Minimum Wages and Special Interest Theory-an Anecdote

Businesses will support policies that benefit it by hurting its competition.  Dan Hamermesh explains this in referring to an example of a minimum wage proposal from Germany.

One might wonder why a big employer is pushing a plan that might raise its average variable cost. The reason is that the German Post, which is a high-wage employer, faces increasing competition from lower-cost carriers. If the minimum wage is imposed, it will not raise Deutsche Post’s average variable cost by much, since most of its workers already make more than the proposed minimum wage; but it will raise its competitors’ costs.

That will give Deutsche Post an advantage over its competitors — or at least reduce its disadvantage. It will be able to compete more successfully against its formerly lower-cost competitors.

Comments

[Ironman]

Wal-Mart also supports a higher minimum wage [Ref: http://tinyurl.com/jv9n7 ] for exactly the same reasons, as many of its small business competitors often rely heavily on low wages to be competitive with the company:

http://tinyurl.com/2bjqu7

Here's a tool that considers a minimum wage increase from the small business owner's (micro) perspective:

http://tinyurl.com/jcdjw

And here's another tool that puts you in the President's shoes for the macro perspective:

http://tinyurl.com/332btx

[Seamus McKenna]

We have minimum wage legislation here in Ireland too. Our economists are divided (no surpises there) on their value but as in your post, if companies are only motivated to back minimum wages because they want to minimise a disadvantage - is that not a race to the bottom?