Minimum Wage Goes Up
Today the Federal minimum wage rate increase takes effect, boosting the minimum wage from $5.15 an hour to $7.25 an hour over 3 years. Along with this we will likely see an increase in unemployment; especially among young and low-skilled workers.
The laws of economics, no less reliable than other scientific laws, cannot be overridden by government officials, no matter how much authority they’ve been granted. When the minimum wage is increased, employers will respond by firing those employees who’s productivity falls below the new threshold. An employer hires an employee who will provide a level of productivity(output) that, at a minimum, equals the required investment(input). To do otherwise would cause the employer to suffer a loss, and eventually go out of business. A higher demand for people with higher productivity, and a premature replacement of low wage workers with capital equipment, are an inevitable result of mandatory wage increases(assuming all other factors remain unchanged).
Minimum wage legislation is a poor attempt to repair economic problems introduced by existing government intervention. The inability of some in the lower working class to maintain a reasonable standard of living with their relatively meager income is caused mainly by the weakening value of our fiat currency due to deficit spending, credit expansion and inflation. This is another piece of evidence supporting Mises’ claim that the “middle-of-the-road” policy will eventually lead to complete control over the economy by the government(socialism). Every interventionist policy creates a negative, unintended consequence that requires further intervention, until complete control over the economic system is coercively enforced, and liberty has all but vanished.
No matter how well-intentioned, government intervention in economic matters always has detrimental effects. In the long term, the results are typically contrary to solution which was intended. We simply cannot create wealth out of thin air. The best solution for unemployment and a higher standard of living is to withdraw government from economic affairs. In a truly free market, though not perfect, we would tend toward full-employment and our standard of living would be maximized.
Why should politicians be making these sensitive decisions that can only effectively be made by individuals? What makes them more qualified and less fallible than those who are directly involved in the transactions in question? If wealth can magically be created through minimum wage legislation, why not increase it to $30 an hour?
July 25th, 2007 at 1:11 pm
I agree with everything you wrote. You can also include taxes. Lower taxes continue to generate higher revenues, leading to more employment, yet the government continues to try and raise taxes.
Economists they are not. Free market capatilists they are not.
Not sure that I’ll ever vote for an incumbent again. It’s past time to give the power back to the people/free market.
July 25th, 2007 at 1:29 pm
I agree 100 percent. before they can effectively cut taxes they need to cut government spending. that is the real problem. no matter how much politicians promise to be fiscally responsible, they continue to expand government spending. the measly tax cuts touted by the republicans amount to nothing more than a farce when the deficit spending and inflated money supply is taken into consideration.
“It’s past time to give the power back to the people/free market.”
absolutely!
July 25th, 2007 at 2:32 pm
I’m reminded of Ronald Reagan’s famous quote…
“The nine most terrifying words in the English language are, “I’m from the government and I’m here to help.”
July 25th, 2007 at 2:52 pm
that quote fits well with the intent of my blog.
if people are so concerned about the welfare of the less fortunate — which they aught to be — why don’t they donate their own time and/or money to help them rather than reaching into the pockets of others? not only is this more efficient, it’s also morally sound.