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How to prove that the minimum wage destroys jobs

by | 10th, April 2013

BRITAIN FAIR TIP CAMPAIGN

I KNOW, I know, we’re forever told that the minimum wage doesn’t in fact destroy jobs. It’s a lovely cuddly policy that has absolutely no bad effects at all. Except, if we consider Amazon’s Mechanical Turk marketplace this simply cannot be correct.

Estimates of what workers can earn on these crowdsourced tasks range from about $1.20 to $5 an hour without any benefits. Employers treat them as independent contractors not covered by federal minimum-wage legislation.

The minimum wage in the US is currently $7.25 an hour. We have to assume that the people doing this work cannot find jobs at that minimum wage. For they’d be off earning $7.25 an hour rather than working for $1.25 to $5 an hour if they could.

And we also should assume that these jobs aren’t worth paying $7.25 an hour to have done. If they were then people would be paying that rather than relying upon God Knows Who at the other end of the internet. So how many people do that?

Research by Panos Ipeirotis, a computer expert at the Stern School of Business at New York University, estimates that Mechanical Turk alone engages 500,000 active workers in more than 100 countries, with workers heavily concentrated in two countries: the United States (with 50 percent of the total) and India (with 40 percent).

Leave India out of it because $5 an hour is a damn good wage there. What we’ve actually got then is 250,000 people happy to do work in the US at less than minimum wage. And we’ve people happy to get these jobs done at less than minimum wage but presumably not at minimum wage or higher.

Thus we really should conclude that if we insisted that these jobs must pay minimum wage then these 250,000 jobs would disappear.

So, remind me again of how the minimum wage hasn’t made other jobs disappear?



Posted: 10th, April 2013 | In: Money Comments (2) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink