More thoughts;exceeding the minimum

http://www.princeton.edu/~tleonard/papers/minimum_wage.pdf

http://oregonstate.edu/instruct/anth484/minwage.html

I actually was unsure if the minimum wage was designed to be a "living wage" or not...and while I know it has indisputably always hurt me as an individual when it has raised, it seems possible that is a poor reason to stand against it. After all, I would indeed need to be a selfish and shallow cad to object to something that helps large numbers of people simply because it is to my detriment. So I did some research.
It seems the minimum wage stems from certain social movements in the mid-19th Century, largely in England during the Industrial Age. In the U.S. it gathered steam in the early 20th Century, albeit solely for women...and, oddly, as a way to keep the numbers of employed women low. Huh?
Well, the theory was that by making it illegal to employ women for less than a certain wage they would become un-hirable as the concomitant belief was that women were not "worth" that much money as workers. That movement was running counter to the growing women's suffrage movement and seems to echo a certain status quo sentiment.
Numerous prominent economists spoke about the real, perceived, and anticipated effects of the minimum wage. Mills came down firmly saying it results in disemployment for the poorest people. His theory argued that those people employed for less than the minimum wage were employed in jobs that did not produce sufficient revenue to maintain higher wages. Therefore, the goods and services produced will either raise in price to cover the increased payouts in wages or will cease to be provided unless another alternative means of reducing cost could be found. He argued that would be the step taken...by reducing the number of people performing the job. Obviously this is a gross undersimplification of his arguements...but it boils it down to the net result. Establishment of a minimum wage equaled lost jobs for the lowest paid people.
Of course, one thing to remember is this:Mills was a theorist. Like most theorists, relating their theoretical work to the real world is not always easy. And establishing accuracy is near impossible as will seen later on when we look at the Neo-classicist economical positions and beliefs. As far as reality goes...well, we all know the U.S. has a minimum wage.
It first became law in the U.S. under the disastrous FDR in 1938. And initially it was not designed to be a living wage. What it did do was create a threshold under which people could not be legally employed. This led to little change since, in the middle of the Great Depression, there just weren't jobs like that available anyway. Of course, this one had effects even years later.
I refer of course to the strawberry fields. Growing up we were able to pick berries in the fields. Pay was on a piece-work basis...x number of dollars per pallet. The faster you picked the more you made. I used to make between 20 and 40 bucks a day depending on how much effort I put into it over the course of about 5 hours...and I was a moderate speed picker at best.Well, the geniuses in government decided to "protect" the kids and migrants by making it hourly. But people did not want to pay the higher rates for their strawberries. Drive out by St. Helens. Where there used to be field after field of berries there are now homes or weeds. Where there used to be a cannery there is now a 4 man shop working on their own airplane. Well done. That sure helped the kids and the people involved in the strawberry industry. Oh, and...have you priced berries lately? Not only are they harder to get (and in my opinion, less tasty...they certainly look poorer quality and I can seldom bring myself to eat them anymore) but the price is ridiculous. A halecks worth costs more than a pallet used to.
Of course, that is anecdotal evidence of how application of minimum wage cost jobs and products. It is not scientific and does not alter whether the m-wage is a good idea or bad idea. It does, however, illustrate a point later made by Sidgwick; "You can make it illegal to employ a man under a certain rate of wages, but you cannot secure his employment at that rate, unless the community will undertake to provide for an indefinite number of claimants work remunerated at more than its market value."
Put another way...and remember, these are THEORISTS I am quoting and paraphrasing...the idea is that everyone employs and is employed in the manner they believe is most beneficial to themselves. The employers are getting the best possible productivity per dollar and therefore the best profit possible, the workers are earning the best possible amount of money for the skill set used in their current employment, etc. If conditions change then the optimum use of resources changes. And most economists following the Mills model therefore believe the net result is lost jobs for the lowest paid workers...the very people a raise in minimum wage is designed to help.
Interestingly enough, one proponent of the minimum wage as a means to a living wage (though he couched it in other terms) did so specifically because it would result in the disemployment of poor workers. Webb insisted that a minimum wage would ensure that "...the surplus of unemployed workmen shall be exclusively the less efficient workmen..."
Of course, Webb also was just a theorist, so his opinion on the result does not carry the weight of actual results either. It is interesting to see the idea behind the formation of the wage, however. And entertaining for me, which in the end is really what all this is about :-)
After the minimum wage was enacted there was lots of talk about the effect but few if any studies.Everything continued to be theory. And theories abounded as to who was helped or hurt.
When studies were finally done, the results were surprising. As early as 1946 Stigler said, "Do minimum wages reduce poverty? An obviously relevant question is, 'Are affected workers poor? ...The surprising answer is, generally, no."
But the wage continued to climb because, after all, it did sound good...and the theory of "living wage" was becoming popular as the social movements gained prominence and steam. But did the m-wage become more and more helpful?
"For young adults (ages 20 -24), the effect of the minimum wage on employment is 'negative and smaller' than that for teens." was the result established by Brown, Gilroy and Cohen in the 70s and 80s.
Theroretically, the primary people using minimum wage jobs to provide for families are going to be young people just out of high school or college students. That, in my mind, pretty closely mirrors the ages of 20 - 25 or so...almost exactly the ages hurt worst by the minimum wage.
Ironically, this was written quite close to the time a study was done on minimum wage impact in side by side states with similar starting wages. The study was done by people who actively sought to argue it needed to be higher. And they found...it did not help.
2 primary results occur: 1, sometimes the number of people decreases, the prices of goods increase, and the net results for the poorest sectors vary from slight improvement to slight regression in their standard of living, taken as a whole. 2, instead of raising prices, the companies simply adjust benefits, so again...the result ranges from slightly worse to slightly better with the majority being no real change.
Leonard (in the first piece cited) concludes then the minimum wage debate, particularly in light of how few "poor and near-poor" are affected, by saying this:
"Even if one believes that minimum-wage increases do not disemploy low-wage workers, or is prepared to suffer disemployment as a cost of redistribution, it is significant that minimum wages do so little for the goals of poverty reduction or progressive income redistribution." (p. 22)
I won't even get into the ethics of income redistribution...and I could really come down hard against both main sides of that argument...but the end result is pretty sad. If indeed it is designed to help the poverty stricken, almost everyone agrees it has failed and failed miserably. Yet other studies show that the inevitable, inescapable result of raises in minimum wage is inflation which hits...you guessed it...the middle classes. The same people that drive so hard to get it raised.
I love the IDEA of the minimum wage as something to make sure the poverty stricken attain a living wage. Helping people is a great idea. Sadly...the execution has sucked and, at least to my mind, clearly demonstrated raising the minimum wage is a counterproductive act that hurts far more than it helps.