Casper

With recent hikes in business contributions to national insurance, the cost of employing someone in the UK is becoming more and more expensive - even now, in this time of sharply increasing unemployment. Therefore, I think the minimum wage law should be abolished.

It's not just about giving businesses more freedom, it's about giving workers more freedom too. It's the freedom to say, "I know you can't afford to pay me minimum wage, but I'd rather work for less than have no job at all."

Workers sometimes have a choice between a pay cut and being laid off entirely - but if they're on minimum wage, they don't have that choice.

Remember, employment is a privately negotiated contract. Neither party is obliged to accept any deal. Nobody's forced to work for a pittance. Private parties should be free to negotiate whatever they want between them.

But the reality is that at the moment businesses want to cut costs and one particular way is to cut wages yet they are barred from doing so by the minimum wage law. If you don't allow pay to be cut, jobs disappear.

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Will

Abolishing the minimum wage would be idiocy, but there's definitely an argument for lowering it in a recession.

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"When the government fears the people, there is liberty. When the people fear the government, there is tyranny."
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Casper

If you accept that there is a good reason to lower the minimum wage during a recession, why would abolishing the minimum wage altogether be idiocy?

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MisterEnglish

I don't agree.

Not one iota.

Those earning minimum wage are already suffering enough during a recession. They're the ones already at the bottom of the pile, the working class earning a pittance and barely getting by.

How is abolishing the best employment law to ever have been created going to help them during the recession?

Would you work for less than minimum wage, Casper? I sure as hell wouldn't.

Casper

Those earning the national minimum wage (NMW) are not ‘the ones already at the bottom of the pile’: the unemployed are.

Abolishing the NMW will help them in the way that more jobs will be available as not all employers can afford to pay all of their employees the minimum wage.

I would rather work for less than the current minimum wage than have no job at all.

At the moment, businesses need to cut costs and one way is to cut pay. In tight times like these, there's a general lowering of pay across the board - except at the very bottom end of the scale, where the minimum wage prevents the pay from going any lower, so the jobs disappear instead.

Remove the minimum wage and we can keep some people employed who would otherwise end up unemployed and worse off.

Young people have particularly suffered because of the minimum wage - youth unemployment is higher than it was before 1999. Unemployment as a whole must now be approaching 7%, and on the up at one of the fastest rates ever seen.

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MisterEnglish

But the point of the NMW is so that people who work can afford to live. If you allow employers to pay less than this, people will work their asses off for next to nothing! I also think that it will be abused by the bourgeosie, who will do most anything to line their own pockets!

Yes, times are tight and something needs to be done to slow the increase of unemployment - but I'm sorry I don't think that this is a viable solution.

Will

Amazingly, the Tories have recently suggested a voluntary reduced NMW. So workers can volunteer to work for less, so that they can keep their jobs, and still be earning more than if they were on jobseekers allowance.

Sounds fairly reasonably on paper. However, there's nothing to stop companies forcing their workers to "volunteer" or lose their jobs entirely. You could always audit each company to see if their request is reasonable or not, but how much would that cost?

I still maintain that temporarily lowering the minimum wage a little would be simpler, fairer, and would ease the strain on many companies. I also maintain that abolishing the minimum wage altogether would be idiocy. We would see mass poverty throughout the UK.

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Admin Will - Think for yourself, it hasn't been banned, yet.
"When the government fears the people, there is liberty. When the people fear the government, there is tyranny."
- Thomas Jefferson
Contact me.

Friedman

You cannot make a man worth a given amount by making it illegal for anyone to offer him less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation.

The net loss to society that results from this sweeping act of “wrongful discharge? is staggering. Those losses include: (1) The loss of employment to the individual himself, (2) the shrinking of the economic pie by the loss of his productive contribution, (3) the financial loss to society in supporting him in his idleness (unemployment compensation, welfare, etc.), (4) the financial loss in funding useless job training programs and other government efforts to get him re-employed, and (5) the net loss to society in having consumer prices driven up to cover the higher labor costs, and the loss of market share to foreign competition that may occur.

In a free society, people must have the right to offer their services in the marketplace for whatever price they choose, whether they are workers serving employers or businesses serving consumers. It is by this process that productivity, wage rates, and prosperity are maximized. Government has no more business objecting to a low wage rate for a menial job than it has objecting to a business that offers its services or products for a low price. Government intervention in these matters distorts economic decision-making, misallocates scarce resources, and destroys personal liberty.

Casper

Why would there suddenly be mass poverty?

The first thing that happens when a law is passed that no one shall be paid less than the NMW is that no one who is not worth the NMW to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment.

It may be thought that if the law forces the payment of a higher wage in a given industry, that industry can then charge higher prices for its product, so that the burden of paying the higher wage is merely shifted to consumers. Such shifts, however, are not easily made, nor are the consequences of artificial wage-raising so easily escaped. A higher price for the product may not be possible: it may merely drive consumers to the equivalent imported products or to some substitute. Or, if consumers continue to buy the product of the industry in which wages have been raised, the higher price will cause them to buy less of it. While some workers in the industry may be benefited from the higher wage, therefore, others will be thrown out of employment altogether. On the other hand, if the price of the product is not raised, marginal producers in the industry will be driven out of business; so that reduced production and consequent unemployment will merely be brought about in another way.

When such consequences are pointed out, there are those who reply: “Very well; if it is true that the X industry cannot exist except by paying starvation wages, then it will be just as well if the minimum wage puts it out of existence altogether.” But this brave pronouncement overlooks the realities. It overlooks, first of all, that consumers will suffer the loss of that product. It forgets, in the second place, that it is merely condemning the people who worked in that industry to unemployment. It ignores, finally, that bad as were the wages paid in the X industry, they were the best among all the alternatives that seemed open to the workers in that industry; otherwise the workers would have gone into another. If, therefore, the X industry is driven out of existence by a minimum wage law, then the workers previously employed in that industry will be forced to turn to alternative courses that seemed less attractive to them in the first place. Their competition for jobs will drive down the pay offered even in these alternative occupations. There is no escape from the conclusion that the minimum wage will increase unemployment.

We know as a matter of experience that it is the big companies —those most often accused of being monopolies—that pay the highest wages and offer the most attractive working conditions. It is commonly the small marginal firms, perhaps suffering from excessive competition, that offer the lowest wages. But all employers must pay enough to hold workers or to attract them from each other.

All this is not to argue that there is no way of raising wages. It is merely to point out that the apparently easy method of raising them by government fiat is the wrong way and the worst way. The best way to raise wages, therefore, is to raise labour productivity. This can be done by many methods, namely: by an increase in the machines with which the workers are aided; by new inventions and improvements; by more efficient management on the part of employers; by more industriousness and efficiency on the part of workers; by better education and training. The more the individual worker produces, the more he increases the wealth of the whole community. The more he produces, the more his services are worth to consumers, and hence to employers. And the more he is worth to employers, the more he will be paid. Real wages come out of production, not out of government decrees.

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Reiver

The "minimum wage equals disemployment" argument is reliant on the assumption of perfect competition. As we move away from that textbook world, monopsony becomes the norm! You don’t have to refer to the single buyer of labour. You can refer to the notion of imperfect information, with job search frictions leading to firms facing upward sloping labour supply schedules (i.e. wage making power). The minimum wage can then increase both wages and employment. Its ironically about reducing market failure problems, as economic rents are redistributed from the employer to employee.

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Deceased