Monday, September 21, 2009

Minimum Wage.

I must admit having never given much thought to the minimum wage. It's such a massive element of modern economic practice, and was a part of my life for the period of time that I worked at a grocery store.

Still, I just read up on the issue and I'm torn. First, there has been a consensus among economists of any politcal ilk that the minimum wage raises unemployment: bad. But later studies are questioning this conclusion as biased: bad in a different way. Many studies show no connection at all between employment and minimum wage, indicating that the minimum wage is already near the equilibrium point for low-pay labor: good(?).

But then I have to question if the minimum wage is already set at the equilibrium point, why bother with the law at all? If all it does is make us feel good, like we're sticking up for the common man, we need to ditch that delusion and act based on reality. It doesn't matter if the law has no effect in either direction, merely having a pointless law is inefficiency we cannot afford. Get rid of the minimum wage.

Alternatives to a minimum wage likewise seem irrelevant to me. If the MW does nothing, and the world is adequate now, why bother with "alternatives." Any alternative to something that does nothing would also do nothing because there's nothing to replace. If we replaced the government-set minimum with something like collective bargaining, we end up with the same problem, namely wages are set in stone for minimum workers, restricting flexibility.

Logically, this could hurt workers who would, in a perfectly free market, be able to sell their labor for more than the set minimum, but with so much activity set on and around that minimum, all they can hope for is to at least start with everyone else. And if the worker disagreed, the totality of the labor market would be against him since it was he and his fellow workers who negotiated for the wage. I don't really know if that lost flexibility would be offset by higher pay for those who would have otherwise been paid less. And since this discussion should be about the health of the system and not the individual, lamenting one valuable worker's inability to get paid more cannot be lamented as an unacceptable injustice. If ten workers get paid more than they would in a perfectly free market, and only one worker gets paid less than he would, the system is likely better off.

I have to admit, I find little to disagree with in the concept of a refundable tax credit, aside from the fact that Britain's implementation of it is apparently a circus. But what I like most about the credit system is that we can apply credits to anything we want.

I am a huge advocate of community service. Encourage people to do it. Use it as the primary form of punishment for criminals. Hold state run service "parties" that act like giant socials where people clean up garbage or fix playgrounds. Implement a department of community service where people can sign up and be sent to wherever needs help. Attach tax credits to it. It's great. For every hour of community service a person can get a dollar in tax credit.

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