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How the minimum wage creates insecure jobs

Summary:
We hear much about the precariat these days. People stuck in flexible jobs with no real security. We also hear much about how successful the minimum wage has been. No bad effects upon the labour market at all. At which point people should check that first sentence again.For of course security of employment costs the employer money. Thus this effect comes into play:Is the rise of ‘atypical’ work arrangements – such as self-employment, freelancing, gig work and zero-hour contracts – a result of workers wanting such jobs or because they have no other choice? This column reports evidence from the UK and the US that while atypical workers may like flexibility, they would prefer a steady job. Indeed, workers would agree to earn less in order to increase their employment security.What’s the thing

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We hear much about the precariat these days. People stuck in flexible jobs with no real security. We also hear much about how successful the minimum wage has been. No bad effects upon the labour market at all. At which point people should check that first sentence again.

For of course security of employment costs the employer money. Thus this effect comes into play:

Is the rise of ‘atypical’ work arrangements – such as self-employment, freelancing, gig work and zero-hour contracts – a result of workers wanting such jobs or because they have no other choice? This column reports evidence from the UK and the US that while atypical workers may like flexibility, they would prefer a steady job. Indeed, workers would agree to earn less in order to increase their employment security.

What’s the thing a minimum wage won’t allow? Making such trade offs about lower wages and higher security when in the presence of that wage floor.

Total compensation is what interests the employer and if some certain part of it - say wages - is mandated then the bite of low wages has to come out of some other part of that compensation package.

To insist that all precarity is only the result of the minimum wage would be to go too far. But we will insist that some goodly part of it is about exactly that. And since some workers at least would happily trade lower wages for higher security - the minimum wage floor not allowing that - then the minimum wage itself is utility destroying for those low wage workers.

Just another reason why the only correct minimum wage is £0.00 an hour of course.

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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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