This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Minimum Wage Is a Law Against Workers

The other lawn care providers are upset and begin protesting they can't make a living wage because others are willing to undercut what they claim is a fair price. They spend money lobbying elected officials and a minimum wage law is enacted that requires at least $17 per lawn. It's obvious that the increased demand from those unwilling to pay $15 but are willing to pay $10 will evaporate.

Some of the homeowners willing to pay $15 will not accept $17 and the market will contract to the relative degree. There's another impact that isn't easily identifiable, but economic theory dictates will happen. The prospect of making $17 a lawn instead of between $10-$15 entices others to enter the lawn care business. As a result, the competition for lawn care services intensifies from a greater supply of workers and decreased demand for service and a smaller pie dividend into smaller slices for each.

As the above example illustrates, minimum wage laws remove the freedom of suppliers and consumers to negotiate a market-based wage, and replace it with a centrally planned wage that ignores the needs of employees and employers.

Minimum wage proponents always fail to mention or take account for the absolute truth that a person or business placing a $1 value on a given unit of a product/service will either not buy above $1, or will actively seek out alternatives. Regardless of the input costs, businesses can only charge what the market is willing to pay.

Businesses must adjust their model to match what the consumer wants. If a country implements a minimum wage, production will move and/or consumer demand will fall. It's not just theory -- it's obvious in practice by observing container shipments. Seaspan (SSW), Hyundai Merchant Marine, and other container shipping companies arrive with full containers into U.S. ports and return to Asia at 20%-25% capacity.

Minimum wage laws have made it illegal for low-skilled (and many not low-skilled) employees to compete, and they are forced into unemployment. Adding salt to the wound, competition is increased because a higher wage naturally increases the supply of willing workers. At $7 per hour,  based on their individual situation, some will determine that it's not worth it but others wanting $7 and job skills or a chance to demonstrate their abilities to move up will take it.

However, at $8 per hour, many not willing to work for $7 will enter the labor pool, displacing the lowest-skilled workers. The same people that many minimum wage advocates wrongly believe they are helping with their well-intended, albeit incorrect, strategy.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $132.65 1.82%
FB $81.91 0.47%
GOOG $555.37 -1.71%
TSLA $231.55 6.01%
YHOO $44.36 -0.36%

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs