How much should minimum wage be?

[brianeyci]

Fine MoO, I would like a juristiction where the minimum wage has been abolished and the purchasing power of the poorest members of society has gone up please. I won't even semantic whore "poorest members" either. If you can show me that elimination of the minimum wage results in real results for poor people, then I will be convinced and concede.

Brian

[brianeyci]

You still haven't demonstrated this.

Do you agree that people work at the minimum wage because that's the minimum someone will be willing to pay them? It works in reverse too for unskilled labour where there are more people than jobs. If a job is at minimum wage, and there are more people willing to do that job than there exists jobs, then the minimum wage holds up the value of the wage up to 5.15 that would plummet otherwise because there are more people willing to work for less. Why does your thought experiment work one way and not the other?

YES! The United States.

What about the people who work at minimum wage right now at 5.15? The minimum wage has nothing to do with them getting 5.15 and it's all about market?

Brian

[Big Phil]

Brianeyci,

Do you even know who works for the minimum wage? It's people who work at McDonalds, unskilled labor, or childcare providers. In other words, it's jobs that virtually anyone can do, and therefore there's a massive supply of potential workers.

Places like Wal-Mart, JC Penney, Home Depot typically pay much more than minimum wage because they have to. If they don't, as CommanderWilkens pointed out (correctly), their employees will go find better jobs.

This whole living wage argument, or wanting to ensure that people have money to spend in the economy, is a silly argument, because typically the only people who work for minimum wage are teenagers or people with ZERO job skills.

By contrast, somebody like me, Stravo, Mike Wong, etc. (college degree and several years of experience) are not hanging out on street corners looking for work. There's a limited supply of these people, particularly those who have specialized skills (such as engineers), therefore the price to hire them goes up.

[brianeyci]

I already conceded the living wage argument as stupid. Right now I'm just defending the existence of the minimum wage and the need to match it with inflation.

<edit>MoO I will concede to you if you can show me a juristiction in practical terms where the minimum wage was eliminated and the purchasing power of the poorest members of society increased.

The United States. For practical purposes, the minimum wage has been eliminated by inflation because the equilibrium wage even for unskilled workers is greater than the minimum wage, making it an ineffective price floor. A worker at Wal-Mart, by your own inflation data, who makes $8.15 today (the starting salary for the least-skilled Wal-Mart employee) is better off than the minimum wage worker was when the minimum wage was established (in a tribute to increasing productivity).

Anyway MoO, since you say that inflation has taken care of the minimum wage and that because of this poor people have seen real results, I looked up Table 698 in the US Census and found out not to much surprise that the percentage of people living under the poverty line is still at a fat ten percent. Clearly something has to be done about this, since the market is not lowering the poverty rate by any appreciable level. In fact ever since the anti-minimum wage craze of the eighties look at the percentage of poor people, a clear double digits most of the way and usually around ten percent. So this isn't semantic whoring poor people either, this is what you want, including unemployed people. So clearly you can see that the minimum wage freezes have been a failure in terms of significantly reducing the gap between the rich and the poor. The minimum wage can't be the most responsible for the poverty levels since as you mentioned the equilibrium wage exceeds the minimum wage.



<edit>And look, right around the time of the 1997 5.15 Federal Wage Hike, the poverty level goes 11%, 10.3%, 10%, 9.3%, 8.7% until the inflation catches up and makes the hike worth less around 2000/2001 according to that inflation data I posted. Then it goes up as the minimum wage value goes to 4.69 (adjusted) below the 4.75 value pre-1997 levels (again adjusted).</edit>

Brian

[His Divine Shadow]

Corporations already do this in third world countries, you don't think they would do it here if they could get away with it? Please .

The real question is then, can they get away with it here?

