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A Regionally Variable Minimum Wage Destroys The Base Case For A Minimum Wage

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Among the stupidities the human mind is prone to is the failure to stand back and consider the problem being addressed as a whole. For example, I well recall some of the stouter Stalinists considering the failure of Venezuela’s food supply system. That Chavez then Maduro socialisation of agriculture, food processing and retail had left the population with nothing to eat. A solution was required. Our Stalinists decided that the full nationalisation of the entire food system was the answer. Rather than a consideration of the problem in the round, which was that the current problems had been caused by the inability of the government to manage the food system. Thus asking them to do more of that could be a problematic solution.

We can all come up with more examples of the same phenomenon.

And here is another:

Peter Bofinger argues that regionally-differentiated minimum wages should be considered for the post-coronavirus period.

We don’t need to go any further into the paper than that. For we’re not critiquing the details at all. Instead we’re having a go at the base and underlying logic here.

So, what is the argument in favour of a minimum wage? Stripped to its essentials it is that there is some just and righteous amount that people should receive for their labours. Sure, it’s possible to go on to justify that on different grounds – monopsony, it’s just plain right, wot abaht the workers and so on – but that is the base argument.

At which point if we now say that the same workies, doing the same work but just happening to be in different places should gain different wages we’ve just blown up our base motivation, haven’t we? We are insisting that there isn’t some base amount that everyone should gain for their labours. Instead, we are shouting that “It depends”.

Which is does of course. It depends upon the attributes – skills, application to the task – of the workers. To the wealth and richness of the surrounding society. Upon the profitability of the enterprise being undertaken and so on. In fact, it depends upon so many different things that we have no method of actually defining what is the correct wage. What people should be paid is something emergent from the interaction of all those people and all of those things.

Once we’ve said that it does depend we’ve now lost that anchor of the basic justification for a minimum wage at all. The only reason this isn’t obvious to those who suggest such refinements being that they never do stop and consider their proposals in the round.

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  1. It’s a bit subtler than that. The argument is that there is some just and righteous amount that people should receive for their labours. Everyone, no matter where, Bangladesh or Birmingham. Plus, plus, plus, now for the tricky part, plus a regional living adjustment, so that the minimum wager in Knightsbridge gets a bit more than the equivalent in Dhaka.

    Admit it. You were thinking he meant that the regional minimum wage for Ayrshire should be a bit less than the national minimum wage, weren’t you? Fat. Chance. The arrow always points in the direction of more, more, more.

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