One of the problems with economics that I have found is that in many cases economic fact is counterintuitive. The reason bad policies are passed is because the perception of the argument is easier to convey than the true economic fact. The minimum wage is a great example. Other than one paper written in 1996 (that has never been reproduced by another economist), there is a mountain of evidence that should be used to remove the minimum wage. The minimum wage however, is a very popular issue with many voters despite the fact it doesn’t help and increases teenage unemployment.
Another popular issue on the campaign is household wage stagnation. Whoever the Democrat nominee is this November expect to hear about how the Middle Class is shrinking, and their living standards are stagnant. There won’t be much of debate about these claims because the outdated “household income” statistics will be cited. David Freddoso takes on the myth of household wage stagnation over at the Corner today.
Household income is a terrible measure for comparing 1970 with today — one major reason being that the average household has shrunk since then by one-fifth. Also, 27 percent of households today are one-person households — up from 17 percent in 1970. One-person households are the most likely to be in the bottom quintile. Consonant with this fact, Thomas Sowell explained in a recent NROTV interview with Peter Robinson that the top 20 percent household bracket contains nearly twice as many actual people as that bottom 20 percent bracket.
What, that’s not clear? This is exactly one of the problems developed nations face today. It’s very difficult to counter bad economic arguments when the real answer is complicated to explain. The Democrats continue to push the envelope when it comes to bad economic ideas, especially on free trade, subsidies, health care, and the minimum wage. In an age of instant gratification it is going to become more and more difficult to present and implement correct economic policy when it’s easier to sell a distorted version of the truth.
without a minimum wage, what prevents an employer from simply not paying workers after they’ve performed the work?
The minimum wage isn’t used as a contract between employee and employer. Your question is more about the concept of contractual law.
you don’t know anything about labor law do you?
“Anything” is a bit of a stretch. I studied a bit of industrial relations in college which focused on labor contracts and arbitration. I wouldn’t argue however, that labor law is an area of expertise.
It’s also worth pointing out that hardly anyone (I’ve never seen it at least) argues that the reason to keep the minimum wage is to make sure employers pay their employees. There’s certainly other laws that could be drafted (if they’re not in place already) that solve that problem (if it even exists).
my question was a very pragmatic one. your answer about “contractual law” was a very esoteric one.
what type of other laws do you suggest drafting? laws that offer employee protections are the realm of what you call “liberals” so who would draft this legislation? certainly not the folks you vote for.
no, there is no payment protection law at the federal level other than the fair labor standards act. many states (such as missouri) don’t have wage collection laws either. so, it’s the feds or workers don’t feed their families. yes, the problem does exist.
once again, your absolutist ideology concerning the role of government in the economy does not address reality and exists only to reinforce a certain arrangement of power that you and i do not ultimately benefit from.
So the problem of wage collection is so bad it’s worth putting up with minimum wage law that increases unemployment? Workers can’t feed their families if they’re not working.
okay, let’s assume that you’re right and the mw causes unemployment:
therefore, what i’m saying is that if there is no mw law then employees are vulnerable to not getting paid and yes, very frequently do not. what you’re saying is that with a mw law there are fewer jobs. neither option is very appealing. so there needs to be a compromise between regulation and the free market. this is very much the point that i frequently try to make to you that your absolutist free market ideology is not always pragmatic.
I understand your point… but what’s the argument for raising the minimum wage then (Labor Union pay scales are the real reason)? With the cost of living increasing if we just left it alone it would be below the level that causes unemployment and would take care of all the worries you have about wage collection.
the mw has been increased 22 times since the flsa was passed in 1938. shouldn’t that have led to massive unemployment?
There’s a wealth of economic literature written about the minimum wage if you’re really interested in it. The MW is a populism tool aimed at ignorant voters and Unions. There aren’t a lot of people that work true MW jobs. Teenagers who work summer jobs and part time jobs are the one mostly effected.
The MW isn’t high enough to cause major problems, the only reason it’s raised at all anymore is for Union contracts.
you didn’t answer my question at all and i don’t see the connection between union prevailing wage rates and the mw.
Union contracts are tied to the MW. They’re pay rates are based on a percentage above the MW. With the MW goes up, their pay goes up.