[Big Phil]

snip

You're attributing the decrease in poverty to an increase in the minimum wage but, even if you make the minimum wage, you are still below the poverty line in most states. It looks to me, however, like the poverty level fluctuates between 10.3% and 12.3%, and only dropped below that in the late 90's. Do you remember what was happening in the mid-late 90's? Rapidly growing economy, lots of job growth, dot.coms, etc... Any of that ring a bell? You think that might have had anything to do with the decrease in the poverty level?

[lance]

Brianeyci,

Do you even know who works for the minimum wage? It's people who work at McDonalds, unskilled labor, or childcare providers. In other words, it's jobs that virtually anyone can do, and therefore there's a massive supply of potential workers

. I have yet to find a job that actually pays the minimum. McDonalds starts at ~5.75, Burger King, A&W pay a little more. Construction pays ~15 an hour.

Places like Wal-Mart, JC Penney, Home Depot typically pay much more than minimum wage because they have to. If they don't, as CommanderWilkens pointed out (correctly), their employees will go find better jobs.

I seriously can't immagine working at Wal-mart being much worse than McDonalds or labor.

typically the only people who work for minimum wage are teenagers or people with ZERO job skills.

Actually minimum wage only applies to people who are over 19 I belive.

[/quote]

[brianeyci]

You're attributing the decrease in poverty to an increase in the minimum wage but, even if you make the minimum wage, you are still below the poverty line in most states. It looks to me, however, like the poverty level fluctuates between 10.3% and 12.3%, and only dropped below that in the late 90's. Do you remember what was happening in the mid-late 90's? Rapidly growing economy, lots of job growth, dot.coms, etc... Any of that ring a bell? You think that might have had anything to do with the decrease in the poverty level?

Ossus wanted my definition of poor people to include unemployed people and people who made above the minimum wage so I chose the poverty line instead of just plucking people who made the minimum wage or less.

But you're right I'm correlating statistics without showing the connection, and looking at the other minimum wage increases they didn't decrease the poverty level at all. So that was stupid to do. If I chose purely the people who made the minimum wage, they would obviously see an increase in their purchasing power with a minimum wage increase, but so little people make the minimum wage.

The question is then, why is the minimum wage so harmful that it needs to be removed. I still maintain that removing the minimum wage would be hurting whoever is making the minimum wage right now, about 0.7% of Americans, and that the connection betweeen the minimum wage an unemployment is minimum (no pun intended). If everybody pays over the minimum wage except a few select jobs, then it isn't really the minimum wage holding up unemployment to around 7% or so. And I would rather there not be the existence of legal sweat shops.

Using MoO's own statistics from his link, every ten percent increase in the minimum wage results in 1 to 3 percent less jobs for teenagers. Going from 5.25 to 7.25 is about a 40% increase so that's about a 4% to 12% increase in unemployment in teenagers while the other 96% to 88% of teenagers get 40% more income. And of course older workers working at the minimum wage would have an advantage over teenagers with experience. So even going strictly by "good of the many", more people benefit when increasing 5.15 to match inflation (I believe 7.25, not certain). Meanwhile businesses have to get more efficient.

<edit>If you are wondering, from that census data 0.4% of adults over 25 work for the minimum wage. So if a few teenagers lose their jobs with a minimum wage hike, I'm not going to cry if older people get a 40% increase in their purchasing power and teenagers buy less Tommy or Nike. The majority of jobs lost would be teenagers, and older people working at minimum wage probably wouldn't lose their jobs at all just because the attrition would come from the least experienced, the teenagers.</edit>

Brian

[Master of Ossus]

Fine MoO, I would like a juristiction where the minimum wage has been abolished and the purchasing power of the poorest members of society has gone up please. I won't even semantic whore "poorest members" either. If you can show me that elimination of the minimum wage results in real results for poor people, then I will be convinced and concede.

Brian

My argument is that it's not going to do anything, not that it's going to help people who are currently earning the minimum wage. It will help people who are unemployed by driving down the unemployment rate and making it easier to get jobs with less turn-over, as has been demonstrated repeatedly by empirical studies done when the minimum wage has been raised and then as inflation has eroded the real purchasing power of said wage.

