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Jul 24, 2009

Minimum Wage Prosperity

Suddenly, McJobs are Good (Link is stale)
07/24/09 - Blogs.DailyMail by DonSurber

[edited] Labor union officials and their handmaidens in Congress, including former congresswoman Solis, derided any increase in employment under a Republican president, calling them "McJobs". They derided them, even if they were above minimum wage, because new jobs do not pay as much as old jobs.

Now that Obanomics has turned a mild recession of 7.6% unemployment into 9.5% unemployment, in just 4 months, we have Solis praising a 70 cents an hour increase in the minimum wage as an economic stimulus.

Solis says that raising the minimum wage to $7.25/hour is going to help the economy and increase employment. I hope she doesn't mean it will help the economy while decreasing employment. Or, hurt the economy while increasing employment.

Where are the studies and information about the ideal minimum wage? Maybe the sky is the limit. Why not set the minimum wage at $50/hour? That would send funds to poor people while lifting the economy, right? (sarcasm)

The minimum wage is just another way of saying: "Fire that person unless you can pay them $7.25 per hour. We would rather that they be out of work, than work for less than we think is polite."

The government cannot help people by restricting their choices.

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A Minimum Wage Equals Minimum Jobs
07/30/09 - Reason.com by John Stossel

[edited] Politicians declare that workers should get a raise, and people assume they will actually get it. But, government can increase wages by decree only if employers set wages arbitrarily. You have to believe that employers are arbitrarily stingy.

Say an employee produces $4 of value each hour after all business expenses, and the employer offers just $2. Another employer will hire him away for $3 or more. Competition drives wages up to the the worker's level of productivity.

Several years ago, Santa Monica, CA made the town a workers' paradise by requiring everyone to be paid at least $12.25 an hour. Restaurant owner Jeff King complained to me, that the law would "dry up the entry-level jobs for just the people they're trying to help."

He was right. It's why gas stations no longer hire teenagers to wash your windshield. Wage minimums tell employers: "Don't give a beginner a chance." The people of Santa Monica later woke up and overturned the "living wage."

If minimum-wage advocates really believe wages are set arbitrarily, why do they favor only a $7.50 or $14 minimum? Why not $100? At those levels, even a diehard interventionist knows that workers would be hurt. But, the principle is the same at lower levels. Wages follow productivity, not whim. If the minimum wage is set above productivity, those workers will be harmed.

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The Minimum Wage Explains Some Job Losses
03/13/11 - EconLog by David Henderson

Tyler Cohen [edited]:  Many workers are paid very close to what they produce. Their productivity may even be lower than the cost of training, employing, and insuring them. Firing these employees is tough for the workers, and maybe bad for society at large, but it doesn't much reduce profits. It's a cold, hard reality.

Why can't unemployed workers find new jobs for less pay, especially now that business is recovering?

David Henderson [edited]:  The explanation is the minimum wage. On July 24, 2009, it increased by $.70 to $7.25 an hour. The real increase was about 12% when adjusted for inflation.

A 10% increase in the minimum wage causes a 1-3% drop in the number of jobs held by people age 16 to 24 ("youths"). A 12% increase (as above) would cause job losses of 190,000 to 570,000 among 16 million youths. That is from the increase. The previous minimum certainly kept many others from being employed.

If your productivity is low, or the costs of training you are high, then you won't be able to find a job at the minimum wage. This is true even if you know inside yourself that you could learn a job and become productive in a short time.

The government allows you to get training by paying a school for six months, while you may earn nothing. But, it will not allow a business to "exploit" you by paying you a small wage while you get practical training on the job for six months.

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Low Skilled Workers Are Not Helped
07/26/09 - Cafe Hayek by economist Don Boudreaux

[edited] Uncle Sam has hiked the minimum wage, raising the hourly cost of employing low-skilled workers by 10.7%. This is always unwise, and more so when unemployment is rising.

Say that Uncle Sam passed a minimum-salary statute for economists, requiring that every employed economist be paid at least $300,000 annually. I would, of course, love to earn this much by teaching economics. My more accomplished colleagues would benefit, such as Tyler Cowen and Walter Williams. But, I would lose my job.

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Using the Minimum Wage to Hamper Your Rivals
07/24/09 - Econlog.Econlib by David Henderson

[edited] Forty years ago, politicians who pushed for the increased minimum wage did not hide their motives or their knowledge of who the victims would be.

In a 1957 Senate hearing, Senator (and future President) John F. Kennedy of Massachusetts said:

Having on the market a rather large source of cheap labor depresses wages outside of that group, the wages of the white worker who has to compete.

When an employer can substitute a colored worker at a lower wage, it affects the whole wage structure of an area, doesn't it? There are, as you pointed out, hundreds of thousands of colored workers looking for decent work.

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Increases in the Minimum Wage Kill Job Creation
06/15/10 - HotAir by Ed Morrissey

[edited]  The Center for Freedom and Prosperity offers this 4:25 video about the destructive results of the minimum wage.

Democrats increased the minimum wage in steps from $5.15 to $7.25 per hour. They claimed to be helping the young and poor.

The minimum wage did no direct harm when it was less than the usual wage for entry-level jobs. When the minimum wage rose above that wage, employers stopped offering those entry level jobs.

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Exploiting the Minimum Wage
07/24/09 - Open Market by Ryan Young

[edited] Young people with little or no work experience may not be able to offer $7.25 per hour worth of productivity. No wonder so many of them are having trouble finding summer jobs. The law says that they have to be paid more than they are worth [if they are hired]. Wage floors reduce the number of jobs.

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Raising Rival's Costs
7/24/09 - Marginal Revolution by Alex Tabarrok

[edited] Some employers benefit from an increase in the minimum wage because it raises the cost of labor for their rivals. This is why unions have typically been in favor of the minimum wage even when their own workers make much more than the minimum.

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