You’ll be aware that with no real prodding whatsoever, the Key Government last week raised the minimum wage by 50 cents, to the loud cheers of economic illiterates everywhere.
Here is perhaps the clearest illustration possible of how the enforced minimium wage hurts most those its supporters claim will be helped:
Not that this fact will bother the illiterates.
Like their loud support for many other policies of equally destructive power, it’s more about looking good to their right-on friends than actually doing good for those they claim they want to help.
Oh, some of the illiterates will still say, but if employers pay people more when they can’t afford it, consumption will increase across the board so that we can all afford more! It is certainly true that higher money wages will increase total consumption—for a time anyway. This is not however a means by which anyone is actually made richer. This argument foolishly assumes that consumption is what produces weath, and that more of it produces an increasing amount. It ignores the source of those higher wages – which was capital that could have otherwise be spent more productively. It ignores the source of all real wealth, which is real production, not increasing consumption -- and that the ‘seed corn’ for all real production is this capital, of which the world is always desperately short. It ignores the fact that if more capital is spent paying a level of wages above what is being produced, then even less will be produced. It ignores the fact that if more capital were instead to be spent producing ever more wealth, instead of being spend unproductively or on more consmption, then production can increase and real wages really will increase right across the board!
Oh, some other folk will say, but if shitty employers will only pay shittier wages then they should be driven out of business anyway! Which, when you think about it, is simply reiterating the point made in the cartoon above. Because if those employers are driven out of business, then who do they think is going to emply those whose skills are worth less than this idealised minimum?
The minimum wage: making people into unemployable since the concept was first invented.