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Minimum Wage Laws Equal Less Jobs
With Obama's recent push for an increase in the minimum wage to $9/hour, it's important to look at the consequences of a minimum wage of any (economically relevant) amount. Unfortunately, when one looks at the situation from a logical, supply-and-demand point of view, it becomes obvious that the minimum wage is another example of a law backed by good intentions with unintended, harmful consequences.
Notice the word "equilibrium." That's important.
Firstly, it's completely dishonest to claim that without the minimum wage, we'd all be starving and forced to live off six pennies a day. If a company posted a job for $0.25/hour, I can almost guarantee that they wouldn't get any applications. Labor is a market, and there's a balance. While workers may have to impress employers with their experience and education and such, employers also have to compete for workers. To attract workers to their business, they might offer competitive pay, good medical benefits, advancement opportunities, a good work environment, etc. In a free market, this balance between available jobs and workers is kept relatively stable. It's when the government involves itself through economic regulations like price (wage) controls that the market gets distorted and one group is put at a disadvantage to another.
The problem is that enacting a minimum wage law doesn't suddenly give all the working poor a decent-paying job. Instead, it forces employers to consider many people to be unemployable because their sudden increase in pay may not be justifiable by their production, experience, or education. The increase in pay due to the minimum wage may even make it economically impossible for the business owner to keep that worker's position anyway; what if the job itself just isn't worth $9/hour?
This is the exact reason why proponents of the minimum wage don't follow their logic to its necessary conclusion. Why doesn't Mr. Obama, if he cares about the little man so much, increase the minimum wage to $15/hour? Or $25/hour? Because by raising the minimum wage, the government forces people out of their jobs, and their jobs out of the country. It's entirely possible to put the entire workforce out of work just by following the logic of minimum wage proponents.
On average, unemployment for young people is 15% higher than it is for adults. Why are young people having difficulty finding jobs today? Because, due to the minimum wage and other regulations, it's too expensive for most companies to risk the time and money necessary to train an inexperienced high school or college graduate who will probably move on to something else within a year or two anyway.
Instead, the business is forced to minimize the risk posed by a higher minimum wage by only hiring over-qualified, over-experienced workers for entry-level jobs that used to be worked by teenagers and college grads. This creates a vicious cycle of unemployment for young people that can't get the experience they need to begin their professional careers; this cycle is compounded in a weak economy. I'm sure every college graduate reading this can at least remember a time when they were staring at a posting on Indeed or Careerbuilder and muttering, "so I need experience before I can get experience?"
I'm still trying to figure it out myself.
Don't let its proponents fool you: they claim that the minimum wage protects the poor and the marginalized of society. The truth is the minimum wage will only create more unemployment and misery for the workers it's supposed to protect. Minimum wage laws, by their very nature, only outlaw jobs that pay less than a totally arbitrary dollar amount while doing nothing to create a more favorable environment for businesses to employ people.
So what's the solution? How about "freedom of contract?" Wouldn't it be a novel idea for people to negotiate their own pay, hours, benefits, etc., without involving government force? If someone wants to take a $5/hour job rather than sit around and do nothing, why shouldn't they be able to? Should a willing worker go jobless or be forced on welfare because his or her experience, education, or production may not merit the government-enforced minimum wage? In a free society, the price of one's labor is an issue that should be decided between the worker and his potential employer, not the government."
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