Arguments against those who say increasing minimum wage will damage the economy?

[tel100]

I am an ardent socialist and I regularly get involved in debates about increasing the minimum wage in the UK from £5 to £8 or even £10 (a postion taken by numerous small socialist parties in the UK)
Yet I often seem to get stuck on what to say when people say it will cripple businesses and the economy. They also say that it will drive up prices and cause increased unemployment.

So as a socialist can anyone help me on how I can defend a position in terms of economics (because I know how to argue that it is morally essential).

regards
tel

[Lumpen Bourgeois]

Ever heard of wage-led growth? You could argue that an increase of the minimum wage could cause the aggregate demand for goods to increase(since workers would have more to spend) which would lead employers to demand more labor. Simply put, the minimum wage could, theoretically any way, increase employment, which runs contrary to the conventional wisdom.

Unfortunately, I think in a capitalist economy, minimum wage polices will most likely lead to some inflation.

[Yehuda Stern]

To quote Trotsky's Transitional Program:


Property owners and their lawyers will prove the “unrealizability” of these demands. Smaller, especially ruined capitalists, in addition will refer to their account ledgers. The workers categorically denounce such conclusions and references. The question is not one of a “normal” collision between opposing material interests. The question is one of guarding the proletariat from decay, demoralization and ruin. The question is one of life or death of the only creative and progressive class, and by that token of the future of mankind. If capitalism is incapable of satisfying the demands inevitably arising from the calamities generated by itself, then let it perish. “Realizability” or “unrealizability” is in the given instance a question of the relationship of forces, which can be decided only by the struggle. By means of this struggle, no matter what immediate practical successes may be, the workers will best come to understand the necessity of liquidating capitalist slavery.

[Charles Xavier]

The amount of employers may decrease but the amount of jobs won't. There will still be demand, especially if wages go up. If a business cannot afford to pay workers a decent wage they shouldn't be in business anyways. As for local small businesses they would be shooting themselves in the foot to be against this as most people spend I'd say 80% of their disposable income(ie income after taxes and bills are paid) within the local community.

[BobKKKindle$]

Inflation (i.e. sustained increases in retail prices in multiple economic sectors) is the result of conscious decisions on the part of employers often in response to increases in production costs, and derives from the desire of these employers to maintain or increase the rate of profit - and so if there is anyone who should be "blamed" for inflation it not workers who are demanding a higher minimum wage or improved working conditions, but the people who are actually responsible for deciding the prices at which goods should be sold - i.e. employers. This argument is also deeply hypocritical when we consider that employers are currently receiving vast sums of money in the form of profits as well as the wages they "earn" in their capacity as managers and yet at the same time they still accuse workers of being too aggressive when they issue minor demands which could easily be accommodated.

[Revolution 9]

Ever heard of wage-led growth? You could argue that an increase of the minimum wage could cause the aggregate demand for goods to increase(since workers would have more to spend) which would lead employers to demand more labor. Simply put, the minimum wage could, theoretically any way, increase employment, which runs contrary to the conventional wisdom.

Unfortunately, I think in a capitalist economy, minimum wage polices will most likely lead to some inflation.


The amount of employers may decrease but the amount of jobs won't. There will still be demand, especially if wages go up. If a business cannot afford to pay workers a decent wage they shouldn't be in business anyways. As for local small businesses they would be shooting themselves in the foot to be against this as most people spend I'd say 80% of their disposable income(ie income after taxes and bills are paid) within the local community.

Saying that the minimum wage would stimulate demand enough to offset the unemployment it causes is extremely one-sided. You have to remember that the newly unemployed would consume/save/invest less, which would balance out the increased consumption/saving/investment of those still employed.

In other words, an increase in the minimum wage will increase unemployment. Furthermore, an increased minimum wage will disproportionately hurt small businesses over large businesses. Small, local businesses are the ones that usually hire the most marginalized workers, and thus they receive a small profit. An increase in the minimum wage simply increases the labor costs of these small firms, causing increased difficulties for them, not to mention increased unemployment.


