SL-Mark:

> "In making such a request, I would have at least expected the courtesy that you provided some of your own statistical data to back your argument first."

That is exactly my point. There is no data to support the position. The data is at best sketchy. Look at rises in minimum wage and they are correlated more to rises in inflation than to the slowdown of economic growth. Governments typically rise minimum wages when they have little choice left. Inflation has eroded people's spending capacity to such an extent that only a rise in minimum wage can ensure that the lowest segments of society have enough to afford to live. The question is, what caused the economic slowdown: Inflation? Higher wages? People spending less due to inflation? As with all economics and econometric data, the information is highly incomplete. To assert that higher minimum wages lead to a slowing of the economy is like saying that because it is a cold day you will most likely catch a flu. It is mere conjecture.

People often forget that most western governments interpret economic data to justify government policy. A good example of this is the bank meltdown of 2008. During the Bush administration Allan Greenspan and other leading economists justified "liberalizing" the credit markets, including mortgage lending rules and third party lending (private banks lending to other banks). The idea was that the credit market would "sort itself out" and that less government intervention would stimulate the economy by making it easier to borrow and lend money to individuals and institutions. Instead banks figured they could keep lending and borrowing recklessly until they were so over-extended that the whole banking system faced a catastrophic meltdown. The so-called genius economists had interpreted financial data to justify government policy, rather than letting the real economy dictate how the government should act.

> "Even Ireland in its latest austerity budget actually reduced the statutory minimum wage, recognising the fact it is a hindrance to growth. "

Ireland now has lowered the minimum wage. Is that a solution? Or is the financial crisis being used as an excuse to undermine the working class? If lowering the minimum wage is a solution, what caused the problem in the first place? Was it a high a minimum wage? Or was it a reckless government that borrowed money without ever thinking that they would have to pay it back some day? Who is to blame? The workers who get the minimum wage? The inept government that mismanaged its finances? The unscrupulous lenders who lent money to Ireland knowing fully well that the country would be in trouble at some point?

Finally, who makes a profit here? If all else fails, just follow the money trail, and that will lead you to the Holy Grail. The Anglo-Irish Bank overextended itself in the property market. I found this snipped in Wikipedia:

"In many deals, Anglo Irish Bank would lend to wealthy individuals to further their equity participation. According to the CEO of Ireland's the National Asset Management Agency (NAMA), loan-to-value on deals was as high as 100%. As a result the bank was totally exposed to any decline in value. In many cases, Anglo took personal guarantees as security. However, NAMA attaches no value to these personal guarantees.

Of the €36.5 billion of loans not being transferred to NAMA, Anglo Irish Bank has taken a provision of €4.9 billion... ... Anglo Irish Bank has large exposures to entrepreneurs such as Seán Quinn of Quinn Group and Barry O’Callaghan, of EMPG. In both cases, the bank's security was limited and largely on the men's shares in businesses. The provision of €4.9 billion compares with impaired loans of €9.5 billion at the end of December 2009."

So it is the minimum wage that is a hindrance to growth in Ireland. Silly me for thinking all along that it was the bankers and their capitalist friends who were getting all those huge loans knowing fully well that once they declared bankruptcy they would not have to pay them back. As a result of this fiasco the Irish government bought 75% of the Anglo-Irish Bank's stock, effectively being forced to nationalize the bank or face a catastrophic meltdown.

I am sure it was the minimum wage all along. If they had just kept the minimum wages low, the greedy capitalists who played roulette with Ireland's banking sytem would have been OK and there would have been no meltdown.

All in all, Ireland lowered the minimum wage, not to justify economic growth, but to do a favour to the same rich people who took the Irish working classes and their hard-earned savings to the cleaners. Who has the capital to invest in those businesses that will hire at a lower minimum wage? Those who stole the capital in the first place! Now there will be real economic growth due to more "investment" stimulated by "lower labour costs".

> "Yes, this is true and as the Western economies shoot themselves in the foot with these social polices which hurt competitiveness, we can see other nations now starting to overtake on the huge head start we had. This head start of course achieved through minimal intervention in business and the economy."

Like China? China is of course, NOT under the control of an all powerful communist party. The reason why China is attractive to western companies is because it has the biggest population on the earth, a low per capita income, and a communist party that is corrupt and can easily be bought to advantage. China has almost no environmental protection policies and worker safety policies. When the local population has asked that polution be reduced, nothing is done because the communist government has its greasy fingers EVERYWHERE. China is a bad example, because it is a form of state capitalism. The state uses the population as cheap labour, and that is what has made China attractive to foreign companies. The massive flow of capital into China is of some benefit to the local population, but it has mostly gone into the hands of a local business and comuunist party elite. Listening to people talk about China one would think that China REALLY REALLY got rid of its millions of poor people.

> "However, I maintain that the minimum wage does effect the supply and demand for labour in a way that causes greater unemployment."

I suppose that if the price of labout became very high overnight then unemployment would rise rapidly. Historically, rises in minimum wage occurred in response to inflationary pressures. I think it would be difficult to prove whether it was higher wages or inflation that lead to lower consumption, lower demand for labour and eventually higher unemployment.

In reality the picture is complex. Inflation and higher wages go together. It is unavoidable in a system that tries to stave off mass discontent with some benefits for people with lower income. Perhaps a better interpretation is one of a continuos cycle.

Inflation -> Lower consumption -> Decreased demand for goods -> Higher unemployment

Higher minimum wage -> higher overall wages -> higher consumption -> Increased demand for goods -> lower unemployment

Higher minimum wage -> lower rate of capital investment -> less job creation -> higher unemployment

Under this logic rises in the minimum wage could potentially be both bad or good.

If inflation is triggering a long term rise in minimum wage, then it is tempting to blame the minimum wage for an economic slowdown. However, the minimum wage does not rise continuosly. Minimum wages rise sporadically. In many cases they will remain the same for years. Goverments usually rise the minimum wage as a last resort, when other avenues of economic stimulus have failed. It is for this reason that statistical data cannot prove much.

Locally, here in Canada I have seen minimum wages rise both during recession and boom times. During recession, to stimulate spending. During boom times to offset higher inflation. It seems that the minimum wage is more a symptom than a cause of the economic growth or slowdown.