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We should abolish the minimum wage to help the poor
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Abolishing the minimum wage would:
Why do people think that you can increase the price of something without affecting demand for it when it comes to the minimum wage?
Practically everyone agrees that when you increase the price of a good or service, people demand less of it.
If I'm selling apples for £1, and the next day the price is £1.05 for the same thing, doesn't it make sense that people will buy fewer of them?
Or if I'm selling houses - if the price is £250,000 for a given property one week, and has risen to £275,000 the next, the property being exactly the same, less people will be interested in purchasing it.
So, if I'm selling my labour for £5 an hour, won't there be fewer people interested in hiring me if I charge £6.30 without having made changes to my skills?
It seems obvious.
If you were going to pay £30 for a haircut in salon A or £50 for a haircut in salon B, and it would be the same haircut wouldn't you choose salon A?
Why then do people seem to think you can artificially (that is to say by government proclamation - a price floor, in this case - rather than by market forces) raise the price of labour from a free-market price to a minimum price without affecting the demand for labour?
It's one of the reasons that jobs go overseas, particularly those jobs that would be filled by unskilled or low-skilled workers - it just isn't cost efficient to hire someone to produce goods here for the minimum wage when you could pay someone just as productive a fraction of that amount in another country which also may have other cost-saving advantages (less regulation, lower taxes, etc).
It's not exactly rocket science, is it? The idea that people will buy less of something that's more expensive than it would be in a free market doesn't seem a complex one.
In the US, rises in the minimum wage as a percentage of the average wage have no real effect on college graduates, a noticeable effect on high school graduates and a substantial effect on those who did not graduate high school.
(Data source: 2012 Statistical Abstract of the United States, Table 627
www.census.gov/compendia/statab/cats/labor_force_employment_earnings.html)
Practically everyone agrees that when you increase the price of a good or service, people demand less of it.
If I'm selling apples for £1, and the next day the price is £1.05 for the same thing, doesn't it make sense that people will buy fewer of them?
Or if I'm selling houses - if the price is £250,000 for a given property one week, and has risen to £275,000 the next, the property being exactly the same, less people will be interested in purchasing it.
So, if I'm selling my labour for £5 an hour, won't there be fewer people interested in hiring me if I charge £6.30 without having made changes to my skills?
It seems obvious.
If you were going to pay £30 for a haircut in salon A or £50 for a haircut in salon B, and it would be the same haircut wouldn't you choose salon A?
Why then do people seem to think you can artificially (that is to say by government proclamation - a price floor, in this case - rather than by market forces) raise the price of labour from a free-market price to a minimum price without affecting the demand for labour?
It's one of the reasons that jobs go overseas, particularly those jobs that would be filled by unskilled or low-skilled workers - it just isn't cost efficient to hire someone to produce goods here for the minimum wage when you could pay someone just as productive a fraction of that amount in another country which also may have other cost-saving advantages (less regulation, lower taxes, etc).
It's not exactly rocket science, is it? The idea that people will buy less of something that's more expensive than it would be in a free market doesn't seem a complex one.
In the US, rises in the minimum wage as a percentage of the average wage have no real effect on college graduates, a noticeable effect on high school graduates and a substantial effect on those who did not graduate high school.
(Data source: 2012 Statistical Abstract of the United States, Table 627
www.census.gov/compendia/statab/cats/labor_force_employment_earnings.html)
(edited 11 years ago)
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Abolishing the minimum wage won't really help the poor though.
Theory isn't always directly transferable to reality, You can't read a book on plumbing or brain surgery and then know with certainty what to do in every practical situation. Surely it is the same for economic theory?
There are studies out there that say increasing the minimum wage would benefit the entire economy.
http://blogs.telegraph.co.uk/finance/jeremywarner/100023849/minimum-wage-should-be-substantially-raised-not-cut/
Theory isn't always directly transferable to reality, You can't read a book on plumbing or brain surgery and then know with certainty what to do in every practical situation. Surely it is the same for economic theory?
