paul@phs.UUCP (Paul C. Dolber) (08/16/84)
Forgive me if I cover ground here that has already been satisfactorily
covered, but phs was intermittently without news for a month or so,
and I missed the beginning of the unemployment/minimum wage debate.
Most of the material presented here is from Chapter 3 -- "Minimum Wage,
Maximum Folly" -- of Williams's book, "The State Against Blacks." I
highly recommend this book. Indeed, I was tempted to post the whole
thing; instead, I've just presented a few quotes.
What is the intent of minimum wage legislation? In this country, it
is widely believed (and perhaps true) that it is to improve the lot
of the poor. Williams argues -- persuasively -- that its effect is
quite different. In fact, it is widely appreciated that one may
use minimum wage legislation for quite a different set of reasons.
For example, Gert Beetge ("secretary of [South Africa's] avowedly
racist Builder's Worker's Union") stated that "'There is no job
reservation left in the building industry, and in the circumstances
I support the rate for the job [ = minimum wage] as the second best
way of protecting our white artisans;'" he further stated that "'he
would be prepared to allow black artisans into the industry provided
that minimum wages were raised from Rand 1,40 to at least Rand 2,00
per hour and if rate-for-the-job were strictly enforced.'" American
unions' motives may be different, but "The effects of union action
do not depend on its motivation. That is, whether the union means to
help or to harm the low-skilled worker, the effect is to price him
out of the market."
What are the effects of minimum wage legislation? (1) The long and the
short of it is that minimum wage laws prevent unskilled workers from
getting jobs. "While there is some debate over the magnitude of the
effects, the weight of academic research by economists points to the
conclusion that unemployment for some population groups is directly
related to legal minimum wages and that the unemployment effects of
the minimum wage law are felt disproportionately by nonwhites."
(He's got a bunch of references for this.) Also, minimum wage laws
(2) make automation more favorable, and (3) increase the amount that
the highly-skilled laborer can charge for his labor (if his work can
be done by two low-skilled laborers, and the cost of their labor
goes up, then the cost of his labor can go up correspondingly).
What would be the effects of repeal of minimum wage legislation?
(1) Unskilled workers could learn a skill. (2) Those without any
work experience could gain some. (3) Those whose productivity was
very low would be able to get something, rather than nothing.
(4) "There would be some employers who would higher blacks at the
lower wage. Doing so and hence experiencing lower production costs,
these firms would reap supernormal profits. Such a firm would be
able to underprice the racially discriminating firms, thereby
capturing a greater share of the market and attracting more investors.
In addition, new firms may enter the scene, enticed by the profits.
In their attempt to secure the cheaper black labor, they would offer
higher wages. The effect would be that of wage equality between blacks
and whites."
"Moral philosophers can get into unending debate over whether it is
fair for some people to have to... accept lower prices for what they
sell (as in the case of labor services) than others do. But solid
economic evidence shows that whatever the handicap, preventing people
from lowering... the price of what they sell... tends to reinforce
that handicap." Finally, to close I'll cite the same poem ("The
Malefactor's Plea" by James Kenneth Stephen) that Williams cited to
open his chapter on the minimum wage:
"Of sentences that stir my bile, / Of phrases I detest,
There's one beyond all others vile: / 'He did it for the best.'"
Read the book. Regards, Paul Dolber @ DUMC (...duke!phs!paul).
Williams, Walter E. 1982. The State Against Blacks. McGraw-Hill Book
Company, New York. 183 pages.faustus@ucbvax.UUCP (Wayne Christopher) (08/24/84)
On the minimum wage -- what evidence do we have that a given employer would, in fact, hire more workers if he were allowed to pay them less? Look at it this way: say we have a job that takes a reasonably competent worker a certain amount of time to do, paid at the minimum wage. If he were allowed to pay less, does it follow that he would instead hire more workers who were less competent to do the same job? No, he would just pay the same worker less. Or maybe the reduced labor costs would allow him to make more money, and thus expand his business, hiring more workers and eventually paying more in wages than he would have at the higher wage. This may be so, but I think that the overall effect of a lower minimum wage would be that taken as a whole, less money would get out into the pool of poor unskilled workers. Granted, it would be spread around more fairly, but that is a secondary consideration. Of course, I know nothing about economics, but this just seems to be common sense... Wayne