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Is the current national hoopla to “do something” about minimum wages another governmental mistake? Absolutely. Minimum wage laws lessen employment opportunities for workers (especially teens and low-skilled workers) and hurt some of the very individuals that they are allegedly designed to help…the working poor. Boosting the minimum wage substantially at the state or federal level would be a public policy mistake.
The law of demand operates in all markets including and especially labor markets. If I operate a lawn service or a car dealership or if I’m a large box retailer, any increase in the price (cost) of labor that is not accompanied by an increase in productivity, will decrease my incentive to hire or retain workers; with my income revenue relatively fixed, I simply must use fewer factors of production. In addition, I also have an incentive to substitute some (cheaper) non-labor resource in an attempt to maintain the overall productivity of the operation. Thus the monetary incentives associated with the income and substitution effects result in fewer workers hired or retained.
Minimum wage laws always decrease employment opportunities and always interfere with free choice and the freedom of contract. They are supported by politicians seeking votes and by labor unions anxious to cripple non-union, low cost competitors. They are also inherently discriminatory since they hurt only workers on the lowest rung of the employment ladder; workers making $30 an hour are not directly affected. And increasing the minimum wage provides no boost to overall “consumption” (as advocates maintain) since the workers displaced easily negate any (slight) income change for the workers retained.
reply to post by Krazysh0t
Not sure what kind of "libertarianism" you're following, hmmm.
Of-course there should be no minimum wage laws. They're bad for businesses, bad for employees and bad for the people.
reply to post by gladtobehere
Actually as a realist in addition to being a Libertarian I understand that the ideal Libertarian utopia is a pipe dream. However it is something that can be striven for.
Averages are terrible things to take into account. All you need is an outlier (say the 1%) and you can skew an average in one direction or another. How about talking about the mathematical mode of incomes? Can we get that statistic instead? Also another thing that is skewing the average is that many people start at minimum wage and get raises. These people are no longer at minimum wage so they increase the average above minimum wage. If there was no minimum wage, these employees would be starting out at a reduced wage than the one that we currently have.
Look I understand the effect that minimum wage has on the free market, unfortunately it is a necessity. Sure if we abolished it, things would start correcting for awhile. But how long until the country is back to the situation that we were in at the turn of the last century? One thing is always true, there will be someone who will take advantage of the system. This person will teach others how to do it, either directly or indirectly. These people in turn will pass this knowledge onto more people and eventually the loophole being utilized here will become the norm and will become so rooted into the system that getting it out takes an act of Congress.
reply to post by masqua
So you are more entitled to a job because of your age? Wow!
Your suppose to be able to get a job because there is a demand for workers in a growing economy.
But, instead everyone thinks they are entitled to a cell phone, car, health care, house, and education for free.
As a result no one can retire because half of our wages go to taxes to pay for all the spoiled brats that are to lazy to make it on their own.
reply to post by greencmp
It really comes down to too much of one thing against not enough of it. Too much regulation strangles the market while not enough lets crooks walk all over everyone else and dictate the rules. The goal should be a happy middle ground. Unfortunately the government is incapable of doing this. The government always overreacts to any problem. This wouldn't be such a bad thing if the government didn't wait until the utter last minute to fix problems. So now the problem has exacerbated to crazy levels so when the government finally addresses the problem with its huge overreaction, we end up with things like Obamacare or our current minimum wage laws.