is it a good thing? should we abolish it?
Political crusades for raising the minimum/living wage are back again. Advocates of minimum/living wage laws often give themselves credit for being more "compassionate" towards "the poor." A simple and one of the most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labour without reducing the amount of labour that will be hired.Switzerland is one of the few modern nations without a minimum wage law.Switzerland's unemployment rate was 3.1 percent. (It does have collective bargaining agreements between its workers and management and almost the entire population is covered by it).Most people start off in entry level jobs that pay much less than they will earn after they get some work experience. But, when minimum/living wage levels are set without regard to their initial productivity, young people are disproportionately unemployed ie priced out of jobs.Unemployed young people lose not only the pay they could have earned but, at least equally important, the work experience that would enable them to earn higher rates of pay later on.Many advocates of minimum wage laws usually base their support of such laws on their estimate of how much a worker "needs" in order to have "a living wage" — or on some other criterion that pays little or no attention to the worker's skill level, experience or general productivity. So it is hardly surprising that minimum wage laws set wages that price many a young workers out of a job.Minimum wage laws can also even affect the level of racial discrimination. In an earlier era, when racial discrimination was both legally and socially accepted, minimum wage laws were often used openly to price minorities out of the job market. In 1925, a minimum wage law was passed in the Canadian province of British Columbia, with the intent and effect of pricing Japanese immigrants out of jobs in the lumbering industry. In South Africa during the era of apartheid, white labor unions urged that a minimum wage law be applied to all races, to keep black workers from taking jobs away from white unionized workers by working for less than the union pay scale. People whose wages are raised by law do not necessarily benefit, because they are often less likely to be hired at the imposed minimum wage rate. Labour unions have been supporters of minimum wage laws in countries around the world, since these laws price non-union workers out of jobs, leaving more jobs for union members.
I'm repeating myself from another thread and I'll take you at your word but essentially if you make labour so cheap, you have to remove the benefit system and no politician in a first world country is going to do that.
The argument for increasing to a living wage is actually well founded based on historical situations where the price of a man's labour was less than the cost of the food he needed to live. The Speenhamland system from the late 1790's strove to create minimum labour costs to ensure labourers could afford their daily bread. When the price of goods was more than what they could earn they essentially relied on the state for food and shelter so didn't bother to work at all.
Coming back to now, what we have is a system of benefits that far outweigh what you can buy on the minimum wage. It is not a system based on supply and demand as you infer, it is based on minimum standards. The benefits system provides support for far more things now, including food and housing. Considering the crippling size of mortgage deposits and bonds for renting, a typical person on the minimum wage has no chance of affording shelter, his best chance of getting a roof over his head is to fake an injury, become a druggie or even an alcoholic.
Sadly work is not the route to getting the basics, society now expects them by right.
So it is no surprise that the bedroom tax is now in force and that we have 1 million less people on disability benefit. The incentive for these people if they want a 3 bedroom house, is to work for a good wage but paying them a fiver an hour isn't the answer, it's paying them a tenner an hour.