Wednesday, 6 April 2016

Ten Unavoidable Problems with a Living Minimum Wage, by Steve Baba

Steve Baba, PhD, Ten Unavoidable Problems with a Living Minimum Wage from 100% Waste of your Money to Millions Unemployed, 2014 EEENI Inc.

The "Living Wage" has been a big topic over the last few years. So popular with the chattering classes was this idea, that in a moment of madness, our chancellor decided to make it part of last Autumn's budget. This book offers some interesting arguments that indicate that wage controls are not sound economics.

The bulk of this book takes the form of a dialogue between an economist and an activist at a McDonald's cafe. The activist asks the economist to sign a petition in favour of the Living Wage. Our economist, predictably offers the response that a minimum wage could lead to increased unemployment. The activist replies by pointing out the theories of the "New Economics," which holds that employers would still employ the same number of people. The economist does not contest this claim, but offers ten reasons why a minimum wage could still have a distorting effect on the employment market even if employers still kept on the same number of workers in minimum wage jobs. Central to these arguments is the theory that the result of a minimum wage would be an increased number of applicants to minimum wage jobs, resulting in disadvantaged applicants being crowded out. This is a very readable and enjoyable way of presenting some quite intricate economic arguments.

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