From economics professor Dr. Mark J. Perry:
What are the specific objections of economists to the minimum wage and why do they generally favor market wages instead? Here are ten reasons in favor of market wages over a government-mandated minimum wage:
- Proposed minimum wages are almost always arbitrary and never based on sound economic analysis. Why $10.10 an hour and not $9.10? Why $15 an hour and not $16 an hour?
- A uniform federal minimum wage may be sub-optimal for many states, and uniform state minimum wages may be sub-optimal for many cities. A one-size-fits-all approach to the minimum wage is really a “one-size-fits-none.”
- Minimum wage laws require costly taxpayer-funded monitoring and enforcement mechanisms, whereas market wages don’t.
- Minimum wage laws discriminate against unskilled workers in favor of skilled workers, and the greatest amount of discrimination takes place against minority groups, like blacks.
- Adjustments to total compensation following minimum wage laws will disadvantage workers in the form of reduced hours, reduced fringe benefits, and reduced on-the-job training.
- Many unskilled workers will be unable to find work and will be denied valuable on-the-job training and the opportunity to acquire experience and skills.
- Minimum wage laws prevent mutually advantageous, voluntary labor agreements between employers and employees from taking place.
- To the extent that higher minimum wages result in lower firm profits and higher retail prices, that’s a form of legal plunder by workers from employers and consumers that is objectionable.
- Market-determined wages are efficient, whereas government-mandated wages create distortions in the labor markets that prevent labor markets from clearing.
- Like all government price controls, minimum wage laws are distortionary. If you trust government officials and politicians to legislate and enforce a minimum wage for unskilled workers, you should logically trust those same bureaucrats to set all prices, wages and interest rates in the economy. Realistically, if you agree that those economy-wide price controls would be undesirable, then you should also agree that the minimum wage law is also undesirable.