Minimum Wage Laws

by Jason Stotts

This short video does a very good job of explaining the problem of minimum wage laws.

One problem that it does not address is this: let’s say under market conditions you employ 100 low-level workers each for $1 per day.  In order to rectify this “social injustice” a minimum wage law is passed such that th enew minimum wage is $2.  Ceteris paribus, you can now only employ 50 workers, since the total expenditure on this amount of labor cannot exceed $100.  Thus, the effect minimum wage law was to give 50 workers extra income and to deprive 50 workers of all of their income.  This is hardly better for the 50 workers who now have zero income instead of their $1 per day wage.  In fact, in Economics it is considered an obvious truth that minimum wage laws create a minimum level of unemployment and all of it at the lowest income levels, harming only the poorest workers.

This example, among countless others, should give people pause when the gesticulate for their to be a law for something that they feel is wrong, even though they don’t understand it.  When the government tries to manipulate the market, instead of doing it’s proper function which is to protect the rights of individuals, then there are always negative repercussions: like poor Simon.