Opinion: The Case for Abolition of the Minimum Wage
A minimum wage is a rate of pay that is legally binding, in this article referring to private sector pay. Multiple Democratic candidates have made raising the minimum wage a prominent issue, outlined in their 2020 platform.
A number of candidates, including frontrunners Bernie Sanders, Elizabeth Warren and Joe Biden, have endorsed the idea of increasing the minimum wage to keep up with inflation, lift the standard of living and give workers more legal hold in their places of employment. Even Donald Trump has claimed he is “looking at that” when asked about raising the minimum wage in a Telemundo interview in June.
Meanwhile, millions of political opponents not given spotlight by the media propose the exact opposite: to lower the federal minimum wage to $0.00 an hour. As many countries successfully prosper with no formal or universal minimum wage, there may be a case to encourage less regulation. Due to economic shortages and observable macroeconomic indicators, lower minimum wages tend to be correlated with higher employment and standards of living.
With knowledge of foreign business and economics, the case to abolish the minimum wage converts from radical position to a common sense initiative. A federal, mandated minimum wage both restricts individual liberties and economic growth.
One might ask how could we possibly have NO federal minimum wage? Why wouldn’t every employer just hire people at 0.01¢ an hour?
The answers to these questions are simple and are the same reasons less than 1% of American workers get paid $7.25 an hour according to the Bureau of Labor Statistics. The vast majority of these jobs are either filled by workers under the age of 25 or are part-time jobs.
One concept that is crucial to understand is that there are market wages that would get paid regardless of regulation. No full-time professor, doctor, or lawyer in the USA would be willing to work for just $10 an hour, because their labor is worth much more to them and they could easily find someone else willing to pay more for their services.
The natural rate of pay the market demands is called the market equilibrium wage. The labor market is just like any other market: there is supply and demand for workers. A binding federal minimum wage, a minimum wage above the market equilibrium wage, will inherently cause unemployment as people willing to work for less will not be able to get hired as employees must hire to a certain level. Binding minimum wages virtually always either increase unemployment, cuts in benefits, or restrictions on time allowed to work. This can already be seen in the United States, with cities like Seattle and New York City seeing these types of cuts and shortages.
On an international scale, many of the world’s richest countries have low or non-existent federal minimum wage laws. Norway, South Africa, Egypt, Liechtenstein, Singapore, Switzerland, United Arab Emirates, Denmark, and Switzerland, amongst numerous developed countries, have no universal, legally-binding minimum wage. Some of these countries have some nuances for public minimum wage requirements, but generally all have no legally fixed rate on private wages.
Note that I’ve listed countries with radically different governments, economic systems, cultures, and population sizes. All of these countries have their own issues, but they all tend to be some of the safest and prosperous countries in their area. Only a handful of countries have no federal minimum wage for the private sector, yet five of these countries take up half of the top 10 spots of the 2019 Quality of Life Index by U.S News and World Report.
On the other hand, countries like North Korea, Iraq, Haiti, and Afghanistan all have federally mandated minimum wages. With these observations, it becomes clear that a minimum wage both does not guarantee any high standard of living and is not necessary to have a high quality of life.
So why bother getting rid of the minimum wage now? Won’t inflation eventually render our already-low minimum wage non-binding and ineffective? While our current minimum wage is already non-binding for most industries, it is important to completely dissolve it as it cannot possibly fit the needs of every single American worker in every town in every state.
The minimum wage should be abolished to allow complete flexibility between the employer and the employee. For example, if an employee values more vacation days over wage growth, they can easily find a solution that fits their needs with an employer if minimum wage does not force terms of a contract. Ultimately, all jobs are voluntarily filled.
Minimum wage laws stop two consenting parties from legally benefiting each other. If you don’t like your current job, negotiate your benefits/wages or go to a competitor. If you can’t find a competitor to match your demands, you’re either not skilled enough to find alternatives or you’re already getting the best offer possible in your area.
Regardless, a high minimum wage actually hurts the poor as people in poverty are typically lower-skill and cannot obtain as high of an education. If wages are artificially high, making employment even more limited, these same people cannot enter the workforce as easily in order for them to gain paid experience and advance their careers. Minimum wage laws are a burden that should be lifted as soon as possible; many people cannot wait to get real on-the-job experience and pay.
Abolishing the minimum wage will maximize liberty for employees and can increase employment with combinations of payment to suit individual needs. In contrast, the argument for a higher minimum wage requires sweeping government intervention, loss of jobs, restrictions on benefits and promotion of an economic policy that can be detrimental to the mere existence of business if pushed too far.
The argument to abolish the minimum wage is easy and completely reasonable when people are educated on the topic: you won’t see a minimum wage advocate pointing out the fact that neither Finland or Iceland have a federal minimum wage. With no minimum wage, our countries businesses would function similarly to its current state, but with more power to the workers and increased flourishing industries.
As long as private unions are allowed to fully exist and function while ease of business is high, standards will overall go up and specialization can occur for the infinitely different levels of skill and demand.
The case is left as Nobel Prize-winning economist Milton Friedman once explained: “These people confuse wage rates with wage income. It has always been a mystery to me to understand why a youngster is better off unemployed at $1.60 an hour than employed at $1.25”.