I am not an economist, but...

[spudtater]

More jobs == good, yes?

Then the minimum wage is going to have bad effects, in that it's effectively a tax on the number of workers that a company employs.

Why not do away with minimum wage, ramp up corporate tax, and then feed the proceeds right back to low earners?

An additional advantage would be reducing the overworking of low-paid employees.

(I might be missing something here, so feel free to point it out...)

Comments

[sigmonster.livejournal.com]

More jobs paying shitty wages is not necessarily good. Wages lower than a living wage are indeed heavily subsidised via tax credits and income support. An increase in general taxation or corporation taxation will have distorting effects on employment in the long run, and minimum wages invite employers to be more productive *per employee* in a way which increasing corporation tax doesn't, which in turn is a good thing.

Also there are many factors affecting employment and costs of employment and not all of them are active at once - there are lots of interesting threshold / catastrophe(*) effects. However, the Low Pay Commission (I think that's the name) recommends the level of the minimum wage and it does have to take the effects on the employment market into account - which is why the rate of increase slowed last year to just about CPI instead of substantially higher than CPI.

It's very much a case of all else never being equal...

(*)term of art, no moral implications in this usage.

[zotz]

You want to talk to darkstones about this. He's done economics. As he doesn't seem to be here, though . . .

As I understand it, there's a logical argument that this should be the case, but a notable lack of evidence that it works this way in practice. Notably, in Britain employment continued to rise when a minumum wage was introduced in the late nineties.

There's a concept "NAIRU", the non-accelerating-inflation rate of unemployment (or some such), which is related to this. It seems to have been commonly held that unemployment below about 7% results in wage inflation and therefore price inflation, but at best this was a rule of thumb and you'd have to ask an actual economist (see above) whether there was much actual evidence for there being a reliable figure or for it being 7% - the impression I got was that there wasn't.

[spudtater.livejournal.com]

I see. It's certainly true that a bunch of interacting factors do have the tendency to make a system behave in nonintuitive ways.

One thing I forgot to mention: decreasing or scrapping the minimum wage would at least help prevent scampi being sent to Thailand to be de-shelled...   8^P

[figg.livejournal.com]

because it is easier to force companies to pay their workers than to pay taxes.

[spudtater.livejournal.com]

Also a good point.

[wee0ne.livejournal.com]

More jobs == good, yes?
No.

More people with a disposable income == good.

The problem of no minimum wage is actually a complex one, which fails more on a socio-political level that a commercial one.

If you earn less than the amount required to live, you turn to the state for benefit (lets just no go anywhere near the "no state benefit" discussion).

Now, given the choice of working in a shitty job, for a shitty boss, who's basically trying to get the most for the least, or getting the same money for less hassle and less stress (and believe me, getting money out the state is a lot of hassle, and a lot of stress)
... most people will go for the second option.

So, what you end up with is lots of people on state income (either wholly or partially), and lots of businesses paying minimum wages (thus minimum tax bills).
Now, the state-supported income has to come from somewhere - either higher corporate tax or higher personal tax. Both of these lose votes, politically.
Also, the state supported income system has to be administered. As you have more people in the system, and more money sloshing around in the system, it requires more resources to manage... which means even more corporate- or personal-taxes (again, losing you votes)
In addition, the working population objects to "free-loaders" - those people who take from the state system and never give back - so resources need to be allocated to catch these people, and to use "carrot & stick" methods to ensure that people do not "free-load".

So, in short: no minimum wage leads to lost votes and more drain on the treasury.

(there is another interesting wrinkle in the minimum-wage situation: easter european workers actually get a higher standard of living coming over here to do the minimum-wage jobs than they can get at home, so the indigenous population [which wants more income] actually lose out on jobs to immigrant workers... which means the taxes of the immigrant workforce helps to pay the state benefit for the indigenous unemployed....)

And following on....

[wee0ne.livejournal.com]

I quote:

A friend is reasonably senior within the Dept of Employment and was "born
with silver spoon in his mouth" so is totally out of touch with the real
world at base level.
Last week he was moaning that there were plently of jobs for those who 
want to work in our area (we have lost pottery industy, Michelin tyre 
company, all the pits and a big steel works)
I asked where as my son is lucky to have a job as an asssistant manager in 
a shoe shop yet is still only paid a few pence above minimum wage.
What has happended is this area (The Potteries / Stoke-on-Trent) has 
become the distribution warehouse capital of UK.
Sound reasonable but they aren't sighted anywhere near the lower end of 
the housing market where most of the workers are obliged to live so that 
means either running a car or 2- 3 busses to get there.
Consiquently these "plently of jobs" are minimum wage, away for workers
homes and often shift hours.
By the time you take into account fuel needed to get there people are
certainly going to feel the travelling costs in their wage packet.
Those without their own transport are probably looking at  2-3 hours a day
traveling on busses / walking.
Where is the government when planning how to revitalise a depressed area
such as ours ?
Common sense says if you are going to pay low wages then you should least
make sure you have easy access to workers who can get there easilly and
cheaply not miles away.
Actually the answer was in last night paper - they employ Poles anyway so
aren't bothered if the local unemployed have difficulty getting to 
business areas :-(

[gominokouhai]

> More jobs == good, yes?

For whom?

There's only a finite amount of work to be done.

[brucec.livejournal.com]

I recently heard that for some people on the minimum wage, it doesn't actually make sense for them to take a job, because once they lose all their benefits and start paying for transport etc. they're better off sitting at home getting unemployment benefit. By increasing the minimum wage, these people would earn more by being at work and so would stop taking our taxes to sit at home.

[xquiq.livejournal.com]

Perhaps, but then perhaps that would simply shift that incentive to another part of the population.

I'm somewhere to the left of Friedman (along with most people I'd imagine), but there's no doubt that government intervention in the labour market skews incentives.

[spudtater.livejournal.com]

As somebody who's recently been on "Jobseeker's allowance", I can confirm that there is little to no incentive to get a job. I asked about getting a part-time job while receiving benefits, and was told that I could still get benefits, but everything I earned would be deducted from my benefits; i.e. I couldn't keep any of it. So, obviously, I didn't take the part-time job. (I was, however, working voluntarily, so I'm not a complete scrounger...)   8^]

The problem is, in a nutshell, that the system is strongly biased against low-earners. (Probably because they have little political power.)

I'd prefer the solution of blurring the line between benefits and low wages, so that low-earners can also get, for example, free prescriptions, better housing benefit, etc.

[xquiq.livejournal.com]

The arguments for and against minimum wage are pretty complex and since I've not read up on it in years, I'm not going to attempt a coherent summary of them.

One thing I would say is that corporations are remarkably mobile these days, in part due to the flexibility of the modern workforce, less employment protection and varying incentives to companies to set up shop in a particular location. Thus we run the very real danger that large scale companies will relocate if corporation tax is too high.

Interestingly enough, British wages were relatively expensive even before the minimum wage.

Both seeking and succeeding in employment are a matter of incentives. Economists may argue over the minimum wage and its effects on the labour market, but I've never encountered one who would argue that a full employment equilibrium is feasible.

[spudtater.livejournal.com]

We're screwed either way, it seems. If we have high corporation taxes, the companies move offshore. If we have high minimum (or expected) wage, then they outsource.