Embed Notice

Following from my last thread on unions and wages, I wanted to address that other capitalist shibboleth, the minimum wage.

AS EVERYONE KNOWS, prices are set by the market. When the state sets a wage by fiat that is higher than the equilibrium price, firms can’t afford to hire as many workers as they had previously intended. This creates both unemployment among the least productive, lowest paid workers, but also reduces the productivity of all those firms—ie, deadweight loss.

The real minimum wage, as I’m sure you all know, is $0.00. That is, there is some poor benighted or desperate fool willing to work for literally any price N, and some firm might be willing to employ them at that price as long as the worker can produce N + $0.01 worth of value for the firm. But minimum wage law sets those wages arbitrarily high, and firms can’t afford to hire and pay this worker if that wage is higher than N.

This is all VERY BAD.

1/