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Thursday, July 10, 2014 - 8:22amSanction this postReply
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Such clear explanations.  Reisman is brilliant!  



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Post 1

Thursday, July 10, 2014 - 10:16amSanction this postReply
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Yes, Steve, Reisman's essay is brilliant.

 

Reisman also points out that minimum-wage laws create unemployment even when there is an increase in employment following an increase in the minimum-wage law.  How so?

 

Well if the increase in the minimum wage law is less than the rate of inflation, then even though more people are now working than before, not as many people will be working as would have been working had the minimum-wage law not been raised.  This is the difference between the seen and the unseen that Henry Hazlitt talks about in his legendary Economics In One Lesson.

 

For example, suppose that the minimum wage is raised by 2%, while the rate of inflation and the funds available for employment increase by 4%. Employers will now have more money to spend on labor, and can hire more workers. But they won't be able to hire as many workers as they could have hired had the minimum wage not been raised. The difference between the number of additional workers they have hired and the number they could have hired is the (unseen) unemployment created by the higher minimum wage.

 

See in this connection: http://archive.mises.org/6174/the-state-against-economic-law-the-case-of-minimum-wage-legislation/



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Thursday, July 10, 2014 - 11:25amSanction this postReply
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Chopping off the very lowest rung, putting it out of reach of those who need access to that lowest rung the most.

 

All this is doing is kicking more learning disabled/special needs kids away from potential KMart greeter jobs, etc., and maybe subsidizing a tiny handful of folks barely more capable.

 

A handful of HS kids working at unreported summer jobs mowing lawns and cleaning windows will ignore MW and do what they must to make a few bucks in these flat on their backs economies of waiting.   

 

This is pitting 70 IQ folks against 60 IQ folks as a form of compassion --purely imagined by 90 IQ folks.

 

These compassion whores have just made the on ramp to the economies steeper.  That is all they've done.   What do they -think- they are doing by even having a MW, much less raising it?   It should be abolished, not raised.   As a minimum, eliminated on a federal basis-- let 50 states run the experiment.  What business does the federal government even have implementing a national MW?   It should be mostly outward looking, not redundantly inward looking, running its forever screw the pooch OneSizeFitsAll failing experiments in getting it all wrong at once.

 

That on ramp should(and does, one way or the other) go all the way down to '0' with internships and volunteer work and apprenticeships.

 

These MW folks are like that guy we've all known, who doesn't quite get it.   Can't balance a checkbook, completely befuddled by most things in modernity, but ... has a theory about MW, and clings to it until his fingers bleed, like a worn beyond recogition favorite stuffed toy, well beyond child hood.    You know, like that dottering old fool Harry Reid, or Pelosi, or one of those complete tools.

 

(Edited by Fred Bartlett on 7/10, 11:29am)



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Thursday, July 10, 2014 - 11:29amSanction this postReply
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From Adam Smith on through Henry Hazlit there was an intelligent discussion of what was not visible but had to be considered.  And those who have disagreed with them are usually working hard to pretend that there are no droids here.

 

There is another major problem with the minimum wage law.  It establishes a presumption that a government has a moral right to tell an employer what they can or can't pay a worker.  They appear to get away with it because of the bias that it is okay to regulate businesses, while being mindful of the fact that if politicians tried to tell employees that they had to give up some of their existing wages, due to some new MAXimum wage law (part of income equality package?) they would be out of office in short order.



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Post 4

Tuesday, July 15, 2014 - 12:51amSanction this postReply
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Another way in which minimum wage laws are immoral is that they prevent the sellers of labor services from offering the buyers a more valuable service in order to get hired.  If a worker is willing to give the employer a better deal than someone else is by offering to do the same work for less pay, then why shouldn't he get the job in preference to those who are not offering as good a deal -- who are offering to do the same work for more pay?  If a worker is just as good but is less expensive, doesn't he deserve to be hired in preference to someone who is no better but is more expensive?  

 

A minimum wage law is like a maximum price law.   A maximum price law prevents the buyer from offering the seller a better deal (more money) than other buyers are offering.  Say you are selling a painting, and you get two offers, one to buy the painting for $1,000 and the other to buy it for $2,000.  Obviously, the person who is offering you the $2,000 deserves the painting over the person who is offering you only $1,000. 

 

Well, the same principle applies to the sellers of labor services as it does to the buyers of a painting.  Both are vieing with competitors to obtain a value by offering more for that value than someone else is.  Why should either be prevented by law from earning that value?!  There is no moral justification for a minimum wage law any more than there is for a maximum price law. 