There are studies out there that say increasing the minimum wage would benefit the entire economy.
http://blogs.telegraph.co.uk/finance/jeremywarner/100023849/minimum-wage-should-be-substantially-raised-not-cut/
In theory this makes sense - obviously price floors will lead to excess supply. But if the minimum wage was reduced, then many currently minimum wage jobs may see a fall in their wage rates to reflect the new freedom. From a free market perspective this makes sense, but it wouldn't help those in those jobs. Furthermore, whilst in theory many new jobs would become available due to the low level of remuneration possible, demand for those jobs would be low as most people wouldn't be willing to do what would be boring manual labour for low reward. I'm not saying I disagree with it, but I don't think it would actually help the poor, as people aren't that desperate to be employed.
Original post by pandabird
How will it help the poor? I completely fail to see that?
More jobs will be available.
Minimum wage makes no sense to me.
Original post by Dirac Delta Function
More jobs will be available.
Minimum wage makes no sense to me.
Minimum wage makes no sense to me.
Minimum wage rises or falls according to inflation. IF inflation rises poor people wont be able to afford basic needs. Yes the value of work should reflect the wages but that's not fair
Original post by Dirac Delta Function
More jobs will be available.
Minimum wage makes no sense to me.
Minimum wage makes no sense to me.
Hang on...so welfare cuts + even lower wages= ?
If they want to cut the welfare system, they should increase minimum wage or vice versa. You can't do both. People like you (and the Tories) think of the country as whole, only considering the figures, but those figures are people who deserve some sort of quality of life. You can't punish working class people when we are reliant on them as a country.
(edited 11 years ago)
But many minimum wage jobs (cleaners etc.) need to be done anyway. The demand doesn't decrease because the cost increases. Lowering or abolishing minimum wage would mean that these people would still be employed but below a living wage.
Original post by Aspiringlawstudent
So, if I'm selling my labour for £5 an hour, won't there be fewer people interested in hiring me if I charge £6.30 without having made changes to my skills?
So, if I'm selling my labour for £5 an hour, won't there be fewer people interested in hiring me if I charge £6.30 without having made changes to my skills?
A good quality life in the UK depends on a good wage, if you dropped the minimum wage then people would start paying at £1 per hour and it is possible that the outsourced employment would return. However the idea would never take as people would then fall back onto benefits instead as they'd make more money than actually working.
If the benefits scheme was scrapped due to pressure on the economy then the country would eventually "drop down" the HDI as people couldn't afford basic necessities and social class gap would become more prevalent. The rich-poor gap would increase pushing the country's Gini index and that would lead to a multitude of problems.
You will probably see that within the next few decades that China's wage policies will change(/rise) to reflect a minimum wage system similar to that of all developed countries, this tends to happen with all developing countries. It's already starting to happen as shown in this BBC article.
Of course this is all just speculative though!
Original post by pandabird
Hang on...so welfare cuts + even lower wages= ?
If they want to cut the welfare system, they should increase minimum wage or vice versa. You can't do both. People like you (and the Tories) think of the country as whole, only considering the figures, but those figures are people who deserve some sort of quality of life. You can't punish working class people when we are reliant on them as a country.
If they want to cut the welfare system, they should increase minimum wage or vice versa. You can't do both. People like you (and the Tories) think of the country as whole, only considering the figures, but those figures are people who deserve some sort of quality of life. You can't punish working class people when we are reliant on them as a country.
When did I say anything about welfare cuts?
Lower wages are better than no wages. More importantly, it helps people get experience and off their back sides. It allows employers to have more apprenticeships and be more willing to take on newbies because the risk to them is reduced.
I find it bizarre that people think saying "sorry, you can either be paid £x per hour or nothing at all" is helping anyone. It just forces employers not to take people on.
I totally agree with the OP but would like to add another objection.
Labourites believe that all the time the NMW is in place low wages are no longer problematic because the issue has been addressed. In many ways it's put a contentious and interesting topic beyond the realm of political debate because the state -in all it's wisdom- has taken some form of action.
I'm sorry but that's a load of rubbish.
Those on the NWM in the most part live a pretty grim existence of debt, high housing costs and an overal low quality of life. The NWM hasn't worked for them and nobody aspires to get a minimum wage job. If the NMW were abolished tomorrow it would at least get us thinking about the issue of subsistance pay again and may spur some more creative solutions.
The NWM isn't the be all and end all of the wage problem. It needs further action.
Labourites believe that all the time the NMW is in place low wages are no longer problematic because the issue has been addressed. In many ways it's put a contentious and interesting topic beyond the realm of political debate because the state -in all it's wisdom- has taken some form of action.
