Does raising the minimum wage really do anything to improve the lives of the common worker?

Question

I believe that the free market should determine wages like it determines prices.

I for one only worked for minimum wage for about a month when I was in high school. I got off my duff and found a job that paid more and I was in a tiny town with a very limited number of jobs. By the way where the Feds get off telling a buisness owner what they should pay their people any way. How about if we pay people what their work is worth.

Answer 1

A simple question that is deeply tied to economic theory. In classical economics (Adam Smith) the invisible hand of the market determines everything. That is a very basic definition, feel free to read Wealth of Nations for yourself.

In practice, firms have shown they will maximize profits at the expense of workers. Not all firms, but many. This can lead to a stagnant economy in which products and services are out of the reach of the masses. Well, who will then purchase the products and services that keep the economy going? Henry Ford illustrated this by paying workers higher wages. He not only got the best workers, but they bought Ford vehicles as well.

On the flip side of the equation, incresing the min wage by too much, can increase inflation. Basically everyone has more money, but it is worth less per unit. Think of all those countries where it takes a truckload of currency to buy a loaf of bread.

It is a balancing act. Economist are constanly debating where this middle point is located.

Answer 2

Yes, the minimum wage helps "common" workers. It tells the free market that there must be boundaries & a minimum amount of fair distribution of the profits gained from workers' work.

The free market pushes wages down. And down. And down. As far as it can. The free market doesn't care if you can't live off your wages, or that you have a job at all. Or whether you are a child, or a prisoner, or have a family to take care of, or handicapped, or whether the work you do causes black lung or asbestosis or other fatal diseases. Read about the Great Depression & see what unfettered market forces are capable of.

It seems only logical that there should be a force pushing the other way, making sure that even the working poor get a decent share of the fruits of their labor. We can't expect justice, fairness, ethics or perspective beyond profits from the free market. There has to be limits & no means other than federal statute has proven effective so far in reining in the excesses that the free market is capable of. The free market can do great things, but sometimes it needs mandated boundaries so that it does not cause harm.

Having an gigantic, insurmountable chasm between the rich and the poor is the kind of thing history books teach cause crime, chaos and revolutions. If we like this country of ours the way it is, it's important to take a look around & make sure that most people aren't being trapped in poverty or "wage slavery." Apathy can turn our democracy into a plutocracy in no time at all, I'm afraid. And having no minimum wage means the end to the "land of opportunity."

Answer 3

No, the common worker doesn't work for minimum wage. Does it improve the lives of the workers who do? Yes, very much. Look at it on a percentage basis. If you are working for $5.50 an hour, 20 hours per week, and you get a $0.35 raise, that's an increase of 7 dollars per week, or one McDonald's double cheese burger every day. If you're trying to live on a wage like that, that's huge. The free market does determine wages like it determines prices. For example, the free market determines that a price is set above it's cost to the distributor. Nothing is sold below cost, or your business is losing money with every sale. The same can be said of the worker. The government has determined the absolute bottom a worker can earn and still survive (eating every other day), and has set the price of those workers at a minimum. Just like consumers would gladly exploit businesses who sold goods under cost until they went out of business, companies would gladly exploit workers who worked for too little until they died. It isn't in the national interest to let that happen.

Answer 4

Depends on when it is attempted and by how much. The a assumption that it is necessarily inflationary and will lead to a significant job loss at lower wages levels are not always correct.

In this current market where we are approaching full employment the demand elasticity for labor should be rather inelastic. Low wage workers can not in the short run ask for and get a raise and will have to wait for market forces to balance. Employers in the short run hold all the cards in this game and it is in their best interest (in terms of maximizing the marginal product of their investment) to pay the lowest wages possible.

In this current market we could probably get away with small and well timed increases to minimum wages. Especially since they haven't kept up with inflation, so that in real terms the lowest paid have been suffering wage decreases for the last eight years.

Answer 5

Raising the minimum wage is harmful to all people, but it is most harmful to the poorest. Those artificial, forced wage expenses will be passed down from the businesses to the consumers.

The products and services most affected are those that serve the lower end of the financial spectrum, like fast food. So a minimum wage worker gets a pay increase, but then everything in their world costs more. It doesn't affect the rich as much because their world is not filled with minimum wage industries. They eat in fancy restaurants as opposed to McDonald's.

And, of course, this doesn't even take into account that at least some businesses would be forced to go with fewer workers to offset their increased payroll. Many employees would also be shifted to part-time as the employer tries to get their payroll expense back within budget.

So let's summarize the effects of a minimum wage increase for the minimum wage worker. 1) Pay increase offset by increased cost of most everything he does. 2) Many of them lose their job, lowering their pay to the ultimate minimum wage of zero. 3) Many more will be shifted to part-time, making less money overall than they made prior to the "increase" and many will lose the other benefits associated with full-time employment.

Nice plan. As usual, the people who propose this fail to take into account the real world. They believe you can make an artificial change to the free market without the free market responding. Every action causes a reaction.

Answer 6

Raising the minimum wage won't really solve the problem (This coming from a hardcore liberal!)

A lady I work with has a son who dropped out of High School about a year ago. He got his first full time job making 9.75$/hr. This was without a GED, it was without any special skills. He's washing semi's at an interstate rest area.

There are jobs out there that pay more than minimum wage if people look around. They might be harder than your average minimum wage job.

I agree that the free market should determine wage as it determines price. However, that said, if we're going to get serious about letting free market determine wages, then we need to get serious. That involves farmers. Farm subsidies need to go and we need to be uniform across the board on allowing free market to determine wage/price or it won't work.

Answer 7

Nope, at least in Mexico it does not. Raising the minimum daily wage of like 14 dollars, only means that everything else will increase as well. The minimum wage is revised every year and if it increases by 8% that means groceries will begin to increase until they are like 50% per year more than you used to pay, the same goes with water, electricity, gasoline which increases by 2% every month. Nope, what I used to buy at the beginning of the year with 500 pesos will cost me around 700 by the end of the year.
The need to work is so strong and the good stable jobs with benefits are so few, people work without benefits and do not complain because if they do, they are let go and someone else will certainly take their place before you can say Jack Sparrow.
Free market rules by the law of demand and supply. There are more people willing to work for less, than there are good paying jobs.

Answer 8

Prior to the enactment of the first minimum wage law, young blacks had higher employment rates than whites. After the law, that changed dramatically, with a huge negative impact on the undereducated and unskilled. With no minimum wage, unskilled, undereducated workers could get some money while learning skills and business acumen.

But a business cannot pay unskilled and uneducated people more money than they're worth. So they lost jobs. It has a very negative effect. This has been what is happening ever since.

Is there any Constitutional authority for the government to be intruding on private enterprise like this?

Answer 9

I think it's great for lower class workers. However, I think it does conflict with the wages of those who typically earn more. It could have a negative impact on businesses offering "competitive wages" by lowering the overall wages for everyone. Most people who earn good money, worked hard to get there. A national raise could upset everything. People should be paid, based on the type of labor they're doing and their geographical location. I realize this would happen in a perfect world, but why should someone get paid 7.50/hr. minimum to file their nails all day?

Answer 10

i think there should at least be a minimum but in saying that, i think there is more of a free market at work here...take for example illegals....they are doing the minimum wage jobs for much less than the legal minimum wage and thus taking the jobs away from those workers (high schoolers, new to the job market, etc.) so would a higher minimum wage help, probably not since very few companies adhere to it.