The laws of supply and demand can’t be suspended.
Someone should tell that to the sponsors of Senate Bill 39, State Minimum Wage/Inflation Increases. Sponsored by Sens. Don Davis (D-Greene), Paul Lowe, Jr. (D-Forsyth) and Angela Bryant (D-Nash), this bill would raise the state’s minimum wage annually according to the annual rate of inflation. The basic premise is to ensure that the state’s minimum wage – currently $6.15 an hour – would rise along with rising costs of living.
Minimum wage laws are an infringement on freedom. In a free society, people would be free to engage in work arrangements free from government coercion and threats. The minimum wage, however, criminalizes voluntary agreements between employer and employee if the agreed-upon wage happens to be below the amount arbitrarily chosen by the political class.
Moreover, simple supply and demand tells us that minimum wage laws are harmful to low-skilled, low-income people.
The law of supply states that sellers of a good or service will be willing to supply more as prices rise. In this case, if wages for work rise, more people will be willing to supply their labor.
The law of demand states that buyers of goods and services will buy less as prices rise. In this case, when wages are higher, employers would be less willing to “purchase” labor.
Thus, when minimum wage laws establish a higher wage rate for low-skilled labor by decree, more people will be willing to take low-skilled jobs, while employers will demand fewer workers. At the government-imposed wage rate, there will be more willing sellers of labor than there are willing buyers. This is called a “supply surplus,” which in the labor market translates into unemployment.
Empirical studies are not needed to confirm this, nor can they refute this. It is simply logic.
In other words, more workers will be competing for fewer jobs. And because of the supply surplus, employers can be more selective when hiring for low-skilled jobs, which means lower-skilled and less-educated people will be crowded out from these opportunities.
The end result of the minimum wage is higher unemployment for low-skilled, low-income, less-educated people – typically young minorities. The minimum wage eliminates opportunities for them to gain vital work experience and build up the human capital so essential for them to advance to better opportunities in the future.
Because minimum wage laws criminalize peaceful, voluntary labor agreements, make bad economics, and ultimately hurt low-skilled people the most, Senate Bill 39 is this week’s Bad Bill of the Week.