Minimum Wage Laws Don’t Work. Here’s Why

A minimum wage seems to be a compassionate law requiring employers to pay low-income workers a wage necessary to meet a reasonable standard of living.

So should we have a minimum wage? And if so, what should it be?

The current minimum wage is $7.25, which merely acts as a floor price since most states have their own, higher minimum wages. The 2016 Democrat and Republican presidential nominees both support some sort of minimum wage. Hillary Clinton has advocated for a federal minimum wage of $12 per hour, while Donald Trump has been vague. In some instances, he has called on raising the minimum wage to $10, but in other cases, emphasizes that such policy should be left to the states.

A minimum wage is merely a price. That price is the cost of an hour of labor, a cost your employer must pay. This price can be viewed the same way as any other cost, such as an iPhone, computer, or new pair of shoes.

Like anything, price will be dictated by supply and demand. While you might pay $700 for the new iPhone, it is unlikely that you would pay $5,000 for the same phone. That’s the problem with minimum wage. The more something costs, the fewer people there are who will want to purchase that item (work). So when it comes to a minimum wage, the question becomes: at what cost will an employer decide not to “purchase” (i.e. hire) a new employee.

You may think then that an employer will only offer the lowest price (wages). But that’s certainly not true, either. In fact, if an employer has a high demand for workers in a certain industry, wages will rise. Conversely, when there is an abundance of workers, but too few jobs in another industry, then the wages will tend to fall.
The problem with minimum wages is that they act as a price control by setting a minimum price an employer can pay to hire a worker (hence, “minimum” wage).

This policy actually leads to more unemployment.

When minimum wage laws require a business to pay more than it can afford or is willing to pay, more people are out of work, and fewer businesses are willing to hire.

Even liberal California Governor Jerry Brown, who helped pass a $15 minimum wage, admits that minimum wages are economically harmful. In his own budget he wrote, “such an increase [in the minimum wage] would require deeper cuts to the budget and exacerbate the recession by raising businesses’ costs, resulting in more job losses.” Those are his words, not mine!

Liberals believe that those who oppose minimum wage laws are simply advocating for business. Yet, minimum wage laws are actually antithetical to the freedoms and rights of the workers!

Consider this. Minimum wage laws forbid workers – producers of goods or services – from working for less than what the government requires, or the minimum wage. That means that if the minimum wage was increased to $15, as California has proposed or Bernie Sanders wants nationally, you would be breaking the law if you were willing to be employed in the economy for less than $15 hour – or $31,000 a year.

Yes, that means it would be illegal for a worker to support themselves in a career that pays anything less, even $14 per hour. As I wrote in a previous post, this notion was perfectly summarized by the late economist Henry Hazlitt, when he wrote that limiting employment opportunities, “deprive[s] the man of the independence and self-respect that come from self-support.”

Minimum wages don’t hurt businesses nearly as much as they hurt the very people liberals want to support. Instead of allowing all people to engage in productivity, liberals want to make it illegal to do so unless you get paid a certain level of income. Most individuals would be willing to take a job that pays $14 an hour ($29,000 a year) rather than be unemployed. But unemployment is essentially what the law requires unless you get that extra $1 per hour.

Harvard economist Greg Mankiw ran the statistics on minimum wage and found that it most often impacts teenagers and low-income households. His analysis concluded that a 10 percent rise in the in minimum wage reduces teenage employment by one and three percent. Based on a $15 minimum wage, that would amount to more than 171,000 teenage jobs.

He also concludes that few adult workers have to worry about making minimum wage. His study shows that more than half of all minimum wage workers in the U.S. are under 25 years old – and about a quarter were between 16 and 19 years of age. Most important, only about 3 percent of those over the age of 25 years earn the minimum wage.

The minimum wage doesn’t work, and more often than not, leads to increased unemployment.

Really, it’s quite insane. (For more from the author of “Minimum Wage Laws Don’t Work. Here’s Why” please click HERE)

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