16506: Vilaire: Re: Danier: minimum wage and its unintended consequences. (fwd)

[Bob Corbett <corbetre@webster.edu>]

From: Vilaire@aol.com

Mr. Danier,

Thanks for your latest post in response to mine responding to your original
post. However, in order to prevent reinforcing the theory that economists talk
nothing but hot air (you know what they say about us: economists know
everything about money except how to make it), I'll only address a very tiny part of
your post, namely the central theme of your analysis that an increase in the
minimum wage is bad news for Haiti (you'll excuse the paraphrase, no?).

Your write:
"Mr. Vilaire, there are cost associated with imported goods. For example,
the cost of the dollar. If the Gourde devalueates with respect to dollar
then it will cost more to buy the same merchandise from overseas. The
normal tendency is to pass the cost to the consumers making it harder for
those who do not work. Minimum wage does help the unemployed."

Of course there are "costs" associated with imported goods and currency
devaluation. My only point was to refute your argument about a corresponding
increase in the price of IMPORTED goods due to an increase in the minimum wage in
Haiti, leading to widespread inflation. As you know, there are many more direct
factors causing inflation in Haiti: terrible mismanagement of the economy,
irresponsible monetary and fiscal policy, lack of coherent strategy, wild
printing of currency, etc.

It seems to me that your focus on the minimum wage as a major factor is
terribly out of sync given the following:
-The new minimum wage of 70 gourdes/day is less than what workers were
earning in 1995 or even in the 80s, in real terms. Illustration: 70 Gourdes today
represents about U.S $1.75. In 1995, the same 70 Gourdes was about U.S. $4.60.
And this is only taking devaluation into account; not the full scope of
inflation, mind you. So, Mr. Danier, Haitian wages have been decreasing even with an
"increase." Notwithstanding the "increase" in the minimum wage, workers (along
with everyone else) will be victims of increased inflation. They are not the
cause of it. Victims.

Cheers,
Marx-Vilaire