Having had my progressive, liberal, egalitarian credentials brought into question last week, I feel that this week’s article must further discuss the pro and cons of a substantial increase in the minimum wage.

The reaction from the employers’ side has been as predictable as it has been one-sided. There’s only so much money in the kitty and if we have to pay more per worker, we can only afford fewer of them. So unemployment will rise. This is what happens whenever the government interferes in the magical workings of the marketplace - inefficiencies, market distortions and other ideological disasters.

Their arguments seem quite logical. Raising the minimum wage will help some workers, especially those with the wit or capacity to improve productivity so that the higher labour cost to their employers is offset by higher output and consequently higher revenue. But others, especially the least qualified and skilled, who normally double as the poorest, will lose out because they will be fired or never hired in the first place.

The motivation behind the minimum wage is to put a floor under the income of the poorest, and keep them from being so poor. But if raising the minimum wage costs them their jobs, then it seems to achieve exactly the opposite of what we want.

So much for logic. How about reality?

When a minimum wage was mooted for the UK in the late 1990’s, the business sector (and their political wing, also known as the Conservative Party) was using much the same arguments. The national minimum wage went into effect in 1999 anyway, and the argument quietly disappeared. If there was an effect on unemployment, it was so small the army of statisticians couldn’t find it. And while the Conservatives are now dismantling benefits of all shapes and sizes, they no longer see any point in going after the minimum wage.

Similar results have been found elsewhere. Though some studies find a negative impact on employment, the effect is normally minimal.

So how come logic so consistently leads to the wrong conclusion?

One reason is that minimum wage laws normally cover only part of the employment scene. The self-employed do not, in any meaningful sense, receive a wage, so they are left out. And in Thailand, this means the millions involved in agriculture and in the informal economy. In fact, employment in agriculture and fisheries, even if waged, is normally excluded from minimum wage law.

So even if the minimum wage does reduce employment in that sector of the economy where the minimum wage applies, there is nothing to stop people shifting to the uncontrolled sector, but remaining ‘employed’, if only selling khanom khrok on the street corner.

And if the minimum wage law is poorly enforced, as we saw last week, and if the labour force includes a few million undocumented foreign workers, then the effect of the minimum wage, and any change to it, is again diluted.

But think what happens when the minimum wage is increased and a substantial number of workers now have more money at the end of the day. That ‘extra cost’ to employers doesn’t just sit there. What happens to it?

Well we can bet it won’t be salted away in foreign tax havens; it won’t be splurged on imported luxury goods; and it won’t be spent on trips to see the midnight sun in the Arctic reaches of Norway.

It will be spent. Immediately. Here. (Or maybe back home in the countryside as remittances). For a lucky few, a fraction may be put aside as savings (which for most of the working class in Thailand means reducing the size of their negative savings - debts to the loan sharks).

Whatever. It will immediately go back into the economy. Perhaps to buy more of the products from the factory whose owners were thinking of retrenching the workforce in the face of higher costs and who now might need those workers to keep up with demand.

The capitalists who have invested in production for the export market can’t expect the same rebound effect and are still stuck in a race to the bottom against competitors in lower-wage countries. But nobody forced them to join this race and it was an export-vulnerable economy that collapsed on them in 1997. Do they never learn?

And the idea that a minimum wage distorts the market and everyone’s earnings should be should be determined by Economics 101’s law of supply and demand is just bunk. How many employees dictate their terms of conditions of employment who are not called Wayne Rooney? There is precious little choice about wages when looked at from the employees’ side of the table beyond take it or leave it.

Employers set wage levels according to one criterion and one only – what’s the lowest pay they can get away with? The more enlightened might look at the effect of slightly higher pay on lowered turnover rates, or retaining corporate knowledge. But none will factor the social justice of a living wage into the calculations.

Whether the minimum wage is the ideal mechanism for increasing the spending power of the poor sods on the bottom rungs of the economy is another matter, but it’s what we’ve got. Pheu Thai have promised to raise it and heaven only knows they have enough capitalist employers in their ranks, so they should know what they’re getting themselves into.

So do it.

Now.