What is the argument made by minimum wage laws critics who argue that they creat

Question

What is the argument made by minimum wage laws critics who argue that they create more unemployment than would otherwise be the case? Which Apple supplier has come under intense scrutiny (especially in China) these last few years over its labour practices? What labour practice was deemed most objectionable in its operations following a third party audit? What did the firm do as a result? What was a big break from the past made by HP in a case discussed in class? According to Jonathan Portes, what is the biggest problem of one segment of the British youth labour force? According to Bryan Caplan, what is "make work bias" and what should we aim for instead?

Explanation / Answer

Minimum wage fixes a wage level for labor such that there is no place for cheap labor in the market. It increases unemployment by reducing the pool of low wage jobs. For example if an employer needs someone to perform a job and he values the work at Rs.3000 per month,and the minimum wage is Rs. 8000, he will not hire the person. Thus, minimum wage law will only lead to increase in umemployment among less skilled labor.

As the minimum wage doesnot apply to internships, some companies are hiring interns to do the work. Foxconn technology, which is a manufacturing partner of Apple deployed vocational students on assembly lines to manufacture apple products. These students were forced to work in the plant as failing to do so would become an obstacle in their graduation.

Apple group hired a non government organisation FLA (Fair Labour Association) to audit the factories in China. The results were astonishing as the employee working conditions turned out to be bad. They were working for more than 60 hours per week as stipulated in Apple's code of conduct.Following the third party audit certain actions were taken such as hiring tens of thousands of new workers, eliminating illegal overtime, improving safety protocols and upgrading workers’ accommodation and other amenities.

According to Jonathan Portes the biggest problem of one segment of the British youth is caused by immigration. In Britain, low skilled immigrants have taken jobs from unskilled natives and thus, live on benefits. Also, high skilled immigrants have eliminated the scope of promotions and going up the ladder for low skilled natives.

According to Bryan Caplan, the tendency to judge economic performance not by production but by employment is called Work Bias.With productivity gains, certain jobs become unnecessary and is thus rational for those workers to use their talent somewhere else. The real economic growth is not he number of labour employed but thhe productivity of the labour. The best social insurance is to make more product and not to make more work.

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