Inflation (i.e. sustained increases in retail prices in multiple economic sectors) is the result of conscious decisions on the part of employers often in response to increases in production costs, and derives from the desire of these employers to maintain or increase the rate of profit - and so if there is anyone who should be "blamed" for inflation it not workers who are demanding a higher minimum wage or improved working conditions, but the people who are actually responsible for deciding the prices at which goods should be sold - i.e. employers. This argument is also deeply hypocritical when we consider that employers are currently receiving vast sums of money in the form of profits as well as the wages they "earn" in their capacity as managers and yet at the same time they still accuse workers of being too aggressive when they issue minor demands which could easily be accommodated.

Your argument is a non sequitur. Only because employers make profits (which is their marginal input into the production of their goods) doesn't mean we have to blame them for inflation. A profit is simply when you make objects of less value (e.g. steel, capital, land, labor, etc.) into objects of more value (like cars).

If businessmen didn't keep up with inflation, they would not be making a profit, and therefore they would be performing a kind of economic terrorism by taking more valuable objects and making them less valuable.

This leads us to the true cause of inflation: monetary expansion. If it weren't for the ever expanding supply of money the government forces on us, prices wouldn't rise as much, protecting the savings of the people who need it most.

[Lumpen Bourgeois]

Saying that the minimum wage would stimulate demand enough to offset the unemployment it causes is extremely one-sided. You have to remember that the newly unemployed would consume/save/invest less, which would balance out the increased consumption/saving/investment of those still employed.

In other words, an increase in the minimum wage will increase unemployment.


You are assuming that employers will quickly layoff workers as soon as the minimum wage is increased. In reality, it maybe quite costly for the employer to layoff workers. Instead, the employer may decide to keep those workers employed long enough at least, for the increase in overall effective demand, resulting from the increased minimum wage, to take effect.

Furthermore, you're assuming that minimum wage always causes unemployment. I'll admit the minimum wage may sometimes increase unemployment, depending on particular circumstances, but it's quite a claim to say it always will.

[bruce]

Furthermore, you're assuming that minimum wage always causes unemployment. I'll admit the minimum wage may sometimes increase unemployment, depending on particular circumstances, but it's quite a claim to say it always will.

While it may increase unemployment, it will necessarily lead to increased costs. Those increases could develop into raising prices, decreased material resources leading to a lesser product, or, as is most common, decreased labor supply.

[cyu]

Don't even debate minimum wages at all - it's a trap. The capitalists are just redirecting the discussion into one that's between one that's only slightly non-capitalist vs. a fully capitalist one. It's no real choice at all.

You should redirect the discussion into what *you* want out of the economy. An anarcho-syndicalist might say that minimum wage isn't needed at all if employees ran all corporations democratically - since it won't be a company dictator telling everyone how much they are paid, but the employees deciding for themselves how much they are paid.

In fact, if you can redirect the debate into one in which it's between a fully anti-capitalist chioce and one that's moderately anti-capitalist, then you'd be doing pretty good... obviously if you had such a situation, people wouldn't even be bothering with the minimum wage at that point.

[Diagoras]

You need to make sure you define your terms when discussing this with them. What do they mean by "damage the economy" precisely? You can't present the economy as if it is an entity in itself, from which bourgeois economists are privy to special revelation. What they will essentially come to when terms are defined will be something along the lines of: "profits are decreased, which will lead to less available capital for employers to use on job hours and new positions for employment". For all practical purposes, they are correct. Operating within a capitalist market structure, increases in payment to workers DOES lead to a decrease in employment, because employers are not going to be willing to lessen their own share of the pie. Thus, they really just shuffle around the funds that are largely already assigned to laborers. So, you may have more work piled on you to make up the difference, or extremely transitional workers will be used to replace full-time workers, or "the number of shift hours available" will suddenly shrink, etc...

This should not be seen as a victory for your capitalist interlocutors. What they have just confirmed is that, operating under this wage system, capitalism is incapable of providing the incomes necessary for many people to live above paycheck to paycheck. When wages go up, inflation occurs, jobs can disappear, etc, causing economic security and the well-being for many to fall. You should take this as an opportunity to point out these failures, and then extrapolate these failures to the general failures of the capitalist system to effectively and efficient provide for the fundamental material needs of most human beings, and its artificially sustained scarcity.

