Black Markets and Minimum Wage

Categories: Economics Minimum Wage Violence

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The nature of illegal, or "black", markets is both different and similar to that of the legally established markets with enforceable property rights. While the two types of the market function as mechanisms for scarce resource allocation, they are characterized by diverse means of such allocation. As noted by Donohue III & Levitt (1998), violence, or threat of violence, effectively substitute impersonal price mechanism as the main means of securing access to limited resources (1998, p. 463). Accordingly, the players on the black market are differentiated in the terms of their fighting ability, which encompass both observable and random components (Donohue III & Levitt, 1998, p.

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464).

The randomness of the black market violence outcomes is usually connected with the prevailing modes of interaction among buyers and sellers (i.e. past records of (un)trustworthy behavior, cultural values having its impact on the perception of a bargain, etc.). However, given the criminal character of most such interactions, they are invariably fraught with the danger of violence use, which constantly accompanies the black market commercial proceedings.

The main factor having an impact on such outcomes may be an encounter's unpredictability. In particular, the presence of lethal weapons may lead to greater violence potential, as the fighting ability of possible combatants is both enhanced and equalized thereby (Donohue III & Levitt, 1998, p. 467). This factor appears to stand behind a stark increase in gunfight and drug violence and delinquency, especially among juvenile street gangs.

In my opinion, the growth of black market networks and the violence connected therewith should be construed as not merely the result of growing profit margins in criminal deals but also as determined by alienation in our daily lives.

It is predicated on the loss of spiritual commonality, which is the sorry fact of our existence in post-modernist materialistic society. Unless this situation could be improved, the moral decay and descent in criminality, of which illegal markets are a symptom, still continue. Minimum Wage The conventional wisdom holds that a minimum wage imposition would invariably lead to the harmful consequences both on demand and supply sides of the labor market. At the same time, the results of recent empirical surveys (Flinn, 2006), demonstrate that minimum wage may be rather beneficial to both workers and firms and the society at large. However, such situation would require the presence of monopsony power-invested firms on the labor market, which is predicated on respective job search frictions and match-specific capital existence (Flinn, 2006, p. 1014). Moreover, proceeding from the minimum wage welfare effects model one may suppose that minimum wage may be regarded as "an instrument to increase total welfare of labor market participants or the entire society" (Flinn, 2006, p. 1027).

In this sense, minimum wage may be regarded as beneficial. At the same time, though, the imposition of minimum wage, together with other government regulations of the market, may be seen as unduly increasing of the state power in the realm of economy. The state intervention may actually decrease workers' ability to bargain for better wages by accustoming them to receiving respective wage increases through bureaucratic regulations. As demonstrated by the 1980s neoconservative revolution in the USA, the bureaucratization of the labor movement leads to the inability to face the employers' thrust towards curtailing the gains secured by the labor during 'social partnership' decades. Thus, paradoxically, greater government regulation of the labor market contributes, in the long run, to an emergence of the more acquiescent labor force whose militancy is significantly lower than that under classical laissez-faire capitalism.