This week's winner is Robin Dicey, of Bannockburn, for his letter about how to increase the minimum wage. He receives a copy of The Quarry (Random House), by Johan Theorin.
Lift productivity and wage rises will follow
In reply to the letters by Vicky Carthew (8.8.12) and D. Hill (9.9.12), an economy based on regulation would be great if it were not for the inevitable unintended consequences. If we could simply dial up a wealthier economy by legislating a $15/hour minimum wage, wouldn't a $16, or even a $20 minimum be still better?
What happens when regulations force higher costs is employers have to consider three courses of action: first, reduce costs as far as they can (usually reducing staffing levels); second, investing in technology so as to reduce wages costs and, third, passing on costs in order to survive. Or they could simply decide enough is enough and go out of business.
So where does this leave us?
Fewer people working, an export sector struggling in the world market as a result of higher costs, and the costs of imports going through the roof. The result will be a local economy most likely in a far worse state than at present, with many of our jobs out-sourced overseas. How does this actually help anyone?
The new regulated minimum wage would very probably have a lower purchasing power than what it does right now. The economy has to first show a lift in productivity before there can be any real wage benefits. This is where the focus should be.
Robin Dicey
Bannockburn [Abridged]
