Minimum wages

I don't normally do politics here on this blog, so this is something of an experiment.

SNCF, the French train drivers, were on strike again recently.  They were striking in the Rhône Alps, that is prime skiing territory, and on the first weekend of the school holidays, that is the prime ski holiday travel time.  This is of course when they can cause the most disruption, and therefore when they have the most power.  I got to pondering wage negotiations and from there, the minimum wage laws.

A book on "Pricing for Results" (I think) (by John Winkler, available on Amazon) posed the following question in a quiz (paraphrased, and as best I can remember it):  "You run a pharma company, you market a blood pressure treatment that patients are obliged to use for the rest of their lives once they have started it.  The product is obsolete and has been replaced by a cheaper alternative.   Your competitors have ceased production of the old drug and you find yourself with a monopoly on its supply.  What should your pricing policy be?"   The answer was that you should choose a moral pricing policy.

A different book on negotiation posed the following different question "You are a dentist and a patient comes to you for a filling.  You notice that he hasn't paid his last bill.  When do you remind him?  a) Before treatment, b) When he's in the chair or c) On his way out."  The answer was c), since in both the other options you have too much power - in b) you have way too much power and might lose the customer.

I mention these two questions because they make explicit two players, power and morality, that are present in negotiations alongside the antagonists, but being unseen and intangible, are often ignored.  They are usually present in inverse proportions but perhaps they are present together in the greatest negotiators.

Power and morality are present in wage negotiations.  Usually the employer is a company, represented by a person.  Although this person is subject to moral constraints on their actions, the company is not: although it has legal status as a person, a company's behaviour is constrained only by the laws of the land.  A company that further constrains its actions according to moral considerations will (generally) be overtaken by competitors that don't.  On the other hand, people dispute the morality of hiring a person on a wage that cannot sustain their life at some socially acceptable level of comfort and hence they seek laws to mitigate the effects of "too much" employer power.

One of the jobs of government is the creation of a society that conforms (more or less) to the wishes and best interests of the populace.  You could call this social engineering.  This necessarily distorts the natural state of markets, including, where applicable, employment markets: stiff penalties for murder mean that you can never find a professional assassin when you want one, and they're more expensive than they would be in a free market. If you accept that a government should institute a safety net for the poorest of the population so that they don't starve, the question becomes one of what kinds of market distortion (and moral hazard) you are prepared to accept, and to what extent.

We can look at union powers, redundancy legislation, income support, minimum wages, unemployment benefits and so on, in various combinations, delivering different moral hazards, different market distortions, and different results on company competitiveness, employment levels and living standards.  A vote for a minimum wage is often seen as unconstrained: if you vote "yes", then where does it stop?  But it's not, or doesn't have to be.  My personal belief is that a minimum wage can have a part to play in a societal safety net for the poorest among us:  it's one of the tools available,  to be used with intelligence and discretion.