Minimum wage leads to more unemployment

THE EDITOR: The trade unions want the minimum wage raised to $30 an hour. Their argument is that this is necessary to ensure that workers can meet the cost of living. But if this is so why stick to $30 an hour? Why not $50? Or, for that matter, why not $1,000 an hour so that in a few months every worker in TT can be a multi-millionaire?

The reason is that even trade unionists know that wage rates are determined at the margin – ie, an employer will pay workers a rate where their productivity is higher than their salaries, so the company can make a profit.

When the Government mandates a minimum wage, this causes employers to take other measures to keep their company viable, such as giving workers fewer hours or laying off some employees.

Moreover, economists have long proven, through studies in many countries (including TT), that the minimum wage results in higher unemployment for the least-skilled people.

This happens because the Minimum Wage Act is in essence a law that makes it illegal for lower-skilled people to offer their labour at a cheaper price. Thus, employers are prevented from hiring them (unless they are unregistered Venezuelans).

And what is the least-skilled, least-employable cohort in TT? It is young black males. These are the ones who will bear the brunt of an increased minimum wage should the Government decide to cave in to union demands.

ELTON SINGH

Couva