Sunday, January 18, 2015

A $15 minimum wage?

The NDP have put their collective minds together and come up with a bright idea. Why not a federal minimum wage at $15 per hour?  Low income workers will have more money to spend, the economy will be boosted and we'll all live happily ever after. Luckily it looks like this election is either Harper's or Trudeau's to lose so we probably won't have to worry about the bitter prosecutor and his happy go lucky gang of malcontents in the New Democratic Party but on the off chance we are faced with an NDP or NDP / Liberal coalition government which does put through a $15 / hr minimum wage what would be the consequences of that policy?

Labour is a heterogenous market. Every worker's efforts on behalf of their employer are unique. Their wage represents their marginal revenue product, or how much they contribute to the productive process. Unless the market is highly uncompetitive they will already be paid roughly what through their labour they create. If their wage is arbitrary set at twice their present rate by the state it becomes uneconomic for the business to keep them on. This is the process by which the minimum wage works; far from lifting the poor out of the gutter it forces them to remain idle and unemployed. The very people that the minimum wage claims to help are those who it oppresses.

Wages rise naturally with productivity, as new technology is developed and more capital is acquired. Instead of imposing additional price controls on the labour market we should seek to remove what intervention already exists. Instead a $15/hr minimum wage we should allow anyone to work at any wage and rid the working class of the payroll taxes which we all despise. An end to the minimum wage would mean significantly less unemployment and a much better quality of life for the countless number of Canadians who would be able to re-enter the labour market. 

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