Friday, April 01, 2005

What Minimum Wages Mean

There is a political cry in the air these days to increase the minimum wage. Most any student who has ever taken a course in Principles of Microeconomics has heard that the demand and supply cross of the economist shows that a minimum wage decreases the amount of labor employed and leads to unemployed workers. But the graphical models of the economist may lead students to not truly understand how a minimum wage works in the real world. If you want to get your hands dirty with the economic reality of an increase in the minimum wage, then you need to click right here.

2 comments:

Larry Eubanks said...

I don't think I understand monterey63's reference to checks and balances. It seems to me corporations are created with "check and balances" well defined in many ways. These legal entities have elaborate rules of governance, and as well an elaborate system of regulation courtesy of Congress.

Specifically, why should we think that all the legal rules for governance combined with the government's regulatory system aren't sufficient?

Larry Eubanks said...

There doesn't seem much in your last comment to move me in your direction.

"Bribes of corporate contributions" seems to cry out for more depth of explanation, and even, the question: "What system of political economy would you replace our system with?"

What does "real equity" mean? There is an economic logic to salary determination that is related to productivity and to the value of the product. Greater productivity brings greater salaries, in general. I think this is as it should be. Perhaps there is some identifiable flaw in the salary choices in corporations that breaks this economic linkage between salaries and productivity? Does the idea of "real equity" seek to relate salary determination to something other than productivity and the value of the product?