Short Response To A Conservative – The Minimum Wage

This is going to be a very short response to this “essay” here written by CredibleHulk. I normally don’t respond to people like Hulk, however I read this post and nearly died of laughter and felt compelled to say something on the matter. Let’s begin, he starts off by explaining the modern microeconomic model of how supply and demand works, the reason for this is because most right-wing arguments come on the basis of abstract theory and not the material and objective world, for this reason most of their ideas seem to fail in practice. His next argument goes as follows,

As a first principle, free people should be able to bargain and engage in voluntary exchange with each other without having the government come down and mandate a certain relationship. Let us take the example of a gas station owner who wants to hire help for the summer but is not willing to pay more than two dollars an hour. Under current policy, the gas station worker would not be able to hire anyone because he is not willing to pay the federally mandated $7.25 an hour. This explains why a recent study found that “…this period’s full set of minimum wage increases reduced employment among individuals ages 16 to 30 with less than a high school education by 5.6 percentage points.”

For this idea that employers should be free to bargain and engage in “voluntary exchange” is pure idealist nonsense and is impossible in the free market system that you advocate for. If you were really in favor of collective bargaining, that’s what you would be arguing in favor of. I know how much rightists love to point to the European countries that have no minimum wage as an example of how effective the free market sets wages, and then basically ignore the fact that the only reason those countries are able to fend without a minimum wage is because of their collective bargaining and federally overseen union systems. As for the recent study he cites, that specific study did come to the conclusion that increases in the minimum wage increased unemployment among low skilled workers, this is not new information and it has been well established for many years that increasing the minimum wage does have affects on those who are lower skilled, however there are many other studies that show this evidence can be outweighed by the positive affects of the minimum wage such as study done by the Center For Economic Policy and Research reviewed hundreds of different studies done on the minimum wage and concluded:

Economists have conducted hundreds of studies of the employment impact of the minimum wage. Summarizing those studies is a daunting task, but two recent meta-studies analyzing the research conducted since the early 1990s concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers. The most likely reason for this outcome is that the cost shock of the minimum wage is small relative to most firms’ overall costs and only modest relative to the wages paid to low-wage workers. In the traditional discussion of the minimum wage, economists have focused on how these costs affect employment outcomes, but employers have many other channels of adjustment. Employers can reduce hours, non-wage benefits, or training. Employers can also shift the composition toward higher skilled workers, cut pay to more highly paid workers, take action to increase worker productivity (from reorganizing production to increasing training), increase prices to consumers, or simply accept a smaller profit margin. Workers may also respond to the higher wage by working harder on the job. But, probably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers.

From this data, they were able to put together a graph of elasticity to represent the overall average affect the minimum wage has on the employment rate, and this is the graph they ended up creating:

Further analysis of the affect the minimum wage has on the employment rate can be seen based on compiling a graph from data from the Bureau of Labor statistics which the represents a familiar trend,

minimum-wage-vs-ratio-of-unemployment-rates-1950-jan-2013 (1).png

So as we can tell from these graphs, increases in the minimum wage have very little impact on the overall employment rate, but rather just that of lower skilled workers and this will bring me into my next argument as to why this problem is inherent to capitalism, and why Hulk’s essay is actually a very good argument in favor of socialism. As Hulk pointed out, in our current market economy the minimum wage is ever increasing with the intensity of lower skilled labor. As lower skilled labor becomes more and more skilled, there will be fewer workers who can do the work, and yet their old, less skilled jobs are still being done by either volunteers, automation, etc., and despite this progress in humanity those people will still be living in poverty, despite us still producing enough resources to ensure that they not be impoverished. As we progress into the future, labor will get more and more skilled, and it won’t matter what the minimum wage is when companies start to realize that the more minuscule tasks usually done by low skilled workers, can be done for much cheaper by changing the job to get less people to do it, or by simple automation and because of this fact, this will force the majority of the population into unemployment despite us still producing enough to sustain life for everyone.

I realize what the rightists would say in response to this. People like Stefan Molyneux when confronted with the reality of automation will simply state that new markets will always open up with the progress of society and this will lead to new jobs. This argument ignores the fact that resources on the Earth are finite, and so markets cannot grow forever no matter how much the bourgeoisie want them to, and the fact that even if new markets open up; with the proposal of private education, there won’t be enough skilled workers to fulfill these new jobs, this is even being seen in the modern day with there being many more job openings in industries such as computer science and technology, but simply not enough educated people willing to get the degree to fulfill them. This problem is being seen in many fields of academics all across the world,



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