The fault is not with the minimum wage being too low or high, it is with there be a wage system at all, and with the meeting of the basic needs of people being contradictory to their notion of what a "healthy" economy should look like.

[BobKKKindle$]

Your argument is a non sequitur. Only because employers make profits (which is their marginal input into the production of their goods) This is incorrect - profits are generated by paying workers less than the value of their labour. The idea that employers "deserve" profits because they have contributed capital towards production, or because they have chosen to forgo present consumption in anticipation of a greater monetary reward at some point in the future, is a crucial element of bourgeois economics, and is intended to create the illusion that the accumulation of wealth in the hands of the few is legitimate, and an accurate reflection of how production takes place, thereby obscuring the reality of the capitalist system. Marxists have always sought to uncover the truth and show that labour is the only source of labour and so the only way an employer can ever make a profit is through exploitation.


If businessmen didn't keep up with inflation, they would not be making a profit, This is incorrect - if an employer was faced with an increase in production costs including the successful imposition of wage demands they could retain stable prices and yet still make a profit even if the rate of profit was diminished. Employers can also increase the prices of their goods beyond the general rate of inflation to generate additional profit: in the UK, energy companies have recently chosen to take advantage of their monopoly position by increasing prices despite the fact that both real wage costs and the price of oil have been falling.


and therefore they would be performing a kind of economic terrorism by taking more valuable objects and making them less valuable.This is incorrect - keeping the prices of consumer goods constant and increasing wages is not terrorism. Allowing workers to endure conditions of intense poverty and deprivation is much more of a crime than slightly reducing the profits of employers, who are already accumulating vast wealth despite the fact that they could be easily done away with and replaced with a system of collective ownership and an economy geared towards meeting human needs, not the interests of the few.


This leads us to the true cause of inflation: monetary expansionThis is incorrect - as is generally the case with bourgeois economists you are considering inflation as an entirely abstract phenomenon beyond the control of anyone. The fact is that inflation is the result of large numbers of individuals (especially but not limited to employers) choosing to increases the prices of the goods they sell. The actions of governments may have a role to play in influencing the decisions these individuals make, but it is absurd to suggest that the government on its own is the sole or even the most important cause of inflation.

It doesn't seem as if there was a single element of truth in your entire post.

[fabiansocialist]

I am an ardent socialist and I regularly get involved in debates about increasing the minimum wage in the UK from £5 to £8 or even £10 (a postion taken by numerous small socialist parties in the UK)
Yet I often seem to get stuck on what to say when people say it will cripple businesses and the economy. They also say that it will drive up prices and cause increased unemployment.

Take that lying bourgeois argument to its logical conclusion and paying workers nothing would stimulate the economy a great deal.

The whole question is falsely posed. Let me give an example of another falsely posed question: you go to a hotel and pay $30 for a room; the desk realises they've overcharged you by $5 and give it to a bellboy to return to you. The bellboy pockets $2 and returns $3 to you. So you have paid $27 and the bellboy has pocketed $2. Where's the missing dollar? It's the same kind of intellectual trickery and sleight-of-hand that takes place with regard to minimum wage. Let me elaborate.

As with the hotel example above, the trick is to focus on the right thing; in this case it's capitalist's surplus -- how much they squeeze out of workers. Low wages means they squeeze more. Is this what they mean by "stimulating" the economy. I would argue it does the opposite as it means less for workers to spend. This is the cause of periodic slumps: not enough purchasing power for workers. Look again at the logical limit: would paying workers nothing stimulate the economy? No -- because there would be no-one to buy anything.

The problem is not a minimum wage and where that wage happens to be; it's an irrational and exploitative economic system whose working depends on low wages, and whose beneficiaries are unwilling to share the benefits of the system more equitably. And this system has petty bourgeoisie at its base, who will go out of business if the minimum wage is raised -- but this is incidental to the thrust of the main argument I am making. The system itself should be changed so that talk of "minimum wage" becomes irrelevant. As with the hotel paradox above, it depends on seeing things the right way, and not being fooled into focusing on smoke-and-mirrors, where the numbers never seem to add up right.

Did you resolve the hotel paradox above?