Friday, January 7, 2011

Case study: minimum wage laws

"The higher the price of something, the less people will take of it; and the lower its price, the more people will take of it? The law of demand applies to wages, interest and rent because, after all, they are the prices of something... [because of minimum wage increases in 2007] Sea International moved its operation from Samoa to a highly automated cannery plant in Lyons, Ga. That resulted in roughly 2,000 jobs lost in Samoa and a gain of 200 jobs in Georgia."
Let me be clear: I'm not concluding anything, or trying to tell readers (if any) that increasing minimum wage is always a bad idea. I don't know. I _am_ pointing out a case study to the effect that it's stupid to think that increasing the minimum wage by $1 an hour is the same thing as increasing income of the poor by $1 an hour. Unless they are underpaid in actual fact (i.e. they are actually worth more to the business than they are currently being paid, with their employer pocketing the difference), increasing the minimum wage will just result in their unemployment.
If you think about it, that makes minimum wage laws a pretty blunt policy instrument, since it has no way to account for actual worker value. If you set minimum wage at level X, you are making life better for some unknown number of people who are worth X and being paid less than that, and much worse for some other unknown number of people who aren't worth X and are now doomed to permanent unemployment unless their skills can be somehow upgraded.
Be pretty if you are,
Be witty if you can,
But be cheerful if it kills you.
If you're so evil, eat this kitten!

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