Market Power and Minimum Wage Part 2

My post yesterday generated some pushback from someone who I respect very much; when he disagrees with me, it causes me to think I am wrong.  So, let me try to clarify something:

I am not arguing that everyone, everywhere is always getting paid their exact MPL wage.  I suspect there are many folks who are not.  But minimum wage is not a solution to this problem.  Here’s why:

Minimum wage is a one-size-fits-all solution.  Consideration to the particulars of any given employment situation are not considered.  If a person is earning $6/hr, but his MPL is $8/hr, a minimum wage of $8 would likely benefit him.  But, if a person is earning $6/hr and his MPL is $6/hr, a minimum wage of $8 would harm him.  This fellow would be more likely to face negative consequences of minimum wage: hour cuts, loss of job, etc.

Minimum wage is bad, among other reasons, because the negative consequences are most likely to fall on those who can lease afford them.

One thought on “Market Power and Minimum Wage Part 2

  1. Maybe, a failure to note how underpaying individuals, who deserve more by their MPL, is harmful to the business and will lead to loss of business, if not already.
    Over the years, of visiting the shop of another acquaintence, I took mental notes of her business as it related to the hiring of several employees and the difference in customer satisfaction based on who was minding the store.
    First, when the owner was the person customers interacted with, sales were generally higher, for the day. Customers, complained less and left more satisfied with their transaction. This was not case with most of the hired associates.
    Second, over the course of 5years, turnover was very high. I met all of the associates. Only two were competent enough, IMO, to match the customer satisfaction and generate the higher sales, that the owner did regularly.
    The shop owner did as would have been expected when the MPL was substantial and in relation to skilled available labor, in the market. She paid them increased wages to retain their services.
    The experience was much like a LearnLiberty economic educational video playing out before my eyes.


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