Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Monday, April 04, 2005

Labour Shortages and the Minimum Wage

As I posted just above this piece, there is apparently a labour shortage at current wage rates in the major Chinese manufacturing regions. I cannot help but wonder why employers don't raise the wage rates. Is it possible that even though the Chinese economy is no longer anything like the bad-old days of centralized, complete command, employers still tend wait for politicians for guidance? If so, they will not have long to wait.
[T]he local authorities are taking action. Officials in different Guangdong cities, as well as the adjacent special economic zone of Shenzhen, are competing with one another to raise their local minimum wage. In early March, Shenzhen announced that it would raise its minimum to $83 a month from $74.

My guess is that this is yet another example of administrators doing little more than following, and possibly ratifying, strong market trends. I find it difficult to imagine that raising a minimum wage that is less than the market clearing wage should have any effect in the long run.
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