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From: david@fisher.UUCP (David Rubin)
Newsgroups: net.politics
Subject: Re: Unemployment & the minimum wage
Message-ID: <200@fisher.UUCP>
Date: Mon, 16-Jul-84 11:24:47 EDT
Article-I.D.: fisher.200
Posted: Mon Jul 16 11:24:47 1984
Date-Received: Tue, 17-Jul-84 01:35:31 EDT
References: <215@idi.UUCP>
Organization: Princeton Univ. Statistics
Lines: 66

[This sentence is false]

Some thoughts on Richard Kiessig's thoughts about minimum wages:

>	Also take the case where a black and a white apply to
>an employer for the same job.  They are equally well
>qualified.  The employer will likely hire the white simply
>because he is probably better educated.  Under the normal laws
>of the free market, the black could simply underbid the white -
>say by offering to work for $3.25/hr. instead of $3.50/hr.,
>and he would surely be hired.  That sort of competition is
>inhibited by the current system.

Two comments:
	(1) If one were more educated than the other, than they could
	    no longer be called "equally well qualified", and if the
	    employer ASSUMES the white is more educated, then that is
	    racial discrimination.
	(2) In the case where two workers can freely underbid one
	    another, why do we assume that the black is more likely to
	    underbid the equally qualified (or unqualified) white?

>	He also made the point that entry barriers in existing
>industries have really gotten out of hand.  It takes $65,000
>to get a taxi license in New York City, for example.  50 years
>ago, all you had to do was to hang a sign on your car, and
>you were in business.  He also pointed out how the "qualification
>exams" for certain things like beauticians is prejudiced
>against minorities.  One black lady passed the practical
>part of the exam just fine, but couldn't handle the written
>part because of her poor education.  She didn't get her license.
>She's now unemployed, when she is perfectly qualified to work.

This is not germane to a discussion of regulation of WAGES. Here you
are objecting to a high (exorbitant!) license fee. License fees are
meant to benefit holders of licenses, not the population in general.

>...............  Why not just let the market determine
>how much a person's skills are worth?  Why does the
>goverment feel it has to intercede?  The only thing
>I can think of is that they are trying to "fix" something -
>poverty, perhaps?  If the minimum wage were a cure to poverty,
>couldn't we just set it at $5/hr. in Pakistan and instantly
>cure their horrible poverty?  No.

Certainly, you cannot arbitrarily set a minimum wage and expect that
poverty will disappear. However, setting a minimum wage can be an
effective way for producers (the population) who collectively possess
a monopoly of a product (labor) to set the price (minimum wage) 
through collusion (government action) that maximizes their profits
(total real wages). Viewed in such a fashion, it is clear that
individual producers can gain by "cheating" on their cartel by working
for subminimum wages, but the destruction of the cartel will prove
detrimental in the long run to all producers.

Such a practice is certainly not in keeping with a competitive market,
but I do not subscribe to the assumption that labor is just another
good that must be treated in the same way as steel or dishwashing
detergent. 

I am willing to admit that the minimum wage may not actually be set for
maximum utility, which leaves the question of level quite open.

				
					David Rubin
			{allegra|astrovax|princeton}!fisher!david