Articles from January 2016

Minimum Wage Laws

A wage is a price that employers are willing to pay for an employee. Prices are subject to the law of demand. We have all seen the effect of demand where a price goes up and people buy less or a price goes down and people buy more. Setting a minimum wage increases the price to employ a whole group of people which will eventually result in an increase in unemployment including those persons who will now give up on the job market and are not counted in government unemployment numbers. Employers will adjust the way they run their businesses by changing the duties of a fewer number of employees or perhaps by introducing capital assets so a fewer number of employees can be more productive. People work for low wages because their lack of skills and experience puts them at that level of productivity. The way to increase productivity and the associated wage level is to increase skills and experience. The first step to increased productivity is to gain skills and experience in a low paying job, a step that is not available for many due to minimum wage laws. Many politicians and their supporters think the minimum wage is compassionate while in fact it consigns many to despair of being able to work. One does wonder about the sincerity of politicians since they increase the minimum wage a few dollars rather than to something like thirty dollars. Minimum wage laws are a prime example of the untended consequences of government intervention in the economy where those it is supposed to help are actually hurt.