Minimum Wage Fallacy? Watch

Sinatrafan
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I'm quite concerned about the lack of debate over the minimum wage, especially in the current election climate. I really dislike the fact that there is this assumption that the minimum wage is a wonderful thing and should always be pushed higher and higher. When you actually give this issue some thought a clear argument against the minimum wage develops.

In general the MW is probably a good thing, but there is a complete lack of discussion over its negative impact. Whilst it may be a good idea it is certainly not a risk free entity and that is what I would like to raise today.

Employment
If I am an employer who is considering whether or not to employ a new member of staff I have two options. I can either employ somebody or push an extra workload on to my existing staff. The MW makes new staff very expensive (relatively speaking) and I am therefore less likely to employ somebody new than if they were cheaper.

This problem is worsened by modern employment law which effectively means it is more difficult than ever to sack an employee if they turn out to not be very good.

Being that I am faced with employing somebody who is expensive and hard to get rid of, should they not be very good, I am far more likely to be risk averse and simply offload the needed work onto my current employees. Indeed, I may choose to invest in previously uneconomical machines to replace my employees altogether as my workers become more expensive.

Inflation
Of course inflation more accurately represents an increase in the money supply rather than just market pressures pushing up prices, but there is of course an effect on the price of commodities relating to the MW.

If I am a businessman and I am forced to pay my employees more then I obviously have to recoup those loses by either firing staff or rising prices. So whilst you as an individual may be earning more, there will be a knock on effect that many of the commodities you buy with your paycheck will end up being more expensive, negating much of the improvement in your standard of living by having a larger pay packet. And indeed if I choose to fire employees instead of raise prices this further worsens the impact of the MW on employment.

Stigma
This is a far more wishy washy debate that I don't think particularly matters, but one I feel worth mentioning even if only as a theoretical downside. There is a slight stigma associated with doing a job that pays MW. Previously you may have earned £7ph for example and not been classed as MW. If the MW then rises to £7ph then all of a sudden you have had that stigma of being a MW employee thrust upon you.

Conclusion
The MW seems like a great idea for those in work, who wouldn't love more money each month right? But it's a dreadful thing for those seeking work. It puts employers off employing people (it certainly won't encourage them right?) meaning greater unemployment and more welfare claiming. This in turn means less people contributing in taxes and more people taking money in the form of benefits.

Of course abolishing the MW may lead to exploitation of individuals, but fundamentally it would lead to the creation of more jobs in the economy. The bottom line is that if I were unemployed I would much rather have a job paying £6ph than no job at all.

To stress once again, I am not necessarily anti-MW, I just dislike the way that there is no debate over its impact and it is assumed to be a de-facto wonderful thing where everyone applauds every time a rise is mentioned.
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The_Mighty_Bush
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I agree with you. People just think that higher minimum wage is always a good thing when evidently it isn't as you could set the price at £50 p/h but you'd have to be an idiot to think that was a good idea.

Imo minimum wage should be abolished for everyone under 18 or perhaps even under 21. This would increase youth employment and allow people to get the work experience that they need at an earlier age. Youth unemployment is pretty high and you only have to look at the history of the employment of young black men in America to see that after MW was introduced, young black unemployment began to rise and is now at 70%+ when it used to be lower than young white employment at 20%.

This push for a government guaranteed "living" wage is absolutely absurd and harmful to society.

Left-wing policies are often well intentioned but the reality is that many of them harm the poorest rather than helping them as private charity does.
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InArduisFouette
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(Original post by The_Mighty_Bush)
I agree with you. People just think that higher minimum wage is always a good thing when evidently it isn't as you could set the price at £50 p/h but you'd have to be an idiot to think that was a good idea.

Imo minimum wage should be abolished for everyone under 18 or perhaps even under 21. This would increase youth employment and allow people to get the work experience that they need at an earlier age. Youth unemployment is pretty high and you only have to look at the history of the employment of young black men in America to see that after MW was introduced, young black unemployment began to rise and is now at 70%+ when it used to be lower than young white employment at 20%.

This push for a government guaranteed "living" wage is absolutely absurd and harmful to society.

