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Originally Posted by Yakk
Politico and Alan, those are not true statements.
There is not a fixed pool of money that can be spent on the minimium wage jobs. Companies can rebudget, reduce profits, increase or decrease service to areas, hire out from other companies gaining more productive workers. Any economic model which claims that there is a fixed pool of money to hire minimium wage workers, without substantial and massive documentary, theoretical, and statistical support is a dishonest one.
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From an economic standpoint, my statement was 100% true. There are volumes of empirical evidence showing this. It's not about there being a fixed amount spent on low wage workers, it's about companies having fixed budgets. If at a certain pay scale comanies demand X labor, when the cost of labor goes up, they will demand less. Its the same as any other good-prices rise, demand falls.
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Alan, there are scenarios in which an increase in minimum wage would not reduce consumption of minimium wage employment.
A minimium wage being set acts like the government setting a monopoly price. Depending on the utility curve of employing minimium wage workers, it is possible that employment might not go down. This isn't all that likely -- but it is possible.
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It has nothing to do with utility, it has to do with marginal costs. And if you raise minimum wage, you raise marginal costs of each worker. Now if the minimum wage level still has the MC lower than the MVP (marginal value of production) of each worker, you might be right. But that would never be the case, because MC should always equal MVP (or be as fractionally close as possible). So raising MC would put it over MVP.
And it doesn't work like a monopoly, a minimum wage generally sets up a pure competition model, because all firms become price-takers at the minimum wage level.
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It is also possible that it would reduce employment, but significantly less than the % increase in the minimium wage. Which would mean fewer people employed, but more money going to the poorest parts of the nation.
Which "frees" up the now unemployed for government assisted education, ideally, in order to increase their job prospects.
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Again, neither of these statements disproves what I said, which was simply that raising the minimum wage lowers employment. And also, I'm sure people laid off due to minimum wage increases are happy to know that those who still have jobs are making more.
And your whole idea about freeing up people for gov't programs just seems ridiculous to me. You might as well have said it will give agriculture a boost, as it causes so many people to have food stamps to spend on foodstuffs.
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Setting a higher minimium wage is an attempt to say "any job less than this in value is a charity case, not a livelyhood".
It is true that an arbitrailly high min wage would be disasterous. The same is true of an arbitrarially low min wage.
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How can you have an "arbitrarilly low" minimum wage? A minimum wage would never go lower than what market forces would demand, which wouldn't be arbitrary. It would be what the job market in that area could bear.
And the problem isn't even really minimum wage work. The percentage of single-earner families that rely upon minimum wage is miniscule. Minimum wage laws always get a lot of uproar, but usually they just end up being much ado about nothing, because they don't affect the lowest elements of society. Minimum wage laws have the greatest effect on middle-class teens. Unless you advocate a much-higher "living wage" which would be better targetted at lower-income groups, but would also have catastrophic effects upon the economy.