Why Raising the Minimum Wage Isn't Logical: A Critical Analysis

In the ongoing debate over minimum wage, a common question arises: what is the point of raising the minimum wage if all prices go up with it? This article explores the logical and economic justifications for minimum wage legislation, the potential impacts of automation, and alternative solutions to providing a fair standard of living.

The Misconception of Minimum Wage

The term minimum wage is often misused. It is more accurately described as a price floor, which establishes a minimum legal limit for hourly wages. The core question then becomes: if raising the price floor causes businesses to increase their prices, leading to no net gain for workers, what is the purpose of such legislation?

Automation and the Future of Jobs

Advancements in technology have led to significant changes in the job market. In this century, all jobs that can be automated will be automated, computerized, or sent offshore. This trend is driven by the imperative to maximize net profits. Governments, such as the federal government, may be forced to invent new solutions to address economic challenges. One proposed solution is to provide a monthly stipend to all US adult citizens, which would offer a fair yet modest standard of living. This stipend would effectively cancel out existing welfare programs, thereby addressing the issue of economic security.

The Logical Flaws of Minimum Wage

The concept of minimum wage is fundamentally flawed. Workers should be compensated based on the value they provide, not just for showing up. Minimum wage legislation is inherently socialistic, as it imposes a uniform wage rate without considering individual contributions. For example, the governor of California owns restaurants and has a loophole that allows him to avoid paying minimum wage by performing baking tasks. This highlights the disparity in how different entities operate within the same regulatory framework.

Economic Impact of Raising the Minimum Wage

Raising the minimum wage often leads to a decrease in employment levels. Employers may cut staff rather than reduce their strongest employees. This is particularly true in industries where a monopoly exists, such as essential services like healthcare. However, in most other sectors, factors beyond labor costs, such as price competition and consumer choice, play significant roles in determining prices and employment levels. For instance, fast food restaurants are not essential commodities, as consumers have alternatives. Higher wages can actually lead to increased consumer spending, as workers have more disposable income to spend on goods like hamburgers.

Conclusion

The debate over minimum wage reform is complex and multifaceted. While some argue that raising the minimum wage is necessary to address economic inequality, the reality is that it often fails to achieve its intended goals when prices adjust accordingly. Alternative solutions, such as universal basic income, offer a more comprehensive approach to ensuring a fair standard of living for all. As we navigate the economic challenges of the 21st century, it is crucial to consider the holistic impact of policy decisions on both workers and businesses.