Thursday, August 14, 2008

Are the poor too rich?

I read a piece in Cafe Hayek a while back, lamenting the rise in the US minimum wage. I left a short quotation: "Qu'ils mangent de la brioche."

I didn't expect much response, even though Americans owe one of their most famous symbols and (in part) their very Revolutionary victory to the French. But I had a glance at the comment thread this morning and there was indeed a riposte:

"Jonah Golberg wrote a really good editorial on this about four years back. Good stuff and good Economics & History lesson, too!"

Can the realtor (estate agent) who posted this, and the salaried economics professor who hosted it, be right? Are the working American poor really so feather-bedded by their £3-something per hour earnings? Does anyone have a different Economics & History lesson?

Does even the slightest concern for the poor make me (the son of a refugee from the murderous ravages of the Red Army in East Prussia) a no-good pinko Commie son-of-a-gun?

I shall read my newly-acquired Sloman's "Essentials of Economics" and then I'll know the answer.

18 comments:

jams o donnell said...

£3-something an hour? My God they will be getting ideas above their station! Seriously increasing sod all by 12% still gives you sod all, near as damn it....

Tim H said...

Given this government’s policy of infinite limits on immigration and encouraging outsourcing, without the minimum wage the pay on offer at the bottom end of the market would be well below £1ph.

Unless this or a future government introduces a policy of euthanasia for the terminally unemployed, sick, or old then it has to have some employment protection for the countries nationals so that it can raise the taxes it desperately needs.

SACKERSON said...

I believe the poor are taxed at 40% or more. So the more such poor, the better?

Don Boudreaux said...

One of the most important lessons that economics teaches is that consequences often differ from intentions. A related lesson is to search for the 'unseen' beyond the easily seen. Person A can (and often does) share the same goal as person B, but does not share person B's confidence in a particular means (e.g., minimum-wage legislation) of achieving that goal.

Simply because the proponents of that particular means proclaim that their intentions are noble -- and because that means appears to be the most straightforward path to the goal -- does not imply that those who object to the means also object to the goal.

SACKERSON said...

Understood, Don, and thank you for gracing my page. But what would be the effect, do you think, of immediately abolishing the minimum wage?

Don Boudreaux said...

Fortunately, not much would happen if the minimum-wage were abolished. In the U.S., fewer than five percent of workers earn that wage, and the vast majority who DO earn it live in non-poor households.

One effect of abolishing the minimum-wage is that many middle-class white teenagers in America would get paid somewhat lower wages at their summer jobs and some inner-city, poor black and hispanic youngsters would be able to find jobs that they now cannot find.

SACKERSON said...

Interesting; thank you.

I expect we agree that the market does not work efficiently, but it seems from what you have just said that the minimum wage would not make much difference, except to offer very poorly-paid work to some of the inner-city disadvantaged. Are there not better threads to pull on in this Gordian knot? For example, the huge expansion of credit in the last five years that has ballooned housing values and rents, should instead have powered investment in industry; or at least we could have done without five years of the money Hoover on "blow" and then have to suffer some years of "suction".

And should we not have more effective education and careers advice for the lower strata of society, so that they don't have to try to live on Mcjobs, that may not even last very long - here in the UK, one supermarket (Tesco's) is already trialling automated checkouts.

On both sides of the Atlantic, I think one could make a case for saying that we've had horrendous economic mismanagement, and it seems saddening to me that we should start looking for the solution by tinkering with the people at the vulnerable end.

But maybe I'll know better when I've read Sloman; and then von Mises.

AntiCitizenOne said...

Minimum wage is another way of saying compulsory unemployment productivity.

It's Far Far better to have employers competing for people than schemes with massive unintended consequences.

SACKERSON said...

What if, perhaps because of the possibility of outsourcing abroad, the wage set by the market is not enough for the employee to live on? Adam Smith pointed out that societies and economies could go backwards, like Bengal in his day. Would a State- (taxpayer-) paid income supplement be preferable to outright unemployment, with all the disadvantages of the latter - worsening health, potential criminality, skills decay?

Tim H said...

... - worsening health, potential criminality, skills decay

All of these things are happening now.

The damage done is not just at the bottom. This government’s attitude endangers all skill levels. Everyone, except lawyers and other inner party members, is in danger of having their livelihoods destroyed as happened to many in the IT sector in the earlier part of this decade.

dearieme said...

"and (in part) their very Revolutionary victory to the French": that's a bit of an understatement. The French Navy and Army won Yorktown, the battle that ended the war. And, in all probability, the French were behind at least some parts of the rebellion from the start - the large artillery pieces carefully hidden for use when the rebellion started presumably weren't supplied by the Red Indians.

dearieme said...

But back to business: the minimum wage is a gormless idea, as so elegantly outlined by Don above. Even New Labour people probably understood that, but the political attraction of introducing a minimum wage in Britain presumably outweighed the economic and social damage that they knew it would do.

dearieme said...

Mind you, my own guess was that the damage would only really appear after the next recession/depression, when a minimum wage would stop people pricing themselves back into work. Maybe we'll see in a few years time whether I was right.

SACKERSON said...

DM: fascination on the Rev War - who do you read for that?

Minimum wage - what do you think of Wat Tyler's "Citizens' Basic Income" instead (I think Anti-Citizen One has a similar notion)? Removes the benefit trap.

dearieme said...

Citizen's wage: I can see the attractions, but I've no idea how practical it would be. At the very least it would call for massively tight control of immigration. Whether it would even be legal under EU despotism is unknown to me.

For our American cousins' history, I found Bichino's "Rebels and Redcoats" a fascinating read. (Actually, most of my (many) literal American cousins are descended from immigrants who arrived long after the Great Treason, but they all get indoctrinated with the same tosh at school.)

dearieme said...

Apols: spelling mistake.
http://en.wikipedia.org/wiki/Hugh_Bicheno

SACKERSON said...

Control of immigration - fine. EU - leave it.

Citizen's wage - pay it and check rigorously and regularly for fraud. Suspend if in jail or abroad, attach in the case of court fines, withhold if refusing suitable work or unable to work because of alcohol/illicit drugs (I think much of this is fairly similar to the original old age pension).

Also: credit £6k p.a. per head to the Bursar for every kid who goes to a private school, BUT remove charitable status AND any requirement to meet quotas of any kind. The surprise (to some) then might be the outstanding success of private ethnic minority schools.

SACKERSON said...

P.S. Thanks for the Bicheno lead.