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Saturday, July 19, 2014 - 12:19amSanction this postReply
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MW is an economic killer, it when raised can and DOES cause small businesses on a tight margin to shut down.  The people it is "intended" to help are priced right out of the market.  



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Saturday, July 19, 2014 - 7:40amSanction this postReply
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But on the other hand



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Post 7

Saturday, July 19, 2014 - 6:25pmSanction this postReply
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Regarding the link that Peter posted, see the follow essay by Reisman in which he discusses how employment can increase even in the face of an increase in the minimum-wage law:  http://georgereismansblog.blogspot.com/search?q=minimum+wage+laws

 

His answer is that the increased employment is lower than it would have been had the minimum-wage law not been raised.  This is the point that I was making in Post #1 about the difference between employment that is seen and employment that is unseen.  

 

Reisman also points out that economists who claim that minimum-wage laws do not necessarily cause unemployment are denying the law of demand, which states: 

 

"[O]ther things being equal, the higher is the price of any good or service, the smaller is the quantity of it demanded, i.e., the quantity that buyers purchase, and that, by the same token, the lower is the price of any good or service, the larger is the quantity of it demanded, i.e., the quantity that buyers purchase. Since wages are merely the price of labor services, the Law of Demand implies that all government and labor-union interference that forcibly raises wage rates above the height at which they would otherwise have been reduces the quantity of labor employers seek to employ in comparison with what it would otherwise have been. It thus implies that the government’s or labor unions’ interference causes unemployment.

"One major reason for the existence of the Law of Demand is that while people would like to buy more goods and services, their ability to spend is always limited by the funds at their disposal. Lower prices enable the same funds to buy more, while higher prices prevent any given amount of funds from buying as much. In order to overthrow the Law of Demand, [one] would need . . . to show how the division of a given-sized numerator (i.e., the funds people have available to spend) by a larger-sized denominator (i.e., the prices and wages they must pay) does not result in a reduced quotient (i.e., ability to buy goods and labor services). It should be obvious that this is simply impossible and that insofar as the Law of Demand rests on the laws of arithmetic, no statistical data can ever overthrow it. Rather, the statistical data must be interpreted in a way that is logically consistent with the laws of arithmetic and their derivative, the Law of Demand." 
(Reisman, "The State Against Economic Law: the Case of Minimum Wage Legislation.")

 

Another way to look at this is to imagine the following:  Suppose that a geometry teacher were to argue that the Pythagorean theorum is not necessarily valid, because she discovered after physically measured a right triangle that the height squared plus the base squared did not exactly equal the hypotenuse squared.  What would you say in response to his claim, which is based on empirical observation -- on going out and actually measuring a particular right triangle?  Would you say that perhaps the Pythagorean theorum isn't necessarily true, after all?  Or would you say that the measurement which the teacher performed had to involve a small error, because the Pythagorean theorem is a well-established law of geometry?  Clearly, you'd say the latter.

 

The link that Peter posted also includes the following comment from President Obama: "When ... you raise the minimum wage, you give a bigger chance to folks who are climbing the ladder, working hard.... And the whole economy does better, including businesses."  This is the opposite of the truth.  Minimum-wage laws prevent young unskilled workers like black teenagers from ever getting a foot on the economic ladder to begin with, thereby preventing them from gaining job experience and eventually qualifying for a better paying job, a point that Fred made in Post #2.

 

The link also included this comment from Sylvia Allegretto, an economist at the University of California, Berkeley: "[R]esearch comparing counties in states that raised their minimums with neighboring counties in states that did not has found no negative impact on employment."  As Rand would say, this is a perfect example of concrete-bound thinking.  Allegretto continued, "Restaurants and other low-wage employers may have other ways of offsetting the cost of higher wages, aside from cutting back on hiring, she said. Higher pay can reduce staff turnover and save on hiring and training costs."

 

If employers thought that it would be more profitable to pay higher wages, because it would cut down on turnover and save on hiring and training costs, they would already be doing it.  What right does Ms Allegretto have to second-guess their decisions, especially as she has no intimate knowledge of their operations, nor do the legislators who are aggressively passing these increases in the minimum wage law.

 

The arrogance of these pseudo-economists and legislators who think they have the right to dictate the business decisions of firms whose operations they have no knowledge of and are not responsible for is simply stunning!



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