[Master of Ossus]

You still haven't demonstrated this.

Do you agree that people work at the minimum wage because that's the minimum someone will be willing to pay them?

I can't make heads nor tails of this question. Can you please clarify?

It works in reverse too for unskilled labour where there are more people than jobs. If a job is at minimum wage, and there are more people willing to do that job than there exists jobs, then the minimum wage holds up the value of the wage up to 5.15 that would plummet otherwise because there are more people willing to work for less. Why does your thought experiment work one way and not the other?

It works both ways. There's something called an "equilibrium point." And, incidentally, the problem that you've just admitted to (ie. there being more unskilled labor than jobs) is indicative of a market failure CAUSED BY THE MINIMUM WAGE. Thank you for admitting that the minimum wage keeps people out of jobs.

What about the people who work at minimum wage right now at 5.15? The minimum wage has nothing to do with them getting 5.15 and it's all about market?

Brian

Correct. Their MRP's are at or above $5.15, or else they would not be employed for even that wage. They will continue to receive about $5.15 if the minimum wage no longer existed.

[brianeyci]

My argument is that it's not going to do anything, not that it's going to help people who are currently earning the minimum wage. It will help people who are unemployed by driving down the unemployment rate and making it easier to get jobs with less turn-over, as has been demonstrated repeatedly by empirical studies done when the minimum wage has been raised and then as inflation has eroded the real purchasing power of said wage.

Inflation goes up faster than usual if you raise the minimum wage?

Anyway it's easy to accept that when you raise the minimum wage there's job loss. How does that translate into more jobs if you lower/get rid of the minimum wage?

If you say that the equilibrium wage is over the minimum wage and only .7 percent of Americans make the minimum wage right now, .4 of adults, then why would getting rid of the minimum wage create new jobs? I see it as punishing the people who are making the minimum wage compared to if you raise the minimum wage, helping the people who are currently making the minimum wage. At the expense of teenagers, but oh well.

Brian

[Master of Ossus]

Anyway MoO, since you say that inflation has taken care of the minimum wage and that because of this poor people have seen real results, I looked up [snip]and found out not to much surprise that the percentage of people living under the poverty line is still at a fat ten percent.

What a surprise--a worker who works full time for the minimum wage is earning well below the poverty line for a family of two. It's absolutely stunning that taking a measurement which has no real effect other than to keep people out of a job is going to do little to raise families above the poverty line.

Clearly something has to be done about this, since the market is not lowering the poverty rate by any appreciable level.

The poverty line ignores any number of factors that go in to making someone actually poor. Someone who was considered upper-middle class in 1925 had a real purchasing power that would place them well below the poverty line today. Moreover, the poverty line does not distinguish between people who are making $7,500/year and people who are making zero, even though the person who is earning $7,500 is significantly better off than the person who is involuntarily unemployed for the entire period.

In fact ever since the anti-minimum wage craze of the eighties look at the percentage of poor people, a clear double digits most of the way and usually around ten percent.

Except that the minimum wage was raised in 1990, 1991, 1996, and 1997. Your own statements DESTROY your argument that the minimum wage is a valuable instrument in lowering Fed-defined poverty rates, which is no real surprise to anyone who's thought about the thing.

So this isn't semantic whoring poor people either, this is what you want, including unemployed people. So clearly you can see that the minimum wage freezes have been a failure in terms of significantly reducing the gap between the rich and the poor.

Bullshit. I see that raising the minimum wage has been totally ineffective at lowering poverty levels. Not that you will care.

