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Saturday, April 06, 2013

To Hike or Not To Hike

There have been lot of rumblings of late regarding the minimum wage. The president has suggested that it be raised to $9 per hour. Elizabeth Warren has been a staunch champion lately on this issue has been summarily raked over the coals by the usual collection of mouth foamers with the same bullshit argument that claims they know something about economics and that liberals know nothing. Well, here are the facts, based on the simple economics they claim to grasp so easily.

If the minimum wage is set below the market equilibrium, it will have no effect on the efficiency of the market. Even though the government has set a price floor, the market is bearing a higher price so it doesn't matter. Yet, if the price floor is set above the market equilibrium, unemployment will occur because employers would be induced to higher fewer workers, given the higher cost they must now pay their employees. More people would enter the labor market and jobs would be scarcer.

So, the question becomes...where is the market equilibrium? Well, with so many different markets out there in this country, it would depend on which market you are talking about and that's why the mouth foamers can get away with painting with such a broad and dishonest brush. If there is to be a minimum wage increase, then there should be a series of studies that examine the market equilibrium for those markets most affected my the hike. I would think the service industry and the retail industry would be good places to start.

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