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.
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