Minimum wages harm those it tries to help


When I say that I am completely against the minimum wage, most people are appalled. They say that I hate poor people and that I want to see them impoverished and unemployed. They say that the people on minimum wages can barely survive with prices the way that they are today. I believe that is why most people hate or look down on libertarianism; they simply don’t understand the economy and how the free market works. They take everything they have around them for granted, when none of it would be possible without capitalism and the market. We are the ones who are looking to exalt the poor from their impoverished status and increase the quality of living for every human being in society, and the current intrusive government policies are the problems that cause impoverishment and are not the solution.

To better understand what wages are, it is best that we define them. A wage is nothing more than a measurement of productivity. The business owner measures it’s employees based on how useful they are to the owner. If an employee is doing a great job, then they are producing more for the employer and are paid more. Those that are not as productive will be paid less than those that are seen as useful. A minimum wage, then, is not the lowest wage that an employer will pay to an employee. It is a hurdle; it is a set amount that people cannot be paid less than. So, anyone who would have been making 4 dollars an hour without minimum wage is forced into unemployment and is not allowed to work.

The people who advocate the minimum wage overlook three main and destructive elements of that policy.

1) Minimum wage encourages unemployment, it does not discourage it
2) Minimum wage causes businesses to charge more for their products which make people poorer, not wealthier
3) Minimum wage encourages illegal immigration and prison incarceration

1) A good example of this destructive force would be to look at two equally sized pies. Each can be sliced up into a certain number of parts, and there is no more pie than what exists. The size of the pies is finite, then, because it can be measured. Let us slice the first pie up into 6 segments, representing the splitting up of finite amounts of resources that businesses possess in order to pay their employees. Like the size of a pie, the income of a businesses can be measured, so the business owner can only split up a certain amount of their revenue to pay their employees. So, this business employs 6 people. The government then steps in and states that the pie slices are not big enough for each employee. The business owner then has to slice the pie up into 4 slices, and can only afford to pay for 4 of his employees. The size of the pie, which is the income of the business, has not changed, so a rise in the minimum wage is the cause of unemployment because the businesses cannot afford to hire more people.

Take, for example, what happened during the Depression. Roosevelt, in his infinite wisdom, decided that if wages were high then the people who got the money could spend more and the economy would be better for everyone. By keeping wages high, however, businesses could not afford to hire more people and unemployment went through the roof. We could, theoretically, have had absolutely no unemployment whatsoever if wages were allowed to fall to whatever wage they would. The people who did have the jobs during the Depression would have been making considerably less money than they were, but where is the equality of the current system that we are promised? Why should some people be allowed to make 5 dollars an hour while the rest of society is not allowed to work at all? Would it not be better that two people get 2.50 dollars per hour than only one of them getting 5 dollars an hour?

Another example of this would be to look at the welfare situation. When someone is on welfare, they are getting a certain amount of money from public funds, which is money that has been stolen from the rest of society to pay for it. Let’s say that someone on welfare would get 100 dollars per week from this fund. With a minimum wage barrier in place, the person on welfare has no other way of collecting income other than the 100 dollars per week. There is no place that will hire them because no one will employ them for less than minimum wage, so they are forced to live on the 100 dollars a week. If there was a place that would hire this person for 2 dollars an hour somewhere, then they would have an income of 80 dollars from the employer and 100 dollars from welfare, which would bring them to 180 dollars and closer to helping themselves out of impoverishment. They would also be providing a good or service to the rest of society which helps everyone in that society instead of just sitting on their couch waiting for the next check to arrive. Which is more: 2 dollars an hour or 0?

2) The minimum wage laws create a problem for employers. They are forced to charge more for their products because they need to pay people higher wages than what they are worth. These costs are then passed down to the consumers and hurt the poor people the most, and it causes employers to look for economical ways to save money in areas that normally would be filled by a human being. The example of elevator attendants is a good example of this. When elevators first came out and the minimum wage was .45 cents for an employee, the elevators were all manned by friendly people that would tip their hat to you and ask you which floor that you would like to go to. The attendant would operate the elevator, and the business owner could offer you a service through their employee. The attendants were perfectly happy to work for that wage, as they would have worked somewhere else if they did not like their job. When the minimum wage was increased to .75 cents, there was not an instantaneous firing of elevator attendants. However, new elevators that were put in were designed in order to be automated, so that an attendant was not necessary to carry the passengers. Thus, the minimum wage being raised phased out the desire by business owners for elevator attendants, and they are a thing of the past today. We can see the same thing happening today with luggage carriers at airports, cashiers at grocery marts, and many other examples. Higher minimum wages causes businesses to consider automating the service so that they don’t have to pay the higher wages, and this encourages unemployment.

