Minimum Wage Laws

I honestly can't recall if I have written about this yet. If I have, it's worth talking about again. I am firmly against any sort of minimum wage laws and here's why.

We first need to look at the supposed reason for implementing a minimum wage law. The politicians say the reason is to get more money to the people who work for minimum wage, the lower class. Politically it sounds great, and to most of America it sounds great, but let's look at the impact of such a law here.

If you increase the minimum wage you increase the amount workers are paid. From a business stand point who has people employed for minimum wage, will experience an increase in labor costs to produce whatever good or service it is that they produce. This causes an increase in the cost of production and will be shown on the output side in higher prices for that good. Just because the government increases the minimum wage, doesn't mean that these companies will take profit losses. They will either cut labor costs by firing people or they will or they will increase the price of their good. It's basic economics, as the price of input increases, the price of output increases and that's exactly what happens.

Let's go back to the beginning here with the original goal of the politicians in mind. They wish to be able to give a minimum wage worker more money to they can provide themselves and their family with more goods and services. Now, the type of services and goods that manufactures who have individuals working under them for minimum wage generally produce cheaper goods (fast food, grocery stores, etc.). The minimum wage worker now has to pay more for his/her goods and services or they are out of a job because of labor cuts. So, the politicians now raise minimum wage laws again and we go full circle. It's a snowball effect.

I think that this topic is important because it brings up a variety of important issues. Historically periods when the government raises minimum wage laws we experience higher unemployment and higher inflation. Both are because of the above mentioned reasons. Well then, why do they do it?

There are two reasons and both are quite plausible. The politicians know this because they have economic advisers who aren't idiots, but they choose to go ahead and enact these policies because the general public thinks a minimum wage is a good thing and their only goal in mind is reelection. The other reason is plain and simple. Politicians don't know the effect that minimum wage has on the economy and the lower class. I've said this before and I'll say it again, politicians are not bright educated people. They have B.S. degrees (and I'm not talking bachelor of science here). They tend to be charismatic and ignorant. They don't get elected on what they know, they get elected on appealing to the public. I don't know which reason is worse, but both speak to 99% of the problems here in the United States.

This shows another view point that I believe strongly in, and that's free market. There's no way that the best economists in the whole world could set a market price for wages. A completely free market is a far fetched idea at this point because of the great amount of government influence in the economy has skewed everything so far from market equilibrium that a correction would be disastrous for our economy. But the more of these policies enacted whether it be in the form of subsidies and taxes (all have the reason of influencing price) the closer we move to socialism. As things go down hill in our economy we will continue to see more of these types of ridiculous policies based on curtain agendas.

The final aspect I would like to talk about that I have mentioned before is that the poor are affected first and the worst by inflation. It makes it harder and harder for them to become successful, and I believe it is the main reason why the rich are getting richer and the poor are getting poorer here in the U.S. The middle class is shrinking and it will continue to shrink. There's a fine line in regards to wealth and poverty and it gets finer with every dollar that the Federal Reserve prints.