how min wages really work

http://freakonomics.blogs.nytimes.com/2008/03/28/using-the-minimum-wage-to-beat-the-competition/

I’m rather underwhelmed by the premise of a minimum wage to begin with, but here is basically another example of how regulation, supposedly intended to impose costs on large conglomerates, is actually a war against the little guy, small businesses.

Wal-Mart (I’m picking on them because everyone else does, not because they’re the only ones doing this) or other large businesses can afford to absorb the somewhat higher costs of employing workers at higher rates than they might otherwise. They often usually offer a rate higher than min-wage anyway to compete for the large quantity of unskilled workers, making the legal wage scale something of a misnomer as few people are employed at this rate. Small businesses run by private individuals instead of corporate boardrooms on the other hand often cannot. The result: small businesses, which still account for over half of American jobs, have to fire workers or have to raise prices to levels above that of the large conglomerate and thus risk being priced out of the market. Now as far as the retail game, this has basically already happened. Small companies have migrated to other more specialized services or small scale manufacturing operations with higher pay scales than min wage anyway. Obviously this isn’t the case in Germany yet.

As with unions, the purpose of min wage laws has long since evaporated. If people cannot earn a ’living wage’ at their employ, then they need to rise to a position that does earn that wage or they need to accept reduced lifestyles (plasma TVs and nice shoes are not necessities of life). I could easily live on the meager salary a part-time minimum wage job offered what with all the tax credits and other economic transfers made available to people at that income. Maybe that makes me weird, and I’d certainly take a higher lifestyle from greater income.. but I’m not on minimum wage either. Unions certainly like the wage hikes.. but again.. the artificial increases where there are not accompanying increases in productivity leads to a lack of new jobs where unions are concerned (part of the plan to begin with, reducing the job market increases the value of the workers in that market). And again, unions are out-of-date. They need to be focused on international trade and labor agreements, not wringing more money out of American corporations and feeding American political war chests.

I wish people could keep this in mind when the politicos float the idea of min wage hikes. Anyone else wondering why we’re having job creation slowdowns and a hint of recession less than a year after the passage of a number of state minimum wage hikes?