There is a growing inequality in America, fueled by the inflationary policies of the government & Federal Reserve. Printing money (the real definition of inflation) makes the bottom 99% poorer, it is the reason that one jobholder in the 50s & 60s could feed a family and own a house even with an admin career. Now, that same household needs two earners, possibly with side jobs, just to afford rent. This is due to inflation, subject of another post. But for now, we will consider the problem of a worker working full time, but not being able to provide a decent living for them and their family.
A popular solution to this problem is the minimum wage, which guarantees a level of payment to a worker sufficient to live on. This sounds good, ensuring that people who work don’t have to worry about food, shelter, etc. But the minimum wage intensifies the problem, creating more job insecurity, and making society poorer in general.
The minimum wage law does one thing only; it makes consensual jobs illegal. A minimum wage law will say something like ‘All jobs that pay less than $15 are illegal and must be destroyed.’ That is literally all the law will say, followed by the penalties, including jail time, for offering or holding such a consensual job.
There are a few people who will be better off due to this law, those that currently earn less than $15/hour, and whose employees decide to raise their wage to this level so they can keep them employed (many or most of them will see their hours reduced, negating the benefits). But literally everybody else in society will be worse off due to minimum wage legislation.
The hardest hit are those whose labor doesn’t add enough value to make them worth the minimum wage floor. These are the most vulnerable in society; immigrants who don’t speak English well, college students without anything on their resumes, people without specific skills or training, etc. Minimum wage laws force these people to be wards of the state, forever. They will never get the skills they need to produce on their own and work towards their goals. Thus one axiom or truth of a minimum wage is that it adds to structural unemployment; it creates a class of people who are priced out of earning a living on their own.
It also hurts entrepreneurs, who have identified a way to grow their business. The minimum wage law prevents them from doing this, which also hurts any consumers who would be positively affected by the new, higher quality, or cheaper products or services that would be offered had the job been allowed.
Aside from the negative effects it has on the prosperity of society, the minimum wage is also immoral. It makes consensual jobs illegal; if an entrepreneur wants to hire someone for $14/hour, and someone is willing to accept that job, that is consensual, with no negative side effects, nobody is hurt. It is immoral to tell the entrepreneur that they must destroy the job, and the worker that they must remain unemployed. Consensual jobs always make society wealthier, the economy is not zero-sum.
The best way to help workers earn a decent living of course is to stop the giant government budget deficits and money printing, the source of the problem. But there are other things a government can do to improve the lives of marginal workers. First and foremost, is eliminate licensing and permitting required to start a business or just sell things. Our grandparents immigrating to this country made a living by peddling or starting other businesses on their own; nowadays that is impossible, because of all the regulations involved. They must file for permits which require an extensive knowledge of English, and they must possess some capital to give the state just for the privilege of providing services to people. These permits & licenses are in place supposedly to protect people, but that is not the case, paperwork doesn’t protect anyone, just having a license or permit doesn’t weed out bad actors, there are other more efficient mechanisms to protect consumers that don’t involve barriers to entry. The real reason permits & licensing exist is because of legacy businesses, who don’t want competition. They persuade politicians to enact laws limiting new entrants, which get sold to the public as for their own good. Removing these obstacles to starting a business would help marginal workers earn a living and build for the future, more than anything the government can do proactively.
Another way governments can help in a more direct way, is by providing resources for workers to earn more. Having resources available to people (maybe only to those who earn below a certain amount), to help them create resumes, appear presentable to employers, connect them with employers who have jobs available matching their skills, and having an idea of what is needed in the marketplace to connect workers with learning new relevant skills, would help the most marginalized earn a living on their own, by increasing the value they add to production.
Prosperity can never be legislated. For people to make a decent living, they have to create value, which is done through skills and experience, not laws.
