Comments on: Regionalise the Minimum Wage

By: terje (say tay-a)

terje (say tay-a) — Fri, 20 Jul 2007 13:30:03 +0000

I think that a submission to the Fair Pay Commission based on the need for regional variation would be a good idea. It may not success but it may at least generate some debate about how to interprete the needs of the unemployed.

By: Jim Fryar

Jim Fryar — Fri, 20 Jul 2007 12:41:43 +0000

Certainly Terje;
The article does indicate that in an area of high employment that the minimum ‘Illegal Immigrant Indicator rate’ or whatever you economic types use, as a technical term to describe the free market rate will be higher than the rate that would be expected in other less competitive areas.

It also points out that the IIIR for other less competitive illegals is lower, and also that better quality illegals are preferred even at the higher rate.

Perhaps we should put a submission to the Fair Pay Commission to adopt the IIIR to set regional minimum rates (if we need them at all)

By: terje (say tay-a)

terje (say tay-a) — Fri, 20 Jul 2007 11:27:28 +0000

Thanks Jim.

The weakness with the argument put in the article you reference is that if unskilled illegal Mexican workers can demand US$14 per hour due to supply and demand then it is easy to mount an argument that a minimum wage of US$8 per hour is harmless. I would not particularily bother much to oppose minimum wage laws if they were harmless.

However the reality is that minimum wage laws assume that economic conditions are essentially consistent across the domain to which they apply. This is generally untrue. Whilst a minimum wage might be below the market clearing rate in some geographic areas and some economic sectors it will typically be above the market clearing rate in other areas or other sectors. In the former case the minimum wage is ineffective and in the second case the minimum wage is harmful.

By: Jim Fryar

Jim Fryar — Fri, 20 Jul 2007 09:59:07 +0000

I found an interesting article, “Mexican workers prove we need to Abolish the Minimum Wage” on ‘American Libertarian’ http://americanlibertarian.blogspot.com/

By: terje (say tay-a)

terje (say tay-a) — Sun, 15 Jul 2007 10:43:41 +0000

Andrew is probably right that the constitution would be a barrier. However lets ignore that for a moment.

One way to achieve it would be to start by having a national minimum wage determined as it currently is by the The Fair Pay Commission. The criteria they currently use is:-

In fulfilling its wage-setting function, the Commission must have regard to:

* The capacity for the unemployed and low paid to obtain and remain in employment;

* Employment and competitiveness across the economy;

* Providing a safety net for the low paid; and

* Providing minimum wages for junior employees, and employees to whom training arrangements apply and employees with disabilities that ensure those employees are competitive in the labour market.

SOURCE: http://www.fairpay.gov.au/fairpay/About/

You would then provide some scope for the Fair Pay Commission to re-examine this decision for some smaller geographic subset of the Australia economy as requested by any of the following:-

a) The relevant federal minister.
b) A relevant local government authority

Other requests might be accepted at the discretion of the commision based on their merits.

For example a review of a remote aboriginal community with unemployment of 60% may warrant a revised minimum wage because of “The capacity for the unemployed and low paid to obtain and remain in employment” as applicable to the region.

Of course my preference would still be for no legislated minimum wage but at least a regionalised minium wage would provide a greater degree of flexibility that accomodated the economic differences between regions.

Regards,
Terje.

By: Jim Fryar

Jim Fryar — Sat, 14 Jul 2007 13:23:39 +0000

It’s a great idea, although hard to implement if done from a central perspective. A central authority would find it difficult to keep in tough with the economic situation in the remoter regions, although it may be able to glean enough information from census data.

One thought that came to mind is the possibility of seconding the authority to local government, however many of them would be economically out of touch enough to feel that they can gain kudos from having a higher minimum wage than those around them. The same might apply to the states.

Having a lower minimum wage in depressed areas would have the effect of making local industries more competitive, and attracting others, while causing workers to move to areas of higher employment, and hence higher wages.

I will leave the ‘how to’ to you economic types, but if we can do it , then I am all for it.

By: Jim Fryar

Jim Fryar — Sat, 14 Jul 2007 02:47:54 +0000

I’ll get back to you on this. I just wanted to remind people that it was here, and at the time I didn’t want to distract attention from ‘Little Children’ as I felt that it could do a great deal to help us come up with positive ideas.

Regards, Jim.

By: terje (say tay-a)

terje (say tay-a) — Fri, 13 Jul 2007 23:42:31 +0000

Sorry for the stuff up Jim.

The Little Children discussion passed 250 comments and it did seem to dominate discussion for a while.

What was the comment you wanted to make?

By: Jim Fryar

Jim Fryar — Sat, 07 Jul 2007 23:46:24 +0000

Terje;
You really stuffed up this time; Putting two really good posts on so close together. When Little Children starts to go off the interest horizon you will have to remind us of this one, as in it’s own way it is just as important.

I wont comment here at the moment, but when things settle down a bit, I’ll be back.

By: Club Troppo » Missing Link 3 July, 2007

Club Troppo » Missing Link 3 July, 2007 — Tue, 03 Jul 2007 12:48:22 +0000

[...] at Thoughts on Freedom wonders if the economic costs of setting a minimum wage can be mitigated by regionalising it while John Humphreys finds hints of free market reform in the Middle [...]