Thursday, August 1, 2019

Why Minimum Wage Laws Increase Unemployment

If the discipline of economics has one certain principle it is the law of supply and demand. Briefly, the law states:

The quantity of a good supplied (i.e., the amount owners or producers offer for sale) rises as the market price rises, and falls as the price falls. Conversely, the quantity of a good that the market demands falls as the price rises and rises as the price falls.

Meaning that laws that raises the minimum wage reduce the quantity of labor demanded. Or more simply, minimum wage laws create unemployment among those at the bottom of the heap, i.e.., those workers for whom demand is least, and for whom demand, beyond a certain price, is non-existent.

This obvious fact naturally does nothing to modify the demands of the comfortably off opinionators, Ron Unz, for example, and legislative idiots in the US Congress.

Spelled out in greater detail, here's the case against minimum wage laws.

Yes, abolishing the minimum wage would create many miserably badly paid jobs. But to be employed even at a miserably low wage is better than to be unemployed, on the workforce trash heap. Moreover, working at a low wage provides opportunity to acquire skills that qualify workers for better paid work.

Those who want to help the working poor, should advocate for a reverse income tax, or some other form of taxpayer funded wage subsidy. But don't think legislators can interfere with the market mechanism without creating consequences that hurt people and damage the economy.


Globalist Economics No. 37: Raising the Minimum Wage, or How to Make Water Flow Uphill

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