Here’s another issue related to the minimum wage that I think supports opponents of the minimum wage (most economists) and presents a serious challenge to the proponents of the minimum wage:
1. Opponents of the minimum wage law generally support no minimum wage, i.e. a minimum wage of $0.00 per hour. To support a minimum wage of $0.00 per hour, the opponents can rely on economic theory, economic logic, scientific thinking, empirical evidence and cost-benefit analysis to support their position, which might be summarized as follows:
Increases in the minimum wage generate certain benefits (higher wages) for some workers, but generate costs (fewer entry-level jobs, fewer hours, fewer benefits, less-on-the-job training, reduced opportunities to acquire work skills, etc.) that outweigh the benefits, making unskilled workers as a group worse off on net from increases in the minimum wage. Further, a minimum wage of $0.00 per hour requires no regulatory mechanism and therefore no enforcement costs.
Bottom Line: A minimum wage of $0.00 is optimal because it generates net benefits to society that are greater than the net benefits of a mandated, artificially high minimum wage.
2. Proponents of the minimum wage law support periodic increases of the minimum wage, e.g. to $9.00 per hour, but never seem to provide any justification or analysis that would support a position that $9.00 per hour is somehow optimal for society. That is, why $9.00 per hour and not $9.25 or $8.75 per hour? Why not $8, $10 or $18 per hour? Why not $90 or $900? In other words, what is special or optimal about $9 per hour that justifies that hourly wage for unskilled workers? What theory, analysis, logic or rationale justifies $9 per hour over all other alternatives?
Bottom Line: If there is no economic theory or logic or cost-benefit analysis that justifies $9.00 per hour as an optimal wage for unskilled, entry-level workers, which seems to be the case, then a $9.00 minimum wage is exposed as being totally arbitrary and random. Unless and until Obama and other proponents of a $9 per hour minimum wage can provide some analysis to show that $9 is optimal and maximizes the net benefits to unskilled workers, then it’s a policy that really can’t be taken seriously. Further, the minimum wage requires a costly regulatory mechanism that administers and enforces the government-mandated wage, which is a cost that needs to be considered.