Minimum Wage Law

Does a higher minimum wage law translate in to higher standard of living? The democrats have promised it, but will it help?

The answer is obviously no. Money has no inherent value, it's simply a means of exchanging goods and services. Raising the minimum wage in the long run simply changes the measuring stick of what money is. If your five feet tall or sixty inches, and would like to be sixty eight inches or five feet eight, then could simply change the definition of what a foot is. You still wouldn't be able to reach in to the cabinet above the refrigerator, but you'd be five feet eight inches.

Why do we have minimum wage laws?
When a large disparity exists between the very wealthy and the working poor, and in the absence of a large middle class, a minimum wage law can have the effect of increasing the living standards of the working poor. But even in this scenario, the minimum wage law will only work if the money supply is rigidly fixed. Minimum wage laws are simply about buying votes. It's a fraudulent method used by political parties to foster support from people who don't know any better.

Consider the logic
Money and wages are determined by you. In a free market economy this is always the case. How much are you willing to pay for a particular good or service? Your gut reaction is to say X number of dollars. But this isn't what you are really evaluating. The real equation is how much work are you willing to do, to pay for a particular object. Money is simply the agreed up means of exchanging the labor for the good or service.

If you are willing to pay ten percent of your earned wages for an automobile, that doesn't change. If you are willing to pay fifteen minutes of work for a sandwich, fries and a drink for lunch, that doesn't change. Today that may translate in to five dollars. If the minimum wage is raised to eight dollars, you will still only be willing to work fifteen minutes for the exchange.

So what happens when the minimum wage rises?
The company making your hamburger, fries and drink pays more to have those products created, so they charge more. You on the other hand wish to maintain your standard of living so you demand an increase in pay. Now your company must raise the cost of its products and services to maintain the business. In the end, if the money supply is not perfectly fixed, we have a wash. The standard of living for the working poor hasn't risen any at all. The middle class worker takes a short term hit, and then adjusts his rate of pay, and we're right back where we started.

So who gets hurt?
People who save money, and lend money at fixed rates. Part of the appeal of a stable currency is that money should have a store of value. If you save five hundred dollars, you want that five hundred to be able to purchase the same amount of goods and services three years from now, as it does today. When minimum wages increase, inflation increases, and the value of your five hundred dollars (the yardstick) decreases.

The most disastrous forms of minimum wage laws.
The worst type of minimum wage laws are those indexed to inflation. These laws create a self perpetuating cycle of higher inflation. The end result is that companies try to stay ahead of the inflation curve and raise prices in anticipation. The working poor are usually left in a much worse position than that which they started with.

Still not convinced?
Than ask yourself this question. Why not raise the minimum wage to one hundred dollars per hour? That's ridiculous, inflation would run rampant. But there really is no difference in raising the minimum wage one penny, or one dollar. The value of money is by its very nature linear. If it weren't, you could never invest or save money at all. The value of a dollar is the same across the country, just as the value of a penny is.

The real problem is that minimum wage laws are mean. They give a sense of false hope to working poor, and often a disincentive to work harder, and then later the rug is pulled from under them when rising prices outstrip the rise in minimum wage gains.