Dispatches from a Small Business
My Forbes column is up on the minimum wage. It covers some of the ground I could not get to on TV the other night.
Off-topic, but I'm surprised you have no comment on what's happening with Travis Corcoran (TJIC).
To what extent are union contracts locked into some multiple of minimum wage?
Even in their depleted situation, union workers are considerably more numerous than minimum wage types, and therefore constitute a more valuable electoral constituency.
As usual, Warren, you hit the nail on the head. Bart also makes an excellent point.
Minimum wages increases can and do disrupt large parts of the work force. Relative to minimum wage causes discontent as "higher paid" workers see their lesser paid and more often lesser skilled fellow workers catching up with them on the pay scale. The increase in minimum wages in no way reflect any increase in productivity by the recipient of the minimum wage, but now we have other workers looking for that similar non increase in productivity wage increase.
This problem can cause huge difficulties. The "higher paid" workers are unsettled and the employers are stressed as they attempt to find the extra money to pay for this increase in wages that is not reflected in increase in productivity or skill.
Increases should come with increases in productivity or skill, skills can be defined and once the defined level of skill is reached a wage increase should follow. What will happen is that workers will set their own wage level depending on their skill set or if they reach the top level of defend skill they will either be happy to stay there or as you say will move into a deferring field with in the same organisation and again start climbing the skill tree.
People need to be learning and upskilling all the time and it would be better for the employer to encourage this than for the government tp impose arbitrary wage increases
No employer can spend more for any worker (including all of the hidden costs such as half of FICA, mandatory benefits, management, office space, taxes, etc.) than than the worker's output is worth in the market. The law can make it illegal to employ the worker, to the detriment of everyone and the benefit of no one.
While I agree with your analysis, in a country like South Africa where official unemployment is 25% (but probably higher), large poverty levels, strong, politically driven unions, tough labour laws etc it is very difficult to make this point stick. There is currently a large argument about "decent jobs" as seen here: http://www.businessday.co.za/articles/Content.aspx?id=132224.
Great Britain didn't have a minimum wage until the Labour Party imposed one for the first time in 1999. However, fluctuating and sometimes very high unemployment rates had been observed in the UK for many decades before (and in the years since).
On the evidence of the UK economy over time (statistics go back to the Victorian era), there must be powerful factors affecting unemployment rates apart from whether a country imposes a minimum wage (or range of wages-- the UK minimum is lower for "youths").
Those other factors make it difficult to discern the actual effects of minimum-wage laws on unemployment rates in complex economies, except perhaps on narrow cohorts like your post-retirement camp staffers.
The "noisy signal" problem aids unions and other rent-seekers, whose lies and distortions are harder to refute when challenges must be primarily based on logic rather than very simple statistics.