The minimum wage issue

In trying not to nuance the consequences of having and reviewing a minimum wage are several. To begin with, minimum wages are almost never based on employee productivity, but rather on cost-of-living variables. This means that the new salary is not paid with increases in productivity. As a result, there are two known effects. On the one hand, the new minimum wage makes it more difficult to hire new employees. Already, it is alleged, there are many people who cannot work because no one, given their qualifications and experience, would pay even that salary.

If there were no minimum wageIn fact, many activities are carried out informally, under the radar of the law, and thus operate in a system of free supply and demand for jobs.

On the other hand, a mandatory wage increase, which is not aligned with their productivity, is a cost increase. And here two things can happen; one is that the employer passes this cost on to the prices of their products, so that the net effect of the wage increases comes to nothing because now the cost of living rises. Or, on the other hand, if they cannot pass on the wage increase to the market, they affect their profitability and may be forced to cut jobs, not hire new employees or even shrink or close down.

Minimum wage increases commonly have a "staircase" effect. By increasing the salary of the employee who earns minimum wage, with the increase it is possible that he/she will now earn as much as the second employee who will demand that he/she also be adjusted and so on, so that the effect on the company can be significant.

On the other hand, the arguments in favor of the minimum wage are varied. On the one hand, it is alleged that the wage is adjusted to existing cost and price situations. On the other hand, it is argued that companies, even before the increase, due to inflationary forces, have already raised their prices, affecting the wage, which has not yet been adjusted. Numerous studies in many parts of the world are also cited, which show that these increases are not as regressive on employment as alleged. Also, the practice of decreeing minimum wages by industry or by region attempts to dispense distributive justice. None of these arguments escapes the political grandstanding and shouting from both sides that usually accompanies the adoption of this measure.

On the one hand, as long as we maintain a system of subsidies that provide an income to a good part of the citizens, even if it is less than the minimum wage, but enough to feel comfortable without doing anything, it is difficult to improve formal employment rates. Although less than the minimum wage, but enough to feel comfortable without doing anything, it is difficult to improve formal employment rates.

On the other hand, in the medium and long term, an economy that forces wages without a counterpart in productivity is not viable. The obvious effect of this practice is that, although you raise wages at the base, along the wage curve, they are compressed. Because their increases, already where there is no binding legislation, tend to reflect their true productivity. In other words, wages tend to stagnate.

The long and short of it all is that labor productivity must be promoted. And there is a good list of tasks to do so, starting with allowing wages linked to productivity measures, and hiring flexibility. This will make it attractive to invest in equipment, technology, and effective and efficient methods that do not bend the worker to a compensation that does not even cover his cost of living. Let them live their lives with dignity, with "the sweat of their brow" and not with political and regressive handouts.