<edit>And look, right around the time of the 1997 5.15 Federal Wage Hike, the poverty level goes 11%, 10.3%, 10%, 9.3%, 8.7% until the inflation catches up and makes the hike worth less around 2000/2001 according to that inflation data I posted. Then it goes up as the minimum wage value goes to 4.69 (adjusted) below the 4.75 value pre-1997 levels (again adjusted).</edit>

Brian

I love the way you argue that "inflation catches up" with something, as if it's an instantaneous effect. Why did raising the Federal minimum wage have virtually no impact on poverty rates in 1990, 1991, and 1996? Hint: the minimum wage is not responsible for the lowering of the poverty rates. And guess what? There was a huge economic boom that was happening concurrently with this reduction in Federal poverty rates. Go on, though, and continue cherry-picking data to create spurious correlations to support your argument while ignoring identical actions that were complete failures in dealing with the exact same issues that you use to support your story of unmitigated success.

[Master of Ossus]

Inflation goes up faster than usual if you raise the minimum wage?

I've never seen any empirical study suggesting that a minimum wage increases inflation rates (though, ironically, Wal-Mart has been demonstrated to lower inflation rates in surrounding areas).

Anyway it's easy to accept that when you raise the minimum wage there's job loss. How does that translate into more jobs if you lower/get rid of the minimum wage?

Let me get this straight: raising something results in job loss, but lowering something does not allow recovery of said jobs?

If you say that the equilibrium wage is over the minimum wage and only .7 percent of Americans make the minimum wage right now, .4 of adults, then why would getting rid of the minimum wage create new jobs?

Because we have a huge number of unemployed people who are presumably willing to work for less than the minimum wage, since getting some positive wage is better than getting nothing. Removing a price floor allows a market to clear.

I see it as punishing the people who are making the minimum wage compared to if you raise the minimum wage, helping the people who are currently making the minimum wage. At the expense of teenagers, but oh well.

Brian

But you haven't even established that people who are currently making the minimum wage will see a fall in real wages, after minimum wage is removed. Are you claiming that their MRP's will fall in the post-minimum wage era or are you claiming that MRP is not correlated with wages?

[brianeyci]

I thought about this a bit and it seems to me that the solution would be to just raise minimum wage but keep it below the equilibrium point. Therefore teenagers who don't really need it lose jobs, but the adults (25 years and older, .4 percent of the American population) who are working minimum wage get an increase in their purchasing power. Will you settle for that? Matching the 5.15 with inflation would keep it below the equilibrium you mentioned.

If not, why not.

If not, how about this. Suppose there is someone who does three dollars worth of work, person B. Person A hires him and the work still needs to be done, and because he doesn't want to break the law he hires him at 5.15. When the minimum wage is gone, he no longer has to pay 5.15 and so hires people for three bucks.

How did person A make money through this time? He made money, but he made less. Because there was somebody willing to work for less than B, but A couldn't hire him because of minimum wage laws.

I argue that with jobs at the minimum wage, the minimum wage is artificially holding up their wages above what they'd be worth. So if you remove the minimum wage, either inflation takes care of their wage and makes it worth its actual MRP, or they are fired and other people willing to work for the MRP are hired. Causing dilution of poor people's purchasing power.

As for lowering something resulting in job gains not following from raising something resulting in job losses, the answer's obvious both logically and empirically. A is raise minimum wage, B is job cut. A implies B, in other words raise minimum wage therefore job cuts. But the logical contrapositive is ~B implies ~A, in other words no job cuts means no raise in minimum wage. The inverse, ~A implies ~B, no raise in minimum wage (axing minimum wage) means no job cuts (job gains), is not logically equivalent. Practically once those jobs are cut the businesses either find a way to adapt with the employees they have left (my efficiency point with the minimum wage) or they go out of business. Why would they want to hire more people when they have either figured out a way to survive with the higher wage or are gone?

I would like to know what kind of "sleeper" industries are dying to hire people at under the minimum wage at all, if they exist.

Because we have a huge number of unemployed people who are presumably willing to work for less than the minimum wage, since getting some positive wage is better than getting nothing.

