James Leroy Wilson's blog

Thursday, December 07, 2006

Repeal the Minimum Wage

This is my latest at the Partial Observer. Excerpt:

Even minimum wage proponents may say "don't be ridiculous" if it is suggested that the minimum wage should be $20/hour, or $100/hour. That's because they know such rates would cause unemployment. They understand the concept: an increase in the price of something cuts down on its demand. This applies to wages as to everything else. Every time wages are forcibly increased, there will be businesses who are no longer willing to purchase labor. That means there will be people wanting to sell their labor, but there will be no buyers. That's unemployment.

It may be true that most businesses do not lay off workers when the minimum wage is increased, particularly if they are already going with the minimal number of staff required to function. The real effect of the minimum wage on unemployment is invisible. The cost is in the workers who would have been hired but were not because businesses couldn't afford hiring at the new minimum wage.

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