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Repeal Minimum Wage?





tony
Copying from http://www.faqs.org/faqs/libertarian/faq ....


What position do libertarians take on minimum wage laws?

Skilled, experienced workers make high wages because employers compete
to hire them. Poorly educated, inexperienced young people can't get
work because minimum wage laws make them too expensive to hire as
trainees. Repeal of the minimum wage would allow many young, minority
and poor people to work.

It must be asked, if the minimum wage is such a good idea, why not
raise it to $200 an hour? Even the most die-hard minimum wage advocate
can see there's something wrong with that proposal.

The only "fair" or "correct" wage is what an employer and employee
voluntarily agree upon. We should repeal minimum wage now. [3]



I have always been a big proponent of minimum wage. now, after reading this, I am really starting to think minimum wage is bad. what do others think?
MaxStirner
As a social libertarian I would of course agree that minimum wages have no place in a laisse faire economic system. Having said that, it is important to remember that such a repeal is not a stand-alone decision; if one wants to implement a truly free-market economy a la Murray Rothbard (Man, Economy and State) then there is a lot to be done and picking and choosing just a few items that seem opportune will not be helpful and might very well tip the scales even farther in the wrong direction.
Here in Germany, one of the last West-European nations that does not have a minimum wage, the battle is on and this will probably be a major item in the 2009 elections. At the moment all employees/workers who do not earn enough to reach a minimum income (a bit below 1.000€ net) are subsidized by the state. This has become rather expensive as wages have stagnated or even diminished while cost of living rises, so many politicians here argue that even a moderate rise in unemployment might be better that indirectly subsidizing companies in order to keep the jobs from moving to eastern Europe or Asia (although it is obvious that unskilled labor will move anyway since even subsidies cannot compete with low labor costs elsewhere.).
So my answer in an imperfect world would be: establish a minimum wage which allows the person an income one can exist on, rather than attempting to keep jobs in the country which will migrate east anyway. If nothing else, it would at least help prevent social unrest, something quite few people here see as almost unavoidable.
kerryworkman
tony wrote:


It must be asked, if the minimum wage is such a good idea, why not
raise it to $200 an hour? Even the most die-hard minimum wage advocate
can see there's something wrong with that proposal.



Lets take it to the other extreme, why not pay your employees $.10 a day for unskilled labor. If you could get away with it, wouldn't you? True, it is not practicle, and you would be hard pressed to find anyone willing to work for that, but it is just as much of a stretch as raising minimum wage to $200/hr.
MaxStirner
kerryworkman wrote:
tony wrote:


It must be asked, if the minimum wage is such a good idea, why not
raise it to $200 an hour? Even the most die-hard minimum wage advocate
can see there's something wrong with that proposal.



Lets take it to the other extreme, why not pay your employees $.10 a day for unskilled labor. If you could get away with it, wouldn't you? True, it is not practicle, and you would be hard pressed to find anyone willing to work for that, but it is just as much of a stretch as raising minimum wage to $200/hr.


Although defining a minimum wage is difficult, I believe it's doable. Let us take the low end first (0,10$/hour):

Why are you willing to establish a minimum wage at all? First, in all probability because you would like to ensure that the average unskilled worker does not need to live in poverty. But even if a social conscience does not hinder you, there are a number of other reasons, such as needing at least moderately literate employees even in the unskilled sector of a post-industrial economy. Also, costs of civil unrest, crime-fighting, drug-abuse, ... can be much higher and more difficult to foresee or calculate. Finally, in an age of mass-production all workers are also customers to some extent.

Now examine the other extreme (200$/hour): Most of the reasons given above for paying a minimum wage have disappeared long before you get anywhere near a 200$ / work-hour. Above all, the law of diminishing returns will be working against you. For someone without enough means for food and housing, a minimum wage means everything, for those whose wages already allow him/her a decent livelihood, it is, in comparison, no more than a welcome perk.
deStructuralized
All I have to say is that what Max has written here is one of the most detailed, well-reasoned, and balanced analyses of minimum wage as it relates to Libertarianism I've ever read.

I've found that members of my generation (Y) tend to lean Libertarian, and when you couple that with the human propensity to latch onto a buzz-phrase or ideology and take it to an extreme without truly understanding the factors at play, you get a lotttt of people saying to "just get rid of it, 100% of the time."

I'm not well read enough on this particular subject to speak any further on it, but, I tip my hat to you.
MaxStirner
(->deStructuralized)
Tyvm for your kind praise Embarassed , I'm sure not to deserve it. Growing up in the 60ies, first reading Ayn Rand, later the rest of the libertarian / objectivist fiction and non.fiction, I was probably as radical and intransigent as all libertarians at that age tend to be. Perhaps it was age or the fact of spending most of my life in third world countries, that has led me to put more emphasis on the first word in "social libertarian".
macrat
It should cover the employee's basic needs, which is home/housing, transportation, medical fees, welfare for children (present or future), a portion of basic furnishings, food, basic clothing, education costs, and personal entertainment, all within a month's time, inside a rate of 20 or so hours a week. With the minimum wage stagnating and housing, education and medical costs rising, many have had to economize or sacrifice portions of what their wages should cover. Home downsized to a small condominium, personal enjoyment replaced with a second job. Some have turned to food stamps and welfare programs to make up for the differences. A few have had to turn to charities for food, clothing, even housing assistance.

Are you sure you want to repeal the minmum wage, forcing new workers to barely meet their basic living needs on their own?
ocalhoun
The one main problem I see is this premise:
'If people are cheaper to hire, businesses will hire more people'

If that premise turns out to be false, then repealing the minimum wage would only be a way to transfer income from the poorest workers to corporate balance sheets.



Better, in my opinion, would be to allow limited exceptions to the minimum wage.
Possibilities would be:
- Waiving minimum wage for people who have been unemployed for at least 1 year previously.
- Government work programs that provide a small wage along with food, shelter, all the basic necessities -- and which are required to accept nearly all applications for new hires. -- Working ONLY in fields that do not compete with private ventures - in order to prevent these work programs from growing and taking over the economy.
- Allowing private charities -- in a strictly controlled fashion -- to hire people below minimum wage.
- Or some combination of the above.
gandalfthegrey
Our cost of living, or the cost of operations of a business - goes towards a few things

1. Wages / Labour Costs
2. Inflation
3. Rent / Interest on Investments
4. Taxes

Instead of getting rid of the minimum wage, I think we should impose limits on wealth. Our system is flawed in that a few are becoming so ridiculously wealthily, while others are struggling or starving.

Is it a recipe for disaster and future unrest having 20% of the population controlling 80% of the wealth.
ocalhoun
gandalfthegrey wrote:
Our cost of living, or the cost of operations of a business - goes towards a few things

1. Wages / Labour Costs
2. Inflation
3. Rent / Interest on Investments
4. Taxes

?

How is inflation the #2 cost?
It has been uncommonly low lately, and since most companies, most people, and even the US government are highly in debt, inflation's erosion of the debt should more than compensate for inflation's erosion of dollar-numerated assets.


Kinda iffy about #4 as well... that depends on exactly whose expenses you're talking about. Many (if not most) large corporations pay little or no taxes, thanks to tax law loopholes*, international accounts/operations, and creative accounting. (Usually perfectly legal as well, though they do sometimes throw a little fraud in there as well.)


Now... I wonder... How would expense #1 change if executive** pay was reduced, rather than reducing only minimum wage pay?


*Loopholes that, of course, have nothing to do with the army of lobbyists they maintain, or the campaign donations they give... nothing at all.
**By which I mean all high-level executives. CEO's are not the only ones who are overpaid.
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