Recently this semester in Microeconomics we have been learning about price floors. A price floor is a legal minimum at which a good or service can be sold for. Now price floors are okay until they become effective, that is, they become higher than what the equilibrium price and quantity would want. Now when price floors become effective you have a surplus.Minimum wage is a classic example of a price floor. When you set the minimum price at say 6 bucks an hour and the equilibrium is 5 bucks an hour then more people will want to work than there are jobs supplied at that rate, as a result you have a surplus and that surplus is known as unemployment.
Now our society is a free market economy. We have always advocated education because nobody really wants to work at the minimum wage. We all want nice cars, nice clothes, big houses, and lots of money to put our children through college when tuition becomes something around $80,000 a year. Given that costs will only continue to rise in everything that we purchase as consumers, do we really want to advocate a minimum wage, a safety net that gives citizens the comfort of falling back on when they choose to produce very little? It only causes more unemployment and a false sense of value. I mean really, do you see the reason behind a person earning an extra dollar for wrapping your hamburger just because they raise the minimum wage? No, and it only hurts consumers. I believe in placing proper value where it is merited. If someone chooses not to go to school, not to differentiate themselves, or not to increase their skill then they should be given a wage that is the correct value to their contribution to society.
Now I understand some of you will say that if you get rid of the minimum wage and give people a dollar an hour or two dollars an hour then you’re exploiting them. But like my economics teacher says “The only thing more tragic than an exploited worker is an unexploited worker”, they don’t have a job! You are artificially creating value and giving it to a person whose contribution to society is much less than that and as a result more people want to work at that minimum wage price and less businesses want to give out jobs at that minimum wage price and so you have increasing unemployment.
When we as a society encourage education and place heavy emphasis on it than what kind of effect does that have on our message when we always want to raise the minimum wage? “Little Johnny it’s important to get an education because it stimulates your mind and puts you in a better position to take advantage of all that society has to offer in a market economy but, even if you decide to drop out, it’s okay because we will continue to raise minimum wage so that you will have a safety net to fall back on”. Well it’s not okay because we live in a world where international trade is expanding, where we have to compete against more countries that have lower minimum wages, where automation of rule based tasks with machines are replacing unskilled labor, and outsourcing is a growing trend in American businesses. The reason to study hard and stay in school has never been stronger than it is today.We need to let go of minimum wage if we are to remain competitive domestically, internationally, and academically.Raise the minimum wage? Yeah right, I’ll stay in school thanks.
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2 comments:
I'm no economist, but I'm trying to figure out how someone working a minimum wage job could get into college, much less stay in college.
Here are some figures that make me wonder how anyone could go to college on their own, with a minimum wage job.
Actual Costs of College: Academic Year 2006-2007
Four-Year Public
Tuition and Fees $5,836
Books and Supplies
The national average at four-year private colleges in 2006-2007 is $935.
You see, even without living on campus, just tuition and books would cost them almost $7,000 per year. And if they make only $5.85 per hour, they would have $23,400 to live on, but college would take them down to $16, 664 to live on for a year. How could anyone afford to live on minimum wage and go to college?
You have to look at the bigger picture cec. That perspective is too zoomed in. What about the millions of others who are displaced by a minimum wage and have no income at all because market dynamics states a shortage of jobs at effective price floors. Its either you get a job that pays the minimum wage or you dont get a job at all because there are not enough jobs to go around. Increasing minimum wage displaces more teenagers who need jobs and creates more unemployment. So we face a trade off between number of jobs and the wage of that job.
Removing the minimum wage is a reminder to those who decide not to differentiate themselves that they will receive a wage that is consistent with their contribution to society and that there will be no hand holding.
In 2005 the US Bureau of Labor reported that half of minimum wage owners were under 25 and 1/4 were teenagers. These workers are not as differentiated as older workers on average because there is positive correlation between age and experience. Experience is a factor that contributes to differentiation and so one can deduce that those who take minimum wage jobs or jobs that pay very little dont neccesarily stay in them for very long, they get paid more as time goes on.
If your argument is how would an individual pay for education that would differentiate themselves if they cant pay for it given the already low minimum wage than that is still a zoomed in question. My main idea is adressing minimum wage and its applications to society as a whole.
Public policy may improve those outcomes to individuals seeking education and a job to pay for it if minimum wage was repealed and it could do so by raising funds from the regained dead weight loss that occurs with price floors (i.e. minimum wage). Basically more people work after minimum wage is repealed and more taxes can be collected, the government has additional tax dollars to redistribute to other programs.
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