Minus The Nemesis
A Collaboration of Some of the Finest Thought on Today's World


Thursday, May 11, 2006
S. 2725 by Hillary Clinton et al.

As I understand it (and I am no Hayek or von Mises), wages should be raised via production and not government interference. There is a myth that the minimum wage legislation raises the market wage (this isn't true). Once you raise the minimum wage, unemployment will soon follow. The reason being is that once the government sets a fixed wage price by raising the minimum wage (say for example $5.00), it's illegal to hire anyone at below that rate. Those that aren't worth that (i.e. less than the $5.00) don't have jobs. Some will try and compensate by charging more for the product and shifting the risen minimum wage to the consumer. It may work in a short run, but overall consumers will buy less of said product and the market takes a downward turn.

Because of this unemployment as a result of raising minimum wage, there is a need for a relief program (welfare). The problem with this is that if you set the minimum wage to $5.15 you have forbidden anyone to work 40 hours in a week for less than $206/week. The relief may have been set up to provide only $137/week which effectively blocks a dude from being gainfully employed for say $176/week when you can support him for $137/week for doing nothing. Dude's value of his services is gone. If you raise the relief, to $206/week then you have scum bags trying to collect off of doing nothing vice being productive. Suppose that someone is getting paid more than $5.15/hour at say, $6.00/hour ($240/week) they may look at that and say that for a $36/week cut, I could be getting paid by doing nothing at home. So, it turns into a situation where labor may be working for differences in the wages and production is affected by that.

All in all through the research I did I found that it's best to raise wages by increasing marginal labor productivity and that the government should perhaps "step off". I don't think that Hillary Clinton is doing something good here. While tying it in to the big bad government's salary (when they get a raise, so do you) is appealing to the people, it is effectively useless.

In the event that any of this is incorrect, and you are versed in economics (or you are in fact either F.A. Hayek or Ludwig von Mises), blast away! This was just my precursory research...if nothing else, use all the above for just that; your own research. I think that you will find in the long run it's still not a good idea.


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