Unemployment and Minimum Wage

One contributor to large-scale unemployment in urban areas is the minimum wage law. Although it may seem like a benign protocol implemented for the sake of securing worker’s wages, it has a detrimental impact on employment rates. This law removes any incentive on the part of business to hire individuals who cannot justify the payment of a minimum wage. Sadly, in many areas throughout North America, this is the case. Assuming that someone’s physical labour is only worth a fraction of what the government demands that employers must pay them, a business would be employing this individual on a financial deficit.  Many unemployed persons cannot, despite their best efforts, find adequate employment because the skills they posses (or lack thereof) do not justify the payment of a minimum wage.

Consider the hypothetical case of some downtrodden denizen living in the inner city of Detroit. This person has never finished high school, is incapable of doing simple arithmetic, and possesses no employment experience at any legitimate establishment. Undoubtedly, this individual will have quite a challenging time finding employment because he possesses no skills for which to justify a minimum wage. Assuming that his service at a fast food restaurant or a gas station may only justify a wage of say, five dollars an hour, the minimum wage law prevents him from receiving this due payment, and subsequently from attaining a job. This is the case of many people across America who find themselves without a job; their labour is not worth the minimum wage, and businesses have no incentive to hire these people. A wage of five dollars an hour may seem dismal to some, but it is a more desirable alternative than living in a box beneath an overpass.

Some would argue that if the minimum wage were abolished tomorrow, then companies would start paying their employees at dirt-cheap rates. This however is an exaggerated fallacy. Because the work force is competitive, an employer who pays higher wages would have more potential employees seeking to work for them, and would thus be more successful. You, as a worker would have more incentive to provide your labour to a company that pays you better. Nobody with a considerable education would prefer to work for dirt-cheap if another business offered them higher wages.  This is just yet another instance in which the free market prevails over government intervention.