Is minimum wage legislation the appropriate way to deal with poverty?

The problem with minimum wage legislation is that it is an inappropriate tool to solve a very difficult problem.  A universal basic income would be a more effective way of dealing with poverty.

People working for low wages are only a part of the problem of people struggling to survive on minimum incomes.  Legislated minimum wages may help some people at the bottom of the wage scale, but it will do nothing for the others and may even add to the number of unemployed.

The agricultural surplus is the excess food a farm worker produces beyond his/her own needs.  This is what allows the rest of us to do the things we do. With the huge agricultural surplus we currently have and with modern technology we do not need for everyone to “work” for the most part of their lives.

In our society we have traditionally distributed this surplus via jobs and wages.  It may be this system is breaking down and we should be looking for alternatives such as a basic income scheme.  Unfortunately many people have a religious quality belief that employment is essential and that anyone who does not work his/her entire life is a deadbeat.  The work ethic is great for those who want to build empires based the work of others.  Maybe the minimum wage is appealing because it is seen as a way of transferring profits to workers.

Another problem with minimum wage legislation is that it distorts the operation of the market and some low paying jobs may be lost as the minimum wage raises costs.    A universal income scheme would allow individuals to decide the minimum wage at which they would work.  Those people who want to eat fast foods would have to pay enough for the restaurant to attract workers as people would not be obligated to work in order to survive.

We probably should not take for granted the agricultural surplus will continue indefinitely as there are many things which could wreck our food factories.  There could also be problems with the non-agricultural part of our economy.  In either case minimum wage legislation will not be of much use whereas a universal income scheme might make adjustments easier.


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5 Responses

  1. […] a response to a LinkedIn discussion on the Environmental Economics list publishing a post by Art Powell I commented on 23. February […]

  2. simply understood that the minimum wage will increase the cost of the companies. For any company the motive is profit, increase in costs unarguably decreases the profit. So to solve this problem, companies stop employing or in the worse case lay off employees… Minimum wage thus exaggerate the poverty rather than the other way round.

  3. […] a response to a LinkedIn discussion on the Environmental Economics list publishing a post by Art Powell I commented on 17. March […]

  4. Minimum wage is a meat cleaver approach. Economists, from conservatives like Friedman to liberal are in fair agreement that the negative income tax is best if we are to create a floor income, since it allows market allocation better and preserves incentives to work. Regarding the “living wage” issue, the underlying value is that all jobs deserve to be accorded a wage that allows the earner to support him/herself, which is a major paradigm shift. Previously and including today to a lesser extent, no such guarantee was attached to a job; many lower paid jobs, from fast food to yard maintenance, were for spare income, such as to dependents in a household, rather than for main sources of household income. So as a society, we should be aware that the high minimumum wage, being sold as undergirding the right to a living wage, involves a major paradigm shift for our society. And since the minimum wage is a relatively inefficient way to address the issue, there are significant societal costs to the position that all people deserve a basic living wage and that the minimum wage is used to achieve it.

  5. […] a response to a LinkedIn discussion on the Environmental Economics list publishing a post by Art Powell I commented on 21. March […]

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