From: pjm@anegada.sps.mot.com (Patrick J. McGuinness)
Subject: Re: Minimum wage: balancing job losses vs pay increases
Organization: Motorola Inc., Austin TX
Date: Sat, 25 Jul 1992 22:25:42 GMT

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.

The analysis by the AFL-CIO's economists on the effects of the minimum
wage increase in 1989, from $3.35 to $4.50, estimated that the
rise in the minimum wage would cost several hundred thousand jobs
(the estimates ranged from 100,000 to 500,000). It also marginally
increases the inflation rate.
In fact, almost all economists agree on that. 

>>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? I
>can't support the "jobs at any wage" position.

But you do apparently support having them be unemployed instead.

>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.

Nope. There is a negative impact there, albeit marginal.

>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.

And workers, like entry level workers, that aren't fully productive,
get canned. Shifting of costs, while not a positive overall, will help some
individuals (capital-intensive or more skilled labor).
Unfortunately, the minimum wage hurts the unskilled
and entry-level workers who most need work.
>
>>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.]

Why is that? Becuase the negative consequences of the minimum wage
at that level would become so blatant that nobody could defend it.

>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.

The option of increasing productivity is already a necessity
to the company if they wish to become more competitive.  You have
shown that if the company was faced with a rising labor cost they
would react in a way that hurts either the company (eat costs), the
customers (increase prices), or the employees (lay people off).
Well guess what? You are right -- they *all* get hurt.

> In the mean time, the workers
>who actually *got* a raise have more money to spend.

The net effect of the law is a reduction in economic activity.

>>Jim Del Vecchio
>
>jking

-------
P. McGuinness
ObClintonRemark:  Just say no to Justice Mario!
Newsgroups: alt.politics.clinton,alt.politics.elections