CynicusEconomicus: February 2013

Friday, February 15, 2013

The Minimum Wage

Apologies for not posting for so long. Also, this is going to be one of the shortest posts I think I have written. I occasionally browse the Mises institute, although I am not an Austrian economist (they have some good points, but others are more questionable). This time round, I stumbled on an article on the minimum wage. This key passage was of particular interest:

The advocates of the minimum wage and its periodic boosting reply that all this is scare talk and that minimum wage rates do not and never have caused any unemployment. The proper riposte is to raise them one better; all right, if the minimum wage is such a wonderful anti-poverty measure, and can have no unemployment-raising effects, why are you such pikers? Why you are helping the working poor by such piddling amounts? Why stop at $4.55 an hour? Why not $10 an hour? $100? $1,000?

The logic appears to be simple and very clear. The 'piddling' amounts is because higher amounts would cause unemployment, and the advocates know it! I do not favour the minimum wage as I have always considered it a misguided tool (I will not go into all my reasons now). However, this single passage seems so simple and logical, it is difficult to argue with. Rarely in economics is there such a simple, concise and clearly expressed argument. Does anyone have a counter-argument to this simple logic, as I would be fascinated to hear it? Maybe this is too simple?

Key Posts From the Archive...

If you are new to the blog, you may want to start with these key posts:

Some posts on the underlying causes of the crisis:

'5 Minutes to Midnight' - A summary of the problems in the world economy, published in the magazine 'Trade and Forfaiting Review' (external link). 'The Economic Crisis - The Underlying Cause' - An update from a previous post (see next). The Banking Crisis - What is REALLY going on - An overview pulling many of my thoughts together in one place (a useful introduction, but not a substitute for the original posts). A review of 2008 and predictions for 2009 here.

General Posts:

A Funny View of Wealth - A long essay that describes the problems in the UK Economy, and which predicted the current economic crisis in 2007. Isn't all Growth Built on Debt provides a short/basic introduction, but read the original if you have time.

The Cigarette Lighter Problem - An illustration of the fundamental problems in the Western economies and 'Government Borrowing and Interest Rates' for the troubles government can cause. 'The Central Banks and Their Role in the Crash' - includes an explanation of why quantitative easing in Japan is different from the US and UK.

The Banking System - Synthetic Economics - Why our entire financial system is built on confidence alone (bear with it, because it is not easy).

The collapse of the Service Economy, or why the US and UK economies are about to shrink by around 30% in the next couple of years.

US and UK Guarantee Consumer Debt - a summary of what the bank bailouts really meant.

The Perpetual Economic Growth Machine - A Basic Problem with Keynesian Economics

Some Solutions:

NHS, Education and Benefits System reform - Several posts on possible long term solutions. A controversial post on reforming energy policy. Reforming Banking and Money can found here, and taxation here.

To grasp the full picture, you may want to take a look at the archives (below). There is a lot more to be found than the above....

Look here for more...

Recommended Sites

The IFS

Adam Smith Institute

Steve Tierney - a blog from a regular commentator on this blog (see comments on most posts) Tiberius Leodis - another regular commentator, who occasionally challenges some of the points in this blog. Focused on Leeds city in the UK, and the effects of the crisis on the city (see comments on the most posts in the last few months). Social Democracy for the 21st Century - A blog established by Lord Keynes, a long standing commentator on the blog and critic of much of the content of the blog. If you are looking for a different point of view, a good starting point. For some interesting opinion, one of the commentators on this blog publishes a blog, interestingly called The Fat Bigot NZClimate