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A strange defence of the minimum wage

Summary:
We’re told that an increase in the minimum wage raises productivity:The labour market needs to be rebalanced. For wages to rise, workers need to take home a larger share of national income – through a higher minimum wage, more security for workers in the “gig economy” and a higher proportion of sectors in which trade unions engage in collective bargaining. As other European countries show, this helps, not hinders, productivity improvement.The proof is this, details in this paper.OK, let us accept the contention for a moment. Raise the minimum wage, this raises labour productivity. So, for any given level of output we need to employ less labour then. That is, in the absence of a boost to economic growth we have just proven that a higher minimum wage creates unemployment.We agree, it

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We’re told that an increase in the minimum wage raises productivity:

The labour market needs to be rebalanced. For wages to rise, workers need to take home a larger share of national income – through a higher minimum wage, more security for workers in the “gig economy” and a higher proportion of sectors in which trade unions engage in collective bargaining. As other European countries show, this helps, not hinders, productivity improvement.

The proof is this, details in this paper.

OK, let us accept the contention for a moment. Raise the minimum wage, this raises labour productivity. So, for any given level of output we need to employ less labour then. That is, in the absence of a boost to economic growth we have just proven that a higher minimum wage creates unemployment.

We agree, it probably does. It’s just that we think it’s a strange argument in favour of a rise in the minimum wage.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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