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Minimum wage should be abolished

The+minimum+wage+functions+as+a+price+floor%2C+which+causes+a+surplus+of+labor.+More+people+will+want+jobs+than+can+get+them.
The minimum wage functions as a price floor, which causes a surplus of labor. More people will want jobs than can get them.

The minimum wage functions as a price floor, which causes a surplus of labor. More people will want jobs than can get them.

Infographic by Noah Siderhurst

Infographic by Noah Siderhurst

The minimum wage functions as a price floor, which causes a surplus of labor. More people will want jobs than can get them.

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When thinking about wealth inequality as a middle class liberal, it’s easy to get caught up in feel-good policies that have little effect. The biggest of these, I feel, is the idea of a minimum wage. This conclusion lies in simple macroeconomic theory (I know the terms simple and macroeconomic theory don’t often go together, but please bear with me).

Since we first formed societies, people have felt sorry for those worse off than themselves. This fundamental feeling has translated into many different policies aimed at closing the gap between wealthy and poor, one such being the minimum wage. However, the only real purpose the minimum wage serves is to ease middle class liberals’ (and maybe some conservatives’) conscience. It has little real positive effect on the lives of the poor.

Think about supply and demand in the job market for a low-wage industry like fast food. Usually, in an economy without a minimum wage, the quantity of labor (number of jobs) workers are willing to supply equals the quantity of labor (jobs) employers are willing to buy (number of people they are willing to employ). The price at which they agree to make this exchange then falls at an equilibrium price. This is the price where employers will be able to find as many employees as they need at a price that is competitive to attract these employees.

To explain, if you can make more money somewhere else, you will not stay in the job you currently have, and your employer will have to pay you more to keep you from leaving (the wage they pay you not to leave is the equilibrium price of labor).

Now let’s consider what happens when a minimum wage is set in place.

There are much better ways to help the poor than fighting the free market system.”

At an effective minimum wage, more workers will want to work than employers will be able to employ. If the minimum wage is $10 per hour, you are much more likely to seek out a job than if it is $7.25 an hour.

At the same time, employers will hire fewer workers at the higher wage. Instead, they may simply require current employees to do more, invest in job-killing labor replacements like self-checkout lines and Sheetz-style ordering kiosks and pass on the higher labor costs in the form of higher prices, which causes inflation (none of these effects are desirable).

Both higher supply, in the form of more people who want to work, at the same time as lower demand, in the form of less employers who want to hire, lead to a surplus of labor.

And because of this surplus, more people want jobs than can get them. That is, whether or not you get a job when you need one is based on who you know or how lucky you are rather than need. In a normal market, people with the most need will work for the least, practically guaranteeing them a job, though not necessarily a good one. Even though you may end up with a low paying job, isn’t that better than none at all?

In addition, simply having a higher minimum wage does not translate into a higher standard of living. Inflation, caused when employers are forced to raise prices as labor costs rise, would actually reduce the buying power of the minimum wage to before it was raised. You would make more, but your money would be worth less.

Even so, you could argue that an economy with no minimum wage is cruel. Cries for a “living wage” are all too powerful when it comes to images of severe poverty.

However, there are other ways of improving poor people’s lives that would not interfere with the market’s efficiency in allocating resources. These include investment in education, which would mean higher wages in higher skilled jobs for many poor people (this would also leave more low skilled jobs available for teenagers like myself). Other policies, which many liberals also support, include universal health care and free preschool. All of these reduce financial burden on the poor without the same ill effects as a minimum wage.

So, based on this analysis, the only real reason for anyone to support a minimum wage is simply because it makes us think we are good and on the side of the poor. In other words, a minimum wage makes us feel like compassionate teddy bears when in fact we are out of touch monsters if we support it.

Speaking as a liberal myself, there are much better ways we can spend our time to improve the lives of the poor without fighting the free market system that has allowed America to stand out for centuries.

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Every person has a story.
Minimum wage should be abolished