Another example would be in the food industry. My best friend works as a manager in a big restaurant in the casino, so he used to tell me all sorts of stories about how the restaurant and almost all restaurants employ legal foreigners to keep their costs low. The legal immigrants are willing to work for a lower rate than Americans are allowed to work for, and are paid less accordingly. This works out well for both of the participants; the restaurant is allowed to employ people at less than minimum wage rates, and the workers enjoy working at a rate that is acceptable to them. Why should this be any different for a bum that is on the side of the road? Would they not be happy with working at a place for less than a minimum wage rather than being penniless? The other way that restaurants pay people is to pay them under the table or illegally. He didn’t mention that his restaurant does anything of the sort, but I worked for one that did and the business and I both agreed to the situation. It worked out well for the restaurant because they didn’t have to pay me as much, and it worked well for me because I was young and was looking for any job at all regardless of pay.

If the minimum wage law is infallible, then why do we have exceptions? Why is it that we allow certain industries to pay below minimum wage and we have certain programs that allow young teens to work for pay that is less than minimum wage?

3) Minimum wage increases illegal immigration for reasons that I mention above. This is further increased by our social welfare programs that entice people to come here for programs such as free health care, education, money in the form of food stamps and the like, but minimum wage has it’s draws as well. The business owner needs a way to pay people less than minimum wage because they simply cannot afford to run a business and pay the same rate. Instead, they allow these illegal workers to work in their businesses because they settle for less. In turn, both the employer and employee benefit from this transaction, so it shows that the minimum wage is just nonsense. If it was abolished the next day, would you go and get a job at 4 dollars an hour if you were already getting paid 10? Of course not, but the people who don’t have any jobs and could not get a minimum wage job would be overjoyed at working for 4 dollars because they would at least have an opportunity to make some money.

I leave this topic for last because I think it is easily the most devastating consequence of the minimum wage debate. Prisons are no longer used solely for incarceration; they have become a source of income for both the private prison building industries and the direct holders of those prisoners. The prison companies make more money as more people are incarcerated, so the tendency is to incarcerate more people. The laws are made stricter and the punishments more severe so as to fill the prisons and maximize profits. Where minimum wages come into the picture is when companies hire the felons to do slave labor for them. Companies like AT&T hire felons for .15 cents an hour nowadays, and the companies use this slave labor for immense profits. They would be able to pay these people 3 dollars 4 dollars an hour without a minimum wage, but instead resort to hiring slaves for their labor. Thus, incarceration is encouraged so as to use them like property and slaves; they work construction and state jobs at absolutely no pay. This incentive to criminalize people would be less so if companies could pay their employees less than minimum wage.

I leave you with this concept. If the minimum wage is so fantastic, why don’t we increase it more? Why don’t we increase it to 100 dollars an hour, so that everyone would be rich? The reason is that no one would be employed save the few thousand that actually got a job, and rest of the country would be entirely unemployed. Thus, the minimum wage among other reasons is one of the main reasons for unemployment and a major contributing factor to reliance on welfare.

If we let poor people work who currently are not allowed to work because their productivity is below minimum wage, then we would have additional productivity in the marketplace. When more productivity exists, then more goods are produced, which leads to greater abundance of goods. When the supply of goods is increased, the price of that item goes down. Do you see how lower prices lead to less need for higher wages? If I am getting paid 100 dollars an hour and a loaf of bread cost 10 million dollars, then I would be poor quickly. If I was getting paid 20 cents an hour but bread was only 1 cent a loaf, then I would be better off. The numeric value of wages does not matter; it is the relation of wages to prices that matters. Lower prices benefit everyone, so let’s get everyone working so we can make more goods! Get rid of the minimum wage and let people work!

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