This really is the crux of your argument, and you haven't shown anything other than "raise minimum wage and there are job losses" (like duh I knew this) to show that "lower minimum wage and there are job gains" or "get rid of minimum wage and there are job gains" which doesn't logically follow.

I am also looking for a real world example of the minimum wage being gotten rid of and poverty levels going down. If not I will even settle for poor people not being hurt by minimum wage being removed. Inflation is besides the point because there are still people working at the minimum wage right now in America so it still exists.

Brian

[Pu-239]

I would like to know what kind of "sleeper" industries are dying to hire people at under the minimum wage at all, if they exist.

Small businesses.

[Middleclass]

If not, how about this. Suppose there is someone who does three dollars worth of work, person B. Person A hires him and the work still needs to be done, and because he doesn't want to break the law he hires him at 5.15. When the minimum wage is gone, he no longer has to pay 5.15 and so hires people for three bucks.

I humbly submit that in this scenario, Person A is mentally handicapped and shouldn't be making these kinds of decisions. If the MRP is $3.00, and the wage is $5.15, then person A loses $2.15 every hour that person B works. Since person A will want to minimize losses, he will fire person B. Therefore, minimum wage causes unemployment. If the minimum wage is abolished, then person B can make $3.00 per hour, which is the absolute maximum that any employer will pay him for this job, ever (excluding silly scenarios like governmental subsidy). Person B is being hurt by the minimum wage, decreasing his earning potential (from $3/hour to 0) and making him noticeably poorer. You can say "the job needs to be done", but that is not exactly precise. He surely wouldn't pay anyone a million dollars to do it. Not even $50 an hour. So to be exact, the job creates $3 worth of benefit to the employer, per hour. No employer will endure a negative surplus, even if it means not having that job done.

I'm sorry if this sounds condesending, but do you understand MRP and it's role in wage creation and price theory?

[brianeyci]

I'm sorry if this sounds condesending, but do you understand MRP and it's role in wage creation and price theory?

To be honest, no. I avoided any business related course in high school like the plague, and I don't even have a first year economics course under my belt in university. But I don't see why necessarily it has to be a loss. It almost sounds like a false dilemma to me--either they hire people worth their MRP or they go out of business. If D is willing to work less than person C, that doesn't exactly mean that C is not making a profit for the employer, but that the employer would make more profit if he hired D. I don't see what's wrong with my line of reasoning. If MRP is the wrong terminology for it then fine.

Brian

[Master of Ossus]

I thought about this a bit and it seems to me that the solution would be to just raise minimum wage but keep it below the equilibrium point. Therefore teenagers who don't really need it lose jobs, but the adults (25 years and older, .4 percent of the American population) who are working minimum wage get an increase in their purchasing power. Will you settle for that? Matching the 5.15 with inflation would keep it below the equilibrium you mentioned.

If not, why not.

Teenagers compete with unskilled adults for jobs. Your solution provides a competitive advantage to teenagers, and while it changes the nature of the market failure it does nothing to equilibrate markets.

If not, how about this. Suppose there is someone who does three dollars worth of work, person B. Person A hires him and the work still needs to be done, and because he doesn't want to break the law he hires him at 5.15. When the minimum wage is gone, he no longer has to pay 5.15 and so hires people for three bucks.

But he wouldn't have hired person B in the first place, because person B's work wasn't worth $5.15, before.

How did person A make money through this time? He made money, but he made less. Because there was somebody willing to work for less than B, but A couldn't hire him because of minimum wage laws.

No, under your scenario he lost money because person B's work is worth $3 and he was paying him $5.15.

I argue that with jobs at the minimum wage, the minimum wage is artificially holding up their wages above what they'd be worth. So if you remove the minimum wage, either inflation takes care of their wage and makes it worth its actual MRP, or they are fired and other people willing to work for the MRP are hired. Causing dilution of poor people's purchasing power.