Left-wing policies are often well intentioned but the reality is that many of them harm the poorest rather than helping them as private charity does.

living wage = reduced government subsidies i nthe form of tax credits , HB etc ...
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The_Mighty_Bush
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(Original post by zippyRN)
living wage = reduced government subsidies i nthe form of tax credits , HB etc ...
What's HB?

I'm all for reduced government subsidies and creating an economy where money doesn't needlessly flow from private to state to private etc. but if it puts people out of work and makes business unprofitable then it isn't a great idea.

Just realised HB is Housing Benefit.
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billydisco
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Here is something everybody should really ponder upon- you cannot give masses of people who do not deserve wealth, wealth. What do I mean by this?

If you raise the minimum wage, then inflation will occur, cancelling-out the increase......

People with poor skills will always be poor! You cannot change this.
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billydisco
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(Original post by The_Mighty_Bush)
Left-wing policies are often well intentioned but
but devoid of reality and economics.

Oh lets give every person on earth £1m........... oh wait, why is this 3-bedroomed semi £4m instead of £250k? :rolleyes:
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questioningfox
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The biggest scam of the minimum wage is that they (the government) have the audacity appease the population whilst silently constraining them in unforgiving wage slavery (Dull Jobs +Long Hours) to the elitist owners of factors of production.
After all you think Fast food chain X and Supermarket Y cant afford to pay there staff a living wage with the chief executive earning a fabulous wage. Does he really work harder or perhaps is a conspiracy that has left the 99% scrapping for the dregs of profits and economic growth?
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Jammy Duel
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(Original post by questioningfox)
The biggest scam of the minimum wage is that they (the government) have the audacity appease the population whilst silently constraining them in unforgiving wage slavery (Dull Jobs +Long Hours) to the elitist owners of factors of production.
After all you think Fast food chain X and Supermarket Y cant afford to pay there staff a living wage with the chief executive earning a fabulous wage. Does he really work harder or perhaps is a conspiracy that has left the 99% scrapping for the dregs of profits and economic growth?
Particularly where a machine can't do it, SOMEBODY has to do the dull jobs and SOMEBODY has to put the hours in, whether you're payed tuppence or millions it needs to be done for the society we live in

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MagicNMedicine
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Always good to see how the right wingers deal with the minimum wage:

"Immigration has driven down wages and caused a cost of living crisis for British workers"

"The minimum wage is too high and British workers at the lower end of the pay scale are paid too much"

It's either one way or another, either workers are overpaid or they aren't. If you believe immigration has artificially driven down wages then clearly the minimum wage isn't too high, it's too low. Perhaps if it was at the right level all those Eastern Europeans wouldn't be able to undercut our workers by being willing to work on lower wages....
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Martyn*
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Low wages are also not a good thing either. There is so much money wasted by government. There are too many vanity projects. If you don't pay your workers, their quality of life decreases and that creates anxiety and social problems. What happens when these problems manifest themselves in other ways? You have anarchy. You have disorder and discontent.
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username878267
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(Original post by MagicNMedicine)
Always good to see how the right wingers deal with the minimum wage:

"Immigration has driven down wages and caused a cost of living crisis for British workers"

"The minimum wage is too high and British workers at the lower end of the pay scale are paid too much"

It's either one way or another, either workers are overpaid or they aren't. If you believe immigration has artificially driven down wages then clearly the minimum wage isn't too high, it's too low. Perhaps if it was at the right level all those Eastern Europeans wouldn't be able to undercut our workers by being willing to work on lower wages....
Yup. There is also no evidence to support a minimum wage increase resulting in inflation cancelling the increase out...
Another contradiction of right wingers:

"We should not give benefits to people, they should get a job"
"There shouldn't be a minimum wage"

So they don't want people on benefits but then don't want people to be paid enough so they don't need benefits.
Either pay benefits or make companies pay the minimum wage. The second one costs the taxpayer far less aswell...
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The_Mighty_Bush
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(Original post by Bornblue)
Yup. There is also no evidence to support a minimum wage increase resulting in inflation cancelling the increase out...
Another contradiction of right wingers:

"We should not give benefits to people, they should get a job"
"There shouldn't be a minimum wage"

So they don't want people on benefits but then don't want people to be paid enough so they don't need benefits.
Either pay benefits or make companies pay the minimum wage. The second one costs the taxpayer far less aswell...
STOP MAKING BAD ARGUMENTS.

