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> Another consequence, little noted, is that minimum wage laws in effect create a "mundane labor" based currency. Instead of fixing a dollar to a weight of gold

> Another consequence, little noted, is that minimum wage laws in effect create a "mundane labor" based currency. Instead of fixing a dollar to a weight of gold, or floating the currency outright, the value of a dollar is fixed to ~8.3 minutes of menial work. A gallon of gas thus costs about a half-hour of work ... and regardless of what minimum wage is, supply-and-demand realities mean that a gallon of gas[1] will _always_ cost about a half-hour of menial work; raise the minimum wage by fiat, and the price at the pump will rise to match. Why would that be the case unless the overall worldwide demand of gas was gated by the ability of minimum wage workers in a particular jurisdiction to buy gas? Even this, this would appear to assume that their demand was completely elastic, such that cheaper gas would cause them to buy enough more until it was that expensive again? And why gas? Is the price of all staples (bread, milk, etc.) inescapably tied to the minimum wage? If so, I'd love to concrete evidence for that claim -- it seems like quite a surprising conclusion to me.

ctdonath 15y ago
I use gas as the example because it has the by-far fastest price adjustment _and_ the broadest commodity usage. Other prices will also catch up, but take longer to do so. (Keep in mind we're talking in short posts, not peer-reviewed treatises. The ability to extrapolate to reasonable consequences is assumed.) Consider an extreme case. A popular retort to minimum wage laws is "well, just set the minimum to $1000/hr and everyone will be rich!" Doesn't work that way because paying someone $1000 to sweep a floor for an hour means $1000 represents no greater value than sweeping a floor for an hour. Given that $1000/hr for any/all menial jobs does not mean that all workers can run out and buy ~300 gallons of gas after working an hour - supply-and-demand will kick in and the sudden demand for "cheap" gas of limited supply means prices will shoot up to ~$500/gal to match "normal" sales/usage. Ditto other prices, commodities in particular. If the clerk behind the gas station register is making $1000/hr, the gas sure won't go for $3.25/gal. Why would the conclusion be surprising? It's supply and demand. The currency acts as a ratio modifier adapting the value of one thing to the value of another; whatever the units of that ratio are, a gallon of gas will (given current social norms) always be worth about half an hour of menial labor. Raise the minimum wage, the dollars available to the mundane laborer will increase, the supply of goods/services remains about the same, so the price of goods/services will rise to match the availability of dollars earned thru mundane labor. Prices rise to what the market will bear; ensuring everyone earns more currency means it will take more currency to buy.

ctdonath 15y ago

I use gas as the example because it has the by-far fastest price adjustment _and_ the broadest commodity usage. Other prices will also catch up, but take longer to do so. (Keep in mind we're talking in short posts, not peer-reviewed treatises. The ability to extrapolate to reasonable consequences is assumed.) Consider an extreme case. A popular retort to minimum wage laws is "well, just set the minimum to $1000/hr and everyone will be rich!" Doesn't work that way because paying someone $1000 to sweep a floor for an hour means $1000 represents no greater value than sweeping a floor for an hour. Given that $1000/hr for any/all menial jobs does not mean that all workers can run out and buy ~300 gallons of gas after working an hour - supply-and-demand will kick in and the sudden demand for "cheap" gas of limited supply means prices will shoot up to ~$500/gal to match "normal" sales/usage. Ditto other prices, commodities in particular. If the clerk behind the gas station register is making $1000/hr, the gas sure won't go for $3.25/gal. Why would the conclusion be surprising? It's supply and demand. The currency acts as a ratio modifier adapting the value of one thing to the value of another; whatever the units of that ratio are, a gallon of gas will (given current social norms) always be worth about half an hour of menial labor. Raise the minimum wage, the dollars available to the mundane laborer will increase, the supply of goods/services remains about the same, so the price of goods/services will rise to match the availability of dollars earned thru mundane labor. Prices rise to what the market will bear; ensuring everyone earns more currency means it will take more currency to buy.