This Forbes article discusses how full employment in the economy
is more beneficial for workers than adjusting the minimum wage rate. More so,
if the goal is to raise the wages of the
workers, then we should be arguing for policies that create full employment and
not for any more of that minimum wage silliness. A Walmart located in Washington D.C. noted they might need to downsize depending on the possibility
of a minimum wage increase. The minimum wage there is currently $11.50 an hour,
but this could possibly increase to $15.00 an hour if a proposed ballot measure is
successful in November. When trying to raise workers wages through the minimum
wage, it successfully increases wages, however, other workers end up with no
wages as a result. Therefore,
a better solution would be to reach full employment in the economy to raise
wages.
If there’s unemployment around then companies
don’t have to pay workers high value because if anyone gets asks for a pay
rise, the employer can just fire them and hire some of the reserve army of the
unemployed. However, this power arrangement entirely changes when there’s no
unemployment. In order to find workers, the employer is now in competition with
other capitalists for the profit. That competition means that they have to raise
wages to get the workers they want. If we’re at full employment then wages (more properly,
total compensation, including things like paid time off, pension contributions,
healthcare insurance and yes, taxes on employment) will rise with productivity
in real terms and productivity plus inflation in nominal terms. Which is,
actually, what we would like to be happening. Thus we’d like the economy to be
at full employment.
http://www.forbes.com/sites/timworstall/2016/01/21/walmart-and-karl-marx-full-employment-is-the-workers-best-friend-not-the-minimum-wage/#2715e4857a0b6e1f459b5393
I agree with the article and your take on it. Raising minimum wage would only cause inflation and higher unemployment. However, attempting to reach full employment would cause a highly competitive environment that causes natural wage increases. I think that the idea of raising minimum wage sounds good, and thus is a popular political move. However, as I mentioned before, I don't think it is the right answer.
ReplyDeleteI would also agree with your take on this article and the inconsistencies of an increase of wages and a positive connection with the economy. Full employment does seem like a much better strategy but i would be interested to see the managerial effects that policy would have.
ReplyDeleteIn August, Walmart messed around with the idea of raising the minimum wage to 15$ an hour and suffered the consequences. The company felt a decline in employee moral as many long time employees complained about these newer unskilled workers making higher wages. Another wealth management firm also messed around with raising the minimum wage and it ended with two employees quitting. This was because they were not content with these entry employees making such high salaries. Raising wages through full employment would be a safer economic solution rather than raising the minimum wages.
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