Minimum wage laws are seen by many as a mechanism to uplift the poor by ensuring every employee receives a “living wage.” For the economically ignorant that fairytale makes sense. For those with even a slight understanding of economics it’s a recipe for disaster.
The problem with minimum wage laws is the same problem with any government writ, they’re based on coercion instead of market forces. Market forces are based on wealth creation. When more wealth is created employees can be paid. Government writ doesn’t create new wealth so minimum wage laws rely on the current amount of wealth. Since the employers don’t have more wealth to draw from they’re forced to increase their prices to compensate, which often makes their product unaffordable to those who could previously afford it:
The U.S. restaurant industry is in a funk. Blame it on lunch.
Americans made 433 million fewer trips to restaurants at lunchtime last year, resulting in roughly $3.2 billion in lost business for restaurants, according to market-research firm NPD Group Inc. It was the lowest level of lunch traffic in at least four decades.
Cost is another factor working against eating out for lunch. While restaurants have raised their tabs over the past few years to cope with rising labor costs, the price of food at supermarkets has continued to drop, widening the cost gap between bringing in lunch and eating out.
Statists often scoff at the idea that minimum wage laws hurt the poor. How could laws that are advertised as helping the poor possibly hurt the poor? By forcing employers to increase their prices and thus make their product that was previous affordable to poorer individuals unaffordable.
The best way to help uplift the poor is to create more wealth. Creating more wealth requires fulfilling the wants and needs of consumers. Commands from governments cannot accomplish that no matter how many people vote in favor of them.