Damage from Minimum Wage Laws

Thoughts on a Free Market Economy….

“Damage from Minimum Wage Laws”

By Phyllis Hunsinger

November 1, 2020

                What is a wage? The dictionary defines wage as a fixed, regular payment by an employer to an employee, especially to a manual or unskilled worker. The wage represents the value that the employee brings to the job. 

                What is meant by minimum wage? A minimum wage is the amount per hour the government requires employers to pay any employee. Minimum wage jobs are generally entry level jobs.  These jobs are a perfect place for young workers to gain employment experience or for the unskilled to find employment.  Most workers do not stay in minimum wage jobs; these jobs provide work experience that can be taken to other areas of employment or for advancement within the company.

                Since the wage represents the value that an employee brings to the company, regardless of government edicts mandating a minimum wage, labor costs cannot exceed what is produced by that labor.  There is a push among some in the federal government to set $15 per hour as the minimum wage.  The problem is a matter of value. A government requirement to pay employees beyond the amount their labor produces forces the business to make choices that include (1)reducing staff; (2)raising prices; (3)going out of business.  None of these choices are good for the employee, the business, or the economy.

                 In Economics in One Lesson, Henry Hazlitt explains the detrimental effects of minimum wage:  “You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less.  You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation.”

                Entry level, minimum wage jobs provide opportunities for young people to develop a work ethic and skills. When government forces companies to pay an unrealistic, minimum wage, young workers cannot compete with more skilled employees; therefore, these young people are delayed in acquiring work related skills which keeps them from succeeding financially. The only way the government can improve the plight of workers is to remove crushing, job killing policies and instead adopt policies that encourage employers to become more innovative resulting in economic growth and profits, which will allow more employees to be hired.

                Voicing support for raising the minimum wage sounds good and garners votes by politicians; however, the unintended consequences of such an action destroys job opportunities for young and unskilled workers.

https://www.free-dom.us.com, Phyllis Hunsinger, © 2020, all rights Reserved

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