Minimum Wage: A Free Market Constriction
The Fair Labor standards act of 1938, enacted as Franklin Delano Roosevelt’s socialist programs in the New Deal, established a minimum wage as well as other provisions such as overtime pay and child labor standards. Prior to the decade during the roaring 20’s, the free market thrived and the economy and standards of living were fantastic. However, in the years to follow, the Great depression occurred due to a fall in the money supply and people hoarding money from the Federal Reserve rather than consuming. FDR attempted to shake this by dramatically increasing the size of the federal government and creating a wealth of extraneous social programs.
In today’s economic discourse, talks of increasing the minimum wage and forcing businesses to require mandatory maternity leave for females are increasingly prevalent. The candidates in the 2016 election, with Bernie Sanders talking about strong-arming businesses into giving a 15 dollar minimum wage, or Donald Trump forcing businesses to provide a 6 week maternity leave. The problem with both is simple and can be defined in a single sentence: Government intervention forcing businesses to abide by regulations and not allowing free market to thrive.
At a glance, 15 dollars an hour seems reasonable, in the current market, 15 dollars an hour would seem to be a good wage to earn for low wage workers. However, if instituted, it will cause cost of living to skyrocket. This is seen in the city of San Francisco, who according to the Bureau of Labor Statistics has seen a spike in the cost of goods and services in the city. As it stands, they are currently at 13 dollars and hour, and will continue to increase to 15 by the year 2018 per the Fair Wage Act of 2016.
A solution to the problem is to abolish the minimum wage entirely. Despite what some may think, this will allow for businesses to regulate their own business, as is their right to do so as a business. Opponents to this idea would claim that it would allow for exploitation and poverty rates to increase.
However, that could not be further from the truth. A person chooses to take the job based on salary and benefits and weighs that compared to other potential job prospects before taking a job. If the employer wants to remain profitable and continue to function as a business, they must have workers to work there, and by extension must make the position appealing for employees to take. A business will not remain in business if they offer their employees 25 cents an hour for doing hard labor.
The business, based on their profits and earnings should have the sole power to decide how much they compensate their employees. Abolition of the minimum wage will cause a free market to thrive, and will benefit the economy, thus creating a better business environment as a whole.
Forcibly raising the minimum wage creates an artificial inflation, which devalues the currency. When a young child asks their father “If we are in such a debt then why don’t we just print more money,” they do not think of the implications that would have on inflation and the economy as a whole. Thus is the same with artificially giving out more money to employees for the exact same amount of work.
Raising the minimum wage artificially creates an inflated currency and only accelerates the amount at which inflation continually rises. Additionally, those who fight for a minimum wage increase to that of the “living wage” of 15 dollars an hour miss the main point; minimum wage jobs were never intended to be a wage to live off of.
When examined of the demographic that primarily makes up these low skill positions, the main employees are largely young, teenaged workers looking to work on the side after High School to make a few bucks for food and perhaps a new surfboard. The sole purpose of these jobs is to hire workers who are just starting out in the working world and to teach them about time management, accountability, and work ethic. They were never intended to be sole careers to support a family off of.
An increase in minimum wage would have detrimental consequences to the free market and to the economy as a whole within the United States. The University of New Hampshire conducted a survey of 166 leading economists and a starkly large majority of over 76% agreed that raising the minimum wage would have a negative impact on the jobs available and 7 out of 10 economists believed that it would put an unholy constraint on the small businesses ability to stay in business.
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