Thursday, 7 April 2011

Lefty Logic & the Minimum Wage.

Lefties' double-think on the minimum wage is quite staggering. It is perfectly fair to argue against low wages as immoral and perfectly fair to suggest that the state should not be subsidising meagre wages. Howver to suggest that the minimum wage has no effect on the labour market, as Truth Reason & Liberty does, is absurd.

By comparison, the effect of the minimum wage upon the labour market has been negligible. Not least because employers have been able to offset it with reduced staff hours, increased prices, and measures to increase productivity - as the Low Pay Commission reported in 2005 (PDF).
especially if you cite "measures to increase productivity", which typically means firing your low-skilled workers and buying a machine. That is an effect on the labour market, and he, as most lefites do, contradict themselves within a single sentence.

The losers in the minimum wage are the low-skilled who find their labour worth less than they are legally allowed to sell it for. They are forced to subsist on state hand-outs instead. Of course the minimum wage was introduced at a time of plenty, which went on for a long time. This masked the effect of the minimum wage, which is steadily rising youth unemployment. This becomes apparent when the music stops, as it did abruptly in 2008.

It is terrible that some people can't find decent-paying work, and the minimum wage outlaws companies employing people who are only able to survive with additional state benefits. However denying people a paying job means they will never get the skills to get anything better. please don't pretend raising the minimum wage is without cost.

Minimum wages either have little effect, or they cause unemployment. They cannot raise living standards without increasing the number of people without work.



15 comments:

Phil Dickens said...

"That is an effect on the labour market, and he, as most lefites do, contradict themselves within a single sentence"

I wasn't arguing that the minimum wage had no effect on the labour market. I was arguing that pinning rising unemployment entirely on this and advocating scrapping it as the solution is a nonsense.

Would it increase employment? To an extent, yes. Those "who find their labour worth less than they are legally allowed to sell it for" could get off the dole and become cheap labour. Great.

That they can then be used as a way to force down the wages of others - the traditional way bosses play workers off against each other - and bring about a race to the bottom on terms and conditions is something else I'm sure you'll applaud. Those who see their income drop more rapidly than it already is won't, though. Nor those who replace the cheap labour on the dole precisely because they're not cheap labour.

And that cheap labour, lest we forget, pays far less than a decent standard of living. We see this when exploited migrant groups live in absolute squalor for what they earn. Those currently "forced to subsist on state hand-outs instead" will still have to do so, unless they want to be considerably worse off.

Although, that said, I'm not expressly advocating the minimum wage. Certainly not as the solution to all of life's woes. I just realise that at present scrapping it only opens even more people to exploitation than already are at the hands of the ruling class.

Obviously, those who have a more favourable relationship to capital than workers and the unemployed will have no problem with that.

Found A Voice said...

I was going to argue with Phil, but then thought, "what's the point?".

He seeks to remind of all that is wrong in the world. I met many of them when I lived in Liverpool for nearly a decade - they can't see past the prism of their indoctrination.

Shame.

jorjun said...

The minimum wage is all about politics and pandering to the employer class, it has little to do with genuine welfare of workers. But the argument is subtle, and so it doesn't count - one of the downsides to popular democracy.

The minimum wage creates a surplus of labour (those below the line in ability or value).

Labour surplus drives wages downwards. We saw this effect when the min. wage was introduced, it effectively rolled out the minimum wage to more people. It has become the standard pleb wage, even for a variety of different demands made upon the worker in terms of skill and dedication.

Rather than being some kind of progressive social initiative, it tends to reduce labour costs. Interns, of course, are completely unpaid, or effectively negatively paid when travel & subsistence is factored. No minimum wage for our betters.

If we got rid of the min. wage, many more low-level jobs would appear, soaking up the surplus labour pool. Lefties are far too distrustful of market forces.

Without a min. wage instead of job seekers being on the back foot, employers would again be more likely to have to bid to obtain talent.

So, widespread under-employment and wage reduction is the chief minimum wage effect. This is great for champagne socialists who pretend to care, but really want their pigs safely and productively penned-in, at lowest cost. After all without union representation, what is the point of caring about individual workers? Where's the lobby? Where's the political incentive, where's the kick-backs? And it is so easy to pretend you care.

