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Wednesday, 11 July 2012

Minimum Wage = Maximum Distortion

Right now there is a questionnaire floating around the interwebs concerning the minimum wage in Jersey. I had the link but its gotten lost in the ether somewhere, so it will be added at the bottom should I find it again. This questionnaire is a trick, nothing more. It is designed to (1) fool you into believing that you can in any way influence the oligarch's agenda and (2) with fool you into accepting the continued existence of a minimum wage, with leading and frankly economically stupid questions such as "should it go up/down/round and round?".



There should be no minimum wage. The free market should dictate how much a given person should be paid in a given role, taking into account their previous experience/capacity/efficiency in the role.

Having a minimum wage dictated by politicians, who have little to no knowledge of how an economy should operate, let alone the workings of the way in which the island's economy is handled/regulated/distorted abysmally by the bureaucrats.The Treasury Minister doesn't know what's best for businesses. He doesn't know what's best for employees. All he serves to do is manipulate and distort the market for the benefit of the government, not for the benefit of the people.

An essentially arbitrary number is chosen by a very small group of people (if not one), which is then 'approved' by the government (another small group of people). These people are politicians, not workers, not business owners, not electricians, chefs, sales assistants or hairdressers. They have no idea what the market desires in terms of the supply and demand of labour, goods and services. Even if they did have perfect information about the needs of the market and based their 'magic number' on this data, it would still be as meaningless as the demands of the market can change at the drop of a hat, to reflect consumer habits etc etc.

Those who would use the argument "Well if there was no minimum wage then what's to stop McDonald's paying me £1 an hour." The answer to this misguided approach is you and your own free will. Nobody would choose to work for £1ph. Instead of the financial prospects of the workers being restricted to a "go-to figure", which the businesses will always favour as - let's face it, what the minimum wage really means is if you pay your workers 1p less per hour, you as the employer would potentially face criminal sanctions. This is madness! THIS IS SPARTA!!!

The lower the minimum wage, the lower the quality of life for those who earn it as they would be forced to work longer hours to be able to afford the necessities of life. What you are saying to someone being paid minimum wage is "your skills are so limited and your capacity so low that we value your labour at the lowest possible rate we as your employer can get away with, whilst avoiding criminal liability." "Then the minimum wage must be higher!" I hear you shout. This is also misguided. Imagine that you own a small restaurant with 5 employees, each working 40 hours p/w. You pay the 3 waitresses minimum wage.

The government then decides that the arbitrary figure of minimum wage is to be increased, which would result in your wage bill being 15% higher. You had no say in this matter and there's nothing you can do about it. As a business owner you would inevitably pass that increase in cost on to the customer. If your outlay is 15% higher, then if follows that you should increase your food prices to reflect this. Increasing your prices will drive away customers who would otherwise have dined in your restaurant. This will lead you to reduce your more expensive wage bill by laying off an employee or giving them less working hours. The workers face being laid off, the business needs to make cutbacks or increase prices, which only drives consumers away, therefore hampering the island's economy as a whole. Nobody is served well by this legislation at all.



As you can see, the minimum wage is designed with honorable intentions, but alas it achieves the opposite effect. On paper it is supposed to help the workers but in reality it is in direct contradiction to workers' interests. If everyone's labour were to be evaluated on an individual basis in the free market, then there would be more jobs, more economic freedom and more prosperity (3 things the SoJ have proven time and time again NOT to be interested in for the people's sake, but for their own sakes.)

If someone's labour was only worth say £5/h then they should not be prevented by a gang of robed idiots from working for that amount. If someone's labour was worth £50/h then the same rules apply.

Unemployment is at record highs just now and this figure is only going to increase (because the SoJ sold the fulfilment industry down the river for no justifiable reason - and yes I do have a law degree and yes I did read the relevant legislation and yes it was totally appalling how the SoJ acted. Irreprehensible, in fact.) There are people with low skill sets out there, of course. The minimum wage just seeks to box them out of the job market, as by setting a minimum standard of skills, anyone who does not meet these requirements will never get a job. In the free market however, they would be able to find a job whose pay reflected the value added to the business by their labour.

If minimum wage was at £10 say, then less people would be hired as the operating costs of being forced to pay such a high wage bill would dissuade businesses from hiring more people. As a result the economy suffers.

Get rid of the minimum wage and the economy will improve leaps and bounds (despite the Bank of England's efforts to debase the contents of all our wallets through quantitative easing/printing money/fraud. Whatever name you give it, the minimum wage hampers the island's economy. The bigger fish can be fried in due course, I hope.

I'm a dreamer, but I'm not the only one...

Further reading:
www.cato.org/pubs/pas/PA701.pdf - Explains how the long lost cousins in New Jersey are at a financial detriment due to the minimum wage.