WillJ said:
To those who remind us of the nineteenth century, it's certainly true that at that time things were pretty damn bad, but there was less capital back then; you can't expect the poor to have been making wages that even begin to compare with the wages the poor of today make, or to have been living in conditions that were any better than being one step above pure crap. Sure, it's quite possible that if a minimum wage were enacted in 1880, the workers of 1880 would have been significantly better, but just pointing out that the workers in 1880 as we know it weren't doing so well doesn't prove anything.
Okay, you want a better argument for minimum wage, here's my best shot:
First, let me begin by pointing out that there is a minimum wage (to my knowledge) in every single first world country. One could make the argument that the implementation of a minimum wage only occurred because a country attained enough capital to afford higher wages. To some extent, this is true. Nations must meet a certain threshold mark in order to implement many programmes. However, I contend that a minimum wage is, in fact, essential not only to a healthy society, but in fact to a healthy, first-world economy.
The fact that a minimum wage is essential to a healthy society is fairly obvious. Throughout history, a hungry people are a radical people. Lenin would not have risen to power had he not promised "Bread and Peace" nor would the French Revolution have reached such horrific levels had the economy remained stable. The quality of a nation is not how it rewards those citizens at the top, but rather how it takes care of those towards the bottom. The homelessness, despair, and death that is often associated with countries that implement no minimum wage and/or sweatshop labour cannot and, historically, has not gone hand in hand with just government and harmonious society.
The contention that a minimum wage is essential to a healthy economy, on the other hand, is far more difficult to prove, yet I shall endeavor to do my best. Let us first examine societies before the minimum wage. They were characterized by an enormous disparity of wealth, with a few families (i.e. the Rockefellers, Carnegies, and Pierreponts) controlling a large percentage of the wealth and an overwhelming majority working 12 hours a day for pennies. Literacy rates were extremely low, and education at a university was restricted to the sons and daughters of the so-called "Captains of Industry." In short, you were either rich or poor, with no middle ground and virtually zero social mobility. Although the minimum wage was passed in 1912, it was not really enforced until the end of the Great Depression. The results were astounding. Seemingly out of nowhere, a middle class (the Baby Boomer generation) grew as a result of higher wages and, consequentially, the ability to go to college. Americans were going off to college in droves, and as a result skilled labour became predominant where factory workers had once consisted of the majority. True, it is difficult to go to college on minimum wage, but the establishment of a 'benchmark' drove real wages up, effectively lifting everyone up another notch on the economic ladder. The same phenomenon was happening in Europe as well, albeit a bit slowed due to reconstruction post-WWII. It is this very same middle class that has not only represented the "American dream" and been portrayed as ideal in our popular culture, but also the very same class that has educated itself and, in the process, led to a remarkable boom in innovation and productivity.
I'm not sure why you'd need empirical evidence, since the logic is so simple and I'd be very impressed if you could refute it. In a free market, if, for example, a job is worth $4 an hour and only $4 an hour to an employer, he will pay $4 an hour or less to whoever does it. If, however, the government decrees a minimum wage of $5 an hour, the employer would obviously fire this employee (or maybe risk using the employee illegally, but I doubt that's too likely).
Note, though, that if in a free market, an employer is willing to pay $6 an hour for a job, but gets away with paying $4 an hour, and the government then declares a minimum wage of $5, then the employer will rise the wage to the required $5. And that's where the (possible) justification of the minimum wage is. So what I'd like to see is some evidence of how much of this theoretical stuff actually goes on.
I need empirical evidence because reality is often far more complicated than simple economic models. However, you want a refutation, and I shall give you a refutation.
Your model fails to take into account two factors, one of which being the educated class phenomenon as described previously. A successful new enterprise requires at least one of two elements - a new product and/or entrepreneurial risk. The former generally requires an education. Although some inventors like Thomas Edison were able to teach themselves the skills necessary to invent, the overwhelming majority received a high school, if not college, education. As I pointed out previously, with a minimum wage comes both the ability to take time off of work to go to school (public or private) as well as the ability to pay for higher education. If, for example, there is a 50% increase in the number of students enrolled in high school, then it is reasonable to assume that the chances of someone inventing a new product are 50% greater. The classic example of if you put a million monkeys in a room with typewriters, one will end up writing Shakespeare can easily be transposed to this scenario: if you put a million more people in a chemistry class, one of them will become a chemist.
The latter prerequisite, entrepreneurial risk, requires capital. Now, it is easy to declare that minimum wage would in fact decrease the amount of entrepreneurial risk. However, I aim to display that the opposite is true.
First, let us imagine that it takes $200 dollars to start a widget shop. Joe is now working for $5/day for Frank. Joe saves $1/day and, after 200 days, is able to open his widget shop. In this scenario, a minimum wage does not factor in because, either way, Frank or Joe would be able to start the shop. However, what many fail to realize is the man-hours it requires to run this widget shop. If it takes 12 hours/day to run the shop, then Frank could not possibly run both his current shop and the new one. Thus, Joe is able to use the new funds from the minimum wage to start and run his shop. With the added variable of time, minimum wage becomes necessary for entrepreneurial risk to be taken.
Second, let us examine a slightly different scenario. Joe is still working for Frank, but Joe wants to start a biblet shop, which requires only 6 hours/day but needs $400 to create. Joe cannot possibly start up this shop because it would take too long to save up the money so, like most people, he goes to the bank for a loan of $200. Frank has already taken a loan to pay for his own business, while Joe has a clean slate. In this scenario, the bank is more likely to loan to Joe than Frank because Joe has no existing debts. Thus, in this example, minimum wage is necessary so that more people have disposable income and, in the process, can take risks.
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