It's not the same to argue that there should be no minimum wage as it is to argue that people shouldn't be paid enough.

MagicNMedicine's argument was terrible as well. Conflating being against immigration with being "right-wing" even though most libertarians like myself believe strongly in more open borders rather than closed ones.
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username878267
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(Original post by The_Mighty_Bush)
STOP MAKING BAD ARGUMENTS.

It's not the same to argue that there should be no minimum wage as it is to argue that people shouldn't be paid enough.

MagicNMedicine's argument was terrible as well. Conflating being against immigration with being "right-wing" even though most libertarians like myself believe strongly in more open borders rather than closed ones.
It's not a bad argument. You don't seem to make any arguments yourself, just criticism others..
Plenty of right wing people say they don't want people on benefits. Plenty of people are on benefits because they don't earn enough to live on.
To then say we shouldn't have a minimum wage which would ensure employees were paid more and reduce the need for benefits, contradicts that.

It's 'I don't want these people to be on benefits but I don't want them to be paid enough so they don't need to be on benefits'. It's a total contradiction.
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username878267
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(Original post by The_Mighty_Bush)
I agree with you. People just think that higher minimum wage is always a good thing when evidently it isn't as you could set the price at £50 p/h but you'd have to be an idiot to think that was a good idea.
STOP MAKING BAD ARGUMENTS
Total strawman argument right there. No one is arguing that the minimum wage should be £50. Even the most ardent of left wingers would not argue for that. Obviously it wouldn't be a good idea for it to be £50 but that's not what people are arguing for.

You can't possibly compare raising it by £1-2 with raising it by £43.
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username878267
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Evidence from overseas supports this view. A famous 1990 study, by David Card and Alan Krueger, compared fast food employment in New Jersey and Pennsylvania after one state increased its minimum wage and the other didn’t. They didn’t find a significant effect on employment.

Another landmark paper looked at US restaurant employment in 288 different pairs of adjacent counties that had different minimum wages. They found that minimum wages are effective in boosting pay, but they don’t harm employment.

These studies aren’t alone. A paper in the British Journal of Industrial Relations examined 1,494 estimates of the employment effect of US minimum wage rises published in 64 different papers. They found that there was virtually no employment effect from minimum wage rises.

Similarly, in the UK, the evidence has been clear. When the UK first introduced a minimum wage in 1999, the British government took a cautious approach. They were worried about the sort of negative effects that the likes of Hockey and ACCI warn about. But they never arrived. The UK’s minimum wage is now 75% higher than it was when it was introduced, while the UK CPI has risen by just 37% over the same period.

This large rise in the real value of the UK minimum wage hasn’t cost jobs. The UK Low Pay Commission has now commissioned over 130 pieces of research from accomplished academic economists, which finds minimum wages boost workers’ pay, but don’t harm employment.



There is almost nothing to suggest or prove that raising the minimum wage costs jobs.
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Europhile
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Minimum wage should be like £20 per hour.
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The_Mighty_Bush
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(Original post by Bornblue)
It's not a bad argument. You don't seem to make any arguments yourself, just criticism others..
I do make arguments.

(Original post by Bornblue)
Plenty of right wing people say they don't want people on benefits.
This is true. People in the left and the centre often say this too though because most people recognise that people being on Jobseeker's allowance is not good if it is for the long-term. That's for the individual and the taxpayer.

(Original post by Bornblue)
Plenty of people are on benefits because they don't earn enough to live on.
You missed out the important bit: people are on benefits because they don't earn enough AND these government benefit programmes exist.

(Original post by Bornblue)
To then say we shouldn't have a minimum wage which would ensure employees were paid more and reduce the need for benefits, contradicts that.
No, it doesn't because the conclusions you are making are wrong. You are assuming that minimum wage=reduced need for benefits because superficially some of the poorest people in the country will be getting more money and therefore be less reliant on the state to live.

Minimum wage laws do not guarantee that EVERYONE will get paid at least that wage because they cannot stop employers releasing staff that they can't afford any more. The reason this is damaging for your argument is that benefit costs would rise rather than fall if unemployment rose as a result of an implementation of a minimum wage law.

