government legislator to do this same thing is truly minuscule; thus making the businessman a much better judge of what wage rates to pay his employees than the legislator. Also, the minimum wage is a crude, overly standardized instrument. One single wage floor is set across the entire economy. How could this possibly be as accurate, for individual business-profitability purposes, as each individual business owner determining, based on his specialized knowledge of the particular business and psychological circumstances surrounding a particular employment relation, what wage rate would make the most business sense to pay to his various employees? Is it possible that particular businesses might make a mistake and pay a wage rate that is sub-optimally low, which a higher minimum wage could then correct? Absolutely. But it is also possible, and far more likely, that the politicians will "make a mistake" (if this is even the goal they are aiming at, which it generally is not) and set a minimum wage that will throw a lot of wage relationships further away from the profit-optimizing rate. Thus, if this efficiency wage hypothesis is correct, business owners will have greater incentives to implement it, and thus be the better parties to implement it, than one-size-fits-all minimum wage-setting government legislators. As such, establishing its veracity is not in fact an argument in favour of having a minimum wage. 3. Income Inequality In this section, my opponent is, unintentionally I am sure, being a bit misleading. He first talks about all the woes of increased income inequality in general, including the dreaded "hollowing out of the middle class". He then goes on to try to relate this increased general income inequality to the decline of the real minimum wage over the same time period. He uses the Autor study to claim that about: "30 to 50% of the growth in income inequality from 1979 to 1989 can be attributed to the falling real value of the minimum wage" (ResponsiblyIrresponsible) But what the authors actually write in their concluding section is this: "Under our preferred model specification and estimation sample, we estimate that between 1979 and 1989, the decline in the real value of the minimum wage is responsible for 30 to 50 percent of the growth of lower tail inequality in the female, male, and pooled wage distributions (as measured by the differential between the log of the 50th and 10th percentiles)" (Autor et al., 2014, pg. 26-27) Note that what the authors are talking about is lower tail wage inequality, not general income inequality. They are talking solely about the wage distribution between the 10th and 50th percentiles. Neither the "1%", the "rich", nor even the "upper middle class", are included in this part of the distribution, nor, it should be noted, are the unemployed. The authors are just saying that a reduced real minimum wage has contributed to a greater gap between the wages of workers receiving close to the legislated minimum wage rate and those receiving close to the median wage rate in the economy. This finding is perfectly plausible and is probably accurate. But in this form, it doesn"t seem as bad as my opponent makes it out to be. In fact, as per my point #3 in my positive case, a greater gap between the minimum wage and the median wage could even be a good thing. 4. The MW does not kill jobs Like most headlines, this one is wildly over-simplistic, as I think even my opponent would agree. Or does he really want to imply that, even if the minimum wage were raised to $100 an hour, no one at all would lose their jobs? Also, the "does not" is a very bold choice of words, considering how divided even the empirical evidence is on this subject, not to mention the theoretical considerations militating against the statement. To give the reader a sense of how truly divided these "reliable" empirical studies really are, I offer a review found on the Ontario Ministry of Labour"s website (Google knows I"m from Toronto): "Based on more recent studies using US data from the 1980s and into the 1990s, the results tend to be conflicting. Some find effects within the former consensus range whereby a minimum wage increase of 10% would lead to an employment reduction of 1-3% (Neumark and Wascher 1992, 1994, 2000, Williams 1993, Williams and Mills 1998). Some find even larger negative effects (Burkhauser, Couch and Wittenburg 2000, Deere, Murphy and Welch 1995, Kim and Taylor 1995). Others find adverse employment effects that are close to zero or statistically insignificant (Card 1992a, 1992b, Card, Katz and Krueger 1994, Card and Krueger 1994, 1995 and 2000, Katz and Krueger 1992, Klerman 1992, Solon 1990, and Wellington 1991). Studies that use panel data to estimate the employment transitions of persons affected by minimum wage increases tend to find adverse employment effects that range from small (Currie and Fallick 1996, Zavodny 2000) to substantial (Abowd, Kramarz, Lemieux and Margolis 2000 and Linneman 1982)." And: "In the Canadian context, researchers have generally found an adverse employment effect of raising minimum wages especially for young workers. Studies from the 1980s suggest that a 10% increase in minimum wages would result in 1%-3% reduction in employment (Swidinsky, 1980; Schaafsma & Walsh, 1983). More recent studies find larger adverse employment effects (Baker, Benjamin & Stanger, 1999; Yeun, 2003; Baker, 2005; Campolieti, Fang and Gunderson, 2005a.b.; Campolieti, Gunderson & Riddell, 2006; Sen, Rybczynski and Van De Waal, 2011). Typically those studies find that teen employment would drop by 3% - 6% if the minimum wage is raised by 10%." http://www.labour.gov.on.ca... So" What all this is telling us is that economic law somehow changes every time a new empirical study is done, and that economic law is particularly unfavourable to raising the minimum wage in Canada, when compared to the US, where the results are more mixed. Or, more plausibly, what it is telling us is that flawed, non-reproducible empirical studies purporting to either prove or disprove pieces of deductive economic reasoning should be taken with a massive dose of salt. This is unfortunate for my opponent, as this would mean that cherry picking empirical studies is not in fact sufficient to disprove crucial pieces of economic theory, such as that minimum price controls on a commodity always have the very real potential to artificially create unsold surpluses of that commodity, in this case, labour.