Don’t mess with prices
It is indeed true that some people do not have as much money as we’d like them to have in a country as rich as we are. The solution therefore is to give them some money. That is, rather than mess with prices and so shaft the economy itself, just give poor people money.
More specifically, with reference to the minimum wage, it’s possible to make monopsony, efficiency etc arguments seriously. OK:
Still, it is difficult for me to believe that minimum wage hikes beyond what improves efficiency are justified if it is at all politically feasible to simply give people money.
What is that rate which improves efficiency taking those monopsony arguments seriously?
The federal minimum wage that maximizes productive efficiency is about $8 as of 2022; considering the differing marginal utilities of high and low earners increases this to around $15. I point this out not as evidence that the minimum wage is bad, per se, but that the arguments for redistribution and efficiency are mutually contradictory. If it is being advocated for to redistribute, then it must be compared to the efficiency and efficacy of other programs which redistribute, a comparison I believe it suffers by.
$8 an hour? Given that Britain is a poorer country, with lower overall wages, plus the FX effect, say £4 an hour? A rate near no one would be paid anyway and thus one that won’t damage the economy by its imposition.
What is clear is that the minimum wage is only tenable as a method of redistribution when there is no better alternative available.
But there is that better alternative available, obviously. Just give money to people.
This does then meet a different problem. Which is that near no one is willing to have a benefits system which would top up wages from £4 an hour to the £25k a year that the current system can provide. That would just fail as soon as anyone saw their tax bill. Which is why this grossly inefficient and damaging method of the minimum wage is used instead. Those imposing the system know that we’d not be willing to pay for their largesse directly. Therefore they disguise the largesse they’re handing out from our money and our lifestyles.
Which leads to an interesting conclusion. If we’d not pay this bill in a direct and efficient manner then that bill should not be imposed. Hiding it is fooling us into being willing to pay it, isn’t it? Further, the very fact that they do hide it is proof that they don’t believe we’d pay it willingly and directly.
Just a thought, isn’t democracy supposed to be the system where we’re asked what we want to do rather than one in which we’re fooled into what they want to be done to us?
Tim Worstall