Monday, January 9, 2012

The Unseen Effects Of Minimum Wage Laws

The purpose of minimum wage laws (or so we are told) is to increase the standard of living for the worker who is receiving wages, reduce poverty, and to make sure that workers are being payed a "fair" wage for their labor. Without bringing in a slew of charts or numbers into the argument, let us think about this logically for a moment. One question that comes to mind is, what about those workers whose labor does not meet the minimum wage? What happens to these people? We have to assume that these people will not be employed, which essentially means that they were put into poverty due to such a mandate, have a reduced standard of living due to not being paid, and have not earned a "fair" wage for a labor or service that they could have provided. Unfortunately, "fair" in the sense of wages is not determined by the voluntary agreement between the business owner and worker but instead by the outside party that mandates such a wage. How this outside party ever comes up with such a number, we will never know, but while we are all left wondering, many people will be left without a job and we will also never get to know what jobs could have existed.

Remember the days of full service gas stations? One could argue that minimum wage laws could have something to do with these services going away for good (other then where full services gas stations are forced to provide such services by law; New Jersey for example). Today, Pennsylvania's minimum wage is $7.25 per hour. Think about it; what gas station would pay a young teenager, for example, $7.25 per hour to wash car windows or check the fluids in your car? It's a service that many people miss and would not mind to see come back but again, no business owner would risk being fined or shut down because they paid an employee less then the mandated wage. If we think logically about this law, it breaks down almost immediately into arbitrary nonsense that never ends up helping anyone, especially those who could be employed had this barrier to entry in the labor market never existed.