Tuesday, July 08, 2008

Tens of thousands of workers priced out of employment

That should be today's headline.

Instead, the media rejoice at the rise in the minimum wage, with headlines such as "Low paid win $21.66 a week extra" and "Pay hike for lowest earners".

Wow, the government conjurs wealth into existence with its magic wand !

All it has to do is raise the legislated minimum wage, and voila, every single employer magically receives the extra money and is able to pass it on to every single employee who was working for them at the minimum wage.

Every job is maintained at a higher wage, nobody needs to be fired.

Unfortunately, the media will not report a single case where people lost their jobs because of this law. Even where those people were willing to work for a wage below the new minimum. They are being priced out of employment. Government destroys job security with any kind of industrial relations laws. It does not, and can not create job security for a single person.

I'll repeat the definition of this regulation very clearly.

It is not purely a "minimum wage". Only in the sense that it defines a minimum that an employer must offer an employee to form an agreement where the employer gives up money in exchange for the employees labour. This definition ignores the fact that there is always an alternative - not offering employment.

It is more accurately, "a price floor" - i.e A price level below which, any form of employment is illegal. A price level that means any worker whose marginal value of productivity falls below this threshold is not allowed to work. Low skilled workers, migrants, elderly, handicapped, youth are all told that they cannot sell their labour unless they improve their productivity and value towards an employer until it is worth more than the minimum - and sometimes this is not possible.