What would happen if we did away with "minimum wage" and let the economy run its course?

Question

What do you think the effect would be...for better or worse?

Answer 1

Not much would happen to economy. The labor market already pays above minimum wage for most jobs.

What would happen if the government mandated that no restaurant could sell a burger for less and $0.60? Would that have a big impact on burger prices? Not really. $0.59 is probably about the lowest you'll pay for a fast food burger and that represents a small percentage of total burgers sold. So, you'd see that price go up $0.01. Would that have an impact on the price of burgers in the $1 - $6 range? Not likely. Would it cause less burgers to be sold? Again, not likely.

Now, let's say the government mandated a minimum price of $8 for burgers. That would drastically reduce the number of burgers sold and a high percentage of burgers would be priced at $8. If, at some point in the future, the government removed that minimum price, then you would see a drastic change in the burger market as companies would rush in with lower prices.

However, take away the $0.60 minimum price and you wouldn't see much change at all.

The minimum wage, at it's current level, is more like the $0.60 minimum burger price than the $8 minimum price.

Answer 2

Look at other (third world) countries or our own history. Sweatshops, child labor, unsafe working conditions, etc. (several issues together, I know.)

Goods and services are produced more cheaply but the average quality of life decreases. Even if you yourself gets rich (Rockerfeller, Carnagie, Ford, Gates, etc) do you want to be surrounded by hungry, miserable (angry?) people. It that why those guys gave away so much money towards the ends of their lives?

There are some efficiencies to be had when more niches are filled. Maybe a plant manager would pay a college student to study books all night long to provide some level of security. The student gets a few bucks for something he would have (should have) been doing anyway. But not $5.15 that he would have paid for a full-time guard.

But those cases are rear. There seem to be enough desparate people that some would take 2 or 3 dollars an hour. Some certainly do illegally, but it would be more widespread without a minimum wage.

We have de facto minimum work standards (show up, mostly sober, do work, don't steal, show up the next day). Why not have minimum payment standards?

When I earn more money, I save it. When the working poor earn more, they mostly spend it. So it circulates in the economy and helps increase economic activity and opportunity.

Answer 3

Minimum wage is a bench mark normally set by the law of the land...

In real day to day trade / transactions it may not be followed even
now....

Eventually and always demand and supply equal them self...

SO the paid wage depends on the negotiated rate between
job provider and job seeker..As such in this negotiation min wage
will be a bench mark.

Minimum wage if excessivly imposed out price an economy or
a working section of the economy (eg EUROPE is outpriced
by lower wage economy like taiwan etc ... or Jobs here (call centers and soft ware are going to cheaper workers where
as plumbers and CPA are not so easily replaced (section of economy))

So in effect minimum wage really help industry in an economy
to stay competitive if loosely enforced and if over zealously
enforced out price an economy ....

It does nothing for the work force as people will work for less if the need is there...and job providers will pay more if need is there..

Answer 4

If you did away with the minimum wage at the same time you "completely" sealed the border, that would be fine. At first jobs would still pay little until the labor market began to dry up - then wages would rise to the respectable level. As long as we continue to let millions in here illegally and even some legally, there will be an abundance of potential labor, and that labor will continue to be undervalued. Also, as unskilled labor came to be paid sufficiently, the rest of us would enjoy tax cuts as the welfare state would simultaneously be diminishing. I'd say it would be for the better.....definitely.

Answer 5

I live in a third world country, for the unemployed and poor, it is already considred lucky when you land a minimum waged job. Supplies of jobs is not enough to satisfy the demand. To get by, people take up informal jobs, which actually pays lower than the minimum wage.

for me, i belive removing the minimum wage, will allow firms to hire more workers, giving jobs to more people. Employment has other benfits besides wage, it empowers the people. and liek what was said above, lower wage means less inflation

Answer 6

Lower unemployment, because factories and other employers would have more motivation to hire unskilled labor that would otherwise not be worth is or they would have mechanized.

Deflation, too. Lower prices & lower wages = more valuable money = deflation.

Answer 7

it would be worse at first because people would have to actually work instead ofrely on the fact that they will get paid. i think the market woudl stabilize eventually. peopel would start getting paid for what they are worth and not what someone says they are worth. it would be harder for epopel to move up form the bottom though.

Answer 8

The truth is it would eventually fix itself.

The less people get paid, the less they can spend. The less money people spend, the less money businesses make. The less money businesses make, the less money they can pay.

wait a second. This seems to lead to the exact opposite of what I originally introduced. Hmmm

Answer 9

good question. depends if you ask kim beazley or peter costello. ultimately it would depend on market conditions and the economy so no definite answer i believe. Might want to see if any experienced economists can comment more

Answer 10

You'd see more people moving onto the welfare rolls, as they get more money by not working than they would if they did work.