Adam Smith showed us the importance of free markets for the welfare of the people in a nation (Smith, 1776). At that time people were restricted to a local environment and governments thought they could best protect national interest by preventing too much exchange. The market has undoubtedly liberated many people from local bonds by promoting free choice. This liberation has stimulated innovation and increased welfare. Thus, the highly specialized institution of a market—specialized as it concerns the exchange of commodities only—was very successful. This success is explained by the fact that in the 18th and 19th centuries markets made it possible for people to establish more comprehensive relations to other cultures and resources. This feature surpasses the commodity dimension usually represented in a market. Commodities from the Indies, China or Egypt, and its accompanying technical innovations connected people with other cultures and stimulated their imagination. In this paper we seek to develop a theory that is founded on these institutional dimensions.
Economists elaborating on the theory of markets emanating from Smith’s seminal work, have taught us that “free” means “perfect competition”, which is arrived at if no individual has any observable influence on the formation of the market price. That means a person enters a market anonymously, and only her anonymous willingness-to-pay is recognized and communicated. Economists have also shown that the perfectly competitive market mechanism is amoral: it processes what is demanded or supplied, without any moral filtering, and it accepts any initial distribution of wealth, however unjust. As argued above, this seems far removed from the underlying basic relational realities.
This report discusses the findings from the Low Pay Commission (LPC) project ‘The Impact of the National Minimum Wage on Profits and Prices’. The background to this work is that there is by now a large body of work examining the impact of minimum wages on employment, with a particular focus placed upon whether minimum wages price workers out of jobs as predicted by orthodox competitive labour market theory (Borjas, 2004; Brown, 2003), or whether there is any effect on employment at all, as stressed in the newer, so called ‘revisionist’ work (as typified by Card and Krueger, 1994). This, often controversial, research does find it rather hard to identify important job displacement effects associated with minimum wage floors.
Since it is also the case that affected workers do receive significant wage gains from minimum wages, this does beg the question as to how firms are able to sustain the higher wage costs induced by minimum wages. It is evident that, if employment effects are small, then something else has to give. One possibility is that the minimum wage eats into profit margins, or raises prices, and this is the focus of this research project.
Diets come and diets go. Sometimes it seems the only thing that sticks around is the fat. Most of America bases diet choice on the popular media, which is constantly seeking the "next revolution" in dieting to grab the attention of shoppers standing in checkout lines, usually next to the candy and snacks.
