Minimum Wage Effect

Frederic Sautet makes the claim that Economics should be axiomatic in this article. He uses as reference a Becker/Posner article in the WSJ. Sautet searches for certainty in a profession which has none. Take the Becker/Posner position: They basically claim that Minimum Wage increases will reduce Employment of low-Skilled labor, alter Capital Inputs, and lead to higher Prices. No One asks, though, if this is an Immediate Effect, Intermediate Effect, or Long-Term Effect. The market for Unskilled Labor has the irreverent habit of increasing Employment after a Minimum Wage increase. Is this a suggestion that such losses are not an Immediate Effect, but a Intermediate Effect, even possibly a Long-Term Effect? This might bear some examination.

The Immediate Effect of a Minimum Wage increase seem obvious to increase Labor desire to work at such occupations, as they will receive greater recompense. The wider choice of Applicants for such work allow for greater discernment by Employers of proper labor cadres at less Cost of evaluation, and with the better choice of Labor, lower Job Training Costs. Capital Inputs may be lessened by the Wage increase, but to what degree does this impact the Business concern; it could actually lower total Capital Costs, by fully exploiting the Life Expectancy of all Capital Inputs without degrading the Business quality. Product Price increases have a distinct Shock Effect on Economists, though there are Questions to be asked: Are current Product Prices what is called Market-Ready?–this means have they previously been advancing in common rate with the total mix of Product pricing, or have they been enjoying an economic profit from falling in relationship to other Prices? Will there be a disadvantageous Jerk in the Product Price increases, or will it be a natural flow upward to conform to the General Product pricing? What does all This impact on Our study of Immediate Effect of Minimum Wage increases?

We must turn now to the Intermediate Effect of Minimum Wage increases. Business firms who have integrated the Minimum Wage increases will express no impact, Business firms who cannot integrate the Minimum Wage increases will fail, while Business firms organized after the Minimum Wage increases will not feel the increases at all. The major impact of the Minimum Wage increases on Business comes within the scope of competing within the new Product Price schedules, or incapacity to restart effective reCapitalization; new firms being immune to this effect else they would not have started in the first place. Business firms capable of integrating the Increases obviously possess a operational format based upon an effective Product list. Business firms which could not integrate the Wage increases obviously were already operating on marginal Profits sufficiently inadequate that reCapitalization would probably have incited failure anyway. Capital formation rates would suggest that Business entrance (new firms) remain relatively unaffected by total Production Costs, so the total number of Business firms will remain relatively stable or increase. It seems the Intermediate Effect of Minimum Wage increases demand simply greater Business efficiency, without much impact upon Business Debt Service.

The Long-Term Effect of Minimum Wages increases does indeed seem to reduce Minimum Wage employment, but for reasons which appear beneficial. Employers tend to utilize Incentive Pay increases to a greater degree with their previously Hired to retain them, the higher Minimum Wage costing firms a higher Price in lower Productivity from untrained labor. The other major push comes in Minimum Wage labor learning greater skills, and moving on to better employment which suits their career goals. I, as an Individual and as an Analyst, have no trouble with either of these effects. lgl