# what would happen if minimum wage was abolished?

#### strantor

Joined Oct 3, 2010
5,226
If minimum wage were abolished tomorrow, what do you think would be the effect? I just had this discussion with a family member. said family member is very adamant that "something is only worth what someone else is willing to pay for it, including labor" - which I almost totally agree with, except in the area of the minimum wage. He thinks that there should be no minimum wage, and all wages should be determined by supply and demand. I think that if there were no minimum wage, people with no skills would make so little that the burden on the tax payers would be substantially increased. I think it would be a bad move. I actually think the minimum wage should be increased. what are your thoughts?

this question is about economics, not politics, please don't steer it towards politics.

#### joeyd999

Joined Jun 6, 2011
4,377
Increase minimum wage = unemployment increases;

Decrease minimum wage = unemployment decreases;

My WAG:

Eliminate minimum wage = 0% unemployment.

#### strantor

Joined Oct 3, 2010
5,226
Ok, I see that; the more a company has to pay employees, the more they strive to get by with the least amount of employees possible. In the philippines, in the department stores, they have an employee assigned to each aisle, who knows everything there is to know about the products on their aisle. very different from the skeleton crew that walmart employs.
BUT, as I see it, the issue is complicated by the fact that we have welfare and the likes. If we got rid of the minimum wage and walmart doubled their crew and paid them half the wages, we would still be paying the same amount in goverment assistance with tax. do you agree?
and then there will be a portion of society who simply won't work for 4$/hr, (this would be in addition to the ones who already simply won't work for 7.25$/hr)
I have a feeling that if we were to get rid of minimum wage and welfare at the same time, we would be a 3rd world country before long, with people living in burroughs in poverty, and no way out.

#### joeyd999

Joined Jun 6, 2011
4,377
Ok, I see that; the more a company has to pay employees, the more they strive to get by with the least amount of employees possible. In the philippines, in the department stores, they have an employee assigned to each aisle, who knows everything there is to know about the products on their aisle. very different from the skeleton crew that walmart employs.
BUT, as I see it, the issue is complicated by the fact that we have welfare and the likes. If we got rid of the minimum wage and walmart doubled their crew and paid them half the wages, we would still be paying the same amount in goverment assistance with tax. do you agree?
and then there will be a portion of society who simply won't work for 4$/hr, (this would be in addition to the ones who already simply won't work for 7.25$/hr)
I have a feeling that if we were to get rid of minimum wage and welfare at the same time, we would be a 3rd world country before long, with people living in burroughs in poverty, and no way out.
You are making the (very bad) assumption that it's a zero sum game. If i hire 10 workers at $10 per hour, then i would instead hire 20 workers at$5 per hour.

it doesn't work like that. I hire *no one* at minimum wage! I don't mind paying competitive wages and salaries, and I do. But, damn it, the people I hire better make me more money than I pay them, or they'll be looking for another job!

I sweep my own floors, and take out my own trash. That is because minimum wage is too much to pay for *that* job.

All minimum wage laws do is keep unskilled and inexperienced workers from getting jobs that would give them the skills and experience to make more money in the future.

I wrote somewhere here a few weeks ago that they should bring back unpaid apprenticeships in the private sector. Imagine if you could work for an engineer, an electrician or an auto mechanic, and get a useful education and on-the-job skills for free, as opposed to paying overpriced votech or college tuition.

Did you know, that in Washington D.C. they have unpaid apprenticeships for aides to Senators and Congressmen? If it's good enough for them, then why not for us?

Joined Dec 26, 2010
2,148
My WAG: Eliminate minimum wage = 0% unemployment.
Not really: We may well find that reducing the minimum rate of pay or abolishing it altogether may make it possible for more people to be employed, but this can hardly be a guaranteed cure for unemployment. Minimum wages are a relatively recent phenomenon but unemployment existed before minimum rates were introduced. In addition, plenty of countries still do not have minimum wages, but neither do they have full employment.

The problem is that a supply of cheap labour is not the only ingredient required for the economy to prosper. Even if the cost of employment could be brought down to the vanishing point, as in a slave economy*, there are other costs than labour. There may not be much of a market for goods either, if wages are too low for people to buy them

*Even the lowest paid employees or actual slaves will cost something if they are to remain capable of working, unless it is possible to contemplate a regime based on forced labour extermination camps, perhaps with such efficiency enhancing measures as enforced cannibalism, and the recycling of the dead as raw materials for manufacture.

