More Minimum Wage Stupidity

The Minimum Wage and the Pacific Islands

It is bad enough when it is thought that a single Federal Minimum Wage can be appropriately applied to both Mississippi and metropolitan New York, but it is a whole other level of mindlessness to apply the same level to a Pacific island.

It is not much of a further step to say that islands with different currencies should all have a minimum wage of the same numerical value in the local currency.

While the minimum wage is always counterproductive with both winners and losers, the best measure of the impact would be the percentage of wages below the minimum wage level if there were no minimum wage.

For example, a minimum wage that is lower than 95% of all the hourly wages in an economy, is not going to have a large measured impact on the whole economy, despite its catastrophic impact on those whose employment has been made illegal.

Over various similar economies, islands or not, the best first approximation as to where wages and other prices fall is determined by two factors. Prices will rise with a larger local supply of local money, whatever its name, and fall with a larger number of households demanding to hold money.

Allowing Congress to set a single universal legal minimum wage is akin to leaving your three year old alone in your apartment and telling him to amuse himself with a variety of matches and lighters.

Commenter Albert links a picture of the effects of the Minimum Wage (SMIC)

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