Free Markets, Free People

Honduras And The Effects Of Raising The Minimum Wage

Honduras is going through a rather large spike in kidnappings. From 5 in 2005 to 121 in 2008. In an attempt to understand this rise in kidnappings, The Overseas Security Advisory Council (OSAC), part of the Bureau of Diplomatic Security of the U.S. Department of State, was sure that economic conditions had most likely driven the spike. But what specifically was likely to have caused it? Apparently an increase in the minimum wage:

In January, Honduran President Manuel Zelaya increased the minimum wage 60 percent, raising monthly wages from US$ 181 to $289. As a result, an estimated 15,000 people have been laid off in urban areas. This number is expected to steadily increase as businesses cannot afford the new mandatory wages. Remittances from Hondurans in the U.S. have also decreased throughout 2008.

Some analysts predict increased crime in Honduras due to citizens unable to find legitimate sources of income. Many unemployed Hondurans could look to kidnapping for ransom in order to obtain large sums of money for a small amount of planning and effort. As the disparity between economic classes continues, wealthy Hondurans or foreigners of affluent appearance conducting business in Honduras could continue to be targeted at a higher rate.

Of course everytime increases are argued against here, those in favor of them tend to wave off the point that raising the wage will cause unemployment among those who can least afford it. Obviously I’m not contending that if we do so here, those laid off will take up kidnapping, but to pretend such rises in minimum wage don’t have any detrimental effect is simply not true – and Honduras provides the case study.


Tweet about this on TwitterShare on FacebookShare on Google+Share on TumblrShare on StumbleUponShare on RedditPin on PinterestEmail this to someone

8 Responses to Honduras And The Effects Of Raising The Minimum Wage

  • I have found my education in economics lacking and answers to current problems not obvious.  If the purpose of increasing the minimum wage is for people who work to be able to pay for food and housing, are there other means for closing the gap between wages and the cost of living? 

    • Yes … acquiring skills which lead to better paying jobs. The scarcer the skills the higher the pay. Thus you have the market rewarding effort instead of the government rewarding existence.

  • Inovation is also ocurring in the kidnap industry here.  There is now an “Express Kidnap” service where you can have your loved one home for dinner for a smaller, easier to raise amount (about $5,000).  This also widens the market of who can be kidnapped.

    • Mexico, too, is suffering from the rise in “Express Kidnapping” as the ordinary criminal scum are emboldened by the activities of the narcotrafficantes and the weak response of the police. The middle-classes are increasingly being targeted in urban areas.

  • ” those in favor of them tend to wave off the point that raising the wage will cause unemployment among those who can least afford it”
    They don’t “wave it off”.  They say “I don’t understand how that can possibly happen.  We should raise the minimum wage, because what you describe simply won’t happen.”
    I am not making this up.

  • Honduras is a shithole. Express kidnappings go for around 40k, and they target middle class, including americans…
    they take young children…stay away.