Minimum wage: unnecessary and potentially harmful
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by Tyrsis
As Congress are voting in the 2.00 USD minimum wage today, one should spare a thought for the poorest of our nation.
Anyone who believes that the minimum wage laws will actually improve the welfare of the poor makes a fundamentally incorrect assumption: that employers will have no choice but to pay their bottom employees more. The fact is: the pool of employed workers will not remain constant. And so, if an employer doesn't wish to pay 2.00 USD, the employer will simply choose not to hire the worker. Hence, the minimum wage serves to produce unemployment in the sector which it is intended to help: the very poor.
It does this by destroying the job opportunities of those workers who are worth less than 2.00 USD - they are now limited to a wage of 0.00 USD. I know I'd much prefer 1.00 USD.
Not only this, but it is unnecessary. Our labour markets are very healthy, and the natural minimum wage is apparently hovering around 5 USD at the moment. There seems to be no need for such legislation. But I remember when I was just starting work, I was being paid lower than that. Now, imagine the unfairness of this: being unable to work for less than the minimum wage, because the government says so, and hence never being able to develop my human capital (construction skills) and eventually earning the much higher wage I do now. It makes no sense for the government to interrupt a mutually voluntary transaction. If I agree, and my employer agrees, what right does the government have to intervene in our harmonious transaction?
Even though the minimum wage may be non-binding today, let's understand it now - it is potentially harmful and unnecessary. Let's never support a minimum wage, regardless of the wage. By principle, it is incorrect.
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You are mistaken as to why our current minimum wage is "hovering" at 5 USD. Right after the transition to V1 there was a bug where minimum wage of 5 USD was carried over from Beta. However, besides the salary setting this was not reflected anywhere. Employers could not choose a salary below 5 USD, but on the Country page it was listed as "N/A". This obliterates your points about a "healthy" labor market and "natural" minimum wage, since there were a ton of employers who chose the very least they could offer as payment to the least skilled. Over time when the employee skills improve they will most definitely be able to find better paying jobs, but during those first two weeks it will be close to impossible for them to raise their Wellness on a 1 USD per day joke of a salary. Even 2 USD will not help much. Minimum wage is necessary to ensure that the employer does not take advantage of poor and low skilled workers who would otherwise have no choice but to accept an unreasonably low salary.
The minimum wage is currently set to 5 USD even though it was listed as "N/A." 2 USD will be a lot better, especially for raw materials companies.
Arguing that it "protects" the low skilled workers is a long shot. It will help some, and it will hurt some. Employers will simply hire less of them, if they have to pay more. Some will be employed, and some will be unemployed. How is it fair that the government disallows the unemployed unskilled worker from bargaining with their employer to a wage lower than the minimum wage? It works for the worker, and it works for the employer, but because the draconian government decides it's not okay, then it is deemed illegal - despite it helping both parties. As for what Archibald said, excellent - a decrease from 5 USD to 2 USD is a much welcomed change. However, I will continue to argue for no minimum wage at all - but I do respect this kind of pragmaticism in politics.
Another way you could put it is that we cannot merely concern ourselves with the welfare of those fortunate enough to be employed. We should also care about the welfare of those who are unemployed. It is certainly an unjust rule to disallow the unemployed from competing with the employed, by setting a minimum wage so that the unemployed cannot offer to do a job cheaper than an employed worker. It is most likely that an employer will hire more workers, if the labour markets were allowed to be competitive to push wages down. Note that wage cuts aren't a big deal, such wage cuts serve to put downward pressure on prices, as cuts in labour costs are passed on to the consumer. This helps everyone, whereas the minimum wage pushes up prices, hurting everyone, and only benefiting those who are lucky enough to be employed. Like I said at the beginning, we ought to be concerned about the welfare of both the employed and the unemployed, not just the employed.