Essential Information on the Minimum Wage
In order to be properly informed about the minimum wage there are a few essential concepts that must be understood. The first is the economic basics of supply and demand. The second is the negative effect that a minimum wage has on our society.
Economics Basics: Supply and Demand by Investopedia is extremely important because we live in a capitalist society and jobs wages are determined by supply and demand. Employers compete with each other to hire the best fit person for the job. This drives up the prices of wages. Employees are competing with one another for jobs. This is what counterbalances the wage increase made by employers. The reason that this article is so important is that setting a minimum wage really messes with the way this whole supply and demand thing works. The minimum wage is a price floor which makes the supply and demand curves shift.
Investopedia also wrote an article about price ceiling and price floors. This article explains the effect that price ceiling and floors have on supply and demand. When the price floor is set below what the markets determined the price to be, then there is no direct impact on the market price. The market price is only impacted when the price floor surpasses the market price. When this occurs, it dramatically affects the demand. In the case of wages, when the price floor of wages is set past what the market has determined is a fair price, then there is a decrease in supply of jobs. After the implementation of a price floor there are people who keep their jobs. Some of whom may have an increase in pay. The issue occurs with the people that were priced out of the labor market and lost their jobs.
Another great source of information about the minimum wage is an article written by Forbes called A Case Against The Minimum Wage. This article dives into the negative effects that the implementation of a minimum wage can create. Most of the information given in this article can already be seen in our society today. The increase in wages has completely annihilated entry-level jobs. A great example of this is how people used to fill up our gas for us. This job no longer exists because the productivity of filling up gas is below the minimum wage. The sad part is not that we have to fill up our own gas, the sad part is that these jobs do not exist. Most of the people that held these jobs grew up to be mechanics because they got the opportunity to develop skills while on the job. In today’s world, you have to pay to learn to become a mechanic. This further increases the gap between the poor and the wealthy because you now need money to get skills. This article also discusses how the minimum wage is great politics but bad economics. Sure it sounds great that we can just give the poor a raise. The reality is that it hurts the lower class the most. The best way to increase the wealth of the poor is to make them more productive. This can be done by focusing on education in communities that need them the most and reintroducing entry-level jobs through the elimination of the minimum wage.
My final and best source for learning about the minimum wage is Peter Schiff Debates Abolishing Minimum Wage at Yale Political Union on Youtube. Peter Schiff has been a major inspiration on changing my views on the minimum wage. He believes that the minimum wage laws hurt the poorest and least skilled by pricing them out of the job market. His arguments really treats the minimum wage as a civil rights issue. The minimum wage limits the ability of an individual to sell their labor. Low skill workers that made below minimum wage no longer have their jobs because the government has forced employers to only hire people that are productive enough to make at least minimum wage. Not only have these people lost their jobs, they have lost their ability to learn more skills on the job in order to make more money. Even more disturbing is the origin of the minimum wage. The minimum wage was created by unionized American workers in the railroad industry. The issue for them was that they were losing their jobs to immigrant workers because they accepted less money. They implemented the minimum wage to so that employers would have to pay the same for American workers and immigrant workers. This lead to the unionized American workers getting their jobs back.
It is time to rethink the minimum wage. Instead of letting the government set wages, let’s have the market set wages so that low skilled workers can get more skills and so we can reduce income inequality.