1.
What's the Effect of the Law?
Advocates of a minimum wage will argue that $6.50 an hour is better than $5.15 an hour. Of course having $6.50 is preferable to $5.15 -- no one denies this. But that is not the relevant issue. At $6.50 the number of workers demanded (employed) by firms will be less than at $5.15. This is nothing but the theory of demand: more is demanded at a lower price and less at a higher price. And the number of workers offering their labor for sale (applying for jobs) will be greater at $6.50 than at $5.15. This is nothing more than the law of supply: more is supplied at a higher price and less at a lower price. Therefore, the issue is not the wage itself but the number of workers that firms will be willing and able to hire at different wages.
As the example in the graph below illustrates, 100 workers will be hired at $5.15 while at $6.50 only 75 will be hired. Likewise, a wage of $5.15 will attract 100 workers while 125 workers will offer their labor at $6.50. In judging the effects of the minimum wage, the comparison is not between $5.15 and $6.50, as the advocates prefer to characterize the debate, but between: a situation wherein 100 workers have jobs at $5.15 OR a situation wherein only 75 workers have jobs at $6.50, along with 25 workers losing their jobs, along with 25 people wasting their time looking for jobs that aren't there.
The only honest way for people to advocate an increase in the minimum wage would be to say they would prefer 75 people having jobs at $6.50 to 100 people having jobs at $5.15. To deny these conclusions is not simply to deny that the minimum wage causes unemployment but more fundamentally to deny the validity of the laws of supply and demand.
Wage +-----+-----+-----+----|
+-----+-----+-----+----|
$5.15+-----+-----+-----+----|
+-----+-----+-----+----|
+-----+-----+-----+----|
+-----+-----+-----+----|
+-----+-----+-----+-Demand
+----------------------+
0 75 100 125
Laborers
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