17.
"Businesses Can Afford It"
One justification heard for a minimum wage increase is that the U.S. is
a rich country and so surely businesses can afford to pay a higher wage
to their lowest paid employees. While in some grand sense this may be
true, it entirely misses the point. The question before us regarding
the minimum wage law is, whether it is worth it to the business to
hire a particular employee at the higher rate. Just as a potential
employee will only offer his labor if he believes he will benefit from
the arrangement, businesses will only offer to hire that labor if they
believe they will profit from the transaction. As stated in Section 10,
a higher wage will encourage businesses to find substitutes for labor
(even possibly the substitute of doing without). If the expense of the
labor is greater than the benefit of hiring that labor then the business
will not hire the labor, regardless of whether it could or not. As an
analogy for this point, undoubtedly you
could
pay more for your morning
cup of coffee, but just because you
could
does not mean that when faced
with the higher price you
will
still make the purchase. Substitutes will
be sought (even possibly doing without). If the expense of the cup of
coffee is greater than its value to you
you
will not buy that cup of coffee,
regardless of whether you could or not. Demand for all resources,
labor included, is based on willingness as well as ability.
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