Rethink the Minimum Wage

It is quite startling that many, and probably, the majority of the population support a minimum wage. It sounds like a harmless policy and is not given much thought in the public. People think that such a wealthy corporation such as Walmart and McDonalds have the funds to pay their employees a few extra bucks! (Side note: These large corporations aren't paying the guy who flips your hamburger, franchise owners are, and ultimately you are too. Another point that isn't looked at when talking about minimum wage). It is such an appealing concept because it makes us feel good that a single mom is making a few extra bucks an hour, contrary to before. A few economical fallacies can easily disprove this theory. It is a common phrase to “fight for 15”, meaning a 15 dollar minimum wage law. This $15 minimum wage has been applied to cities such as Seattle. Now $15 sounds like a good number, but why? Why were activists in Seattle fighting for $15? Activists across the country are now demanding $15 for their local cities, but why? Before it was $7.50, then $12, finally $15. What will it be next, $20, $30, $50, $80, $100, $1,000,000,000,000,000,000,000 /hr? No, $1,000,000,000,000,000,000,000 is definitely too much for someone who works on flipping burgers, you might be thinking to yourself. If we raise the minimum wage to such a number then that single mother would not have to work so much or that college graduate could pay off their debt. But if the minimum wage was so high then the business would go bankrupt, people would lose their jobs, and ultimately people buying the product would be paying those wages increases with higher prices or not get those products at all. 

How do we make sure people are making a fair wage? We don’t, the free market does. When people go to work, they exchange their labor (producing something like making a complete hamburger or contributing to that process) in exchange for an agreed upon wage. How much a person works is how much they receive, as long as the owner of the business is profiting off of the labor. If the owner was not profiting off the labor of the person they hired, the owner is better off firing the worker, ultimately making the workers wage $0. 

In order to determine someone's wage we need to think of their labor in terms of economic value, how much money they can make for an employer. If person A works for a burger fast food place and makes 20 burgers an hour and each burger makes $1 in profit, they made the employer $20 in profit, excluding the labor cost. Now say we have person B who makes 10 burgers an hour because they are just overall slower than person A, who has more experience. If the minimum wage was $15, person B would be fired immediately because each hour they work the employer is losing an extra 5 dollars. The owner is better off without person B. Person B now makes $0 because his economic value was less than the minimum wage. 

A voluntary exchange is created between the employer and the worker. They are both equals within this transaction. The employer creates an offer (of anything, food, gold, currency, etc)  for the worker to perform X task. The worker has the option to decline the offer, as he views it as non-beneficial or accept the offer as he views it as beneficial. The same applied to the employer.

The minimum wage hurts the people we try to help the most. People with little skills and education are hurt the most because their economical value is much lower than wages we impose as law. As people are on the jobs longer, their economical value grows, with new skills acquired. If a person believes an employer is not paying them their full economical value the worker can ask for a raise, the employer has the choice to retain their talent, or the employee can go to a competitor, which believes that the workers economical value can be better used.

The main idea:

Raising the minimum wage hurts the people with little education or skills, increases costs to consumers, and bankrupts businesses. We need to abolish the minimum wage completely or lower it to $0.