I heard the following proposed as a less harmful alternative to the current form of minimum wage. I think it is convoluted and as harmful as the way minimum wage is done now, if not more so.
Minimum wage is implemented by designating that (with some exceptions), no one is to be paid less than $X/hour.
The alternative proposed is to look at the percentage of the workforce in a given area that is living below the official poverty line. This then becomes the maximum percentage of employees any company is permitted to pay at a rate below the poverty line.
Now, I know right away there are some problems with this idea such as bringing in employees from other areas to get around restrictions, the disproportionate impact it would have on small businesses, and businesses that offer primarily low-income jobs due to the nature of the work (unskilled manual labor).
In this proposed minimum wage alternative, I think there is a fundamental problem (that would undermine the proponent’s goals) with the relationship between the employers and the percentage restriction that applies to them. It seems to me that the employers could directly influence that percentage, based on how many they choose to hire and what they offer for compensation… A kind of feedback loop.
Thoughts?
Obviously.
Still, as a sort of thought-experiment, I’m focused on the relationship between the employers and the percentage. I’m no math whiz, but something tells me there’s a huge problem there, all other problems with the proposal aside.
What relationship? It’s as arbitrary as consulting an astrologer to determine the right number of employees to be paid below the “poverty-line”.
It’s arbitrary to say “this number is going to be the limit.”
What I’m saying is I think there’s an issue with the employer being able to manipulate, through hiring and compensation, this number that’s supposed to regulate them.
Again, I’m only interested in this as an amusing “what if” scenario.
I don’t understand the logic. All this could ever achieve is to freeze the poverty rate. If some % is below the poverty level, they are already being paid a poverty wage. And that % is then the new ceiling…
This would become a cap and trade situation where companies trade low wage labor.
The problem we currently have is that raw land cannot be used without buying it from people who never homesteaded it. Then the minimum wage would be the level of earnings that people can make working unclaimed land. No need for an artificial wage floor. A natural floor would exist. See the law of rent.
Why would a libertarian bother with an alternative market tinkering? Just toss the whole thing away. Done.
The idea was proposed to me. I’m just pondering it out of boredom.
I think dude6935 has it right though. The poverty rate would be frozen in place.
Well it would still be a minimum wage, just with some arbitrary, adjustable value instead of a fixed amount. Why is it better to ban everyone below the “official” poverty line from working than to ban everyone below some fixed hourly wage from working? Besides, how will demanding that the poor be paid more money abolish poverty? The poor as a class still have the same amount of productivity, you cannot raise the amount of goods and services they can afford above their utility. Mandating that they be paid more than they are worth just prices them out of competitiveness and makes them poorer. Only higher productivity can abolish poverty, and productivity is lowered by banning certain groups of people from working.
I think dude6935 has it right though. The poverty rate would be frozen in place.
^^^ Purely theoretically, only if every employer achieves the exact cap. This is an academic point anyway, all this sounds like “now that we removed cancer, what should we give the patient instead?”.
Any sort of wage controls will destroy jobs. If you (or whoever you’re talking to) absolutely insists that there be some kind of “minimum amount” someone is paid, you might as well go with a minimum income/basic garunteed income. That is, the employer pays whatever, but the employee gets a subsidy from the State up to a certain point. So the arguement about forcing employers to pay a “living wage” goes away.
There are, of course, many problems with the concept of a basic garaunteed income, foremost among them that it still requires coercive, redistributive taxation. It also reduces the incentive to work and creates a dependant class, although we already have those problems in the current system.
There’s no way to know what effect it would have, whether to freeze, reduce or (most likely) increase poverty. Any interference in the market distorts the coordination of supply and demand. This is as true of labor as any other good. Discoordination results in unmet demands (needs, wants) which would have been met but for the interference in the market. If that is not the definition of impoverishment, I don’t know what is.
Clayton -