Minimum Wages Laws Having Economic Effect Should Be Abolished

I agree to your definition, but reserve the right to challenge any should I choose to do so. I will start by refuting my opponents contentions then move onto my own. "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. " You make the assumption that higher wages result in higher prices, but just the opposite is true. In a competitive free market businesses cannot afford to raise prices or else they lose consumers. To compensate for an increased wage businesses will have to lower profits or else risk failure altogether. "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. " Thank you for providing me with my first contention RoyLatham! The idea that automation causes unemployment is one of the most repeated economic fallacies still around today. I quote a section from Henry Hazlitts "Economics In One Lesson" "Suppose a clothing manufacturer learns of a machine that will make menï¿½€™s and women s overcoats for half as much labor as previously. He installs the machines and drops half his labor force. This looks at first glance like a clear loss of employment. But the machine itself required labor to make it; so here, as one offset, are jobs that would not otherwise have existed. The manufacturer, however, would have adopted the machine only if it had either made better suits for half as much labor, or had made the same kind of suits at a smaller cost. If we assume the latter, we cannot assume that the amount of labor to make the machines was as great in terms of payrolls as the amount of labor that the clothing manufacturer hopes to save in the long run by adopting the machine; otherwise there would have been no economy, and he would not have adopted it. So there is still a net loss of employment to be accounted for. But we should at least keep in mind the real possibility that even the first effect of the introduction of labor-saving machinery may be to increase employment on net balance; because it is usually only in the long run that the clothing manufacturer expects to save money by adopting the machine: it may take several years for the machine to ï¿½€œpay for itself. ï¿½€ï¿½ After the machine has produced economies sufficient to offset its cost, the clothing manufacturer has more profits than before. (We shall assume that he merely sells his coats for the same price as his competitors and makes no effort to undersell them. ) At this point, it may seem, labor has suffered a net loss of employment, while it is only the manufacturer, the capitalist, who has gained. But it is precisely out of these extra profits that the subsequent social gains must come. The manufacturer must use these extra profits in at least one of three ways, and possibly he will use part of them in all three: (1) he will use the extra profits to expand his operations by buying more machines to make more coats; or (2) he will invest the extra profits in some other industry; or (3) he will spend the extra profits on increasing his own consumption. Whichever of these three courses he takes, he will increase employment. In other words, the manufacturer, as a result of his economies, has profits that he did not have before. Every dollar of the amount he has saved in direct wages to former coat makers, he now has to pay out in indirect wages to the makers of the new machine, or to the workers in another capital-using industry, or to the makers of a new house or car for himself or for jewelry and furs for his wife. In any case (unless he is a pointless hoarder) he gives indirectly as many jobs as he ceased to give directly. " Not only does automation increase employment, but it also increases purchasing power allowing consumers to buy more product with less money. By my opponents own admission the minimum wage increases a move toward increased automation. I say cheers! 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. Who ever said minimum wage laws cure poverty? They merely help workers support themselves. As I mentioned before increase wage come from profits so the actual amount of a minimum wage should be high enough to help workers support themselves, but not high enough to entirely destroy profits. 4. Merely stating alternatives is not a contention, but nevertheless minimun wage laws might spur productivity unlike welfare programs. If employees can get paid more hourly for their work, they work harder. Minimum wage laws also decrease inefficient government spending for societal welfare programs or regulatory agencies since these laws are easier to enforce and administer. Let's not forget that minimum wage laws to do not create a cycle of dependence as workers must still work to earn their salary. Clearly we can see that minimum wage laws have beneficial effects by increasing automation, which in turn increases employment and purchasing power. It also is more effective at dealing poverty then other government "solutions. " Minimum wage laws help people provide a stable home for many families and help workers receive fair pay.