Gurdiev on minimum wage

Minimum wage – economic consequences, exploitation and slavery

Constantin Gurdgiev is a very bright Russian academic economist writing in the Damian Kiberd space in the Sunday Times. His article in January 31st 2010 is headed “minimum wage is suffocating jobless” He quotes a study by the National Bureau of Economic Research in the US which stated that an increase in the US Minimum wage in 1997 caused a 4.5% increase in the number of poor families. A 10% increase in the minimum wage in good times tends to reduce employment in young workers by 1% – 2%. Irish minimum wage increased from €7.65 to €8.65 in 2006-07. This implies that employment in the under 25s was reduced by 4,800 workers. Gurgiev claims that this translates into a reduction of 10,000 younger people in work. He concludes that the minimum wage interferes with supply and demand like any price fixing cartel in this case to the detriment of the most vulnerable and youngest in society. There is an incentive to hyper-automate with maximum capital investment to eliminate labour costs.

There is an opposite scenario which is that slavery of modern times is the result of very low wages. Decency goes out the door to be replaced by exploitation and greed. I know of a Sub-Saharian African who minded an elderly lady in Dublin 16 for what worked out as €30 per day for at least 12 hours daily. Bus fares were nearly €3 per day and food was not included. The exploitation of some foreigners here is criminal. I will write a detailed piece on this soon. Marx was right when he said “Workers of the world unite, you have nothing to lose but your chains”. However, I am not a communist but that does not mean that exploitation and abuse should remain unopposed.