Tuesday, June 24, 2014

"Living Wage"

Living Wage

Over the last year or so there has been much conversation on the subject of a "living wage". A very large protest for this new minimum wage is taking place in the fast food industry. In the immediate, it seems like a good idea. It would provide everyone with an income that allows them to live above the poverty line no matter what industry they are a part of. When looking closer it can be seen that by providing a higher minimum wage, no changes will actually take place in the long run. By raising the minimum wage, jobs that had a higher wage will have to raise their wages as well in order to keep their employees from leaving. If wages all across the board raise then the cost of living will also go up. (This change in cost of living is a result of the fact that cost of labor is one of the costs of production, and if costs of production go up the selling price will go up as well.) If cost of living and wages go up at the same time, then no real changes will be seen in the financial ability to live. In this article it talks about different politicians who are making efforts to increase the minimum to get it to the point of this so called "living wage". It is interesting to see how much focus is put into this, when no matter what they do to the dollar amount a forced wage will not have much or any affect. It appears that regardless of the truth about minimum wages, politicians will always be pursuing this topic in some way because it has a strong influence on the masses and influencing the masses is how elections are won.


1 comment:

Larry Eubanks said...

I'm not sure we should say there will not be much effect. Certainly you point to significant consequences. But, there are others, must notably a decrease in the amount of labor employed. Also a higher wage will mean an increase in the amount of labor supplied. Both taken together mean an increase in unemployment. Given government programs, there will be consequences in these programs as well, and as Hazlitt pointed out, government spending means taxes. One last consequence to mention which is unseen is that, as Hazlitt explains in his discussions of the minimum wage, there will be less productivity in total over time in the community and people in general will prosper less over time.