Re: Effects of raising minimum wages in USA

On Thu, 22 Jun 2006 10:04:12 +0200, Ryan <ryan.castle@xxxxxxxxx> wrote:

The concentration of people working for exactly minimum wage suggests
to me that market processes do not work perfectly for labour supply. No
one working for minimum wage can have a marginal product lower than
minimum wage, or they would lose their jobs. And since it seems very
unlikely that so many people are worth precisely minimum wage, you have
to assume that many people are worth more, and could get more if they
were better at negotiating. If the marginal product of employed people
is distributed normally, then raising minimum wage might make some
people unemployable, but perhaps not very many.

If, as other people have suggested, the demand for labour at levels
around minimum wage is very price inelastic, then changing minimum wage
might not have much influence on quantity demanded. Raising it merely
transfers surplus from buyers of labour to workers. Which is good or
bad, depending on who you are, but not an issue of efficiency.

Australia's minimum wage is dramatically higher than that of the US,
and our unemployment rate is very similar. That doesn't prove much
about minimum wage except that there are obviously other, more
important factors in determining unemployment levels.

Yes, there are. Minim wage is an important factor among less educated and less paid workers. For expample I do not think anybody would propose that minimu wage influences unemployment level of well-paid specialists and freelancers.



--
Michał Gancarski
"If there's not drama and negativity in my life, all my songs will be really wack and boring or something." Eminem
.

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