I'm sorry but that's a load of rubbish.
Those on the NWM in the most part live a pretty grim existence of debt, high housing costs and an overal low quality of life. The NWM hasn't worked for them and nobody aspires to get a minimum wage job. If the NMW were abolished tomorrow it would at least get us thinking about the issue of subsistance pay again and may spur some more creative solutions.
The NWM isn't the be all and end all of the wage problem. It needs further action.
Original post by SmallTownGirl
But many minimum wage jobs (cleaners etc.) need to be done anyway. The demand doesn't decrease because the cost increases. Lowering or abolishing minimum wage would mean that these people would still be employed but below a living wage.
How do you figure?
Do you have a housekeeper? A maid? Cook? I might be wrong, but I'm going to guess that you don't - I certainly don't have any of those.
If it would cost you, say, £2.50 an hour to have one of these workers, would you?
I would.
I think plenty of other people would too.
Plenty of jobs that currently people don't even think about creating would be created if labour costs are lower. If I could pay someone £2.50 to walk a dog for me, I would. If I have to pay them £6.31 an hour, I'd walk it myself. Plenty of new jobs would be created for people with low skills.
You seem to be caught in the classic trap of the seen and the unseen. You see all the people currently working at minimum wage and you think 'how could the minimum wage be causing unemployment? Look, there's plenty of people working for the minimum wage right now' - but you don't see all the people that WOULD be working if employers could pay less, who are currently sat at home or at the jobcentre because their skills aren't valued enough by people to justify employing them at the minimum wage and they're effectively priced out of the labour force.
(edited 11 years ago)
Employment would increase, but wages of those at the bottom of the pay scale would decrease considerably. This can be seen time again in semi developed economes, take the semi-urbanised regions of India for example, they have like 8 people to do the work that a single person in the developed world could - at a tiny fraction of the price.
Original post by Dirac Delta Function
When did I say anything about welfare cuts?
Lower wages are better than no wages. More importantly, it helps people get experience and off their back sides. It allows employers to have more apprenticeships and be more willing to take on newbies because the risk to them is reduced.
I find it bizarre that people think saying "sorry, you can either be paid £x per hour or nothing at all" is helping anyone. It just forces employers not to take people on.
Lower wages are better than no wages. More importantly, it helps people get experience and off their back sides. It allows employers to have more apprenticeships and be more willing to take on newbies because the risk to them is reduced.
I find it bizarre that people think saying "sorry, you can either be paid £x per hour or nothing at all" is helping anyone. It just forces employers not to take people on.
Because it is simply not feasible when benefits are being cut. You're just avoiding the most fundamental issue that people need to be able survive on a wage. How will earning a poor wage get people 'off their backsides'? Lower wages also means decreased spending which is not good, certainly at a time like this.
(edited 11 years ago)
Original post by Hunarench95
Employment would increase, but wages of those at the bottom of the pay scale would decrease considerably. This can be seen time again in semi developed economes, take the semi-urbanised regions of India for example, they have like 8 people to do the work that a single person in the developed world could - at a tiny fraction of the price.
I don't necessarily think that's a problem; it's really a choice between that or an ever-increasing structural rate of unemployment.
Original post by rcummins1
Surely a compromise would be to allow companies to pay free-market wages, then for the Government to subsidise it so that it falls in line with a minimum wage figure?
That's what I thought but then you would get even more dissatisfaction with people's "hard earned money going to people who were too lazy to get a decent job".
Original post by Aspiringlawstudent
I don't necessarily think that's a problem; it's really a choice between that or an ever-increasing structural rate of unemployment.
Or failing that, we could just cut welfare allowances - would increase employment?
Original post by pandabird
You're just avoiding the most fundamental issue that people need to be able survive on a wage. How will earning a poor wage get people 'off their backsides'?
You can survive on far less than the minimum wage. Do you have to take a reduction in living standards? Of course. Do you have to live in multi-family homes? Probably.
But the alternative is not justified. We can't keep forcing up the minimum wage without pricing more and more people out of the labour force, meaning we end up with ever-increasing structural unemployment rates, meaning we have more and more people sat at home collecting welfare checks which have to be paid for by people that are productive. That's not justifiable.
I don't think it's acceptable that unemployed people should be subsidised by employed people.
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