REFLECTIONS

Posted on August 17, 2013

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MINIMUM WAGE, GOOD INTENTIONS, BAD POLICY

Fast food workers in Missouri want $15.00 per hour minimum wage or more than double the $7.25 wage today.

To double the minimum wage would result in inflation of fast food prices and in other sectors of the economy. Employees throughout the economy would want pay hikes.

Minimum wage laws are politically sacred, and politicians who argue against increasing the minimum wage commit political suicide.

Voters believe that minimum wage laws are necessary to ensure that low-skilled workers, especially new entrants, teens and minorities, earn a living wage and are not exploited by greedy capitalists.

But raising the minimum wage law does not produce desired results. The cruel and unspoken irony is that minimum wage laws do the most harm to the segments of our society that we seek to help—the unskilled poor and the inexperienced youth.

Intuitively we all understand the fundamental principle of economics that when the price of anything increases, the quality demanded of that good or service will decrease.

Simply put, with other things being constant, the number of jobs offered will decrease when the minimum wage is artificially increased. Employers will find ways to use more machines to replace workers or reduce the number of workers and increase the efficiency of the remaining workers.

How exactly does mandating an increase in the price of labor help those currently unemployed?

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