Minimum wages and poverty

A $15 minimum wage would be great for those employed by the fast food chains but would probably do little to alleviate poverty for those who remain unemployed or otherwise close to the line.

This observation follows from a Business Insider video interview with Paul Krugman.  I was concerned because it is not clear the headline is supported by what he said.   Here’s the headline: “Watch Paul Krugman, in 2 minutes, Destroy The Argument That We Can’t Pay Fast-Food Workers Higher Wages” and here is what he said:  “But what all the evidence says is we can raise these wages without losing a lot of jobs.  The best research on minimum wages all says that when the minimum wage is as low as it is in the United States there is hardly any cost to raising it.”  I know the guy won a Nobel Prize in economics but that is all the more reason to carefully evaluate a statement such as this.  Sometimes people who are recognized as experts make unsupported statements outside their specialty.

In this case he may be partially right.  Some firms in industries that usually employ  low-paid workers have found they can do well by paying their staff better than usual and providing decent benefits.  Employees who are being treated well stay on the job longer and provide better service to customers. This may not apply to all firms in all industries. 

But the reality is that generally wages are determined by supply and demand and governments that try to fight market forces often make things worse.   That people are willing to work for current wages paid by the fast-food industry indicates the supply exceeds the demand.  There may also be small firms paying low wages that genuinely cannot pay $15 per hour.  There could also be lots of owners or self-employed people not making that much.

Perhaps this should be considered a problem of poverty and we should be looking to alleviate all poverty rather than just for those who make the most noise.

I believe we should have a collective responsibility to ensure everyone has the opportunity to live at the same standard as most other people.  One way to do this would be a universal income scheme.  As well as dealing with poverty such a scheme would in effect set a minimum wage determined by supply and demand in that people would not have to work for low wages for life support.

Poverty is a big issue in North America and around the world, one which is probably going to get worse as the economy continues to slide.  Let’s try to arrange our economy so that no one has to live in poverty.

 

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Paul Krugman’s wish for an alien invasion

Paul Krugman is so frustrated by the lack of support for another round of stimulus spending that he’s now calling for a fake alien invasion of the United States to spur a World War II-style defense buildup.

The above quote is from a Huffington Post news item.

I can see his point but the more I think about it, the less I like it.

The Second World War was  65 years ago.  Since then the people on this planet have used up a lot of resources.  If it is true that current economic problems are caused by declining resources this kind of stimulus spending would bring closer the date of a major human catastrophe – unless we can discover some new easily accessible resources.

If the resources are available we probably won’t need to a fake alien invasion.  There are enough human warriors around to get the real thing going but good.

Aren’t there nicer ways to do stimulus. With all those new weapons around, somebody would find an excuse to try them.  Then we would all be losers.

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