Marginal revenue product is not something you can get around just by claiming that other people are willing to work for it. If someone isn't willing to work for their MRP's, then they will never work. Period. No business will pay anyone a wage that is greater than the amount of revenue that person brings in for the business--they would lose money by doing so. Similarly, no worker will need to work for less money than their MRP because if a business offered a wage less than their MRP, then another business would hire them for something higher.

As for lowering something resulting in job gains not following from raising something resulting in job losses, the answer's obvious both logically and empirically. A is raise minimum wage, B is job cut. A implies B, in other words raise minimum wage therefore job cuts. But the logical contrapositive is ~B implies ~A, in other words no job cuts means no raise in minimum wage.

Except that the minimum wage is the exogenous event, here. We have no control over exogenous job cuts.

The inverse, ~A implies ~B, no raise in minimum wage (axing minimum wage) means no job cuts (job gains), is not logically equivalent. Practically once those jobs are cut the businesses either find a way to adapt with the employees they have left (my efficiency point with the minimum wage) or they go out of business. Why would they want to hire more people when they have either figured out a way to survive with the higher wage or are gone?

Businesses would adopt more capital intensive models, and substitute capital for labor under your scenario. There are no market forces for locking them in to a particular resource mixture, and if one of their primary inputs becomes more expensive then they will change processes in the long run and use less of the more expensive resource.

I would like to know what kind of "sleeper" industries are dying to hire people at under the minimum wage at all, if they exist.

Virtually any industry should be able to gain some non-zero, positive benefit from hiring additional workers. It's just a matter of reducing their costs to the point where it is feasible for them to do so.

This really is the crux of your argument, and you haven't shown anything other than "raise minimum wage and there are job losses" (like duh I knew this) to show that "lower minimum wage and there are job gains" or "get rid of minimum wage and there are job gains" which doesn't logically follow.

Minimum wage reduces employment, and the elasticity is somewhere between -.1 and -.2, measured empirically. Elasticities work in either direction, albeit instantaneously, and so assuming linearity the elimination of the minimum wage would cut unemployment by over one half. Of course, this is not a reasonable measure because of the instantaneous nature of an elasticity, but removing the minimum wage would still serve to reduce unemployment in the economy.

I am also looking for a real world example of the minimum wage being gotten rid of and poverty levels going down. If not I will even settle for poor people not being hurt by minimum wage being removed. Inflation is besides the point because there are still people working at the minimum wage right now in America so it still exists.

Brian

But its effects have become negligible. It's difficult to find a country with the balls to actually remove the minimum wage because most people (like you) have absolutely no clue what the actual effects of a minimum wage are. Nonetheless, the example of the United States makes it pretty clear that there is no correlation between the minimum wage and poverty rates.

[Master of Ossus]

I'm sorry if this sounds condesending, but do you understand MRP and it's role in wage creation and price theory?

To be honest, no. I avoided any business related course in high school like the plague, and I don't even have a first year economics course under my belt in university. But I don't see why necessarily it has to be a loss. It almost sounds like a false dilemma to me--either they hire people worth their MRP or they go out of business. If D is willing to work less than person C, that doesn't exactly mean that C is not making a profit for the employer, but that the employer would make more profit if he hired D. I don't see what's wrong with my line of reasoning. If MRP is the wrong terminology for it then fine.

Brian

I see what the problem is. Do you have knowledge of calculus? Can I explain it to you in such terms?

In short, though, your reasoning is correct provided that C and D have equal MRP's. However, there is no incentive for D to work for less than C if the market can clear, because a competing business will have incentives to hire D at the true value of his MRP. The result, assuming equilibrium markets, is that C and D will both work for their MRP's and precisely their MRP's.

[brianeyci]

I see what the problem is. Do you have knowledge of calculus? Can I explain it to you in such terms?

Yes. You could, but you really don't have to, I'm surprised you didn't start flaming me. It's pretty clear to me now I was talking out of my ass for most of this thread, especially about the living wage part, and now even the existence of the minimum wage is pretty questionable.

