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The Case Against the Minimum Wage

It is important to remember that many of the economic issues we face today were not caused by the Communist Chinese Party’s virus at all, but in fact the CCP Virus has often merely highlighted the poor economic planning and policies of our leaders over the last several decades. One of these policies is the minimum wage, the minimum amount, as set by our bureaucrats, that an American business can pay its employees.

On the attached supply and demand graph, equilibrium is shown where supply and demand meet. Equilibrium represents the price at which:

a. Those consumers, or in this case job applicants, willing to reap smaller short-term rewards for the good or service they are trying to get will get that service, in this case a job.

b. The business makes the most money.

c. There is the most overall efficiency in this market.

This is extremely important, as it highlights how the unabridged free market creates prices in a marketplace.

A minimum wage only does anything if the wage set by the government is higher than equilibrium price, so we’ll assume that it does. Going with the graph, we’ll say that equilibrium salary for a specific job is 6 dollars, and the minimum wage is set at 7 dollars. Basic economics dictates that the employer can no longer keep as many employees and still remain profitable, as he is now forced to pay people for more than what the market has determined their labor to be worth. This is reflected on the graph… in this example, the employer will bring down the amount of labor, in hours per year, by 1 million-a 5% decrease-which approximates a 5% reduction in this market of employees. Not only are jobs lost, but this also leads to what is labeled here as a Dead-Weight loss, where the overall efficiency of the economy is adversely affected by regulation, decreasing net profitability for both the employer and the sum employees.

This, although only a hypothetical example, actually outlines how the minimum wage hurts the economy on a daily basis. But only does it hurt the business itself, it also adversely affects those more than willing to have any job, at any price. This is because having a job to put on, for example, one’s resume in the future, inherently increases the value of your labor, and as such the wage which businesses are willing to pay you. As such, those who are initially paid 5 dollars an hour or perhaps 4 dollars an hour to perform labor that is actually worth 4 or 5 dollars an hour, are far better off in the long run, as they are now able to make more money for themselves in the future; living the American dream and becoming a more productive member of society.

With this in mind, it is important that we fight The Minimum Wage, and other Neo-Keynesian policies, in order to ensure a healthy rate of employment through classical economic policy and basic American principles of Laissez-faire capitalism, so that the blessings of political and economic freedom we inherited are carried into the future.

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