Re: AltInst: Productivity-indexed minimum wage

From: Hal Finney <>
Date: Tue Aug 11 1998 - 16:19:11 PDT

"George L. O'Brien" <> writes:
> So what exactly is the case for setting the minimum wage substantially
> above the market clearing level? Certainly, it will benefit those lucky few
> who get those jobs. However, if the minimum wage were set at say, $10 an
> hour, we can be certain that the substitution of capital, technology, and
> imports would accelerate extremely rapidly.

Playing devil's advocate, some low paying jobs cannot be easily
substituted. Humans are far more versatile and capable than robots
in many applications and so it will be a long time before they are
replaceable. It is also possible (although this is less convincing)
that demand for some of these low paying jobs is relatively insensitive
to price and so raising the wage will result in the loss of only a
small fraction of jobs. Somebody's got to pick lettuce, and if labor
costs are a small enough fraction of the grower's expenses then he can
tolerate increases without reducing employment much.

In cases where all this is true, then raising the minimum wage would
mean a net increase in income for low paid workers, even taking into
consideration the loss of employment which results.

It would appear that raising the minimum wage would be more effective in
those industries where loss of employment would be small.


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Received on Tue Aug 11 23:26:29 1998

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