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Originally Posted by alansmithee
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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There exist goods for which a rise in prices causes a rise in demand. They are not common. However, your universal statement that for all goods a rise in price causes a drop in demand is not true.
If you look at the sellers of minimium wage labour as a block, the total money going to them can vary with the price of minimium wage, depending on the elasticity of demand of minimium wage labour. Setting a minimium wage is a form of monopoly pricing -- and quite often it is benefitial for a monopoly to price the good they are selling (in this case, minimium wage labour) higher than a free, competative market would.
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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.
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This assumes there are no "income effects" from changing the cost of labour.
You do realize that almost every little economic maxim you have memorized has a metric tonne of "the following things must be true in order for this model to hold", right?
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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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I am talking about the selling of labour by people, not the purchasing of labour by firms. Setting the minimium wage is a monopoly pricing act on the part of labour.
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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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People who are doing minimium wage labour do not have free time to learn new skills. If you had government programs that trained the unempolyed for higher skilled jobs, having fewer people do minimium wage jobs and training the rest for higher productivity jobs makes sense.
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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.
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If you set the minimum wage at 0$/hour, this would be pretty damn low. It is possibly nobody would work for that much. If you prefer, I could state "the legally required minimium wage" instead of "minimium wage". Given that this thread is about the US federal government setting the "legally required minimium wage", I figured saying "minimium wage" would be clear enough. I apologize if you did not understand what I meant.
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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.
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Because the lack of middle-class teen labour would have a catastrophic effect on the economy?
Changing the minimium wage should tend to increase the price of non-minimium wage labour. If only to allow companies to hire and keep better than average workers, or more qualified workers, or to hire people to do less enjoyable jobs...