Thursday, April 28, 2011

Proof the Minimum Wage is Causing Unemployment

McDonald’s and its franchisees hired 62,000 people in the U.S. after receiving more than one million applications, the company said in an e-mailed statement.

These are minimum wage jobs and it shows that there are plenty of people willing to work, if they could find jobs. But with minimum wage laws, instead of companies having the opportunity to bid for these people at lower wages, the job seekers are shut out of the labor market.

It's simple supply and demand economics. There are x number of jobs available at the minimum wage, if the number of those willing to work at that wage exceeds the number of jobs available at the minimum wage, then some will not be able to find jobs. Market wages, as opposed to government controlled lower bound wages, means more firms will be able to bid for workers, until the market clears.

No one is forcing anyone to work at any specific wage. At a market clearing wage, those that want to work at the market rate will be able to do so, and given that McDonald's had to turn away close to a million applicants, it suggests that the minimum wage is causing severe unemployment.

15 comments:

  1. "it suggests that the minimum wage is causing severe unemployment. "

    Really Robert? Or do you think the main cause is a federal reserve that manipulates the markets and hands out hundreds of billions in taxpayer money to goldman sachs causing people who were previously making 70k a year get laid off so they have to go in the McJob line and get a job that will be 10k-14k a year.

    Im all for getting rid of minimum wage, but I just had to call you out for that ridiculous statement at the end.

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  2. @Anonymous --

    Obviously, Robert doesn't mean that minimum wage is the ONLY cause of severe unemployment. In every discussion of the minimum wage, must its opponents qualify their argument EVERY TIME by pointing out that the minimum wage is not the only cause, or indeed often not the primary cause, of unemployment?

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  3. I've been making this argument for years to my liberal friends and they get apoplectic over it. They counter with the "need" for a living wage and just cannot comprehend that living wages are economically destructive and massively inflationary (thus making it the new minimum wage) or that the minimum wage is not intended for people to raise a family. It's for people with no marketable job skills to get a job, learn skills, create a work history, and eventually advance to something better.

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    1. The comparative statics argument that it does is a micro-household argument not macro analysis which is required by the question. Here's the macro analysis: Minimum wage increase is a countercyclical strategy that is used during times of recession to jump-start the economy. Some trigger happy employers may layoff their employees only to see demand for their products increase as minimum wage earners increase their buying power and as higher wage recipients also acquire higher wage in a domino effect scenario. This positive shift in demand for output makes these myopic employers look stupid as now they will need to hire and spend resources in training new workers as the individuals they laid off have now found new jobs.

      The possible inflationary impact is too small and harmless especially given the starting point when this is often implemented: recession which is often accompanied by low prices and interest rates.

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  4. The only thing the McDonalds story shows is that there are far more people looking for jobs than there are jobs available. And that has nothing to do with the minimum wage.

    People are in trouble - they are suffering. When our pets suffer what do we do? We take them to the vet to put them gently out of their misery. It is time to do the same for any person in the country who has had enough of the BS. Most people would not be ready to throw in the towel, but perhaps 10% would do so, if the government, the medical profession, and the people were even a little decent and would allow an individual to take even a modicum of control over their life - if people were given just a modicum of control so they could end their lives painlessly when they got ready, then I'm estimating 10% would do so very soon. But, I doubt that those in power would grant people to have even that small amount of control over their OWN lives. Why? Because those in power are scum.

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  5. "The only thing the McDonalds story shows is that there are far more people looking for jobs than there are jobs available. And that has nothing to do with the minimum wage. "

    I am sorry but I have to ask this - are you wilfully blind and/or dumb? If employers cannot offer a lower wage to prospective jobseekers, i.e. a wage at which these employees are actually productive assets to them, how does this NOT aggravate unemployment? Some people really do live with their heads stuck in the ground. Yes, people are suffering, and yes they are miserable. How does mandating a minimum wage based on the dubious, subjective, nonsensical concept of a "Living" wage fix this? It doesn't.

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  6. So they hired 1 out of 20 people? My uncle (accountant) told me that he was told there were 250 applicants for his position after being hired for a new job recently. What exactly does this prove about minimum wage? That seems normal in this recession.

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  7. I wrote a blog about this several months ago. I have first-hand experience in the damage that minimum wage causes--not only to businesses that directly employ min wage workers (like I did), but to other businesses and ALL low wage workers themselves.

    http://www.morecommonfreakingsense.com/2010/11/minimum-wage-increase-in-illinois.html

    A more recent article by CNBC that talks of some of the stats regarding teenagers and unemployment...
    http://www.cnbc.com/id/42572175

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  8. Would we be better off if McDonalds had employed 124,000 people at $4 per hour instead of 62,000 people at $8 per hour? I don't think so.

    All employers hire the number of people they need to keep their business going. They would not hire more than that number at any wage - they only want to deal with the number required to do their business. It's called a business - not a charity. They only have so many hamburgers to flip, and that's it. There are only so many grills to make burgers on. AND I don't want someone making $4 per hour to prepare my food - they could not afford to stay healthy and clean. SORRY YOU CAPITALIST SCUM THAT WANT TO HIRE PEOPLE FOR $2/DAY AND MAKE THEM WORK 16 HOURS/7 DAYS/WEEK! WE THE PEOPLE AREN'T INTERESTED - IF YOU WANT THOSE KINDS OF CONDITIONS, GET YOUr SCUMMY BUTTS OVER TO ASIA AND HAVE AT IT - GET OUT OF OUR COUNTRY AND STAY OUT - WE DO NOT WANT YOUR SCUMMY ILK BREATHING OUR AIR AND TAKING UP SPACE THAT DECENT PEOPLE COULD USE! DO YOU HAVE ANY QUESTIONS? AND THAT GOES FOR YOU TOO INQUISITOR - GET YOUR TICKET AND GET OUT!!!

    The minimum wage protects the workers from scum.

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  9. There is no such thing as a 'market clearing wage'. Have you not heard of the Great Depression? Laissez-faire capitalism, no minimum wage ... mass unemployment. Your thesis is therefore false.

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  10. Capitalist? Gotta break the news to you. We've been a socialist society my entire 48 years of life and were broke. Wake up idiots!

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  11. hey guys i have another question
    what came first? chicken or the egg?

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    1. The socialists in the future built time machines so that could go back and start the great depression. In the UK they even got the British to go back to the gold standard after ww1. Sneaky buggers won't they be?

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  12. So can someone explain how the depression occurred if there were no socialists policies back in the day?

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  13. If we get rid of the minimum wage, are doctors going to charge less for there services?

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