On the compulsory minimum wage

First, I would like to point out that my opponent's third contention is reliant on his second. Second, I would like to acknowledge that his debate refers to the existence of a compulsory minimum wage in general; however, I will accept his interpretation of the debate. Now, to his case for a compulsory minimum wage: 1. Bargaining Power My opponent asserts that in most cases, the advantage of bargaining power lies in the hands of the employers. This, however, is not true. In the same way that an employee is reliant on an employer for income, an employer is reliant on an employee for labour [1]. Because anti-trust laws exist in the United States [2], and pro-labour union laws such as the Wagner Act exist [3], bargaining power most often shifts towards the employees rather than the employer. So, my opponent's first contention is based on a false premise. 2. Cost of Living A minimum wage is not necessary to ensure that the employee can recieve wages necessary to meet the cost of living. a. Because the minimum wage law only outlaws jobs that drop below its standard [4], the employees are actually worse off than before. Being unemployed generally earns an individual less than being employed on any wage [5]. b. In addition to that, wages cannot drop below the "natural" minimum wage [6]. 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 [7]. c. 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 [8]. So, in a free market, the only cause for the high poverty levels described in my opponent's third argument would be unemployment, which is caused by the minimum wage (see my first round arguments, which have not been directly refuted). 3. Civil Unrest/High Crime Rates Results in Heavy Costs When we now apply my opponent's third contention, it favours the absense of a minimum wage, rather than a call for its existence. This is because the minimum wage outlaws jobs, causing unemployment and therefore poverty. THE CON CASE 1. The Business Cycle "Deflation" here means "a decline in general price levels" [9]. "Aggregate demand" of a product here means "the sum of all personal consumption expenditures, business expenditures, and government expenditures in a particular time period" [10]. Deflation occurs naturally due to market changes in supply and demand, whether because of market changes or because of monetary activity [11]. Regardless of the specific cause of deflation, natural or artificial, it causes nominal prices to decrease. Because "the produce of labour constitutes the natural recompense or wages of labour" [12], the nominal value of wages drops along with the nominal value of prices. When this nominal value drops below the nominal value of the minimum wage, the job is eliminated from practicality in the private sector. This unemployment then creates a greater deflation, as this individual must now consume considerably less than before. So, the minimum wage intensifies the business cycle by creating more deflation in times of deflation. Had there been no minimum wage, wage levels would be able to fluctuate naturally with price levels to a much greater extent, as wages would be able to drop below a minimum wage to adapt to price levels without worsening the problem to the same extent. 2. The Minimum Wage Trilemma If a minimum wage is lower than a job would otherwise pay, then it has no effect. If a minimum wage is higher than the economic value of a job, then it eliminates that job from economic feasibility. If a minimum wage is higher than what a job would pay, then inflation occurs until the wages return to a level above the minimum wage. When a minimum wage is set, most jobs fit into the first category, many jobs fit into the second category, and the rest fit into the third. Because of the nature of the trilemma, the minimum wage can only have a negative effect. 3. Economist Consensus In 1978, approximately 90% of economists agreed that the minimum wage overall had negative economic effects on low-skilled workers [13]. While major economic studies have tried to frame the minimum wage as harmless or even beneficial, The Economist concludes that: "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" [14]. Two economists, one the Senior Economics Professor at The University of Chicago, the other is the "Associate Director in the Division of Research and Statistics at the Federal Reserve Board", have studied the effects of the minimum wage for almost two decades and conclude in their collaberation entitled "Minimum Wages" that: ". .. 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" [15]. So, a majority of economists agree that the minimum wage causes unemployment for poor workers, therefore increasing poverty. When we apply my opponent's third contention and his second potential additional contention, this concern is significant enough to VOTE CON. 4. Unemployment "Employers will hire workers if the revenue resulting from the workers' labor exceeds the costs of hiring and employing that labor" [16] is a basic fact of economics. Assuming that the minimum wage is higher than the nominal value of a field of work, that field of work can no longer be hired. Because the fields of work that produce the least money are most often the fields of work that require the least amount of skills [17] [18], the minimum wage eliminates mostly the jobs of poor and otherwise unskilled workers. These workers have the least chance of finding new jobs [19]. This unnecessary elimination of jobs harms the productivity of a country, and therefore, its wealth. [1] The Wealth of Nations, Book I, Chapter VIII . http://econlib.org... [2] . http://www.consortiuminfo.org... [3] . http://en.wikipedia.org... [4] . http://www.investorwords.com... [5] Assuming that X is positive, X>0. . http://dictionary.reference.com... [Definition 23] [6] . http://econlib.org... [paragraph 15], top of paragraph [7] . http://econlib.org... [paragraph 15], middle of paragraph [8] . http://www.wisegeek.com... [9] . http://investorwords.com... [10] . http://www.investorwords.com... [11] . http://www.inflationdata.com... [12] . http://www.adamsmith.org... [first sentence] [13] . http://ideas.repec.org... (The article must be downloaded to view) [14] . http://www.nd.edu... [15] . http://mitpress.mit.edu... [16] . http://www.cato.org... [17] The Wealth of Nations, Book I, Chapter X, . http://econlib.org... [paragraphs 8-10, 12] [18] . http://www.capmag.com... [19] . http://www.heritage.org...