It is not sufficient either to ensure that there are no benefits or other means of support, so that only by working can people avoid starvation. The result if such a regime may simply be a famine. Some may approve of this in principle, but whether they would approve of the breakdown in law and order which would be likely to accompany it is another matter.

I do not believe in quick fixes for the sort of situation that faces us now.

#### strantor

Joined Oct 3, 2010
5,226
All minimum wage laws do is keep unskilled and inexperienced workers from getting jobs that would give them the skills and experience to make more money in the future.
why is that? is it because minimum wage is enough for someone to "get comfortable" with their unskilled labor and not seek a better job/experience out of necessity?

#### joeyd999

Joined Jun 6, 2011
4,377
why is that? is it because minimum wage is enough for someone to "get comfortable" with their unskilled labor and not seek a better job/experience out of necessity?
No. It's because they don't yet have skills enough to be worth the wage. Ergo, no job.

Currently, youth unemployment is somewhere around 27%. Minority youth unemployment is closer to 50%. It's not that no one wants to hire them. They simply have no value to provide at minimum wage.

#### maxpower097

Joined Feb 20, 2009
816
We would go back to slavery.

#### joeyd999

Joined Jun 6, 2011
4,377
It's funny. When I was a kid, I used to *beg* the local hi-tech employers to hire me for anything at any price. I just wanted to be around tech, and do what I could.

In high school, I got two companies to simultaneously let me work as a technician, paid under the table at below minimum wage. I'd go to one from 4:00PM to 6:00PM after school, and the second from 7:30PM to 11:00PM. I loved every minute of it. It was the best time of my life!

The first company was acquired by another in another city. The first thing they did was fire the engineer, and gave me his job. Weeks later they closed down the site in my city to relocate to the other. They begged me to go with them. I had to turn it down because I was going to University in the fall, but where would I be today if they never gave me that chance to begin with!

I don't think there is anything wrong with choosing your own price, and working when and where you want to. To be honest, I don't see where the government gets the right to tell me otherwise!

Joined Dec 26, 2010
2,148
I suspect that we may be heading for a bloodbath. Sustained youth unemployment rates on that scale are dangerous.

#### joeyd999

Joined Jun 6, 2011
4,377

Joined Dec 26, 2010
2,148
I really don't think it would have all that much effect, nor do I seriously believe anyone would try slavery, despite my earlier reference to it. Abolishing the minimum wage would probably help a bit, and certainly might legitimise some of the work currently done in the hidden economy, often by illegal immigrants*. I just don't see it as a panacea.

*Of which there are plenty in UK, as elsewhere.

#### joeyd999

Joined Jun 6, 2011
4,377
I really don't think it would have all that much effect, nor do I seriously believe anyone would try slavery, despite my earlier reference to it. Abolishing the minimum wage would probably help a bit, and certainly might legitimise some of the work currently done in the hidden economy, often by illegal immigrants*. I just don't see it as a panacea.

*Of which there are plenty in UK, as elsewhere.
I prefaced my first post with "WAG". There is really no history I can point to that can say what really would happen if minimum wage were repealed. But I think it would be significant.

Each time the Fed or states increase minimum wage, there is a considerable and measurable drop in employment, especially with regard to youth and minorities. I think there are *many* who would love to have a job, any job, but don't yet have skill that make them marketable at minimum wage rates.

#### joeyd999

Joined Jun 6, 2011
4,377
WAG = Wild A** Guess

#### maxpower097

Joined Feb 20, 2009
816
In 2010 in the US, only 6% of all workers earned minimum wage or less. Why do you assume that, if minimum wage laws were repealed, that we would digress into slavery?

Edit: Source: http://www.bls.gov/cps/minwage2010.htm
I'm not being litteral but you would see corporations like walmart and other fortune 500 companies drop wages so low it would be near slavery. Just look how far out of whack our min wage vs inflation is. If it were up to the corporations to decide min pay. They would rape the people.

#### thatoneguy

Joined Feb 19, 2009
6,359
If there were no welfare, and no minimum wage, we wouldn't have the problem with "undocumented immigrants" working for less than minimum wage in the US.

