Well, should we increase or decrease minimum wage?

Or even abolish it completely?

I know you've all heard of this argument before, but I haven't heard a good answer yet so I'm asking.

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While it will increase the cost of living for most of us, for the minimum wage earners it would make their lives better (economically speaking of course). If paying them a low wage makes them a liability rather than an asset, it's best to raise the minimum wage. And if it means prevention of future costs, so the better.

Suppose you have an economy where the average worker works 30 hours a week and earn Y dollars/week.

The worker who recieves Y dollars/week may recieve on average 30 worker-hours a week at his or her service without donations.

The worker who recieves 2*Y dollars/week may recieve on average 60 worker-hours a week at his or her service without donations.

The worker who recieves 3*Y dollars/week may recieve on average 120 worker-hours a week at his or her service without donations.

However...

The worker who recieves Y/2 dollars/week may recieve on average 15 worker-hours a week at his or her service without donations.

The worker who recieves Y/3 dollars/week may recieve on average 10 worker-hours a week at his or her service without donations.

Say we have 6 workers, so that the total amount of service available is 180 worker-hours. At first, we start with the equilibrium where all workers are paid the same and recieve the same service.

Person 1: 30 hours of service recieved
Person 2: 30 hours of service recieved
Person 3: 30 hours of service recieved
Person 4: 30 hours of service recieved
Person 5: 30 hours of service recieved
Person 6: 30 hours of service recieved

So each person earns Y for 30 hours. When one person starts making twice as much as the others, look what happens to the others:

Case 2)
Person 1: 25.7 hours of service recieved
Person 2: 25.7 hours of service recieved
Person 3: 51.4 hours of service recieved
Person 4: 25.7 hours of service recieved
Person 5: 25.7 hours of service recieved
Person 6: 25.7 hours of service recieved

And three times as much:

Case 3)
Person 1: 22.5 hours of service recieved
Person 2: 22.5 hours of service recieved
Person 3: 67.5 hours of service recieved
Person 4: 22.5 hours of service recieved
Person 5: 22.5 hours of service recieved
Person 6: 22.5 hours of service recieved

The value of a working hour for the rest is therefore decreased by 14.3% in Case 2, and it is decreased by 25% in Case 3 (ceteris paribus).

Raising the minimum wage closes the gap between minimum wage workers and those of us making above minimum wage. It devalues my dollar by increasing inflation. It causes unemployement by making affordable employees unaffordable.

It's only a short term solution for minimum wage workers because once inflation sets in they are back where they started. Mean while those of us who work for companies that refuse to give cost of living raises essentially get a pay decrease because their dollar isn't worth as much as it was.

The only advantage I can see in raising minimum raise is that it may cause a temporary "kick start" to the economy by increasing the dollars rolling into peoples pockets. Kinda like those checks Bush sent out to everybody when he got elected, and we all see how effective that was.

My suspicious mind tells me the biggest reason politicians increase minimum wage is to buy votes while they themselve know it's not helping anybody.

All in all I'd have to give it a thumbs down.

While I don't think the effects would be THAT bad in the current market, I pretty much agree with the guy above.

Really, no one's winning much of anything. Adjust for inflation and it doesn't do much other than give people a case of the happies. The people it's helping don't need it (most are seniors and teen-college aged kids) as they've either maxed out their earning potential or haven't even begun to tap into it. So I don't know. I don't think it'd do much of anything except give us a slightly (very) effect. Anything that's in the negative ain't worth it.

i get paid minimum wage and i hate it. I work for Jewel and get min wage, but i have to pay union dues. PAr of the reason why minimum wage went up in the unites states is because union lobbyists wanted them to go up. They said that they cared about the workers, which couldnt be farther from the truth. Perhaps they should allow me to not pay anymore union dues and left minimum wage alone. I would be getting paid more. The union takes more money from me than fed taxes, state taxes, soc sec, and medicare combined. Ther reason why min wage was pushed by unions was because all of the unskilled workers who demand the most benefits from the union would be fired because the cost of doing business would increase. Most people dont realize that unemployment goes up with the minimum wage. If you eliminate the minimum wage, you will essentially eliminate unemployment aside from those who simply would rather not have money than work because they are so lazy and will assume they can live off welfare. My solution to that is to eliminate welfare and then see what happens.

Raising the minimum wage from 5.15 to 7.25 or 8.50 for that matter helps no one. Can you imagine trying to live off that much? The rising cost of food makes minimum wage earners increasingly poorer. We need to fix this problem at the source and end inflation and government subsidies.

I have little sympathy for the minimum wage because it is based on big gov't, but most attacks on such as those above are based on silly, static, equilibrium analysis of the economy which is nothing like reality.

It may increase prices or unemployment, it might not. If the best evidence it would do this is a couple of graphs which are static snapshots of a hypothetical economy based on absurd assumptions and with ample internal inconsistencies I'd be very doubtful.

It is bad because working people have to rely on some far off officials to do it, instead of being in control of their own creative activity.

Yet you still choose to work for minimum wage.

Why not find a job that isn't union?

Funny you should say that. I know a lot of folks who, once they were IN a union, realized how horrible unions really are.

You get what you pay for, pay minimum, get minimum. Case and argument closed.