The minimum wage should be abolished

1.There is a good chance that a minimum wage will create unemployment: If the minimum wage is raised above what a particular employer is willing to pay for a particular person to do a particular job for them, then that job will not be available for that person, and if it was available, raising the minimum wage will eliminate it. If you"re looking to get a job as a dishwasher at a particular restaurant, and the owner is only willing to pay at most $7 an hour for another dishwasher, than if the minimum wage is set any higher than $7 an hour, you will not get that job. If you cannot find anything else, you will be unemployed. This is how the minimum wage can create unemployment. It is a minimum price control on a commodity, labor, which has the potential to create unsold surpluses of that commodity on the market, ie. unemployment. This little bit of economic logic is irrefutable. No amount of inevitably flawed empirical studies (as all empirical studies in the social sciences are, due to the inability to properly isolate variables) claiming to show no relationship between raising the minimum wage and unemployment can demonstrate that employers will voluntarily pay more than they are willing to pay for a given labor service. For those who believe that the price of unskilled labor has little effect on the amount of unskilled labor demanded by a given employer, I would recommend a visit to a hotel in India. You will immediately notice that there are about four times as many employees in an Indian hotel as there are in a similarly sized North American hotel. Why? Because labor is a lot cheaper, both absolutely and relatively, in India than it is in North America. There is no place for the person whose only job it is to greet guests and put flower necklaces around their necks in the North American hotel market, while there is in the Indian hotel market. Higher North American wage rates, for both natural (supply and demand for labor) and artificial (minimum wage) preclude such a job from existing economically. Now, is it guaranteed that having a minimum wage or increasing the minimum wage will create unemployment in a given situation? No. But is there a good chance that it will? Absolutely. So why even run the risk of introducing or maintaining a policy that might cause the most vulnerable people to be out of work? Why not just abolish this risky, market-distorting price control and find a better way of helping poorer people? 2.Chases away investment Capital investment and wage rates have a somewhat paradoxical relationship to one another. On one hand, low wage rates in a region, other things equal, tend to attract more capital investment to that region, as most businessmen are always trying to produce in regions where their costs of production can be the lowest, other things equal. On the other hand, capital investment in a region serves to raise real wage rates in that region in general. This is both because saved-up capital funds are what are used by businesses to pay wages to workers, and because capital investment not directed to buying labor is usually directed to securing producer goods that will help make the labor hired more productive (machinery, tools, office buildings, research & development, training programs, etc") Because producer goods are ultimately useless without the labor to use them, labourers in a region with a relatively abundant supply of producer goods are in a better position to demand higher wages than labourers in a region with a relatively scarce supply of producer goods. The labor of those in the former region is more valuable to employers because it serves to set in motion a more productive complex of producer goods than the labor of those in the latter region. Ignoring for the moment the great difficulties of talking about the price of "labor in general", the least important use of labor in the former region will probably be more valuable to employers than the least important use of labor in the latter region. This means that market real wage rates will tend to be higher in the former region than in the latter region. Thus, capital investment is attracted to regions with lower wage rates, but the act of capital investment serves to raise wage rates in the region. Let us suppose that capital investment, attracted to a region with relatively low wage rates, resulted in a "natural" raising of those wage rates. At some point, the region would get to a point where its wage rates were high enough to cease attracting capital investment due to the lowness of the region"s wage rates. Other factors in the region, such as the prevalence of law and order, respect for investors, low tax rates, the relative lack of burdensome restrictive regulations, an increasingly skilled and conscientious workforce, a greater supply of domestically-owned savings/capital funds, a good supply of valuable land and natural resources, and a relative lack of economic and political instability, amongst others, could still operate to attract capital investment to that region, but relatively low wage rates would now no longer be among those factors. Since the primary purpose of courting capital investment is to raise real wage rates, there is no use lamenting the fact that capital investment has in fact raised them, even if it won"t be attracted as rapidly in the future due to the wage rates that are now relatively higher. The problem with imposing a minimum wage is that it is as if capital investment has done its job and raised wage rates among unskilled workers, when in fact this isn"t the case. The higher wage rates, due to the minimum wage, among unskilled workers results in attracting less capital investment to the region in which it is imposed, but the capital investment that would have been attracted by the lower wage rates, had the minimum wage not been imposed, is nowhere to be seen! Wage rates are raised not through capital investment, as they would be in a free-market environment, but through throwing unskilled people who can"t land a position where their skills are worth more to their employers than the minimum wage, out of work. 3.Dampens a spur for low skilled workers to improve their skills and change their jobs: The wage rates set in a free labor market serve as useful signals to workers. They indicate what skills and jobs are important to the society"s employers and consumers (state of demand), and they indicate how rare the ability and willingness to perform these jobs is in that market (state of supply). If a worker is in a job that has a low free-market wage, it is a signal that either the worker"s skills or current job are relatively unimportant to employers and consumers, or that, while the job is important, too many workers are willing and able to perform these jobs satisfactorily. Usually, it is a mix of both. In either case, the relatively low wage rate is a signal from the society"s consumers (producers/employers being their intermediaries in this regard), telling the worker that he would be more valuable to them if he were doing something else. In a free-market, this signal is not just idle hand-waving; the worker is incentivized to pay heed and to take action. If he does, he will be rewarded with a higher wage rate, and thus a higher standard of living. This action might involve moving to a new location, taking night classes to learn new skills, trying hard to show your employer that you have what it takes to assume a higher position in the company, or simply taking a look to see whether higher paying jobs are out there that you are already qualified for. If a minimum wage is imposed, this spur is dampened for workers at the bottom end of the wage ladder. Those that are not thrown out of work receive an artificially higher wage for the positions they are able to retain. This causes the wage gap between these jobs and jobs that paid above the minimum wage before it was imposed to narrow. With this narrowing, workers have less of an incentive to put themselves in an employment position that is more useful to society"s consumers than the one they are in currently.