The Channel 10 evening news carried a story on a Kansas Republican legislator who was proposing a raise in the minimum wage. Although it sounded eminent, I can't find it online - if anyone knows how to search the legislative website for proposals like this, please email me!
These election year rallies around emotionally-charged issues like the minimum wage remind me of parties people throw on the coasts in the face of a huge hurricane that ends in tragedy because people think they can ignore the forces of nature. And like a Hurricane, the laws of supply and demand are forces of nature. Not paying attention to them is like not respecting Mother Nature, with equally tragic results.
The facts are these: (1) the only minimum wage - the real one - is zero; (2) the laws of supply and demand - which are not in dispute by any economist on any side of the debate - state that when you artificially raise a price of something (like the price of labor - e.g. the so-called "minimum wage") it tends to cause more of that something to be supplied and less of it to be demanded. This results in a surplus.
Politicians discuss minimum wage laws in terms of "benefits" they will confer on workers who will receive those increased wages. But the real minimum wage is zero, and that is exactly what many of these workers will receive in the aftermath of government-mandated raises -- because they will lose their jobs. The labor market is no more exempt than the peanut or car markets: artificially raised prices will create surplus. In a labor surplus, the least skilled -- those very people the policitian purports to be helping with his proposal to increase the minimum wage -- will lose their jobs.
I could stop there with the "it's econ 101 stupid" lecture, but here's the deal: we should be free to associate with whomever we want. No one should be allowed to interfere with that. This basic principle - freedom of association - is core to our economy's success. Why? Because in the absence of coercion both parties gain from an exchange. Otherwise they wouldn't do it. When an external entity interferes with an exchange, as the government does when it mandates minimum wages, it's more than likely one or both sides will be worse off.
Life is tough and clearly there are times when we only have a list of bad choices to choose from. Normally, unskilled workers would prefer to make the best of a bad list of choices than to have those choices reduced or taken away from them. Raising minimum wages is a great, emotionally-charged issue for a politician to wield during an election year... but it is a very cruel and heartless trick played on those who are using their minimum-wage positions to build a ladder to a better future.
