Hey everybody. I'm embarrassed to ask, but oh well. If the minimum wage was abolished, do any of you think this would pull down wages in those positions? I'm inclined to think not, since the people already hired are considered worth that price. At the same time, I wonder if the increased supply of labor would cause the cost of labor to drop? I appreciate your insights. Thanks! :)
nuksukow:the increased supply of labor would cause the cost of labor to drop
You got it.
So, the supply increases... BUT these newly employed individuals aren't as skilled as those who were hired before the minimum wage was repealed. Do wages for those employed before the repeal now drop? Does that mean their wage wasn't a real market wage? This is what is confusing me. From an unemployment standpoint it all makes sense, but when someone poses a question regarding a "race to the bottom" I don't have a very sophisticated answer. :( Bah!
nominal wages may decrease but real wages (the amount of stuff your wage actually buys) increase. its funny when statists argue for a minimum wage then argue for an inflation in the money supply. it simply makes the minimum wage useless.
nuksukow:Does that mean their wage wasn't a real market wage?
You got it again. Of course their wage is artificial...it is inflated in proportion to the imposed wage minimum. (Not by $8/hr or whatever the minimum is, but in proportion to the amount of the labor market that the mandate forces out of the equation. This is why Bill is saying real wages would go up...because since the wage rate is artificially high, people are getting paid more than they otherwise would in a free market...which means the cost of production is higher, and therefore end-user prices are higher.)
Have a look at this list and pick out the titles that sound relevant to your particular questions. I think that'll help with the specifics.
I think it is really impossible to tell whether real wages would rise, fall or remain unchanged. Economics can only deduce the general effects of a minimum wage as compared to the market wage that would prevail if there were no minimum wage. However, there are no data that can tell us what humans will value in this moment or the next, we can only know what individual human actors have chosen in the past, i.e. what wages have been voluntarily agreed upon. Further, we do not know what wage agreements have not been made as a result of enforced minimum wage laws. Other factors affect wages, such as liscensing restrictions and state-granted monopoly or oligopoly privileges. Also, individuals may choose leisure over labor.
I think it is really impossible to tell whether real wages would rise, fall or remain unchanged.
I don't think this is entirely true. We know that a lot of businesses are currently struggling. We also know there is high unemployment. I think there are plenty of people willing to take a lower wage and plenty of businesses which would prefer to pay their workers less.