The Minimum Wage Is a Sound Economic Policy

My opponent's claims that wages will fall is illogical. "The argument [yours] is defective. It takes it for granted that the employers pocket the difference between the marginal-productivity wage rate and the lower monopoly rate as an extra monopoly gain and do not pass it on to the consumers in the form of a reduction in prices. For if they were to reduce prices according to the drop in costs of production, they, in their capacity as entrepreneurs and sellers of the products, would derive no advantage from cutting wages. The whole gain would go to the consumers and thereby also to the wage-earners in their capacity as buyers; the entrepreneurs themselves would be benefitted only as consumers. "[1]Here is additional evidence for the Marginal Productivity theory: "There prevails a tendency for wage rates to reach the point at which they are equal to the price of the marginal product of the kind of labor in question. If wage rates drop below this point, the gain derived from the employment of every [p. 598] additional worker will increase the demand for labor and thus make wage rates rise again. If wage rates rise above this point, the loss incurred from the employment of every worker will force the employers to discharge workers. The competition of the unemployed for jobs will create a tendency for wage rates to drop. "[1]In addition, my opponent's claims about the industrial revolution are actually misguided. [2] Therefore, wages stay close to marginal productivity because there is competition for those workers in the labor market. Next, my opponent attacks my unemployment arguments. Take this analogy: "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. "[3]Here is a graph showing how the minimum wage can effect unemployment: [4] Here is a better way to show the process: [6] Is there empirical evidence? Yes, there's more. I am going to focus more on low-skilled workers when I post my refutation. My opponent first claims that the correlation is false simply because of recessions. However, the trend can be traced further back: [5]Notice how the minimum wage is increased before the unemployment level rises. This indicates that the minimum wage does cause unemployment. Looking carefully at the graph in 1990 shows that the minimum wage was increased before the recession unemployment set in. There is even more. There is a mountain of empirical evidence showing that the minimum wage increases unemployment [7]particularly among teenagers. [8]Here are a few quotes: "Where most economists agree is that the higher minimum wage does not do much to relieve poverty. That is partly because many poor people would not gain (since they do not work); partly because some of the costs of higher minimum wages are shifted onto poor consumers; but mainly because many minimum-wage workers are not poor. "[9]". .. minimum wages do not achieve the main goals set forth by their supporters. They reduce employment opportunities for less-skilled workers and tend to reduce their earnings; they are not an effective means of reducing poverty; and they appear to have adverse longer-term effects on wages and earnings, in part by reducing the acquisition of human capital. "[10]Then, my opponent attacks my inflation argument, but that too can fall easily:The natural price of a product is based on many factors and among these is labour. When the costs of labour increase, the price of its products increase as a result. When this happens market-wide (as it would with a minimum wage), it leads to this price inflation. This price inflation increases until the nominal value of labour is essentially what it was before [11]. Finally, my opponent claims that I have not really refuted his R2 argument; however, in the beginning of my R3 about how the minimum wage actually hurts the economy, I do refute it. Even so, I will expand upon it here. A minimum wage is not necessary to ensure that the employee can recieve wages necessary to meet the cost of living. I. Because the minimum wage law only outlaws jobs that drop below its standard [12], the employees are actually worse off than before. Being unemployed generally earns an individual less than being employed on any wage [13]. II. In addition to that, wages cannot drop below the "natural" minimum wage [14]. The "natural" minimum wage here refers to the natural minimum that an unregulated market will pay for labour. The natural minimum wage is equal to twice the subsistence of the labourer [15]. III. In addition, if workers do not make much more than what is required to subsist, they often unionize, shifting the bargaining power towards the employees [16]. Therefore, the minimum wage does not help workers or employment. I think I have effectively proven my case, but I will take this short amount of space to clear something up. I agree with my opponent that the resolution of this debate states whether or not the minimum wage should be abolished. However, he is wrong when he says that I have not touched on its abolition; only on its increase. I have provided enough evidence that concludes that the minimum wage both increases unemployment and prices. Take, for example, the minimum wage/unemployment correlation I posted a graph of earlier. Why can't it be inferred that greater reductions, and the eventual elimination of the minimum wage would lower unemployment further? The same goes for prices. Here is my final point (note, this isn't a new argument). It can also be inferred from my argument that if a minimum wage of, say $2 were implemented, it would be rather unneccessary. Therefore, it can be abolished simply because it is a waste of time and resources. I have proved that the minimum wage should be abolished as well. BoP is shared, and I have refuted my opponent's argument and produced my own. Thanks again to Magicr for the debate. Sources:[1]: . http://mises.org...[2]: . http://www.fee.org...[3]: . http://factspluslogic.com...[4]: . http://mises.org...[5]: . http://www.unc.edu...[6]: . http://web.archive.org...[7]: Mazumdar, Dipak. "The Marginal Productivity Theory of Wages and Disguised Unemployment. " The Review of Economic Studies 26.3 (Jun, 1959): pp. 190–197[8]: Brozen, Yale. "The Effect of Statutory Minimum Wage Increases on Teen-age Employment. " Journal of Law and Economics, Vol. 12(April 1969): pp. 109–122[9]: . http://www.nd.edu...[10]: . http://mitpress.mit.edu...[11]: Smith, Adam. "The Wealth of Nations": Chapter VI: Of The Component Parts Of The Price of Commodities. [12]: . http://www.investorwords.com...[13]: Assuming that X is positive, X>0, . http://dictionary.reference.com..., Definition 23[14]: . http://econlib.org...[15]: . http://econlib.org...[16]: . http://www.wisegeek.com...;