Wednesday, February 15, 2012

Minimum Wage: Eliminate it!

In theory, minimum wage could be a great thing. It helps ensure employees are fairly compensated for the work they offer, right? Well, not always. I would actually argue that the minimum wage value of labor is over-estimated, and this miscalculation has many negative consequences to the economy. For example, let's take a a company that is forced to implement a new minimum wage above what the company was previously paying. The company has absolutely allocated some amount of money to pay employees, so then what are the employer's options? First, they could fire a few people in order to remain within the parameters of the allocated budget. This option has self-evident negative affects, especially considering people were willing to work for a lower price. According to supply and demand, if you raise the price of a product or service, less of the aforementioned good or service will be purchased. Labor is not exempt from this theory. In fact, a rapidly decreasing rate of unemployment is a significant contributing factor in a recession. Not to mention that many jobs would be outsourced to countries that do not implement the same law. [And Isn't this what we're seeing right now? It IS our fault that China gets all our business] The second option that the employer has is to increase the budget for employment. This higher cost has to be payed for somehow, though. The costs to the company would be translated into a higher price of the product or service. In addition, the people who were either fired, as in the case of a new minimum wage law, or not hired, has in the case of an existing minimum wage law, are statistically not highly educated either (comparatively). This makes it even more difficult fro them to find a new job.

My proposition on how to fix this? Eliminate minimum wage! Or at least lower it significantly. This would create countless job opportunities. More importantly, it would establish America as more self-sustaining , because goods would be cheaper to buy and produce in America!

In fact, the negative effects of minimum wage were effectively illustrated in 2009. After increasing the monthly minimum wage by a little over double, 15,000 people were layed off in addition to increased violence and a grudge against the system. Clearly, minimum wage is simply ineffective.