Essay 4.2

Politicians often talk about raising the minimum wage in the United States. Whether they do so for their political gains or because of their genuine concern for the people, they claim that minimum wage laws benefit those at the lowest rung of the economic ladder. But does it really benefit the poor? The economic way of thinking may suggest otherwise. As mentioned in the textbook, the law of demand suggests that employers tend to hire more unskilled workers while the wages are low, other things being constant. When a government implements a fixed minimum wage without considering the market-clearing wage which is achieved based on supply and demand, their action can have unintended consequences. A minimum wage is an example of a price floor. The law requires that no one accept nor offer a wage that is below the set minimum wage. As the minimum wage is often set above the market-clearing wage, the quantity supplied will increase and the quantity demanded will decrease. More unskilled workers will seek employment at the more attractive wage while more employers will hire less workers because of the increase in the amount of wages they have to pay. As a consequence, a surplus of labor arises generating unemployment in the unskilled labor market. The same law which intends to help the poor ends up hurting them. While the minimum wage law helps one group of workers, it hurts the even poorer workers. As a consequence of the minimum wage law, the employers have to make a choice between paying higher wages to unskilled workers and simply hiring skilled workers. They are more likely to hire skilled workers as it makes more sense economically. Rather than helping the poorest of the poor, the minimum wage law ends up helping the ones who are better off. Since the minimum wage law does not help the poorest of the poor in reality, one could argue that it is unethical given that it ends up benefitting the slightly better-off. One could also argue that it is immoral for one group of people to use the force of law to enact their agendas on another group of people.