Tuesday, August 01, 2006

Minimum Wage

What really determines Legislative decisions like raising the Minimum Wage?

We can discount Economic theory, as Economists generally insist that Minimum Wage levels retard Hiring and total Labor employment. I somewhat doubt this rationale! It seems to me that Hiring occurs whenever there is productive labor to be performed, with Businessmen moaning but still hiring. A Posting today suggested difficulty of Firing led to reluctance to Hire. The United States remains easy to dismiss excess labor, whether through Firing, layoffs, downsizing, or forced Retirements. It does not seem the basic force behind American business refusal to Hire at speeds of previous times.

We have witnessed Outsourcing within the last two decades, but a special Outsourcing; it not be a question of American productivity or Production Cost, simply that greater Profits could be realized by foreign production. Corporate leadership realized this fact, but forgot it was based upon certain underpinnings. The real constant need was American Consumer Demand. The later had to stay high and constant, else foreign production lost its Profits alure. Production has to be sold, requiring a solid market.

Why the interest in Minimum Wage today?

Corporate leadership recognizes Trends in the economy even faster than the Fed. They noticed a slaking in Consumer Demand, especially in Transportation and Energy-consumptive Products, though consistent across the economic spectrum. Consumers are reaching their Credit Card limits, and their Home values are dropping; many having high, habitual monthly Costs in Mortgage debt. They glance at Minimum Wage laborers, and visualize a scenario: A $2/hour Minimum Wage hike often enough means a $64, $80, or $96 a Week increase in labor incomes; translating into a rise in Credit Card limits without any significant rise in Taxes upon it. Again, it is Christmas for the Corporations.

Jeff Cornwall has a nice article on self interest. His contention stands as self interest does not necessarily mean greed or failure to meet social commitments. I am not sure this spread of self interest motivation can be assigned to the Corporate structure. lgl

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