How The Free Market Deals With “Minimum Wage” or “Living Wage” Increases

In 2013 there was a bump in discussion with regards to raising minimum wage to what is being termed a “living wage”.

Price Floor

Any Economics 101 student can tell you is that a minimum wage is a price floor. What price floors do is prevent the market from reaching the equilibrium point and in the case of a minimum wage (or living wage) they create a higher supply of people who want those jobs, and a lower number of employers wanting to provide those jobs. This in the very high tech economics language creates “waste”.

So how does the free market deal with minimum wage? Well in 2011, McDonalds in Europe knew that the job of order taker at McDonalds was a position that they could replace with cheaper order kiosks. So they replaced the jobs of hourly income earning people with kiosks.

And mark my words, if Ontario raises it’s minimum wage to the “living wage”McDonald's Kiosk level being asked for of $14 an hour, there will be no where left for students to find jobs. McDonalds will bring in kiosks. Mom and Pop shops will lay off students and work the extra hours themselves. The  black market “cash” jobs will make a huge comeback. Tax coffers will suffer as unemployment rises and underground employment markets thrive outside of the sight of the tax man.

What we SHOULD be doing is eliminating minimum wage. Let employers pay people what the job value is based on the supply and demand curves finding that equilibrium point.

2 thoughts on “How The Free Market Deals With “Minimum Wage” or “Living Wage” Increases

  • December 28, 2013 at 9:52 pm
    Permalink

    There’s also the fact that the government has neither the authority nor the right to tell someone the price of his or her labour. If I want to sell my labour for $1.00 an hour that’s my business and only my business and not the government’s.

  • December 29, 2013 at 7:19 am
    Permalink

    So we should open the doors of immigration (even wider) and allow a bunch of Africans to come here and work for 4$ a day! I mean they’ll get free health care, government subsidized housing and a host of other social benefits! personally I think we the abolishment of slavery and forced servitude was the worst thing we ever did. Can any of the bleeding hearts explain to me why the Somalia population of Alberta is a fraction of a percent but yet they make up near 20% of the prison population? Yeah thought so!

Comments are closed.