November 30, 2011

As Wages Rise, Tough Choices

This article describes how minimum wage increase will effect the un/employement. Seven states including Colorado are increasing minimum wage beginning in 2012.
I like that the author of the article is fair enough to present both sides of the argument: those who say that increasing wages will help employees, and those who say that it will actually hurt them.
"Legislators commonly recommend boosting the minimum wage to compensate for
cost-of-living increases." "Evidence of any loss of employment or hours for the type of
minimum-wage changes we have seen in the U.S. in the last 20 years," says
Arindrajit Dube, a professor of economics at the University of Massachusetts
Amherst. If employers cut back on labor, it's generally due to poor economic
conditions, not pay requirements, Mr. Dube says."
How ignorant and arrogant can these professors get to say that?
Further in the article, the author tells about all the small business owners who plan to cut either number of employees or number of hours they work.
"About half of R.L. Vallee's roughly 450 employees make the minimum wage—mostly
entry-level cashiers, sales associates and inventory-control personnel. To cope
with the wage increases in Vermont, the 69-year-old family business plans to cut
employees' work hours in that state and is considering having employees there
pay a larger share of the premiums for their employer-provided health insurance."
""When you raise the price of something, including entry-level
labor, you're going to decrease demand for it," says Michael Saltsman, research
fellow at the Employment Policies Institute, a nonprofit research group in
Washington, D.C."
It's exactly what Austrian economists predicted would happen when minimum wage is increased: it won't help the employees; it will hurt them because employers will not pay more to employees only because government told them so. They'll pay more only if employees will produce more profit. Unfortunately government cannot regulate this part. You don't have to be a rocket scientist to understand this. Unfortunately it's not the case with politicians and some economists. They want to command the universe, and it aint gonna happen.

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