Now you can argue against the idea that MW law does increase unemployment but you can't say the opponenents position is contradictory because it evidently isn't in the cases of those who are principled and use logic.

You are arguing against a strawman here as you are lax to do.

(Original post by Bornblue)
It's 'I don't want these people to be on benefits but I don't want them to be paid enough so they don't need to be on benefits'. It's a total contradiction.
No, it's not a contradiction. It's just muddled ideology that makes you think it is.

(Original post by Bornblue)
STOP MAKING BAD ARGUMENTS
Total strawman argument right there. No one is arguing that the minimum wage should be £50. Even the most ardent of left wingers would not argue for that. Obviously it wouldn't be a good idea for it to be £50 but that's not what people are arguing for.

You can't possibly compare raising it by £1-2 with raising it by £43.
Ok, I retract that statement. It was over the top and most left-wingers don't think that the MW should be increased to such levels. Although there is a guy in this thread saying it should be £20 p/h which would obviously be stupid. He could be joking, I don't know.

However the point behind the argument does hold to some extent and I think it is true that the left won't oppose any increase in the minimum wage in practice. Do you want the MW to be £10 p/h?

(Original post by Bornblue)
Evidence from overseas supports this view. A famous 1990 study, by David Card and Alan Krueger, compared fast food employment in New Jersey and Pennsylvania after one state increased its minimum wage and the other didn’t. They didn’t find a significant effect on employment.

Another landmark paper looked at US restaurant employment in 288 different pairs of adjacent counties that had different minimum wages. They found that minimum wages are effective in boosting pay, but they don’t harm employment.

These studies aren’t alone. A paper in the British Journal of Industrial Relations examined 1,494 estimates of the employment effect of US minimum wage rises published in 64 different papers. They found that there was virtually no employment effect from minimum wage rises.

Similarly, in the UK, the evidence has been clear. When the UK first introduced a minimum wage in 1999, the British government took a cautious approach. They were worried about the sort of negative effects that the likes of Hockey and ACCI warn about. But they never arrived. The UK’s minimum wage is now 75% higher than it was when it was introduced, while the UK CPI has risen by just 37% over the same period.

This large rise in the real value of the UK minimum wage hasn’t cost jobs. The UK Low Pay Commission has now commissioned over 130 pieces of research from accomplished academic economists, which finds minimum wages boost workers’ pay, but don’t harm employment.



There is almost nothing to suggest or prove that raising the minimum wage costs jobs.
Sources for these?

There are other studies which say different things so I'm unconvinced the evidence is as clear as you suggest. You can look at youth unemployment for a potential hint at what MW can do.

Black male youth in America is can also be linked with the MW.
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KBradders
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18-20 year olds should get the full proper minimum wage though. At 18 you are classed as an adult in this country, why should this age group have a lower minimum wage? They do the same job as a 21 year old, but get paid less? It is legislation to exploit workers because of their age.
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whorace
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(Original post by KBradders)
18-20 year olds should get the full proper minimum wage though. At 18 you are classed as an adult in this country, why should this age group have a lower minimum wage? They do the same job as a 21 year old, but get paid less? It is legislation to exploit workers because of their age.
I agree with you. If you are old enough to do the job you are old enough to be paid the same wage, unless you are on a different contract.
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liquid funk
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(Original post by questioningfox)
The biggest scam of the minimum wage is that they (the government) have the audacity appease the population whilst silently constraining them in unforgiving wage slavery (Dull Jobs +Long Hours) to the elitist owners of factors of production.
After all you think Fast food chain X and Supermarket Y cant afford to pay there staff a living wage with the chief executive earning a fabulous wage. Does he really work harder or perhaps is a conspiracy that has left the 99% scrapping for the dregs of profits and economic growth?
This is correct, our society today is nothing more than a sophisticated form of slavery of the masses.

The problem is a case of wealth distribution.
http://www.theguardian.com/uk-news/2...-55-population

Don't kid yourself people, it is absolutely wrong, and in the long term simply unfeasible. There was a very good article in the independent about this, I'll try and link.

Just to add, we currently as of right now have the technological capability to design and build robots to take over the vast majority of mundane boring jobs.

Our culture is built on the idea that "You have to earn your right to live." How messed up is that huh?
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