Highly Recommended: Our Top Rated Income Stream
 

Why Minimum Wage Laws Should Be killed

written by John Chow on July 24, 2007

Secure Affiliate Marketing

I received this email yesterday from Jobacle.com asking me to take part in the minimum wage challenge. The challenge ask all bloggers to live on minimum wage for one week.

You will need to learn how to stretch a dollar because every other expense will go towards your budget. Think you can stay nourished and entertained while maintaining the quality of your life? Prove it. Take the challenge.

Unfortunately, Jobacle.com gave everyone too much of an out for the challenge to really work.

We don’t want to make this overly complicated. So if you decide to participate you can still live in your house and pay your mortgage. You can still get behind the wheel of your SUV. And yes, if there’s a medical emergency, you can still take care of it. Even keep your high-speed Internet connection.

If I were to remove the cost of housing, internet and transportation, then the only thing I really need to pay for is food. While I wouldn’t be able to eat very well on minimum wage, I’m pretty sure I wouldn’t have to live on mac and cheese either.

The challenge is to highlight the new Fair Minimum Wage Act which came into effect today in the U.S. The new minimum wage is $5.85 per hour and will increase to $6.55 per hour next year and $7.25 the year after that. Jobacle.com feels the new wage level is a joke and disrespectful to employees.

I believe the minimum wage laws should be killed off and wages should be subjected to the laws of supply and demand. I’m sure my position isn’t very popular but I think politicians will eventually have to recognize that minimum wage laws just doesn’t do what it was intended to do.

Minimum Wage Law Hurts The People It Was Designed To Protect

Jobs are subject to the laws of supply and demand just like any other commodity, with or without a minimum wage law. If something is price low, you sell more. When you price it high, you sell less. When wages gets too high, companies hire less. The means more unemployment. Canada’s (British Columbia) minimum wage is $8.00 an hour (and our dollar is almost on par with the U.S. now). Canada has higher unemployment than the U.S. I wonder why?

The whole point of a minimum wage law is that the market wage for some workers is deemed to be too low. If it is fixed by law above the market level, it must be at a point where the supply exceeds the demand. Economists have a technical term for that gap. It’s called unemployment. Advocates of minimum wages either reject that elementary logic or don’t care.

A minimum wage law denies workers the freedom and right to negotiate their own wage contracts. It forces employers to lay off workers whose work is no longer worth the minimum wage and reconsider future hiring plans.

Minimum Wage Laws Are Unfair To Workers

What is a fair wage? My answer would be whatever the employee and the employer negotiates. Certainly it is not fair to be forced by the government to be unemployed at $5.85 per hour. Minimum wage laws forces workers to remain unemployed rather than accept work at a lower wage. It forces the unemployed to accept the indignity of welfare rather than the indignity of a job. It kills job opportunities for youth, women, visible minorities, unskilled workers and denies young workers the chance of getting on-the-job-training and work experience.

It’s Self Defeating Model

Raising the minimum wage may make it look like it’s giving more money to workers but it’s really a self defeating model. Assuming the business doesn’t lay off any workers, it’s operating cost just went up. What does a business do when their operating expenses increase? They raise prices to make up the difference. That adds to inflation. Suddenly, everything cost more and that wage increase buys about the same amount of stuff it did before.

We Are In A Global Economy

An increase in the minimum wage is always followed by an increase in off shoring jobs. Does the US have any tech support call centers left? When you operate in a global economy, having minimum wage laws just means businesses can go somewhere else to find labor. It’s not just big businesses that are off shoring jobs to districts with no minimum wage laws. You’ll be amazed at how many mom and pop operations are sending work offshore.

You Are Where You Want To Be

I grew up in the poorest neighborhood in Canada. My parents came to Canada with nothing but my dad always told me that in this country, I have no limits on what I can achieve – that if I didn’t like my situation, I have the power to change it. I am where I am today because I was stupid enough to believe that.

We live in a capitalist country, not a communist one. It’s not the government’s job to take care of you or your family but many people seem to believe that. You don’t like living on minimum wage? You can’t live on what you’re making right now? Then do something about it! I would argue that everyone of us is where we want to be right now. Because if we’re not where we want to be, we would do something about it. I don’t know about you, but I rather be in control of my own destiny than let the government be in control of it.

For more information on the true effects of minimum wage laws, read the Fraser Institute report The Economics of Minimum Wage Laws.

Did you enjoy this post? Get John Chow Dot Com updates via email...

Stay up to date with all of John Chow’s tips for making money online and blog posts by subscribing via email. Your email will be kept private and never shared with anyone.