Minimum wages

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South Africa blogger Fodder thinks the minimum wage is too low:

It is a blight on our new democracy that our government says a person can live on such a minute amount of money every month, if one wants to go the minimum wage route then at least ensure the minimum is a livable amount of money.

I have some sympathy with the idea of minimum wages, much more sympathy for the workers who earn them, but none at all with this way of looking at the problem. (Fodder's commenters seem to agree.) If alleviating poverty was that simple, all governments should simply rule that the minimum wage was $100 an hour for all of us.

In theory, a minimum wage above the market clearing wage will simply put workers out of a job, and nobody will gain from that; a minimum wage at or below the market clearing wage is irrelevant.

In practice, a minimum wage can help to strengthen the bargaining position of poor workers, but too high and it will not be paid - people will either find themselves out of a job, or employed 'off the books', which helps nobody.

The Doing Business team have been gathering data on minimum wages across the world. They argue that if a minimum wage is too close to the average value-added per worker, it's going to be counterproductive because inexperienced workers just won't get a look-in. Comments are open.

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