- Capitalism and Alternatives -

minimum wages - sleight of hand

Posted by: Gee ( si ) on March 31, 1999 at 13:11:21:

In Reply to: Studies?.....2nd take-corrected) posted by bill on March 31, 1999 at 12:27:50:

What the interesting Levy study (i wont rubbish it, it is relavent - although its a surbey of opinions not actual effects) shows is that small businesses wont sack people because of a smsll increase in labor cost. It doesnt refute the earlier studies mentioned (thats mostly where I get it from) but does point out that demand is less elastic than assumed. In other words raising minimum wages a little bit doesnt result in mass unemployment, although it still has the effect of raising costs, prices and inhibiting hiring accross the board. Infact this last point is put forth by the Levy study, that bigger increases stop even small companies from hiring extra staff - which is not the intention (I hope) of minimum wage laws.

Labor Secretary Robert Reich fosters the misunderstanding by claiming that 40 percent of minimum-wage workers are the "sole breadwinners in their family." He does not mention that 57 percent of minimum-wage workers are single individuals, many of them teenagers or college students living with parents. Fewer than 3 percent of workers with wages below $5.15 are single parents.

Because total employment tends to grow (due to wealth creation) and because inflation (also influenced by state, ie the hand that giveth taketh away!) diminishes the real value of a fixed minimum wage, a moderate increase of the minimum wage does not prompt employers to fire millions of workers. Nevertheless, employment will be much
lower after employers have made their adjustments than it otherwise would have been.

In other words, minimum wage increases are a political slight of hand, hence they are never so audacious as to raise it to $10 an hour.


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