A minimum wage is bad for the planet | Brussels Blog

A minimum wage is bad for the planet

posted by on 10th Aug 2015

Could giving everyone an equal carbon dividend
support a low waged economy
with a happier less polluting work force?

Carbon Fee and Dividend

In a previous post “Stop growth, redistribute wealth and try to save the planet” the idea of green redistribution is described:

One possible scheme to avoid dangerous climate change is this: Levy a high tax on carbon emissions and share the proceeds equally. To avoid dangerous climate change, the tax will need to be high enough to substantially reduce carbon emissionsn. Howevver, this will cause a fall in production and consumption.
Compared to the poor, the rich and affluent cause more carbon emissions simply because they consume more. Their share of the proceeds would not cover their increased taxes. For the poor, who have lower emissions there would be a net gain. Ther is therefore a redistribution from the rich and affluent to the poor. The post World Wide Carbon Fee and Dividend describes such a scheme.
It is not Green Growth but it is Green Redistribution.

To avoid dangerous climate change, the tax will need to be high enough to substantially reduce carbon emissions. This will cause a fall in production and consequent consumption.  Applied to nations this becomes James Hansen’s Carbon Fee & Dividend. The key point here is that everybody has a basic income from their carbon dividend.

The minimum wage

All political parties in the UK support a minimum or living wage, although the Liberal Democrats have expressed some caution about its effects on employment:

Liberal Democrats will ask the Low Pay Commission to look at ways of raising the National Minimum Wage as the economy grows without damaging employment opportunities.

In “Marvel At The Effects Of The Minimum Wage In San Francisco”, Timothy Worstall describes how minimum wage causes a loss of employment

We’re repeatedly told that raising the minimum wage doesn’t lead to job losses (or, in the jargon, unemployment effects). There’s a variety of reasons put forward, from the nonsensical (employers make so much profit they can just take the cash from there) to the simply wrong (if the poor have more money then they’ll spend it and this boosts the total economy. True, but given the marginal propensity to spend of perhaps 15% this isn’t large enough to have the claimed effect) to the truly delusional (raising waiters’ pay will mean that waiters spend more in restaurants meaning larger profits for restaurants). All just trying to deny that labor is a normal good and when the price of it rises people are going to want to purchase less of it.

In short, raising the minimum wage causes a loss of jobs. However, higher levels of employment can be achieved by increasing production so the politicians that argue for high minimum wages also advocate economic growth. This leads them Some even believe that this is possible to have economic growth without increasing greenhouse gas emissions. They believe in the fantasy of “Green Growth”.

A minimum wage encourages policies which may destroy the planet

The post “Is Green Growth a Fantasy?” shows that economic growth is nearly impossible without triggering dangerous climate change: World economic output must be reduced (at least temporally) to avoid dangerous climate change.

This does mean that jobs will be less productive but also less polluting. In addition, jobs are likely to be more satisfying. If workers have the unearned income of a carbon dividend, they will be less likely to accept unpleasant jobs.

This means it is necessary to consume and produce less. Consequently, if labour is a “normal good” that responds to price signals, wages must fall to achieve a desired level of employment.

By mandating higher wages, a minimum wage is forcing politicians to follow growth policies which may destroy the planet.


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