RE: Help with a Minimum Wage Model

From: Lee Corbin (lcorbin@tsoft.com)
Date: Sun Apr 06 2003 - 22:39:08 MDT

  • Next message: Lee Corbin: "RE: Help with a Minimum Wage Model"

    Reason writes

    > You're missing the very complex part of the model that shows how much
    > revenue an entrepreneur can generate per employee. Personnel are the
    > largest cost in almost all businesses. You are also missing the
    > taxation cost of enforcing a minimum wage.
    >
    > That and workers never becoming entrepreneurs is silly. It's a dynamic
    > equilibrium at best, and the number of entrepreneurs is all over the map
    > with legislation, cost of money, industry you have in mind, etc, etc...

    Yes, but my goal is to find the minimum number of assumptions,
    (and if possible to minimize their implausibility), that would
    enable anyone to think that minimum wage is a good idea.

    Hal writes

    > Generally, with a higher minimum wage there will be fewer
    > workers employed, but the details of that generalization
    > will depend very much on the specifics of the case.

    > With a higher minimum wage, there would probably be fewer people employed,
    > for several reasons: there may be some substitutability between people and
    > technology, so if people get more expensive, some work tasks will shift
    > to technology;

    So I can begin to list the (faulty) assumptions that cause some
    people to support minimum wage laws.

    1. Higher minimum wage does not eliminate the existence of
       jobs due to advances in technology.

    > expenses to produce products will be higher, so there will tend
    > to be fewer products consumed and so fewer people employed;

    2. There is no supply and demand relationship affecting the
       value of worker efforts, (and hence their retainability)

    > and some tasks just can't be done economically above a certain price,
    > so those jobs will be eliminated if the minimum wage is above that price.

    3. Jobs are givens: in black and white terms, society needs
       to perform and will perform a job X, or it will not

    (Hal also mentions situations in which his three factors would
    not necessarily apply.)

    Lee



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