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02/06/2014

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Great article. I actually heard an interview with Secretary Perez this week on the radio. He also quoted the example of Ford. I take issue with this example. Ford used this as their compensation strategy as a means to attract, motivate, and retain their employees. They were willing to pay above the market value for their people because they wanted the best and wanted to keep the best. If the government had mandated that pay level, Ford would have had no competitive advantage, as their workers could have gone to work for any other employer and receive the same wage. When private business pays above the market, it will create a shortage of employment at that wage, creating competition and allowing Ford to choose from the best.

If my memory of fundamental economics is correct, implementing a price floor that is above the equilibrium price of labor will cause a supply of labor that is greater than the demand for labor. This causes a labor surplus and limits the number of jobs available.

The number of people working for minimum wage suggests that the equilibrium price for labor is already lower than the current federal standard. Although it would never happen, lowering the minimum wage would create more jobs, opportunity, and would lower unemployment figures. Many of my friends are still in school and live in college towns where there are not enough jobs. If there were no minimum wage, they would certainly work for $6.00/hour to earn a few extra bucks. More companies would come to town to hire this cheaper labor, more profits for these companies, more jobs, more taxes, more money pumped back into the economy, etc.

The issue of stagnating wages is certainly a problem, but if past increases in the minimum wage haven't solved the problem, how can the argument be made that it will be different this time?

Any argument may be made, David. Don't know the answer, but I have heard the phrase, "the triumph of hope over experience."

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