My take on the minimum wage discussion: Prices in an economy represent the objective signals of two exchange participants subjective preference.That is, the supplier of a good appraises through his own calculation the relative value of his good against the demander own valuation. The exchange therefore occurs when the two participants reach an equilibrium valuation and strike a deal: The price! Basically, the price exchange mechanism works more or less like an ebay bidding process. The problems arise when the coercive hands of politics interfere into the natural exchange process first off by distorting the value of the medium of exchange, the money, and then by attempting to set a price floor in total disregard of the valuation of the market participants. The discussion of the minimum wage in my opinion is merely a cop-out! Why? Because, on one hand the workers are right indeed to argue that their income does not suffice to support their living standard; while at the meantime the employers are saying that artificially increasing workers wage would increase their cost and lower their long term competitive prospect and even hurt their ability to employ people. Both parties are hurting in this equation! Where does the problem lays then? Simply, the fundamental issue lays in the debasement and the destruction of the moneys purchasing power through inflation. Inflation, the artificial increase of the money supply causes prices to rise above their real value, thus hurting the groups on fixed income who see their living standard deteriorate. Inflation transfers purchasing power and wealth in the hands of those who have access to credit and investments, often banks and big corporations while the majority of the populace suffers the consequences; within whom we find small businesses and the working class. The media tries to portray the minimum wage discussion as a dialectical opposition between the working class and the rich selfish employers. The entire argument is meant to raise tension between groups that tend to cooperate with each others while ignoring the fundamental problem laying elsewhere. Inflation, the debasement of the currencys buying power, which is unfortunately accepted worldwide, as policy by central banks and governments, is the real culprit of todays economic crisis. Not only does inflation hurts the poor and the working class, it also distort entrepreneurs ability to forecast the future and sow the seed of booms and busts cycles in the economy. Is it really irrelevant how much your are paid as long as your income can support your basic needs? Thats the fundamental issue at hand here! Some people argue that the minimum wage should be raised to $15/hr; but what is $15/hr worth when gas price is at $5/gallon, food cost are an all time high, healthcare is expensive, education is almost unaffordable for most, and the price of everything is rising years after years despite the alleged increase in productivity of the economy? The discussion needs to be focused on the core and fundamental issue of monetary policy and the of artificial increase of the money! Does that benefits most people or does it hurt most? An investigation into history shows that prices have risen dramatically through time despite the improvement in productivity and technological advances. Shouldnt the general price level rather fall with better science, new discovery, new technology and constant innovation? In an inflation free society, everything ought to be relatively cheaper, not more expensive! Central banks artificial distortion of the money supply is hurting the productive groups like entrepreneurs, businesses, and workers! Both groups should really be holding hands and march together for Just prices against the corrupting policy promoted by Central banks! What was the minimum wage of workers in Zimbabwe during their experimentation with hyperinflation? In wage rate is not that important in an aggregate and truly depends on supply and demand within a given industry. It is the interference of central banks in manipulating the supply and value of the currency that ought to be the focus here, but is unfortunately ignored as we speak!
Posted on: Fri, 31 Jan 2014 10:27:06 +0000
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