The Truth about the Minimum Wage

By Chad Hovind

Every few months you see a movie, a speech, or a picket about so-called "just wages" and a call to elevate the minimum wage.  We call out "greedy employers" for exploitation with the assumption that the minimum wage is never high enough. The assumption is that businesses are exploiting the entry level employees.  As an example, the recent picketers are calling on McDonald's to raise the minimum wage up to $15.00. How can the market determine a "fair wage" when it's not a living wage?

Entry level jobs are not intended to be payrolls for a career to provide for a family.  They are designed as entry level, "get some job experience" training for folks who are new to the workforce. Often, high school and college students take jobs at minimum wage to start their life and make some extra money.  As a parent of two high school students, I'd love them to work hourly for $3.00-$5.00 during the summer to learn the value of money, work, and be productive. After all, many of us have teens who are playing too much X-box who could be much more productive.

When the government comes in and requires businesses to set an arbitrary minimum wage, several unintended consequences occur.  When businesses are required to raise the cost of their labor, they cannot necessarily raise the cost of the product.  Can McDonald's charge $3.00 more per hamburger if they are paying $3.00 more per employee? Usually, they can't.  Why?  Businesses are required to set their price based on the "customers' point of view."   If the price and quality of your product (in this case, a hamburger) is not perfectly balanced at the customers' desire for price and quality, they will go somewhere else.  That will result in cutting jobs and requiring longer working hours. [more...]

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