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An article in Australian newspaper The Age describes a paper just released by the Reserve Bank of Australia which has found that periodic increases in the Minimum Wage (also known as the "Award" wage in Australia) did not negatively affect the level of employment in each respective industry:
The paper, published by the central bank's economic research department on the final day the Fair Work Commission hearings had to decide if 2.3 million Australians will get a pay rise in July, found "no evidence that small, incremental increases in award wages had an adverse effect on hours worked or the job destruction rate".
It used a sample of 32,000 jobs between 1998 and 2008, when award wages were increased by a flat dollar amount each year, to find jobs with larger award wage rises had larger increases in hours worked than jobs experiencing a smaller award wage rise.
"I am able to rule out adverse effects on hours worked. I also find that award wage increases do not have a statistically significant effect on the job destruction rate," said researcher James Bishop.
"If anything, the point estimates suggest that the job destruction rate actually declines when the award wage is increased."
[...] The RBA paper said their results may not "necessarily generalise to large, unanticipated changes in award wages", cautioned it only included adult positions, and that the consequences of wage increases may "be borne by job seekers, rather than job holders".
"There will always be some point at which a minimum wage adjustment will begin to reduce employment," the paper stated.
Naturally, this is proving problematic for some politicians who have been advocating against increases in the minimum wage due to fears that this will harm business.
Link to Abstract and Paper (pdf).
(Score: 3, Insightful) by khallow on Friday May 18 2018, @12:18PM (4 children)
Except for the poor getting poorer. Let us keep in mind that the predicted harm of minimum wage is expected to hit the poorest of society, and well, the fact that the poorest of society are that poor, is the excuse for minimum wage in the first place.
This is just an economic shell game. We might not know how you'll get conned because the game can be rigged in clever ways. But the laws of supply and demand didn't get suspended. Raise the cost of labor (notice that minimum wage specifically increases the cost of employing the poorest of society!) and the demand for it will go down.
My bet here is that we already are seeing problems of high minimum wages, such as increased migration from low cost-of-living areas (which also happen to be low wage areas) to high cost-of-living areas. But they are conveniently invisible to those who perform these studies.
I have a standing prediction [soylentnews.org] that if California successfully raises its minimum wage to $15 per hour, Fresno will within a few years see population decline for the first time in its existence. Fresno unlike nearby San Jose has almost half of its workers working for less than $15 per hour. So a high minimum wage will inordinately affect Fresno compared to San Jose (and other high wage/cost-of-living areas).
(Score: 2) by c0lo on Friday May 18 2018, @01:01PM (1 child)
Did you mean places where the income inequality is increasing above the "morbidity" line?
You can sleep well on this account, there are countries in this world where this doesn’t happen and still nobody is a destitute
Lower the cost of labor enough and nobody can afford to buy your products.
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 1) by khallow on Saturday May 19 2018, @01:37AM
You can only do that by forcing people to work for little. In practice other people who offer more will get the labor that you're not paying for.
(Score: 0) by Anonymous Coward on Friday May 18 2018, @01:36PM (1 child)
But the demand for labour isn't solely determined by its cost, but also by its necessity. If a company needs four people to fulfil all its orders, then four people must be employed. Of course, the cost of the final product may have to increase, but that does not necessarily mean that the number of orders, and thereby the number of people employed, will decrease - especially if the price increases and small and gradual.
Essentially, by raising the minimum wage, it is a wealth transfer from the customers of businesses which employ people at minimum wage, to the minimum-wage earners themselves. If 100% of a business' customers are minimum-wage earners, then there is next to zero net change in wealth distribution. But if even just one more-wealthy person is a customer, then those on minimum wage will increase in relative wealth.
(Score: 1) by khallow on Saturday May 19 2018, @01:35AM
In other words, we have here the claim that enough of the labor market is inelastic that we can squeeze employers for more money. But in practice, what do we see? Why massive moves to cheaper areas every time such a squeeze happens. Off-shoring and automation wouldn't happen at such high adoption rates, if labor markets were strongly inelastic.