Friar Bijou wrote:
Ok, if I'm reading you correctly, gbaji, having the, say, top 20% of wage earners making more and more money each year driving up prices is cool. If the bottom 30% make more money and that drives up prices, that's bad.
It's not about making more money. It's about the government passing a law forcing them to be paid more money. The top 20% of wage earners are earning their wages because the market naturally values whatever they do at that amount. Period. There's no government law saying that a CEO must earn $10m/year, right? And no law mandates how much money Brad Pitt gets paid for making a movie. The market determines this. Thus, their wages don't "drive up" anything. They are scaled to the relative value of what they do (as valued by the consumers of what they do).
Can we agree that the only reason to even consider raising the minimum wage (or having one in the first place) is if the market would result in people earning less than that proposed minimum? Point being that if out of every potential employer in the market, none of them are willing to pay you more than say $5/hour for your labor, by definition, that's how much your labor is worth. Meaning that your employer gains some value from your labor sufficient that he can afford to pay you that $5/hour and make enough extra money to justify the hassle of hiring you in the first place.
If the government raises the minimum wage, that means that everyone who's wage is actually increased by that is now getting paid more than their labor is actually valued by the market
. Which means that the consumers of the product of that labor are normally only willing to pay a given amount for that product, which means your employer only makes X profits off the sale of that product, and is only willing to pay you Y pay for it. Raising that wage means everything else has to adjust. Suddenly, the employer must charge more for the product his workers produce in order to pay the higher wage. But consumers weren't willing to pay more for that product previously. But now they are forced to because the entire industry has been affected. If it had just been a single employer who raised his prices (perhaps even to pay his workers more), consumers would go to a competitor with lower prices. That's how the "normal" price for those products are set. Since wages are raised across the board in competing industries, prices can raise across the board as well since there's no competitive disadvantage now. But this means that everyone else is saddled with that increased cost. Prices go up, causing inflation, and over time other wages will adjust as well.
End result is that nothing changes.
If your wages increase naturally as a result of your labor being valued more, that has no negative effect. But if everyone's wages are raised artificially, it has a negative effect. Huge difference. This is not about "rich vs poor". It's about how we value things in a market. So if you earn minimum wage and over time increase your wage from $7.50/hour to $9.50/hour, you gain $2/hour. But if you and every other minimum wage earner have your earnings increased to $9.50/hour, you gain nothing. Please tell me you can see why this is true? Edited, Mar 3rd 2014 10:56pm by gbaji