The minimum wage - why is it and what is it for?

[tenderfoot]

I'm currently debating with people that think the minimum wage is strictly for kids as a way to make spending money.

Whereas I was under the impression that it was the minimum one needed for basic survival and vividly recall that people could live - meagerly - but on their own and that one could pay for college working minimum wage jobs. Now, this was way back in the 1970's before Ronald Reagan.

These days people act as if one should be thankful for being paid for work done at all, let alone being paid to be able to survive and get better educated. Are there instances in history of mass layoffs because of raising the minimum wage?

I find it interesting when people quibble about service workers habits, getting orders correct and such - when they're paid peanuts - as if there's incentive to do good work or care in first place.

I think this is a subject that needs to be discussed.

So, what is the purpose of the minimum wage? Are low-wages a means of motivation?

You tell me and thank you for listening.

[TreasonousBastard]

1. During the Depression a worker might make a dollar a day, but...

another desperate worker showed up willing to make 75 cents. And it keeps getting lower until no one wants to bid lower. The minimum wage exists to stop this sort of thing when there is an oversupply of workers. It's not really designed to guarantee a "living wage."

Wikipedia has a pretty good discussion of it at:

https://en.wikipedia.org/wiki/Minimum_wage

[tenderfoot]

2. Thank you.

[Avalux]

3. You must be young. My grandfather was a child laborer.

This was before any sort of employee protection laws, an 8 hour workday, etc. There was nothing to prevent a 14 year old from working 12-16 hours a day for pennies. Minimum wage and other laws were put in place to protect people from being abused by employers; they were instrumental in creating the middle class.

Here is a website that lists all laws put in place in support of workers:

http://www.dol.gov/opa/aboutdol/lawsprog.htm

I suggest you read them, and look at the history surrounding their implementation.

[zipplewrath]

4. To not waste a precious resource

Just as we don't want natural resources of this country "wasted" (water, gas, air, etc.) we want our labor force to be put to a useful, efficient, and productive end. Under priced labor tends to get that labor put to less efficient and down right wasteful purposes. Under slavery, the labor was often wasted on very inefficient efforts, and it frequently caused an abuse of agricultural land (mostly due to over farming/harvesting).

In anything approaching a "free" labor market, producers have a general advantage over labor in "negotiating" prices. This results in artificially low prices for labor. Collective bargaining is one way to address this disadvantage. Another way is to set minimum wages. They are very effective and have been shown not to harm production or economies at all. In fact, they can often improve certain economies because they drive the need for a more "talented" work force to ensure the employees are "worth" the labor costs. This will drive on the job training, public education, etc.

All you have to do is look at countries with "freer" employment situations and you can see the effect of overly "free" labor markets. You tend to get VERY transient labor that tends to chase minor fluctuations in labor costs. You get infrastructure that is very short lived leading to sudden and quite disruptive production fluctuations based upon the most recent factory collapse/fire/disaster. You get difficulties in insurance markets and capital markets because of the uncertainty in long term investments because of unsure infrastructure to support the long term capital investments in production and delivery.

A long term, stable, well developed work force is excellent for markets, economies, and investment. Dynamic and unpredictable workforces (and markets in general) are only good for speculators and "investors" that only want short term results. The recent housing bubble and collapse was associated with various influences that were looking to "flip" investments, or get their returns "on the front end" instead of actually investing in what was being sold. That's bad for everyone.