From: mfriedma@uucp (Michael Friedman)
Newsgroups: alt.politics.clinton,talk.politics.misc,sci.econ
Subject: Re: Minimum wage: balancing job losses vs pay increases
Date: 24 Jul 92 23:18:08 GMT
Organization: Oracle Corporation
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In article <1497@cogsci.ucsd.EDU> king@cogsci.ucsd.EDU (Jonathan King) writes:
>n9020351@henson.cc.wwu.edu (James Douglas Del-Vecchio) writes:
>>king@cogsci.ucsd.EDU (Jonathan King) writes:
>>>crisp@netcom.com (Richard Crisp) writes:
>>>>Minimum wages have the effect of reducing employment or increasing
>>>>unemployment (state it your preferred way).

>>>That's one effect.  The other effect is to raise wage levels for those
>>>who are working, which could (say) increase consumption and create new
>>>jobs.  One sentence on the topic is not a useful analysis of the
>>>situation.

Mind explaining why this would increas consumption?  After all, you're
just taking money out of one set of pockets - the people whose skills
are not worth more than the minimum wage - and putting them in another
set of pockets - the people who are worth keeping at a slightly higher
salary - and adding a bit of inflation to boot.  You aren't adding any
buying power to the economy so why should consumption increase?

>>It has no such effect.  It merely eliminates all jobs paying 
>>below the floor, with no change for the workers already getting the 
>>minimum or better.

>What?  As if you want to promote the creation of sub-minimum wage jobs
>in the economy, when you can't live on minimum anyway?  Sorry, but I
>can't support the "jobs at any wage" position.  I can't name a
>developed democracy that doesn't have some sort of wage regulations
>at the low end.

So you oppose sub-minimum jobs so strongly you want to make them
illegal?  This seems kind or unreasonable especially as many states
are moving to eliminate welfare for able-bodied adults without children.

>Further, wage inflation always used to be one of the big arguments
>against the minimum wage, but I see that you're denying this effect.

Well, he's wrong.  The key is the marginal benefit from adding extra
workers.  McDonalds won't just close.  They'll raise prices.  That
reduces demand.  So they fire some burger flippers.  That solves
McDonalds' provblem, but everyone else is paying a bit more for
hamburgers so the CPI goes up.  That's called inflation.  Needless to
say, everyone else wants more money to compensate, the CPI goes up
more, and the minimm wage is back where it was in real dollars.

>I wouldn't necessarily make this argument, but one could try to argue
>that minimum wages are another way to encourage businesses to increase
>per worker productivity.

So you want to put unproductive people on welfare?  That's loony!!

>>It would be interesting to see, if say you work for Burger Phlem,
>>for example, for $4.85/hr, if a minimum wage increase to $9/hr would
>>cause you to get a $4.15/hr raise, or if you would just get canned.

>Oh, please.  When has there ever been such a dramatic rise in the
>minimum wage?  [Answer: never, and it's obvious why not.] 

No.  But thought experiments with large changes make it very clear
that the posited benefits of small changes have no rational
underpinning.  

>But this
>does bring back the other point about what happens you raise the
>minimum wage: the company has a choice.  It can swallow the added
>cost, find some way to increase productivity to cover the cost,
>increase prices, or lay people off.  In the mean time, the workers
>who actually *got* a raise have more money to spend.

1.  How long do you think it takes to lay people off?  Not as long as
it takes for Congress to raise the minimum wage.

2.  Say you're right.  So what?  This money isn't being created out of
thin air.  It's coming from someone else.  Why is this redirection beneficial?

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Newsgroups: alt.politics.clinton,talk.politics.misc