Indeed that is key. Some people may believe that unemployment is a choice – in fact, some people may believe that as a society we want to provide everyone a given minimum level of income.

Now there are two issues here:

1) Society may not want to do that,
2) Work is an “experience good” (sort of, it is quite a bad analogy actually 😛 ) – so getting people to work may reduce the cost of work in the future, implying that we should try to push more work now.

If the first issue is true, then that is that. If it is not, and the second issue is true – then it may still be possible to create a scheme with guaranteed income and “government work” – which gets people acquainted with work, and able to join the labour force.

Either way – I see the minimum wage as a very indirect mechanism.

“Well if productivity is a ‘good thing’, isn’t this a brilliant way to improve it? Won’t every employer do everything in their power to improve it because of the direct benefit they will receive?”

That is true – if the business extracts all the surplus then it will do the “socially optimal” amount of investment. However, as a society we may prefer it if some of the surplus went to non-business owners – even if that means a smaller pie.

Of course, that means admitting that the pie is smaller, and stating that there is some reason for why this redistribution is in our interest – there is no efficiency grounds for it, just personally determined equity grounds.

Might be true economically but is it the best way socially? aren’t you saying ‘make unemployment a valid choice instead of work’? Does that create the right incentives? if it becomes a tool of policy to use the benefit for a ‘minimum social wage’ mightn’t that firstly risk pushing up unemployment as people make the choice, and secondly drive up the cost as more people with votes push for an even higher minimum social wage without making an economic contribution?

On productivity, this quote:

“But in a capitalist system any benefit from productivity increases goes directly into the pockets of business owners.”

Well if productivity is a ‘good thing’, isn’t this a brilliant way to improve it? Won’t every employer do everything in their power to improve it because of the direct benefit they will receive?

I suspect the benefits are not quite as clear cut or at least, they are not as direct as Tane is implying. I wonder if he is forgetting the issue of competition, which can erode the financial benefits of improved productivity for some, and instead productivity ends up just helping you stand still.

There is definitely some scope for minimum wages, whether it be to enforce some belief of “fairness” for peoples work or because the labour market is imperfect. However, I think the case for any given level of a minimum wage must be thought through heavily – I’m not a fan of arbitrarily regulating prices.