I also wholeheartedly agree with joey on the apprenticeship concept. I worked at a two way radio shop in high school and learned a great deal. They paid me, even though I would have done it without pay. They gave me one of their old scopes for a Christmas present even. This is while I was going to high school.

Now, if somebody wanted to do the same thing, I highly doubt they would get the freedom I had, let alone spare equipment as gifts when they upgrade, since forcing them to pay me when I didn't really care about more than gas money (which wasn't much of anything back then) would hurt them more than help them.

If you are a sole proprietor of a business, it makes absolutely no sense to pay somebody $8/hr to train them how to do every job they need to do. After they go to a vo-tech, they know about 65% of what they NEED to know, and still expect$40k/year, when they are worth maybe min wage once they are fully trained, at which point, if they did good, they can move onto a better job, since they are no longer a drain.

The way the system has been set up by the .gov is to make everybody owe the government money through student loans (which can't be bankrupted away as they used to), and not lifting a finger about the "undocumented worker" issue, because nobody currently on welfare would want to work if they can just have another kid and get another $200/month. There needs to be a LOT of reform, and not in just one area. It will happen sooner or later, probably sooner. So the more you know about various abilities and vocations, the better you'll be when the walls come tumbling down. The hood rats will be turning towards theft for their income, what will you do? That was the conclusion of one report after studying "Welfare Reform" - crime rate through the roof, not people suddenly working. For those who think minimum wage eliminated is the same is slavery, that's simply dramatizing it. If you are only worth$4/hour, work for $4/hour and study and learn all you can while at work, and while at home, and while any skilled tradesman will let you "hang around" with him without getting in his way, so he can give you a bit of apprentice education. There is no such thing as a "living wage", only an uncomfortable life that a person needs to better themselves to make more comfortable. #### JoeJester Joined Apr 26, 2005 4,259 This being a world wide resource, there has to be a country out there with no mandatory miniminum wage. Yes, the employee needs to provide enough goods or services to pay for their wages. Minimum wage as published isn't the true employee costs. It costs the employer more than the minimum wage to hire a minimum wage employee. I read an article years ago about wages in Taiwan. It seems the employees have an idea of their worth to a company, and the company knows the value of training, experience, and retention of good people. You can bet they were paid what they were worth. #### Wendy Joined Mar 24, 2008 22,138 I strongly disagree with TOG's last statement. A living wage pays for a place to live, and if you don't have enough money for even the lowest digs? We have a overpass in Dallas full of people in that predicament. Rent is not free, nor is electricity or water. And there are never enough low rent places for the current people who are squeaking by. I don't think I mentioned food either. Medicine, forget about it, nothing is free in this country. This is not as true in many other countries, but here everything is locked down tight. A minimum wage should feed you enough to maintain health, put a roof over your head with heat, and allow you to live in sanitary conditions (this means plumbing and sewage), minimum clothes. If you stink, as in never wash, and can not wash your cloths you will not have a job. Why is this a hard concept? Dallas has a lower cost of living than most cities. New York is among the highest. At$4/hour 40 hours works out to $160, figure about$40 of that for federal tax. Try providing the basics of life with that kind of cash, it can not be done. Yet it is their own fault because jobs are so easy to get, right?

Something I forgot to mention. Companies regularly get around providing any benefits by requiring their people to work less than 40 hours, which is insult to injury. There are no hidden costs, the people come in on roving schedules that will not allow for second jobs. But they are very disingenuous about their policies to the public. They abuse the people and the system.

These concepts, both mine and others, border on politics at its most basic. It will get people hot and bothered, it did me.

I'll watch this thread and bite my tongue, something I am lousy at. I suspect it will have a very short life before it gets locked. Since I am biased I will ask other moderators to keep an eye on it.

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#### justtrying

Joined Mar 9, 2011
429
I just have to comment on the living wage... there is something to be said about people coming out of school expecting to be paid thousands of dollars, but one thing for certain, any human being needs a safe place to live and a food to survive. If you don't earn enough money to attain those, what kind of benefit would you be to your employer? Rent is incredibly expensive. Up until May of this year, BC had a training wage, this means that anyone new to a job would receive a wage of \$6 if they were deemed to be a beginner. The training period was set by the employer, how long that would be is anyone's guess as there is no max. time limit. Ponder on that for a while. If a company views their new employee as a drain and not an asset, I am not sure how that employee is to learn, grow and develop in that environment.