A mandated minimum wage does more damage than good.

I wish to prove my case using four simple points. Before I begin, I will briefly address the comments from Con in Round 1. He asks how a "mandated minimum wage does more harm than a minimum wage without being mandated?" A non-mandated minimum wage, as defined, would be voluntary and thus have no impact as I will argue further. ----------------------------------------- 1) Minimum wages hurt employers. ----------------------------------------- One can anticipate with some certainty that the alleged greed of capitalists will be entered as proof for the need of a minimum wage. We are continually told that businesses need to be forced to raise the wages of the common worker, for they will never do so voluntarily. However, this runs contrary to logic. The key to understanding this is the awareness that no business will pay an employee more than the value of his contribution. As an employer is coerced into paying higher wages for his employees, he is forced to make one of two decisions to retain a satisfactory profit level. First, he could pass the escalated cost of labor on to the customer in the form of product price increases. Alternatively, he could reduce the cost of labor by reducing hours or laying off workers. If the circumstances do not allow either of these options the business owner would be forced to shut down and all parties involved would be the worse off. Ultimately, the employer loses either productivity or customers; or he loses both in extreme cases when he loses the entire business. ----------------------------------------- 2) Minimum wages hurt employees. ----------------------------------------- Advocates of the minimum wage rate contend that they are fighting for the betterment of the masses and generally the poor in particular. As I have shown above, this is a case of good intentions gone badly. In reality the minimum wage policy primarily hurts those it was designed to assist: teenagers and unskilled workers. When hiring a worker, an employer must take into account more than merely the hourly wage. In addition to the wage seen by the employee, there is a cornucopia of other mandated benefits such as the employer's share of Social Security, Medicare, and unemployment and worker compensation programs. These employer-provided benefits run as high as 30% of the hourly wage [1]. Therefore, a $7.25 minimum wage [2] turns into a liability in excess of $9 per hour. When faced with these costs, employers will only retain those employees which provide a value of $9 or more to the company. This generally does not include transient workers such as teenagers and unskilled menial laborers. The market tends toward wage rates which allow as many people who want work to be employed and for those who wish to hire workers as many employees as they need. Institutional unemployment is the result of the government coercing employers to pay wages higher than this natural level [3]. Economist Henry Hazlitt expertly brings this idea forward. "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" [4]. ----------------------------------------- 3) Minimum wages hurt customers. ----------------------------------------- Customers experience two effects from wages above the natural market wage rate. First, as briefly described above, price levels increase due to a natural tendency to pass higher costs on to the customer. Second, they experience a reduction in the standard of living. As the required minimum wage increases, so increases the funds available to those who were not among the unlucky pink slip recipients. One will already see higher prices in those labor intensive markets which were forced to pass on cost increases to the customer. However, in the other markets which were negligibly affected by the increased cost of labor the prices will still have a tendency to increase since the entire market has experienced a general increase in money supply. In other words, since customers potentially could have more money in their pockets they would be willing to pay higher prices for the goods they need and desire. At best they would experience negligible change, at worst a reduction in the standard of living. ----------------------------------------- 4) Minimum wages hurt society. ----------------------------------------- As a net result of the three aspects described above – employers, employees, and customers – society in general would experience a shortage of labor, increase in unemployment, increase in black market jobs, and decrease in standard of living. By arbitrarily mandating a minimum wage for labor, the government is denying the right to work from those people who are willing and capable of working for less than that amount. When a person is unable to work legally the option is to not work, thus drawing unemployment and being a further drain on society, or work in the black market. ----------------------------------------- References: ----------------------------------------- [1] At the Intersection of the Minimum Wage and Illegal Immigration, Howard Baetjer, The Freeman Volume 57, Issue 2 [2] Department of Labor, Wage and Hour Division (http://www.dol.gov...) [3] Human Action, Ludwig von Mises, Chapter 30, Part 3 [4]Economics in One Lesson, Henry Hazlitt, Chapter 18