Combine the minimum wage with Labour's massive, unchecked rise in immigration and it looks obvious that they wanted to ensure spare labour capacity and low wage rollout. Plus it is 'good' for inflation. Vince Cable seems just as depraved as the last lot.

Jackart said...

"That they can then be used as a way to force down the wages of others - the traditional way bosses play workers off against each other - and bring about a race to the bottom"

That's the standard marxist narrative, and it's nonsense. People choose work, and if that work is shitty, dangerous, unpleasant or poorly remunerated, you won't get your workers.

Greater freedom for employers means competition for employees driving standards UP. You only get a race to the bottom when you have too few employers, something tight labour market legislation causes.

Lefties cause their own narrative to the detriment of the workers.

JimmyGiro said...

Not only will there be some extra jobs available, should the minimum wage be scrapped, but there will be a slightly higher chance that some jobs will turn up in your locality.

This is an extremely important point when your wages are near the bottom, since any bus fares etc., to such jobs, dramatically effect the margins of gain.

JimmyGiro said...

P.S., and what jorjan said :)

startledcod said...

Rather than reply to all the posts in any detail I want to pick up on a couple of points; Phil Dickens writes "Those "who find their labour worth less than they are legally allowed to sell it for" could get off the dole and become cheap labour. Great." Well actually when referring to youth unemployment (which is a tradgedy) it is great. Nothing is better for youths than learning to get out of bed, turn up on time, work steadily even though the wages are low. It turns them in to marketable commodities so that they can get better, more interesting, better paid jobs. The minimum wage prevents them bring able to price their ability into the market. I have a young guy working in my garden, when he started I gave him this lecture. I pay him a modest hourly rate although well above the minimum. It is all working exceedingly well, he is now employed five or six days a week because he is priced correctly and will shortly get a raise.

I had never thought about how the MW prices wages down bybecoming the de facto rate for the least skilled. Good point @jorjun.

Anonymous said...

Dear Phil

I only really read one sentence of yours and realised you have zero knowledge of the job market.

As the owner of 5 businesses and employer of many people and being involved at many levels over many years with lots of business in a range of industries I've never ever experienced a "race to the bottom" in order to pay workers as little as possible. This is typical left wing crap that seriously diminishes the workers.

Ever heard the saying pay peanuts get monkeys? All the businesses I know will pay for talent and expertise and experience and attitude.


The NMW is a farce 1) It destabilizes the market 2) is meaningless £5.93 per hour in London is not the same as £5.93 hour in Bradford 3) and it just encourages people to stay on benefits as they get more income that way.


Minimum wage isn't the issue, its the theft by taxation via income tax, national insurance, employers national insurance and additional fuel and alcohol duties AND then another 20% VAT.

If all the taxes where collapsed into one so that we knew what we were paying and then a starter rate of £12k before tax was introduced that would have a MASSIVE effect on job creation and employment


Love

Woolfie Smith

Anonymous said...

@jorjun

Total garbage.

There is NOT a shortage of work or jobs in this country

Woolfie Smith

Anonymous said...

Whoops

apologies to jorjun wrong name

Woolfie S

Weekend Yachtsman said...
This comment has been removed by the author.
Weekend Yachtsman said...

If the minimum wage has no effect on unemployment, clearly we should raise it to £20 an hour.

Then everyone would have lots of money and fluffy kittens would abound.

If you can't see what's wrong with this argument, you are probably a Guardian leader writer.

Phil Dickens said...

"Greater freedom for employers means competition for employees driving standards UP. You only get a race to the bottom when you have too few employers, something tight labour market legislation causes."

And that's standard rightist doctrine. Forgetting those golden days before most of the legislation you complain about today when this, err, never happened!

Details. Details.

jorjun said...

dude. I don't want to go into specifics, but when my old knowledge got sold to India, the market wouldn't pay anything. Never mind a minimum wage. Nothing. Nada.

Several years later (self-study, no courses available in this subject), and now they want what I've got, and the minimum wage is irrelevant.

I could take on some facebook-wielding useless kid, there's almost enough orders, but I would have to weed out the non-productive majority. Because I don't want to start a charity for Vince Cable, and 85% of people cannot focus & are worth less than £3 / hour.

More likely I will not employ anybody. It's too risky for the outlay.

Mr Ecks said...

As for driving labnour costs down what about 3 million migrants your ZaNu Lab buddies allowed in as a matter of policy. They might have done a little to drive wages down.

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