Understanding the Minimum Wage: Why Employers Cannot Pay Less Than Minimum Wage Even with Agreed Consent

Employers are often under the impression that if an employee agrees to work for less than the minimum wage, it is acceptable. However, this understanding is incorrect. Laws such as the minimum wage are designed to protect employees from exploitation and unfair labor practices. In this article, we will explore why employers cannot pay employees less than the minimum wage, despite their consent.

Why the Minimum Wage Exists

The minimum wage is established to protect the rights of employees, often referred to as the weaker party. The primary reason for setting a minimum wage is to prevent employers from underpaying employees for their work. If employers could legally pay employees less, it could lead to widespread exploitation and unfair labor practices.

In a recent example, Lexi Emmers, a new high school graduate who claims to get her news from Fox and Newsmax, poses a question regarding the minimum wage. Lexi asks, “A rapper who knows everything” because they get their news from sources that are not considered “Democrat papers.” Despite her seeming independence, she still questions a basic economic principle, demonstrating the need for clarity on this important topic.

Historical and Economic Context

Twenty years ago, a friend of the author was a contract worker at an internet company. When the position became vacant, the author was offered a daily rate of $3000. Although the author was happy to work for $3000 per day, they later negotiated a reduced rate of $1500 per day in exchange for some additional benefits. This experience demonstrates that while employees can negotiate terms, it does not authorize employers to violate labor laws.

The Economics of Minimum Wage

Many argue that minimum wage laws are created for political purposes and stifle the free market. However, the minimum wage is not about stifling trade or setting price controls; it is about ensuring basic fairness in the workplace. The principle of supply and demand is often cited to support this argument. The value of a service is determined by the highest bidder, and payment should reflect this value. Employment contracts that involve illegal activity, such as paying less than the minimum wage, always make both sides better off, which contradicts the concept of exploitation.

It is essential to understand that the minimum wage serves as a safeguard for workers. In a strong economy, the demand for labor increases, which, in turn, raises the price of labor. This is illustrated through the example of Hong Kong, a region that never had or needed a minimum wage. In Hong Kong, cheap labor attracted investment, leading to increased production and more skilled workers. As workers became more valuable due to their skills, the demand for their labor rose, and the increased demand drove up wages.

The Impact on the Economy and Currency Value

In a strong economy, the value of the country's currency also tends to rise. This rise in currency value benefits all citizens as it increases their purchasing power. For example, in a strong economy, more housing is built, which helps to stabilize home prices. If an individual desires to live in a place like Manhattan, they can either find a roommate or develop additional skills to increase their value in the workforce.

Another common argument is that a high minimum wage is needed to afford housing. However, this is not the core issue. Housing prices are influenced by supply and demand dynamics. In a robust economy, more housing will be built to meet demand, thereby keeping prices in check. The key to maintaining a strong economy is to minimize government intervention, such as excessive taxation and stringent regulations that can stifle economic growth.

Conclusion

In summary, while employees can negotiate terms within certain limits, employers cannot lawfully pay employees less than the minimum wage, even if both parties agree. The minimum wage is in place to protect workers from exploitation and ensure fair compensation. A strong economy benefits both employers and employees, as it creates a virtuous cycle of demand and supply that drives up wages and increases the value of the currency. By fostering a free-market environment, we can ensure that labor laws serve their intended purpose and support both economic and social stability.