Re: Minimum wage

[PJShah <pjshah@del2.vsnl.net.in>]

Charu datt wrote:

> PJShah wrote:
>
> > The arguments against the minimum wage are quite well known.  . . .
>
> > Low-skilled people who are
> > the supposed beneficiaries are hurt the most.  . . .
>
> > its [min wage's] alleged benefits flow not at the cost of
> "exploiters"
> but at
> > the cost of some other poor folks.
>
> Could you explain further?
> How does paying below subsistence wage benefit anyone
> but the person paying out the wage at the expense of the wage earner?
>

The employers have the option of not hiring or firing those already
working if their marginal productivity is below the min wage.  If a
worker's contribution is of Rs. 10 an hour then it won't make sense to
hire him or keep him if i have to pay him anything more than Rs. 10/hr.
If, say, the min wage is Rs. 15/hr, I'll let the workers go whose
production is not valued at that level. Now who is likely lose the job
in this situation?  The newly employed, less experienced and skilled, or
a person of a particular race or caste or gender I don't really like.
So the people who are able to keep the job may benefit to some extent by
the new min wage, but other poor will lose out.

Given the higher labor costs, it becomes profitable to employ more
capital intensive methods of production--buy more machinery instead of
labor.  The power of the public sector unions in India explain why these
firms are more capital intensive than expected given the abudance labor
in India.  Given the wage structure of public sector employees it's
rational to be more capital intensive.

One may say that for a time some low-wage workers may benefit at the
cost of employers but many more workers will surely lose in the long
run.  And most importantly, those who lose are really at the bottom of
the labor market, the alleged beneficiaries of the min wage.
parth-







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