A favorite tactic of the Dems.
Not long ago here in the States, the House passed a bill to raise the Federal minimum wage. This bill was then defeated in the Senate. Senate Republicans used filibuster tactics to prevent the bill from passing; it had 53 votes but required 60 to pass.
It appears to be a favorite tactic of which ever party finds itself in the minority.
Tell that to the one who loses his job because his employer can no longer affort to pay the wages of four employees and has to cut back to three..
Or tell it to the family that just gained income? Tell it to the businesses that gain customers because a larger section of the population has more money to spend?
Granted, both sides to this issue are deep set on their beliefs. We each have a knee-jerk reaction. When I see Republicans blocking an attempt to raise wages, my first thought is, "yep, there they go...rich business owners protecting their own." But you no doubt hear about Dems trying to do the same and think, "Here they go, stomping on small business."
One of the big arguments against raising the minimum wage is that the cost of living goes up. This is true...but it goes up a small amount across the board. Therefore the cost is absorbed by all; the guy in the Lexus pays 25 cents extra for his burger, too. Thus, a small amount of the burden of modern living is shifted off our poorest citizens and evenly distributed across the whole.
It does hurt employers in the short term. But how much? First off, the raise would be over several years...it's not like wages would be going up 2 dollars next week.
Does every small business have to fire a worker? Probably not. Often companies are running at close to the optimal number of employees anyway (if the owner took any economics classes, that is). An employer has to weigh whether a loss of an employee would reduce productivity and therefore profits...if that loss is bigger that a wage increase, which I am willing to be is more often than not, then that worker won't be fired.
In the end, the cost of living goes up anyway; if wages stay the same, people have to keep working more and more to make ends meet. We went from a time where one family member could support a household, to a time where few can afford not to have both parents working.
Generally, the argument Classicals make against any minimum wage is that wage rates should be determined by the market; this would provide the highest number of jobs at the highest pay rate the market would bare.
This makes sense in theory, but doesn't describe what happens in practice.
1. For one, entire industries use exploitive tactics to keep overall wages low. This behavior, of course, spawned unions...which use the same tactics, but the other direction...cooperative bargaining to keep wages artificially high (by artificial, I mean "not determined by the market").* Generally, moderately-strong unions seem to be a good way to balance the market, in the sense that companies can't get too greedy, but the workers can't topple their own position. Non-union shops have to pay higher wages as well, to compete for good labor. The average worker makes more money, so he/she has larger amounts of expendable income...which is then spent back into the economy.
2. Classicals maintain that if wages were low across the board, and determined by the market, costs of living would also fall. It turns out that that depends on the elasticity of demand of a given product or service. In other words, health care will never reduce in demand...it gets more expensive all the time, but people still need the service. Therefore...it gets more expensive all the time. Education is another example. In the US there are fewer and fewer good-paying jobs that don't require at least some college education. Therefore, demand is always increasing. In fact, the lower your wage, the more motivated you are to go back to school. Since the demand will continue to rise, so will the price of education...though wages are not rising to match.
On a side note: what's really happening is that wages are falling but debt is rising. Credit is easier and easier to get. Our economy is fueled by debt, which causes it to expand further, requiring more debt to feed it. $250,000 dollars for a home...$50,000 for an education...$30,000 dollars for a car. Joe Blow consumer says, "Man, that's a load. I am really stressed out. I know how I can make myself feel better! How about $2000 for a TV? What's 2000 bucks when I owe as much as I do?"
*The other reason for the birth of unions was the appalling conditions workers had to endure around the end of the 19th and beginning of the 20th century.
Did you know products in the stores are marked up by as much as 50 percent or more? A sale is really not a sale its just where the price should have started to begin with. ha ha
That's not uncommon at all. Here's my favorite: sales at retail stores. Mark an item up 40 to 60%, then put it on "sale" for 15% off. Customers think they getting a "good deal." Even better: clearance sales. Clearance is 40 to 50 percent off...but the item was marked up over that, so they still make a profit while convincing the customer that they are taking a loss.
Yep, retail stores make hundreds of millions by cheating customers and paying obscenely low wages and little or no health benefits. Makes you want to hit Target and rack up the credit card, eh?
Edited by locally pwned, 27 January 2007 - 01:01 AM.
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