You do understand the rationale behind the minimum wage though, that everybody's time has equal worth regardless of their skills, grounded in human rights. Now I'm starting to think that's kind of bullshit though.

So I have to concede to you. I'll pick up an economics textbook when my exams are over instead of wasting your time.

Brian

[Darth Wong]

Hmm, jumping in here, I'd just like to point out that minimum wage is also an attempt to get uneducated people off the welfare rolls by forcing employers to pay enough money to make it worth welfare recipients' time and effort to work.

It could be said that employers would simply hire fewer people if minimum wage is increased, but on the other hand, employers hiring people for extremely low wages basically means "illegal immigrant labour", because citizens can simply go on welfare and make as much as (if not more then) these slave wages by sitting at home and waiting for their cheques.

[Master of Ossus]

Hmm, jumping in here, I'd just like to point out that minimum wage is also an attempt to get uneducated people off the welfare rolls by forcing employers to pay enough money to make it worth welfare recipients' time and effort to work.

It could be said that employers would simply hire fewer people if minimum wage is increased, but on the other hand, employers hiring people for extremely low wages basically means "illegal immigrant labour", because citizens can simply go on welfare and make as much as (if not more then) these slave wages by sitting at home and waiting for their cheques.

At least in the US, that concern was (partially) addressed by using the Earned Income Tax Credit program. Basically, the program subsidizes the wages of people who earn below a certain amount of money each year (with adjustments for people who are married, have kids, etc. etc.), so that if they get a job that pays them $5 per hour, the government gives them an additional $1 per hour (numbers fictional). It is generally preferred to the minimum wage because it's a government program and so it does not create the sort of disincentive to hire workers that minimum wage programs create while still generating the positive incentive effect for people to work and get off of welfare. It's also one of the more controversial government social programs that I endorse (at least in principle).

[Sea Skimmer]

It could be said that employers would simply hire fewer people if minimum wage is increased, but on the other hand, employers hiring people for extremely low wages basically means "illegal immigrant labour", because citizens can simply go on welfare and make as much as (if not more then) these slave wages by sitting at home and waiting for their cheques.

Which is why there are all sorts of restrictions on who can get welfare and for how long now, it’s pretty near impossible most places for a single male without some kind of crippling injury to get welfare for example.

[unigolyn]

Hmm, jumping in here, I'd just like to point out that minimum wage is also an attempt to get uneducated people off the welfare rolls by forcing employers to pay enough money to make it worth welfare recipients' time and effort to work.

It could be said that employers would simply hire fewer people if minimum wage is increased, but on the other hand, employers hiring people for extremely low wages basically means "illegal immigrant labour", because citizens can simply go on welfare and make as much as (if not more then) these slave wages by sitting at home and waiting for their cheques.

And the response to this would be a negative income tax. The gist of it is that as long as you work, the government takes a percentage of your earnings (let's say 20%) but also gives you a set amount of money, which would be enough to live on (let's say 12K CAD yearly). Therefore you can go stack dog turds for $1 per hour and make 2000 bucks a year and give 400 of that to the government, but they'll also give you $11600 back, and you're making $13200 a year. (obviously higher-income people would pay more in taxes than they get back)

Since anyone giving you that buck per hour to stack those dog turds is making money off you doing that, and since no one would hire someone to do that for $7.65 an hour, there's an economic gain where there wasn't one before.

Benefits? Minimum wage eliminated, and since it's basically a flat tax, all the benefits of tax code simplification also ensue (i.e. less loopholes and writeoffs equals more tax revenue). Everyone who works is guaranteed a living income (not wage). No one will want to hire illegal immigrants, because any unskilled citizen entitled to the tax refund will actually work for less than any immigrant. Unemployment should all but vanish.

[lance]

Actually minimum wage only applies to people who are over 19 I belive.

I checked and for the first 90 consecutive calender days people under 20 may be paid 4.25